UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended March 31, 2022.
| ☐ | |
| |
| Transition report pursuant to Section 13 or 15(d) ofthe Securities Exchange Act of 1934 |
|
For the transition period from __________ to ____________.
Commission File Number 001-40023
GT BIOPHARMA, INC.
(Exact name of registrant as specified in its charter)
| 94-1620407 | |
|
|
| |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
8000 Marina Blvd, Suite 100 415-919-4040
|
N/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 Class | Trading Symbol | Name of exchange on which registered | ||
Common Stock, $0.001 par value per share | GTBP | Nasdaq |
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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ |
| 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 ☐ No ☒
As of November 12, 2021,May 16, 2022, the issuer had 30,582,354 shares of common stock outstanding.
GT Biopharma, Inc. and Subsidiaries
FORM 10-Q
For the Quarter Ended September 30, 2021
Table of Contents
| Page | |||||
| PART I – FINANCIAL INFORMATION |
| ||||
| Item 1. | Financial Statements | ||||
|
| ||||
3 | |||||
4 | |||||
Condensed Consolidated Statements of Stockholders’ Equity (Deficit) | 5 | ||||
7 | |||||
Condensed Notes to Consolidated Financial Statements (Unaudited) | 8 | ||||
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| 17 | |||
Quantitative and Qualitative Disclosures About Market |
| 19 | |||
| 19 | ||||
| 20 | ||||
| 6. |
| 20 | |||
| |||||
| |||||
| |||||
| |||||
| |||||
| 21 | ||||
GT BIOPHARMA, INC.INC AND SUBSIDIARIES
Condensed Consolidated Balance SheetsCONDENSED CONSOLIDATED BALANCE SHEETS
|
| September 30, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
ASSETS: |
| (unaudited) |
|
|
| |||
Current assets |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 9,682,000 |
|
| $ | 5,297,000 |
|
Short-term investments |
|
| 26,031,000 |
|
| 0 |
| |
Prepaid expenses and other current assets |
|
| 85,000 |
|
|
| 364,000 |
|
Total Current Assets |
| $ | 35,798,000 |
|
| $ | 5,661,000 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 2,802,000 |
|
| $ | 2,243,000 |
|
Accrued expenses |
|
| 749,000 |
|
|
| 1,296,000 |
|
Accrued interest |
|
| 0 |
|
|
| 4,838,000 |
|
Convertible notes payable (net of discount of $4,519,000 at December 31, 2020) |
|
| 0 |
|
|
| 26,303,000 |
|
Line of Credit |
|
| 31,000 |
|
|
| 31,000 |
|
Derivative liability |
|
| 340,000 |
|
|
| 383,000 |
|
Total current liabilities |
|
| 3,922,000 |
|
|
| 35,094,000 |
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity (Deficit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible Preferred stock, par value $0.01, 15,000,000 shares authorized: |
|
|
|
|
|
|
|
|
Series C - 96,230 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively |
|
| 1,000 |
|
|
| 1,000 |
|
Series J - 0 and 2,353,548 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively |
|
| 0 |
|
|
| 2,000 |
|
Series K- none issued and outstanding at September 30, 2021 and December 31, 2020, respectively |
|
| 0 |
|
|
| 0 |
|
Common stock, par value $0.001, 2,000,000,000 shares authorized, 30,508,260 and 5,218,122 shares issued and outstanding as of September 30, 2021 and December 31, 2020 , respectively |
|
| 30,000 |
|
|
| 5,000 |
|
Common stock issuable, 1,004,495 shares at September 30, 2021 |
|
| 3,416,000 |
|
|
| 0 |
|
Additional paid in capital |
|
| 663,991,000 |
|
|
| 566,356,000 |
|
Accumulated deficit |
|
| (635,393,000 | ) |
|
| (595,628,000 | ) |
Non-Controlling Interest |
|
| (169,000 | ) |
|
| (169,000 | ) |
Total stockholders' equity (deficit) |
|
| 31,876,000 |
|
|
| (29,433,000 | ) |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
| $ | 35,798,000 |
|
| $ | 5,661,000 |
|
(in thousands, except shares and par value)
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 7,286 | $ | 8,968 | ||||
| Short-term investments | 19,454 | 23,011 | ||||||
| Prepaid expenses and other current assets | 453 | 190 | ||||||
| Total current assets | 27,193 | 32,169 | ||||||
| Operating lease right-of-use asset | 237 | - | ||||||
| Deposits | 9 | - | ||||||
| TOTAL ASSETS | $ | 27,439 | $ | 32,169 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 8,113 | $ | 8,220 | ||||
| Accrued expenses | 1,170 | 1,901 | ||||||
| Current operating lease liability | 100 | - | ||||||
| Derivative liability | 120 | 138 | ||||||
| Total current liabilities | 9,503 | 10,259 | ||||||
| Non-current operating lease liability | 147 | - | ||||||
| Total liabilities | 9,650 | 10,259 | ||||||
| Stockholders’ equity | ||||||||
| Convertible Preferred stock, par value $, shares authorized | ||||||||
| Series C – shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively | 1 | 1 | ||||||
| Convertible Preferred stock | - | - | ||||||
| Common stock, par value $, shares authorized, shares and shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively | 32 | 32 | ||||||
| Common stock issuable shares and shares at March 31, 2022 and December 31, 2021, respectively | - | 1,113 | ||||||
| Additional paid in capital | 676,780 | 674,348 | ||||||
| Accumulated deficit | (659,024 | ) | (653,584 | ) | ||||
| Total stockholders’ equity | 17,789 | 21,910 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 27,439 | $ | 32,169 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
GT BIOPHARMA, INC.INC AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
| For the Three Months ended |
|
| For the Nine Months ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
|
| (unaudited) |
|
| (unaudited) |
|
| (unaudited) |
|
| (unaudited) |
| ||||
Revenues |
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
| 1,008,000 |
|
|
| (84,000 | ) |
|
| 3,287,000 |
|
|
| 252,000 |
|
Selling, general and administrative (including $577,000 and $15,450,000 of stock compensation to officers and directors in 2021 during the three and nine months ended September 30, 2021, respectively) |
|
| 4,946,000 |
|
|
| 2,029,000 |
|
|
| 36,050,000 |
|
|
| 4,321,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations |
|
| 5,954,000 |
|
|
| 1,945,000 |
|
|
| 39,337,000 |
|
|
| 4,573,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (Income) Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
| (32,000 | ) |
|
|
|
|
|
| (32,000 | ) |
|
|
|
|
Unrealized loss on marketable securities |
|
| 33,000 |
|
|
|
|
|
|
| 33,000 |
|
|
|
|
|
Change in fair value of derivative liability |
|
| (502,000 | ) |
|
| 0 |
|
|
| (43,000 | ) |
|
| 0 |
|
Settlement expense |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 11,206,000 |
|
Interest expense |
|
| 0 |
|
|
| 931,000 |
|
|
| 696,000 |
|
|
| 6,227,000 |
|
Total Other Expense, net |
|
| (501,000 | ) |
|
| 931,000 |
|
|
| 654,000 |
|
|
| 17,433,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
| $ | (5,453,000 | ) |
| $ | (2,876,000 | ) |
| $ | (39,991,000 | ) |
| $ | (22,006,000 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
| $ | (0.17 | ) |
| $ | (0.64 | ) |
| $ | (1.54 | ) |
| $ | (5.13 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
| 31,381,282 |
|
|
| 4,513,534 |
|
|
| 25,945,827 |
|
|
| 4,288,808 |
|
(in thousands, except per share data)
| 2022 | 2021 | |||||||
| For the three months ended | ||||||||
| March 31, | ||||||||
| 2022 | 2021 | |||||||
| (unaudited) | (unaudited) | |||||||
| Revenues | $ | - | $ | - | ||||
| Operating Expenses: | ||||||||
| Research and development | 2,087 | 1,640 | ||||||
| Selling, general and administrative (including $and $expense from stock compensation granted to officers, employees and directors during the three months ended March 31, 2022 and 2021, respectively) | 3,355 | 27,362 | ||||||
| Loss from Operations | 5,442 | 29,002 | ||||||
| Other (Income) Expense | ||||||||
| Interest income | (8 | ) | - | |||||
| Interest expense | - | 696 | ||||||
| Change in fair value of derivative liability | (18 | ) | (21 | ) | ||||
| Unrealized loss on marketable securities | 24 | - | ||||||
| Total Other (Income) Expense | (2 | ) | 675 | |||||
| Net Loss | $ | (5,440 | ) | $ | (29,677 | ) | ||
| Net loss per share - basic and diluted | $ | (0.17 | ) | $ | (1.83 | ) | ||
| Weighted average common shares outstanding - basic and diluted | 32,486,116 | 16,239,938 | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
GT BIOPHARMA, INC.INC AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders' Equity (Deficit) (unaudited)CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
For the three and nine months ended September 30, 2021 and 2020(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
|
|
| Non |
|
|
|
| ||||||||||
|
| Preferred Shares |
|
| Common Shares |
|
| Common Shares Issuable |
|
| Paid in |
|
| Accumulated |
|
| Controlling |
|
|
|
| |||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Interest |
|
| Total |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Balance, December 31, 2020 |
|
| 2,449,778 |
|
| $ | 3,000 |
|
|
| 5,218,122 |
|
| $ | 5,000 |
|
|
| - |
|
| $ | 0 |
|
| $ | 566,356,000 |
|
| $ | (595,628,000 | ) |
| $ | (169,000 | ) |
| $ | (29,433,000 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Extinguishment of debt discount upon adoption of ASU 2020-06 |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| (4,745,000 | ) |
|
| 226,000 |
|
|
| 0 |
|
|
| (4,519,000 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Preferred Series J-1 to common stock |
|
| (2,353,548 | ) |
|
| (2,000 | ) |
|
| 692,220 |
|
|
| 1,000 |
|
|
| - |
|
|
| 0 |
|
|
| 1,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued upon mandatory conversion of notes payable and accrued interest |
|
| - |
|
|
| 0 |
|
|
| 10,408,827 |
|
|
| 10,000 |
|
|
| 1,004,495 |
|
|
| 3,416,000 |
|
|
| 35,373,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 38,799,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued upon exercise of warrants |
|
| - |
|
|
| 0 |
|
|
| 3,073,818 |
|
|
| 3,000 |
|
|
| - |
|
|
| 0 |
|
|
| 16,430,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 16,433,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in public offering, net of cost |
|
| - |
|
|
| 0 |
|
|
| 4,945,000 |
|
|
| 5,000 |
|
|
| - |
|
|
| 0 |
|
|
| 24,674,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 24,679,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for research and development agreement |
|
| - |
|
|
| 0 |
|
|
| 189,753 |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 1,355,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,355,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for services |
|
| - |
|
|
| 0 |
|
|
| 2,142,746 |
|
|
| 2,000 |
|
|
| - |
|
|
| 0 |
|
|
| 9,101,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 9,103,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
Equity compensation to officers and board of directors |
|
| - |
|
|
| 0 |
|
|
| 3,837,774 |
|
|
| 4,000 |
|
|
| - |
|
|
| 0 |
|
|
| 15,446,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 15,450,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (39,991,000 | ) |
|
|
|
|
|
| (39,991,000 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2021 |
|
| 96,230 |
|
| $ | 1,000 |
|
|
| 30,508,260 |
|
| $ | 30,000 |
|
|
| 1,004,495 |
|
| $ | 3,416,000 |
|
| $ | 663,991,000 |
|
| $ | (635,393,000 | ) |
| $ | (169,000 | ) |
| $ | 31,876,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2021 |
|
| 96,230 |
|
| $ | 1,000 |
|
|
| 28,144,077 |
|
| $ | 28,000 |
|
|
| 3,152,000 |
|
| $ | 10,716,000.00 |
|
| $ | 655,655,000 |
|
| $ | (629,940,000 | ) |
| $ | (169,000 | ) |
| $ | 36,291,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued upon conversion of notes payable |
|
| - |
|
|
| 0 |
|
|
| 2,147,018 |
|
|
| 2,000 |
|
|
| (2,147,505 | ) |
|
| (7,300,000 | ) |
|
| 7,294,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| (4,000 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued upon exercise of warrants |
|
| - |
|
|
| 0 |
|
|
| 26,000 |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 138,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 138,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for services |
|
| - |
|
|
| 0 |
|
|
