Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020March 31, 2021

or

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to                 

Commission File Number: 001-37758

 

MOLECULIN BIOTECH, INC.

(Exact name of registrant as specified in its charter)

Delaware

2834

47-4671997

(State or Other Jurisdiction of Incorporation or Organization)

(Primary Standard Industrial Classification Code Number)

(IRS Employer Identification Number)

 

5300 Memorial Drive,							Suite 950
Houston,			TX	TX			77007
(Address of principal executive offices)							(Zip Code)

 

713-300-5160

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Registration S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

 

Large accelerated filer ☐						Smaller reporting company ☒
Non-accelerated filer ☒						Emerging growth company ☒
Accelerated filer ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ☐ No ☒

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class			Trading Symbol (s)			Name of each exchange on which registered
Common Stock, par value $0.001 per share			MBRX			The NASDAQ Stock Market LLC

 

The registrant had 62,464,56428,444,425 shares of common stock outstanding at November 5, 2020.May 4, 2021.

 

 

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Table of Contents

 

 

PART 1 FINANCIAL INFORMATION

Item 1. Financial Statements

Moleculin Biotech, Inc.

Condensed Consolidated Balance Sheets

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

(unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

Moleculin Biotech, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

(unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

Moleculin Biotech, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

Moleculin Biotech, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except for shares)

(unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

Moleculin Biotech, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

1. Nature of Business and Liquidity

The terms "MBI" or "the Company", "we", "our", and "us" are used herein to refer to Moleculin Biotech, Inc. MBI is a clinical-stage pharmaceutical company, organized as a Delaware corporation in July 2015,2015. with itsThe Company's focus is on the treatment of highly resistant cancers and viruses through the development of its drug candidates. These candidates all of which are based substantially on license agreements withdiscoveries licensed from The University of Texas System on behalf of the MD Anderson Cancer Center, which we refer to as MD Anderson. MBI formed Moleculin Australia Pty. Ltd., (MAPL), a wholly owned subsidiary in June 2018, to perform certain preclinical development in Australia. This enableshas enabled the Company to enjoyrealize the benefits of certain research and development tax credits in Australia. In February 2019,the Company entered into an agreement withsublicensed essentially all of the rights to its technologies in 29 countries in Europe and Asia to WPD Pharmaceuticals Sp.z o.o. (WPD or WPD Pharmaceuticals) in exchange for collaboration on development in Poland. Also in 2019, the Company sublicensed its technologies to Animal Life Sciences, LLCInc. (ALI), where the Company has granted a sublicense to ALI toenable research develop, make, have made, use, offer to sell, sell, export or import and commercialize certain licensed productscommercialization for non-human use and share development data. As part of this agreement, ALI issued to the Company a 10% interest in ALI. ALI converted into a corporation and became Animal Life Sciences, Inc.

Core Technologies - MBIThe Company has three core technologies: 1) Annamycin, which the Company refers to as a "next generation" anthracycline; 2) a portfolio of Immune/Transcription Modulators, of which WP1066 is one of the lead molecules; and 3) a portfolio of Metabolism/Glycosylation Inhibitors, of which WP1122 is the lead molecule. The Company has six drug candidates, representing all three core technologies, and twothree of which have multipleshown human activity in clinical trials. As of the end of 2020, those three drug candidates accounted for five clinical trials in the United States (US) and allEurope. Two of whichthose trials are based on discoveries made at MD Anderson. These core technologies areexternally funded studies of WP1066 in brain tumors. Two internally funded Phase 1) clinical trials, Annamycin 2) its STAT3 Immune/Transcription Modulators, or simply "Immune/Transcription Modulators" WP1066 portfolio and 3) its Antimetabolite (including Metabolism/Glycosylation Inhibitors) WP1122 portfolio of molecules. The Company’s clinical stage drugs are Annamycin, an anthracycline which is currently inone Phase 1/2 study for the treatment of relapsed acute myeloid leukemia (AML), withand oneWP1220 in cutaneous T-cell lymphoma (CTCL), were successfully concluded. An additional Phase 11/2 clinical trial of Annamycin in AML is also internally funded and is currently ongoing. In 2021, the Company anticipates the initiation of four or more new clinical trials in addition to the three trials continuing from 2020.

