See accompanying notes to unaudited condensed consolidated financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.
Notes to the Unaudited Condensed Consolidated Financial Statements
1. Nature of Business
The terms "MBI" or "the Company", "we", "our", and "us" are used herein to refer to Moleculin Biotech, Inc. MBI is a clinical-stage pharmaceutical company, organized as a Delaware corporation in July 2015, which focuses on the treatment of highly resistant cancers and viruses through the development of its drug candidates, based substantially on discoveries licensed from The University of Texas System on behalf of the MD Anderson Cancer Center, which the Company refers to as MD Anderson. MBI formed Moleculin Australia Pty. Ltd. (MAPL), a wholly owned subsidiary in June 2018, to perform certain preclinical development in Australia. This has enabled the Company to realize the benefits of certain research and development tax credits in Australia. In July 2021, MBI formed Moleculin Amsterdam B.V., a wholly owned subsidiary, primarily to act as its legal representative for clinical trials in Europe.
In 2019, the Company sublicensed essentially all of the rights to its technologies in over 25 countries in Europe and Asia to WPD Pharmaceuticals Sp.z o.o. (WPD or WPD Pharmaceuticals) in exchange for a minimum amount of externally funded collaboration on development in Europe over a certain amount of time. This sublicense was last amended in December 2021 and extended the assignment date in August 2022. Also in 2019, the Company sublicensed its technologies to Animal Life Sciences, Inc. (ALI), to enable research and commercialization for non-human use and share development data. As part of this agreement, ALI issued to the Company a 10% interest in ALI.
The Company has three core technologies, based substantially on discoveries made at and licensed from MD Anderson. Having six drug candidates, three of which have now shown human activity in clinical trials, the Company believes that success in its lead program, Annamycin, has allowed and will allow further pipeline expansion into multiple high-value oncology indications.
The Company's core technologies consist of the following: a) Annamycin; b) WP1066 Portfolio; and c) WP1122 Portfolio. The Company has six drug candidates, representing all three core technologies, and three of those have shown human activity in clinical trials. In the US and Europe, the Company has conducted, is currently conducting, or plans in the near term to conduct clinical trials for its drug candidates - Annamycin, WP1066, WP1220 (which is part of the WP1066 Portfolio), and WP1122. At the beginning of 2022, all trials are or were in the Phase 1 portion, except the WP1220 trial, which was a proof-of-concept trial. Recently, one of the Annamycin trials moved into its Phase 2 portion of the trial. In 2021 and 2022, there were also multiple "right-to-try" (or their foreign equivalent) uses of Annamycin and WP1066. The Company plans to conduct additional trials and is in the process of obtaining the appropriate regulatory approval and beginning those trials. The Company utilizes its own internal resources and funds to conduct some of these trials and also has trials being conducted via physician-sponsored trials which utilize primarily external funds, usually grant funds, which are not presented in the financial statements.
The Company does not have manufacturing facilities and all manufacturing activities are contracted out to third parties. Additionally, the Company does not have a sales organization. The Company’s overall strategy is to seek potential outlicensing opportunities with development/commercialization strategic partners who are better suited for the marketing, sales and distribution of its drugs, if approved.
2. Basis of presentation, principles of consolidation, significant accounting policies and liquidity
Reverse Stock Split - On January 29, 2021, the Company filed a Certificate of Amendment to its amended and restated certificate of incorporation with the Secretary of State of the State of Delaware to effect a reverse stock split of all the issued and outstanding shares of the Company's common stock at a ratio of 1 for 6. The accompanying condensed consolidated financial statements and notes to the condensed consolidated financial statements give retroactive effect to the reverse stock split for all periods presented. Certain amounts in the financial statements, the notes thereto, and elsewhere in the Form 10-Q may be slightly different than previously reported due to rounding up of fractional shares as a result of the reverse stock split.
Basis of Presentation – Unaudited Condensed Consolidated Financial Information - The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP) for financial information, and in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (SEC) with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited condensed consolidated financial statements furnished reflect all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair statement of results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements of the Company as of December 31, 2021 and for the year then ended, including the notes thereto contained in the Form 10-K filed with the SEC on March 24, 2022.
