UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM ~~10-Q/A~~10-Q

~~(Amendment No. 1)~~

☒	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

~~☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934~~

For the quarterly period ended ~~June~~September 30, ~~2021.~~2022.

☐	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

~~☐ Transition report pursuant to Section 13 or 15(d) of~~~~the Securities Exchange Act of 1934~~

For the transition period from ~~_____~~__________ to ~~_____.~~____________.

Commission File Number 001-40023

GT BIOPHARMA, INC.

(Exact name of registrant as specified in its charter)

~~GT BIOPHARMA, INC.~~Delaware		94-1620407
~~(Exact name of registrant as specified in its charter)~~

~~Delaware~~

~~94-1620407~~

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

~~9350 Wilshire Blvd. Suite 203~~

~~Beverly Hills, CA 90212~~

~~(Address of principal executive offices and zip code)~~

~~(800) 304-9888~~

~~(Registrant’s telephone number, including area code)~~

~~N/A~~8000 Marina Blvd, Suite 100
Brisbane, CA94005
(Address of principal executive offices and zip code)

~~(Former name, former address and former fiscal year, if changed since last report)~~

415-919-4040

(Registrant’s telephone number, including area code)

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 August 15, 2021,~~October 31, 2022, the issuer had ~~30,482,193~~32,557,720 shares of common stock outstanding.

~~EXPLANATORY NOTE~~

We are filing this Amendment 1 to the Quarterly Report on 10Q for the Quarter Ended June 30, 2021 of GT Biopharma, Inc. (“the Original Form 10Q”), as filed with the Securities and Exchange Commission on August 23, 2021 to properly reflect the prior comparative period restatements that have previously been reported. The Original Form 10Q, as amended, reads in its entirety as set forth below.

~~Table of Contents~~

GT Biopharma, Inc. and Subsidiaries

~~FORM 10-Q~~

~~For the~~ ~~Quarter Ended June 30, 2021~~

Table of Contents

		Page
PART I – FINANCIAL INFORMATION			~~Page~~
Item 1.	Financial Statements
~~Item 1.~~	~~Financial Statements~~		4
	Condensed Consolidated Balance Sheets as of ~~June~~September 30, ~~2021 (unaudited)~~2022 (Unaudited) and December 31, ~~2020~~2021			4	3
	Condensed Consolidated Statements of Operations for the three months and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 ~~and 2020 (unaudited)~~(Unaudited)			5	4
	Condensed Consolidated Statements of Stockholders’ Equity ~~(Deficit) (unaudited)~~for the three months and nine months ended September 30, 2022 and 2021 (Unaudited)			6	5
	Condensed Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 ~~and 2020 (unaudited)~~(Unaudited)			7
	Condensed Notes to Consolidated Financial Statements (Unaudited)			8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			21	18
Item 3.	Quantitative and Qualitative Disclosures About Market ~~Risk~~Risks			26	20
Item 4.	Controls and Procedures			26	20

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings			27	21
Item ~~1A.~~ 6.	~~Risk Factors~~Exhibits			27	21
~~Item 2.~~	~~Unregistered Sales of Securities and Use of Proceeds~~			27
~~Item 5.~~		~~Other Information~~			27
~~Item 6.~~	~~Exhibits~~			28
SIGNATURES				29	22

~~Table of Contents~~

~~PART I. FINANCIAL INFORMATION~~

~~Item 1. Financial Statements~~

GT BIOPHARMA, INC AND SUBSIDIARIES
Condensed Consolidated Balance Sheets

June 30,

December 31,

2021

2020

ASSETS:

(unaudited)

Current assets

Cash and cash equivalents

$ 39,505,000

$ 5,297,000

Prepaid expenses

62,000

364,000

Total Current Assets

$ 39,567,000

$ 5,661,000

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities

Accounts payable

$ 1,497,000

$ 2,243,000

Accrued expenses

906,000

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

842,000

383,000

Total current liabilities

3,276,000

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 June 30, 2021 and December 31, 2020, respectively

1,000

1,000

Series J-1 - 0 and 2,353,548 shares issued and outstanding at June 30, 2021 and December 31, 2020 , respectively

0

2,000

Series K- none issued and outstanding at June 30, 2021 and December 31, 2020 , respectively

0

0

Common stock, par value $0.001, 2,000,000,000 shares authorized, 28,144,077 and 5,218,122 shares issued and outstanding as of June 30, 2021 and December 31, 2020 , respectively

28,000

5,000

Common stock issuable, 3,152,000 shares at June 30, 2021

10,716,000

0

Additional paid in capital

655,655,000

566,356,000

Accumulated deficit

(629,940,000 )

(595,628,000 )
Non Controlling Interest

(169,000 )

(169,000 )
Total stockholders' equity (deficit)

36,291,000

(29,433,000 )

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

$ 39,567,000

$ 5,661,000

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

~~Table of Contents~~

GT BIOPHARMA, INC AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)

For the Three Months ended

For the Six Months ended

June 30,

June 30,

2021

2020

2021

2020

(unaudited)

(unaudited)
(as restated)

(unaudited)

(unaudited)
(as restated)

Revenues

$ 0

$ 0

$ 0

$ 0

Operating Expenses:

Research and development

639,000

12,000

2,279,000

336,000

Selling, general and administrative (including $577,000 and $14,873,000 of stock compensation to officers and directors in 2021 during the three and six months ended June 30, 2021)

3,742,000

1,546,000

31,104,000

2,292,000

Loss from Operations

4,381,000

1,558,000

33,383,000

2,628,000

Other Expense

Change in fair value of derivative liability

480,000

0

459,000

0

Settlement expense

0

11,206,000

0

11,206,000

Interest expense

0

4,658,000

696,000

5,296,000

Total Other Expense, net

480,000

15,864,000

1,155,000

16,502,000

Net Loss

$ (4,861,000 )

$ (17,422,000 )

$ (34,538,000 )

$ (19,130,000 )

Net loss per share

Basic and diluted

$ (0.15 )

$
(4.12
)

$ (1.39 )

$ (4.58 )

Weighted average common shares outstanding

Basic and diluted

33,516,428

4,229,408

24,925,908

4,175,211

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

~~Table of Contents~~

GT BIOPHARMA, INC AND SUBSIDIARIES

~~Condensed Consolidated Statements~~CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except shares and par value)

September 30 December 31,
2022 2021
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 2,465 $ 8,968
Short-term investments 18,319 23,011
Prepaid expenses and other current assets 88 190
Total Current Assets 20,872 32,169

Operating lease right-of-use asset 190 -
Deposits 9 -
TOTAL ASSETS $ 21,071 $ 32,169

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable $ 3,325 $ 8,220
Accrued expenses 1,537 1,901
Current operating lease liability 106 -
Derivative liability 57 138
Total Current Liabilities 5,025 10,259

Non-current operating lease liability 92 -
Total Liabilities 5,117 10,259

Stockholders’ Equity
Convertible Preferred stock, par value $0.01, 15,000,000 shares authorized
Series C - 96,230 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively 1 1
Common stock, par value $0.001, 250,000,000 shares authorized, 32,507,618 shares and 32,061,989 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

33

32

Common stock issuable zero shares and 327,298 shares at September 30, 2022 and December 31, 2021, respectively - 1,113
Additional paid in capital 684,804 674,348
Accumulated deficit (668,884 ) (653,584 )
Total Stockholders’ Equity 15,954 21,910
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 21,071 $ 32,169

The accompanying notes are an integral part of ~~Stockholders' Equity (Deficit) (unaudited)~~these unaudited condensed consolidated financial statements.

GT BIOPHARMA, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

For the three months ended For the nine months ended
September 30, September 30,
2022 2021 2022 2021
(unaudited) (unaudited) (unaudited) (unaudited)

Revenues $ - $ - $ - $ -

Operating Expenses
Research and development (includes $201 and $0 of expense from stock compensation to officers, employees and directors vesting during the three months ended September 30, 2022 and 2021, and $327 and $0 for the nine months ended September 30, 2022 and 2021, respectively)
2,743
1,008 5,969 3,287
Selling, general and administrative (includes $2,743 and $577 of expense from stock compensation granted to officers, employees and directors during the three months ended September 30, 2022 and 2021, and $3,527 and $15,450 for the nine months ended September 30, 2022 and 2021, respectively) 4,280 4,946 9,510 36,050
��
Loss from Operations 7,023 5,954 15,479 39,337

Other (Income) Expense
Interest income (107 ) (32 ) (151 ) (32 )
Interest expense - - - 696
Change in fair value of derivative liability (58 ) (502 ) (81 ) (43 )
Unrealized loss on marketable securities 23 33 53 33
Total Other (Income) Expense (142 ) (501 ) (179 ) 654

Net Loss $ (6,881 ) $ (5,453 ) $ (15,300 ) $ (39,991 )

Net loss per share – basic and diluted $ (0.22 ) $ (0.17 ) $ (0.48 ) $ (1.54 )

Weighted average common shares outstanding – basic and diluted 31,380,634 31,381,282 31,723,792 25,945,827
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
GT BIOPHARMA, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
For ~~the six months ended June~~The Three Months Ended September 30, 2022 (Unaudited)
Shares Amount Shares Amount Shares Amount Capital Deficit Total
Preferred Shares Common Shares Common Shares Issuable Additional Paid in Accumulated
Shares Amount Shares Amount Shares Amount Capital Deficit Total

Balance, June 30, 2022 96 $ 1 30,694 $ 31 - $ - $ 677,411 $ (662,003 ) $ 15,440

Equity compensation to officers, employees, and board of directors - - 456
1
-
-
2,943 - 2,944

Equity compensation to consultants - - 135 - - - 1,200 - 1,200

Issuance of common shares in settlement of vendor payable - - 1,222 1 - - 3,250 - 3,251

Net loss - - - - - - - (6,881 ) (6,881 )

Balance, September 30, 2022 96 $ 1 32,507 $ 33 - $ - $ 684,804 $ (668,884 ) $ 15,954
For The Nine Months Ended September 30, 2022 (Unaudited)
Preferred Shares Common Shares Common Shares Issuable Additional Paid Accumulated
Shares Amount Shares Amount Shares Amount in 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 previously issued for services - - (291 ) - - - - - -

Cancellation of common stock previously issued to prior CEO - - (1,845 ) (1 ) - - (222 ) - (223 )

