Pat. No. | Title | Country | Status |
U.S. Patent Application USSN 14/237,494Number 62/443,904 | P62-zz chemical inhibitorUse and composition for treating Myasthenia Gravis | US | Expired |
U.S. Patent Application Number 62/449,699 | Neostigmine combination for treating Myasthenia Gravis | US | Expired |
U.S. Patent Application Number 62/536,595 | Method and composition for treating Myasthenia Gravis | US | Pending |
ChinaU.S. Patent Application
CN201280048718 Number 62/536,580 | P62-zz chemical inhibitorNeostigmine pharmaceutical combination for treating Myasthenia Gravis | ChinaUS | Pending |
| | | |
PCT Application Number PCT/US/18/12754 | Use and composition for treating Myasthenia Gravis | PCT | Claims priority from US 62/443,904 |
Taiwan Application Number 107100813 | | TW | Awaiting FC Report |
PCT Application Number PCT/US18/014700 | Neostigmine pharmaceutical combination for treating Myasthenia Gravis | PCT | Claims priority from US 62/449,699 |
Taiwan Application Number 101702591 | | TW | Awaiting FC Report |
14
Patent Application for GTP-011MultiCell Immunotherapeutics, Inc. (MCIT) License Agreement. Oxis licensed exclusive rights to three antibody-drug conjugates (ADCs) that MCIT will prepare for further evaluation
One patent application filed by Oxis as prospective therapeuticsGTP in 2017 with the U.S. PTO protects a 72-hour patch of oxybutynin for the treatment of triple-negative breast cancer, and multiple myeloma and associated osteolytic bone disease. Undermotion sickness. We plan to file a PCT extension in 2018. All patents list below are owned by the termsCompany.
Appl. No. | Title | Country | Status |
U.S. Patent Application Number 62/440,575 | Use and composition for preventing and treating motion sickness | US | Expired |
US Patent Application Number 62/595,667 | Use, method, and device for the prevention and treatment of motion sickness | US | Pending* |
PCT Application Number PCT/US/17/68944 | Use and composition for preventing and treating motion sickness | PCT | Claims priority from US 62/440,575 |
Taiwan Application Number 107100079 | | TW | Awaiting FC Report |
* This application is pending, but was used as priority document of the agreement, MCIT will develop three ADC product candidates which contain Oxis' lead drug candidates OXS-2175 and OXS-4235. Oxis paid MCIT a license fee of $500,000 and will reimburse MCIT up to $1.125 million forPCT ‘944, including its development costs to make the three ADCs exclusively licensed to Oxis. Assuming all clinical development milestones are achieved and manufacturing rights to the three ADCs purchased, Oxis will pay MCIT an additional sum of $22.75 million and pay a royalty of 3% of net yearly worldwide sales upon marketing approval of the ADCs.subject matter
MCIT's ADC platform technology is based on unique multivalent, cleavable linkers that allow drugs tethered to the antibody to be released intracellularly or extracellularly upon binding of the antibody to the target cell. Additionally, the MCIT's ADC technology platform allows multiple drugs to be attached per targeting antibody, and to release the drugs in their original form without modification of the drug.
Research and DevelopmentEmployees
Expenditures for research and development activities related to continuing operations were $1,000,000 and $-0- for the years ended December 31, 2015 and 2014, respectively. During the six months ended June 30, 2016 and 2015, we incurred $475,000 and $250,000 of research and development expenses.
Our currently projected expenditures for 2016 include approximately $4-$5 million for research and development. The actual cost of our programs could differ significantly from our current projections if we change our planned development process. In the event that actual costs of our clinical program, or any of our other ongoing research activities, are significantly higher than our current estimates, we may be required to significantly modify our planned level of operations.
There is a risk that any drug discovery and development program may not produce revenue because of the risks inherent in drug discovery and development. The successful development of any product candidate is highly uncertain. It is difficult to reasonably estimate or know the nature, timing and costs of the efforts necessary to complete the development of, or the period in which material net cash inflows are expected to commence from any product candidate, due to the numerous risks and uncertainties associated with developing drugs. Any failure to complete any stage of the development of products in a timely manner could have a material adverse effect on our operations, financial position and liquidity.
Competition
The biotechnology and pharmaceutical industries are subject to rapid technological change. Competition from domestic and foreign biotechnology companies, large pharmaceutical companies and other institutions is intense and expected to increase. A number of companies are pursuing the development of pharmaceuticals in our targeted areas. According to the Pharmaceutical Manufacturers Research Association, at the end of 2015 there were 168 drugs in development for the treatment of breast cancer, and there were 135 drugs in development for the treatment of lymphomas (blood cell cancers including multiple myeloma).
Government Regulation
United States
Our research and development activities and the future manufacturing and marketing of any products we develop are subject to significant regulation by numerous government authorities in the United States and other countries. In the United States, the Federal Food, Drug and Cosmetic Act and the Public Health Service Act govern the testing, manufacture, safety, efficacy, labeling, storage, record keeping, approval, advertising and promotion, and distribution of our drug candidates and any products we may develop. In addition, this regulatory framework is subject to changes that may adversely affect approval, delay an application or require additional expenditures.
The steps required before a pharmaceutical compound may be marketed in the United States include: preclinical laboratory and animal testing; submission of an IND to the FDA, which must become effective before clinical trials may commence; conducting adequate and well-controlled clinical trials to establish the safety and efficacy of the drug; submission of a New Drug Application, or NDA, or Biologics License Application, or BLA, to the FDA; satisfactory completion of an FDA pre-approval inspection of the manufacturing facilities to assess compliance with cGMP; and FDA approval of the NDA or BLA prior to any commercial sale or shipment of the drug. In addition to obtaining FDA approval for each product, each drug-manufacturing establishment used must be registered with the FDA and be operated in conformity with cGMP. Drug product manufacturing facilities may also be subject to state and local regulatory requirements.
Preclinical testing includes laboratory evaluation of product chemistry and animal studies to assess the safety and efficacy of the product and its formulation. The results of preclinical testing are submitted to the FDA as part of an IND, and, unless the FDA objects, the IND becomes effective 30 days following its receipt by the FDA.
Clinical trials involve administration of the study drug to healthy volunteers and to patients diagnosed with the condition for which the study drug is being tested under the supervision of qualified clinical investigators. Clinical trials are conducted in accordance with protocols that detail the objectives of the study, the parameters to be used to monitor safety and the efficacy criteria to be evaluated. Each protocol is submitted to the FDA as part of the IND. Each clinical trial is conducted under the auspices of an independent Institutional Review Board, or IRB, in the United States, or Ethics Committee, or EC, outside the United States, for each trial site. The IRB or EC considers, among other matters, ethical factors and the safety of human clinical trial subjects.
Clinical trials are typically conducted in three sequential phases, but the phases may overlap or be repeated. In Phase 1 clinical trials, the drug is initially introduced into healthy human subjects or patients and is tested for adverse effects, dosage tolerance, pharmacokinetics, and clinical pharmacology. Phase 2 clinical trials involve the testing of a limited patient population in order to characterize the actions of the drug in targeted indications, in order to determine drug tolerance and optimal dosage and to identify possible adverse side effects and safety risks. When a compound appears to be effective at a specific dosage and have an acceptable safety profile in Phase 2 clinical trials, Phase 3 clinical trials are undertaken to further evaluate and confirm clinical efficacy and safety within an expanded patient population at multiple clinical trial sites. The FDA reviews the clinical plans and monitors the results of the trials and may discontinue the trials at any time if significant safety issues arise. Similarly, an IRB or EC may suspend or terminate a trial at a study site that is not being conducted in accordance with the IRB or EC's requirements or that has been associated with unexpected serious harm to subjects.
The results of preclinical testing and clinical trials are submitted to the FDA for marketing approval in the form of an NDA or BLA. The submission of an NDA or BLA also requires the payment of user fees, but a waiver of the fees may be obtained under specified circumstances. The testing and approval process is likely to require substantial time, effort and resources and there can be no assurance that any approval will be granted on a timely basis, if at all, or that conditions of any approval, such as warnings, contraindications, or scope of indications will not materially impact the potential market acceptance and profitability of the drug product. Data obtained from clinical trials are not always conclusive, and the FDA may interpret data differently than we interpret the same data. The FDA may refer the application to an advisory committee for review, evaluation and recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it generally follows such recommendations. The approval process is affected by a number of factors, including the severity of the disease, the availability of alternative treatments and the risks and benefits of the product demonstrated in clinical trials.
Additional preclinical testing or clinical trials may be requested during the FDA review period and may delay any marketing approval. After FDA approval for the initial indications, further clinical trials may be necessary to gain approval for the use of the product for additional indications. In addition, after approval, certain types of changes to the approved product, such as manufacturing changes, are subject to further FDA review and approval. The FDA mandates that adverse effects be reported to the FDA, and the regulatory agency may also require post-marketing testing to continue monitoring for expected and unexpected adverse effects, which can involve significant expense. Adverse effects observed during the commercial use of a drug product or which arise in the course of post-marketing studies can result in the need for labeling revisions, including additional warnings and contraindications; and if the findings significantly alter the risk/benefit assessment, the potential withdrawal of the drug from the market.
Among the conditions for FDA approval is the requirement that the prospective manufacturer's quality control and manufacturing procedures conform to the FDA's cGMP requirements. Domestic manufacturing facilities are subject to biannual FDA inspections and foreign manufacturing facilities are subject to periodic inspections by the FDA or foreign regulatory authorities. If the FDA finds that a company is not operating in compliance with cGMPs, the continued availability of the product can be interrupted until compliance is achieved; and if the deficiencies are not corrected within a reasonable time frame, the drug could be withdrawn from the market. In addition, the FDA strictly regulates labeling, advertising and promotion of drugs. Failure to conform to requirements relating to licensing, manufacturing and promoting drug products can result in informal or formal sanctions, including warning letters, injunctions, seizures, civil and criminal penalties, adverse publicity and withdrawal of approval.
Foreign
We are also subject to numerous and varying foreign regulatory requirements governing the design and conduct of clinical trials and marketing approval for pharmaceutical products to be marketed outside of the United States. The approval process varies among countries and regions and can involve additional testing; and the time required to obtain approval may differ from that required to obtain FDA approval.
The steps to obtain approval to market a pharmaceutical compound in the European Union include: preclinical laboratory and animal testing; conducting adequate and well-controlled clinical trials to establish safety and efficacy; submission of a Marketing Authorization Application, or MAA; and the issuance of a product marketing license by the European Commission prior to any commercial sale or shipment of drug. In addition to obtaining a product marketing license for each product, each drug manufacturing establishment must be registered with the European Medicines Agency, or EMA, must operate in conformity with European good manufacturing practice and must pass inspections by the European health authorities.
Upon receiving the MAA, the Committee for Human Medicinal Products, or CHMP, a division of the EMA, will review the MAA and may respond with a list of questions or objections. Answers to questions posed by the CHMP may require additional tests to be conducted. Responses to the list of questions or objections must be provided to and deemed sufficient by the CHMP within a defined time frame. Ultimately, a representative from each of the European Member States will vote whether to approve the MAA.
Foreign regulatory approval processes include all of the risks associated with obtaining FDA approval, and approval by the FDA does not ensure approval by the health authorities of any other country.
Employees
As of June 30, 2016,December 31, 2018, we had two employees, the chief executive officer and chief financial officer of the company.three employees. Many of our activities are out-sourcedoutsourced to consultants who provide services to us on a project basis. As business activities require and capital resources permit, we will hire additional employees to fulfill our company'scompany’s needs.
Properties
Our executive offices are located at 100 South Ashley Drive, Suite 600, Tampa, FL, 33602.Form and Year of Organization
In 1965, the corporate predecessor of GT Biopharma, Diagnostic Data, Inc. was incorporated in the State of California. Diagnostic Data changed its incorporation to the State of Delaware in 1972; and changed its name to DDI Pharmaceuticals, Inc. in 1985. In 1994, DDI Pharmaceuticals merged with International BioClinical, Inc. and Bioxytech S.A. and changed its name to OXIS International, Inc. On July 17, 2017, we amended our Certificate of Incorporation for the purpose of changing our name from Oxis International, Inc. to GT Biopharma, Inc.
Legal ProceedingsRecent Developments
Financing
InOn May 2015, Aaion Partners Inc,22, 2019, GT Biopharma, Inc. (the "Company") entered into a consulting firm, filedSecurities Purchase Agreement with ten purchasers (individually, a breach of contract action against"Purchaser," and collectively, the Company in the Superior Court of California County of Los Angeles, Case No: BC581098. The lawsuit seeks payment under a consulting agreement. In July, 2015, the Company filed a cross-claim against Aaion Partners Inc. for breach of contract and tort claims. In December 2015, we settled this claim for $150,000"Purchasers") pursuant to be made in three cash payments and 11,429 shares of restricted common stock. The Company paid $50,000 of the cash due and issued the stock owed. As of this filing,which the Company has not madeissued to the 2 remaining cash paymentsPurchasers Convertible Debentures in an aggregate principal amount of $1,300,000 (the "Debentures"), which Debentures are convertible into the Company's common stock (the "Common Stock") at a price of $0.35 per share. The Company and is in default in the settlement agreement.each Purchaser also entered into a Registration Rights Agreement.
On June 23, 2016, the Company was served with a complaint filed in the Circuit CourtThe issuance of the 13th Judicial CircuitDebentures was made in reliance on the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"), for the offer and for Hillsborough County, FL, Case No. 16-CA-004791. Suit was brought againstsale of securities not involving a public offering and Regulation D promulgated under the Company by Lippert/Heilshorn and Associates, Inc. who is alleging they are owed compensation for consulting services provided to the company. They are seeking payment of $73,898. The Company has engaged legal counsel to answer the complaint.Securities Act.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Until May 2009, ourOn February 4, 2019, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the purchasers identified on the signature pages thereto (individually, a “Purchaser,” and collectively, the “Purchasers”), pursuant to which the Company issued to the Purchasers, on February 4, 2019, Secured Convertible Notes in an aggregate principal amount of $1,352,224 (the “Notes”), consisting of gross proceeds of $1,052,224 and settlement of existing debt of $300,000, which Notes shall be convertible at any time after issuance into shares (the “Conversion Shares”) of the Company’s common stock, was tradedpar value $0.001 per share (the “Common Stock”), at a conversion price of $0.60 per share (the “Conversion Price”).
The Notes accrue interest at the rate of 10% per annum and mature on August 2, 2019. Interest on the OTC Bulletin Board ("OTCBB") underNotes is payable in cash or, at a Purchaser’s option, in shares of Common Stock at the symbol "OXIS." From May 20, 2009 until March 11, 2010, our commonConversion Price. Upon the occurrence of an event of default, interest accrues at 18% per annum. The Notes contain customary default provisions, including provisions for potential acceleration, and covenants, including negative covenants regarding additional indebtedness and dividends. The Conversion Price is subject to adjustment due to certain events, including stock was traded on Pink OTC Markets Inc. trading platform underdividends and stock splits, and is subject to reduction in certain circumstances if the symbol "OXIS." Since January 2015, our common stockCompany issues Common Stock or Common Stock equivalents at an effective price per share that is quoted onlower than the OTCQB underConversion Price then in effect. The Company may only prepay the "OXIS" trading symbol.
Trading in our common stock has fluctuated greatly duringNotes with the past year. Accordingly, the prices for our common stock quoted on the OTCQB or Pink OTC Markets Inc. may not necessarily be reliable indicatorsprior written consent of the value of our common stock. The following table sets forth the high and low bid prices for shares of our common stock for the quarters noted, as reported on the OTCQB and the Pink OTC Markets Inc. The following price information reflects inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
YEAR | PERIOD | HIGH | LOW |
| | | |
Fiscal Year 2014 | First Quarter | 2.50 | 0.75 |
| Second Quarter | 0.80 | 3.25 |
| Third Quarter | 6.25 | 1.25 |
| Fourth Quarter | 7.50 | 2.50 |
Fiscal Year 2015 | First Quarter | 13.50 | 5.13 |
| Second Quarter | 11.78 | 5.03 |
| Third Quarter | 6.23 | 3.50 |
| Fourth Quarter | 5.23 | 2.93 |
Fiscal Year 2016 | First Quarter | 3.20 | 0.41 |
| Second Quarter | 0.60 | 0.31 |
Our common stock is also quoted on several European based exchanges including Berlin (OXI.BE), Frankfurt (OXI.DE), the Euronext (OXI.NX) and Paris, (OXI.PA). The foregoing trading prices exclude trading on these foreign stock markets.
respective Purchasers thereof.
Stockholders
AsContemporaneously with the execution and delivery of June 30, 2016, there were 1,330 stockholdersthe Purchase Agreement, on February 4, 2019, the Company and certain of record,its wholly-owned subsidiaries entered into a Security Agreement (the “Security Agreement”) with Alpha Capital Anstalt, as collateral agent on behalf of the Purchasers, and with the Purchasers, pursuant to which total does not include stockholders who hold their sharesthe Purchasers have been granted a first-priority security interest in "street name." The transfer agent for our common stock is ComputerShare, whose address is 350 Indiana Street, Golden, CO 80401.
Dividends
We have not paid any dividends on our common stock to date and do not anticipate that we will pay dividends in the foreseeable future. Any payment of cash dividends on our common stock in the future will be dependent upon the amount of funds legally available, our earnings, if any, our financial condition, our anticipated capital requirements and other factors that the Board of Directors may think are relevant. However, we currently intend for the foreseeable future to follow a policy of retaining all of our earnings, if any, to finance the development and expansion of our business and, therefore, do not expect to pay any dividends on our common stock in the foreseeable future.
Equity Compensation Plan Information
The following is a summary of our equity compensation plans at June 30, 2016:
Plan Category | | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) | | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) |
Equity compensation plans approved by security holders (1) | | 374,801 | | $4.78 | | 133,445 |
Equity compensation plans not approved by security holders | | - | | - | | - |
Total | | 374,801 | | $4.78 | | 133,445 |
(1) | As of June 30, 2016, we had options issued and outstanding to purchase 967 shares of common stock under our 2003 Stock Incentive Plan, -0- shares of our common stock under the 2010 Plan and 373,833 shares of common stock under our 2014 Stock Incentive Plan. |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Until the end of 2008, we were engaged in the business of developing and selling clinical and research assay products and out-licensing certain therapeutic compounds addressing conditions and diseases associated with oxidative stress. During 2008, we lost our majority-owned subsidiary, BioCheck, Inc., which was engaged in the production of enzyme immunoassay diagnostic kits for clinical laboratories, and in December 2008 we sold substantially all of the assets of our research assay product linethe Company and such subsidiaries securing (i) an aggregate principal amount of $1,352,224 of Notes and (ii) an aggregate principal amount of $9,058,962 of the Company’s 10% Senior Convertible Debentures issued on August 2, 2018, September 7, 2018 and September 24, 2018 held by such Purchasers.
The Purchase Agreement contains customary representations, warranties and covenants, including covenants, subject to Percipio Biosciences, Inc. Commencing in 2009, our focus shifted fromcertain exceptions, that the clinical and research assay business to developing and marketing nutraceutical productsCompany, until the date on which less than 10% of the Notes are outstanding, shall not affect any Variable Rate Transaction (as defined in the field of oxidative stress reduction, with a focus on productsPurchase Agreement) and that, include EGT™for as long as a component. We conducted limited operations,Purchaser holds any Notes or Conversion Shares, the Company shall amend the terms and had limited revenues from these products in 2013conditions of the Purchase Agreement and in 2014. the transactions contemplated thereby with respect to such Purchaser to give such Purchaser the benefit of any terms or conditions under which the Company agrees to issue or sell any Common Stock or Common Stock equivalents that are more favorable to an investor than the terms and conditions granted to such Purchaser under the Purchase Agreement and the transactions contemplated thereby.
In July 2014, we began pursuingaddition, the acquisition of novel therapeutics from various educational and research institutions.
As shown inCompany entered into a registration rights agreement (the “Registration Rights Agreement”) with the accompanying consolidated financial statements,Purchasers, pursuant to which the Company has incurred an accumulated deficit of $119,190,000 through June 30, 2016. On a consolidated basis,agreed to file, within 14 days after February 4, 2019, one or more registration statements on Form S-3 (or, if Form S-3 is not then available to the Company, had cashsuch form of registration that is then available to effect a registration for resale of the subject securities) covering the resale of all Conversion Shares, subject to certain penalties set forth in the Registration Rights Agreement. The Form S-3 was filed by the Company on February 14, 2019.
On May 22, 2019, the Company consummated an additional financing in the same format and cash equivalentsstructure as the February 4, 2019, financing. The notes issued in the May 22, 2019, financing totaled $1,300,000 in the aggregate.
Results of $355,000 at June 30, 2016. BecauseOperations
Comparison of the Three Months Ended March 31, 2019 and 2018
Research and Development Expenses
During the three months ended March 31, 2019 and 2018, we incurred $.8 million and $3.5 million of research and development expenses. Research and development costs decreased due primarily to the reductions employees, consultants and preclinical expenses. We anticipate our lackdirect clinical costs to increase in second half of funds,2019 upon the initiation of a phase one clinical trial of our most advanced TriKe product candidate, OXS-3550.
Selling, general and administrative expenses
During the three months ended March 31, 2019 and 2018, we will have to raise additional capital in order to fund ourincurred $3.2 million and $3.7 million of selling, general and administrative expenses. The decrease in selling, general and administrative expenses is primarily attributable the reduction of salaries.
Interest Expense
Interest expense was $.5 million and $2.9 million for the three months ended March 31, 2019 and 2018 respectively. The decrease is primarily due to a decrease related to the amortization of the original issue discount and the value of warrants issued with the January 2018 financing.
Comparison of the Fiscal Years Ended December 31, 2018 and 2017
Research and Development Expenses
During the years ended December 31, 2018 and 2017, we incurred $9.1 million and $1.1 million of research and development expenses. Thereexpenses, respectively. 2018 research and development costs increased due primarily to the addition of new employees, increased regulatory and preclinical consultant costs to support the GTB-3550 IND, higher costs to advance the CNS portfolio and position the assets for licensing efforts, and higher preclinical and clinical expenses incurred at the University of Minnesota to continue development of our immune-oncology assets. 2018 expenses also include non-cash compensation of $6.8 million. We anticipate our direct clinical and preclinical costs to continue to increase throughout 2019, totaling approximately $12 to $15 million, as we initiate a Phase 1 clinical trial of our most advanced TriKe product candidate, GTB-3550 in the first half of 2019, and initiate IND-enabling activities for GTB-C3550, and GTB-1615.
Selling, general and administrative expenses
During the years ended December 31, 2018 and 2017, we incurred $12.5 million and $134.5 million of selling, general and administrative expenses, respectively. Selling, general and administrative expenses in 2017 were driven by stock compensation related to the acquisition of Georgetown Translational Pharmaceuticals on September 1, 2017. Stock compensation expenses totaled $2.3 million and $129.1 million for in 2018 and 2017, respectively. Additional selling, general, and administrative expenses in 2018 were due to increased spending on investor relations campaigns to broaden awareness of the Company, and increased legal costs primarily associated with financing efforts. We anticipate selling, general and administrative expenses, excluding stock compensation, to range between $1 and $2 million in the coming quarters.
Loss on impairment
For the year ended December 31, 2018, the Company recorded an intangible asset impairment charge of $228.5 million related to the portfolio of CNS IPR&D assets, which represents the excess carrying value compared to fair value. The impairment charge was the result of both internal and external factors. In the 3rd quarter of 2018, the Company experienced changes in key senior management, led by the appointment of a CEO with extensive experience in oncology drug development. These changes resulted in the prioritization for immuno-oncology development candidates relative to the CNS development candidates acquired from Georgetown Translational Pharmaceuticals. In conjunction with these strategic changes, limited internal resources have delayed the development of the CNS IPR&D assets. The limited resources, changes in senior leadership, and favorable market conditions for immuno-oncology development candidates have resulted in the Company choosing to focus on development of its immuno-oncology portfolio. We are no assurancesassessing our options to realize value from the CNS IPR&D assets. In light of this shift in market strategy, the Company performed a commercial assessment and a valuation of the CNS IPR&D assets, both to assess fair value and support potential future licensing efforts. Based on the results of the independent valuation, the Company recorded the impairment charge noted above.
Interest Expense
Interest expense was $9.1 million and $8.6 million for the years ended December 31, 2018 and 2017, respectively. The increase is due to an increase in non-cash amortization of debt issuance costs associated with convertible debentures and warrants issued in January 2018.
Liquidity and Capital Resources
The Company’s current operations have focused on business planning, raising capital, establishing an intellectual property portfolio, hiring, and conducting preclinical studies and clinical trials. The Company does not have any product candidates approved for sale and has not generated any revenue from product sales. The Company has sustained operating losses since inception and expects such losses to continue over the foreseeable future. During the three months ended March 31, 2019, the Company raised $1 million through a series of issuances of convertible debentures in February. Also, as noted above, the Company raised $1.3 million on May 22, 2019, through the issuance of convertible notes. We anticipate that wecash utilized for selling, general, and administrative expenses will be able to raiserange between $1 and $2 million in the funds necessary to maintain our operations or to implement our business plan. coming quarters, while research and development expenses will vary depending on clinical activities.
The consolidated financial statements includedof the Company have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in this Annual Reportthe normal course of business. Accordingly, the financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.
The Company has incurred substantial losses and negative cash flows from operations since its inception and has an accumulated deficit of $533.4 million and cash of $51 thousand as of March 31, 2019. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales or revenue from out-licensing of its products currently in development. Substantial additional financing will be needed by the Company to fund its operations and to commercially develop its product candidates. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
Management is currently evaluating different strategies to obtain the required funding for future operations. These strategies may include but are not limited to: public offerings of equity and/or debt securities, payments from potential strategic research and development, licensing and/or marketing arrangements with pharmaceutical companies. Management has also implemented cost saving efforts, including reduction in executive salaries and reduced travel. Management believes that these ongoing and planned financing endeavors, if successful, will provide adequate financial resources to continue as a going concern for at least the next six months from the date the financial statements are issued; however, there can be no assurance in this regard. If the Company is unable to secure adequate additional funding, its business, operating results, financial condition and cash flows may be materially and adversely affected.
Critical Accounting Policies
We consider the following accounting policies to be critical given they involve estimates and judgments made by management and are important for our investors’ understanding of our operating results and financial condition.
Long-Lived Assets
Our long-lived assets include property, plant and equipment, capitalized costs of filing patent applications and goodwill and other assets. We evaluate our long-lived assets for impairment in accordance with ASC 360, whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Estimates of future cash flows and timing of events for evaluating long-lived assets for impairment are based upon management’s judgment. If any of our intangible or long-lived assets are considered to be impaired, the amount of impairment to be recognized is the excess of the carrying amount of the assets over its fair value.
Applicable long-lived assets are amortized or depreciated over the shorter of their estimated useful lives, the estimated period that the assets will generate revenue, or the statutory or contractual term in the eventcase of patents. Estimates of useful lives and periods of expected revenue generation are reviewed periodically for appropriateness and are based upon management’s judgment. Goodwill and other assets are not amortized.
Certain Expenses and Liabilities
On an ongoing basis, management evaluates its estimates related to certain expenses and accrued liabilities. We base our estimates on historical experience and on various other assumptions that we cannotbelieve to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.
Inflation
We believe that inflation has not had a material adverse impact on our business or operating results during the periods presented.
Off-balance Sheet Arrangements
We have no off-balance sheet arrangements as of June 15, 2019.
