Note 8 - Commitments and Contingencies

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

8. 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 for the years ended  December 31, 2021, and December 31, 2020, respectively. 

Lease Obligations Payable

Effective January 1, 2019, the Company adopted ASC 842, which requires recognition of a right-of use asset and a lease liability for all leases at the commencement date based on the present value of the lease payment over the lease term.

In March 2018, the Company entered into a Lease Agreement (the “Lease”) which it uses for its corporate office space and headquarters. The term of the Lease began in August 2018 and will continue for an initial term of 66 months, which may be renewed for an additional 5 years. The Company is required to remit base monthly rent which will increase at an average approximate rate of 3% each year. The Company is also required to pay additional rent in the form of its pro-rata share of certain specified operating expenses of the Landlord. The leased space is located in Houston, Texas. The corporate office lease is classified as an operating lease.

In August 2019, the Company entered into an Amended Lease Agreement (the "Lab Lease") which it uses for lab space. The term of the Lease began in September 2019 and will continue for an initial term of 35 months, with no further right or option to renew. The Company is required to remit base monthly rent which will increase at an average approximate rate of 3% each year. The Lab Lease is classified as an operating lease. In August 2019, the Company entered into a sublease with a related party, Houston Pharmaceuticals, Inc. (HPI). The Company has granted HPI access to all of its Lab Lease space and HPI has agreed to pay the Company 50% of the Company's rent payable under the Lab Lease less 50% of any benefits from any sublease or other lab service agreement the Company may receive from its Lab Lease. Although HPI has access to the Company's Lab Lease space, it is the intent of the parties that they equally share the Lab Lease space for research purposes. The Company recorded approximately $42,000 in sublease income from the related party for the years ended December 31, 2021 and December 31, 2020, respectively. Sublease income is recorded as other income on the Company's consolidated statement of operations and comprehensive loss.

During the year ended December 31, 2021, the Company did not enter into any lease arrangements requiring any additional right-of-use assets or liabilities to be recorded.

The Company made an accounting policy election not to apply the recognition requirements to short-term leases. The Company recognizes the lease payments for short-term leases in profit or loss on a straight-line basis over the lease term, and variable lease payments in the period in which the obligation for those payments is incurred.

The following summarizes quantitative information about the Company's operating leases for the years ended  December 31, 2021, and December 31, 2020, respectively (in thousands): 

	Year Ended December 31,
	2021		2020
Lease cost:
Operating lease cost	$	116	$	116
Short-term lease cost		-		17
Variable lease cost		29		29
Total	$	145	$	162

Other supplemental cash flow information for operating leases is as follows (in thousands):

	Year Ended December 31,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	138	$	134

As of December 31, 2021, future minimum leases under ASC 842 under the Company's operating leases were as follows (in thousands):

Maturity of lease liabilities	As of December 31, 2021
2022	$	105
2023		56
2024		10
2025		—
2026		—
2027 and thereafter		—
Total lease payments		171
Less: imputed interest		(12	)
Present value of operating lease liabilities	$	159

As of December 31, 2021, the weighted average remaining lease term for operating leases is 1.7 years, and the weighted average discount rate is 9.6%. The interest rate implicit in lease contracts is typically not readily determinable and as such, the Company uses an incremental borrowing rate based on a peer analysis using information available at the commencement date, which represents an internally developed rate that would be incurred to borrow, on a collateralized basis, over a similar term, an amount equal to the lease payments in a similar economic environment. 

Licenses

MD Anderson

Under agreements associated with Annamycin, the WP1122 Portfolio and the WP1066 Portfolio all described below, the Company is responsible for certain license, milestone and royalty payments over the course of the agreements. Annual license fees can cost as high as $0.1 million depending upon the anniversary, milestone payments for the commencement of phase II and phase III clinical trials can cost as high as $0.5 million. Other milestone payments for submission of an NDA to the FDA and receipt of first marketing approval for sale of a license product can be as high as $0.6 million. Royalty payments can range in the single digits as a percent of net sales on drug products or flat fees as high as $0.6 million, depending upon certain terms and conditions. Not all of these payments are applicable to every drug. In March 2021, after a determination that the Company did not intend to pursue development of WP1732, the Company entered into a termination of the license agreement related to WP1732 dated February 12, 2018 with MD Anderson. Total expenses under these agreements were$267,000 and $255,000, respectively, for the years ended  December 31, 2021 and 2020.

