UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.           )

 

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x Preliminary Proxy Statement
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¨ Definitive Proxy Statement
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¨ Soliciting Material Pursuant to §240.14a-12

 

Moleculin Biotech, Inc.

 

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

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Moleculin Biotech, Inc.

2575 West Bellfort, Suite 333

Houston, TX, 77054

(713) 300-5160

 

To the Stockholders of Moleculin Biotech, Inc.:

 

You are cordially invited to attend the Annual Meeting of Stockholders of Moleculin Biotech, Inc. on May 25, 2017. The Annual Meeting will begin at 12:30 p.m. local time at the Hilton Garden Inn, 3201 Sage Road, Houston, Texas 77056.

 

Information regarding each of the matters to be voted on at the Annual Meeting is contained in the attached Proxy Statement and Notice of Annual Meeting of Stockholders. We urge you to read the proxy statement carefully. The proxy statement and proxy card are being mailed to all stockholders of record as of April 26, 2017.

 

Because it is important that your shares be voted at the Annual Meeting, we urge you to complete, date and sign the enclosed proxy card and return it as promptly as possible in the accompanying envelope, whether or not you plan to attend in person. Even after returning your proxy, if you are a stockholder of record and do attend the meeting and wish to vote your shares in person, you still may do so.

 

We look forward to seeing you on May 25, 2017.

 

Very truly yours,

 

MOLECULIN BIOTECH, INC.

 

By: /s/ Walter Klemp  
  Walter Klemp  
  Chairman of the Board and Chief Executive Officer  

 

Important Notice Regarding the Availability of Proxy Materials
for the Annual Shareholder Meeting to be Held on May 25, 2017:
Electronic Copies of the Proxy Statement and our 2016 Annual Report on Form 10-K are available at
http://www.[______].com

 

 

 

 

Moleculin Biotech, Inc.

2575 West Bellfort, Suite 333

Houston, TX, 77054

(713) 300-5160

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

To Be Held May 25, 2017

 

TO THE STOCKHOLDERS OF MOLECULIN BIOTECH, INC.:

 

NOTICE IS HEREBY GIVEN that the 2017 Annual Meeting of Stockholders of Moleculin Biotech, Inc. (the “Company”) will be held at the Hilton Garden Inn, 3201 Sage Road, Houston, Texas 77056, on May 25, 2017 at 12:30 p.m., local time, for the following purposes, as described in the accompanying Proxy Statement:

 

1. To elect four Board nominees to the Board of Directors of the Company, each to serve until the 2018 annual meeting of stockholders of the Company or until such person’s successor is qualified and elected.

 

2. To ratify the appointment of Grant Thornton, LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2017.

 

3. To approve an amendment to the Company’s Certification of Incorporation to effect a reverse stock split of the outstanding shares of the Company’s common stock, at one of the following reverse stock split ratios, 1-for-___, 1-for-___, 1-for-___ or 1-for-___, as determined by the Board of Directors in its sole discretion, prior to the one-year anniversary of this Annual Meeting.

 

4. To authorize an adjournment of the Annual Meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposal 3.

 

5 To transact any other business that is properly brought before the Annual Meeting or any adjournment or postponement thereof.

 

Only stockholders of record of the Company at the close of business on April 26, 2017 are entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement thereof. A complete list of these stockholders will be open for the examination of any stockholder of record at the Company’s principal executive offices located at 2575 West Bellfort, Suite 333, Houston, TX, 77054 for a period of ten days prior to the Annual Meeting. The list will also be available for the examination of any stockholder of record present at the Annual Meeting. The Annual Meeting may be adjourned or postponed from time to time without notice other than by announcement at the meeting.

 

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE PROVIDED.

 

  By Order of the Board of Directors,
   
  MOLECULIN BIOTECH, INC.
   
  /s/ Walter Klemp
Houston, Texas Walter Klemp
April 30, 2017 Chairman of the Board and Chief Executive Officer

 

 

 

 

Table of Contents

 

  Page
   
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING 1
   
WHY DID YOU SEND ME THIS PROXY STATEMENT? 1
   
WHAT PROPOSALS WILL BE ADDRESSED AT THE ANNUAL MEETING? 1
   
WHO MAY VOTE ON THESE PROPOSALS? 1
   
HOW MANY VOTES DO I HAVE? 1
   
WHY WOULD THE ANNUAL MEETING BE POSTPONED? 2
   
HOW DO I VOTE BY PROXY? 2
   
HOW DO I VOTE IN PERSON? 2
   
MAY I REVOKE MY PROXY? 2
   
WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL? 3
   
ARE THERE ANY RIGHTS OF APPRAISAL? 3
   
WHO BEARS THE COST OF SOLICITING PROXIES? 3
   
WHERE ARE MOLECULIN’S PRINCIPAL EXECUTIVE OFFICES? 3
   
HOW CAN I OBTAIN ADDITIONAL INFORMATION ABOUT MOLECULIN? 4
   
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 4
   
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE 5
   
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS 5
   
GOVERNANCE OF THE COMPANY 7
   
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS 10
   
RELATED PARTY TRANSACTIONS 16
   
PROPOSAL 1: ELECTION OF DIRECTORS 17
   
PROPOSAL 2: TO RATIFY THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 18
   
AUDIT COMMITTEE REPORT 19
   
PROPOSAL 3: APPROVAL OF AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION TO EFFECT REVERSE STOCK SPLIT OF THE COMPANY’S COMMON STOCK 20
   
PROPOSAL 4: AUTHORIZATION TO ADJOURN THE ANNUAL MEETING 26
   
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K 27
   
OTHER PROPOSED ACTION 27
   
STOCKHOLDER PROPOSALS AND SUBMISSIONS 27

 

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MOLECULIN BIOTECH, INC.

PROXY STATEMENT

FOR

ANNUAL MEETING OF STOCKHOLDERS

To Be Held May 25, 2017

 

INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

 

WHY DID YOU SEND ME THIS PROXY STATEMENT?

 

This proxy statement and the enclosed proxy card are furnished in connection with the solicitation of proxies by the Board of Directors of Moleculin Biotech, Inc., a Delaware corporation, for use at the Annual Meeting of Moleculin Biotech stockholders to be held at the Hilton Garden Inn, 3201 Sage Road, Houston, Texas 77056, on May 25, 2017 at 12:30 p.m., local time, and at any adjournments or postponements of the Annual Meeting. This proxy statement summarizes the information you need to make an informed vote on the proposals to be considered at the Annual Meeting. However, you do not need to attend the Annual Meeting to vote your shares. Instead, you may simply complete, sign and return the enclosed proxy card using the envelope provided. The terms “Moleculin,” “Company,” “we,” or “our” refer to Moleculin Biotech, Inc.

 

WHAT PROPOSALS WILL BE ADDRESSED AT THE ANNUAL MEETING?

 

We will address the following proposals at the Annual Meeting:

 

1. To elect four Board nominees to the Board of Directors of the Company, each to serve until the 2018 annual meeting of stockholders of the Company or until such person’s successor is qualified and elected.

 

2. To ratify the appointment of Grant Thornton, LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2017.

 

3. To approve an amendment to the Company’s Certification of Incorporation to effect a reverse stock split of the outstanding shares of the Company’s common stock, at one of the following reverse stock split ratios, 1-for-___, 1-for-___, 1-for-___ or 1-for-___, as determined by the Board of Directors in its sole discretion, prior to the one-year anniversary of this Annual Meeting.

 

4. To authorize an adjournment of the Annual Meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposal 3.

 

5 To transact any other business that is properly brought before the Annual Meeting or any adjournment or postponement thereof.

 

WHO MAY VOTE ON THESE PROPOSALS?

 

We will send this proxy statement, the attached Notice of Annual Meeting and the enclosed proxy card on or about April 30, 2017 to all stockholders as of April 26, 2017 (the “Record Date”). Stockholders who owned shares of our common stock at the close of business on the Record Date are entitled to vote at the Annual Meeting in all matters properly brought before the Annual Meeting.

 

On the Record Date, we had _____________ shares of issued and outstanding common stock entitled to vote at the Annual Meeting.

 

HOW MANY VOTES DO I HAVE?

 

Each share of common stock is entitled to one vote on each matter presented at the Annual Meeting. Cumulative voting is not permitted.

 

 

 

 

WHY WOULD THE ANNUAL MEETING BE POSTPONED?

 

The Annual Meeting will be postponed if a quorum is not present on May 25, 2017. The presence in person or by proxy of at least a majority of our common stock outstanding as of the Record Date will constitute a quorum and is required to transact business at the Annual Meeting. If a quorum is not present, the Annual Meeting may be adjourned until a quorum is obtained.

 

Abstentions and broker non-votes are treated as shares present or represented at the meeting, but are not counted as votes cast. Shares held by brokers who do not have discretionary authority to vote on a particular matter and who have not received voting instructions from their customers are not counted or deemed to be present or represented for the purpose of determining whether stockholders have approved that matter, but they are counted as present for the purposes of determining the existence of a quorum at the Annual Meeting.

 

HOW DO I VOTE BY PROXY?

 

Whether you plan to attend the Annual Meeting or not, we urge you to complete, sign and date the enclosed proxy card and return it promptly in the envelope provided. Returning the proxy card will not affect your right to attend the Annual Meeting and vote in person.

 

If you properly fill in your proxy card and send it to us in time to vote, your proxy (one of the individuals named on your proxy card) will vote your shares as you have directed. If you sign the proxy card but do not make specific choices, your proxy will vote your shares as recommended by the Board of Directors as follows:

 

1. FOR the election of the Board’s four nominees to our Board of Directors.

 

2. FOR ratification of the appointment of Grant Thornton, LLP as our independent registered public accounting firm for the year ending December 31, 2017.

 

3. FOR approval of an amendment to the Company’s Certification of Incorporation to effect a reverse stock split of the outstanding shares of the Company’s common stock, at one of the following reverse stock split ratios, 1-for-___, 1-for-___, 1-for-___ or 1-for-___, as determined by the Board of Directors in its sole discretion, prior to the one-year anniversary of this Annual Meeting.

 

4. FOR authorization of an adjournment of the Annual Meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposal 3.

 

If any other matters are presented, your proxy will vote in accordance with his or her best judgment. At the time this proxy statement was printed, we knew of no matters that needed to be acted on at the Annual Meeting other than those discussed in this proxy statement.

 

HOW DO I VOTE IN PERSON?

 

If you plan to attend the Annual Meeting and vote in person on May 25, 2017, or at a later date if the meeting is adjourned or postponed, we will give you a ballot when you arrive. However, if your shares are held in the name of your broker, bank or other nominee, you must bring a power of attorney executed by the broker, bank or other nominee that owns the shares of record for your benefit and authorizing you to vote the shares.

 

MAY I REVOKE MY PROXY?

 

If you give a proxy, you may revoke it at any time before it is exercised. You may revoke your proxy in three ways:

 

1. You may send in another proxy with a later date.

 

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2. You may notify us in writing (or if the stockholder is a corporation, under its corporate seal, by an officer or attorney of the corporation) at our principal executive offices before the Annual Meeting that you are revoking your proxy.

 

3. You may vote in person at the Annual Meeting.

 

WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?

 

Proposal 1: Election of Directors .

 

A plurality of the eligible votes cast is required to elect director nominees, and as such, the four nominees who receive the greatest number of votes cast by stockholders, entitled to vote at the meeting, will be elected. A nominee who receives a plurality means he or she has received more votes than any other nominee for the same director’s seat. Broker non-votes will have no effect on this proposal.

 

Proposal 2: Ratification of Appointment of Independent Registered Public Accounting Firm.

 

The approval of Proposal 2 requires the affirmative vote of a majority of the shares present in person or by proxy and entitled to vote on the matter. Broker non-votes will not be taken into account in determining the outcome of the proposal, and abstentions will be counted as votes against the proposal.

