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Item 1. Financial Statements

2022-11-10 compared with 2022-08-12 · 247 added, 164 removed, 563 unchanged (42% 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;

28,606,706 and 28,578,338 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

28,627,827 and 28,578,338 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

14 unchanged sentences

(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:

Research and development

14,790  

11,239  

General and administrative

30 unchanged sentences

( 16 )  

( 38 )  

Comprehensive loss

6 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

38 unchanged sentences

$ 75,178  

Supplemental disclosures of cash flow information:

Non-cash investing and financing activities:

Purchases of property and equipment in accounts payable and accrued liabilities

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands, except for shares)

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Common Stock Subscribed

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$ 66,359  

Six Months Ended June 30, 2021

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

21,121  

( 11 )  

Stock-based compensation

Consolidated net loss

( 8,611 )  

Cumulative translation adjustment

( 19 )  

Balance, September 30, 2022

28,627,827  

$ 153,450  

$ ( 95,065 )  

$ 58,417  

Nine Months Ended September 30, 2021

Common Stock Subscribed

46 unchanged sentences

$ 84,700  

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  

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.

MBI is a clinical-stage pharmaceutical company, organized as a Delaware corporation in July 2015, which focuses 

on the treatment of highly resistant cancers and viruses through the development of its drug candidates, based substantially on discoveries licensed from The University of Texas System on behalf of the MD Anderson Cancer Center, which the Company refers to as MD Anderson.

MBI is a clinical-stage pharmaceutical company, organized as a Delaware corporation in July 2015, which focuses on the treatment of highly resistant cancers and viruses through the development of its drug candidates, based substantially on discoveries licensed from The University of Texas System on behalf of the MD Anderson Cancer Center, which the Company refers to as MD Anderson.

MBI formed Moleculin Australia Pty.

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

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

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

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

This sublicense was last amended in December 2021.

This sublicense was last amended in December 2021 and extended the assignment date in August 2022.

Also in 

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In the US and Europe, the Company has conducted, is currently conducting, or plans in the near term to conduct clinical trials for its drug candidates - Annamycin, WP1066, WP1220 (which is part of the WP1066 Portfolio), and WP1122.

All trials are or were in the Phase 1 portion except the WP1220 trial, which was a proof-of-concept trial, and one of the Annamycin trials which is moving into its Phase 2 portion of the trial in the second half of 2022.

In 2021 and early 2022, there were also three "right-to-try" (or their foreign equivalent) uses of Annamycin and WP1066.

At the beginning of 2022, all trials are or were in the Phase 1 portion, except the WP1220 trial, which was a proof-of-concept trial.

Recently, one of the Annamycin trials moved into its Phase 2 portion of the trial.

In 2021 and 2022, there were also multiple "right-to-try" (or their foreign equivalent) uses of Annamycin and WP1066.

The Company plans to conduct additional trials and is in the process of obtaining the appropriate regulatory approval and beginning those trials. The Company utilizes its own internal resources and funds to conduct some of these trials and also has trials being conducted via physician-sponsored trials which utilize primarily external funds, usually grant funds, which are not presented in the financial statements.

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

December 31, 2021 and notes thereto contained in the Form 10 -K filed with the SEC on March 24, 2022.

December 31, 2021 and for the year then ended, including the notes thereto contained in the Form 10 -K filed with the SEC on March 24, 2022.

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

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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, 2021 .

There have been no material changes to the significant accounting policies during the six months ended June 30, 2022 .

There have been no material changes to the significant accounting policies during the nine months ended September 30, 2022 .

Use of Estimates - The preparation of these condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.

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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 company 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, 2022  and 2021 , the Company incurred net losses of 

$ 13.6  million a n d $ 8.7  million, respectively, and had net cash flows used in operating activities o f 

$ 12.8  million an d $ 10.4  million, r espectively.

At June 30, 2022 , the Company had an accumulated deficit of 

$ 86.5  million and cash and cash equivalents of 

$ 58.0  million. T he Company expects its cash on hand as of June 30, 2022  will be sufficient to fund the Company's operations beyond the near term.

For the nine months ended September 30, 2022  and 2021 , the Company incurred net losses of $ 22.3  million and $ 13.1  million, respectively, and had net cash flows used in operating activities of $ 20.4  million and $ 14.7  million, respectively.

At September 30, 2022 , the Company had an accumulated deficit of $ 95.1  million and cash and cash equivalents of $ 50.4  million. The Company expects its cash on hand as of September 30, 2022  will be sufficient to fund the Company's operations beyond the near term.

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

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

June 30, 2022

September 30, 2022

December 31, 2021

Prepaid insurance

$ 1,262  

Prepaid sponsored research

$ 1,346  

Prepaid insurance

Vendor prepayments and deposits

Related party receivables

Non-trade receivables

Related party receivables

Total prepaid expenses and other current assets

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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, 2022 and December 31, 2021 (table in thousands): 

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

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

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

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

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The table below of Level 3 liabilities (table 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, 2022

Three Months Ended September 30, 2022

Warrant Liability Long-Term

Warrant Liability Total

Balance, March 31, 2022

$ 1,252  

Balance, June 30, 2022

Change in fair value - net

( 421 )  

Balance, June 30, 2022

The table below of Level 3 liabilities (table in thousands) begins with the valuation as of December 31, 2021  and then is adjusted for changes in fair value that occurred during the six months ended June 30, 2022 .

Balance, September 30, 2022

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Warrant Liability Long-Term

5 unchanged sentences

( 1,184 )  

Balance, June 30, 2022

Balance, September 30, 2022

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.

