What changed in this filing

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Item 1. Financial Statements

2021-11-10 compared with 2021-08-11 · 226 added, 183 removed, 592 unchanged (41% of the section changed)

3 unchanged sentences

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

September 30,

Current assets:

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100,000,000 shares authorized;

28,552,213 and 11,536,720 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

28,577,088 and 11,536,720 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

Additional paid-in capital

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Subscription Receivable

( 10 )  

Accumulated other comprehensive income

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(in thousands, except share and per share data)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Operating expenses:

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Total operating expenses

11,606  

10,096  

Loss from operations

( 5,517 )  

( 5,034 )  

( 11,606 )  

Other income (loss):

Gain (loss) from change in fair value of warrant liability

( 5,099 )  

Other income:

Gain from change in fair value of warrant liability

Other income, net

Interest income, net

$ ( 4,244 )  

$ ( 10,112 )  

$ ( 8,689 )  

Net loss per common share - basic and diluted

$ ( 0.15 )  

$ ( 1.02 )  

$ ( 0.35 )  

Weighted average common shares outstanding, basic and diluted

28,451,532  

9,913,878  

25,148,399  

9,117,856  

$ ( 4,244 )  

$ ( 10,112 )  

$ ( 8,689 )  

Other comprehensive income (loss):

Foreign currency translation

( 10 )  

Comprehensive loss

$ ( 4,250 )  

$ ( 10,087 )  

$ ( 8,699 )  

See accompanying notes to unaudited condensed consolidated financial statements.

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(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

$ ( 8,689 )  

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

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Change in fair value of warrant liability

( 2,750 )  

Operating lease, net

1 unchanged sentence

Prepaid expenses and other current assets

( 305 )  

Accounts payable

Accrued expenses and other current liabilities

( 72 )  

Net cash used in operating activities

( 10,405 )  

Cash flows from investing activities:

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Proceeds from exercise of warrants

Payment of tax liability for vested restricted stock units

Proceeds from sale of common stock, net of issuance costs

74,685  

15,298  

Net cash provided by financing activities

74,748  

15,303  

Effect of exchange rate changes on cash and cash equivalents

( 10 )  

Net change in cash and cash equivalents

64,333  

Cash and cash equivalents, at beginning of period

15,173  

10,735  

Cash and cash equivalents, at end of period

$ 79,506  

$ 16,734  

Supplemental disclosures of cash flow information:

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(in thousands, except for shares)

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Common Stock Subscribed

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$ 84,700  

Six Months Ended June 30, 2020

Issuance of common stock in connection with Consulting Agreement

( 2,500 )  

( 10 )  

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

21,125  

( 23 )  

Stock-based compensation

Consolidated net loss

( 4,379 )  

Cumulative translation adjustment

( 16 )  

Balance, September 30, 2021

28,577,088  

$ 151,175  

$ ( 69,984 )  

$ 81,259  

Nine Months Ended September 30, 2020

Common Stock Subscribed

38 unchanged sentences

$ 15,629  

Issued for cash - sale of common stock, net of issuance costs of $ 135

216,855  

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

( 17 )  

Stock-based compensation

Consolidated net loss

( 3,395 )  

Cumulative translation adjustment

Balance, September 30, 2020

10,294,095  

$ 68,649  

$ ( 54,277 )  

$ 14,467  

See accompanying notes to unaudited condensed consolidated financial statements.

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Notes to the Unaudited Condensed Consolidated Financial Statements

Nature of Business

The terms "MBI" or "the Company", "we", "our", and "us" are used herein to refer to Moleculin Biotech, Inc.

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Ltd., (MAPL), a wholly owned subsidiary in June 2018, to perform certain preclinical development in Australia.

This has enabled the Company to realize the benefits of certain research and development tax credits in Australia. In July 2021, MBI formed Moleculin Amsterdam B.V., a wholly owned subsidiary, to act as its legal representative for clinical trials in Europe for Moleculin Biotech, Inc. 

This has enabled the Company to realize the benefits of certain research and development tax credits in Australia. In July 2021, MBI formed Moleculin Amsterdam B.V., a wholly owned subsidiary, primarily to act as its legal representative for clinical trials in Europe for Moleculin Biotech, Inc. 

In 2019, the Company sublicensed essentially all of the rights to its technologies in 29 countries in Europe and Asia to WPD Pharmaceuticals Sp.z o.o.

(WPD or WPD Pharmaceuticals) in exchange for collaboration on development in Europe.

(WPD or WPD Pharmaceuticals) in exchange for a minimum amount of externally funded collaboration on development in Europe over a certain amount of time.

Also in 

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and 3 ) a portfolio of Metabolism/Glycosylation Inhibitors, of which WP1122 is the lead molecule.

The Company has six drug candidates, representing all three core technologies, and three of those have shown human activity in clinical trials.

The Company has five  drug candidates, representing all three core technologies, and three of those have shown human activity in clinical trials.

As of the end of 2020, those three drug candidates accounted for five clinical trials in the United States (U.S.) and Europe.

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An additional internally funded Phase 1/2 clinical trial of Annamycin in AML is currently ongoing in Poland.

In the second quarter of 2021, the Company commenced enrollment and dosed the first subject in its U.S. Phase 1b/2 clinical trial evaluating Annamycin for the treatment of soft tissue sarcoma (STS) lung metastases. The Company anticipates that the externally funded WP1066 trial in brain tumors at MD Anderson will be terminated this year and expects to commence a similar WP1066 externally funded trial elsewhere in 2022.

Enrollment in that trial is also ongoing.

The Company anticipates that the externally funded WP1066 trial in brain tumors at MD Anderson will be terminated this year and expects to commence a similar WP1066 externally funded trial elsewhere in 2022.

Additionally, MBI expects a second, grant funded Phase 1b/2 clinical trial of Annamycin in STS lung metastases to be primarily investigator-funded in Poland.

MBI also plans to begin a Phase 1/2 clinical trial of Annamycin in combination with Ara-C for the treatment of AML in Europe, by seeking approval for its own clinical trial and, possibly, a second, similar grant funded trial through its sublicensee, WPD Pharmaceuticals in Poland. The Company is actively working with regulatory authorities in the United Kingdom (U.K.) to initiate a Phase 1 clinical trial of WP1122 in healthy volunteers with the intent to progress to COVID- 19 patients either there or in locations where the prevalence of COVID- 19 will adequately support recruitment.

MBI also plans to begin a Phase 1/2 clinical trial of Annamycin in combination with Ara-C for the treatment of AML in Europe by seeking approval for its own clinical trial and, possibly, a second, similar grant funded trial through its sublicensee, WPD Pharmaceuticals in Poland.