Common stock issued upon conversion of notes payable - - 327
-
(327 ) (1,113 ) 1,113 - -

Equity compensation to officers, employees, and board of directors - - 620 1 - - 3,853 - 3,854

Equity compensation to consultants - - 412 - - - 2,462 - 2,462

Issuance of common shares in settlement of vendor payable - - 1,222 1 - - 3,250 - 3,251

Net loss - - - - - - - (15,300 ) (15,300 )

Balance, September 30, 2022 96 $ 1 32,507 $ 33 - $ - $ 684,804 $ (668,884 ) $ 15,954
5

For The Three Months Ended September 30, 2021 ~~and 2020~~(Unaudited)

Preferred Shares

Common Shares

Common Shares Issuable

Additional
Paid in

Accumulated

Non
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 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

8,261,809

8,000

3,152,000

10,716,000

28,075,000

0

0

38,799,000

Common shares issued upon exercise of warrants

-

0

3,047,818

3,000

-

0

16,293,000

0

0

16,296,000

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

2,050,060

2,000

-

0

8,777,000

0

0

8,779,000

-

Equity compensation to officers and board of directors

-

0

3,739,295

4,000

-

0

14,869,000

0

0

14,873,000

-

Net loss

(34,538,000 )

(34,538,000 )

Balance, June 30, 2021

96,230

$ 1,000

28,144,077

$ 28,000

3,152,000

$ 10,716,000

$ 655,655,000

$ (629,940,000 )

$ (169,000 )

$ 36,291,000

Balance, March 31, 2021

96,230

$ 1,000

20,517,431

$ 21,000

7,634,000

$ 25,956,000.00

$ 623,287,000

$ (625,079,000 )

$ (169,000 )

$ 24,017,000

Common shares issued upon conversion of notes payable

-

0

4,482,487

4,000

(4,482,000 )

(15,240,000 )

15,232,000

0

0

(4,000 )

Common shares issued upon exercise of warrants

-

0

2,953,394

3,000

-

0

16,232,000

0

0

16,235,000

Issuance of common stock for services

-

0

92,286

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

(4,861,000 )

(4,861,000 )

Balance, June 30, 2021

96,230

$ 1,000

28,144,077

$ 28,000

3,152,000

$ 10,716,000

$ 655,655,000

$ (629,940,000 )

$ (169,000 )

$ 36,291,000

Balance, December 31, 2019

2,449,778

$ 3,000

4,104,982

$ 4,000

-

$ 0

$ 548,184,000

$ (567,332,000 )

$ (169,000 )

$ (19,310,000 )

Beneficial conversion feature of convertible notes

-

0

62,647

0

-

0

213,000

0

0

213,000

Issuance of common stock for settlement of litigation

-

0

205,882

0

-

0

29,000

$ 0

0

29,000

Common shares issued upon conversion of notes payable

-

0

63,882

0

0

-

1,910,000

0

0

1,910,000

Equity compensation

-

0

-

0

-

0

146,000

0

0

146,000

Fair value of amended convertible notes and warrants

-

-

-

-

-

-

8,643,000

-

-

8,643,000

Net loss

-

0

-

0

-

0

(19,130,000 )

0

(19,130,000 )

Balance, June 30, 2020

2,449,778

$ 3,000

4,437,394

$ 4,000

-

$ 0

$ 559,125,000

$ (586,462,000 )

$ (169,000 )

$ (27,499,000 )

Balance, March 31, 2020

2,449,778

$ 3,000

4,152,908

$ 4,000

-

$ 0

$ 548,347,000

$ (569,040,000 )

$ (169,000 )

$ (20,855,000 )

Beneficial conversion feature of convertible notes

-

0

62,647

0

-

0

213,000

0

0

213,000

Issuance of common stock for settlement of litigation

-

0

205,882

0

-

0

29,000

0

0

29,000

Common shares issued upon conversion of notes payable

-

0

15,957

0

-

0

1,747,000

0

0

1,747,000

Equity compensation

-

0

-

0

-

0

146,000

0

0

146,000

Fair value of amended convertible notes and warrants

-

-

-

-

-

-

8,643,000

-

-

8,643,000

Net loss

-

0

-

0

-

0

(17,422,000 )

0

(17,422,000 )

Balance, June 30, 2020

2,449,778

$ 3,000

4,437,394

$ 4,000

-

$ 0

$ 559,125,000

$ (586,462,000 )

$ (169,000 )

$ (27,499,000 )

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

		Preferred Shares				Common Shares				Common Shares Issuable						Additional Paid in		Accumulated
		Shares		Amount		Shares		Amount		Shares			Amount			Capital		Deficit			Total

Balance, June 30, 2021			96	$	1		28,144	$	28		3,152		$	10,716		$	655,655	$	(630,109	)	$	36,291

Common shares issued upon mandatory conversion of notes payable and accrued interest			-		-		2,147		2		(2,148	)		(7,300	)		7,294		-			(4	)

Common shares issued upon exercise of warrants	��		-		-		26		-		-			-			138		-			138

Issuance of common stock for services			-		-		93		-		-			-			327		-			327

Equity compensation to officers and board of directors			-		-		98		-		-			-			577		-			577

Net loss			-		-		-		-		-			-			-		(5,453	)		(5,453	)

Balance, September 30, 2021			96	$	1		30,508	$	30		1,004		$	3,416		$	663,991	$	(635,562	)	$	31,876

For The Nine Months Ended September 30, 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		-			-			10,409		10		1,004		3,416		35,373			-			38,799

Common shares issued upon exercise of warrants		-			-			3,074		3		-		-		16,430			-			16,433

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		-			-			2,142		2		-		-		9,101			-			9,103

Equity compensation to officers and board of directors		-			-			3,838		4		-		-		15,446			-			15,450
Equity compensation to officers, employees, and board of directors		-			-			3,838		4		-		-		15,446			-			15,450

Net loss		-			-			-		-		-		-		-			(39,991	)		(39,991	)

Balance, September 30, 2021		96		$	1			30,508	$	30		1,004	$	3,416	$	663,991		$	(635,562	)	$	31,876

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

GT BIOPHARMA, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	2022			2021
	For the nine months ended
	September 31,
	2022			2021
	(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(15,300	)	$	(39,991	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation – consultants		2,462			10,458
Stock based compensation - officers, employees and board of directors		3,854			15,450
Convertible notes payable issued for consulting services		-			720
Change in fair value of derivative liability		(81	)		(43	)
Change in operating lease right-of-use assets		70			-
Unrealized loss on marketable securities		53			-
Changes in operating assets and liabilities:
Decrease in prepaid expenses		102			279
(Increase) in deposits		(9	)		-
(Decrease) Increase in accounts payable and accrued expenses		(2,008	)		537
(Decrease) in operating lease liability		(62	)		-
Increase in accrued interest		-			689
Net Cash (Used in) Operating Activities		(10,919	)		(11,901	)

CASH FLOWS FROM INVESTING ACTIVITIES
Sales (purchases) of investments		4,639			(26,031	)
Net Cash Provided by (Used in) Investing Activities		4,639			(26,031	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock		-			24,679
Cancellation of common stock upon settlement with former officer		(223	)		-
Proceeds from exercise of warrants		-			16,433
Proceeds from issuance of notes payable		-			1,205
Net Cash (Used in) Provided by Financing Activities		(223	)		42,317

Net (Decrease) Increase in Cash		(6,503	)		4,385
Cash at Beginning of Period		8,968			5,297
Cash at End of Period	$	2,465		$	9,682

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest	$	-		$	-
Income taxes paid	$	-		$	-

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Right-of-use assets exchanged for lease liabilities	$	260		$	-
Extinguishment of unamortized debt discount and adjustment to accumulated deficit upon adoption of ASU 2020-06	$	-		$	4,745
Common stock issued upon conversion of notes payable and accrued interest	$	-		$	38,799
Common stock issued upon settlement of vendor payable	$	3,251		$	-
Convertible notes payable issued for accrued expenses	$	-		$	1,525

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

~~Table of Contents~~

GT BIOPHARMA, INC AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows

For the Six Months Ended

June 30,

2021

2020

(unaudited)

(unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$ (34,538,000 )

$ (19,130,000 )
Adjustments to reconcile net loss to net cash used in operating activities:

Change in fair value of derivative liability

459,000

0

Stock based compensation - consultants and research and development

10,134,000

0

Stock based compensation - officers and board of directors

14,873,000

147,000

Convertible notes payable issued for consulting services

720,000

0

Amortization of debt discount

0

1,000

Non-cash interest expense

0

3,955,000

Settlement expense

0

11,206,000

Effect of changes in assets and liabilities:

Prepaid expenses

302,000

126,000

Accounts payable and accrued expenses

(611,000 )

61,000

Accrued interest

689,000

0

Net Cash Used in Operating Activities

(7,972,000 )

(3,634,000 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock

24,679,000

0

Proceeds from exercise of warrants

16,296,000

0

Proceeds from issuance of notes payable

1,205,000

4,457,000

Net Cash Provided by Financing Activities

42,180,000

4,457,000

Net Increase (Decrease) in Cash

34,208,000

823,000

Cash at Beginning of Period

5,297,000

28,000

Cash at End of Period

$ 39,505,000

$ 851,000

Cash paid during the year for:

Interest

$ 0

$ 0

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

$ 200,000

Extinguishment of unamortized debt discount and adjustment to accumulated deficit upon adoption of ASU 2020-06

$ 4,745,000

$ 0

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

~~Table of Contents~~

GT BIOPHARMA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(UNAUDITED)~~

~~As of~~September 30, 2022 and ~~For the Six Months Ended June 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 ~~off~~on our proprietary Tri-specific Killer Engager ~~(TriKE™~~(TriKE^®)~~, and 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 a natural killer (“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 six months ended June 30, 2021, the Company incurred a net loss of $34.5 million and used cash in operating activities of $8.0 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. In addition, our independent registered public accounting firm, in their report on our audited financial statements for the year ended December 31, 2020, raised substantial doubt about the Company’s ability to continue as a going concern.