2 unchanged sentences

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, 2022 and 2021 , approximatel y 

For the three months ended September 30, 2022 and 2021 , approximately  

6.0  million and 

1 unchanged sentence

For the 

six months ended June 30, 2022 and 2021 , approximatel y 4.8  million an d 3.9 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, 2022 and 2021 , approximately 5.2  million an d 4.1  million, respectively, of potentially dilutive shares were excluded from the computation of diluted earnings per share due to their antidilutive effect.

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

See Note 8 - Subsequent Events.

Recent Accounting Pronouncements

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GAAP for certain financial instruments with characteristics of both liabilities and equity, including convertible instruments and contracts in an entity's own equity.

The guidance is effective for the Company beginning on January 1, 2022 and prescribes different transition methods for the various provisions. The Company's adoption of this pronouncement did not have a material impact on the Company's condensed consolidated financial statements.

The guidance was effective for the Company beginning on January 1, 2022 and prescribes different transition methods for the various provisions. The Company's adoption of this pronouncement did not have a material impact on the Company's condensed consolidated financial statements.

In May 2021, 

7 unchanged sentences

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

June 30, 2022

September 30, 2022

December 31, 2021

9 unchanged sentences

$ 2,258  

Additionally, accounts payable includes  $ 48,000  

as of June 30, 2022  and December 31, 2021 , for a related party payable.

Additionally, accounts payable includes  $ 72,000 and $ 48,000  

as of September 30, 2022  and December 31, 2021 , respectively, for related party payables.

Liability Classified Warrants

5 unchanged sentences

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

June 30, 2022

September 30, 2022

December 31, 2021

6 unchanged sentences

Dividend yield

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

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

Number of Shares

11 unchanged sentences

( 67,349 )  

Balance at June 30, 2022

Balance at September 30, 2022

2,656,296  

2 unchanged sentences

$ 9.49  

Exercisable at June 30, 2022

Exercisable at September 30, 2022

2,656,296  

2 unchanged sentences

$ 9.49  

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

Equity Classified Warrants

In June 2022, the Company granted equity-classified warrants to purchase 50,000 shares of common stock with a ten -year term and an exercise price of $ 1.49 vesting annually over four years while services are being performed. In August 2021, the Company entered into a portfolio development advisory agreement with a related party entity, associated with Dr.

In September 2022, the Company entered into a portfolio advisory agreement with a related party entity, associated with Dr.

Waldemar Priebe, and in connection with the agreement, the Company granted equity-classified warrants to purchase 250,000 shares of common stock with a ten -year term and an exercise price of $ 1.24 .

The September 2022 warrants vest as follows:

50% vests upon execution of the agreement, provided the advisor does not terminate the agreement prior to the first anniversary of the agreement;

and (b) 50% vests 60 days after the end of the one -year term, subject to the Company's Board of Directors determining that the services provided have been adequately performed. In June 2022, the Company granted equity-classified warrants to purchase 50,000 shares of common stock with a ten -year term and an exercise price of $ 1.49 vesting annually over four years while services are being performed. 

In August 2021, the Company entered into a portfolio development advisory agreement with a related party entity, associated with Dr.

Waldemar Priebe, and in connection with the agreement, the Company granted equity-classified warrants to purchase 250,000 shares of common stock with a ten -year term and an exercise price of $ 3.08 .

2 unchanged sentences

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

The Company's Board of Directors determined that the services had been adequately performed, and, as such, the August 2021 warrants are fully vested.

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

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

At June 30, 2022 , the Company ha d 446,502  eq uity classified warrants outstanding an d 193,710  wa rrants were exercisable.

At September 30, 2022 , the Company had 646,501  equity classified warrants outstanding and 272,284  warrants were exercisable.

December 31, 2021 , the Company had 396,502 equity classified warrants outstanding and 186,560  warrants were exercisable.

The Company recorded stock compensation expense for eq uity classified warrants of $ 83,000 and $ 11,000 for the three months ended 

June 30, 2022 and 2021 , respectively. The Company recorded stock compensation expense for equity classified warrants of $ 166,000 and $ 11,000 for the six months ended June 30, 2022 and 2021 , respectively. 

June 30, 2022 , there was $ 451,000 of unrecognized stock compensation expense related to the Company's equity classified warrants.

The Company recorded stock compensation expense for equity classified warrants o f $ 232,000 a nd $ 422,000 for the three months ended 

September 30, 2022 and 2021 , respectively, an d $ 398,000 and $ 432,000 for the nine months ended September 30, 2022 and 2021 , respectively. At 

September 30, 2022 , there was $ 507,000 of unrecognized stock compensation expense related to the Company's equity classified warrants.

2022 Stock Issuances

During the six months ended June 30, 2022 , the Company issued 28,368 shares of common stock related to the vesting of restricted stock units. 

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

2021 Stock Issuances

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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.

February 2021, the Company entered into an underwritten public offering for the sale by the Company of

14,273,684 shares of its common stock at a public offering price of

$ 4.75 per share and granted the underwriters a

30 -day option to purchase up to an additional

2,141,052 shares of common stock offered in the public offering, which was exercised.

The Company received total proceeds of

$ 78.0  million, prior to deducting the underwriting discount and other estimated offering expenses. In

January 2021 the Company issued

468,684 shares for gross proceeds of

$ 2.9 million using the Company's

2020 At The Market Agreement (

2020 ATM Agreement) with Oppenheimer & Co., Inc.

The Company terminated the

2020 ATM Agreement on

February 2, 2021. 