In October 2021, the Company received authorization from regulatory authorities in the United Kingdom (U.K.) to commence a Phase 1a clinical trial of WP1122 in healthy volunteers with the intent to progress t o COVID- 19 patients either there or i n locations where the prevalence of COVID- 19 will adequately support recruitment.

The Company intends to internally fund the initial trials of WP1122 but may seek external funding opportunities if encouraging activity is seen in COVID- 19 patients.

Additionally, the Company is pursuing filing an Investigative New Drug application (IND) in the U.S. with WP1122 for the treatment of certain cancers in 2021.

Additionally, the Company is pursuing filing an Investigative New Drug application (IND) in the U.S. with WP1122 for the treatment of certain cancers prior to the end of 

Finally, the Company continues to seek opportunities to collaborate on a potential Phase 2 clinical study of WP1220 in CTCL.

The Company does not have manufacturing facilities and all manufacturing activities are contracted out to third parties.

Additionally, the Company does not have and does not intend to have a sales organization.

Additionally, the Company does not have a sales organization.

The Company’s overall strategy is to seek potential outlicensing opportunities with development/commercialization strategic partners who are better suited for the marketing, sales and distribution of its drugs, if approved.

COVID- 19 - In March 2020, the World Health Organization declared the outbreak of a novel Coronavirus (COVID- 19 ) as a pandemic, which continues to spread throughout the world.

COVID- 19 and Worldwide Supply Chain Issues  - In M arch 2020, the World Health Organization declared the outbreak of a novel Coronavirus (COVID- 19 ) as a pandemic, which continues to spread throughout the world.

The spread of COVID- 19 has caused significant volatility in U.S.

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Additionally, the Company believes that the potential for impact to its supply chain due to COVID- 19 will be reduced as vaccine production normalizes throughout the industry.

In view of current worldwide trends with respect to COVID- 19, MBI does not expect COVID- 19 to materially impact recruitment for current or future oncology trials as COVID- 19 hospitalizations have recently decreased.

However, the Company cannot be certain that these trends will continue and there is the possibility they may reverse, especially in view of the increases in the D variant cases.

In the third quarter, worldwide supply chain issues began delaying certain shipments.

The supply chain for the manufacturing of the Company's drug candidates and supplies for clinical trials can be complicated and involves several parties.

If the Company were to experience any supply chain issues, including as a result of the COVID- 19 pandemic, the Company's product supply could be disrupted.

The Company believes that its operations have not been materially impacted to date.

In view of current worldwide trends with respect to COVID- 19 and worldwide supply chain issues, MBI does not expect either issue to materially further impact recruitment for or the operation of current or future clinical trials.

However, the Company cannot be certain that these trends will continue and there is the possibility they may reverse.

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

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These interim condensed unaudited consolidated financial statements should be read in conjunction with the audited financial statements of the Company as of 

December 31, 2020 and 

December 31, 2020 and notes thereto contained in the Form 10 -K filed with the SEC on March 24, 2021.

Principles 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.

Principles of Consolidation - The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Any reference in these notes to applicable guidance is meant to refer to U.S.

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Significant Accounting Policies - The Company's significant accounting policies are described in Note 2, Basis of Presentation, principles of consolidation and significant accounting policies , to the consolidated financial statements included in the Company's Annual Report on Form 10 -K for the year ended December 31, 2020 .

There have been no material changes to the significant accounting policies during the six months ended June 30, 2021 , other than those noted below.

There have been no material changes to the significant accounting policies during the nine months ended September 30, 2021 , other than those noted below.

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.

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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.

Liquidity and Financial Condition - The Company is an early stage and emerging growth company (EGC) and has not generated any revenues to date.

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Since inception, the Company has incurred losses and negative cash flows from operating activities.

For the six months ended June 30, 2021  and 2020 , the Company incurred net losses of $ 8.7  million and $ 11.3  million, respectively, and had net cash flows used in operating activities of $ 10.4  million and $ 9.3  million, respectively.

At June 30, 2021 , the Company had an accumulated deficit of $ 65.6  million and cash and cash equivalents of $ 79.5  million. The Company expects its cash on hand as of June 30, 2021  will be sufficient to fund the Company's operations beyond the near term.

For the nine months ended September 30, 2021  and 2020 , the Company incurred net losses of 

$ 13.1  million an d 

$ 14.7  million, respectively, and had net cash flows used in operating activities o f 

$ 14.7  million and $ 14.6  million, r espectively.

At September 30, 2021 , the Company had an accumulated deficit of 

$ 70.0  million a nd cash and cash equivalents of $ 75.2  million. 

The Company expects its cash on hand as of September 30, 2021  will be sufficient to fund the Company's operations beyond the near term.

Such projections are subject to changes in the Company’s internally funded preclinical and clinical activities, including unplanned preclinical and clinical activity.

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

The following table provides liabilities reported at fair value and measured on a recurring basis at June 30, 2021 and December 31, 2020 (in thousands): 

Fair value of warrant liability as of June 30, 2021:

The following table provides liabilities reported at fair value and measured on a recurring basis at September 30, 2021 and December 31, 2020 (in thousands): 

Fair value of warrant liability as of September 30, 2021:

$ 3,712  

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The table below of Level 3 liabilities (in thousands) begins with the valuation as of the beginning of the 

second quarter and then is adjusted for changes in fair value that occurred during the second quarter.

third quarter and then is adjusted for changes in fair value that occurred during the third  quarter.

The ending balance of the Level 3 financial instrument presented above represents the Company's best estimates and may not be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments.

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Warrant Liability Long-Term

Warrant Liability Total

Balance, March 31, 2021

Balance, June 30, 2021

$ 5,390  

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( 1,678 )  

Balance, June 30, 2021

Balance, September 30, 2021

$ 3,712  

The table below of Level 3 liabilities (in thousands) begins with the valuations as of December 31, 2020  and is adjusted for the exercises and for changes in fair value that occurred during the six months ended June 30, 2021 .

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Warrant Liability Long-Term

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( 4,428 )  

Balance, June 30, 2021

Balance, September 30, 2021

$ 3,712  

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In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be antidilutive.

For the three months ended June 30, 2021 and 2020 , approximately 4.0  million and approximately 3.5  million, respectively, of potentially dilutive shares were excluded from the computation of diluted earnings per share due to their antidilutive effect.

For the three months ended September 30, 2021 and 2020 , approximately 4.5  million and approximately 3.8  million, respectively, of potentially dilutive shares were excluded from the computation of diluted earnings per share due to their antidilutive effect.