DESCRIPTION OF BUSINESS
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), Tetra-specific Killer Engager (TetraKE) and bi-specific Antibody Drug Conjugate (ADC) technology platforms. Our TriKE and TetraKE platforms generate proprietary moieties designed to harness and enhance the cancer killing abilities of a patient’s own natural killer, or NK, cells. Once bound to an NK cell, our moieties are designed to enhance the NK cell and precisely direct it to one or more specifically-targeted proteins (tumor antigens) expressed on a specific type of cancer, ultimately resulting in the cancer cell’s death. TriKEs and TetraKEs are made up of recombinant fusion proteins, can be designed to target any number of tumor antigens on hematologic malignancies, sarcomas or solid tumors and do not require patient-specific customization. They are designed to be dosed in a common outpatient setting similar to modern antibody therapeutics and are expected to have reasonably low cost of goods. Our ADC platform generates product candidates that are bi-specific, ligand-directed single-chain fusion proteins that, we believe, represent the next generation of ADCs.
We are using our TriKE and TetraKE platforms with the intent to bring to market immuno-oncology products that can treat a range of hematologic malignancies, sarcoma and solid tumors. The platforms are scalable, and we are putting processes in place to be able to produce IND-ready moieties in a timely manner after a specific TriKE or TetraKE 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 TriKEs and TetraKEs may have the ability, if approved for marketing, to be used on a stand-alone basis, 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 also believe our bi-specific, ligand-directed single-chain fusion proteins are examples of the next generation of ADCs. We believe GTB-1550 has certain properties that could result in competitive advantages over recently approved ADC products targeting leukemias andlymphomas and/or have utility in other niche populations. In a Phase 1 trial, of nine patients that achieved adequate blood levels, in two heavily pretreated patients a continuous partial remission (PR) and complete remission (CR) were observed. One of these patients, who had failed multiple previous treatment regimens, has been in remission since early 2015.
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 and TetraKE platforms and are generating additional intellectual property around specific moieties.
Also, in connection with the acquisition of Georgetown Translational Pharmaceuticals on September 1, 2017, we acquired a portfolio of in-process research and development central nervous system (“CNS”) assets consisting of innovative reformulations and/or repurposing of existing therapies. These CNS assets address disease states such as chronic neuropathic pain, myasthenia gravis and motion sickness. We are currently pursuing out-licensing opportunities related to these assets.
Immuno-Oncology Platform
Tri-specific Killer Engagers (TriKEs) and Tetra-specific Killer Engagers (TetraKEs)
The generation of chimeric antigen receptor, or CAR, expressing T cells from monoclonal antibodies has represented an important step forward in cancer therapy. These therapies involve the genetic engineering of T cells to express either CARs, or T cell receptors, or TCRs, and are designed such that the modified T cells can recognize and destroy cancer cells. While a great deal of interest has recently been placed upon chimeric antigen receptor T, or CAR-T, therapy, it has certain limitations for broad potential applicability because it can require an individual approach that is expensive and time consuming, and may be difficult to apply on a large scale. We believe there is an unmet need for targeted immuno-oncology therapies that have the potential to be dosed in a patient-friendly outpatient setting, can be used on a stand-alone basis, augment the current monoclonal antibody therapeutics and/or be used in conjunction with more traditional cancer therapy. We believe our TriKE and TetraKE constructs have this potential and therefore we have generated, and intend to continue to generate, a pipeline of product candidates to be advanced into the clinic on our operations.own or through potential collaborations with larger companies.
NK cells represent an important immunotherapeutic target as they are involved in tumor immune-surveillance, can mediate antibody- dependent cell-mediated cytotoxicity (ADCC), contain pre-made granules with perforin and granzyme B and can quickly secrete inflammatory cytokines, and unlike T cells they do not require antigen priming and can kill cells in the absence of major histocompatibility complex (MHC) presentation.
Unlike full-length antibodies, TriKEs and TetraKEs are small single-chain fusion proteins that bind the CD16 receptor of NK cells directly producing a potent and lasting response, as demonstrated by preclinical studies. An additional benefit they may have is attractive biodistribution, as a consequence of their smaller size, which we expect to be important in the treatment of solid tumors. In addition to these advantages, TriKEs and TetraKEs are designed to be non-immunogenic, have appropriate clearance properties and can be engineered quickly to target a variety of tumor antigens.
Background and Select Non-Clinical Data
In conjunction with our research agreement with the Masonic Cancer Center at the University of Minnesota, the exploration of targeting NK cells to a variety of tumors initially focused on novel bi-specific killer engagers, or BiKEs, composed of the variable portions of antibodies targeting the CD16 activating receptor on NK cells and CD33 (AML and MDS; see figure below), CD19/CD22 (B cell lymphomas), or EpCAM (epithelial tumors (breast, colon, and lung)) on the tumor cells.
Subsequently, a tri-specific (TriKE) construct that replaced the linker molecule between the CD16 scFv and the CD33 scFv with a modified IL-15 molecule, containing flanking sequences, was generated and tested. Data indicate that the CD16 x IL-15 x CD33 and CD16 x IL-15 x EpCAM TriKEs potently induce proliferation of healthy donor NK cells, possibly greater than that induced by exogenous IL-15, which is absent in the BiKE platform. Targeted delivery of the IL-15 through the TriKE also resulted in specific expansion of the NK cells without inducing T cell expansion on post-transplant patient samples.
When compared to the CD16 x CD33 BiKE, the CD16 x IL-15 x CD33 TriKE is also capable of potently restoring killing capacity of post- transplant NK cells against CD33-expressing HL-60 Targets and primary AML blasts. These results demonstrated the ability to functionally incorporate an IL-5 cytokine into the BiKE platform and also demonstrated the possibility of targeting a variety of cytokines directly to NK cells while reducing off-target effects and the amount of cytokines needed to obtain biologically relevantfunction.
The figure below is a schematic of a BiKE construct (top) and a TriKE construct (bottom), which has the modified IL-15 linker between the CD16 scFv and the CD33 scFv components.
The TriKE constructs were also tested against three separate human tumor cell lines: HL-60 (promyelocitic leukemia), Raji (Burkitt’s lymphoma), and HT29 (colorectal adenocarcinoma), in addition to a model for ovarian cancer. All cell lines contained the Luc reporter to allow for in vivo imaging of the tumors. These systems were used to show in vivo efficacy of BiKEs (1633) and TriKEs (GTB-3550) against relevant human tumor targets (HL-60-luc) over an extended period of time. The system consisted of initial conditioning of mice using radiation (250-275 cGy), followed by injection of the tumor cells (I.V. for HL-60-luc and Raji-luc, intra-splenic for HT29-luc and IP for ovarian for MA-148-luc), a three-day growth phase, injection of human NK cells, and repeated injection of the drugs of interest, BiKE and TriKE (three to five times a week). Imaging was carried out at day 7, 14, and 21, and extended as needed.
Figure A below shows the results (tumor burden and mortality) when dosing NK cells alone (top panel), the BiKE version (lacking IL-15) of GTB-3550 (middle panel; called 1633), and the TriKE, GTB-3550 (bottom panel; then called 161533) in the above described human tumor model, HL-60-luc. In the NK-cell-only arm, two out of the five mice were dead by day 21 with two of the surviving mice having extensive tumor burden as depicted by the colored images. In contrast, all five mice in each of the BiKE and TriKE arms survived. In addition, the tumor burden in the TriKE-treated mice was significantly less than in the BiKE-treated mice, demonstrating the improved efficacy from NK cells in the TriKE-treated mice.
Based on these results, and others, the IND for GTB-3550 was filed in June 2017 by the University of Minnesota. FDA requested that additional preclinical toxicology be conducted prior to initiating clinical trials. The FDA also requested some additional information and clarifications on the manufacturing (CMC) and clinical packages. The requested additional information and clarifications were completed and incorporated by us into the IND in eCTD format. We filed the IND amendment in June 2018 and announced on November 1, 2018 that we had received notification from the FDA that the IND was open and the Company was authorized to initiate a first-in-human Phase 1 study with GTB-3550 in AML, MDS and severe mastocytosis. We expect to be in a position to begin the Phase 1 clinical trial in the first half of 2019.
Generation of humanized single-domain antibody targeting CD16 for incorporation into the TriKE platform
To develop second generation TriKEs, we designed a new humanized CD16 engager derived from a single-domain antibody. While scFvs consist of a heavy and a light variable chain joined by a linker, single-domain antibodies consist of a single variable heavy chain capable of engaging without the need of a light chain counterpart (see figure below).
These single-domain antibodies are thought to have certain attractive features for antibody engineering, including physical stability, ability to bind deep grooves, and increased production yields, amongst others. Pre-clinical studies demonstrated increased activity (NK Cell Degranulation) and functionality (NC Cell Cytokine Production) of the single-domain CD16 TriKE (GTB-C3550) compared to the original TriKE (GTB-3550) (see figure below). These data were presented at the 2017 American Society of Hematology Conference.
Targeting Solid Tumors and Other Potentially Attractive Characteristics
Unlike full-length antibodies, TriKEs and TetraKEs are small single-chain fusion proteins that bind the CD16 receptor of NK cells directly producing a potentially more potent and lasting response as demonstrated by preclinical studies. An additional benefit that they may have is an attractive biodistribution, because of their smaller size, which we expect to be important in the treatment of solid tumors. In addition to these potential advantages, TriKEs and TetraKEs are designed to be non-immunogenic, have appropriate clearance properties and can be engineered quickly to target a variety of tumor antigens. We believe these attributes make them an ideal pharmaceutical platform for potentiated NK cell-based immunotherapies and have the potential to overcome some of the limitations of CAR-T therapy and other antibody therapies.
Examples of our earlier stage solid tumor targeting product candidates are focused on EpCAM, Her2, Mesothelin (mesothelioma and lung adenocarcinoma), and CD133 alone and in combination. We believe certain of these constructs have the potential to target prostate, breast, colon, ovarian, liver, and head and neck cancers. Depending on the availability of drug supply, we hope to initiate human clinical testing for certain of our solid tumor product candidates in 2020.
Efficient Advancement of Potential Future Product Candidates --Production and Scale Up
We are using our TriKE and TetraKE platforms with the intent to bring to market multiple immuno-oncology products that can treat a range of hematologic malignancies, sarcomas and solid tumors. The platforms are scalable and we are currently working with several third parties investigating the optimal expression system of the TriKEs and TetraKE constructs which we expect to be part of a process in which we are able to produce IND-ready moieties in approximately 90-120 days after the construct conceptual design.
After conducting market and competitive research, specific moieties can then be rapidly advanced into the clinic on our own or through potential collaborations with larger companies. We are currently evaluating over a dozen moieties and intend to announce additional clinical product candidates in the second half of 2019.
We believe our TriKEs and TetraKEs will have the ability, if approved for marketing, to be used on a stand-alone basis, augment the current monoclonal antibody therapeutics, or be used in conjunction with more traditional cancer therapy and potentially overcome certain limitations of current chimeric antigen receptor, or CAR-T, therapy.
Bi-specific Antibody-Drug Conjugates Program
Antibody–drug conjugates (ADCs) are a class of potent biopharmaceutical drugs designed as a targeted therapy for the treatment of cancer. ADCs combine the antitumor potency of highly cytotoxic small-molecule drugs with the high selectivity, pharmacokinetic profile of mAbs. These attributes allow sensitive discrimination between healthy and diseased tissue. We believe our bi-specific, ligand-directed single-chain fusion protein represents an example of the next generation of ADCs.
We are currently utilizing a single chain bispecific recombinant fusion protein consisting of an anti-CD22 sFv, an anti-CD19 sFv, and DT390 (the catalytic and translocation domains of diphtheria toxin). It is a cytotoxic molecule produced by recombinant DNA techniques composed of a fusion gene consisting of sequences for DT390 and also sequences encoding two separate and distinct sFvs, one recognizing CD22 and one recognizing CD19. The anti-CD22 sFv comes from the monoclonal antibody RFB4 and this sFv is currently in clinical trials involving another anti-CD22 immunotoxin called BL22. The anti-CD19 sFv is from the monoclonal antibody HD37 that has previously been used clinically. Published preclinical studies have shown that the presence of both sFvs on the same single chain molecule results in a bispecific fusion toxin that has superior activity and anti-cancer effects compared to the monospecific fusion toxins. Between the VL and VH regions of the sFvs, we have introduced aggregation reducing sequences (ARL) which has produced a product which has demonstrated better activity against scid mouse systemic models of B cell malignancy. The action of DT2219 occurs as a result of binding to the CD22 and/or CD19 receptors, subsequent internalization, and enzymatic inhibition of protein synthesis leading to cell death.
We believe that our single-chain bi-specific recombinant fusion proteins utilizing novel linkers and innovative warheads represent an important advance over currently marketed ADCs. Utilizing our bi-specific ADC platform we have the ability to generate novel ADCs with unique targets, linkers and warheads. This platform provides us with the ability to rapidly construct novel ADCs with the potential to treat a wide range of cancers, including hematologic and solid tumors.
Immuno-Oncology Product Candidates
Our most advanced bi-specific ADC, GTB-1550, which targets CD19+ and/or CD22+ hematological malignancies, is in the Phase 2 component of a Phase 1/2 Non-Hodgins Lymphoma (NHL)/Acute Lymphocytic Leukemia (ALL) trial which is an open-label, investigator-led study. We are initially targeting certain hematologic malignancies as we believe our product candidates may have certain advantages over existing and other in-development products.
Our TriKE product candidates, GTB-3550 and GTB-C3550, are single-chain, tri-specific scFv recombinant fusion proteins composed of the variable regions of the heavy and light chains (or heavy chain only) of anti-CD16 antibodies, wild-type or a modified form of IL-15 and the variable regions of the heavy and light chains of an antibody designed to precisely target a specific tumor antigen. We utilize the NK stimulating cytokine human IL-15 as a crosslinker between the two scFvs which is designed to provide a self-sustaining signal leading to the proliferation and activation of NK cells thus enhancing their ability to kill cancer cells mediated by antibody-dependent cell-mediated cytotoxicity (ADCC).
Our TetraKE product candidates are single-chain fusion proteins composed of human single-domain anti-CD16 antibody, wild-type IL-15 and the variable regions of the heavy and light chains of two antibodies that are designed to target two specific tumor antigens expressed on specific types of cancer cells. An example of a TetraKE product candidate is GTB-1615 which is designed to target EpCAM and CD133 positive solid tumors. EpCAM is found on many solid tumor cells of epithelial origin and CD133 is a marker for cancer stem cells. GTB-1615 is designed to enable a patient’s NK cells to kill not only the heterogeneous population of cancer cells found in many solid tumors but also kill the cancer stem cells that can be responsible for recurrences.
GTB-1550
GTB-1550 is a bispecific scFv recombinant fusion protein-drug conjugate composed of the variable regions of the heavy and light chains of anti-CD19 and anti-CD22 antibodies and a modified form of diphtheria toxin (DT390) as its cytotoxic drug payload. CD19 is a membrane glycoprotein present on the surface of all stages of B-lymphocyte development and is also expressed on most B-cell mature lymphoma cells and leukemia cells. CD22 is a glycoprotein expressed on B-lineage lymphoid precursors, including precursor acute lymphoblastic leukemia, and often is co-expressed with CD19 on mature B-cell malignancies such as lymphoma.
GTB-1550 targets cancer cells expressing the CD19 receptor or CD22 receptor or both receptors. When GTB-1550 binds to cancer cells, the cancer cells internalize GTB-1550, and are killed due to the action of drug’s cytotoxic diphtheria toxin payload. GTB-1550 has completed a Phase 1 human clinical trial in patients with relapsed/refractory B-cell lymphoma or leukemia.
The initial Phase 1 study enrolled 25 patients with mature or precursor B-cell lymphoid malignancies expressing the CD19 receptor or CD22 receptor or both receptors. All 25 patients received at least a single course of therapy. The treatment at the higher doses produced objective tumor responses with one patient in continuous partial remission and the second in complete remission. A Phase 1/2 trial of GTB-1550 in 18 patients was recently completed in patients with ALL/NHL. The FDA-approved clinical trial was conducted at the University of Minnesota's Masonic Cancer Center. The data is currently being analyzed. We expect to submit data from this Phase 1/2 study for presentation/publication.
GTB-3550
GTB-3550 is our first TriKE product candidate. It is a single-chain, tri-specific scFv recombinant fusion protein conjugate composed of the variable regions of the heavy and light chains of anti-CD16 and anti-CD33 antibodies and a modified form of IL-15. We intend to study this anti-CD16-IL-15-anti-CD33 TriKE in CD33 positive leukemias, a marker expressed on tumor cells in acute myelogenous leukemia, or AML, myelodysplastic syndrome, or MDS, and other hematopoietic malignancies. CD33 is primarily a myeloid differentiation antigen with endocytic properties broadly expressed on AML blasts and, possibly, some leukemic stem cells. CD33 or Siglec-3 (sialic acid binding Ig-like lectin 3, SIGLEC3, SIGLEC3, gp67, p67) is a transmembrane receptor expressed on cells of myeloid lineage. It is usually considered myeloid-specific, but it can also be found on some lymphoid cells. The anti-CD33 antibody fragment that will be used for these studies was derived from the M195 humanized anti-CD33 scFV and has been used in multiple human clinical studies. It has been exploited as target for therapeutic antibodies for many years. We believe the recent approval of the antibody-drug conjugate gemtuzumab validates this targeted approach.
The GTB-3550 IND will focus on AML, the most common form of adult leukemia with 21,000 new cases expected in 2018 alone (American Cancer Society). These patients typically receive frontline therapy, usually chemotherapy, including cytarabine and an anthracycline, a therapy that has not changed in over 40 years. About half will have relapses and require alternative therapies. In addition, MDS incidence rates have dramatically increased in the population of the United States from 3.3 per 100,000 individuals from 2001-2004 to 70 per 100,000 annually, MDS is especially prevalent in elderly patients that have a median age of 76 years at diagnosis. The survival of patients with MDS is poor due to decreased eligibility, as a result of advanced age, for allogeneic hematopoietic cell transplantation (Allo- HSCT), the only curative MDS treatment (Cogle CR. Incidence and Burden of the Myelodysplastic Syndromes. Curr Hematol Malig Rep. 2015; 10(3):272-281). We believe GTB-3550 could serve as a relatively safe, cost-effective, and easy-to-use therapy for resistant/relapsing AML and could also be combined with chemotherapy as frontline therapy thus targeting the larger market.
The IND for GTB-3550 was filed in June 2017 by the University of Minnesota. FDA requested that additional preclinical toxicology be conducted prior to initiating clinical trials. The FDA also requested some additional information and clarifications on themanufacturing (CMC) and clinical packages. The requested additional information and clarifications were completed and incorporated by us into the IND in eCTD format. We filed the IND amendment in June 2018 and announced on November 1, 2018 that we had received notification from the FDA that the IND was open and the Company was authorized to initiate a first-in-human Phase 1 study with GTB-3550 in AML, MDS and severe mastocytosis. We expect to be in a position to begin the Phase 1 clinical trial in the first half of 2019.
GTB-C3550
GTB-C3550 is a next-generation, follow-on, to our lead TriKE, GTB-3550. GTB-C3550 contains a modified CD16 moiety which has improved binding characteristics and enhanced tumor cell killing based on functional assays and animal models of AML. Using our platform technology, we substituted the anti-CD16 scFv arm in GTB-3550 with a novel humanized single-domain anti-CD16 antibody to create this second-generation molecule which may have improved functionality. Single-domain antibodies, such as GTB-C3550, typically have several advantages, including better stability and solubility, more resistance to pH changes, can better recognize hidden antigenic sites, lack of a VL portion thus preventing VH/VL mispairing and are suitable for construction of larger molecules. GTB-C3550 induced a potent increase in NK cell degranulation, measured by CD107a expression against HL-60 AML tumor targets when compared to our first- generation TriKE (70.75±3.65% vs. 30.75±5.05%). IFN production was similarly enhanced (29.2±1.8% vs. 6.55±1.07%). GTB-C3550 also exhibited a robust increase in NK cell proliferation (57.65±6.05% vs. 20.75±2.55%). GTB-3550 studies will help inform the development of GTB-C3550 which we expect will de-risk the GTB-C3550 program as data will be generated to make an informed decision on which, or both, will be brought into later phase studies.
GTB-1615
GTB-1615 is an example of our first-generation TetraKEs designed for the treatment of solid tumors. It is a single-chain fusion protein composed of CD16-IL15-EpCAM-CD133. EpCAM is found on many solid tumor cells of epithelial origin and CD133 is a marker for cancer stem cells. This TetraKE is designed to target not only the heterogeneous population of cancer cells found in solid tumors but also the cancer stem cells that are typically responsible for recurrences. Depending on the availability of drug supply, we hope to initiate human clinical testing for certain of our solid tumor product candidates in 2020.
Central Nervous System
Our CNS portfolio consists of in-process R&D (“IPR&D”) assets acquired in connection with the acquisition of Georgetown Translational Pharmaceuticals (“GTP”) on September 1, 2017, consisting of innovative reformulations and/or repurposing of existing therapies. These CNS assets address disease states such as chronic neuropathic pain (product candidate PainBrake, utilizing AccuBreak technology), myasthenia gravis (product candidate GTP-004) and motion sickness (product candidate GTP-011).
In the 3rd quarter of 2018, the Company experienced changes in key senior management, led by the appointment of a CEO with extensive experience in oncology drug development. These changes resulted in the prioritization of immuno-oncology development candidates relative to the CNS development candidates acquired from Georgetown Translational Pharmaceuticals. In conjunction with these strategic changes, limited internal resources have delayed the development of the CNS IPR&D assets. The limited resources, changes in senior leadership, and favorable market conditions for immuno-oncology development candidates have resulted in the Company choosing to focus on development of its immuno-oncology portfolio. We are assessing our options to realize value from the CNS IPR&D assets.
Our Strategy
Our goal is to be a leader in immuno-oncology therapies targeting a broad range of indications including hematological malignancies, sarcoma and solid tumors and to generate value from our CNS product candidates. Key elements of our strategy are to:
Expedite clinical development, regulatory approval and commercialization of our bi-specific ADC, GTB-1550, in specific indications with a high unmet-medical need such as patients who are resistant or refractory to conventional treatment and also assess fast-to- market strategies in potential orphan indications
Based upon promising clinical results from the initial GTB-1550 Phase 1 study, we began enrolling patients in a Phase 2 trial during the first quarter of 2017 for our most advanced oncology product candidate, GTB-1550, for the treatment of patients with relapsed/refractory B- cell leukemias or lymphomas. In the Phase 1 study, of the nine patients who received GTB-1550 at the higher doses, two had durable complete responses in heavily pretreated patients. One of these patients, who had failed multiple previous treatment regimens, has been cancer free since the beginning of 2015.
A Phase 1/2 trial of GTB-1550 in 18 patients was recently completed in patients with ALL/NHL. The FDA-approved clinical trial was conducted at the University of Minnesota's Masonic Cancer Center. The data is currently being analyzed. We expect to submit data from this Phase 1/2 study for presentation/publication.
We will also utilize our bi-specific ADC platform to generate novel ADCs with unique targets, linkers and warheads. We anticipate that this platform will give us the ability to rapidly construct novel ADCs with the potential to treat a wide range of cancers, including hematologic and solid tumors.
Rapidly advanced our Tri-specific Killer Engagers (TriKEs), GTB-3550 and GTB-C3550
Our TriKE and TetraKE product candidates have the potential to be groundbreaking therapies targeting a broad range of hematologic malignancies, sarcomas and solid tumors. We are preparing to study GTB-3550, an anti-CD16-IL-15-anti-CD33 TriKE in CD33 positive leukemias, a marker expressed on tumor cells in AML, MDS and other myeloid malignancies. We expect to begin a Phase 1 clinical trial in the first half of 2019 in patients with relapsed/refractory AML. The Phase 1 trial will be a dose finding study. We expect this will be closely followed by Phase 2 trials to determine the most efficacious dosing and cycles with the aim to maximize efficacy while minimizing on-target, off-disease adverse events.
GTB-C3550 contains a humanized single-domain anti-CD16 moiety which demonstrated improved binding characteristics and enhanced tumor cell killing based on functional assays and animal models of AML.
We have designed GTB-3550 and GTB-C3550, if approved for marketing, to serve as a relatively safe, cost-effective, and easy-to-use therapies for resistant/relapsing AML or MDS which could also be combined with chemotherapy as frontline therapy thus targeting a broad AML/MDS market.
GTB-C3550 is a next-generation, follow-on, to our lead TriKE, GTB-3550. GTB-3550 studies will help inform the development of GTB-C3550. We believe this will de-risk the GTB-C3550 program as the data being generated will help to make informed decisions on which, or both, will be brought into later phase studies and in which patient populations.
Utilize our TriKE and TetraKE platform technologies to develop a robust pipeline of targeted immuno-oncology products targeting a wide range of hematologic malignancies, sarcomas and solid tumors for development on our own and through potential collaborations with larger pharmaceutical companies
We are using our TriKE and TetraKE platforms with the intent to bring to market multiple, targeted, off-the-shelf therapies that can treat a range of hematologic malignancies, sarcomas and solid tumors. The platforms are scalable and we are currently working with several third parties investigating the optimal expression system of the TriKEs and TetraKE constructs which we expect to be part of a process in which we are able to produce IND-ready moieties in approximately 90-120 days after the construct conceptual design. After conducting market and competitive research, specific moieties can then be rapidly advanced into the clinic on our own or through potential collaborations with larger pharmaceutical companies.
We are currently evaluating over a dozen moieties and intend to announce additional clinical product candidates in the second half of 2019. Depending on the availability of drug supply, we hope to initiate human clinical testing for certain of our solid tumor product candidates in 2020.
We believe our TriKEs and TetraKEs will have the ability, if approved for marketing, to be used on a stand-alone basis, augment the current monoclonal antibody therapeutics, or be used in conjunction with more traditional cancer therapy and potentially overcome certain limitations of current chimeric antigen receptor, or CAR-T, therapy.
Continue our collaborative relationship with the Masonic Cancer Center at the University of Minnesota, under a program led by Dr. Jeffrey Miller and become the leading NK-oriented immune-oncology company
We believe that the TriKE and TetraKE constructs represent potentially groundbreaking innovations in immunotherapy. In July 2016 we entered into an exclusive license agreement with the University of Minnesota to develop and commercialize cancer therapies using TriKE and TetraKE technology developed by researchers at the university to target NK cells to cancer.
We believe TriKE and TetraKE therapeutics have the potential to significantly impact the standard of care for hematologic malignancies, sarcomas, as well as solid tumors. The direct engagement of the NK cell with the tumor cell via very specific receptors may increase the efficacy while decrease the toxicity seen with other forms of immunotherapies. If approved, we expect the TriKEs and TetraKEs will be able to be administered at cancer treatment facilities without the need for specialized centers or product-specific trained staff.
We also intend to selectively evaluate and potentially acquire or enter into licensing or other agreements for technologies and/or product candidates that we believe would complement our oncology product candidates and platform technologies.
Monetize our CNS programs through transactions with commercialization-oriented pharmaceutical companies and/or other transactions
Our CNS portfolio consists of IPR&D assets acquired in connection with the acquisition of GTP on September 1, 2017, consisting of innovative reformulations and/or repurposing of existing therapies. These CNS assets address disease states such as chronic neuropathic pain, myasthenia gravis and motion sickness.
In the 3rd quarter of 2018, the Company experienced changes in key senior management, led by the appointment of a CEO with extensive experience in oncology drug development. These changes resulted in the prioritization of immuno-oncology development candidates relative to the CNS development candidates acquired from Georgetown Translational Pharmaceuticals. In conjunction with these strategic changes, limited internal resources have delayed the development of the CNS IPR&D assets. The limited resources, changes in senior leadership, and favorable market conditions for immuno-oncology development candidates have resulted in the Company choosing to focus on development of its immuno-oncology portfolio.
We expect to monetize our CNS portfolio through licensing deals with commercialization-oriented pharmaceutical companies, which could result in income, or enter into other transaction structures with the intent to generate value for our shareholders.