In late 2020, MBI received US Food and Drug Administration (FDA) clearance to proceed with an additional Phase 1b/2 clinical trial of Annamycin for the treatment of soft tissue sarcoma (STS) lung metastases and the Company expects to commence this study in the US in the second half of 2021. Based on a recently announced reimbursement grant awarded in Poland, MBI expects a second Phase 1b/2 clinical trial of Annamycin in STS lung metastases to be primarily investigator-funded in Europe. MBI also plans to begin a Phase 1/2 clinical trial of Annamycin in combination with Ara-C for the treatment of AML in Europe, by seeking approval for its own clinical trial and a second, similar grant funded trial through its sublicensee, WPD Pharmaceuticals in Poland. The Company is also working with regulatory authorities in the United States of America (US) recently concluding, WP1066, an Immune/Transcription Modulator, which is in twoKingdom (UK) to initiate a Phase 1 clinical trial of WP1122 in healthy volunteers with the intent to progress to COVID-19 patients either there or in locations where the prevalence of COVID-19 will adequately support recruitment. The Company intends to internally fund the initial trials of WP1122 but may seek external funding opportunities if activity is seen in COVID-19 patients. Additionally, the Company is pursuing filing an Investigative New Drug application (IND) in the US for the treatment of brain tumors, andcertain cancers in WP1220,2021. Finally, the Company continues to seek opportunities to collaborate on a member of the WP1066 portfolio of drugs, which has completed apotential Phase 1 proof-of-concept clinical trial in Poland for the topical treatment of cutaneous T-cell lymphoma (CTCL), a form of skin cancer.

The Company refers to Annamycin as a "Next Generation Anthracycline" since it is designed to avoid the multidrug resistance mechanisms that typically defeat currently approved anthracyclines, as well as to be non-cardiotoxic, which is the dose limiting toxicity for all currently approved anthracyclines. Annamycin is currently in a Phase 1/2 clinical trial in Europe, having successfully completed a Phase 1 safety trial in the US in early 2020, and preliminary clinical data suggests that it may have the potential to become the first therapy suitable for the majority of relapsed AML patients regardless of gene mutations. These trials have so far demonstrated safety, including the absence of any cardiotoxicity, and have demonstrated some initial efficacy. Additionally, preclinical research in animal models at MD Anderson demonstrated that Annamycin is able to significantly improve survival in multiple tumors that have metastasized to the lungs. Coupled with research demonstrating that Annamycin is capable of accumulating in the lungs at high levels, this suggests that Annamycin may be well suited to become a treatment for lung-localized tumors and the Company is performing preclinical work to enable an IND or its equivalent to be filed by the end of this year.

WP1066 is one of several Immune/Transcription Modulators in the Company's pipeline that appear capable of stimulating immune response to tumors by inhibiting the errant activity of Regulatory T-Cells (TRegs) while also inhibiting key oncogenic transcription factors, including p-STAT3, c-Myc and HIF-1 alpha. These transcription factors are widely sought targets that may also play a role in the lack of efficacy of immune checkpoint inhibitors in certain resistant tumors. The “proof-of-concept” Phase 1 trial in Poland for WP1220 demonstrated safety and efficacy and the Company intends to attempt to join efforts with a strategic partner for the continued developmentstudy of WP1220 as a topical therapy forin CTCL.

The Company is also developing new prodrugsdoes not have manufacturing facilities and all manufacturing activities are contracted out to exploit the potential uses of its WP1122 portfolio of antimetabolites, including inhibitors of glycolysis and glycosylation. Its lead Metabolism/Glycosylation Inhibitor compound, WP1122, provides an opportunity to cut off the fuel supply of tumors and viruses by taking advantage of their overdependence on glucose and glycolysis as compared with healthy cells. New research also points to the potential for the glucose decoy (2-DG) within WP1122 to be capable of enhancing the usefulness of checkpoint inhibitors and inhibiting glycosylation and glycolysis in virally infected cells. During 2020, the Company entered into agreements with several third party research centers to conduct research on WP1122 for antiviral properties against a range of viruses, including Coronavirus. Additional research with other molecules in this portfolio with independent contractors has also begun.