Principles of Consolidation - The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP. The Company views its operations and manages its business in one operating segment. All long-lived assets of the Company reside in the U.S.
Significant Accounting Policies - The Company's significant accounting policies are described in Note 2, Basis of Presentation, principles of consolidation and significant accounting policies, to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes to the significant accounting policies during the nine months ended September 30, 2022.
Use of Estimates - The preparation of these condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differing materially from those estimated amounts used in the preparation of financial statements. Estimates are used in the following areas, among others: fair value estimates on intangible assets, warrants, and stock-based compensation expense, as well as accrued expenses and taxes.
Liquidity and Financial Condition - The Company is an early stage company and has not generated any revenues to date. As such, the Company is subject to all of the risks associated with early stage companies. Since inception, the Company has incurred losses and negative cash flows from operating activities. For the nine months ended September 30, 2022 and 2021, the Company incurred net losses of $22.3 million and $13.1 million, respectively, and had net cash flows used in operating activities of $20.4 million and $14.7 million, respectively. At September 30, 2022, the Company had an accumulated deficit of $95.1 million and cash and cash equivalents of $50.4 million. The Company expects its cash on hand as of September 30, 2022 will be sufficient to fund the Company's operations beyond the near term. Such projections are subject to changes in the Company’s internally funded preclinical and clinical activities, including unplanned preclinical and clinical activity. The Company does not expect to experience positive cash flows from operating activities in the near future and anticipates incurring operating losses for the next few years as it supports the development of its core technologies to the point of generating revenue, most likely via outlicensing, and continues to invest in research and development for additional applications of the Company's core technologies and potentially increase its pipeline of drug candidates. If the Company needs to raise additional capital in order to continue to execute its business plan, there is no assurance that additional financing will be available when needed or that management will be able to obtain financing on terms acceptable to the Company. A failure to raise sufficient capital could adversely impact the Company's ability to achieve its intended business objectives and meet its financial obligations as they become due and payable.
Cash and Cash Equivalents - Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. The Company maintains cash accounts principally at one financial institution in the U.S., which at times, may exceed the Federal Deposit Insurance Corporation’s limit. The Company has not experienced any losses from cash balances in excess of the insurance limit. The Company’s management does not believe the Company is exposed to significant credit risk at this time due to the financial condition of the financial institution where its cash is held.
Prepaid Expenses and Other Current Assets - Prepaid expenses and other current assets consist of the following (table in thousands):
| | September 30, 2022 | | | December 31, 2021 | |
Prepaid sponsored research | | $ | 1,346 | | | $ | 474 | |
Prepaid insurance | | | 938 | | | | 589 | |
Vendor prepayments and deposits | | | 807 | | | | 486 | |
Non-trade receivables | | | 6 | | | | 23 | |
Related party receivables | | | 4 | | | | 22 | |
Total prepaid expenses and other current assets | | $ | 3,101 | | | $ | 1,594 | |
Fair Value of Financial Instruments - The Company's financial instruments consist primarily of non-trade receivables, accounts payable, accrued expenses and its warrant liability. The carrying amount of non-trade receivables, accounts payable, and accrued expenses approximates their fair value because of the short-term maturity of such.
The Company has categorized its assets and liabilities that are valued at fair value on a recurring basis into a three-level fair value hierarchy in accordance with U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and lowest priority to unobservable inputs (Level 3).
Assets and liabilities recorded in the balance sheets at fair value are categorized based on a hierarchy of inputs as follows:
Level 1 – Unadjusted quoted prices in active markets of identical assets or liabilities.
Level 2 – Quoted prices for similar assets or liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.
Level 3 – Unobservable inputs for the asset or liability.
The Company’s financial assets and liabilities recorded at fair value on a recurring basis include the fair value of warrant liability discussed in Note 4.