Oncology Markets
B-cell Lymphomas/Leukemias
B-cell lymphoma is a type of cancer that forms in B cells (a type of immune system cell). B-cell lymphomas may be either indolent (slow- growing) or aggressive (fast-growing). Non- Hodgkin lymphoma has an incidence rate of 19.4 per 100,000 per year and B-cell lymphomas make up most (about 85%) of NHL in the United States. There are many different types of B-cell non- Hodgkin lymphomas. These include Burkitt lymphoma, chronic lymphocytic leukemia/small lymphocytic lymphoma (CLL/SLL), diffuse large B-cell lymphoma, follicular lymphoma, and mantle cell lymphoma.
Acute Lymphoblastic Leukemia
Acute lymphoblastic leukemia, or ALL, is an acute form of leukemia, or cancer of the white blood cells, characterized by the overproduction and accumulation of immature white blood cells, known as lymphoblasts. In persons with ALL, lymphoblasts are overproduced in the bone marrow and continuously multiply, causing damage and death by inhibiting the production of normal cells (such as red and white blood cells and platelets) in the bone marrow and by spreading (infiltrating) to other organs.
It is estimated that there will be 5,930 new cases of ALL reported in the United States in 2019 (ACS Cancer Facts & Figures 2019). "Acute" is defined by the World Health Organization standards, in which greater than 20% of the cells in the bone marrow are blasts. Chronic lymphocytic leukemia is defined as having less than 20% blasts in the bone marrow. Acute lymphoblastic leukemia is seen in both children and adults; the highest incidence is seen between ages 2 to 3 years (>90 cases per 1 million per year). ALL is the most common cancer diagnosed in children and represents approximately 25% of cancer diagnoses among children younger than 15 years. Among children with ALL, approximately 98% attain remission, and approximately 85% of patients aged 1 to 18 years with newly diagnosed ALL treated on current regimens are expected to be long-term event-free survivors, with over 90% surviving at 5 years.
Multiple Myeloma
Multiple myeloma is a type of cancer that forms in white blood cells and will affect an estimated 32,110 people in 2019 in the U.S. causing about 12,960 deaths. Multiple myeloma causes cancer cells to accumulate in the bone marrow, where they crowd out healthy blood cells. Multiple myeloma is also characterized by destructive lytic bone lesions (rounded, punched-out areas of bone), diffuse osteoporosis, bone pain, and the production of abnormal proteins which accumulate in the urine. Anemia is also present in most multiple myeloma patients at the time of diagnosis and during follow-up. Anemia in multiple myeloma is multifactorial and is secondary to bone marrow replacement by malignant plasma cells, chronic inflammation, relative erythropoietin deficiency, and vitamin deficiency. Plasma cell leukemia, a condition in which plasma cells comprise greater than 20% of peripheral leukocytes, is typically a terminal stage of multiple myeloma and is associated with short survival.
Myeloid Leukemias
Acute Myeloid Leukemia
AML is a heterogeneous hematologic stem cell malignancy in adults with incidence rate of 4.3% per 100,000 populations. The median age at the time of diagnosis is 68 years. AML is an aggressive disease and is fatal without anti-leukemic treatment. AML is the most common form of adult leukemia with an estimated 21,450 new cases in 2019 in the U.S. These patients will require frontline therapy, usually chemotherapy including cytarabine and an anthracycline, a therapy that has not changed in over 40 years. Myelodysplastic syndromes (MDS) are a heterogeneous group of myeloid neoplasms characterized by dysplastic features of erythroid/myeloid/megakaryocytic lineages, progressive bone marrow failure, a varying percentage of blast cells, and enhanced risk to evolve into acute myeloid leukemia. It is estimated that over 10,000 new cases of MDS are diagnosed each year and there are minimal treatment options; other estimates have put this number higher. In addition, the incidence of MDS is rising for unknown reasons.
Solid Tumors
In the United States, in 2019, it is estimated there will be approximately 1,762,450 new cases of cancer resulting in 606,880 deaths. Greater than 80% of these cancers will be classified as solid tumors. The most prevalent new cases of solid tumors being breast, lung, prostate, colorectal and bladder. (American Cancer Society, Cancer Facts & Figures 2019)
Sarcomas
A sarcoma is a type of cancer that develops from certain tissues, like bone or muscle. Bone and soft tissue sarcomas are the main types of sarcoma. Soft tissue sarcomas can develop from soft tissues like fat, muscle, nerves, fibrous tissues, blood vessels, or deep skin tissues. They can be found in any part of the body. Most of them develop in the arms or legs. They can also be found in the trunk, head and neck area, internal organs, and the area in back of the abdominal cavity (known as the retroperitoneum). Sarcomas are not common tumors, and most cancers are the type of tumors called carcinomas.
The American Cancer Society's estimates for soft tissue sarcomas in the United States for 2019 are (these statistics include both adults and children): about 12,750 new soft tissue sarcomas will be diagnosed (7,240 cases in males and 5,510 cases in females). 5,270 Americans (2,840 males and 2,430 females) are expected to die of soft tissue sarcomas. The most common types of sarcoma in adults are undifferentiatedpleomorphic sarcoma (previously called malignant fibrous histiocytoma), liposarcoma, and leiomyosarcoma. Certain types occur more often in certain areas of the body than others. For example, leiomyosarcomas are the most common abdominal sarcoma, while liposarcomas and undifferentiated pleomorphic sarcoma are most common in legs. But pathologists (doctors who specialize in diagnosing cancers by how they look under the microscope), may not always agree on the exact type of sarcoma. Sarcomas of uncertain type are very common. (American Cancer Society, Cancer Facts & Figures 2019)
Manufacturing
We do not currently own or operate manufacturing facilities for the production of clinical or commercial quantities of any of our product candidates. We rely on a small number of third-party manufacturers to produce our compounds and expect to continue to do so to meet the preclinical and clinical requirements of our potential product candidates as well as for all of our commercial needs. We do not have long-term agreements with any of these third parties. We require in our manufacturing and processing agreements that all third-party contract manufacturers and processors produce active pharmaceutical ingredients, or API, and finished products in accordance with the FDA’s current Good Manufacturing Practices, or cGMP, and all other applicable laws and regulations. We maintain confidentiality agreements with potential and existing manufacturers in order to protect our proprietary rights related to our drug candidates.
Patents and Trademarks
Immuno-oncology platform
University of Minnesota License Agreement
We (through our wholly owned subsidiary Oxis Biotech, Inc.) are party to an exclusive worldwide license 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 to target NK cells to cancer. Under the terms of the agreement, we receive 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 shall be 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 University of Minnesota will receive an upfront license fee, royalty fees ranging from 4% to 6%, minimum annual royalty payments of $250,000 beginning in 2022, $2,000,000 in 2025, and $5,000,000 in 2027 and certain milestone payments totaling $3,100,000.
The following is a list of the patent applications that we licensed from the University of Minnesota:
Appl. No. | Title | Country | Status |
U.S. Patent Application Number 62/237,835
| Therapeutic compounds and its uses
| US | Expired |
PCT Patent Application Number PCT/US2016/055722 | Therapeutic componds and methods
| US | Pending |
Daniel A. Vallera, Ph.D. License Agreement
We are party to an exclusive worldwide license agreement with Daniel A. Vallera, Ph.D. and his co-inventor Jeffrey Lion, or jointly, Dr. Vallera, to further develop and commercialize DT2219ARL (GTB-1550), a novel therapy for the treatment of various human cancers. Under the terms of the agreement, we receive exclusive rightsto conduct research and to develop, make, use, sell, and import DT2219ARL worldwide for the treatment of any disease, state or condition in humans. We shall be 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 DT2219ARL, 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, Dr. Vallera will receive an upfront license fee, royalty fees ranging from 3% for net sales and 25% of net sublicensing revenues, and certain milestone payments totaling $1,500,000.
The following is a list of the patent applications and patents that we licensed from Dr. Vallera under our license agreements:
Pat./Pub. No. | Title | Country | Status |
U.S. Patent Application Number 61/160,530 | Methods and compositions for bi-specific targeting of cd19/cd22 | US | Expired |
U.S. Patent Number 9,371,386 | Methods and compositions for bi-specific targeting of cd19/cd22 | US | Issued |
U.S. Patent Application Number 15/187,579 | Methods and compositions for bi-specific targeting of cd19/cd22 | US | Pending |
ID4 License Agreement
Pursuant to a patent license agreement with ID4, dated December 31, 2014, or the ID4 License Agreement, we received an exclusive, worldwide license to certain intellectual property, including intellectual property related to treating a p62mediated disease (e.g., multiple myeloma). The terms of this license require us to pay ID4 royalties equal to 3% of net sales of products and 25% royalty of net sublicensing revenues. The license will expire upon expiration of the last patent contained in the licensed patent rights, unless terminated earlier. We may terminate the licensing agreement with ID4 by providing ID4 with 30 days written notice.
We will owe the following cash amounts to ID4 Pharma upon the attainment of the following milestones:
(i)
Filing of an investigational new drug application with a competent regulatory authority anywhere in the world $50,000.
(ii)
Initiation of Phase I Human Clinical Trial: $50,000.
(iii)
Initiation of Phase II Human Clinical Trial: $100,000.
(iv)
Initiation of pivotal Phase III Human Clinical Trial: $250,000. and
(v)
Receipt of the first marketing approval: $250,000
The following is a list of the patent applications and patent that we licensed from ID4 under the ID4 license agreement:
Pat./Appl. No. | Title | Country | Status |
U.S. Patent Number 9,580,382 | P62zz chemical inhibitor | US | Issued |
U.S. Patent Application Number 61/521,287 | P62zz chemical inhibitor | US | Expired |
PCT Patent Application Number PCT/US2012/049911 | P62zz chemical inhibitor | PCT | Expired |
U.S. Patent Application Number 14/727,710 | P62zz chemical inhibitor | US | Pending |
Chinese Patent Application 201280048718 | P62zz chemical inhibitor | US | Pending |
Central Nervous System
Patents for AccuBreak Tablets
We have in-licensed the rights to use the AccuBreak patents with drugs that, like carbamazepine, are voltage-gated sodium channel blockers in North America. The license field includes voltage gated sodium channels inhibitors and blockers for the treatment of epilepsy, neuropathic pain, and bipolar disorder.
Under the agreement, AccuBreak received an upfront license fee of $35,000, royalty fees ranging from 2.5% to 5%, minimum annual royalty payments, and 20% of net sublicensing revenues.
We will owe the following cash amounts to AccuBreak upon the attainment of the following milestones:
●
$50,000 six months after the first approval of the first indication by the FDA;
●
$50,000 nine months after the first approval of the first indication by the FDA;
●
$100,000 12 months after the first approval of the first indication by the FDA;
●
$25,000 upon achievement of $25,000,000 of cumulative net sales in the world;
●
$50,000 upon achievement of $50,000,000 of cumulative net sales in the world; and
●
$100,000 upon achievement of $75,000,000 of cumulative net sales in the world.
Four formulation patents protect the AccuBreak Technology:
Pat. No. | Title | Country | Status |
U.S. Patent Number 7,838,031 | Method for administering a partial dose using a segmented pharmaceutical tablet | US | Issued |
U.S. Patent Number 7,879,352 | Scored pharmaceutical tablets comprising a plurality of segments | US | Issued |
U.S. Patent Number 8,158,148 | Pharmaceutical tablets comprising two or more unitary segments | US | Issued |
U.S. Patent Number 8,231,902 (ABT- 054) | Segmented pharmaceutical dosage forms | US | Issued |
The core patent expires in 2025.
Patent Applications for GTP-004
Four patent applications filed by GTP in 2017 with the U.S. PTO protect the combination of pyridostigmine or neostigmine + an antiemetic for the treatment of myasthenia gravis. We plan to file extensions under the Patent Cooperation Treaty, or PCT, in 2018. All patents list below are owned by the Company.
Pat. No. | Title | Country | Status |
U.S. Patent Application Number 62/443,904 | Use and composition for treating Myasthenia Gravis | US | Expired |
U.S. Patent Application Number 62/449,699 | Neostigmine combination for treating Myasthenia Gravis | US | Expired |
U.S. Patent Application Number 62/536,595 | Method and composition for treating Myasthenia Gravis | US | Pending |
U.S. Patent Application Number 62/536,580 | Neostigmine pharmaceutical combination for treating Myasthenia Gravis | US | Pending |
| | | |
PCT Application Number PCT/US/18/12754 | Use and composition for treating Myasthenia Gravis | PCT | Claims priority from US 62/443,904 |
Taiwan Application Number 107100813 | | TW | Awaiting FC Report |
PCT Application Number PCT/US18/014700 | Neostigmine pharmaceutical combination for treating Myasthenia Gravis | PCT | Claims priority from US 62/449,699 |
Taiwan Application Number 101702591 | | TW | Awaiting FC Report |
Patent Application for GTP-011
One patent application filed by GTP in 2017 with the U.S. PTO protects a 72-hour patch of oxybutynin for the treatment of motion sickness. We plan to file a PCT extension in 2018. All patents list below are owned by the Company.
Appl. No. | Title | Country | Status |
U.S. Patent Application Number 62/440,575 | Use and composition for preventing and treating motion sickness | US | Expired |
US Patent Application Number 62/595,667 | Use, method, and device for the prevention and treatment of motion sickness | US | Pending* |
PCT Application Number PCT/US/17/68944 | Use and composition for preventing and treating motion sickness | PCT | Claims priority from US 62/440,575 |
Taiwan Application Number 107100079 | | TW | Awaiting FC Report |
* This application is pending, but was used as priority document of the PCT ‘944, including its subject matter
Employees
As of December 31, 2018, we had three employees. Many of our activities are outsourced to consultants who provide services to us on a project basis. As business activities require and capital resources permit, we will hire additional employees to fulfill our company’s needs.
Form and Year of Organization
In 1965, the corporate predecessor of GT Biopharma, Diagnostic Data, Inc. was incorporated in the State of California. Diagnostic Data changed its incorporation to the State of Delaware in 1972; and changed its name to DDI Pharmaceuticals, Inc. in 1985. In 1994, DDI Pharmaceuticals merged with International BioClinical, Inc. and Bioxytech S.A. and changed its name to OXIS International, Inc. On July 17, 2017, we amended our Certificate of Incorporation for the purpose of changing our name from Oxis International, Inc. to GT Biopharma, Inc.
Recent Developments
License Agreements
Pursuant to a patent license agreement with the ID4, dated December 31, 2015, we received a non-exclusive, worldwide license to certain intellectual property, including intellectual property related to treating a p62-mediated disease (e.g., multiple myeloma).
On March 10, 2015, Oxis licensed exclusive rights to three antibody-drug conjugates (ADCs) that MCIT will prepare for further evaluation by Oxis as prospective therapeutics for the treatment of triple-negative breast cancer, and multiple myeloma and associated osteolytic bone disease. Under the terms of the agreement, MCIT will develop three ADC product candidates which contain Oxis' lead drug candidates OXS-2175 and OXS-4235.
In September 2015, Oxis executed an exclusive worldwide license agreement with Daniel A. Vallera, Ph.D. and his associate (jointly "Dr. Vallera"), to further develop and commercialize DT2219ARL (OXS-1550), a novel therapy for the treatment of various human cancers. Under the terms of the agreement, OXIS receives exclusive rights to conduct research and to develop, make, use, sell, and import DT2219ARL worldwide for the treatment of any disease, state or condition in humans. OXIS shall own 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 DT2219ARL, including without limitation the Food and Drug Administration in the United States and the European Agency for the Evaluation of Medicinal Products in the European Union. Under the agreement, Dr. Vallera will receive an upfront license fee, royalty fees, and certain milestone payments.
In July 2016, Oxis executed an exclusive worldwide license agreement with the Regents of the University of Minnesota, to further develop and commercialize cancer therapies using Trispecific Killer Engager (TriKE) technology developed by researchers at the university to target NK cells to cancer. Under the terms of the agreement, OXIS 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. OXIS shall own 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 Food and Drug Administration in the United States and the European Agency for the Evaluation of Medicinal Products in the European Union. Under the agreement, the University of Minnesota will receive an upfront license fee, royalty fees, and certain milestone payments.
Financing
In January 2016, the Company
On May 22, 2019, GT Biopharma, Inc. (the "Company") entered into a securities purchase agreementSecurities Purchase Agreement with one accredited investorten purchasers (individually, a "Purchaser," and collectively, the "Purchasers") pursuant to sell 10%which the Company has issued to the Purchasers Convertible Debentures in an aggregate principal amount of $1,300,000 (the "Debentures"), which Debentures are convertible debentures, with and an exercise price of $1.25, with an initial principal balance of $150,000 and warrants to acquire up to 80,000 shares ofinto the Company's common stock (the "Common Stock") at an exercisea price of $1.25$0.35 per share.
In May 2016, the The Company and each Purchaser also entered into a securities purchase agreement with twenty accredited investors to sell 10% convertible debentures, with and an exercise price of $0.40, with an initial principal balance of $1,390,044 and warrants to acquire up to 3,475,111 sharesRegistration Rights Agreement.
The issuance of the Company's common stock at an exercise priceDebentures was made in reliance on the exemption provided by Section 4(a)(2) of $0.45 per share.the Securities Act of 1933, as amended (the "Securities Act"), for the offer and sale of securities not involving a public offering and Regulation D promulgated under the Securities Act.
In July 2016, the Company
On February 4, 2019, GT Biopharma, Inc. (the “Company”) entered into a securities purchase agreement with one accredited investor to sell 10% convertible debentures, with and an exercise price of $0.40, with an initial principal balance of $112,135 and warrants to acquire up to 280,338 shares of the Company's common stock at an exercise price of $0.45 per share.
In August 2016, the Company entered into a securities purchase agreement with one accredited investor to sell 10% convertible debentures up $1,000,000, with and an exercise price of $0.40, with an initial principal balance of $250,000 and warrants to acquire up to 2,500,000 shares of the Company's common stock at an exercise price of $0.45 per share.
Restructuring Agreements
Effective January 8, 2016, Company entered into agreements to effect the restructuringSecurities Purchase Agreement (the "Restructuring"“Purchase Agreement”) of certain unregistered debt and equity securities of the Company that will result in an issuance of up to 28,389,193 shares of common stock of the Company (the "Common Stock"). In connection with the Restructuring,purchasers identified on the Company entered intosignature pages thereto (individually, a note conversion agreement (the "Conversion Agreement"), a warrant exercise agreement (the "Exercise Agreement") and a preferred stock exchange agreement (the "Exchange Agreement"“Purchaser,” and collectively, with the Conversion Agreement and the Exercise Agreement, the "Restructuring Agreements"“Purchasers”), pursuant to which the Company issued to the Purchasers, on February 4, 2019, Secured Convertible Notes in an aggregate principal amount of $1,352,224 (the “Notes”), consisting of gross proceeds of $1,052,224 and settlement of existing debt of $300,000, which Notes shall be convertible at any time after issuance into shares (the “Conversion Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a conversion price of $0.60 per share (the “Conversion Price”).
The Notes accrue interest at the rate of 10% per annum and mature on August 2, 2019. Interest on the Notes is payable in cash or, at a Purchaser’s option, in shares of Common Stock at the Conversion Price. Upon the occurrence of an event of default, interest accrues at 18% per annum. The Notes contain customary default provisions, including provisions for potential acceleration, and covenants, including negative covenants regarding additional indebtedness and dividends. The Conversion Price is subject to adjustment due to certain events, including stock dividends and stock splits, and is subject to reduction in certain circumstances if the Company issues Common Stock or Common Stock equivalents at an effective price per share that is lower than the Conversion Price then in effect. The Company may only prepay the Notes with the prior written consent of the respective Purchasers thereof.
Contemporaneously with the execution and delivery of the Purchase Agreement, on February 4, 2019, the Company and certain of its wholly-owned subsidiaries entered into a Security Agreement (the “Security Agreement”) with Alpha Capital Anstalt, as collateral agent on behalf of the Company's creditorsPurchasers, and investorswith the Purchasers, pursuant to which the Purchasers have agreed that (i) certain outstanding debtbeen granted a first-priority security interest in substantially all of the assets of the Company (collectively, the "Debt") will be converted into sharesand such subsidiaries securing (i) an aggregate principal amount of Common Stock;$1,352,224 of Notes and (ii) certain outstanding warrants to purchase sharesan aggregate principal amount of capital stock$9,058,962 of the Company’s 10% Senior Convertible Debentures issued on August 2, 2018, September 7, 2018 and September 24, 2018 held by such Purchasers.
The Purchase Agreement contains customary representations, warranties and covenants, including covenants, subject to certain exceptions, that the Company, (collectively,until the "Warrants") will be exerciseddate on a cashless basis for shares of Common Stock; and (iii) certain outstanding shares of Series H Convertible Preferred Stockwhich less than 10% of the Notes are outstanding, shall not affect any Variable Rate Transaction (as defined in the Purchase Agreement) and that, for as long as a Purchaser holds any Notes or Conversion Shares, the Company (the "Series H Preferred Stock")shall amend the terms and Series I Convertible Preferred Stockconditions of the Company (the "Series I Preferred Stock" and together with the Series H Preferred Stock, the "Preferred Stock") will be exchanged for shares of Common Stock. The Conversion Agreement, Exercise Agreement and ExchangePurchase Agreement and the transactions contemplated thereby with respect to such Purchaser to give such Purchaser the benefit of any terms or conditions under which the Company agrees to issue or sell any Common Stock or Common Stock equivalents that are described in further detail below. more favorable to an investor than the terms and conditions granted to such Purchaser under the Purchase Agreement and the transactions contemplated thereby.
UnderIn addition, the Conversion Agreement, certain creditorsCompany entered into a registration rights agreement (the “Registration Rights Agreement”) with the Purchasers, pursuant to which the Company has agreed to file, within 14 days after February 4, 2019, one or more registration statements on Form S-3 (or, if Form S-3 is not then available to the Company, such form of registration that is then available to effect a registration for resale of the Company holding an aggregatesubject securities) covering the resale of approximately $15,056,000 (including accrued interest and penalties) of outstanding Debt agreedall Conversion Shares, subject to convert all such outstanding Debt into shares of Common Stock at a conversion price of $1.25 per share upon successful completioncertain penalties set forth in the Registration Rights Agreement. The Form S-3 was filed by the Company of a $6 million financing. However, since the financing did not occur by March 15, 2016, the Conversion Agreement was terminated.on February 14, 2019.
In addition, under the Exercise Agreement, certain investors together holding warrants to purchase 12,269,240 shares of capital stock ofOn May 22, 2019, the Company exchanged such warrantsconsummated an additional financing in the same format and received one share of Common Stockstructure as the February 4, 2019, financing. The notes issued in exchange for each share of capital stock of the Company underlyingMay 22, 2019, financing totaled $1,300,000 in the warrants.
Finally, under the Exchange Agreement, certain investors together holding 25,000 shares of Series H Preferred Stock and 1,666,667 shares of Series I Preferred Stock have agreed to convert all such shares of Preferred Stock into an aggregate of 4,075,000 shares of Common Stock upon successful completion by the Company of a $6 million financing.aggregate.
The Restructuring Agreements terminated the warrants and any anti-dilution protection thereunder. In addition, all creditor and investor parties to the Restructuring Agreements provided a waiver of any and all past defaults and breaches under the Warrants and Preferred Stock, in consideration of the shares issued pursuant to the Restructuring Agreements.
Results of Operations
Comparison of the Three Months Ended June 30, 2016March 31, 2019 and 20152018
License revenueResearch and Development Expenses
During the three months ended June 30, 2016March 31, 2019 and 2015, we received $-0- and $20,000 of licensing revenue related to a Vitamin D producing line of sun care and skin care products under a license from ESLLC.
Research and Development Expenses
During the three months ended June 30, 2016 and 2015,2018, we incurred $250,000$.8 million and $-0-$3.5 million of research and development expenses. Research and development costs decreased due primarily to the reductions employees, consultants and preclinical expenses. We anticipate our direct clinical costs to increase in second half of 2019 upon the initiation of a phase one clinical trial of our most advanced TriKe product candidate, OXS-3550.
Selling, general and administrative expenses
During the three months ended June 30, 2016March 31, 2019 and 2015,2018, we incurred $1,871,000$3.2 million and $1,451,000$3.7 million of selling, general and administrative expenses. The increasedecrease in selling, general and administrative expenses is primarily attributable to an increase in professional fees, license fees investor relations and stock compensation.
Change in valuethe reduction of warrant and derivative liabilities
During the three months ended June 30, 2016, we recorded a gain as a result of a decrease in the fair market value of outstanding warrants and beneficial conversion features of $5,263,000, compared to a gain of $29,140,000 during the three months ended June 30, 2015. This reduction is a result of a decrease in the fair market value of outstanding debt and equity securities accounted for as derivative liabilities and the conversion of warrants to common stock.salaries.
Interest Expense
Interest expense was $1,599,000$.5 million and $849,000$2.9 million for the three months ended June 30, 2016March 31, 2019 and 2015 respectively. The increase is primarily due to an increase in the non-cash amortization of the debt issuance costs associated with the convertible debentures and demand notes payable and expenses related the issuance of additional shares
Comparison of the Six Months Ended June 30, 2016 and 2015
License revenue
During the six months ended June 30, 2016 and 2015, we received $-0- and $27,000 of licensing revenue related to a Vitamin D producing line of sun care and skin care products under a license from ESLLC.
Research and Development Expenses
During the six months ended June 30, 2016 and 2015, we incurred $475,000 and $250,000 of research and development expenses.
Selling, general and administrative expenses
During the six months ended June 30, 2016 and 2015, we incurred $5,547,000 and $3,019,000 of selling, general and administrative expenses. The increase in selling, general and administrative expenses is primarily attributable to an increase in professional fees, license fees investor relations and stock compensation.
Change in value of warrant and derivative liabilities
During the six months ended June 30, 2016, we recorded a gain as a result of a decrease in the fair market value of outstanding warrants and beneficial conversion features of $36,759,000, compared to a gain of $17,874,000 during the six months ended June 30, 2015.
Interest Expense
Interest expense was $3,245,000 and $8,288,000 for the six months ended June 30, 2016 and 20152018 respectively. The decrease is primarily due to a decrease related to the amortization of the original issue discount and the value of warrants issued with the January 2018 financing.
Comparison of the Fiscal Years Ended December 31, 2018 and 2017
Research and Development Expenses
During the years ended December 31, 2018 and 2017, we incurred $9.1 million and $1.1 million of research and development expenses, respectively. 2018 research and development costs increased due primarily to the addition of new employees, increased regulatory and preclinical consultant costs to support the GTB-3550 IND, higher costs to advance the CNS portfolio and position the assets for licensing efforts, and higher preclinical and clinical expenses incurred at the University of Minnesota to continue development of our immune-oncology assets. 2018 expenses also include non-cash compensation of $6.8 million. We anticipate our direct clinical and preclinical costs to continue to increase throughout 2019, totaling approximately $12 to $15 million, as we initiate a Phase 1 clinical trial of our most advanced TriKe product candidate, GTB-3550 in the first half of 2019, and initiate IND-enabling activities for GTB-C3550, and GTB-1615.
Selling, general and administrative expenses
During the years ended December 31, 2018 and 2017, we incurred $12.5 million and $134.5 million of selling, general and administrative expenses, respectively. Selling, general and administrative expenses in 2017 were driven by stock compensation related to the acquisition of Georgetown Translational Pharmaceuticals on September 1, 2017. Stock compensation expenses totaled $2.3 million and $129.1 million for in 2018 and 2017, respectively. Additional selling, general, and administrative expenses in 2018 were due to increased spending on investor relations campaigns to broaden awareness of the Company, and increased legal costs primarily associated with financing efforts. We anticipate selling, general and administrative expenses, excluding stock compensation, to range between $1 and $2 million in the coming quarters.
