U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 10-Q
 
☑
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2019.2020.
 
☐
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from _____ to _____.For the transition period from   to  .
 
Commission File Number 0-80920000-08092
 
GT BIOPHARMA, INC.
(Exact name of small business issuerregistrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
94-1620407
(I.R.S. employer
identification number)
 
9350 Wilshire Blvd. Suite 203
Beverly Hills, CA 90212
 
(Address of principal executive offices and zip code)
(800) 304-9888
(Registrant’s telephone number, including area code)
 
310 N. Westlake Blvd, Suite 206
Westlake Village, CA 91362N/A
 (Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of exchange on which registered
N/AN/AN/A
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☑ No  ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer ☐Accelerated filer ☐
Non-accelerated filer  ☐ ☑Smaller reporting company ☑
Emerging growth company ☐ 
  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐·.Yes ☐    No ☑
 
AtAs of August 11, 2019,2020, the issuer had outstanding the indicated number of76,560,862 shares of common stock:  66,144,882.stock outstanding.
 

 
 
 
GT Biopharma, Inc. and Subsidiaries
FORM 10-Q
For the Six Months QuarterEnded June 30, 20192020
Table of Contents
 
 
PART I  FINANCIAL INFORMATION
 Page 
    
Item 1.
Financial Statements
   
 
Consolidated Balance Sheets as of June 30, 20192020 (Unaudited) and December 31, 20182019
  
3
1		 
 
Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019 and 2018 (Unaudited)
  4
2		 
 
Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019 and 2018 (Unaudited)
3
Consolidated Statements of Stockholders' Deficit
  4
Condensed Notes to Consolidated Financial Statements
  5
 
Condensed Notes to Consolidated Financial Statements6
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
  1516 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
  19
21		 
Item 4.
Controls and Procedures
  19
21		 
PART II  OTHER INFORMATION
 
Item 1.
Legal Proceedings
  2021 
Item 1A.
Risk Factors
  2022 
Item 2.
Unregistered Sales of Securities and Use of Proceeds
  2022 
Item 3.
Defaults Upon Senior Securities
  22 
Item 4.
Mine Safety Disclosures
  22 
Item 5.
Other Information
  22 
Item 6.
Exhibits
22
SIGNATURES  23 
SIGNATURES
24
 

 
GT Biopharma, Inc. and Subsidiaries
as of June 30, 20192020 and December 31, 20182019
Consolidated Balance Sheets
Consolidated Balance Sheets(in Thousands, Except Par Value and Share Data)
 
 
(in Thousands, Except Par Value and Share Data)
 
 
 
 
 
June 30,
2019
 
 
December 31,
2018
 
 
June 30,
2020
 
 
December 31,
2020
 
ASSETS
 
(unaudited)
 
 
 
 
 
(unaudited)
 
 
 
 
Current Assets:
 
 
 
 
 
 
Cash and cash equivalents
 $264 
 $60 
 $851 
 $28 
Prepaid expenses
  22 
  30 
  120 
  246 
Total Current Assets
  286 
  90 
  971 
  274 
    
    
Intangible assets
  25,262 
  0 
Deposits
  12 
  12 
Operating lease right-to-use asset
  147 
  - 
  80 
  110 
Fixed assets, net
  - 
  35 
  - 
  0 
Total Other Assets
  25,421 
  25,309 
  92 
  122 
TOTAL ASSETS
 $25,707 
 $25,399 
 $1,063 
 $396 
LIABILITIES AND STOCKHOLDERS’ EQUITY
    
LIABILITIES AND STOCKHOLDERS’ DEFICIT
    
Current Liabilities:
    
    
Accounts payable
 $1,710 
 $1,762 
 $2,001 
 $1,940 
Accrued expenses
  2,665 
  1,455 
  1,313 
  2,379 
Deferred rent
  8 
Accrued interest
  3,283 
  2,029 
Operating lease liability
  147 
  - 
  90 
  120 
Note payable to related party
  - 
  100 
Line of credit
  31 
  31 
Convertible debentures
  12,170 
  10,673 
Convertible notes
  21,844 
  13,207 
Total Current Liabilities
  16,731 
  14,029 
  28,562 
  19,706 
    
    
Total liabilities
  16,731 
  14,029 
    
Stockholders’ Equity:
    
Convertible preferred stock - $0.001 par value; 15,000,000 shares authorized:
    
Series C - 96,230 and 96,230 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively
  1 
Series J-1 – 2,353,548 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively
  2 
  1 
Common stock - $0.001 par value; 750,000,000 shares authorized; and 52,644,882 and 50,650,478 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively
  53 
  51 
Stockholders’ Deficit:
    
Convertible preferred stock - $0.01 par value; 15,000,000 shares authorized:
    
Series C - 96,230 and 96,230 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively
  1 
Series J-1 – 2,353,548 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively
  24 
Common stock - $0.001 par value; 750,000,000 shares authorized; and 75,435,862 and 69,784,699 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively
  75 
  70 
Additional paid-in capital
  545,073 
  540,171 
  550,389 
  548,096 
Accumulated deficit
  (535,984)
  (528,685)
  (577,819)
  (567,332)
Noncontrolling interest
  (169)
  (169)
Total Stockholders’ Equity
  8,976 
  11,370 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 $25,707 
 $25,399 
Total Stockholders’ Deficit
  (27,499)
  (19,310)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
 $1,063 
 $396 
The accompanying notes are an integral part of these consolidated financial statements.

GT BIOPHARMA, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)
 
 
Three Months Ended June 30,
 
 
Six Months Ended June 30,
 
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Research and development
  154 
  3,251 
  988 
  6,724 
Selling, general and administrative expenses
  2,125  
  1,906  
  5,347  
  5,593  
Total operating expenses
  2,279  
  5,157  
  6,335  
  12,317  
Loss from operations
  (2,279)
  (5,157)
  (6,335)
  (12,317)
Other income (expense):
    
    
    
    
Loss on disposal of assets
  (31)
  -- 
  (31)
  -- 
Interest expense
  (479)
  (3,924)
  (933)
  (6,855)
Total other income (expense)
  (510)
  (3,924)
  (964)
  (6,855)
Loss before provision for income taxes
  (2,789)
  (9,081)
  (7,299)
  (19,172)
Provision for income tax
  -  
  -  
  -  
  -  
Net loss
  (2,789)
  (9,081)
  (7,299)
  (19,172)
Net loss per common share – basic and diluted
 $(.05)
 $(0.18)
 $(.14)
 $(0.38)
Weighted average common shares outstanding – basic and diluted
  51,918,252  
  50,117,977  
  51,507,849  
  50,117,977  

The accompanying notes are an integral part of these consolidated financial statements.
 

 
GT Biopharma, Inc. and SubsidiariesBIOPHARMA, INC. AND SUBSIDIARIES
Consolidated Statements of Cash FlowsOperations
For the Six Months Ended June 30, 2019 and 2018(Unaudited)
(in Thousands)In thousands, except per share data)
 
 
 
2019  
 
 
2018  
 
 
 
(unaudited)
 
 
(unaudited)
 
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net loss
 $(7,299)
 $(19,172)
Adjustments to reconcile net loss to net cash used in operating activities:
 
Depreciation
  10 
  2 
Stock compensation expense for options and warrants issued to employees and non-employees
  3,705 
  6,489 
Amortization of debt discounts
  331 
  6,855 
Non-cash interest expense
  1,140 
  - 
Loss on disposal od assets
  31 
  0 
Amortization of loan costs
  - 
  407 
Changes in operating assets and liabilities:
    
    
Other assets
  8 
  - 
Accounts payable and accrued liabilities
  26 
  (581)
Net cash used in operating activities
  (2,048)
  (6,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
    
    
Acquisition of fixed assets
  - 
  (2)
Net cash used by investing activities
  0 
  (2)
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
    
Proceeds from notes payable
  2,352 
  7,055 
Loan costs
  - 
  (533)
Repayment of note payable
  (100)
  - 
Net cash provided by financing activities
  2,252 
  6,522 
Minority interest
  - 
  - 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
  204 
  520 
CASH AND CASH EQUIVALENTS - Beginning of period
  60 
  576 
CASH AND CASH EQUIVALENTS - End of period
 $264 
 $1,096 
 
    
    
Supplemental disclosures:
    
    
Interest paid
 $- 
 $- 
Income taxes paid
 $- 
 $- 
 
    
    
Supplemental disclosures:
    
    
Issuance of common stock upon conversion of convertible notes
 $1,035 
 $- 
Issuance of common stock upon conversion of accrued interest
 $10 
 $- 
 
 
Three Months Ended June 30,
 
 
Six Months Ended June 30,
 
 
 
2020
 
 
2019
 
 
2020
 
 
2019
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Research and development
  12 
  154 
  336 
  988 
Selling, general and administrative expenses
  1,546  
  2,125  
  2,292  
  5,347  
Total operating expenses
  1,558  
  2,279  
  2,628  
  6,335  
Loss from operations
  (1,558)
  (2,279)
  (2,628)
  (6,335)
Other income (expense):
    
    
    
    
Loss on disposal of assets
  - 
  (31)
  - 
  (31)
Settlement expense
  (2,563)
  - 
  (2,563)
  - 
Interest expense
  (4,658)
  (479)
  (5,296)
  (933)
Total other income (expense)
  (7,221)
  (510)
  (7,859)
  (964)
Loss before provision for income taxes
  (8,779)
  (2,789)
  (10,487)
  (7,299)
Provision for income tax
  -  
  -  
  -  
  -  
Net loss
  (8,779)
  (2,789)
  (10,487)
  (7,299)
Net loss per common share – basic and diluted
 $(.12)
 $(.05)
 $(.15)
 $(0.14)
Weighted average common shares outstanding – basic and diluted
  71,899,937  
  51,918,252  
  70,978,579  
  51,507,849  
 
The accompanying notes are an integral part of these consolidated financial statements.
 

GT Biopharma, Inc. and Subsidiaries
Consolidated Statement of Stockholders’ Deficit
(In thousands)
 
 
Preferred Stock
 
 
Common Stock
 
 
Additional Paid-in
 
 
Accumulated
 
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Capital
 
 
Deficit
 
Balance at January 1, 2020
  2,450 
 $25 
  69,785 
 $70 
 $548,096 
 $(567,332)
Issuance of common stock for convertible notes
    
    
  1,065 
  1 
  212 
    
Beneficial conversion feature of convertible notes
    
    
  3,500 
  3 
  26 
    
Issuance of common stock for settlement of litigation
    
    
  1,086 
  1 
  1,909 
    
Issuance of common stock for compensation
    
    
    
    
  146 
    
Net loss
    
    
    
    
    
  (10,487)
Balance at June 30, 2020
  2,450 
 $25 
  75,436 
 $75 
 $550,389 
 $(577,819)
 
 
Preferred Stock
 
 
Common Stock
 
 
Additional Paid-in
 
 
Accumulated
 
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Capital
 
 
Deficit
 
Balance at January 1, 2019
  1,260 
 $13 
  50,650 
 $51 
 $540,160 
 $(528,685)
Issuance of preferred stock
  1,190 
  12 
    
    
  1,128 
    
Issuance of common stock for convertible notes
    
    
  1,994 
  2 
  1,040 
    
Beneficial conversion feature of convertible notes
    
    
    
    
  158 
    
Issuance of common stock for compensation
    
    
    
    
  2,565 
    
Net loss
    
    
    
    
    
  (7,299)
Balance at June 30, 2019
  2,450 
 $25 
  52,644 
 $53 
 $545,051 
 $(535,984)
The accompanying notes are an integral part of these consolidated financial statements.

GT Biopharma, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2020 and 2019
(in Thousands)
 
 
2020
 
 
2019
 
 
 
(unaudited)
 
 
(unaudited)
 
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
Net loss
 $( 10,487)
 $( 7,299)
Adjustments to reconcile net loss to net cash used in operating activities:
    
    
Depreciation
  - 
  10 
Stock compensation expense for options and warrants issued to employees and non-employees
  147 
  3,705 
Amortization of debt discounts
  1 
  331 
Non-cash interest expense
  3,955 
  1,140 
Loss on disposal of assets
  - 
  31 
Settlement expense
  2,363 
  - 
Changes in operating assets and liabilities:
    
    
Other assets
  126 
  8 
Accounts payable and accrued liabilities
  261 
  26 
Net cash used in operating activities
  ( 3,634)
  ( 2,048)
CASH FLOWS FROM INVESTING ACTIVITIES:
    
    
Acquisition of fixed assets
  - 
  - 
Net cash used by investing activities
  0 
  0 
CASH FLOWS FROM FINANCING ACTIVITIES:
    
    
Proceeds from notes payable
  4,457 
  2,352 
Loan costs
  - 
  - 
Repayment of note payable
  - 
  (100)
Net cash provided by financing activities
  4,457 
  2,252 
Minority interest
  - 
  - 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
  823 
  204 
CASH AND CASH EQUIVALENTS - Beginning of period
  28 
  60 
CASH AND CASH EQUIVALENTS - End of period
 $851 
 $264 
 
    
    
Supplemental disclosures:
    
    
Interest paid
 $69 
 $- 
Income taxes paid
 $- 
 $- 
 
    
    
Supplemental disclosures:
    
    
Issuance of common stock upon conversion of convertible notes
 $200 
 $1,035 
Issuance of common stock upon conversion of accrued interest
 $12 
 $10 
The accompanying notes are an integral part of these consolidated financial statements.

GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
 
1.            
The Company and Summary of Significant Accounting Policies
 
Business
 
In 1965, the corporate predecessor of GT Biopharma, Diagnostic Data, Inc. was incorporated in the State of California. Diagnostic Data changed its incorporation to the State of Delaware in 1972. and changed its name to DDI Pharmaceuticals, Inc. in 1985. In 1994, DDI Pharmaceuticals merged with International BioClinical, Inc. and Bioxytech S.A. and changed its name to OXIS International, Inc. In July 2017, the Company changed its name to GT Biopharma, Inc.
 
We areThe Company is a clinical stage biopharmaceutical company focused on the development and commercialization of novel immuno-oncology products based off our proprietary Natural Killer (NK) cell engager (Tri-specificTri-specific Killer Engager (TriKE) &(TriKE™), Tetra-specific Killer Engager (TetraKE)(TetraKE™) and bi-specific Antibody Drug Conjugate (bispecific-ADC)ligand-directed single-chain fusion protein technology platforms. OurThe Company’s TriKE and TetraKE platforms generate proprietary moietiestherapeutics designed to harness and enhance the cancer killing abilities of a patient’s own natural killer cells, or NK cells. Once bound to aan NK cell, ourthe Company’s moieties are designed to stimulateenhance the NK cell, and precisely direct it to one or more specifically-targeted proteins (tumor antigens) expressed on a specific type of cancer cell or virus infected cell, ultimately resulting in the cancertargeted cell’s death. TriKEs and TetraKEs are made up of recombinant fusion proteins, can be designed to target any number of tumor antigens on hematologic malignancies, sarcomas or solid tumors and do not require patient-specific customization. They are designed to be dosed in an outpatient setting and are expected to have reasonably low cost of goods. Our bispecific-ADC platform can generate product candidates that are ligand-directed single-chain fusion proteins that simultaneously target two tumor antigens. We believe our bispecific-ADC moieties represents the next generation of ADCs.
 
Going Concern
 
The Company’s current operations have focused on business planning, raising capital, establishing an intellectual property portfolio, hiring, and conducting preclinical studies and clinical trials. The Company does not have any product candidates approved for sale and has not generated any revenue from product sales. The Company has sustained operating losses since inception and expects such losses to continue over the foreseeable future.
 
The financial statements of the Company have been prepared on a going­concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the financial statements do not include any adjustments that might be necessary should the Company be unable to continue in existence.
 
The Company has incurred substantial losses and negative cash flows from operations since its inception and has an accumulated deficit of $536$578 million and cash of $264$851 thousand as of June 30, 2019.2020. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of its products currently in development. Substantial additional financing will be needed by the Company to fund its operations and to commercially develop its product candidates. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
 
Management is currently evaluating different strategies to obtain the required funding for future operations. These strategies may include but are not limited to: public offerings of equity and/or debt securities, payments from potential strategic research and development, and licensing and/or marketing arrangements with pharmaceutical companies. If the Company is unable to secure adequate additional funding, its business, operating results, financial condition and cash flows may be materially and adversely affected.
 
Use of Estimates
 
The financial statements and notes are representations of the Company'sCompany’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America, and have been consistently applied in the preparation of the financial statements. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities revenues and expenses and disclosures of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
 

GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
Basis of Consolidation and Comprehensive Income
 
The accompanying consolidated financial statements include the accounts of GT Biopharma, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated. The Company'sCompany’s financial statements are prepared using the accrual method of accounting.

 
Basis of Presentation
 
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and disclosures required by U.S. GAAP for complete consolidated financial statements have been condensed or omitted herein. The interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company'sCompany’s Form 10-K for the year ended December 31, 2018.2019 filed with the SEC on March 27, 2020. The unaudited interim condensed consolidated financial information presented herein reflects all normal adjustments that are, in the opinion of management, necessary for a fair statement of the financial position, results of operations and cash flows for the periods presented. The Company is responsible for the unaudited interim consolidated financial statements included in this report. The results of operations of any interim period are not necessarily indicative of the results for the full year.
 
Cash and Cash Equivalents
 
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.
 
Concentrations of Credit Risk
 
The Company'sCompany’s cash and cash equivalents, marketable securities and accounts receivable are monitored for exposure to concentrations of credit risk. The Company maintains substantially all of its cash balances in a limited number of financial institutions. The balances are each insured by the Federal Deposit Insurance Corporation up to $250,000. The Company had balances totaling $14,000a balance of approximately $600,000 in excess of this limit at June 30, 2019.
2020.
 
Stock Based Compensation to Employees
 
The Company accounts for its stock-based compensation for employees in accordance with Accounting Standards Codification (“ASC”) 718.  The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees over the related vesting period.
 
The Company granted no stock options during the six months ended June 30, 2020 and 2019, and 2018, respectivelyrespectively.
 

GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)

Long-Lived Assets
 
Our long-lived assets include property, plant and equipment, capitalized costs of filing patent applications and other indefinite lived intangible assets. We evaluate our long-lived assets for impairment, other than indefinite lived intangible assets, in accordance with ASC 360, whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Estimates of future cash flows and timing of events for evaluating long-lived assets for impairment are based upon management’s judgment. If any of our intangible or long-lived assets are considered to be impaired, the amount of impairment to be recognized is the excess of the carrying amount of the assets over its fair value.
 
Applicable long-lived assets are amortized or depreciated over the shorter of their estimated useful lives, the estimated period that the assets will generate revenue, or the statutory or contractual term in the case of patents. Estimates of useful lives and periods of expected revenue generation are reviewed periodically for appropriateness and are based upon management’s judgment.
 

Impairment of Long-Lived Assets
The Company's long-lived assets currently consist of indefinite lived intangible assets associated with IPR&D (“In-Process Research & Development”) projects and related capitalized patents acquired in the acquisition of Georgetown Translational Pharmaceuticals, Inc. as described in Note 2 below.  Intangible assets associated with IPR&D projects are not amortized until approval by the Food and Drug Administration (FDA) is obtained in a major market subject to certain specified conditions and management judgment. The useful life of an amortizing asset generally is determined by identifying the period in which substantially all of the cash flows are expected to be generated.
 
The Company evaluates indefinite lived intangible assets for impairment at least annually and whenever impairment indicators are present in accordance with ASC 350. When necessary, the Company records an impairment loss for the amount by which the fair value is less than the carrying value of these assets. The fair value of intangible assets other than goodwill is typically determined using the “relief from royalty method”, specifically the discounted cash flow method utilizing Level 3 fair value inputs. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, which includes the expected impact of competitive, legal and/or regulatory forces on the projections and the impact of technological risk associated with IPR&D assets, as well as the selection of a long-term growth rate; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.
 
The Company performs impairment testing for all other long-lived assets whenever impairment indicators are present. When necessary, the Company calculates the undiscounted value of the projected cash flows associated with the asset, or asset group, and compares this estimated amount to the carrying amount. If the carrying amount is found to be greater, we record an impairment loss for the excess of book value over fair value.
 
Income Taxes
 
The Company accounts for income taxes using the asset and liability approach, whereby deferred income tax assets and liabilities are recognized for the estimated future tax effects, based on current enacted tax laws, of temporary differences between financial and tax reporting for current and prior periods. Deferred tax assets are reduced, if necessary, by a valuation allowance if the corresponding future tax benefits may not be realized.
 
Net Income (Loss) per Share
 
Basic net income (loss) per share is computed by dividing the net lossincome (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net lossincome (loss) for the period by the weighted average number of common shares outstanding during the period, plus the potential dilutive effect of common shares issuable upon exercise or conversion of outstanding, convertible notes and debentures (including shares issuable upon conversion of accrued interest or other default amounts with respect to such convertible notes or debentures), stock options and warrants during the period. The weighted average number of potentially dilutive common shares excluded from the calculation of net income (loss) per share totaled in 39,416,352127,946,216 and 3,390,12039,416,352 as of June 30, 20192020 and 2018,2019, respectively.
 
Patents
 
Acquired patents are capitalized at their acquisition cost or fair value. The legal costs, patent registration fees and models and drawings required for filing patent applications are capitalized if they relate to commercially viable technologies. Commercially viable technologies are those technologies that are projected to generate future positive cash flows in the near term. Legal costs associated with patent applications that are not determined to be commercially viable are expensed as incurred. All research and development costs incurred in developing the patentable idea are expensed as incurred. Legal fees from the costs incurred in successful defense to the extent of an evident increase in the value of the patents are capitalized.
 

GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
Capitalized cost for pending patents are amortized on a straight-line basis over the remaining twenty year legal life of each patent after the costs have been incurred. Once each patent is issued, capitalized costs are amortized on a straight-line basis over the shorter of the patent'spatent’s remaining statutory life, estimated economic life or ten years.
 
Fixed Assets
 
Fixed assets isare stated at cost. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets, which are 3 to 10 years for machinery and equipment and the shorter of the lease term or estimated economic life for leasehold improvements.

 
Fair Value
 
The carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.  The three levels are defined as follows:
 
● 
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. The Company’s Level 1 assets include cash equivalents, primarily institutional money market funds, whose carrying value represents fair value because of their short-term maturities of the investments held by these funds.
 
● 
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. The Company’s Level 2 valuation amounts consist of warrants and beneficial conversion features arising from the issuance of convertible securities and in accordance with ASC 815-40.There were not such liabilities at June 30, 2020.
 
● 
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. There were no such assets or liabilities as of June 30, 2020.
 
Research and Development
 
Research and development costs are expensed as incurred and reported as research and development expense. Research and development costs totaling $1totaled $0.3 million and $6.7$1 million for the six months ended June 30, 20192020 and 2018,2019, respectively.
 
Revenue Recognition
 
License Revenue
 
License arrangements may consist of non-refundable upfront license fees, exclusive licensed rights to patented or patent pending technology, and various performance or sales milestones and future product royalty payments. Some of these arrangements are multiple element arrangements.
 
Non-refundable, up-front fees that are not contingent on any future performance by us, and require no consequential continuing involvement on our part, are recognized as revenue when the license term commences and the licensed data, technology and/or compound is delivered.  We defer recognition of non-refundable upfront fees if we have continuing performance obligations without which the technology, right, product or service conveyed in conjunction with the non-refundable fee has no utility to the licensee that is separate and independent of our performance under the other elements of the arrangement. In addition, if we have continuing involvement through research and development services that are required because our know-how and expertise related to the technology is proprietary to us, or can only be performed by us, then such up-front fees are deferred and recognized over the period of continuing involvement.
 

GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)

Payments related to substantive, performance-based milestones in a research and development arrangement are recognized as revenue upon the achievement of the milestones as specified in the underlying agreements when they represent the culmination of the earnings process. As of June 30, 2019,2020, the Company has not generated any licensing revenue.
 
Recent Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance related to accounting for leases, Accounting Standards codification Topic 842 (ASC 842). We adopted the new guidance on January 1, 2019 using the modified retrospective approach and the optional transition method. Under this adoption method, comparative prior periods were not adjusted and continue to be reported with our historical accounting policy. The primary impact of adopting this standard was the recognition of $173 thousand in operating lease liabilities and $165 thousand in right of use assets.