| 92,686 |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 327,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 327,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation to officers and board of directors |
|
| - |
|
|
| 0 |
|
|
| 98,479 |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 577,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 577,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (5,453,000 | ) |
|
|
|
|
|
| (5,453,000 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2021 |
|
| 96,230 |
|
| $ | 1,000 |
|
|
| 30,508,260 |
|
| $ | 30,000 |
|
|
| 1,004,495 |
|
| $ | 3,416,000 |
|
| $ | 663,991,000 |
|
| $ | (635,393,000 | ) |
| $ | (169,000 | ) |
| $ | 31,876,000 |
|
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
| For The Three Months Ended March 31, 2022 (Unaudited) | ||||||||||||||||||||||||||||||||||||
| Preferred Shares | Common Shares | Common Shares Issuable | Additional Paid in | Accumulated | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, December 31, 2021 | 96 | $ | 1 | 32,062 | $ | 32 | 327 | $ | 1,113 | $ | 674,348 | $ | (653,584 | ) | $ | 21,910 | ||||||||||||||||||||
| Cancellation of common stock | - | - | (291 | ) | - | - | - | - | - | - | ||||||||||||||||||||||||||
Issuance of common shares for common shares issuable | - | - | 327 | - | (327 | ) | (1,113 | ) | 1,113 | - | - | |||||||||||||||||||||||||
| Issuance of common shares as equity compensation to officers, employees, and board of directors | - | - | 85 | - | - | - | 447 | - | 447 | |||||||||||||||||||||||||||
| Issuance of common shares for services | - | - | 163 | - | - | - | 872 | - | 872 | |||||||||||||||||||||||||||
| Extinguishment of debt discount upon adoption of ASU 2020-06 | ||||||||||||||||||||||||||||||||||||
| Conversion of Preferred Series J-1 to common stock | ||||||||||||||||||||||||||||||||||||
| Conversion of Preferred Series J-1 to common stock, Shares | ||||||||||||||||||||||||||||||||||||
| Common shares issued upon mandatory conversion of notes payable and accrued interest | ||||||||||||||||||||||||||||||||||||
| Common shares issued upon mandatory conversion of notes payable and accrued interest, Shares | ||||||||||||||||||||||||||||||||||||
| Common shares issued upon exercise of warrants | ||||||||||||||||||||||||||||||||||||
| Common shares issued upon exercise of warrants, Shares | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock in public offering, net of cost | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock in public offering, net of cost, Shares | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock for research and development agreement | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock for research and development agreement, Shares | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | (5,440 | ) | (5,440 | ) | ||||||||||||||||||||||||||
| Balance, March 31, 2022 | 96 | $ | 1 | 32,346 | $ | 32 | - | $ | - | $ | 676,780 | $ | (659,024 | ) | $ | 17,789 | ||||||||||||||||||||
Balance, December 31, 2019 |
|
| 2,449,778 |
|
| $ | 3,000 |
|
|
| 4,104,982 |
|
| $ | 4,000 |
|
|
| - |
|
| $ | - |
|
| $ | 548,184,000 |
|
| $ | (567,332,000 | ) |
| $ | (169,000 | ) |
| $ | (19,310,000 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial conversion feature of convertible notes |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 27,000 |
|
|
| - |
|
|
| - |
|
|
| 27,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for settlement of litigation |
|
| 0 |
|
|
| 0 |
|
|
| 205,882 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,909,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,909,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued upon conversion of notes payable |
|
| 0 |
|
|
| 0 |
|
|
| 185,118 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 9,277,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 9,277,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation |
|
| 0 |
|
|
| 0 |
|
|
| 63,882 |
|
|
| 0 |
|
|
| 0 |
|
|
| - |
|
|
| 146,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 146,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of warrants for services |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 180,000 |
|
|
| - |
|
|
| 0 |
|
|
| 180,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
| (22,006,000 | ) |
|
| - |
|
|
| (22,006,000 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2020 |
|
| 2,449,778 |
|
| $ | 3,000 |
|
|
| 4,559,865 |
|
| $ | 4,000 |
|
|
| - |
|
| $ | - |
|
| $ | 559,723,000 |
|
| $ | (589,338,000 | ) |
| $ | (169,000 | ) |
| $ | (29,777,000 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2020 |
|
| 2,449,778 |
|
| $ | 3,000 |
|
|
| 4,559,865 |
|
| $ | 4,000 |
|
|
| - |
|
| $ | - |
|
| $ | 559,723,000 |
|
| $ | (586,462,000 | ) |
| $ | (169,000 | ) |
| $ | (26,901,000 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
| (2,876,000 | ) |
|
| - |
|
|
| (2,876,000 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2020 |
|
| 2,449,778 |
|
| $ | 3,000 |
|
|
| 4,559,865 |
|
| $ | 4,000 |
|
|
| - |
|
| $ | - |
|
| $ | 559,723,000 |
|
| $ | (589,338,000 | ) |
| $ | (169,000 | ) |
| $ | (29,777,000 | ) |
| For The Three Months Ended March 31, 2021 (Unaudited) | ||||||||||||||||||||||||||||||||||||
| Preferred Shares | Common Shares | Common Shares Issuable | Additional Paid in | Accumulated | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, December 31, 2020 | 2,450 | 3 | 5,218 | 5 | - | - | 566,356 | (595,797 | ) | (29,433 | ) | |||||||||||||||||||||||||
| Extinguishment of debt discount upon adoption of ASU 2020-06 | - | - | - | - | - | - | (4,745 | ) | 226 | (4,519 | ) | |||||||||||||||||||||||||
| Conversion of Preferred Series J-1 to common stock | (2,354 | ) | (2 | ) | 692 | 1 | - | - | 1 | - | - | |||||||||||||||||||||||||
| Common shares issued upon mandatory conversion of notes payable and accrued interest | - | - | 3,779 | 4 | 7,634 | 25,956 | 12,846 | - | 38,806 | |||||||||||||||||||||||||||
| Common shares issued upon exercise of warrants | - | - | 95 | - | - | - | 58 | - | 58 | |||||||||||||||||||||||||||
| Issuance of common stock in public offering, net of cost | - | - | 4,945 | 5 | - | - | 24,674 | - | 24,679 | |||||||||||||||||||||||||||
| Issuance of common stock for research and development agreement | - | - | 190 | - | - | - | 1,355 | - | 1,355 | |||||||||||||||||||||||||||
| Issuance of common stock for services | - | - | 1,957 | 2 | - | - | 8,450 | - | 8,452 | |||||||||||||||||||||||||||
| Equity compensation to officers and board of directors | - | - | 3,641 | 4 | - | - | 14,292 | - | 14,296 | |||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | (29,677 | ) | (29,677 | ) | |||||||||||||||||||||||||
| Balance, March 31, 2021 | 96 | $ | 1 | 20,517 | $ | 21 | 7,634 | $ | 25,956 | $ | 623,287 | $ | (625,248 | ) | $ | 24,017 | ||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
GT BIOPHARMA, INC.INC AND SUBSIDIARIES
Condensed Consolidated Statements of Cash FlowsCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| For the Nine Months Ended |
| |||||
|
| September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
| (unaudited) |
|
| (unaudited) |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
Net loss |
| $ | (39,991,000 | ) |
| $ | (22,006,000 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Change in fair value of derivative liability |
|
| (43,000 | ) |
|
| 0 |
|
Stock based compensation - consultants and research and development |
|
| 10,458,000 |
|
|
| 0 |
|
Stock based compensation - officers and board of directors |
|
| 15,450,000 |
|
|
| 327,000 |
|
Convertible notes payable issued for consulting services |
|
| 720,000 |
|
|
| 0 |
|
Amortization of debt discount |
|
| - |
|
|
| 0 |
|
Non-cash interest expense |
|
| 0 |
|
|
| 3,970,000 |
|
Settlement expense |
|
| - |
|
|
| 11,206,000 |
|
Effect of changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
| 279,000 |
|
|
| 3,000 |
|
Accounts payable and accrued expenses |
|
| 537,000 |
|
|
| 1,165,000 |
|
Accrued interest |
|
| 689,000 |
|
|
| 0 |
|
Net Cash Used in Operating Activities |
|
| (11,901,000 | ) |
|
| (5,335,000 | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Purchases of investments |
|
| (26,031,000 | ) |
|
| 0 |
|
Net Cash Used by Investing Activities |
|
| (26,031,000 | ) |
|
| 0 |
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from exercise of warrants |
|
| 16,433,000 |
|
|
| 0 |
|
Proceeds from issuance of common stock |
|
| 24,679,000 |
|
|
| 0 |
|
Proceeds from issuance of notes payable |
|
| 1,205,000 |
|
|
| 5,657,000 |
|
Net Cash Provided by Financing Activities |
|
| 42,317,000 |
|
|
| 5,657,000 |
|
|
|
|
|
|
|
|
|
|
Net Increase in Cash |
|
| 4,385,000 |
|
|
| 322,000 |
|
Cash at Beginning of Period |
|
| 5,297,000 |
|
|
| 28,000 |
|
Cash at End of Period |
| $ | 9,682,000 |
|
| $ | 350,000 |
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for: |
|
|
|
|
|
|
|
|
Interest |
| $ | 0 |
|
| $ | 69,000 |
|
Income taxes paid |
| $ | 0 |
|
| $ | 0 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Common stock issued upon conversion of notes payable and accrued interest |
| $ | 38,799,000 |
|
| $ | 630,000 |
|
Extinguishment of unamortized debt discount and adjustment to accumulated deficit upon adoption of ASU 2020-06 |
| $ | 4,745,000 |
|
| $ | 0 |
|
(in thousands)
| 2022 | 2021 | |||||||
| For the three months ended | ||||||||
| March 31, | ||||||||
| 2022 | 2021 | |||||||
| (unaudited) | (unaudited) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | (5,440 | ) | $ | (29,677 | ) | ||
| Adjustments to reconcile net loss to net cash (used in) operating activities: | ||||||||
| Stock based compensation for services | 872 | 9,807 | ||||||
| Stock based compensation to officers, employees and board of directors | 447 | 14,296 | ||||||
| Convertible notes payable issued for consulting services | - | 720 | ||||||
| Change in fair value of derivative liability | (18 | ) | (21 | ) | ||||
| Change in operating lease right-of-use assets | 23 | - | ||||||
| Unrealized loss on marketable securities | 24 | - | ||||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) decrease in prepaid expenses | (263 | ) | 276 | |||||
| Increase in deposits | (9 | ) | - | |||||
| Increase (decrease) in accounts payable and accrued expenses | (838 | ) | 219 | |||||
| (Decrease) in operating lease liability | (13 | ) | - | |||||
| Increase in accrued interest | - | 696 | ||||||
| Net Cash (Used in) Operating Activities | (5,215 | ) | (3,684 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Sale of investments | 3,533 | - | ||||||
| Net Cash Provided by Investing Activities | 3,533 | - | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of common stock | - | 24,679 | ||||||
| Proceeds from exercise of warrants | - | 58 | ||||||
| Proceeds from issuance of notes payable | - | 1,205 | ||||||
| Net Cash Provided by Financing Activities | - | 25,942 | ||||||
| Net Increase (Decrease) in Cash | (1,682 | ) | 22,258 | |||||
| Cash at Beginning of Period | 8,968 | 5,297 | ||||||
| Cash at End of Period | $ | 7,286 | $ | 27,555 | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
| Cash paid during the year for: | ||||||||
| Interest | $ | - | $ | - | ||||
| Income taxes | $ | - | $ | - | ||||
| SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Right-of-use assets and lease liabilities recognized pursuant to lease agreement | $ | 260 | $ | - | ||||
| Extinguishment of unamortized debt discount and adjustment to accumulated deficit upon adoption of ASU 2020-06 | $ | - | $ | 4,519 | ||||
| Common stock issued upon conversion of notes payable and accrued interest | $ | - | $ | 38,806 | ||||
| Convertible notes payable issued for accrued expenses | $ | - | $ | 1,525 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
GT BIOPHARMA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
As ofMarch 31, 2022 and For the Nine Months Ended September 30, 2021 and 2020
(Unaudited)
Note 1 – Organization and Operations
In 1965, the corporate predecessor of GT Biopharma Inc. (Company), 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.