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

The Company received total proceeds of $ 78.0  million, prior to deducting the underwriting discount and other estimated offering expenses. In January 2021 the Company issued 468,684 shares for gross proceeds of $ 2.9 million using the Company's 2020 At The Market Agreement ( 2020 ATM Agreement) with Oppenheimer & Co., Inc.

The Company terminated the 2020 ATM Agreement on February 2, 2021. 

Stock-Based Compensation and Outstanding Awards

The 2015 Stock Plan, as amended and approved by the Company's stockholders in May 2022, provides for the grant of stock options, stock awards, stock unit awards, and stock appreciation rights.

As of June 30, 2022 , there wer e 756,462  sh ares remaining to be issued under the 2015 Stock Plan. 

Stock-based compensation for the three and six months ended June 30, 2022 and 2021 , respectively (table in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

As of September 30, 2022 , there were 752,296  s hares remaining to be issued under the 2015 Stock Plan. 

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

Three Months Ended September 30,

Nine Months Ended September 30,

General and administrative

$ 1,089  

$ 1,085  

Research and development

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$ 1,740  

During the six months ended June 30, 2022 , the Company granted 832,832  stock options with a weighted average fair value of $ 1.26 per share, a weighted average exercise price o f $ 1.49  per sh are that vest over a one to four -year period from the grant date on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards.

$ 1,817  

During the nine months ended September 30, 2022 , the Company grante d 842,832  s tock options with a weighted average fair value of $ 1.26 per share and a weighted average exercise price o f $ 1.49  per sh are, which options vest over a one to four -year period from the grant date on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards.

In addition, during the 

nine months ended September 30, 2022 , the Company granted 452,334 restricted stock units with a weighted average fair value of $ 1.49 per share, that vest over a four year period from the grant date on a straight line basis over the requisite service period. 

Income Taxes  

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The Company does not expect to pay any significant federal, state, or foreign income taxes in 2022  as a result of the losses recorded during the 

three and six months ended June 30, 2022 and the additional losses expected for the remainder of 2022  and cumulative net operating loss carryforwards.

three and nine months ended September 30, 2022 and the additional losses expected for the remainder of 2022  and cumulative net operating loss carryforwards.

Accounting standards require the consideration of a valuation allowance for deferred tax assets if it is “more likely than not”

that some component or all of the benefits of deferred tax assets will not be realized.

As a result, as of June 30, 2022  and 

As a result, as of September 30, 2022  and 

December 31, 2021 the Company maintained a full valuation allowance for all deferred tax assets.

The Company recorded no income tax provision for the three and six months ended June 30, 2022 and 2021 , respectively.

The effective tax rate for the six months ended June 30, 2022 and 2021  is 0 %.

The Company recorded no income tax provision for the three and nine months ended September 30, 2022 and 2021 , respectively.

The effective tax rate for the nine months ended September 30, 2022 and 2021  is 0 %.

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

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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, 2022 .

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

Lease Obligations Payable

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

Three Months Ended September 30,

Nine Months Ended September 30,

Operating lease cost

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In June 2022, the Company extended the Lab Lease for its lab space until September 30, 2027, with no further right or option to renew.

The Company will continue to be required to remit base monthly rent which will increase at an average approximate rate of 3 % per year. The Company recorded approximatel y $ 10,000 and $ 21,000  i n sublease income from a related party for the 

three and six months ended June 30, 2022 and 2021 , respectively.

The Company will continue to be required to remit base monthly rent which will increase at an average approximate rate of 3 % per year.

The Company recorded approximately $ 12,000 and $ 10,000  i n sublease income from a related party for the three months ended September 30, 2022 and 2021 , respectively, and $ 32,000 and $ 31,000 for the nine months ended 

September 30, 2022 and 2021 , respectively.

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

Operating cash flows from operating leases w as $ 35,000 an d $ 34,000 for the three months ended 

June 30, 2022 and 2021 , respectively, and $ 70,000  

and $ 68,000 for the 

six months ended June 30, 2022 and 2021 , respectively.

MD Anderson - Total expenses related to the Company's license agreements with MD Anderson were  $ 56,000  for the three months ended June 30, 2022 and 2021 , respectively, and $ 133,000  

Operating cash flows from operating leases w as $ 21,000 and $ 35,000 for the three months ended 

September 30, 2022 and 2021 , respectively, and $ 91,000  and $ 103,000 for the 

nine months ended September 30, 2022 and 2021 , respectively.

MD Anderson - Total expenses related to the Company's license agreements with MD Anderson were  $ 56,000  f or the three months ended September 30, 2022 and 2021 , an d $ 189,000  

and $ 150,000 for the 

six months ended June 30, 2022 and 2021 , respectively.

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

The first agreement, which has a term of two years, continues a prior consulting arrangement with HPI on the Company's licensed molecules and requires payments of $ 43,500 per quarter to HPI.

The Company renewed the agreement in May 2022.

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 f or the three months ended June 30, 2022 and 2021 , respectively, and $ 117,000 for the six months ended June 30, 2022 and 2021  respectively.

nine months ended September 30, 2022 and 2021 , respectively.

HPI - The Company has two agreements with a related party, Houston Pharmaceuticals, Inc.

The first agreement, which was renewed in May 2022, continues a prior consulting arrangement with HPI and requires payments of $ 43,500 per quarter. The second agreement, which can be cancelled with sixty days' notice by either party, allows access to laboratory equipment owned by HPI for a payment of $ 15,000 per quarter.

Total expenses related to the Company's agreements with HPI w ere $ 59,000 for each of the 

three months ended September 30, 2022 and 2021 , and $ 176,000  for each of the nine months ended September 30, 2022 and 2021 .

