What changed in this filing

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Item 1. Financial Statements

2023-05-10 compared with 2022-11-10 · 274 added, 522 removed, 288 unchanged (73% of the section changed)

3 unchanged sentences

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

September 30,

Current assets:

29 unchanged sentences

100,000,000 shares authorized;

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

29,600,323 and 28,627,827 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Additional paid-in capital

10 unchanged sentences

$ 57,422  

See accompanying notes to unaudited condensed consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

Moleculin Biotech, Inc.

1 unchanged sentence

(in thousands, except share and per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Operating expenses:

Research and development

14,790  

11,239  

General and administrative

1 unchanged sentence

Total operating expenses

23,592  

17,763  

Loss from operations

( 8,354 )  

( 6,157 )  

( 23,592 )  

Other income:

3 unchanged sentences

$ ( 7,915 )  

$ ( 4,379 )  

$ ( 22,255 )  

Net loss per common share - basic and diluted

$ ( 0.28 )  

$ ( 0.15 )  

$ ( 0.78 )  

Weighted average common shares outstanding, basic and diluted

2 unchanged sentences

$ ( 7,915 )  

26,302,638  

$ ( 8,611 )  

$ ( 4,379 )  

$ ( 22,255 )  

Other comprehensive loss:

Foreign currency translation

( 19 )  

( 16 )  

( 38 )  

Comprehensive loss

$ ( 7,919 )  

$ ( 4,395 )  

$ ( 22,293 )  

See accompanying notes to unaudited condensed consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

Moleculin Biotech, Inc.

1 unchanged sentence

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

3 unchanged sentences

Stock-based compensation

License rights expense settled in stock

Change in fair value of warrant liability

3 unchanged sentences

Prepaid expenses and other current assets

( 1,507 )  

Accounts payable

( 156 )  

Accrued expenses and other current liabilities

3 unchanged sentences

Purchase of fixed assets

( 67 )  

Net cash used in investing activities

( 67 )  

Cash flows from financing activities:

Proceeds from exercise of warrants

Payment of tax liability for vested restricted stock units

( 23 )  

Proceeds from sale of common stock, net of issuance costs

74,685  

Net cash (used in) provided by financing activities

( 23 )  

74,724  

Net cash provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

( 38 )  

Net change in cash and cash equivalents

( 20,511 )  

Net decrease in cash and cash equivalents

( 5,880 )  

Cash and cash equivalents, at beginning of period

Cash and cash equivalents, - beginning of period

43,145  

70,903  

Cash and cash equivalents, at end of period

Cash and cash equivalents, - end of period

$ 37,265  

$ 66,104  

See accompanying notes to unaudited condensed consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

Moleculin Biotech, Inc.

1 unchanged sentence

(in thousands, except for shares)

Nine Months Ended September 30, 2022

Common Stock Subscribed

Accumulated  

Par Value Amount

Three Months Ended March 31, 2023

Par Value Amount

2 unchanged sentences

Other Comprehensive Income (Loss)

Subscription Receivable

Stockholder's Equity

Total Stockholders' Equity

Balance, December 31, 2022

28,578,338  

$ 151,733  

$ ( 72,810 )  

$ 78,993  

Issuance of common stock with equity purchase agreement

Common stock issued for license rights

Stock-based compensation

Consolidated net loss

( 6,867 )  

Cumulative translation adjustment

Balance, March 31, 2023

28,578,338  

$ 152,260  

$ ( 79,677 )  

$ 72,665  

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

28,368  

( 12 )  

Stock-based compensation

Consolidated net loss

( 6,777 )  

Cumulative translation adjustment

( 31 )  

Balance, June 30, 2022

28,606,706  

$ 152,762  

$ ( 86,454 )  

$ 66,359  

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

Par Value Amount

Three Months Ended March 31, 2022

Par Value Amount

2 unchanged sentences

Other Comprehensive Income (Loss)

Subscription Receivable

Stockholders' Equity

Total Stockholders' Equity

Balance, December 31, 2021

11,536,720  

26,966  

$ 74,671  

$ ( 56,916 )  

$ ( 129 )  

$ 17,760  

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

16,883,420  

( 26,966 )  

74,537  

74,684  

Reverse stock split

14,285  

( 60 )  

Warrants exercised

10,000  

Stock-based compensation

Consolidated net loss

( 4,445 )  

Cumulative translation adjustment

Balance, March 31, 2022

28,444,425  

$ 149,788  

$ ( 61,361 )  

$ 88,516  

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

107,788  

Subscription of common stock in connection with Consulting Agreement

( 10 )  

Stock-based compensation

Consolidated net loss

( 4,244 )  

Cumulative translation adjustment

Balance, June 30, 2021

28,552,213  

$ 150,231  

$ ( 65,605 )  

$ ( 10 )  

$ 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.

See accompanying notes to condensed consolidated financial statements.

Moleculin Biotech, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

Notes to the 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 formed Moleculin Australia Pty.

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

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

In 2019, the Company sublicensed essentially all of the rights to its technologies in over 25 countries in Europe and Asia to WPD Pharmaceuticals Sp.z o.o.

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

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

Also in 

2019, the Company sublicensed its technologies to Animal Life Sciences, Inc.

(ALI), to enable research and commercialization for non-human use and share development data.

As part of this agreement, ALI issued to the Company a 10 % interest in ALI.

The Company has three core technologies, based substantially on discoveries made at and licensed from MD Anderson.