The Company is a clinical stage biopharmaceutical company focused on the development and commercialization of novel immuno-oncology products based offon our proprietary Tri-specific Killer Engager (TriKE™(TriKE®), Tetra-specific Killer Engager (Dual Targeting TriKEDual Targeting TriKE) platforms. fusion protein immune cell engager technology platform. The Company’s TriKE and Dual Targeting TriKE platforms generate® platform generates proprietary therapeutics designed to harness and enhance the cancer killing abilities of a patient’s own natural killer cells, or NK cells. Once bound to an NK cell, our moieties are designed to enhance the NK cell, and precisely direct it to one or more specifically targeted proteins expressed on a specific type of cancer cell or virus infected cell, resulting in the targeted cell’s death. TriKE®s can be designed to target any number of tumor antigens on hematologic malignancies or solid tumors and do not require patient-specific customization.
Note 2 –Going Concern
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, for the nine months ended September 30, 2021, the Company incurred a net loss of $40.0 million and used cash in operating activities of $11.9 million. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that these financial statements are issued. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
During the nine months ended September 30, 2021, the Company received net cash of $24.7 million from the sale of 4,945,000 shares of its common stock pursuant to a public offering, issuance of notes payable for cash of $1.2 million and $16.4 million in cash from exercise of warrants for a total cash received of $42.3 million. At September 30, 2021, the Company had cash on hand and short-term investments in the amount of $35.7 million. 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. 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. Management estimates that the current funds on hand will be sufficient to continue operations through the next six months. The Company’s ability to continue as a going concern is dependent upon its ability to continue to implement its business plan.
Note 3 – Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Oxis Biotech, Inc. and Georgetown Translational Pharmaceuticals, Inc. All intercompany transactions and balances have been eliminated in consolidation.
The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 20202021 filed with the SEC on April 16, 2021March 28, 2022 (the “2020“2021 Annual Report”). The consolidated balance sheet as of December 31, 20202021 included herein was derived from the audited consolidated financial statements as of that date.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all adjustments contained herein are of a normal recurring nature. Results of operations for the fiscal periods presented herein are not necessarily indicative of fiscal year-end results.
Liquidity |
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Oxis Biotech, Inc. and Georgetown Translational Pharmaceuticals, Inc. Intercompany transactions and balances have been eliminated in consolidation.
Reverse Stock Split
On February 10, 2021, the Company completed a 1:17 reverse stock split of the Company’s issued and outstanding shares of common stock and all fractional shares were rounded up. All share and per share amounts in the accompanying financial statements have been adjusted retroactivelyprepared under the assumption that the Company will continue as a going concern. Such assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the quarter ended March 31, 2022, the Company recorded a net loss of $5.4 million and used cash in operations of $5.2 million. As of March 31, 2022, the Company had a cash and short-term investments balance of $26.7 million, working capital of $17.7 million and stockholders’ equity of $17.8 million. Management anticipates that the $26.7 million of cash and cash equivalents, and short-term investments are adequate to reflectsatisfy the reverse stock split as if it had occurred at the beginningliquidity needs of the earliest period presented.Company for at least one year from the date the Company’s condensed consolidated financial statements for the quarter ended March 31, 2022 were issued.
Historically, the Company has financed its operations through public and private sales of common stock, issuance of preferred and common stock, issuance of convertible debt instruments, and strategic collaborations.
| 8 |
COVID-19
In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, has adversely affected workforces, customers, economies, and financial markets globally. It has also disrupted the normal operations of many businesses. This outbreak could decrease spending, adversely affect demand for the Company’s products, and harmoperations.
While the pandemic has impacted the Company’s business and results of operations.
Duringoperations, during the ninethree months ended September 30, 2021,March 31, 2022, the Company believes the COVID-19 pandemic didhad limited impact on its operating results. However, theThe Company has not observed any impairments of its assets or a significant change in the fair value of its assets due to the COVID-19 pandemic. At this time, it is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or results of operations, financial condition, or liquidity.
The Company has been following the recommendations of health authorities to minimize exposure risk for its team members, including the temporary closure of its corporate office and having team members work remotely. Most vendors have transitioned to electronic submission of invoices and payments.
Accounting Estimates
The preparation of financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”)GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include accruals for potential liabilities, valuation of notes payable, assumptions used in deriving the fair value of derivative liabilities, valuation of equity instruments issued for services and realization of deferred tax assets. Actual results could differ from those estimates.
Cash Equivalents and Short-Term Investments
The Company considers highly liquid investments with maturities of three months or less at the date of acquisition as cash equivalents in the accompanying condensed consolidated financial statements. As of September 30, 2021,March 31, 2022 total cash and cash equivalents, which consistsconsist of cash and money market funds, amounted to approximately $3.9 $7.3 million.
The Company also invested its excess cash in commercial paper and corporate notes and bonds. Management generally determines the appropriate classification of its investments at the time of purchase. We classify these investments as short-term investments, as part of current assets, based upon our ability and intent to use any and all of these investments as necessary to satisfy liquidity requirements that may arise from our businesses. Investments are carried at fair value with the unrealized holding gains and losses reported in the accompanying condensed consolidated statements of operations. As of September 30, 2021,March 31, 2022 total short-term investments amounted to approximately $26$19.5 million.
Stock-Based Compensation
The Company accounts for share-based awards to employees and nonemployees and consultants in accordance with the provisions of ASC 718, Compensation-Stock Compensation. Stock-based compensation cost is measured at fair value on the grant date and that fair value is recognized as expense over the requisite service, or vesting, period.
Fair Value of Financial Instruments
FASBFinancial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820-10 requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet for which it is practicable to estimate fair value. ASC 820-10 defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties.
The three levels of the fair value hierarchy are as follows:
Level 1 | Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access. | |
Level 2 | Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. | |
Level 3 | Valuations based on inputs that are unobservable, supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
The carrying amount of the Company’s derivative liability of $340,000$120,000 at September 30, 2021March 31, 2022 and $383,000$138,000 at December 31, 20202021 was based on Level 2 measurements.
The carrying amounts of the Company’s other financial assets and liabilities, such as cash, short-term investments, prepaid expense, accounts payable and accrued expenses approximate their fair values because of the short maturity of these instruments.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. The fair value of the embedded derivatives areis determined using a Binomial valuation method at inception and on subsequent valuation dates.
| 9 |
Stock-Based Compensation
The Company accounts for share-based awards to employees, nonemployees and consultants in accordance with the provisions of ASC 718, Compensation-Stock Compensation. Stock-based compensation cost is measured at fair value on the grant date and that fair value is recognized as expense over the requisite service, or vesting period.
The Company values its equity awards using the Black-Scholes option pricing model, and accounts for forfeitures when they occur. Use of the Black-Scholes option pricing model requires the input of subjective assumptions including expected volatility, expected term, and a risk-free interest rate. The Company estimates volatility using a its own historical stock price volatility. The expected term of the instrument is estimated by using the simplified method to estimate expected term. The risk-free interest rate is estimated using comparable published federal funds rates.
Research and Development Costs
Costs incurred for research and development are expensed as incurred. The salaries, benefits, and overhead costs of personnel conducting research and development of the Company’s products are included in research and development expenses. Purchased materials that do not have an alternative future use are also expensed.
Leases
The Company accounts for its leases in accordance with Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASC 842”). ASC 842 requires lessees to (i) recognize a right of use asset (“ROU asset”) and a lease liability that is measured at the present value of the remaining lease payments, on the consolidated balance sheets, (ii) recognize a single lease cost, calculated over the lease term on a straight-line basis and (iii) classify lease related cash payments within operating and financing activities. The Company has made an accounting policy election to not recognize short-term leases on the consolidated balance sheets and all non-lease components, such as common area maintenance, were excluded. At any given time during the lease term, the lease liability represents the present value of the remaining lease payments, and the ROU asset is measured as the amount of the lease liability, adjusted for pre-paid rent, unamortized initial direct costs, and the remaining balance of lease incentives received. Both the lease ROU asset and liability are reduced to zero at the end of the lease term.
The Company leases office space and equipment. At the lease inception date, the Company determines if an arrangement is, or contains a lease. Some of the Company’s leases include options to renew at similar terms. The Company assesses these options to determine if the Company is reasonably certain of exercising these options based on relevant economic and financial factors. Options that meet these criteria are included in the lease term at the lease commencement date
During the period ended March 31, 2022, the Company executed lease agreements for its office space and equipment and as a result, recorded operating lease right-of-use assets and the related lease liabilities of $260,000 pursuant to ASC 842, Leases (see Note 8).
Basic earnings (loss) per share is computed using the weighted-average number of common shares outstanding during the period. Common stock issuable is included in our calculation as of the date of the underlying agreement. Diluted earnings (loss) per share is computed using the weighted-average number of common shares and the dilutive effect of contingent shares outstanding during the period. Potentially dilutive contingent shares, which primarily consist of convertible notes, stock issuable tofor the exercise of stock options and warrants have been excluded from the diluted loss per share calculation because their effect is anti-dilutive.
Schedule of Anti-dilutive Securities
|
| September 30, 2021 |
|
| September 30, 2020 |
| ||
|
|
|
|
|
|
| ||
A. Options to purchase common stock |
|
| - |
|
|
| 3 |
|
B. Warrants to purchase common stock |
|
| 2,337,274 |
|
|
| 106,650 |
|
C. Convertible notes payable |
|
| - |
|
|
| 4,678,823 |
|
D. Convertible Series J Preferred stock |
|
| - |
|
|
| 692,220 |
|
E. Convertible Series C Preferred stock |
|
| 7 |
|
|
| 7 |
|
|
|
| 2,337,281 |
|
|
| 5,477,703 |
|
March 31 2022 (Unaudited) | March 31 2021 | |||||||
| Options to purchase common stock | 302,500 | - | ||||||
| Warrants to purchase common stock | 2,337,274 | 5,319 | ||||||
| Unvested restricted common stock | 681,270 | 1.596,659 | ||||||
| Total anti-dilutive securities | 3,321,044 | 1,601,978 | ||||||
Concentration
Cash is deposited in one financial institution. The balances held at this financial institution at times may be in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits of up to $250,000.
The Company has a significant concentration of expenses incurred and accounts payable from a single vendor. Please see Note 4 for further information.