Loss on impairment
For the year ended December 31, 2018, the Company recorded an intangible asset impairment charge of $228.5 million related to the portfolio of CNS IPR&D assets, which represents the excess carrying value compared to fair value. The impairment charge was the result of both internal and external factors. In the 3rd quarter of 2018, the Company experienced changes in key senior management, led by the appointment of a CEO with extensive experience in oncology drug development. These changes resulted in the prioritization for immuno-oncology development candidates relative to the CNS development candidates acquired from Georgetown Translational Pharmaceuticals. In conjunction with these strategic changes, limited internal resources have delayed the development of the CNS IPR&D assets. The limited resources, changes in senior leadership, and favorable market conditions for immuno-oncology development candidates have resulted in the Company choosing to focus on development of its immuno-oncology portfolio. We are assessing our options to realize value from the CNS IPR&D assets. In light of this shift in market strategy, the Company performed a commercial assessment and a valuation of the CNS IPR&D assets, both to assess fair value and support potential future licensing efforts. Based on the results of the independent valuation, the Company recorded the impairment charge noted above.
Interest Expense
Interest expense was $9.1 million and $8.6 million for the years ended December 31, 2018 and 2017, respectively. The increase is due to an increase in non-cash amortization of the debt issuance costs associated with the convertible debentures and demand notes payable, non-cash interest related to the beneficial conversion feature of new debt and expenses related the issuance of additional shareswarrants issued in January 2018.
Liquidity and Capital Resources
OnThe Company’s current operations have focused on business planning, raising capital, establishing an intellectual property portfolio, hiring, and conducting preclinical studies and clinical trials. The Company does not have any product candidates approved for sale and has not generated any revenue from product sales. The Company has sustained operating losses since inception and expects such losses to continue over the foreseeable future. During the three months ended March 31, 2019, the Company raised $1 million through a consolidated basis, we hadseries of issuances of convertible debentures in February. Also, as noted above, the Company raised $1.3 million on May 22, 2019, through the issuance of convertible notes. We anticipate that cash utilized for selling, general, and cash equivalentsadministrative expenses will range between $1 and $2 million in the coming quarters, while research and development expenses will vary depending on clinical activities.
The financial statements of $355,000 at June 30, 2016 and $15,666,000 of current liabilities (of which $15,174,000 represented current cash obligations and $492,000 represented non-cash warrant liabilities and accrued expenses). As a result,the Company have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the financial statements do not include any adjustments that might be necessary should the Company be unable to continue in existence.
The Company has incurred substantial losses and negative cash basis, as of June 30, 2016, we had a working capital deficit of $14,819,000. In addition, we haveflows from operations since its inception and has an accumulated deficit of $118,190,000 through June 30, 2016.$533.4 million and cash of $51 thousand as of March 31, 2019. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales or revenue from out-licensing of its products currently in development. Substantial additional financing will be needed by the Company to fund its operations and to commercially develop its product candidates. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
In January 2016,Management is currently evaluating different strategies to obtain the required funding for future operations. These strategies may include but are not limited to: public offerings of equity and/or debt securities, payments from potential strategic research and development, licensing and/or marketing arrangements with pharmaceutical companies. Management has also implemented cost saving efforts, including reduction in executive salaries and reduced travel. Management believes that these ongoing and planned financing endeavors, if successful, will provide adequate financial resources to continue as a going concern for at least the next six months from the date the financial statements are issued; however, there can be no assurance in this regard. If the Company entered into convertible debentures totaling $150,000.is unable to secure adequate additional funding, its business, operating results, financial condition and cash flows may be materially and adversely affected.
In May 2016, the Company entered into convertible debentures totaling $1,390,044.
In July 2016, the Company entered into convertible debentures totaling $112,135.
In August 2016, the Company entered into convertible debentures totaling $250,000.
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'investors’ understanding of our operating results and financial condition.
Basis of Consolidation
The consolidated financial statements contained in this report include the accounts of OXIS International, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated.
Revenue Recognition
Product Revenue
The Company manufactures, or has manufactured on a contract basis, fine chemicals and nutraceutical products, which are its primary products to be sold to customers. Revenue from the sale of its products, including shipping fees, will be recognized when title to the products is transferred to the customer which usually occurs upon shipment or delivery, depending upon the terms of the sales order and when collectability is reasonably assured. Revenue from sales to distributors of its products will be recognized, net of allowances, upon delivery of product to the distributors. According to the terms of individual distributor contracts, a distributor may return product up to a maximum amount and under certain conditions contained in its contract. Allowances are calculated based upon historical data, current economic conditions and the underlying contractual terms.
Long-Lived Assets
Our long-lived assets include property, plant and equipment, capitalized costs of filing patent applications and goodwill and other assets. We evaluate our long-lived assets for impairment in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"ASC 360, whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Estimates of future cash flows and timing of events for evaluating long-lived assets for impairment are based upon management'smanagement’s judgment. If any of our intangible or long-lived assets are considered to be impaired, the amount of impairment to be recognized is the excess of the carrying amount of the assets over its fair value.
Applicable long-lived assets are amortized or depreciated over the shorter of their estimated useful lives, the estimated period that the assets will generate revenue, or the statutory or contractual term in the case of patents. Estimates of useful lives and periods of expected revenue generation are reviewed periodically for appropriateness and are based upon management'smanagement’s judgment. Goodwill and other assets are not amortized.
Certain Expenses and Liabilities
On an ongoing basis, management evaluates its estimates related to certain expenses and accrued liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.
Derivative Financial Instruments
During the normal course of business, from time to time, we issue warrants as part of a debt or equity financing. We do not enter into any derivative contracts for speculative purposes. We recognize all derivatives as assets or liabilities measured at fair value with changes in fair value of derivatives reflected as current period income or loss unless the derivatives qualify for hedge accounting and are accounted for as such. During the six months ended June 30, 2016 and 2015, we issued warrants to purchase 3,475,111 and 376,000 shares of common stock, respectively, in connection with equity transactions. In accordance with ASC Topic 815-40, "Derivatives and Hedging — Contracts in Entity's Own Stock" ("ASC 815-40"), the value of these warrants is required to be recorded as a liability, as the holders have an option to put the warrants back to us in certain events, as defined.
Inflation
We believe that inflation has not had a material adverse impact on our business or operating results during the periods presented.
Off-balance Sheet Arrangements
We have no off-balance sheet arrangements as of June 15, 2019.
DESCRIPTION OF BUSINESS
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), Tetra-specific Killer Engager (TetraKE) and bi-specific Antibody Drug Conjugate (ADC) technology platforms. Our TriKE and TetraKE platforms generate proprietary moieties designed to harness and enhance the cancer killing abilities of a patient’s own natural killer, or NK, cells. Once bound to an NK cell, our moieties are designed to enhance the NK cell and precisely direct it to one or more specifically-targeted proteins (tumor antigens) expressed on a specific type of cancer, ultimately resulting in the cancer cell’s death. TriKEs and TetraKEs are made up of recombinant fusion proteins, can be designed to target any number of tumor antigens on hematologic malignancies, sarcomas or solid tumors and do not require patient-specific customization. They are designed to be dosed in a common outpatient setting similar to modern antibody therapeutics and are expected to have reasonably low cost of goods. Our ADC platform generates product candidates that are bi-specific, ligand-directed single-chain fusion proteins that, we believe, represent the next generation of ADCs.
We are using our TriKE and TetraKE platforms with the intent to bring to market immuno-oncology products that can treat a range of hematologic malignancies, sarcoma and solid tumors. The platforms are scalable, and we are putting processes in place to be able to produce IND-ready moieties in a timely manner after a specific TriKE or TetraKE 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 TriKEs and TetraKEs may have the ability, if approved for marketing, to be used on a stand-alone basis, 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 also believe our bi-specific, ligand-directed single-chain fusion proteins are examples of the next generation of ADCs. We believe GTB-1550 has certain properties that could result in competitive advantages over recently approved ADC products targeting leukemias andlymphomas and/or have utility in other niche populations. In a Phase 1 trial, of nine patients that achieved adequate blood levels, in two heavily pretreated patients a continuous partial remission (PR) and complete remission (CR) were observed. One of these patients, who had failed multiple previous treatment regimens, has been in remission since early 2015.
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 and TetraKE platforms and are generating additional intellectual property around specific moieties.
Also, in connection with the acquisition of Georgetown Translational Pharmaceuticals on September 1, 2017, we acquired a portfolio of in-process research and development central nervous system (“CNS”) assets consisting of innovative reformulations and/or repurposing of existing therapies. These CNS assets address disease states such as chronic neuropathic pain, myasthenia gravis and motion sickness. We are currently pursuing out-licensing opportunities related to these assets.
Immuno-Oncology Platform
Tri-specific Killer Engagers (TriKEs) and Tetra-specific Killer Engagers (TetraKEs)
The generation of chimeric antigen receptor, or CAR, expressing T cells from monoclonal antibodies has represented an important step forward in cancer therapy. These therapies involve the genetic engineering of T cells to express either CARs, or T cell receptors, or TCRs, and are designed such that the modified T cells can recognize and destroy cancer cells. While a great deal of interest has recently been placed upon chimeric antigen receptor T, or CAR-T, therapy, it has certain limitations for broad potential applicability because it can require an individual approach that is expensive and time consuming, and may be difficult to apply on a large scale. We believe there is an unmet need for targeted immuno-oncology therapies that have the potential to be dosed in a patient-friendly outpatient setting, can be used on a stand-alone basis, augment the current monoclonal antibody therapeutics and/or be used in conjunction with more traditional cancer therapy. We believe our TriKE and TetraKE constructs have this potential and therefore we have generated, and intend to continue to generate, a pipeline of product candidates to be advanced into the clinic on our own or through potential collaborations with larger companies.
NK cells represent an important immunotherapeutic target as they are involved in tumor immune-surveillance, can mediate antibody- dependent cell-mediated cytotoxicity (ADCC), contain pre-made granules with perforin and granzyme B and can quickly secrete inflammatory cytokines, and unlike T cells they do not require antigen priming and can kill cells in the absence of major histocompatibility complex (MHC) presentation.
Unlike full-length antibodies, TriKEs and TetraKEs are small single-chain fusion proteins that bind the CD16 receptor of NK cells directly producing a potent and lasting response, as demonstrated by preclinical studies. An additional benefit they may have is attractive biodistribution, as a consequence of their smaller size, which we expect to be important in the treatment of solid tumors. In addition to these advantages, TriKEs and TetraKEs are designed to be non-immunogenic, have appropriate clearance properties and can be engineered quickly to target a variety of tumor antigens.
Background and Select Non-Clinical Data
In conjunction with our research agreement with the Masonic Cancer Center at the University of Minnesota, the exploration of targeting NK cells to a variety of tumors initially focused on novel bi-specific killer engagers, or BiKEs, composed of the variable portions of antibodies targeting the CD16 activating receptor on NK cells and CD33 (AML and MDS; see figure below), CD19/CD22 (B cell lymphomas), or EpCAM (epithelial tumors (breast, colon, and lung)) on the tumor cells.
Subsequently, a tri-specific (TriKE) construct that replaced the linker molecule between the CD16 scFv and the CD33 scFv with a modified IL-15 molecule, containing flanking sequences, was generated and tested. Data indicate that the CD16 x IL-15 x CD33 and CD16 x IL-15 x EpCAM TriKEs potently induce proliferation of healthy donor NK cells, possibly greater than that induced by exogenous IL-15, which is absent in the BiKE platform. Targeted delivery of the IL-15 through the TriKE also resulted in specific expansion of the NK cells without inducing T cell expansion on post-transplant patient samples.
When compared to the CD16 x CD33 BiKE, the CD16 x IL-15 x CD33 TriKE is also capable of potently restoring killing capacity of post- transplant NK cells against CD33-expressing HL-60 Targets and primary AML blasts. These results demonstrated the ability to functionally incorporate an IL-5 cytokine into the BiKE platform and also demonstrated the possibility of targeting a variety of cytokines directly to NK cells while reducing off-target effects and the amount of cytokines needed to obtain biologically relevantfunction.
The figure below is a schematic of a BiKE construct (top) and a TriKE construct (bottom), which has the modified IL-15 linker between the CD16 scFv and the CD33 scFv components.
The TriKE constructs were also tested against three separate human tumor cell lines: HL-60 (promyelocitic leukemia), Raji (Burkitt’s lymphoma), and HT29 (colorectal adenocarcinoma), in addition to a model for ovarian cancer. All cell lines contained the Luc reporter to allow for in vivo imaging of the tumors. These systems were used to show in vivo efficacy of BiKEs (1633) and TriKEs (GTB-3550) against relevant human tumor targets (HL-60-luc) over an extended period of time. The system consisted of initial conditioning of mice using radiation (250-275 cGy), followed by injection of the tumor cells (I.V. for HL-60-luc and Raji-luc, intra-splenic for HT29-luc and IP for ovarian for MA-148-luc), a three-day growth phase, injection of human NK cells, and repeated injection of the drugs of interest, BiKE and TriKE (three to five times a week). Imaging was carried out at day 7, 14, and 21, and extended as needed.
Figure A below shows the results (tumor burden and mortality) when dosing NK cells alone (top panel), the BiKE version (lacking IL-15) of GTB-3550 (middle panel; called 1633), and the TriKE, GTB-3550 (bottom panel; then called 161533) in the above described human tumor model, HL-60-luc. In the NK-cell-only arm, two out of the five mice were dead by day 21 with two of the surviving mice having extensive tumor burden as depicted by the colored images. In contrast, all five mice in each of the BiKE and TriKE arms survived. In addition, the tumor burden in the TriKE-treated mice was significantly less than in the BiKE-treated mice, demonstrating the improved efficacy from NK cells in the TriKE-treated mice.
Based on these results, and others, the IND for GTB-3550 was filed in June 2017 by the University of Minnesota. FDA requested that additional preclinical toxicology be conducted prior to initiating clinical trials. The FDA also requested some additional information and clarifications on the manufacturing (CMC) and clinical packages. The requested additional information and clarifications were completed and incorporated by us into the IND in eCTD format. We filed the IND amendment in June 2018 and announced on November 1, 2018 that we had received notification from the FDA that the IND was open and the Company was authorized to initiate a first-in-human Phase 1 study with GTB-3550 in AML, MDS and severe mastocytosis. We expect to be in a position to begin the Phase 1 clinical trial in the first half of 2019.
Generation of humanized single-domain antibody targeting CD16 for incorporation into the TriKE platform
To develop second generation TriKEs, we designed a new humanized CD16 engager derived from a single-domain antibody. While scFvs consist of a heavy and a light variable chain joined by a linker, single-domain antibodies consist of a single variable heavy chain capable of engaging without the need of a light chain counterpart (see figure below).
These single-domain antibodies are thought to have certain attractive features for antibody engineering, including physical stability, ability to bind deep grooves, and increased production yields, amongst others. Pre-clinical studies demonstrated increased activity (NK Cell Degranulation) and functionality (NC Cell Cytokine Production) of the single-domain CD16 TriKE (GTB-C3550) compared to the original TriKE (GTB-3550) (see figure below). These data were presented at the 2017 American Society of Hematology Conference.
Targeting Solid Tumors and Other Potentially Attractive Characteristics
Unlike full-length antibodies, TriKEs and TetraKEs are small single-chain fusion proteins that bind the CD16 receptor of NK cells directly producing a potentially more potent and lasting response as demonstrated by preclinical studies. An additional benefit that they may have is an attractive biodistribution, because of their smaller size, which we expect to be important in the treatment of solid tumors. In addition to these potential advantages, TriKEs and TetraKEs are designed to be non-immunogenic, have appropriate clearance properties and can be engineered quickly to target a variety of tumor antigens. We believe these attributes make them an ideal pharmaceutical platform for potentiated NK cell-based immunotherapies and have the potential to overcome some of the limitations of CAR-T therapy and other antibody therapies.
Examples of our earlier stage solid tumor targeting product candidates are focused on EpCAM, Her2, Mesothelin (mesothelioma and lung adenocarcinoma), and CD133 alone and in combination. We believe certain of these constructs have the potential to target prostate, breast, colon, ovarian, liver, and head and neck cancers. Depending on the availability of drug supply, we hope to initiate human clinical testing for certain of our solid tumor product candidates in 2020.
Efficient Advancement of Potential Future Product Candidates --Production and Scale Up
We are using our TriKE and TetraKE platforms with the intent to bring to market multiple immuno-oncology products that can treat a range of hematologic malignancies, sarcomas and solid tumors. The platforms are scalable and we are currently working with several third parties investigating the optimal expression system of the TriKEs and TetraKE constructs which we expect to be part of a process in which we are able to produce IND-ready moieties in approximately 90-120 days after the construct conceptual design.
After conducting market and competitive research, specific moieties can then be rapidly advanced into the clinic on our own or through potential collaborations with larger companies. We are currently evaluating over a dozen moieties and intend to announce additional clinical product candidates in the second half of 2019.
We believe our TriKEs and TetraKEs will have the ability, if approved for marketing, to be used on a stand-alone basis, augment the current monoclonal antibody therapeutics, or be used in conjunction with more traditional cancer therapy and potentially overcome certain limitations of current chimeric antigen receptor, or CAR-T, therapy.
Bi-specific Antibody-Drug Conjugates Program
Antibody–drug conjugates (ADCs) are a class of potent biopharmaceutical drugs designed as a targeted therapy for the treatment of cancer. ADCs combine the antitumor potency of highly cytotoxic small-molecule drugs with the high selectivity, pharmacokinetic profile of mAbs. These attributes allow sensitive discrimination between healthy and diseased tissue. We believe our bi-specific, ligand-directed single-chain fusion protein represents an example of the next generation of ADCs.
We are currently utilizing a single chain bispecific recombinant fusion protein consisting of an anti-CD22 sFv, an anti-CD19 sFv, and DT390 (the catalytic and translocation domains of diphtheria toxin). It is a cytotoxic molecule produced by recombinant DNA techniques composed of a fusion gene consisting of sequences for DT390 and also sequences encoding two separate and distinct sFvs, one recognizing CD22 and one recognizing CD19. The anti-CD22 sFv comes from the monoclonal antibody RFB4 and this sFv is currently in clinical trials involving another anti-CD22 immunotoxin called BL22. The anti-CD19 sFv is from the monoclonal antibody HD37 that has previously been used clinically. Published preclinical studies have shown that the presence of both sFvs on the same single chain molecule results in a bispecific fusion toxin that has superior activity and anti-cancer effects compared to the monospecific fusion toxins. Between the VL and VH regions of the sFvs, we have introduced aggregation reducing sequences (ARL) which has produced a product which has demonstrated better activity against scid mouse systemic models of B cell malignancy. The action of DT2219 occurs as a result of binding to the CD22 and/or CD19 receptors, subsequent internalization, and enzymatic inhibition of protein synthesis leading to cell death.
We believe that our single-chain bi-specific recombinant fusion proteins utilizing novel linkers and innovative warheads represent an important advance over currently marketed ADCs. Utilizing our bi-specific ADC platform we have the ability to generate novel ADCs with unique targets, linkers and warheads. This platform provides us with the ability to rapidly construct novel ADCs with the potential to treat a wide range of cancers, including hematologic and solid tumors.
Immuno-Oncology Product Candidates
Our most advanced bi-specific ADC, GTB-1550, which targets CD19+ and/or CD22+ hematological malignancies, is in the Phase 2 component of a Phase 1/2 Non-Hodgins Lymphoma (NHL)/Acute Lymphocytic Leukemia (ALL) trial which is an open-label, investigator-led study. We are initially targeting certain hematologic malignancies as we believe our product candidates may have certain advantages over existing and other in-development products.
Our TriKE product candidates, GTB-3550 and GTB-C3550, are single-chain, tri-specific scFv recombinant fusion proteins composed of the variable regions of the heavy and light chains (or heavy chain only) of anti-CD16 antibodies, wild-type or a modified form of IL-15 and the variable regions of the heavy and light chains of an antibody designed to precisely target a specific tumor antigen. We utilize the NK stimulating cytokine human IL-15 as a crosslinker between the two scFvs which is designed to provide a self-sustaining signal leading to the proliferation and activation of NK cells thus enhancing their ability to kill cancer cells mediated by antibody-dependent cell-mediated cytotoxicity (ADCC).
Our TetraKE product candidates are single-chain fusion proteins composed of human single-domain anti-CD16 antibody, wild-type IL-15 and the variable regions of the heavy and light chains of two antibodies that are designed to target two specific tumor antigens expressed on specific types of cancer cells. An example of a TetraKE product candidate is GTB-1615 which is designed to target EpCAM and CD133 positive solid tumors. EpCAM is found on many solid tumor cells of epithelial origin and CD133 is a marker for cancer stem cells. GTB-1615 is designed to enable a patient’s NK cells to kill not only the heterogeneous population of cancer cells found in many solid tumors but also kill the cancer stem cells that can be responsible for recurrences.
GTB-1550
GTB-1550 is a bispecific scFv recombinant fusion protein-drug conjugate composed of the variable regions of the heavy and light chains of anti-CD19 and anti-CD22 antibodies and a modified form of diphtheria toxin (DT390) as its cytotoxic drug payload. CD19 is a membrane glycoprotein present on the surface of all stages of B-lymphocyte development and is also expressed on most B-cell mature lymphoma cells and leukemia cells. CD22 is a glycoprotein expressed on B-lineage lymphoid precursors, including precursor acute lymphoblastic leukemia, and often is co-expressed with CD19 on mature B-cell malignancies such as lymphoma.
GTB-1550 targets cancer cells expressing the CD19 receptor or CD22 receptor or both receptors. When GTB-1550 binds to cancer cells, the cancer cells internalize GTB-1550, and are killed due to the action of drug’s cytotoxic diphtheria toxin payload. GTB-1550 has completed a Phase 1 human clinical trial in patients with relapsed/refractory B-cell lymphoma or leukemia.
The initial Phase 1 study enrolled 25 patients with mature or precursor B-cell lymphoid malignancies expressing the CD19 receptor or CD22 receptor or both receptors. All 25 patients received at least a single course of therapy. The treatment at the higher doses produced objective tumor responses with one patient in continuous partial remission and the second in complete remission. A Phase 1/2 trial of GTB-1550 in 18 patients was recently completed in patients with ALL/NHL. The FDA-approved clinical trial was conducted at the University of Minnesota's Masonic Cancer Center. The data is currently being analyzed. We expect to submit data from this Phase 1/2 study for presentation/publication.
GTB-3550
GTB-3550 is our first TriKE product candidate. It is a single-chain, tri-specific scFv recombinant fusion protein conjugate composed of the variable regions of the heavy and light chains of anti-CD16 and anti-CD33 antibodies and a modified form of IL-15. We intend to study this anti-CD16-IL-15-anti-CD33 TriKE in CD33 positive leukemias, a marker expressed on tumor cells in acute myelogenous leukemia, or AML, myelodysplastic syndrome, or MDS, and other hematopoietic malignancies. CD33 is primarily a myeloid differentiation antigen with endocytic properties broadly expressed on AML blasts and, possibly, some leukemic stem cells. CD33 or Siglec-3 (sialic acid binding Ig-like lectin 3, SIGLEC3, SIGLEC3, gp67, p67) is a transmembrane receptor expressed on cells of myeloid lineage. It is usually considered myeloid-specific, but it can also be found on some lymphoid cells. The anti-CD33 antibody fragment that will be used for these studies was derived from the M195 humanized anti-CD33 scFV and has been used in multiple human clinical studies. It has been exploited as target for therapeutic antibodies for many years. We believe the recent approval of the antibody-drug conjugate gemtuzumab validates this targeted approach.
The GTB-3550 IND will focus on AML, the most common form of adult leukemia with 21,000 new cases expected in 2018 alone (American Cancer Society). These patients typically receive frontline therapy, usually chemotherapy, including cytarabine and an anthracycline, a therapy that has not changed in over 40 years. About half will have relapses and require alternative therapies. In addition, MDS incidence rates have dramatically increased in the population of the United States from 3.3 per 100,000 individuals from 2001-2004 to 70 per 100,000 annually, MDS is especially prevalent in elderly patients that have a median age of 76 years at diagnosis. The survival of patients with MDS is poor due to decreased eligibility, as a result of advanced age, for allogeneic hematopoietic cell transplantation (Allo- HSCT), the only curative MDS treatment (Cogle CR. Incidence and Burden of the Myelodysplastic Syndromes. Curr Hematol Malig Rep. 2015; 10(3):272-281). We believe GTB-3550 could serve as a relatively safe, cost-effective, and easy-to-use therapy for resistant/relapsing AML and could also be combined with chemotherapy as frontline therapy thus targeting the larger market.
The IND for GTB-3550 was filed in June 2017 by the University of Minnesota. FDA requested that additional preclinical toxicology be conducted prior to initiating clinical trials. The FDA also requested some additional information and clarifications on themanufacturing (CMC) and clinical packages. The requested additional information and clarifications were completed and incorporated by us into the IND in eCTD format. We filed the IND amendment in June 2018 and announced on November 1, 2018 that we had received notification from the FDA that the IND was open and the Company was authorized to initiate a first-in-human Phase 1 study with GTB-3550 in AML, MDS and severe mastocytosis. We expect to be in a position to begin the Phase 1 clinical trial in the first half of 2019.
GTB-C3550
GTB-C3550 is a next-generation, follow-on, to our lead TriKE, GTB-3550. GTB-C3550 contains a modified CD16 moiety which has improved binding characteristics and enhanced tumor cell killing based on functional assays and animal models of AML. Using our platform technology, we substituted the anti-CD16 scFv arm in GTB-3550 with a novel humanized single-domain anti-CD16 antibody to create this second-generation molecule which may have improved functionality. Single-domain antibodies, such as GTB-C3550, typically have several advantages, including better stability and solubility, more resistance to pH changes, can better recognize hidden antigenic sites, lack of a VL portion thus preventing VH/VL mispairing and are suitable for construction of larger molecules. GTB-C3550 induced a potent increase in NK cell degranulation, measured by CD107a expression against HL-60 AML tumor targets when compared to our first- generation TriKE (70.75±3.65% vs. 30.75±5.05%). IFN production was similarly enhanced (29.2±1.8% vs. 6.55±1.07%). GTB-C3550 also exhibited a robust increase in NK cell proliferation (57.65±6.05% vs. 20.75±2.55%). GTB-3550 studies will help inform the development of GTB-C3550 which we expect will de-risk the GTB-C3550 program as data will be generated to make an informed decision on which, or both, will be brought into later phase studies.
GTB-1615
GTB-1615 is an example of our first-generation TetraKEs designed for the treatment of solid tumors. It is a single-chain fusion protein composed of CD16-IL15-EpCAM-CD133. EpCAM is found on many solid tumor cells of epithelial origin and CD133 is a marker for cancer stem cells. This TetraKE is designed to target not only the heterogeneous population of cancer cells found in solid tumors but also the cancer stem cells that are typically responsible for recurrences. Depending on the availability of drug supply, we hope to initiate human clinical testing for certain of our solid tumor product candidates in 2020.
Central Nervous System
Our CNS portfolio consists of in-process R&D (“IPR&D”) assets acquired in connection with the acquisition of Georgetown Translational Pharmaceuticals (“GTP”) on September 1, 2017, consisting of innovative reformulations and/or repurposing of existing therapies. These CNS assets address disease states such as chronic neuropathic pain (product candidate PainBrake, utilizing AccuBreak technology), myasthenia gravis (product candidate GTP-004) and motion sickness (product candidate GTP-011).
In the 3rd quarter of 2018, the Company experienced changes in key senior management, led by the appointment of a CEO with extensive experience in oncology drug development. These changes resulted in the prioritization of immuno-oncology development candidates relative to the CNS development candidates acquired from Georgetown Translational Pharmaceuticals. In conjunction with these strategic changes, limited internal resources have delayed the development of the CNS IPR&D assets. The limited resources, changes in senior leadership, and favorable market conditions for immuno-oncology development candidates have resulted in the Company choosing to focus on development of its immuno-oncology portfolio. We are assessing our options to realize value from the CNS IPR&D assets.