Having six drug candidates, three of which have now shown human activity in clinical trials, the Company believes that success in its lead program, Annamycin, has allowed and will allow further pipeline expansion into multiple high-value oncology indications.

The Company's core technologies consist of the following:

a) Annamycin;

b) WP1066 Portfolio;

and c) WP1122 Portfolio.

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

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

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

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

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

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

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

MBI is a clinical-stage pharmaceutical company, organized as a Delaware corporation in July 2015, with clinical programs for hard-to-treat cancers and viruses.

The Company has three core technologies, each of which have had one or more drugs successfully complete a Phase 1 clinical trial, based substantially on discoveries made at and licensed from The University of Texas System on behalf of the MD Anderson Cancer Center (MD Anderson) in Houston, Texas. The Company has two wholly owned subsidiaries, Moleculin Australia Pty.

Ltd., which was set up to perform certain preclinical development and Moleculin Amsterdam B.V., which acts as its legal representative for clinical trials in Europe. The Company utilizes its own internal resources and funds to conduct some of these trials and also has trials being conducted via physician-sponsored trials.

The physician-sponsored trials utilize primarily external funds, such as grant funds, which are not presented in these financial statements. The Company does not have manufacturing facilities and all manufacturing activities are contracted out to third parties.

Additionally, the Company does not have a sales organization.

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

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

Reverse Stock Split - On January 29, 2021, the Company filed a Certificate of Amendment to its amended and restated certificate of incorporation with the Secretary of State of the State of Delaware to effect a reverse stock split of all the issued and outstanding shares of the Company's common stock at a ratio of 1 for 6 .

The accompanying condensed consolidated financial statements and notes to the condensed consolidated financial statements give retroactive effect to the reverse stock split for all periods presented.

Certain amounts in the financial statements, the notes thereto, and elsewhere in the Form 10 -Q 

may be slightly different than previously reported due to rounding up of fractional shares as a result of the reverse stock split.

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

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

Basis of Presentation –

Unaudited Condensed Consolidated Financial Information - The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the U.S.

Condensed Consolidated Financial Information - The accompanying condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the U.S.

GAAP) for financial information, and in accordance with the rules and regulations of the U.S.

Securities and Exchange Commission (SEC) with respect to Form 10 -Q and Article 8 of Regulation S- X.

Securities and Exchange Commission (SEC) with respect to Form 10 -Q and Article 8  of Regulation S- X.

Accordingly, they do not include all of the information and footnotes required by U.S.

GAAP for complete financial statements.

The unaudited condensed consolidated financial statements furnished reflect all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair statement of results for the interim periods presented.

The condensed consolidated financial statements furnished reflect all normal adjustments, which are, in the opinion of management, necessary for a fair statement of results for the interim periods presented.

Interim results are not necessarily indicative of the results for the full year.

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

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

December 31, 2022 and for the year then ended, including the notes thereto contained in the Form 10 -K filed with the SEC on March 22, 2023.

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

Principles of Consolidation - The accompanying 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.

The Company views its operations and manages its business in one operating segment.

All long-lived assets of the Company reside in the U.S.

All material long-lived assets of the Company reside in the U.S.

Significant Accounting Policies - The Company's significant accounting policies are described in Note 2, Basis of Presentation, principles of consolidation and significant accounting policies , to the consolidated financial statements included in the Company's Annual Report on Form 10 -K for the year ended December 31, 2022 .

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

There have been no material changes to the significant accounting policies during the three months ended March 31, 2023 .

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.

10 unchanged sentences

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

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

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

For the three months ended March 31, 2023  and 2022 , the Company incurred net losses of 

$ 7.9  million and $ 6.9  million, respectively, and had net cash flows used in operating activities o f 

$ 6.0  million a nd $ 4.8  million, respectively.

At March 31, 2023 , the Company had an accumulated deficit o f 

$ 109.8  million and cash and cash equivalents of 

$ 37.3  million. T he Company expects its cash on hand as of March 31, 2023  will be sufficient to fund the Company's operations beyond the near term.

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

The Company does not expect to experience positive cash flows from operating activities in the near future and anticipates incurring operating losses for the next few years as it supports the development of its core technologies to the point of generating revenue, most likely via outlicensing, and continues to invest in research and development for additional applications of the Company's core technologies and potentially increase its pipeline of drug candidates.

The Company does not expect to experience positive cash flows from operating activities in the near future and anticipates incurring operating losses for the next few years as it supports the development of its core technologies to the point of generating revenue, most likely via out-licensing, and continues to invest in research and development for additional applications of the Company's core technologies and potentially increase its pipeline of drug candidates.

If the Company needs to raise additional capital in order to continue to execute its business plan, there is no assurance that additional financing will be available when needed or that management will be able to obtain financing on terms acceptable to the Company.

A failure to raise sufficient capital could adversely impact the Company's ability to achieve its intended business objectives and meet its financial obligations as they become due and payable.

A failure to raise sufficient capital could adversely impact the Company's ability to achieve its intended business objectives and meet its financial obligations as they become due and payable. In March 2022, the Company received a subpoena from the SEC requesting information and documents, including materials related to certain individuals ( none of which are the Company's officers or directors) and entities, and materials related to the development of and statements regarding the Company's drug candidate for the treatment of COVID- 19.

The Company has received, and expects to continue to receive, periodic further requests from the SEC staff with respect to this matter.

The Company is 

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 it has made, the Company believes in the accuracy and adequacy of such prior disclosures.