Segments
The Company determined its reporting units in accordance with ASC 280, “Segment Reporting” (“ASC 280”). Management evaluates a reporting unit by first identifying its’ operating segments under ASC 280. The Company then evaluates each operating segment to determine if it includes one or more components that constitute a business. If there are components within an operating segment that meet the definition of a business, the Company evaluates those components to determine if they must be aggregated into one or more reporting units. If applicable, when determining if it is appropriate to aggregate different operating segments, the Company determines if the segments are economically similar and, if so, the operating segments are aggregated.
Management has determined that the Company has one consolidated operating segment. The Company’s reporting segment reflects the manner in which its chief operating decision maker reviews results and allocates resources. The Company’s reporting segment meets the definition of an operating segment and does not include the aggregation of multiple operating segments.
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. Under ASU 2020-06, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. The new guidance also requires the if-converted method to be applied for all convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. Adoption of the standard requires using either a modified retrospective or a full retrospective approach. Effective January 1, 2021, we early adopted ASU 2020-06 using the modified retrospective approach. Adoption of the new standard resulted in a decrease to additional paid-in capital of $4,519,000 (see Note 4).
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. ASU 2021-04 provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. An issuer measures the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange. ASU 2021-04 introduces a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification). ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date. Early adoption is permitted for all entities, including adoption in an interim period. If an entity elects to early adoptEffective January 1, 2022, we adopted ASU 2021-04 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The adoption of ASU 2021-04 isusing a prospective approach. It did not expected to have a material impact on the Company’s financial statements or disclosures.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission (the “SEC”) did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.
Note 4 - 3 – Fair Value of Financial Instruments
The estimated fair values of financial instruments outstanding were:were (in thousands):
Schedule of Estimated Fair Value of Financial Instrument
| March 31, 2022 (Unaudited) | ||||||||||||||||
| Unrealized | Unrealized | Fair | ||||||||||||||
| Cost | Gains | Losses | Value | |||||||||||||
| Cash and cash equivalents | $ | 7,286 | $ | — | $ | — | $ | 7,286 | ||||||||
| Short-term investments | 19,496 | — | (42 | ) | 19,454 | |||||||||||
| Total | $ | 26,782 | $ | — | $ | (42 | ) | $ | 26,740 | |||||||
|
| Sept. 30, 2021 |
| December 31, 2021 | ||||||||||||||||||||||||||||
|
|
| Unrealized |
| Unrealized |
| Fair |
| Unrealized | Unrealized | Fair | |||||||||||||||||||||
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| Cost | Gains | Losses | Value | ||||||||||||||||
Cash and cash equivalents |
| $ | 9,682,000 |
| $ | 0 |
| $ | 0 |
| $ | 9,682,000 |
| $ | 8,968 | $ | — | $ | — | $ | 8,968 | |||||||||||
Short-term investments |
|
| 26,064,000 |
|
|
| 0 |
|
|
| (33,000 | ) |
|
| 26,031,000 |
| 23,040 | — | (29 | ) | 23,011 | |||||||||||
|
| $ | 35,746,000 |
|
| $ | 0 |
|
| $ | (33,000 | ) |
| $ | 35,713,000 |
| ||||||||||||||||
| Total | $ | 32,008 | $ | — | $ | (29 | ) | $ | 31,979 | |||||||||||||||||||||||
|
| December 31, 2020 |
| |||||||||||||
|
|
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| |||||
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||
Cash and cash equivalents |
| $ | 5,297,000 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 5,297,000 |
|
The following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents and investments) (in thousands):
Schedule of Fair Value Hierarchy Financial Assets
| Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||||
|
| Sept. 30, 2021 |
| March 31, 2022 (Unaudited) | ||||||||||||||||||||||||||||
|
| Fair Value |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||
Money market funds |
| $ | 3,936,000 |
| $ | 3,936,000 |
| $ | 0 |
| $ | 0 |
| $ | 6,299 | $ | 6,299 | $ | — | $ | — | |||||||||||
Corporate notes and commercial paper |
| 26,031,000 |
|
| 0 |
|
| 26,031,000 |
|
| 0 |
| 19,454 | — | 19,454 | — | ||||||||||||||||
|
| $ | 29,967,000 |
|
| $ | 3,936,000 |
|
| $ | 26,031,000 |
|
| $ | 0 |
| ||||||||||||||||
| Total financial assets | $ | 25,753 | $ | 6,299 | $ | 19,454 | $ | — | ||||||||||||||||||||||||
| Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
| December 31, 2021 | ||||||||||||||||
| Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
| Money market funds | $ | 5,484 | $ | 5,484 | $ | — | $ | — | ||||||||
| Corporate notes and commercial paper | 23,011 | — | 23,011 | — | ||||||||||||
| Total financial assets | $ | 28,495 | $ | 5,484 | $ | 23,011 | $ | — | ||||||||
As of March 31, 2022, the fair value of the derivative liability amounted to $120,000. The details of derivative liability transactions for the three months ended March 31, 2022 and 2021, are as follows:
Schedule of Derivative Liability Transactions
| March 31, 2022 | March 31, 2021 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Beginning balance | $ | 138,000 | $ | 383,000 | ||||
| Fair value upon issuance of warrants | - | - | ||||||
| Change in fair value | (18,000 | ) | (21,000 | ) | ||||
| Extinguishment | - | - | ||||||
| Ending balance | $ | 120,000 | $ | 362,000 | ||||
Note 54 – Convertible NotesAccounts Payable
Convertible notesAccounts payable consisted of the following:following (in thousands):
Schedule of Accounts Payable
|
| September 30, 2021 |
|
| December 31, 2020 |
| ||
|
|
|
|
|
|
| ||
A. Notes payable issued for cash |
| $ | 0 |
|
| $ | 24,085,000 |
|
B. Notes payable issued for settlement agreements |
|
| 0 |
|
|
| 2,528,000 |
|
C. Notes payable issued for forbearance agreements |
|
| 0 |
|
|
| 3,849,000 |
|
D. Notes payable issued for consulting services |
|
| 0 |
|
|
| 360,000 |
|
|
|
| 0 |
|
|
| 30,822,000 |
|
Less unamortized debt discount |
|
| 0 |
|
|
| (4,519,000 | ) |
Convertible notes, net of discount |
| $ | 0 |
|
| $ | 26,303,000 |
|
| March 31, 2022 | December 31, | |||||||
| (Unaudited) | ||||||||
| Accounts payable to a third-party manufacturer | $ | 7,423 | $ | 6,335 | ||||
| Other accounts payable | 690 | 1,885 | ||||||
| Total accounts payable | $ | 8,113 | $ | 8,220 | ||||
A. The Company relies on a third-party contract manufacturing operation to produce and/or test our compounds used in our potential product candidates. As of March 31, 2022 the Company was indebted $7.4 million of accounts payable to this vendor.
Note 5 – Convertible Notes Payable
Notes Payable Issued for Cash
As part of the Company’s financing activities, the Company issued convertible notes payable in exchange for cash. These notes payable were unsecured, bear interest at a rate of 10% per annum, mature in nine months up to one year from the date of issuance,totaling $25.3 million between August 1, 2018 and are convertible to common stock at an average conversion rate of $3.40 per share, subject to certain beneficial ownership limitations (with a maximum ownership limit of 4.99%) and standard anti-dilution provisions. As of December 31, 2020, the outstanding balance of these notes amounted to $24,085,000.
In January 2021, the Company issued similar notes payable in exchange for cash of $1,205,000.26, 2021. On February 16, 2021, in accordance with the terms of the note agreements upon completion of the equity offering, discussed in Note 7, these notes were mandatorily converted at a conversion rate of $3.40$3.40 per share into shares of the Company’s common stock.
B.
Notes PayablePayable Issued for Settlement Agreements
In fiscal 2019 and 2020, the Company issued its convertible notes payable in the amount of $2.5 million to resolve claims and disputes pertaining to certain debt and equity instruments issued by the Company in prior years. The notes were unsecured, bear interest at a rate of 10%, mature in nine months up to one year from the date of issuance, and are convertible to common stock at a conversion rate of $3.40 per share, as adjusted, subject to certain beneficial ownership limitations (with a maximum ownership limit of 4.99%) and standard anti-dilution provisions. As of December 31, 2020, outstanding balance of these notes payable for settlement agreements amounted to $2,528,000.
On February 16, 2021 in accordance with the note agreements upon completion of the equity offering, discussed in Note 7, these notes were mandatorily converted at a conversion rate of $3.40 $3.40 per share into shares of the Company’s common stock.
C.
Notes PayablePayable Issued for Forbearance Agreements
On June 23, 2020, the Company entered into Standstill and Forbearance Agreements (collectively, the “Forbearance Agreements”) with the holders of $13.2$13.2 million aggregate principal amount of the Convertible Notes (the “Default Notes”), which were in default. Pursuant to the Forbearance Agreements, the holders of the Default Notes 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$15 million and, in connection therewith, commences listing on NASDAQ (collectively, the “New Financing”) or (ii) January 31, 2021 (the “Termination Date”). As of December 31, 2020, outstanding balance of the notes payable amounted to $3,849,000.
On February 16, 2021 in accordance with the note agreements upon completion of the equity offering, discussedthese notes, in Note 7, these notesthe amount of $3.8 million, were mandatorily converted at a conversion rate of $3.40 $3.40 per share into shares of the Company’s common stock.
| 12 |
D.
Notes PayablePayable issued for Consulting Agreements
In prior years, the Company issued its convertible notes payable in exchange for consulting services. These notes payable are unsecured, bear interest at a rateservices in the amount of 10% per annum, mature in nine months up to one year from the date of issuance, and are convertible to common stock at an average conversion rate of $3.40 per share, subject to certain beneficial ownership limitations (with a maximum ownership limit of 4.99%) and standard anti-dilution provisions. As of December 31, 2020, outstanding balance of these notes payable amounted to $360,000.$1.6 million.
In January 2021, the Company issued similar notes payable of $720,000 in exchange for consulting services. In addition, the Company also issued a note payable of $525,000 in exchange for the cancellation of unpaid consulting fees that was recorded as part of accrued expenses as of December 31, 2020.
On February 16, 2021 in accordance with the note agreements upon completion of the equity offering, discussed in Note 7, these notes in the aggregate amount of $1,605,000$1.6 million were mandatorily converted at a conversion rate of $3.40$3.40 per share into shares of the Company’s common stock.
Notes Payable issued for Accrued Interest
In prior years, the Company recorded accrued interest of $5.6 million related to all notes payable. On February 16, 2021, in accordance with the note agreements upon completion of the equity offering, the accrued interest was mandatorily converted at a conversion rate of $3.40 per share into shares of the Company’s common stock.
As of December 31, 2020, the Company accrued interest of $4,838,000 related to these convertible notes payable. During the period ended September 30, 2021, the Company accrued interest of $696,000. As a result of the mandatory conversion of the Company’s notes payable, on February 16, 2021, total accrued interest amounted to $5,527,000 were converted to 1,627,647 shares of common stock.
As a result, total notes payable of $33,272,000 and accrued interest of $5,527,000 for a total of $38,799,000 were mandatorily converted to 11,413,322 shares of common stock.
Adoption of ASU 2020-062020-06
In fiscal 2020, the Company recorded a note/debt discount of $4,745,000$4.7 million to account for the beneficial conversion feature that existed on the date of issuance for the above convertible notes payable. The debt discount iswas being amortized to interest expense over the term of the corresponding convertible notes payable. At December 31, 2020, the Company had recorded an unamortized note/debt discount of $4,519,000.
On January 1, 2021 the Company chose to adopt Accounting Standards Update (“ASU”)ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. Under ASU 2020-06, the embedded conversion features are no longer required to be separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital.