2.
Intangibles
On September 1, 2017, the Company entered into an Agreement and Plan of Merger whereby it acquired 100% of the issued and outstanding capital stock of Georgetown Translational Pharmaceuticals, Inc. (GTP). In exchange for the ownership of GTP, the Company issued a total of 16,927,878 shares of its common stock, having a share price of $15.00 on the date of the transaction, to the three prior owners of GTP which represented 33% of the issued and outstanding capital stock of the Company on a fully diluted basis. $253.8 million of the value of shares issued was allocated to intangible assets consisting of a portfolio of three CNS development candidates, which are classified as IPR&D. 
As of September 30, 2018, the Company recorded an intangible asset impairment charge of $228.5 million related to the portfolio of CNS IPR&D assets within Operating Expenses, which represents the excess carrying value compared to fair value. The impairment charge was the result of both internal and external factors. In the 3rdquarter of 2018, the Company experienced changes in key senior management, led by the appointment of a new CEO with extensive experience in oncology drug development. These changes resulted in the prioritization of immuno-oncology development candidates relative to CNS development candidates. In conjunction with these strategic changes, limited internal resources have delayed the development of the CNS IPR&D assets. The limited resources, changes in senior leadership, and favorable market conditions for immuno-oncology development candidates have resulted in the Company choosing to focus on development of its immuno-oncology portfolio. In light of this shift in market strategy, the Company performed a commercial assessment and a valuation of the CNS IPR&D assets, both to assess fair value and support potential future licensing efforts. The valuation indicated an excess carrying value over the fair value of these assets, resulting in the impairment charge noted above.
The fair value of the CNS IPR&D assets was determined using the discounted cash flow method which utilized significant estimates and assumptions surrounding the amount and timing of the projected net cash flows, which includes the probability of commercialization, the assumption that the assets would be out-licensed to third-parties for continued development for upfront licensing fees and downstream royalty payments based on net sales, and expected impact of competitive, legal and/or regulatory forces on the projections, as well as the selection of a long-term growth rate; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.
3.            
Debt
 
Convertible NotesNotes/Debentures
 
On January 22, 2018,As of June 30, 2020, the Company entered into a Securities Purchase Agreement (“SPA”) with fourteen accredited investors (individually, a “Buyer” and collectively, the “Buyers”) pursuant to which the Company agreed to issue to the Buyers senior convertible notes in anhad approximately $21.8 million aggregate principal amount of $7,760,510 (the “Notes”), which Notes shall be convertible intonotes and debentures (collectively, the Company’s common stock, par value $0.001 per share (the “Common Stock”“Convertible Notes”) at a price of $4.58 per share, and five-year warrantsoutstanding that were issued pursuant to securities purchase agreements (or, in the Company’s Common Stock representing the right to acquire an aggregate of approximately 1,694,440 shares of Common Stock (the “Warrants”).
Pursuant to the terms of SPA the Notes were subject to an original issue discount of 10% resulting in proceeds to the Company of $7,055,000 from the transaction.
Upon the purchasecase of the Settlement Notes (as defined herein), the Buyers received Warrants to purchaseSettlement Agreement (as defined herein)) entered into with numerous investors. The Company issued an additional approximately $3.2 million aggregate principal amount of Convertible Notes on July 7, 2020. See Note 6, 1,694,440 shares of Common StockSubsequent Events. Such Warrants are exercisable for (5) years from under the date the shares underlying the Warrants are freely saleable. The initial Exercise Price is $4.58. According to the terms of the warrant agreement, the Warrants are subject to certain adjustments depending upon the price and structure of a subsequent financing, including a qualified financing with gross proceeds of at least $20 million, as defined in the agreements.caption “Convertible Notes.”
 
The issuance of the Notes and Warrants were made in reliance on the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) for the offer and sale of securities not involving a public offering, and Regulation D promulgated under the Securities Act.
Contemporaneously with the execution and delivery of the SPA, the Company and the Buyers executed and delivered a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which the Company has agreed to provide certain registration rights with respect to the Registrable Securities under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws.
Senior Convertible Debentures
On August 2, 2018, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement with the purchasers identified on the signature pages thereto (individually, a “Purchaser,” and collectively, the “Purchasers”) pursuant to which the Company issued to the Purchasers one year 10% Senior Convertible Debentures in an aggregate principal amount of $5,140,000 (the “Debentures”), which Debentures shall be convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a price of $2 per share. The Company used a portion of these proceeds to repay $4.4 million of the notes issued on January 22, 2018. Additionally, the remaining $3.3 million of the notes issued on January 22, 2018 were converted into the Debentures at the same terms discussed above.
On September 7, 2018, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement with the purchasers identified on the signature pages thereto (individually, a “Purchaser,” and collectively, the “Purchasers”) pursuant to which the Company has issued to the Purchasers one year 10% Senior Convertible Debentures in an aggregate principal amount of $2,050,000 (the “Debentures”), which Debentures shall be convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a price of $2 per share.

On September 24, 2018, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement with the purchasers identified on the signature pages thereto (individually, a “Purchaser,” and collectively, the “Purchasers”) pursuant to which the Company has issued to the Purchasers one year 10% Senior Convertible Debentures in an aggregate principal amount of $800,000 (the “Debentures”), which Debentures shall be convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a price of $2 per share.
On February 4, 2019, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the purchasers identified on the signature pages thereto (individually, a “Purchaser,” and collectively, the “Purchasers”), pursuant to which the Company issued to the Purchasers, on February 4, 2019, Secured Convertible Notes in an aggregate principal amount of $1,352,224 (the “Notes”), consisting of gross proceeds of $1,052,224 and settlement of existing debt of $300,000, which Notes shall beare convertible at any time, after issuanceat the holder’s option, into shares (the “Conversion Shares”) of the Company’s common stock par value $0.001 per share (the “Common Stock”), at aan initial conversion price, subject to certain beneficial ownership limitations (which vary between maximum ownership of between 4.99% and 9.99%). The conversion price of $0.60 per share (the “Conversion Price”).
The Notes accrue interest at the rate of 10% per annum and mature on August 2, 2019. Interest on theConvertible Notes is payable in cash or, at a Purchaser’s option, in shares of Common Stock at the Conversion Price. Upon the occurrence of an event of default, interest accrues at 18% per annum. The Notes contain customary default provisions, including provisions for potential acceleration, and covenants, including negative covenants regarding additional indebtedness and dividends. The Conversion Price isalso generally subject to adjustment due to certain events, including stock dividends, and stock splits and is subject to reduction in certain circumstances ifconnection with the issuance by the Company issues Common Stockof common stock or Common Stockcommon stock equivalents at an effective price per share that is lower than the Conversion Priceconversion price then in effect. The conversion price for each of the Company’s outstanding Convertible Notes is currently $0.20 per share. In addition, approximately $5.2 million aggregate principal amount of the Company’s Convertible Notes will be subject to mandatory conversion in connection with the completion of a future financing in the amount of at least $15 million, subject to the beneficial ownership limitations described above.
The Convertible Notes generally have terms of six months to one year and mature between August 2, 2019 and January 7, 2021, unless earlier converted or repurchased. The Convertible Notes each accrue interest at a rate of 10% per annum, subject to increase to 18% per annum upon and during the occurrence of an event of default with respect to certain of the Convertible Notes. Interest is payable in cash or, with respect to certain of the Convertible Notes, and at the holder’s option, in shares of common stock based on the conversion price then in effect.
Pursuant to the terms of the Settlement Notes, the Company may onlyis required to make an offer to repurchase, at the holder’s option, the Settlement Notes at price in cash equal to 100% of the aggregate principal amount of the Settlement Note plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase following the consummation by the Company of a financing transaction, or a series of transactions, resulting in aggregate gross proceeds to the Company in excess of $7.5 million. Generally, the Company otherwise does not have the right to prepay any of the Convertible Notes withwithout the prior written consent of the respective Purchasers thereof.holders of such securities.
 
Contemporaneously with the executionThe Convertible Notes contain a number of affirmative and deliverynegative covenants and customary events of the Purchase Agreement, on February 4, 2019, the Company and certaindefault. As of its wholly-owned subsidiaries entered into a Security Agreement (the “Security Agreement”) with Alpha Capital Anstalt, as collateral agent on behalf of the Purchasers, and with the Purchasers, pursuant to which the Purchasers have been granted a first-priority security interest in substantially all of the assets of the Company and such subsidiaries securing (i) anJune 30, 2020, approximately $13.2 aggregate principal amount of $1,352,224 ofour Convertible Notes and (ii) an aggregate principal amount of $9,058,962 of the Company’s 10% Senior Convertible Debentures issued on August 2, 2018, September 7, 2018 and September 24, 2018 held by such Purchasers.were in default. See “Forbearance Agreements” below.
 
The Purchasesecurities purchase agreements and Settlement Agreement, contains customary representations, warranties andas applicable, also generally contain certain ongoing covenants including covenants, subject to certain exceptions, thatof the Company, until the dateincluding rights of participation in certain future financing transactions, limitations on which less than 10%future variable rate transactions and “at-the-market” offerings and “most favored nation” provisions giving holders of certain of the Convertible Notes are outstanding, shall not effect any Variable Rate Transaction (as defined in the Purchase Agreement) and that, for as long as a Purchaser holds any Notes or Conversion Shares, the Company shall amend the terms and conditions of the Purchase Agreement and the transactions contemplated thereby with respect to such Purchaser to give such Purchaser the benefit of any terms or conditions under which the Company agrees to issue or sell any Common Stockcommon stock or Common Stockcommon stock equivalents that are more favorable to an investor than the terms and conditions granted to such Purchaserholder under the Purchase Agreementapplicable securities purchase agreement and the transactions contemplated thereby.
 

GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)

The Convertible Notes are senior obligations of the Company. In addition, approximately $8.9 million aggregate principal amount of the Convertible Notes are secured by a first priority security interest in substantially all of the assets of the Company and its subsidiaries. Convertible Notes are also secured by individual pledges by certain of our current and former officers and directors of our common stock owned by such officer and directors.
For additional information about the Convertible Notes, see Note 4, Debt to the Company’s audited consolidated financial statements included in the Company’s Form 10-K for the year ended December 31, 2019.
Forbearance Agreements
Effective as of June 23, 2020, the Company entered into Standstill and Forbearance Agreements (collectively, the “Forbearance Agreements”) with the holders of $13.2 million aggregate principal amount of the Convertible Notes (the “Default Notes”), which are currently in default. Pursuant to the Forbearance Agreements, the holders of the Default Notes have agreed to forbear from exercising their rights and remedies under the Default Notes (including declaring such Default Notes (together with any default amounts and accrued and unpaid interest) immediately due and payable) until the earlier of (i) the date that the Company completes a future financing in the amount of $15 million and, in connection therewith, commences listing on NASDAQ (collectively, the “New Financing”) or (ii) October 1, 2020 (the “Termination Date”). As a result of the ongoing default, the Default Notes are currently accruing interest at the default rate of 18% per annum and have accrued additional default amounts of approximately $3.9 million in the aggregate as of June 30, 2020.
The obligations of the holders to forbear from exercising their rights and remedies under the Default Notes pursuant to the Forbearance Agreements will terminate on the earliest of (i) the Termination Date, (ii) the date of any bankruptcy filing by the Company or its subsidiaries, (iii) the date on which the Company defaults on any of the terms and conditions of the Forbearance Agreements or (iv) the date the Forbearance Agreements are otherwise terminated or expire.
The Forbearance Agreements contain various customary and other representations, warranties and covenants of the Company and the holders of the Default Notes, including an agreement that the Default Notes (together with default amounts and accrued and unpaid interest) will be converted into common stock upon the closing of a New Financing at a conversion price equal to the lesser of (i) the conversion price in effect for the Default Notes on the date of such New Financing or (ii) 75% of the lowest per share price at which common stock is or may be issued in connection with such New Financing, in each case, subject to certain beneficial ownership limitations (with a maximum ownership limit of 9.99%). Shares of the Company’s preferred stock, which are convertible into the Company’s common stock, will be issued in lieu of common stock to the extent that conversion of the Default Notes is prohibited by such beneficial ownership limitations.
Settlement Notes
On June 19, 2020, the Company entered into a registration rightssettlement agreement (the “Registration Rights“Settlement Agreement”) with Empery Asset Master Ltd., Empery Tax Efficient, LP and Empery Tax Efficient II, LP (collectively, the Purchasers,“Empery Funds”), Anthony Cataldo and Paul Kessler resolving all remaining disputes between the parties pertaining to certain Convertible Notes and warrants to purchase common stock of the Company (collectively, the “Original Securities”) issued by the Company to the Empery Funds in January 2018 pursuant to a securities purchase agreement. In connection with the Settlement Agreement, the Company issued Convertible Notes in an aggregate principal amount of $450,000 (the “Settlement Notes”) to the Empery Funds on June 19, 2020. The Settlement Notes are convertible at any time, at the holder’s option, into shares of our common stock at an initial conversion price of $0.20 per share, subject to certain beneficial ownership limitations (with a maximum ownership limit of 4.99%).

GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
The Settlement Notes mature on December 19, 2020, unless earlier converted or repurchased. The terms of the Settlement Notes are generally the same as the Company’s other Convertible Notes, except that the Company is required to make an offer to repurchase, at the option of each holder, the Settlement Notes at price in cash equal to 100% of the aggregate principal amount of the Settlement Notes plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase following the consummation by the Company of a financing transaction, or a series of transactions, resulting in aggregate gross proceeds to the Company in excess of $7.5 million.
Fiscal 2019 and Fiscal 2020 Convertible Notes Transactions
On February 4, 2019, the Company entered into a securities purchase agreement with certain purchasers pursuant to which the Company has agreed to file, within 14 days after February 4, 2019, one or more registration statements on Form S-3 (or, if Form S-3 is not then available to the Company, such formit issued secured Convertible Notes in an aggregate principal amount of registration that is then available to effect a registration for resale$1,352,224, consisting of the subject securities) covering the resalegross proceeds of all Conversion Shares, subject to certain penalties set forth in the Registration Rights Agreement. The Form S-3 was filed by the Company on February 14, 2019.$1,052,224 and settlement of existing debt of $300,000, which Convertible Notes were convertible into common stock at an initial conversion price of $0.60 per share.
 
On May 22, 2019, GT Biopharma, Inc. (the “Company”)the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”)securities purchase agreement with thecertain purchasers identified on the signature pages thereto (individually, a “Purchaser,” and collectively, the “Purchasers”), pursuant to which the Company issued to the Purchasers, on May 22, 2019, Secured Convertible Notes in an aggregate principal amount of $1,300,000, (the “Notes”), which Convertible Notes shall bewere convertible at any time after issuance into shares (the “Conversion Shares”) of the Company’s common stock par value $0.001 per share (the “Common Stock”), at aan initial conversion price of $0.35 per share (the “Conversion Price”).share.
 
The Notes accrue interest at the rate of 10% per annumBetween July 31 and mature on November 22, 2019. Interest on the Notes is payable in cash or, at a Purchaser’s option, in shares of Common Stock at the Conversion Price. Upon the occurrence of an event of default, interest accrues at 18% per annum. The Notes contain customary default provisions, including provisions for potential acceleration, and covenants, including negative covenants regarding additional indebtedness and dividends. The Conversion Price is subject to adjustment due to certain events, including stock dividends and stock splits, and is subject to reduction in certain circumstances if the Company issues Common Stock or Common Stock equivalents at an effective price per share that is lower than the Conversion Price then in effect. The Company may only prepay the Notes with the prior written consent of the respective Purchasers thereof.
The Purchase Agreement contains customary representations, warranties and covenants, including covenants, subject to certain exceptions, that the Company, until the date on which less than 10% of the Notes are outstanding, shall not effect any Variable Rate Transaction (as defined in the Purchase Agreement) and that, for as long as a Purchaser holds any Notes or Conversion Shares, the Company shall amend the terms and conditions of the Purchase Agreement and the transactions contemplated thereby with respect to such Purchaser to give such Purchaser the benefit of any terms or conditions under which the Company agrees to issue or sell any Common Stock or Common Stock equivalents that are more favorable to an investor than the terms and conditions granted to such Purchaser under the Purchase Agreement and the transactions contemplated thereby.
In addition,August 28, 2019, the Company entered into a registration rightssecurities purchase agreement (the “Registration Rights Agreement”) with the Purchasers,certain purchasers pursuant to which the Company has agreed to file, within 30 days after May 22,issued Convertible Notes in an aggregate principal amount of $975,000, which Convertible Notes are convertible into the Company’s common stock at an initial conversion price of $0.20 per share.
On December 19, 2019, one or more registration statements on Form S-3 (or, if Form S-3 is not then available to the Company such form of registration that is then availableentered into a securities purchase agreement with one purchaser pursuant to effect a registration for resale of the subject securities) covering the resale of all Conversion Shares, subject to certain penalties set forth in the Registration Rights Agreement. The Form S-1 was filed bywhich the Company on June 21, 2019.issued Convertible Notes in an aggregate principal amount of $200,000, which Convertible Notes are convertible into the Company’s common stock at an initial conversion price of $0.20 per share.
 

On January 30, 2020, the Company entered into a securities purchase agreement with one purchaser pursuant to which the Company issued Convertible Notes in an aggregate principal amount of $200,000, which Convertible Notes are convertible into the Company’s common stock at an initial conversion price of $0.20 per share.
 
Between April 20 and May 7, 2020, the Company entered into a securities purchase agreement with certain purchasers pursuant to which the Company issued Convertible Notes in an aggregate principal amount of $2,017,000, which Convertible Notes are convertible into the Company’s common stock at an initial conversion price of $0.20 per share.
On June 19, 2020, the Company entered into the Settlement Agreement pursuant to which the Company issued the Settlement Notes in an aggregate principal amount of $450,000, which Settlement Notes are convertible into the Company’s common stock at an initial conversion price of $0.20 per share.
On July 7, 2020, the Company entered into a securities purchase agreement with certain purchasers pursuant to which the Company issued Convertible Notes in an aggregate principal amount of $3,190,000, which Convertible Notes are convertible into the Company’s common stock at an initial conversion price of $0.20 per share.
Gemini Financing Agreement
 
On November 8, 2010, the Company entered into a financing arrangement with Gemini Pharmaceuticals, Inc., a product development and manufacturing partner of the Company, pursuant to which Gemini Pharmaceuticals made a $250,000 strategic equity investment in the Company and agreed to make a $750,000 purchase order line of credit facility available to the Company. The outstanding principal of all Advancesadvances under the Lineline of Creditcredit will bear interest at the rate of interest of prime plus 2 percent2% per annum. There is $31,000 due on this credit line at June 30, 2019.2020.

GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
 
4.3.            
Stockholders'Stockholders’ Equity
 
Common Stock
 
InOur authorized capital stock consists of 750,000,000 shares of common stock, par value $0.001 per share, and 15,000,000 shares of preferred stock, par value $0.01 per share. As of June 30, 2020, 75,435,862 shares of common stock were issued and outstanding.
During the first six months of 2019,ended June 30, 2020, the Company issued 1,994,4051,064,734 shares of common stock upon conversion of $1,045,453$212,947 in principal and interest on senior convertible notes.Convertible Notes.
On May 1, 2020, the Company issued 1,086,429 shares of common stock for consulting services.
On June 19, 2020, the Company issued 3,500,000 shares of common stock pursuant to the Settlement Agreement.
 
Preferred Stock
 
The 96,230 shares of Series C preferred stock, par value $0.01 per share (the “Series C Preferred Stock”), are convertible into 111 shares of the Company’s common stock at the option of the holders at any time. The conversion ratio is based on the average closing bid price of the common stock for the fifteen consecutive trading days ending on the date immediately preceding the date notice of conversion is given, but cannot be less than 0.20 or more than 0.2889 common shares for each share of Series C Preferred Stock. The conversion ratio may be adjusted under certain circumstances such as stock splits or stock dividends. The Company has the right to automatically convert the Series C Preferred Stock into common stock if the Company lists its shares of common stock on the Nasdaq National Market and the average closing bid price of the Company’s common stock on the Nasdaq National Market for 15 consecutive trading days exceeds $3,000.00. Each share of Series C Preferred Stock is entitled to the number of votes equal to 0.26 divided by the average closing bid price of the Company’s common stock during the fifteen consecutive trading days immediately prior to the date such shares of Series C Preferred Stock were purchased. In the event of liquidation, the holders of the Series C Preferred Stock shall participate on an equal basis with the holders of the common stock (as if the Series C Preferred Stock had converted into common stock) in any distribution of any of the assets or surplus funds of the Company. The holders of Series C Preferred Stock are entitled to noncumulative dividends if and when declared by the Company’s board of directors (the “Board”). No dividends to holders of the Series C Preferred Stock were issued or unpaid through June 30, 2020.
On September 1, 2017, the Company designated 2,000,000 shares of Series J Preferred Stock. Shares of Seriespreferred stock (the “Series J Preferred Stock will have the same voting rights as shares of common stock with each share of Series J Preferred Stock entitled to one vote at a meeting of the shareholders of the Corporation. Shares of Series J Preferred Stock will not be entitled to receive any dividends, unless and until specifically declared by our board of directors. The holders of the Series J Preferred Stock will participate, on an as-if-converted-to-common stock basis, in any dividends to the holders of common stock. Each share of the Series J Preferred Stock is convertible into one share of our common stock at any time at the option of the holder.
Stock”). On the same day, the Board issued 1,513, 5481,513,548 shares of those sharesSeries J Preferred Stock in exchange for the cancellation of debt.certain indebtedness.  In the first quarter of 2019, it was discovered that a certificate of designation with respect to the Series J Preferred Stock had never been filed with the Office of the Secretary of State for the State of Delaware.  Legal research determined that despite the fact the Company had issued shares of Series J Preferred Stock, those shares had, in fact, never existed.
 
To remedy the situation, on April 4, 2019, the Company filed a certificate of designation with the Office of the Secretary State for the State of Delaware designating a series of preferred stock as the Series J-1 preferred stock, par value $0.01 per share (the “Series J-1 Preferred Stock.Stock”).  On April 19, 2019, the Company issued 2,353,548 shares of those shares.Series J-1 Preferred Stock.  The issuance was in lieu of the preferred stockSeries J Preferred Stock that should have been issued on September 1, 2017, and in settlement for not receiving preferred stock until 20 months after the debt for which the stock was issued was cancelled. The Company reflected an expense in general and administrative costs in the quarter ended June 30, 2019 totaling $1,140,000.
 
The

GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
Shares of the Series J-1 Preferred Stock are convertible at any time, at the option of the holders, into shares of the Company’s common stock at an effective conversion price of $0.20 per share, subject to adjustment for, among other things, stock dividends, stock splits, combinations, reclassifications of our capital stock and mergers or consolidations, and subject to a beneficial ownership limitation which prohibits conversion if such conversion would result in the holder (together with its affiliates) being the beneficial owner of in excess of 9.99% of the Registrant at the rate of $0.60 per share.  The issuance was exempt from the registration requirements of Section 5 of the Securities Act of 1933 pursuant to Section 4(2) of the same Act since the issuance of theCompany’s common stock. Shares did not involve any public offering.  
350,000 of the Series JJ-1 Preferred Stock have the same voting rights a shares of preferred stock had been previously converted into 350,000 shares ofthe Company’s common stock, with the holders of the Series J-1 Preferred Stock entitled to vote on an as-converted-to-common stock basis, subject to the beneficial ownership limitation described above, together with the holders of the Company’s common stock on all matters presented to the Company’s stockholders. The Series J-1 Preferred Stock are not entitled to any dividends (unless specifically declared by the Board), but will participate on an as-converted-to-common-stock basis in December 2017.any dividends to the holders of the Company’s common stock. In the event of the Company’s dissolution, liquidation or winding up, the holders of the Series J-1 Preferred Stock will be on parity with the holders of the Company’s common stock and will participate, on a on an as-converted-to-common stock basis, in any distribution to holders of the Company’s common stock.
 
5.4.            
Stock Options and Warrants
 
Stock Options
 
The following table summarizes stock option transactions for the six months ended June 30, 2019:2020:
 
 
 
Number of Options
 
 
Weighted Average Exercise Price
 
Outstanding, December 31, 2018
  1,133 
 $1,320.00 
Granted
  - 
  - 
Exercised
  - 
  - 
Expired
  (1,133)
  1,320.00 
Outstanding, June 30, 2019
  - 
 $- 
Exercisable, June 30, 2019
  - 
 $- 

 
 
Number of Options
 
 
Weighted Average Exercise Price
 
Outstanding, December 31, 2019
  40 
 $877.50 
Granted
  - 
  - 
Exercised
  - 
  - 
Expired
  - 
  - 
Outstanding, June 30, 2020
  40 
 $877.50 
Exercisable, June 30, 2020
  40 
 $877.50 
 
Common Stock Warrants
 
Warrant transactions for the six months ended June 30, 20192020 are as follows:
 
 
 
Number of Warrants
 
 
Weighted Average Exercise Price
 
Outstanding at December 31, 2018:
  1,813,053 
 $0.35 
Granted
  - 
  - 
Forfeited
  -
  - 
Exercised
  - 
  - 
Outstanding at June 30, 2019
  1,813,053 
 $0.35 
Exercisable at June 30, 2019
  1,813,053 
 $0.35 
 
 
Number of Warrants
 
 
Weighted Average Exercise Price
 
Outstanding at December 31, 2019:
  1,813,053 
 $0.20 
Granted
  5,500,000 
 $0.20 
Forfeited/canceled
  480,352 
 $0.20 
Exercised
  - 
  - 
Outstanding at June 30, 2020
  6,832,701 
 $0.20 
Exercisable at June 30, 2020
  6,832,701 
 $0.20 

GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
Settlement Warrants
Pursuant to the Settlement Agreement, the Company issued pre-funded warrants to purchase up to an aggregate of 5,500,000 shares of common stock (the “Settlement Warrants”) at an exercise price of $0.20 per share, subject to adjustment in certain circumstances. The Settlement Warrants expire on June 19, 2025. The aggregate exercise price of the Settlement Warrants was deemed to be pre-funded to the Company in conjunction with exchange of previously issued warrants to purchase 480,352 shares of common stock pursuant to the Settlement Agreement. Exercise of the Settlement Warrant is subject to certain additional terms and conditions, including certain beneficial ownership limitations.
Forbearance Agreements
Pursuant to the Forbearance Agreements,(i) the exercise price of all warrants to purchase common stock held by holders of the Default Notes will be reduced to equal the conversion price of the Default Notes and (ii)the number of shares of common stock underlying such warrants shall be increased so that the total exercise price of all such warrants after the decrease in the exercise price equals the total exercise price of all such warrants prior to the decrease in the exercise price. Further, the expiration date of all such warrants shall be extended for three years following the closing date of any New Financing.
 