For the 

six months ended June 30, 2021 and 2020 , approximately 3.9  million and 3.3 million, respectively, of potentially dilutive shares were excluded from the computation of diluted earnings per share due to their antidilutive effect.

nine months ended September 30, 2021 and 2020 , approximately  

4.1  million a nd 3.4  million, respectively, of potentially dilutive shares were excluded from the computation of diluted earnings per share due to their antidilutive effect.

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

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

June 30, 2021

September 30, 2021

December 31, 2020

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Accrued legal, regulatory, professional and other

Operating lease liability - current

Accrued payroll and bonuses

Operating lease liability - current

Accrued related party

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$ 1,791  

Additionally, accounts payable includes $ 48,000 as of June 30, 2021  and December 31, 2020 , respectively, for a related party payable. 

Additionally, accounts payable includes 

$ 48,000 as of September 30, 2021  and December 31, 2020 , respectively, for a related party payable. 

Liability Classified Warrants

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

June 30, 2021

September 30, 2021

December 31, 2020

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Dividend yield

A summary of the Company's liability classified warrant activity during the six months ended June 30, 2021 and related information follows: 

A summary of the Company's liability classified warrant activity during the nine months ended September 30, 2021 and related information follows: 

Number of Shares

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( 10,000 )  

Balance at June 30, 2021

Balance at September 30, 2021

2,723,645  

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$ 9.46  

Exercisable at June 30, 2021

Exercisable at September 30, 2021

2,723,645  

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$ 9.46  

For a summary of the changes in fair value associated with the Company's warrant liability for the six months ended June 30, 2021 , see Note 2 - Basis of presentation, principles of consolidation and significant accounting policies - Fair Value of Financial Instruments.

For a summary of the changes in fair value associated with the Company's warrant liability for the nine months ended September 30, 2021 , see Note 2 - Basis of presentation, principles of consolidation and significant accounting policies - Fair Value of Financial Instruments.

Equity Classified Warrants

During the six months ended June 30, 2021 , the Company granted equity-classified warrants to purchase 71,500  shares of common stock vesting quarterly over five years while services are being rendered. 

At June 30, 2021 , the Company had 146,502 equity classified warrants outstanding and 54,410  warrants were exercisable.

In April 2021, the Company granted equity-classified warrants to purchase 71,500  shares of common stock with a five -year term and an exercise price of $ 3.63  vesting quarterly over five years while services are being performed.

In August 2021, the Company entered into a portfolio development advisory agreement with a related party entity and in connection with the agreement, the Company granted equity-classified warrants to purchase 250,000 shares of common stock with a ten -year term and an exercise price of $ 3.08 .

The August 2021 warrants vest as follows:

(a) 50% vests upon execution of the agreement, provided the advisor does not terminate the agreement prior to the end of the one -year term;

and (b) 50% vests 60 days after the end of the one -year term, subject to the Company's Board of Directors determining that the services provided have been adequately performed. Also, both the April 2021 

and August 2021 warrants vest in full if there is a change of control event, as defined in the agreement.

At September 30, 2021 , the Company had 396,502  equity classified warrants outstanding and 182,985  warrants were exercisable.

December 31, 2020 , the Company had 109,639 equity classified warrants outstanding and 85,472 warrants were exercisable.

The Company recorded stock compensation expense for equity classified warrants of $ 11,000 and $ 5,000 for the three and six months ended June 30, 2021 and 2020 , respectively and  $ 328,000 of unrecognized stock compensation expense related to the Company's equity classified warrants.

The Company recorded stock compensation expense for eq uity classified warrants of $ 422,000 and zero  for the three months ended 

September 30, 2021 and 2020 , respectively, and $ 432,000  and $5,000 during the 

nine months ended September 30, 2021 and 2020 , respectively.

September 30, 2021 , there was 

$ 632,000 of unrecognized stock compensation expense related to the Company's equity classified warrants.

2021 Stock Issuances

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The initial commitment shares issued in June 2021 were valued at $ 0.4 million, recorded as an addition to equity for the issuance of common stock and treated as a reduction to equity as a cost of capital to be raised under the Purchase Agreement.

There have been no additional shares issued to date under this agreement.

In February 2021, the Company entered into an underwritten public offering for the sale by the Company of 14,273,684 shares of its common stock at a public offering price of $ 4.75 per share and granted the underwriters a 30 -day option to purchase up to an additional 2,141,052 shares of common stock offered in the public offering, which was exercised.

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The 2015 Stock Plan provides for the grant of stock options, stock awards, stock unit awards, and stock appreciation rights.

As of June 30, 2021 , there were 43,628  shares remaining to be issued under the 2015 Stock Plan. 

Stock-based compensation for the three and six months ended June 30, 2021 and 2020 , respectively (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

As of September 30, 2021 , there wer e 43,628  s hares remaining to be issued under the 2015 Stock Plan. 

Stock-based compensation for the three and nine months ended September 30, 2021 and 2020 , respectively (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

General and administrative

$ 1,085  

$ 1,029  

Research and development

Total stock-based compensation expense

During the six months ended June 30, 2021 , the Company granted 532,865 stock options with a weighted average fair value of $ 3.24 per share and 150,000 shares of restricted stock units with a weighted average fair value of $ 3.73 per share.

$ 1,817  

$ 1,265  

During the nine months ended September 30, 2021 , the Company granted 532,865 stock options with a weighted average fair value of $ 3.24 per share at the date of grant and 150,000 shares of restricted stock units with a weighted average fair value of $ 3.73 per share at the date of grant.

These stock options have a weighted average exercise price of $ 3.75 per share and vest over a one to three -year period from the grant date on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards.

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The Company does not expect to pay any significant federal, state, or foreign income taxes in 2021  as a result of the losses recorded during the 

three and six months ended June 30, 2021 and the additional losses expected for the remainder of 2021 and cumulative net operating loss carryforwards.

three and nine months ended September 30, 2021 and the additional losses expected for the remainder of 2021 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 June 30, 2021  and 

As a result, as of September 30, 2021  and 

December 31, 2020 the Company maintained a full valuation allowance for all deferred tax assets.

The Company recorded no income tax provision for the three and six months ended June 30, 2021 and 2020 , respectively.

The effective tax rate for the six months ended June 30, 2021 and 2020  is 0 %.

The Company recorded no income tax provision for the three and nine months ended September 30, 2021 and 2020 , respectively.

The effective tax rate for the nine months ended September 30, 2021 and 2020  is 0 %.