 

Proposal 3: Approval of an amendment to the Company’s Certification of Incorporation to effect a reverse stock split as determined by the Board of Directors in its sole discretion.

 

The approval of Proposal 3 requires the affirmative vote of a majority of the Company’s outstanding shares entitled to vote on the matter. Broker non-votes and abstentions will be counted as votes against the proposal.

 

Proposal 4: Authorization of an adjournment of the Special Meeting.

 

The approval of Proposal 4 requires the affirmative vote of a majority of the shares present in person or by proxy and entitled to vote on the matter. Broker non-votes will not be taken into account in determining the outcome of the proposal, and abstentions will be counted as votes against the proposal.

 

If you do not give instructions to your bank or brokerage firm, it will nevertheless be entitled to vote your shares in its discretion on “routine matters.” However, absent your instructions, the record holder will not be permitted to vote your shares on a non-routine matter, which are referred to as “broker non-votes,” properly brought before the meeting. Broker non-votes (shares held by brokers that do not have discretionary authority to vote on the matter and have not received voting instructions from their clients) are not counted or deemed to be present or represented for the purpose of determining whether stockholders have approved that proposal, but will be counted in determining whether there is a quorum present.

 

ARE THERE ANY RIGHTS OF APPRAISAL?

 

The Board of Directors is not proposing any action for which the laws of the State of Delaware, our certificate of incorporation or our bylaws provide a right of a stockholder to obtain appraisal of or payment for such stockholder’s shares.

 

WHO BEARS THE COST OF SOLICITING PROXIES?

 

We will bear the cost of soliciting proxies in the accompanying form and will reimburse brokerage firms and others for expenses involved in forwarding proxy materials to beneficial owners or soliciting their execution.

 

WHERE ARE MOLECULIN’S PRINCIPAL EXECUTIVE OFFICES?

 

The principal executive offices of Moleculin are located at 2575 West Bellfort, Suite 333, Houston, TX, 77054 and our telephone number is (713) 300-5160.

 

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HOW CAN I OBTAIN ADDITIONAL INFORMATION ABOUT MOLECULIN?

 

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, which requires that we file reports, proxy statements and other information with the SEC. The SEC maintains a website that contains reports, proxy and information statements and other information regarding companies, including Moleculin, that file electronically with the SEC. The SEC’s website address is www.sec.gov. In addition, our filings may be inspected and copied at the public reference facilities of the SEC located at 100 F Street, N.E. Washington, DC 20549.

 

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth information, as of April 26, 2017, regarding beneficial ownership of our common stock by:

 

· each of our directors;

 

· each of our executive officers;

 

· all directors and executive officers as a group; and

 

· each person, or group of affiliated persons, known by us to beneficially own more than five percent of our shares of common stock.

 

Beneficial ownership is determined according to the rules of the SEC, and generally means that person has beneficial ownership of a security if he or she possesses sole or shared voting or investment power of that security, and includes options that are currently exercisable or exercisable within 60 days. Each director or officer, as the case may be, has furnished us with information with respect to beneficial ownership. Except as otherwise indicated, we believe that the beneficial owners of common stock listed below, based on the information each of them has given to us, have sole investment and voting power with respect to their shares, except where community property laws may apply. Except as otherwise noted below, the address for each person or entity listed in the table is c/o Moleculin Biotech, Inc., 2575 West Bellfort, Suite 333, Houston, Texas 77054.

 

    Shares beneficially
owned prior to
Offering
    Percent of Class (1)  
Name and Address of Beneficial Owner                
Walter V. Klemp     2,480,724 (2)%     14.4 %
Donald Picker     1,098,635 (3)%     6.4 %
Jonathan Foster            
Louis Ploth     50,000 (4)     *  
Robert Shepard            
Robert George            
Michael Cannon            
Jacqueline Northcut            
Directors and Named Executive Officers as a Group (7 persons)     3,579,359 (6)%     20.8 %
5% or greater shareholders                
Waldemar Priebe     4,140,573 (3)(5)%     24.1 %
AnnaMed, Inc.     1,425,000 (2)%     8.3 %

 

*             Less than 1%.

 

(1)          Based on _____________ shares of common stock outstanding as of April 26, 2017.

 

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(2)          The 1,425,000 shares held by AnnaMed, Inc. have been included in the amount for Mr. Klemp. Mr. Klemp has voting and dispositive power over the shares held by AnnaMed, Inc.

 

(3)           Of the amount in the table, 630,000 shares held by IntertechBio Corp. have been included in the amounts for Drs. Picker and Priebe. Drs. Picker and Priebe have voting and dispositive power over the shares held by IntertechBio Corp.

 

(4)          Consists of shares underlying options.

 

(5)          Of the amount in the table, 629,000 shares held by Houston Pharmaceuticals, Inc. have been included in the amount for Dr. Priebe. Dr. Priebe has voting and dispositive power over the shares held by Houston Pharmaceuticals, Inc.

 

(6)          Does not include shares underlying options held by Mr. Ploth who resigned from the company in August 2016.

 

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers and directors, and persons who own more than ten percent of our common stock, to file reports of ownership and changes in ownership of our common stock with the SEC. Officers, directors, and greater-than-ten-percent stockholders are required by the SEC’s regulations to furnish us with copies of all Section 16(a) forms that they file. Based solely upon a review of the Section 16(a) forms furnished to us during the most recent fiscal year, we believe that all such forms required to be filed were timely filed, by the officers, directors, and security holders required to file the forms during the fiscal year ended December 31, 2016, except our President, Donald Picker, and 10% or greater shareholder, Waldemar Priebe, each of whose Form 3 filings was inadvertently filed late.

 

INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS

 

Directors and Executive Officers

 

The following table sets forth the names and ages of all of our directors and executive officers as of April 26, 2017. Our officers are appointed by, and serve at the pleasure of, the Board of Directors.  

  

Name   Age   Position
Walter V. Klemp   56   Chairman of the Board and Chief Executive Officer
Jonathan P. Foster   53   Chief Financial Officer and Executive Vice President
Donald Picker   70   President and Chief Operating Officer
Robert Shepard   64   Chief Medical Officer
Robert E. George   67   Director
Michael D. Cannon   71   Director
Jacqueline Northcut   55   Director

 

Set forth below is biographical information about each of the individuals named in the tables above:

 

Walter V. Klemp - Chairman of the Board and Chief Executive Officer . Mr. Klemp is a co-founder of our company, and has served as our chairman of the board and chief executive officer since July 2015. Since 2006, Mr. Klemp has served as the chairman, co-founder and part-time chief executive officer of Moleculin, LLC. Since November 2011, Mr. Klemp has also served as chief executive officer of Soliton, Inc., a medical device company focused on developing new technology for use in aesthetics, and as such, Mr. Klemp is currently devoting only part of his work time to us. Mr. Klemp served as president and chief executive officer of Zeno Corporation from 2004 to April 2011, where he developed and marketed dermatology devices and drugs from concept through FDA approval and market launch. From 1987 to 2000, Mr. Klemp served as chief executive officer and chairman of Drypers Corporation, a publicly traded multinational consumer products company that was listed as #1 on the INC 500 List of America’s Fastest Growing Companies. We believe that Mr. Klemp’s history with our company and background, coupled with his extensive experience in the medical field, provide him with the qualifications to serve as a Chairman of the Board and CEO.

 

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Jonathan P. Foster - Chief Financial Officer and Executive Vice President . Mr. Foster has served as our chief financial officer and executive vice president since August 2016. Mr. Foster brings more than 30 years in financial experience holding a variety of executive and senior financial positions with public, private, start-up to large corporate and international companies. From February 2012 to August 2016, Mr. Foster served as Chief Financial Officer and Executive Vice President of InfuSystem Holdings, Inc., a national provider of infusion pumps and related services to the healthcare industry. From May 2011 to January 2012, Mr. Foster served as a consultant to the Chief Financial Officer of LSG Sky Chefs, USA, Inc., a subsidiary of Deutsche Lufthansa AG. Mr. Foster served on the Board of Financial Institutions for the State of South Carolina from 2006 to 2012. Mr. Foster is a Certified Public Accountant (South Carolina) and holds the designation of Chartered Global Management Accountant from the American Institute of Certified Public Accountants. He received his BS in Accounting from Clemson University in 1985.

 

Donald Picker, PhD - President and Chief Operating Officer. Dr. Picker joined Moleculin, LLC in 2007 as its chief executive officer and has served as our chief operating officer since July 2015 and as our president since January 2016. In 2007, Dr. Picker became the chief executive officer of IntertechBio. From 2006 through 2007, Dr. Picker was the President of Tapestry Pharmaceuticals. From 1998 to 2003, Dr. Picker was CEO of Synergy Pharmaceuticals. Synergy was merged into Callisto Pharmaceuticals where he was vice present of research and development until 2006. Dr. Picker led the development of carboplatin and cisplatin from concept to FDA approval. Dr. Picker received his BS degree from Brooklyn Polytechnic University and his PhD from SUNY Albany in 1975. Dr. Picker is currently devoting only part of his work time to us, and provides services as needed to us.

 

Robert Shepard, MD, FACP, Chief Medical Officer. Dr. Shepard has served as our chief medical officer since June 2016. From 2013 until 2014, Dr. Shepard served as vice president of scientific and medical affairs for Accelovance. Shepard has extensive research credentials in hematology and oncology and is board certified in oncology, hematology and internal medicine. He has a wide array of experience in translational medicine and clinical research and has been actively involved in oncology research since 1970, responsible for the clinical development of several drugs and immune therapies for biopharmaceutical companies, including serving as the consulting Chief Medical Officer for six companies. Dr. Shepard is a Magna Cum Laude graduate of Harvard University in biochemical sciences and molecular biophysics and studied in the Harvard-M.I.T. Health Sciences program. He held fellowships in hematology and oncology at the Tufts-New England Medical Center where he conducted laboratory research in leukemias, myeloma and myelodysplasia, as well as fellowship in pharmacology and molecular genetics at the Dana-Farber Cancer Center and Harvard Medical School. Dr. Shepard holds academic appointments at Harvard University, Tufts University and the University of Virginia.

 

Robert E. George - Director . Mr. George joined our board of directors upon our IPO. He was a partner with the international accounting firm of PricewaterhouseCoopers (PWC) for 27 years until 2010, where his client service sectors included healthcare, among others. Mr. George currently serves as Chairman of the Audit Committee for The University of Texas Health Science Center at Houston and, since June 2011, has been a member of The University of Texas at Austin, McCombs Graduate School of Business accounting faculty. Since January 2014, he also has been the Director of Energy Programs and Conferences for the Professional Development Institute. Mr. George graduated with accounting honors from the University of North Texas. We believe Mr. George’s deep and broad level of expertise in financial accounting and reporting matters, particularly in the healthcare sector, as a former audit partner at PricewaterhouseCoopers provide him with the qualifications to serve as a director.

 

Michael D. Cannon - Director . Mr. Cannon joined our board of directors upon our IPO. Between 1997 and 2004, Mr. Cannon was the Chief Science Officer, EVP and a Director of SICOR, Inc., a U.S. public pharmaceutical company, until its acquisition by Teva Pharmaceutical Industries, Inc. SICOR focused on generic finished dosage injectable pharmaceuticals, active pharmaceutical ingredients and generic biopharmaceuticals. While at SICOR, he oversaw the acquisition and development of the biological business, including initiation and management of international partnerships, as well as on the design, construction, and licensure of protein manufacturing facilities. From July 2005 to December 2009, Mr. Cannon was a member of the scientific advisory board of Trevi Health Ventures LP, a New York investment fund specializing in health care investments. From May 2005 until December 2011, Mr. Cannon was a partner in a private partnership formed to evaluate and perform preliminary development of intellectual property in the healthcare sector. Since 2005, Mr. Cannon has served as a board member for several private companies. Mr. Cannon currently serves on the board of directors of 4 privately held biotech companies, including 2 focused on cancer-related treatments, and has been a partner and advisor in several biotech venture firms. Mr. Cannon has a degree in chemistry from Fordham College. We believe Mr. Cannon’s distinguished career in the biotechnology field, particularly as Chief Science Officer, EVP and a Director of SICOR, a publicly traded company, provide him with the qualifications to serve as a director.