The following table provides liabilities reported at fair value and measured on a recurring basis at September 30, 2022 and December 31, 2021 (table in thousands):
Description | | Fair Value | | | Level 1 | | | Level 2 | | | Level 3 | |
Fair value of warrant liability as of September 30, 2022: | | $ | 228 | | | $ | — | | | $ | — | | | $ | 228 | |
Fair value of warrant liability as of December 31, 2021: | | $ | 1,412 | | | $ | — | | | $ | — | | | $ | 1,412 | |
The table below of Level 3 liabilities (table in thousands) begins with the valuation as of the beginning of the third quarter and then is adjusted for changes in fair value that occurred during the third quarter. The ending balance of the Level 3 financial instrument presented above represents the Company's best estimates and may not be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments.
Three Months Ended September 30, 2022 | | Warrant Liability Long-Term | | | Warrant Liability Total | |
Balance, June 30, 2022 | | $ | 649 | | | $ | 649 | |
Change in fair value - net | | | (421 | ) | | | (421 | ) |
Balance, September 30, 2022 | | $ | 228 | | | $ | 228 | |
The table below of Level 3 liabilities (table in thousands) begins with the valuation as of December 31, 2021 and then is adjusted for changes in fair value that occurred during the nine months ended September 30, 2022. The ending balance of the Level 3 financial instrument presented above represents the Company's best estimates and may not be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments.
Nine Months Ended September 30, 2022 | | Warrant Liability Long-Term | | | Warrant Liability Total | |
Balance, December 31, 2021 | | $ | 1,412 | | | $ | 1,412 | |
Change in fair value - net | | | (1,184 | ) | | | (1,184 | ) |
Balance, September 30, 2022 | | $ | 228 | | | $ | 228 | |
Loss Per Common Share - Basic net loss per common share is computed by dividing net loss available to common shareholders by the weighted-average number of common shares outstanding during the period. For purposes of this calculation, options to purchase common stock, restricted stock units subject to vesting and warrants to purchase common stock are considered to be common stock equivalents. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be antidilutive. For the three months ended September 30, 2022 and 2021, approximately 6.0 million and 4.5 million, respectively, of potentially dilutive shares were excluded from the computation of diluted earnings per share due to their antidilutive effect. For the nine months ended September 30, 2022 and 2021 , approximately 5.2 million and 4.1 million, respectively, of potentially dilutive shares were excluded from the computation of diluted earnings per share due to their antidilutive effect.
Subsequent Events - The Company’s management reviewed all material events through the date of these unaudited condensed consolidated financial statements. See Note 8 - Subsequent Events.
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40) (ASU 2020-06). ASU 2020-06 simplifies the complexity associated with applying U.S. GAAP for certain financial instruments with characteristics of both liabilities and equity, including convertible instruments and contracts in an entity's own equity. The guidance was effective for the Company beginning on January 1, 2022 and prescribes different transition methods for the various provisions. The Company's adoption of this pronouncement did not have a material impact on the Company's condensed consolidated financial statements.
In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt - Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. ASU 2021-04 clarifies certain aspects of the current guidance to promote consistency among reporting of an issuer's accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments in this update were effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company's adoption of this pronouncement effective January 1, 2022 did not have a material impact on the Company's condensed consolidated financial statements.
The Company does not believe that any other recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying condensed consolidated financial statements.
3. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following components (table in thousands):
| | September 30, 2022 | | | December 31, 2021 | |
Accrued research and development | | $ | 1,336 | | | $ | 1,005 | |
Accrued legal, regulatory, professional and other | | | 803 | | | | 442 | |
Accrued payroll and bonuses | | | 433 | | | | 606 | |
Operating lease liability - current | | | 112 | | | | 96 | |
Accrued liabilities due to related party | | | 110 | | | | 109 | |
Total accrued expenses and other current liabilities | | $ | 2,794 | | | $ | 2,258 | |
Additionally, accounts payable includes $72,000 and $48,000 as of September 30, 2022 and December 31, 2021, respectively, for related party payables.
4. Warrants
Liability Classified Warrants
The Company uses the Black-Scholes option pricing model to determine the fair value of its warrants at the date of issue and outstanding at each reporting date. The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds linearly interpolated to obtain a maturity period commensurate with the term of the warrants. Estimated volatility is a measure of the amount by which the Company's stock price is expected to fluctuate each year during the expected life of the warrants. Only the volatility of the Company's own stock is used in the Black-Scholes option pricing model.