The income tax rates vary from the federal and state statutory rates primarily due to the change in fair value of the stock warrants and valuation allowances on the Company’s deferred tax assets.

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Commitments and Contingencies

In addition to the commitments and contingencies described elsewhere in these notes, see below for a discussion of the Company's commitments and contingencies as of June 30, 2021 .

In addition to the commitments and contingencies described elsewhere in these notes, see below for a discussion of the Company's commitments and contingencies as of September 30, 2021 .

Lease Obligations Payable

The following summarizes quantitative information about the Company's operating leases for the three and six months ended June 30, 2021 and 2020 , respectively (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

The following summarizes quantitative information about the Company's operating leases for the three and nine months ended September 30, 2021 and 2020 , respectively (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Operating lease cost

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The Company recorded approximatel y $ 10,000  and $ 31,000  i n sublease income from a related party for the 

three and six months ended June 30, 2021 and 2020 , respectively.

three and nine months ended September 30, 2021 and 2020 , respectively.

Sublease income is recorded as other income, net on the Company's condensed consolidated statement of operations and comprehensive loss.

Operating cash flows from operating leases was $ 34,000 and $ 33,000 for the three months ended 

June 30, 2021 and 2020 , respectively, and $ 68,000 and $ 66,000 for the 

six months ended June 30, 2021 and 2020 , respectively. 

MD Anderson - Total expenses related to the Company's license agreements with MD Anderson were $ 56,000 a nd $ 61,000 for the three months ended June 30, 2021 and 2020 , respectively, and $ 94,000 and $ 122,000 for the six months ended June 30, 2021 and 2020 , respectively.

Operating cash flows from operating leases was $ 35,000 a nd $ 34,000 for the three months ended 

September 30, 2021 and 2020 , respectively, and $ 103,000 and $ 100,000 for the 

nine months ended September 30, 2021 and 2020 , respectively. 

MD Anderson - Total expenses related to the Company's license agreements with MD Anderson were $ 56,000 a nd $ 61,000 for the three months ended September 30, 2021 and 2020 , respectively, and $ 150,000 and $ 183,000 for the nine months ended September 30, 2021 and 2020 , respectively.

HPI - On March 16, 2020, the Company entered into two agreements with a related party, Houston Pharmaceuticals, Inc.

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The second agreement, which can be cancelled with sixty days' notice by either party, allows the Company's employees access to laboratory equipment owned by HPI for a payment of $ 15,000 per quarter to HPI.

Total expenses related to the Company's agreements with HPI wer e $ 59,000  for the three months ended June 30, 2021 and 2020 , respectively, and $ 117,000 and $ 167,000 for the six months ended June 30, 2021 and 2020 , respectively.

Sponsored Research Agreements with MD Anderson - MBI has a Sponsored Laboratory Study Agreement with MD Anderson expiring December 31, 2022. 

The expenses recognized under this MD Anderson agreement with regards to the Sponsored Laboratory Study Agreements wer e $ 184,000 a nd $ 212,000 for the three months ended June 30, 2021 and 2020 , respectively, and $ 278,000 a nd $ 358,000 for the six months ended June 30, 2021 and 2020 , respectively.

Total expenses related to the Company's agreements with HPI wer e $ 59,000  for the three months ended September 30, 2021 and 2020 , respectively, and $ 176,000 and $ 226,000 for the nine months ended September 30, 2021 and 2020 , respectively.

Sponsored Research Agreements with MD Anderson - MBI has a Sponsored Laboratory Study Agreement with MD Anderson expiring December 31, 2022.

 In July 2021, the Company amended its Sponsored Laboratory Study Agreement with MD Anderson for total payment of $ 175,000 to support the continuation of the project. The expenses recognized under this MD Anderson agreement with regards to the Sponsore d Laboratory Study Agreements wer e $ 220,000 a nd $ 212,000 for the three months ended September 30, 2021 and 2020 , respectively, and $ 498,000 a nd $ 537,000 for the nine months ended September 30, 2021 and 2020 , respectively.

Subsequent Events

In addition to the subsequent events discussed elsewhere in these notes, see below for a discussion of the Company's subsequent events occurring after June 30, 2021 .

In July 2021, the Company amended its Sponsored Laboratory Study Agreement with MD Anderson for total payment of $ 0.2 million to support the continuation of the project.

On August 10, 2021, the Company entered into a portfolio development advisory agreement with an entity affiliated with Dr.

Waldemar Priebe.

In connection with the services to be provided pursuant to the agreement, the Company agreed to issue the entity a ten -year warrant to purchase 250,000 shares of Company common stock with an exercise price of $3.08, which was equal to the market price of the Company’s common stock on the effective date of the agreement.

The warrant vest as follows:

(a) 50% vests upon execution of the agreement, provided the advisor does not terminate the agreement prior to the end of the one -year term;

and (b) 50% vests 60 days after the end of the one -year term, subject to the Company’s Board of Directors determining that the services to be provided have been adequately performed;

provided that the warrant shall vest in full upon a change of control event.

There were no additional subsequent events occurring after September 30, 2021  except those discussed elsewhere in these notes.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Our forward-looking statements reflect our current views about future events, are based on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements.

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

Our ability to continue our relationship with MD Anderson, including our ability to maintain current licenses and license future intellectual property resulting from our sponsored research agreements with MD Anderson;

The success or the lack thereof, including the ability to recruit patients of our clinical trials through all phases of clinical development;

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The impact of COVID-19 on our clinical trials, clinical drug candidate supplies, preclinical activities and our ability to raise future financing;

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

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Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements.

Overview 

We are a clinical stage pharmaceutical company focused on the treatment of highly resistant cancers and viruses.

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Anderson Cancer Center (MD Anderson).

These three core technologies are Annamycin, the WP1066 Portfolio, and the WP1122 Portfolio and include a total of six drug candidates, three of which have now shown human activity in clinical trials.

These three core technologies are Annamycin, the WP1066 Portfolio, and the WP1122 Portfolio and include a total of five drug candidates, three of which have now shown human activity in clinical trials.

Three Core Technologies

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An additional Phase 1/2 clinical trial of Annamycin in AML is also internally funded and is currently ongoing.

In 2021, we anticipate the initiation of four or more new clinical trials in addition to the three trials continuing from 2020.

We anticipate that the brain tumor trial at MD Anderson will be terminated this year and we expect a new, similar externally funded trial to begin elsewhere in 2022.

In 2021, we have initiated two additional clinical trials and we anticipate the initiation of two or more n ew clinical trials in addition to the three trials continuing from 2020, as discussed further below.