 

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Jacqueline Northcut - Director . Ms. Northcut joined our board of directors upon our IPO. Ms. Northcut served as President and CEO of BioHouston from 2002 until 2015. BioHouston, Inc. is a non-profit organization founded by Houston, Texas area academic/research institutions to assist in the commercialization efforts of development stage life science and biotechnology companies. During this same period, Ms. Northcut became the founder and CEO of the Texas BioAlliance, an organization created to further assist with development efforts of biotechnology and medical device companies in the state of Texas. In these capacities she organized the Texas Life Science Forum and the Texas Life Science CEO Summit, helping connect biotech CEOs with funding, technical, regulatory and other resources. Ms. Northcut was previously a Partner in the international accounting firm of Arthur Andersen & Co., where she worked from 1984 to 2002. Ms. Northcut received her BBS from Harding University in 1984. Ms. Northcut currently serves on the board of directors of one privately held biotech company focused on cancer-related treatments. We believe Ms. Northcut’s vast experience with development stage life science and biotechnology companies as President and CEO of BioHouston and her expertise in financial accounting and reporting matters as a former audit partner at Arthur Andersen, her with the qualifications to serve as a director.

 

No director is related to any other director or executive officer of our company or our subsidiaries, and, there are no arrangements or understandings between a director and any other person pursuant to which such person was elected as director.

 

GOVERNANCE OF THE COMPANY

 

Our Board of Directors

 

Our Board of Directors oversees the business affairs of Moleculin and monitors the performance of management. Pursuant to our Bylaws, the Board of Directors shall consist of no less than one director. Members of the Board of Directors discussed various business matters informally on numerous occasions throughout the year 2016. The Board held three meetings during 2016. Each incumbent director attended at least 75% of the total number of meetings of the Board of Directors and committee meetings of which such director was a member (held during the period for which such director was in office).

 

Director Independence

 

The rules of the Nasdaq Stock Market, or the Nasdaq Rules, require a majority of a listed company’s board of directors to be composed of independent directors. In addition, the Nasdaq Rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and governance committees be independent. Under the Nasdaq Rules, a director will only qualify as an independent director if, in the opinion of our board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The Nasdaq Rules also require that audit committee members satisfy independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee, accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries or otherwise be an affiliated person of the listed company or any of its subsidiaries. In considering the independence of compensation committee members, the Nasdaq Rules require that our board of directors must consider additional factors relevant to the duties of a compensation committee member, including the source of any compensation we pay to the director and any affiliations with our company.

  

Our board of directors undertook a review of the composition of our board of directors and its committees and the independence of each director. Based upon information requested from and provided by each director concerning his background, employment and affiliations, including family relationships, our board of directors has determined that each of our directors, with the exception of Mr. Klemp, are independent as defined under the Nasdaq Rules.

 

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Board Committees

 

Upon the completion of our IPO in May 2016, we established a Nominating and Corporate Governance Committee, an Audit Committee and a Compensation Committee. Our Board of Directors has adopted and approved a charter for each of these standing committees. The charters, which include the functions and responsibilities of each of the committees, can be found in the “Investors – Corporate Governance” section on our web site at www.moleculin.com.

 

Audit Committee . The members of the Audit Committee are Robert George (Chairperson), Jacqueline Northcut and Michael Cannon. Each member of the Audit Committee is independent as defined by the Nasdaq Rules. In addition, each member of the Audit Committee satisfies the additional requirements of the SEC and Nasdaq Rules for audit committee membership, including the additional independence requirements and the financial literacy requirements. The Board has determined that at least two members of the Audit Committee, Mr. George and Ms. Northcut, are “audit committee financial experts” as defined in the SEC’s rules and regulations. The primary purpose of the Audit Committee is to oversee the quality and integrity of our accounting and financial reporting processes and the audit of our financial statements. The Audit Committee is responsible for selecting, compensating, overseeing and terminating the selection of our independent registered public accounting firm.

 

Nominating and Corporate Governance Committee. The members of the Nominating and Corporate Governance Committee are Robert George (Chairperson), Jacqueline Northcut and Michael Cannon. Each member of the Nominating and Corporate Governance Committee is independent as defined by Nasdaq Rules. The primary functions and responsibilities of the Nominating and Corporate Governance Committee are to: (a) determine the qualifications, qualities, skills, and other expertise required to be a director; (b) identify and screen individuals qualified to become members of the Board; (c) make recommendations to the Board regarding the selection and approval of the nominees for director; and (d) review and assess the adequacy of our corporate governance policies and procedures.

 

Compensation Committee . The members of the Compensation Committee are Jacqueline Northcut (Chairperson), Michael Cannon and Robert George. Each member of the Compensation Committee is independent as defined by Nasdaq Rules.

 

The Compensation Committee is responsible for, among other things, reviewing and making recommendations to the Board of Directors with respect to the annual compensation for our Chief Executive Officer. The Compensation Committee also is responsible for reviewing and making recommendations to the Board of Directors the annual compensation and benefits for our other executive officers. The Compensation Committee also, among other things, reviews compensation of the Board, reviews and makes recommendations on all new executive compensation programs that are proposed for adoption, and administers the Company’s equity incentive plans. The Compensation Committee is responsible for reviewing director compensation for service on the Board and Board committees at least once a year and to recommend any changes to the Board.

 

Our Chief Executive Officer reviews the performance of our other executive officers (other than himself) and, based on that review, our Chief Executive Officer makes recommendations to the Compensation Committee about the compensation of executive officers (other than himself). Our Chief Executive Officer does not participate in any deliberations or approvals by the Board or the Compensation Committee with respect to his own compensation.

 

Board Member Attendance at Annual Meetings

 

We do not have a formal policy regarding Board attendance at our annual meetings. This is our first annual meeting since becoming a public company.

 

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Board Leadership Structure and Role in Risk Oversight

 

Walter Klemp serves as both our Chief Executive Officer and Chairman of the Board. Our Board of Directors has no policy with regard to the separation of the offices of Chairman of the Board and Chief Executive Officer, and believes, given the size of our company, it is appropriate for Mr. Klemp to serve in both roles.

 

Our management is responsible for managing risks in our business, including developing processes to manage and monitor risks. The Board views its role as one of oversight. The Board focuses on understanding management’s risk management systems, the effectiveness of those systems, and the way in which management proactively manages risks. In addition, the Board utilizes the Nominating and Corporate Governance Committee, the Audit Committee and the Compensation Committee to manage risks that arise under each committee’s area of focus.

 

Nomination of Director Candidates

 

We receive suggestions for potential director nominees from many sources, including members of the Board, advisors, and stockholders. Any such nominations, together with appropriate biographical information, should be submitted to the Chairperson of the Nominating and Corporate Governance Committee in the manner discussed below. Any candidates submitted by a stockholder or stockholder group are reviewed and considered in the same manner as all other candidates.

 

Qualifications for consideration as a Board nominee may vary according to the particular areas of expertise being sought as a complement to the existing board composition. However, minimum qualifications include high level leadership experience in business activities, breadth of knowledge about issues affecting the Company, experience on other boards of directors, preferably public company boards, and time available for meetings and consultation on Company matters. Our Nominating and Corporate Governance Committee does not have a formal policy with regard to the consideration of diversity in identifying director candidates, but seeks a diverse group of candidates who possess the background, skills and expertise to make a significant contribution to the Board, to the Company and our stockholders. Candidates whose evaluations are favorable are recommended by our Nominating and Corporate Governance Committee to the full Board for consideration. The full Board selects and recommends candidates for nomination as directors for stockholders to consider and vote upon at the annual meeting.

 

A stockholder wishing to nominate a candidate for election to our Board of Directors at any annual meeting at which the Board of Directors has determined that one or more directors will be elected must submit a written notice of his or her nomination of a candidate to the Chairperson of the Nominating and Corporate Governance Committee (c/o the Corporate Secretary), providing the candidates name, biographical data and other relevant information together with a consent from the nominee. Pursuant to our Bylaws, the submission must be received at our principal executive offices 120 days prior to the anniversary date of the mailing date of our previous year’s proxy statement so as to permit the Board of Directors time to evaluate the qualifications of the nominee.

 

We have not employed an executive search firm, or paid a fee to any other third party, to locate qualified candidates for director positions.

 

Stockholder Communications with Directors

 

Persons wishing to write to our Board of Directors, or to a specified director or committee of the Board, should send correspondence to the Corporate Secretary at 2575 West Bellfort, Suite 333, Houston, TX, 77054. Electronic submissions of stockholder correspondence will not be accepted.

 

The Corporate Secretary will forward to the directors all communications that, in his or her judgment, are appropriate for consideration by the directors. Examples of communications that would not be appropriate for consideration by the directors include commercial solicitations and matters not relevant to the stockholders, to the functioning of the Board or to the affairs of Moleculin. Any correspondence received that is addressed generically to the Board of Directors will be forwarded to the Chairman of the Board.

 

Code of Ethics

 

We have adopted a written code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller and any persons performing similar functions. The code of ethics is on the “Investors – Corporate Governance – Governance Documents” section of our web site at www.moleculin.com.We intend to disclose any future amendments to, or waivers from, the code of ethics within four business days of the waiver or amendment through a website posting or by filing a Current Report on Form 8-K with the SEC.

 

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COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

 

Executive Officer Compensation

 

We were formed in July 2015. To provide you with a complete picture of the compensation paid to our executive officers for the fiscal years ended December 31, 2016 and 2015 when they acted in executive capacities for Moleculin, LLC and for Moleculin, the following table and the related notes set forth information relating to the compensation paid to each of the named executive officers set forth below (the “named executive officers”) by Moleculin, LLC and Moleculin.

 

Name and Principal Position   Year   Salary($)     Option
awards
($) (1)
    All other
compensation
($) (2)
    Total ($)  
Moleculin, LLC:                                    
Walter V. Klemp, Chairman and Acting Chief Executive Officer   2016                          
    2015     40,650                     40,650  
Donald Picker, President and Chief Operating Officer   2016                          
    2015     47,425                     47,425  
                                     
MBI:                                    
Walter V. Klemp, Chairman and Chief Executive Officer   2016     175,000 (3)                   175,000  
    2015                          
Donald Picker, President and Chief Operating Officer   2016     131,250                     131,250  
    2015                          
Jonathan P. Foster, Chief Financial Officer (4)   2016     97,717       1,506,909       7,199       1,611,825  
Louis Ploth, Jr., Former Chief Financial Officer (5)   2016     111,009               7,485       118,494  
    2015     44,141 (6)     27,390               71,531  

 

(1)          Represents the full grant date fair value of the option grant calculated in accordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the named executive officer. For a summary of the assumptions made in the valuation of the awards, please see Note 5 to our financial statements as of and for the period ended December 31, 2016 included in Form 10-K provided to you along with this proxy statement.

 

(2)          Represents payments made for medical coverage.

 

(3)          Mr. Klemp’s employment agreement provided that Mr. Klemp would defer 50% of his salary for 12 months, which deferred salary will be payable upon Mr. Klemp’s termination or on June 1, 2019. Of the foregoing $175,000 amount, $87,500 was paid during the year and $87,500 represents the deferred portion of Mr. Klemp’s salary.

 

(4)          Mr. Foster became our chief financial officer in August 2016.

 

(5)          Mr. Ploth resigned as our chief financial officer in August 2016.

 

(6)          Includes $7,000 of consulting fees paid during the year.

 

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Equity Awards

 

The following table sets forth certain information concerning our outstanding options for our named executive officers at December 31, 2016.