During the six months ended June 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 $16.3 million in cash from exercise of warrants for a total cash received of $42 million. At June 30, 2021, the Company had cash on hand in the amount of $39.5 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, ~~2020~~2021 filed with the SEC on ~~April 16, 2021~~March 28, 2022 (the ~~“2020~~“2021 Annual Report”). The consolidated balance sheet as of December 31, ~~2020~~2021 included herein was derived from the audited consolidated financial statements as of that date.

~~Table of Contents~~

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.

~~Basis of Presentation and Principles of Consolidation~~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 retroactively~~prepared 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 nine months ended September 30, 2022, the Company recorded a net loss of $15.3 million and used cash in operations of $10.9 million. As of September 30, 2022, the Company had a cash and short-term investments balance of $20.8 million, working capital of $15.8 million and stockholders’ equity of $16.0 million. Management anticipates that the $20.8 million of cash and cash equivalents, and short-term investments are adequate to ~~reflect~~satisfy the ~~reverse stock split as if it had occurred at the beginning~~liquidity 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 September 30, 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.

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 harm~~operations.

While the pandemic has impacted the Company’s ~~business and results of operations.~~

~~During~~operations, during the ~~six~~nine months ended ~~June~~September 30, ~~2021,~~2022, the Company believes the COVID-19 pandemic ~~did~~had limited impact on its operating results. ~~However, the~~The 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 ~~compensation and~~ services and realization of deferred tax assets. Actual results could differ from those estimates.

~~Stock-Based Compensation~~Cash Equivalents and Short-Term Investments

The Company ~~accounts for share-based awards~~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, 2022, total cash and cash equivalents which consist of cash and money market funds, amounted to ~~employees~~approximately $2.5 million.

The Company also invested its excess cash in commercial paper and ~~nonemployees~~corporate notes and ~~consultants in accordance with~~bonds. Management generally determines the ~~provisions~~appropriate classification of ~~ASC 718, Compensation-Stock Compensation. Stock-based compensation cost is measured~~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 onwith the ~~grant date~~unrealized holding gains and ~~that fair value is recognized as expense over~~losses reported in the ~~requisite service, or vesting, period.~~accompanying condensed consolidated statements of operations. As of September 30, 2022, total short-term investments amounted to approximately $18.3 million.

~~Table of Contents~~

Fair Value of Financial Instruments

~~FASB~~Financial Accounting Standards Board (“FASB”) Accounting Standards Codification ~~("ASC"~~(“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 ~~$842,000~~$57,000 at ~~June~~September 30, ~~2021~~2022 and ~~$383,000~~$138,000 at December 31, ~~2020~~2021 was based on Level 2 measurements.

The carrying amounts of the Company’s other financial assets and liabilities, such as cash, 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 ~~are~~is determined using a Binomial valuation method at inception and on subsequent valuation dates.

Stock-Based Compensation

The Company accounts for share-based awards to employees, non-employees 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 its own historical stock price volatility. The expected term of the instrument is estimated by using the simplified method. 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 nine months ended September 30, 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).

Net Loss Per Share

Basic ~~earnings (loss)~~loss per share is computed using the weighted-average number of common shares outstanding during the period. Common stock issuable is ~~considered to be outstanding~~included in ~~the~~our calculation ~~from~~as of the date of ~~grant.~~the underlying agreement. Diluted ~~earnings (loss)~~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,~~common 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.

~~Table of Contents~~

These following common stock equivalents were excluded in the computation of the net loss per share because their effect is ~~anti-dilutive.~~anti-dilutive:

Schedule of Anti-dilutive Securities

June 30,
2021

June 30,
2020

A. Options to purchase common stock

-

3

B. Warrants to purchase common stock

2,365,473

106,650

C. Convertible notes payable

-

4,678,823

D. Convertible Series J-1 Preferred stock

-

692,220

E. Convertible Series C Preferred stock

7

7

2,365,480

5,477,703

	September 30, 2022 (Unaudited)	September 30, 2021 (Unaudited)
Options to purchase common stock	1,835,452	-
Warrants to purchase common stock	2,337,274	2,337,274
Unvested restricted common stock	295,588	-
Convertible Series C Preferred Stock	-	7
Total anti-dilutive securities	4,468,314	2,337,281

Concentration

Cash is deposited in one financial institution. The balances held at this financial institution at times may be more than 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~~“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 adopt~~Effective 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.~~using a prospective approach. The adoption of ~~ASU 2021-04 is~~this standard did not ~~expected to~~ have a material impact on the Company’s financial statements or disclosures.

~~Table of Contents~~

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832)—Disclosures by Business Entities about Government Assistance. ASU 2021-10 increases the transparency of government assistance including the disclosure of (1) the types of assistance, (2) an entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements. The ASU is effective for fiscal years beginning after December 15, 2021. The Company adopted this ASU as of January 1, 2022 on a prospective basis. The adoption of this standard did not have any 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”)~~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 3 – Fair Value of Financial Instruments

The estimated fair values of financial instruments outstanding were (in thousands):

Schedule of Estimated Fair Value of Financial Instrument

September 30, 2022 (Unaudited)
Unrealized Unrealized Fair
Cost Gains Losses Value
Short-term investments $ 18,372 $ — $ (53 ) $ 18,319
Total $ 18,372 $ — $ (53 ) $ 18,319
December 31, 2021
Unrealized Unrealized Fair
Cost Gains Losses Value
Short-term investments $ 23,040 $ — $ (29 ) $ 23,011
Total $ 23,040 $ — $ (29 ) $ 23,011
11
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
September 30, 2022 (Unaudited)
Fair Value Level 1 Level 2 Level 3
Money market funds $ 2,319 $ 2,319 $ — $ —
Corporate notes and commercial paper 18,319 18,319 — —
Total financial assets $ 20,638 $ 20,638 $ — $ —
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 $ 28,495 $ — $ —
As of September 30, 2022, the fair value of the derivative liability was $57,000. The details of derivative liability transactions for the nine months ended September 30, 2022 and 2021, are as follows:
Schedule of Derivative Liability Transactions
September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021
Three Months Ending Nine Months Ending
September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Beginning balance $ 115,000 $ 842,000 $ 138,000 $ 383,000
Issuance of warrants — — — —
Change in fair value $ (58,000 ) $ (502,000 ) $ (81,000 ) $ (43,000 )
Extinguishment — — — —
Ending balance $ 57,000 $ 340,000 $ 57,000 $ 340,000

Note 4 ~~- Convertible Notes~~– Accounts Payable

~~Convertible notes~~Accounts payable consisted of the ~~following:~~following (in thousands):

Schedule of Accounts Payable

June 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

	September 30, 2022		December 31, 2021
		(Unaudited)
Accounts payable to a third-party manufacturer	$	2,636	$	6,335
Other accounts payable		689		1,885
Total accounts payable	$	3,325	$	8,220

A. ~~Notes Payable Issued for Cash~~The Company relies on a third-party contract manufacturer to produce and/or test compounds used in our potential product candidates.

On August 24, 2022, the Company entered into an agreement with this third-party manufacturer and issued 1,222,281 shares of common stock with a fair value of $3.3 million as part of a payment agreement. The shares were valued at $2.66 based on the closing price of the Company’s common stock on the date of the agreement. As part of the ~~Company’s financing activities,~~agreement, the Company ~~issued convertible notes payable~~also paid this third-party manufacturer $1.3 million on September 1, 2022 and $1.0 million on October 3, 2022, respectively, and agreed to pay another $1.0 million in exchange for cash. These notes payable were unsecured, bear interest at a rate of 10% per annum, mature in six 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, the outstanding balance of these notes amounted to $24,085,000.

November 2022. In ~~January 2021,~~addition, the Company ~~issued similar notes payable~~and the third-party manufacturer agreed that services to be rendered in ~~exchange for cash of $1,205,000. On February 16, 2021 in accordance with the note agreements upon completion of the equity offering discussed in Note 7, these notes,~~future periods, as specified in the ~~aggregate amount~~agreement, will be paid or settled at the Company’s discretion, in a combination of ~~$25,290,000, were mandatorily converted at a conversion rate of $3.40 per share into 7,438,235 shares~~cash and issuance of the Company’s common stock. The agreement also amended certain agreements executed in prior years which eliminated future financial commitment of the Company.

B. ~~Notes Payable Issued for Settlement Agreements~~

~~In fiscal 2019 and 2020, the Company issued its convertible notes~~The Company’s accounts payable to ~~resolve claims~~this third-party manufacturer amounted to $2.6 million and ~~disputes pertaining to certain debt~~$6.3 million as of September 30, 2022 and equity instruments issued by the Company in prior years. The notes were unsecured, bear interest at a rate of 10%, mature in six 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.~~2021, respectively.

~~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 per share into 743,529 shares of the Company’s common stock.~~

~~Table of Contents~~

C.5 – Convertible Notes Payable ~~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 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 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 discussed in Note 7, these notes were mandatorily converted at a conversion rate of $3.40 per share into 1,132,059 shares of the Company’s common stock.

D. ~~Notes Payable 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 rate of 10% per annum, mature in six 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.

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 an unpaid consulting fee 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 were mandatorily converted at a conversion rate of $3.40 per share into 472,059 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 June 30, 2021, the Company accrued interest of $689,000 for a total accrued interest of $5,527,000.

As a result of the mandatory conversion of the Company’s notes payable, on February 16, 2021, all notes payable of $33,272,000 and accrued interest of $5,527,000, for a total of $38,799,000, were mandatorily converted to 11,413,809 shares of common stock.

~~Adoption of ASU 2020-06~~

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~~of certain 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.

~~Table of Contents~~

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 5 - 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 June 30, 2021 and December 31, 2020, the outstanding balance of this credit line amounted to $31,000 respectively.~~

Note 6 - – 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 ~~815,~~480, the fair value of these warrants ~~are~~is classified as a liability in the Condensed Consolidated Balance ~~Sheet~~Sheets and will be re-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

	June 30, 2021			December 31, 2020			September 30,			December 31,
							2022			2021
Stock Price	$	15.50		$	7.21
							(Unaudited)
Stock price							$	1.76		$	3.05
Risk-free interest rate		0.87	%		0.36	%		4.25	%		1.26	%
Expected volatility		135	%		135	%		114	%		129	%
Expected life (in years)	4.33 years			4.60 years				2.8			3.6
Expected dividend yield		0			0			-			-

Fair Value:
Warrants	$	842,000		$	383,000
Derivative liability, measurement input
Fair value of warrants							$	57,000		$	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.~~expected volatility. The expected life ~~of the derivative securities~~ was determined by using 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 six months ended June 30, 2021, the~~The Company recognized ~~an expense~~a gain of ~~$459,000~~$58,000 and $81,000 to account for the change in fair value of the derivative ~~liability.~~liability between the reporting periods for the three months and nine months ended September 30, 2022.