6.5.            
Commitments and Contingencies
 
Leases
As described in Note 1. Nature of Operations and Summary of Significant Accounting Policies, we adopted new lease accounting guidance effective January
On October 1, 2019.
We determine if a contractual arrangement is a lease at inception. Our lease arrangements provide2018, the Company the rightentered into a three-year lease agreement for its office in Westlake Village, CA. In addition to utilizeminimum rent, certain specified tangible assets for a periodleases require payment of time in exchange for consideration. Our leases primarily relate to building office space. Our leases currently consist solely of operating leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet.
We recognize a lease liabilityreal estate taxes, insurance, common area maintenance charges and a right of use asset at the lease commencement date based on the present value of the future lease payments over the lease term discounted using our incremental borrowing rate. Implicit interest rates within our leaseother executory costs. The Company recognizes rent expense under such arrangements are rarely determinable. Right of use assets also include, if applicable, prepaid lease payments and initial direct costs, less incentives received.
We recognize operating lease expense on a straight-line basis over the effective term of the lease within selling general and administrative expenses.each lease.
 
Our leases do not contain any material residual value guarantees or material restrictive covenants. Some of our leases include optional renewal periods or termination provisions which we assess at inception to determine the term of the lease, subject to reassessment in certain circumstances.
The following table summarizes the Company’s future minimum lease commitments as of June 30 2019:, 2020:
 
Year ending December 31:
 
 
 
 
 
 
2019
  34,000 
2020
  71,000 
  36,000 
2021
  61,000  
  61,000  
Total minimum lease payments
 $166,000  
 $97,000  
 
Rent expense for the six months ended June 30, 2020 and 2019 and 2018 was $35,000 and $54,000,$35,000, respectively.
6.            
Subsequent Events
Convertible Notes
 On July 7, 2020, the Company entered into a securities purchase agreement with certain purchasers pursuant to which the Company issued Convertible Notes in an aggregate principal amount of $3,190,000 (the “July 2020 Notes”). The July 2020 Notes are convertible at any time, at the holder’s option, into shares of our common stock at an initial conversion price of $0.20 per share, subject to certain beneficial ownership limitations (with a maximum ownership limit of 9.99%).
 

GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
The July 2020 Notes mature on January 7, 2021, unless earlier converted or repurchased. The terms of the July 2020 Notes are generally the same as the Company’s other Convertible Notes, except that the July 2020 Notes will be subject to mandatory conversion in the event of the completion of a future financing in the amount of at least $15 million at a conversion price equal to the lesser of (i) the conversion price in effect for the July 2020 Notes on the date of completion of such financing or (ii) 75% of the lowest per share price at which common stock may be issued in connection with any conversion rights associated with the financing, in each case, subject to the beneficial ownership limitations described above. See Note 2,Debtunder the caption “Convertible Notes/Debentures” for additional information regarding the terms of the Company’s Convertible Notes.
Common Stock
In July 2020, the Company issued 1,125,000 shares of common stock upon conversion of $225,000 aggregate principal amount of Convertible Notes.
Warrant
On July 28, 2020, the Company issued a warrant to purchase up to an aggregate of 1,000,000 shares of common stock at an exercise price of $0.20 per share, subject to adjustment in certain circumstances. The warrant expires on July 28, 2025. The warrant was issued as compensation for certain services provided to the Company.
 
Employment Agreements
 
On October 18, 2018,Effective August 1, 2020 (the “Effective Date”), the Company and Anthony J. Cataldo (“Mr. Cataldo”) entered into a Consultant Agreement with Anthony Cataldo.an employment agreement (the “Cataldo Agreement”) appointing Mr. Cataldo the Executive Chairman of the Company. The term of the ConsultantCataldo Agreement shall remain in effect until September 30, 2019. This Agreement supersedesis three years (the “Initial Term”) with the Consultant Agreement dated February 14, 2018 and will payoption of one-year renewals thereafter. During the Term, Mr. Cataldo $25,000will be paid a cash salary of $30,000 per month duringtogether with customary benefits, expense reimbursement and the termpossibility of performance bonuses. In consideration for remaining with the Company for the full three years of the Agreement.Initial Term, Mr. Cataldo will receive a stock grant equal to ten percent of the issued and outstanding common stock of the Company on a fully diluted basis, calculated with the inclusion of the current stock holdings of Mr. Cataldo. Prior to the Effective Date, Mr. Cataldo was serving as the chief executive officer and chairman of the board of the Company.
 
On October 19, 2018,Effective August 1, 2020 (the “Effective Date”), the Company and Steven Weldon (“Mr. Weldon”) entered into an Executive Employment Agreement with Dr. Urbanski, reflecting his current position asemployment agreement (the “Weldon Agreement”) appointing Mr. Weldon the Chief ExecutiveFinancial Officer of the Company. Under the terms of this agreement, Dr. Urbanski’s annual salary is essentially unchanged from his previous positions. Dr. Urbanski is also entitled to participate in the Company’s bonus plans. Under the Executive Employment Agreement, the Company has agreed that upon shareholder approval of a Stock Option Plan, it will recommend to the Board that the Company grant Dr. Urbanski a Non-Qualified stock option to purchase 2,971,102 sharesThe term of the Company’s common stock having an exercise equal to the fair market value of the shares on the date of the Agreement. The stock option grant would vest according to the following schedule: (i) 1,250,000 fully vested shares upon signing of the agreement, (ii) 1,250,000 shares on January 1, 2019, and (iii) 471,102 shares on January 1, 2020. On March 15, 2019, Dr, Urbanski resigned his position as Chief Executive Officer, President and Chairman of the Board.
On April 3, 2019, the Company entered into the SeparationWeldon Agreement with Dr. Urbanski in connection with his resignation as the Company’s Chief Executive Officer. Pursuant to the terms of the Separation Agreement Dr. Urbanski will receive six months’ salary of $212,500 paid in two installments and the Company will reimburse the premiums associated with Dr. Urbanski’s continuation health coverage for six months following his resignation. The Settlement Agreement also contains a release by Mr. Ali of any claims against the Company arising from or relating to his employment and customary confidentiality, non-disparagement and cooperation covenants.
8.            
Subsequent Events
Debts
 On July 31, 2019, GT Biopharma, Inc.is three years (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with one purchaser, pursuant to which the Company issued to the Purchaser, on July 31, 2019, Secured Convertible Note in the principal amount of $25,000 (the “Note”), which Note shall be convertible at any time after issuance into shares (the “Conversion Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a conversion price of $0.20 per share (the “Conversion Price”).
The Note accrues interest at the rate of 10% per annum and matures on January 31, 2020. Interest on the Note is payable in cash or, at a Purchaser’s option, in shares of Common Stock at the Conversion Price. Upon the occurrence of an event of default, interest accrues at 18% per annum. The Note contains customary default provisions, including provisions for potential acceleration, and covenants, including negative covenants regarding additional indebtedness and dividends. The Conversion Price is subject to adjustment due to certain events, including stock dividends and stock splits, and is subject to reduction in certain circumstances if the Company issues Common Stock or Common Stock equivalents at an effective price per share that is lower than the Conversion Price then in effect. The Company may only prepay the Note with the prior written consent of the respective Purchasers thereof.
The Purchase Agreement contains customary representations, warranties and covenants, including covenants, subject to certain exceptions, that the Company, until the date on which less than 10% of the Note is outstanding, shall not effect any Variable Rate Transaction (as defined in the Purchase Agreement) and that, for as long as a Purchaser holds any Notes or Conversion Shares, the Company shall amend the terms and conditions of the Purchase Agreement and the transactions contemplated thereby with respect to such Purchaser to give such Purchaser the benefit of any terms or conditions under which the Company agrees to issue or sell any Common Stock or Common Stock equivalents that are more favorable to an investor than the terms and conditions granted to such Purchaser under the Purchase Agreement and the transactions contemplated thereby.
In addition, the Company entered into a registration rights agreement (the “Registration Rights Agreement”“Initial Term”) with the Purchaser, pursuant to whichoption of one-year renewals thereafter. During the Term, Mr. Weldon will be paid a cash salary of $25,000 per month together with customary benefits, expense reimbursement and the possibility of performance bonuses. In consideration for remaining with the Company has agreedfor the full three years of the Initial Term, Mr. Weldon will receive a stock grant equal to file, within 30 days after July 31, 2019, one or more registration statementsseven percent of the issued and outstanding common stock of the Company on Form S-3 (or, if Form S-3 is not then availablea fully diluted basis, calculated with the inclusion of the current stock holdings of Mr. Weldon. Prior to the Company, such form of registration that is then available to effectEffective Date, Mr. Weldon was serving as the chief financial officer, principal accounting officer and as a registration for resaledirector of the subject securities) covering the resale of all Conversion Shares, subject to certain penalties set forth in the Registration Rights Agreement.
Common Stock
On August 14, 2019,the Company’s CEO AnthonyCataldo received as compensation a restricted stock award of 7,000,000 common shares and the Company’s CFO Steven Weldon received as compensation a restricted stock award of 4,500,000 common shares. Also, two Company consultants were paid as compensation a restricted stock award of 1,000,000 common shares each.Company. 
 

Item 2.
IMtem 2.     Management’sanagement’s Discussion and Analysis of Financial Condition and Results of Operations.
 
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
 
Some of the statements in thethis Quarterly Report on Form 10-Q are forward-looking statements about what may happen in“forward-looking statements” within the future.meaning of the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements regarding our current beliefs, goals and expectations about matters such as our expected financial position and operating results, our business strategy and our financing plans. The forward-looking statements in the Form 10-Qthis report are not based on historical facts, but rather reflect the current expectations of our management concerning future results and events. The forward-looking statements generally can be identified by the use of terms such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “may,” “guidance,” “estimate,” “potential,” “outlook,” “target,” “forecast,” “likely” or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals are, or may be, forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be different from any future results, performance and achievements expressed or implied by these statements. We cannot guarantee that our forward-looking statements will turn out to be correct or that our beliefs and goals will not change. Our actual results could be very different from and worse than our expectations for various reasons. You should review carefully all information, including the discussion of risk factors under “Item“Part I. Item 1A: Risk Factors” and “Item“Part II. Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Form 10-K for the year ended December 31, 2018.2019.  Any forward-looking statements in the Form 10-Q are made only as of the date hereof and, except as may be required by law, we do not have any obligation to publicly update any forward-looking statements contained in this Form 10-Q to reflect subsequent events or circumstances.
 
Throughout this Quarterly Report on Form 10-Q, the terms “GTBP,” “we,” “us,” “our,” “the company” and “our company” refer to GT Biopharma, Inc., a Delaware corporation formerly known as Oxis International, Inc., DDI Pharmaceuticals, Inc. and Diagnostic Data, Inc, together with our subsidiaries.
 
Overview
 
We are a clinical stage biopharmaceutical company focused on the development and commercialization of novel immuno-oncologyimmuno-therapeutic products based offon our proprietary Tri-specific Killer Engager (TriKE),(TriKE™) and Tetra-specific Killer Engager (TetraKE)(TetraKE™) platform technologies. Our TriKE and bi-specific Antibody Drug Conjugate (ADC) technology platforms. Our immuno-oncology portfolio is based offTetraKE platforms generate proprietary therapeutic candidates that are designed to harness and enhance the immune response of a proprietary technology platform consisting of single-chain bi-, tri- and tetra-specific scFv’s, combined with proprietary antibody-drug linkers and drug payloads. Constructs include bispecific and trispecific scFv constructs, proprietary drug payloads, bispecific targeted antibody-drug conjugates, or ADCs, as well as tri- and tetra-specific antibody-directed cellular cytotoxicity, or ADCC. Our proprietary tri- and tetra-specific ADCC platform engages natural killer cells, orpatient’s endogenous NK cells. Once bound to an NK cell, our platform moieties are designed to enhance the activity of NK cells, are cytotoxic lymphocyteswith targeted direction to one or more proteins expressed on a specific type of the innate immune system capablecancer cell or virus infected cell, ultimately resulting in targeted cell death. We have constructed our TriKEs and TetraKEs of immune surveillance. NK cells mediate ADCC through the highly potent CD16 activating receptor. Upon activation, NK cells deliverrecombinant fusion proteins that can be designed to target a storewide array of membrane penetrating apoptosis-inducing molecules. Unlike T cells, NK cellstumor antigen that may be located on hematologic malignancies, sarcomas or solid tumors. Our TriKEs and TetraKEs do not require antigen priming.patient-specific or autologous customization.
 