The correspondence from the SEC transmitting the subpoena to the Company states that the SEC is 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.

The Company 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 three months ended March 31, 2023 and 2022 , the Company has expensed approximately $ 0.5  million 

and $ 0.1 million, respectively, in related general and administrative fees and expenses.

Cash and Cash Equivalents - Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents.

1 unchanged sentence

The Company has not experienced any losses from cash balances in excess of the insurance limit.

The Company’s management does not believe the Company is exposed to significant credit risk at this time due to the financial condition of the financial institution where its cash is held.

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

September 30, 2022

December 31, 2021

Prepaid sponsored research

$ 1,346  

Prepaid insurance

Vendor prepayments and deposits

Non-trade receivables

Related party receivables

Total prepaid expenses and other current assets

$ 3,101  

$ 1,594  

The Company’s management does not believe the Company is exposed to significant credit risk at this time due to the financial condition of the financial institution where its cash is held. 

Fair Value of Financial Instruments - The Company's financial instruments consist primarily of non-trade receivables, accounts payable, accrued expenses and its warrant liability.

11 unchanged sentences

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 3.

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:

The following table provides the financial liabilities reported at fair value and measured on a recurring basis at March 31, 2023 and December 31, 2022 (table in thousands): 

Fair value of warrant liability as of March 31, 2023:

Fair value of warrant liability as of December 31, 2022:

$ 1,412  

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

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

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

Three Months Ended September 30, 2022

Warrant Liability Long-Term

Warrant Liability Total

Balance, June 30, 2022

Change in fair value - net

( 421 )  

Balance, September 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 nine months ended September 30, 2022 .

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

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Warrant Liability Long-Term

Warrant Liability Total

Balance, December 31, 2022

$ 1,412  

Change in fair value - net

( 1,184 )  

Balance, September 30, 2022

Balance, March 31, 2023

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.

1 unchanged sentence

Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents.

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

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

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

For the three months ended March 31, 2023 and 2022 , approximatel y 

6.2  million and 

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

For the 

nine months ended September 30, 2022 and 2021 , approximately 5.2  million 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.

4.8  million, respectively, of potentially dilutive shares were excluded from the computation of diluted earnings per share due to their anti-dilutive effect. 

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

See Note 8 - Subsequent Events. 

Recent Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No.

2020 - 06, Debt with Conversion and Other Options (Subtopic 470 - 20 ) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815 - 40 ) (ASU 2020 - 06 ).

ASU 2020 - 06 simplifies the complexity associated with applying U.S.

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

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

In May 2021, 

the FASB issued ASU No.

2021 - 04, Earnings Per Share (Topic 260 ), Debt - Modifications and Extinguishments (Subtopic 470 - 50 ), Compensation - Stock Compensation (Topic 718 ), and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815 - 40 ):

Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options.

ASU 2021 - 04 clarifies certain aspects of the current guidance to promote consistency among reporting of an issuer's accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange.

The amendments in this update were effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company's adoption of this pronouncement effective January 1, 2022 did not have a material impact on the Company's condensed consolidated financial statements.

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

Accrued Expenses and Other Current Liabilities

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

September 30, 2022

December 31, 2021

Accrued research and development

$ 1,336  

$ 1,005  

Accrued legal, regulatory, professional and other

Accrued payroll and bonuses

Operating lease liability - current

Accrued liabilities due to related party

Total accrued expenses and other current liabilities

$ 2,794  

$ 2,258  

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

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

See Note 7  - Subsequent Events. 

Recent Accounting Pronouncements 

- There are no recently issued accounting standards updates that are currently expected to have a material impact on the Company. 

Liability Classified Warrants

The Company uses the Black-Scholes option pricing model to determine the fair value of its warrants at the date of issue and outstanding at each reporting date.

The Company uses the Black-Scholes option pricing model (BSM) to determine the fair value of its warrants at the date of issue and outstanding at each reporting date.

The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S.

2 unchanged sentences

Only the volatility of the Company's own stock is used in the Black-Scholes option pricing model. 

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

September 30, 2022

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

March 31, 2023

December 31, 2022

6 unchanged sentences

Dividend yield

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

A summary of the Company's liability classified warrant activity during the three months ended March 31, 2023 and related information follows: 

Number of Shares

6 unchanged sentences

Balance at January 1, 2023

2,723,645  

$ 6.30  

$ 16.80  

$ 9.46  

( 67,349 )  

Balance at September 30, 2022

2,656,296  

$ 6.30  

$ 16.80  

$ 9.49  

Exercisable at September 30, 2022

2,656,296  

$ 6.30  

$ 16.80  

$ 9.49  

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.

Expired warrants

Balance at March 31, 2023

Exercisable at March 31, 2023

For a summary of the changes in fair value associated with the Company's warrant liability for the three months ended March 31, 2023 , see Note 2 - Basis of presentation, principles of consolidation and significant accounting policies - Fair Value of Financial Instruments.

Equity Classified Warrants

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

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

The September 2022 warrants vest as follows:

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

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

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

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

The August 2021 warrants vest as follows:

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

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

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

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

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

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

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

The Company recorded stock compensation expense for equity classified warrants 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 nine months ended September 30, 2022 , the Company issued 49,489  shares of common stock related to the vesting of restricted stock units. 

2021 Stock Issuances

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

Pursuant to the terms of the 2021 ATM Agreement, the Company may offer and sell, from time to time through Oppenheimer shares of the Company's common stock with an aggregate sales price of up to $ 50.0 million.