Drug Candidates - Within the Company's core technologies, it currently has 5 drug candidates representing 3 substantially different mechanisms of action. Annamycin is a chemotherapy designed to inhibit the replication of DNA of rapidly dividing cells and is the Company's most mature drug candidate. The Company has a trial open in Poland and one that recently completed in the US. The US Phase 1 portion of the Phase 1/2 trial reached key safety end points in early 2020. As a result of discussions with the FDA, the Company will utilize its trial in Europe to establish a recommended Phase 2 dose (RP2D) and to generate additional safety and efficacy data as requested by the FDA. The Phase 1/2 trial in Poland continues its dose escalation and is in its fifth cohort where patients are being treated at 240mg/m2. The second patient in that cohort experienced a dose limiting toxicity (DLT), secondarily related to concomitant medication not being withheld. The DLT was resolved, and that cohort will be expanded to a total of six patients. If a second DLT in this cohort occurs, then we would enroll three subjects that would be treated at 210mg/m2 to confirm the maximum tolerated dosage. If no additional DLT occurs in the current cohort, then we will progress to the sixth cohort at 300mg/m2. We believe the impact of the COVID-19 pandemic is slowing the pace of our patient recruitment in our Polish Annamycin clinical trial. We cannot assess when such an impact on our trial will be alleviated or if it will worsen. So far both trials have demonstrated that Annamycin, to date, is safe and is non-cardiotoxic. The trials have demonstrated initial efficacy as well.

In addition to Annamycin, the Company has other drug development projects, two of which are also in clinical trials:

Clinical Trials - The Company has concluded the initial Phase 1 portion of its Phase 1/2 trial of Annamycin for the potential treatment of AML in the US due to the FDA’s requirement to set the initial dose level relatively low in comparison with previous Annamycin clinical trials.parties. Additionally, the Company believes that patient recruitment for its Annamycin AML clinical trial in Europe will continuedoes not have and does not intend to be more successful than in the US duehave a sales organization. The Company’s overall strategy is to a comparatively lower number of competitive clinical trials and the protocol there being approved to start at a significantly higher dose than in the USseek potential outlicensing opportunities with fewer enrollment screening limitations. This European AML trial is in its fifth cohort in the dose ranging Phase 1 portion of the trial. The Company has also announced plans to submit an IND or its equivalentdevelopment/commercialization strategic partners who are better suited for the usemarketing, sales and distribution of Annamycin to potentially treat lung metastases, which it expects to submit before the end of 2020.

In September 2018, the physician-sponsored WP1066 Phase 1 clinical trial for the treatment of glioblastoma and melanoma metastasized to the brain, which opened for recruitment in July 2018, began treating patients. In April 2020, a second physician-sponsored Phase 1 trial for the potential treatment of pediatric brain tumors began recruitment and has begun treating patients. In August 2019, the Company completed its proof-of-concept Phase 1 clinical trial in Poland to study WP1220, a part of the WP1066 portfolio, for the treatment of CTCL. This trial demonstrated the safety of WP1220 and also demonstrated, the Company believes, initial efficacy sufficient to support beginning a Phase 2 clinical trial. The Company intends to attempt to join efforts with a strategic partner in 2021 for the further development of WP1220 for the treatment of CTCL.

Moleculin has recently announced discoveries (both internally funded and independently developed) supporting the potential use of WP1122 for the treatment of COVID-19 and other viral diseases. The Company is deploying resources on the development of an IND or its equivalent for testing WP1122 in patients with COVID-19 and/or certain cancers, as such preclinical work may support both viral and cancer indications. It expects to submit such an IND or its equivalent in the first half of 2021, as access to in vivo studies may necessitate such timing.drugs if approved.

Licenses - The Company has been granted royalty-bearing, worldwide, exclusive licenses for the patent and technology rights related to all of MBI's drug technologies, as these intellectual property rights are owned in part or entirely by MD Anderson. The Annamycin drug substance is no longer covered by any existing patent protection, however, the Company filed new patent applications in July 2019 for formulation, synthetic process and reconstitution related to MBI's Annamycin drug product candidate, although there is no assurance that the Company will be successful in obtaining such patent protection. Most of this technology is also licensed from MD Anderson. The Company sponsors significant research at MD Anderson. New patents may result out of this research. From time to time, there are license issues that need to be discussed and handled with MD Anderson such as adding additional patents to existing license agreements and extension of milestones. The Company believes that such issues will be handled in the ordinary course of business.

Independently from potential patent protection, MBI has received Orphan Drug designation (ODD) from the FDA for Annamycin for the treatment of AML and for WP1066 for the treatment of glioblastoma. ODD may provide tax and other benefits during product development, and if either product is approved, may lead to a grant of seven-year market exclusivity. Under that exclusivity, which runs from the date of the approval of the New Drug Application (NDA) in the US, the FDA generally (there are important exceptions) could not approve another product containing the same drug for the designated indication. The Company also intends to apply for similar status in the European Union (EU) where market exclusivity could extend to 10 years from the date of Marketing Authorization Application (MAA) approval. Separately, the FDA may also grant market exclusivity of 5 years for newly approved new chemical entities (which the Company believes Annamycin would be one), which would preclude approval of any other annamycin product, but there can be no assurance that such exclusivity will be granted. In April 2019, FDA approved the Company's request for Fast Track Designation for Annamycin for the treatment of relapsed or refractory AML. Fast Track Designation, the purpose of which is to expedite drug development and approval, is granted to drugs intended to treat serious conditions and where data demonstrate the potential to address an unmet medical need.