We also haveare using our TriKE and TetraKE platforms with the intent to bring to market products that treat a CNS portfolio consistsrange of innovative reformulations and/hematologic malignancies, sarcomas, solid tumors and selected infectious diseases. Our platforms are scalable, and in addition to our first clinical indication of our TriKE platform in relapsed or repurposing of existing therapies.refractory acute myelogenous leukemia, we are preparing investigational new drug applications based on a specific TriKE or TetraKE design. We intend to continue to advance into the clinic, on our own or through potential collaborations with larger companies, multiple TriKE or TetraKE product candidates. We believe our TriKEs and TetraKEs may have the ability, if approved for marketing, to be used as monotherapy, be dosed concomitantly with current monoclonal antibody therapeutics, be used in conjunction with more traditional cancer therapy, and potentially overcome certain limitations of current chimeric antigen receptor therapy.
We are also using our TriKE and TetraKE platforms to develop therapeutics for the treatment of infectious diseases such as human immunodeficiency virus (“HIV”) and COVID-19 infection. For example, while the use of anti-retroviral drugs has substantially improved the morbidity and mortality of individuals infected with HIV, these therapeutic agents address certain unmet medical needs that can leaddrugs are designed to improved efficacy while addressing tolerabilitysuppress virus replication and safety issues that tendedto help modulate progression to AIDS and to limit the usefulnessfurther transmission of the original approved drug.virus. Despite the use of anti-retroviral drugs, infected individuals retain reservoirs of latent HIV-infected cells that, upon cessation of anti-retroviral drug therapy, can reactivate and reestablish an active HIV infection. Destruction of these latent HIV infected cells is the primary objective of curative therapy. Our CNS drug candidates address disease states such as chronic neuropathic pain, myasthenia gravisHIV-TriKE contains the antigen binding fragment (Fab) from a broadly-neutralizing antibody targeting the HIV-Env protein. The HIV-TriKE is designed to target HIV while redirecting NK cell killing specifically to actively replicating HIV infected cells. The HIV-TriKE induced NK cell proliferation and vestibular disorders.demonstrated the ability in vitro to reactivate and kill HIV-infected T-cells. These findings indicate a potential role for the HIV-TriKE in the reactivation and elimination of the latently infected HIV reservoir cells by harnessing the NK cell’s ability to mediate the antibody-directed cellular cytotoxicity.

We have licensed the exclusive rights from the University of Minnesota to the TriKE and TetraKE platforms.
 
Recent Developments
 
Collaboration Agreement
On March 10, 2020, we entered into a collaboration agreement with Cytovance® Biologics, a USA-based contract development and manufacturing organization and a subsidiary of Hepalink, to provide development services for a TriKE therapeutic for the treatment of the coronavirus infection. Under the terms of the collaboration agreement, the companies will focus on preparing sufficient quantities of our coronavirus TriKE drug product for preclinical evaluation using Cytovance’s E. coli-basedKeystone Expression System™ and subsequently, will scale-up production using Cytovance’s GMP microbial manufacturing platform for evaluation of TriKE in humans to treat the coronavirus infection.
Bridge Financing
Between April 20 and July 7, 2020, we entered into securities purchase agreements pursuant to which we issued Convertible Notes (including the July 2020 Notes) in an aggregate principal amount of approximately $5.2 million (collectively, the “Bridge Notes”), which, together with an additional $0.4 million aggregate principal amount of Convertible Notes issued between December 2019 and January 2020, completed our previously announced bridge financing (the “Bridge Financing”) resulting in gross proceeds to us of approximately $5.6 million. The Bridge Notes are convertible at any time, at the holder’s option, into shares of our common stock at an initial conversion price of $0.20 per share, subject to certain beneficial ownership limitations (with a maximum ownership limit of 9.99%).
The Bridge Notes each have a term of six months and mature between August 20, 2020 and January 7, 2021, unless earlier converted or repurchased. The terms of the Bridge Notes are generally the same as the Company’s other Convertible Notes, except that the Bridge Notes will be subject to mandatory conversion in the event of the completion of a future financing in the amount of at least $15 million at a conversion price equal to the lesser of (i) the conversion price in effect for the Bridge Notes on the date of completion of such financing or (ii) 75% of the lowest per share price at which common stock may be issued in connection with any conversion rights associated with the financing, in each case, subject to the beneficial ownership limitations described above.
The additional $0.4 million aggregate principal amount of Convertible Notes issued between December 2019 and January 2020 as part of the Bridge Financing have the same terms as the Bridge Notes, except that they are not subject to mandatory conversion in connection with a subsequent financing.
See Note 2,Debtunder the caption “Convertible Notes/Debentures” for additional information regarding the terms of the Company’s Convertible Notes.
Forbearance Agreements
Effective as of June 23, 2020, we entered into the Forbearance Agreements with the holders of approximately $13.2 million aggregate principal amount of the Default Notes, which are currently in default. Pursuant to the Forbearance Agreements, the holders of the Default Notes have agreed to forbear from exercising their rights and remedies under the Default Notes (including declaring such Default Notes (together with default amounts and accrued and unpaid interest) immediately due and payable) until the earlier of (i) the date that we complete a New Financing or (ii) the Termination Date.

Pursuant to the Forbearance Agreement, the holders of the Default Notes have also agreed that the Default Notes (together with default amounts and accrued and unpaid interest) will be converted into common stock upon the closing of a New Financing at a conversion price equal to the lesser of (i) the conversion price in effect for the Default Notes on the date of such New Financing or (ii) 75% of the lowest per share price at which common stock is or may be issued in connection with such New Financing, in each case, subject to certain beneficial ownership limitations (with a maximum ownership limit of 9.99%). Shares of our preferred stock, which are convertible into the Company’s common stock, will be issued in lieu of common stock to the extent that conversion of the Default Notes is prohibited by such beneficial ownership limitations.
In addition, to the extent that any holders of the Default Notes also hold warrants to purchase shares of the Company’s common stock, the exercise price, number of underlying shares and expiration date of such warrants will also be subject to adjustment upon closing of a New Financing in accordance with the terms of the Forbearance Agreements.
Settlement with Empery Funds
Settlement Agreement
 
On February 4, 2019, GT Biopharma, Inc. (the “Company”)June 19, 2020, we entered into a Securities Purchasethe Settlement Agreement (the “Purchase Agreement”) with the purchasers identified onEmpery Funds, Anthony Cataldo and Paul Kessler resolving all remaining disputes between the signature pages thereto (individually,parties pertaining to the Original Securities. See Part II, Item 1. “Legal Proceedings.”
As a “Purchaser,” and collectively,result of the “Purchasers”),Settlement Agreement, the Company paid the Empery Funds cash payments in an aggregate amount of $0.2 million. In addition, pursuant to whichthe Settlement Agreement, the Company issued to the Purchasers, on February 4, 2019, SecuredEmpery Funds, solely in exchange for the outstanding Original Securities, (i) an aggregate of 3.5 million shares of common stock, (ii) pre-funded warrants to purchase an aggregate of 5.5 million shares of common stock and (iii) Convertible Notes in an aggregate principal amount of $1,352,224 (the “Notes”), consisting of gross proceeds of $1,052,224 and settlement of existing debt of $300,000, which$0.45 million.
Settlement Notes shall be
The Settlement Notes are convertible at any time, after issuanceat the holder’s option, into shares (the “Conversion Shares”) of the Company’s common stock par value $0.001 per share (the “Common Stock”), at aan initial conversion price of $0.60$0.20 per share, (the “Conversion Price”subject to certain beneficial ownership limitations (with a maximum ownership limit of 4.99%). The Settlement Notes mature on December 19, 2020.The terms of the Settlement Notes are generally the same as the Company’s other Convertible Notes,except that the Company is required to make an offer to repurchase, at the holder’s option, the Settlement Notes at price in cash equal to 100% of the aggregate principal amount of the Settlement Notes plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase following the consummation by the Company of a financing transaction, or a series of transactions, resulting in aggregate gross proceeds to the Company in excess of $7.5 million.
 
Settlement Warrants
The Notes accrue interest atSettlement Warrants provide for the ratepurchase of 10% per annum and mature on August 2, 2019. Interest on the Notes is payable in cash or, at a Purchaser’s option, inup to an aggregate of 5.5 million shares of Common Stockcommon stock at an exercise price of $0.20 per share, subject to adjustment in certain circumstances, and expire on June 19, 2025. Exercise of the Conversion Price. Upon the occurrence of an event of default, interest accrues at 18% per annum. The Notes contain customary default provisions, including provisions for potential acceleration, and covenants, including negative covenants regarding additional indebtedness and dividends. The Conversion Pricewarrant is subject to adjustment due to certain events,additional terms and conditions, including stock dividends and stock splits, and is subject to reduction in certain circumstances if the Company issues Common Stock or Common Stock equivalents at an effective price per share that is lower than the Conversion Price then in effect. The Company may only prepay the Notes with the prior written consentbeneficial ownership limitations (with a maximum ownership limit of the respective Purchasers thereof.4.99%).
 

 
Contemporaneously with the execution and delivery of the Purchase Agreement, on February 4, 2019, the Company and certain of its wholly-owned subsidiaries entered into a Security Agreement (the “Security Agreement”) with Alpha Capital Anstalt, as collateral agent on behalf of the Purchasers, and with the Purchasers, pursuant to which the Purchasers have been granted a first-priority security interest in substantially all of the assets of the Company and such subsidiaries securing (i) an aggregate principal amount of $1,352,224 of Notes and (ii) an aggregate principal amount of $9,058,962 of the Company’s 10% Senior Convertible Debentures issued on August 2, 2018, September 7, 2018 and September 24, 2018 held by such Purchasers.
The Purchase Agreement contains customary representations, warranties and covenants, including covenants, subject to certain exceptions, that the Company, until the date on which less than 10% of the Notes are outstanding, shall not effect any Variable Rate Transaction (as defined in the Purchase Agreement) and that, for as long as a Purchaser holds any Notes or Conversion Shares, the Company shall amend the terms and conditions of the Purchase Agreement and the transactions contemplated thereby with respect to such Purchaser to give such Purchaser the benefit of any terms or conditions under which the Company agrees to issue or sell any Common Stock or Common Stock equivalents that are more favorable to an investor than the terms and conditions granted to such Purchaser under the Purchase Agreement and the transactions contemplated thereby.
In addition, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the Purchasers, pursuant to which the Company has agreed to file, within 14 days after February 4, 2019, one or more registration statements on Form S-3 (or, if Form S-3 is not then available to the Company, such form of registration that is then available to effect a registration for resale of the subject securities) covering the resale of all Conversion Shares, subject to certain penalties set forth in the Registration Rights Agreement. The Form S-3 was filed by the Company on February 14, 2019.
On May 22, 2019, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the purchasers identified on the signature pages thereto (individually, a “Purchaser,” and collectively, the “Purchasers”), pursuant to which the Company issued to the Purchasers, on May 22, 2019, Secured Convertible Notes in an aggregate principal amount of $1,300,000 (the “Notes”), which Notes shall be convertible at any time after issuance into shares (the “Conversion Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a conversion price of $0.35 per share (the “Conversion Price”).
The Notes accrue interest at the rate of 10% per annum and mature on November 22, 2019. Interest on the Notes is payable in cash or, at a Purchaser’s option, in shares of Common Stock at the Conversion Price. Upon the occurrence of an event of default, interest accrues at 18% per annum. The Notes contain customary default provisions, including provisions for potential acceleration, and covenants, including negative covenants regarding additional indebtedness and dividends. The Conversion Price is subject to adjustment due to certain events, including stock dividends and stock splits, and is subject to reduction in certain circumstances if the Company issues Common Stock or Common Stock equivalents at an effective price per share that is lower than the Conversion Price then in effect. The Company may only prepay the Notes with the prior written consent of the respective Purchasers thereof.
The Purchase Agreement contains customary representations, warranties and covenants, including covenants, subject to certain exceptions, that the Company, until the date on which less than 10% of the Notes are outstanding, shall not effect any Variable Rate Transaction (as defined in the Purchase Agreement) and that, for as long as a Purchaser holds any Notes or Conversion Shares, the Company shall amend the terms and conditions of the Purchase Agreement and the transactions contemplated thereby with respect to such Purchaser to give such Purchaser the benefit of any terms or conditions under which the Company agrees to issue or sell any Common Stock or Common Stock equivalents that are more favorable to an investor than the terms and conditions granted to such Purchaser under the Purchase Agreement and the transactions contemplated thereby.
In addition, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the Purchasers, pursuant to which the Company has agreed to file, within 30 days after May 22, 2019, one or more registration statements on Form S-3 (or, if Form S-3 is not then available to the Company, such form of registration that is then available to effect a registration for resale of the subject securities) covering the resale of all Conversion Shares, subject to certain penalties set forth in the Registration Rights Agreement. The Form S-1 was filed by the Company on June 21, 2019.