As a result of the adoption of ASU 2020-06, the Company extinguished the previously recorded debt discount of $4,745,000$4.7 million by charging the opening additional paid in capital at January 1, 2021. In addition, the Company also adjusted accumulated deficit to account for the derecognition of the $226,000$0.2 million interest expense due to the amortization of the debt discount that was recorded in fiscal 2020.As a result of these adjustments, the unamortized debt discount of $4,519,000$4.5 million was extinguished.
Note 6 – Line of Credit
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 advances under the line of credit will bear interest at the rate of interest of prime plus 2% per annum.
As of September 30, 2021 and December 31, 2020, the outstanding balance of this credit line amounted to $31,000 respectively.
Note 7 – Derivative Liability
During the year ended December 31, 2020, the Company issued certain warrants that contained a fundamental transaction provision that could give rise to an obligation to pay cash to the warrant holder upon occurrence of certain change in control type events.
In accordance with ASC 480, the fair value of these warrants areis classified as a liability in the Condensed Consolidated Balance Sheet and will be re-measuredre- measured at the end of every reporting period with the change in value reported in the statement of operations.
The derivative liabilities were valued using a Binomial pricing model with the following average assumptions:
Schedule of Derivative Liabilities Assumptions
| March 31 | December 31 | |||||||||||||||
|
| September 30, 2021 |
|
| December 31, 2020 |
| 2022 | 2021 | ||||||||
|
|
|
|
|
| (Unaudited) | ||||||||||
Stock Price |
| $ | 6.68 |
| $ | 7.21 |
| $ | $ | |||||||
Risk-free interest rate |
| 0.98 | % |
| 0.36 | % | 2.42 | % | 1.26 | % | ||||||
Expected volatility |
| 132 | % |
| 135 | % | 127 | % | 129 | % | ||||||
Expected life (in years) |
| 3.83 years |
| 4.60 years |
| 3.3 | 3.6 | |||||||||
Expected dividend yield |
| 0 |
| 0 |
| - | - | |||||||||
|
|
|
|
|
| |||||||||||
Fair Value: |
|
|
|
|
| |||||||||||
Warrants |
| $ | 340,000 |
|
| $ | 383,000 |
| ||||||||
| Fair Value of Warrants | $ | 120,000 | $ | 138,000 | ||||||||||||
The risk-free interest rate was based on rates established by the Federal Reserve Bank. The Company uses the historical volatility of its common stock to estimate the future volatility for its common stock. The expected life of the derivative securities was determined by the remaining contractual life of the derivative instrument. For derivative instruments that already matured, the Company used the estimated life. The expected dividend yield was based on the fact that the Company has not paid dividends to its common stockholders in the past and does not expect to pay dividends to its common stockholders in the future.
During the ninethree months ended September 30, 2021,March 31, 2022, the Company recognized a gain of $ 43,000 18,000 to account for the change in fair value of the derivative liability between the reporting periods in accordance with ASC 842.
Note 87 – Stockholders’ Equity (Deficit)
The Company’s authorized capital as of March 31, 2022 was shares of common stock, par value $ per share, and shares of preferred stock, par value $ per share.
Common Stock
Common Stock Issuable
AsOn February 16, 2021, as a result of the mandatory conversion of the notes payable and accrued interest in the aggregate amount of $38,799,000 on February 16, 2021,$38.8 million, the Company is obligated to issueissued a total of shares of common stock to the respective noteholders.noteholders, of which were already issued as of December 31, 2021. The remaining common shares issuable at December 31, 2021 valued at $1.1 million, were issued during the three months period ended March 31, 2022.
AsCancellation of September 30, 2021,common stock
During the period ended March 31, 2022, the Company was only ablecancelled and returned to issue 10,408,827authorized capital previously issued shares of common stock.
Equity compensation to officers, employees, and board of directors
As part of employment agreements with its former CEO and its former CFO (“Officers”), the Officers received a fully vested stock grant equal to an aggregate of % and % of the fully diluted shares of common stock or approximately 91% or $35,383,000 of the converted notes payableCompany (calculated with the inclusion of the current stock holdings of the CEO) upon conversion of options, warrants and accrued interestConvertible Notes in association with a national markets qualified financing as consideration for entering into the Agreement (with such stock to vest and be delivered within 30 days after the respective noteholders. With regardsnational markets qualified financing). In addition, the Company also granted similar equity compensation to members of the remaining 1,004,495 unissuedCompany’s board of directors wherein these directors received stock grants equal to % and % of the fully diluted shares of common stock or $3,416,000 of the converted notes payable and accrued interest, the Company is in the process of obtaining the necessary supporting documentation from the respective noteholders which will then be providedCompany.
For financial reporting purposes,to be issued vested immediately while the Company reported $3,416,000 as common stock issuable in the accompanying statementsremaining 67% will vest over a period of stockholders' equity to account for the estimated balance of the converted notes payable and accrued interest that the Company has not yet issued the corresponding common stock.
Subsequent to September 30, 2021, the Company issued a total of 74,094 shares of common stock to these noteholders upon submission of the required documentation to the Company’s stock transfer agent.
Issuance of Common Stock in public offering.
On February 16, 2021, the Company completed a public offering of 4,945,000 shares of common stock for net proceeds of $24,679,000, after deducting underwriting discounts, commissions and other direct offering expenses. As part of the offering, the Company also granted these investors, warrants to purchase 5,192,250 shares of common stock. The warrants are fully vested, exercisable at $5.50 per share and will expire in five years.
As a result of the completion of the publicits equity offering and the successful listing oflisted its shares of common stock on the Nasdaq Capital Markets, convertible notes with an aggregate principal amount of $33,272,000 and accrued interest of $5,527,000 mandatorily converted at its stated conversion rate of $3.40 per share into 11,413,322Market. As such, shares of the Company’sits common stock (see Note 4).were granted to these Officers, employees and board of directors, which had a fair value of $18.6 million. Since the grant of the common stock is subject to milestone or performance conditions, the Company measured the fair value of the common stock on the respective date of the agreement, and such awards were recorded as compensation expense as the milestone or performance condition is met and in accordance with its vesting terms.
During the period ended March 31, 2021, the Company recognized $ million of stock compensation expense related to vesting of shares to officers, employees and board of directors.
During the period ended March 31, 2022, the Company recognized $ of stock compensation expense related to vesting of shares to officers, employees and board of directors. The fair value of the remaining unvested shares of common stock to officers, employees and board of directors at March 31, 2022 was $million and will be recognized as stock compensation expense in future periods.
| 13 |
Issuance of Common Stockcommon shares for services - consultants
As part of consulting agreements with certain consultants, the Company agreed to grant these consultants common stock equal to 1%% and 3%% of the fully diluted shares of common stock of the Company upon conversion of options, warrants and Convertible Notes in association with a national markets qualified financing as consideration for entering into the Agreement (with such stock to vest and be delivered within 30 days after the national markets qualified financing).
On February 16, 2021, the Company completed its equity offering and listed its shares of common stock on the Nasdaq Capital Markets (see Note 7).Market. As a result of this offering, the Company agreed to issue to these consultants 2,502,518 shares of common stock with a grant date fair value of $9,679,000,$10.7 million, of which 1,829,620 shares of common stock are fully vested immediately while the remaining 672,898,, shares of common stock will vestvests over . Pursuant to current accounting guidelines, as the grant of the common stock is subject to milestone or performance conditions, the Company measured the fair value of the common stock on the respective date of the agreement, and then such award is being recorded as compensation expense based upon the vesting term of the grant.
During the period ended September 30,March 31, 2021, pursuantthe Company recognized $ million of stock compensation expense related to the vesting termsissuance of the agreements, the Company issued 1,992,746 shares of common stock that vestedand the vesting of shares to these consultants and recordedconsultants.
During the correspondingperiod ended March 31, 2022, the Company recognized $of stock compensation expense related to the issuance of $7,890,000. In addition, the Company also issued 150,000 shares of common stock with aand the vesting of shares of common stock issued to consultants for services in fiscal 2022. The fair value of $1,213,000 to other consultants for service rendered. As a result, the Company recognized an aggregate of $9,103,000 in stock compensation expense based upon the vesting of common stock granted to consultants.
As of September 30, 2021, there are 509,772 unvested shares of common stock with a fair value of $1,789,000 whichto consultants at March 31, 2022 was $million and will be recognized as stock compensation expense in future periods.
Issuance of Common Stock for research and development agreement
During the nine months ended September 30, 2021, the Company issued 189,753 shares of common stock for a research and development agreement valued at $1,355,000. The common shares were valued on the market price at the date of grant.
Issuance of Common Stock upon exercise of warrants
During the nine months ended September 30, 2021, the Company issued 3,073,818 shares of common stock upon the exercise of warrants resulting in cash proceeds of $16,433,000.
Preferred Stock
A. Series J
Preferred Stock
On September 1, 2017, the Board designated 2,000,000 shares of Series J preferred stock (the “Series J Preferred Stock”). On the same day, the Board issued 1,513,548 shares of Series J Preferred Stock in exchange for the cancellation of 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. Despite the fact the Company had issued shares of Series J Preferred Stock, the issuance of those shares was not valid and was of no legal effect.
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”). On April 19, 2019, the Company issued 840,000 shares of Series J-1 Preferred Stock. The issuance was in lieu of the Series 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.
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 $3.40 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 Company’s common stock or 692,220 shares of common stock. Shares of the Series J-1 Preferred Stock have the same voting rights a shares of the 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 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.
On February 16, 2021, as a result of the completion of the public offering and the successful listing of its shares of common stock on the Nasdaq Capital Markets, 2,353,548 shares of Series J-1 Preferred stock mandatorily converted at a conversion rate of $3.40 per share into 692,220 shares of the Company’s common stock.
B.
Series C Preferred Stock
During Fiscal 2017, the Company issued At March 31, 2022 and March 31, 2021, there were shares of Series C Preferred Stock. The 96,230 shares of Seriesseries C preferred stock, par value $0.01 $per share (the “Series C Preferred Stock”), are convertible into 7 shares issued and outstanding.
As a result of reverse stock splits in previous years and the agreement terms for adjusting the rights of the Company’s common stock atrelated shares, 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 $3.40 or more than $4.9113 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. Inare not currently convertible, have no voting rights, and in the event of liquidation, the holders of the Series C Preferred Stock shallwould not 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 also are not currently entitled to noncumulativeany 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 September 30,March 31, 2022 and 2021.
C.
Series K Preferred Stock
On February 16, 2021, the Board designated shares of Series K preferred stock, par value $.01.$. (the “Series K Preferred Stock”).
Shares of the Series K 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 rate of shares of common stock for each share of Series K Preferred. Shares of the Series K Preferred Stock have the same voting rights aas the shares of the Company’s common stock, with the holders of the Series K Preferred Stock entitled to vote on an as-converted-to-common stock basis, subject to the beneficial ownership limitation, together with the holders of the Company’s common stock on all matters presented to the Company’s stockholders. The Series K 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 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 K 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.
As of September 30,March 31, 2022 and December 31, 2021, there were no shares of Series K Preferred stock issued and outstanding.