COVID COVID-19 - In March 2020, the World Health Organization declared the outbreak of a novel Coronavirus (COVID-19) as a pandemic, which continues to spread throughout the world. The spread of COVID-19 has caused significant volatility in US and international markets, including Poland, where the CompanyMBI conducts some of its clinical trials and Italy, where its drug supply is produced. There has been limited interruption of the Company’sits drug supply, and somemost Polish clinics where the Company is conducting trials have limitedare limiting access onfor monitoring activities. Additionally, the CompanyMBI believes COVID-19 has materially slowed the progressrecruitment of the Company'spatients for its clinical trials. This could worsen or be alleviated at any time. Furthermore, there is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the US and international economies and, as such, the Company is unable to determine if it will have a material impact to its operations.

Nasdaq - On September 30, 2020, Additionally, the Company received a letter from NASDAQ notifyingbelieves that the Company thatpotential for impact to its supply chain due to COVID-19 will be reduced as vaccine production normalizes throughout the last industry. In light of current worldwide trends with respect to COVID-3019, 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 letterMBI does not result in the immediate delisting of the Company's common stock from the Nasdaq Capital Market. In accordance with Nasdaq Listing Rule expect COVID-581019(c)( to materially impact recruitment for current or future oncology trials as COVID-319)(A), hospitalizations have recently decreased. However, the Company has been provided an initial period of 180 calendar days, or until March 29, 2021, to regain compliance withcannot be certain that these trends will continue and there is the Bid Price Rule. If, at any time before March 29, 2021, 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 March 29, 2021, the Companypossibility they may be afforded a second180 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 may include, if necessary, implementing a reverse stock split. If the Company does not regain compliance with the Bid Price Rule by March 29, 2021 and is not eligible for an additional compliance period at that time, the Nasdaq Staff will provide written notification to the Company that its common stock may be delisted. The Company would then be entitled to appeal the Nasdaq Staff’s determination to a NASDAQ Listing Qualifications Panel and request a hearing. There can be no assurance that, if the Company does appeal a delisting determination by the Nasdaq Staff to the NASDAQ Listing Qualifications Panel, that such appeal would be successful. 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.reverse.

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

Reverse Stock Split - On January 29, 2021, the Company filed a Certificate of Amendment to the amended and restated certificate of incorporation with the Secretary of State and 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 consolidated financial statements and notes to the consolidated financial statements gives retroactive effect to the reverse stock split for all periods presented. Certain amounts in the financial statements, the notes thereto, and elsewhere in the Form 10-Q may be slightly different than previously reported due to rounding up of fractional shares as a result of the reverse stock split.

Basis of Presentation – Unaudited Interim Condensed Consolidated Financial Information - The accompanying unaudited interim condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the US (U.S. GAAP) for financial information, and in accordance with the rules and regulations of the US Securities and Exchange Commission (SEC) with respect to 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 interim 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. Interim results are not necessarily indicative of the results for the full year. These interim condensed unaudited consolidated financial statements should be read in conjunction with the audited financial statements of the Company as of December 31, 20192020 and December 31, 20182019 and notes thereto contained in the Form 10-K filed with the SEC on March 19,2020.24, 2021.

Principles of consolidationConsolidation - The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP. The companyCompany views its operations and manages its business in 1one operating segment. All long-lived assets of the Company reside in the US.

Significant Accounting Policies - The Company's significant accounting policies are described in Note 2,Basis of Presentation, principles of consolidation and significant accounting policies, to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes to the significant accounting policies during the three months ended March 31, 2021, other than those noted below.

Use of Estimates - The preparation of these condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differing materially from those estimated amounts used in the preparation of financial statements. Estimates are used in the following areas, among others: fair value estimates on intangible assets, warrants, and stock-based compensation expense, as well as accrued expenses and taxes.