Sponsored Research Agreements - In June 2022, the Company entered into a new Sponsored Research Agreement with MD Anderson for a total payment of $ 1.3 million to support the continuation of the project through December 31, 2024.

In addition, 

the Company also has Sponsored Research Agreements with other universities, one in the US and one in Europe. T otal expenses related to the Company's Sponsored Research  Agreements wer e $ 313,000  a nd $ 184,000 for the three months ended June 30, 2022 and 2021 , respectively, and $ 500,000  

and $ 278,000 for the six months ended June 30, 2022 and 2021 , respectively.

In addition, the Company also has Sponsored Research Agreements with other universities, one in the US and one in Europe. Total expenses related to the Company's Sponsored Research Agreements were $ 315,000  and $ 220,000 for the three months ended September 30, 2022 and 2021 , respectively, and $ 815,000  and $ 498,000 for the nine months ended September 30, 2022 and 2021 , respectively.

License Terminations 

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Additionally, in March 2021, the Company determined the stability of WP1732, a molecule in the WP1066 Portfolio was less than satisfactory and, as such, in March 2021 the Company terminated its license for WP1732 with MD Anderson.

Total expenses related to the Company's license terminations were zero for the three months ended June 30, 2022 and 2021 , respectively, and $ 400,000 and zero for the six months ended June 30, 2022 and 2021 , respectively.

In October 2022, the Company entered into a two -year option on a license for WP1732.

Total expenses related to the Company's license terminations were zero for each of the three months ended September 30, 2022 and 2021 , and $ 400,000 and zero for the nine months ended September 30, 2022 and 2021 , respectively.

Subsequent Events

In addition to the subsequent events discussed elsewhere in these notes, see below for a discussion of a subsequent event occurring after June 30, 2022 .

On December 19, 2021, the Company consented to allow WPD, upon a default to a third -party lender that had advanced funds to WPD (the “Lender”), to assign the WPD Agreement to the Lender, subject to certain conditions, including such assignment occurring prior to December 1, 2022, and subject to the Lender granting us the right to terminate the WPD Agreement upon any assignment as described in such consent.

On August 9, 2022, the Company extended the date by which the assignment must occur until December 31, 2023.

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

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

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.

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Our ability to continue our relationship with MD Anderson, including, but not limited to, our ability to maintain current licenses and license future intellectual property resulting from our sponsored research agreements with MD Anderson;

The success or the lack thereof, including the ability to recruit patients on a timely basis, for a variety of reasons, of our clinical trials through all phases of clinical development;

The success or the lack thereof, including the ability to recruit subjects on a timely basis, for a variety of reasons, of our clinical trials through all phases of clinical development;

Our ability to satisfy any requirements imposed by the US Food & Drug Administration (FDA) (or its foreign equivalents) as a condition of our clinical trials proceeding or beginning as planned;

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b) our WP1066 Portfolio, which includes WP1066 and WP1220, two of several Immune/Transcription Modulators in the portfolio designed to inhibit p-STAT3 (phosphorylated signal transducer and activator of transcription) among other transcription factors associated with tumor activity, while also stimulating a natural immune response to tumors by inhibiting the errant activity of Regulatory T-Cells (TRegs);

and c) our WP1122 Portfolio, which contains compounds (including WP1122, WP1096, WP1097) designed to exploit, amongst other uses, the potential uses of inhibitors of glycolysis such as 2-deoxy-D-glucose (2-DG), which we believe may provide an opportunity to cut off the fuel supply of tumors by taking advantage of their high level of dependence on glucose in comparison to healthy cells, as well as target the roles of glycolysis and glycosylation in viruses, such as SARS-CoV-2 (the virus responsible for COVID-19).

Recent Business Developments

Below are recent business developments.

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

On July 28, 2022, we announced that with five US sites active in our MB-107 clinical trial, the safety review of the fourth cohort in a dose escalation clinical trial evaluating Annamycin for the treatment of soft tissue sarcoma (STS) lung metastases was completed, thus concluding the Phase 1b portion of our U.S.

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

On October 11, 2022, we received another report from an independent cardiology expert assessing recent subjects in two of our trials (fifth cohort in MB-105 and the first four cohorts in MB-107) covering 18 subjects.

This assessment concluded with “there was no preliminary signal of excessive cardiotoxicity (indeed, no cardiotoxicity) with Annamycin at the administered doses in this dataset.” This brings a total of 42 subjects in our three trials utilizing Annamycin where no evidence of cardiotoxicity has been identified by an independent expert cardiologist.

All expert reviews included analysis of ejection fraction, echo strain and certain troponin levels intended to assess the potential for both acute and chronic heart damage. We will, of course, continue to gather these and other data as our trials continue, as they are essential to ultimately demonstrating the safety and effectiveness of Annamycin.

For the Treatment of Soft Tissue Sarcoma Lung Metastases

Enrolled First Subjects and Began Treatment in the MB-107 Phase 2 Portion of Phase 1b//2 Study of  

Annamycin In Subjects With Previously Treated Soft Tissue Sarcomas With Pulmonary Metastases

During the third quarter of 2022, we treated in a Phase 2 portion of the MB-107 Phase 1b/2 clinical trial of Annamycin for the treatment of soft tissue sarcoma (STS) lung metastases the first three subjects at 360 mg/m 2 .

Due to adverse events (primarily myelosuppression, which is anticipated with high doses of anthracycline therapy) in the first three subjects, we lowered the Recommended Phase 2 Dose (RP2D) to 330 mg/m 2 in October 2022 and we believe that this lower dose will enable continued treatment of subjects with fewer interruptions.

