mbrx20210930

mbrx20210930_10q.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2021

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

For the transition period from to

Commission File Number: 001-37758

MOLECULIN BIOTECH, INC.

(Exact name of registrant as specified in its charter)

Delaware

2834

47-4671997

(State or Other Jurisdiction of

Incorporation or Organization)

(Primary Standard Industrial

Classification Code Number)

(IRS Employer

Identification Number)

5300 Memorial Drive,

Suite 950

Houston,

77007

(Address of principal executive offices)

(Zip Code)

713-300-5160

(Registrant’s telephone number, including area code)

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

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

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

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

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

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

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

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

The registrant had 28,577,088 shares of common stock outstanding at November 3, 2021.

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Moleculin Biotech, Inc.

Table of Contents

		Page
	PART I – FINANCIAL INFORMATION	3

Item 1.	Condensed Consolidated Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months ended September 30, 2021 and 2020 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2021 and 2020 (unaudited)	5
	Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19

Item 4.	Controls and Procedures	19

	PART II – OTHER INFORMATION	20

Item 1.	Legal Proceedings	20

Item 1A.	Risk Factors	20

Item 2.	Unregistered sales of Equity Securities and Uses of Proceeds	20

Item 3.	Defaults Upon Senior Securities	20

Item 4.	Mine Safety Disclosures	20

Item 5.	Other Information	20

Item 6.	Exhibits	21

	Signatures	22

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PART 1 FINANCIAL INFORMATION

Item 1. Financial Statements

Moleculin Biotech, Inc.

Condensed Consolidated Balance Sheets

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

(unaudited)

	*September 30,*			*December 31,*
	*2021*			*2020*
Assets
Current assets:
Cash and cash equivalents	$	75,178		$	15,173
Prepaid expenses and other current assets		1,892			2,025
Total current assets		77,070			17,198
Furniture and equipment, net		353			483
Intangible assets		11,148			11,148
Operating lease right-of-use asset		131			202
Total assets	$	88,702		$	29,031

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,390		$	1,129
Accrued expenses and other current liabilities		2,266			1,791
Total current liabilities		3,656			2,920
Operating lease liability - long-term, net of current portion		75			159
Warrant liability - long-term		3,712			8,192
Total liabilities		7,443			11,271
Commitments and contingencies (Note 7)
Stockholders' equity
Preferred stock, $0.001 par value; 5,000,000 shares authorized, no shares issued or outstanding		—			—
Common stock, $0.001 par value; 100,000,000 shares authorized; 28,577,088 and 11,536,720 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		29			69
Additional paid-in capital		151,175			74,671
Subscription Receivable		—			(129	)
Accumulated other comprehensive income		39			65
Accumulated deficit		(69,984	)		(56,916	)
Total stockholders’ equity		81,259			17,760
Total liabilities and stockholders’ equity	$	88,702		$	29,031

See accompanying notes to unaudited condensed consolidated financial statements.

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Moleculin Biotech, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

(unaudited)

	*Three Months Ended September 30,*						*Nine Months Ended September 30,*
	*2021*			*2020*			*2021*			*2020*
Revenues	$	—		$	—		$	—		$	—

Operating expenses:
Research and development		4,095			4,435			11,239			10,971
General and administrative		2,021			1,659			6,394			5,122
Depreciation and amortization		41			57			130			154
Total operating expenses		6,157			6,151			17,763			16,247
Loss from operations		(6,157	)		(6,151	)		(17,763	)		(16,247	)
Other income:
Gain from change in fair value of warrant liability		1,678			2,743			4,428			1,489
Other income, net		13			10			30			32
Interest income, net		87			3			236			10
Net loss	$	(4,379	)	$	(3,395	)	$	(13,069	)	$	(14,716	)

Net loss per common share - basic and diluted	$	(0.15	)	$	(0.33	)	$	(0.50	)	$	(1.55	)
Weighted average common shares outstanding, basic and diluted		28,573,476			10,245,810			26,302,638			9,496,585

Net Loss	$	(4,379	)	$	(3,395	)	$	(13,069	)	$	(14,716	)
Other comprehensive income (loss):
Foreign currency translation		(16	)		10			(26	)		2
Comprehensive loss	$	(4,395	)	$	(3,385	)	$	(13,095	)	$	(14,714	)

See accompanying notes to unaudited condensed consolidated financial statements.