 

Outstanding Equity Awards At Fiscal Year-End—2016

 

Name   Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
    Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
    Option
Exercise Price
($)
    Option
Expiration Date
 
Walter V. Klemp     -       -       -       -  
Donald Picker     -       -       -       -  
Jonathan P. Foster     -       400,000 (1)     5.85       8/19/2026  
Louis Ploth (2)     -       200,000 (2)     0.20       12/10/2025  

 

(1)          The unvested shares underlying the option vest in equal annual installments over a four-year period commencing August 2017, provided Mr. Foster continues as our chief financial officer on each vesting date.

 

(2)          The unvested shares underlying the option vested in equal annual installments over a four-year period commencing December 2017, provided Mr. Ploth was employed on each vesting date. Mr. Ploth resigned as our chief financial officer in August 2016. Pursuant to a separation agreement we entered into with Mr. Ploth, Mr. Ploth will be permitted to exercise 25% of the options to purchase common stock granted in December 2015, or 50,000 shares, until May 2020. The remaining options to purchase 150,000 shares were cancelled.

  

Employment Agreements

 

Klemp Employment Agreement

 

On October 13, 2016, we entered into an employment agreement with Mr. Walter Klemp pursuant to which Mr. Klemp agreed to serve as our Chief Executive Officer commencing on such date. The agreement provides for an annual salary of $300,000, provided that Mr. Klemp has agreed to defer 50% of his salary for 12 months, which deferred salary will be payable upon Mr. Klemp’s termination or on June 1, 2019. If Mr. Klemp’s employment is terminated at our election without “cause” (as defined in the agreement), which requires 30 days advanced notice, or by Mr. Klemp for “good reason” (as defined in the agreement), Mr. Klemp shall be entitled to receive severance payments equal to the greater of 12 months of Mr. Klemp’s base salary or the base salary Mr. Klemp would have received had he remained employed through the third anniversary of the date of the agreement. Mr. Klemp has agreed not to compete with us for 12 months after the termination of his employment. If we determine to retain a new chief executive officer during the term of the agreement, we have the option, at our discretion, to convert Mr. Klemp into a consultant on the same terms as set forth above.

 

Foster Employment Agreement

 

On August 19, 2016, we entered into an employment agreement with Mr. Jonathan P. Foster pursuant to which Mr. Foster agreed to serve as our Chief Financial Officer and Executive Vice President commencing on such date for an initial term of three years, which will be automatically renewed for additional one-year terms unless either party chooses not to renew the agreement. The agreement provides for an annual salary of $250,000. Mr. Foster may receive an annual bonus, provided that the final determination on the amount of the annual bonus, if any, will be made by the Compensation Committee of the Board of Directors, based on criteria established by the Compensation Committee.

 

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Under the agreement, Mr. Foster was granted a ten-year option to purchase 400,000 shares at an exercise price per share equal to the closing price of our common stock on the date of execution of his employment agreement, which was $5.85. The option vests in four equal installments (or 100,000 shares each installment) on each of the succeeding four anniversary dates of the execution of the agreement, provided Mr. Foster is Chief Financial Officer on such vesting date. In the event of a “change of control” (as defined in the agreement) prior to the final vesting of all of the options, all of the unvested options shall immediately vest; provided, however, in the event the acquiring party desires to replace the unvested options with a substitute grant of equal or greater value, such proposed substitution shall be submitted to the Compensation Committee, and the Compensation Committee shall decide whether to allow the unvested options to vest or whether to cancel the unvested options and replace them with the substitute grant proposed by the acquiring party.

 

If Mr. Foster’s employment is terminated at our election without “cause” (as defined in the agreement), which requires 90 days advance notice, or by Mr. Foster for “good reason” (as defined in the agreement), Mr. Foster shall be entitled to receive severance payments equal to nine months of Mr. Foster’s base salary and a pro rata portion of the target bonus, if any, for the year in which such termination occurs. In addition, if Mr. Foster’s employment is terminated prior to the end of the term of the agreement by us without cause or by Mr. Foster for good reason, and such termination occurs within three months prior to a change in control, in contemplation of a change in control or within six months after a change in control, Mr. Foster shall be entitled to receive, in addition to the severance discussed above, an acceleration of the vesting of the option grant described in the prior paragraph. Mr. Foster agreed not to compete with us until nine months after the termination of his employment.

 

Director Compensation

 

On September 23, 2016, our board, after receiving the recommendation of the compensation committee, approved the following policy for compensating non-employee members of the board:

 

•      Each non-employee director receives annual cash compensation of $30,000. In addition, the chairperson of the audit committee, compensation committee and nominating and governance committee receives an annual payment of $15,000, $10,000 and $7,500, respectively, and the other members of such committees shall receive an annual payment of $7,500, $5,000 and $3,750, respectively.

 

•      Upon the initial appointment (or election) of non-employee directors to the board, the director will be issued a 10-year option to purchase 20,000 shares of our common stock, under the Company's 2015 Stock Plan, with 3-year annual vesting and an exercise price equal the closing price of our common stock on the date of the appointment (or election). All non-employee directors serving as of September 23, 2016, the date of the initial adoption of the policy, received the foregoing initial stock option grant as of such date.

 

•      Annually, on the date of our annual meeting, each non-employee director will be issued a 10-year option to purchase 15,000 shares of our common stock, under the Company's 2015 Stock Plan, with 3-year annual vesting and an exercise price equal the closing price of our common stock on the date of the annual meeting. 

 

The following table sets forth the total compensation earned by our non-employee directors in 2016:

 

Name   Fees earned or paid in cash ($)     Option awards ($) (1)     Total ($)  
Michael D. Cannon     27,116       72,714       99,830  
Robert E. George     33,712       72,714       106,426  
Jacqueline Northcut     30,047       72,714       102,761  

 

(1)           Represents the full grant date fair value of the 20,000 share option award our board approved and granted to each non-employee director on September 23, 2016, calculated in accordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the director. For a summary of the assumptions made in the valuation of the awards made in 2016, please see Note 5 to our financial statements as of and for the period ended December 31, 2016 included in Form 10-K provided to you along with this proxy statement. As of December 31, 2016, the foregoing ten-year option to purchase 20,000 shares at an exercise price of $5.71 per share represented the sole option or stock award outstanding for each the non-employee directors.

 

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Scientific Advisory Board

 

Our executive team is supported by our scientific advisory board, the members of which include scientists experienced in the fields in which we pursue.

 

Dr. Waldemar Priebe, Ph.D, Chair of Scientific Advisory Board (SAB) . Waldemar Priebe is a founder of and one of the founding scientists at Moleculin, LLC and serves as Chairman of our Scientific Advisory Board. Dr. Priebe is also a Professor of Medicinal Chemistry at the Department of Experimental Therapeutics at The University of Texas MD Anderson Cancer Center. Dr. Priebe led the discovery of the molecules that form the basis for our lead drug candidates. As a founder or founding scientist at a number of successful biotechnology firms such as Aronex Pharmaceuticals, Houston Pharmaceuticals, Reata Pharmaceuticals, and IntertechBio, Dr. Priebe has been integral in advancing several drugs through the pipeline, three of which are currently in clinical development. He has also developed several new small molecule compounds that have been licensed as potential drugs.

 

Dr. Madeleine, Duvic, M.D., SAB Member . Dr. Duvic is Professor of Internal Medicine and Dermatology and Deputy Chairman of the Department of Dermatology at MD Anderson, a former board member of the American Academy of Dermatology and recent Vice President of the Society for Investigative Dermatology. Elected to the ADA, Dr. Duvic is also a Founder and board member of the United States Consortium for Cutaneous Lymphomas, performs translational research in CTCL, and has been engaged in the design and conduct of clinical trials that resulted in new therapies for CTCL. Dr. Duvic also serves on Medical and Scientific Boards of the National Alopecia Areata Foundation and Cutaneous Lymphoma Foundation. She is the Principal Investigator of the NAAF funded Alopecia Areata Registry.

 

Dr. John Paul Waymack, M.D., ScD, SAB Member. Dr. Waymack has served as CMO of Kitov Pharmaceuticals since July 2013. Dr. Waymack brings over 20 years' experience in the biopharma field. A former academic transplant surgeon and FDA medical officer, he has over 20 years' experience as a drug development consultant for major pharmaceutical companies, including Pfizer, Roche, Pharmacia, Warner Lambert and Searle. During his 10-year academic career, Dr. Waymack published over 100 scientific essays, mainly in the fields of prostaglandins and immunology. In addition, he was commissioned and served as a Major in the US Army Medical Corps in the position of Chief of Surgical Research at the Institute for Surgical Research. Dr. Waymack was also an Associate Professor of Surgery at the University of Texas Medical Branch and at the University of Medicine and Dentistry of New Jersey.

 

Dr. Sandra Silberman, M.D., Ph.D . Dr. Silberman’s career in clinical development began at Pfizer, Inc., where she oversaw the initiation of Tarceva (TM) clinical trials. Dr. Silberman then led the global development of Gleevec (TM) at Novartis. Dr. Silberman was a Vice President and Global Therapeutic Area Head in Oncology at Eisai. Subsequently, she served as a senior advisor to a number of biopharmaceutical companies, and numerous biotech companies as an independent industry consultant.  She joined Quintiles in 2009 as the Vice President of Oncology and Global Head of Translational Medicine in the newly formed Innovation division, overseeing drug development and novel technologies for new partnerships with the pharmaceutical and biotechnology industries. Dr. Silberman earned her B.A., Sc.M. and Ph.D. from the Johns Hopkins University School of Arts and Sciences, School of Public Health and School of Medicine, respectively.  Her major focus of investigation and doctoral thesis was in the burgeoning area of tumor immunology.  Dr. Silberman received her M.D. from Cornell University Medical College, completing a postdoctoral training and her fellowship in hematology/oncology at the Brigham & Women's and the Dana Farber Cancer Institute in Boston.  Dr. Silberman is currently an attending physician in the Hematology/Oncology clinic at the Duke VA in Durham, NC.

 

We intend to compensate the members of our Scientific Advisory Board, or SAB, based on our utilization of their time. As of the date hereof, we have entered into compensatory agreements with Drs. Waymack and Silberman pursuant to which we (i) agreed to pay the scientific advisors $4,000 per month, and (ii) made a one-time grant of a 10-year option to purchase 10,000 shares of our common stock, under the Company's 2015 Stock Plan, with 3-year annual vesting and an exercise price equal the closing price of our common stock on the date of the grant, which was $2.31 per share. We currently do not have any compensatory arrangements with Drs. Priebe or Duvic.

 

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Other Executive Agreements

 

On August 21, 2016, we accepted the resignation of Mr. Louis Ploth from his position as our Chief Financial Officer effective immediately. On October 7, 2016, we entered into a separation agreement with Mr. Ploth, pursuant to which, among other items, Mr. Ploth generally released us from any claims he may have against us or our affiliates, and we agreed to pay Mr. Ploth a severance payment of $100,000 over a 12-month period and to pay Mr. Ploth’s medical insurance premiums until August 31, 2017. Pursuant to the separation agreement, Mr. Ploth will be permitted to exercise 25% of the options to purchase common stock granted to Mr. Ploth in December 2015, or 50,000 shares, until May 2020.

 

2015 Stock Plan

 

We have adopted a 2015 Stock Plan (the “Plan”). The Plan is a stock-based compensation plan that provides for discretionary grants of stock options, stock awards and stock unit awards to key employees and non-employee directors. The purpose of the Plan is to recognize contributions made to our company and its subsidiaries by key employees and non-employee directors and to provide them with additional incentive to achieve the objectives of our company. The following is a summary of the Plan.

 

Administration .  The Plan is administered by our Compensation Committee of the board of directors (we refer to body administering the Plan as the “Committee”). The Committee has full authority to select the individuals who will receive awards under the Plan, determine the form and amount of each of the awards to be granted and establish the terms and conditions of awards.