Going ConcernLiquidity and Financial Condition - These condensed consolidated financial statements have been prepared on a going concern basis, which assumes The Company is an early stage and emerging growth company (EGC) and has not generated any revenues to date. As such, the Company will continueis subject to realize its assets and discharge its liabilities in the normal course of business. The continuationall of the Company as a going concern is dependent upon the ability ofrisks associated with early stage and emerging growth companies. Since inception, the Company to obtain necessary equity financing to continue operationshas incurred losses and negative cash flows from operating activities. For the attainment of profitable operations. As of September 30, three months ended March 31, 2021 and 2020, the Company has incurred net losses of $4.4 million and $1.2 million, respectively, and had net cash flows used in operating activities of $3.6 million and $4.3 million, respectively. At March 31, 2021, the Company had an accumulated deficit of $54.3$61.4 million since inception and had not yet generated any revenue from operations. Additionally, management anticipates thatcash and cash equivalents of $86.3 million. The Company expects its cash on hand as of September 30, 2020March 31, 2021, is will be sufficient to fund its plannedthe Company's operations into but not beyond the near term. These factors raise substantial doubt regardingSuch 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 anticipates incurring operating losses for the next several years. 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 continueachieve its intended business objectives and meet its financial obligations as a going concern. These unaudited condensed consolidated financial statements do not include any adjustments to the recoverabilitythey become due and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company may seek additional funding through a combination of equity offerings, debt financings, government or other third-party funding, commercialization, marketing and distribution arrangements, other collaborations, strategic alliances and licensing arrangements and delay planned cash outlays or a combination thereof. Management cannot be certain that such events or a combination thereof can be achieved.payable.

Cash and Cash Equivalents - Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. The Company considers all highly liquidmaintains cash accounts with original maturities ofprincipally at threeone months or less at the date of acquisition to be cash equivalents. Periodicallyfinancial institution in the ordinary course of business, the CompanyUS, which at times, may carryexceed the Federal Deposit Insurance Corporation’s limit. The Company has not experienced any losses from cash balances at financial institutions in excess of the Federally insured limitsinsurance 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 $250,000.the financial institution where its cash is held.

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

Vendor prepayments at September 30, 2020 and December 31, 2019, includes approximately $1.1 million and $1.5 million, respectively, for the expansion of Annamycin production commitments on a commercial scale currently expected to be delivered through the remainder of 2020 and into the first quarter of 2021 for use in clinical trials.

Intangible Assets - Intangible assets with finite lives are amortized using the straight-line method over their estimated period of benefit. Acquired intangible assets identified as in-process research and development (IPR&D) assets, are considered indefinite lived until the completion or abandonment of the associated research and development efforts. If the associated research and development effort is abandoned, the related IPR&D assets will be written-off and the Company will record a noncash impairment loss on its statements of operations. For those compounds that reach commercialization, the IPR&D assets will be amortized over their estimated useful lives. The Company evaluates the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. NaN impairments of intangible assets have been identified during any of the periods presented. Intangible assets are tested for impairment on an annual basis, and between annual tests if indicators of potential impairment exist, using a fair-value-based approach.

Property and Equipment, net - Leasehold improvements, furniture, equipment and software are recorded at cost and are depreciated using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized over the shorter of the estimated useful life or the remaining lease term. Accumulated depreciation on property and equipment was $0.4 million and $0.3 million at September 30, 2020 and December 31, 2019, respectively.

Operating Lease Right-of-Use Asset - The Company determines if an arrangement is a lease at contract inception or during modifications or renewal of an existing lease. Operating lease assets represent the Company's right to use an underlying asset for the lease term and operating lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date of the lease based upon the present value of lease payments over the lease term. The lease payments used to determine the Company's operating lease assets may include lease incentives, stated rent increases and escalation clauses linked to rates of inflation when determinable and are recognized in the Company's operating lease assets in the Company's condensed consolidated balance sheet. The Company has elected the practical expedient and does not separate lease components from nonlease components for its leases. The Company's operating leases are reflected in operating lease right-of-use asset (ROU), accrued expenses and other current liabilities, and operating lease liability - long-term, net of current portion in the Company's condensed consolidated balance sheets. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Short-term leases, defined as leases that have a lease term of 12 months or less at the commencement date, are excluded from this treatment and are recognized on a straight-line basis over the term of the lease. Refer to Note 7 - Commitments and Contingencies - Lease Obligations Payable for additional information related to the Company’s operating leases.

Cost Method Investment - The Company's cost method investment consists of an investment in a corporation in which it does not have the ability to exercise significant influence over its operating and financial activities. Management evaluates this investment for possible impairment quarterly.