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

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

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

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

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

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

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

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

At March 31, 2023 , the Company had 646,501  eq uity classified warrants outstanding and 404,434  warrants were exercisable.

December 31, 2022 , the Company had 646,501 equity classified warrants outstanding and 400,859 warrants were exercisable.

The Company recorded stock compensation expense for the non-employee consulting agreements o f $ 46,000  a nd $ 83,000 for the three months ended 

March 31, 2023 and 2022 , respectively. At 

March 31, 2023 , there was $ 391,000  of unrecognized stock compensation expense related to the Company's equity classified warrants.

Lincoln Park Equity Line

During the three months ended March 31, 2023 , pursuant to the 2021 Lincoln Park purchase agreement, the Company issued to Lincoln Park 150,381  shares of common stock for gross proceeds of $ 0.1  million and in 

April 2023, the Company issued an additional 

75,187  shares of common stock, resulting in gross proceeds of $ 0.1 million.

The 2021 Lincoln Park Agreement, which has $ 19.8 million available, terminates in June 2024.

Other Components of Equity

In March 2023, the Company and WPD agreed to terminate the WPD Agreement.

Pursuant to the termination, the Company agreed to pay WPD (or its designees) $ 700,000 in cash and shares of its common stock valued at $ 800,000 .

March 2023, the Company issued 822,115 shares of common stock to WPD (or its designee) to satisfy this commitment.

See Note 6  - Commitments and Contingencies.

Stock-Based Compensation and Outstanding Awards

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

As of September 30, 2022 , there were 752,296  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,

The 2015 Stock Plan provides for the grant of stock options, stock awards, stock unit awards, and stock appreciation rights to employees, non-employee directors and consultants.

As of March 31, 2023 , there wer e 

752,296  shar es remaining to be issued under the 2015 Stock Plan. 

Stock-based compensation expense for the three months ended March 31, 2023 and 2022 , respectively, is as follows (table in thousands): 

Three Months Ended March 31,

General and administrative

$ 1,089  

$ 1,085  

Research and development

Total stock-based compensation expense

$ 1,740  

$ 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 2023  as a result of the losses recorded during the 

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

three months ended March 31, 2023 and the additional losses expected for the remainder of 2023  and cumulative net operating loss carryforwards.

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

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

As a result, as of September 30, 2022  and 

As a result, as of March 31, 2023  and 

December 31, 2022 the Company maintained a full valuation allowance for all deferred tax assets.

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

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

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

The Company recorded no income tax provision for the three months ended March 31, 2023 and 2022 , respectively.

The effective tax rate for the three months ended March 31, 2023 and 2022  is nil .

The income tax rates vary from the federal and state statutory rates primarily due to the change in fair value of the stock warrants, Internal Revenue Code Section 162 (m) limitations and ISO activity, as well as the valuation allowances on the Company’s deferred tax assets.

The Company estimates its annual effective tax rate at the end of each quarterly period.

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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 September 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 March 31, 2023 .

Lease Obligations Payable

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

Three Months Ended September 30,

Nine Months Ended September 30,

The following summarizes quantitative information about the Company's operating leases for the three months ended March 31, 2023 and 2022 , respectively (table in thousands):

Three Months Ended March 31,

Operating lease cost

Variable lease cost

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

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

The Company recorded approximately $ 12,000 and $ 10,000  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.

In June 2022, the Company extended the lab lease until September 30, 2027, with no further right or option to renew.

The Company recorded approximately $ 12,000  and $ 10,000  i n sublease income from a related party for the three months ended March 31, 2023 and 2022 , 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 $ 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 

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

Operating cash flows from operating leases w as $ 38,000  a nd $ 35,000 for the three months ended 

March 31, 2023 and 2022 , respectively.

Licenses 

MD Anderson - Total expenses related to the Company's license agreements with MD Anderson were  $ 64,000  and $ 76,000 f or the three months ended March 31, 2023 and 2022 , 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. 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.

(HPI) with total expenses of 

$ 59,000 for 

each of the 

three months ended March 31, 2023 and 2022

Sponsored Research Agreements - The Company has a sponsored research agreement with MD Anderson expiring December 31, 2024.

In April 2023, the Company entered into an amendment to the Sponsored Research Agreement with MD Anderson for total payment of $ 0.7  million to support the continuation of the project.

In addition, the Company also has Sponsored Research Agreements with other universities, one in the US and one in Europe.

The expenses recognized under the agreements were $ 155,000  a nd $ 187,000 for the three months ended March 31, 2023 and 2022 , respectively.

License Terminations 

Since February 2019, 

the Company was party to a sublicense agreement with WPD Pharmaceuticals (WPD), pursuant to which it sublicensed to WPD certain intellectual property rights, including rights to Annamycin, its WP1122 portfolio, and its WP1066 portfolio (as amended, the “WPD Agreement”).

WPD is affiliated with Dr.

Waldemar Priebe, the Company's founder.

In March 2023, the Company and WPD agreed to terminate the WPD Agreement and agreed to pay WPD (or its designee) $ 700,000 in cash and shares of its common stock valued at $ 800,000 .

March 2023, the Company issued 822,115 shares of common stock to WPD's designee to satisfy this commitment. With the termination of the WPD Agreement, the Company now has acquired the rights in certain territories previously sub-licensed to WPD to all of its licensed intellectual property, other than the rights related to non-human animals.