 

Number of Shares of Common Stock.  The number of shares of the common stock that may be issued under the Plan is 2,500,000. Shares issuable under the Plan may be authorized but unissued shares or treasury shares. If there is a lapse, forfeiture, expiration, termination or cancellation of any award made under the Plan for any reason, the shares subject to the award will again be available for issuance. Any shares subject to an award that are delivered to us by a participant, or withheld by us on behalf of a participant, as payment for an award or payment of withholding taxes due in connection with an award will not again be available for issuance, and all such shares will count toward the number of shares issued under the Plan. The number of shares of common stock issuable under the Plan is subject to adjustment, in the event of any reorganization, recapitalization, stock split, stock distribution, merger, consolidation, split-up, spin-off, combination, subdivision, consolidation or exchange of shares, any change in the capital structure of the company or any similar corporate transaction. In each case, the Committee has the discretion to make adjustments it deems necessary to preserve the intended benefits under the Plan. No award granted under the Plan may be transferred, except by will, the laws of descent and distribution.

 

Eligibility .  All employees designated as key employees for purposes of the Plan and all non-employee directors are eligible to receive awards under the Plan. As of March 31, 2017, six employees and all non-employee directors were eligible to participate in the Plan.

 

Awards to Participants .  The Plan provides for discretionary awards of stock options, stock awards and stock unit awards to participants. Each award made under the Plan will be evidenced by a written award agreement specifying the terms and conditions of the award as determined by the Committee in its sole discretion, consistent with the terms of the Plan.

   

Stock Options The Committee has the discretion to grant non-qualified stock options or incentive stock options to participants and to set the terms and conditions applicable to the options, including the type of option, the number of shares subject to the option and the vesting schedule; provided that the exercise price of each stock option will be the closing price of the common stock on the date on which the option is granted (“fair market value”), each option will expire ten years from the date of grant and no dividend equivalents may be paid with respect to stock options. It is intended that stock options qualify as “performance-based compensation” under Section 162(m) of the Code and thus be fully deductible by us for federal income tax purposes, to the extent permitted by law.

 

In addition, an incentive stock option granted to a key employee is subject to the following rules: (i) the aggregate fair market value (determined at the time the option is granted) of the shares of common stock with respect to which incentive stock options are exercisable for the first time by a key employee during any calendar year (under all incentive stock option plans of the company and its subsidiaries) cannot exceed $100,000, and if this limitation is exceeded, that portion of the incentive stock option that does not exceed the applicable dollar limit will be an incentive stock option and the remainder will be a non-qualified stock option; (ii) if an incentive stock option is granted to a key employee who owns stock possessing more than 10% of the total combined voting power of all class of stock of the company, the exercise price of the incentive stock option will be 110% of the closing price of the common stock on the date of grant and the incentive stock option will expire no later than five years from the date of grant; and (iii) no incentive stock option can be granted after ten years from the date the Plan was adopted.

 

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Stock Awards .  The Committee has the discretion to grant stock awards to participants. Stock awards will consist of shares of common stock granted without any consideration from the participant or shares sold to the participant for appropriate consideration as determined by the Board. The number of shares awarded to each participant, and the restrictions, terms and conditions of the award, will be at the discretion of the Committee. Subject to the restrictions, a participant will be a shareholder with respect to the shares awarded to him or her and will have the rights of a shareholder with respect to the shares, including the right to vote the shares and receive dividends on the shares; provided that dividends otherwise payable on any performance-based stock award will be held by us and will be paid to the holder of the stock award only to the extent the restrictions on such stock award lapse, and the Committee in its discretion can accumulate and hold such amounts payable on any other stock awards until the restrictions on the stock award lapse.

 

Stock Units.  The Committee has the discretion to grant stock unit awards to participants. Each stock unit entitles the participant to receive, on a specified date or event set forth in the award agreement, one share of common stock or cash equal to the fair market value of one share on such date or event, as provided in the award agreement. The number of stock units awarded to each participant, and the terms and conditions of the award, will be at the discretion of the Committee. Unless otherwise specified in the award agreement, a participant will not be a shareholder with respect to the stock units awarded to him prior to the date they are settled in shares of common stock. The award agreement may provide that until the restrictions on the stock units lapse, the participant will be paid an amount equal to the dividends that would have been paid had the stock units been actual shares; provided that dividend equivalents otherwise payable on any performance-based stock units will be held by us and paid only to the extent the restrictions lapse, and the Committee in its discretion can accumulate and hold such amounts payable on any other stock units until the restrictions on the stock units lapse.

 

Performance-Based Awards.  The Committee has the discretion to establish restrictions on the stock awards that qualify the awards as “performance-based compensation” under Section 162(m) of the Code so that they are fully deductible by us for federal income tax purposes. In such case, the Committee may establish performance goals for certain performance periods and targets for achievement of the performance goals, and the restrictions on the stock subject to the award will lapse if the performance goals and targets are achieved for the designated performance period. The performance goals will be based on one or more of the following criteria: (i) net earnings or net income (before or after taxes); (ii) earnings per share; (iii) net sales or revenue growth; (iv) net operating profit or income (including as a percentage of sales); (v) return measures (including, but not limited to, return on assets, capital, invested capital, equity, sales, or revenue); (vi) cash flow (including, but not limited to, operating cash flow, free cash flow, cash flow return on equity, and cash flow return on investment); (vii) earnings before or after taxes, interest, depreciation, and/or amortization; (viii) gross or operating margins; and (ix) share price (including, but not limited to, growth measures and total shareholder return). Performance goals may be absolute in their terms or measured against or in relationship to the performance of other companies or indices selected by the Committee. The performance goals may be particular to one or more lines of business or subsidiaries or may be based on our performance as a whole. The performance goals may be identical for all participants for a given performance period or, at the discretion of the Committee, may differ among participants. In addition, performance goals may be adjusted for any events or occurrences (including acquisition expenses, extraordinary charges, losses from discontinued operations, restatements and accounting charges and restructuring expenses), as may be determined by the Committee.

 

Payment for Stock Options and Withholding Taxes .  The Committee may make one or more of the following methods available for payment of any award, including the exercise price of a stock option, and for payment of the minimum required tax obligation associated with an award: (i) cash; (ii) cash received from a broker-dealer to whom the holder has submitted an exercise notice together with irrevocable instructions to deliver promptly to us the amount of sales proceeds from the sale of the shares subject to the award to pay the exercise price or withholding tax; (iii) by directing us to withhold shares of common stock otherwise issuable in connection with the award having a fair market value equal to the amount required to be withheld; and (iv) by delivery of previously acquired shares of common stock that are acceptable to the Committee and that have an aggregate fair market value on the date of exercise equal to the exercise price or withholding tax, or certification of ownership by attestation of such previously acquired shares.

 

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Provisions Relating to a “Change in Control” of the Company .  Notwithstanding any other provision of the Plan or any award agreement, in the event of a “Change in Control” of the company, the Committee has the discretion to provide that all outstanding awards will become fully exercisable, all restrictions applicable to all awards will terminate or lapse, and performance goals applicable to any stock awards will be deemed satisfied at the highest target level. In addition, upon such Change in Control, the Committee has sole discretion to provide for the purchase of any outstanding stock option for cash equal to the difference between the exercise price and the then fair market value of the common stock subject to the option had the option been currently exercisable, make such adjustment to any award then outstanding as the Committee deems appropriate to reflect such Change in Control and cause any such award then outstanding to be assumed by the acquiring or surviving corporation after such Change in Control.

 

Amendment of Award Agreements; Amendment and Termination of the Plan; Term of the Plan .  The Committee may amend any award agreement at any time, provided that no amendment may adversely affect the right of any participant under any agreement in any material way without the written consent of the participant, unless such amendment is required by applicable law, regulation or stock exchange rule.

 

The Board may terminate, suspend or amend the Plan, in whole or in part, from time to time, without the approval of the shareholders, unless such approval is required by applicable law, regulation or stock exchange rule, and provided that no amendment may adversely affect the right of any participant under any outstanding award in any material way without the written consent of the participant, unless such amendment is required by applicable law, regulation or rule of any stock exchange on which the shares are listed.

 

Notwithstanding the foregoing, neither the Plan nor any outstanding award agreement can be amended in a way that results in the repricing of a stock option. Repricing is broadly defined to include reducing the exercise price of a stock option or cancelling a stock option in exchange for cash, other stock options with a lower exercise price or other stock awards. (This prohibition on repricing without shareholder approval does not apply in case of an equitable adjustment to the awards to reflect changes in the capital structure of the company or similar events.)

 

No awards may be granted under the Plan on or after the tenth anniversary of the effective date of the Plan.

 

RELATED PARTY TRANSACTIONS

 

We were incorporated in July 2015. In August 2015, in exchange for the issuance of 630,000 shares of common stock, we acquired the rights to the license agreement with MD Anderson covering our WP1122 Portfolio held by IntertechBio Corporation. Waldemar Priebe, chairman of our Scientific Advisory Board, and Don Picker, our president and chief operating officer, are shareholders of IntertechBio and control the voting and dispositive power over the shares held by IntertechBio.

 

In August 2015, in exchange for the issuance of 1,431,000 shares of common stock, we acquired the rights to the Annamycin data related to the original Annamycin IND and the development of Annamycin held by AnnaMed, Inc., a company controlled by Walter Klemp, our Chairman and chief executive officer.

 

Prior to our IPO, in exchange for the issuance of 629,000 shares of common stock, we, on Moleculin, LLC’s behalf, entered into an agreement with HPI whereby HPI agreed to terminate its option to sublicense certain rights to the WP1066 Portfolio and to enter into a co-development agreement with us, allowing us to benefit from HPI’s grant-funded development efforts currently under way. Waldemar Priebe and Don Picker are shareholders of HPI, and Dr. Priebe have the voting and dispositive power over the shares held by HPI.

 

Prior to our IPO, we merged with Moleculin, LLC. Moleculin, LLC was the holder of the license agreement with MD Anderson covering our WP 1066 Portfolio. As a result of the merger, we issued the equity interests holders of Moleculin, LLC an aggregate of 999,931 shares of our common stock. Waldemar Priebe, Walter Klemp and Don Picker were members of Moleculin, LLC and received 6,046 shares, 22,795 shares and 6,046 shares, respectively, of our common stock as a result of the merger. In addition, Walter Klemp and Don Picker were members of the board of Moleculin, LLC.

 

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In July and August 2015, in Messrs. Klemp, Picker and Priebe purchased 1,100,000 shares, 500,000 shares and 3,000,000 shares of our common stock, respectively, at a purchase price of $0.001 per share.

 

On July 1, 2013, Moleculin, LLC agreed to reimburse HPI for laboratory space used by Moleculin, LLC from January 2010 through December 2013 in the amount of $31,764. Moleculin, LLC stopped using the space in 2014. On September 1, 2013, Moleculin, LLC agreed to reimburse HPI for laboratory equipment used by Moleculin, LLC for the period from January 2009 through December 2013 in the amount of $35,000. Moleculin, LLC stopped using the equipment in 2014. During the year ended December 31, 2013, Moleculin, LLC paid $100,000 for laboratory services provided by HPI for the five years prior to August 1, 2013. We do not intend to utilize HPI for such services in the future.

 

We currently employ Lindsey Picker, the daughter of Don Picker, our president and chief operating officer, as a clinical research assistant on an at-will basis with an annual salary is $75,000.

 

Policies and Procedures for Related Party Transactions

 

Our audit committee charter provides that our audit committee is responsible for reviewing and approving in advance any related party transaction. This will cover, with certain exceptions set forth in Item 404 of Regulation S-K under the Securities Act, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships in which we were or are to be a participant, where the amount involved exceeds $120,000 and a related person had or will have a direct or indirect material interest, including, without limitation, purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person. All of the transactions described in this section occurred prior to the creation of our audit committee and the adoption of this policy.