Warrants and Options
Common Stock Warrants
Stock warrant transactions for the ninethree months ended September 30, 2021:March 31, 2022:
Schedule of Warrant Activity
|
| Number of Warrants |
|
| Weighted Average Exercise Price |
| Number of | Weighted Average | ||||||||
Outstanding at December 31, 2020: |
| 221,041 |
| $ | 3.40 |
| ||||||||||
| Warrants | Exercise Price | |||||||||||||||
| Outstanding at December 31, 2021: | 2,337,274 | $ | 5.30 | |||||||||||||
Granted |
| 5,192,250 |
| 5.50 |
| - | - | |||||||||
Forfeited/canceled |
| 0 |
| - |
| - | - | |||||||||
Exercised |
|
| (3,076,017 | ) |
|
| 5.50 |
| - | - | ||||||
Outstanding at September 30, 2021 |
|
| 2,337,274 |
|
| $ | 5.38 |
| ||||||||
Exercisable at September 30, 2021 |
|
| 2,337,274 |
|
| $ | 5.38 |
| ||||||||
| Warrants outstanding at March 31, 2022 | 2,337,274 | $ | 5.30 | |||||||||||||
| Warrants exercisable at March 31, 2022 | 2,337,274 | $ | 5.30 | |||||||||||||
As of September 30, 2021,March 31, 2022, all issued and outstanding warrants are fully vested, and thehave no intrinsic value as the exercise price of these warrants amounted to $3,180,000.
was greater than the market price.
The following were
Common Stock Options
On February 16, 2021, as partSchedule of the Company’s public offering, the Company issued warrants to investors to purchase up to an aggregate of 5,192,250 shares of common stock. The warrants have an exercise price of $5.50 per share, subject to adjustment in certain circumstances and will expire in five years.Options Activity
| Number of | Weighted Average | |||||||
| Options | Exercise Price | |||||||
| Options outstanding at December 31, 2021: | 302,500 | $ | 3.05 | |||||
| Granted | - | - | ||||||
| Forfeited/canceled | - | - | ||||||
| Exercised | - | - | ||||||
| Options outstanding at March 31, 2022 | 302,500 | $ | 3.05 | |||||
| Options exercisable at March 31, 2022 | 111,215 | $ | 3.05 | |||||
| 14 |
During the nine months ended September 30, 2021, the Company issued 3,076,017 shares of common stock upon exercise of warrants which also resulted cash proceeds of $16,433,000.
Note 9 – Related Party
During the period ended September 30, 2021, the Company recorded consulting expense of $350,000 for services rendered by a consultant who is also an owner of approximately 10% of the Company’s issued and outstanding common stock. In addition, the Company also issued a note payable to this consultant of $525,000 in exchange for the cancellation of unpaid consulting fees of $525,000 that was recorded as part of accrued expenses at DecemberAt March 31, 2020. There was no similar consulting expense incurred during the period ended September 30, 2020.
Note 10 – Equity Compensation to Officers and Board of Directors
As part of employment agreements with its former CEO and its CFO, these officers2022, there were to receive a fully vested stock grants equal to aggregate of 10% and 1.5% of the fully diluted shares of common stock of the Company (calculated with the inclusion of the current stock holdings of Mr. Cataldo) upon conversion of unvested options warrants and Convertible Notes in association with a national markets qualified financing as consideration for entering into the Agreement (with such stock to vest and be delivered within 30 days after the national markets qualified financing). In addition, the Company also granted similar equity compensation to members of the Company’s Board of Directors wherein these directors were to receive stock grants equal to 1% and 1.25%, as applicable, of the fully diluted shares of common stock of the Company, of which, 1/3rd was vested when issued following the qualified financing , and of which 1/3rd will vest on each of the first and second anniversaries of thegrant date on which the director was elected to the Company’s Board of Directors.
On February 16, 2021, the Company completed its equity offering and listed its shares of common stock on the Nasdaq Capital Markets (see Note 7). As a result of this offering, 3,197,662 shares of fully vested common stock with a fair value of $11,701,000 were granted and issued to these officers. In addition, the Company also granted 1,181,745 shares of common stock to members of the Company’s Board of Directors with a fair value of $6,920,000, of$511,115 which 393,915 shares of common stock are fully vested upon grant while the remaining 787,830 shares of common stock will vest over two years. During the period ended September 30, 2021, the Companybe recognized as stock compensation expense of $3,748,000 to account forin future periods based upon the 640,112 shares of common stock granted to the Board of Directors that vested.
Pursuant to current accounting guidelines, as the grant of the common stock is subject to milestone or performance condition, the Company measured the fair value of the common stock on the respective date of the agreement, and then such award was recorded as compensation expense as the milestone or performance condition is met and in accordance with itsremaining vesting term of the grant.applicable grants.
As of September 30, 2021, there are 541,633 unvested shares of common stock with a fairThere was intrinsic value of $3,172,000 that will be recognizedthe outstanding options as compensation in future periods.of March 31, 2022 as the exercise price of these options was greater than the market price.
Note 118 – Commitments and Contingencies
1. Litigation
We areThe Company is involved in certain legal proceedings that arise from time to time in the ordinary course of our business. Except for income tax contingencies, we record accruals for contingencies to the extent that our management concludes that the occurrence is probable and that the related amounts of loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. There is no current or pending litigation of any significance with the exception of the matters that have arisen under, and are being handled in, the normal course of business.
a. 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, an individual (“Lion”), and by Daniel Vallera, an individual (“Vallera”). Lion and Vallera are referred to jointly as the “Plaintiffs”.“Plaintiffs.” The complaint was filed against GT Biopharma, Inc. and its subsidiary Oxis Biotech, Inc. (either of them or jointly, the “Company”). The Plaintiffs allegealleged breach of a license agreement between the Plaintiffs and the Company entered into on or about September 3, 2015. Lion alleges breach of a consulting agreement between Lion and the Company entered into on or about September 1, 2015. Vallera alleges breach of a consulting agreement between Vallera and the Company entered into in or around October, 2018. The Complaint seeks actual damages of $1,670,000, for the fair market valueA settlement of the number of shares of GT Biopharma, Inc. that at the time of judgment represent 882,353 shares of such stock as of September 1, 2015, and that GT Biopharma, Inc. issue Lion the number of common shares of GT Biopharma, Inc. that at the time of judgment represent 882,353 such shares as of September 1, 2015.The Company filed an answer to the complaint denying many allegations and asserting affirmative defenses. Discovery has commenced and trial is scheduled for May, 2022. The Company believes the case is without merit and will defend it vigorously.
b. On March 3, 2021 a complaint was filed by Sheffield Properties in the superior Court of California. County of Ventura. The litigation arose from a commercial lease entered into by GT Biopharma for office space in Westlake Village. In July, 2021 we entered into settlement agreement with Sheffield Propertiesreached on February 7, 2022 in the amount of $100,000.$425,000. This amount was fully accrued at December 31, 2021. The settlement amount was subsequently paid on March 4, 2022.
2. Significant Agreements
Research and Development Agreement:Agreements
We areThe Company is a party to a scientific research agreement with the Regents of the University of Minnesota, effective June 16, 2021. This scientific research agreement aims to work with the Company with three major goals in mind: (1) support the Company’s TriKE® product development and GMP manufacturing efforts; (2) TriKE® pharmacokinetics optimization in humans; and (3) investigation of the patient’s native NK cell population based on insights obtained from the analysis of the human data generated during our GTB-3550 clinical trial. The major deliverables proposed here are: (1) creation of IND enabling data for TriKE® constructs in support of our product development and GMP manufacturing efforts; (2) TriKE® platform drug delivery changes to allow transition to alternative drug delivery means and extended PK in humans; and (3) gain an increased understanding of changes in the patient’s native NK cell population as a result of TriKE® therapy. Most studies will use TriKE® DNA/amino acid sequences created by us under current UMN/GTB licensing terms. The term of this agreement shall expire on June 30, 2023.
The University of Minnesota shall use reasonable efforts to complete the project for a fixed sum of $2.1 million. The Company recorded expense of $1.1 million through March 31, 2022.
On October 5, 2020, GT Biopharma entered into a Master Services Agreement with a third-party product manufacturer to perform biologic development and manufacturing services on behalf of the Company. Associated with this, the Company has subsequently signed five Statements of Work for the research and development of products for use in clinical trials. At March 31 2022, the Company’s commitments in relation to these Statements of Work and any related Change Orders totaled approximately $13.0 million, of which $8.4 million was incurred at that date and an additional $4.6 million is in process during fiscal year 2022.
Patent and License Agreements
2016 Exclusive Patent License Agreement
The Company is party to an exclusive worldwide license agreement with the Regents of the University of Minnesota, (“UofMN”), to further develop and commercialize cancer therapies using TriKE® technology developed by researchers at the universityUofMN to target NK cells to cancer. Under the terms of the 2016 agreement, we receivethe Company receives exclusive rights to conduct research and to develop, make, use, sell, and import TriKE® technology worldwide for the treatment of any disease, state, or condition in humans. We areThe Company is responsible for obtaining all permits, licenses, authorizations, registrations, and regulatory approvals required or granted by any governmental authority anywhere in the world that is responsible for the regulation of products such as the TriKE® technology, including without limitation the FDA in the United States and the European Agency for the Evaluation of Medicinal Products in the European Union. Under the agreement, the UniversityUofMN received an upfront payment of Minnesota will receive$0.2 million, and an annual License Maintenance fee of $0.1 million beginning in 2021. The agreement also includes 4% royalty fees, (not to exceed 6%) under subsequent license agreements or amendments to this agreement or minimum annual royalty payments ranging from $0.25 million to $5.0 million. The agreement also includes certain performance milestone payments totaling $3.1 million, and one-time sales milestone payments of $1.0 million upon reaching $250 million in gross sales, and $5.0 million upon reaching $500 million dollars in cumulative gross sales of Licensed Products.
| 15 |
2021 Patent License Agreement
On March 26, 2021, the Company signed an agreement specific to the B7H3 targeted TriKE®. Under the agreement, the UofMN received an upfront license fee of $20,000 and will receive an annual License Maintenance fee of $5,000 beginning in 2022, 2.5% to 5%royalty fees, ranging from 5% to 6%,or minimum annual royalty payments of $0.25$0.25 million beginning in the year after the first commercial salesales of the licensed productLicensed Product, and $2.0$2.0 million beginning in the 5th fifth year after the first commercial sale of licensed product and every year thereafter throughout the remainder of the term, andsuch Licensed Product. The agreement also includes certain performance milestone payments totaling $3.1 million.$3.1 million-, and one-time sales milestone payments of $1.0 million upon reaching $250 million in gross sales, and $5.0 million upon reaching $500 million dollars in cumulative gross sales of Licensed Products. There is no double payment intended; if one of the milestone payments has been paid under the 2016 agreement no further payment is due for the corresponding milestone above.
During the period ended September 30,Lease Agreements
On November 19, 2021 the Company recorded researchentered into a sublease with Aimmune Therapeutics, Inc. for 4,500 square feet of office space located in Brisbane, California having a commencement date of January 1, 2022 and development expensesmaturing on June 30, 2024. Additionally, on February 8, 2022, the Company entered into a lease of $550,000 pursuanta photocopier, which matures on February 7, 2025.
Rent expense related to this agreement.these leases reflected on the Company’s Condensed Consolidated Statements of Operations totaled $29,000.