Fair Value of Financial Instruments - The Company's financial instruments consist primarily of non-trade receivables, accounts payable, accrued expenses and its warrant liability. The carrying amount of non-trade receivables, accounts payable, and accrued expenses approximates their fair value because of the short-term maturity of such.

The Company has categorized its assets and liabilities that are valued at fair value on a recurring basis into a three-level fair value hierarchy in accordance with U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and lowest priority to unobservable inputs (Level 3).

Assets and liabilities recorded in the balance sheets at fair value are categorized based on a hierarchy of inputs as follows:

Level 1 – Unadjusted quoted prices in active markets of identical assets or liabilities.

Level 2 – Quoted prices for similar assets or liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3 – Unobservable inputs for the asset or liability.

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

The following table provides assets and liabilities reported at fair value and measured on a recurring basis at September 30, 2020March 31, 2021 and December 31, 20192020 (in thousands): 

The table below (in thousands) of Level 3 liabilities begins with the valuation as of the beginning of the thirdfirst quarter and then is adjusted for the issuances and exercises that occurred during the thirdfirst quarter of 20202021 and adjusts for balancesadjusted for changes in fair value that occurred during the currentfirst quarter. The ending balance of the Level 3 financial instrument presented above represents ourthe Company's best estimates and may not be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. 

The table below (in thousands) of Level 3 liabilities begins with the valuation as of December 31, 2019 and then is adjusted for the issuances and exercises, and changes in fair value that occurred during the nine months ended September 30, 2020. The ending balance of the Level 3 financial instrument presented above represents our best estimates and may not be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments.

Loss Per Common Share - Basic net loss per common share is computed by dividing net loss available to common shareholders by the weighted-average number of common shares outstanding during the period. For purposes of this calculation, options to purchase common stock, restricted stock units subject to vesting and warrants to purchase common stock are considered to be common stock equivalents. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be antidilutive. For the three months ended September 30, 2020March 31, 2021 and 20192020, approximately 22.93.8 million and approximately 14.73.1 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, 2020 and 2019, approximately 20.8 million and approximately 11.3 million, respectively, of potentially dilutive shares were excluded from the computation of diluted earnings per share due to their antidilutive effect.

Stock-based Compensation - Stock-based compensation expense includes the estimated fair value of equity awards vested or expected to vest during the reporting period. The Company accounts for its stock-based compensation awards in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic (ASC) 718, Compensation—Stock Compensation (ASC 718). ASC 718 requires all stock-based payments to employees, including grants of employee stock options, restricted stock units, and modifications to existing stock options, to be recognized in the consolidated statements of operations based on their fair values. The grant date fair value of stock options is determined using the Black-Scholes option pricing model and the grant date fair value of restricted stock awards is determined using the closing price of the Company’s common stock on the date of grant (or if the date of grant is not a business day, on the business day prior to the date of the grant). The awards are subject to service vesting conditions. Compensation expense related to awards to employees and directors with service-based vesting conditions is recognized on a straight-line basis based on the grant date fair value over the associated service period of the award, which is generally the vesting term, net of forfeitures which are recognized as they occur. Compensation expense related to awards to non-employees with service-based vesting conditions is recognized based on the then-current fair value at each financial reporting date prior to the measurement date over the associated service period of the award or the vesting event, applicable, which is generally the vesting term. Effective January 1, 2020, the Company began using the volatility of its own stock since it now has sufficient historic data in its stock price.

Subsequent Events - The Company’s management reviewed all material events through the date these unaudited condensed consolidated financial statements were issued for subsequent events disclosure consideration, see other notes and specifically Note 8 - Subsequent Events.

Recent Accounting Pronouncements

In August 2018, the FASB issued Accounting Standards Update (ASU) No.2018-13, Fair Value Measurement (Topic 820) (ASU 2018-13). ASU 2018-13 modifies the disclosure requirements on fair value measurements in ASC Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company's adoption of this pronouncement effective January 1, 2020 did not have a material impact on the Company's condensed consolidated financial statements.

In December 2019, the FASB issued ASU No.2019-12, Income Taxes (Topic 740) (ASU 2019-12). ASU 2019-12 modifies the requirements for the timing of adoption of enacted change in tax law. The effects of changes on taxes currently payable or refundable for the current year must be reflected in the computation of annual effective tax rate in the first interim period that includes the enactment date of the new legislation, beginning after December 15, 2020. Early adoption is permitted upon issuance of this ASU. The Company is currently evaluating the impact that this standard will have, if any, on its financial statements.