 

PROPOSAL 1:

ELECTION OF DIRECTORS

 

Our Board of Directors currently consists of four members: Walter V. Klemp, Robert George, Jacqueline Northcut and Michael Cannon. The Nominating and Governance Committee nominated and the Board approved and recommended all of the current members of our Board for re-election. All nominees have consented to being named herein and have indicated their intention to serve as our directors, if elected. The Board has no reason to believe that any nominee would be unable or unwilling to serve if elected. Unless authority to do so is withheld, the persons named as proxies will vote the shares represented by such proxies for the election of the named director nominees. In case any of the nominees becomes unavailable for election to the Board the persons named as proxies will have full discretion and authority to vote or refrain from voting for any other nominees in accordance with their judgment. The Board nominees, if elected, will serve until the next annual meeting of shareholders or until each successor is duly elected and qualified.

 

Biographical information for our directors is provided above in the section entitled “Information About Directors and Executive Officers.”

 

Vote Required and Recommendation of the Board of Directors

 

A plurality of the eligible votes cast is required to elect director nominees, and as such, the four nominees who receive the greatest number of votes cast by stockholders, entitled to vote at the meeting, will be elected. A nominee who receives a plurality means he or she has received more votes than any other nominee for the same director’s seat. Broker non-votes will have no effect on this proposal. The Board recommends that stockholders vote FOR each of the four nominees for election to our Board of Directors.

 

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PROPOSAL 2:

TO RATIFY THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

Our Audit Committee has selected Grant Thornton LLP as our independent registered public accounting firm to audit our financial statements for the fiscal year ending December 31, 2017. Our stockholders are being asked to ratify this appointment. In the event that ratification of this selection of auditors is not approved by the stockholders, we will reassess our selection of auditors. Representatives of Grant Thornton LLP are expected to be present at the Annual Meeting, will be available to respond to appropriate questions, and will have the opportunity to make a statement at the Annual Meeting.

 

Change in independent registered public accounting firm

 

On February 21, 2017, our Audit Committee dismissed GBH CPAs, PC (“GBH”) as its independent registered public accounting firm, effective as of such date.

 

The report of GBH on the Company’s financial statements as of December 31, 2015 and for the period from July 28, 2015 (inception) to December 31, 2015 and the financial statements of Moleculin, LLC as of and for the years ended December 31, 2015 and 2014 did not contain an adverse opinion or disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope, or accounting principles, other than an explanatory paragraph relating to the Company’s ability to continue as a going concern. During the year ended December 31, 2015 and through February 21, 2017 there were no: (1) disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) with GBH on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of GBH, would have caused GBH to make reference to the matter in its report on the financial statements for such year.

 

We requested that GBH furnish us with a letter addressed to the SEC stating whether it agrees with the above statements. A copy of such letter, dated February 22, 2017, was filed as exhibit 16.1 to the current report on Form 8-K we filed with the SEC on February 22, 2017.

 

On February 21, 2017, our Audit Committee approved the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for the fiscal year ended December 31, 2016.

 

During the period from July 28, 2015 (inception) to December 31, 2015, and through February 21, 2017, neither the Company nor anyone on their behalf consulted with Grant Thornton LLP with respect to either (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither written nor oral advice was provided to the Company that Grant Thornton LLP concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue; (ii) any matter that was either the subject of disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).

 

Aggregate fees for professional services rendered to us by Grant Thornton LLP for services provided for the fiscal year ended December 31, 2016, and GBH CPAs, PC for the respective services for the fiscal years ended December 31, 2016 and 2015, respectively, were as follows:

 

    2016     2015  
             
Audit and Quarterly Review Fees   $ 112,500  (1)   $ 53,000  
Audit-related fees   $ 41,000  (2)   $ 7,500  
Tax fees     --       --  
All other fees   $ 48,000  (3)     --  
TOTAL   $ 201,500     $ 60,500  

 

(1)       For the fiscal year ended December 31, 2016, $112,500 of the fees in the table were paid to Grant Thornton LLP. In addition to the amounts listed in the table for the fiscal year ended December 31, 2016, we paid audit fees to GBH CPAs, PC of $38,500.

 

(2)       Represents audit-related fees for services performed by GBH CPAs, PC during 2016.

 

(3)       Represents other fees related to the filing of Form S-1 registration statements during 2016.

 

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Audit and Quarterly Review Fees

 

Audit fees represent the aggregate fees billed for professional services rendered by our independent accounting firm for the audit of our annual financial statements, review of financial statements included in our quarterly reports, review of registration statements or services that are normally provided in connection with statutory and regulatory filings or engagements for those fiscal years.

 

Audit-Related Fees

 

Audit-related fees represent the aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under Audit Fees.

 

Tax Fees

 

Tax fees represent the aggregate fees billed for professional services rendered by our principal accountants for tax compliance, tax advice, and tax planning for such years.

 

All Other Fees

 

All other fees represent the aggregate fees billed for products and services other than the services reported in the other categories.

 

Audit Committee Pre-Approval Policies and Procedures

 

The Audit Committee on an annual basis reviews audit and non-audit services performed by the independent auditors. All audit and non-audit services are pre-approved by the Audit Committee, which considers, among other things, the possible effect of the performance of such services on the auditors’ independence.

 

Vote Required and Recommendation of the Board of Directors

 

The approval of Proposal 2 requires the affirmative vote of a majority of the shares present in person or by proxy and entitled to vote on the matter. Broker non-votes will not be taken into account in determining the outcome of the proposal, and abstentions will be counted as votes against the proposal. The Board recommends that stockholders vote FOR the ratification of the appointment of Grant Thornton, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017.

 

AUDIT COMMITTEE REPORT

 

Under the rules established by the SEC, we are required to provide certain information about the Company’s independent registered public accounting firm and the Company’s financial statements for its most recently ended fiscal year. The Audit Committee of the Board is furnishing the following report in fulfillment of the SEC’s requirements.

 

One of the responsibilities of the Audit Committee is to recommend that the Company’s financial statements be included in its Annual Report on Form 10-K. The Audit Committee took a number of steps in making this recommendation for the fiscal year ended December 31, 2016. First, the Audit Committee reviewed and discussed with the Company’s management and Grant Thornton, the Company’s independent registered public accounting firm for 2016, the Company’s audited financial statements for the fiscal year ended December 31, 2016. Second, the Audit Committee discussed with Grant Thornton the matters required to be discussed by Auditing Standard No. 16, as adopted by the Public Company Accounting Oversight Board, or the “PCAOB,” including information regarding the scope and results of the audit. These discussions were intended to assist the Audit Committee in overseeing the Company’s financial reporting and disclosure process. Finally, the Audit Committee received the written disclosures and the letter from Grant Thornton required by the applicable requirements of the PCAOB regarding Grant Thornton’s communications with the Audit Committee concerning independence, and has also discussed with Grant Thornton its independence. Through its discussions with Grant Thornton and management, including discussions with Grant Thornton and management regarding the financial statements, discussions with Grant Thornton regarding the scope and results of the audit and Grant Thornton’s independence and such other matters deemed relevant and appropriate by the Audit Committee, the Audit Committee recommended to the Board that the Company’s audited financial statements be included in the Company’s 2016 Annual Report on Form 10-K to be filed with the SEC.

 

Robert George (Chairperson)

Jacqueline Northcut

Michael Cannon

 

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PROPOSAL 3: APPROVAL OF AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION TO EFFECT REVERSE STOCK SPLIT OF THE COMPANY’S COMMON STOCK

 

General

 

Our Board is recommending that our stockholders approve a proposed amendment to our Amended and Restated Certificate of Incorporation in substantially the form attached hereto as Annex A , to effect a reverse stock split of our outstanding shares of common stock at one of the following reverse stock split ratios, 1-for-___, 1-for-___, 1-for-___ or 1-for-___, as determined by the Board of Directors in its sole discretion, at any time prior to the one-year anniversary of this Annual Meeting. If the stockholders approve and adopt the proposed amendment to effect the reverse stock split, and our Board decides to implement it, the reverse stock split will become effective on the date of the filing of the proposed amendment with the Secretary of State of the State of Delaware.

 

The reverse stock split will be realized simultaneously for all outstanding common stock and the ratio determined by our Board will be the same for all outstanding shares of common stock. The reverse stock split will affect all holders of shares of our common stock uniformly and each stockholder will hold the same percentage of our common stock outstanding immediately following the reverse stock split as that stockholder held immediately prior to the reverse stock split, except for adjustments that may result from the treatment of fractional shares as described below. The proposed amendment will not reduce the number of authorized shares of common stock (which will remain at 75,000,000) or preferred stock (which will remain at 5,000,000) or change the par values of our common stock (which will remain at $0.001 per share) or preferred stock (which will remain at $0.001 per share).

 

Background

 

Our common stock is currently quoted on The NASDAQ Capital Market (“NASDAQ”), and we are therefore subject to its continued listing requirements, including requirements with respect to the market value of publicly-held shares, market value of listed shares, minimum bid price per share, and minimum stockholder's equity, among others, and requirements relating to board and committee independence. If we fail to satisfy one or more of the requirements, we may be delisted from NASDAQ.

 

The minimum closing bid price requirement set forth in NASDAQ Listing Rule 5550(a)(2) is $1.00. If we fall below this threshold for a period of thirty consecutive business days, we will receive a notice from NASDAQ requiring we take actions to comply with the requirement within 180 days, by having the closing bid price of our common stock meet or exceed $1.00 per share for at least ten consecutive business days. If we do not regain compliance, we would then be subject to delisting.

 

The closing price of our common stock on April 26, 2017 was $______. Furthermore, since February 8, 2017 the closing price of our common stock has not exceeded $1.50, and the closing price of our common stock has been as low as $0.80 per share.

 

Purpose of the Proposed Reverse Stock Split

 

Our Board’s primary objective in proposing the reverse stock split is to raise the per share trading price of our common stock. In particular, this will help us to maintain the listing of our common stock on NASDAQ.

 

Delisting from NASDAQ may adversely affect our ability to raise additional financing through the public or private sale of equity securities, may significantly affect the ability of investors to trade our securities and may negatively affect the value and liquidity of our common stock. Delisting also could have other negative results, including the potential loss of employee confidence, the loss of institutional investors or interest in business development opportunities.

 

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If we are delisted from NASDAQ and we are not able to list our common stock on another exchange, our common stock could be quoted on the OTC Bulletin Board or in the “pink sheets.” As a result, we could face significant adverse consequences including, among others:

 

· a limited availability of market quotations for our securities;

 

· a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;

 

· a limited amount of news and little or no analyst coverage for us;

 

· we would no longer qualify for exemptions from state securities registration requirements, which may require us to comply with applicable state securities laws; and

 

· a decreased ability to issue additional securities (including pursuant to short-form registration statements on Form S-3 for which we will be eligible in June 2017) or obtain additional financing in the future.

 

Although we are currently in compliance with NASDAQ listing requirements, our Board believes that the proposed reverse stock split is a potentially effective means for us to maintain compliance with the listing rules of NASDAQ and to avoid, or at least mitigate, the likely adverse consequences of our common stock being delisted from the NASDAQ by producing the immediate effect of increasing the bid price of our common stock.

 

Increase the Market Price of our Common Stock to a Level More Appealing for Investors

 

We also believe that the reverse stock split could enhance the appeal of our common stock to the financial community, including institutional investors, and the general investing public. We believe that a number of institutional investors and investment funds are reluctant to invest in lower-priced securities and that brokerage firms may be reluctant to recommend lower-priced securities to their clients, which may be due in part to a perception that lower-priced securities are less promising as investments, are less liquid in the event that an investor wishes to sell its shares, or are less likely to be followed by institutional securities research firms and therefore more likely to have less third-party analysis of the Company available to investors. We believe that the reduction in the number of issued and outstanding shares of our common stock caused by the reverse stock split, together with the anticipated increased stock price immediately following and resulting from the reverse stock split, may encourage interest and trading in our common stock and thus possibly promote greater liquidity for our stockholders, thereby resulting in a broader market for the common stock than that which currently exists.