Additionally, the Company acquired the in-process research and development that WPD has created during the term of the agreement.

In February 2022, the Company and Exploration Invest Pte Ltd.

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

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

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

(Exploration) entered into a license termination agreement pursuant to which the Company agreed to pay Exploration $ 400,000  to terminate certain License Agreements and extend confidentiality requirements until the 10 -year anniversary of the license termination agreement. Total expenses, reflected in research and development expenses, related to the Company's license terminations were $ 1.5 million and $ 0.4 million for the three months ended March 31, 2023 and 2022 , respectively.

Subsequent Events

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

In addition to the subsequent events discussed elsewhere in these notes, see below for a discussion of subsequent events occurring after March 31, 2023 .

On May 5, 2023, 

the Company received a letter from NASDAQ notifying the Company that for the last 

30  consecutive business days the bid price for the Company's common stock had closed below the minimum $ 1.00  per share requirement for continued inclusion on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 

5550 (a)( 2 ) (the "Bid Price Rule").

The deficiency letter does 

not  result in the immediate delisting of the Company's common stock from the Nasdaq Capital Market.

In accordance with Nasdaq Listing Rule 

5810 (c)( 3 )(A), the Company has been provided an initial period of 

180  calendar days, or until 

November 1, 2023, 

to regain compliance with the Bid Price Rule.

If, at any time before November 1, 2023, 

the bid price for the Company's common stock closes at $ 1.00  or more for a minimum of 

10  consecutive business days, the Nasdaq Staff will provide written notification to the Company that it complies with the Bid Price Rule, unless the Staff exercises its discretion to extend this 

10  day period pursuant to Nasdaq Listing Rule 

5810 (c)( 3 )(G).

If the Company is 

not  in compliance with the Bid Price Rule by November 1, 2023, 

the Company 

be afforded a 

second  

180  calendar day period to regain compliance.

To qualify, the Company would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, except for the minimum bid price requirement.

In addition, the Company would be required to notify Nasdaq of its intent to cure the minimum bid price deficiency, which 

include, if necessary, implementing a reverse stock split.

If the Company does 

not  regain compliance with the Bid Price Rule by November 1, 2023, 

not  eligible for an additional compliance period at that time, the Nasdaq Staff will provide written notification to the Company that its common stock 

The Company would then be entitled to appeal the Nasdaq Staff’s determination to a NASDAQ Listing Qualifications Panel and request a hearing.

There can be 

no  assurance that, if the Company does appeal a delisting determination by the Nasdaq Staff to the NASDAQ Listing Qualifications Panel, that such appeal would be successful. The Company intends to monitor the closing bid price of its common stock and 

may ,  if appropriate, consider available options to regain compliance with the Bid Price Rule, which could include effecting a reverse stock split.

However, there can be 

no  assurance that the Company will be able to regain compliance with the Bid Price Rule.

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

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

Our ability to source our drug products at reasonable prices;

Compliance with obligations under intellectual property licenses with third parties;

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

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

Our ability and third parties’

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

We are a clinical stage pharmaceutical company with a growing pipeline of clinical programs for the treatment of highly resistant cancers and viruses.

We have three core technologies, based substantially on discoveries made at and licensed from MD Anderson Cancer Center (MD Anderson) in Houston, Texas.

We have six drug candidates, three of which have now shown human activity in clinical trials.

Core Technologies

We are a clinical stage pharmaceutical company with a growing pipeline, including Phase 2 clinical programs for hard-to-treat cancers and viruses. We have three core technologies, each of which have had one or more drugs successfully complete a Phase 1 clinical trial (subject to publishing final Clinical Study Report), based substantially on discoveries made at and licensed from MD Anderson Cancer Center (MD Anderson) in Houston, Texas.

Three of our six drug candidates have shown human activity in clinical trials and are currently in Phase 1b/2 or Phase 2 clinical trials.

Since our inception, our drugs have completed, are currently in, or have received approval to proceed in eleven clinical trials.

Our Core Technologies

Our core technologies consist of the following:

a) Annamycin, a “next generation”

anthracycline designed to eliminate the cardiotoxicity associated with currently prescribed anthracyclines (Annamycin has no material cardiotoxicity noted by a specialist in subjects treated and reviewed to date in Moleculin’s clinical trials), while also significantly increasing, as shown in animal studies, drug accumulation in certain key targeted organs (such as the lungs, pancreas and liver) and avoiding multidrug resistance mechanisms when compared in non-human studies with doxorubicin (one of the most commonly used anthracyclines);

a) Annamycin or L-Annamycin is a “next generation”

anthracycline designed to be different than currently approved anthracyclines, which are limited in utility because of cardiotoxicity risks and their susceptibility to multidrug resistance mechanisms.

Annamycin was designed to avoid multidrug resistance and has shown no cardiotoxicity 1  in subjects treated in clinical trials to date.

Furthermore, we have demonstrated safe dosing beyond the dose limitations imposed by regulatory authorities upon currently prescribed anthracyclines due to their inherent cardiotoxicity;

b) our WP1066 Portfolio, which includes WP1066 and WP1220, two of several Immune/Transcription Modulators in the portfolio designed to inhibit p-STAT3 (phosphorylated signal transducer and activator of transcription 3) among other transcription factors associated with tumor activity, while also stimulating a natural immune response to tumors by inhibiting the errant activity of Regulatory T-Cells (TRegs);

and c) our WP1122 Portfolio, which contains compounds (including WP1122, WP1096, 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.

c) our WP1122 Portfolio, which contains compounds (including WP1122, WP1096, and WP1097) designed to exploit 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 viruses that depend upon glycolysis and glycosylation to infect and replicate.