~~Table of Contents~~

The Company recognized a gain of $502,000 and $43,000 to account for the change in the fair value of the derivative liability between the reporting periods for the three months and nine months ended September 30, 2021.

Note 7 - – Stockholders’ Equity ~~(Deficit)~~

The Company’s authorized capital as of September 30, 2022 was 750,000,000 shares of common stock, par value $0.001 per share, and 15,000,000 shares of preferred stock, par value $0.01 per share. The Company subsequently changed its authorized shares of common stock to 250,000,000 shares (see Note 9).

Common Stock

Common Stock Issuable

~~As a result,~~

On February 16, 2021, because 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 issue~~issued a total of ~~11,413,809~~11,413,322 shares of common stock to the respective ~~noteholders.~~noteholders, of which 11,086,024 were already issued as of December 31, 2021. The remaining 327,298 common shares issuable at December 31, 2021 valued at $1.1 million, were issued during the nine months ended September 30, 2022.

AsCancellation of ~~June 30, 2021, the~~common stock

The Company ~~was only able to issue 8,261,809~~cancelled 290,999 previously issued shares of common stock ~~or approximately 72% or $28,083,000~~during the nine months ended September 30, 2022.

Equity compensation to officers, employees and directors

	a.	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 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 the CEO) 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, the Company also granted similar equity compensation to members of the Company’s board of directors wherein these directors received stock grants equal to 1% and 1.25% of the fully diluted shares of common stock of the Company. Pursuant to the agreement, approximately 33% of the common stock to be issued vested immediately while the remaining 67% vests over a period of two years.

		On February 16, 2021, the Company completed its equity offering and listed its shares of common stock on the Nasdaq Capital Market. As such, 4,379,407 shares of its common stock were granted to these Officers, employees and 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 was met and in accordance with its vesting terms.

		During the three months and nine months ended September 30, 2022, the Company recognized $382,000 and $1.1 million of stock compensation expense related to the vesting of common shares to officers, employees and directors.

		During the three months and nine months ended September 30, 2021, the Company recognized $577,000 and $15.4million of stock compensation expense related to the vesting of these common shares to officers, employees and directors.

	b.	In July 2022, the Company granted 378,058 shares of fully vested common stock with a fair value of $938,000 to certain officers of the Company for services rendered.

		During the three months and nine months ended September 30, 2022, the Company recognized $938,000 and $938,000 of stock compensation expense related to the vesting of these common shares.

	c.	During the three months and nine months ended September 30, 2022, the Company also recognized stock compensation expense of $1.6 million and $1.8 million, respectively, to account for the fair value of vested stock options.

As a result, the Company recognized total stock compensation expense of $2.9 million and $3.8 million for the ~~converted notes payable~~three months and ~~accrued interest to the respective noteholders. With regards to the remaining 3,152,000 unissued~~nine months ended September 30, 2022.

As of September 30, 2022, there were 134,836 unvested shares of common stock ~~the Company is in the process of obtaining the necessary supporting documentation from the respective noteholders which will then be provided~~issued to ~~the Company’s stock transfer agent as a requirement for the issuance of the common stock certificate.~~

For financial reporting purposes, the Company reported $10,716,000 as common stock issuable in the accompanying statements of stockholders equity to account for the estimated balance of the converted notes payableofficers, employees and ~~accrued interest for which the Company has not yet issued the corresponding common stock.~~

~~Subsequent to June 30, 2021, the Company issued a total of 2,313,116 shares of common stock to these noteholders upon submission of the required documentation to the Company’s stock transfer agent.~~

~~Common Stock~~

~~The following were transactions during the six months ended June 30, 2021:~~

~~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 11,413,809 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). Pursuant to the agreement, approximately 75% of the common stock to be issued will vest immediately while the remaining 25% will vest over a period of two years.

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 consultantsdirectors with a fair value of $9,679,000. 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.

~~Table of Contents~~

During the period ended June 30, 2021, pursuant to the vesting terms of the agreements, the Company issued 1,900,060 shares of common stock with a grant date fair value of $7,564,000 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 2,050,060 shares of common stock and recognized stock compensation expense of $8,779,000 to account the fair value of common stock that vested.

~~As of June 30, 2021, the unvested and unissued common stock totaled 602,458 shares of common stock with an estimated fair value of $2,115,000~~ $626,000 that will be recognized as stock compensation expense in future periods pursuant to its vesting term.

Equity compensation to consultants

	a.	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 Market. As a result of this offering, the Company agreed to issue to these consultants 2,850,090 shares of common stock with a grant date fair value of $10.7 million, of which 1,934,817 shares of common stock vested immediately while the remaining 915,273, shares of common stock vests 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 is being recorded as compensation expense based upon the vesting term of the grant.

		During the three months and nine months ended September 30, 2022, the Company recognized stock compensation expense of $325,000 and $976,000, respectively, related to the vesting of these common shares to consultants.

	b.	In July 2022, the Company granted 20,882 shares of fully vested common stock with a fair value of $52,000 to certain consultants for services rendered. This was recognized as stock compensation expense for the three months and nine months ending September 30, 2022.

		During the three months and nine months ended September 30, 2022, the Company recognized $64,000 and $675,000 of stock compensation expense related to the vesting of common shares.

	c.	During the three months and nine months ended September 30, 2022, the Company also recognized stock compensation expense of $759,000 and $759,000, respectively, to account for the fair value of all vested stock options.

As a result, the Company recognized total stock compensation expense of $1.2 million and $2.5 million during the three and nine months ended September 30, 2022, respectively.

During the three months and nine months ended September 30, 2021, the Company recognized an aggregate of $327,000 and $9.1 million of stock compensation expense related to the vesting of common shares granted to consultants.

As of September 30, 2022, there were 160,752 unvested shares of common stock issued to consultants with a fair value of $552,000 that will be recognized as stock compensation expense in future periods based upon ~~the remaining~~their vesting ~~term of the grant.~~term.

~~Issuance of Common Stock for research and development agreement~~

~~During the six months ended June 30, 2021, the Company issued 189,753 shares~~Settlement of common stock ~~for~~with a ~~research~~former Officer

On April 29, 2022, the Company entered into a settlement agreement with its former Chief Executive Officer (“Officer”) and ~~development agreement valued at $1,355,000.~~received 1,845,000 shares of its previously issued common stock in full and final settlement of all its claims against the Officer. The common ~~shares were valued on the market price at the date of grant.~~

~~Issuance of Common Stock upon exercise of warrants~~

~~During the six months ended June 30, 2021,~~stock was subsequently cancelled. In addition, the Company ~~issued 3,047,818 shares~~incurred legal and professional expenses of $223,000. Pursuant to current accounting guidelines, this amount was accounted as costs of the acquisition of the common stock ~~upon~~and recorded as a reduction to additional paid in capital. Both the ~~exercise of warrants resulting in cash proceeds of $16,296,000.~~Company and the Officer released each other from claims under the settlement agreement.

Preferred Stock

A.Series C Preferred Stock

~~In prior year, the Company issued~~ At September 30, 2022 and December 31, 2021, there were 96,230 shares of ~~Series~~series C preferred ~~stock. The Series C has a~~stock, par value ~~of $0.01~~$0.01 per share (the “Series C Preferred Stock”), issued and ~~are convertible into 7 shares~~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 at~~related 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. 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 such96,230 shares of Series C Preferred Stock ~~were purchased. In~~are not currently convertible, have no voting rights, and in the event of liquidation, the holders of the Series C Preferred Stock ~~shall~~would 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 ~~noncumulative~~any dividends if and when declared by the Company’s board of directors (the “Board”). No dividends to holders of the Series C Preferred Stock were issued or unpaid through ~~June~~September 30, ~~2021.~~2022 and 2021, respectively.

~~As of June 30, 2021 and December 31, 2020, total Series C Preferred Stock issued and outstanding totaled 96,230 shares.~~

B.~~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.

~~Table of Contents~~

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. As of December 31, 2020, total Series J-1 Preferred Stock issued and outstanding totaled 2,353,548 shares.

On February 16, 2021, as a result of the completion of the public offering and the listing of its shares of common stock on the Nasdaq Capital Markets, the entire 2,353,548 shares of Series J-1 Preferred Stock were mandatorily converted at a conversion rate of $3.40 per share into 692,220 shares of the Company’s common stock. As of June 30, 2021, there were no shares of Series J-1 Preferred stock issued and outstanding.

C.Series K Preferred Stock

On February 16, 2021, the Board designated 115,000 shares of Series K preferred stock, par value ~~$.01.~~$.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 100 shares of common stock for each share of Series K ~~Preferred Stock.~~Preferred. Shares of the Series K Preferred Stock have the same voting rights as 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 ~~June~~September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, there were no shares of Series K Preferred ~~Stock~~stock issued and outstanding.

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Warrants and Options

Common Stock Warrants

Stock warrant transactions for the ~~six~~nine months ended ~~June~~September 30, ~~2021:~~2022 were as follows:

Schedule of Warrant Activity

Number of Warrants

Weighted Average Exercise Price

Outstanding at December 31, 2020:

221,041

$ 3.40

Granted

5,192,250

5.50

Forfeited/canceled

-

-

Exercised

(3,047,818 )

5.50

Outstanding at June 30, 2021

2,365,473

$ 5.38

Exercisable at June 30, 2021

2,365,473

$ 5.38

	Number of		Weighted Average
	Warrants		Exercise Price
Warrants outstanding at December 31, 2021		2,337,274	$	5.30
Granted		-		-
Forfeited/cancelled		-		-
Exercised		-		-
Warrants outstanding at September 30, 2022		2,337,274	$	5.30
Warrants exercisable at September 30, 2022		2,337,274	$	5.30

As of ~~June~~September 30, ~~2021,~~2022, all issued and outstanding warrants are fully vested, and ~~the~~have no intrinsic value as the exercise price of these warrants ~~amounted to $23,937,000.~~was greater than the market price.