Our experience with subjects in the Phase 1b portion of this trial suggested that while 360 mg/m 2 may be tolerated by subjects initially, continued treatment may be delayed or interrupted due to adverse events, primarily myelosuppression, hence lowering the dose from 360 mg/m 2 to 330 mg/m 2 was contemplated in advance of beginning the Phase 2 expansion pending results from the first three subjects in the expansion phase. We expect to treat at least 25 subjects in this Phase 2 portion of the clinical trial.

In October 2022, we began dosing the first subject at this new RP2D and enrolled a second subject.

In this trial, Annamycin is being used to treat subjects who had prior anthracycline therapy. Accordingly, each of the three subjects treated at 360 mg/m 2 had disease progression following prior treatment.

In these first three subjects treated at 360 mg/m 2 , we have received the following preliminary data from the sites:

The first subject received two cycles of Annamycin at 360 mg/m 2  but with a two-week delay between the two cycles due to myelosuppression.

The end of cycle 2 scan showed that the target lesions were stable but there was disease progression with new lesions.

The second subject received two cycles with the second cycle reduced to 330 mg/m 2  due to myelosuppression.

We do not have the data from the end of cycle 2 scan.

The third subject received one cycle and had a serious adverse event (also myelosuppression) and exited the study.

Based on a clinical exam, the subject was deemed to have disease progression upon exit.

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

On October 28, 2022, we were notified that the two subjects were dosed in the Phase 1b/2 Study of Liposomal Annamycin (L-Annamycin) in subjects with previously treated soft-tissue sarcomas (STS) with pulmonary metastases at the Maria Sklodowska-Curie National Research Institute of Oncology.

We are collaborating with WPD Pharmaceuticals (WPD) and physicians in Poland in this physician-sponsored clinical trial in Europe.

The grant-funded clinical trial is led by Prof.

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

The trial will use a dosing regimen of once weekly for three weeks in a 28-day cycle rather than once every 21 days as in the US trial.

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

On July 28, 2022, we announced that with five US sites active in our MB-107 clinical trial, the safety review of the fourth cohort in a dose escalation clinical trial evaluating Annamycin for the treatment of STS lung metastases was completed, thus concluding the Phase 1b portion of our U.S.

Phase 1b/2 clinical trial.

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The safety review committee (SRC) deemed the dose of 390 mg/m 2 to be safe after conclusion of the fourth cohort.

Notwithstanding that this dose level was deemed to be safe, tolerability issues present at the 390 mg/m 2 dose level caused delays in follow-on cycles and the reduction of subsequent doses, suggesting that a Recommended Phase 2 Dose (RP2D) below 390 mg/m 2 was warranted.

Consistent with the recommendation of the SRC, we determined that the RP2D will be 360 mg/m 2 for the first three subjects in the Phase 2 portion of the study.

The SRC will then review the clinical safety data at this dose and determine whether the RP2D should be further reduced to 330 mg/m 2 prior to proceeding with the additional 22 subjects.

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

for discussion regarding final determination of RP2D.

In addition to continuing to assess safety, including gathering additional information about short-term side effects and possible risks, this Phase 2 portion of the study will also explore the efficacy of Annamycin as a single agent for the treatment of subjects with STS lung metastases for whom prior chemotherapy has failed, and for whom new chemotherapy is considered appropriate.

In the Phase 1b portion of the study, 15 subjects were enrolled and treated per the protocol in four cohorts to determine the maximum tolerable dose and/or the RP2D.

In the Phase 1b portion of the study, fifteen subjects were enrolled and treated per the protocol in four cohorts to determine the maximum tolerable dose and/or the RP2D.

Of the fifteen subjects, all received prior anthracycline treatment and had disease progression prior to entering our study.

Each cohort had three subjects, except for the fourth cohort, which (per the protocol) was expanded to six subjects after a dose-limiting toxicity occurred in a single subject.

Up to 28 subjects, to account for potential over enrollment, will be enrolled at the RP2D in Phase 2 to focus more on quantifying efficacy as well as providing additional safety information.

Of the fifteen subjects treated per the protocol, two continue with treatment, and eight subjects have been followed without evidence of disease progression for two months or greater, with three of the eight free of disease progression for 120 days or more.

These data are early-stage, preliminary and subject to change, and there is no guarantee that such results will be replicated in the Phase 2 portion of the trial.

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

On May 5, 2022, we announced that we received allowance from the Polish Department of Registration of Medicinal Products (URPL), as well as the requisite Ethics Committee approval, to proceed with our Phase 1/2 clinical trial in Poland of Annamycin in combination with Cytarabine (also known as “Ara-C”

and for which the combination of Annamycin and Ara-C is referred to as AnnAraC) in the treatment of subjects with acute myeloid leukemia (AML) who are refractory to or relapsed after induction therapy.

Up to twenty-eight subjects, to account for potential over enrollment, will be enrolled at the RP2D in Phase 2 to focus more on quantifying efficacy as well as providing additional safety information.

For the Treatment of Acute Myeloid Leukemia

Opened Enrollment in the Phase 1 Portion of the Phase 1/2 Study of Annamycin  

in Combination with Cytarabine for the Treatment of Subjects with Acute Myeloid Leukemia (AML) That is Refractory to or Relapsed After Induction Therapy

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

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

The Phase 1/2 AnnAraC trial (MB-106), an open label trial, builds on the safety and dosage data from the two successfully concluded single agent Annamycin AML Phase 1 trials (MB-104 and MB-105) in the U.S.

and Europe, respectively, and the preclinical data from our sponsored research studies.