Our Strategy
Our goal is to be a leader in immuno-oncology therapies targeting a broad range of indications including hematological malignancies, sarcoma and solid tumors and to generate value from our CNS product candidates. Key elements of our strategy are to:
Expedite clinical development, regulatory approval and commercialization of our bi-specific ADC, GTB-1550, in specific indications with a high unmet-medical need such as patients who are resistant or refractory to conventional treatment and also assess fast-to- market strategies in potential orphan indications
Based upon promising clinical results from the initial GTB-1550 Phase 1 study, we began enrolling patients in a Phase 2 trial during the first quarter of 2017 for our most advanced oncology product candidate, GTB-1550, for the treatment of patients with relapsed/refractory B- cell leukemias or lymphomas. In the Phase 1 study, of the nine patients who received GTB-1550 at the higher doses, two had durable complete responses in heavily pretreated patients. One of these patients, who had failed multiple previous treatment regimens, has been cancer free since the beginning of 2015.
A Phase 1/2 trial of GTB-1550 in 18 patients was recently completed in patients with ALL/NHL. The FDA-approved clinical trial was conducted at the University of Minnesota's Masonic Cancer Center. The data is currently being analyzed. We expect to submit data from this Phase 1/2 study for presentation/publication.
We will also utilize our bi-specific ADC platform to generate novel ADCs with unique targets, linkers and warheads. We anticipate that this platform will give us the ability to rapidly construct novel ADCs with the potential to treat a wide range of cancers, including hematologic and solid tumors.
Rapidly advanced our Tri-specific Killer Engagers (TriKEs), GTB-3550 and GTB-C3550
Our TriKE and TetraKE product candidates have the potential to be groundbreaking therapies targeting a broad range of hematologic malignancies, sarcomas and solid tumors. We are preparing to study GTB-3550, an anti-CD16-IL-15-anti-CD33 TriKE in CD33 positive leukemias, a marker expressed on tumor cells in AML, MDS and other myeloid malignancies. We expect to begin a Phase 1 clinical trial in the first half of 2019 in patients with relapsed/refractory AML. The Phase 1 trial will be a dose finding study. We expect this will be closely followed by Phase 2 trials to determine the most efficacious dosing and cycles with the aim to maximize efficacy while minimizing on-target, off-disease adverse events.
GTB-C3550 contains a humanized single-domain anti-CD16 moiety which demonstrated improved binding characteristics and enhanced tumor cell killing based on functional assays and animal models of AML.
We have designed GTB-3550 and GTB-C3550, if approved for marketing, to serve as a relatively safe, cost-effective, and easy-to-use therapies for resistant/relapsing AML or MDS which could also be combined with chemotherapy as frontline therapy thus targeting a broad AML/MDS market.
GTB-C3550 is a next-generation, follow-on, to our lead TriKE, GTB-3550. GTB-3550 studies will help inform the development of GTB-C3550. We believe this will de-risk the GTB-C3550 program as the data being generated will help to make informed decisions on which, or both, will be brought into later phase studies and in which patient populations.
Utilize our TriKE and TetraKE platform technologies to develop a robust pipeline of targeted immuno-oncology products targeting a wide range of hematologic malignancies, sarcomas and solid tumors for development on our own and through potential collaborations with larger pharmaceutical companies
We are using our TriKE and TetraKE platforms with the intent to bring to market multiple, targeted, off-the-shelf therapies that can treat a range of hematologic malignancies, sarcomas and solid tumors. The platforms are scalable and we are currently working with several third parties investigating the optimal expression system of the TriKEs and TetraKE constructs which we expect to be part of a process in which we are able to produce IND-ready moieties in approximately 90-120 days after the construct conceptual design. After conducting market and competitive research, specific moieties can then be rapidly advanced into the clinic on our own or through potential collaborations with larger pharmaceutical companies.
We are currently evaluating over a dozen moieties and intend to announce additional clinical product candidates in the second half of 2019. Depending on the availability of drug supply, we hope to initiate human clinical testing for certain of our solid tumor product candidates in 2020.
We believe our TriKEs and TetraKEs will have the ability, if approved for marketing, to be used on a stand-alone basis, augment the current monoclonal antibody therapeutics, or be used in conjunction with more traditional cancer therapy and potentially overcome certain limitations of current chimeric antigen receptor, or CAR-T, therapy.
Continue our collaborative relationship with the Masonic Cancer Center at the University of Minnesota, under a program led by Dr. Jeffrey Miller and become the leading NK-oriented immune-oncology company
We believe that the TriKE and TetraKE constructs represent potentially groundbreaking innovations in immunotherapy. In July 2016 we entered into an exclusive license agreement with the University of Minnesota to develop and commercialize cancer therapies using TriKE and TetraKE technology developed by researchers at the university to target NK cells to cancer.
We believe TriKE and TetraKE therapeutics have the potential to significantly impact the standard of care for hematologic malignancies, sarcomas, as well as solid tumors. The direct engagement of the NK cell with the tumor cell via very specific receptors may increase the efficacy while decrease the toxicity seen with other forms of immunotherapies. If approved, we expect the TriKEs and TetraKEs will be able to be administered at cancer treatment facilities without the need for specialized centers or product-specific trained staff.
We also intend to selectively evaluate and potentially acquire or enter into licensing or other agreements for technologies and/or product candidates that we believe would complement our oncology product candidates and platform technologies.
Monetize our CNS programs through transactions with commercialization-oriented pharmaceutical companies and/or other transactions
Our CNS portfolio consists of IPR&D assets acquired in connection with the acquisition of GTP on September 1, 2017, consisting of innovative reformulations and/or repurposing of existing therapies. These CNS assets address disease states such as chronic neuropathic pain, myasthenia gravis and motion sickness.
In the 3rd quarter of 2018, the Company experienced changes in key senior management, led by the appointment of a CEO with extensive experience in oncology drug development. These changes resulted in the prioritization of immuno-oncology development candidates relative to the CNS development candidates acquired from Georgetown Translational Pharmaceuticals. In conjunction with these strategic changes, limited internal resources have delayed the development of the CNS IPR&D assets. The limited resources, changes in senior leadership, and favorable market conditions for immuno-oncology development candidates have resulted in the Company choosing to focus on development of its immuno-oncology portfolio.
We expect to monetize our CNS portfolio through licensing deals with commercialization-oriented pharmaceutical companies, which could result in income, or enter into other transaction structures with the intent to generate value for our shareholders.
Oncology Markets
B-cell Lymphomas/Leukemias
B-cell lymphoma is a type of cancer that forms in B cells (a type of immune system cell). B-cell lymphomas may be either indolent (slow- growing) or aggressive (fast-growing). Non- Hodgkin lymphoma has an incidence rate of 19.4 per 100,000 per year and B-cell lymphomas make up most (about 85%) of NHL in the United States. There are many different types of B-cell non- Hodgkin lymphomas. These include Burkitt lymphoma, chronic lymphocytic leukemia/small lymphocytic lymphoma (CLL/SLL), diffuse large B-cell lymphoma, follicular lymphoma, and mantle cell lymphoma.
Acute Lymphoblastic Leukemia
Acute lymphoblastic leukemia, or ALL, is an acute form of leukemia, or cancer of the white blood cells, characterized by the overproduction and accumulation of immature white blood cells, known as lymphoblasts. In persons with ALL, lymphoblasts are overproduced in the bone marrow and continuously multiply, causing damage and death by inhibiting the production of normal cells (such as red and white blood cells and platelets) in the bone marrow and by spreading (infiltrating) to other organs.
It is estimated that there will be 5,930 new cases of ALL reported in the United States in 2019 (ACS Cancer Facts & Figures 2019). "Acute" is defined by the World Health Organization standards, in which greater than 20% of the cells in the bone marrow are blasts. Chronic lymphocytic leukemia is defined as having less than 20% blasts in the bone marrow. Acute lymphoblastic leukemia is seen in both children and adults; the highest incidence is seen between ages 2 to 3 years (>90 cases per 1 million per year). ALL is the most common cancer diagnosed in children and represents approximately 25% of cancer diagnoses among children younger than 15 years. Among children with ALL, approximately 98% attain remission, and approximately 85% of patients aged 1 to 18 years with newly diagnosed ALL treated on current regimens are expected to be long-term event-free survivors, with over 90% surviving at 5 years.
Multiple Myeloma
Multiple myeloma is a type of cancer that forms in white blood cells and will affect an estimated 32,110 people in 2019 in the U.S. causing about 12,960 deaths. Multiple myeloma causes cancer cells to accumulate in the bone marrow, where they crowd out healthy blood cells. Multiple myeloma is also characterized by destructive lytic bone lesions (rounded, punched-out areas of bone), diffuse osteoporosis, bone pain, and the production of abnormal proteins which accumulate in the urine. Anemia is also present in most multiple myeloma patients at the time of diagnosis and during follow-up. Anemia in multiple myeloma is multifactorial and is secondary to bone marrow replacement by malignant plasma cells, chronic inflammation, relative erythropoietin deficiency, and vitamin deficiency. Plasma cell leukemia, a condition in which plasma cells comprise greater than 20% of peripheral leukocytes, is typically a terminal stage of multiple myeloma and is associated with short survival.
Myeloid Leukemias
Acute Myeloid Leukemia
AML is a heterogeneous hematologic stem cell malignancy in adults with incidence rate of 4.3% per 100,000 populations. The median age at the time of diagnosis is 68 years. AML is an aggressive disease and is fatal without anti-leukemic treatment. AML is the most common form of adult leukemia with an estimated 21,450 new cases in 2019 in the U.S. These patients will require frontline therapy, usually chemotherapy including cytarabine and an anthracycline, a therapy that has not changed in over 40 years. Myelodysplastic syndromes (MDS) are a heterogeneous group of myeloid neoplasms characterized by dysplastic features of erythroid/myeloid/megakaryocytic lineages, progressive bone marrow failure, a varying percentage of blast cells, and enhanced risk to evolve into acute myeloid leukemia. It is estimated that over 10,000 new cases of MDS are diagnosed each year and there are minimal treatment options; other estimates have put this number higher. In addition, the incidence of MDS is rising for unknown reasons.
Solid Tumors
In the United States, in 2019, it is estimated there will be approximately 1,762,450 new cases of cancer resulting in 606,880 deaths. Greater than 80% of these cancers will be classified as solid tumors. The most prevalent new cases of solid tumors being breast, lung, prostate, colorectal and bladder. (American Cancer Society, Cancer Facts & Figures 2019)
Sarcomas
A sarcoma is a type of cancer that develops from certain tissues, like bone or muscle. Bone and soft tissue sarcomas are the main types of sarcoma. Soft tissue sarcomas can develop from soft tissues like fat, muscle, nerves, fibrous tissues, blood vessels, or deep skin tissues. They can be found in any part of the body. Most of them develop in the arms or legs. They can also be found in the trunk, head and neck area, internal organs, and the area in back of the abdominal cavity (known as the retroperitoneum). Sarcomas are not common tumors, and most cancers are the type of tumors called carcinomas.
The American Cancer Society's estimates for soft tissue sarcomas in the United States for 2019 are (these statistics include both adults and children): about 12,750 new soft tissue sarcomas will be diagnosed (7,240 cases in males and 5,510 cases in females). 5,270 Americans (2,840 males and 2,430 females) are expected to die of soft tissue sarcomas. The most common types of sarcoma in adults are undifferentiatedpleomorphic sarcoma (previously called malignant fibrous histiocytoma), liposarcoma, and leiomyosarcoma. Certain types occur more often in certain areas of the body than others. For example, leiomyosarcomas are the most common abdominal sarcoma, while liposarcomas and undifferentiated pleomorphic sarcoma are most common in legs. But pathologists (doctors who specialize in diagnosing cancers by how they look under the microscope), may not always agree on the exact type of sarcoma. Sarcomas of uncertain type are very common. (American Cancer Society, Cancer Facts & Figures 2019)
Manufacturing
We do not currently own or operate manufacturing facilities for the production of clinical or commercial quantities of any of our product candidates. We rely on a small number of third-party manufacturers to produce our compounds and expect to continue to do so to meet the preclinical and clinical requirements of our potential product candidates as well as for all of our commercial needs. We do not have long-term agreements with any of these third parties. We require in our manufacturing and processing agreements that all third-party contract manufacturers and processors produce active pharmaceutical ingredients, or API, and finished products in accordance with the FDA’s current Good Manufacturing Practices, or cGMP, and all other applicable laws and regulations. We maintain confidentiality agreements with potential and existing manufacturers in order to protect our proprietary rights related to our drug candidates.
Patents and Trademarks
Immuno-oncology platform
University of Minnesota License Agreement
We (through our wholly owned subsidiary Oxis Biotech, Inc.) are party to an exclusive worldwide license 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 to target NK cells to cancer. Under the terms of the agreement, we receive 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 shall be 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 University of Minnesota will receive an upfront license fee, royalty fees ranging from 4% to 6%, minimum annual royalty payments of $250,000 beginning in 2022, $2,000,000 in 2025, and $5,000,000 in 2027 and certain milestone payments totaling $3,100,000.
The following is a list of the patent applications that we licensed from the University of Minnesota:
Appl. No. | Title | Country | Status |
U.S. Patent Application Number 62/237,835
| Therapeutic compounds and its uses
| US | Expired |
PCT Patent Application Number PCT/US2016/055722 | Therapeutic componds and methods
| US | Pending |
Daniel A. Vallera, Ph.D. License Agreement
We are party to an exclusive worldwide license agreement with Daniel A. Vallera, Ph.D. and his co-inventor Jeffrey Lion, or jointly, Dr. Vallera, to further develop and commercialize DT2219ARL (GTB-1550), a novel therapy for the treatment of various human cancers. Under the terms of the agreement, we receive exclusive rightsto conduct research and to develop, make, use, sell, and import DT2219ARL worldwide for the treatment of any disease, state or condition in humans. We shall be 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 DT2219ARL, 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, Dr. Vallera will receive an upfront license fee, royalty fees ranging from 3% for net sales and 25% of net sublicensing revenues, and certain milestone payments totaling $1,500,000.
The following is a list of the patent applications and patents that we licensed from Dr. Vallera under our license agreements:
Pat./Pub. No. | Title | Country | Status |
U.S. Patent Application Number 61/160,530 | Methods and compositions for bi-specific targeting of cd19/cd22 | US | Expired |
U.S. Patent Number 9,371,386 | Methods and compositions for bi-specific targeting of cd19/cd22 | US | Issued |
U.S. Patent Application Number 15/187,579 | Methods and compositions for bi-specific targeting of cd19/cd22 | US | Pending |
ID4 License Agreement
Pursuant to a patent license agreement with ID4, dated December 31, 2014, or the ID4 License Agreement, we received an exclusive, worldwide license to certain intellectual property, including intellectual property related to treating a p62mediated disease (e.g., multiple myeloma). The terms of this license require us to pay ID4 royalties equal to 3% of net sales of products and 25% royalty of net sublicensing revenues. The license will expire upon expiration of the last patent contained in the licensed patent rights, unless terminated earlier. We may terminate the licensing agreement with ID4 by providing ID4 with 30 2016.days written notice.
We will owe the following cash amounts to ID4 Pharma upon the attainment of the following milestones:
24(i)
Filing of an investigational new drug application with a competent regulatory authority anywhere in the world $50,000.(ii)
Initiation of Phase I Human Clinical Trial: $50,000.
(iii)
Initiation of Phase II Human Clinical Trial: $100,000.
(iv)
Initiation of pivotal Phase III Human Clinical Trial: $250,000. and
(v)
Receipt of the first marketing approval: $250,000
The following is a list of the patent applications and patent that we licensed from ID4 under the ID4 license agreement:
Pat./Appl. No. | Title | Country | Status |
U.S. Patent Number 9,580,382 | P62zz chemical inhibitor | US | Issued |
U.S. Patent Application Number 61/521,287 | P62zz chemical inhibitor | US | Expired |
PCT Patent Application Number PCT/US2012/049911 | P62zz chemical inhibitor | PCT | Expired |
U.S. Patent Application Number 14/727,710 | P62zz chemical inhibitor | US | Pending |
Chinese Patent Application 201280048718 | P62zz chemical inhibitor | US | Pending |
DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONSCentral Nervous System
Executive OfficersPatents for AccuBreak Tablets
We have in-licensed the rights to use the AccuBreak patents with drugs that, like carbamazepine, are voltage-gated sodium channel blockers in North America. The license field includes voltage gated sodium channels inhibitors and Directorsblockers for the treatment of epilepsy, neuropathic pain, and bipolar disorder.
Under the agreement, AccuBreak received an upfront license fee of $35,000, royalty fees ranging from 2.5% to 5%, minimum annual royalty payments, and 20% of net sublicensing revenues.
We will owe the following cash amounts to AccuBreak upon the attainment of the following milestones:
●
$50,000 six months after the first approval of the first indication by the FDA;
●
$50,000 nine months after the first approval of the first indication by the FDA;
●
$100,000 12 months after the first approval of the first indication by the FDA;
●
$25,000 upon achievement of $25,000,000 of cumulative net sales in the world;
●
$50,000 upon achievement of $50,000,000 of cumulative net sales in the world; and
●
$100,000 upon achievement of $75,000,000 of cumulative net sales in the world.
Four formulation patents protect the AccuBreak Technology:
Pat. No. | Title | Country | Status |
U.S. Patent Number 7,838,031 | Method for administering a partial dose using a segmented pharmaceutical tablet | US | Issued |
U.S. Patent Number 7,879,352 | Scored pharmaceutical tablets comprising a plurality of segments | US | Issued |
U.S. Patent Number 8,158,148 | Pharmaceutical tablets comprising two or more unitary segments | US | Issued |
U.S. Patent Number 8,231,902 (ABT- 054) | Segmented pharmaceutical dosage forms | US | Issued |
The core patent expires in 2025.
Patent Applications for GTP-004
Four patent applications filed by GTP in 2017 with the U.S. PTO protect the combination of pyridostigmine or neostigmine + an antiemetic for the treatment of myasthenia gravis. We plan to file extensions under the Patent Cooperation Treaty, or PCT, in 2018. All patents list below are owned by the Company.
Pat. No. | Title | Country | Status |
U.S. Patent Application Number 62/443,904 | Use and composition for treating Myasthenia Gravis | US | Expired |
U.S. Patent Application Number 62/449,699 | Neostigmine combination for treating Myasthenia Gravis | US | Expired |
U.S. Patent Application Number 62/536,595 | Method and composition for treating Myasthenia Gravis | US | Pending |
U.S. Patent Application Number 62/536,580 | Neostigmine pharmaceutical combination for treating Myasthenia Gravis | US | Pending |
| | | |
PCT Application Number PCT/US/18/12754 | Use and composition for treating Myasthenia Gravis | PCT | Claims priority from US 62/443,904 |
Taiwan Application Number 107100813 | | TW | Awaiting FC Report |
PCT Application Number PCT/US18/014700 | Neostigmine pharmaceutical combination for treating Myasthenia Gravis | PCT | Claims priority from US 62/449,699 |
Taiwan Application Number 101702591 | | TW | Awaiting FC Report |
Patent Application for GTP-011
One patent application filed by GTP in 2017 with the U.S. PTO protects a 72-hour patch of oxybutynin for the treatment of motion sickness. We plan to file a PCT extension in 2018. All patents list below are owned by the Company.
Appl. No. | Title | Country | Status |
U.S. Patent Application Number 62/440,575 | Use and composition for preventing and treating motion sickness | US | Expired |
US Patent Application Number 62/595,667 | Use, method, and device for the prevention and treatment of motion sickness | US | Pending* |
PCT Application Number PCT/US/17/68944 | Use and composition for preventing and treating motion sickness | PCT | Claims priority from US 62/440,575 |
Taiwan Application Number 107100079 | | TW | Awaiting FC Report |
* This application is pending, but was used as priority document of the PCT ‘944, including its subject matter
Employees
As of December 31, 2018, we had three employees. Many of our activities are outsourced to consultants who provide services to us on a project basis. As business activities require and capital resources permit, we will hire additional employees to fulfill our company’s needs.
Form and Year of Organization
In 1965, the corporate predecessor of GT Biopharma, Diagnostic Data, Inc. was incorporated in the State of California. Diagnostic Data changed its incorporation to the State of Delaware in 1972; and changed its name to DDI Pharmaceuticals, Inc. in 1985. In 1994, DDI Pharmaceuticals merged with International BioClinical, Inc. and Bioxytech S.A. and changed its name to OXIS International, Inc. On July 17, 2017, we amended our Certificate of Incorporation for the purpose of changing our name from Oxis International, Inc. to GT Biopharma, Inc.
Legal Proceedings
On December 24, 2018, Empery Asset Master, Empery Tax Efficient, LP, and Empery Tax Efficient II, LP (collectively, “Plaintiffs) filed in the N.Y. Supreme Court, Index No. 656408/2018, alleging causes of action against the Company for Breach of Contract, Liquidated Damages, Damages, and Indemnification. The claims arose out of a securities purchase agreement entered into between Plaintiffs and the Company pursuant to which the Company issued convertible notes and warrants to Plaintiffs in or around January 2018. Plaintiffs allege, inter alia, that the Company failed to pay Plaintiffs’ outstanding principal on or before the July 23, 2018 maturity date of said notes, failed to convert a portion of said notes in response to Plaintiffs’ conversion notice, and failed to timely adjust the exercise price of said warrants. At issue are notes issued to Plaintiffs in the aggregate principal amount of approximately $2.2 million and warrants representing the right of Plaintiffs to acquire an aggregate of 480,352 shares of common stock in the Company.
MANAGEMENT
The following table sets forth the name, age and position held by each of our executive officers and directors as of June 30, 2015.15, 2019. Directors are elected for a period of one year and thereafter serve until the next annual meeting at which their successors are duly elected by the stockholders.
Name | | Age |
| Position |
Anthony J. Cataldo | | 65 | 67 | Chief Executive Officer and Chairman of the Board |
Steven Weldon | | 40 | 43 | Chief Financial Officer, Principal Accounting Officer and Director |
Anthony J. Cataldowas appointed to the Board of Directors on July 31, 2014 and he was appointed Chief Executive Officer and Chairman on March 15, 2019. Previously he served as Vice Chairman of the Board since January 2019. Mr. Cataldo has extensive experience with the Company, having served on the Board of Directors from July 2014 until November 19, 2014. Most recently, From2018, also serving as Chief Executive Officer from November 2014 to September 2017 and Executive Chairman of the Board from September 2017 to February 2018 during that time. Prior to joining the Company, from February 2011 tountil June 2013, Mr. Cataldo served as Chairman and CEO/Founder of Genesis Biopharma, Inc. (Now(now known as Lion Biotechnologies,Iovance Biotherapeutics, Inc. Trading symbol, LBIO)). Mr. Cataldo createdis credited with developing the Stage Four Cancer treatment for melanoma known as Lion/Genesis with the inclusion ofusing assets purchaseacquired from the National Cancer Institute (NIH) for their novel treatment of Stage Four Cancer treatment for melanoma.
Mr. Cataldo also served as Chairman of the board of directors of Brand Partners Group, Inc., a provider of integrated products and services dedicated to providing financial services and traditional retail clients with turn-key environmental solutions, from October 2003 through August 2006.
. Mr. Cataldo also served as non-executive co-chairman of the board of directors of MultiCell Technologies, Inc., a supplier of functional, non-tumorigenic immortalized human hepatocytes from February 2005 throughuntil July 2006. Mr. Cataldo has also served as Executive Chairman of Calypte Biomedical Corporation, a publicly traded biotechnology company, involved in the development and sale of urine based HIV-1 screening tests from May 2001 through November 2004. Mr. Cataldo served as the
Steven Weldon was appointed Chief ExecutiveFinancial Officer and Chairmanto our board of directors on March 20, 2019. Previously Mr. Weldon was appointed to the Board of Directors of Miracle Entertainment, Inc., a Canadian film production company, from May 1999 through May 2002 where he was the executive producer or producer of several motion pictures. From August 1995 to December 1998, Mr. Cataldo served as President and Chairman of the Board of Senetek, PLC, a publicly traded biotechnology company involved in age-related therapies.
Steven Weldon was appointed to our Board of DirectorsCompany in September 2014 and as our President and Chief Financial Officer in November 2014.2014 until October 2018.. Mr. Weldon has over 15 years of financial and accounting experience. The majority of his career has been focused on tax planning, preparation, and CFO consulting. Mr. Weldon'sWeldon’s financial background includes experience in managerial, private accounting and planning. He has served on the board of several publicly traded companies as both, Chief Executive Officerchief executive officer and Chief Financial Officer. For several years, he taught accounting and tax courses to undergrad students at Florida Southern College. He received his Bachelor of Science degree and his Masters in Business Administration from Florida Southern College.chief financial officer. Mr. Weldon was appointed as Chief Financial Officerchief financial officer and as a member of the board of directors of GrowbloxGB Sciences, Inc., a Delaware corporation (OTCMKTS:GBLX) in September 2005 and served in both positions until November 2014. Mr. Weldon also served as chief executive officer of GrowbloxGB Sciences from December 29, 2009, through May 2, 2011, and from April 18, 2012, through March 13, 2014.
During For several years, he taught accounting and tax courses to undergrad students at Florida Southern College. He received his bachelor of science degree and his Master’s in Business Administration from Florida Southern College and is a licensed Certified Public Accountant in the past five years noneState of our directors, executive officers, promoters or control persons was:
1) | the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; |
2) | convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); |
3) | subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or |
4) | found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law. |
Director IndependenceFlorida.
We do not have any independent directors serving on our Board of Directors. The definition the Company uses to determine whether a director is independent is NASDAQ Rule 4200(a)(15). See Exhibit 99 hereto.
Scientific & Medical Advisory Board
To assist with the development and commercialization of our drug platforms, we previously established a Scientific & Medical Advisory Board consisting of scientists and clinicians experienced with the development and use of the treatments of cancer. Under their advisory agreements, the members of our Scientific & Medical Advisory Board received a monthly advisory fee.
Daniel Miller
Cassian Yee, M.D., University of Texas MD Anderson Cancer Center.Cassian Yee, M.D., Professor, Department of Immunology, Division of Cancer Medicine, and Director, Solid Tumor Cell Therapy, Center for Cancer Immunology Research at the University of Texas MD Anderson Cancer Center and a Professor, Department of Melanoma Medical Oncology, Division of Cancer Medicine at the University of Texas MD Anderson Cancer. Dr. Yee previously held the position of Professor in Division of Oncology at the University of Washington, and was a Member in the Department of Immunology, Clinical Research Division of the Fred Hutchinson Cancer Research Center. Dr. Yee received his medical degree from the University of Manitoba in Canada, and trained as a research fellow at the Ontario Cancer Institute in Toronto before continuing his medical residency at Stanford University. Dr. Yee completed his fellowship in medical oncology, and postdoctoral research studies at the University of Washington and the Fred Hutchinson Cancer Research Center. Dr. Yee is a recipient of the Cancer Research Institute Investigator Award, and the Damon Runyon Walter Winchell Clinical Investigator Award. Dr. Yee is also a Burroughs Wellcome Scientist in Translational Research, and has been elected a member of the American Society for Clinical Investigation.