~~The following were~~Common Stock Options

Common stock option transactions ~~during~~for the ~~six~~nine months ended ~~June~~September 30, ~~2021:~~2022 were as follows:

Schedule of Options Activity

	Number of		Weighted Average
	Options		Exercise Price
Options outstanding at December 31, 2021		302,500	$	3.05
Granted		1,532,952		2.48
Forfeited/cancelled		-		-
Exercised		-		-
Options outstanding at September 30, 2022		1,835,452	$	2.57
Options exercisable at September 30, 2022		1,209,847	$	2.56

On ~~February 16, 2021, as part of the Company’s public offering,~~July 15, 2022, the Company ~~issued warrants~~granted certain consultants, employees, officers and directors stock options to ~~investors to~~ purchase ~~up to~~ an aggregate of ~~5,192,250~~ 1,532,952 shares of common stock. The ~~warrants~~stock options are ~~fully vested, have an exercise price of $5.50 per share, subject to standard adjustment in certain circumstances and will expire in five years.~~

~~During the six months ended June 30, 2021, the Company issued 3,047,818 shares of common stock upon exercise of warrants which also resulted cash proceeds of $16,296,000.~~

~~Note 8 - Related Party~~

During the period ended June 30, 2021, the Company recorded consulting expense of $250,000 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 expensesexercisable at ~~December 31, 2020. There was no similar consulting expense incurred during the period ended June 30, 2020.~~

~~Note 9 - Equity Compensation to Officers and Board of Directors~~

As part of employment agreements with its Chief Executive Officer (CEO) and its Chief Financial Officer (CFO), these officers were to receive a fully vested stock grant equal to aggregate of 10% and 1.5% of the fully diluted shares of common stock of the Company (calculated with the exclusion of the current stock holdings of the CEO, Mr. Cataldo, and calculated with the inclusion of the current stock holdings the CFO, Mr. Handelman) upon conversion of options, warrants and Convertible Notes in association $2.48 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 grant equal to 1% and 1.25% of the fully diluted shares of common stock of the Company. Pursuant to the agreement, approximately 75% of the common stock to be issued vested immediately while the remaining 25% will vestvesting term over a period of ~~two years.~~

~~On February 16, 2021, the Company completed its equity offering~~5 months up to 36 months, will expire in ten years from grant date and listed its shares of common stock on the Nasdaq Capital Markets (see Note 7). As such, 4,379,407 shares of its common stock were granted to these officers and directors which had a fair value of $18,621,000. 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 its vesting term of the grant.

~~Table of Contents~~

~~During the period ended June 30, 2021, the Company recognized stock compensation of $14,873,000 to account for equity compensation to officers and directors of the 3,739,295 shares that vested.~~

~~As of June 30, 2021, the unvested and unissued common stock totaled 640,112 shares of common stock~~ with an estimated fair value of ~~$3,748,000 that~~$3.4 million using the Black Scholes Option pricing model. The Company is recognizing the corresponding stock compensation expense of these options based upon the vesting term. During the three months and nine months ended September 30, 2022, the Company recognized stock compensation expense relating to the vesting of these options of $2.3 million and $2.3 million, respectively.

At September 30, 2022, there were 625,605 unvested options with a grant date fair value of $1.5 million which will be recognized as stock compensation expense in future periods based upon the remaining vesting term of the ~~grant.~~applicable grants.

There was no intrinsic value of the outstanding options as of September 30, 2022 as the exercise price of these options was greater than the market price.

Note ~~10 -~~ 8 – Commitments and Contingencies

1. Litigation

~~We are~~The 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~~Other than the item discussed below, 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”. The complaint was filed against GT Biopharma, Inc. and its subsidiary Oxis Biotech, Inc. (either of them or jointly, the “Company”). The Plaintiffs allege 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 value 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 arises 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 Properties in the amount of $100,000 and such amount was recorded as part of accrued expenses of June 30, 2021.~~

2. On May 13, 2022, the Company made a claim against Michael Handelman, its former Chief Financial Officer, asserting that he misappropriated Company funds and shares of common stock, and failed to file the required SEC reports on Form 3 and Form 4 regarding each acquisition and disposition of Company’s common stock. The Company seeks monetary damages estimated at $370,000; the return of shares of common stock received without authorization and the disgorgement of any profits earned from the sale of those shares; a full accounting for all sums charged on the Company’s debit card, with payment to the Company for any charges that cannot be demonstrated to have a corporate purpose; an order directing Michael Handelman to make all filings required by Section 16(a) of the 1934 Act; an award of all sums and shares improperly issued to members of Handelman’s family; and an award of the Company’s attorneys’ fees and any forum and arbitration fees.

As a component of Mr. Handelman’s contract with the Company, disputes shall be fully addressed and finally resolved by binding arbitration conducted by the American Arbitration Association (AAA) in New York City, New York, in accordance with its National Employment Dispute Resolution rules. In connection with any such arbitration, the Company shall bear all costs not otherwise borne by a plaintiff in a court proceeding. The Company agrees that any decisions of the Arbitration Panel will be binding and enforceable in any state that the Company conducts the operation of its business. In accordance with California Labor Laws, the Company has designated Los Angeles, California as the venue for this arbitration. The Company is awaiting to receive a date of hearing from AAA.

Significant Agreements

Research and Development ~~Agreement:~~Agreements

	a.	The Company is a party to a scientific research agreement with the Regents of the University of Minnesota (“UoMN”), 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 good manufacturing practice (“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 investigational new drug (“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 UoMN/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, of which $924,000 was incurred and recorded in prior years.

		For the three months and nine months ended September 30, 2022, the Company recorded an expense of $192,000 and $575,000 relating to scientific research agreement as compared to $541,000 and $541,000 for the same comparable periods in 2021.

		At September 30, 2022, the Company’s remaining commitments in relation to this agreement amounted to approximately $601,000.

	b.	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. The Company’s commitments in relation to these Statements of Work and any related Change Orders totaled approximately $13 million, of which $10.5 million was incurred and recorded in prior years.

		For the three months and nine months ended September 30, 2022, the Company recorded an expense of $720,000 and $1.9 million, relating to the Master Service Agreement as compared to $528,000 and $677,000 for the same comparable periods in 2021.

		As a result of an amendment to the agreement dated August 24, 2022, the Company has no remaining commitments in relation to these Statements of Work and any related Change Orders (see Note 4).

~~We are~~Patent and License Agreements

2016 Exclusive Patent License Agreement

The Company is party to an exclusive worldwide license ~~patent and clinical trial agreements~~agreement with the Regents of the University of Minnesota, to further develop and commercialize cancer therapies using TriKE^® technology developed by researchers at the ~~university~~UofMN to target NK cells to cancer. Under the terms of the 2016 agreement, ~~we receive~~the 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 are~~The 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 UofMN received an upfront payment of $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.

For the ~~University~~three months and nine months ended September 30, 2022, the Company incurred $90,000 and $313,000 of ~~Minnesota will receive~~patent expense relating to the 2016 Exclusive Patent License Agreement. For the three months and nine months ended September 30, 2021 the Company incurred $67,000 and $339,000 of patent expense related to this agreement.

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, ~~(upon commencement of commercial sales) ranging from 4% to 6%,~~or minimum annual royalty payments of ~~$0.25~~$0.25 million beginning in ~~2022, $2.0~~the year after the first commercial sales of Licensed Product, and $2.0 million beginning in ~~2025, and $5.0 million beginning in 2027 and~~the fifth year after the first commercial sale of such 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~~For the ~~period~~three months and nine months ended ~~June~~September 30, 2022, the Company did not incur any research and development expense relating to 2021 Patent License Agreement.

Lease Agreements

On November 19, 2021 the Company ~~recorded research~~entered into a sublease with a third party for approximately 4,500 square feet of office space located in Brisbane, California, at a monthly rent of $9,450, with a commencement date of January 1, 2022 and ~~development expenses of $507,000 pursuant to this agreements. We are presently evaluating GTB-3550, our lead TriKE therapeutic product candidate in a Phase I/II clinical trial.~~

~~Table of Contents~~

~~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 6 months)

$ 1,211,000

2022

2,460,000

2023

2,460,000

2024

2,017,000

2025 and thereafter

591,000

Total

$ 8,739,000

~~Note 11- Subsequent Events~~

~~Subsequent to~~maturing on June 30, ~~2021,~~2024. Additionally, on February 8, 2022, the Company ~~issued 25,000 shares~~entered into a lease of ~~common stock upon exercise~~a photocopier, at a monthly rent of ~~warrants for cash proceeds of $137,500.~~

~~Subsequent to June 30, 2021, the Company issued a total of 2,313,116 shares of common stock to noteholders whose notes payable and accrued interest were mandatorily converted to common stock~~$415, which matures on February ~~16, 2021 (see Note 4)~~7, 2025.

~~Note 12- Restatement of Prior Quarters (unaudited)~~

~~Management of GT Biopharma, Inc. and its audit committee, identified an accounting error in~~Rent expense related to these leases reflected on the previously reported results of operations for the three and six month periods ended June 30, 2020 in the recognition of an additional loss on extinguishment of debt of $8,643,000 as a result of the June 2020 forbearance agreements that was not previously recorded (see Note 4). As a result, the previously filed unauditedCompany’s condensed consolidated statements of operations totaled $29,000and stockholders’ deficit for the three and six month periods ended June 30, 2020 may no longer be relied upon. The Company has restated its unaudited related condensed consolidated statements of operations and stockholders’ deficit for the three and six month periods ended June 30, 2020. The restatement did not affect the previously reported assets and liabilities in the corresponding financial statements.

~~The effects of the discrepancy discovered related to the accounting error on the previously filed Form 10-Q are summarized as follows:~~

$~~Condensed Consolidated Statement of Operations~~87,000 for the three months and nine months ended ~~June~~September 30, ~~2020 (unaudited)~~2022.

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

	September 30, 2022 (Unaudited)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	79,000
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	$	260,000
Weighted-average remaining lease term (in years):
Operating leases		2.0
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

	Operating leases (Unaudited)

Within one year	$	121,000
After one year and within two years		94,000
After two years and within three years		2,000
Total future minimum lease payments	$	217,000
Less – discount		(19,000	)
Lease liability	$	198,000

Note 9 - Subsequent Events

On October 3, 2022, the Company issued 50,102 shares of common stock with a fair value of $93,000 to an officer of the Company as settlement of debt.