Results of Operations
 
Comparison of the Three Months Ended June 30, 20192020 and 20182019
 
Research and Development Expenses
 
During the three months ended June 30, 20192020 and 2018,2019, we incurred $.2 million$12 thousand and $3.3 million$154 thousand of research and development expenses.expenses, respectively. Research and development costs decreased due primarily to the reductions employees, consultantsreduction of employee, consultant and preclinical expenses. We anticipate our direct clinical costs towill increase in the second half of 2019 upon2020 with the initiationcontinuation of a phase oneour Phase I clinical trial of our most advanced TriKe product candidate, OXS-3550.GTB-3550.
 
Selling, general and administrative expenses
 
During the three months ended June 30, 20192020 and 2018,2019, we incurred $2.1$1.5 million and $1.9$2.1 million of selling, general and administrative expenses.  The increase in selling, general and administrative expenses, is primarily attributable the settlement of preferred shares.
Interest Expense
Interest expense was $.5 million and $3.9 million for the three months ended June 30, 2019 and 2018 respectively.  The decrease is primarily due to a decrease related to the amortization of the original issue discount and beneficial conversion features related to various financing.
Comparison of the Six Months Ended June 30, 2019 and 2018
Research and Development Expenses
During the six months ended June 30, 2019 and 2018, we incurred $1.0 million and $6.7 million of research and development expenses. Research and development costs decreased due primarily to the reductions employees, consultants and preclinical expenses. We anticipate our direct clinical costs to increase in second half of 2019 upon the initiation of a phase one clinical trial of our most advanced TriKe product candidate, OXS-3550.
Selling, general and administrative expenses
During the six months ended June 30, 2019 and 2018, we incurred $5.4 million and $5.6 million of selling, general and administrative expenses.  The decrease in selling, general and administrative expenses is primarily attributable the reduction of payroll and stock compensation expenses.
 
Interest Expense
 
Interest expense was $.9expenses were $4.6 million and $6.9$0.5 million for the three months ended June 30, 2020 and 2019, respectively.  The increase is primarily due to the accrual of default interest under the Default Notes.
Comparison of the Six Months Ended June 30, 2020 and 2019
Research and Development Expenses
During the six months ended June 30, 2020 and 2019, we incurred $336 thousand and $1 million of research and development expenses, respectively. Research and development costs decreased due primarily to the reduction of employee, consultant and preclinical expenses. We anticipate our direct clinical costs will increase in the second half of 2020 upon the continuation of our Phase I clinical trial of our most advanced TriKe product candidate, GTB-3550.
Selling, general and administrative expenses
During the six months ended June 30, 2020 and 2019, we incurred $2.3 million and $5.3 million of selling, general and administrative expenses, respectively.  The decrease in selling, general and administrative expenses is primarily attributable the reduction of payroll and stock compensation expenses.
Interest Expense
Interest expenses were $5.3 million and $0.9 million for the six months ended June 30, 20192020 and 20182019 respectively.  The decreaseincrease is primarily due to a decrease related to the amortizationaccrual of default interest under the original issue discount and beneficial conversion features related to various financing.

Default Notes..
 
Liquidity and Capital Resources
 
The Company’s current operations have focused on business planning, raising capital, establishing an intellectual property portfolio, hiring, and conducting preclinical studies and clinical trials. The Company does not have any product candidates approved for sale and has not generated any revenue from product sales. The Company has sustained operating losses since inception and expects such losses to continue over the foreseeable future. During the six months ended June 30, 2019,2020, the Company raised $2.4$4.5 million through a series of issuances of convertible debentures in February and May. Convertible Notes. We anticipate that cash utilized for selling, general and administrative expenses will range between $1 and $2 million in the coming quarters, while research and development expenses will vary depending on clinical activities. The Company is pursuing several alternatives to address this situation, including the raising of additional funding through equity or debt financings. In order to finance existing operations and pay current liabilities over the next 12 months, the Company will need to raise an additional $15 million of capital in 2020.
 
The financial statements of the Company have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the financial statements do not include any adjustments that might be necessary should the Company be unable to continue in existence.
 

The Company has incurred substantial losses and negative cash flows from operations since its inception and has an accumulated deficit of $536$577 million and cash of $264$851 thousand as of June 30, 2019.2020. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales or revenue from out-licensing of its products currently in development. Substantial additional financing will be needed by the Company to fund its operations and to commercially develop its product candidates. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
 
Management is currently evaluating different strategies to obtain the required funding for future operations. These strategies may include but are not limited to: public offerings of equity and/or debt securities, payments from potential strategic research and development, licensing and/or marketing arrangements with pharmaceutical companies. Management has also implemented cost saving efforts, including reduction in executive salaries and reduced travel. Management believes that these ongoing and planned financing endeavors, if successful, will provide adequate financial resources to continue as a going concern for at least the next six months from the date the financial statements are issued; however, there can be no assurance in this regard. If the Company is unable to secure adequate additional funding, its business, operating results, financial condition and cash flows may be materially and adversely affected.
 
Critical Accounting Policies
 
We consider the following accounting policies to be critical given they involve estimates and judgments made by management and are important for our investors’ understanding of our operating results and financial condition.
Basis of Consolidation
The consolidated financial statements contained in this report include the accounts of GT Biopharma, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated.
 
Long-Lived Assets
 
Our long-lived assets include property, plant and equipment, capitalized costs of filing patent applications and goodwill and other assets.  We evaluate our long-lived assets for impairment in accordance with ASC 360, whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.  Estimates of future cash flows and timing of events for evaluating long-lived assets for impairment are based upon management’s judgment.  If any of our intangible or long-lived assets are considered to be impaired, the amount of impairment to be recognized is the excess of the carrying amount of the assets over its fair value.
 
Applicable long-lived assets are amortized or depreciated over the shorter of their estimated useful lives, the estimated period that the assets will generate revenue, or the statutory or contractual term in the case of patents.  Estimates of useful lives and periods of expected revenue generation are reviewed periodically for appropriateness and are based upon management’s judgment.  Goodwill and other assets are not amortized.
 
Certain Expenses and Liabilities
 
On an ongoing basis, management evaluates its estimates related to certain expenses and accrued liabilities.  We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of liabilities that are not readily apparent from other sources.  Actual results may differ materially from these estimates under different assumptions or conditions.
 

Inflation
 
We believe that inflation has not had a material adverse impact on our business or operating results during the periods presented.
 

Off-balance Sheet Arrangements
 
We have no off-balance sheet arrangements as of June 30, 2019.2020.
 
ItemItem 3.  QuantitativeQuantitative and Qualitative Disclosures About Market Risk
 
This company qualifies as a smaller reporting company, as defined in 17 C.F.R. §229.10(f)(1) and is not required to provide information by this Item.
 
ItemItem 4. ControlsControls and Procedures
 
Evaluation of Disclosure Controls and Procedures
 
Our principal executive officer and principal financial officer evaluated the effectiveness of our “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the United States Securities Exchange Act of 1934, as amended)amended (the “Exchange Act”), as of June 30, 2019.2020.  Based on that evaluation we have concluded that our disclosure controls and procedures were not effective as of June 30, 2019.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting.  Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended,2020 as a process designed by, or under the supervisionresult of a company’s principal executive and principal financial officers and effected by a company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
●Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
●Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
●Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
All internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
As of June 30, 2019, management of the company conducted an assessment of the effectiveness of the company’s internal control over financial reporting.  In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework.  In the course of the assessment, material weaknesses were identified in the company’s internal control over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Management determined that fundamental elements of an effective control environment were missing ordue to (i) inadequate as of June 30, 2019.  The most significant issues identified were: 1) lack of segregation of duties, due to very small staff and significant reliance on outside consultants, and 2)(ii) risks of executive override also due to lack of establishedand (iii) insufficient written policies and small employee staff.  Based onprocedures for accounting and financial reporting with respect to the material weaknessesrequirements and application of both U.S. GAAP and SEC regulation, in each case, as described in "Item 9A. Controls and Procedures" in the Company's Form 10-K for the year ended December 31, 2019.
The Company is taking steps, and intends to take additional steps, to mitigate the issues identified above, management has concluded thatand implement a functional system of internal control over financial reporting wasreporting. Such measures will include, but not effective asbe limited to: hiring of June 30, 2019.  As the company’s operations increase, the company intends to hire additional employees in itsour finance and accounting department.department; preparation of risk-control matrices to identify key risks and develop and document policies to mitigate those risks; and identification and documentation of standard operating procedures for key financial and SEC reporting activities. 
 
Changes in Internal Control over Financial Reporting
 
Other than as describedExcept for the ongoing remediation of the material weaknesses in internal controls over financial reporting noted above, no changes in our internal control over financial reporting were made during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 

PART II.  OTHER INFORMATION
 
Item 1.  PLART II.  OTHER INFORMATIONegal Proceedings
 
Item 1.  Legal Proceedings
On December 24, 2018, the Empery Asset Master, Empery Tax Efficient, LP, and Empery Tax Efficient II, LP (collectively, “Plaintiffs)Funds filed in the N.Y. Supreme Court, Index No. 656408/2018, alleging causes of action against the Company for Breach of Contract, Liquidated Damages, Damages, and Indemnification. The claims arose out of a securities purchase agreement entered into between Plaintiffsthe Empery Funds and the Company pursuant to which the Company issued convertible notes and warrantsthe Original Securities to Plaintiffsthe Empery Funds in or around January 2018. On June 19, 2020, the Company and the Empery Funds, among others, entered into the Settlement Agreement resolving all remaining disputes between the parties pertaining to the Original Securities. See “ Part I, Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations—“under the caption”Recent Developments—Settlement with Empery Funds.”
On August 28, 2019, a complaint was filed in the Superior Court of California, County of Los Angeles, West Judicial District, Santa Monica Courthouse, Unlimited Civil Division by Jeffrey Lion and Daniel Vallera. Lion and Vallera are referred to jointly as the “Plaintiffs.” The complaint was filed against the Company and its subsidiary Oxis Biotech, Inc. (either of them or jointly, the “Defendant”). The Plaintiffs allege inter alia,breach of a license agreement between the Plaintiffs and the Defendant entered into on or about September 3, 2015. Lion alleges breach of a consulting agreement between Lion and the Defendant entered into on or about September 1, 2015. Vallera alleges breach of a consulting agreement between Vallera and the Defendant entered into in or around October, 2018. The complaint seeks actual damages of $1,670,000, for the fair market value of the number of shares of the Company’s common stock that at the time of judgment represent 15,000,000 shares of such stock as of September 1, 2015, and that the Company failed to pay Plaintiffs’ outstanding principal on or beforeissue Lion the July 23, 2018 maturity date of said notes, failed to convert a portion of said notes in response to Plaintiffs’ conversion notice, and failed to timely adjust the exercise price of said warrants. At issue are notes issued to Plaintiffs in the aggregate principal amount of approximately $2.2 million and warrants representing the right of Plaintiffs to acquire an aggregate of 480,352 sharesnumber of common shares the Company’s common stock inthat at the Company.time of judgment represent 15,000,000 such shares as of September 1, 2015.

 
ItemItem 1A.  RiskRisk Factors
 
Information regarding risk factors appears under “Risk Factors” included in Part I. Item 1A,1A. Risk Factors,Factors. of our Annual Report on Form 10-K for the year ended December 31, 2018.2019. There have been no material changes from the risk factors previously disclosed in the above-mentioned periodic report.
 