1  In discussions of “no cardiotoxicity”

of Annamycin, management’s beliefs are based on an expert’s opinion based their review of certain clinical trial subject data including LVEF, ECHO strain analyses, and cardiac biomarkers –

troponin’s I & T

Our Focus  

We are focused on internally funded development of:

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

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

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

We have also recently established a Recommended Phase 2 Dose (RP2D) for WP1122 to potentially enable future externally funded oncology and virology trials.

Beyond this, we support development of our core technologies through several externally funded clinical trials with the potential for others in the near-term.

Our Clinical Trials

In the US and Europe, we or independent investigators have approval to begin, are currently conducting or have completed eleven internally or externally funded clinical trials for four of our drug candidates –

Annamycin, WP1066, WP1220, and WP1122 since inception.

All clinical trials are or were in the Phase 1 or 2 stage.

During 2021, we had four active clinical trials evaluating either Annamycin or WP1066 in the US and Europe.

This increased to six active or recently completed trials in 2022 involving Annamycin, WP1066, and WP1122.

In 2021 and 2022, there were five “right-to-try”

(or their foreign equivalent) uses of Annamycin and WP1066.

Three of the six clinical trials active in 2022 are internally funded trials of Annamycin and one is an internally funded Phase 1 clinical trial for WP1122 establishing an RP2D.

Moving into 2023, we are actively recruiting in three clinical trials in a Phase 1b or Phase 2 stage and have recently concluded one trial.

These three currently active clinical trials are open label so we expect to be able to periodically announce human activity that is being demonstrated in these trials during 2023. In February 2023, the externally funded Phase 1 clinical trial with WP1066 for the treatment of pediatric brain tumors concluded.

We expect up to three externally funded Phase 1b/2 clinical trials for WP1066 in the treatment of GBM and other brain tumors in 2023.

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

Annamycin - A clinical trial application (CTA) in Poland for a Phase 1b/2 trial of Annamycin in combination with Cytarabine or AnnAraC for the treatment of AML (MB-106) was allowed in 2022.

This trial was later approved to expand into Italy in 2022 and dosing subjects began there in March 2023.

With preclinical data in mice demonstrating a 68% improvement in activity in AML with AnnAraC over Annamycin alone and having concluded our single agent trials of Annamycin in AML showing 80% activity in the highest dosing cohort we are now focusing our efforts in AML exclusively on this combination trial.

Annamycin - We are currently recruiting a Phase 2 clinical trial using Annamycin for the treatment of STS lung mets (MB-107).

This multicenter trial is being conducted in the US, with the Phase 2 portion expected to recruit 25 subjects.

Annamycin - An investigator sponsored trial (externally funded) was initiated in Poland in 2022 to study an alternative dosing regimen for Annamycin in the treatment of STS lung mets.

This trial began administering drug to subjects in late 2022. 

WP1066 - In 2022, an investigational new drug (IND) application we filed in the US for a Phase 1 clinical trial studying WP1066 for treating glioblastoma multiforme (GBM) in adults went into effect.

Consistent with our strategy of leveraging external funding for many of our clinical trials, we intend to capitalize on external funding opportunities for investigator-initiated clinical trials in adult cancer patients in 2023.

We supplied drug product to an externally funded pediatric brain tumor trial with WP1066 up to its conclusion in February 2023.

WP1122 - Our Phase 1a clinical trial of WP1122 in the United Kingdom for the treatment of COVID-19 (MB-301) began recruiting in 2022, and we completed the trial in late 2022, establishing an RP2D.

We are in the process of completing this trial - locking the database and finalizing a clinical study report (CSR).

This RP2D will possibly aid in future externally funded trials for the treatment of certain viruses and cancers as we look for investigator led studies.

WP1122 - In 2022, we filed an IND with the FDA that then went into effect, allowing us to proceed with a clinical trial using WP1122 for the treatment of GBM.

This may lead to an investigator-initiated trial (IIT) in oncology.

Additionally, an investigator independently filed a CTA in Brazil in 2022 to study WP1122 for the treatment of moderate to severe COVID-19.

Based on current COVID-19 epidemiology, we do not expect this externally funded trial to be conducted.

Additionally, we are in discussions with research institutions in the US, Asia, and South America regarding possible externally funded trials or programs involving WP1066 and WP1122.

Recent Business Developments 

Below are recent business developments.

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.

The trial began in June of 2021.

Preliminary results from the study continue to document clinical activity for Annamycin in the treatment of STS.

The safety review committee (SRC) deemed the dose of 390 mg/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 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, fifteen subjects were enrolled and treated per the protocol in four cohorts to determine the maximum tolerable dose and/or the RP2D.

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

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

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

For the Treatment of Acute Myeloid Leukemia

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

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

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

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

On May 5, 2022, we announced that we received allowance from the Polish Department of Registration of Medicinal Products (URPL), as well as the requisite Ethics Committee approval, to proceed with our Phase 1/2 clinical trial in Poland of Annamycin in combination with Ara-C in the treatment of subjects with AML who are refractory to or relapsed after induction therapy.

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

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

Presented Positive Preclinical Annamycin Data at the AACR 2022 Annual Meeting

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

The objective of this animal study was to assess the efficacy of Annamycin in experimental colorectal cancer liver and lung metastasis models.