On October 10, 2022, at a special meeting of the stockholders of the Company, the stockholders ratified and approved the inclusion of discretionary votes by brokers and other nominees holding shares for beneficial owners in the tabulation of votes on the proposal presented at the Company’s annual meeting of stockholders to reduce the authorized number of shares of the Company’s common stock from 750,000,000 shares to 250,000,000 shares.

Previously
Reported

Adjustment

As Restated

Operating expense

$
(7,221,000 )

$
(8,643,000 )

$
(15,864,000 )
Net loss

(8,779,000 )

(8,643,000 )

(17,422,000 )
Net Loss per common share - basic and undiluted

$ (2.08 )

$ (2.04 )

$ (4.12 )

~~Condensed Consolidated Statement of Operations for the six months ended June 30, 2020 (unaudited)~~

Previously
Reported

Adjustment

As Restated

Operating expense

$
(7,859,000 )

$
(8,643,000 )

$
(16,502,000 )
Net loss

(10,487,000 )

(8,643,000 )

(19,130,000 )
Net Loss per common share - basic and undiluted

$ (2.51 )

$ (2.07 )

$ (4.58 )

~~Table of Contents~~

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 carefully 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,” “us,” “our,” “the company” and “our company” refer to GT Biopharma, Inc., a Delaware corporation formerly known as Oxis International, Inc., DDI Pharmaceuticals, Inc. and Diagnostic Data, Inc, together with our subsidiaries.

Overview

We are a clinical stage biopharmaceutical company focused on the development and commercialization of novel immuno-oncology products based off our proprietary Tri-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-targeted~~specifically 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 contains the antigen binding fragment (Fab) from a broadly-neutralizing antibody targeting the HIV-Env protein. The HIV-TriKE is designed to target HIV while redirecting NK cell killing specifically to actively replicating HIV infected cells. The HIV-TriKE induced NK cell proliferation, and 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).

~~Table of Contents~~

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.

~~Recent Developments~~

Economic Disruption

~~On February 16, 2021,~~

While 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~~make our strategic planning decisions based on the assumption that the markets we are targeting will grow in the long term, our business is dependent, in large part on, and directly affected by, business cycles and other ~~direct offering expenses. As part of~~factors affecting 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~~economy. Our industry depends 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 11,413,809 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). Pursuant to the consulting agreement, approximately 75% of the common stock to be issued will vest immediately while the remaining 25% 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 consultants 2,502,518 shares of common stock. During the period ended June 30, 2021, pursuant to the vesting terms of the consulting agreements, we issued 1,900,060 shares of common stock to these consultants and recorded the corresponding stock compensation expense of $7,565,000. 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 agreement, approximately 75% of the common stock to be issued will vest immediately while the remaining 25% will vest over a period of two years.

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.

~~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~~general economic conditions 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 sharefactors, including consumer spending and ~~will expire~~preferences, changes in ~~five years.~~

~~As a result of the completion of the public offering~~inflation rates, supply chain issues 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 11,413,809 shares of the Company’s common stock (see Note 4).

~~Table of Contents~~

~~Issuance of Common Stock~~impediments should they arise for ~~services - consultants~~

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. Pursuant to current accounting guidelines,us, 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,~~U.S. and ~~then such award was recorded as compensation expense as the milestone or performance condition was met~~various other major economies are now experiencing, consumer confidence, fuel costs, fuel availability, environmental impact, governmental incentives and regulatory requirements, and political volatility, especially in ~~accordance with its vesting term of the grant.~~cybersecurity growth markets.

~~During the period ended June 30, 2021, pursuant to the vesting terms of the agreements, the Company issued 1,900,060 shares of common stock to these consultants.~~ In addition, the ~~Company also issued 150,000 shares~~outbreak of ~~fully vested common stock with a fair value of $1,213,000~~hostilities between Russia and Ukraine and global reactions thereto have increased U.S. domestic and global energy prices. Oil supply disruptions related to the Russia-Ukraine conflict, and sanctions and other ~~consultants~~measures taken by the U.S. and its allies, could lead to higher costs for ~~service rendered. As a result,~~gas, food, and goods in the ~~Company issued a total of 2,050,060 shares of common stock~~U.S. and ~~recognized stock compensation expense of $8,779,000 to account~~other geographies and exacerbate the ~~fair value of common stock that vested.~~

As of June 30, 2021, the unvested and unissued common stock totaled 602,458 shares of common stock with an estimated fair value of $2,115,000 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 six months ended June 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~~inflationary pressures on the ~~market price at the date~~worldwide economy, with potentially adverse impacts on our business, results of ~~grant.~~operations and financial condition.

~~Issuance of Common Stock upon exercise of warrants~~

~~During the six months ended June 30, 2021, the Company issued 3,047,818 shares of common stock upon the exercise of warrants resulting in cash proceeds of $16,296,000.~~

Results of Operations

Comparison of the Three Months and Nine Months Ended ~~June~~September 30, ~~2021~~2022 and ~~2020~~2021

Research and Development Expenses

~~During~~We recorded $2.8 million and $1.0 million in research and development expense (“R&D”) for the three months ended ~~June~~September 30, ~~2021~~2022 and ~~2020, we incurred $639,000 and $12,000 research and development expenses,~~2021, an increase of ~~$627,000. Research~~$1.8 million over the prior year comparable period. We recorded $5.9 million and ~~development costs increased~~$3.3 million in R&D for the nine months ended September 30, 2022 and 2021, an increase of $2.6 million over the prior year comparable period. The increase in R&D resulted primarily due ~~primarily~~ to ~~the admittance~~hiring of additional ~~patients into~~employees and professionals in 2022, and costs associated with the ~~phase one/two clinical trial. We anticipate our direct clinical costs to increase in the remainder of 2021 upon the continuation of a phase one/two clinical trial~~continued development and manufacturing of our most advanced ~~TriKe~~TriKE® product ~~candidate, OXS-3550.~~candidates GTB-3650 and GTB-5550.

Selling, general and administrative expenses

~~During the three months ended June 30, 2021~~

We recorded $4.3 million and ~~2020, we incurred $3,742,000 and $1,546,000 of selling, general and administrative expenses. The increase of $2,196,000~~$4.9 million in selling, general and administrative ~~expenses is~~expense (“SG&A”) for the three months ended September 30, 2022 and 2021, a decrease of $0.6 million over the prior year comparable period. We recorded $9.5 million and $36.1 million in SG&A for the nine months ended September 30, 2022 and 2021, a decrease of $26.6 million over the prior year comparable period. The decrease in SG&A resulted primarily ~~attributable the increase in stock-based compensation. In the period ended June 30, 2021 we incurred $3,742,000 of stock-based compensation, we incurred $147,000~~due to a decrease in stock-based compensation to consultants, officers and directors. We recorded additional expenses during the nine months ended September 30, 2021 that consisted of legal, finance, business advisory, consulting and professional fees in support of our planned growth and new public company compliance initiatives.

Interest Income

We recorded interest income of $107,000 and $32,000 for the three months ended September 30, 2022 and 2021, and $151,000 and $32,000 for the nine months ended September 30, 2022 and 2021, respectively. The increase in interest income is due to the interest earned on short-term investments in the three months and nine months ended September 30, 2022 as compared to the same comparable periods of 2021.

Interest Expense

We recorded $0 interest expense for the three months ended September 30, 2022 and 2021, and $0 and $696,000 for the nine months ended September 30, 2022 and 2021, respectively. The decrease in interest expense is due to the conversion of convertible notes payable to common shares during ~~2020.~~2021. The Company did not have any outstanding convertible notes payable as of and during the three months and nine months periods ended September 30, 2022.

Change in fair value of derivative liability

~~Change~~The change in fair value of derivative liability was ~~an expense~~due to fair value remeasurement which resulted in a gain of ~~$480,000~~$58,000 and $502,000 for the three months ending September 30, 2022 and 2021, respectively. The Company recorded a gain of $81,000 for the nine months ended September 30, 2022 compared to a gain of $43,000 for nine months ending September 30, 2021.

Unrealized loss on marketable securities

The unrealized loss on marketable securities was due to fair value remeasurement of our marketable securities which resulted in a loss of $23,000 and $33,000 for the three months ended ~~June~~September 30, 2022 and September 30, 2021, and ~~we had no such gain or loss~~$53,000 and $33,000 for the ~~same period in 2020.~~

~~Settlement expense~~

~~Settlement expense was an expense of $11,206,000 for the three~~nine months ended ~~June~~September 30, ~~2020~~2022 and ~~we had no such gain or loss for the same period in 2021.~~2021, respectively.

~~Table of Contents~~

~~Interest Expense~~

Interest expense was $0 and $4,658,000 for the three months ended June 30, 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 Six Months Ended June 30, 2021 and 2020~~

~~Research and Development Expenses~~

During the six months ended June 30, 2021 and 2020, we incurred $2,279,000 and $336,000 research and development expenses, an increase of $2,245,400. 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 direct clinical costs to increase in the remainder of 2021 upon the continuation of a phase one/two clinical trial of our most advanced TriKe product candidate, OXS-3550.

~~Selling, general and administrative expenses~~

During the six months ended June 30, 2021 and 2020, we incurred $31,104,000 and $2,292,000 of selling, general and administrative expenses. The increase of $28,812,000 in selling, general and administrative expenses is primarily attributable the increase in stock-based compensation. In the period ended June 30, 2021 we incurred $25,007,000 of stock-based compensation, we incurred no such expenses during 2020.

~~Change in fair value of derivative liability~~

~~Change in fair value of derivative liability was an expense of $459,000 for the six months ended June 30, 2021 and we had no such gain or loss for the same period in 2020.~~

~~Settlement expense~~

~~Settlement expense was an expense of $11,206,000 for the six months ended June 30, 2020 and we had no such gain or loss for the same period in 2021.~~

~~Interest Expense~~

Interest expense was $696,000 and $5,296,000 for the six months ended June 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 six months ended June 30, 2021, the Company raised the net amount of $24.7 million through issuance of common stock, raised $16.3 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 $4.5 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 $1$4 million and $2$5 million, ~~in the coming quarters, while~~and research and development expenses will ~~vary depending on clinical activities.~~range between $13 million and $15 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 losses~~reported cash and ~~has~~ cash equivalents of ~~$39.5~~$2.5 million, and short-term investments of $18.3 million as of ~~June~~September 30, ~~2021. The Company anticipates incurring additional losses until such time, if ever,~~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 ~~fund~~funds its operations ~~and to commercially develop its product candidates. These factors raise substantial doubt about~~for more than twelve months from the ~~Company’s ability to continue as a going concern.~~date of this filing.