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Moleculin Biotech, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	*Nine Months Ended September 30,*
	*2021*			*2020*
Cash flows from operating activities:
Net loss	$	(13,069	)	$	(14,716	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		130			154
Stock-based compensation		1,817			1,265
Change in fair value of warrant liability		(4,428	)		(1,489	)
Operating lease, net		102			90
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		133			294
Accounts payable		261			(810	)
Accrued expenses and other current liabilities		361			565
Net cash used in operating activities		(14,693	)		(14,647	)
Cash flows from investing activities:
Purchase of fixed assets		—			(360	)
Net cash used in investing activities		—			(360	)
Cash flows from financing activities:
Proceeds from exercise of warrants		63			5
Payment of tax liability for vested restricted stock units		(24	)		(17	)
Proceeds from sale of common stock, net of issuance costs		74,685			17,077
Net cash provided by financing activities		74,724			17,065
Effect of exchange rate changes on cash and cash equivalents		(26	)		2
Net change in cash and cash equivalents		60,005			2,060
Cash and cash equivalents, at beginning of period		15,173			10,735
Cash and cash equivalents, at end of period	$	75,178		$	12,795

Supplemental disclosures of cash flow information:
Cash paid for taxes	$	11		$	20
Non-cash investing and financing activities:
Purchases of property and equipment in accounts payable and accrued liabilities	$	—		$	316

See accompanying notes to unaudited condensed consolidated financial statements.

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Moleculin Biotech, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except for shares)

(unaudited)

	*Nine Months Ended September 30, 2021*
	Common Stock					Common Stock Subscribed											Accumulated
	Shares		Par Value Amount			Shares			Par Value Amount		Additional Paid-In Capital			Accumulated Deficit			Other Comprehensive Income (Loss)			Subscription Receivable			Stockholder's Equity
Balance, December 31, 2020		11,536,720	$	69			26,966		$	—	$	74,671		$	(56,916	)	$	65		$	(129	)	$	17,760
Issuance of common stock, net of issuance costs of $6,159		16,883,420		18			(26,966	)		—		74,537			—			—			129			74,684
Reverse stock split		14,285		(60	)		—			—		60			—			—			—			—
Warrants exercised		10,000		1			—			—		115			—			—			—			116
Stock-based compensation		—		—			—			—		405			—			—			—			405
Consolidated net loss		—		—			—			—		—			(4,445	)		—			—			(4,445	)
Cumulative translation adjustment		—		—			—			—		—			—			(4	)		—			(4	)
Balance, March 31, 2021		28,444,425	$	28			—		$	—	$	149,788		$	(61,361	)	$	61		$	—		$	88,516
Issuance of common stock in connection with equity purchase agreement, net of issuance costs of $403		107,788		1			—			—		—			—			—			—			1
Subscription of common stock in connection with Consulting Agreement		—		—			2,500			—		10			—			—			(10	)		—
Stock-based compensation		—		—			—			—		433			—			—			—			433
Consolidated net loss		—		—			—			—		—			(4,244	)		—			—			(4,244	)
Cumulative translation adjustment		—		—			—			—		—			—			(6	)		—			(6	)
Balance, June 30, 2021		28,552,213	$	29			2,500		$	—	$	150,231		$	(65,605	)	$	55		$	(10	)	$	84,700
Issuance of common stock in connection with Consulting Agreement		3,750		—			(2,500	)		—		(10	)		—			—			10			—
Common stock issued upon vesting of restricted stock units (net of shares withheld for payment of tax liability)		21,125		—			—			—		(23	)		—			—			—			(23	)
Stock-based compensation		—		—			—			—		977			—			—			—			977
Consolidated net loss		—		—			—			—		—			(4,379	)		—			—			(4,379	)
Cumulative translation adjustment		—		—			—			—		—			—			(16	)		—			(16	)
Balance, September 30, 2021		28,577,088	$	29			—		$	—	$	151,175		$	(69,984	)	$	39		$	—		$	81,259