Xing-Qun (Sean) Xie, MD, PHD, EMBA, University of Pittsburgh. Sean Xie, MD, PhD, EMBA is a tenured Professor at the Department of Pharmaceutical Sciences/Drug Discovery Institute at University of Pittsburgh and Associate Dean for Research Innovation at the School of Pharmacy. He is Principal Investigator of an integrated research laboratory of CompuGroup, BioGroup and ChemGroup, and Founding Director of Computational Chemical Genomics Screening Center. Dr. Xie is also Director/PI of NIH funded National Center of Excellence for Computational Drug Abuse Research. Dr. Xie holds joint faculty positions at the Departments of Computational System Biology and Structural Biology, and Pittsburgh Cancer Institute MT/DD Program. He serves as an invited guest editor for AAPS Journal, Editorial Board of American Journal of Molecular Biology, and Associate Editor of BMC Pharmacology and Toxicology. In 2013, he was named an honorary professor of Chinese Academy of Medical Sciences & Peking Union Medical College. Dr. Xie is a recipient of the 2014 American Association of Pharmaceutical Scientists (AAPS) Outstanding Research Achievement Award.
Dr. Lisa A. Haile, Ph.D., DLA Piper. Dr. Lisa A. Haile, Ph.D. currently serves as Co-Chair, Global Life Sciences Sector at DLA Piper. Dr. Haile has special technical expertise in molecular biology and immunology. She has particular experience with patentability, non-infringement and validity opinions; licensing strategies; FDA counseling; due diligence work in connection with venture capital, private and public financing; mergers and acquisitions in the life sciences industry; and strategic counseling for comprehensive life sciences patent portfolio management and value creation. Dr. Haile is a member of DLA Piper's Executive Committee.
Dr. Haile's experience includes US and international patent preparation and prosecution as well as IP reviews for investors relating to technologies including novel genetically altered organisms, antisense, RNA and siRNA molecules, peptides, proteins, DNA, antibodies, vaccines, diagnostics and therapeutics.
Dr. Stephen M. Chang, PH.D., New York Stem Cell Foundation. Dr. Stephen M. Chang is Vice President-Research & Development at New York Stem Cell Foundation, Chief Scientific Officer at Stemgent, Inc., and Independent Director at MultiCell Technologies, Inc. Dr. Chang was previously employed as Chief Scientific Officer & Vice President by Canji, Inc., Chief Scientific Officer & Vice President at Schering-Plough Research Institute, and President and Chief Executive Officer at MultiCell Immunotherapeutics, Inc. He served on the Board of Directors at Histogen, Inc. Dr. Chang received his undergraduate degree from the University of Michigan and a doctorate degree from the University of California, Irvine.
Committees of the Board of Directors
Due to the small number of directors, at the present time the duties of an Audit Committee, Nominating and Governance Committee, and Compensation Committee are performed by the board of directors as a whole. At such time as we have more directors on our board of directors, these committees will be reconstituted.
Code of Ethics
A copy of the company’s code of ethics is attached to this annual report as exhibit 14.1.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who own more than 10% of a registered class of the company’s equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission (“SEC”). Executive officers, directors and greater than 10% stockholders are required by SEC regulations to furnish the company with copies of all Section 16(a) forms they file. All of our executive officers and directors filed the required reports; however, Kathleen Clarence-Smith and Raymond Urbanski filed one Form 3 late and Raymond Urbanski, Anthony J. Cataldo and Steven Weldon each filed one Form 4 late.
26
EXECUTIVE COMPENSATION
Compensation of Executive Officers
The following table setsets forth certain information concerning the annual and long-term compensation for services rendered to us in all capacities for the fiscal years ended December 31, 20152018 and 20142017 of all persons who served as our principal executive officers and as our principal financial officer during the fiscal year ended December 31, 2015.2018. No other executive officers received total annual compensation during the fiscal year ended December 31, 20152018 in excess of $100,000. The principal executive officer and the other named officers are collectively referred to as the "Named“Named Executive Officers."
Name and Principal Position | | Year | | Salary ($) | | Bonus ($) | | Stock Awards | | Option Awards(1) ($) | | Non-Equity Incentive Plan Compensation Earnings ($) | | Nonqualified Deferred Compensation Earnings ($) | | All Other Compensation ($) | | Total |
Anthony J. Cataldo, | | 2015 | | $216,000 | | $134,000 | | $ ---- | | $ 102,535 | | $ ––– | | $ ––– | | $ ––– | | $ 452,535 |
Chairman(2) | | 2014 | | $154,000 | | $ ––– | | $ 402,291 | | $ 139,079 | | $ ––– | | $ ––– | | $ ––– | | $ 695,370 |
| | | | | | | | | | | | | | | | | | |
Kenneth Eaton, | | 2015 | | $ ––– | | $ ––– | | $ ––– | | $ ––– | | $ ––– | | $ ––– | | $ ––– | | $ ––– |
Chief Executive Officer (Principal Executive Officer) (3) | | 2014 | | $ 224,560 | | $ ––– | | $ ––– | | $ ––– | | $ ––– | | $ ––– | | $ ––– | | $ 224,560 |
| | | | | | | | | | | | | | | | | | |
Steven Weldon, | | 2015 | | $168,000 | | $ ––– | | $ 197,845 | | $ ––– | | $ ––– | | $ ––– | | $ ––– | | $365,845 |
Chief Financial Officer (Principal Financial Officer) (4) | | 2014 | | $ 25,500 | | $ ––– | | $ 57,945 | | $ ––– | | $ ––– | | $ ––– | | $ ––– | | $83,445 |
”
(1) | This column represents option awards computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures related to service-based vesting conditions. For additional information on the valuation assumptions with respect to the option grants, refer to Note 1 of our financial statements in this Annual Report. These amounts do not correspond to the actual value that will be recognized by the named executives from these awards. |
(2) | Mr. Cataldo served as our Chief Executive Officer from March 2009 to August 2011 and again in November 2014, and was appointed Chairman of the Board of Directors on July 25, 2014. |
Name and Principal Position | | | | | All Other Compensation ($) (2) | |
| | | | | | |
Anthony J. Cataldo | 2018 | - | - | - | 404,151 | 404,151 |
CEO (6) | 2017 | 310,667 | 90,000 | 77,275,253 | - | 77,675,920 |
| | | | | |
Steven Weldon | 2018 | 230,000 | - | - | - | 230,000 |
CFO (5) | 2017 | 245,333 | - | 38,472,797 | - | 38,718,130 |
| | | | | |
Raymond Urbanski, M.D. | 2018 | 321,154 | - | 7,644,490 | - | 7,965,644 |
Former CEO (3) | 2017 | 133,333 | - | 7,644,490 | - | 7,777,823 |
| | | | | |
Shawn Cross | 2018 | 233,942 | 20,000 | - | - | 253,942 |
Former CEO (4) | 2017 | 104,165 | - | - | - | 104,165 |
| | | | | |
Kathleen Clarence-Smith | 2018 | 278,846 | - | - | - | 278,846 |
Former CEO (7) | 2017 | 166,667 | - | - | - | 166,667 |
(3) | Mr. Eaton was appointed Chief Executive Officer in November 2013 and resigned in November 2014. |
(4) | Mr. Weldon was appointed Chief Financial Officer on November 3, 2014. |
(1)
The amounts in this column represent the aggregate grant date fair value of the restricted stock awards and restricted stock units, determined in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718. GT Biopharma determines the grant date fair value of the awards by multiplying the number of units granted by the closing market price of one share of GT Biopharma common stock on the award grant date. These amounts do not reflect the actual economic value that will be realized by the named executive officer upon the vesting or the sale of the common stock awards.
(2)
The amount in this column represents compensation earned under Consultant Agreements with the Company.
(3)
Dr. Urbanski was appointed Chief Medical Officer on September 1, 2017, President of May 9, 2018, and Chief Executive Officer on July 3, 2018. He resigned as Chief Executive Officer on March 15, 2019.
(4)
Mr. Cross was appointed President and Chief Operating Officer on October 15, 2017 and Chairman and Chief Executive Officer on February 14, 2018. Mr. Cross resigned from the Company on July 2, 2018.
(5)
Mr. Weldon was appointed Chief Financial Officer on March 20, 2019. He was previously the Chief Financial Officer from November 3, 2014 until October 11, 2018.
(6)
Mr. Cataldo was appointed Chief Executive Officer on March 15, 2019. Mr. Cataldo previously served as our Chief Executive Officer from March 2009 to August 2011 and again in November 2014 to September 1, 2017. He was Executive Chairman from September 1, 2017 to February 14, 2018, and has been providing services to the Company under a Consultant Agreement since February 14, 2018.
(7)
Dr. Clarence-Smith was Chief Executive Officer from September 1, 2017 to February 14, 2018. Dr. Clarence-Smith served as our Vice-Chairwoman and President of the Neurology Division from February 14, 2018 until her resignation from the Company on October 9, 2018. Employment Agreements
Employment Agreements
TheOn October 18, 2018, the Company has entered into employment agreementsa Consultant Agreement with Anthony J. Cataldo and Steven Weldon. Pursuant to the agreements, Mr. Cataldo and Mr. Weldon receive annual salaries of $216,000 and $168,000 respectively, as well as bonuses under certain circumstances and as awarded by the Board of Directors.Cataldo. The term of employment underthe Consultant Agreement shall remain in effect until September 30, 2019. This Agreement supersedes the Consultant Agreement dated February 14, 2018 and will pay Mr. Cataldo's agreement is for three years with a year to year renewal option thereafter. TheCataldo $25,000 per month during the term of employment under Mr. Weldon'sthe Agreement.
On October 19, 2018, the Company entered into an Executive Employment Agreement with Dr. Urbanski, reflecting his current position as Chief Executive Officer of the Company. Under the terms of this agreement, Dr. Urbanski’s annual salary is for two years withessentially unchanged from his previous positions. Dr. Urbanski is also entitled to participate in the Company’s bonus plans. Under the Executive Employment Agreement, the Company has agreed that upon shareholder approval of a yearStock Option Plan, it will recommend to year renewalthe Board that the Company grant Dr. Urbanski a Non-Qualified stock option thereafter.to purchase 2,971,102 shares of the Company’s common stock having an exercise equal to the fair market value of the shares on the date of the Agreement. The stock option grant would vest according to the following schedule: (i) 1,250,000 fully vested shares upon signing of the agreement, (ii) 1,250,000 shares on January 1, 2019, and (iii) 471,102 shares on January 1, 2020. On March 15, 2019, Dr, Urbanski resigned his position as Chief Executive Officer, President and Chairman of the Board.
Stock Option Grants
The following table sets forth information as of December 31, 2015,2018, concerning unexercised options, unvested stock and equity incentive plan awards for the executive officers named in the Summary Compensation Table.
27Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | |
Steven Weldon | - | - | - | $- | |
Anthony Cataldo | 358 | - | - | $750 | 2019-7-1 |
Anthony Cataldo | 358 | - | - | $1,500 | 2019-7-1 |
Anthony Cataldo | 358 | - | - | $2,250 | 2019-7-1 |
OUTSTANDING EQUITY AWARDS AT YEAR ENDED DECEMBER 31, 2015
| Option Awards | Stock Awards |
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
| | | | | | | | | |
Anthony Cataldo | 321,833 | - | - | $2.50 | 07/01/19 | | | | |
Anthony Cataldo | 321,833 | - | - | $5.00 | 07/01/19 | | | | |
Anthony Cataldo | 321,833 | 321,833 | - | $7.50 | 07/01/19 | | | | |
Director Compensation
Beginning in January 2012,2018, non-employee members of the Board of Directors are to receive $3,000$42,500 per quarter either in cash or registered shares,year, plus an option to purchase 25,000 shares at the market price at the end$15,000 annually for Chairing a Committee and $5,000 annually as a member of each quarter. Thea Committee. Also, upon shareholder approval of a Stock Option Plan, Directors will be granted 150,000 options willthat vest equally over a one yearthree-year period. There was no compensation paid to non-employee directors during fiscal 2015.Vesting will accelerate if the Company undergoes a change of control transaction for cash.
Name | Fees Earned or Paid in Cash ($) | | | |
Dr. John Bonfiglio (1) | $- | $- | $- | $- |
Dr. Peter Kiener (1) | $8,173 | $- | $- | $8,173 |
Geoffrey Davis (1) | $26,250 | $- | $- | $26,250 |
Anthony Cataldo | $- | $- | $- | $- |
Federica O'Brien (2) | $8,173 | $- | $- | $8,173 |
(1) Dr. Bonfiglio, Dr. Kiener and Mr. Davis resigned from the Board on March 20, 2019 |
(2) Ms. O'Brien resigned from the Board on July 2, 2018 |
VOTING SECURITIES AND PRINCIPAL HOLDERS
The following table sets forth certain information regarding beneficial ownership of our common stock as of August 10, 2016June 16, 2019, (a) by each person known by us to own beneficially 5% or more of any class of our common stock, (b) by each of our Named Executive Officers,named executive officers, (c) by each of our directors and (d) by all of our current executive officers and directors as a group. As of August 10, 2016ofJune 16, 2019, there were 28,065,959 51,374,417 shares of our common stock issued and outstanding. Shares of common stock subject to stock options and warrantspreferred stock that are currently exercisable or exercisable within 60 days of June 30, 201616, 2019 are deemed to be outstanding for the purposepurposes of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless indicated below, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Except as otherwise indicated, the address of each stockholder is c/o OXIS International,GT Biopharma, Inc. at 100 South Ashley Street,310 N. Westlake Blvd., Suite 600, Tampa, FL 33602.206, Westlake Village, CA 91362.
Name and Address of Beneficial Owner | Number of Shares of Common Stock Beneficially Owned | | Percent of Shares of Outstanding Common Stock |
Security Ownership of Certain Beneficial Owners: | | | |
Bristol Investment Fund, Ltd. | 1,525,472 (1) | | 5.44% |
Theorem Group, LLC (2) | 2,096,480 (2) | | 7.47% |
Alpha Capital Anstalt | 2,034,830(3) | | 7.25% |
James W. Heavener | 1,684,100(4) | | 6.00% |
Security Ownership of Management: | | | |
Anthony J. Cataldo | 4,030,731 | | 15.22% |
Steven Weldon | 601,610 | | 2.27% |
| | | |
Executive officers and directors as a group — 2 persons | 4,632,341 | | 17.49% |
(1) | As reported on SC 13G/A filed with the SEC on April 4, 2016. Paul Kessler, manager of Bristol Capital Advisors, LLC, the investment advisor to Bristol Investment Fund, Ltd., has voting and investment control over the securities held by Bristol Investment Fund, Ltd. Mr. Kessler disclaims beneficial ownership of these securities. |
(2) | As reported on SC 13D/A filed with the SEC on January 26, 2016. Anshuman Dube, manager of Theorem Group, LLC, has voting and investment control over the securities. Mr. Dube disclaims beneficial ownership of these securities. |
(3) | As reported on SC 13G filed with the SEC on January 26, 2016 Konrad Ackermann, director of Alpha Capital Anstalt, has voting and investment control over the securities. |
(4) | As reported on SC 13G filed with the SEC on February 9, 2016 James W. Heavener has voting and investment control over the securities. |
Name and Address of Beneficial Owner | Number of Shares of Common Stock Benefically Owned | Percent of Shares of Outstanding Common Stock |
Security Ownership of Certain Beneficial Owners: | | |
Kathleen Clarence-Smith, M.D., Ph.D. (7) | 7,521,051 | 14.66% |
Mark Silverman (7) | 7,226,108 | 14.09% |
William Heavener (1) | 4,674,749 | 9.11% |
Bristol Investment Fund, Ltd. (2) | 4,534,795 | 8.84% |
Adam Kasower (3) | 3,645,620 | 7.11% |
Theorem Group, LLC (4) | 3,540,130 | 6.90% |
Alpha Capital Anstalt (5) | 2,966,667 | 5.78% |
The Rosalinde and Arthur Gilbert Foundation (6) | 2,739,267 | 5.34% |
Security Ownership of Management and Directors: | | |
Anthony J. Cataldo (7) | 3,734,320 | 7.28% |
Steven Weldon (7) | 2,269,707 | 4.43% |
| | |
Executive officers and directors as a group — 2 people | 6,004,027 | 11.71% |
(1)
As reported on Schedule 13G/A filed with the SEC on February 5, 2019. The address of William Heavener is 3300 University Blvd, Suite 218, Winter Park, FL 32792
(2)
As reported on Schedule 13G/A filed with the SEC on February 12, 2019. Paul Kessler, manager of Bristol Capital Advisors, LLC, the investment advisor to Bristol Investment Fund, Ltd., has voting and investment control over the securities held by Bristol Investment Fund, Ltd. Mr. Kessler disclaims beneficial ownership of these securities except to the extent of his pecuniary interest therein. The address of Bristol Capital Advisors, LLC is 662 N. Sepulveda Blvd., Suite 300, Los Angeles, California 90049.
(3)
Includes 1,011,274 shares issuable upon conversion of principal on outstanding convertible debentures and 120,088 shares available through exercise of warrants
(4)
As reported on Schedule 13G filed with the SEC on November 14, 2017. The address of Theorem Group LLC is 315 Beverly Drive, Suite 502, Beverly Hills, CA 90212
(5)
As reported on Schedule 13G filed with the SEC on February 13, 2019. The address of Alpha Capital Anstalt is Lettstrasse 32, FL-9490 Vaduz, Furstentums, Liechtenstein
(6)
Includes 2,655,205 shares issuable upon conversion of principal on outstanding convertible debentures and 84,062 shares available through exercise of warrants
(7)
Security interest in these shares has been granted to various holders of the Company’s senior convertible notes to secure the Company’s obligations under these notes in accordance with a Stock Pledge Agreement dated August 2, 2018.
Equity Compensation Plan Information
The following is a summary of our equity compensation plans at December 31, 2018:
Plan Category | Number of Securities To be Issued Upon Exercise of Outstanding Options, Warrants, and Rights (a) | Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights (b) | Number of Securities Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) |
| | | |
Equity compensation plans approved by security holders (1) | 1,113 | $1,320 | - |
Equity compensation plans not approved by security holders | - | $- | - |
| | | |
Total | 1,113 | $1,320 | - |
(1) As of December 31, 2018, we had options issued and outstanding to purchase 1,113 shares of common stock under our 2014 Stock Incentive Plan.
SELLING STOCKHOLDERS
This prospectus relates in part to our registering the resale of 40,216,064 shares of common stock of the Company by Selling Stockholders who may acquire such shares upon the conversion of notes and Series J-1 Preferred Stock. There can be no assurance that the Selling Stockholders will sell any or all of their common stock offered by this prospectus. We do not know if, when, or in what amounts, the selling stockholders may offer the common stock for sale.
Selling Stockholders
The following table sets forth:
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the names of the Selling Stockholders;
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the number of shares of common stock that can be acquired by each of the Selling Stockholders through the conversion of notes and preferred stock before the offering;
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the number of shares of common stock being registered with respect to each Selling Stockholder;
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the number of shares of common stock owned by each of the Selling Stockholders after the offering assuming all notes and applicable shares of preferred stock are converted and all common shares acquired are sold; and
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the person with voting or investment control if the stockholder is not a natural person.
As of June 14, 2019, there were 51,374,417 shares of common stock outstanding. To the extent that any successor(s) to the named selling stockholder(s) wish to sell under this prospectus, we will file a prospectus supplement identifying such successors as selling stockholders.
Selling Stockholders | Shares Acquireable upon Conversion of Notes and Preferred Stock | | Shares Owned After the Offering Assuming all Notes and Preferred Stock are Converted and all Shares Sold | Person with Voting or Investment Control |
Bristol Investment Fund, Ltd. | 8,589,685 | 8,589,685 | 6,745,117 | Paul Kessler |
Bristol Capital LLC | 2,223,498 | 2,223,498 | * | Paul Kessler |
James Heavener | 5,218,013 | 5,218,013 | 3,892,882 | |
Adam Kasower | 2,140,229 | 2,140,229 | 1,091,664 | |
Red Mango Enterprises Limited | 2,388,486 | 2,388,486 | 1,365,180 | Chris Parker |
Alpha Capital Anstalt | 3,406,667 | 3,406,667 | * | Nicola Feuerstein |
The Rosalinde and Arthur Gilbert Foundation | 4,639,828 | 4,639,828 | 2,360,565 | Martin H. Blank |
Hewlett Fund LP | 1,341,905 | 1,341,905 | * | Martin Chopp |
Clearview Bio LLC | 1,277,500 | 1,277,500 | * | Tisno Onggara |
Brio Capital Master Fund, Ltd | 1,008,810 | 1,008,810 | * | Shaye Hirsch |
Jeffrey Bronfman Revocable Living Trust | 851,950 | 851,950 | * | Jeffrey Bronfman |
Robert H. Lipp Separate Property Trust | 938,643 | 938,643 | * | Robert H. Lipp |
The RSZ Trust | 1,778,798 | 1,778,798 | * | Richard Ziman |
Diane S. Lipp Separate Property Trust | 173,656 | 173,656 | * | Diane S. Lipp |
Lipp Irrevocable Trust | 173,656 | 173,656 | * | Diane S. Lipp |
Martin H. Blank and Linda M. Blank Rev Trust | 135,548 | 135,548 | * | Martin H. Blank |
The Runnels Family Trust DTD 1-11-2000 | 1,296,429 | 1,296,429 | * | G. Tyler Runnels |
District 2 Capital Fund LP | 1,294,524 | 1,294,524 | * | Eric J. Schlanger |
Michael Breen | 259,286 | 259,286 | * | |
Greg Suess | 259,286 | 259,286 | * | |
Jeff Bronfman Revocable Living Trust | 505,381 | 505,381 | * | Jeffrey Bronfman |
Contreras Family Trust | 314,286 | 314,286 | * | |
28*It is unknown to the Company whether the Selling Stockholder holds shares other than those being registered.
PLAN OF DISTRIBUTION
We are registering 40,216,064 shares of our common stock for possible sale by the selling stockholders.
We will not receive any of the proceeds from the sale by the selling stockholders of the shares of common stock. We will bear all fees and expenses incident to our obligation to register the shares of common stock.
The selling stockholders may sell all or a portion of the shares of common stock beneficially owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the shares of common stock are sold through underwriters or broker-dealers, the selling stockholders will be responsible for underwriting discounts or commissions or agent’s commissions. The shares of common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions,
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on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;
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in the over-the-counter market;
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in transactions otherwise than on these exchanges or systems or in the over-the- counter market;
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through the writing of options, whether such options are listed on an options exchange or otherwise;
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ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
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block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
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purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
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an exchange distribution in accordance with the rules of the applicable exchange;
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privately negotiated transactions;
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sales pursuant to Rule 144;
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broker-dealers may agree with the selling security holders to sell a specified number of such shares at a stipulated price per share;
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a combination of any such methods of sale; and
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any other method permitted pursuant to applicable law.
If the selling stockholders effect such transactions by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling stockholders or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the shares of common stock or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of common stock in the course of hedging in positions they assume. The selling stockholders may also sell shares of common stock short and deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The selling stockholders may also loan or pledge shares of common stock to broker-dealers that in turn may sell such shares.
The selling stockholders may pledge or grant a security interest in some or all of the senior convertible notes, warrants or shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as amended, amending, if necessary, the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer and donate the shares of common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
The selling stockholders and any broker-dealer participating in the distribution of the shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the shares of common stock is made, a prospectus supplement, if required, willbe distributed which will set forth the aggregate amount of shares of common stock being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling stockholders and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.
Under the securities laws of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.
There can be no assurance that any selling stockholder will sell any or all of the shares of common stock registered pursuant to the registration statement, of which this prospectus forms a part.
The selling stockholders and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing ofpurchases and sales of any of the shares of common stock by the selling stockholders and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common stock to engage in market-making activities with respect to the shares of common stock. All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the shares of common stock.
We will pay all expenses of the registration of the shares of common stock pursuant to the registration rights agreement, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however, that a selling stockholder will pay all underwriting discounts and selling commissions, if any. We will indemnify the selling stockholders against liabilities, including some liabilities under the Securities Act, in accordance with the registration rights agreements, or the selling stockholders will be entitled to contribution. We may be indemnified by the selling stockholders against civil liabilities, including liabilities under the Securities Act, that may arise from any written information furnished to us by the selling stockholder specifically for use in this prospectus, in accordance with the related registration rights agreement, or we may be entitled to contribution.
Once sold under the registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands of persons other than our affiliates.
DESCRIPTION OF OUR CAPITAL STOCK
The following description of our capital stock, together with any additional information we include in any applicable prospectus supplement or any related free writing prospectus, summarizes the material terms and provisions of our common stock. For the complete terms of our common stock, please refer to our amended andrestated certificate of incorporation, the and our amended and restated bylaws that are incorporated by reference into the registration statement of which this prospectus is a part or may be incorporated by reference in this prospectus or any applicable prospectus supplement. The terms of these securities may also be affected by Delaware General Corporation Law. The summary below and that contained in any applicable prospectus supplement or any related free writing prospectus are qualified in their entirety by reference to our amended and restated certificate of incorporation and our amended and restated bylaws.
General
As of the date of this Prospectus, our authorized capital stock consists of 150,000,000750,000,000 shares of common stock, par value $0.001 per share, and 15,000,000 shares of preferred stock, par value $0.001 per share. As of August 10, 2016,June 15, 2019, there were 28,065,959approximately 51.3 million shares of our common stock outstanding,issued and 1,787,897 shares of our preferred stock outstanding.
Holders of our common stock are entitled to one vote for each share of common stock held of record for the election of directors and on all matters submitted to a vote of stockholders. Holders of our common stock are entitled to receive dividends ratably, if any, as may be declared by our board of directors out of legally available funds, subject to any preferential dividend rights of any preferred stock then outstanding. In the event of our dissolution, liquidation or winding up, holders of our common stock are entitled to share ratably in our net assets legally available after the payment of all of our debts and other liabilities, subject to the liquidation preferences of any preferred stock then outstanding. Holders of our common stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future. All outstanding shares of our common stock are fully paid and nonassessable. Except as described below in "Anti-Takeover Effects of“Anti-Takeover Provisions Under Our Charter and Bylaws and Delaware Law, Provisions of Our Amended and Restated Certificate of Incorporation and Our Amended and Restated By-Laws,"” a majority vote of common stockholders is generally required to take action under our amended and restated certificate of incorporation and amended and restated by-laws.
bylaws.
Anti-Takeover Provisions Under Our Charter and Bylaws and Delaware Law
Certain provisions of Delaware law, our amended and restated certificate of incorporation and our bylaws contain provisions that could have the effect of delaying, deferring or discouraging another party from acquiring control of us. These provisions, which are summarized below, may have the effect of discouraging coercive takeover practices and inadequate takeover bids. These provisions are also designed, in part, to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with an unfriendly or unsolicited acquirer outweigh the disadvantages of discouraging a proposal to acquire us because negotiation of these proposals could result in an improvement of their terms.
Amended and Restated Certificate of Incorporation
Undesignated Preferred Stock
. Our board of directors is authorized, withouthas the ability to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of us. These and other provisions may have the effect of deferring hostile takeovers or delaying changes in control or management of our company.
Special Meetings of Stockholders. Our bylaws provide that special meetings of our stockholders may be called only by our chairman of the board, our president or our board of directors, thus prohibiting a stockholder from calling a special meeting. This provision might delay the ability of our stockholders to force consideration of a proposal or for stockholders controlling a majority of our capital stock to take any action, including the removal of directors.
Board Vacancies Filled Only by Majority of Directors. Vacancies and newly created seats on our board may be filled only by a majority of the directors then in office. Only our board of directors may determine the number of directors on our board. The inability of stockholders to determine the number of directors or to fill vacancies or newly created seats on our board of directors makes it more difficult to change the composition of our board of directors, but these provisions promote a continuity of existing management.
No Cumulative Voting. The Delaware General Corporation Law, or DGCL, provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless our amended and restated certificate of incorporation provides otherwise. Our amended and restated certificate of incorporation and bylaws do not expressly provide for cumulative voting.
Directors Removed Only by Special Meeting of Stockholders. A director can be removed only by the affirmative vote of a majority of the votes of the issued and outstanding stock entitled to vote for the election of directors of the corporation given at a special meeting of the stockholders called and held for this purpose.