Annamycin

On June 29, 2017, the Company entered into a Patent and Technology License Agreement with MD Anderson licensing certain technology related to the method of preparing Liposomal Annamycin and on December 17, 2021 the Company entered into an amendment to this agreement to include certain technology related to the method of reconstituting Liposomal Annamycin. On December 2, 2021, the Company entered into a Patent and Technology License Agreement with MD Anderson licensing certain technology related to lung targeted therapies with Annamycin. The terms and payments of these agreements are included in the summary above under “Commitments and Contingencies – Licenses – MD Anderson”. The terms of these agreements extend until the later of 20 years from the effective date of the agreements, or the expiration of the last-to-expire licensed patent. In addition, commencing on the four-year anniversary of each agreement, MD Anderson has the right to remove any jurisdiction from such agreement, upon 90 days’ notice, if the Company has not commercialized or is not using commercially reasonable efforts actively and effectively to attempt to commercialize a licensed invention in such jurisdiction.

WP1122 Portfolio

The rights and obligations to an April 2012 Patent and Technology License Agreement entered into by and between IntertechBio and MD Anderson (the “2012 Agreement”) have been assigned to MBI. Therefore, MBI has obtained a royalty-bearing, worldwide, exclusive license to intellectual property, including patent rights, related to our WP1122 Portfolio and to our drug product candidate, WP1122. On December 3, 2021, the Company entered into a new patent and technology license agreement (the “2021 Agreement”) with MD Anderson licensing certain technology related to WP1122 anti-viral treatments. The 2012 Agreement was amended in May 2020 to allow for the extension of certain milestones. The initial milestone required the Company to file an IND with the FDA for a Phase I study by February 20, 2021. The Company extended the deadline for this milestone by six months by making the required extension payment, and the Company has the right to receive two additional six-month extensions in the future by making additional extension payments. On August 3, 2021, the Company filed a CTA for the application of WP1122 in the United Kingdom to commence a Phase 1a clinical trial of WP1122. MD Anderson agreed that this CTA filing would further extend the deadline to file an IND with the FDA for a Phase I study until February 2022. In December 2021, the Company submitted an IND for the treatment of GBM with WP1122 to the FDA, thus meeting the IND filing milestone. The term of the 2012 agreement extends until the later of 15 years from the effective date of the agreement, or the expiration of the last-to-expire licensed patent. In addition, MD Anderson may terminate the 2012 agreement if the Company fails to commence a Phase 1 study for a licensed product prior to November 20, 2022; or if the Company fails to commence a Phase 2 study for licensed product prior to November 20, 2024. The term of the 2021 agreement extends until the later of 20 years from the effective date of the agreement, or the expiration of the last-to-expire licensed patent. In addition, MD Anderson may terminate the 2021 agreement if the Company fails to file an IND for a Phase 1 study for a licensed product prior to December 3, 2024; or if the Company fails to commence a Phase 1 study for licensed product prior to December 3, 2026. The Company believes that the recent approval for its clinical trial application for a WP1122 Phase 1 clinical trial for COVID-19 will meet these required milestones.