The efficacy of Annamycin was tested in syngeneic models of metastatic colorectal cancer established in lungs or liver.

Annamycin exhibited robust antitumor activity in both models.

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

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

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

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

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

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

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

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

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

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

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

Continued Compassionate Use of WP1066

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

Moved Intravenous and Other Formulations of WP1066 into Preclinical Testing

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Based on the overall results in Cohort 1, the SRC deemed the cohort dose safe and well-tolerated and began our SAD Cohort 2 with a dose escalation to 16 mg/kg.

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

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

Received Approval from the UK ’

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 as part of studying WP1122 for the treatment of COVID-19 (MB-301).

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

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

On May 9, 2022, Dr.

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

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

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

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

On May 4, 2022, we announced that we engaged Wolfram C.

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

Dempke served as the Vice President, Scientific Solutions:

Hematology & Oncology, at Worldwide Clinical Trials.

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

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.

Annamycin 

MB-106 Annamycin in Combination with Cytarabine for the Treatment of AML

On May 2, 2023, we announced successful completion of the first cohort in our Phase 1b portion of our Phase 1b/2 clinical trial using Annamycin in combination with Cytarabine for the treatment of AML (MB-106).

In this cohort three subjects were treated, all of whom are believed to be relapsed from multiple prior therapies.

Annamycin was dosed at 190 mg/m 2 , along with Cytarabine at 2.0 g/m2/day for 5 days (total dose of 10g/m 2 ), consistent with the familiar 7+3 regimen.

We, at the recommendation of the safety review committee, deemed the first cohort dose as safe and opened the second cohort with the Annamycin dose being increased to 230 mg/m 2 .

The median of prior therapies for these three subjects were 5 (2 to 7).

the subjects, who was 78 years of age at the time of the study initiation with 2 prior 

multi-year therapies, was preliminary recorded as a complete response or CR per the protocol and it was confirmed that the CR was durable after four weeks.

The other two subjects were shown to have disease progression.

Subjects have already been identified as potential candidates for the second cohort which is now recruiting.

MB-107 Annamycin Monotherapy for the Treatment of STS Lung Mets

In our MB-107 clinical trial treating STS lung mets with Annamycin as monotherapy, thirteen subjects have been recruited to date for this Phase 2 trial and treated at the confirmed Recommended Phase 2 Dose (RP2D) of 330 mg/m 2 .

Two subjects left the study due to infusion related reactions to the initial dose of the study drug.

Ten subjects have received two cycles and had their end of cycle 2 scan.

One subject has received their initial dose and has not received cycle 2 scans.

To date, six or 60% have exhibited stable disease (SD) after receiving two cycles.

Three are continuing with the study drug.

One such subject has received six cycles after their end of cycle 4 scan exhibited stable disease.

For the three subjects with SD not continuing with the study drug, they are being followed for progression free survival and, for all subjects, overall survival is being monitored.

This data is preliminary and subject to change.

Other Trial and Publications

The Phase 1b/2 investigator sponsored trial (externally funded) was initiated in Poland in 2022 to study an alternative dosing regimen for Annamycin in the treatment of STS lung mets.

This trial has enrolled and treated two subjects with two cycles in the first cohort of the Phase 1b portion of the study.

There will be three subjects per cohort with the first cohort treating subjects with 35 mg/m 2 of Annamycin per week (3 weeks on and 1 week off per cycle).

After two cycles the subjects will receive their end of cycle 2 scan.

At the end of two cycles both subjects treated to date demonstrated progressive disease.

This is early in where Annamycin is being dosed weekly.

Preclinical data demonstrated a benefit to weekly dosing of Annamycin versus traditional chemotherapy dosing of every three weeks.

We announced in April the presentation of positive pharmacokinetics and tissue-organ distribution data demonstrating high antitumor activity of Annamycin in preclinical cancer models, which sponsored research data was presented at the American Association for Cancer Research (AACR) Annual Meeting 2023.

In this research, Annamycin demonstrated increased penetration and accumulation in the liver, which correlated with high antitumor activity in HEPA 1-6 hepatocellular carcinoma and CT26 colon cancer liver metastasis models .

This poster was presented at the AACR Annual Meeting 2023, which took place April 14-19, 2023, at the Orange County Convention Center in Orlando, FL.

The poster titled , Exploration of Annamycin Organotropism to Target Primary and Metastatic Liver Cancers was presented by Rafal Zielinski, Ph.D., Department of Experimental Therapeutics, Division of Cancer Medicine, The University of Texas MD Anderson Cancer Center as part of the Experimental and Molecular Therapeutic Session:

“Novel Antitumor Agents, PI3K/AKT Inhibitors, Proteasome Inhibitors, and Topoisomerases.”

The poster outlined results from the analysis of the pharmacokinetics of two formulations of Annamycin, liposome formulated drug product (L-ANN) and free Annamycin (ANN), in the liver in comparison with doxorubicin (DOX) and to determine its tumoricidal potential in a hepatocellular carcinoma (HCC) model in situ and in experimental models of liver metastasis.

We continue discussions with two US academic institutions and another foreign academic institution for externally funded trials for the use of WP1066 for the treatment of glioblastomas and/or pediatric brain tumors.

We expect to finalize agreements in the second quarter with at least one of these institutions and begin trials in the second half of 2023.

With the data generated from the MB-301 clinical trial setting an RP2D for WP1122 and additional sponsored research, we continue to explore avenues of external funding for further development of this portfolio.