Amendment of Charter Provisions. In order to designateamend certain of the above provisions in our amended and issue up to 15,000,000 sharesrestated certificate of preferred stock in one or more series. In the pastincorporation and our bylaws, the board has designated series lettered A through Iof directors is expressly authorized to adopt, alter or repeal the bylaws, subject to the rights of the stockholders entitled to vote. Stockholders can vote at any stockholder meeting and issued sharesrepeal, alter, or amend the bylaws by the affirmative vote of a majority of the stockholders entitled to vote in those series. Assuch meeting.
Delaware Anti-takeover Statute
We are subject to Section 203 of the DGCL. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of this prospectus, only preferred sharesthe transaction in which the series designated C, H,person became an interest stockholder, unless the business combination is approved in a prescribed manner. A “business combination” includes mergers, asset sales and I have shares issuedother transactions in which the interested stockholder receives or could receive a financial benefit on other than a pro rata basis with other stockholders. An “interested stockholder” is a person who, together with affiliates and outstanding. In connection with this Offering, the board has recently designated series J which is being offered in the Offering as part of the B Units. Our board of directors can fixassociates, owns, or alter the rights, preferences and privileges of the shares of each series and any of its qualifications, limitations or restrictions, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences and the number of shares constituting a class or series. The issuance of preferred stock could, under certain circumstances, result in onewithin three years did own, 15% or more of the following adverse effects:
corporation’s outstanding voting stock. This provision has an anti-takeover effect with respect to transactions not approved in advance by our board of directors, including discouraging takeover attempts that might result in a premium over the market price for the shares of our market price. With approval of our stockholders, we could amend our amended and restated certificate of incorporation in the future to avoid the restrictions imposed by this anti-takeover law.
decreasing The provisions of Delaware law and our amended and restated certificate of incorporation could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of our common stock;stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing changes in our management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.
restricting dividends on our common stock;Transfer Agent and Registrar
dilutingOur transfer agent and registrar for our capital stock is ComputerShare. The transfer agent’s address is 350 Indiana Street, Golden, Colorado 80401, and its telephone number is (303) 262-0600.
Listing
Our common stock is listed on the voting powerOTCQB under the symbol “GTBP.” The last reported sale price of our common stock;stock on the OTCQB on June 14, 2019, was $0.29 per share. Our common stock is also quoted on several European-based exchanges including Berlin (GTBP.BE), Frankfurt (GTBP.DE), the Euronext (GTBP.NX) and Paris (GTBP.PA).
impairing
LEGAL MATTERS
Certain legal matters in connection with this offering will be passed upon for us by Gary R. Henrie, Attorney at Law, Nauvoo, Illinois. These legal matters include that shares of common stock to be sold by the liquidationSelling Shareholders are validly issued, fully paid and non-assessable. Mr. Henrie's address is P.O. Box 107, 315 Kimball's Garden Circle, Nauvoo, IL 62354. Mr. Henrie is licensed to practice law in the states of Nevada and Utah.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable.
EXPERTS
The consolidated financial statements, and the related financial statement schedule, incorporated in this Prospectus by reference to our Annual Report on Form 10-K have been audited by Seligson & Giannattasio, LLP, an independent registered public accounting firm, as stated in their report, which is incorporated herein by reference. Such financial statements and financial statement schedule have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 under the Securities Act with the Securities and Exchange Commission with respect to the sale or resale of an aggregate of 40,216,064 shares of common stock. This prospectus was filed as a part of that registration statement but does not contain all of the information contained in the registration statement and exhibits. Reference is thus made to the omitted information. Statements made in this prospectus are summaries of the material terms of contracts, agreements and documents and are not necessarily complete; however, all information we considered material has been disclosed. Reference is made to each exhibit for a more complete description of the matters involved and these statements are qualified in their entirety by the reference. You may inspect the registration statement, exhibits and schedules filed with the Securities and Exchange Commission at the Securities and Exchange Commission's principle office in Washington, D.C. Copies of all or any part of the registration statement may be obtained from the Public Reference Section of the Securities and Exchange Commission, 100 F. Street, N.E., Washington, D.C. 20549. The Securities and Exchange Commission also maintains a web site (http://www.sec.gov) that contains this filed registration statement, reports, proxy statements and information regarding us that we have filed electronically with the Commission. For more information pertaining to our company and the sale or resale of an aggregate of 40,216,064 shares of common stock, reference is made to the registration statement.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2019 AND DECEMBER 31, 2019 (Unaudited) | F-1 |
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CONSOLIDATED STATEMENTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2019 AND 2018 (Unaudited) | F-2 |
| |
CONSOLIDATED STATEMENTS OF CASH FLOWS - SIX MONTHS ENDED SEPTEMBER 30, 2018 AND 2017 (Unaudited) | F-3 |
| |
NOTES TO FINANCIAL STATEMENTS (Unaudited) | F-4 |
| |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | F-14 |
| |
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2018 AND DECEMBER 31, 2017 | F-15 |
| |
CONSOLIDATED STATEMENTS OF OPERATIONS - YEARS ENDED DECEMBER 31, 2018 AND 2017 | F-16 |
| |
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY/(DEFICIT) - YEARS ENDED DECEMBER 31, 2018 AND 2017 | F-17 |
| |
CONSOLIDATED STATEMENTS OF CASH FLOWS - YEARS ENDED DECEMBER 31, 2018 AND 2017 | F-18 |
| |
NOTES TO FINANCIAL STATEMENTS | F-19 |
GT Biopharma, Inc. and Subsidiaries |
as of March 31,2019 and December 31, 2018 |
Consolidated Balance Sheets |
(in Thousands, Except Par Value and Share Data) |
| | |
| | |
ASSETS | | |
Current Assets: | | |
Cash and cash equivalents | $51 | $60 |
Prepaid expenses | 27 | 30 |
Total Current Assets | 78 | 90 |
| | |
Intangible assets | 25,262 | 25,262 |
Deposits | 12 | 12 |
Operating lease right-to-use asset | 153 | - |
Fixed assets, net | 34 | 35 |
Total Other Assets | 25,461 | 25,309 |
TOTAL ASSETS | $25,539 | $25,399 |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | |
Current Liabilities: | | |
Accounts payable | $1,898 | $1,762 |
Accrued expenses | 2,136 | 1,455 |
Deferred rent | - | 8 |
Operating lease liability | 161 | - |
Note payable to related party | - | 100 |
Line of credit | 31 | 31 |
Convertible debentures | 11,297 | 10,673 |
Total Current Liabilities | 15,523 | 14,029 |
| | |
Total liabilities | 15,523 | 14,029 |
| | |
Stockholders’ Equity: | | |
Convertible preferred stock - $0.001 par value; 15,000,000 shares authorized: | | |
Series C - 96,230 and 96,230 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively | 1 | 1 |
Series J – 1,163,548 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively | 1 | 1 |
Common stock - $0.001 par value; 750,000,000 shares authorized; and 51,374,417 and 50,650,478 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively | 51 | 51 |
Additional paid-in capital | 543,327 | 540,171 |
Accumulated deficit | (533,195) | (528,685) |
Noncontrolling interest | (169) | (169) |
Total Stockholders’ Equity
| 10,016 | 11,370 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
| $25,539 | $25,399 |
| | |
The accompanying notes are an integral part of these consolidated financial statements. |
GT Biopharma, Inc. and Subsidiaries |
|
|
(in Thousands, Except per Share Data) |
| |
| | |
Revenue: | | |
License revenues | $- | $- |
TOTAL REVENUE | - | - |
Cost of License Revenue | - | - |
Gross profit | - | - |
Operating Expenses: | | |
Research and development | 834 | 3,473 |
Selling, general and administrative | 3,222 | 3,687 |
Total operating expenses | 4,056 | 7,160 |
Loss from Operations | (4,056) | (7,160) |
Other income (expense) | | |
Interest expense/income | (454) | (2,931) |
Total Other Income (Expense) | (454) | (2,931) |
Loss before minority interest and provision for income taxes | (4,510) | (10,091) |
Less: Loss attributable to the noncontrolling interests | - | - |
Loss before provision for income taxes | (4,510) | (10,091) |
Provision for income taxes | - | - |
Net loss | (4,510) | (10,091) |
Loss per share | | |
Basic | $(0.09) | $(0.20) |
Diluted | $(0.09) | $(0.20) |
| | |
Weighted Average Shares Outstanding – basic and diluted | | |
Basic | 51,092,886 | 50,117,977 |
Diluted | 51,092,886 | 50,117,977 |
| | |
The accompanying notes are an integral part of these consolidated financial statements. |
GT Biopharma, Inc. and Subsidiaries |
Consolidated Statements of Cash Flows |
For the Three Months Ended March 31, 2019 and 2018 |
|
| |
| | |
| | |
CASH FLOWS FROM OPERATING ACTIVITIES: | | |
Net loss | $(4,510) | $(10,091) |
Adjustments to reconcile net loss to net cash used in operating activities: | | |
Depreciation | 1 | 1 |
Stock compensation expense for options and warrants issued to employees and non-employees | 2,565 | 3,060 |
Amortization of debt discounts | 163 | 2,665 |
Non-cash interest expense | - | 266 |
Amortization of loan costs | - | 407 |
Changes in operating assets and liabilities: | | |
Other assets | 3 | - |
Accounts payable and accrued liabilities | 817 | (534) |
Net cash used in operating activities | (961) | (4,226) |
CASH FLOWS FROM INVESTING ACTIVITIES: | | |
Acquisition of fixed assets | - | (2) |
Net cash used by investing activities | 0 | (2) |
CASH FLOWS FROM FINANCING ACTIVITIES: | | |
Proceeds from notes payable | 1,052 | 7,055 |
Loan costs | - | (533) |
Repayment of note payable | (100) | - |
Net cash provided by financing activities | 952 | 6,522 |
Minority interest | - | - |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (9) | 2,294 |
CASH AND CASH EQUIVALENTS - Beginning of period | 60 | 576 |
CASH AND CASH EQUIVALENTS - End of period | $51 | $2,870 |
| | |
Supplemental disclosures: | | |
Interest paid | $- | $- |
Income taxes paid | $- | $- |
| | |
Supplemental disclosures: | | |
Issuance of common stock upon conversion of convertible notes | $430 | $- |
Issuance of common stock upon conversion of accrued interest | $4 | $- |
| | |
The accompanying condensed notes are an integral part of these consolidated financial statements. |
GT BIOPHARMA, INC. AND SUBSIDIARIES CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019
(UNAUDITED)
1.
The Company and Summary of Significant Accounting Policies
Business
In 1965, the corporate predecessor of GT Biopharma, Diagnostic Data, Inc. was incorporated in the State of California. Diagnostic Data changed its incorporation to the State of Delaware in 1972. and changed its name to DDI Pharmaceuticals, Inc. in 1985. In 1994, DDI Pharmaceuticals merged with International BioClinical, Inc. and Bioxytech S.A. and changed its name to OXIS International, Inc. In July 2017, the Company changed its name to GT Biopharma, Inc.
We are a clinical stage biopharmaceutical company focused on the development and commercialization of novel immuno-oncology products based off our proprietary Natural Killer (NK) cell engager (Tri-specific Killer Engager (TriKE) & Tetra-specific Killer Engager (TetraKE)) and bi-specific Antibody Drug Conjugate (bispecific-ADC) technology platforms. Our TriKE and TetraKE platforms generate proprietary moieties designed to harness and enhance the cancer killing abilities of a patient’s own natural killer, or NK, cells. Once bound to a NK cell, our moieties are designed to stimulate the NK cell and precisely direct it to one or more specifically-targeted proteins (tumor antigens) expressed on a specific type of cancer, ultimately resulting in the cancer cell’s death. TriKEs and TetraKEs are made up of recombinant fusion proteins, can be designed to target tumor antigens on hematologic malignancies, sarcomas or solid tumors and do not require patient-specific customization. They are designed to be dosed in an outpatient setting and are expected to have reasonably low cost of goods. Our bispecific-ADC platform can generate product candidates that are ligand-directed single-chain fusion proteins that simultaneously target two tumor antigens. We believe our bispecific-ADC moieties represents the next generation of ADCs.
Going Concern
The Company’s current operations have focused on business planning, raising capital, establishing an intellectual property portfolio, hiring, and conducting preclinical studies and clinical trials. The Company does not have any product candidates approved for sale and has not generated any revenue from product sales. The Company has sustained operating losses since inception and expects such losses to continue over the foreseeable future.
The financial statements of the Company have been prepared on a goingconcern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the financial statements do not include any adjustments that might be necessary should the Company be unable to continue in existence.
The Company has incurred substantial losses and negative cash flows from operations since its inception and has an accumulated deficit of $533.3 million and cash of $51 thousand as of March 31, 2019. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of its products currently in development. Substantial additional financing will be needed by the Company to fund its operations and to commercially develop its product candidates. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019
(UNAUDITED)
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. Management has also implemented cost saving efforts, including reduction in executive salaries and reduced travel. Management believes that these ongoing and planned financing endeavors, if successful, will provide adequate financial resources to continue as a going concern for at least the next six months from the date the financial statements are issued. however, there can be no assurance in this regard. If the Company is unable to secure adequate additional funding, its business, operating results, financial condition and cash flows may be materially and adversely affected.
Use of Estimates
The financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America, and have been consistently applied in the preparation of the financial statements. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities revenues and expenses and disclosures of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
Basis of Consolidation and Comprehensive Income
The accompanying consolidated financial statements include the accounts of GT Biopharma, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated. The Company's financial statements are prepared using the accrual method of accounting.
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and disclosures required by U.S. GAAP for complete consolidated financial statements have been condensed or omitted herein. The interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Form 10-K for the year ended December 31, 2018. The unaudited interim condensed consolidated financial information presented herein reflects all normal adjustments that are, in the opinion of management, necessary for a fair statement of the financial position, results of operations and cash flows for the periods presented. The Company is responsible for the unaudited interim consolidated financial statements included in this report. The results of operations of any interim period are not necessarily indicative of the results for the full year.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.
Concentrations of Credit Risk
The Company's cash and cash equivalents, marketable securities and accounts receivable are monitored for exposure to concentrations of credit risk. The Company maintains substantially all of its cash balances in a limited number of financial institutions. The balances are each insured by the Federal Deposit Insurance Corporation up to $250,000. The Company had no balances in excess of this limit at March 31, 2019.
GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019
(UNAUDITED)
Stock Based Compensation to Employees
The Company accounts for its stock-based compensation for employees in accordance with Accounting Standards Codification (“ASC”) 718. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees over the related vesting period.
The Company granted no stock options during the quarters ended March 31, 2019 and 2018, respectively
Long-Lived Assets
Our long-lived assets include property, plant and equipment, capitalized costs of filing patent applications and other indefinite lived intangible assets. We evaluate our long-lived assets for impairment, other than indefinite lived intangible assets, in accordance with ASC 360, whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Estimates of future cash flows and timing of events for evaluating long-lived assets for impairment are based upon management’s judgment. If any of our intangible or long-lived assets are considered to be impaired, the amount of impairment to be recognized is the excess of the carrying amount of the assets over its fair value.
Applicable long-lived assets are amortized or depreciated over the shorter of their estimated useful lives, the estimated period that the assets will generate revenue, or the statutory or contractual term in the case of patents. Estimates of useful lives and periods of expected revenue generation are reviewed periodically for appropriateness and are based upon management’s judgment.
Impairment of Long-Lived Assets
The Company's long-lived assets currently consist of indefinite lived intangible assets associated with IPR&D (“In-Process Research & Development”) projects and related capitalized patents acquired in the acquisition of Georgetown Translational Pharmaceuticals, Inc. as described in Note 2 below. Intangible assets associated with IPR&D projects are not amortized until approval by the Food and Drug Administration (FDA) is obtained in a major market subject to certain specified conditions and management judgment. The useful life of an amortizing asset generally is determined by identifying the period in which substantially all of the cash flows are expected to be generated.
The Company evaluates indefinite lived intangible assets for impairment at least annually and whenever impairment indicators are present in accordance with ASC 350. When necessary, the Company records an impairment loss for the amount by which the fair value is less than the carrying value of these assets. The fair value of intangible assets other than goodwill is typically determined using the “relief from royalty method”, specifically the discounted cash flow method utilizing Level 3 fair value inputs. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, which includes the expected impact of competitive, legal and/or regulatory forces on the projections and the impact of technological risk associated with IPR&D assets, as well as the selection of a long-term growth rate; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.
The Company performs impairment testing for all other long-lived assets whenever impairment indicators are present. When necessary, the Company calculates the undiscounted value of the projected cash flows associated with the asset, or asset group, and compares this estimated amount to the carrying amount. If the carrying amount is found to be greater, we record an impairment loss for the excess of book value over fair value.
GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019
(UNAUDITED)
Income Taxes
The Company accounts for income taxes using the asset and liability approach, whereby deferred income tax assets and liabilities are recognized for the estimated future tax effects, based on current enacted tax laws, of temporary differences between financial and tax reporting for current and prior periods. Deferred tax assets are reduced, if necessary, by a valuation allowance if the corresponding future tax benefits may not be realized.
Net Income (Loss) per Share
Basic net income (loss) per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period, plus the potential dilutive effect of common shares issuable upon exercise or conversion of outstanding stock options and warrants during the period. The weighted average number of potentially dilutive common shares excluded from the calculation of net income (loss) per share totaled in 22,731,781 and 4,553,668 as of March 31, 2019 and 2018, respectively.
Patents
Acquired patents are capitalized at their acquisition cost or fair value. The legal costs, patent registration fees and models and drawings required for filing patent applications are capitalized if they relate to commercially viable technologies. Commercially viable technologies are those technologies that are projected to generate future positive cash flows in the near term. Legal costs associated with patent applications that are not determined to be commercially viable are expensed as incurred. All research and development costs incurred in developing the patentable idea are expensed as incurred. Legal fees from the costs incurred in successful defense to the extent of an evident increase in the value of the patents are capitalized.
Capitalized cost for pending patents are amortized on a straight-line basis over the remaining twenty year legal life of each patent after the costs have been incurred. Once each patent is issued, capitalized costs are amortized on a straight-line basis over the shorter of the patent's remaining statutory life, estimated economic life or ten years.
Fixed Assets
Fixed assets is stated at cost. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets, which are 3 to 10 years for machinery and equipment and the shorter of the lease term or estimated economic life for leasehold improvements.
Fair Value
The carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels are defined as follows:
●
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. The Company’s Level 1 assets include cash equivalents, primarily institutional money market funds, whose carrying value represents fair value because of their short-term maturities of the investments held by these funds.
●
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. The Company’s Level 2 liabilities consist of liabilities arising from the issuance of convertible securities and in accordance with ASC 815-40: a warrant liability for detachable warrants, as well as an accrued derivative liability for the beneficial conversion feature. These liabilities are remeasured each reporting period. Fair value is determined using the Black-Scholes valuation model based on observable market inputs, such as share price data and a discount rate consistent with that of a government-issued security of a similar maturity. There were not such liabilities at March 31, 2019.
●
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.
GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019
(UNAUDITED)
Research and Development
Research and development costs are expensed as incurred and reported as research and development expense. Research and development costs totaling $.8 million and $3.5 million for the years ended March 31, 2019 and 2018, respectively.
Revenue Recognition
License Revenue
License arrangements may consist of non-refundable upfront license fees, exclusive licensed rights to patented or patent pending technology, and various performance or sales milestones and future product royalty payments. Some of these arrangements are multiple element arrangements.
Non-refundable, up-front fees that are not contingent on any future performance by us, and require no consequential continuing involvement on our part, are recognized as revenue when the license term commences and the licensed data, technology and/or compound is delivered. We defer recognition of non-refundable upfront fees if we have continuing performance obligations without which the technology, right, product or service conveyed in conjunction with the non-refundable fee has no utility to the licensee that is separate and independent of our performance under the other elements of the arrangement. In addition, if we have continuing involvement through research and development services that are required because our know-how and expertise related to the technology is proprietary to us, or can only be performed by us, then such up-front fees are deferred and recognized over the period of continuing involvement.
Payments related to substantive, performance-based milestones in a research and development arrangement are recognized as revenue upon the achievement of the milestones as specified in the underlying agreements when they represent the culmination of the earnings process. As of March 31, 2019, the Company has not generated any licensing revenue.
Recent Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance related to accounting for leases, Accounting Standards codification Topic 842 (ASC 842). We adopted the new guidance on January 1, 2019 using the modified retrospective approach and the optional transition method. Under this adoption method, comparative prior periods were not adjusted and continue to be reported with our historical accounting policy. The primary impact of adopting this standard was the recognition of $173 thousand in operating lease liabilities and $165 thousand in right of use assets.
On September 1, 2017, the Company entered into an Agreement and Plan of Merger whereby it acquired 100% of the issued and outstanding capital stock of Georgetown Translational Pharmaceuticals, Inc. (GTP). In exchange for the ownership of GTP, the Company issued a total of 16,927,878 shares of its common stock, having a share price of $15.00 on the date of the transaction, to the three prior owners of GTP which represented 33% of the issued and outstanding capital stock of the Company on a fully diluted basis. $253.8 million of the value of shares issued was allocated to intangible assets consisting of a portfolio of three CNS development candidates, which are classified as IPR&D.
As of September 30, 2018, the Company recorded an intangible asset impairment charge of $228.5 million related to the portfolio of CNS IPR&D assets within Operating Expenses, which represents the excess carrying value compared to fair value. The impairment charge was the result of both internal and external factors. In the 3rdquarter of 2018, the Company experienced changes in key senior management, led by the appointment of a new CEO with extensive experience in oncology drug development. These changes resulted in the prioritization of immuno-oncology development candidates relative to CNS development candidates. In conjunction with these strategic changes, limited internal resources have delayed the development of the CNS IPR&D assets. The limited resources, changes in senior leadership, and favorable market conditions for immuno-oncology development candidates have resulted in the Company choosing to focus on development of its immuno-oncology portfolio. In light of this shift in market strategy, the Company performed a commercial assessment and a valuation of the CNS IPR&D assets, both to assess fair value and support potential future licensing efforts. The valuation indicated an excess carrying value over the fair value of these assets, resulting in the impairment charge noted above.
GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019
(UNAUDITED)
The fair value of the CNS IPR&D assets was determined using the discounted cash flow method which utilized significant estimates and assumptions surrounding the amount and timing of the projected net cash flows, which includes the probability of commercialization, the assumption that the assets would be out-licensed to third-parties for continued development for upfront licensing fees and downstream royalty payments based on net sales, and expected impact of competitive, legal and/or regulatory forces on the projections, as well as the selection of a long-term growth rate; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.
Convertible Notes
On January 22, 2018, the Company entered into a Securities Purchase Agreement (“SPA”) with fourteen accredited investors (individually, a “Buyer” and collectively, the “Buyers”) pursuant to which the Company agreed to issue to the Buyers senior convertible notes in an aggregate principal amount of $7,760,510 (the “Notes”), which Notes shall be convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”) at a price of $4.58 per share, and five-year warrants to purchase the Company’s Common Stock representing the right to acquire an aggregate of approximately 1,694,440 shares of Common Stock (the “Warrants”).
Pursuant to the terms of SPA the Notes were subject to an original issue discount of 10% resulting in proceeds to the Company of $7,055,000 from the transaction.
Upon the purchase of the Notes, the Buyers received Warrants to purchase 1,694,440 shares of Common Stock. Such Warrants are exercisable for (5) years from the date the shares underlying the Warrants are freely saleable. The initial Exercise Price is $4.58. According to the terms of the warrant agreement, the Warrants are subject to certain adjustments depending upon the price and structure of a subsequent financing, including a qualified financing with gross proceeds of at least $20 million, as defined in the agreements.
The issuance of the Notes and Warrants were made in reliance on the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) for the offer and sale of securities not involving a public offering, and Regulation D promulgated under the Securities Act.
Contemporaneously with the execution and delivery of the SPA, the Company and the Buyers executed and delivered a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which the Company has agreed to provide certain registration rights with respect to the Registrable Securities under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws.
Senior Convertible Debentures
On August 2, 2018, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement with the purchasers identified on the signature pages thereto (individually, a “Purchaser,” and collectively, the “Purchasers”) pursuant to which the Company issued to the Purchasers one year 10% Senior Convertible Debentures in an aggregate principal amount of $5,140,000 (the “Debentures”), which Debentures shall be convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a price of $2 per share. The Company used a portion of these proceeds to repay $4.4 million of the notes issued on January 22, 2018. Additionally, the remaining $3.3 million of the notes issued on January 22, 2018 were converted into the Debentures at the same terms discussed above.
GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019
(UNAUDITED)
On September 7, 2018, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement with the purchasers identified on the signature pages thereto (individually, a “Purchaser,” and collectively, the “Purchasers”) pursuant to which the Company has issued to the Purchasers one year 10% Senior Convertible Debentures in an aggregate principal amount of $2,050,000 (the “Debentures”), which Debentures shall be convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a price of $2 per share.
On September 24, 2018, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement with the purchasers identified on the signature pages thereto (individually, a “Purchaser,” and collectively, the “Purchasers”) pursuant to which the Company has issued to the Purchasers one year 10% Senior Convertible Debentures in an aggregate principal amount of $800,000 (the “Debentures”), which Debentures shall be convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a price of $2 per share.
On February 4, 2019, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the purchasers identified on the signature pages thereto (individually, a “Purchaser,” and collectively, the “Purchasers”), pursuant to which the Company issued to the Purchasers, on February 4, 2019, Secured Convertible Notes in an aggregate principal amount of $1,352,224 (the “Notes”), consisting of gross proceeds of $1,052,224 and settlement of existing debt of $300,000, which Notes shall be convertible at any time after issuance into shares (the “Conversion Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a conversion price of $0.60 per share (the “Conversion Price”).
The Notes accrue interest at the rate of 10% per annum and mature on August 2, 2019. Interest on the Notes is payable in cash or, at a Purchaser’s option, in shares of Common Stock at the Conversion Price. Upon the occurrence of an event of default, interest accrues at 18% per annum. The Notes contain customary default provisions, including provisions for potential acceleration, and covenants, including negative covenants regarding additional indebtedness and dividends. The Conversion Price is subject to adjustment due to certain events, including stock dividends and stock splits, and is subject to reduction in certain circumstances if the Company issues Common Stock or Common Stock equivalents at an effective price per share that is lower than the Conversion Price then in effect. The Company may only prepay the Notes with the prior written consent of the respective Purchasers thereof.
Contemporaneously with the execution and delivery of the Purchase Agreement, on February 4, 2019, the Company and certain of its wholly-owned subsidiaries entered into a Security Agreement (the “Security Agreement”) with Alpha Capital Anstalt, as collateral agent on behalf of the Purchasers, and with the Purchasers, pursuant to which the Purchasers have been granted a first-priority security interest in substantially all of the assets of the Company and such subsidiaries securing (i) an aggregate principal amount of $1,352,224 of Notes and (ii) an aggregate principal amount of $9,058,962 of the Company’s 10% Senior Convertible Debentures issued on August 2, 2018, September 7, 2018 and September 24, 2018 held by such Purchasers.
The Purchase Agreement contains customary representations, warranties and covenants, including covenants, subject to certain exceptions, that the Company, until the date on which less than 10% of the Notes are outstanding, shall not effect any Variable Rate Transaction (as defined in the Purchase Agreement) and that, for as long as a Purchaser holds any Notes or Conversion Shares, the Company shall amend the terms and conditions of the Purchase Agreement and the transactions contemplated thereby with respect to such Purchaser to give such Purchaser the benefit of any terms or conditions under which the Company agrees to issue or sell any Common Stock or Common Stock equivalents that are more favorable to an investor than the terms and conditions granted to such Purchaser under the Purchase Agreement and the transactions contemplated thereby.