The assumptions used in determining the fair value of the liability classified warrants are as follows:
| | September 30, 2022 | | | December 31, 2021 | |
Risk-free interest rate | | 3.6% to 4.3% | | | 0.1% to 1.1% | |
Volatility | | 54.4% to 93.4% | | | 71.8% to 114.5% | |
Expected life (years) | | 0.4 to 2.9 | | | 0.1 to 3.6 | |
Dividend yield | | —% | | | —% | |
A summary of the Company's liability classified warrant activity during the nine months ended September 30, 2022 and related information follows:
| | Number of Shares | | | Range of Warrant Exercise | | | Weighted Average | | | Weighted Average Remaining Contractual | |
| | Under Warrant | | | Price per Share | | | Exercise Price | | | Life (Years) | |
Balance at January 1, 2022 | | | 2,723,645 | | | $ | 6.30 | | | $ | 16.80 | | | $ | 9.46 | | | | 2.6 | |
Expired | | | (67,349 | ) | | | 8.10 | | | | 9.00 | | | | — | | | | — | |
Balance at September 30, 2022 | | | 2,656,296 | | | $ | 6.30 | | | $ | 16.80 | | | $ | 9.49 | | | | 1.9 | |
Exercisable at September 30, 2022 | | | 2,656,296 | | | $ | 6.30 | | | $ | 16.80 | | | $ | 9.49 | | | | 1.9 | |
For a summary of the changes in fair value associated with the Company's warrant liability for the nine months ended September 30, 2022, see Note 2 - Basis of presentation, principles of consolidation and significant accounting policies - Fair Value of Financial Instruments.
Equity Classified Warrants
In September 2022, the Company entered into a portfolio advisory agreement with a related party entity, associated with Dr. Waldemar Priebe, and in connection with the agreement, the Company granted equity-classified warrants to purchase 250,000 shares of common stock with a ten-year term and an exercise price of $1.24. The September 2022 warrants vest as follows: (a) 50% vests upon execution of the agreement, provided the advisor does not terminate the agreement prior to the first anniversary of the agreement; and (b) 50% vests 60 days after the end of the one-year term, subject to the Company's Board of Directors determining that the services provided have been adequately performed. In June 2022, the Company granted equity-classified warrants to purchase 50,000 shares of common stock with a ten-year term and an exercise price of $1.49 vesting annually over four years while services are being performed.
In August 2021, the Company entered into a portfolio development advisory agreement with a related party entity, associated with Dr. Waldemar Priebe, and in connection with the agreement, the Company granted equity-classified warrants to purchase 250,000 shares of common stock with a ten-year term and an exercise price of $3.08. The August 2021 warrants vest as follows: (a) 50% vests upon execution of the agreement, provided the advisor does not terminate the agreement prior to the first anniversary of the agreement; and (b) 50% vests 60 days after the end of the one-year term, subject to the Company's Board of Directors determining that the services provided have been adequately performed. The Company's Board of Directors determined that the services had been adequately performed, and, as such, the August 2021 warrants are fully vested. In April 2021, the Company granted equity-classified warrants to purchase 71,500 shares of common stock with a five-year term and an exercise price of $3.63 vesting quarterly over five years while services are being performed. Additionally, both the April 2021 and August 2021 warrants vest in full if there is a change of control event, as defined in the agreements.
At September 30, 2022, the Company had 646,501 equity classified warrants outstanding and 272,284 warrants were exercisable. At December 31, 2021, the Company had 396,502 equity classified warrants outstanding and 186,560 warrants were exercisable.
The Company recorded stock compensation expense for equity classified warrants of $232,000 and $422,000 for the three months ended September 30, 2022 and 2021, respectively, and $398,000 and $432,000 for the nine months ended September 30, 2022 and 2021, respectively. At September 30, 2022, there was $507,000 of unrecognized stock compensation expense related to the Company's equity classified warrants.