~~Table of Contents~~

Management is currently evaluating different strategies to obtain the required funding for future operations. These strategies may include but are not limited ~~to:~~to public offerings of equity and/or debt securities, payments from potential strategic research and development grants, licensing and/or marketing arrangements with other pharmaceutical companies. Management has also implemented cost saving efforts, including reduction in executive salaries and reduced travel. Management believes that these ongoing and planned financing endeavors, if successful, will provide adequate financial resources to continue as a going concern for at least the next 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.

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. ~~The~~These condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Oxis Biotech, Inc. and Georgetown Translational Pharmaceuticals, Inc. ~~Intercompany~~All intercompany transactions and balances have been eliminated in consolidation.

~~Reverse Stock Split~~Accounting Estimates

~~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 feature~~valuation of ~~notes payable,~~equity instruments issued for services, and valuation of deferred tax assets. Actual results could differ from those estimates.

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.~~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

~~Table of Contents~~

~~Inflation~~

We believe that inflation has not had a material adverse impact on our business or operating results during the periods ~~presented.~~presented other than the impact of inflation on the general economy. However, there is a risk that the Company’s operating costs could become subject to inflationary pressures in the future, which would have the effect of increasing the Company’s operating costs, and which would put additional stress on the Company’s working capital resources.

Off-balance Sheet Arrangements

We have no off-balance sheet arrangements as of ~~June~~September 30, ~~2021.~~2022.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

This ~~company~~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 officer~~Principal Executive Officer, Principal Financial Officer and ~~principal financial officer~~Principal 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 ~~June~~September 30, ~~2021.~~2022. Based on that evaluation, we have concluded that our disclosure controls and procedures were not effective as of ~~June~~September 30, ~~2021~~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 intends~~has continued to take ~~additional steps,~~measures to mitigate the issues identified and implement a functional system of internal ~~control~~controls over financial reporting. ~~Such~~Specifically, the Company has brought on board an experienced Chief Financial Officer, and retained the services of outside consultants to review the Company’s accounting practices, bank records, transactions with affiliates and/or related parties, expense reimbursement practices and vendor payment practices. 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. The Special Committee completed its assigned directives on April 29, 2022. The directives included measures that included or will include, but not be limited ~~to:~~to, hiring of additional employees in ~~our finance and~~the Company’s 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.

~~Table of Contents~~

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 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 allege breach of a license agreement between the Plaintiffs andMay 13, 2022, the Company ~~entered into~~made a claim against Michael Handelman, its former Chief Financial Officer, asserting that he misappropriated Company funds and shares of common stock, and failed to file the required SEC reports on ~~or about September~~Form 3 ~~2015. Lion alleges breach~~and Form 4 regarding each acquisition and disposition of ~~a consulting agreement between Lion and~~Company’s common stock. The Company seeks monetary damages estimated at $370,000; the ~~Company entered into on or about September 1, 2015. Plaintiffs seek actual damages of $400,000 for breach of the license agreement, and Lion seeks the fair market value of the number~~return of shares of common stock received without authorization and the disgorgement of any profits earned from the sale of those shares; a full accounting for all sums charged on the Company’s debit card, with payment to the Company for any charges that cannot be demonstrated to have a corporate purpose; an order directing Michael Handelman to make all filings required by Section 16(a) of the 1934 Act; an award of all sums and shares improperly issued to members of Handelman’s family; and an award of the Company’s attorneys’ fees and any forum and arbitration fees.

As a component of Mr. Handelman’s contract with the Company, disputes shall be fully addressed and finally resolved by binding arbitration conducted by the American Arbitration Association (AAA) in New York City, New York, in accordance with its National Employment Dispute Resolution rules. In connection with any such arbitration, the Company shall bear all costs not otherwise borne by a plaintiff in a court proceeding. The Company agrees that any decisions of the Arbitration Panel will be binding and enforceable in any state that the Company conducts the operation of its business. In accordance with California Labor Laws, GT Biopharma ~~Inc. that at~~has designated Los Angeles, California as the ~~time of judgment represent 15,000,000 shares of such stock as of September 1, 2015.~~venue for this arbitration. The Company ~~filed an answer~~is awaiting to ~~the complaint denying many allegations and asserting affirmative defenses. Discovery has commenced, and trial is scheduled for May 2, 2022.~~receive a date of hearing from AAA.

Item ~~1A. Risk Factors~~6. Exhibits

Exhibit

Description

Filed Herewith

Form

Number

SEC File No.

Filing Date

3.1

Restated Certificate of Incorporation as filed in Delaware September 10, 1996 and as thereafter amended through March 1, 2002

10-KSB

3.A

000-08092

4/1/2002

3.2

Certificate of Amendment to the Restated Certificate of Incorporation of GT Biopharma, Inc., dated February 9, 2011

10-K

3.2

000-08092

3/31/2011

3.3

Certificate of Amendment to the Restated Certificate of Incorporation of GT Biopharma, Inc., effective as of July 19, 2017

8-K/A

3.1

000-08092

3/15/2018

3.4

Certificate of Amendment to the Restated Certificate of Incorporation of GT Biopharma, Inc., effective as of February 10, 2021

8-K

3.1

001-40023

2/11/2021

3.5

Certificate of Amendment to Restated Certificate of Incorporation of the Registrant effective June 13, 2022

DEF 14A

001-40023

4/29/2022

3.6

Bylaws, as restated effective September 7, 1994 and as amended through April 29, 2003

10-QSB

000-08092

8/14/2003

4.1

Certificate of Designation of Preferences, Rights and Limitations of Series K Preferred Stock of GT Biopharma, Inc., dated April 3, 2019

10-K

4.2

001-40023

4/16/2021

10.1

Settlement and Investment Agreement dated August 24, 2022, by and between GT Biopharma, Inc. and Cytovance Biologics, Inc.+

31.1

Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.

31.2

Certification of Principal Financial Officer and Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.

32.1

Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Principal Financial Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002

101.INS

Inline XBRL Instance Document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

*	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.
+	The Registrant has omitted portions of this exhibit that are both not material and the type of information that the Registrant treats as private or confidential.

Information regarding risk factors appears under “Risk Factors” included in Part I. Item 1A. Risk Factors. of our Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes from the risk factors previously disclosed in the above-mentioned periodic report.

~~Item 2. Unregistered Sales of Securities and Use of Proceeds~~

The Company made the following issuances of its unregistered equity securities pursuant to exemptions contained in Section 4(a)(2) or 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”) and/or Rule 506 of Regulation D promulgated thereunder that have not previously been reported:

~~2,826 shares of common stock upon exercise of warrants for cash during the quarter ended June 30, 2021.~~

~~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.

~~Table of Contents~~

~~Item 6. Exhibits~~SIGNATURES

Incorporated by Reference

Exhibit

Description

Filed
Herewith

Form

Number

SEC File No.

Filing Date

3.1

Restated Certificate of Incorporation as filed in Delaware September 10, 1996 and as thereafter amended through March 1, 2002

10-KSB

3.A

000-08092

04/01/2002
3.2

Certificate of Amendment to the Restated Certificate of Incorporation of GT Biopharma, Inc., dated February 9, 2011

10-K

3.2

000-08092

03/31/2011
3.3

Certificate of Amendment to the Restated Certificate of Incorporation of GT Biopharma, Inc., effective as of July 19, 2017

8-K/A

3.1

000-08092

03/15/2018
3.4

Certificate of Amendment to the Restated Certificate of Incorporation of GT Biopharma, Inc., effective as of February 10, 2021

8-K

3.1

001-40023

02/11/2021
3.5

Bylaws, as restated effective September 7, 1994 and as amended through April 29, 2003

10-QSB

3

000-08092

08/14/2003
4.1

Certificate of Designation of Preferences, Rights and Limitations of Series J-1 Preferred Stock of GT Biopharma, Inc., dated April 3, 2019

8-K

3.1

000-08092

04/05/2019
4.2

Certificate of Designation of Preferences, Rights and Limitations of Series K Preferred Stock of GT Biopharma, Inc., dated April 3, 2019

10-K

4.2

001-40023

04/16/2021
10.1

Employment Agreement with Dr. Gregory Berk, dated April 23, 2021.

10-Q

10.3

001-40023

05/17/2021
31.1

Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.

X

31.2

Certification of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended

X

32.1*

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).

X

32.2*

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).

X

101.INS

Inline XBRL Instance Document.

X

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

X

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

X

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

X

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

X

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

X

*
This certification shall not be deemed “filed” for purposes of Section 18 of the 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.