In August 2020, the FASB issued ASU No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40) (ASU 2020-06). ASU 2020-06 amendssimplifies the guidancecomplexity associated with applying U.S. GAAP for the derivatives scope exception forcertain financial instruments with characteristics of both liabilities and equity, including convertible instruments and contracts in an entity's own equity to reduce form-over-substance-based accounting conclusions. The Board observed that the application of the derivatives scope exception guidance results in accounting for some contracts as derivatives while accounting for economically similar contracts as equity. The Board also decided to improve and amend the related EPS guidance. The amendments in this Update areguidance is effective for public business entities that meet the definition of a Securities Company beginning on January 1, 2022 and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined byprescribes different transition methods for the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.various provisions. The Company is currently evaluating the impact that this standard will have, if any, on its financial statements.

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

3. Accrued Expenses and Other Current Liabilities

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

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

4. Warrants

At September 30, 2020, and December 31, 2019, respectively, the Company has the following warrants outstanding:

⁽¹⁾ If the Company subdivides (by any stock split, stock dividend, recapitalization or otherwise) its outstanding shares of its common stock into a smaller number of shares, the warrant exercise price is proportionately reduced and the number of shares under outstanding warrants is proportionately increased. Additionally, if the Company combines (by combination, reverse stock split or otherwise) its outstanding shares of common stock into a smaller number of shares, the warrant exercise price is proportionately increased and the number of shares under outstanding warrants is proportionately decreased. Also, the Company may voluntarily reduce the warrant exercise price for its warrants issued in March 2019 and February 2017 and may voluntarily extend the contractual term of its warrants issued in February 2017.

⁽²⁾ Includes warrants to purchase 710,212 shares at an exercise price of $2.02, expiring December 22, 2023, and warrants to purchase 32,779 shares at an exercise price of $2.32, expiring June 21, 2023.

⁽³⁾ Includes warrants to purchase 100,000 shares at an exercise price of $2.41 and warrants to purchase 50,000 shares at an exercise price of $3.00.

Liability Classified Warrants

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

The risk-free interest rate assumption is based upon observed interest rates on zero coupon US Treasury bonds linearly interpolated to obtain a maturity period commensurate with the term of the warrants.

Estimated volatility is a measure of the amount by which the Company's stock price is expected to fluctuate each year during the expected life of the warrants. Beginning in 2020, only the volatility of the Company's own stock is used in the BSM as it now has sufficient historic data in its stock price. In 2019, the Company used the volatility of its own stock blended with the volatility of peer entities due to the lack of sufficient historical data of its stock price.

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

A summary of the Company's liability classified warrant activity during the ninethree months ended September 30, 2020March 31, 2021 and related information follows: 

In connection with the Company's stock offering that closed in February 2020, the Company issued warrants to purchase 5,625,000 shares of its common stock, that are exercisable six months from the date of issuance, at a price of $1.05 per share, subject to adjustment in certain circumstances, and expire five years from the date they are first exercisable, and issued Oppenheimer & Co. Inc. a warrant (Underwriter Warrant) to purchase up to 525,000 shares of its common stock with an exercise price of $1.05 per share, subject to adjustment in certain circumstances, which expires in February 2025.

For a summary of the changes in fair value associated with ourthe Company's warrant liability for the ninethree months ended September 30, 2020March 31, 2021, see Note 2 - Basis of presentation, principles of consolidation and significant accounting policies - Fair Value of Financial Instruments.

Equity Classified Warrants

In April 2020, equity warrants to purchase up to 100,000 shares of common stock were issued to a consultant, with vesting contingent on certain conditions focused on generating up to $10 million of approved research and development expenditures on the Company's drug portfolio.

At September 30,March 31, 2021 and December 31, 2020, respectively, the Company had 607,802109,639 equity classified warrants outstanding and 512,80285,472 warrants were exercisable. At December 31, 2019, the Company had 507,802 equity classified warrants outstanding and all were exercisable.

The Company recordedThere was 0 and $92,000 in stock compensation expense for non-employee consulting agreements equity classified warrants for the three months ended September 30, 2020March 31, 2021 and 20192020, respectively and $5,000 and $94,000 during the nine months ended September 30, 2020 and 2019, respectively. At September 30, 2020, there was $91,000$124,000 of unrecognized stock compensation expense related to the Company's equity-classified warrants.