The brain tumor trial at MD Anderson will be terminated this year, as the original lead physician investigator moved to another institution, and we expect a new, similar externally funded trial to begin elsewhere in 2022.

Below we use certain terms to describe our clinical trials. By "internally funded”

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“Externally funded”

drug candidates include those for which preclinical work is funded and performed by external collaborators and for which clinical trials are physician sponsored.

drug candidates include those for which preclinical work is funded and performed by external collaborators and/or for which clinical trials are physician sponsored.

For externally funded research, any grant funds that support such preclinical work or clinical trials and most of the associated expenses are not reflected in our financial statements.

However, the costs of drug product and other minor supporting activities that we provide for externally funded preclinical activities and clinical trials are included in our financial statements.

Recently reported data from our sponsored research demonstrates that in AML mouse models, the combination of Annamycin with Ara-C (a chemotherapy drug commonly used in AML patients) has a synergistic effect, suggesting that this combination may be more beneficial for AML patients than Annamycin as a single agent. Accordingly, we plan to begin a Phase 1/2 clinical trial of Annamycin in combination with Ara-C for the treatment of AML in Europe, by seeking approval for our own internally funded clinical trial in Europe and possibly a second, similar trial through our sublicensee, WPD Pharmaceuticals, in Poland. Furthermore, we received U.S.

Recently reported data from our sponsored research demonstrates that in AML mouse models, the combination of Annamycin with Ara-C (a chemotherapy drug commonly used in AML patients) has a synergistic effect, suggesting that this combination may be more beneficial for AML patients than Annamycin as a single agent. Accordingly, and as one of the possible trials to be initiated mentioned above in 2021, we plan to begin a Phase 1/2 clinical trial of Annamycin in combination with Ara-C for the treatment of AML in Europe, by seeking approval for our own internally funded clinical trial in Europe and possibly a second, similar trial through our sublicensee, WPD Pharmaceuticals, in Poland. Furthermore, we received U.S.

Food and Drug Administration (FDA) clearance in late 2020 to proceed with a Phase 1b/2 clinical trial of Annamycin for the treatment of soft tissue sarcoma (STS) lung metastases and we began this internally funded trial in the U.S.

in the third quarter of 2021.

in the second quarter of 2021.

Additionally, we expect in 2021 a second Phase 1b/2 clinical trial of Annamycin in sarcoma lung metastases to be primarily investigator-funded in Europe.

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physician-sponsored Phase 1 trials, one at MD Anderson for the treatment of glioblastoma (GBM) in adults and another at Emory University for the treatment of pediatric brain tumors (including DIPG and medulloblastoma).

The brain tumor trial at MD Anderson will be terminated this year and we expect a new, similar externally funded trial to begin elsewhere in 2022.

We began and completed a "proof-of-concept" Phase 1 clinical trial in 2020 in Poland for a third drug, WP1220 (a molecule in the WP1066 Portfolio), for the topical treatment of cutaneous T-cell lymphoma (CTCL).

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If we are not successful in this outreach, we may choose to use internal funds to generate additional human data to facilitate such outreach efforts.

Finally, we are also in discussions with regulatory authorities in the United Kingdom (U.K.) to initiate a Phase 1 clinical trial of WP1122 in healthy volunteers with the intent to progress to COVID-19 patients either there or in locations where the prevalence of COVID-19 will adequately support recruitment.

Finally, we received authorization from regulatory authorities in the United Kingdom (U.K.) to commence a Phase 1a clinical trial of WP1122 in healthy volunteers with the intent to progress to COVID-19 patient s either there o r in locations where the prevalence of COVID-19 will adequately support recruitment.

We intend to internally fund the initial trials of WP1122 but may seek external funding opportunities.

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for the treatment of certain cancers with WP1122.

In summary, we had five clinical trials underway or concluded in 2020 and we now expect up to seven or more clinical trials to be underway or approved in 2021, including externally funded trials.

In summary, we had five clinical trials underway or concluded in 2020 and we now expect up t o six clinic al trials to be underway or approved in 2021, including externally funded trials, with more expected to begin in 2022.

Update on Clinical Trials and Licensing

Annamycin is currently in one Phase 1/2 clinical trial in Europe, and the Phase 1 portion of another Phase 1/2 AML trial in the U.S.

has been concluded, subject to final database lock and closure, which should occur in the third quarter of 2021. 

has been concluded, subject to final database closure, which should occur prior to the end of 2021.

The trial in Poland is in its fifth cohort, where patients are being treated at 240 mg/m2.

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In March 2021, patient 4 in this cohort experienced a similar DLT, which also resolved.

Although treatment was discontinued for Patients 2 and 4, a total of three patients in this cohort received the full dose of Annamycin without any DLTs and, based on preliminary data, all three responded to treatment, with one relapsed patient experiencing a complete response (CR), a refractory patient experiencing a partial response (PR) and another relapsed patient completely clearing circulating blasts.

With this preliminary data, 67% of the patients receiving a full course of treatment at 240 mg/m2 experienced clinical benefit. One of these patients was a refractory patient which experienced the PR.

Although treatment was discontinued for Patients 2 and 4, a total of three patients in this cohort received the full dose of Annamycin without any DLTs and, based on preliminary data, all three responded to treatment, with one relapsed patient experiencing a partial response , a refractory patient experiencing a partial response (PR) and another relapsed patient completely clearing circulating blasts.

With this preliminary data, 67% of the patients receiving a full course of treatment at 240 mg/m2 experienced clinical benefit.

It is also noteworthy that the patient with a PR was refractory to prior induction therapy and, as such, a response to single agent therapy is generally not expected.

Although the elevated liver enzymes described above meet the test of a “Dose Limiting Toxicity”

per the original clinical trial protocol, our medical advisors have determined that these instances were transient and self-limited with no evidence of serious sequalae (related longer-term negative effects) and, therefore, should not be considered DLTs in future patients unless these elevated enzyme levels do not return to near baseline (baseline or less than or equal to grade 1) within a reasonable time or if there is other evidence of serious sequalae. Based on this new data, we amended the protocol for this trial in Poland to change the DLT criteria as it relates to transient grade 3 elevations to allow us to dose three additional patients in the 240 mg/m2 cohort.

per the original clinical trial protocol, our medical advisors have determined that these instances were transient and self-limited with no evidence of serious sequalae (related longer-term negative effects) and, therefore, should not be considered DLTs in future patients unless these elevated enzyme levels do not return to near baseline (baseline or less than or equal to grade 1) within a reasonable time or if there is other evidence of serious sequalae. Based on this new data, we amended the protocol for this trial in Poland to change the DLT criteria as it relates to transient grade 3 elevations of liver enzymes to allow us to dose three additional patients in the 240 mg/m2 cohort.