Other information related to leases and future minimum lease payments under non-cancellable operating leases were as follows:
Schedule of Other Information Related Leases Under Non-Cancellable
March 31, 2022 (Unaudited) | ||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||
| Operating cash flows from operating leases | $ | 20,000 | ||
| Right-of-use assets obtained in exchange for lease liabilities: | ||||
| Operating leases | $ | 260,000 | ||
| Weighted-average remaining lease term (in years): | ||||
| Operating leases | 2.5 | |||
| Weighted-average discount rate: | ||||
| Operating leases | 10 | % | ||
Future minimum lease payments under non-cancellable operating leases were as follows:
Schedule of Future Minimum Lease Payments
March 31, 2022 (Unaudited) | ||||
| Within one year | $ | 90,000 | ||
| After one year and within two years | 122,000 | |||
| After two years and within three years | 65,000 | |||
| Thereafter | - | |||
| Total future minimum lease payments | $ | 277,000 | ||
| Less – discount | (30,000 | ) | ||
| Lease liability | $ | 247,000 | ||
3. Employee Compensation
The following table summarizes the Company’s future financial commitment to certain employees pursuant to their respective employment agreements:
Year ending |
| Amount |
| |
2021 remaining (remaining 3 months) |
| $ | 527,000 |
|
2022 |
|
| 2,085,000 |
|
2023 |
|
| 2,085,000 | �� |
2024 |
|
| 2,085,000 |
|
2025 and thereafter |
|
| 761,000 |
|
Total |
| $ | 7,543,000 |
|
Note 12- 9 - Subsequent Events
Subsequent to September 30, 2021,On April 29, 2022, the Company issuedentered into a total of 74,094 shares of common stock to noteholders whose notes payable and accrued interest were mandatorily converted to common stock on February 16, 2021 (see Note 4). On November 5, 2021 the Company terminated the employment of Anthony Cataldo assettlement agreement with its former Chief Executive Officer (“Officer”) and Michael Handelman as Chief Financialreceived shares of its common stock in full and final settlement of all its claims against the Officer. On November 8,The common stock certificates were received by the Board appointed Dr. Greg Berk as Interim Chief Executive Officer,Company on May 2, 2022 and Dr. Gavin Choy as Acting Chief Financial Officer. On November 8, 2021, the Board also appointed Michael Breen as Executive Chairman of the Board. Compensation for Dr. Berk shall be an annual salary of $500,000, annual target bonus of up to 50% of salary, and a stock grant of 0.25% of the fully diluted stock as of the date of his appointment. Compensation for Michael Breen shall be an annual salary of $425,000, annual target bonus of up to 75% of salary, and a stock grant of 1% of the fully diluted stock.common shares were subsequently cancelled.
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Dr. Berk previously served as a private consultant in the field of drug development and was the Chief Medical Officer of Celularity, a privately owned company. Previously, he served as Chief Medical Officer at Verastem and as President, Chief Medical Officer and Board Member of Sideris Pharmaceuticals. From May 2012 until January 2014, Dr. Berk was Chief Medical Officer of BIND Therapeutics. Prior to this, he was Chief Medical Officer at Intellikine, a privately held biotechnology company focused on the discovery and development of novel PI3 Kinase and mTOR inhibitors. Intellikine was acquired by Takeda/Millennium in January 2012. He also served as Senior Vice President of Global Clinical Development at Abraxis BioScience, where he was responsible for the company’s overall clinical strategy, including efforts to expand the indications for their lead clinical program (Abraxane®). Dr. Berk obtained his medical degree from Case Western Reserve University, and completed his internship, residency and fellowship in internal medicine, hematology and medical oncology, at the Weill Medical College of Cornell University and New York Presbyterian Hospital, where he also served as a faculty member from 1989-2004. During this time Dr. Berk served as an investigator on several industry-sponsored and cooperative group oncology clinical trials, including the pivotal trials for Gleevec® and Avastin®.
Dr. Choy received his Doctor of Pharmacy from the University of Southern California and completed residency training at the U.S. Department of Veteran Affairs. Dr. Choy also holds a Master of Business Administration focused on Health Care from the University of California, Irvine, Paul Merage School of Business. Dr. Choy has more than 20 years in the pharmaceutical and biotechnology industry with various executive leadership roles, including serving as a Chief Operating Officer at Apollomics, Inc. as well as President, CG Pharmaceuticals, Inc.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this Quarterly Report on Form 10-Q are “forward-looking statements” within the 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 this 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 “Part I. Item 1A: Risk Factors” and “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, 2020.2021. 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,“we,” “us,” ”our,“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-oncology products based off our proprietary Tri- specificTri-specific Killer Engager (TriKE™(TriKE®) fusion protein immune cell engager technology platform. Our TriKE® platform generates proprietary therapeutics designed to harness and enhance the cancer killing abilities of a patient’s own natural killer cells, or NK cells. Once bound to an NK cell, our moieties are designed to enhance the NK cell, and precisely direct it to one or more specifically-targetedspecifically targeted proteins expressed on a specific type of cancer cell or virus infected cell, ultimately resulting in the targeted cell’s death. TriKE® can be designed to target any number of tumor antigens on hematologic malignancies, sarcomas or solid tumors and do not require patient-specific customization.
We are using our TriKE® platform with the intent to bring to market immuno-oncology products that can treat a range of hematologic malignancies, sarcoma and solid tumors. The platform is scalable, and we are putting processes in place to be able to produce IND-ready moieties in a timely manner after a specific TriKE® conceptual design. After conducting market and competitive research, specific moieties can then be advanced into the clinic on our own or through potential collaborations with larger companies. We are also evaluating, in conjunction with our Scientific Advisory Board, additional moieties designed to target different tumor antigens. We believe our TriKE® may have the ability, if approved for marketing, to be used as a monotherapy, augment the current monoclonal antibody therapeutics, be used in conjunction with more traditional cancer therapy and potentially overcome certain limitations of current chimeric antigen receptor, or CAR-T, therapy.
We are also using our TriKE® platform to develop therapeutics useful for the treatment of infectious disease such as for the treatment of patients infected by the human immunodeficiency virus (HIV). While the use of anti-retroviral drugs has substantially improved the health and increased the longevity of individuals infected with HIV, these drugs are designed to suppress virus replication to help modulate progression to AIDS and to limit further transmission of the 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 re-establish an active HIV infection. For a curative therapy, destruction of these latent HIV infected cells must take place. The HIV-TriKE HIV- TriKE® contains the antigen binding fragment (Fab) from a broadly-neutralizingbroadly neutralizing antibody targeting the HIV-Env protein. The HIV-TriKE HIV- TriKE® is designed to target HIV while redirecting NK cell killing specifically to actively replicating HIV infected cells. The HIV-TriKE HIV- TriKE® induced NK cell proliferation, and 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 (ADCC).
Our initial work has been conducted in collaboration with the Masonic Cancer Center at the University of Minnesota under a program led by Dr. Jeffrey Miller, the Deputy Director. Dr. Miller is a recognized leader in the field of NK cell and IL-15 biology and their therapeutic potential. We have exclusive rights to the TriKE® platform and are generating additional intellectual property.
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Recent Developments
On February 16, 2021, we completed a public offering of 4,945,000 shares of common stock for net proceeds of $24,679,000, after deducting underwriting discounts, commissions and other direct offering expenses. As part of the offering, we also granted these investors warrants to purchase 5,192,250 shares of common stock. The warrants are fully vested, exercisable at $5.50 per share and will expire in five years.
As a result of the completion of the public offering and the successful listing of our shares of common stock on the Nasdaq Capital Markets, convertible notes with an aggregate principal amount of $33,272,000 and accrued interest of $5,527,000 mandatorily converted at its stated conversion rate of $3.40 per share into 11,413,322 shares of our common stock (see Note 4 of the Financial Statements).
As part of consulting agreements with certain consultants, we agreed to grant these consultants shares of common stock equal to 1% and 3% of the fully diluted shares of our common stock upon completion of a qualified financing and listing on a national market as consideration for entering into such consulting agreement (with such stock to vest and be delivered within 30 days after the national markets qualified financing).
On February 16, 2021, we completed a qualified equity offering and listing. As a result, we granted these consultants 2,502,518 shares of common stock. During the period ended September 30, 2021, pursuant to the vesting terms of the consulting agreements, we issued 1,992,746 shares of common stock to these consultants and recorded the corresponding stock compensation expense of $7,890,000. In addition, we also issued 150,000 shares of common stock with a fair value of $1,213,000 to other consultants for services rendered.
On February 16, 2021, as a result of the completion of the public offering and the successful listing of our shares of common stock on the Nasdaq Capital Markets, 2,353,548 shares of Series J-1 Preferred Stock mandatorily converted at a conversion rate of $3.40 per share into 692,220 shares of our common stock. (See Note 7 of our Financial Statements)
On February 16, 2021, as part of our public offering of common stock and warrants, we issued warrants to investors to purchase up to an aggregate of 5,192,250 shares of common stock. The warrants have an exercise price of $5.50 per share, subject to adjustment in certain circumstances and will expire in five years. (See Note 7 of our Financial Statements)
As part of employment agreements with our CEO and CFO, these officers were to receive a fully vested stock grant of shares of common stock equal to aggregate of 10% and 1.5% of the fully diluted shares of our common stock (calculated with the inclusion of the current stock holdings of Mr. Cataldo, our CEO, and Mr. Handelman, our CFO) upon conversion of options, warrants and convertible notes in association with a national markets qualified financing as consideration for entering into the Agreement (with such stock to vest and be delivered within 30 days after the national markets qualified financing). In addition, we also granted similar equity compensation to members of our Board of Directors wherein these directors were to receive stock grant equal to 1% and 1.25% of the fully diluted shares of our common stock. Pursuant to these agreements, the common stock to be issued will vest over a period of two years. On February 16, 2021, we completed a qualified equity offering and listing. As a result, we granted these employees 4,379,407 shares of common stock.
On April 23, 2021, our Compensation Committee approved amendments to the compensation terms of Anthony Cataldo, the Chief Executive Officer and Michael Handelman, the Chief Financial Officer to increase their base salary and bonus compensation. (See Part II, Item 5 of this report)
On April 23, 2021, Dr. Gregory Berk resigned as a director and accepted employment as our Chief Medical Officer. In connection with his appointment as Chief Medical Officer, the Compensation Committee approved a four-year employment agreement for Dr. Berk.
On August 23, 2021, Dr. Gregory Berk was promoted to the position of President of Research & Development and Chief Medical Officer. Dr. Berk assume additional responsibilities including discovery, non-clinical development, clinical development and manufacturing.
Issuance of Common Stock in public offering
On February 16, 2021, the Company completed a public offering of 4,945,000 shares of common stock for net proceeds of $24,679,000, after deducting underwriting discounts, commissions and other direct offering expenses. As part of the offering, the Company also granted these investors, warrants to purchase 5,192,250 shares of common stock. The warrants are fully vested, exercisable at $5.50 per share and will expire in five years.
As a result of the completion of the public offering and the listing of its shares of common stock on the Nasdaq Capital Markets, convertible notes payable and accrued interest with an aggregate amount of $38,799,000 were mandatorily converted at its stated conversion rate of $3.40 per share into 11,413,322 shares of the Company’s common stock (see Note 4).
Issuance of Common Stock for services - consultants
As part of consulting agreements with certain consultants, the Company agreed to grant these consultants common stock equal to 1% and 3% of the fully diluted shares of common stock of the Company upon conversion of options, warrants and Convertible Notes in association with a national markets qualified financing as consideration for entering into the Agreement (with such stock to vest and be delivered within 30 days after the national markets qualified financing).
On February 16, 2021, the Company completed its equity offering and listed its shares of common stock on the Nasdaq Capital Markets. As such, 2,502,518 shares of common stock were granted to these consultants with a fair value of $9,679,000, of which, 1,829,620 shares of common stock are fully vested while the remaining 672,898 shares of common stock will vest over two years. Pursuant to current accounting guidelines, as the grant of the common stock is subject to milestone or performance conditions, the Company measured the fair value of the common stock on the respective date of the agreement, and then such award was recorded as compensation expense as the milestone or performance condition was met and in accordance with its vesting term of the grant.
During the period ended September 30, 2021, pursuant to the vesting terms of the agreements, the Company issued 1,992,746 shares of common stock to these consultants. In addition, the Company also issued 150,000 shares of fully vested common stock with a fair value of $1,213,000 to other consultants for service rendered. As a result, the Company issued a total of 2,142,746 shares of common stock and recognized stock compensation expense of $9,105,000 to account the fair value of common stock that vested.