5. Equity
2022 Stock Issuances
During the nine months ended September 30, 2022, the Company issued 49,489 shares of common stock related to the vesting of restricted stock units.
2021 Stock Issuances
In June 2021, the Company entered into an At Market Issuance Sales Agreement (2021 ATM Agreement) with Oppenheimer & Co. Inc. Pursuant to the terms of the 2021 ATM Agreement, the Company may offer and sell, from time to time through Oppenheimer shares of the Company's common stock with an aggregate sales price of up to $50.0 million. As of the date of this report, there have been no issuances under the 2021 ATM Agreement.
In June 2021, the Company entered into a Purchase Agreement with Lincoln Park Capital Fund. Pursuant to the terms of the Purchase Agreement, Lincoln Park agreed to purchase from the Company up to $20.0 million of common stock (subject to certain limitations) from time to time during the term of the Purchase Agreement. Pursuant to the terms of the Purchase Agreement, at the time the Company signed the Purchase Agreement, the Company issued 107,788 shares of common stock to Lincoln Park as an initial fee for its commitment to purchase shares of the Company's common stock under the Purchase Agreement, and has agreed to issue Lincoln Park up to an additional 53,893 shares of common stock as commitment shares pro-rata when and if Lincoln Park purchases (at our discretion) the $20.0 million aggregate commitment. The initial commitment shares issued in June 2021 were valued at $0.4 million, recorded as an addition to equity for the issuance of common stock and treated as a reduction to equity as a cost of capital to be raised under the Purchase Agreement.
In February 2021, the Company entered into an underwritten public offering for the sale by the Company of 14,273,684 shares of its common stock at a public offering price of $4.75 per share and granted the underwriters a 30-day option to purchase up to an additional 2,141,052 shares of common stock offered in the public offering, which was exercised. The Company received total proceeds of $78.0 million, prior to deducting the underwriting discount and other estimated offering expenses. In January 2021 the Company issued 468,684 shares for gross proceeds of $2.9 million using the Company's 2020 At The Market Agreement (2020 ATM Agreement) with Oppenheimer & Co., Inc. The Company terminated the 2020 ATM Agreement on February 2, 2021.
Stock-Based Compensation and Outstanding Awards
The 2015 Stock Plan, as amended and approved by the Company's stockholders in May 2022, provides for the grant of stock options, stock awards, stock unit awards, and stock appreciation rights. As of September 30, 2022, there were 752,296 shares remaining to be issued under the 2015 Stock Plan.
Stock-based compensation for the three and nine months ended September 30, 2022 and 2021, respectively, consists of the following components (table in thousands):
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | 2022 | | | 2021 | | | 2022 | | | 2021 | |
General and administrative | | $ | 378 | | | $ | 443 | | | $ | 1,089 | | | $ | 1,085 | |
Research and development | | | 321 | | | | 534 | | | | 651 | | | | 732 | |
Total stock-based compensation expense | | $ | 699 | | | $ | 977 | | | $ | 1,740 | | | $ | 1,817 | |
During the nine months ended September 30, 2022, the Company granted 842,832 stock options with a weighted average fair value of $1.26 per share and a weighted average exercise price of $1.49 per share, which options vest over a one to four-year period from the grant date on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards. In addition, during the nine months ended September 30, 2022, the Company granted 452,334 restricted stock units with a weighted average fair value of $1.49 per share, that vest over a four year period from the grant date on a straight line basis over the requisite service period.
6. Income Taxes
Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
The Company does not expect to pay any significant federal, state, or foreign income taxes in 2022 as a result of the losses recorded during the three and nine months ended September 30, 2022 and the additional losses expected for the remainder of 2022 and cumulative net operating loss carryforwards. Accounting standards require the consideration of a valuation allowance for deferred tax assets if it is “more likely than not” that some component or all of the benefits of deferred tax assets will not be realized. As a result, as of September 30, 2022 and December 31, 2021 the Company maintained a full valuation allowance for all deferred tax assets.