WP1066 Portfolio

The rights and obligations to a June 2010 Patent and Technology License Agreement entered into by and between Moleculin LLC and MD Anderson (the “2010 Agreement”) have been assigned MBI. Therefore, MBI has obtained a royalty-bearing, worldwide, exclusive license to intellectual property rights, including patent rights, related to its WP1066 drug product candidate. On February 3, 2022, the Company entered into a new patent and technology license agreement (the “2022 Agreement”) with MD Anderson licensing certain technology related to WP1066 checkpoint inhibitors. In consideration for these agreements, the Company must make payments to MD Anderson including an up-front payment, milestone payments and minimum annual royalty payments for sales of products developed under the license agreement. Annual Maintenance fee payments will no longer be due upon marketing approval in any country of a licensed product under the 2010 Agreement. One-time milestone payments are due upon commencement of the first Phase III study for a licensed product within the United States, Europe, China or Japan; upon submission of the first NDA for a licensed product in the United States; and upon receipt of the first marketing approval for sale of a licensed product in the United States. The term of the 2010 Agreement extends until the later of 15 years from the effective date of the agreement, or the expiration of the last-to-expire licensed patent. The term of the 2022 Agreement extends until the later of 20 years from the effective date of the agreement, or the expiration of the last-to-expire licensed patent. In addition, MD Anderson may terminate the 2022 Agreement if the Company fails to file for an IND for a Phase 1 study before February 2, 2025 in the United States, France, Germany, Italy, Spain, the United Kingdom or China. The Company believes that to the clinical trial application in China filed prior to 2016 meets this milestone.

HPI

MBI entered into an outlicensing agreement with HPI, pursuant to which it granted certain intellectual property rights to HPI, including rights covering the potential drug candidate, WP1066 (HPI Out-Licensing Agreement). Upon payment of the option repurchase payment in 2019, the HPI Out-Licensing Agreement was terminated and MBI regained all rights to the licensed subject matter and rights to any and all development data and any regulatory submissions including any IND, NDA or ANDA related to the licensed subject matter and can end the license without any other obligation. In March 2020, the Company entered into two agreements with HPI. The first agreement, which has a term of two years, continues a prior consulting arrangement with HPI on the Company's licensed molecules and requires payments for $43,500 per quarter to HPI. The second agreement, which can be cancelled with sixty days notice by either party, allows the Company's employees access to laboratory equipment owned by HPI and this requires a payment of $15,000 per quarter to HPI. Total expenses related to HPI were $234,000 and $284,000, for the years ended December 31, 2021 and 2020, respectively. 

Sponsored Research Agreements with MD Anderson

MBI has a Sponsored Laboratory Study Agreement with MD Anderson expiring December 31, 2022. In July 2021, the Company amended its Sponsored Laboratory Study Agreement with MD Anderson for total payment of $175,000 to support the continuation of the project. The expenses recognized under the MD Anderson agreement with regards to the Sponsored Laboratory Study were $697,000 and $629,000, respectively for the years ended December 31, 2021 and 2020.

Other Licenses

Dermin

In 2015, we obtained the rights and obligations for certain patent and technology development and license agreements with Dermin Sp. Zoo (Dermin). In connection with such agreements, certain intellectual property rights related to Annamycin, our WP1122 portfolio, and our WP1066 portfolio were licensed to Dermin and Dermin was granted a royalty-bearing, exclusive license to manufacture, have manufactured, use, import, offer to sell and/or sell products in the field of human therapeutics under the licensed intellectual property in certain countries in Europe and Asia. In July 2019, Dermin assigned its rights under the foregoing license agreements to an affiliated entity of Dermin, Exploration Invest Pte Ltd. (Exploration). On July 30, 2019, the Company and Exploration entered into an agreement pursuant to which the Company agreed to issue Exploration shares of Company common stock valued at $0.5 million (based on the greater of the closing price of the common stock on the date of the agreement or the 10-day average closing price prior to the date of the agreement) in exchange for the modifying the license agreements to: (i) limit the licensed territory solely to Poland; and (ii) limit the patent rights and technology rights licensed to Exploration to the patent rights and technology rights that existed on the date the original license agreements were entered into with Dermin. In August 2019, the Company issued 71,663 shares of Company common stock to Exploration to satisfy this commitment. In February 2022, the Company and Exploration entered into a license termination agreement pursuant to which the Company agreed to pay Exploration $0.4 million to terminate each of the License Agreements, and extend its confidentiality requirements until the 10-year anniversary of the license termination agreement. The Company paid $0.4 million to Exploration in February 2022 to satisfy this commitment. As such, all of the above licenses have been terminated.