~~Table of Contents~~

~~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: ~~December 29, 2021~~ October 31, 2022	By:	/s/ ~~Gavin Choy~~	Manu Ohri
		~~Acting~~ Manu Ohri
		Chief Financial Officer

GT BIOPHARMA, INC AND SUBSIDIARIES
Condensed Consolidated Balance Sheets

	June 30,			December 31,
	2021			2020
ASSETS:	(unaudited)
Current assets
Cash and cash equivalents	$	39,505,000		$	5,297,000
Prepaid expenses		62,000			364,000
Total Current Assets	$	39,567,000		$	5,661,000

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities
Accounts payable	$	1,497,000		$	2,243,000
Accrued expenses		906,000			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		842,000			383,000
Total current liabilities		3,276,000			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 June 30, 2021 and December 31, 2020, respectively		1,000			1,000
Series J-1 - 0 and 2,353,548 shares issued and outstanding at June 30, 2021 and December 31, 2020 , respectively		0			2,000
Series K- none issued and outstanding at June 30, 2021 and December 31, 2020 , respectively		0			0
Common stock, par value $0.001, 2,000,000,000 shares authorized, 28,144,077 and 5,218,122 shares issued and outstanding as of June 30, 2021 and December 31, 2020 , respectively		28,000			5,000
Common stock issuable, 3,152,000 shares at June 30, 2021		10,716,000			0
Additional paid in capital		655,655,000			566,356,000
Accumulated deficit		(629,940,000	)		(595,628,000	)
Non Controlling Interest		(169,000	)		(169,000	)
Total stockholders' equity (deficit)		36,291,000			(29,433,000	)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$	39,567,000		$	5,661,000

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

GT BIOPHARMA, INC AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)

	For the Three Months ended						For the Six Months ended
	June 30,						June 30,
	2021			2020			2021			2020
	(unaudited)			(unaudited) (as restated)			(unaudited)			(unaudited) (as restated)
Revenues	$	0		$	0		$	0		$	0

Operating Expenses:
Research and development		639,000			12,000			2,279,000			336,000
Selling, general and administrative (including $577,000 and $14,873,000 of stock compensation to officers and directors in 2021 during the three and six months ended June 30, 2021)		3,742,000			1,546,000			31,104,000			2,292,000

Loss from Operations		4,381,000			1,558,000			33,383,000			2,628,000

Other Expense
Change in fair value of derivative liability		480,000			0			459,000			0
Settlement expense		0			11,206,000			0			11,206,000
Interest expense		0			4,658,000			696,000			5,296,000
Total Other Expense, net		480,000			15,864,000			1,155,000			16,502,000

Net Loss	$	(4,861,000	)	$	(17,422,000	)	$	(34,538,000	)	$	(19,130,000	)

Net loss per share
Basic and diluted	$	(0.15	)	$	(4.12	)	$	(1.39	)	$	(4.58	)

Weighted average common shares outstanding
Basic and diluted		33,516,428			4,229,408			24,925,908			4,175,211

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

	September 30			December 31,
	2022			2021
		(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	2,465		$	8,968
Short-term investments		18,319			23,011
Prepaid expenses and other current assets		88			190
Total Current Assets		20,872			32,169

Operating lease right-of-use asset		190			-
Deposits		9			-
TOTAL ASSETS	$	21,071		$	32,169

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	3,325		$	8,220
Accrued expenses		1,537			1,901
Current operating lease liability		106			-
Derivative liability		57			138
Total Current Liabilities		5,025			10,259

Non-current operating lease liability		92			-
Total Liabilities		5,117			10,259

Stockholders’ Equity
Convertible Preferred stock, par value $0.01, 15,000,000 shares authorized
Series C - 96,230 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		1			1
Common stock, par value $0.001, 250,000,000 shares authorized, 32,507,618 shares and 32,061,989 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		33			32
Common stock issuable zero shares and 327,298 shares at September 30, 2022 and December 31, 2021, respectively		-			1,113
Additional paid in capital		684,804			674,348
Accumulated deficit		(668,884	)		(653,584	)
Total Stockholders’ Equity		15,954			21,910
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	21,071		$	32,169


	For the three months ended						For the nine months ended
	September 30,						September 30,
	2022			2021			2022			2021
	(unaudited)			(unaudited)			(unaudited)			(unaudited)

Revenues	$	-		$	-		$	-		$	-

Operating Expenses
Research and development (includes $201 and $0 of expense from stock compensation to officers, employees and directors vesting during the three months ended September 30, 2022 and 2021, and $327 and $0 for the nine months ended September 30, 2022 and 2021, respectively)		2,743			1,008			5,969			3,287
Selling, general and administrative (includes $2,743 and $577 of expense from stock compensation granted to officers, employees and directors during the three months ended September 30, 2022 and 2021, and $3,527 and $15,450 for the nine months ended September 30, 2022 and 2021, respectively)		4,280			4,946			9,510			36,050
												��
Loss from Operations		7,023			5,954			15,479			39,337

Other (Income) Expense
Interest income		(107	)		(32	)		(151	)		(32	)
Interest expense		-			-			-			696
Change in fair value of derivative liability		(58	)		(502	)		(81	)		(43	)
Unrealized loss on marketable securities		23			33			53			33
Total Other (Income) Expense		(142	)		(501	)		(179	)		654

Net Loss	$	(6,881	)	$	(5,453	)	$	(15,300	)	$	(39,991	)

Net loss per share – basic and diluted	$	(0.22	)	$	(0.17	)	$	(0.48	)	$	(1.54	)

Weighted average common shares outstanding – basic and diluted		31,380,634			31,381,282			31,723,792			25,945,827

	Preferred Shares						Common Shares				Common Shares Issuable						Additional Paid in			Accumulated			Non 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 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			8,261,809		8,000		3,152,000			10,716,000			28,075,000			0			0			38,799,000

Common shares issued upon exercise of warrants		-			0			3,047,818		3,000		-			0			16,293,000			0			0			16,296,000

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			2,050,060		2,000		-			0			8,777,000			0			0			8,779,000
																											-
Equity compensation to officers and board of directors		-			0			3,739,295		4,000		-			0			14,869,000			0			0			14,873,000
																											-
Net loss																					(34,538,000	)					(34,538,000	)

Balance, June 30, 2021		96,230		$	1,000			28,144,077	$	28,000		3,152,000		$	10,716,000		$	655,655,000		$	(629,940,000	)	$	(169,000	)	$	36,291,000

Balance, March 31, 2021		96,230		$	1,000			20,517,431	$	21,000		7,634,000		$	25,956,000.00		$	623,287,000		$	(625,079,000	)	$	(169,000	)	$	24,017,000

Common shares issued upon conversion of notes payable		-			0			4,482,487		4,000		(4,482,000	)		(15,240,000	)		15,232,000			0			0			(4,000	)

Common shares issued upon exercise of warrants		-			0			2,953,394		3,000		-			0			16,232,000			0			0			16,235,000

Issuance of common stock for services		-			0			92,286		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																					(4,861,000	)					(4,861,000	)

Balance, June 30, 2021		96,230		$	1,000			28,144,077	$	28,000		3,152,000		$	10,716,000		$	655,655,000		$	(629,940,000	)	$	(169,000	)	$	36,291,000

Balance, December 31, 2019		2,449,778		$	3,000			4,104,982	$	4,000		-		$	0		$	548,184,000		$	(567,332,000	)	$	(169,000	)	$	(19,310,000	)

Beneficial conversion feature of convertible notes		-			0			62,647		0		-			0			213,000			0			0			213,000

Issuance of common stock for settlement of litigation		-			0			205,882		0		-			0			29,000		$	0			0			29,000

Common shares issued upon conversion of notes payable		-			0			63,882		0		0			-			1,910,000			0			0			1,910,000

Equity compensation		-			0			-		0		-			0			146,000			0			0			146,000

Fair value of amended convertible notes and warrants		-			-			-		-		-			-			8,643,000			-			-			8,643,000

Net loss		-			0			-		0		-			0						(19,130,000	)		0			(19,130,000	)

Balance, June 30, 2020		2,449,778		$	3,000			4,437,394	$	4,000		-		$	0		$	559,125,000		$	(586,462,000	)	$	(169,000	)	$	(27,499,000	)

Balance, March 31, 2020		2,449,778		$	3,000			4,152,908	$	4,000		-		$	0		$	548,347,000		$	(569,040,000	)	$	(169,000	)	$	(20,855,000	)

Beneficial conversion feature of convertible notes		-			0			62,647		0		-			0			213,000			0			0			213,000

Issuance of common stock for settlement of litigation		-			0			205,882		0		-			0			29,000			0			0			29,000

Common shares issued upon conversion of notes payable		-			0			15,957		0		-			0			1,747,000			0			0			1,747,000

Equity compensation		-			0			-		0		-			0			146,000			0			0			146,000

Fair value of amended convertible notes and warrants		-			-			-		-		-			-			8,643,000			-			-			8,643,000

Net loss		-			0			-		0		-			0						(17,422,000	)		0			(17,422,000	)

Balance, June 30, 2020		2,449,778		$	3,000			4,437,394	$	4,000		-		$	0		$	559,125,000		$	(586,462,000	)	$	(169,000	)	$	(27,499,000	)

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

	June 30, 2021		June 30, 2020

A. Options to purchase common stock		-		3
B. Warrants to purchase common stock		2,365,473		106,650
C. Convertible notes payable		-		4,678,823
D. Convertible Series J-1 Preferred stock		-		692,220
E. Convertible Series C Preferred stock		7		7
		2,365,480		5,477,703

	September 30, 2022 (Unaudited)
			Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Short-term investments	$	18,372	$	—	$	(53	)	$	18,319
Total	$	18,372	$	—	$	(53	)	$	18,319

	December 31, 2021
			Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Short-term investments	$	23,040	$	—	$	(29	)	$	23,011
Total	$	23,040	$	—	$	(29	)	$	23,011

	Fair Value		Level 1		Level 2		Level 3
	September 30, 2022 (Unaudited)
	Fair Value		Level 1		Level 2		Level 3
Money market funds	$	2,319	$	2,319	$	—	$	—
Corporate notes and commercial paper		18,319		18,319		—		—
Total financial assets	$	20,638	$	20,638	$	—	$	—

	September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021
	Three Months Ending						Nine Months Ending
	September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Beginning balance	$	115,000		$	842,000		$	138,000		$	383,000
Issuance of warrants		—			—			—			—
Change in fair value	$	(58,000	)	$	(502,000	)	$	(81,000	)	$	(43,000	)
Extinguishment		—			—			—			—
Ending balance	$	57,000		$	340,000		$	57,000		$	340,000

	June 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

	Number of Warrants			Weighted Average Exercise Price
Outstanding at December 31, 2020:		221,041		$	3.40
Granted		5,192,250			5.50
Forfeited/canceled		-			-
Exercised		(3,047,818	)		5.50
Outstanding at June 30, 2021		2,365,473		$	5.38
Exercisable at June 30, 2021		2,365,473		$	5.38

Year ending	Amount
2021 remaining (remaining 6 months)	$	1,211,000
2022		2,460,000
2023		2,460,000
2024		2,017,000
2025 and thereafter		591,000
Total	$	8,739,000

	Previously Reported			Adjustment			As Restated
Operating expense	$	(7,221,000	)	$	(8,643,000	)	$	(15,864,000	)
Net loss		(8,779,000	)		(8,643,000	)		(17,422,000	)
Net Loss per common share - basic and undiluted	$	(2.08	)	$	(2.04	)	$	(4.12	)