5. Equity

July 2020 Q12021Stock Issuances

In July 2020,February 2021, pursuant to the 2019 ATM Agreement, the Company issued 1,301,126entered 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 at an average price of $1.47 per share throughoffered in the ATM Prospectus Supplement.public offering, which was exercised. The Company received total proceeds of $1.9$78.0 million, netprior to deducting the underwriting discount and other estimated offering expenses. In January 2021 the Company issued 468,684 shares for gross proceeds of $0.1$2.9 million in transaction expenses. Previously, in April 2020, pursuant tousing the Company's At The Market Agreement with Oppenheimer & Co., Inc. The Company terminated the 20192020 ATM Agreement on February 2, 2021. Additionally, during the Companyfirst quarter of 2021,10,000 shares were issued 7,170,964 sharesdue to the exercise of common stock at an average price of $1.44 per share through the ATM Prospectus Supplement. The Companywarrants related to past public offerings. Gross proceeds received total proceeds of $10.3 million, net of $0.3 million in transaction expenses.due to these exercises approximated $63,000.

February Q12020Stock OfferingIssuances

In February 2020, the Company entered into subscription agreements with certain institutional investors for the sale by the Company of 7,500,0001,250,000 shares of its common stock and warrants to purchase 5,625,000937,501 shares of common stock at a combined public offering price of $0.80$4.80 per share and related warrant. The Company received total proceeds of $6.0 million, net of $0.7 million in transactionprior to deducting the placement agent fees and other offering expenses. See Note 4 - Warrants for equity classified warrants granted during the nine months ended September 30, 2020.

Stock-basedStock-Based Compensation and Outstanding Awards

Under the terms of the Company’s 2015 Stock Plan, as amended, and approved by its stockholders in June 2020, 10.5 million shares of the Company’s common stock were available for grant to employees, non-employee directors and consultants. The 2015 Stock Plan provides for the grant of stock options, stock awards, stock unit awards, orand stock appreciation rights. As of September 30, 2020March 31, 2021, there were 4,409,132726,493 shares remaining to be issued under the 2015 Stock Plan. The Company did not have any grants, exercises, or forfeitures of any stock-based awards during the three months ended March 31, 2021.

Stock-based compensation for the three and ninemonths ended September 30, 2020March 31, 2021 and 20192020, respectively (in thousands):

Each of the Company's stock-based compensation arrangements are discussed below.

Stock Options

Stock option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant. Stock option awards generally have a 10-year contractual term and vest over a 4-year period for employees and over a 1 to 3-year period for directors from the grant date on a straight-line basis over the requisite service period. The grant-date fair value of stock options is determined using the Black-Scholes option-pricing model. Additionally, the Company’s stock options provide for full vesting of unvested outstanding options, in the event of a change of control of the Company.

The fair value of each stock option is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted below. The expected term of the stock option awards was computed using the “plain vanilla” method as prescribed by the Securities and Exchange Commission Staff Accounting Bulletin 107 because the Company does not have sufficient data regarding employee exercise behavior to estimate the expected term. Beginning in 2020, the Company used the volatility of its own stock in the BSM as it now has sufficient historic data in its stock price. Prior to 2020, the volatility was determined by referring to the average historical volatility of a peer group of public companies combined with its own due to the lack of sufficient historical data of its stock price. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

The fair value of the option grants has been estimated, with the following weighted-average assumptions:

Stock option activity for the nine months ended September 30, 2020 is as follows:

Options granted during 2020 have an aggregated fair value of $1.3 million that was calculated using the Black-Scholes option-pricing model. At September 30, 2020, total compensation cost not yet recognized was $3.0 million and the weighted average period over which this amount is expected to be recognized is 2.65 years. The aggregate fair value of options vesting in the nine months ended September 30, 2020 and 2019, respectively, was $1.2 million and $1.0 million, respectively. In July 2020, the Company granted 1,349,750 employee stock options. In August 2020, the Company issued 100,000 options to Dr. Waldemar Priebe, one of the Company's founders and chair of our Scientific Advisory Board. In October 2020, the Company granted 40,000 stock options, with 3-year annual vesting upon appointment of Elizabeth Cermak to the Company's Board of Director's.

Restricted Stock

Restricted stock units are granted with a grant date fair value determined using the closing price of the Company's common stock on the grant date. Restricted stock units vest annually in 4 equal installments. Additionally, the Company’s restricted stock unit agreements provide for full vesting of the restricted stock award in the event of a change of control of the Company.

Restricted stock unit activity for the nine months ended September 30, 2020 is as follows:

 As of September 30, 2020, total compensation cost not yet recognized was $0.6 million and the weighted average period over which this amount is expected to be recognized is 3.3 years.