 

We cannot assure you that all or any of the anticipated beneficial effects on the trading market for our common stock will occur. Our Board cannot predict with certainty what effect the reverse stock split will have on the market price of our common stock, particularly over the longer term. Some investors may view a reverse stock split negatively, which could result in a decrease in our market capitalization. Additionally, any improvement in liquidity due to increased institutional or brokerage interest or lower trading commissions may be offset by the lower number of outstanding shares. We cannot provide you with any assurance that our shares will continue to qualify for listing on NASDAQ. As a result, the trading liquidity of our common stock may not improve. In addition, investors might consider the increased proportion of unissued authorized shares to issued shares to have an anti-takeover effect under certain circumstances, since the proportion allows for dilutive issuances.

 

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Determination of Ratio

 

The ratio of the reverse stock split, if approved and implemented, will be a ratio of 1-for-___, 1-for-___, 1-for-___ or 1-for-___, as determined by the Board of Directors in its sole discretion, prior to the one-year anniversary of this Annual Meeting. In determining the reverse stock split ratio, our Board will consider numerous factors, including:

 

· the historical and projected performance of our common stock;

 

· general economic and other related conditions prevailing in our industry and in the marketplace;​

 

· the projected impact of the selected reverse stock split ratio on trading liquidity in our common stock;​

 

· our capitalization (including the number of shares of our common stock issued and outstanding);​

 

· the prevailing trading price for our common stock and the volume level thereof; and​

 

· potential devaluation of our market capitalization as a result of a reverse stock split.

 

The purpose of asking for authorization to amend the Amended and Restated Certificate of Incorporation to implement the reverse stock split at a ratio to be determined by the Board, as opposed to a ratio fixed in advance, is to give our Board the flexibility to take into account then-current market conditions and changes in price of our common stock and to respond to other developments that may be deemed relevant when considering the appropriate ratio.

 

Principal Effects of the Reverse Stock Split

 

A reverse stock split refers to a reduction in the number of outstanding shares of a class of a corporation’s capital stock, which may be accomplished, as in this case, by reclassifying and combining all of our outstanding shares of common stock into a proportionately smaller number of shares. For example, if our Board decides to implement a 1-for-5 reverse stock split of our common stock, then a stockholder holding 10,000 shares of our common stock before the reverse stock split would instead hold 2,000 shares of our common stock immediately after the reverse stock split. The reverse stock split will affect all of our stockholders uniformly and will not affect any stockholder’s percentage ownership interests in our company or proportionate voting power, except for minor adjustments due to the additional net share fraction that will need to be issued as a result of the treatment of fractional shares. No fractional shares will be issued in connection with the reverse stock split. Instead, we will issue one full share of the post-reverse stock split common stock to any stockholder who would have been entitled to receive a fractional share as a result of the process.

 

The principal effect of the reverse stock split will be that (i) the number of shares of common stock issued and outstanding will be reduced from ________ shares as of the Record Date to a number of shares between and including one-_____ to one-_____ that amount, as the case may be based on the ratio for the reverse stock split as determined by our Board, (ii) all outstanding options and warrants entitling the holders thereof to purchase shares of common stock will enable such holders to purchase, upon exercise of their options or warrants, as applicable, between and including one-_____ to one-_____ of the number of shares of common stock which such holders would have been able to purchase upon exercise of their options or warrants, as applicable, immediately preceding the reverse stock split at an exercise price equal to between and including _____ to _____ times the exercise price specified before the reverse stock split, resulting in essentially the same aggregate price being required to be paid therefor upon exercise thereof immediately preceding the reverse stock split, as the case may be based on the ratio for the reverse stock split as determined by our Board, and (iii) the conversion price of our outstanding convertible promissory notes will increase to an amount equal to between and including ______ to _____ times the conversion price before the stock split entitling the holders thereof to receive between one-_____ to one-_____ of the number of shares of common stock upon conversion of such notes (and accrued interest at the option of the holder) which such holders would have received upon conversion of such notes immediately preceding the reverse stock split.

 

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The following table, which is for illustrative purposes only, illustrates the effects of the reverse stock split at certain exchange ratios within the foregoing range, without giving effect to any adjustments for fractional shares of common stock, on our outstanding shares of common stock and authorized shares of capital stock as of the Record Date.

 

   

Before Reverse

Stock Split

  After Reverse Stock Split  
        1-for-     1-for-     1-for-    
Common Stock Authorized                  
Preferred Stock Authorized                  
Common Stock Issued and Outstanding                  
Common Stock Underlying Options and Warrants                  
Common Stock Underlying Convertible Notes (excluding accrued interest)                  
Common Stock Available for Grant under 2015 Stock Equity Plan                  
Total Common Stock Authorized but Unreserved                  

 

The amendment will not change the terms of our common stock. The shares of new common stock will have the same voting rights and rights to dividends and distributions and will be identical in all other respects to the common stock now authorized. The common stock issued pursuant to the reverse stock split will remain fully paid and non-assessable. The reverse stock split is not intended as, and will not have the effect of, a “going private transaction” covered by Rule 13e-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We will continue to be subject to the periodic reporting requirements of the Exchange Act.

 

Accounting Matters

 

The reverse stock split will not affect the par value of our common stock. As a result, on the effective date of the reverse stock split, the stated capital on our balance sheet attributable to the common stock will be reduced to between and including one-_____ to one-_____ of its present amount, as the case may be based on the ratio for the reverse stock split as determined by our Board, and the additional paid-in capital account shall be credited with the amount by which the stated capital is reduced. The per share net loss and net book value of our common stock will be retroactively increased for each period because there will be fewer shares of our common stock outstanding.

 

Effect of Authorized but Unissued Shares

 

The reverse stock split will have the effect of significantly increasing the number of authorized but unissued shares of common stock. The number of authorized shares of common stock will not be decreased and will remain at 75,000,000. Because the number of outstanding shares will be reduced as a result of the reverse stock split, the number of shares available for issuance will be increased. See the table above under the caption “Principal Effects of the Reverse Stock Split” that shows the number of unreserved shares of common stock that would be available for issuance at various reverse stock split ratios.

 

Our Board believes that we will need to raise additional capital in the ordinary course of business. In addition, we may issue shares to acquire other companies or assets or engage in business combination transactions. As of the date of this Proxy Statement, we have no specific plans, arrangements or understandings, whether written or oral, with respect to the increase in shares available for issuance as a result of the reverse stock split.

 

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Potential Anti-Takeover and Dilutive Effects

 

The purpose of the reverse stock split is not to establish any barriers to a change of control or acquisition of the Company. However, because the number of authorized shares of common stock will remain at 75,000,000, this proposal, if adopted and implemented, will result in a relative increase in the number of authorized but unissued shares of our common stock as compared to the outstanding shares of our common stock and could, under certain circumstances, have an anti-takeover effect. Shares of common stock that are authorized but unissued provide our Board with flexibility to effect, among other transactions, public or private financings, mergers, acquisitions, stock dividends, stock splits and the granting of equity incentive awards. However, these authorized but unissued shares may also be used by our Board, consistent with and subject to its fiduciary duties, to deter future attempts to gain control of us or make such actions more expensive and less desirable. After implementation of the proposed amendment, our Board will continue to have authority to issue additional shares from time to time without delay or further action by the stockholders except as may be required by applicable law or the NASDAQ listing standards, assuming the Company remains listed on NASDAQ. Our Board is not aware of any attempt to take control of our business and has not considered the reverse stock split to be a tool to be utilized as a type of anti-takeover device. We currently have no plans, proposals or arrangements to issue any shares of common stock that would become newly available for issuance as a result of the reverse stock split.

 

In addition, if we do issue additional shares of our common stock, the issuance could have a dilutive effect on earnings per share and the book or market value of the outstanding common stock, depending on the circumstances, and would likely dilute a stockholder’s percentage voting power in the Company. Holders of common stock are not entitled to preemptive rights or other protections against dilution. Our Board intends to take these factors into account before authorizing any new issuance of shares.

 

Certain Risks Associated with the Reverse Stock Split

 

Before voting on this proposal, you should consider the following risks associated with the implementation of the reverse stock split:

 

· Although we expect that the reverse stock split will result in an increase in the market price of our common stock, we cannot assure you that the reverse stock split, if implemented, will increase the market price of our common stock in proportion to the reduction in the number of shares of common stock outstanding or result in a permanent increase in the market price. The effect the reverse stock split may have upon the market price of our common stock cannot be predicted with any certainty, and the history of similar reverse stock splits for companies in similar circumstances to ours is varied. The market price of our common stock is dependent on many factors, including our business and financial performance, general market conditions, prospects for future success and other factors detailed from time to time in the reports we file with the SEC. Accordingly, the total market capitalization of our common stock after the proposed reverse stock split may be lower than the total market capitalization before the proposed reverse stock split and, in the future, the market price of our common stock following the reverse stock split may not exceed or remain higher than the market price prior to the proposed reverse stock split.

 

· The reverse stock split may result in some stockholders owning “odd lots” of less than 100 shares of our common stock on a post-split basis. These odd lots may be more difficult to sell, or require greater transaction costs per share to sell, than shares in “round lots” of even multiples of 100 shares.

 

· While our Board believes that a higher stock price may help generate investor interest, there can be no assurance that the reverse stock split will result in a per share price that will attract institutional investors or investment funds or that such share price will satisfy the investing guidelines of institutional investors or investment funds. As a result, the trading liquidity of our common stock may not necessarily improve.

 

Procedure for Effecting Reverse Stock Split and Exchange of Stock Certificates

 

If the reverse stock split is approved by our stockholders, the reverse stock split would become effective at such time prior to the one-year anniversary of this Annual Meeting as it is deemed by our Board to be in the best interests of the Company and its stockholders and we file the amendment to our Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware. Even if the reverse stock split is approved by our stockholders, our Board has discretion not to carry out or to delay in carrying out the reverse stock split. Upon the filing of the amendment, all the old common stock will be converted into new common stock as set forth in the amendment.

 

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As soon as practicable after the effective time of the reverse stock split, stockholders will be notified that the reverse stock split has been effected. If you hold shares of common stock in a book-entry form, you will receive a transmittal letter from our transfer agent as soon as practicable after the effective time of the reverse stock split with instructions on how to exchange your shares. After you submit your completed transmittal letter, a transaction statement will be sent to your address of record as soon as practicable after the effective date of the reverse stock split indicating the number of post-reverse stock split shares of common stock you hold.

 

Some stockholders hold their shares of common stock in certificate form or a combination of certificate and book-entry form. Our transfer agent will act as exchange agent for purposes of implementing the exchange of stock certificates, if applicable. If you are a stockholder holding pre-split shares in certificate form, you will receive a transmittal letter from our transfer agent as soon as practicable after the effective time of the reverse stock split. The transmittal letter will be accompanied by instructions specifying how you can exchange your certificate representing the pre-split shares of our common stock for a statement of holding. When you submit your certificate representing the pre-split shares of our common stock, your post-split shares of our common stock will be held electronically in book-entry form in the Direct Registration System. This means that, instead of receiving a new stock certificate, you will receive a statement of holding that indicates the number of post-split shares you own in book-entry form. We will no longer issue physical stock certificates unless you make a specific request for a share certificate representing your post-split ownership interest.

 

Stockholders should not destroy any stock certificate(s) and should not submit any certificate(s) until requested to do so.

 

Beginning on the effective time of the reverse stock split, each certificate representing pre-split shares will be deemed for all corporate purposes to evidence ownership of post-split shares.