The clinical trial is expected to commence patient enrollment in the third quarter of 2022. 

Presentation of Positive Preclinical Annamycin Data at the AACR 2022 Annual Meeting

Presented Positive Preclinical Annamycin Data at the AACR 2022 Annual Meeting

On April 8, 2022, we announced that preclinical data of Annamycin tested in syngeneic models of metastatic colorectal cancer established in lungs or liver was accepted for poster presentation at the American Association for Cancer Research (AACR) Annual Meeting 2022, which was held April 8-13, 2022, in New Orleans, Louisiana.

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Annamycin exhibited robust antitumor activity in both models.

We believe that this study demonstrating efficacy of Annamycin in colorectal cancer models provides compelling evidence for further preclinical development aimed at initiation of clinical studies in metastatic colorectal cancer patients. 

We believe this study demonstrating efficacy of Annamycin in colorectal cancer models provides compelling evidence for further preclinical development aimed at supporting the initiation of clinical studies in metastatic colorectal cancer patients. 

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

In 2021, Emory University researchers filed and received clearance to proceed with an IND for a trial to treat children and young adults (up to age 25) with recurrent or refractory malignant brain tumors without a known cure with WP1066.

This trial, which is externally funded except for study drug supplied by us, is being conducted at the Aflac Cancer & Blood Disorders Center at Children's Healthcare of Atlanta.

In October 2022, the Emory trial enrolled the last subject in the last cohort at 8 mg/kg.

Discussions are underway to explore WP1066 in combination with radiation on similar tumors in a Phase 2 clinical trial in the near future.

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

During the third calendar quarter of 2022, we continued discussions with two academic institutions in separate programs for the treatment of brain tumors.

We expect one to be a Phase 1b/Phase 2 Clinical Trial with WP1066 combined with radiation for the treatment of adult glioblastoma.

We expect this trial to begin in the first half of 2023.

The other, we expect, will focus on the use of WP1066 for an expanded access program for gliomas that harbor G34R mutations, and we expect this program to begin in the first half of 2023.

Continued Compassionate Use of WP1066

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

Moved Intravenous and Other Formulations of WP1066 into Preclinical Testing

Starting in 2020, we began developing an appropriate intravenous (IV) formulation for WP1066 or its analogs.

As a result of these studies, we believe the lead molecule WP1066 may be our best candidate in this portfolio for intravenous administration, and efforts are underway to identify and optimize the best strategy for IV delivery.

In the third quarter of 2022, we identified two IV formulas to move into preclinical testing while working on improving oral delivery as well.

We believe our WP1066 Portfolio represents a novel class of agents capable of focusing on multiple targets, including the activated form of a key oncogenic transcription factor, STAT3.

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

On April 21, 2022, we announced that we received allowance from the FDA for our Investigative New Drug (IND) application to study WP1066 for the treatment of recurrent malignant glioma.

With this IND now cleared, we plan to evaluate strategic partnerships and collaborations to conduct a Phase 1 open label, single arm, dose escalation study of the safety, pharmacokinetics and efficacy of oral WP1066 in adult patients with recurrent malignant glioma.

We expect the clearance of this IND to further support the ongoing pediatric studies being conducted by a team at Emory University, and we are evaluating the potential for additional externally funded investigator-initiated studies.

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

With this IND now cleared, we plan to evaluate strategic partnerships and collaborations to conduct a Phase 1 open label, single arm, dose escalation study of the safety, pharmacokinetics, and efficacy of oral WP1066 in adult subjects with recurrent malignant glioma.

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

In late October 2022 after further review of the data and in discussions with our clinical team, we determined that the maximum tolerated dose (MTD) for WP1122 is a daily cumulative dose of 32 mg/kg in two divided doses for seven days, and we concluded the Phase 1a Clinical Trial of WP1122.

We believe this will advance future studies of WP1122 in antiviral and oncology indications.

With an IND active for WP1122 for the treatment of glioblastoma and a COVID-19 investigator sponsored trial in Brazil in the approval process, we have concluded that advancing WP1122 in these indications will occur only if external funds are available.

We will begin to close out the Phase 1a study and generate the clinical study report.

With this Phase 1a study coming to a successful conclusion earlier than expected, and with our decision to limit further development to studies for which external funding is available, we believe we are positioned to reduce the use of internal funds on WP1122.

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

On October 14, 2022, we provided an update on the preliminary results from the second multiple ascending dose (MAD) cohort of our first-in-human Phase 1a study of WP1122.

This cohort consisted of an initial 4 subjects, who were scheduled to be dosed daily for 7 days with 64 mg/kg/day of WP1122 or placebo in the dose escalation trial evaluating the safety and pharmacokinetics (PK) of WP1122 in healthy volunteers in the United Kingdom (UK).

In conjunction with the study safety review committee, we stopped the second MAD cohort when 2 subjects experienced non-serious adverse events that, although asymptomatic, met the stoppage criteria in the protocol.

Although we considered the potential to open a third MAD cohort (2a) to dose subjects at a reduced dose level of 48mg/kg, we subsequently determined that the primary objectives of this Phase 1a study had already been met by establishing a safe and tolerable dose and that continued testing with healthy volunteers would not be a wise use of resources.

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

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

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

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

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

On August 19, 2022, we announced preliminary results from the third cohort of our first-in-human Phase 1a study of WP1122.

This cohort consisted of 10 subjects dosed with 32 mg/kg or placebo in the dose escalation trial evaluating the safety and pharmacokinetics (PK) of WP1122 in healthy volunteers in the United Kingdom (UK).