WPD Licensing Agreement

Since February 2019, we were party to a sublicense agreement with WPD Pharmaceuticals (WPD), pursuant to which we sublicensed to WPD certain intellectual property rights, including rights to Annamycin, its WP1122 portfolio, and its WP1066 portfolio (as amended, the “WPD Agreement”).

WPD is affiliated with Dr.

Waldemar Priebe, our founder. In March 2023, we and WPD agreed to terminate the WPD Agreement.

Pursuant to the termination, we agreed to pay WPD (or its designee) $700,000 in cash and shares of our common stock valued at $800,000.

In March 2023, we issued 822,115 shares of common stock to WPD's designee to satisfy this commitment. With the termination of the WPD Agreement, we now have acquired the rights in certain territories previously sub-licensed to WPD to all of our licensed intellectual property, other than the rights related to non-human animals.

Additionally, we acquired the in-process research and development that WPD has created during the term of the agreement.

As part of this Agreement, WPD assigned their rights and duties to us for the Phase 1b/2 investigator sponsored trial (externally funded) initiated in Poland in 2022 to study an alternative dosing regimen for Annamycin in the treatment of STS lung mets.

The approximate value of the grant supporting this investigator sponsored trial is $1.5 million. 

Results of Operations

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Condensed Consolidated Statements of Operations

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Operating expenses:

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Interest income, net

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

Research and Development Expense.

Research and development (R&D) expense was $6.0 million and $4.1 million for the three months ended September 30, 2022 and 2021, respectively.

The increase of $1.9 million is mainly related 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 $3.1 million and $2.0 million for the three months ended September 30, 2022 and 2021, respectively.

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

Gain from Change in Fair Value of Warrant Liability.

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

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

We calculated the fair value of the warrants outstanding using the Black-Scholes model.

A gain results principally from a decline in our share price during the period and a loss results principally from an increase in our share price.

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

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

Research and Development Expense.

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

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

Research and development (R&D) expense was $5.7 million and $4.6  million for the three months ended March 31, 2023 and 2022 , respectively.

The increase of $1.1 million is mainly related t o the WPD sublicense termination. 

General and Administrative Expense.

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

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

General and administrative e xpense was $2.6 million and 

$2.4  million for the three months ended March 31, 2023 and 2022 , respectively.

The increase of 

$0.2  million is mainly related to an increase in regulatory and legal services, and consulting & advisory fees.

Gain from Change in Fair Value of Warrant Liability.

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

We recorded a net gain of $0.04 million in the first quarter of 2023 as compared to a net gain of $0.2 million in the first quarter of 2022, 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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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.

Interest income, net.

 Interest income, net increased by approximately $0.4 million for the comparable quarterly periods due to rising interest rates during the past year.

Liquidity and Capital Resources

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

Nine Months Ended September 30,

Three Months Ended March 31,

Net cash used in operating activities

Net cash used in investing activities

Net cash (used in) provided by financing activities

Net cash provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

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.

Net decrease in cash and cash equivalents

As of March 31, 2023, 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 $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 nine months ended September 30, 2022.

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

Pursuant to the terms of the 2021 ATM Agreement, we may offer and sell, from time to time through Oppenheimer shares of our common stock with an aggregate sales price of up to $50.0 million.

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

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

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

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

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

We granted the underwriters a 30-day option to purchase up to an additional 2,141,052 shares of common stock offered in the public offering.

The offering closed on February 5, 2021 and gross proceeds of the offering were approximately $67.8 million, prior to deducting the underwriting discount and other offering expenses.

On February 10, 2021, the underwriters of the public offering exercised in full their option to purchase an additional 2,141,052 shares of common stock at the public offering price of $4.75 per share, bringing total gross proceeds to approximately $78.0 million before underwriting discount.

In January 2021, we issued 468,684 shares for gross proceeds of $2.9 million using our 2020 ATM Agreement with Oppenheimer & Co., Inc.

We terminated the 2020 ATM Agreement on February 2, 2021.

Additionally, during the first quarter of 2021, 10,000 shares were issued due to the exercise of warrants related to past public offerings.

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

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

Cash used in operations w as $6.0 million for the three months ended March 31, 2023 .

This $1.2 million increase over the prior year period of $4.8 million was primarily due to payments for increased clinical trial activity, costs related to the WPD sublicense termination, 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 provided by fin ancing activities

During the three months ended March 31, 2023, utilizing the Lincoln Park Equity Line, we issued 1 50,381 shares of common stock (including commitment shares), at an average price of $0.94 per share, resulting in gross proceeds of $0.1 million .

Subsequent to March 31, 2023, we issued to Lincoln Park an additional 75,187 shares of common stock, (including commitment shares), at an average price of $0.93 per share, resulting in gross proceeds of $0.1 million. 

We believe that our existing cash and cash equivalents as of March 31, 2023 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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The correspondence from the SEC transmitting the subpoena to us states that the SEC is trying to determine whether there have been any violations of federal securities laws, but that its investigation does not mean that the SEC has concluded that anyone has violated the law or that the SEC has a negative opinion of any person, entity, or security. We cannot predict when this matter will be resolved or what, if any, action the SEC may take following the conclusion of the investigation.

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

million, respectively, in related legal fees and expenses.

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

During the three months ended March 31, 2023 and 2022, we have expended approximately $0.5 million and  $0.1 

million, respectively, in related legal fees and expenses. 

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