 

Fractional Shares

 

No fractional shares will be issued in connection with the reverse stock split. Instead, we will issue one full share of the post-reverse stock split common stock to any stockholder who would have been entitled to receive a fractional share as a result of the process. Each common stockholder will hold the same percentage of the outstanding common stock immediately following the reverse stock split as that stockholder did immediately prior to the reverse stock split, except for minor adjustment due to the additional net share fraction that will need to be issued as a result of the treatment of fractional shares.

 

No Dissenter’s Rights

 

Under the Delaware General Corporation Law, our stockholders are not entitled to dissenter’s rights with respect to the reverse stock split or the corresponding amendment to our Amended and Restated Certificate of Incorporation to effect the reverse stock split and we will not independently provide our stockholders with any such right.

 

Federal Income Tax Consequences of the Reverse Stock Split

 

The following is a summary of important tax considerations of the reverse stock split. It addresses only stockholders who hold our common stock as capital assets. It does not purport to be complete and does not address stockholders subject to special rules, such as financial institutions, tax-exempt organizations, insurance companies, dealers in securities, foreign stockholders, stockholders who hold their pre-reverse stock split shares as part of a straddle, hedge or conversion transaction, and stockholders who acquired their pre-reverse stock split shares pursuant to the exercise of employee stock options or otherwise as compensation. This summary is based upon current law, which may change, possibly even retroactively. It does not address tax considerations under state, local, foreign and other laws. The tax treatment of a stockholder may vary depending upon the particular facts and circumstances of such stockholder. Each stockholder is urged to consult with such stockholder’s own tax advisor with respect to the tax consequences of the reverse stock split.

 

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Generally, a reverse stock split will not result in the recognition of gain or loss for federal income tax purposes. The adjusted basis of the new shares of common stock will be the same as the adjusted basis of the common stock exchanged for such new shares. The holding period of the new, post-reverse stock split shares of the common stock resulting from implementation of the reverse stock split will include the stockholder’s respective holding periods for the pre-reverse stock split shares. Stockholders who acquired their shares of our common stock on different dates or at different prices should consult their tax advisors regarding the allocation of the tax basis of such shares. Additional information about the effects of the reverse stock split on the basis of holders of our common stock will be included in Internal Revenue Service Form 8937, Report of Organizational Actions Affecting Basis of Securities, which we will post to our website on or before the 45th day following the effective date of the reverse stock split, if effected.

 

The foregoing views are not binding on the Internal Revenue Service or the courts. Accordingly, each stockholder should consult with his or her own tax advisor with respect to all of the potential tax consequences to him or her of the reverse stock split.

 

Vote Required and Recommendation of the Board of Directors

 

The approval of Proposal 3 requires the affirmative vote of a majority of our outstanding shares of common stock. Broker non-votes and abstentions will be counted as votes against the proposal. The Board recommends that stockholders vote FOR the approval of the amendment to our Amended and Restated Certificate of Incorporation to effect a reverse stock split of our outstanding shares of common stock at one of the following reverse stock split ratios, 1-for-___, 1-for-___, 1-for-___ or 1-for-___, as determined by the Board of Directors in its sole discretion, prior to the one-year anniversary of this Annual Meeting.

 

PROPOSAL 4: AUTHORIZATION TO ADJOURN THE ANNUAL MEETING

 

General

 

If the Annual Meeting is convened and a quorum is present, but there are not sufficient votes to approve Proposal 3, one or more of our proxy holders may move to adjourn the Annual Meeting at that time in order to enable our Board to solicit additional proxies.

 

In this proposal, we are asking our stockholders to authorize one or more of our proxy holders to adjourn the Annual Meeting to another time and place, if necessary, to solicit additional proxies in the event that there are not sufficient votes to approve Proposal 3. If our stockholders approve this proposal, one or more of our proxy holders can adjourn the Annual Meeting and any adjourned session of the Annual Meeting to allow for additional time to solicit additional proxies, including the solicitation of proxies from our stockholders that have previously voted. Among other things, approval of this proposal could mean that, even if we had received proxies representing a sufficient number of votes to defeat Proposal 3, we could adjourn the Annual Meeting without a vote on such proposals and seek to convince our stockholders to change their votes in favor of such proposals.

 

If it is necessary to adjourn the Annual Meeting, no notice of the adjourned meeting is required to be given to our stockholders, other than an announcement at the Annual Meeting of the time and place to which the Annual Meeting is adjourned, so long as the meeting is adjourned for 30 days or less and no new record date is fixed for the adjourned meeting. At the adjourned meeting, we may transact any business which might have been transacted at the original meeting.

 

Vote Required and Recommendation of the Board of Directors

 

The approval of Proposal 4 requires the affirmative vote of a majority of the shares present in person or by proxy and entitled to vote on the matter. Broker non-votes will not be taken into account in determining the outcome of the proposal, and abstentions will be counted as votes against the proposal. The Board recommends that stockholders vote FOR the approval to authorize the adjournment of the Annual Meeting.

 

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AVAILABILITY OF ANNUAL REPORT ON FORM 10-K

 

A copy of our 2016 Annual Report on Form 10-K has been mailed concurrently with this proxy statement to stockholders entitled to notice of and to vote at the Annual Meeting, provided that we have not included the exhibits to the Form 10-K. We will provide copies of these exhibits upon request by eligible stockholders, provided that we may impose a reasonable fee for providing such exhibits, which is limited to our reasonable expenses. Requests for copies of such exhibits or the amount of the fee payable should be mailed to Moleculin Biotech, Inc., 2575 West Bellfort, Suite 333, Houston, TX, 77054, Attention: Corporate Secretary.

 

OTHER PROPOSED ACTION

 

Our Board of Directors does not intend to bring any other matters before the Annual Meeting, nor does it know of any matters which other persons intend to bring before the Annual Meeting. If, however, other matters not mentioned in this proxy statement properly come before the Annual Meeting, the persons named in the accompanying form of proxy will vote thereon in accordance with the recommendation of the Board of Directors.

 

STOCKHOLDER PROPOSALS AND SUBMISSIONS

 

In order to be eligible for inclusion in our proxy statement and form of proxy for our 2018 Annual Meeting, a proposal of a stockholder, including the submission of a stockholder nominee for election to our Board of Directors, must be received at our principal executive offices located in Houston, Texas no later than January 1, 2018 (the “Deadline”). For any proposal that a stockholder wishes to propose for consideration at the 2018 Annual Meeting but does not wish to include in the proxy materials for that meeting, our Amended and Restated Bylaws require a notice of the proposal to be delivered not less than 120 days prior to the anniversary of the mailing date of our proxy materials for the preceding annual meeting of stockholders. The notice of the proposal also must comply with the content requirements for such notices set forth in our Amended and Restated Bylaws

 

Whether or not you expect to be present at the Annual Meeting, please sign and return the enclosed proxy promptly. Your vote is important. If you are a stockholder of record and attend the Annual Meeting and wish to vote in person, you may withdraw your proxy at any time prior to the vote.

 

  By Order of the Board of Directors
MOLECULIN BIOTECH, INC.
 
     
  /s/ WALTER KLEMP  
  Walter Klemp  
 

Chairman of the Board and Chief Executive

Officer

 

 

Houston, Texas

April 30, 2017

 

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Annex A

 

STATE OF DELAWARE

CERTIFICATE OF AMENDMENT

OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF

MOLECULIN BIOTECH, INC.

 

Moleculin Biotech, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”) for the purpose of amending its Amended and Restated Certificate of Incorporation in accordance with the General Corporation Law of the State of Delaware, does hereby make and execute this Certificate of Amendment to the Amended and Restated Certificate of Incorporation, as amended, and does hereby certify that:

 

1.         The Board of Directors of the Corporation (the “Board”), acting in accordance with the provisions of Sections 141 and 242 of the General Corporation Law of the State of Delaware, adopted resolutions amending its Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), so that effective upon the effective time of this Certificate of Amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware, every [_], [_], [_], [_] shares of the Corporation’s common stock, par value $0.001 per share (hereinafter the “Common Stock”), issued and outstanding shall, automatically and without any action on the part of the respective holders thereof, be combined and converted into one share of Common Stock without increasing or decreasing the par value of each share of Common Stock (the “Reverse Stock split”) and without increasing or decreasing the authorized number of shares of Common Stock or the Corporation’s preferred stock, par value $0.001 per share (hereinafter the “Preferred Stock”); provided, however, no fractional shares of Common Stock shall be issued in connection with the Reverse Stock Split, and instead, the Corporation shall issue one full share of post-Reverse Stock Split Common Stock to any stockholder who would have been entitled to receive a fractional share of Common Stock as a result of the Reverse Stock Split. The Reverse Stock Split shall occur whether or not the certificates representing such shares of Common Stock are surrendered to the Corporation or its transfer agent.

 

2.         Thereafter, pursuant to a resolution of the Board, a meeting of the stockholders of the Corporation was duly called and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of the foregoing amendment.

 

3.         The foregoing amendment has been duly adopted in accordance with the provisions of Section 242 of the General Corporation law of the State of Delaware by the vote of a majority of each class of outstanding stock of the Corporation entitled to vote thereon.

 

4.         This amendment shall be effective as of 5:00 p.m., Eastern Time, on the date of filing of this Certificate of Amendment with the Secretary of State of the State of Delaware.

 

IN WITNESS WHEREOF, I have signed this Certificate this ______ day of ____________, 201__.

 

   
Walter V. Klemp  
Chief Executive Officer  

 

 

 

 

MOLECULIN BIOTECH, INC.

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS

FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON

MAY 25, 2015

 

The undersigned stockholder acknowledges receipt of the Notice of Annual Meeting of Stockholders and the Proxy Statement, each dated April 30, 2017, and hereby appoints Walter Klemp and Jonathan Foster, or either of them, proxies for the undersigned, each with full power of substitution, to vote all of the undersigned's shares of common stock of Moleculin Biotech, Inc. (the “Company”) at the Annual Meeting of Stockholders of the Company to be held at the Hilton Garden Inn, 3201 Sage Road, Houston, Texas 77056, on May 25, 2017 at 12:30pm, local time, and at any adjournments or postponements thereof.

 

 
 
1.

¨  For All

¨  Withhold All

¨  For All Except _______________

The Board of Directors has nominated the following four persons for election as directors of the Company: Walter V. Klemp, Robert George, Jacqueline Northcut and Michael Cannon. Their term will expire at the 2018 Annual Meeting of Stockholders, or until their successors are duly elected and qualified.
     
2. o  For    o  Against    o  Abstain To ratify the appointment of Grant Thornton, LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2017.
     
3. o  For    o  Against    o  Abstain To approve the amendment to the Company’s Amended and Restated Certificate of Incorporation to effect a reverse stock split at one of the following reverse stock split ratios, 1-for-___, 1-for-___, 1-for-___ or 1-for-___, as determined by the Board of Directors in its sole discretion, prior to the one-year anniversary of this Annual Meeting.
     
4. o  For    o  Against    o  Abstain To authorize an adjournment of the Annual Meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposal 3 .
     
5.   In their discretion, upon such other matters as may properly come before the meeting.

 

The board of directors recommends a vote FOR the nominees and proposals above and if no specification is made, the shares will be voted for such nominees and proposal.

 

  Dated   2017
   
  Stockholder's Signature
   
  Stockholder's Signature

 

Signature should agree with name printed hereon. If stock is held in the name of more than one person, EACH joint owner should sign. Executors, administrators, trustees, guardians, and attorneys should indicate the capacity in which they sign. Attorneys should submit powers of attorney.

 

PLEASE SIGN, DATE AND RETURN THE PROXY IN THE ENVELOPE ENCLOSED. THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE NOMINEES SET FORTH IN PROPOSAL 1, FOR THE PROPOSALS SET FORTH IN ITEM 2, 3 AND 4 AND WILL GRANT DISCRETIONARY AUTHORITY PURSUANT TO ITEM 5. THIS PROXY WILL REVOKE ALL PRIOR PROXIES SIGNED BY YOU.

 

 

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