This amendment was approved and granted allowance by regulatory authorities in Poland in July 2021.

If no DLT is experienced with these next three patients, we will escalate dosing in new cohorts by 30 mg/m2 instead of the 60 mg/m2 previously planned, and with a de-escalation of 15 mg/m2 at the DLT dose if future patients experience a DLT.

As of the end of October, one of the three patients needed to complete the cohort was admitted to the trial and began dosing.

Additionally, our sublicense partner, WPD Pharmaceuticals Sp.z o.o.

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WPD is a sub-licensee of certain technologies from us in 29 countries in Europe and Asia.

We plan to commence a similar trial combining Annamycin with Ara-C for the treatment of AML prior to the end of 2021 and possibly prior to this grant funded trial starting.

The grant-funded trial may begin in 2021 but since this is an externally funded trial subject to ongoing granting authority oversight, we cannot provide any assurance as to when or if it will commence.

Regarding our planned U.S.

clinical trial of Annamycin for the treatment of STS lung metastases, we executed a clinical trial agreement with Sarcoma Oncology Research Center, an institution in Santa Monica, CA to be the first clinical site.

In the second quarter of 2021 this trial began enrolling and dosing patients in its U.S.

Phase 1b/2 clinical trial evaluating Annamycin for the treatment of STS lung metastases.

We plan to commence a similar trial combining Annamycin with Ara-C for the treatment of AML prior to the end of 2021 and possibly prior to this grant funded trial s tarting.

The grant-funded trial should begin in the near term and sinc e this is an externally funded trial subject to ongoing granting authority oversight, we cannot provide any assurance as to when or if it will commence.

Regarding our ongoing U.S.

clinical trial of Annamycin for the treatment of STS lung metastases, we currently have three sites  open and active in the study and expect a total of five sites to be active by the first quarter of 2022.

In the second quarter of 2021 this trial began enrolling and dosing patients.

The three sites open are as follows:

1) Sarcoma Oncology Research Center in Santa Monica, CA;

2) Rutgers, The State University in New Brunswick, NJ;

and 3) Washington University in St.

On August 12, 2021, we announced that patients were treated in the first cohort at a dose level of 210 mg/m 2  with no drug-related adverse events constituting a dose limiting toxicity (DLT) during the 21-day DLT evaluation period, including no signs of cardiotoxicity.

The results for all three patients were reviewed in the Cohort Review Meeting, which determined that the trial could progress to the next higher dose level of 270 mg/m 2 .

On October 18, 2021, we announced that the second cohort had concluded safely and that the next cohort at the next higher dose level of 330 mg/m 2 would open.

Additionally, we reported that four of the five patients that have completed scans to date (from cohort one and two) demonstrated a response to treatment, including three with extended and, in one case, continuing stable disease and one patient with a substantial (>30%) reduction in tumor size, constituting a PR under the protocol.

The third cohort was opened the following week and one patient has enrolled and started treatment.

Two other patients have been identified.

 Further updates on patients will be announced at the end of the third cohort.

Earlier in 2021, we announced that the Agencja Badań

Medycznych (The Medical Research Agency) a Polish state agency responsible for development of scientific research in the field of medical and health sciences, awarded a grant equivalent to $1.5 million to the Maria Sklodowska-Curie National Research Institute to fund a Phase 1b/2 clinical trial of Annamycin for the treatment of STS lung metastases. The grant-funded clinical trial will be led by Prof.

Medycznych (The Medical Research Agency) a Polish state agency responsible for development of sc ientific research in the field of medical and health sciences, awarded a grant equivalent to $1.5 million to the Maria Sklodowska-Curie National Research Institute to fund a Phase 1b/2 clinical trial of Annamycin for the treatment of STS lung metastases. The grant-funded clinical trial will be led by Prof.

Piotr Rutkowski, MD, PhD, Head of Department of Soft Tissue/Bone Sarcoma and Melanoma at the Maria Sklodowska-Curie National Research Institute of Oncology in Warsaw, Poland.

Piotr Rutkowski will be assisted, in part, by WPD who will provide support in preparation for and conduct of the clinical trial, which is expected to begin this year.

Piotr Rutkowski will be assisted, in part, by WPD who will provide support in preparation for and conduct of the clinical trial , which is expected to begin befor e the end of the first quarter of 2022.

As this is a grant funded trial, we have limited input and control over timing.

As a part of the collaboration between Moleculin and Prof.

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As a result, and as expected, MD Anderson has notified us that they will be closing this trial.

Several additional institutions have expressed an interest in sponsoring similar research on WP1066 in brain tumors, so to help ensure the potential continuation of this important research, regardless of the sponsoring institution, we have requested the right to reference the MD Anderson IND, as provided for under our Clinical Trial Agreement with MD Anderson, in our own IND. We are working to continue this research in additional physician-sponsored trials in 2022.

Three patients have now been treated in the second cohort of the Phase 1 dose escalation portion of physician-sponsored clinical trial at Emory University for the treatment of pediatric brain tumors with WP1066 at the dose level of 8mg/kg and this dose has been deemed to be safe.

Two more patients will be treated at this dose level, and one of these patients has now begun treatment.

Emory University is amending its protocol to allow dosing at 16 mg/kg after these two additional patients have been dosed.

Several additional institutions have expressed an interest in sponsoring similar research on WP1066 in brain tumors, so to help ensure the potential continuation of this important research, regardless of the sponsoring institution, we hav e requested the right to reference the MD Anderson IND, a s provided for under our Clinical Trial Agreement with MD Anderson, in our own IND. We are working to continue this research in additional physician-sponsored trials in 2022.

One patient has been treated in the third cohort of t he Phase 1 dose escalation portion of physician-sponsored clinical trial at Emory University for the treatment of pediatric brain tumors with WP1066 at the dose level of 8mg/kg.

Two more patients will be treated at this dose level.

Emory University has amended its protocol to allow dosing at 16 mg/kg after these two additional patients have been dosed, and the third cohort dosing has been deemed safe.

Based on previously announced data demonstrating the antiviral potential of our lead antimetabolite molecule, WP1122, we intend to test the drug candidate for the potential treatment of COVID-19. Although we have previously disclosed that antiviral clinical trials in the U.S.

will be dependent upon demonstrating efficacy in an appropriate COVID-19 animal model, we recently engaged in discussions with the Medicines and Healthcare Products Regulatory Agency (MHRA) in the United Kingdom (U.K.) regarding the potential for beginning clinical trials of WP1122 without the need for additional preclinical animal efficacy models.