Based on the overall results in Cohort 3, the Safety Review Committee (SRC) for the study deemed the third single ascending dose (SAD) cohort dose safe and well-tolerated, allowing us to begin our fourth SAD Cohort with a dose escalation to 64 mg/kg.

Additionally, dosing of WP1122 in the multiple ascending dose (MAD) cohorts was to commence at a total daily dose of 32 mg/kg, which had shown to be safe in the single dose cohort.

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

On July 8, 2022, we announced preliminary results from the second cohort of our first-in-human Phase 1a study of WP1122. This cohort consisted of 8 subjects dosed with 16 mg/kg or placebo in the dose escalation trial evaluating the safety and pharmacokinetics (PK) of WP1122 in healthy volunteers in the United Kingdom (UK).

Based on the overall results in Cohort 2, the SRC deemed the second cohort dose safe and well-tolerated and began our SAD Cohort 3 with a dose escalation to 32 mg/kg.

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

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

On June 16, 2022, we announced preliminary results from the first cohort of our first-in-human Phase 1a study of WP1122. This cohort consisted of 9 subjects dosed with 8 mg/kg or placebo in the dose escalation trial evaluating the safety and PK of WP1122 in healthy volunteers in the UK.

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

On May 10, 2022, we announced that we received approval from the UK's MHRA to proceed with a first-in-human Phase 1a study to evaluate the safety and pharmacokinetics of WP1122 in healthy volunteers for the treatment of COVID-19 (MB-301).

The approval follows us having submitted a protocol amendment allowing for a higher ratio of diluting excipients to drug substance to facilitate a faster and simpler mixing procedure before drug administration.

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

The approval followed us having submitted a protocol amendment allowing for a higher ratio of diluting excipients to drug substance to facilitate a faster and simpler mixing procedure before drug administration.

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

On May 9, 2022, Dr.

Andrei Carvalho Sposito, as the sponsor, with the University of Campinas, Brazil, posted with clinicaltrials.gov a possible Phase 1, multi-center, dose escalation study that is to be followed by a Phase 2 randomized, double-blind, placebo-controlled study of the safety and efficacy of WP1122 administered q12h ±1 hr PO in adult patients with COVID-19 who require hospitalization with respiratory support.

The Phase 1 component, if such study occurs, will enroll COVID-19 positive patients who are symptomatic, and the Phase 2 component, if such study occurs, will enroll adults with COVID-19 who require hospitalization for respiratory support and those patients requiring intubation with mechanical ventilation. The initiation of this trial is subject to Brazilian government approvals, contract negotiations with the University of Campinas, and the evolving epidemiology of COVID-19, all of which will determine if we believe that such a study is feasible and inform our decision as to whether to support such a study with drug product and ancillary services.

There is no assurance that the foregoing trials will be commenced by the University of Campinas or that we will choose to be involved in any such trials.

We are currently in discussions with MD Anderson regarding an amendment to an existing license and a new license related to our core technologies.

Such discussions are in the ordinary course of our business.

Engages Wolfram C.

Andrei Carvalho Sposito, as the sponsor, with the University of Campinas, Brazil, posted with clinicaltrials.gov a possible Phase 1, multi-center, dose escalation study that is intended to be followed by a Phase 2 randomized, double-blind, placebo-controlled study of the safety and efficacy of WP1122 administered q12h ±1 hr PO in adult subjects with COVID-19 who require hospitalization with respiratory support.

The Phase 1 component, if such study occurs, will enroll COVID-19 positive subjects who are symptomatic, and the Phase 2 component, if such study occurs, will enroll adults with COVID-19 who require hospitalization for respiratory support and those subjects requiring intubation with mechanical ventilation. The initiation of this trial is subject to Brazilian government approvals, contract negotiations with the University of Campinas, and the evolving epidemiology of COVID-19, all of which will determine if we believe that such a study is feasible and inform our decision as to whether to support such a study with drug product and ancillary services.

There is no assurance that the foregoing trials will be commenced and funded by the University of Campinas.

In October 2022 with MD Anderson, we entered into an option on the WP1732 portfolio, a STAT3 inhibitor, and a license for novel esters of 2-deoxy-glucose with high anti-proliferative activity.

Discussions with MD Anderson regarding our core technologies are in the ordinary course of our business. 

Engaged Wolfram C.

Dempke, MD, PhD, MBA as its European Chief Medical Officer

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Dempke, MD, PhD, MBA, MRCP as our EU - Chief Medical Officer and part-time contractor for our European clinical trials. Dr.

Dempke currently serves as the Vice President, Scientific Solutions:

Dempke served as the Vice President, Scientific Solutions:

Hematology & Oncology, at Worldwide Clinical Trials.

He holds oncology/hematology society memberships in the U.S.

He has published five textbooks and more than 150 peer-reviewed papers.

He has contributed to five textbooks and more than 150 peer-reviewed papers.

Dempke continues to teach classes in the Munich University Medical Oncology department, Germany, and he continues to see patients on a monthly basis.

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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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Interest income, net

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

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

Research and Development Expense.

Research and development (R&D) expense was $4.2 million a nd $3.0 million for the three months ended June 30, 2022 and 2021, respectively.

The increase of $1.2  million is main ly 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 $6.0 million and $4.1 million for the three months ended September 30, 2022 and 2021, respectively.

The increase of $1.9 million is mainly related 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 $3.2 million a nd $2.4 million for the three months ended June 30, 2022 and 2021, respectively.

The increase of $0.8  million is mainly relate d to an increase in regulatory and legal services.

General and administrative expense was $3.1 million and $2.0 million for the three months ended September 30, 2022 and 2021, respectively.