As of September 30, 2021, the unvested and unissued common stock totaled 509,772 shares of common stock with an estimated fair value of $1,789,000 that will be recognized as stock compensation in future periods based upon the remaining vesting term of the grant.
Issuance of Common Stock for research and development agreement
During the nine months ended September 30, 2021, the Company issued 189,753 shares of common stock for a research and development agreement valued at $1,355,000. The common shares were valued on the market price at the date of grant.
Issuance of Common Stock upon exercise of warrants
During the nine months ended September 30, 2021, the Company issued 3,073,818 shares of common stock upon the exercise of warrants resulting in cash proceeds of $16,433,000.
Results of Operations
Comparison of the Three Months Ended September 30,March 31, 2022 and 2021 and 2020
Researchand Development Expenses
During the three months ended September 30,March 31, 2022 and 2021, and 2020, we incurred $1,008,000$2.1 million and $(84,000)$1.6 million of research and development expenses, an increase of $1,092,000.$500,000. Research and development costs increased due primarily to the admittance of additional patients into the phase one/two clinical trial. We anticipate our research and development costs to increase in the remainder of 2021 due to the continued developmentaddition of our most advanced TriKe product candidate, OXS-3650 and other research and development.employees.
Selling, general and administrative expenses
During the three months ended September,March 31, 2022 and 2021, and 2020, we incurred $4,946,000$3.4 million and $2,029,000$27.4 million of selling, general and administrative expenses. The increase of $2,917,000decrease in selling, general and administrative expenses is primarily attributable to a decrease in stock-based compensation to consultants, officers and directors.
Interest Income
Interest income was $8,000 and $0 for the three months ended March 31, 2022 and 2021 respectively. The increase in stock-based compensation. Ininterest income is due to the interest earned in the three months ended March 31, 2022 as compared to the same comparable period in 2021.
Interest Expense
Interest expense was $0 and $696,000 for the three months ended March 31, 2022 and 2021 respectively. The decrease in interest expense is due to the conversion of notes payable to common shares during 2021. The Company did not have any outstanding notes payable as of and during the period ended September 30, 2021 we incurred $902,000 of stock-based compensation, we incurred $147,000 in stock-based compensation expense during 2020. In addition, with the addition of new personnel to support our planned growth and new public company compliance initiatives in fiscal year 2021 we have incurred an increase in expenses that consist primarily of personnel costs from our executive, legal, finance, human resources and information technology organizations and related expenditures, as well as third party professional fees and insurance.March 31, 2022.
Change in fair value of derivative liability
ChangeThe change in fair value of derivative liability due to remeasurement was incomea gain of $502,000$18,000 for the three months ended September 30, 2021 and we had no suchMarch 31, 2022 as compared to a $21,000 gain or loss for the same period in 2020.three months ending March 31, 2021.
Interest ExpenseUnrealized loss on marketable securities
Interest expenseThe unrealized loss on marketable securities was $0$24,000 and $931,000$0 for the three months ended September 30,March 31, 2022 and 2021 and 2020 respectively. The decrease is primarily due to the decrease in the amount of outstanding convertible notes, as these convertible notes were converted on February 16, 2021.
Comparison of the Nine Months Ended September 30, 2021 and 2020
Researchand Development Expenses
During the nine months ended September 30, 2021 and 2020, we incurred $3,287,000 and $252,000 research and development expenses, an increase of $3,035,000. Research and development costs increased due primarily to the issuance of 190,000 shares of common stock as payment of a fee valued at $1,943,000 and the admittance of additional patients into the phase one/two clinical trial. We anticipate our research and development costs to increase in the remainder of 2021 due to the continued development of our most advanced TriKe product candidate, OXS-3650 and other research and development.
Selling, general and administrative expenses
During the nine months ended September 30, 2021 and 2020, we incurred $36,050,000 and $4,321,000 of selling, general and administrative expenses. The increase of $31,729,000 in selling, general and administrative expenses is primarily attributable the increase in stock-based compensation. In the period ended September 30, 2021 we incurred $24,553,000 of stock-based compensation. We incurred no such expenses during 2020. In addition, with the addition of new personnel to support our planned growth and new public company compliance initiatives in fiscal year 2021 we have incurred an increase in expenses that consist primarily of personnel costs from our executive, legal, finance, human resources and information technology organizations and related expenditures, as well as third party professional fees and insurance.
Change in fair value of derivative liability
Change in fair value of derivative liability was income of $43,000 for the nine months ended September 30, 2021 and we had no such gain or loss for the same period in 2020.
Settlementexpense
Settlement expense was an expense of $11,206,000 for the nine months ended September 30, 2020 and we had no such gain or loss for the same period in 2021.
Interest Expense
Interest expense was $696,000 and $6,227,000 for the nine months ended September 30, 2021 and 2020 respectively. The decrease is primarily due to the decrease in the amount of outstanding convertible notes, as the entire balances of convertible notes were converted on February 16, 2021.
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.studies. 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 nine months ended September 30, 2021, the Company raised the net amount of $24.7 million through issuance of common stock, raised $16.4 million through the exercise of warrants and raised $1.2 million from a series of issuances of convertible notes as compared to a total of $5.7 million raised through issuance of convertible notes payable during the same period in 2020. We anticipate that cash utilized in the twelve months following this filing date for selling, general and administrative expenses will range between $2$5 and $3$6 million in the coming quarters, whileand research and development expenses will vary depending on clinical activities.range between $14 and $16 million.
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 lossesreported cash and has cash equivalents of $7.3 million, and short-term investments of $35.7$19.5 million as of September 30, 2021. The Company anticipates incurring additional losses until such time, if ever,March 31, 2022. Management believes 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 has sufficient cash and cash equivalents, and short-term investments to fundfunds its operations and to commercially develop its product candidates. These factors raise substantial doubt aboutfor more than twelve months from the Company’s ability to continue as a going concern.date of this filing.
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, partners, and licensing and/or marketing arrangements with pharmaceutical companies. 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 nine 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.
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Basis of Presentation and Principles of Consolidation
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. TheThese condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Oxis Biotech, Inc. and Georgetown Translational Pharmaceuticals, Inc. Intercompany transactions and balances have been eliminated in consolidation.
Reverse Stock Split
On February 10, 2021, the Company completed a 1:17 reverse stock split of the Company’s issued and outstanding shares of common stock and all fractional shares were rounded up. All share and per share amounts in the accompanying financial statements have been adjusted retroactively to reflect the reverse stock split as if it had occurred at the beginning of the earliest period presented.
Accounting
Accounting Estimates
The preparation of financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include accruals for potential liabilities, valuation of notes payable, assumptions used in deriving the fair value of derivative liabilities, share-based compensation and beneficial conversion featurevaluation of notes payable,equity instruments issued for services, and valuation of deferred tax assets. Actual results could differ from those estimates.
Stock-Based
Stock-Based Compensation
The Company accounts for share-based awards to employees, and nonemployees and consultants in accordance with the provisions of ASC 718, Compensation-Stock Compensation. Stock-based compensation cost is measured at fair value on the grant date and that fair value is recognized as expense over the requisite service, or vesting, period.
The Company values its equity awards using the Black-Scholes option pricing model, and accounts for forfeitures when they occur. Use of the Black-Scholes option pricing model requires the input of subjective assumptions including expected volatility, expected term, and a risk-free interest rate. The Company estimates volatility using as its own historical stock price volatility. The expected term of the instrument is estimated by using the simplified method to estimate expected term. The risk-free interest rate is estimated using comparable published federal funds rates.Inflation
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 September 30, 2021.March 31, 2022.
Item 3. Quantitative 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 byfor this Item.Item
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our principal executive officerPrincipal Executive Officer, Principal Financial Officer and principal financial officerPrincipal Accounting 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 (the “Exchange Act”))amended), as of September 30, 2021.March 31, 2022. Based on that evaluation, we have concluded that our disclosure controls and procedures were not effective as of September 30, 2021March 31, 2022 as a result of material weaknesses in internal control over financial reporting due to (i) inadequate segregation of duties, (ii) risks of executive override and (iii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements 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, 2020.2021.
The Company is taking steps, and intendshas begun to take additional steps,measures to mitigate the issues identified and implement a functional system of internal controlcontrols over financial reporting. Specifically, the Company has hired an experienced Chief Financial Officer, and engaged a forensic accountant to review the Company’s bank records, transactions with affiliates and/or related parties, expense reimbursement practices and vendor payment practices. The forensic accountant’s review is currently ongoing. In addition, the Company’s board of directors previously designated a Special Committee in August 2021 charged with, among other duties, evaluating the current compliance, compensation, operations and personnel of the Company, and determining actions appropriate to address any deficiencies or inefficiencies identified through such evaluation. Such measures have included and/or will include, but not be limited to:to, hiring of additional employees in ourthe Company’s finance and accounting 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.activities, with additional oversight by the Company’s board of directors.
Changes in Internal Control over Financial Reporting
Except 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.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
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, an individual (“Lion”), and by Daniel Vallera, an individual (“Vallera”). Lion and Vallera are referred to jointly as the “Plaintiffs”. Plaintiffs“Plaintiffs.” The complaint was filed a Second Amended Complaint on December 21, 2020. The Second Amended Complaint alleges causes of action against GT Biopharma, Inc. and its subsidiary Oxis Biotech, Inc. (either of them or jointly, the “Company”). The Plaintiffs allegealleged breach of a license agreement between the Plaintiffs and the Company entered into on or about September 3, 2015. Lion alleges breach of a consulting agreement between Lion and the Company entered into on or about September 1, 2015. Plaintiffs seek actual damages of $400,000 for breachA settlement of the license agreement, and Lion seekscase was reached on February 7, 2022 in the fair market valueamount of the number of shares of GT Biopharma, Inc. that$425,000. This amount was fully accrued at the time of judgment represent 15,000,000 shares of such stock as of September 1, 2015.December 31, 2021. The Company filed an answer to the complaint denying many allegations and asserting affirmative defenses. Discovery has commenced, and trial is scheduled for May 2,settlement amount was subsequently paid on March 4, 2022.
Item 5. Other Information.
On April 23, 2021, the Compensation Committee of the Board (the “Compensation Committee”) approved an amendment of the compensation terms of Anthony Cataldo, the Chief Executive Officer, increasing his annual base salary to $500,000 and setting his target bonus at 50% of his annual base salary. Subsequent to such approval the Company entered into an Amended and Restated Employment Agreement with Mr. Cataldo memorializing the increase in his base salary and setting his target bonus, and implementing additional clarifications and revisions to Mr. Cataldo’s Employment Agreement. The Compensation Committee continues to review the Amended and Restated Employment Agreement, Mr. Cataldo’s compensation arrangements and related issues, and will make a final determination regarding the contents of such agreement following additional deliberations.
On April 23, 2021, the Compensation Committee also approved an amendment of the compensation terms of Michael Handelman, the Chief Financial Officer, increasing his annual base salary to $375,000 and setting his target bonus at 40% of his annual base salary. Subsequent to such approval the Company entered into an Amended and Restated Employment Agreement with Mr. Handelman memorializing the increase in his base salary and setting his target bonus, and implementing additional clarifications and revisions to Mr. Handelman’s Employment Agreement. The Compensation Committee continues to review the Amended and Restated Employment Agreement, Mr. Handelman’s compensation arrangements and related issues, and will make a final determination regarding the contents of such agreement following additional deliberations.
Item 6. Exhibits
* | This certification shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, 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 or the Exchange Act. |
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SIGNATURES
Pursuant to the requirements 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.
GT Biopharma, Inc. | ||||
| Dated: May 16, 2022 | By: | /s/ Manu Ohri | ||
Manu Ohri | ||||
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