Based on our initial discussions with the MHRA, we believe that a COVID-19 animal model will not be required in order to receive approval for a clinical trial application (CTA) for a Phase 1 clinical trial beginning with healthy volunteers in that country, although no final determination has been made by the MHRA.

During the second quarter these discussions continued.

Based on their feedback, in August 2021 we submitted a CTA for a Phase 1 clinical trial of WP1122 in the U.K.

will be dependent upon demonstrating efficacy in an appropriate COVID-19 animal model, the Medicines and Healthcare Products Regulatory Agency (MHRA) in the United Kingdom (U.K.) is not making such animal data a requirement for a clinical trial application (CTA) for a Phase 1a clinical trial beginning with healthy volunteers in that country.

Based on their feedback, in August 2021 we submitted a CTA for a Phase 1a clinical trial of WP1122 for the treatment of COVID-19 in the U.K.

On October 19, 2021, we announced that we received authorization from regulatory authorities in the U.K.

to commence a Phase 1a clinical trial of WP1122 in healthy volunteers with the intent to progress to COVID-19 pati ents either there or in loca tions where the prevalence of COVID-19 will adequately support recruitment.

We intend to internally fund the initial trials of WP1122 but may seek external funding opportunities.

The preclinical work to evaluate molecules within the WP1122 portfolio of antimetabolites (which include molecules capable of inhibiting glycolysis and altering glycosylation) for viral indications is mostly similar to the preclinical work we originally planned as part of developing WP1122 for cancer indications.

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We continue to plan to submit such an IND in the U.S.

COVID-19 Impact on Clinical Trials

COVID-19 and Worldwide Supply Chain Issues 

In March 2020, the World Health Organization declared the outbreak of a novel Coronavirus (COVID-19) as a pandemic, which continues to spread throughout the world.

The spread of COVID-19 has caused significant volatility in U.S.

and international markets, including Poland, where we conduct some of our clinical trials and Italy, where our Annamycin drug supply is produced.

There has been limited interruption of our drug supply, and most Polish clinics where we are conducting trials are limiting access for monitoring activities, which could delay our ability to collect data and authorize new patient recruitment.

Additionally, we believe COVID-19 has materially slowed the ability of approved sites to recruit patients for our trials.

Although we have seen recent recruitment increase, this could worsen or be alleviated at any time.

There has been limited interruption of our drug supply, and most Polish clinics where we are conducting trials are limiting access for monitoring activities.

Additionally, we believe COVID-19 materially slowed the recruitment of patients for our clinical trials, but we are now beginning to see an increase in recruitment. This could worsen or be alleviated at any time.

Furthermore, there is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S.

and international economies and, as such, we are unable to determine if it will have a material impact to our operations.

Recently, we continue to experience a limited increase in activity with regard to recruitment of new patients in Poland.

Additionally, we believe that the potential for impact to our supply chain due to COVID-19 has been reduced as vaccine production normalizes throughout the industry.

Considering current worldwide trends with respect to COVID-19, we cannot determine whether COVID-19 will materially impact recruitment for current or future trials.

We are currently in discussions with MD Anderson regarding amendments to existing licenses and new licenses related to Annamycin and WP1122.

Additionally, we believe that the potential for impact to our supply chain due to COVID-19 will be reduced as vaccine production normalizes throughout the industry.

In the third quarter, worldwide supply chain issues began delaying certain shipments.

The supply chain for the manufacturing of our drug candidates and supplies for clinical trials can be complicated and involves several parties.

If we were to experience any supply chain issues, including as a result of the COVID-19 pandemic our product supply could be disrupted.

We believe that our operations have not been materially impacted to date.

In view of current worldwide trends with respect to COVID-19 and worldwide supply chain issues, we do not expect either issue to materially further impact recruitment for or the operation of current or future clinical trials.

However, we cannot be certain that these trends will continue and there is the possibility they may reverse. 

We receive requests for compassionate use (or its foreign equivalent) of our drug candidates in the ordinary course of business.

WP1066 and Annamycin have both been involved with such requests.

As we have very limited involvement in the treatment of such patients, we do not ordinarily report the details on such uses.

We are currently in discussions with MD Anderson regarding amendments to existing licenses and new licenses related to Annamycin and WP1122 and expect to execute the related amendments and new licenses by the end of 2021.

In the second quarter, we amended the WP1122 license to allow for an additional six-month extension to file a U.S.

IND for the application of WP1122 until February 2022 on the condition that we file a similar application in another country.

On August 3, 2021, we filed a CTA for the application of WP1122 in the United Kingdom, which filing satisfied the requirements under the license agreement.

On August 3, 2021, we filed a CTA for the application of WP1122 in the United Kingdom, which filing satisfied one of the requirements under the license agreement.

In addition, we intend to file a U.S.

IND for the application of WP1122 by February 2022.

IND for the application of WP1122 before the end of 2021, which will satisfy the remaining IND filing requirement.

We retain the right to further extend these dates within the amended agreement.

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Below are recent business developments.

Interim Data in Phase 1b/2 Clinical Trial of Annamycin for the Treatment of Soft Tissue Sarcoma Lung Metastases

On October 18, 2021, we announced the interim and preliminary data from the first two cohorts evaluating Annamycin for the treatment of soft tissue sarcoma lung metastases.

The data demonstrated 80% clinical activity, defined as stable disease or better.

We have noted that no DLT’s have been experienced to-date, including cardiotoxicity.

Patient enrollment in third cohort began subsequently. 

Approval to Extend Dose Escalation in Phase 1/2 European Clinical Trial Evaluating Annamycin for the Treatment of Acute Myeloid Leukemia

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FDA Approval of Fast Track Designation for Annamycin in the Treatment of Sarcoma Lung Metastases

On March 30, 2021, we announced that the FDA had approved our request for Fast Track Designation for our drug, Annamycin, for the treatment of STS lung metastases.

On March 30, 2021, we announced that the FDA had approved our request for Fast Track Designation for our drug, Annamycin, for the treatment of soft tissue sarcoma. 

Awarded New Rare Pediatric Disease Designation from U.S.

FDA for WP1066 for the Treatment of Ependymoma

On April 14, 2021, we announced that the FDA had granted Rare Pediatric Disease Designation (RPD) to our p-STAT3 inhibitor, WP1066, for the treatment of ependymoma.

On April 14, 2021, we announced that the FDA had granted Rare Pediatric Disease Designation (RPD) to our p-STAT3 inhibitor, WP1066, for the treatment of ependymoma, one of the four unique indications for which WP1066 now has RPD status.