WPD Pharmaceuticals 

In February 2019, the Company sublicensed certain intellectual property rights, including rights to Annamycin, its WP1122 portfolio, and its WP1066 portfolio to WPD Pharmaceuticals sp. z o.o. (WPD), which sublicense was last amended on December 20, 2021 (such agreement as amended, the “WPD Agreement”). WPD is affiliated with Dr. Waldemar Priebe, one of the Company’s founders and largest shareholder. Under the WPD Agreement, the Company granted WPD a royalty-bearing, exclusive license to research, develop, manufacture, have manufactured, use, import, offer to sell and/or sell products in the field of human therapeutics under the licensed intellectual property in the countries of Poland, Estonia, Latvia, Lithuania, Belarus, Ukraine, Moldova, Romania, Armenia, Azerbaijan, Georgia, Slovakia, Czech Republic, Hungary, Uzbekistan, Kazakhstan, Greece, Austria, Russia, Netherlands, Turkey, Belgium, Switzerland, Sweden, Portugal, Norway, Denmark, Ireland, Finland, Luxembourg, Iceland (licensed territories).

In consideration for entering into the WPD Agreement, WPD agreed that it must use Commercially Reasonable Development Efforts to develop and commercialize products in the licensed territories. For purposes of the WPD Agreement, the term “Commercially Reasonable Development Efforts” (CRDE) means the expenditure, either directly or through the guarantees of grants, by or on behalf of WPD or any of its affiliates of at least: (i) $2.5 million during the first four years of the agreement (or prior to February 2023) on the research, development and commercialization of products in the licensed territories; and (ii) $2.1 million annually for the five years thereafter on the research and development of products in the licensed territories. The total CRDE required by the sublicense is $14.0 million.

During the term of the WPD Agreement, to the extent the Company is required to make any payments to MD Anderson pursuant to its license agreements with MD Anderson, whether a milestone or royalty payment, as a result of the research and development or sale of a sublicensed product, WPD shall be required to advance or reimburse the Company for such payments. In further consideration for the rights granted by the Company to WPD under the WPD Agreement, WPD agreed to pay us a royalty percentage at a rate equal to the royalty rate owed MD Anderson under the Company’s license agreements with MD Anderson plus an additional royalty (the “override royalty percentage”) equal to 1.0% of net sales of any sublicensed products, provided, however, if WPD spends: (i) more than $14.0 million in Commercially Reasonable Development Efforts, the override royalty percentage will decrease to 0.75% of net sales; or (ii) more than $17.0 million in Commercially Reasonable Development Efforts, the override royalty percentage will decrease to 0.5% of net sales.

With certain exceptions, the WPD Agreement will remain in full force and effect until the expiration of the last patent within the sublicensed patents. Notwithstanding the foregoing, the Company has the right, in its sole discretion, to terminate the WPD Agreement in whole, or to materially amend the agreement by removing a portion of the sublicensed subject matter, in connection with certain fundamental transactions or in connection with the granting to an unaffiliated third party of a license or sublicense to all or to a material portion of the sublicensed subject matter within all or substantially all of the licensed territories (such event, the “buyback event”) by making a payment to WPD based on the percentage of licensed territories involved in the buyback event as compared to the overall world healthcare spend and the extent to which WPD has satisfied its Commercially Reasonable Development Efforts requirements.

Animal Life Sciences

In February 2019, the Company sublicensed certain intellectual property rights, including rights to Annamycin, its WP1122 portfolio, and its WP1066 portfolio in the field of non-human animals to ALI (the “ALI Agreement”). ALI is affiliated with Dr. Waldemar Priebe, one of its founders and its largest shareholder. Under the ALI Agreement, the Company granted ALI a worldwide royalty-bearing, exclusive license to research, develop, manufacture, have manufactured, use, import, offer to sell and/or sell products in the field of non-human animals under the licensed intellectual property. This license is subject to the terms in the prior agreements entered into by the Company and MDA.

Employment Agreements

 The Company has agreements with certain executive and other employees to provide benefits in the event of termination. The base salary and certain other benefits would aggregate approximately $0.9 million using the rate of compensation in effect at December 31, 2021.