	*Nine Months Ended September 30, 2020*
	Common Stock				Common Stock Subscribed										Accumulated
	Shares		Par Value Amount		Shares		Par Value Amount		Additional Paid-In Capital			Accumulated Deficit			Other Comprehensive Income (Loss)			Subscription Receivable		Stockholders' Equity
Balance, December 31, 2019		7,621,338	$	46		—	$	—	$	55,055		$	(39,561	)	$	31		$	—	$	15,571
Issuance of common stock, net of issuance costs of $709		1,250,000		7		—		—		559			—			—			—		566
Stock-based compensation		—		—		—		—		397			—			—			—		397
Consolidated net loss		—		—		—		—		—			(1,209	)		—			—		(1,209	)
Cumulative translation adjustment		—		—		—		—		—			—			(33	)		—		(33	)
Balance, March 31, 2020		8,871,338	$	53		—	$	—	$	56,011		$	(40,770	)	$	(2	)	$	—	$	15,292
Issued for cash - sale of common stock, net of issuance costs of $336		1,195,162		7		—		—		10,000			—			—			—		10,007
Warrants exercised		750		—		—		—		9			—			—			—		9
Stock-based compensation		—		—		—		—		408			—			—			—		408
Consolidated net loss		—		—		—		—		—			(10,112	)		—			—		(10,112	)
Cumulative translation adjustment		—		—		—		—		—			—			25			—		25
Balance, June 30, 2020		10,067,250	$	60		—	$	—	$	66,428		$	(50,882	)	$	23		$	—	$	15,629
Issued for cash - sale of common stock, net of issuance costs of $135		216,855		2		—		—		1,778			—			—			—		1,780
Common stock issued upon vesting of restricted stock units (net of shares withheld for payment of tax liability)		9,990		—		—		—		(17	)		—			—			—		(17	)
Stock-based compensation		—		—		—		—		460			—			—			—		460
Consolidated net loss		—		—		—		—		—			(3,395	)		—			—		(3,395	)
Cumulative translation adjustment		—		—		—		—		—			—			10			—		10
Balance, September 30, 2020		10,294,095	$	62		—	$	—	$	68,649		$	(54,277	)	$	33		$	—	$	14,467

See accompanying notes to unaudited condensed consolidated financial statements.

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Moleculin Biotech, Inc.

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. The Company's focus is on the treatment of highly resistant cancers and viruses through the development of its drug candidates. These candidates are based substantially on discoveries licensed from The University of Texas System on behalf of the MD Anderson Cancer Center, which we refer to as MD Anderson. MBI formed Moleculin Australia Pty. Ltd., (MAPL), a wholly owned subsidiary in June 2018, to perform certain preclinical development in Australia. This 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 for Moleculin Biotech, Inc.

In 2019, the Company sublicensed essentially all of the rights to its technologies in 29 countries in Europe and Asia to WPD Pharmaceuticals Sp.z o.o. (WPD or WPD Pharmaceuticals) in exchange for a minimum amount of externally funded collaboration on development in Europe over a certain amount of time. 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: 1) Annamycin, which the Company refers to as a "next generation" anthracycline; 2) a portfolio of Immune/Transcription Modulators, of which WP1066 is one of the lead molecules; and 3) a portfolio of Metabolism/Glycosylation Inhibitors, of which WP1122 is the lead molecule. The Company has five drug candidates, representing all three core technologies, and three of those have shown human activity in clinical trials. As of the end of 2020, those three drug candidates accounted for five clinical trials in the United States (U.S.) and Europe. Two of those trials are externally funded studies of WP1066 in brain tumors. Two internally funded Phase 1 clinical trials, Annamycin in acute myeloid leukemia (AML), and WP1220 in cutaneous T-cell lymphoma (CTCL), were successfully concluded. An additional internally funded Phase 1/2 clinical trial of Annamycin in AML is currently ongoing in Poland. In the second quarter of 2021, the Company commenced enrollment and dosed the first subject in its U.S. Phase 1b/2 clinical trial evaluating Annamycin for the treatment of soft tissue sarcoma (STS) lung metastases. Enrollment in that trial is also ongoing. The Company anticipates that the externally funded WP1066 trial in brain tumors at MD Anderson will be terminated this year and expects to commence a similar WP1066 externally funded trial elsewhere in 2022.