The Company recorded no income tax provision for the three and nine months ended September 30, 2022 and 2021, respectively. The effective tax rate for the nine months ended September 30, 2022 and 2021 is 0%. The income tax rates vary from the federal and state statutory rates primarily due to the change in fair value of the stock warrants and valuation allowances on the Company’s deferred tax assets. The Company estimates its annual effective tax rate at the end of each quarterly period. Jurisdictions with a projected loss for the year where no tax benefit can be recognized due to the valuation allowance could result in a higher or lower effective tax rate during a particular quarter depending on the mix and timing of actual earnings versus annual projections.
7. Commitments and Contingencies
In addition to the commitments and contingencies described elsewhere in these notes, see below for a discussion of the Company's commitments and contingencies as of September 30, 2022.
Lease Obligations Payable
The following summarizes quantitative information about the Company's operating leases for the three and nine months ended September 30, 2022 and 2021, respectively (table in thousands):
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | 2022 | | | 2021 | | | 2022 | | | 2021 | |
Lease cost: | | | | | | | | | | | | | | | | |
Operating lease cost | | $ | 33 | | | $ | 29 | | | $ | 91 | | | $ | 87 | |
Variable lease cost | | | 7 | | | | 7 | | | | 22 | | | | 22 | |
Total | | $ | 40 | | | $ | 36 | | | $ | 113 | | | $ | 109 | |
In June 2022, the Company extended the Lab Lease for its lab space until September 30, 2027, with no further right or option to renew. The Company will continue to be required to remit base monthly rent which will increase at an average approximate rate of 3% per year. The Company recorded approximately $12,000 and $10,000 in sublease income from a related party for the three months ended September 30, 2022 and 2021, respectively, and $32,000 and $31,000 for the nine months ended September 30, 2022 and 2021, respectively. Sublease income is recorded as other income, net on the Company's condensed consolidated statement of operations and comprehensive loss. Operating cash flows from operating leases was $21,000 and $35,000 for the three months ended September 30, 2022 and 2021, respectively, and $91,000 and $103,000 for the nine months ended September 30, 2022 and 2021, respectively.
Licenses
MD Anderson - Total expenses related to the Company's license agreements with MD Anderson were $56,000 for the three months ended September 30, 2022 and 2021, and $189,000 and $150,000 for the nine months ended September 30, 2022 and 2021, respectively.
HPI - The Company has two agreements with a related party, Houston Pharmaceuticals, Inc. (HPI). The first agreement, which was renewed in May 2022, continues a prior consulting arrangement with HPI and requires payments of $43,500 per quarter. The second agreement, which can be cancelled with sixty days' notice by either party, allows access to laboratory equipment owned by HPI for a payment of $15,000 per quarter. Total expenses related to the Company's agreements with HPI were $59,000 for each of the three months ended September 30, 2022 and 2021, and $176,000 for each of the nine months ended September 30, 2022 and 2021.
Sponsored Research Agreements - In June 2022, the Company entered into a new Sponsored Research Agreement with MD Anderson for a total payment of $1.3 million to support the continuation of the project through December 31, 2024. In addition, the Company also has Sponsored Research Agreements with other universities, one in the US and one in Europe. Total expenses related to the Company's Sponsored Research Agreements were $315,000 and $220,000 for the three months ended September 30, 2022 and 2021, respectively, and $815,000 and $498,000 for the nine months ended September 30, 2022 and 2021, respectively.
License Terminations - In February 2022, the Company and Exploration Invest Pte Ltd. (Exploration) entered into a license termination agreement pursuant to which the Company agreed to pay Exploration $400,000 to terminate certain License Agreements and extend confidentiality requirements until the 10-year anniversary of the license termination agreement. Additionally, in March 2021, the Company determined the stability of WP1732, a molecule in the WP1066 Portfolio was less than satisfactory and, as such, in March 2021 the Company terminated its license for WP1732 with MD Anderson. In October 2022, the Company entered into a two-year option on a license for WP1732. Total expenses related to the Company's license terminations were zero for each of the three months ended September 30, 2022 and 2021, and $400,000 and zero for the nine months ended September 30, 2022 and 2021, respectively.
8. Subsequent Events
In addition to the subsequent events discussed elsewhere in these notes, no other subsequent events were noted as occurring after September 30, 2022.