Receives Authorization from the Medicines and Healthcare Products Regulatory Agency (MHRA) to Commence Phase 1a Clinical Trial of WP1122 for the Treatment of COVID-19

On October 19, 2021, we announced that we received authorization from the MHRA to commence a Phase 1a clinical trial of WP1122 in the United Kingdom.

We also announced we received a favorable opinion from the London - Riverside Research Ethics Committee in the U.K.

to begin the study, which is expected to be conducted at the Medicines Evaluation Unit in Manchester, United Kingdom.

IQVIA to Manage Potential COVID-19 Clinical Trial

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Condensed Consolidated Statements of Operations

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Operating expenses:

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Loss from operations

Other income (loss):

Gain (loss) from change in fair value of warrant liability

Other income:

Gain from change in fair value of warrant liability

Other income, net

Interest income, net

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

Research and Development Expense.

Research and development (R&D) expense was $3.0 million and $3.3 million for the three months ended June 30, 2021 and 2020, respectively.

Research and development (R&D) expense was $4.1 million and $4.4 million for the three months ended September 30, 2021 and 2020, respectively.

The decrease of $0.3 million is mainly related to the timing of costs incurred in 2020 of producing additional drug product for Annamycin clinical trials.

General and Administrative Expense.

General and administrative expense was $2.4 million and $1.7 million for the three months ended June 30, 2021 and 2020, respectively.

General and administrative expense was $2.0 million and $1.7 million for the three months ended September 30, 2021 and 2020, respectively.

The increase of $0.3 million is mainly related to an increase in consulting and advisory fees and an increase in our corporate insurance.

Gain from Change in Fair Value of Warrant Liability.

We recorded a net gain o f $1.2 million in the second quarter of 2021 as compared to a net loss of $5.1 million in the second quarter of 2020, for the change in fair value on revaluation of our warrant liability associated with our warrants issued in conjunction with our stock offerings.

We recorded a net gain o f $1.7 million in the third quarter of 2021 as compared to a net gain of $2.7 million in the third quarter of 2020, 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.

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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.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Research and Development Expense.

Research and development (R&D) expense was $7.1 million and $6.5 million for the six months ended June 30, 2021 and 2020, respectively.

The increase of $0.6 million is mainly related to increased clinical trial activity as described above, and costs related to manufacturing of additional drug product.

Research and development (R&D) expense was $11.2 million and $11.0 million for the nine months ended September 30, 2021 and 2020, respectively.

The increase o f $0.2  million i s mainly related t o increased clinical trial activity as described above, and costs related to manufacturing of additional drug product.

General and Administrative Expense.

General and administrative expense was $4.4 million and $3.5 million for the six months ended June 30, 2021 and 2020, respectively.

The increase of $0.9 million is mainly related to an increase in consulting and advisory fees and an increase in our corporate insurance.

General and administrative expense was $6.4 million and $5.1 million for the nine months ended September 30, 2021 and 2020, respectively.

The increase of  

$1.3  million i s mainly related to an increase in consulting and advisory fees and an increase in our corporate insurance.

Gain from Change in Fair Value of Warrant Liability.

We recorded a net g ain o f $2.8 million in the second quarter of 2021 as compared to a net loss of $1.3 million in the second quarter of 2020, for the change in fair value on revaluation of our warrant liability associated with our warrants issued in conjunction with our stock offerings.

We recorded a net gain o f $4.4 million in the third quarter of 2021 as compared to a net gain of $1.5 million in the third quarter of 2020, for the change in fair value on revaluation of our warrant liability associated with our warrants issued in conjunction with our stock offerings.

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

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash used in operating activities

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Net increase in cash and cash equivalents

As of June 30, 2021, there was $0.3 

million of cash on hand in a bank account in Australia and we know of no related limitations impacting our liquidity in Australia.

As of September 30, 2021, there was $0.3 million of cash on hand in a bank account in Australia and we know of no related limitations impacting our liquidity in Australia.

Cash used in operating activities

Cash used in operations was $10.4 million for the six months ended June 30, 2021.

This $1.1 million increase over the prior year period of $9.3 million was primarily due t o:

1) payments for developing, manufacturing and testing drug product as we prepared for clinical trials;

2) an increase in R&D contractor headcount and associated costs; 3) an increase in license fees and 4) increases in consulting and advisory fees as well as an increase in our corporate insurance.

Cash used in operations was $14.7 million for the nine months ended September 30, 2021.

Thi s $0.1 million increase over the prior year period of $14.6 million was primarily due t o payments for increased consulting and advisory fees as well as an increase in our corporate insurance.

These are all a reflection of the ongoing clinical and pre-clinical activity and the associated increase in general and administrative support for our three core drug technologies.

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As of the date of this report, there have been no issuances under the 2021 ATM Agreement.

In June 2021, we entered into a Purchase Agreement with Lincoln Park Capital Fund.

In June 2021, we entered into a Purchase Agreement with Lincoln Park Capital Fund (Lincoln Park Agreement).

Pursuant to the terms of the Purchase Agreement, Lincoln Park agreed to purchase from us up to $20.0 million of common stock (subject to certain limitations) from time to time during the term of the Purchase Agreement.

Pursuant to the terms of the Purchase Agreement, at the time we signed the Purchase Agreement, we issued 107,788 shares of common stock to Lincoln Park as an initial fee for its commitment to purchase shares of our common stock under the Purchase Agreement, and have agreed to issue Lincoln Park up to an additional 53,893 shares of common stock as commitment shares pro-rata when and if Lincoln Park purchases (at our discretion) the $20.0 million aggregate commitment. 

To date, we have not used the 2021 ATM Agreement nor the Lincoln Park Agreement to raise additional capital beyond what is described above.

In February 2021, we completed an underwritten public offering of an aggregate of 14,273,684 shares of common stock at a public offering price of $4.75 per share.

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Gross proceeds received due to these exercises approximated $5,000. 

We believe that our existing cash and cash equivalents as of June 30, 2021 will be sufficient to meet our projected operating requirements, which include a forecasted increase over our current R&D rate of expenditures, into the year 2024.

In July 2020, we issued 216,855 shares of common stock at an average price of $8.82 per share through the ATM Prospectus Supplement.

We received total proceeds of $1.9 million, net of $0.1 million in transaction expenses. 

We believe that our existing cash and cash equivalents as of September 30, 2021 will be sufficient to meet our projected operating requirements, which include a forecasted increase over our current R&D rate of expenditures, into the year 2024.

Such projections are subject to changes in our internally funded preclinical and clinical activities, including unplanned preclinical and clinical activity.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements