As filed with the Securities and ExchangeCommission on December 2, 2016.

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Moleculin Biotech, Inc.

(Exact Name of Registrant as Specified inIts Charter)

2575 West Bellfort, Suite 333

Houston, Texas 77054

(713) 300-5160

(Address, Including Zip Code, and TelephoneNumber, Including Area Code, of Registrant’s Principal Executive Offices)

Mr. Walter Klemp, Chief Executive Officer

2575 West Bellfort, Suite 333

Houston, Texas 77054

(713) 300-5160

(Name, Address, Including Zip Code, and TelephoneNumber, Including Area Code, of Agent For Service)

Copies to:

Approximate date of commencement of proposed saleto the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registeredon this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check thefollowing box.  x

If this form is filed to register additionalsecurities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Actregistration statement number of the earlier effective registration statement for the same offering.  ¨

If this form is a post-effective amendmentfiled pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statementnumber of the earlier effective registration statement for the same offering.  ¨

If this form is a post-effective amendmentfiled pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statementnumber of the earlier effective registration statement for the same offering.  ¨

Indicate by check mark whether the registrantis a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitionsof “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2of the Securities Exchange Act of 1934. (Check one): 

CALCULATION OF REGISTRATION FEE

(1)          Estimatedsolely for purposes of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933.

(2)          Pursuantto Rule 416 under the Securities Act, the securities being registered hereunder include such indeterminate number of additionalshares of common stock as may be issued after the date hereof as a result of stock splits, stock dividends or similar transactions. 

The Registrant hereby amends this RegistrationStatement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendmentwhich specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a)of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, actingpursuant to said Section 8(a), may determine.

The information in thispreliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement isfiled with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell, nor does itseek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion DatedDecember 2, 2016

______________ Units

Each Consisting of One Share of Common Stockand

One Warrant to Purchase ______________ Sharesof Common Stock

Moleculin Biotech, Inc.

We are offering             units, with each unitconsisting of one share of our common stock and one warrant to purchase              share of our common stock (and the            shares of ourcommon stock issuable from time to time upon exercise of the offered warrants). The purchase price for each unit is $                 . Eachwarrant will have an exercise price of $            per share and will expire five years from the date of issuance. The units will notbe issued or certificated. The shares of common stock and the warrants are immediately separable and will be issuedseparately, but will be purchased together in this offering. The shares of common stock, warrants and shares of common stockunderlying the warrants are sometimes collectively referred to herein as the “securities.”

Our common stock is listed on the NASDAQ CapitalMarket under the symbol “MBRX.” On November 30, 2016, the last sale price for our common stock as reported on the NASDAQCapital Market was $2.70 per share. There is no established public trading market for the warrants, and we do not expect a marketto develop. In addition, we do not intend to apply for a listing of the warrants on any national securities exchange.

The offering is being underwritten ona firm commitment basis. We have granted the underwriters an option to buy up to an additional                   shares and/or anadditional              warrants, in any combinations thereof, from us to cover over-allotments. The underwriters may exercise thisoption at any time and from time to time during the 45-day period from the date of this prospectus.

We are an “emerging growth company”as defined in Section 2(a) of the Securities Act of 1933, as amended, and we have elected to comply with certain reduced publiccompany reporting requirements.

Investing in our securities involves a high degree of risk. Seethe section entitled “Risk Factors” appearing on page 13 of this prospectus for a discussion of information that shouldbe considered in connection with an investment in our securities.

Neither the Securities and Exchange Commission nor any otherregulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Anyrepresentation to the contrary is a criminal offense.

The underwriters expect to deliver the common stock and warrantsrepresenting the units to purchasers on or about, 2016.

The date of this prospectus is                     ,2016

Tableof Contents 

No dealer, salesperson or other person is authorizedto give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized informationor representations. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictionswhere it is lawful to do so. The information contained in this prospectus is current only as of its date.

Market data and certain industry data and forecastsused throughout this prospectus were obtained from internal company surveys, market research, consultant surveys, publicly availableinformation, reports of governmental agencies and industry publications and surveys. Industry surveys, publications, consultantsurveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable,but that the accuracy and completeness of such information is not guaranteed. While we are not aware of any misstatements regardingthe industry data presented in this prospectus, our estimates involve risks and uncertainties and are subject to change based onvarious factors, including those discussed under the heading “Risk Factors” in this prospectus.

PROSPECTUS SUMMARY

This summary highlights information containedelsewhere in this prospectus. This summary does not contain all of the information that you should consider before deciding toinvest in our securities. You should read this entire prospectus carefully, including the “Risk Factors” section, ourhistorical financial statements and the notes thereto, and unaudited pro forma financial information, each included elsewhere inthis prospectus. The terms “MBI”, the “Company”, “our”, or “we” refer to MoleculinBiotech, Inc. and, unless the context otherwise requires, its predecessors.

Overview

We are a preclinical-stage pharmaceuticalcompany focused on the development of anti-cancer drug candidates, some of which are based on license agreements with The Universityof Texas System on behalf of the M.D. Anderson Cancer Center, which we refer to as MD Anderson. Our lead drug candidate is liposomalAnnamycin, which we refer to as Annamycin, an anthracycline intended for the treatment of relapsed or refractory acute myeloidleukemia, or AML. Annamycin has been in clinical trials pursuant to an Investigational New Drug application, or IND, that hadbeen filed with the U.S. Food and Drug Administration, or FDA. Due to a lack of development activity by a prior drug developer,this IND was terminated. However, we intend to apply for a new IND based on the same data that supported the original IND, updatedfor subsequent clinical data, and to resume clinical trials for Annamycin. We have two other drug development projects in progress,one involving a portfolio of small molecules, which we refer to as the WP1066 Portfolio, focused on the modulation of key regulatorytranscription factors involved in the progression of cancer, and the WP1122 Portfolio, a suite of molecules targeting the metabolicprocesses involved in cancer in general, and glioblastoma (the most common form of brain tumor) in particular.

We have been granted royalty-bearing, worldwide,exclusive licenses for the patent and technology rights related to our WP1066 Portfolio and WP1122 Portfolio drug technologies,as these patent rights are owned by MD Anderson. The Annamycin drug substance is no longer covered by any existing patent protection.We intend to submit patent applications for formulation, synthetic process and reconstitution related to our Annamycin drug productcandidate, although there is no assurance that we will be successful in obtaining such patent protection. Independently from potentialpatent protection, we believe Annamycin will qualify for Orphan Drug status and have submitted our application to the FDA, whichcould entitle us to market exclusivity of up to 7 and 10 years from the date of approval of a New Drug Application (“NDA”)and Marketing Authorization (“MA”), in the US and the European Union (“EU”), respectively. However, therecan be no assurance that such status will be granted. Separately, the FDA may also grant market exclusivity of up to five yearsfor newly approved new chemical entities (of which Annamycin would be one), but there can be no assurance that such exclusivitywill be granted or, if granted, for how long.

Our Drug Candidates

Annamycin

Our lead product candidate is Annamycin, ananthracycline intended to target the treatment of relapsed or refractory AML. Anthracyclines are a class of chemotherapy drugsdesigned to disrupt the DNA of, and eventually destroy, targeted cancer cells. They are considered to be among the most effectiveanticancer drugs developed and are used to treat a range of cancers, including leukemias, lymphomas, and breast, stomach, uterine,ovarian, bladder, and lung cancers. The effectiveness of currently approved anthracyclines is limited, however, by their propensityto cause heart damage (cardiotoxicity) and for cancer cells to become resistant by natural cell defense (multidrug resistance)mechanisms.

Leukemia is a cancer of the white blood cellsand acute forms of leukemia can manifest quickly and leave patients with limited treatment options. AML is the most common typeof acute leukemia in adults. It occurs when a clone of leukemic progenitor white blood cells proliferates in the bone marrow,suppressing the production of normal blood cells. Currently, the only viable option for acute leukemia patients is a bone marrowtransplant, which is successful in a significant number of patients. However, in order to qualify for a bone marrow transplant,the patient’s leukemia cells must be decreased to a sufficiently low level. This begins with a therapy of combining twochemotherapeutic drugs, which always includes an anthracycline, in inducing remission (a complete response, or CR), which therapyhas not improved since it was first used in the 1970s and we estimate that this induction therapy has the same success rate ofabout 20% as at that time. Unfortunately, the current clinically approved anthracyclines are cardiotoxic, which can result indamage to the heart and limit the dosage amount that may be administered to patients. Additionally, the tumor cells often presentde novo or develop resistance to the first line anthracycline, often through what is called “multidrug resistance”,enabling them to purge themselves of the available anthracyclines. Consequently, there remains no effective therapy for thesepatients and most will succumb quickly to their leukemia. If a patient’s leukemia reappears before they can be preparedfor a bone marrow transplant, they are considered to have “relapsed”. If a patient fails to achieve a sufficient responsefrom the induction therapy to qualify for a bone marrow transplant, they are considered to be “refractory” (resistantto therapy). Together, this group of relapsed and refractory AML patients constitutes our primary focus for treatment with Annamycinand our intent is to pursue FDA approval for Annamycin as a second-line induction therapy for adult relapsed and refractory AMLpatients. 

We believe that pursuing approval as a secondline induction therapy for adult relapsed or refractory AML patients is the shortest path to regulatory approval, but we also believethat one of the most important potential uses of Annamycin is in the treatment of children with either AML or ALL (acute lymphoblasticleukemia, which is more common in children). Accordingly, we also intend to pursue approval for pediatric use when practicable.

Annamycin is a liposome formulated anthracycline(also referred to in literature as “L-Annamycin”). It has been tested in 6 clinical trials and 114 patients withoutany reporting of cardiotoxicity and, in the two of those clinical trials focused on leukemia, with fewer dose-limiting toxicitiesthan are normally experienced with doxorubicin (one of the leading first-line anthracyclines used for induction therapy). Eachof these trials was conducted by previous holders of the intellectual property surrounding Annamycin and not by our company. Annamycindemonstrated significant activity in 8 of 16 patients in a Phase I study in adult relapsed or refractory AML patients, with 6 of14 patients completely clearing leukemic blasts. A 30 patient dose-ranging Phase I/II study in ALL demonstrated a similar levelof activity, with 3 of 10 patients treated with the maximum tolerable dose clearing their leukemic blasts to a level sufficientto qualify for a bone marrow transplant. One of these patients went on to receive a successful curative bone marrow transplant.The other two of these three patients died of tumor lysis syndrome, a condition resulting from the overloading of their systemwith the debris from leukemic blast cells destroyed by the induction therapy. Armed with the knowledge of this potential, prophylacticpretreatment known to protect patients from the effects of tumor lysis syndrome will be deployed where appropriate in future trials.Based on the results of the above clinical trials, we believe Annamycin is different from currently approved induction therapydrugs in four key ways: (i) it has demonstrated clinical activity in a patient population for whom there are currently no effectivetherapies, (ii) it appears to be capable of avoiding the “multi-drug resistance” mechanisms that often limit the effectivenessof currently approved anthracyclines; (iii) it has been shown to be non-cardiotoxic in animal models and no events of cardiotoxicityhave been reported from the use of Annamycin in 114 patients; and (iv) in AML cell lines, it has been shown to be more potent thanone of the leading approved drugs.

Because the prior developer of Annamycin allowedtheir IND to lapse, we are required to submit a new IND for continued clinical trials with Annamycin. Toward this end, we recentlysubmitted a request for a Pre-IND meeting with the FDA. Based on subsequent conversations with the FDA, we will be allowed to incorporateby reference the prior developer’s IND in submitting our new request for IND. We believe this will not only save time andexpense with regard to our IND submission, but it should also reduce the risk that our IND submission is delayed due to a reviewof any of this prior data. Written communication from the FDA indicates they do not see a need for a Pre-IND meeting and plan torespond to questions in our Pre-IND briefing document in writing on December 6, 2016.

Based on initial conversations with the FDA,because of the serious unmet medical need, we believe Annamycin may qualify for accelerated approval based on our planned clinicaltrials. In order to facilitate our communication with the FDA, we requested access to and reviewed in detail the available datasupporting the dose-ranging Phase I/II clinical trial discussed above, which was conducted by a previous developer of Annamycin.In October 2016, we announced that we had identified some positive findings from this review, which gave rise to a modificationof our own clinical development plan. We had indicated that our plan was to conduct a detailed review of the clinical results generatedby that prior developer, and then to use those results to reestablish an IND in order to continue clinical trials of Annamycin.However, in the course of our review, we identified that Annamycin may have greater potential for efficacy than we originally believed,based on an unexpected opportunity to increase the drug’s Maximum Tolerable Dose (“MTD”).

In particular, the Dose Limiting Toxicities(“DLTs”) reported in the previous trial that led to the establishment of the current MTD of 150 mg/m² wereall from patients who had an unusually high number of first-line induction therapy failures prior to being treated with Annamycin.Specifically, of the three patients in the last clinical trial who experienced these DLTs, one of them had failed nineteen priorinduction therapy attempts, another had failed sixteen and the other had failed fifteen before being enrolled in the trial. Weconcluded from our review of this data that, if the heavily treated patients are excluded from the data set, the MTD could havebeen closer to 250 mg/m², substantially higher than the level that was actually set by this previous trial.

We view this as an encouraging development becauseit means we may have an opportunity to increase the MTD for our next trial from 150 mg/m² to 200 or even 250 mg/m².If that turns out to be the case, we believe it could increase the chance for positive outcomes in our next trial.

With the discovery that we may be able to increaseour MTD, we determined to adjust our clinical strategy by adding in a Phase I arm to our next Phase II trial, which will add expenseto our development effort. We believe this change in strategy will add several months to the eventual final approval of the drug,if the drug is approved.

We have also applied for Orphan Drug statuswith the FDA for Annamycin. Based on processing times indicated by the FDA, we expect a response to this application before theend of 2016, however, we can provide no assurance that we will receive a response by that time.

The prevalence ceiling for qualifying rare diseasesunder the US Orphan Drug Act is 200,000 patients and proportionally similar guidelines exist in the EU. The most recently publishedprevalence statistics from the National Cancer Institute reported that an estimated 37,726 patients had acute myeloid leukemiain the United States as of January 1, 2011, and trend data since that publication would indicate that the prevalence today shouldstill be well below the 200,000 patient limitation for Orphan Drugs, which would permit Annamycin for the treatment of acute myeloidleukemia to qualify for Orphan Drug status. Annamycin already qualified for Orphan Drug status with its prior developer and weintend to repeat that process. However, we can provide no assurance that we will be successful in obtaining Orphan Drug statusfor Annamycin.

The WP1066 Portfolio

We have a license agreement with MD Andersonpursuant to which we have been granted a royalty-bearing, worldwide, exclusive license for the patent and technology rights relatedto WP1066 and its close analogs, molecules targeting the modulation of key oncogenic transcription factors.

In vitro testing has shown a high levelof activity for WP1066 against a wide range of solid tumors, and in vitro testing has shown significant activity againsthead and neck, pancreatic, stomach, and ovarian cancers, as well as metastatic melanoma and glioblastoma, among others. In vitrotesting in mouse tumor models has shown that WP1066 inhibits tumor growth, blocks angiogenesis (a process that provides necessaryblood supply to tumors) and increases survival.

With respect to our WP1066 Portfolio, we mustcomplete pre-clinical toxicology testing, along with additional chemistry, manufacturing and control work to fully characterizethe drug, establish the desired formulation and develop reference standards for future drug release, among others, prior to submittingan application for an IND. A clinician at MD Anderson has advised us that she is proceeding with a physician-sponsored IND forWP1066 treatment of brain tumors. We are not participating in this IND process. The clinician has submitted an IND to the FDA andhas indicated that this IND is on hold until documentation of Good Manufacturing Process or GMP production of WP1066 can be presentedto the FDA.

An analog of WP1066, referred to as WP1220,was previously the subject of an IND (WP1220 was referred to as MOL4239 for purposes of this IND) related to use of the moleculein the topical treatment of psoriasis. Clinical trials were commenced on WP1220 in the US, but were terminated early due to limitedefficacy in the topical treatment of psoriatic plaques. Notwithstanding its limitations in treating psoriasis, our pre-clinicalresearch has shown WP1220 to be effective in inhibiting cutaneous T-cell lymphoma (“CTCL”) in multiple CTCL cell lines.Based on this encouraging data, we are collaborating with a Polish drug development company, Dermin Sp. Zo. O. (“Dermin”),which has received a Polish government grant to begin a clinical trial in Poland for the topical treatment of early stage CTCLpatients.

We also conducted a Phase II clinical trialfor WP1066 for the topical treatment of psoriasis, however this trial was terminated early as a significant number of patientsexperienced a non-permanent worsening of their psoriatic plaques after extended use of the drug, suggesting that its use as a topicalagent for non-life threatening diseases such as psoriasis will require further study to optimize dosing and scheduling regimens.

The WP1122 Portfolio

We have a license agreement with MD Andersonpursuant to which we have been granted a royalty-bearing, worldwide, exclusive license for the patent and technology rights relatedto our WP1122 Portfolio and similar molecules targeting the treatment of glioblastoma multiform, or GBM, and related central nervoussystem, or CNS, malignancies.

We believe this technology has the potentialto target a wide variety of solid tumors, which eventually become resistant to all treatments, and thereby provide a large andimportant opportunity for novel drugs. Notwithstanding this potential, we are focused on the treatment of central nervous systemmalignancies and especially GBM. Although less prevalent than some larger categories of solid tumors, cancers of the central nervoussystem are particularly aggressive and resistant to treatment. The prognosis for such patients can be particularly grim and thetreatment options available to their physicians are among the most limited of any cancer.

The American Cancer Society has estimated 23,770new cases of brain and other nervous system cancers will occur in the United States in 2016, resulting in 16,050 deaths. Despitethe severity and poor prognosis of these tumors, there are few FDA-approved drugs on the market.

We have proof of concept data for our WP1122Portfolio, including data on survival of animals subjected to xenografts of human brain tumors, as well as biodistribution andpharmacokinetics. In non-optimal doses and treatment regimes, our WP1122 Portfolio performed equal to or better than the currentmarket leader, temozolomide and provided for superior survival for animals treated in combination with temozolomide.

Risks Relating to Our Business

As a preclinical-stage, pharmaceutical company,our business and ability to execute our business strategy are subject to a number of risks of which you should be aware beforeyou decide to buy our securities. In particular, you should consider the following risks, which are discussed more fully in thesection entitled “Risk Factors”:

Implications of Being an Emerging Growth Company

We qualify as an “emerging growth company”as the term is used in The Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and therefore, we may take advantageof certain exemptions from various public company reporting requirements, including:

We may take advantage of these provisions untilDecember 31, 2021 or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growthcompany if we have more than $1.0 billion in annual revenues, have more than $700 million in market value of our capital stockheld by non-affiliates or issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to takeadvantage of some, but not all, of the available benefits of the JOBS Act. We have taken advantage of some of the reduced reportingrequirements in this prospectus. Accordingly, the information contained herein may be different than the information you receivefrom other public companies in which you hold stock. In addition, the JOBS Act provides that an emerging growth company can delayadopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocablyelected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject tothe same new or revised accounting standards as other public companies that are not emerging growth companies.

Our principal executive offices are locatedat 2575 West Bellfort, Suite 333, Houston, Texas 77054. Our telephone number is (713) 300-5160. Our website address is www.moleculin.com.The information on or accessible through our website is not part of this prospectus. 

The Offering

The number of shares ofcommon stock to be outstanding after this offering is based on 12,054,813 shares of common stock outstanding as of November 28,2016 and does not take into account, as of November 28, 2016:

•          510,000shares of our common stock issuable upon exercise of outstanding stock options to purchase shares of our common stock at a weightedaverage exercise price of $5.28 per share;

•          107,802shares of our common stock issuable upon the exercise of outstanding warrants with a weighted average exercise price of $7.50 pershare;

•          1,990,000shares of our common stock reserved for issuance under our 2015 Stock Plan;

•                                                       sharesupon the conversion of outstanding bridge notes. These notes were to be automatically converted according to their terms into ourcommon stock upon the closing of our IPO to the extent and provided that no holder of these notes was or will be permitted to convertsuch notes to the extent that the holder or any of its affiliates would beneficially own in excess of 4.99% of our common stockafter such conversion. Due to this 4.99% limitation, certain of these notes remained outstanding and will be converted into sharesof our common stock at such time as the 4.99% limitation continues to be met. The                  shares set forth in this paragraph is based onour offering                 units pursuant to this offering;

•                                                       sharesof common stock issuable upon the exercise of the warrants included in the units being sold in this offering; and

•                                                      sharesof common stock issuable upon the exercise of the warrants issued to the representatives of the underwriters.

Unless otherwise indicated, all information in this prospectus assumesthat no exercise of the outstanding options and warrants described above or the warrants offered hereby.

Summary Financial Data

The following table sets forth data derived from our balance sheetat December 31, 2015 and our statement of operations for the period from July 28, 2015 (Inception) to December 31, 2015:

The following table sets forth data derived from Moleculin, LLC’sbalance sheets at December 31, 2015 and 2014 and the related statements of operations for each of the years then ended:

The following table sets forth data derived from our balance sheetat September 30, 2016 and the related statement of operations for the nine months ended September 30, 2016 and the period fromJuly 29, 2015 (Inception) to September 30, 2015. Moleculin, LLC was acquired by MBI on May 2, 2016 and ceased to exist aftersuch acquisition by MBI.

RiskFactors

Investing in our securities involves a highdegree of risk. You should carefully consider each of the following risks, together with all other information set forth in thisprospectus, including the financial statements and the related notes, before making a decision to buy our securities. If any ofthe following risks actually occurs, our business could be harmed. In that case, the trading price of our securities could decline,and you may lose all or part of your investment.

Risks Relating to Our Business

We will require substantial additional funding, which maynot be available to us on acceptable terms, or at all, and, if not so available, may require us to delay, limit, reduce or ceaseour operations.

We intend to use the proceeds from our previousoffering, as well as the proceeds from this offering, to, among other uses, advance Annamycin through clinical development. Developingpharmaceutical products, including conducting preclinical studies and clinical trials, is expensive. We will require substantialadditional future capital in order to complete clinical development and commercialize Annamycin. If the FDA requires that we performadditional nonclinical studies or clinical trials, or if we determine, as we did in October 2016, that additional clinical trialsare required for Annamycin, our expenses would further increase beyond what we currently expect and the anticipated timing of anypotential approval of Annamycin would likely be delayed. Further, there can be no assurance that the costs we will need to incurto obtain regulatory approval of Annamycin will not increase.

We will continue to require substantial additionalcapital to continue our clinical development and commercialization activities. Because successful development of our product candidatesis uncertain, we are unable to estimate the actual amount of funding we will require to complete research and development and commercializeour products under development.

The amount and timing of our future fundingrequirements will depend on many factors, including but not limited to:

Some of these factors are outside of our control.Based upon our currently expected level of operating expenditures, we believe that we will be able to fund our operational planthrough the third quarter of 2017. This period could be shortened if there are any significant increases in planned spending ondevelopment programs or more rapid progress of development programs than anticipated. We do not believe that our existing capitalresources are sufficient to enable us to complete the development and commercialization of Annamycin, if approved, or to initiateany clinical trials or additional development work needed for any other drug candidates, other than as described above. Accordingly,we expect that we will need to raise additional funds in the future.

We may seek additional funding through a combinationof equity offerings, debt financings, government or other third-party funding, commercialization, marketing and distribution arrangementsand other collaborations, strategic alliances and licensing arrangements. Additional funding may not be available to us on acceptableterms or at all. In addition, the terms of any financing may adversely affect the holdings or the rights of our stockholders. Inaddition, the issuance of additional shares by us, or the possibility of such issuance, may cause the market price of our sharesto decline.

If we are unable to obtain funding on a timelybasis, we may be required to significantly curtail one or more of our research or development programs. We also could be requiredto seek funds through arrangements with collaborative partners or otherwise that may require us to relinquish rights to some ofour technologies or product candidates or otherwise agree to terms unfavorable to us.

We have in the past completed related party transactions thatwere not conducted on an arm’s length basis.

We acquired the rights to the license agreementwith MD Anderson covering our WP1122 Portfolio held by IntertechBio Corporation, a company affiliated with certain members of ourmanagement and board of directors. We acquired the rights to all data related to the development of Annamycin held by AnnaMed,Inc., a company affiliated with certain members of our management and board of directors. Prior to our IPO, Moleculin, LLC mergedwith and into our company. Moleculin, LLC was affiliated with certain members of our management and board of directors. Prior toour IPO, we, on Moleculin, LLC’s behalf, entered into an agreement with HPI whereby HPI agreed to terminate its option tosublicense certain rights to the WP1066 Portfolio and entered into a co-development agreement with us. Our largest shareholderand a member of our management are shareholders of HPI.

None of the foregoing transactions were conductedon an arm’s length basis. As such, it is possible that the terms were less favorable to us than in an arm’s lengthtransaction.

Our ability to retain the development rights to the WP1066Portfolio will require us to make up to $1.75 million in future payments to HPI, in addition to payments of shares of our commonstock and cash made in connection with our IPO, pursuant to the development agreement we entered into with HPI.

Our acquisition of Moleculin, LLC prior to ourIPO provided us with the rights to the license agreement Moleculin, LLC had with MD Anderson covering the WP1066 Portfolio. However,Moleculin, LLC previously granted HPI an option to obtain an exclusive sub-license to develop the WP1066 Portfolio in all non-dermatologicalfields. Prior to our IPO, we, on Moleculin, LLC’s behalf, entered into two agreements with HPI. The first agreement terminatedHPI’s option to obtain the aforementioned exclusive sublicense in exchange for a payment of $100,000 and the issuance of629,000 shares of our common stock. The second agreement, the HPI Out-Licensing Agreement is a technology rights and developmentlicense agreement that provided HPI with a non-exclusive sublicense to develop the WP1066 Portfolio. Pursuant to this HPI Out-LicensingAgreement, we agreed to make payments to HPI of $750,000 over a three-year period commencing after our IPO in exchange for HPIallowing us to access any data, information or know-how resulting from the research and development conducted by HPI, which paymentswill be expensed when incurred. Notwithstanding our obligation to make the foregoing payments, the HPI Out-Licensing Agreementdoes not obligate HPI to conduct any specific research or to meet any milestones. Pursuant to the HPI Out-Licensing Agreement,we have the right within three years of the date we entered into the agreement to buy-out from HPI all rights granted to HPI underthe agreement for a payment of $1.0 million. If we do not exercise the foregoing buy-out right within three years, the licensegranted to HPI shall convert into an exclusive license even as to our company. As such, if we do not exercise the buy-out rightfor any reason, we will no longer have access to the non-dermatology uses of the WP1066 Portfolio and all amounts paid to HPI priorto such date will have value only to the extent that the data, information and know-how may be applicable to dermatology applicationsof the WP1066 Portfolio. We do not expect to maintain a reserve of $1.0 million to exercise the buy-out payment and, as such, wewill need to raise additional funds to make the buy-out payment. We cannot assure you that such additional funding, if required,will be available on satisfactory terms, or at all.

We have never been profitable, we have no products approvedfor commercial sale, and to date we have not generated any revenue from product sales. As a result, our ability to reduce our lossesand reach profitability is unproven, and we may never achieve or sustain profitability.

We have never been profitable and do not expectto be profitable in the foreseeable future. We have not yet submitted any drug candidates for approval by regulatory authoritiesin the United States or elsewhere. For the nine-month period ended September 30, 2016, we incurred a net loss of $2,503,047. Wehad an accumulated deficit of $3,251,407 as of September 30, 2016.

To date, we have devoted most of our financialresources to research and development, including our drug discovery research, preclinical development activities and clinicaltrial preparation, as well as corporate overhead. We have not generated any revenues from product sales. We expect to continueto incur losses for the foreseeable future, and we expect these losses to increase as we continue our development of, and seekregulatory approvals for Annamycin, prepare for and begin the commercialization of any approved products, and add infrastructureand personnel to support our continuing product development efforts. We anticipate that any such losses could be significant forthe next several years. If Annamycin or any of our other drug candidates fail in clinical trials or does not gain regulatory approval,or if our drug candidates do not achieve market acceptance, we may never become profitable. As a result of the foregoing, we expectto continue to experience net losses and negative cash flows for the foreseeable future. These net losses and negative cash flowshave had, and will continue to have, an adverse effect on our stockholders' equity and working capital.

Because of the numerous risks and uncertaintiesassociated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expensesor when, or if, we will be able to achieve profitability. In addition, our expenses could increase if we are required by the FDAto perform studies or trials in addition to those currently expected, or if there are any delays in completing our clinical trialsor the development of any of our drug candidates. The amount of future net losses will depend, in part, on the rate of future growthof our expenses and our ability to generate revenues.

Our financial condition would be adversely impacted if ourintangible assets become impaired.

As a result of the accounting for our acquisitionof Moleculin, LLC and the agreement we, on Moleculin, LLC’s behalf, entered into with Houston Pharmaceuticals, Inc., we havecarried on our balance sheet within intangible assets in-process research and development (“IPR&D”) of $11,128,790as of September 30, 2016. Intangibles are evaluated quarterly and are tested for impairment at least annually or when events orchanges in circumstances indicate the carrying value of each segment, and collectively our company taken as a whole, might exceedits fair value. We have retained a third party valuation firm to provide us with an initial valuation of these intangible assets;and we expect to receive their final report prior to the filing of our Form 10-K for the year ended December 31, 2016.

Intangible assets related to IPR&D are consideredindefinite-lived intangible assets and are assessed for impairment annually or more frequently if impairment indicators exist.If the associated research and development effort is abandoned, the related assets will be written-off and the Company will recorda noncash impairment loss on its statement of operations. For those compounds that reach commercialization, if any, the IPR&Dassets will be amortized over their estimated useful lives.

If after receipt of the foregoing valuationreport we determine that the value of our intangible assets is less than the amounts reflected on our balance sheet, we will berequired to reflect an impairment of our intangible assets in the period in which such determination is made. An impairment ofour intangible assets would result in our recognizing an expense in the amount of the impairment in the relevant period, whichwould also result in the reduction of our intangible assets and a corresponding reduction in our stockholders’ equity inthe relevant period. As the transactions discussed above were related party transactions and were not conducted on an arm’slength basis, it is possible that the terms were less favorable to us than what we would have received in an arm’s lengthtransaction. We can provide no assurance that the final valuation of our intangible assets will not result in an impairment charge.

We have a limited operating history and we expect a numberof factors to cause our operating results to fluctuate on an annual basis, which may make it difficult to predict our future performance.

We are a preclinical pharmaceutical companywith a limited operating history. Our operations to date have been limited to acquiring our technology portfolio. We have not yetcommenced any clinical trials or obtained any regulatory approvals for any of our drug candidates. Consequently, any predictionsmade about our future success or viability may not be as accurate as they could be if we had a longer operating history or approvedproducts on the market. Our operating results are expected to significantly fluctuate from quarter-to-quarter or year-to-year dueto a variety of factors, many of which are beyond our control. Factors relating to our business that may contribute to these fluctuationsinclude:

Accordingly, the results of any historical quarterlyor annual periods should not be relied upon as indications of future operating performance.

We cannot be certain that Annamycin will receive regulatoryapproval, and without regulatory approval we will not be able to market Annamycin.

Our business currently depends largely on thesuccessful development and commercialization of Annamycin. Our ability to generate revenue related to product sales, if ever, willdepend on the successful development and regulatory approval of Annamycin for the treatment of relapsed or refractory acute myeloidleukemia, or AML.

We currently have no products approved for saleand we cannot guarantee that we will ever have marketable products. The development of a product candidate and issues relatingto its approval and marketing are subject to extensive regulation by the FDA in the United States and regulatory authorities inother countries, with regulations differing from country to country. We are not permitted to market our product candidates in theUnited States until we receive approval of a NDA from the FDA. We have not submitted any marketing applications for any of ourproduct candidates.

NDAs must include extensive preclinical andclinical data and supporting information to establish the product candidate’s safety and effectiveness for each desired indication.NDAs must also include significant information regarding the chemistry, manufacturing and controls for the product. Obtaining approvalof a NDA is a lengthy, expensive and uncertain process, and we may not be successful in obtaining approval. The FDA review processescan take years to complete and approval is never guaranteed. If we submit a NDA to the FDA, the FDA must decide whether to acceptor reject the submission for filing. We cannot be certain that any submissions will be accepted for filing and review by the FDA.Regulators in other jurisdictions have their own procedures for approval of product candidates. Even if a product is approved,the FDA may limit the indications for which the product may be marketed, require extensive warnings on the product labeling orrequire expensive and time-consuming clinical trials or reporting as conditions of approval. Regulatory authorities in countriesoutside of the United States and Europe also have requirements for approval of drug candidates with which we must comply with priorto marketing in those countries. Obtaining regulatory approval for marketing of a product candidate in one country does not ensurethat we will be able to obtain regulatory approval in any other country. In addition, delays in approvals or rejections of marketingapplications in the United States, Europe or other countries may be based upon many factors, including regulatory requests foradditional analyses, reports, data, preclinical studies and clinical trials, regulatory questions regarding different interpretationsof data and results, changes in regulatory policy during the period of product development and the emergence of new informationregarding our product candidates or other products. Also, regulatory approval for any of our product candidates may be withdrawn.

If we are unable to obtain approval from theFDA, or other regulatory agencies, for Annamycin and our other product candidates, or if, subsequent to approval, we are unableto successfully commercialize Annamycin or our other product candidates, we will not be able to generate sufficient revenue tobecome profitable or to continue our operations.

Any statements in this prospectus indicatingthat Annamycin has demonstrated preliminary evidence of efficacy are our own and are not based on the FDA’s or any othercomparable governmental agency’s assessment of Annamycin and do not indicate that Annamycin will achieve favorable efficacyresults in any later stage trials or that the FDA or any comparable agency will ultimately determine that Annamycin is effectivefor purposes of granting marketing approval.

Delays in the commencement, enrollment and completion of clinicaltrials could result in increased costs to us and delay or limit our ability to obtain regulatory approval for Annamycinand our other product candidates.

Delays in the commencement, enrollment and completionof clinical trials could increase our product development costs or limit the regulatory approval of our product candidates. Wedo not know whether any future trials or studies of our other product candidates will begin on time or will be completed on schedule,if at all. The start or end of a clinical study is often delayed or halted due to changing regulatory requirements, manufacturingchallenges, including delays or shortages in available drug product, required clinical trial administrative actions, slower thananticipated patient enrollment, changing standards of care, availability or prevalence of use of a comparative drug or requiredprior therapy, clinical outcomes or financial constraints. For instance, delays or difficulties in patient enrollment or difficultiesin retaining trial participants can result in increased costs, longer development times or termination of a clinical trial. Clinicaltrials of a new product candidate require the enrollment of a sufficient number of patients, including patients who are sufferingfrom the disease the product candidate is intended to treat and who meet other eligibility criteria. Rates of patient enrollmentare affected by many factors, including the size of the patient population, the eligibility criteria for the clinical trial, thatinclude the age and condition of the patients and the stage and severity of disease, the nature of the protocol, the proximityof patients to clinical sites and the availability of effective treatments and/or availability of investigational treatment optionsfor the relevant disease.

A product candidate can unexpectedly fail atany stage of preclinical and clinical development. The historical failure rate for product candidates is high due to scientificfeasibility, safety, efficacy, changing standards of medical care and other variables. The results from preclinical testing orearly clinical trials of a product candidate may not predict the results that will be obtained in later phase clinical trials ofthe product candidate. We, the FDA or other applicable regulatory authorities may suspend clinical trials of a product candidateat any time for various reasons, including, but not limited to, a belief that subjects participating in such trials are being exposedto unacceptable health risks or adverse side effects, or other adverse initial experiences or findings. We may not have the financialresources to continue development of, or to enter into collaborations for, a product candidate if we experience any problems orother unforeseen events that delay or prevent regulatory approval of, or our ability to commercialize, product candidates, including:

We have never conducted a clinicaltrial or submitted an NDA before, and any product candidate we advance through clinical trials may not have favorable results inlater clinical trials or receive regulatory approval.

Clinical failure can occur at any stage of ourclinical development. Clinical trials may produce negative or inconclusive results, and our collaborators or we may decide, orregulators may require us, to conduct additional clinical trials or nonclinical studies. In addition, data obtained from trialsand studies are susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, whichmay delay, limit or prevent regulatory approval. Success in preclinical studies and early clinical trials does not ensure thatsubsequent clinical trials will generate the same or similar results or otherwise provide adequate data to demonstrate the efficacyand safety of a product candidate. A number of companies in the pharmaceutical industry, including those with greater resourcesand experience than us, have suffered significant setbacks in clinical trials, even after seeing promising results in earlier clinicaltrials.

In addition, the design of a clinical trialcan determine whether its results will support approval of a product and flaws in the design of a clinical trial may not becomeapparent until the clinical trial is well advanced. We may be unable to design and execute a clinical trial to support regulatoryapproval. Further, clinical trials of potential products often reveal that it is not practical or feasible to continue developmentefforts.

If Annamycin is found to be unsafe or lack efficacy,we will not be able to obtain regulatory approval for it and our business would be harmed.

In some instances, there can be significantvariability in safety and/or efficacy results between different trials of the same product candidate due to numerous factors, includingchanges in trial protocols, differences in composition of the patient populations, adherence to the dosing regimen and other trialprotocols and the rate of dropout among clinical trial participants. We do not know whether any clinical trials we or any of ourpotential future collaborators may conduct will demonstrate the consistent or adequate efficacy and safety that would be requiredto obtain regulatory approval and market any products. If we are unable to bring Annamycin to market, or to acquire other productsthat are on the market or can be developed, our ability to create long-term stockholder value will be limited.

Our product candidates may have undesirable side effects thatmay delay or prevent marketing approval, or, if approval is received, require them to be taken off the market, require them toinclude safety warnings or otherwise limit their sales.

Unforeseen side effects from any of our productcandidates could arise either during clinical development or, if Annamycin is approved, after the approved product has been marketed.For example, in the most recent Phase I/II dose-ranging clinical trial of Annamycin, two patients succumbed to tumor lysis syndrome(TLS) resulting from the debris created by Annamycin killing the targeted leukemic blasts more rapidly than anticipated. Now thatthis potential has been identified, prophylactic measures known to protect patients from TLS will be deployed in future clinicaltrials, but there can be no assurance that such measures will be effective or that other adverse events may not emerge relatedto our drug. As another example, we intend to attempt to increase the maximum tolerable dose (MTD) for Annamycin by conductinganother Phase I dose-ranging trial, however, unforeseen side effects could prevent us from increasing the MTD from the one establishedin the prior Phase I/II trial. Additional or unforeseen side effects from Annamycin or any of our other product candidates couldarise either during clinical development or, if approved, after the approved product has been marketed.

The range and potential severity of possibleside effects from therapies such as Annamycin are significant. If Annamycin causes undesirable or unacceptable side effects inthe future, this could interrupt, delay or halt clinical trials and result in the failure to obtain or suspension or terminationof marketing approval from the FDA and other regulatory authorities, or result in marketing approval from the FDA and other regulatoryauthorities only with restrictive label warnings.

If any of our product candidates receives marketingapproval and we or others later identify undesirable or unacceptable side effects caused by such products:

 Any of these events could prevent us orour potential future collaborators from achieving or maintaining market acceptance of the affected product or could substantiallyincrease commercialization costs and expenses, which in turn could delay or prevent us from generating significant revenues fromthe sale of our products.

If the FDA does not find the manufacturing facilities of ourfuture contract manufacturers acceptable for commercial production, we may not be able to commercialize any of our product candidates.

We do not intend to manufacture the pharmaceuticalproducts that we plan to sell. We are currently utilizing contract manufacturers for the production of the active pharmaceuticalingredients and the formulation of drug product for our trials of Annamycin that we will need to conduct prior to seeking regulatoryapproval. However, we do not have agreements for supplies of Annamycin or any of our other product candidates andwe may not be able to reach agreements with these or other contract manufacturers for sufficient supplies to commercialize Annamycinif it is approved. Additionally, the facilities used by any contract manufacturer to manufacture Annamycin or any of our otherproduct candidates must be the subject of a satisfactory inspection before the FDA approves the product candidate manufacturedat that facility. We are completely dependent on these third-party manufacturers for compliance with the requirements of U.S. andnon-U.S. regulators for the manufacture of our finished products. If our manufacturers cannot successfully manufacture materialthat conform to our specifications and the FDA’s current good manufacturing practice standards, or cGMP, and other requirementsof any governmental agency whose jurisdiction to which we are subject, our product candidates will not be approved or, if alreadyapproved, may be subject to recalls. Reliance on third-party manufacturers entails risks to which we would not be subject if wemanufactured our product candidates, including:

Any of these factors could cause the delay ofapproval or commercialization of our product candidates, cause us to incur higher costs or prevent us from commercializing ourproduct candidates successfully. Furthermore, if any of our product candidates are approved and contract manufacturers fail todeliver the required commercial quantities of finished product on a timely basis at commercially reasonable prices and we are unableto find one or more replacement manufacturers capable of production at a substantially equivalent cost, in substantially equivalentvolumes and quality and on a timely basis, we would likely be unable to meet demand for our products and could lose potential revenue.It may take several years to establish an alternative source of supply for our product candidates and to have any such new sourceapproved by the government agencies that regulate our products.

We have no sales, marketing or distribution experience andwe will have to invest significant resources to develop those capabilities or enter into acceptable third-party sales and marketingarrangements.

We have no sales, marketing or distributionexperience. To develop sales, distribution and marketing capabilities, we will have to invest significant amounts of financialand management resources, some of which will need to be committed prior to any confirmation that Annamycin or any of our otherproduct candidates will be approved by the FDA. For product candidates where we decide to perform sales, marketing and distributionfunctions ourselves or through third parties, we could face a number of additional risks, including that we or our third-partysales collaborators may not be able to build and maintain an effective marketing or sales force. If we use third parties to marketand sell our products, we may have limited or no control over their sales, marketing and distribution activities on which our futurerevenues may depend.

We may not be successful in establishing and maintaining developmentand commercialization collaborations, which could adversely affect our ability to develop certain of our product candidates andour financial condition and operating results.

Because developing pharmaceutical products,conducting clinical trials, obtaining regulatory approval, establishing manufacturing capabilities and marketing approved productsare expensive, we may seek to enter into collaborations with companies that have more experience. Additionally, if any of our productcandidates receives marketing approval, we may enter into sales and marketing arrangements with third parties with respect to ourunlicensed territories. If we are unable to enter into arrangements on acceptable terms, if at all, we may be unable to effectivelymarket and sell our products in our target markets. We expect to face competition in seeking appropriate collaborators. Moreover,collaboration arrangements are complex and time consuming to negotiate, document and implement and they may require substantialresources to maintain. We may not be successful in our efforts to establish and implement collaborations or other alternative arrangementsfor the development of our product candidates.

When we collaborate with a third party for developmentand commercialization of a product candidate, we can expect to relinquish some or all of the control over the future success ofthat product candidate to the third party. For example, we have formed a collaboration with a Polish drug development company calledDermin, where we have provided them with sub-license rights to our technologies for use in limited territories in exchange fortheir use of Polish government grant funding to pay for development costs we would otherwise have to fund ourselves. With the exceptionof Annamycin, Dermin’s territories are primarily Poland and lesser surrounding countries, but not including any of the majorEuropean markets (UK, Germany, France, Spain and Italy). In the case of Annamycin, Dermin’s territories also include Germany,but we retain the right to repurchase that territory for $500,000 at any time in the future.

We announced in October 2016 that we had securedan agreement with Dermin to utilize Dermin’s supply of Annamycin for our upcoming clinical trial. If Dermin is unable toprovide us with sufficient supply for clinical trials, or if the drug product supplied is unacceptable for use in our clinicaltrials, our clinical trials may be delayed or the outcomes may be adversely affected.

One or more of our collaboration partners maynot devote sufficient resources to the commercialization of our product candidates or may otherwise fail in their commercialization.The terms of any collaboration or other arrangement that we establish may contain provisions that are not favorable to us. In addition,any collaboration that we enter into may be unsuccessful in the development and commercialization of our product candidates. Insome cases, we may be responsible for continuing preclinical and initial clinical development of a product candidate or researchprogram under a collaboration arrangement, and the payment we receive from our collaboration partner may be insufficient to coverthe cost of this development. If we are unable to reach agreements with suitable collaborators for our product candidates, we wouldface increased costs, we may be forced to limit the number of our product candidates we can commercially develop or the territoriesin which we commercialize them. As a result, we might fail to commercialize products or programs for which a suitable collaboratorcannot be found. If we fail to achieve successful collaborations, our operating results and financial condition could be materiallyand adversely affected.

Our success depends greatly on the success of Annamycin’sdevelopment for the treatment of relapsed or refractory AML, and our pipeline of product candidates beyond this lead indicationis extremely early stage and limited.

Other than Annamycin, our other two drug candidates,our WP1066 Portfolio and our WP1122 Portfolio, are each in the early stages of development. As such, we are dependent on the successof Annamycin in the near term. We cannot provide you any assurance that we will be able to successfully advance any of these indicationsthrough the development process.

We face competition from other biotechnology and pharmaceuticalcompanies and our operating results will suffer if we fail to compete effectively.

The biotechnology and pharmaceutical industriesare intensely competitive and subject to rapid and significant technological change. We have competitors in the United States,Europe and other jurisdictions, including major multinational pharmaceutical companies, established biotechnology companies, specialtypharmaceutical and generic drug companies and universities and other research institutions. Many of our competitors have greaterfinancial and other resources, such as larger research and development staff and more experienced marketing and manufacturing organizationsthan we do. Large pharmaceutical companies, in particular, have extensive experience in clinical testing, obtaining regulatoryapprovals, recruiting patients and manufacturing pharmaceutical products. These companies also have significantly greater research,sales and marketing capabilities and collaborative arrangements in our target markets with leading companies and research institutions.Established pharmaceutical companies may also invest heavily to accelerate discovery and development of novel compounds or to in-licensenovel compounds that could make the product candidates that we develop obsolete. As a result of all of these factors, our competitorsmay succeed in obtaining patent protection and/or FDA approval or discovering, developing and commercializing drugs for the diseasesthat we are targeting before we do or may develop drugs that are deemed to be more effective or gain greater market acceptancethan ours. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangementswith large, established companies. In addition, many universities and private and public research institutes may become activein our target disease areas. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis, technologiesand drug products that are more effective or less costly than any of our product candidates that we are currently developing orthat we may develop, which could render our products obsolete or noncompetitive.

A number of attempts have been made or are underway to provide an improved treatment for AML. Drugs attempting to target a subset of AML patients who present with particular anomaliesinvolving a gene referred to as FLT3 are currently in clinical trials. Other approaches to improve the effectiveness of inductiontherapy are in early stage clinical trials and, although they do not appear to address the underlying problems with anthracyclines,we can provide no assurance that such improvements, if achieved, would not adversely impact the need for improved anthracyclines.A modified version of doxorubicin designed to reduce cardiotoxicity is in clinical trials for the treatment of sarcoma and, althoughthis drug does not appear to address multidrug resistance and is not currently intended for the treatment of acute leukemia, wecan provide no assurance that it will not become a competitive alternative to Annamycin. Although we are not aware of any othersingle agent therapies in clinical trials that would directly compete against Annamycin in the treatment of relapsed and refractoryAML, we can provide no assurance that such therapies are not in development, will not receive regulatory approval and will reachmarket before our drug candidate Annamycin. In addition, any such competing therapy may be more effective and / or cost-effectivethan ours.

If our competitors market products that aremore effective, safer or less expensive or that reach the market sooner than our future products, if any, we may not achieve commercialsuccess. In addition, because of our limited resources, it may be difficult for us to stay abreast of the rapid changes in eachtechnology. If we fail to stay at the forefront of technological change, we may be unable to compete effectively. Technologicaladvances or products developed by our competitors may render our technologies or product candidates obsolete, less competitiveor not economical.

Annamycin does not have any patent protections, includingcomposition of matter patent protection.

We intend to pursue patents with claims directedto Annamycin drug product formulations and the methods of use of Annamycin to treat relapsed or refractory AML and other conditions,and methods for its synthesis, as the composition of matter patent protection for Annamycin has expired. As a result, competitorsmay be able to offer and sell products so long as these competitors do not infringe any other patents that third parties or wehold, including formulation, synthesis and method of use patents. However, method of use patents, in particular, are more difficultto enforce than composition of matter patents because of the risk of off-label sale or use of the subject compounds. Physiciansare permitted to prescribe an approved product for uses that are not described in the product's labeling. Although off-label prescriptionsmay infringe our method of use patents, the practice is common across medical specialties and such infringement is difficult toprevent or prosecute. Off-label sales would limit our ability to generate revenue from the sale of Annamycin, if approved for commercialsale.

The intellectual property rights we have licensed from MDAnderson are subject to the rights of the U.S. government.

We have obtained a royalty-bearing, worldwide,exclusive license to intellectual property rights, including patent rights related to our WP1066 Portfolio and WP1122 Portfoliodrug product candidates from MD Anderson. Some of our licensed intellectual property rights from MD Anderson have been developedin the course of research funded by the U.S. government. As a result, the U.S. government may have certain rights to intellectualproperty embodied in our current or future products pursuant to the Bayh-Dole Act of 1980. Government rights in certain inventionsdeveloped under a government-funded program include a non-exclusive, non-transferable, irrevocable worldwide license to use inventionsfor any governmental purpose. In addition, the U.S. government has the right to require us, or an assignee or exclusive licenseeto such inventions, to grant licenses to any of these inventions to a third party if they determine that: (i) adequate steps havenot been taken to commercialize the invention; (ii) government action is necessary to meet public health or safety needs; (iii)government action is necessary to meet requirements for public use under federal regulations; or (iv) the right to use or sellsuch inventions is exclusively licensed to an entity within the U.S. and substantially manufactured outside the U.S. without theU.S. government’s prior approval. Additionally, we may be restricted from granting exclusive licenses for the right to useor sell our inventions created pursuant to such agreements unless the licensee agrees to additional restrictions (e.g., manufacturingsubstantially all of the invention in the U.S.). The U.S. government also has the right to take title to these inventions if wefail to disclose the invention to the government and fail to file an application to register the intellectual property within specifiedtime limits. In addition, the U.S. government may acquire title in any country in which a patent application is not filed withinspecified time limits. Additionally, certain inventions are subject to transfer restrictions during the term of these agreementsand for a period thereafter, including sales of products or components, transfers to foreign subsidiaries for the purpose of therelevant agreements, and transfers to certain foreign third parties. If any of our intellectual property becomes subject to anyof the rights or remedies available to the U.S. government or third parties pursuant to the Bayh-Dole Act of 1980, this could impairthe value of our intellectual property and could adversely affect our business.

We may incur substantial costs as a result of litigation orother proceedings relating to patent and other intellectual property rights.

We may from time to time seek to enforce ourintellectual property rights against infringers when we determine that a successful outcome is probable and may lead to an increasein the value of the intellectual property. If we choose to enforce our patent rights against a party, then that individual or companyhas the right to ask the court to rule that such patents are invalid or should not be enforced. Additionally, the validity of ourpatents and the patents we have licensed may be challenged if a petition for post grant proceedings such as inter-partes reviewand post grant review is filed within the statutorily applicable time with the U.S. Patent and Trademark Office (USPTO). Theselawsuits and proceedings are expensive and would consume time and resources and divert the attention of managerial and scientificpersonnel even if we were successful in stopping the infringement of such patents. In addition, there is a risk that the courtwill decide that such patents are not valid and that we do not have the right to stop the other party from using the inventions.There is also the risk that, even if the validity of such patents is upheld, the court will refuse to stop the other party on theground that such other party's activities do not infringe our intellectual property rights. In addition, in recent years the U.S.Supreme Court modified some tests used by the USPTO in granting patents over the past 20 years, which may decrease the likelihoodthat we will be able to obtain patents and increase the likelihood of a challenge of any patents we obtain or license.

We may be subject to claims that our employees have wrongfullyused or disclosed alleged trade secrets of their former employers.

As is common in the biotechnology and pharmaceuticalindustries, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies, including ourcompetitors or potential competitors. We may be subject to claims that these employees, or we, have used or disclosed trade secretsor other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even ifwe are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

If we are not able to adequately prevent disclosure of tradesecrets and other proprietary information, the value of our technology and products could be significantly diminished.

We rely on trade secrets to protect our proprietarytechnologies, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficultto protect. We rely in part on confidentiality agreements with our employees, consultants, outside scientific collaborators, sponsoredresearchers and other advisors to protect our trade secrets and other proprietary information. These agreements may not effectivelyprevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure ofconfidential information. In addition, others may independently discover our trade secrets and proprietary information. Costlyand time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtainor maintain trade secret protection could adversely affect our competitive business position.

We will need to expand our operations and increase the sizeof our company, and we may experience difficulties in managing growth.

As of September 30, 2016, we had two full-timeand four part-time employees. As we advance our product candidates through preclinical studies and clinical trials, we will needto increase our product development, scientific and administrative headcount to manage these programs. In addition, to meet ourobligations as a public company, we may need to increase our general and administrative capabilities. Our management, personneland systems currently in place may not be adequate to support this future growth. If we are unable to successfully manage thisgrowth and increased complexity of operations, our business may be adversely affected.

We may not be able to manage our business effectively if weare unable to attract and retain key personnel and consultants.

We may not be able to attract or retain qualifiedmanagement, finance, scientific and clinical personnel and consultants due to the intense competition for qualified personnel andconsultants among biotechnology, pharmaceutical and other businesses. If we are not able to attract and retain necessary personneland consultants to accomplish our business objectives, we may experience constraints that will significantly impede the achievementof our development objectives, our ability to raise additional capital and our ability to implement our business strategy.

We are highly dependent on the development,regulatory, commercialization and business development expertise of our management team, key employees and consultants. If we loseone or more of our executive officers or key employees or consultants, our ability to implement our business strategy successfullycould be seriously harmed. Any of our executive officers or key employees or consultants may terminate their employment at anytime. Replacing executive officers, key employees and consultants may be difficult and may take an extended period of time becauseof the limited number of individuals in our industry with the breadth of skills and experience required to develop, gain regulatoryapproval of and commercialize products successfully. Competition to hire and retain employees and consultants from this limitedpool is intense, and we may be unable to hire, train, retain or motivate these additional key personnel and consultants. Our failureto retain key personnel or consultants could materially harm our business.

In addition, we have scientific and clinicaladvisors and consultants who assist us in formulating our research, development and clinical strategies. These advisors are notour employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availabilityto us and typically they will not enter into non-compete agreements with us. If a conflict of interest arises between their workfor us and their work for another entity, we may lose their services. In addition, our advisors may have arrangements with othercompanies to assist those companies in developing products or technologies that may compete with ours.

Our chief executive officer and our chief operating officerare currently working for us on a part-time basis.

Two of our key employees are currently part-timeand provide services for other biotechnology development efforts. Specifically, Walter Klemp, our chairman and chief executiveofficer is also the chief executive officer of Soliton, Inc., a medical device development company whose business operations wedo not believe conflict with those of our company, and Donald Picker, our president and chief operating officer, is currently alsoserving as chief operating officer of two other biotechnology companies, whose business operations we do not believe conflict withthose of our company. As we progress, if the full-time services of a CEO or COO are required and the current officers cannot providethat level of commitment, we will need to identify a suitable CEO or COO who can dedicate such time to our company. We can provideno assurance that we will be able to successfully identify and retain a qualified candidate for this position.

We do not expect that our insurance policies will cover allof our business exposures thus leaving us exposed to significant uninsured liabilities.

We do not carry insurance for all categoriesof risk that our business may encounter. In particular, we do not carry product liability insurance covering any clinical trialsliability that we may incur. Although we intend to obtain such insurance before we commence any clinical trials, there can be noassurance that we will secure adequate insurance coverage or that any such insurance coverage will be sufficient to protect ouroperations to significant potential liability in the future. Any significant uninsured liability may require us to pay substantialamounts, which would adversely affect our financial position and results of operations.

Risks Relating to this Offering of Our Units

Purchasers in this offering will experience immediate andsubstantial dilution in net tangible book value.

The public offering price in this offering issubstantially higher than the net tangible book value of each outstanding share of our common stock. Purchasers of units in thisoffering will experience immediate and substantial dilution on a book value basis. The dilution per share in the net tangible bookvalue per share of common stock (attributing no value to the warrants included in the units) will be $ per share. See “Dilution.”

Your ownership may be diluted if additional capital stockis issued to raise capital, to finance acquisitions or in connection with strategic transactions.

We intend to seek to raise additional funds,finance acquisitions or develop strategic relationships by issuing equity or convertible debt securities in addition to the sharesissued in this offering, which would reduce the percentage ownership of our existing stockholders. Our board of directors has theauthority, without action or vote of the stockholders, to issue all or any part of our authorized but unissued shares of commonor preferred stock. Our certificate of incorporation authorizes us to issue up to 75,000,000 shares of common stock and 5,000,000shares of preferred stock. Future issuances of common or preferred stock would reduce your influence over matters on which stockholdersvote and would be dilutive to earnings per share. In addition, any newly issued preferred stock could have rights, preferencesand privileges senior to those of the common stock. Those rights, preferences and privileges could include, among other things,the establishment of dividends that must be paid prior to declaring or paying dividends or other distributions to holders of ourcommon stock or providing for preferential liquidation rights. These rights, preferences and privileges could negatively affectthe rights of holders of our common stock, and the right to convert such preferred stock into shares of our common stock at a rateor price that would have a dilutive effect on the outstanding shares of our common stock.

The concentration of our common stock ownership by our currentmanagement will limit your ability to influence corporate matters.

Upon completion of this offering, our directorsand executive officers will beneficially own and will be able to vote in the aggregate approximately                           %of our outstanding common stock. As such, our directors and executive officers, as stockholders, will continue to have the abilityto exert significant influence over all corporate activities, including the election or removal of directors and the outcome oftender offers, mergers, proxy contests or other purchases of common stock that could give our stockholders the opportunity to realizea premium over the then-prevailing market price for their shares of common stock. This concentrated control will limit your abilityto influence corporate matters and, as a result, we may take actions that purchasers in this offering do not view as beneficial.In addition, such concentrated control could discourage others from initiating changes of control. In such cases, the perceptionof our prospects in the market may be adversely affected and the market price of our common stock may decline.

There is no public market for the warrants to purchase sharesof our common stock being offered by us in this offering.

There is no established public trading marketfor the warrants being offered in this offering, and a public market may never develop. In addition, we do not intend to applyto list the warrants on any national securities exchange or other nationally recognized trading system, including the NASDAQ CapitalMarket. Without an active market, the liquidity of the warrants will be limited.

Holders of our warrants will have no rights as a common stockholderuntil such holders exercise their warrants and acquire our common stock.

Until holders of warrants acquire shares ofour common stock upon exercise of the warrants, holders of warrants will have no rights with respect to the shares of our commonstock underlying such warrants. Upon exercise of the warrants, the holders thereof will be entitled to exercise the rights of acommon stockholder only as to matters for which the record date occurs after the exercise date.

The warrants included in this offering may not have any value.

Each warrant has an initial exercise price of$               per share of common stock and will expirefive years from the date of issuance. In the event our common stock price does not exceed the exercise price of the warrants duringthe period when the warrants are exercisable, the warrants may not have any value.

Significant holders or beneficial holders of our common stockmay not be permitted to exercise warrants that they hold.

The warrant agreement governing the warrantsbeing offered hereby will prohibit a holder from exercising its warrants if doing so would result in such holder (together withsuch holder’s affiliates and any other persons acting as a group together with such holder or any of such holder’saffiliates) beneficially owning more than 9.99% of our common stock. Furthermore, during any period in which a holder beneficiallyowns less than 5% of our common stock, the warrant agreement will limit the ability of such holder to exercise its warrants ifdoing so would result in such holder (together with such holder’s affiliates and any other persons acting as a group togetherwith such holder or any of such holder’s affiliates) beneficially owning more than 4.99% of our common stock. As a result,you may not be able to exercise your warrants for shares of our common stock at a time when it would be financially beneficialfor you to do so. In such circumstance you could seek to sell your warrants to realize value, but you may be unable to do so.

Certain provisions in our organizational documents could enableour board of directors to prevent or delay a change of control.

Our organizational documents contain provisionsthat may have the effect of discouraging, delaying or preventing a change of control of, or unsolicited acquisition proposals,that a stockholder might consider favorable. These include provisions:

Furthermore, our board of directors has theauthority to issue shares of preferred stock in one or more series and to fix the rights and preferences of these shares withoutstockholder approval. Any series of preferred stock is likely to be senior to our common stock with respect to dividends, liquidationrights and, possibly, voting rights. The ability of our board of directors to issue preferred stock also could have the effectof discouraging unsolicited acquisition proposals, thus adversely affecting the market price of our common stock.

In addition, Delaware law makes it difficultfor stockholders that recently have acquired a large interest in a corporation to cause the merger or acquisition of the corporationagainst the directors’ wishes. Under Section 203 of the Delaware General Corporation Law, a Delaware corporation maynot engage in any merger or other business combination with an interested stockholder for a period of three years following thedate that the stockholder became an interested stockholder except in limited circumstances, including by approval of the corporation’sboard of directors.

We have no intention of declaring dividends in the foreseeablefuture.

The decision to pay cash dividends on our commonstock rests with our board of directors and will depend on our earnings, unencumbered cash, capital requirements and financialcondition. We do not anticipate declaring any dividends in the foreseeable future, as we intend to use any excess cash to fundour operations. Investors in our common stock should not expect to receive dividend income on their investment, and investors willbe dependent on the appreciation of our common stock to earn a return on their investment.

Failure to maintain effective internal control over our financialreporting in accordance with Section 404 of the Sarbanes-Oxley Act could cause our financial reports to be inaccurate.

We are required pursuant to Section 404 of theSarbanes-Oxley Act of 2002, or Section 404, to maintain internal control over financial reporting and to assess and report on theeffectiveness of those controls. This assessment includes disclosure of any material weaknesses identified by our management inour internal control over financial reporting. Our management concluded that our disclosure controls and procedures were, and continueto be ineffective, and as of June 30, 2016, identified a material weakness in our internal controls over the accounting and reportingfor acquisitions. While management is working to remediate the material weakness, there is no assurance that the changes will remediatethe identified material weakness or that the controls will prevent or detect future material weaknesses. If we are not able tomaintain effective internal control over financial reporting, our financial statements, including related disclosures, may be inaccurate,which could have a material adverse effect on our business.

Failure to continue improving our accounting systems and controlscould impair our ability to comply with the financial reporting and internal controls requirements for publicly traded companies.

As a public company, we operate in an increasinglydemanding regulatory environment, which requires us to comply with the Sarbanes-Oxley Act of 2002, and the related rules and regulationsof the SEC. Company responsibilities required by the Sarbanes-Oxley Act include establishing corporate oversight and adequate internalcontrol over financial reporting and disclosure controls and procedures. Effective internal controls are necessary for us to producereliable financial reports and are important to help prevent financial fraud.

Our management concluded that our disclosurecontrols and procedures were, and continue to be, ineffective and, as of June 30, 2016 identified a material weakness in our internalcontrols over the accounting and reporting for acquisitions. Section 404(a) of the Sarbanes-Oxley Act requires annual managementassessments of the effectiveness of our internal control over financial reporting, starting with the second annual report thatwe would expect to file with the SEC. However, for as long as we remain an “emerging growth company” as defined inthe JOBS Act, we have and intend to continue to take advantage of certain exemptions from various reporting requirements that areapplicable to other public companies that are not “emerging growth companies” including, but not limited to, not beingrequired to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act. We may continue to takeadvantage of these reporting exemptions until we are no longer an “emerging growth company.” If we cannot provide reliablefinancial reports or prevent fraud, our business and results of operations could be harmed and investors could lose confidencein our reported financial information.

On November 14, 2016, our Audit Committee,after discussion with management and our independent registered public accountants, determined that our unaudited consolidatedfinancial statements for the quarter ended June 30, 2016, as reported in our Quarterly Report on Form 10-Q filed on August 15,2016 should no longer be relied upon due to an error identified therein, and that a restatement of these financial statementsis required. We identified certain non-cash errors due to an error in the accounting for the business combination of Moleculin,LLC. We filed a Form 10-Q/A for the quarter ended June 30, 2016 on November 21, 2016 reflecting such corrections in errors.

As an “emerging growth company” under the JumpstartOur Business Startups Act, or JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements.

As an “emerging growth company”under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. We are an emerginggrowth company until the earliest of: 

For so long as we remain an emerging growthcompany, we will not be required to:

We intend to take advantage of all of thesereduced reporting requirements and exemptions. Certain of these reduced reporting requirements and exemptions were already availableto us due to the fact that we also qualify as a “smaller reporting company” under SEC rules. For instance, smallerreporting companies are not required to obtain an auditor attestation and report regarding management’s assessment of internalcontrol over financial reporting; are not required to provide a compensation discussion and analysis; are not required to providea pay-for-performance graph or CEO pay ratio disclosure; and may present only two years of audited financial statements and relatedMD&A disclosure.

Under the JOBS Act, we may take advantage ofthe above-described reduced reporting requirements and exemptions until December 31, 2021, or such earlier time that we no longermeet the definition of an emerging growth company. In this regard, the JOBS Act provides that we would cease to be an “emerginggrowth company” if we have more than $1.0 billion in annual revenues, have more than $700 million in market value of ourcommon stock held by non-affiliates, or issue more than $1.0 billion in principal amount of non-convertible debt over a three-yearperiod. Further, under current SEC rules, we will continue to qualify as a “smaller reporting company” for solong as we have a public float (i.e., the market value of common equity held by non-affiliates) of less than $75 million as ofthe last business day of our most recently completed second fiscal quarter.

We cannot predict if investors will find oursecurities less attractive due to our reliance on these exemptions. If investors were to find our common stock less attractiveas a result of our election, we may have difficulty raising capital.

CAUTIONARY NOTE REGARDING FORWARD-LOOKINGSTATEMENTS

We make forward-looking statements under the“Summary,” “Risk Factors,” “Business,” “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” and in other sections of this prospectus. In some cases, you can identifythese statements by forward-looking words such as “may,” “might,” “should,” “would,”“could,” “expect,” “plan,” “anticipate,” “intend,” “believe,”“estimate,” “predict,” “potential” or “continue,” and the negative of these termsand other comparable terminology. These forward-looking statements, which are subject to known and unknown risks, uncertaintiesand assumptions about us, may include projections of our future financial performance based on our growth strategies and anticipatedtrends in our business. These statements are only predictions based on our current expectations and projections about future events.There are important factors that could cause our actual results, level of activity, performance or achievements to differ materiallyfrom the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. In particular,you should consider the numerous risks and uncertainties described under “Risk Factors.”

While we believe we have identified materialrisks, these risks and uncertainties are not exhaustive. Other sections of this prospectus describe additional factors that couldadversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment.New risks and uncertainties emerge from time to time, and it is not possible to predict all risks and uncertainties, nor can weassess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actualresults to differ materially from those contained in any forward-looking statements.

Although we believe the expectations reflectedin the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements.Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-lookingstatements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to updateany of these forward-looking statements after the date of this prospectus to conform our prior statements to actual results orrevised expectations, and we do not intend to do so.

Forward-looking statements include, but arenot limited to, statements about:

We caution you not to place undue reliance onthe forward-looking statements, which speak only as of the date of this prospectus in the case of forward-looking statements containedin this prospectus.

USE OF PROCEEDS

The net proceeds from the sale of the unitsin this offering are estimated to be approximately $             million, or approximately $             millionif the underwriters exercise in full their option to purchase additional units in this offering, after deducting the underwritingdiscounts and commissions and estimated offering expenses payable by us.

We currently intend to use the net proceedsfrom this offering for working capital and general corporate purposes.

The amounts and timing of our use of the netproceeds from this offering will depend on a number of factors, such as the timing and progress of our research and developmentefforts, the timing and progress of any partnering and commercialization efforts, and technological advances. As of the date ofthis prospectus, we cannot specify with certainty all of the particular uses for the net proceeds to us from this offering. Accordingly,our management will have broad discretion in the timing and application of these proceeds. Pending application of the net proceedsas described above, we intend to temporarily invest the proceeds in short-term, interest-bearing instruments. We reserve the right,at the sole discretion of our Board of Directors, to reallocate the proceeds of this offering in response to developments in ourbusiness and any other factors. 

DIVIDEND POLICY

We have never declared or paid any cash dividendson our capital stock. We currently intend to retain earnings, if any, to finance the growth and development of our business. Wedo not expect to pay any cash dividends on our common stock in the foreseeable future. Payment of future dividends, if any, willbe at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements,restrictions contained in any financing instruments, provisions of applicable law and other factors the board deems relevant.

CAPITALIZATION

The following table sets forth our cash andcash equivalents and capitalization as of September 30, 2016 on:

You should read this capitalization table togetherwith “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations”and our financial statements and the related notes appearing elsewhere in this prospectus.

The number of shares ofcommon stock to be outstanding after this offering is based on 12,054,813 shares of common stock outstanding as of November 28,2016 and does not take into account, as of November 28, 2016:

·          510,000shares of our common stock issuable upon exercise of outstanding stock options to purchase shares of our common stock at a weightedaverage exercise price of $5.28 per share;

·          107,802shares of our common stock issuable upon the exercise of outstanding warrants with a weighted average exercise price of $7.50 pershare;

·          1,990,000shares of our common stock reserved for issuance under our 2015 Stock Plan;

·                            sharesof common stock issuable upon the exercise of the warrants included in the units being sold in this offering; and

·                            sharesof common stock issuable upon the exercise of the warrants issued to the representatives of the underwriters.

DILUTION

Purchasers of our units in this offering willexperience an immediate dilution of net tangible book value per share from the public offering price. Dilution in net tangiblebook value per share represents the difference between the amount per share paid by the purchasers of shares of common stock (attributingno value to the warrants included in the units) and the net tangible book value per share immediately after this offering.

As of September 30, 2016, our net tangible bookvalue was $5,114,845, or $0.42 per share of common stock. Net tangible book value per share represents our total tangible assets,less our total liabilities, divided by the number of outstanding shares of our common stock.

After giving effect to the issuance and saleby us of       units in this offering at an offering price of $      perunit, and after deducting underwriting discounts and commissions and estimated offering expense payable by us, our as adjustednet tangible book value as of September 30, 2016 would have been approximately $      million, orapproximately $      per share. This amount represents an immediate increase in as adjusted net tangiblebook value of $      per share to our existing stockholders and an immediate dilution in the as adjustednet tangible book value of approximately $      per share to new investors purchasing shares of commonstock in this offering at the offering price.

For the purposes of the post-offering informationset forth in the above table, we have assumed the issuance of          shares upon the conversion ofoutstanding bridge notes. These notes were to be automatically converted according to their terms into our common stock upon theclosing of our IPO to the extent and provided that no holder of these notes was or will be permitted to convert such notes to theextent that the holder or any of its affiliates would beneficially own in excess of 4.99% of our common stock after such conversion.Due to this 4.99% limitation, certain of these notes remained outstanding and will be converted into shares of our common stockat such time as the 4.99% limitation continues to be met. The             shares set forth in this paragraphis based on our offering               shares pursuant to this offering.

The above discussion andtable are based on 12,054,813 shares of common stock outstanding as of November 28, 2016, which does not include, as of November28, 2016:

·          510,000shares of our common stock issuable upon exercise of outstanding stock options to purchase shares of our common stock at a weightedaverage exercise price of $5.28 per share;

·          107,802shares of our common stock issuable upon the exercise of outstanding warrants with a weighted average exercise price of $7.50 pershare;

·          1,990,000shares of our common stock reserved for issuance under our 2015 Stock Plan; and

·                           sharesof common stock issuable upon the exercise of the warrants included in the units being sold in this offering; and

·                           sharesof common stock issuable upon the exercise of the warrants issued to the representatives of the underwriters. 

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

The following unaudited pro forma combined financialinformation is based on the historical financial statements of Moleculin Biotech, Inc. after giving effect to our acquisition ofMoleculin, LLC described in Note 2 to our unaudited financial statements for the nine months ended September 30, 2016.

The unaudited pro forma combined statement ofoperations for the year ended December 31, 2015 and the nine months ended September 30, 2016 are presented as if our acquisitionof Moleculin, LLC occurred on January 1, 2015 and were carried forward through to September 30, 2016.

We have based the pro forma adjustments upon availableinformation and certain assumptions that we believe are reasonable under the circumstances. We describe in greater detail the assumptionsunderlying the pro forma combined financial statements in the notes to the unaudited pro forma combined financial statements. Inmany cases, we based these assumptions on preliminary information and estimates. The actual adjustments to our pro forma combinedfinancial statements will depend upon a number of factors and additional information that will be available when we complete thevaluation of Moleculin, LLC’s assets. Accordingly, the actual adjustments that will appear in our financial statements willdiffer from these pro forma adjustments, and those differences may be material.

We acquired Moleculin, LLC on May 2, 2016, and,going forward our financial statements include the operations of Moleculin, LLC. We account for acquired businesses using the acquisitionmethod of accounting, which requires, among other things, that most assets acquired and liabilities assumed be recognized at theirestimated fair values as of the acquisition date and that the fair value of acquired in-process research and development (“IPR&D”)be recorded on the balance sheet. Transaction costs are expensed as incurred. Any excess of the consideration transferred overthe assigned values of the net assets acquired will be recorded as goodwill. The estimated fair values of assets acquired and liabilitiesassumed were determined based on management’s best estimates. Preliminary estimated fair values have been made by managementand are subject to measurement period adjustments which represent updates made to the preliminary purchase price allocation basedon revisions to valuation estimates in the interim period subsequent to the acquisition and initial accounting date up until thepurchase price allocation is finalized which cannot be any later than one year from the acquisition date.

The unaudited pro forma combined financial informationis not intended to represent or be indicative of our consolidated results of operations or financial position that we would havereported had the Moleculin, LLC acquisition been completed as of the date presented, and should not be taken as a representationof our future consolidated results of operations or financial position. The unaudited pro forma combined financial informationdoes not reflect any operating efficiencies and/or cost savings that we may achieve with respect to combining the companies.

The following unaudited financial informationshould be read with the accompanying notes, the financial statements of Moleculin, LLC and the notes thereto included elsewherein this prospectus and the financial statements of MBI and the notes thereto included elsewhere in this prospectus.

Moleculin Biotech, Inc.

Unaudited Pro Forma Combined Statement ofOperations

For the Year Ended December 31, 2015

Moleculin Biotech, Inc.

Unaudited Pro Forma Combined Statement ofOperations

For the Nine Months Ended September 30, 2016

Moleculin Biotech, Inc.

Notes to Unaudited Pro Forma Combined FinancialInformation

Note 1 – Basis of presentation

The unaudited pro forma combined statementsof operations for the nine months ended September 30, 2016 and the year ended December 31, 2015 are based on the historical financialstatements of Moleculin Biotech, Inc. and Moleculin, LLC after giving effect to our acquisition of Moleculin, LLC described inNote 2 to our financial statements for the nine months ended September 30, 2016.

We account for business combinations pursuant to Financial AccountingStandards Board (“FASB”) Accounting Standards Codification (ASC) 805, Business Combinations. In accordance withASC 805, MBI uses its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilitiesassumed at the acquisition date. Goodwill as of the acquisition date is measured as the excess of purchase consideration over thefair value of net tangible and identifiable intangible assets acquired.

The fair values assigned to Moleculin, LLC’s tangible assetsacquired and liabilities assumed are based on management’s estimates and assumptions. The estimated fair values of theseassets acquired and liabilities assumed are considered preliminary and are based on the information and the account balances thatwere available. We believe that the information provides a reasonable basis for estimating the fair values of assets acquired andliabilities assumed. We expect to finalize the valuation of the net tangible and intangible assets prior to the filing of our Form10-K for the year ended December 31, 2016, but not later than one year from the acquisition date.

The unaudited pro forma combined financial information is not intendedto represent or be indicative of our results of operations or financial position that would have been reported had the acquisitionbeen completed as of the date presented, and should not be taken as a representation of our future consolidated results of operationsor financial position. The unaudited pro forma combined financial information does not reflect any operating efficiencies and/orcost savings that we may achieve with respect to the combined companies.

For purposes of these unaudited combined pro forma statements ofoperations, the acquisition of Moleculin, LLC is assumed to have occurred on January 1, 2015. The pro forma statement of operationsfor the year ended December 31, 2015 combined the results of Moleculin, LLC for the year ended December 31, 2015 and our resultsfor the period from inception (July 28, 2015) through December 31, 2015.

Note 2 — Pro forma adjustments

The pro forma adjustments are based on our preliminary estimatesand assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma condensedcombined financial information:

MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysisof Financial Condition and Results of Operations (“MD&A”) contains certain forward-looking statements. Historicalresults may not indicate future performance. Our forward-looking statements reflect our current views about future events, arebased on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materiallyfrom those contemplated by these statements. Factors that may cause differences between actual results and those contemplated byforward-looking statements include, but are not limited to, those discussed in “Risk Factors.” We undertake no obligationto publicly update or revise any forward-looking statements, including any changes that might result from any facts, events, orcircumstances after the date hereof that may bear upon forward-looking statements. Furthermore, we cannot guarantee future results,events, levels of activity, performance, or achievements.

Highlights

We are a preclinical-stage pharmaceuticaldevelopment company organized as a Delaware corporation in July 2015 to focus on the development of anti-cancer drug candidates.We have three drug development projects. Our lead drug candidate is liposomal Annamycin, which is referred to as Annamycin, ananthracyline intended for the treatment of relapsed or refractory acute myeloid leukemia, or AML. Annamycin has been in clinicaltrials pursuant to an investigational new drug application, or IND, that had been filed with the U.S. Food and Drug Administration,or FDA. Due to a lack of development activity by a prior drug developer, this IND was terminated, however we intend to apply fora new IND based on the same data that supported the original IND, updated for subsequent clinical data, and to commence a clinicaltrial for Annamycin.

We have two other drug development projectsin progress. One of them involves a collection of small molecules we refer to as the WP1066 Portfolio that was obtained via ouracquisition of Moleculin, LLC and is focused on the modulation of key regulatory transcription factors involved in the progressionof cancer. The other, which we call the WP1122 Portfolio, is a suite of molecules targeting the metabolic processes involved incancer in general, and glioblastoma in particular that we acquired from IntertechBio Corporation. Both of these technologies arelicensed on a worldwide exclusive basis from The University of Texas M.D. Anderson Cancer Center, or MD Anderson.

Overview

MBI was founded in 2015 in order to combineand consolidate the development efforts involving several anti-cancer technologies, some of which are based on license agreementswith MD Anderson. This effort began with the acquisition of the Annamycin development project from AnnaMed, Inc., or AnnaMed, followedby the acquisition of the license rights to the WP1122 Portfolio from IntertechBio Corporation, or IntertechBio. Further, we, onMoleculin, LLC’s behalf, entered into a co-development agreement with Houston Pharmaceuticals, Inc., or HPI, which culminatedwith the acquisition of Moleculin, LLC and MBI coincident with our initial public offering allowing us to gain control of the WP1066Portfolio.

AnnaMed was formed in 2012 to take over thedevelopment of Annamycin from a prior drug development company, Callisto Pharmaceuticals, Inc., or Callisto. Callisto ceased developmentwork on Annamycin leading to the termination of its IND by the FDA. In order to satisfy unmet license obligations, Callisto agreedto transfer all available Annamycin data to AnnaMed, which data we intend to now use to apply for a new IND. 

IntertechBio was formed in 2009 to license andbegin development on the WP1122 Portfolio. In August 2015, IntertechBio agreed to assign all license rights to us in exchange for630,000 shares of our common stock.

Moleculin, LLC was formed in 2006 and has beenworking to develop the WP1066 Portfolio it licensed from MD Anderson. On May 2, 2016, Moleculin, LLC was merged with and intoMBI. As a result of the merger, we issued the holders of Moleculin, LLC equity interests and convertible notes an aggregate ofapproximately 999,931 shares of our common stock.

Since Moleculin, LLC commenced operations in 2006, substantially all of its efforts have been focusedon research, development and the advancement of the WP1066 Portfolio. Moleculin, LLC did not generate any revenue from productsales and, as a result, incurred significant losses.

Neither Moleculin, LLC nor MBI has manufacturingfacilities and all manufacturing activities are contracted out to third parties. Additionally, Moleculin, LLC utilized third-partyclinical research organizations to carry out clinical trials. Neither Moleculin, LLC nor MBI have a sales organization.

Recent Business Developments

Accelerated Plan for Clinical Drug Production– The Company announced on October 7, 2016, that it had secured an agreement with Dermin Sp. Zo. O. (“Dermin”)to utilize Dermin’s supply of Annamycin for its upcoming clinical trial, substantially reducing the expenditures requiredfor drug product and shortening the time required to produce clinical supplies. The Company believes that this is an importantagreement and key milestone to be reached and that it reduces the potential for drug production to negatively impact its clinicaltimeline. With this agreement in place, the Company’s drug product expense for upcoming clinical trials should be belowprevious estimates.

Moleculin, LLC previously licensed Annamycinto Dermin within a limited region in Europe, enabling Dermin to deploy Polish grant funds toward producing Annamycin. The agreementreached between the two companies allows us to utilize this Annamycin in our upcoming clinical trials rather than having to producenew Annamycin for its own use. The Company believes Dermin benefits from a data sharing arrangement giving it access to our clinicaldata on a faster timeline than it would be able develop on its own.

Updated Plan for Clinical Trials for Annamycin– On October 20, 2016, the Company announced in a conference call that it had identified some significantly positivefindings from its detailed review of the last clinical trial for Annamycin by a prior developer, which has given rise to a modificationof its own clinical development plan.

As the Company previously disclosed, a priordeveloper had conducted a clinical trial with Annamycin, but then subsequently failed to maintain their IND with the FDA. The Companyhad previously indicated that its plan was to conduct a detailed review of the clinical results generated by that prior developer.The Company would then use those results to reestablish an IND in order to continue clinical trials of Annamycin. However, theCompany announced recently that, in the course of its review, it identified that Annamycin may have greater potential for efficacythan the Company originally believed, based on an unexpected potential opportunity to increase the drug’s Maximum TolerableDose (“MTD”). 

In particular, the Dose Limiting Toxicities(“DLTs”) reported in that previous trial that led to the establishment of the current MTD of 150 mg/m2 were all frompatients who had an unusually high number of first-line induction therapy failures prior to being treated with Annamycin. Specifically,of the three patients in the last clinical trial who experienced these DLTs, one of them had failed nineteen prior induction therapyattempts, another had failed sixteen and the other had failed fifteen before being enrolled in the trial. The Company has concludedfrom its review of this data that, if the heavily treated patients are excluded from the data set, the MTD could have been closerto 250 mg/m2, substantially higher than the level that was actually set by this previous trial.

The Company views this as an encouraging developmentbecause it means it may have an opportunity to increase the MTD for its next trial from 150 mg/m2 to 200 or even 250 mg/m2. Ifthat turns out to be the case, the Company believes it could increase the chance for positive outcomes in its next trial.

With the discovery that the Company may be ableto increase its MTD, the Company determined to adjust its clinical strategy by adding in a Phase I arm to its next Phase II trial,which will add some expense to its development effort. However, the Company believes the money saved by utilizing the Dermin druginventory (discussed above) will offset this added expense. The Company believes this change in strategy will add several monthsto the eventual final approval of the drug, however, the Company believes that it remains on track to generate useful Phase IIdata by the second half of 2017.

FDA Guidance Regarding Annamycin IND– On November 17, 2016, the Company announced it had received verbal positive guidance from the FDA regarding its plannedIND submission indicating that the Company may incorporate by reference the IND established by a prior developer. The Company hasindicated in previous disclosures that it expected to begin its next clinical trial by the first half of 2017, however this developmentmay reduce that time frame by several months. The Company has submitted a pre-IND briefing document to the FDA along with key questionsregarding its clinical development plan and a request for a meeting, if the FDA deems it necessary. The FDA recently indicatedin writing that it intends to provide written responses to the Company by December 6, 2016 and that it does not believe a livemeeting is necessary. Once those written responses are received, the Company will adjust its final IND submission document accordinglyand submit for final FDA review. IND submissions are normally reviewed within 30 days of filing.

Update on WP1066 - A clinician at MDAnderson has advised the Company that she is proceeding with a physician-sponsored IND for WP1066 treatment of brain tumors. TheCompany is not participating nor has influence on this IND process. The clinician has submitted an IND to the FDA and has indicatedthat this IND is on hold until documentation of Good Manufacturing Process or GMP production of WP1066 can be presented to theFDA.

Advancement of Preclinical Testing for BrainTumors with WP1122 – On October 25, 2016, the Company announced promising initial results of the preclinical toxicologywork on WP1122, the Company’s unique inhibitor of glucose metabolism, which is an important driver of glycolytic brain tumorprogression and survival. The Company views this as an important step toward future clinical trials for WP1122. A similar chemicalstructure to that which turns morphine into heroine has been used to allow WP1122 to successfully enter the brain and increasecirculation time. The Company indicated that preliminary escalating single dose toxicity testing in mice (oral administration)was successfully completed and even at the highest possible dose, no toxic death was observed. In multiple therapeutic doses,WP1122 was well tolerated during intense twice-daily oral dosing.

The Company believes moving forward with preclinicaltoxicology is the key to its ability to generate proof of concept in humans. The Company had previously announced the presentationof promising preclinical data in July 2016, supporting the potential for using WP1122 as a treatment for glioblastoma.

Appointment of New Chief Financial Officer- On August 22, 2016, the Company announced the appointment, effective August 19, 2016, of Jonathan P. Foster as ExecutiveVice President and Chief Financial Officer. Effective on August 19, 2016, Mr. Foster assumed the duties of CFO from Louis Ploth,Jr., who had come out of retirement in 2015 to help guide the new company through its initial public offering.

Mr. Foster joined us from InfuSystem Holdings,Inc., an NYSE MKT listed company and a leading national provider of infusion pumps and related services to the healthcare industryin the United States and Canada, primarily related to the treatment of cancer, where he served as Executive Vice President andChief Financial Officer, since 2012. He brings more than 30 years of financial experience holding a variety of executive and seniorfinancial positions with public, private, and start-up to large corporate and international companies.

Results of Operations – MBI

The Company was formed on July 28, 2015; therefore,the financial information for 2015 is not comparable to the financial results of the three and nine months ended September 30,2016. The following table sets forth, for the periods indicated, data derived from our statement of operations:

Three Months Ended September 30, 2016 compared to the periodfrom July 28, 2015 (Inception) to September 30, 2015

Research and Development Expense. Research and developmentexpense was $496,659 and $38,409 for the three months ended September 30, 2016 and for the period from July 28, 2015 (inception)to September 30, 2015, respectively. The increase of approximately $458,000 mainly represents accrued license fees to MD Andersonfor approximately $40,000, $37,500 for research performed by HPI, and approximately $228,000 related to MD Anderson sponsored research.We expect to incur increased research and development costs in the future as our product development activities expand.

General and Administrative Expense. General and administrativeexpense was $924,041 and $184,344 for the three months ended September 30, 2016 and for the period from July 28, 2015 (inception)to September 30, 2015, respectively. The expense increase of approximately $740,000 was mainly attributable to additional payrolland related expenses of approximately $459,000 related to a full three months of our Chief Financial Officer’s, Chief OperatingOfficer’s and Chief Executive Officer’s salaries and compensation for our Board of Directors. Also, included in thisquarter’s expense was $118,000 related to the severance of the former Chief Financial Officer. The Company also incurredapproximately $289,000 of expenses related to investor relations, audit and accounting, and insurance costs.  

Interest Expense. Interest expense included expense accruedon our convertible promissory notes issued in 2015 and 2016 bearing interest at the rate of 8% per annum.

Net Loss. The net loss for the three months ended September30, 2016 was $1,432,079 which included non-cash expenses of $48,420 ($977 for depreciation and $47,443 for stock based compensation)and a one-time expense of $118,000 related to the severance of the former Chief Financial Officer. This loss for the period isa significant increase from the loss for the period from July 28, 2015 (inception) to September 30, 2015 of $224,315 as the Companyhad, at that time, just begun operations.

Nine Months Ended September 30, 2016 comparedto the period from July 28, 2015 (inception) through September 30, 2015

Research and Development Expense. Research and developmentexpense was $616,498 and $38,409 for the nine months ended September 30, 2016 and for the period from July 28, 2015 (inception)to September 30, 2015, respectively. The increase of approximately $578,000 mainly represents accrued license fees to MD Andersonfor approximately $92,000, $37,500 for research performed by HPI, and approximately $228,000 related to MD Anderson sponsored research.We expect to incur increased research and development costs in the future as our product development activities expand.

General and Administrative Expense. General and administrativeexpense was $1,847,613 and $184,344 for the nine months ended September 30, 2016 and for the period from July 28, 2015 (inception)to September 30, 2015, respectively. The expense increase of approximately $1,663,000 was mainly attributable to additional payrolland related expenses of approximately $551,000 related to compensation of our Chief Financial Officer’s, Chief OperatingOfficer’s and Chief Executive Officer’s salaries and compensation for our Board of Directors during the third quarterof 2016. The Company also incurred approximately $951,000 of expenses related to investor relations, legal, audit and accounting,and insurance costs.

Interest Expense. Interest expense included expense accruedon our convertible promissory notes issued in 2015 and 2016 bearing interest at the rate of 8% per annum.

Net Loss. The net loss for the nine months ended September30, 2016 was $2,503,047 which included non-cash expenses of $210,568 ($1,629 for depreciation and $208,939 for stock based compensationand other stock based expenses) and a one-time expense of $118,000 related to the severance of the former Chief Financial Officer.This loss for the period is a significant increase from the loss for the period from July 28, 2015 (inception) to September 30,2015 of $224,315 as the Company had, at that time, just begun operations.

The following table sets forth the components of MBI’sstatement of operations for the period from July 28, 2015 (Inception) to December 31, 2015:

Research and Development Expense. Research and developmentexpense was $260,418 for the period from July 28, 2015 (Inception) to December 31, 2015. The expense is mainly related topatent acquisition cost and travel expense of our research and development personnel. 

General and Administrative Expense. General and administrativeexpense was $477,810 for the period from July 28, 2015 (Inception) to December 31, 2015. The expense mainly included professionalfees to our consultants, attorney, accountants and our previous investment banker and financial advisor for services related toour initial public offering.

Interest Expense. Interest expense included expense accruedon our convertible promissory notes issued in August, September and October 2015 bearing interest at the rate of 8% per annum.

Results of Operations – Moleculin

The following table sets forth the components of Moleculin, LLC’saudited statements of operations for the years ended December 31, 2015 and 2014:

Research and Development Expense. Research and developmentexpense was approximately $125,000 for the year ended December 31, 2015 as compared to $799,000 for the prior year. This decreaseof $673,000 was driven primarily by clinical trial costs reductions incurred during 2015 of approximately $250,000; a decreaseof approximately $121,000 in manufacturing costs for clinical supplies; and a decrease in intellectual property costs of approximately$303,000 as compared to 2014.

General and Administrative Expense. General and administrativeexpense for the year ended December 31, 2015 was $329,000 as compared to $840,000 for the prior year. This $511,000 decrease ingeneral and administrative expense related primarily to a reduction in payroll and related personnel costs of approximately $350,000,a reduction in professional services fees of $96,000, and a reduction of travel expenses of $35,000.

Depreciation Expense. Depreciation expense was $11,000 foreach of the years ended December 31, 2015 and 2014. Depreciation is generated from our fixed assets.

Other Income (Expense). Other income for the year ended December31, 2015 was approximately $100,000 as compared to other expense of $160,000 for the prior year. This decrease of $260,000 in expenserelated primarily to an increase of $289,000 in interest expense accrued on our convertible promissory notes issued late in 2014and amortization of debt discount and deferred financing cost associated with those notes, offset by a gain on debt extinguishmentof $549,000 recorded in fourth quarter of 2015 related to the forfeiture of units by MD Anderson Cancer Center in conjunction withthe amendment of a license agreement.

Liquidity and Capital Resources

As of September 30, 2016, we had $6,183,783in cash. During the period from January 1, 2016 through May 2, 2016, we sold 234,296 of common stock for $702,888. On May31, 2016, we completed our initial public offering, pursuant to which we sold 1,540,026 shares of our common stock at $6.00 pershare for net proceeds of $8,464,183 after deducting underwriting discounts and commissions and direct offering expenses payableby us. We believe that our existing cash and cash equivalents as of September 30, 2016 will be sufficient to fund our planned operationsto the end of the third quarter of 2017, which includes our revised clinical trial plan for Annamycin.

We will not generate revenue from product salesunless and until we successfully complete development of, obtain regulatory approval for and begin to commercialize one or moreof our product candidates, which we expect will take a number of years and is subject to significant uncertainty. Accordingly,we anticipate that we will need to raise additional capital to fund our future operations. Until such time that we can generatesubstantial revenue from product sales, if ever, we expect to finance our operating activities through a combination of equityofferings and debt financings and we may seek to raise additional capital through strategic collaborations. However, we may beunable to raise additional funds or enter into such arrangements when needed on favorable terms, or at all, which would have anegative impact on our financial condition and could force us to delay, limit, reduce or terminate our development programs orcommercialization efforts or grant to others rights to develop or market product candidates that we would otherwise prefer to developand market ourselves. Failure to receive additional funding could cause us to cease operations, in part or in full. Furthermore,even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital due to favorablemarket conditions or strategic considerations, which may cause dilution to our existing stockholders.

The following table sets forth the primary sourcesand uses of cash of MBI for the period indicated:

Cash used in operating activities

Net cash used in operating activities was $2,596,647for the nine months ended September 30, 2016 and mainly included payments made for payroll, travel, insurance and professionalfees to our consultants, attorneys and accountants for services related to our becoming a publicly traded company and related filingfees, along with payments made to MD Anderson for license and maintenance fees. Additionally, prepayments were made for insurance.

Cash used in investing activities

Net cash used in investing activities was $109,793for the nine months ended September 30, 2016 and primarily represents the cash paid to acquire Moleculin, LLC.

Cash provided by financing activities

Net cash provided by financing activities was$8,862,132 for the nine months ended September 30, 2016. We received $8,464,183 net proceeds from our IPO stock issuance, $702,888from issuance of common shares at $3 per share, and $165,000 from issuance of convertible notes. Net cash used in financing activitiesincluded approximately $470,000 for payments of notes payable.

Since Moleculin, LLC’s inception and throughDecember 31, 2015, Moleculin, LLC funded its operations primarily through the sale and issuance of convertible preferred unitsand convertible and non-convertible promissory notes. From May to November 2014, Moleculin, LLC issued various convertible notesto its creditors. The note proceeds were $1.5 million. These notes bear interest at 8% per annum and were due on the earlier ofJune 30, 2016 or the consummation of a liquidation event (which event includes the merger between MBI and Moleculin, LLC occurredon May 2, 2016), unless these notes are converted.

The following table sets forth the primary sourcesand uses of cash for the periods indicated for Moleculin, LLC:

Cash used in operating activities

Net cash used in operating activities was approximately$725,000 and $1,354,000 for the years ended December 31, 2015 and 2014, respectively. The $629,000 decrease in net cash used inoperating activities was primarily due to a decrease in spending in research and development, specifically in sponsored researchperformed by MD Anderson, as well as decrease in payments made to professionals and employees. 

Cash used in investing activities

Net cash provided by investing activities wasapproximately $232,000 and $0 for the years ended December 31, 2015 and 2014, respectively. The increase was due to a collectionof long-term receivable from Dermin, Sp. Zo. O. to whom the Company had provided funding assistance for Dermin’s effortsin developing and commercializing certain pharmaceutical products. 

Cash provided by financing activities

Net cash provided by financing activities wasapproximately $0 and $1,525,000 for the years ended December 31, 2015 and 2014, respectively. Cash was provided by issuance ofconvertible notes payable in 2014 of approximately $1,525,000.

JOBS Act and Recent Accounting Pronouncements

The recently enacted JOBS Act provides thatan “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B)of the Securities Act of 1933, as amended, for complying with new or revised accounting standards. In other words, an “emerginggrowth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to privatecompanies. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adoptnew or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

We have implemented all new accounting pronouncementsthat are in effect and may impact our financial statements and we do not believe that there are any other new accounting pronouncementsthat have been issued that might have a material impact on our financial position or results of operations.

Critical Accounting Policies and Significant Judgments and Estimates

The financial statements have been preparedin accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of these financial statementsrequires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure ofcontingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during thereporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonableunder the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilitiesthat are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions orconditions.

We believe that the following accounting policiesare the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult,subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.

Acquisition

We acquired Moleculin,LLC on May 2, 2016, and, going forward our financial statements will include the operations of Moleculin, LLC. We account for acquiredbusinesses using the acquisition method of accounting, which requires, among other things, that most assets acquired and liabilitiesassumed be recognized at their estimated fair values as of the acquisition date and that the fair value of acquired in-processresearch and development (“IPR&D”) be recorded on the balance sheet. Transaction costs are expensed as incurred.Any excess of the consideration transferred over the assigned values of the net assets acquired will be recorded as goodwill. Theestimated fair values of assets acquired and liabilities assumed were determined based on management’s best estimates. Preliminaryestimated fair values are subject to measurement period adjustments which represent updates made to the preliminary purchase priceallocation based on revisions to valuation estimates in the interim period subsequent to the acquisition and initial accountingdate up until the purchase price allocation is finalized which cannot be any later than one year from the acquisition date.

Beneficial Conversion Feature

From time to time, we may issue convertiblenotes that have conversion prices that create an embedded beneficial conversion feature on the issuance date. A beneficial conversionfeature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note isconvertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portionof the note proceeds to the fair value of any attached equity instruments, if any related equity instruments were granted withthe debt. We estimate the fair value of our common stock using the most recent selling price available. The intrinsic value ofthe beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid-in capital. Thedebt discount is amortized to interest expense over the life of the note using the effective interest method.

Research and Development Costs

We record accrued expenses for estimated costsof our research and development activities conducted by third-party service providers, which include the conduct of pre-clinicalstudies and clinical trials and contract manufacturing activities. We record the estimated costs of research and development activitiesbased upon the estimated amount of services provided but not yet invoiced, and we include these costs in accrued liabilities inthe balance sheets and within research and development expense in the statement of operations. These costs are a significant componentof our research and development expenses. We record accrued expenses for these costs based on the estimated amount of work completedand in accordance with agreements established with these third parties.

We estimate the amount of work completed throughdiscussions with internal personnel and external service providers as to the progress or stage of completion of the services andthe agreed-upon fee to be paid for such services. We make significant judgments and estimates in determining the accrued balancein each reporting period. As actual costs become known, we adjust our accrued estimates. Although we do not expect our estimatesto be materially different from amounts actually incurred, our understanding of the status and timing of services performed, thenumber of patients enrolled and the rate of patient enrollment may vary from our estimates and could result in us reporting amountsthat are too high or too low in any particular period. Our accrued expenses are dependent, in part, upon the receipt of timelyand accurate reporting from clinical research organizations and other third-party service providers. To date, there have been nomaterial differences from our accrued expenses to actual expenses.

Impairment of Long-Lived Assets  

Management reviews long-lived assets for impairmentwhenever events or changes in circumstances indicate that the carrying amount may not be realizable or at a minimum annually duringthe fourth quarter of the year. If an evaluation is required, the estimated future undiscounted cash flows associated with theasset are compared to the asset’s carrying value to determine if an impairment of such asset is necessary. The effect ofany impairment would be to expense the difference between the fair value of such asset and its carrying value.

Components of our Results of Operations and Financial Condition

Operating expenses

We classify our operating expenses into threecategories: research and development, general and administrative and depreciation.

Research and development. Research anddevelopment expenses consist primarily of:

We recognize all research and development costsas they are incurred. Clinical trial costs, contract manufacturing and other development costs incurred by third parties are expensedas the contracted work is performed.

We expect our research and development expensesto increase in the future as we advance our product candidates into and through clinical trials and pursue regulatory approvalof our product candidates in the United States and Europe. The process of conducting the necessary clinical research to obtainregulatory approval is costly and time-consuming. The actual probability of success for our product candidates may be affectedby a variety of factors including: the quality of our product candidates, early clinical data, investment in our clinical program,competition, manufacturing capability and commercial viability. We may never succeed in achieving regulatory approval for any ofour product candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completioncosts of our research and development projects or when and to what extent, if any, we will generate revenue from the commercializationand sale of our product candidates.

General and administrative.General and administrative expense consists of personnel related costs, which include salaries, as well as the costs of professionalservices, such as accounting and legal, facilities, information technology and other administrative expenses. We expect our generaland administrative expense to increase following the completion of this offering due to the anticipated growth of our businessand related infrastructure as well as accounting, insurance, investor relations and other costs associated with becoming a publiccompany.

Depreciation. Depreciation expense consistsof depreciation on our property and equipment. We depreciate our assets over their estimated useful life. We estimate machineryand equipment to have a 5-year life and furniture and fixtures to have a 7-year life.

Other income (expense), net

Other income (expense), net consists of interestexpense associated with our notes payable and interest income earned on our cash and investment balances.

BUSINESS

Overview

We are a preclinical-stage, pharmaceuticalcompany focused on the development of anti-cancer drug candidates, some of which are based on license agreements with The Universityof Texas System on behalf of the M.D. Anderson Cancer Center, which we refer to as MD Anderson. Our lead drug candidate is liposomalAnnamycin, which we refer to as Annamycin, an anthracycline intended for the treatment of relapsed or refractory acute myeloidleukemia, or AML. Annamycin has been in clinical trials pursuant to an Investigational New Drug application, or IND, that hadbeen filed with the FDA. Due to a lack of development activity by a prior drug developer, this IND was terminated. However weintend to apply for a new IND based on the same data that supported the original IND, updated for subsequent clinical data andto resume clinical trials for Annamycin. We have two other drug development projects in process, one involving a collection ofsmall molecules, which we refer to as the WP1066 Portfolio, focused on the modulation of key regulatory transcription factorsinvolved in the progression of cancer, and the WP1222 Portfolio, a suite of molecules targeting the metabolic processes involvedin cancer in general and glioblastoma (the most common form of brain tumor) in particular. We also intend to sponsor ongoing researchat MD Anderson in order to improve and expand our drug development pipeline.

We have been granted royalty-bearing, worldwide,exclusive licenses for the patent and technology rights related to our WP1066 Portfolio and WP1122 Portfolio drug technologies,as these patent rights are owned by MD Anderson. The Annamycin drug substance is no longer covered by any existing patent protection.We intend to submit patent applications for formulation, synthetic process and reconstitution related to our Annamycin drug productcandidate, although there is no assurance that we will be successful in obtaining such patent protection. Independently from potentialpatent protection, we believe Annamycin will qualify for Orphan Drug status and we have applied for such status with the FDA, whichwould entitle us to market exclusivity of 7 and 10 years from the date of approval of a New Drug Application (NDA) and MarketingAuthorization (MA), in the United States and the European Union (EU), respectively. Separately, the FDA may also grant market exclusivityof up to 5 years for newly approved new chemical entities (of which Annamycin would be one), but there can be no assurance thatsuch exclusivity will be granted or, if granted, for how long.

Corporate History

We were founded in 2015 by Walter Klemp (ourchairman and CEO), Dr. Don Picker (our President and Chief Operating Officer) and Dr. Waldemar Priebe of MD Anderson (Chairmanof our Scientific Advisory Board) in order to combine and consolidate development efforts that include several MD Anderson anti-cancertechnologies. This effort began with the acquisition of the Annamycin development project from AnnaMed, Inc., or AnnaMed, followedby the acquisition of the license rights to the WP1122 Portfolio from IntertechBio Corporation, or IntertechBio. Further, we undertookan effort to gain control of the WP1066 Portfolio, which culminated with the merger of Moleculin, LLC and MBI and the establishmentof a co-development agreement with Houston Pharmaceuticals, Inc., or HPI, coincident with our IPO.

AnnaMed was formed in 2012 to take over thedevelopment of Annamycin from a prior drug development company, Callisto Pharmaceuticals, Inc., or Callisto. Callisto ceased developmentwork on Annamycin, leading to the termination of its IND by the FDA. Callisto disclosed publicly in its Form 10-K filing for theyear ended 2009 that the clinical data relating to acute leukemia patients “did not support further clinical evaluation ofL-Annamycin as a single agent to treat relapsed or refractory adult acute leukemia patients.” In order to satisfy unmet licenseobligations, Callisto agreed to transfer all available Annamycin data to AnnaMed, which data we will use to apply for a new IND.As such, notwithstanding Callisto’s determination to terminate its development of Annamycin, we will be utilizing the clinicaldata from Callisto’s trials to apply for a new IND. The basis for our decision to proceed notwithstanding Callisto’sdetermination is that we believe the actual clinical data as reported by Dr. Robert Shepard, our Chief Medical Officer and whowas Callisto’s Chief Medical Officer at the time of the clinical trials, to the 2009 Annual Meeting of the American Societyof Clinical Oncology, and as further reported by the Principal Investigators of the clinical trials in a peer-reviewed journalarticle (Clin Lymphoma Myeloma Leuk. 2013 August; 13(4): 430–434. doi:10.1016/j.clml.2013.03.015.), makes clear that thedata does support further clinical evaluation. In addition, the conclusion published in the 2013 Clinical Lymphoma, Myeloma &Leukemia journal article was that “Single agent nanomolecular liposomal annamycin appears to be well-tolerated and evidenceof clinical activity as a single agent in refractory adult ALL.” As reported in both the ASCO presentation and the 2013 journalarticle referenced, the definition of efficacy is based on the following Response Criteria: “Response criteria were achievementof CR defined as ≤5% blasts, granulocyte count of ≥1×109/L, and a platelet count of ≥100×109/L. Partial remissionwas defined the same as CR, except for the presence of 6% to 25% blasts. Hematologic improvement was defined as for CR but plateletcount <100×109/L.” The summary of patient response from the 2013 journal article reads: “After determiningthe MTD, a 10-patient phase IIA was conducted. Eight of the patients completed one cycle of the three days of treatment at theMTD. Of these, five (62%) demonstrated encouraging anti-leukemic activity with complete clearing of circulating peripheral blasts.Three of these subjects also cleared bone marrow blasts with one subsequently proceeding onto successful stem cell transplantation.The other two developed tumor lysis syndrome and unfortunately expired prior to response assessment.” In the Company’sreview of these trials, it confirmed that the activity demonstrated in this summary corresponds with a “Partial remission”as described in the Response Criteria and that the three subjects who “cleared bone marrow blasts” correspond with“CR” (Complete Response).

In 2012, AnnaMed out-licensed development rightsin a limited territory to a Polish special purpose drug development company called Dermin in exchange for Dermin’s developmentwork based on its successful effort to obtain Polish government grant funding to assist in the development of Annamycin. Sincethat time, such grant funding has been used to produce Annamycin in preparation for future clinical trials. In August 2015, weentered into a rights transfer agreement with AnnaMed pursuant to which in exchange for 1,431,000 shares of our common stock AnnaMedagreed to transfer any and all data it had regarding the development of Annamycin and the Annamycin IND, including all trade secrets,know-how, confidential information and other intellectual property rights held by AnnaMed.

IntertechBio was formed in 2009 to license andbegin development on the WP1122 Portfolio. The WP1122 Portfolio was also out-licensed to Dermin, which was awarded a Polish governmentgrant to assist in drug development efforts. In August 2015, IntertechBio agreed to assign all license rights to us in exchangefor our common stock.

Moleculin, LLC was formed in 2006 and has beenworking to develop the WP1066 Portfolio it licensed from MD Anderson. As a part of the formation of Moleculin, LLC, an agreementwas reached with HPI to limit Moleculin, LLC’s development efforts to uses in dermatology only, leaving non-dermatology indicationsto HPI. From 2006 to 2014, Moleculin, LLC funded its operations through the sale of equity and debt securities and through feesreceived from an out-licensing agreement with a Japanese dermatology drug development company, Maruho, Ltd., or Maruho. Since 2012,Moleculin, LLC conducted a series of clinical trials focused on the topical treatment of psoriasis. Although those trials havedemonstrated drug activity, the results to date are not conclusive enough to warrant full commercialization as a topical dermatologydrug. Additional study is required to determine optimal dosing and scheduling regimens for the topical treatment of psoriatic plaques.As a result of this additional complexity with regard to the potential treatment of psoriasis, Maruho did not elect to continueits funding of the psoriasis drug development effort and, therefore, forfeited their license rights to the WP1066 Portfolio thathad been granted to it by Moleculin, LLC. Dermin is planning to clinically evaluate a candidate from the WP1066 Portfolio for thetopical treatment of cutaneous T-cell lymphoma, or CTCL. We do not have control of the clinical plan or timeline for Dermin’sdevelopment effort.

Prior to our IPO, Moleculin, LLC was mergedwith and into our company. The merger agreement contains mutual representations and warranties between the parties. Pursuant tothe merger agreement, we agreed for a period of six years to indemnify and hold harmless each present and former director and/orofficer of Moleculin, LLC whom Moleculin, LLC would have had the power to indemnify under Delaware law that is made a party orthreatened to be made a party to any threatened, pending or completed proceeding or claim by reason of the fact that he or shewas a director or officer of the Moleculin, LLC prior to the effective time of the merger and arising out of actions or omissionsof the indemnified party in any such capacity occurring at or prior to the effective time of the merger against any losses or damagesreasonably incurred in connection with any claim. To our knowledge, no such proceeding or claim exists or has been threatened onthe date hereof and Moleculin, LLC made representations to this effect in the merger agreement. As additional consideration payableto the Moleculin, LLC unit holders, we agreed pursuant to the merger agreement that if drugs for dermatology indications are successfullydeveloped by us (or our successors) using any of the Existing IP Assets, then the Moleculin, LLC unit holders, in the aggregate,will be entitled to receive a 2.5% royalty on the net revenues generated by such drugs. Any such net revenues would include a deductionfor license fees or royalty obligations payable to MD Anderson for such Existing IP Assets. The merger agreement defined “ExistingIP Assets” to mean all intellectual property, licensed by us and Moleculin, LLC as of the time of the merger, including,without limitation, the intellectual property licensed from MD Anderson under the Patent and Technology License Agreement enteredinto by and between IntertechBio Corporation and MD Anderson dated April 2, 2012, as amended, and the Patent and Technology LicenseAgreement dated June 21, 2010, as amended, between MD Anderson and Moleculin, LLC, but excluding any intellectual property relatingto Annamycin. The right to receive the contingent royalty payments described herein are for drugs developed only for dermatologyindications, and do not include drugs developed for any other indications. We have no obligation of any nature to pursue the developmentof any drugs for dermatology indications.

From 2006 through 2015, HPI has been engagedin research related to the use of the WP1066 Portfolio for the treatment of non-dermatology cancers and has received grant awardstotaling approximately $4.9 million toward this effort. Prior to our IPO, we entered into a co-development agreement with HPI wherebyHPI is continuing its grant-funded research and making all resulting data available for our use in exchange for a development fee.We may buy HPI out of its co-development rights in the WP1066 Portfolio at our option. Please see the section “Business –License Agreements” for a description of our agreement with HPI.

Neither our founders nor MBI have or will haveany ownership stake in Dermin, our Polish grant-funded licensee. No Dermin-related grant money is expected to be paid directlyto us, but rather the sublicense agreements require Dermin to share resulting data, which we believe will reduce costs we mightotherwise have to incur directly. There can be no assurance, however, that Dermin will continue to receive the funds they havebeen awarded or that such funds will be spent by Dermin in a manner that will benefit MBI. The sublicensed territories grantedto Dermin for the WP1066 Portfolio are Poland, Ukraine, Czech Republic, Hungary, Romania, Slovakia, Belarus, Lithuania, Latviaand Estonia. For the WP1122 Portfolio, the territory expanded to include Russia and Kazakhstan. For Annamycin, the territory isfurther expanded to include Netherlands, Turkey, Belgium, Switzerland, Austria, Sweden, Greece, Portugal, Norway, Denmark, Ireland,Finland, Luxembourg, Iceland, Uzbekistan, Georgia, Armenia, Azerbaijan and Germany. However, in the case of Germany, this territorymay be reclaimed by us for a payment of $500,000 to Dermin.

The following summarizes the transactional historyand common relationships among HPI, IntertechBio, Moleculin, LLC, MBI, Callisto, AnnaMed, MD Anderson, and our officers and majorshareholders:

Our Drug Candidates

Annamycin

Our lead product candidate is Annamycin. Weintend to use a portion of the proceeds from this offering to conduct clinical trials for Annamycin as a monotherapy for the treatmentof relapsed or refractory acute myeloid leukemia, or AML. If Annamycin is ultimately approved on this basis, it is possible, withthe necessary subsequent testing and approval, that it could be used in the future in combination with other drugs.

Market for Annamycin

Leukemia is a cancer of the white blood cellsand acute forms of leukemia can manifest quickly and leave patients with limited treatment options. AML is the most common typeof acute leukemia in adults. It occurs when a clone of leukemic progenitor white blood cells proliferates in the bone marrow,suppressing the production of normal blood cells. Currently, the only viable option for acute leukemia patients is a bone marrowtransplant, which is successful in a significant number of patients. However, in order to qualify for a bone marrow transplant,the patient’s leukemia cells must be decreased to a sufficiently low level. This begins with a therapy of combining twochemotherapeutic drugs, which always includes an anthracycline, in inducing remission (a complete response, or CR), which therapyhas not improved since it was first used in the 1970s and we estimate that this induction therapy has the same success rate ofabout 20% as at that time. Unfortunately, the current clinically approved anthracyclines are cardiotoxic, which can result indamage to the heart and limit the dosage amount that may be administered to patients. Additionally, the tumor cells often presentde novo or develop resistance to the first line anthracycline, often through what is called “multidrug resistance”,enabling them to purge themselves of the available anthracyclines. Consequently, there remains no effective therapy for thesepatients and unfortunately most will succumb quickly to their leukemia. If a patient’s leukemia reappears before they canbe prepared for a bone marrow transplant, they are considered to have “relapsed”. If a patient fails to achieve asufficient response from the induction therapy to qualify for a bone marrow transplant, they are considered to be “refractory”(resistant to therapy). Together, this group of relapsed and refractory AML patients constitutes our primary focus for treatmentwith Annamycin and our intent is to pursue FDA approval for Annamycin as a second-line induction therapy for adult relapsed andrefractory AML patients.

We believe that pursuing approval as a secondline induction therapy for adult relapsed or refractory AML patients is the shortest path to regulatory approval, but we also believethat one of the most important potential uses of Annamycin is in the treatment of children with either AML or ALL (acute lymphoblasticleukemia, which is more common in children). Accordingly, we also intend to pursue approval for pediatric use when practicable.

Of the estimated 18,860 U.S. cases of acutemyeloid leukemia diagnosed in 2014, an estimated 97% were adult and although exact numbers are not available, we estimate that70% to 80% (approximately 13,000 to 14,000 patients) were expected to relapse or be resistant to first-line therapy.

Prior Clinical Trials for Annamycin

Annamycin is a liposome formulated anthracycline(also referred to in literature as “L-Annamycin”). It has been tested in 6 clinical trials and 114 patients withoutany reported cardiotoxicity and, in the two clinical trials focused on leukemia, with fewer dose-limiting toxicities than are normallyexpected with doxorubicin (one of the leading first-line anthracyclines used for induction therapy). Each of these trials was conductedby Callisto Pharmaceuticals, Inc., the previous holder of the intellectual property surrounding Annamycin, and not by our company.Annamycin demonstrated significant activity in 8 of 16 patients in a Phase I study in adult relapsed or refractory AML patients,with 6 of 14 patients completely clearing leukemic blasts. A 30 patient dose-ranging Phase I/II study in ALL demonstrated a similarlevel of activity, with 3 of 10 patients treated with the maximum tolerable dose clearing their leukemic blasts to a level sufficientto qualify for a bone marrow transplant. One of these patients went on to receive a successful curative bone marrow transplant.The other two of these three patients died of tumor lysis syndrome, a condition resulting from the overloading of their systemwith the debris from leukemic blast cells destroyed by the induction therapy. Armed with the knowledge of this potential, prophylacticpretreatment known to protect patients from the effects of tumor lysis syndrome will be deployed in future trials. Based on theresults of the above clinical trials, we believe Annamycin is different from currently approved induction therapy drugs in fourkey ways: (i) it has demonstrated clinical activity in a patient population for whom there are currently no effective therapies,(ii) it appears to be capable of avoiding the “multi-drug resistance” mechanisms that often limit the effectivenessof currently approved anthracyclines; (iii) it has been shown to be non-cardiotoxic in animal models and no events of cardiotoxicityhave been reported from the use of Annamycin in 114 patients; and (iv) in AML cell lines, it has been shown to be more potent thanone of the leading approved drugs.

Because the prior developer of Annamycin allowedtheir IND to lapse, we are required to submit a new IND for continued clinical trials with Annamycin. Toward this end, we recentlysubmitted a request for a Pre-IND meeting with the FDA. Based on subsequent conversations with the FDA, we will be allowed to incorporateby reference the prior developer’s IND in submitting our new request for IND. We believe this will not only save time andexpense with regard to our IND submission, but it should also reduce the risk that our IND submission is delayed due to a reviewof any of this prior data. Written communication from the FDA indicates they do not see a need for a Pre-IND meeting and plan torespond to questions in our Pre-IND briefing document in writing by December 6, 2016.

Based on initial conversations with the FDA,because of the serious unmet medical need, we believe Annamycin may qualify for accelerated approval based on our planned clinicaltrials. In order to facilitate our communication with the FDA, we requested access to and reviewed in detail the available datasupporting the dose-ranging Phase I/II clinical trial discussed above, which was conducted by a previous developer of Annamycin.In October 2016, we announced that we had identified some positive findings from this review, which gave rise to a modificationof our own clinical development plan. We had indicated that our plan was to conduct a detailed review of the clinical results generatedby that prior developer, and then to use those results to reestablish an IND in order to continue clinical trials of Annamycin.However, in the course of our review, we identified that Annamycin may have greater potential for efficacy than we originally believed,based on an unexpected potential opportunity to increase the drug’s Maximum Tolerable Dose (“MTD”).

In particular, the Dose Limiting Toxicities(“DLTs”) reported in the previous trial that led to the establishment of the current MTD of 150 mg/m² wereall from patients who had an unusually high number of first-line induction therapy failures prior to being treated with Annamycin.Specifically, of the three patients in the last clinical trial who experienced these DLTs, one of them had failed nineteen priorinduction therapy attempts, another had failed sixteen and the other had failed fifteen before being enrolled in the trial. Weconcluded from our review of this data that, if the heavily treated patients are excluded from the data set, the MTD could havebeen closer to 250 mg/m², substantially higher than the level that was actually set by this previous trial.

We view this as an encouraging development becauseit means we may have an opportunity to increase the MTD for our next trial from 150 mg/m² to 200 or even 250 mg/m².If that turns out to be the case, we believe it could increase the chance for positive outcomes in our next trial.

With the discovery that we may be able to increaseour MTD, we determined to adjust our clinical strategy by adding in a Phase I arm to our next Phase II trial, which will add expenseto our development effort. We believe this change in strategy will add several months to the eventual final approval of the drug,if the drug is approved.

We have also applied for Orphan Drug statuswith the FDA for Annamycin. Based on processing times indicated by the FDA, we expect a response to this application before theend of 2016, however, we can provide no assurance that we will receive a response by that time.

The prevalence ceiling for qualifying rare diseasesunder the US Orphan Drug Act is 200,000 patients and proportionally similar guidelines exist in the EU. The most recently publishedprevalence statistics from the National Cancer Institute reported that an estimated 37,726 patients had acute myeloid leukemiain the United States as of January 1, 2011, and trend data since that publication would indicate that the prevalence today shouldstill be well below the 200,000 patient limitation for Orphan Drugs, qualifying Annamycin for the treatment of acute myeloid leukemiato qualify for Orphan Drug status. Annamycin already qualified for Orphan Drug status with its prior developer and we intend torepeat that process. However, we can provide no assurance that we will be successful in obtaining Orphan Drug status for Annamycin.

 Lack of Cardiotoxicity

One of the key dose-limiting toxicities associatedwith currently available anthracyclines like doxorubicin is their propensity to induce life-threatening heart damage. This is especiallyproblematic for pediatric leukemia patients whose life spans can be severely shortened by the very induction therapy designed tocure them of acute leukemia. In the animal model relied upon by the FDA as an indicator of human cardiotoxicity, the non-liposomal(free) form of Annamycin has been shown to be significantly less likely than doxorubicin to create heart lesions in mice and theliposomal formulation (L-Annamycin) has been shown in animal models to have reduced cardiotoxicity to the point where it is unlikelyto cause harm to human patients. This lack of cardiotoxicity means L-Annamycin may be able to be used more aggressively in helpingpatients achieve remission without the potentially deadly long-term side effects of cardiotoxicity. This would be especially valuablein the case of pediatric acute leukemia (both AML and ALL) where long-term survival can be greatly impacted by cardiotoxicity.

Circumventing Multidrug Resistance

In addition to cardiotoxicity, the effectivenessof currently approved anthracyclines is limited by their propensity for succumbing to “multidrug resistance”, wherebytransporters (one type of which is referred to as a “P-glycoprotein pump”) develop on the outer surface of cells toexpel drugs like doxorubicin as a natural defense mechanism. The dosing of current therapies cannot be increased in an attemptto overcome multidrug resistance because of the likelihood of cardiotoxicity and other serious side effects. This limitation preventsadequate dosing of current anthracyclines to produce lasting remission. Annamycin appears to resist being expelled by P-glycoproteinpumps and other similar tested multidrug resistance transporters and thereby would seem to circumvent multidrug resistance. Thischaracteristic has been shown in pre-clinical testing to allow for higher drug uptake in diseased cells, which we believe shouldallow for more effective induction therapy with less risk to the patient.

In order for anthracyclines to provide effective induction therapy, they must be allowed to accumulatein leukemic cells sufficiently to enter the cell’s nucleus where they damage the cell’s DNA and induce apoptosis (celldeath). As induction therapy progresses, however, the targeted cells can develop a natural defense mechanism to prevent the anthracyclineactivity. The graphic below provides a simplified depiction of the formation of a P-glycoprotein pump on the outer surface (membrane)of a leukemic cell. As typical anthracyclines enter the cell, they are attracted to such pumps and are expelled (referred to as“efflux”) before they can accumulate sufficiently to serve their purpose. In contrast, Annamycin avoids such pumpsand is allowed to accumulate sufficiently to destroy the leukemia cell despite the presence of the multidrug resistance mechanisms.

The WP1066 Portfolio

We have a license agreement with MD Andersonpursuant to which we have been granted a royalty-bearing, worldwide, exclusive license for the patent and technology rights relatedto our WP1066 Portfolio and its close analogs, molecules targeting the modulation of key oncogenic transcription factors.

Clinical Testing of WP1066 Portfolio

In vitro testing has shown a high levelof activity for WP1066 against a wide range of solid tumors, and in vivo testing has shown significant activity againsthead and neck, pancreatic, stomach, and ovarian cancers, as well as metastatic melanoma and glioblastoma, among others. In vivotesting in mouse tumor models has shown that WP1066 inhibits tumor growth, blocks angiogenesis (a process that provides necessaryblood supply to tumors) and increases survival.

With respect to our WP1066 Portfolio, we mustcomplete pre-clinical toxicology testing, along with additional chemistry, manufacturing and control work to fully characterizethe drug, establish the desired formulation and develop reference standards for future drug release, among others prior to submittingand application for IND. A clinician at MD Anderson has advised us that she is proceeding with a physician-sponsored IND for WP1066treatment of brain tumors. We are not participating in this IND process. The clinician has submitted an IND to the FDA and hasindicated that this IND is on hold until documentation of Good Manufacturing Process or GMP production of WP1066 can be presentedto the FDA.

An analog of WP1066, referred to as WP1220,was previously the subject of an IND (WP1220 was referred to as MOL4239 for purposes of this IND) related to use of the moleculein the topical treatment of psoriasis. Clinical trials were commenced on WP1220 in the US, but were terminated early due to limitedefficacy in the topical treatment of psoriatic plaques. Notwithstanding its limitations in treating psoriasis, our pre-clinicalresearch has shown WP1220 to be effective in inhibiting cutaneous T-cell lymphoma (CTCL) in multiple CTCL cell lines. Based onthis encouraging data, we are collaborating with a Polish drug development company, Dermin, which has received Polish governmentgrant money to begin a clinical trial in Poland for the topical treatment of early stage CTCL patients. CTCL is a potentially deadlyform of skin cancer for which there are limited treatment options.

We also conducted a Phase II clinical trialfor WP1066 for the topical treatment of psoriasis, however this trial was terminated early as a significant number of patientsexperienced a non-permanent worsening of their psoriatic plaques after extended use of the drug, suggesting that its use as a topicalagent for non-life threatening diseases such as psoriasis will require further study to optimize dosing and scheduling regimens.

Scientific Rationale for WP1066 Portfolio

Cellular biology depends upon signaling mechanismsto regulate functions such as cell growth, death and adaptation. Signal “transduction” is such a mechanism that convertsan upstream stimulus to a cell into a specific cellular response. Signal transduction starts with a signal to a receptor or viaa compound capable of passing through the cell membrane and ends with a change in cell function. The end result of this signalis often the activation of “transcription”, whereby genetic information is expressed and, in the case of oncogenictranscription, disease processes are initiated or maintained.

Receptors span the cell membrane, with partof the receptor outside and part inside the cell. When a chemical signal represented by a specific protein binds to the outer portionof the receptor, it conveys another signal inside the cell. Often there is a cascade of signals within the cell, wherein an upstreaminducer starts a chain of events that resembles a domino effect. Collectively, this sequence is referred to as a “signalingpathway.” Eventually, the signal creates a change in the cell function by changing the expression of specific genes and productionof specific proteins within the cell, and again, in the case of tumor development, such expression results in unwanted oncogenicprocesses.

Importantly, while normal healthy cell functionrelies on signaling mechanisms, diseases are capable of co-opting these mechanisms with negative consequences. Oncogenic processes(including inflammation and proliferation) depend upon signaling pathways that are responsible for coordinating functions suchas cell growth, survival and cell differentiation. A particular class of proteins referred to as Signal Transducers and Activatorsof Transcription (such proteins are “STATs”) regulates the process of disease cell survival and proliferation, angiogenesisand immune system function and is persistently activated in a large number of human inflammatory processes and in hyper-proliferatingdiseases. Because certain of these proteins are known to be co-opted by tumor cells, we refer to them as “oncogenic transcriptionfactors,” of which certain STATs are a subset.

Some STATs, such as STAT3, can be activatedby any one of many different upstream inducers, making them very difficult to target by blocking just one or more of these upstreaminducers. We believe that blocking a targeted STAT directly rather than via its multiple upstream inducers should result in greaterefficacy with lower toxicity.

In the diagram shown below, any one of manydifferent pathways (categorized as Growth Factor Receptors, Cytokine Receptors and Non-Receptor Tyrosine Kinases) triggers theactivation of STAT3 proteins in a process called “phosphorylation”. In this process, phosphates attach to correspondingreceptors on STAT3 and, eventually, two phosphorylated STAT3 proteins (“p-STAT3”) bind together in a pair referredto as a “dimer”. Once the dimer is formed, it enters the cell nucleus and triggers gene transcription. Conversely,if we reduce the presence of p-STAT3 before dimers can be formed, we can prevent the triggering of gene transcription and effectivelyinhibit the disease process.

The upstream effectors shown in the above diagram(SRC, JAK and ABL) are just some of those capable of activating STAT3 once they themselves are activated by a variety of signalcompounds. The complexity and diversity of pathways capable of activating STAT3 make it very difficult to develop effective drugsthat attempt to target the upstream effectors. Furthermore, many of these upstream pathways are necessary for normal healthy cellfunction, so blocking them indiscriminately can lead to unwanted toxicities.

Published research has identified STAT3 as amaster regulator of a wide range of tumors and clearly links STAT3 activation with the progression of these tumors. For this reason,it is believed that direct inhibition of p-STAT3 should be an effective way to reduce or eliminate the progression of these diseases.

Many research efforts havebeen directed toward development of specific methods to control activation of STAT3, but most have focused on targeting the upstreameffectors of these pathways like growth factors, cytokines, and specific kinases including Janus kinases (JAKs). However, we believethat the multifactorial nature of the activation of STAT3 limits the effectiveness of such upstream approaches. Since the activityof p-STAT3 is a final and determinative step in triggering unwanted transcription, we believe it is preferable to inhibit p-STAT3more directly and independently from upstream effectors.

We believe the WP1066 Portfoliorepresents a novel class of agents capable of hitting multiple targets, including p-STAT3, regardless of their upstream methodof activation. By inhibiting the presence of p-STAT3, WP1066 directly attacks tumor cells, as has been demonstrated in numerouspreclinical tests involving a wide range of tumor cells. We believe the effectiveness of WP1066 is not only the result of attackingtumors directly, but also indirectly by stimulating the immune system, increasing the patient’s natural ability to fightoff tumor development. STAT1 is believed to stimulate T-cell activity and thereby the immune system responsible for fighting tumors.WP1066 has been shown to increase the activity of STAT1 at the same time it inhibits the activity of p-STAT3. We believe this dualactivity makes WP1066 a uniquely promising anticancer drug candidate.

We believe the combination of the direct and indirect effects of WP1066 are to be credited withsignificant tumor suppression and increased survival in a number of in vitro cancer models. Below is one example showinga dramatic increase in survival by treating mice with metastatic melanoma with WP1066.

The WP1122 Portfolio

We have a license agreement with MD Andersonpursuant to which we have been granted a royalty-bearing, worldwide, exclusive license for the patent and technology rights relatedto our WP1122 Portfolio and similar molecules targeting the treatment of GBM and related CNS malignancies.

We believe this technology has the potentialto target a wide variety of solid tumors, which eventually become resistant to all treatments, and thereby provide a large andimportant opportunity for novel drugs. Notwithstanding this potential, we are focused on the treatment of central nervous systemmalignancies and especially GBM. Although less prevalent than some larger categories of solid tumors, cancers of the central nervoussystem are particularly aggressive and resistant to treatment. The prognosis for such patients can be particularly grim and thetreatment options available to their physicians are among the most limited of any cancer.

The American Cancer Society has estimated 23,770new cases of brain and other nervous system cancers will occur in the United States in 2016, resulting in 16,050 deaths. Despitethe severity and poor prognosis of these tumors, there are few FDA-approved drugs on the market.

We have proof of concept data for WP1122, includingin vitro activity against cancer cell lines, as well as data on survival of animals subjected to xenografts of human braintumors, including data regarding biodistribution and pharmacokinetics. In non-optimal doses and treatment regimes, WP1122 performedequal to or better than the current market leader, temozolomide and provided for superior survival for animals treated in combinationwith temozolomide.

Scientific Rationale for WP1122

Science has recognized that many cancer cellshave a unique metabolism, distinct from that of normal cells. Dubbed the “Warburg Effect” by its discoverer, tumorsrely preferentially on glycolysis for the metabolism of glucose, even in the presence of abundant oxygen, for energy (adenosinetriphosphate (ATP)) production. This alternative form of energy production makes cancer cells as much as 17 times more dependenton glucose than normal cells.

The fundamental mechanism for imaging activelygrowing tumors using positron emission tomography (PET scans) is the Warburg Effect. A radiolabeled glucose decoy called F18DGaccumulates disproportionately in tumors because of their dramatically increased rate of glucose uptake and accumulation.

Researchers have theorized that if a tumor’saccess to glucose could be blocked the tumor could be starved out of existence. Previous attempts at targeting the metabolism oftumor cells have failed due to the rapid metabolism and short half-life (minutes) of the drugs being investigated. Efforts to targettumor metabolism in the brain were further thwarted by the inability to get glycolytic inhibitors into the brain in sufficient/therapeuticamounts due to the presence of what is called the “blood brain barrier”.

We believe WP1122 has the potential for developinga technology platform for enabling increased cellular uptake, increased drug half-life and, importantly, an increased ability tocross the blood brain barrier, enabling greater uptake in the brain. Our approach was inspired by the same principle that distinguishesmorphine from heroin. Heroin is chemically the diacetyl ester of morphine. While morphine has a limited ability to cross the bloodbrain barrier (making it a good candidate for pain killing without impairing mental function), its diacetyl form, heroin, has theability to accumulate in the brain by 10 to 100 times more than morphine. Once across the blood brain barrier, the acetyl groupsare cleaved off by natural enzyme esterases, leaving pure morphine to accumulate in the brain. Similarly, we believe, based onpre-clinical testing, that WP1122, the diacetyl form of a glucose analog and decoy known as “2-DG”, crosses the bloodbrain barrier where its acetyl groups are cleaved off, allowing the resulting 2-DG to accumulate in the brain at a much higherrate than free 2-DG can do by itself.

Adding to the difficulty in getting free 2-DGacross the blood brain barrier in therapeutic quantities is the relatively short half-life of 2-DG. The free form of 2-DG is rapidlymetabolized and rendered ineffective within minutes of entering the body. In contrast, WP1122 has a half-life of approximately6 hours, making it much more feasible to deliver quantities adequate for a therapeutic effect. In addition, we believe WP1122 mayrepresent an improvement to current PET scan diagnostics techniques because of its unique ability to cross the blood brain barrier.

Overview of the market for our anti-cancer drugs

Cancer is the second leading cause of deathin the United States behind heart disease. In 2014, an estimated 14.5 million people in the United States were living with a pastor current diagnosis of cancer and, in 2016, the National Institutes of Health estimates that nearly 1.7 million new cases willbe diagnosed and almost 600,000 Americans will die from cancer.

Source: American Cancer Society - Cancer Facts & Figures2016

Digestive, reproductive, breast and respiratorycancers comprise 65% of expected cancer diagnoses in 2016, while cancers like leukemia and brain tumors are considered “rarediseases”. Leukemia in particular, can be divided into acute, chronic and other, with acute lymphoblastic leukemia (ALL)and acute myeloid leukemia (AML) comprising 26,540 of the estimated 60,140 new cases expected in the United States this year.

The worldwide cancer drug business has beenestimated to represent approximately $100 billion in annual sales. Our lead drug, Annamycin, is in a class of drugs referred toas anthracyclines, which are chemotherapy drugs designed to destroy the DNA of targeted cancer cells. The most common approvedanthracyclines are daunorubicin and doxorubicin and, prior to the expansion of their generic equivalents, annual revenues generatedfrom anthracyclines have been estimated in the range of $600 million. Acute leukemia is one of a number of cancers that are treatedwith anthracyclines. One industry report estimates that annual drug revenues generated from the demand for AML-related therapiesin the United States, United Kingdom, France, Germany, Italy and Spain were in the range of $151 million in 2012, and we believethat this number may increase if and when improved AML treatments are available.

Our other two active development projects haveapplications (among others) in the treatment of brain tumors, another rare disease for which there are few available treatments.The leading brain tumor drug is temozolomide, a drug introduced under the brand name Temodar. In 2012, one industry source reportedannual revenues of approximately $882 million for Temodar before the expiration of its patent protection, at which point genericversions of the drug began to enter the market and reduce prices.

The Orphan Drug Act of 1983 and other legislativeinitiatives provide incentives and in some cases, accelerated approval pathways for companies that pursue the development of treatmentsfor rare diseases and diseases for which there are few or no acceptable available treatment alternatives. Over the last 10 years,an increasing number of companies have begun using these designations to obtain new drug approvals for drugs where patent coveragehas expired and/or where accelerated approval appears possible. An IMS Health report estimated that, in 2013, the sale of drugswith full or partial Orphan Drug status represented approximately $29 billion in revenue. We consider obtaining Orphan Drug statusand accelerated approval pathways to be an important part of our development strategy for our drug candidates. Notwithstandingthese potential opportunities, we can provide no assurance that our drugs will receive Orphan Drug status or any other specialdesignation that could, among other things, provide for accelerated approval.

Our License Agreements

We acquired the rights and obligations underthe Patent and Technology License Agreement entered into by and between IntertechBio and MD Anderson dated April 2, 2012 (the “IntertechBioAgreement”). Pursuant to that license agreement and an October 2015 amendment, IntertechBio 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. In consideration, IntertechBio agreed to make payments to MD Anderson, including an up-front payment, license documentationfee, annual maintenance fee, milestone payments and minimum annual royalty payments for sales of products developed under the licenseagreement. Specifically, under the IntertechBio Agreement, IntertechBio agreed to pay a nonrefundable upfront documentation feein the amount of $80,000; annual maintenance fee in the amount of $10,000 on the first anniversary of the effective date of theIntertechBio Agreement, $20,000 on the second anniversary of the effective date of the agreement, $40,000 on the third anniversaryof the effective date of the agreement, $60,000 on the fourth anniversary of the effective date of the agreement, $80,000 on thefifth anniversary of the effective date of the agreement and $100,000 on the sixth anniversary of the effective date of the agreementand every anniversary thereafter, except that such payments will no longer be due upon the first sale of a licensed product. Underthe IntertechBio Agreement, IntertechBio also agreed to make a minimum annual royalty in the amount of $200,000 for the first anniversaryfollowing the first sale of a licensed product, $400,000 for the second anniversary following the first sale of a licensed product,and $600,000 for the third year following the first sale of a licensed product and every anniversary thereafter. IntertechBio alsoagreed to make one-time milestone payments in the amount of $200,000 upon commencement of a Phase II study for a licensed product,$250,000 upon commencement of a Phase III study for a licensed product, $400,000 upon filing of a New Drug Application (“NDA”)for a licensed product and $500,000 upon receipt of market approval for sale of a licensed product. MD Anderson has the right toterminate the agreement upon advance notice in the event of a default by IntertechBio. The agreement will also be terminated immediatelyupon IntertechBio’s insolvency. Additionally, MD Anderson has the right to terminate the license agreement if (i) a preclinicaltoxicology program for a licensed product is not initiated within one year of the of effective date of the amendment, (ii) an investigationalnew drug application (IND) is not filed with the Food and Drug Administration (FDA) for a Phase I study for a licensed productwithin three years of the effective date of the amendment, or (iii) a Phase I study for a licensed product is not commenced withinfive years of the effective date of the amendment. The IntertechBio Agreement will expire upon the expiration of the licensed intellectualproperty. In August 2015, the IntertechBio Agreement and amendments thereto were assigned to MBI. Under the assignment, MBI hasassumed the rights and obligations of IntertechBio including, without limitation, the right to manufacture, have manufactured,use, import, offer to sell and/or sell products worldwide for any indication under the licensed intellectual property with theright to sublicense. However, the rights obtained pursuant to the assignment of the IntertechBio Agreement are made subject tothe rights of the U.S. government to the extent that the technology covered by the licensed intellectual property was developedunder a funding agreement between MD Anderson and the U.S. government. All out-of-pocket expenses incurred by MD Anderson in filing,prosecuting and maintaining the licensed patents have been and shall continue to be assumed by MBI. MBI is not required to issueMD Anderson any equity upon the completion of any milestones. On October 8, 2015, IntertechBio entered into a letter agreementwith MD Anderson where MD Anderson agreed to receive past due maintenance fees and patent expenses of $98,108 owed by IntertechBioin four installments. The past due amount is related to certain metabolic inhibitor technology license that was assigned to MBIby IntertechBio and was owed by IntertechBio prior to MBI’s acquisition of the license. Pursuant to the letter, IntertechBioCorporation also agreed to pay $65,504 patent fees to a law firm. In order to have the license in good standing, MBI agreed topay MD Anderson the $98,108 and the $65,504 to a law firm on behalf of IntertechBio Corporation; all such payments have been madein full by MBI.

Due to our acquisition of Moleculin, LLC, weobtained a royalty-bearing, worldwide, exclusive license to intellectual property rights, including patent rights related to ourWP1066 drug product candidate from MD Anderson. Moleculin, LLC entered into a June 2010 Patent and Technology License Agreementwith MD Anderson (the “Moleculin Agreement”). Under the Moleculin Agreement and an October 2015 amendment, Moleculin,LLC obtained the right to manufacture, have manufactured, use, import, offer to sell and/or sell products worldwide for any indicationunder the licensed intellectual property with the right to sublicense. In consideration, Moleculin, LLC agreed to make paymentsto MD Anderson including an up-front payment, milestone payments and minimum annual royalty payments for sales of products developedunder the license agreement. Specifically, under the Moleculin Agreement, Moleculin, LLC agreed to pay a nonrefundable upfrontdocumentation fee in the amount of $223,585; annual maintenance fee in the amount of $20,000 on the first anniversary of the effectivedate of the Moleculin Agreement, which shall increase in $10,000 increments on an annual basis thereafter up to a maximum of $100,000,except that such payments will no longer be due upon marketing approval in any country of a licensed product. Under the MoleculinAgreement, Moleculin, LLC also agreed to make a minimum annual royalty payment to MD Anderson in the amount of $200,000 after thefirst sale of a licensed product. Moleculin, LLC also agreed to make one-time milestone payments in the amount of $150,000 uponcommencement of the first Phase III study for a licensed product within the United States, Europe, China or Japan; $500,000 uponsubmission of the first NDA for a licensed product in the United States; and $600,000 upon receipt of the first marketing approvalfor sale of a licensed product in the United States. MD Anderson has the right to terminate the Moleculin Agreement upon advancednotice in the event of a default by Moleculin, LLC. Moleculin, LLC has the right to terminate the Moleculin Agreement for any reasonupon advance written notice to MD Anderson. The Moleculin Agreement will also be terminated immediately upon Moleculin, LLC’sinsolvency. Per the October 2015 amendment to the Moleculin Agreement, MD Anderson relinquished any rights to any equity previouslydue MD Anderson in Moleculin, LLC. Upon completion of our acquisition of Moleculin, LLC, we assumed the rights and obligationsof Moleculin, LLC including, without limitation, the right to manufacture, have manufactured, use, import, offer to sell and/orsell products worldwide for any indication under the licensed intellectual property with the right to sublicense. However, therights we have obtained pursuant to the assignment of the Moleculin Agreement are made subject to the rights of the U.S. governmentto the extent that the technology covered by the licensed intellectual property was developed under a funding agreement betweenMD Anderson and the U.S. government. All out-of-pocket expenses incurred by MD Anderson in filing, prosecuting and maintainingthe licensed patents have been and shall continue to be assumed by us. MBI is not required to issue MD Anderson any equity in ourcompany upon the completion of any milestones.

On October 8, 2015, Moleculin, LLC enteredinto a letter agreement with MD Anderson for Moleculin, LLC’s past due fees to MD Anderson in the amount of $691,186 of which$300,000 had been paid prior to the letter agreement. Pursuant to the letter agreement, MD Anderson agreed to receive the remainingpast due fee in three installments, which payments have been made in full.

Moleculin, LLC out-licensed certain intellectualproperty rights including rights covering the WP1066 drug product candidate to Dermin (“Moleculin Out-License Agreement”).The licensed intellectual property includes rights obtained by Moleculin, LLC pursuant to a license agreement with MD Anderson(“Moleculin-MD Anderson Agreement”). Under the Moleculin Out-License Agreement, Moleculin, LLC granted Dermin a royalty-bearing,exclusive license to manufacture, have manufactured, use, import, offer to sell and/or sell products in the field of human therapeuticsunder the licensed intellectual property in the countries of Belarus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland,Romani, Slovakia and Ukraine (“licensed territories”). Additionally, Moleculin, LLC agreed to develop and provide adossier containing data related to the licensed subject matter to Dermin. In consideration, Dermin agreed to make payments to Moleculin,LLC, including upfront development fees, annual royalty payments, sublicense fee, and milestone payments. Specifically, under theMoleculin Out-License Agreement, Dermin agreed to make a nonrefundable upfront dossier development payment in the amount of $100,000;a service fee in the amount of $100,000 for assistance provided to Dermin in securing additional funding; and royalty paymentson sales of any licensed product at a rate of no less than the royalty rate due to MD Anderson under the Moleculin-MD AndersonAgreement plus 1%. Dermin also agreed to provide a percentage of certain consideration Dermin receives pursuant to sublicense agreementsin the amount of 25% prior to completion of a Phase IIb clinical study in a licensed territory and 10% on or after completion ofa Phase IIb clinical study in a licensed territory, provided, however, if the sublicense fee is less than the sublicense fee dueto MD Anderson under the Moleculin-MD Anderson Agreement, then Dermin shall be obligated to pay no less than the amount due toMD Anderson plus 5%. Also under the Moleculin Out-License Agreement, Dermin agreed to pay all out-of-pocket expenses incurred byMoleculin, LLC in filing, prosecuting and maintaining the licensed patents for which the license has been granted. The partiesto the Moleculin Out-License Agreement each have the right to terminate the agreement upon advance notice in the event of a defaultby the other party. Dermin has the right to terminate the agreement if (i) Moleculin, LLC fails to timely provide the dossier toDermin after Moleculin, LLC’s filing of an NDA for a licensed product in the United States; or (ii) Moleculin, LLC does notcooperate in assisting Dermin to secure funds to develop the licensed subject matter. Upon completion of our acquisition of Moleculin,LLC, we assumed the rights and obligations of Moleculin, LLC under the Moleculin Out-License Agreement.

We acquired the rights and obligations tothe Patent and Technology License Agreement entered into by and between IntertechBio and Dermin dated April 15, 2011 (the “IntertechBioOut-License Agreement”). Pursuant to that license agreement, IntertechBio exclusively out-licensed intellectual propertyrights to Dermin, including rights covering the WP1122 drug product candidate obtained from MD Anderson pursuant to the IntertechBioAgreement. Under the IntertechBio Out-License Agreement, IntertechBio granted Dermin 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 intellectualproperty in the countries of Belarus, Russia, Kazakhstan, Uzbekistan, Turkmenistan, Czech Republic, Estonia, Hungary, Latvia, Lithuania,Poland, Romania, Slovakia and Ukraine (“licensed territories”). Additionally, IntertechBio agreed to develop and providea dossier containing data related to the licensed subject matter to Dermin. In consideration, Dermin agreed to make payments toIntertechBio, including upfront development fees, annual royalty payments, sublicense fees, and milestone payments. Specifically,under the IntertechBio Out-licensing Agreement, Dermin agreed to make a nonrefundable upfront dossier development fee in the amountof $35,000; a service fee in the amount of $40,000 for assistance provided to Dermin in securing additional funding; and royaltypayments on sales of any licensed product at a rate of no less than the royalty rate due to MD Anderson under the IntertechBioAgreement plus 2%. Dermin also agreed to provide a percentage of certain consideration Dermin receives pursuant to sublicense agreementsin the amount of 25% prior to completion of a Phase IIb clinical study in a licensed territory and 10% on or after completion ofa Phase IIb clinical study in the licensed territories, provided, if the sublicense fee is less than the sublicense fee due toMD Anderson under the IntertechBio Agreement, then Dermin shall be obligated to pay not less than the amount due to MD Andersonplus 5%. Also under the IntertechBio Out-Licensing Agreement, Dermin agreed to pay all out-of-pocket expenses incurred by IntertechBioin filing, prosecution and maintaining the licensed patents for which the license has been granted. The parties to the IntertechBioOut-licensing Agreement each have the right to terminate the agreement upon advanced notice in the event of a default by the otherparty. Dermin has the right to terminate the agreement if (i) IntertechBio fails to timely provide the dossier to Dermin afterIntertechBio’s filing of an NDA for a licensed product in the United States; or (ii) IntertechBio does not cooperate in assistingDermin to secure funds to develop the licensed subject matter.

We entered into a May 2016 out-licensingagreement with HPI, pursuant to which we granted HPI certain intellectual property rights, including rights covering the potentialdrug candidate, WP1066 (“HPI Out-Licensing Agreement”). Under the HPI Out-Licensing Agreement we are required to makean upfront $100,000 payment and quarterly payments in the amount of $37,500 for the first four quarters following the effectivedate of the HPI Out-Licensing Agreement and $75,000 per quarter for the following eight quarters thereafter in consideration forthe right to development data related to the development of licensed products. Notwithstanding our obligation to make the foregoingpayments, the HPI Out-Licensing Agreement does not obligate HPI to conduct any specific research or to meet any milestones. Uponpayment in the amount of $1,000,000 to HPI within three years of the effective date of the HPI Out-Licensing Agreement we willregain all rights to the licensed subject matter and rights to any and all development data and any regulatory submissions includingany IND, NDA or ANDA related to the licensed subject matter. In the event that we do not exercise our right to regain our rightsto the licensed subject matter within three years of the effective date of the HPI Out-Licensing Agreement the license grantedto HPI shall convert to an exclusive license upon HPI’s written notice and we shall be obligated to transfer all existingdata relating to licensed subject matter including any development data and any IND to HPI.

Annamed out-licensed certain intellectualproperty rights including rights covering the potential drug product, Annamycin to Dermin pursuant to a Patent and Technology Developmentand License Agreement dated June 28, 2012 (the “Annamed Agreement”). The licensed intellectual property includes rightsobtained by Annamed pursuant to a license agreement with MD Anderson (“Annamed-MD Anderson Agreement”). Under the AnnamedAgreement, Annamed granted Dermin a royalty-bearing, exclusive license to manufacture, have manufactured, use, import, offer tosell and/or sell products in the field of human therapeutics under the licensed intellectual property in the countries of Poland,Ukraine, Czech Republic, Hungary, Romania, Slovakia, Belarus, Lithuania, Latvia, Estonia, Netherlands, Turkey, Belgium, Switzerland,Austria, Sweden, Greece, Portugal, Norway, Denmark, Ireland, Finland, Luxembourg, Iceland, Kazachstan, Russian Federation, Uzbekistan,Georgia, Armenia, Azerbaijan and Germany (“Annamed licensed territories”). Additionally, Annamed agreed to developand provide a dossier containing data related to the licensed subject matter to Dermin. In consideration, Annamed agreed to providea running royalty at a rate of no less than the royalty due to MD Anderson under the Annamed-MD Anderson Agreement plus 2.5% forthe sale of any licensed product in the Annamed licensed territories excluding Germany and at a rate of 15% for the sale of anylicensed product in Germany. Dermin also agreed to provide a percentage of certain consideration Dermin receives pursuant to sublicenseagreements in the amount of 25% prior to completion of a Phase IIb clinical study in an Annamed licensed territory and 10% on orafter completion of a Phase IIb clinical study in an Annamed licensed territory, provided, however, if the sublicense fee is lessthan the sublicense fee due to MD Anderson under the Annamed-MD Anderson Agreement, then Dermin shall be obligated to pay no lessthan the amount due to MD Anderson plus 5%. Also under the Annamed Agreement, Dermin agreed to pay all out-of-pocket expenses incurredby Annamed in filing, prosecuting and maintaining the licensed patents for which the license has been granted. Annamed has theright to terminate the Annamed Agreement as to any country within the Annamed licensed territories if Dermin fails to provide evidenceof its use of commercially reasonable efforts to commercialize a licensed product in such country within ninety days of Annamed’swritten request. The Annamed Agreement may also be terminated by Annamed upon advanced written notice in the event that Dermindefaults. Dermin has the right to terminate the agreement if (i) Annamed fails to timely provide the documents and informationrequired for Dermin to prepare a dossier within 30 days of Annamed’s filing of an NDA for a licensed product in the UnitedStates; or (ii) Annamed does not cooperate in assisting Dermin to secure funds to develop the licensed subject matter. As of August2015, we have obtained the rights and obligations of Annamed under the Annamed Agreement.

Competition

We operate in a highly competitive segmentof the pharmaceutical market, which market is highly competitive as a whole. We face competition from numerous sources includingcommercial pharmaceutical and biotechnology enterprises, academic institutions, government agencies, and private and public researchinstitutions. Many of our competitors may have significantly greater financial, product development, manufacturing and marketingresources. Additionally, many universities and private and public research institutes are active in cancer research, and some maybe in direct competition with us. We may also compete with these organizations to recruit scientists and clinical development personnel.Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangementswith large and established companies.

The unmet medical need for more effectivecancer therapies is such that anticancer drugs are, by far, the leading class of drugs in development. These include a wide arrayof products against cancer targeting many of the same indications as our drug candidates. While the introduction of newer targetedagents may result in extended overall survival, induction therapy regimens are likely to remain a cornerstone of cancer treatmentin the foreseeable future.

There are a number of established therapiesthat may be considered competitive for the cancer indications for which we intend to develop our lead product, Annamycin. A keyconsideration when treating AML patients is whether the patient is suitable for intensive therapy. The standard of care for thetreatment of newly diagnosed AML patients who can tolerate intensive therapy is cytarabine in combination with an anthracycline(i.e., doxorubicin or daunorubicin) – for some patients, primarily those less than 60 years of age, a stem cell transplantcould also be considered if the induction regimen is effective in attaining a CR (Complete Response). The regimen of cytarabinein combination with an anthracycline has been the standard of care for decades. A patient not suitable for intensive therapy maybe offered the option for low-intensity therapy such as low-dose cytarabine, azacitidine or decitabine. It should be noted that,in the U.S., these are not approved by the FDA for the treatment of AML patients and there remains no effective therapy for thesepatients or for relapsed or refractory AML. The initial focus for Annamycin development is in patients for whom the standard inductionregimen has failed. Also, several major pharmaceutical companies and biotechnology companies are aggressively pursuing new cancerdevelopment programs for the treatment of AML.

A number of attempts have been made or areunder way to provide an improved treatment for AML. Recently, Celator Pharmacetuicals, reported Phase III clinical trial resultsfor a new combined formulation of cytarabine and daunorubicin (commonly used induction therapy drugs) they call Vyxeos. This newliposome formulation provides a 5:1 ratio of cytarabine and daunorubicin in each of three injections. When compared with patientsreceiving 7 injections of cytarabine and 3 injections of daunorubicin (traditional 7+3 induction therapy), patients receiving Vyxeosachieved an average increase in overall survival of approximately 3.5 months (9.5 months compared with 6 months). Despite thisextension of overall survival, Vyxeos did not reduce the toxic side effects of daunorubicin (including cardiotoxicity) and it failedto qualify a significant majority of patients for curative bone marrow transplant.

Drugs attempting to target a subset of AMLpatients who present with particular anomalies involving a gene referred to as FLT3 are currently in clinical trials. Other approachesto improve the effectiveness of induction therapy are in early stage clinical trials and, although they do not appear to addressthe underlying problems with anthracyclines, we can provide no assurance that such improvements, if achieved, would not adverselyimpact the need for improved anthracyclines. A modified version of doxorubicin designed to reduce cardiotoxicity is in clinicaltrials for the treatment of sarcoma and, although this drug does not appear to address multidrug resistance and is not currentlyintended for the treatment of acute leukemia, we can provide no assurance that it will not become a competitive alternative toAnnamycin. Although we are not aware of any other single agent therapies in clinical trials that would directly compete againstAnnamycin in the treatment of relapsed and refractory AML, we can provide no assurance that such therapies are not in development,will not receive regulatory approval and will reach market before our drug candidate Annamycin. In addition, any such competingtherapy may be more effective and / or cost-effective than ours.

Government Regulation

Government authorities in the U.S., at thefederal, state and local level, and other countries extensively regulate, among other things, the research, development, testing,manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approvalmonitoring and reporting, marketing and export and import of products such as those we are developing. The pharmaceutical drugproduct candidates that we develop must be approved by the FDA before they may be legally marketed.

In the United States, the FDA regulatespharmaceutical products under the Federal Food, Drug and Cosmetic Act, and implementing regulations. Pharmaceutical products arealso subject to other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and thesubsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantialtime and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product developmentprocess, approval process or after approval, may subject an applicant to administrative or judicial sanctions. FDA sanctions couldinclude refusal to approve pending applications, withdrawal of an approval, a clinical hold, warning letters, product recalls,product seizures, total or partial suspension of production or distribution injunctions, fines, refusals of government contracts,restitution, disgorgement or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverseeffect on us. The process required by the FDA before a non-biological pharmaceutical product may be marketed in the U.S. generallyinvolves the following:

The lengthy process of seeking requiredapprovals and the continuing need for compliance with applicable statutes and regulations require the expenditure of substantialresources and approvals are inherently uncertain.

Before testing any compounds with potentialtherapeutic value in humans, the pharmaceutical product candidate enters the preclinical testing stage. Preclinical tests includelaboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies to assess the potential safetyand activity of the pharmaceutical product candidate. These early proof-of-principle studies are done using sound scientific proceduresand thorough documentation. The conduct of the single and repeat dose toxicology and toxicokinetic studies in animals must complywith federal regulations and requirements including good laboratory practices. The sponsor must submit the results of the preclinicaltests, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinicalprotocol, to the FDA as part of the IND. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDAhas concerns and notifies the sponsor. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns beforethe clinical study can begin. If resolution cannot be reached within the 30-day review period, either the FDA places the IND onclinical hold or the sponsor withdraws the application. The FDA may also impose clinical holds on a pharmaceutical product candidateat any time before or during clinical studies due to safety concerns or non-compliance. Accordingly, we cannot be sure that submissionof an IND will result in the FDA allowing clinical studies to begin, or that, once begun, issues will not arise that suspend orterminate such clinical study.

Clinical studies involve the administrationof the pharmaceutical product candidate to healthy volunteers or patients under the supervision of qualified investigators, generallyphysicians not employed by or under the clinical study sponsor’s control. Clinical studies are conducted under protocolsdetailing, among other things, the objectives of the clinical study, dosing procedures, subject selection and exclusion criteria,how the results will be analyzed and presented and the parameters to be used to monitor subject safety. Each protocol must be submittedto the FDA as part of the IND. Clinical studies must be conducted in accordance with GCP. Further, each clinical study must bereviewed and approved by an independent institutional review board (“IRB”) at, or servicing, each institution at whichthe clinical study will be conducted. An IRB is charged with protecting the welfare and rights of study participants and considerssuch items as whether the risks to individuals participating in the clinical studies are minimized and are reasonable in relationto anticipated benefits. The IRB also approves the informed consent form that must be provided to each clinical study subject orhis or her legal representative and must monitor the clinical study until completed.

Human clinical studies are typically conductedin three sequential phases that may overlap or be combined:

Post-approval studies, or Phase 4 clinicalstudies, may be conducted after initial marketing approval. These studies are used to gain additional experience from the treatmentof patients in the intended therapeutic indication. The FDA also may require post-marketing testing, known as Phase 4 testing,risk minimization action plans and surveillance to monitor the effects of an approved product or place conditions on an approvalthat could restrict the distribution or use of the product.

Progress reports detailing the results ofthe clinical studies must be submitted at least annually to the FDA and written IND safety reports must be submitted to the FDAand the investigators for serious and unexpected adverse events or any finding from tests in laboratory animals that suggests asignificant risk for human subjects. Phase 1, Phase 2 and Phase 3 clinical studies may not be completed successfully within anyspecified period, if at all. The FDA or the sponsor or its data safety monitoring board may suspend a clinical study at any timeon various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk.Similarly, an IRB can suspend or terminate approval of a clinical study at its institution if the clinical study is not being conductedin accordance with the IRB’s requirements or if the pharmaceutical product has been associated with unexpected serious harmto patients.

Concurrent with clinical studies, companiesusually complete additional animal studies and must also develop additional information about the chemistry and physical characteristicsof the pharmaceutical product as well as finalize a process for manufacturing the product in commercial quantities in accordancewith cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the pharmaceuticalproduct candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the finalpharmaceutical product. Additionally, appropriate packaging must be selected and tested and stability studies must be conductedto demonstrate that the pharmaceutical product candidate does not undergo unacceptable deterioration over its shelf life.

The results of product development, preclinicalstudies and clinical studies, along with descriptions of the manufacturing process, analytical tests conducted on the chemistryof the pharmaceutical product, proposed labeling and other relevant information are submitted to the FDA as part of an NDA requestingapproval to market the product. The submission of an NDA is subject to the payment of substantial user fees. A waiver of such feesmay be obtained under certain limited circumstances.

The FDA reviews all NDAs submitted beforeit accepts them for filing and may request additional information rather than accepting an NDA for filing. Once the submissionis accepted for filing, the FDA begins an in-depth review of the NDA. Under the goals and policies agreed to by the FDA under thePrescription Drug User Fee Act (“PDUFA”), the FDA has 10 months after the 60-day filing date in which to complete itsinitial review of a standard NDA and respond to the applicant, and six months after the 60-day filing date for a priority NDA.The FDA does not always meet its PDUFA goal dates for standard and priority NDAs.

After the NDA submission is accepted forfiling, the FDA reviews the NDA application to determine, among other things, whether the proposed product is safe and effectivefor its intended use, and whether the product is being manufactured in accordance with cGMP to assure and preserve the product’sidentity, strength, quality and purity. The FDA may refer applications for novel pharmaceutical products or pharmaceutical productswhich present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians andother experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions.The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when makingdecisions. During the pharmaceutical product approval process, the FDA also will determine whether a risk evaluation and mitigationstrategy (“REMS”) is necessary to assure the safe use of the pharmaceutical product. If the FDA concludes that a REMSis needed, the sponsor of the NDA must submit a proposed REMS; the FDA will not approve the NDA without a REMS, if required.

Before approving an NDA, the FDA will inspectthe facilities at which the product is manufactured. The FDA will not approve the product unless it determines that the manufacturingprocesses and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product withinrequired specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites as wellas the site where the pharmaceutical product is manufactured to assure compliance with GCP and cGMP. If the FDA determines theapplication, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submissionand often will request additional testing or information. In addition, the FDA will require the review and approval of productlabeling.

The NDA review and approval process is lengthyand difficult and the FDA may refuse to approve an NDA if the applicable regulatory criteria are not satisfied or may require additionalclinical data or other data and information. Even if such data and information is submitted, the FDA may ultimately decide thatthe NDA does not satisfy the criteria for approval. Data obtained from clinical studies are not always conclusive and the FDA mayinterpret data differently than we interpret the same data. The FDA will issue a complete response letter if the agency decidesnot to approve the NDA. The complete response letter usually describes all of the specific deficiencies in the NDA identified bythe FDA. The deficiencies identified may be minor, for example, requiring labeling changes, or major, for example, requiring additionalclinical studies. Additionally, the complete response letter may include recommended actions that the applicant might take to placethe application in a condition for approval. If a complete response letter is issued, the applicant may either resubmit the NDA,addressing all of the deficiencies identified in the letter, or withdraw the application.

If a product receives regulatory approval,the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited,which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warningsor precautions be included in the product labeling. In addition, the FDA may require Phase 4 testing which involves clinical studiesdesigned to further assess pharmaceutical product safety and effectiveness and may require testing and surveillance programs tomonitor the safety of approved products that have been commercialized.

Expedited Development and Review Programs

The FDA has a Fast Track program that isintended to expedite or facilitate the process for reviewing new pharmaceutical products that meet certain criteria. Specifically,new pharmaceutical products are eligible for Fast Track designation if they are intended to treat a serious or life-threateningcondition and demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to thecombination of the product and the specific indication for which it is being studied. Unique to a Fast Track product, the FDA mayconsider for review sections of the NDA on a rolling basis before the complete application is submitted, if the sponsor providesa schedule for the submission of the sections of the NDA, if the FDA determines that the schedule is acceptable and if the sponsorpays any required user fees upon submission of the first section of the NDA.

Any product submitted to the FDA for market,including a Fast Track program, may also be eligible for other FDA programs intended to expedite development and review, such aspriority review and accelerated approval. Any product is eligible for priority review if it has the potential to provide safe andeffective therapy where no satisfactory alternative therapy exists or if it offers a significant improvement in the treatment,diagnosis or prevention of a disease compared to marketed products. The FDA will attempt to direct additional resources to theevaluation of an application for a new pharmaceutical product designated for priority review in an effort to facilitate the review.Additionally, a product may be eligible for accelerated approval. Pharmaceutical products studied for their safety and effectivenessin treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments mayreceive accelerated approval, which means that the products may be approved on the basis of adequate and well-controlled clinicalstudies establishing that the product has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit,or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity. As a condition of approval,the FDA may require that a sponsor of a pharmaceutical product receiving accelerated approval perform adequate and well-controlledpost-marketing clinical studies. In addition, the FDA currently requires as a condition for accelerated approval pre-approval ofpromotional materials, which could impact the timing of the commercial launch of the product. Fast Track designation, priorityreview and accelerated approval do not change the standards for approval but may expedite the development or approval process.

Post-Approval Requirements

Any pharmaceutical products for which theCompany receives FDA approvals are subject to continuing regulation by the FDA, including, among other things, record-keeping requirements,reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information, product samplingand distribution requirements, complying with certain electronic records and signature requirements and complying with FDA promotionand advertising requirements, which include, among others, standards for direct-to-consumer advertising, prohibitions on promotingpharmaceutical products for uses or in patient populations that are not described in the pharmaceutical product’s approvedlabeling (known as “off-label use”), industry-sponsored scientific and educational activities and promotional activitiesinvolving the internet. Failure to comply with FDA requirements can have negative consequences, including adverse publicity, enforcementletters from the FDA, actions by the U.S. Department of Justice and/or U.S. Department of Health and Human Services’ Officeof Inspector General, mandated corrective advertising or communications with doctors, and civil or criminal penalties. Althoughphysicians may prescribe legally available pharmaceutical products for off-label uses, manufacturers may not directly or indirectlymarket or promote such off-label uses.

We rely, and expect to continue to rely,on third parties for the production of clinical and commercial quantities of our products. Manufacturers of our products are requiredto comply with applicable FDA manufacturing requirements contained in the FDA’s cGMP regulations. cGMP regulations require,among other things, quality control and quality assurance, as well as the corresponding maintenance of records and documentation.Pharmaceutical product manufacturers and other entities involved in the manufacture and distribution of approved pharmaceuticalproducts are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannouncedinspections by the FDA and certain state agencies for compliance with cGMP and other laws. Accordingly, manufacturers must continueto expend time, money and effort in the area of production and quality control to maintain cGMP compliance. Discovery of problemswith a product after approval may result in restrictions on a product, manufacturer or holder of an approved NDA, including withdrawalof the product from the market. In addition, changes to the manufacturing process generally require prior FDA approval before beingimplemented and other types of changes to the approved product, such as adding new indications and additional labeling claims,are also subject to further FDA review and approval.

Patent Term Restoration and Marketing Exclusivity

Depending upon the timing, duration andspecifics of the FDA approval of the use of our pharmaceutical product candidates, some of our products covered by U.S. patentsmay be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonlyreferred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years ascompensation for patent term lost during product development and the FDA regulatory review process. However, patent term restorationcannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent termrestoration period is generally one-half the time between the effective date of an IND and the submission date of an NDA plus thetime between the submission date of an NDA and the approval of that application. Only one patent applicable to an approved pharmaceuticalproduct is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patentunless an extension is obtained. The U.S. Patent and Trademark Office, in consultation with the FDA, reviews and renders a decisionon the application for any patent term extension or restoration. In the future, we may be able to apply for extension of patentterm for one or more of our currently licensed patents or any future owned patents to add patent life beyond its current expirationdate, depending upon the expected length of the clinical studies and other factors involved in the filing of the relevant NDA.

Market exclusivity provisions under theU.S. Food, Drug, and Cosmetic Act can also delay the submission or the approval of certain applications of other companies seekingto reference another company’s NDA. Currently seven years of reference product exclusivity are available to pharmaceuticalproducts designated as Orphan Drugs, during which the FDA may not approve generic products relying upon the reference product’sdata. Pediatric exclusivity is another type of regulatory market exclusivity in the U.S. Pediatric exclusivity, if granted, addssix months to existing exclusivity periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivityprotection or patent term, may be granted based on the voluntary completion of pediatric clinical studies in accordance with anFDA-issued “Written Request” for such a clinical study.

Pharmaceutical Coverage, Pricing andReimbursement

Significant uncertainty exists as to thecoverage and reimbursement status of any pharmaceutical product candidates for which we may obtain regulatory approval. In theUnited States and in markets in other countries, sales of any products for which we receive regulatory approval for commercialsale will depend in part upon the availability of reimbursement from third-party payors. Third-party payors include governmentpayors such as Medicare and Medicaid, managed care providers, private health insurers and other organizations. The process fordetermining whether a payor will provide coverage for a pharmaceutical product may be separate from the process for setting theprice or reimbursement rate that the payor will pay for the pharmaceutical product. Third-party payors may limit coverage to specificpharmaceutical products on an approved list, or formulary, which might not, and frequently does not, include all of the FDA-approvedpharmaceutical products for a particular indication. Third-party payors are increasingly challenging the price and examining themedical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. A payor’sdecision to provide coverage for a pharmaceutical product does not imply that an adequate reimbursement rate will be approved.Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriatereturn on our investment in product development. In addition, in the United States there is a growing emphasis on comparative effectivenessresearch, both by private payors and by government agencies. We may need to conduct expensive pharmaco-economic studies in orderto demonstrate the medical necessity and cost-effectiveness of our products, in addition to the costs required to obtain the FDAapprovals. Our pharmaceutical product candidates may not be considered medically necessary or cost-effective. To the extent otherdrugs or therapies are found to be more effective than our products, payors may elect to cover such therapies in lieu of our productsand/or reimburse our products at a lower rate.

Different pricing and reimbursement schemesexist in other countries. In the European Community, governments influence the price of pharmaceutical products through their pricingand reimbursement rules and control of national healthcare systems that fund a large part of the cost of those products to consumers.Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement pricehas been agreed upon. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinicalstudies that compare the cost-effectiveness of a particular pharmaceutical product candidate to currently available therapies.Other member states allow companies to fix their own prices for medicines, but monitor and control company profits. The downwardpressure on healthcare costs in general, particularly prescription drugs, has become very intense. As a result, increasingly highbarriers are being erected to the entry of new products. In addition, in some countries, cross-border imports from low-priced marketsexert a commercial pressure on pricing within a country.

The marketability of any pharmaceuticalproduct candidates for which we may receive regulatory approval for commercial sale may suffer if the government and third-partypayors fail to provide adequate coverage and reimbursement. In addition, emphasis on managed care in the United States has increasedand we expect this will continue to increase the pressure on pharmaceutical pricing. Coverage policies and third-party reimbursementrates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for whichwe may receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

International Regulation

In addition to regulations in the UnitedStates, there are a variety of foreign regulations governing clinical studies and commercial sales and distribution of our currentand future product candidates. Whether or not FDA approval is obtained for a product, approval of a product must be obtained bythe comparable regulatory authorities of foreign countries, or jurisdictions such as the EU, before clinical studies or marketingof the product can commence in those countries. The approval process varies from country to country, and the time may be longeror shorter than that required for FDA approval. The requirements governing the conduct of clinical studies, product licensing,pricing and reimbursement vary greatly from country to country. In addition, certain regulatory authorities may require us to repeatpreviously conducted preclinical and/or clinical studies under specific criteria for approval in their respective country or jurisdictions,which may delay and/or increase the cost of approval in certain markets targeted for approval by us.

Employees

As of September 30, 2016, we had two full-timeemployees and four part-time employees, and accordingly, a high percentage of the work performed for our development projects isoutsourced to qualified independent contractors.

Legal Proceedings

We are not subject to any litigation.

Properties

Our corporate and executive offices arein located in a leased facility in Houston, Texas. The current lease is month-to-month but is expected to be renegotiated in thenext six months. We believe our facilities are sufficient to meet our current needs and that suitable space will be available asand when needed. We do not own any real property.

MANAGEMENT

The following table sets forth certain informationregarding our executive officers and directors as of November 28, 2016.

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

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

Jonathan P. Foster - Chief FinancialOfficer 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 ChiefFinancial Officer and Executive Vice President of InfuSystem Holdings, Inc., a national provider of infusion pumps and relatedservices to the healthcare industry. From May 2011 to January 2012, Mr. Foster served as a consultant to the Chief Financial Officerof LSG Sky Chefs, USA, Inc., a subsidiary of Deutsche Lufthansa AG. Mr. Foster served on the Board of Financial Institutions forthe State of South Carolina from 2006 to 2012. Mr. Foster is a Certified Public Accountant (South Carolina) and holds the designationof Chartered Global Management Accountant from the American Institute of Certified Public Accountants. He received his BS in Accountingfrom Clemson University in 1985.

Donald Picker, PhD - President andChief Operating Officer. Dr. Picker joined Moleculin, LLC in 2007 as its chief executive officer and has served as our chief operatingofficer 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 SynergyPharmaceuticals. 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 fromBrooklyn Polytechnic University and his PhD from SUNY Albany in 1975. Dr. Picker is currently devoting only part of his work timeto us, and provide services as needed by us.

Robert Shepard, MD, FACP, Chief MedicalOfficer. Dr. Shepard has served as our chief medical officer since June 2016. From 2013 until 2014, Dr. Shepardserved as vice president of scientific and medical affairs for Accelovance. Shepard has extensive research credentials in hematologyand oncology and is board certified in oncology, hematology and internal medicine. He has a wide array of experience in translationalmedicine and clinical research and has been actively involved in oncology research since 1970, responsible for the clinical developmentof several drugs and immune therapies for biopharmaceutical companies, including serving as the consulting Chief Medical Officerfor six companies. Dr. Shepard is a Magna Cum Laude graduate of Harvard University in biochemical sciences and molecular biophysicsand studied in the Harvard-M.I.T. Health Sciences program. He held fellowships in hematology and oncology at the Tufts-New EnglandMedical Center where he conducted laboratory research in leukemias, myeloma and myelodysplasia, as well as fellowship in pharmacologyand molecular genetics at the Dana-Farber Cancer Center and Harvard Medical School. Dr. Shepard holds academic appointments atHarvard 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 servesas Chairman of the Audit Committee for The University of Texas Health Science Center at Houston and, since June 2011, has beena member of The University of Texas at Austin, McCombs Graduate School of Business accounting faculty. Since January 2014, he alsohas been the Director of Energy Programs and Conferences for the Professional Development Institute. His past experience includesbeing an Editorial Advisor to the American Institute of Certified Public Accountants Journal of Accountancy and a contributingauthor for two accounting books. Mr. George graduated with accounting honors from the University of North Texas.

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 anda 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 internationalpartnerships, as well as on the design, construction, and licensure of protein manufacturing facilities. From July 2005 to December2009, Mr. Cannon was a member of the scientific advisory board of Trevi Health Ventures LP, a New York investment fund specializingin health care investments. From May 2005 until December 2011, Mr. Cannon was a partner in a private partnership formed to evaluateand perform preliminary development of intellectual property in the healthcare sector. Since 2005, Mr. Cannon has served as a boardmember 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. Cannonhas a degree in chemistry from Fordham College.

Jacqueline Northcut - Director.Ms. Northcut joined our board of directors upon our IPO. Ms. Northcut served as President and CEO of BioHouston from 2002 until2015. BioHouston, Inc. is a non-profit organization founded by Houston, Texas area academic/research institutions to assist inthe commercialization efforts of development stage life science and biotechnology companies. During this same period, Ms. Northcutbecame the founder and CEO of the Texas BioAlliance, an organization created to further assist with development efforts of biotechnologyand medical device companies in the state of Texas. In these capacities she organized the Texas Life Science Forum and the TexasLife Science CEO Summit, helping connect biotech CEOs with funding, technical, regulatory and other resources. Ms. Northcut waspreviously 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.

Director Independence

The rules of the Nasdaq Stock Market, orthe Nasdaq Rules, require a majority of a listed company’s board of directors to be composed of independent directors withinone year of listing. In addition, the Nasdaq Rules require that, subject to specified exceptions, each member of a listed company’saudit, compensation and nominating and governance committees be independent. Under the Nasdaq Rules, a director will only qualifyas an independent director if, in the opinion of our board of directors, that person does not have a relationship that would interferewith the exercise of independent judgment in carrying out the responsibilities of a director. The Nasdaq Rules also require thataudit 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 listedcompany may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other boardcommittee, accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any ofits subsidiaries or otherwise be an affiliated person of the listed company or any of its subsidiaries. In considering the independenceof compensation committee members, the Nasdaq Rules require that our board of directors must consider additional factors relevantto the duties of a compensation committee member, including the source of any compensation we pay to the director and any affiliationswith our company.

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

Compensation of Executive Officers

Summary Compensation Table

MBI was formed in July 2015. To provideyou with a complete picture of the compensation paid to our executive officers for the fiscal years ended December 31, 2015 and2014 when they acted in executive capacities for Moleculin, LLC and MBI, the following table and the related notes set forth informationrelating to the compensation paid to each of the named executive officers by Moleculin, LLC and us.

(1)          Represents the full grant date fair value of the optiongrant calculated in accordance with FASB ASC Topic 718. For a summary of the assumptions made in the valuation of these awards,please see Note 3 to our financial statements as of and for the period ended December 31, 2015 included elsewhere in this prospectus.

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

(3)          Mr. Ploth resigned as our chief financial officer inAugust 2016.

Employment Agreements

Klemp Employment Agreement

On October 13, 2016, we entered into anemployment agreement with Mr. Walter Klemp pursuant to which Mr. Klemp agreed to serve as our Chief Executive Officer commencingon such date. The agreement provides for an annual salary of $300,000, provided that Mr. Klemp has agreed to defer 50% of his salaryfor 12 months, which deferred salary will be payable upon Mr. Klemp’s termination or on June 1, 2019. If Mr. Klemp’semployment is terminated at our election without “cause” (as defined in the agreement), which requires 30 days advancednotice, or by Mr. Klemp for “good reason” (as defined in the agreement), Mr. Klemp shall be entitled to receive severancepayments equal to the greater of 12 months of Mr. Klemp’s base salary or the base salary Mr. Klemp would have received hadhe remained employed through the third anniversary of the date of the agreement. Mr. Klemp has agreed not to compete with us for12 months after the termination of his employment. If we determine to retain a new chief executive officer during the term of theagreement, 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 employmentagreement with Mr. Jonathan P. Foster pursuant to which Mr. Foster agreed to serve as our Chief Financial Officer and ExecutiveVice President commencing on such date for an initial term of three years, which will be automatically renewed for additional one-yearterms unless either party chooses not to renew the agreement. The agreement provides for an annual salary of $250,000. Mr. Fosteris entitled to receive an annual bonus payable. The final determination on the amount of the annual bonus will be made by the CompensationCommittee of the Board of Directors, based on criteria established by the Compensation Committee.

Under the agreement, Mr. Foster was granteda ten-year option to purchase 400,000 shares at an exercise price per share equal to the closing price of our common stock on thedate of execution of his employment agreement, which was $5.85. The option vests in four equal installments (or 100,000 shareseach installment) on each of the succeeding four anniversary dates of the execution of the agreement, provided Mr. Foster is ChiefFinancial Officer on such vesting date. In the event of a “change of control” (as defined in the agreement) prior tothe final vesting of all of the options, all of the unvested options shall immediately vest; provided, however, in the event theacquiring party desires to replace the unvested options with a substitute grant of equal or greater value, such proposed substitutionshall be submitted to the Compensation Committee, and the Compensation Committee shall decide whether to allow the unvested optionsto 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 terminatedat our election without “cause” (as defined in the agreement), which requires 90 days advance notice, or by Mr. Fosterfor “good reason” (as defined in the agreement), Mr. Foster shall be entitled to receive severance payments equal tonine months of Mr. Foster’s base salary and a pro rata portion of the target bonus for the year in which such terminationoccurs. In addition, if Mr. Foster’s employment is terminated prior to the end of the term of the agreement by us withoutcause or by Mr. Foster for good reason, and such termination occurs within three months prior to a change in control, in contemplationof a change in control or within six months after a change in control, Mr. Foster shall be entitled to receive, in addition tothe severance discussed above, an acceleration of the vesting of the option grant described in the prior paragraph. Mr. Fosteragreed not to compete with us until nine months after the termination of his employment.

Equity Awards

The following tablesets forth certain information concerning our outstanding options for our named executive officers at December 31, 2015.

Outstanding Equity Awards AtFiscal Year-End—2015

(1)          The unvested shares underlying the option vested in equalannual 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.

Director Compensation

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

Scientific Advisory Board

Our executive teamis supported by our scientific advisory board, the members of which include scientists experienced in the fields in which we pursue.We compensate the members of our Scientific Advisory Board, or SAB, based on our utilization of their time.

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 Departmentof Experimental Therapeutics at The University of Texas MD Anderson Cancer Center. Dr. Priebe led the discovery of the moleculesthat form the basis for our lead drug candidates. As a founder or founding scientist at a number of successful biotechnology firmssuch as Aronex Pharmaceuticals, Houston Pharmaceuticals, Reata Pharmaceuticals, and IntertechBio, Dr. Priebe has been integralin advancing several drugs through the pipeline, three of which are currently in clinical development. He has also developed severalnew 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, performstranslational research in CTCL, and has been engaged in the design and conduct of clinical trials that resulted in new therapiesfor CTCL. Dr. Duvic also serves on Medical and Scientific Boards of the National Alopecia Areata Foundation and Cutaneous LymphomaFoundation. 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' experienceas 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 andimmunology. In addition, he was commissioned and served as a Major in the US Army Medical Corps in the position of Chief of SurgicalResearch at the Institute for Surgical Research. Dr. Waymack was also an Associate Professor of Surgery at the University of TexasMedical Branch and at the University of Medicine and Dentistry of New Jersey.

Other Executive Agreements

On August 21, 2016, we accepted the resignationof Mr. Louis Ploth from his position as our Chief Financial Officer effective immediately. On October 7, 2016, we entered intoa separation agreement with Mr. Ploth, pursuant to which, among other items, Mr. Ploth generally released us from any claims hemay have against us or our affiliates, and we agreed to pay Mr. Ploth a severance payment of $100,000 over a 12-month period andto pay Mr. Ploth’s medical insurance premiums until August 31, 2017. Pursuant to the separation agreement, Mr. Ploth willbe permitted to exercise 25% of the options to purchase common stock granted to Mr. Ploth in December 2015, or 50,000 shares, untilMay 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 unitawards to key employees and non-employee directors. The purpose of the Plan is to recognize contributions made to our company andits subsidiaries by key employees and non-employee directors and to provide them with additional incentive to achieve the objectivesof our company. The following is a summary of the Plan.

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

Number of Shares of Common Stock. Thenumber of shares of the common stock that may be issued under the Plan is 2,500,000. Shares issuable under the Plan may be authorizedbut unissued shares or treasury shares. If there is a lapse, forfeiture, expiration, termination or cancellation of any award madeunder the Plan for any reason, the shares subject to the award will again be available for issuance. Any shares subject to an awardthat are delivered to us by a participant, or withheld by us on behalf of a participant, as payment for an award or payment ofwithholding taxes due in connection with an award will not again be available for issuance, and all such shares will count towardthe 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 similarcorporate transaction. In each case, the Committee has the discretion to make adjustments it deems necessary to preserve the intendedbenefits under the Plan. No award granted under the Plan may be transferred, except by will, the laws of descent and distribution.

Eligibility. All employeesdesignated as key employees for purposes of the Plan and all non-employee directors are eligible to receive awards under the Plan.On November 1, 2015, six employees and all non-employee directors were eligible to participate in the Plan.

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

Stock Options. The Committeehas the discretion to grant non-qualified stock options or incentive stock options to participants and to set the terms and conditionsapplicable to the options, including the type of option, the number of shares subject to the option and the vesting schedule; providedthat 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 bepaid with respect to stock options. It is intended that stock options qualify as “performance-based compensation” underSection 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 grantedto a key employee is subject to the following rules: (i) the aggregate fair market value (determined at the time the option isgranted) of the shares of common stock with respect to which incentive stock options are exercisable for the first time by a keyemployee 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 limitwill be an incentive stock option and the remainder will be a non-qualified stock option; (ii) if an incentive stock option isgranted to a key employee who owns stock possessing more than 10% of the total combined voting power of all class of stock of thecompany, the exercise price of the incentive stock option will be 110% of the closing price of the common stock on the date ofgrant and the incentive stock option will expire no later than five years from the date of grant; and (iii) no incentive stockoption can be granted after ten years from the date the Plan was adopted.

Stock Awards. The Committeehas the discretion to grant stock awards to participants. Stock awards will consist of shares of common stock granted without anyconsideration 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 discretionof the Committee. Subject to the restrictions, a participant will be a shareholder with respect to the shares awarded to him orher and will have the rights of a shareholder with respect to the shares, including the right to vote the shares and receive dividendson the shares; provided that dividends otherwise payable on any performance-based stock award will be held by us and will be paidto the holder of the stock award only to the extent the restrictions on such stock award lapse, and the Committee in its discretioncan accumulate and hold such amounts payable on any other stock awards until the restrictions on the stock award lapse.

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

Performance-Based Awards. TheCommittee has the discretion to establish restrictions on the stock awards that qualify the awards as “performance-basedcompensation” under Section 162(m) of the Code so that they are fully deductible by us for federal income tax purposes. Insuch case, the Committee may establish performance goals for certain performance periods and targets for achievement of the performancegoals, and the restrictions on the stock subject to the award will lapse if the performance goals and targets are achieved forthe designated performance period. The performance goals will be based on one or more of the following criteria: (i) net earningsor net income (before or after taxes); (ii) earnings per share; (iii) net sales or revenue growth; (iv) net operating profit orincome (including as a percentage of sales); (v) return measures (including, but not limited to, return on assets, capital, investedcapital, equity, sales, or revenue); (vi) cash flow (including, but not limited to, operating cash flow, free cash flow, cash flowreturn 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 orindices selected by the Committee. The performance goals may be particular to one or more lines of business or subsidiaries ormay be based on our performance as a whole. The performance goals may be identical for all participants for a given performanceperiod or, at the discretion of the Committee, may differ among participants. In addition, performance goals may be adjusted forany events or occurrences (including acquisition expenses, extraordinary charges, losses from discontinued operations, restatementsand accounting charges and restructuring expenses), as may be determined by the Committee.

Payment for Stock Options and WithholdingTaxes. The Committee may make one or more of the following methods available for payment of any award, including theexercise 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 todeliver promptly to us the amount of sales proceeds from the sale of the shares subject to the award to pay the exercise priceor withholding tax; (iii) by directing us to withhold shares of common stock otherwise issuable in connection with the award havinga fair market value equal to the amount required to be withheld; and (iv) by delivery of previously acquired shares of common stockthat are acceptable to the Committee and that have an aggregate fair market value on the date of exercise equal to the exerciseprice or withholding tax, or certification of ownership by attestation of such previously acquired shares.

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

Amendment of Award Agreements; Amendmentand Termination of the Plan; Term of the Plan. The Committee may amend any award agreement at any time, provided thatno amendment may adversely affect the right of any participant under any agreement in any material way without the written consentof the participant, unless such amendment is required by applicable law, regulation or stock exchange rule.

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

Notwithstanding the foregoing, neither thePlan nor any outstanding award agreement can be amended in a way that results in the repricing of a stock option. Repricing isbroadly defined to include reducing the exercise price of a stock option or cancelling a stock option in exchange for cash, otherstock options with a lower exercise price or other stock awards. (This prohibition on repricing without shareholder approval doesnot apply in case of an equitable adjustment to the awards to reflect changes in the capital structure of the company or similarevents.)

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

RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

We were incorporated in July 2015. In August2015, in exchange for the issuance of 630,000 shares of common stock, we acquired the rights to the license agreement with MD Andersoncovering our WP1122 Portfolio held by IntertechBio Corporation. Waldemar Priebe, chairman of our Scientific Advisory Board, andDon Picker, our president and chief operating officer, are shareholders of IntertechBio and control the voting and dispositivepower over the shares held by IntertechBio.

In August 2015, in exchange for the issuanceof 1,431,000 shares of common stock, we acquired the rights to the Annamycin data related to the original Annamycin IND and thedevelopment 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 issuanceof 629,000 shares of common stock, we, on Moleculin, LLC’s behalf, entered into an agreement with HPI whereby HPI agreedto terminate its option to sublicense certain rights to the WP1066 Portfolio and to enter into a co-development agreement withus, allowing us to benefit from HPI’s grant-funded development efforts currently under way. Waldemar Priebe and Don Pickerare shareholders of HPI, and Dr. Priebe have the voting and dispositive power over the shares held by HPI. For a detailed discussionof the HPI co-development agreement, see “Business – Our License Agreements.”

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 themerger, 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 .

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 purchaseprice of $0.001 per share.

On July 1, 2013, Moleculin, LLC agreed toreimburse 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 equipmentused by Moleculin, LLC for the period from January 2009 through December 2013 in the amount of $35,000. Moleculin, LLC stoppedusing the equipment in 2014. During the year ended December 31, 2013, Moleculin, LLC paid $100,000 for laboratory services providedby HPI for the five years prior to August 1, 2013. We do not intend to utilize HPI for such services in the future.

Policies and Procedures for Related Party Transactions

Our audit committee charter provides thatour audit committee is responsible for reviewing and approving in advance any related party transaction. This will cover, withcertain 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 amountinvolved 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 occurredprior to the creation of our audit committee and the adoption of this policy.

SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information,as of November 30, 2016, regarding beneficial ownership of our common stock by:

Beneficial ownership is determined according to the rules ofthe SEC, and generally means that person has beneficial ownership of a security if he or she possesses sole or shared voting orinvestment power of that security, and includes options that are currently exercisable or exercisable within 60 days. Each directoror 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, havesole investment and voting power with respect to their shares, except where community property laws may apply. Except as otherwisenoted below, the address for each person or entity listed in the table is c/o Moleculin Biotech, Inc., 2575 West Bellfort, Suite333, Houston, Texas 77054.

*             Less than 1%.

(1)          Based on 12,054,813 shares of common stock outstandingas of November 28, 2016.

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

(3)          The 630,000 shares held by IntertechBio Corp. have beenincluded in the amounts for Drs. Picker and Priebe. Drs. Picker and Priebe have voting and dispositive power over the shares heldby IntertechBio Corp.

(4)          Consists of shares underlying options.

(5)          The 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.

DESCRIPTION OF CAPITAL STOCK

The following summary is a descriptionof the material terms of our capital stock and is not complete. You should also refer to the Moleculin Biotech, Inc. certificateof incorporation and bylaws, which are included as exhibits to the registration statement of which this prospectus forms a part,and the applicable provisions of the Delaware General Corporation Law.

Our amended and restated certificate ofincorporation authorizes us to issue up to 75,000,000 shares of common stock, par value $0.001 per share, and 5,000,000 sharesof preferred stock, $0.001 par value per share. As of November 28, 2016, we have 12,054,813 shares of common stock outstanding.

Common Stock

Shares of our common stock have the followingrights, preferences and privileges:

Voting

Each holder of common stock is entitledto one vote for each share of common stock held on all matters submitted to a vote of stockholders. Any action at a meeting atwhich a quorum is present will be decided by a majority of the voting power present in person or represented by proxy, except inthe case of any election of directors, which will be decided by a plurality of votes cast. There is no cumulative voting.

Dividends

Holders of our common stock are entitledto receive dividends when, as and if declared by the our board of directors out of funds legally available for payment, subjectto the rights of holders, if any, of any class of stock having preference over the common stock. Any decision to pay dividendson our common stock will be at the discretion of our board of directors. Our board of directors may or may not determine to declaredividends in the future. See “Dividend Policy.” The board’s determination to issue dividends will depend uponour profitability and financial condition any contractual restrictions, restrictions imposed by applicable law and the SEC, andother factors that our board of directors deems relevant.

Liquidation Rights

In the event of a voluntary or involuntaryliquidation, dissolution or winding up of the company, the holders of our common stock will be entitled to share ratably on thebasis of the number of shares held in any of the assets available for distribution after we have paid in full, or provided forpayment of, all of our debts and after the holders of all outstanding series of any class of stock have preference over the commonstock, if any, have received their liquidation preferences in full.

Other

Our issued and outstanding shares of commonstock are fully paid and nonassessable. Holders of shares of our common stock are not entitled to preemptive rights. Shares ofour common stock are not convertible into shares of any other class of capital stock, nor are they subject to any redemptionor sinking fund provisions.

Preferred Stock

We are authorized to issue up to 5,000,000 sharesof preferred stock. Our certificate of incorporation authorizes the board to issue these shares in one or more series, to determinethe designations and the powers, preferences and relative, participating, optional or other special rights and the qualifications,limitations and restrictions thereof, including the dividend rights, conversion or exchange rights, voting rights (including thenumber of votes per share), redemption rights and terms, liquidation preferences, sinking fund provisions and the number of sharesconstituting the series. Our board of directors could, without stockholder approval, issue preferred stock with voting and otherrights that could adversely affect the voting power and other rights of the holders of common stock and which could have the effectof making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, a majorityof our outstanding voting stock.

Convertible Notes

On various dates from August 31, 2015 throughJanuary 19, 2016, each as amended on March 10, 2016, we entered into unsecured promissory notes with third party investors. Eachnote bears interest at 8.0% per annum and was to mature on the earlier of June 30, 2016 or the completion of an IPO of our securities.Since the completion of the IPO occurred prior to June 30, 2016, these notes were to be automatically converted according to theirterms into shares of our common stock at their applicable conversion prices upon the IPO to the extent and provided that no holderof these notes was or will be permitted to convert such notes to the extent that the holder or any of its affiliates would beneficiallyown in excess of 4.99% of our common stock after such conversion. Due to this 4.99% limitation, a portion of these notes was notconverted at the time of the IPO and the remaining unconverted principal and accrued interest amounts of the effected notes willremain outstanding and will be converted into shares of our common stock at such time as the 4.99% limitation continues to be met.Until such time as the notes are converted into shares of common stock, the maturity date of the notes will automatically be extendedand we will not be required to repay the notes or the accrued interest relating to the notes in cash. The IPO was completed onMay 31, 2016. On May 31, 2016, pursuant to the conversion feature of the foregoing notes and with restriction of the 4.99% beneficiallyowned condition limitation, discussed above, we issued 1,166,503 shares of common stock in total, reducing the convertible debtprincipal by $183,356 and accrued interest by $17,699. During the three months ended September 30, 2016, an additional 800,057shares of common stock were issued due to the number of shares outstanding allowing for conversion of additional shares under the4.99% beneficially owned condition limitation. This reduced the convertible debt principal by $133,988 and accrued interest by$6,742. The remaining convertible debt without consideration of accrued interest as of September 30, 2016, if converted on September30, 2016, would result in an additional 1,928,899 common shares to be issued.

The holders of our convertible notes haveagreed to the following lock-up of the common stock issuable upon conversion of the notes:

The foregoing lock-up restrictions relateto public sales and do not restrict the transfer of the shares privately, if permitted by applicable law, provided the acquirerof the shares agrees to comply with the above restrictions with respect to any public sales.

Certificate of Incorporation and Bylaw Provisions

Our certificate of incorporation and bylawsinclude a number of anti-takeover provisions that may have the effect of encouraging persons considering unsolicited tender offersor other unilateral takeover proposals to negotiate with our board of directors rather than pursue non-negotiated takeover attempts.These provisions include:

Advance Notice Requirements. Ourbylaws establish advance notice procedures with regard to stockholder proposals relating to the nomination of candidates for electionas directors or new business to be brought before meetings of stockholders. These procedures provide that notice of stockholderproposals must be timely and given in writing to our corporate Secretary. Generally, to be timely, notice must be received at ourprincipal executive offices not fewer than 120 calendar days prior to the first anniversary date on which our notice of meetingand related proxy statement were mailed to stockholders in connection with the previous year’s annual meeting of stockholders.The notice must contain the information required by the bylaws, including information regarding the proposal and the proponent.

Special Meetings of Stockholders. Ourbylaws provides that special meetings of stockholders may be called at any time by only the Chairman of the Board, the Chief ExecutiveOfficer, the President or the board of directors, or in their absence or disability, by any vice president.

No Written Consent ofStockholders. Our certificate of incorporation and bylaws provide that any action required or permitted to be takenby stockholders must be effected at a duly called annual or special meeting of stockholders and may not be effected by any consentin writing by such stockholders.

Exclusive Forum Provision.Our certificate of incorporation provides that the Court of Chancery of the State of Delaware shall be the sole and exclusive forumfor (i) any derivative action or proceeding brought our behalf, (ii) any action asserting a claim of breach of a fiduciaryduty owed by any of our directors or officers to us or our stockholders, (iii) any action asserting a claim against us arisingpursuant to any provision of the Delaware General Corporation Law (the “DGCL”), or our certificate of incorporationor the bylaws, and (iv) any action asserting a claim against us governed by the internal affairs doctrine. This choice offorum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputeswith us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officersand employees. Alternatively, a court could find these provisions of our certificate of incorporation to be inapplicable or unenforceablein respect of one or more of the specified types of actions or proceedings, which may require us to incur additional costs associatedwith resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.

Amendment of Bylaws. Ourstockholders may amend any provisions of our bylaws by obtaining the affirmative vote of the holders of a majority of each classof issued and outstanding shares of our voting securities, at a meeting called for the purpose of amending and/or restating ourbylaws.

Preferred Stock.Our certificate of incorporation authorizes our board of directors to create and issue rights entitling our stockholders to purchaseshares of our stock or other securities. The ability of our board to establish the rights and issue substantial amounts of preferredstock without the need for stockholder approval may delay or deter a change in control of us. See “Preferred Stock”above.

Delaware Takeover Statute

We are subject to Section 203 of theDGCL which, subject to certain exceptions, prohibits a Delaware corporation from engaging in any “business combination”(as defined below) with any interested stockholder for a period of three years following the date that such stockholder becamean interested stockholder, unless: (1) prior to such date, the board of directors of the corporation approved either the businesscombination or the transaction that resulted in the stockholder becoming an interested stockholder; (2) on consummation ofthe transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determiningthe voting stock outstanding those shares owned (x) by persons who are directors and also officers and (y) by employeestock plans in which employee participants do not have the right to determine confidentially whether shares held subject to thisplan will be tendered in a tender or exchange offer; or (3) on or subsequent to such date, the business combination is approvedby the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmativevote of at least 66 ²⁄₃% of the outstanding voting stock that is not owned by the interested stockholder.

Section 203 of the DGCL defines generally“business combination” to include: (1) any merger or consolidation involving the corporation and the interestedstockholder; (2) any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involvingthe interested stockholder; (3) subject to certain exceptions, any transaction that results in the issuance or transfer bythe corporation of any stock of the corporation to the interested stockholder; (4) any transaction involving the corporationthat has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially ownedby the interested stockholder; or (5) the receipt by the interested stockholder of the benefit of any loans, advances, guarantees,pledges or other financial benefits provided by or through the corporation. In general, Section 203 defines an “interestedstockholder” as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation andany entity or person affiliated with or controlling or controlled by such entity or person.

Limitations on Liability and Indemnification of Officersand Directors

Our certificate of incorporation and bylawslimit the liability of our officers and directors and provide that we will indemnify our officers and directors, in each case,to the fullest extent permitted by the Delaware General Corporation Law.

Listing

Our common stock is listed on the NasdaqCapital Market under the symbol “MBRX”.

Transfer Agent

The transfer agent for our common stockis VStock Transfer, LLC.

DESCRIPTIONOF UNITS

In this offering, we are offering for sale                units, with each unit consisting of one share of our common stock and one warrant to purchase                    share of our common stock. The purchaseprice for each unit is $              . The units will not be issued or certificated. The shares of common stock and the warrants included inthe units will be issued separately but can only be purchased together in the units in this offering.

Common Stock

The material terms and provisions of ourcommon stock and each other class of our securities which qualifies or limits our common stock are described under the caption“Description of Capital Stock” in this prospectus.

Warrants

The following summary of certain termsand provisions of warrants that are being offered hereby is not complete and is subject to, and qualified in its entirety by, theprovisions of the warrant, the form of which is filed as an exhibit to the registration statement of which this prospectus formsa part. Prospective investors should carefully review the terms and provisions of the form of warrant for a complete descriptionof the terms and conditions of the warrants.

Duration and Exercise Price. Eachwarrant offered hereby will have an initial exercise price per share equal to $          . The warrants will be immediately exercisableand will expire on the fifth anniversary of the original issuance date. The exercise price and number of shares of common stockissuable upon exercise is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similarevents affecting our common stock and the exercise price. The warrants will be issued separately from the common stock, and maybe transferred separately immediately thereafter. A warrant to purchase                   share of our common stock will be issued for every oneshare purchased in this offering.

Exercisability. The warrants willbe exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice accompaniedby payment in full for the number of shares of our common stock purchased upon such exercise (except in the case of a cashlessexercise as discussed below). A holder (together with its affiliates) may not exercise any portion of the warrant to the extentthat the holder would own more than 4.99% of the outstanding common stock immediately after exercise, except that upon at least61 days’ prior notice from the holder to us, the holder may increase the amount of ownership of outstanding stock after exercisingthe holder’s warrants up to 9.99% of the number of shares of our common stock outstanding immediately after giving effectto the exercise, as such percentage ownership is determined in accordance with the terms of the warrants. No fractional sharesof common stock will be issued in connection with the exercise of a warrant. In lieu of fractional shares, we will either pay theholder an amount in cash equal to the fractional amount multiplied by the exercise price or round up to the next whole share.

Cashless Exercise. If, at the timea holder exercises its warrant, a registration statement registering the issuance of the shares of common stock underlying thewarrants under the Securities Act is not then effective or available, then in lieu of making the cash payment otherwise contemplatedto be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon suchexercise (either in whole or in part) the net number of shares of common stock determined according to a formula set forth in thewarrant.

Exchange Listing. We do not intendto list the warrants on any securities exchange or nationally recognized trading system.

Right as a Stockholder. Except asotherwise provided in the warrants or by virtue of such holder’s ownership of shares of our common stock, the holders ofthe warrants do not have the rights or privileges of holders of our common stock, including any voting rights, until they exercisetheir warrants.

UNDERWRITING

We have entered into an underwriting agreementwith the several underwriters listed in the table below. Roth Capital Partners, LLC is the representative of the underwriters.We refer to the several underwriters listed in the table below as the “underwriters.” Subject to the terms and conditionsof the underwriting agreement, we have agreed to sell to the underwriters, and the underwriters have agreed to purchase from us,units. Our common stock trades on the NASDAQ Capital Market under the symbol “MBRX.”

Pursuant to the terms and subject to theconditions contained in the underwriting agreement, we have agreed to sell to the underwriters named below, and each underwriterseverally has agreed to purchase from us, the respective number of units set forth opposite its name below:

The underwriting agreement provides thatthe obligation of the underwriters to purchase the units offered by this prospectus is subject to certain conditions. The underwritersare obligated to purchase all of the units offered hereby if any of the units are purchased.

We have granted the underwriters anoption to buy up to an additional                 shares of common stockand/or an additional                 warrants at the public offering price per share and public offering price per warrant, respectively, less the underwritingdiscounts and commissions, in any combination thereof from us, to coverover-allotments, if any. The underwriters may exercise this option at any time, in whole or in part, during the 45-day periodafter the date of this prospectus.

Discounts, Commissions and Expenses

The underwriters propose to offer to theunits purchased pursuant to the underwriting agreement to the public at the public offering price set forth on the cover page ofthis prospectus and to certain dealers at that price less a concession not in excess of $             perunit. After this offering, the public offering price and concession may be changed by the underwriters. No such change shall changethe amount of proceeds to be received by us as set forth on the cover page of this prospectus.

In connection with the sale of the unitsto be purchased by the underwriters, the underwriters will be deemed to have received compensation in the form of underwritingcommissions and discounts. The underwriters' commissions and discounts will be     % of the gross proceeds of this offering, or $            perunit, based on the public offering price per unit set forth on the cover page of this prospectus.

We have alsoagreed to reimburse Roth Capital Partners at closing for legal expenses incurred by it in connection with the offering up toa maximum of $75,000. In addition, we have agreed to issue to the representative warrants to purchase up to 7% of theaggregate number of shares of common stock sold in this offering. The representative warrants will have a term of no greaterthan 5 years from the effective date of this registration statement and an exercise price per share equal to the publicoffering price per share sold in this offering. Pursuant to FINRA Rule 5110(g), the representative warrants and any sharesissued upon exercise of therepresentative              warrants shall not be sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale,derivative, put or call transaction that would result in the effective economic disposition of the securities by any personfor a period of 180 days immediately following the date of effectiveness or commencement of sales of this offering, exceptthe transfer of any security:

Subjectto the consummation of this offering, we have also agreed to give the representative a twelve-month right of first refusal to actas our lead underwriter or placement agent for any further capital raising transactions undertaken by us. We have also grantedthe representative a six-month tail fee equal to the cash and warrant compensation in this offering, if any investor with whichwe have had substantive discussions with respect to this offering, provides us with further capital during such six-month periodfollowing termination of our engagement of the representative.

The following table shows the underwritingdiscounts and commissions payable to the underwriters by us in connection with this offering (assuming both the exercise and non-exerciseof the over-allotment option to purchase additional units we have granted to the underwriters):

Indemnification

Pursuant to the underwriting agreement,we have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or tocontribute to payments that the underwriters or such other indemnified parties may be required to make in respect of those liabilities.

Lock-Up Agreements

We have agreed not to (i) offer, pledge,issue, sell, contract to sell, purchase, contract to purchase, lend or otherwise transfer or dispose of, directly or indirectly,any shares of our common stock or any securities convertible into or exercisable or exchangeable for our common stock; (ii) enterinto any swap or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of sharesof common stock; or (iii) file any registration statement with the SEC relating to the offering of any shares of our commonstock or any securities convertible into or exercisable or exchangeable for shares of our common stock, without the prior writtenconsent the representative for a period of 90 days following the date of this prospectus, subject to an 18-day extension undercertain circumstances (the "Lock-up Period"). This consent may be given at any time without public notice. These restrictionson future issuances are subject to exceptions for (i) the issuance of shares of our common stock sold in this offering, (ii) theissuance of shares of our common stock upon the exercise of outstanding options or warrants and the vesting of restricted stockawards or units, (iii) the issuance of employee stock options not exercisable during the Lock-up Period and the grant, redemptionor forfeiture of restricted stock awards or restricted stock units pursuant to our equity incentive plans or as new employee inducementgrants and (iv) the issuance of common stock or warrants to purchase common stock in connection with mergers or acquisitionsof securities, businesses, property or other assets, joint ventures, strategic alliances, equipment leasing arrangements or debtfinancing.

In addition, each of our directors and executiveofficers has entered into a lock-up agreement with the underwriters. Under the lock-up agreements, the directors and executiveofficers may not, directly or indirectly, sell, offer to sell, contract to sell, or grant any option for the sale (including anyshort sale), grant any security interest in, pledge, hypothecate, hedge, establish an open "put equivalent position"(within the meaning of Rule 16a-1(h) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), or otherwisedispose of, or enter into any transaction which is designed to or could be expected to result in the disposition of, any sharesof our common stock or securities convertible into or exchangeable for shares of our common stock, or publicly announce any intentionto do any of the foregoing, without the prior written consent of Roth Capital Partners, for a period of 90 days from the closingdate of this offering, subject to an 18-day extension under certain circumstances. This consent may be given at any time withoutpublic notice. These restrictions on future dispositions by our directors and executive officers are subject to exceptions for(i) one or more bona fide gift transfers of securities to immediate family members who agree to be bound by these restrictionsand (ii) transfers of securities to one or more trusts for bona fide estate planning purposes. Each officer and director shallbe immediately and automatically released from all restrictions and obligations under the lock up agreement in the event that heor she ceases to be a director or officer of our company and has no further reporting obligations under Section 16 of theExchange Act.

Electronic Distribution

This prospectus may be made available inelectronic format on websites or through other online services maintained by the underwriters or by their affiliates. In thosecases, prospective investors may view offering terms online and prospective investors may be allowed to place orders online. Otherthan this prospectus in electronic format, the information on the underwriters' websites or our website and any information containedin any other websites maintained by the underwriters or by us is not part of this prospectus or the registration statement of whichthis prospectus forms a part, has not been approved and/or endorsed by us or the underwriter in its capacity as underwriter,and should not be relied upon by investors.

Price Stabilization, Short Positions and Penalty Bids

In connection with the offering the underwritersmay engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids in accordancewith Regulation M under the Exchange Act:

These stabilizing transactions, syndicatecovering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventingor retarding a decline in the market price of the common stock. As a result, the price of our common stock may be higher than theprice that might otherwise exist in the open market. These transactions may be discontinued at any time.

Neither we nor the underwriters make anyrepresentation or prediction as to the direction or magnitude of any effect that the transactions described above may have on theprice of our shares of common stock. In addition, neither we nor the underwriters make any representation that the underwriterwill engage in these transactions or that any transaction, if commenced, will not be discontinued without notice.

Selling Restrictions

European Economic Area

        Thisprospectus does not constitute an approved prospectus under Directive 2003/71/EC and no such prospectus is intended to be preparedand approved in connection with this offering. Accordingly, in relation to each Member State of the European Economic Area whichhas implemented Directive 2003/71/EC (each, a "Relevant Member State") an offer to the public of any shares of commonstock which are the subject of the offering contemplated by this prospectus may not be made in that Relevant Member State exceptthat an offer to the public in that Relevant Member State of any shares of common stock may be made at any time under the followingexemptions under the Prospectus Directive, if and to the extent that they have been implemented in that Relevant Member State:

(a)   toany legal entity which is a qualified investor as defined in the Prospectus Directive;

(b)   tofewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150,natural or legal persons (other than qualified investors as defined in the Prospectus Directive), subject to obtaining the priorconsent of the representatives of the underwriter for any such offer; or

(c)   inany other circumstances which do not require any person to publish a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, theexpression an "offer to the public" in relation to any shares of common stock in any Relevant Member State means thecommunication in any form and by any means of sufficient information on the terms of the offer and any shares of common stock tobe offered so as to enable an investor to decide to purchase any shares of common stock, as the expression may be varied in thatMember State by any measure implementing the Prospectus Directive in that Member State and the expression "Prospectus Directive"means Directive 2003/71/EC (and any amendments thereto including the 2010 PD Amending Directive to the extent implemented in eachRelevant Member State) and includes any relevant implementing measure in each Relevant Member State and the expression "2010PD Amending Directive" means Directive 2010/73/EU.

United Kingdom

This prospectus is not an approved prospectusfor purposes of the UK Prospectus Rules, as implemented under the EU Prospectus Directive (2003/71/EC), and has not been approvedunder section 21 of the Financial Services and Markets Act 2000 (as amended) (the "FSMA") by a person authorizedunder FSMA. The financial promotions contained in this prospectus are directed at, and this prospectus is only being distributedto, (1) persons who receive this prospectus outside of the United Kingdom, and (2) persons in the United Kingdom whofall within the exemptions under articles 19 (investment professionals) and 49(2)(a) to (d) (high net worth companies,unincorporated associations, etc.) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (all such personstogether being referred to as "Relevant Persons"). This prospectus must not be acted upon or relied upon by any personwho is not a Relevant Person. Any investment or investment activity to which this prospectus relates is available only to RelevantPersons and will be engaged in only with Relevant Persons. This prospectus and its contents are confidential and should not bedistributed, published or reproduced (in whole or in part) or disclosed by recipients to any other person that is not a RelevantPerson.

The underwriter has represented, warrantedand agreed that:

(a)   ithas only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducementto engage in investment activity (within the meaning of section 21 of the FSMA in connection with the issue or sale of anyof the shares of common stock in circumstances in which section 21(1) of the FSMA does not apply to the issuer; and

(b)   it has compliedwith and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the sharesof common stock in, from or otherwise involving the United Kingdom. 

VALIDITYOF SECURITIES

The validity of the securities offeredhereby will be passed upon for us by Schiff Hardin LLP, Washington, DC. Ellenoff Grossman & Schole LLP is acting as counselto the underwriters in connection with this offering.

EXPERTS

The financial statements of Moleculin Biotech,Inc. as of December 31, 2015 and for the period from July 28, 2015 (inception) to December 31, 2015 and the financial statementsof Moleculin, LLC as of and for the years ended December 31, 2015 and 2014 included in this prospectus have been audited byGBH CPAs, PC, an independent registered public accounting firm, as stated in their reports appearing herein. Such financial statementshave been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

WHEREYOU CAN FIND MORE INFORMATION

We have filed with the SEC a registrationstatement on Form S-1 under the Securities Act for the securities being offered by this prospectus. This prospectus, which is partof the registration statement, does not contain all of the information included in the registration statement and the exhibits.For further information about us and the securities offered by this prospectus, you should refer to the registration statementand its exhibits. References in this prospectus to any of our contracts or other documents are not necessarily complete, and youshould refer to the exhibits attached to the registration statement for copies of the actual contract or document. You may readand copy any document that we file at the SEC’s public reference room located at 100 F Street, NE, Washington,D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. SEC filings are alsoavailable to the public at the SEC’s website at www.sec.gov.

We are subject to the reporting and informationrequirements of the Exchange Act and, as a result, will file periodic and current reports, proxy statements and other informationwith the SEC. We expect to make our periodic reports and other information filed with or furnished to the SEC, available, freeof charge, through our website as soon as reasonably practicable after those reports and other information are filed with or furnishedto the SEC. Additionally, these periodic reports, proxy statements and other information will be available for inspection and copyingat the public reference room and website of the SEC referred to above.

INDEX TO FINANCIAL STATEMENTS

Moleculin Biotech, Inc.

Balance Sheets

See accompanying notes to the unaudited financialstatements.

Moleculin Biotech, Inc.
Statements of Operations

(Unaudited)