ItemItem 2.  UnregisteredUnregistered Sales of Securities and Use of Proceeds
 
In January 22, 2018,The Company made the Company entered into a Securities Purchase Agreement (“SPA”) with the fourteen accredited investors (individually, a “Buyer” and collectively, the “Buyers”)following issuances of its unregistered equity securities pursuant to which the Company has agreed to issue to the Buyers senior convertible notesexemptions contained in an aggregate principal amount of $7,760,510 (the “Notes”), which Notes shall be convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”), and five-year warrants to purchase the Company’s Common Stock representing the right to acquire an aggregate of approximately 1,694,440 shares of Common Stock (the “Warrants”).
Pursuant to the terms of SPA the Notes are subject to an original issue discount of 10% resulting in proceeds to the Company of $7,055,000 from the transaction. The Notes are due on July 22, 2018. The Notes are convertible, at the option of the Buyers, at any time prior to payment in full, into shares of common stock of the Company at a price of $4.58 per share (“Conversion Price”). According to the terms of the note agreement, the notes are subject to certain adjustments depending upon the price and structure of a subsequent financing, including a qualified financing with gross proceeds of at least $20 million, as defined in the agreements.
Upon the purchase of the Notes, the Buyers received Warrants to purchase 1,694,440 shares of Common Stock. Such Warrants are exercisable for (5) years from the date the shares underlying the Warrants are freely saleable. The initial Exercise Price is $4.58. According to the terms of the warrant agreement, the notes are subject to certain adjustments depending upon the price and structure of a subsequent financing, including a qualified financing with gross proceeds of at least $20 million, as defined in the agreements.
The issuance of the Notes and Warrants were made in reliance on the exemption provided by Section 4(a)(2) or 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”) for the offer and saleand/or Rule 506 of securities not involving a public offering, and Regulation D promulgated under the Securities Act.thereunder that have not previously been reported:
 
Contemporaneously with the execution and delivery of the SPA,
● 
On May 1, 2020, the Company and the Buyers executed and delivered a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to whichissued 1,086,429 shares of common stock for consulting services.
● 
In July 2020, the Company has agreed to provide certain registration rights with respect to the Registrable Securities under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws. All descriptionsissued 1,125,000 shares of the SPA, the Registration Rights Agreement, the Notes and the Warrants contained herein are qualified in their entirety by reference to the exhibits filed herewith.
On September 7, 2018, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement with the purchasers identified on the signature pages thereto (individually, a “Purchaser,” and collectively, the “Purchasers”) pursuant to which the Company has issued to the Purchasers one year 10% Senior Convertible Debentures in ancommon stock upon conversion of $225,000 aggregate principal amount of $2,050,000 (the “Debentures”), which Debentures shall be convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a price of $2 per share.Convertible Notes.
 
On September 24, 2018, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement with the purchasers identified on the signature pages thereto (individually, a “Purchaser,” and collectively, the “Purchasers”) pursuant to which the Company has issued to the Purchasers one year 10% Senior Convertible Debentures in an aggregate principal amount of $800,000 (the “Debentures”), which Debentures shall be convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a price of $2 per share.

● 
On February 4, 2019, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the purchasers identified on the signature pages thereto (individually, a “Purchaser,” and collectively, the “Purchasers”), pursuant to whichJuly 28, 2020, the Company issued a warrant to the Purchasers, on February 4, 2019, Secured Convertible Notes inpurchase up to an aggregate principal amount of $1,352,224 (the “Notes”), consisting1,000,000 shares of gross proceeds of $1,052,224 and settlement of existing debt of $300,000, which Notes shall be convertible at any time after issuance into shares (the “Conversion Shares”) of the Company’s common stock par value $0.001at an exercise price of $0.20 per share, (the “Common Stock”), at a conversion price of $0.60 per share (the “Conversion Price”).
The Notes accrue interest at the rate of 10% per annum and mature on August 2, 2019. Interest on the Notes is payable in cash or, at a Purchaser’s option, in shares of Common Stock at the Conversion Price. Upon the occurrence of an event of default, interest accrues at 18% per annum. The Notes contain customary default provisions, including provisions for potential acceleration, and covenants, including negative covenants regarding additional indebtedness and dividends. The Conversion Price is subject to adjustment due to certain events, including stock dividends and stock splits, and is subject to reduction in certain circumstances if the Company issues Common Stock or Common Stock equivalents at an effective price per share that is lower than the Conversion Price then in effect.circumstances. The Company may only prepay the Notes with the prior written consent of the respective Purchasers thereof.
Contemporaneously with the execution and delivery of the Purchase Agreement, on February 4, 2019, the Company andwarrant was issued as compensation for certain of its wholly-owned subsidiaries entered into a Security Agreement (the “Security Agreement”) with Alpha Capital Anstalt, as collateral agent on behalf of the Purchasers, and with the Purchasers, pursuant to which the Purchasers have been granted a first-priority security interest in substantially all of the assets of the Company and such subsidiaries securing (i) an aggregate principal amount of $1,352,224 of Notes and (ii) an aggregate principal amount of $9,058,962 of the Company’s 10% Senior Convertible Debentures issued on August 2, 2018, September 7, 2018 and September 24, 2018 held by such Purchasers.
The Purchase Agreement contains customary representations, warranties and covenants, including covenants, subject to certain exceptions, that the Company, until the date on which less than 10% of the Notes are outstanding, shall not effect any Variable Rate Transaction (as defined in the Purchase Agreement) and that, for as long as a Purchaser holds any Notes or Conversion Shares, the Company shall amend the terms and conditions of the Purchase Agreement and the transactions contemplated thereby with respect to such Purchaser to give such Purchaser the benefit of any terms or conditions under which the Company agrees to issue or sell any Common Stock or Common Stock equivalents that are more favorable to an investor than the terms and conditions granted to such Purchaser under the Purchase Agreement and the transactions contemplated thereby.
In addition, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the Purchasers, pursuant to which the Company has agreed to file, within 14 days after February 4, 2019, one or more registration statements on Form S-3 (or, if Form S-3 is not then availableservices provided to the Company, such form of registration that is then available to effect a registration for resale of the subject securities) covering the resale of all Conversion Shares, subject to certain penalties set forth in the Registration Rights Agreement. The Form S-3 was filed by the Company on February 14, 2019.Company.
On May 22, 2019, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the purchasers identified on the signature pages thereto (individually, a “Purchaser,” and collectively, the “Purchasers”), pursuant to which the Company issued to the Purchasers, on May 22, 2019, Secured Convertible Notes in an aggregate principal amount of $1,300,000 (the “Notes”), which Notes shall be convertible at any time after issuance into shares (the “Conversion Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a conversion price of $0.35 per share (the “Conversion Price”).
The Notes accrue interest at the rate of 10% per annum and mature on November 22, 2019. Interest on the Notes is payable in cash or, at a Purchaser’s option, in shares of Common Stock at the Conversion Price. Upon the occurrence of an event of default, interest accrues at 18% per annum. The Notes contain customary default provisions, including provisions for potential acceleration, and covenants, including negative covenants regarding additional indebtedness and dividends. The Conversion Price is subject to adjustment due to certain events, including stock dividends and stock splits, and is subject to reduction in certain circumstances if the Company issues Common Stock or Common Stock equivalents at an effective price per share that is lower than the Conversion Price then in effect. The Company may only prepay the Notes with the prior written consent of the respective Purchasers thereof.
The Purchase Agreement contains customary representations, warranties and covenants, including covenants, subject to certain exceptions, that the Company, until the date on which less than 10% of the Notes are outstanding, shall not effect any Variable Rate Transaction (as defined in the Purchase Agreement) and that, for as long as a Purchaser holds any Notes or Conversion Shares, the Company shall amend the terms and conditions of the Purchase Agreement and the transactions contemplated thereby with respect to such Purchaser to give such Purchaser the benefit of any terms or conditions under which the Company agrees to issue or sell any Common Stock or Common Stock equivalents that are more favorable to an investor than the terms and conditions granted to such Purchaser under the Purchase Agreement and the transactions contemplated thereby.
In addition, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the Purchasers, pursuant to which the Company has agreed to file, within 30 days after May 22, 2019, one or more registration statements on Form S-3 (or, if Form S-3 is not then available to the Company, such form of registration that is then available to effect a registration for resale of the subject securities) covering the resale of all Conversion Shares, subject to certain penalties set forth in the Registration Rights Agreement. The Form S-1 was filed by the Company on June 21, 2019.

 
ItemItem 3.  DefaultsDefaults Upon Senior Securities.
 
NoneAs of June 30, 2020, convertible notes totaling approximately $13.2 million are in default.
 
ItemItem 4.  MineMine Safety Disclosures
 
None.Not applicable.
 
ItemItem 5. OtherOther Information.
 
None.
 


Item 6.  Exhibits
Item 6.  Exhibits
ExhibitDescriptionHerewithFormSEC File No.Filing Date
3.1
Certificate of Amendment to the Certificate of Incorporation of the Registrant, effective as of July 19, 2017.8-K000-08092
03/15/18
10.1
Securities Purchase Agreement by and among the Company and the Buyers, dated February 4, 2019.
8-K
000-08092
02/06/19
10.2
Form of Registration Rights Agreement by and among the Company and the Buyers, dated February 4, 2019.
8-K
000-08092
02/06/19
10.3
Form of Note.
8-K
000-08092
02/06/19
10.4
Form of Warrant.
8-K
000-08092
02/06/19
10.5
Form of Security Agreement
8-K
000-08092
02/06/19
10.6
Form of Registration Rights Agreement by and among the Company and the
Buyers, dated May 22, 2019
Buyers, dated February 4, 2019.
8-K
000-08092
05/24/19
10.7
Form of Note.
8-K
000-08092
05/24/19
10.8
Form of Warrant.
8-K
000-08092
05/24/19
10.9
Form of Security Agreement
8-K
000-08092
05/24/19
31.1
Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
X
31.2
Certification of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
X
32.1*
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
X
32.2*
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).
X
Exhibit No.
Description
101.INS
XBRL Instance Document.
101.SCH
XBRL Taxonomy Extension Schema Document.
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB
XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document.
      Incorporated by Reference
Exhibit Description Herewith FormNumberSEC File No. Filing Date
           
10.1

 Form Securities Purchase Agreement among GT Biopharma, Inc. and the purchaser named therein (executed in April/May 2020)   
10-Q
 
10.4
 
000-08092
 
 
05/15/20
 
  
 
  


  
10.2
 
 Form of Registration Rights Agreement among GT Biopharma, Inc. and the purchaser named therein (executed in April/May 2020)   
10-Q
 
10.5
 
000-08092
 
 
05/15/20
 
           
10.3
 Form of Convertible Note (related to Securities Purchase Agreement executed in April/May 2020)   10-Q10.6000-08092 05/15/20
  
 
      
10.4
 
 Securities Purchase Agreement, dated July 7, 2020, among GT Biopharma, Inc. and the purchaser named therein   
8-K
 
10.1
 
000-08092
 
 
07/09/20
 
  
 
      
10.5
 
 Registration Rights Agreement, dated July 7, 2020, among GT Biopharma, Inc. and the purchaser named therein   
8-K
 
10.3
 
000-08092
 
 
07/09/20
 
           
10.6
 Form of Convertible Note (related to Securities Purchase Agreement, dated July 7, 2020)   8-K4.1000-08092 07/09/20
           
10.7
 
 Form of Standstill and Forbearance Agreement, dated June 23, 2020, between the Company and certain holders of Convertible Notes   
8-K
 
10.1
 
000-08092
 
 
06/23/20
 
  
 
      
10.8
 
 Settlement Agreement, dated June 19, 2020, among GT Biopharma, Inc., Empery Asset Master Ltd., Empery Tax Efficient, LP and Empery Tax Efficient II, LP, Anthony Cataldo and Paul Kessler   
8-K
 
10.1
 
000-08092
 
 
06/19/20
 
           
10.9
 Form of Convertible Note, dated June 19, 2020 (related to Settlement Agreement, dated June 19, 2020)   8-K10.2000-08092 06/19/20
           
10.10
 
 Form of Pre-Funded Warrant to Purchase Common Stock, dated June 19, 2020 (related to Settlement Agreement, dated June 19, 2020)   
8-K
 
10.3
 
000-08092
 
 
06/19/20
 
           
10.11
 Employment agreement with Anthony Cataldo X      
           
10.12
 Employment agreement with Steven Weldon X      
           
31.1
 
 Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended. 
X
 
      
           
31.2
 
 Certification of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a), promulgated under the Securities and Exchange Act of 1934, as amended. 
X
 
      
           
32.1*
 
 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer). 
X
 
      





 

   
32.2*
 
 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer). 
X
 
      
           
101.INS Inline XBRL Instance Document. X      
           
101.SCH Inline XBRL Taxonomy Extension Schema Document. X      
           
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. X      
           
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. X      
           
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. X      
           
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. X      
 
*
 
This certification shall not be deemed “filed” for purposes of Section 18 of the SecuritiesExchange Act, of 1934, or otherwise subject to the liability of that Section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
Act.

 
  SIGNATURESSIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
Dated: August 14, 2020
GT Biopharma, Inc.
Date:August 14, 2019
By: 
/s/ /s/ Anthony Cataldo
Anthony Cataldo
Chief Executive Officer and Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
NamePositionDate
  
/s/ Anthony Cataldo
Anthony Cataldo
Chief Executive Officer and Chairman of the Board Dated: August 14, 20192020
/s/ By: /s/ Steven Weldon
Steven Weldon
Chief Financial Officer (Principal Financial Officer), and Director
August 14, 2019

 
 
24