Additionally, MBI expects a second, grant funded Phase 1b/2 clinical trial of Annamycin in STS lung metastases to be primarily investigator-funded in Poland. MBI also plans to begin a Phase 1/2 clinical trial of Annamycin in combination with Ara-C for the treatment of AML in Europe by seeking approval for its own clinical trial and, possibly, a second, similar grant funded trial through its sublicensee, WPD Pharmaceuticals in Poland. In October 2021, the Company received authorization from regulatory authorities in the United Kingdom (U.K.) to commence a Phase 1a clinical trial of WP1122 in healthy volunteers with the intent to progress to COVID-19 patients either there or in locations where the prevalence of COVID-19 will adequately support recruitment. The Company intends to internally fund the initial trials of WP1122 but may seek external funding opportunities if encouraging activity is seen in COVID-19 patients. Additionally, the Company is pursuing filing an Investigative New Drug application (IND) in the U.S. with WP1122 for the treatment of certain cancers prior to the end of 2021. Finally, the Company continues to seek opportunities to collaborate on a potential Phase 2 clinical study of WP1220 in CTCL.

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.

COVID-19 and Worldwide Supply Chain Issues - In March 2020, the World Health Organization declared the outbreak of a novel Coronavirus (COVID-19) as a pandemic, which continues to spread throughout the world. The spread of COVID-19 has caused significant volatility in U.S. and international markets, including Poland, where MBI conducts some of its clinical trials and Italy, where its Annamycin drug supply is produced. There has been limited interruption of its drug supply, and most Polish clinics where the Company is conducting trials are limiting access for monitoring activities. Additionally, MBI believes COVID-19 materially slowed the recruitment of patients for its clinical trials, but it is now beginning to see an increase in recruitment. This could worsen or be alleviated at any time. Furthermore, there is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. and international economies and, as such, the Company is unable to determine if it will have a material impact to its operations. Additionally, the Company believes that the potential for impact to its supply chain due to COVID-19 will be reduced as vaccine production normalizes throughout the industry. In the third quarter, worldwide supply chain issues began delaying certain shipments. The supply chain for the manufacturing of the Company's drug candidates and supplies for clinical trials can be complicated and involves several parties. If the Company were to experience any supply chain issues, including as a result of the COVID-19 pandemic, the Company's product supply could be disrupted. The Company believes that its operations have not been materially impacted to date. In view of current worldwide trends with respect to COVID-19 and worldwide supply chain issues, MBI does not expect either issue to materially further impact recruitment for or the operation of current or future clinical trials. However, the Company cannot be certain that these trends will continue and there is the possibility they may reverse.

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 the amended and restated certificate of incorporation with the Secretary of State and the State of Delaware to effect a reverse stock split of all the issued and outstanding shares of the Company's common stock at a ratio of 1 for 6. The accompanying consolidated financial statements and notes to the consolidated financial statements 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 Interim Condensed Consolidated Financial Information - The accompanying unaudited interim condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the 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 interim condensed consolidated financial statements furnished reflect all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair statement of results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These interim condensed unaudited consolidated financial statements should be read in conjunction with the audited financial statements of the Company as of December 31, 2020 and notes thereto contained in the Form 10-K filed with the SEC on March 24, 2021.

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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, 2020. There have been no material changes to the significant accounting policies during the nine months ended September 30, 2021, other than those noted below.

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

Liquidity and Financial Condition - The Company is an early stage and emerging growth company (EGC) and has not generated any revenues to date. As such, the Company is subject to all of the risks associated with early stage and emerging growth companies. Since inception, the Company has incurred losses and negative cash flows from operating activities. For the nine months ended September 30, 2021 and 2020, the Company incurred net losses of $13.1 million and $14.7 million, respectively, and had net cash flows used in operating activities of $14.7 million and $14.6 million, respectively. At September 30, 2021, the Company had an accumulated deficit of $70.0 million and cash and cash equivalents of $75.2 million. The Company expects its cash on hand as of September 30, 2021 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.

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, 2021 and December 31, 2020 (in thousands):

Description	*Fair Value*		*Level 1*		*Level 2*		*Level 3*
Fair value of warrant liability as of September 30, 2021:	$	3,712	$	—	$	—	$	3,712
Fair value of warrant liability as of December 31, 2020:	$	8,192	$	—	$	—	$	8,192

The table below of Level 3 liabilities (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, 2021		*Warrant Liability Long-Term*				*Warrant Liability Total*
Balance, June 30, 2021		$

SEC Form 10-Q filed by Moleculin Biotech, Inc.