The increase of $1.1 million is mainly related to an increase in regulatory and legal services.

Gain from Change in Fair Value of Warrant Liability.

We recorded a net gain o f $0.6 million in the second quarter of 2022 as compared to a net gain of $1.2 million in the second quarter of 2021, for the change in fair value on revaluation of our warrant liability associated with our warrants issued in conjunction with our stock offerings.

We recorded a net gain of $0.4 million in the third quarter of 2022 as compared to a net gain of $1.7 million in the third quarter of 2021, for the change in fair value on revaluation of our warrant liability associated with our warrants issued in conjunction with our stock offerings.

We are required to revalue our liability-classified warrants at the time of each warrant exercise, if applicable, and at the end of each reporting period and reflect in the statement of operations a gain or loss from the change in fair value of the warrant in the period in which the change occurred.

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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, 2022 Compared to Six Months Ended June 30, 2021

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

Research and Development Expense.

Research and development (R&D) expense was $8.8 

million a nd $7.1 million for the six months ended June 30, 2022 and 2021, respectively.

The increase of $1.7 

million is mainly relat ed to increased clinical trial activity as described above, a license termination fee, and costs related to manufacturing of additional drug product .

 R&D expense was $14.8 million and $11.2 million for the nine months ended September 30, 2022 and 2021, respectively.

The increase of $3.6 million is mainly relate d to increased clinical trial activity as described above, a license termination fee, and costs related to manufacturing of additional drug product.

General and Administrative Expense.

General and administrative expense was $5.6  million a nd $4.4 million for the six months ended June 30, 2022 and 2021, respectively.

The increase of $1.2  million is mainly related to an increase in regulatory and legal services, consulting and advisory fees .

General and administrative expense was $8.7 million and $6.4 million for the nine months ended September 30, 2022 and 2021, respectively.

Th e increase of $2.3 million is mainly related to a n increase in regulatory and legal services, consulting and advisory fees.

Gain from Change in Fair Value of Warrant Liability.

We recorded a net gain o f $0.8 million during the six months ended June 30, 2022 as compared to a net gain of $2.8 million during the six months ended June 30, 2021, for the change in fair value on revaluation of our warrant liability associated with our warrants issued in conjunction with our stock offerings.

We recorded a net gain of $1.2 million during the nine months ended September 30, 2022 as compared to a net gain of $4.4 million during the nine months ended September 30, 2021, for the change in fair value on revaluation of our warrant liability associated with our warrants issued in conjunction with our stock offerings.

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

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash used in operating activities

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Net (decrease) increase in cash and cash equivalents

As of June 30, 2022, there w as $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, 2022, there w as $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 $12.8 million for the six months ended June 30, 2022.

Thi s $2.4 million increase over the prior year period of $10.4 million was primarily due t o payments for increased clinical trial activity, costs related to manufacturing of additional drug product, and increased consulting, legal, and advisory fees. 

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

Cash used in operations was $20.4 million for the nine months ended September 30, 2022.

Thi s $5.7 million increase over the prior year period of $14.7 million was primarily due t o payments for increased clinical trial activity, costs related to manufacturing of additional drug product, and increased consulting, legal, and advisory fees. These are all a reflection of the ongoing clinical and pre-clinical activity and the associated increase in general and administrative support for our three core drug technologies.

Cash (used in) provided in financing activities

We did not sell any stock during the six months ended June 30, 2022.

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

In June 2021, we entered into an At Market Issuance Sales Agreement (2021 ATM Agreement) with Oppenheimer & Co.

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Gross proceeds received due to these exercises approximated $63,000.

We believe that our existing cash and cash equivalents as of June 30, 2022 will be sufficient to meet our projected operating requirements, which include a potential increase over our current R&D rate of expenditures, beyond the second quarter of 2024.

We believe that our existing cash and cash equivalents as of September 30, 2022 will be sufficient to meet our projected operating requirements, which include a potential increase over our current R&D rate of expenditures, beyond the second quarter of 2024.

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

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In March 2022, we received a subpoena from the SEC requesting information and documents, including materials related to certain individuals (none of which are our officers or directors) and entities, and materials related to the development of and statements regarding our drug candidate for the treatment of COVID-19.

To date, there have been no further information requests. We are not aware of the specific nature of the underlying investigation by the SEC, and to the extent that this investigation relates to prior public disclosures that we have made, we believe in the accuracy and adequacy of such prior disclosures.

We have received, and expect to continue to receive, periodic further requests from the SEC staff with respect to this matter.

We are not aware of the specific nature of the underlying investigation by the SEC, and to the extent that this investigation relates to prior public disclosures that we have made, we believe in the accuracy and adequacy of such prior disclosures.

The correspondence from the SEC transmitting the subpoena to us states that the SEC is trying to determine whether there have been any violations of federal securities laws, but that its investigation does not mean that the SEC has concluded that anyone has violated the law or that the SEC has a negative opinion of any person, entity, or security. We cannot predict when this matter will be resolved or what, if any, action the SEC may take following the conclusion of the investigation.

During the quarter ended and for the six months ended June 30, 2022, we have expended approximately $0.8 million in related legal fees and expenses.

We estimate that potentially an additional $2 million in legal costs will be recognized in the second half of 2022 in connection with our response to this subpoena.

During the quarter ended and for the nine months ended September 30, 2022, we have expended approximately $1.1 million and  $1.9 

million, respectively, in related legal fees and expenses.

We estimate that potentially an additional $1.0 million in legal costs will be recognized in the last quarter of 2022 in connection with our response to this subpoena.

Critical Accounting Policies and Significant Judgments and Estimates

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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