In addition, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the Purchasers, pursuant to which the Company has agreed to file, within 14 days after February 4, 2019, one or more registration statements on Form S-3 (or, if Form S-3 is not then available to the Company, such form of registration that is then available to effect a registration for resale of the subject securities) covering the resale of all Conversion Shares, subject to certain penalties set forth in the Registration Rights Agreement. The Form S-3 was filed by the Company on February 14, 2019.
GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019
(UNAUDITED)
Financing Agreement
On November 8, 2010, the Company entered into a financing arrangement with Gemini Pharmaceuticals, Inc., a product development and manufacturing partner of the Company, pursuant to which Gemini Pharmaceuticals made a $250,000 strategic equity investment in the Company and agreed to make a $750,000 purchase order line of credit facility available to the Company. The outstanding principal of all Advances under the Line of Credit will bear interest at the rate of interest of prime plus 2 percent per annum. There is $31,000 due on this credit line at March 31, 2019.
Common Stock
In the first quarter of 2019, the Company issued 723,940 shares of common stock upon conversion of $434,271 in principal and interest on senior convertible notes.
Preferred Stock
On September 1, 2017, the Company authorized 2,000,000 shares of Series J Preferred Stock. Shares of Series J Preferred Stock will have the same voting rights as shares of common stock with each share of Series J Preferred Stock entitled to one vote at a meeting of the shareholders of the Corporation. Shares of Series J Preferred Stock will not be entitled to receive any dividends, unless and until specifically declared by our board of directors. The holders of the Series J Preferred Stock will participate, on an as-if-converted-to-common stock basis, in any dividends to the holders of common stock. Each share of the Series J Preferred Stock is convertible into one share of our common stock; orstock at any time at the option of the holder.
delaying or preventingOn September 1, 2017 the Company issued a change total of 208,224 shares of Series J Preferred Stock in controlexchange for the conversion of us without further action by our stockholders.debt in the total amount of $250,000.
Our boardOn September 1, 2017 the Company issued a total of directors will make any determination700,278 shares of Series J Preferred Stock in exchange for the cancellation of debt in the total amount of $840,000.
On September 1, 2017 the Company issued 5,046 shares of Series J Preferred Stock upon the exercise of warrants on a cashless basis.
On September 1, 2017 the Company also issued 600,000 shares of Series J Preferred Stock to issue such shares based on its judgmentone entity as payment for $720,000 of consulting services provided to our best interests and the best interests of our stockholders. We have no current plans to issue anyCompany.
In December 2017, the Company converted 350,000 Series J shares of preferred stock into 350,000 shares of common stock.
GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019
(UNAUDITED)
5.
Stock Options and Warrants
Stock Options
The following table summarizes stock option transactions for the quarter ended March 31, 2018:
| | Weighted Average Exercise Price |
Outstanding, December 31, 2018 | 1,133 | $1,320.00 |
Granted | - | - |
Exercised | - | - |
Expired | - | - |
Outstanding, March 31, 2019 | 1,133 | $1,320.00 |
Exercisable, March 31, 2019 | 1,133 | $1,320.00 |
Common Stock Warrants
Warrant transactions for the quarter ended March 31, 2019 are as follows:
| | Weighted Average Exercise Price |
Outstanding at December 31, 2018: | 1,813,053 | $2.00 |
Granted | - | - |
Forfeited | -
| - |
Exercised | - | - |
Outstanding at March 31, 2019 | 1,813,053 | $2.00 |
Exercisable at March 31, 2019 | 1,813,053 | $2.00 |
6.
Commitments and Contingencies
Leases
29As described in Note 1. Nature of Operations and Summary of Significant Accounting Policies, we adopted new lease accounting guidance effective January 1, 2019.
We determine if a contractual arrangement is a lease at inception. Our lease arrangements provide the Company the right to utilize certain specified tangible assets for a period of time in exchange for consideration. Our leases primarily relate to building office space. Our leases currently consist solely of operating leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet.
Series C
We recognize a lease liability and a right of use asset at the lease commencement date based on the present value of the future lease payments over the lease term discounted using our incremental borrowing rate. Implicit interest rates within our lease arrangements are rarely determinable. Right of use assets also include, if applicable, prepaid lease payments and initial direct costs, less incentives received.
We recognize operating lease expense on a straight-line basis over the term of the lease within selling general and administrative expenses.
Our leases do not contain any material residual value guarantees or material restrictive covenants. Some of our leases include optional renewal periods or termination provisions which we assess at inception to determine the term of the lease, subject to reassessment in certain circumstances.
The following table summarizes the Company’s future minimumpayments under operating leases as of December 31, 2018:
Year ending December 31: | |
2019 | 69,000
|
2020 | 71,000 |
2021 | 61,000 |
Total minimum lease payments | $201,000 |
Lease expense for the quarters ended March 31, 2019 and 2018 was $17,000 and $24,000, respectively.
GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019
(UNAUDITED)
Employment Agreements
On October 18, 2018, the Company entered into a Consultant Agreement with Anthony Cataldo. The term of the Consultant Agreement shall remain in effect until September 30, 2019. This Agreement supersedes the Consultant Agreement dated February 14, 2018 and will pay Mr. Cataldo $25,000 per month during the term of the Agreement.
On October 19, 2018, the Company entered into an Executive Employment Agreement with Dr. Urbanski, reflecting his current position as Chief Executive Officer of the Company. Under the terms of this agreement, Dr. Urbanski’s annual salary is essentially unchanged from his previous positions. Dr. Urbanski is also entitled to participate in the Company’s bonus plans. Under the Executive Employment Agreement, the Company has agreed that upon shareholder approval of a Stock Option Plan, it will recommend to the Board that the Company grant Dr. Urbanski a Non-Qualified stock option to purchase 2,971,102 shares of the Company’s common stock having an exercise equal to the fair market value of the shares on the date of the Agreement. The stock option grant would vest according to the following schedule: (i) 1,250,000 fully vested shares upon signing of the agreement, (ii) 1,250,000 shares on January 1, 2019, and (iii) 471,102 shares on January 1, 2020. On March 15, 2019, Dr, Urbanski resigned his position as Chief Executive Officer, President and Chairman of the Board.
Preferred Stock
On April 4, 2019, the Company filed a Certificate of Designation with the Office of the Secretary of State of the State of Delaware. The Certificate of Designation designated 3,000,000 shares of preferred stock as Series J-1 Preferred Stock. A copy of the Certificate of Designation detailing the rights and preferences of the stock is attached hereto as Exhibit 3.1. In the State of Delaware, the Certificate of Designation has the effect of amending the Certificate of Incorporation by adding to the Certificate of Incorporation the terms and conditions of the Designation and the stock designated.
On April 19, 2019, the Companyissued a total of 2,353,548 shares of Series J-1 Preferred Stock (the "Shares") to a total of two entities. The Shares are convertible into shares of common stock of the Registrant at the rate of $0.60 per share. The issuance was exempt from the registration requirements of Section 5 of the Securities Act of 1933 pursuant to Section 4(2) of the same Act since the issuance of the Shares did not involve any public offering.
In addition, the Company entered into a letter agreement with the two entities, pursuant to which the Company has agreed to include the shares of common stock issuable upon full conversion of the Series J-1 Preferred Stock in the next registration statement that the Company files (the "Piggyback Registration Statement"). The Company must file the Piggyback Registration Statement on or before August 30, 2019.
Common Stock
In April 2019, the Company issued 656,181 shares of common stock upon conversion of $393,709 in principal and interest on convertible notes.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of GT Biopharma, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of GT Biopharma, Inc. and subsidiaries ,(the "Company") as of December 31, 2018 and 2017, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the years in the two-year period ended December 31, 2018, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company and subsidiaries as of December 31, 2018 and 2017 and the consolidated results of its operations and its consolidated cash flows for each of the years in the two-year period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
Basis of Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred significant recurring losses. The realization of a major portion of its assets is dependent upon its ability to meet its future financing needs and the success of its future operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from this uncertainty.
/s/ Seligson & Giannattasio, LLP
Seligson & Giannattasio, LLP
We have served as the Company’s auditor since 2008.
White Plains, New York
March 29, 2019
GT Biopharma, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except par value and share data)
| | |
ASSETS | | |
Current Assets: | | |
Cash and cash equivalents | $60 | $576 |
Prepaid expenses | 30 | - |
Total Current Assets | 90 | 576 |
| | |
Intangible assets | 25,262 | 253,777 |
Deposits | 12 | 9 |
Fixed assets, net | 35 | 6 |
Total Other Assets | 25,309 | 253,792 |
TOTAL ASSETS | $25,399 | $254,368 |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | |
Current Liabilities: | | |
Accounts payable | $1,762 | $2,546 |
Accrued expenses | 1,455 | 102 |
Line of credit | 31 | 31 |
Note Payable to Related Party | 100 | - |
Deferred Rent | 8 | - |
Convertible debentures | 10,673 | - |
Total Current Liabilities | 14,029 | 2,679 |
| | |
Total liabilities | 14,029 | 2,679 |
| | |
Stockholders’ Equity: | | |
Convertible preferred stock - $0.001 par value; 15,000,000 shares authorized: | | |
Series C - 96,230 and 96,230 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively | 1 | 1 |
Series J – 1,163,548 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively | 1 | 1 |
Common stock - $0.001 par value; 750,000,000 shares authorized; and 50,650,478 and 50,117,977 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively | 51 | 50 |
Additional paid-in capital | 540,171 | 521,305 |
Accumulated deficit | (528,685) | (269,499) |
Noncontrolling interest | (169) | (169) |
Total Stockholders’ Equity | 11,370 | 251,689 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $25,399 | $254,368 |
The accompanying notes are an integral part of these consolidated financial statements.
GT Biopharma, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands except per share data)
| |
| | |
Operating expenses: | | |
Research and development | $9,067 | $1,068 |
Selling, general and administrative expenses | 12,487 | 134,502 |
Loss on impairment | 228,515 | - |
Total operating expenses | 250,069 | 135,570 |
Loss from operations | (250,069) | (135,570) |
Other income (expense): | | |
Interest expense | (9,117) | (8,602) |
Total other income (expense) | (9,117) | (8,602) |
Loss before provision for income taxes | (259,186) | (144,172) |
Provision for income tax | - | - |
Net loss | $(259,186) | $(144,172) |
Net loss per common share – basic and diluted | $(5.16) | $(8.60) |
Weighted average common shares outstanding – basic and diluted | 50,240 | 16,769 |
The accompanying notes are an integral part of these consolidated financial statements.
GT Biopharma, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity
For the Years Ended December 31, 2018 and 2017
(in thousands)
| | | | | | |
| | | | |
| | | | | | |
Balance at December 31, 2016 | 1,788 | $2 | 104 | $0 | $105,891 | $(124,649) |
Issuance of common stock for acquisition | | | 16,928 | 17 | 253,901 | |
Issuance of common and preferred stock for convertible notes and interest | 909 | 1 | 17,678 | 18 | 25,254 | |
Issuance of common and preferred stock for warrants | 5 | 0 | 497 | 0 | 5,819 | |
Issuance of common for preferred stock | (2,042) | (2) | 5,678 | 6 | (4) | |
Issuance of common and preferred stock for compensation | 600 | 1 | 9,233 | 9 | 129,766 | |
Change in accounting method for debt and warrants | | | | | 678 | (678) |
Net loss | | | | | | (144,172) |
Balance at December 31, 2017 | 1,260 | $2 | 50,118 | $50 | $521,305 | $(269,499) |
Issuance of warrants | | | | | 8,304 | |
Issuance of common stock for convertible notes | | | 162
| 0 | 325 | |
Beneficial conversion feature on convertible notes | | | | | 544 | |
Issuance of common stock for compensation | | | 370 | 1 | 9,693 | |
Net loss | | | | | | (259,186) |
Balance at December 31, 2018 | 1,260 | $2 | 50,650
| $51 | $540,171 | $(528,685) |
The accompanying notes are an integral part of these consolidated financial statements.
GT Biopharma, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
| Twelve Months Ended December 31, |
| | |
CASH FLOWS FROM OPERATING ACTIVITIES: | | |
Net loss | $(259,186) | $(144,172) |
Adjustments to reconcile net loss to net cash used in operating activities: | | |
Depreciation | 7 | 2 |
Loss on impairment of long-lived assets | 228,515 | - |
Stock compensation expense for options and warrants issued to employees and non-employees | 9,696 | 130,124 |
Amortization of debt discounts | 8,663 | 4,914 |
Note Allonge | - | 100 |
Non-cash interest expense | 441 | 2,197 |
Amortization of loan costs | 1,076 | - |
Changes in operating assets and liabilities: | | |
Prepaid Expenses | (30) | - |
Other assets | (3) | (7) |
Other liabilities | 8 | |
Accounts payable and accrued liabilities | 136 | 1,412 |
Net cash used in operating activities | (10,677) | (5,430) |
CASH FLOWS FROM INVESTING ACTIVITIES: | | |
Acquisition of fixed assets | (36) | (4) |
Net cash used by investing activities | (36) | (4) |
CASH FLOWS FROM FINANCING ACTIVITIES: | | |
Proceeds from notes payable | 15,145 | 5,991 |
Loan costs | (533) | - |
Repayment of note payable | (4,415) | - |
Net cash provided by financing activities | 10,197 | 5,991 |
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (516) | 557 |
CASH AND CASH EQUIVALENTS - Beginning of period | 576 | 19 |
CASH AND CASH EQUIVALENTS - End of period | $60 | $576 |
| | |
Supplemental cash flow disclosures: | | |
Issuance of common stock upon conversion of convertible notes | $325 | $- |
Acquisition of intangibles through issuance of common stock | $- | $253,777 |
Issuance of common stock for interest expense | $- | $5,179 |
Issuance of common stock for debt | $- | $19,166 |
The accompanying condensed notes are an integral part of these consolidated financial statements.
Business
In 1965, the corporate predecessor of GT Biopharma, Diagnostic Data, Inc. was incorporated in the State of California. Diagnostic Data changed its incorporation to the State of Delaware in 1972; and changed its name to DDI Pharmaceuticals, Inc. in 1985. In 1994, DDI Pharmaceuticals merged with International BioClinical, Inc. and Bioxytech S.A. and changed its name to OXIS International, Inc. In July 2017, the Company changed its name to GT Biopharma, Inc.
We are a clinical stage biopharmaceutical company focused on the development and commercialization of novel immuno-oncology products based off our proprietary Natural Killer (NK) cell engager (Tri-specific Killer Engager (TriKE) & Tetra-specific Killer Engager (TetraKE)) and bi-specific Antibody Drug Conjugate (bispecific-ADC) technology platforms. Our TriKE and TetraKE platforms generate proprietary moieties designed to harness and enhance the cancer killing abilities of a patient’s own natural killer, or NK, cells. Once bound to an NK cell, our moieties are designed to stimulate the NK cell and precisely direct it to one or more specifically-targeted proteins (tumor antigens) expressed on a specific type of cancer, ultimately resulting in the cancer cell’s death. TriKEs and TetraKEs are made up of recombinant fusion proteins, can be designed to target tumor antigens on hematologic malignancies, sarcomas or solid tumors and do not require patient-specific customization. They are designed to be dosed in an outpatient setting and are expected to have reasonably low cost of goods. Our bispecific-ADC platform can generate product candidates that are ligand-directed single-chain fusion proteins that simultaneously target two tumor antigens. We believe our bispecific-ADC moieties represents the next generation of ADCs.
Also, in connection with the acquisition of Georgetown Translational Pharmaceuticals on September 1, 2017, we acquired a portfolio of IPR&D CNS assets consisting of innovative reformulations and/or repurposing of existing therapies. These CNS assets address disease states such as chronic neuropathic pain, myasthenia gravis and motion sickness.
Basis of Consolidation and Comprehensive Income
The accompanying consolidated financial statements include the accounts of GT Biopharma, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated. The Company's financial statements are prepared using the accrual method of accounting.
Going Concern
As shown in the accompanying consolidated financial statements, the Company has incurred an accumulated deficit of $528,685,000 through December 31, 2018. On a consolidated basis, the Company had cash and cash equivalents of $60,000 at December 31, 2018. The Company's plan is to raise additional capital until such time that the Company generates sufficient revenues to cover its cash flow needs and/or it achieves profitability. However, the Company cannot assure that it will accomplish this task and there are many factors that may prevent the Company from reaching its goal of profitability.
The current rate of cash usage raises substantial doubt about the Company’s ability to continue as a going concern, absent any sources of significant cash flows. In an effort to mitigate this near-term concern the Company intends to seek additional equity or debt financing to obtain sufficient funds to sustain operations. However, the Company cannot provide assurance that it will successfully obtain equity or debt or other financing, if any, sufficient to finance its goals or that the Company will generate future product related revenues. The Company’s financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event that the Company cannot continue in existence.
Use of Estimates
The financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosures of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
Segment Information
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. To date, the Company has viewed its operations and manages its business as one segment operating in the United States of America.
2.
Summary of Significant Accounting Policies
Advertising and promotional fees
Advertising expenses consist primarily of costs incurred in the design, development, and printing of Company literature and marketing materials. The Company expenses all advertising expenditures as incurred. There were no advertising expenses for the years ended December 31, 2018 and 2017, respectively.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.
Concentrations of Credit Risk
The Company's cash and cash equivalents, marketable securities and accounts receivable are monitored for exposure to concentrations of credit risk. The Company maintains substantially all of its cash balances in a limited number of financial institutions. The balances are each insured by the Federal Deposit Insurance Corporation up to $250,000. The Company had no balances in excess of this limit at December 31, 2018.
Stock Based Compensation to Employees
The Company accounts for its stock-based compensation for employees in accordance with Accounting Standards Codification (“ASC”) 718. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees over the related vesting period.
The Company granted no stock options during the years ended December 31, 2018 and 2017, respectively.
Long-Lived Assets
Our long-lived assets include property, plant and equipment, capitalized costs of filing patent applications and other indefinite lived intangible assets. We evaluate our long-lived assets for impairment, other than indefinite lived intangible assets, in accordance with ASC 360, whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Estimates of future cash flows and timing of events for evaluating long-lived assets for impairment are based upon management’s judgment. If any of our intangible or long-lived assets are considered to be impaired, the amount of impairment to be recognized is the excess of the carrying amount of the assets over its fair value.
Applicable long-lived assets are amortized or depreciated over the shorter of their estimated useful lives, the estimated period that the assets will generate revenue, or the statutory or contractual term in the case of patents. Estimates of useful lives and periods of expected revenue generation are reviewed periodically for appropriateness and are based upon management’s judgment.
Impairment of Long-Lived Assets
The Company's long-lived assets currently consist of indefinite lived intangible assets associated with IPR&D (“In-Process Research & Development”) projects and related capitalized patents acquired in the acquisition of Georgetown Translational Pharmaceuticals, Inc. as described in Note 3 below. Intangible assets associated with IPR&D projects are not amortized until approval by the Food and Drug Administration (FDA) is obtained in a major market subject to certain specified conditions and management judgment. The useful life of an amortizing asset generally is determined by identifying the period in which substantially all of the cash flows are expected to be generated.
The Company evaluates indefinite lived intangible assets for impairment at least annually and whenever impairment indicators are present in accordance with ASC 350. When necessary, the Company records an impairment loss for the amount by which the fair value is less than the carrying value of these assets. The fair value of intangible assets other than goodwill is typically determined using the “relief from royalty method”, specifically the discounted cash flow method utilizing Level 3 fair value inputs. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, which includes the expected impact of competitive, legal and/or regulatory forces on the projections and the impact of technological risk associated with IPR&D assets, as well as the selection of a long-term growth rate; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.
The Company performs impairment testing for all other long-lived assets whenever impairment indicators are present. When necessary, the Company calculates the undiscounted value of the projected cash flows associated with the asset, or asset group, and compares this estimated amount to the carrying amount. If the carrying amount is found to be greater, we record an impairment loss for the excess of book value over fair value.
Income Taxes
The Company accounts for income taxes using the asset and liability approach, whereby deferred income tax assets and liabilities are recognized for the estimated future tax effects, based on current enacted tax laws, of temporary differences between financial and tax reporting for current and prior periods. Deferred tax assets are reduced, if necessary, by a valuation allowance if the corresponding future tax benefits may not be realized.
Net Income (Loss) per Share
Basic net income (loss) per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period, plus the potential dilutive effect of common shares issuable upon exercise or conversion of outstanding stock options and warrants during the period.
The computation of basic and diluted net loss per share for the years ended December 31, 2018 and 2017 excludes the common stock equivalents of the following potentially dilutive securities because their inclusion would be anti-dilutive:
| |
| | |
Exercise of common stock warrants | 1,813,053 | - |
Conversion of preferred stock into common stock | 1,163,659 | 1,163,659 |
Conversion of convertible debentures into common stock | 5,704,543 | - |
Exercise of common stock options | 1,113 | 1,246 |
| 8,682,368 | 1,164,905 |
Patents
Acquired patents are capitalized at their acquisition cost or fair value. The legal costs, patent registration fees and models and drawings required for filing patent applications are capitalized if they relate to commercially viable technologies. Commercially viable technologies are those technologies that are projected to generate future positive cash flows in the near term. Legal costs associated with patent applications that are not determined to be commercially viable are expensed as incurred. All research and development costs incurred in developing the patentable idea are expensed as incurred. Legal fees from the costs incurred in successful defense to the extent of an evident increase in the value of the patents are capitalized.
Capitalized costs for pending patents are amortized on a straight-line basis over the remaining twenty-year legal life of each patent after the costs have been incurred. Once each patent is issued, capitalized costs are amortized on a straight-line basis over the shorter of the patent's remaining statutory life, estimated economic life or ten years.
Fixed Assets
Fixed assets are stated at cost. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets, which are 3 to 10 years for machinery and equipment and the shorter of the lease term or estimated economic life for leasehold improvements.
Fair Value
The carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels are defined as follows:
●
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. The Company’s Level 1 assets include cash equivalents, primarily institutional money market funds, whose carrying value represents fair value because of their short-term maturities of the investments held by these funds.
●
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. The Company’s Level 2 liabilities consist of liabilities arising from the issuance of convertible securities and in accordance with ASC 815-40: a warrant liability for detachable warrants, as well as an accrued derivative liability for the beneficial conversion feature. These liabilities are remeasured each reporting period. Fair value is determined using the Black-Scholes valuation model based on observable market inputs, such as share price data and a discount rate consistent with that of a government-issued security of a similar maturity. There were no such liabilities at December 31, 2018.
●
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.
Research and Development
Research and development costs are expensed as incurred and reported as research and development expense. Research and development costs totaled $9.1 million and $1.1 million for the years ended December 31, 2018 and 2017, respectively. Research and development costs for the year ended December 31, 2018 included non-cash compensation of $6.8 million.
Recently Issued Accounting Standards
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2016-02, “Leases.” This ASU requires all lessees to be recognized on the balance sheet as right to use assets and lease liabilities for the rights and obligations created by lease arrangements with terms greater than 12 months. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and for interim periods therein. The Company is in the process of assessing the impact the adoption this ASU will have on its consolidated financial position, results of operations and cash flows. At a minimum, total assets and total liabilities will increase in the period the ASU is adopted. Early adoption of this ASU is permitted. At December 31, 2018, the Company’s undiscounted future minimum payments outstanding for lease obligations (including those currently included as capital lease obligations) were approximately $200,878.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers: Topic 606.” This ASU replaces nearly all existing U.S. GAAP guidance on revenue recognition. The standard prescribes a five-step model for recognizing revenue, the application of which will require significant judgment. The amendments in this ASU are effective for fiscal years beginning after December 15, 2017, and for interim periods therein. The provisions of this ASU may be applied retroactively or on a modified retrospective (cumulative effect) basis. The Company adopted the standard using the modified retrospective approach beginning January 1, 2018. Adoption of this ASU did not have a significant impact on the Company’s consolidated financial position, results of operations and cash flows.
On September 1, 2017, the Company entered into an Agreement and Plan of Merger whereby it acquired 100% of the issued and outstanding capital stock of Georgetown Translational Pharmaceuticals, Inc. (GTP). In exchange for the ownership of GTP, the Company issued a total of 16,927,878 shares of its common stock, having a share price of $15.00 on the date of the transaction, to the three prior owners of GTP which represented 33% of the issued and outstanding capital stock of the Company on a fully diluted basis. $253.8 million of the value of shares issued was allocated to intangible assets consisting of a portfolio of three CNS development candidates, which are classified as IPR&D.
For the year ended December 31, 2018, the Company recorded an intangible asset impairment charge of $228.5 million related to the portfolio of CNS IPR&D assets within Operating Expenses, which represents the excess carrying value compared to fair value. The impairment charge was the result of both internal and external factors. In the 3rd quarter of 2018, the Company experienced changes in key senior management, led by the appointment of a new CEO with extensive experience in oncology drug development. These changes resulted in the prioritization of immuno-oncology development candidates relative to CNS development candidates. In conjunction with these strategic changes, limited internal resources have delayed the development of the CNS IPR&D assets. The limited resources, changes in senior leadership, and favorable market conditions for immuno-oncology development candidates have resulted in the Company choosing to focus on development of its immuno-oncology portfolio. In light of this shift in market strategy, the Company performed a commercial assessment and a valuation of the CNS IPR&D assets, both to assess fair value and support potential future licensing efforts. The valuation indicated an excess carrying value over the fair value of these assets, resulting in the impairment charge noted above.
The fair value of the CNS IPR&D assets was determined using the discounted cash flow method which utilized significant estimates and assumptions surrounding the amount and timing of the projected net cash flows, which includes the probability of commercialization, the assumption that the assets would be out-licensed to third-parties for continued development for upfront licensing fees and downstream royalty payments based on net sales, and expected impact of competitive, legal and/or regulatory forces on the projections, as well as the selection of a long-term growth rate; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.
Convertible Notes
On January 22, 2018, the Company entered into a Securities Purchase Agreement (“SPA”) with fourteen accredited investors (individually, a “Buyer” and collectively, the “Buyers”) pursuant to which the Company agreed to issue to the Buyers senior convertible notes in an aggregate principal amount of $7,760,510 (the “Notes”), which Notes shall be convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”) at a price of $4.58 per share, and five-year warrants to purchase the Company’s Common Stock representing the right to acquire an aggregate of approximately 1,694,440 shares of Common Stock (the “Warrants”).
Pursuant to the terms of SPA the Notes were subject to an original issue discount of 10% resulting in proceeds to the Company of $7,055,000 from the transaction.
Upon the purchase of the Notes, the Buyers received Warrants to purchase 1,694,440 shares of Common Stock. Such Warrants are exercisable for (5) years from the date the shares underlying the Warrants are freely saleable. The initial Exercise Price is $4.58. According to the terms of the warrant agreement, the Warrants are subject to certain adjustments depending upon the price and structure of a subsequent financing, including a qualified financing with gross proceeds of at least $20 million, as defined in the agreements.
The issuance of the Notes and Warrants were made in reliance on the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) for the offer and sale of securities not involving a public offering, and Regulation D promulgated under the Securities Act.
Contemporaneously with the execution and delivery of the SPA, the Company and the Buyers executed and delivered a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which the Company has agreed to provide certain registration rights with respect to the Registrable Securities under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws.
Senior Convertible Debentures
On August 2, 2018, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement with the purchasers identified on the signature pages thereto (individually, a “Purchaser,” and collectively, the “Purchasers”) pursuant to which the Company issued to the Purchasers one year 10% Senior Convertible Debentures in an aggregate principal amount of $5,140,000 (the “Debentures”), which Debentures shall be convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a price of $2 per share. The Company used a portion of these proceeds to repay $4.4 million of the notes issued on January 22, 2018. Additionally, the remaining $3.3 million of the notes issued on January 22, 2018 were converted into the Debentures at the same terms discussed above.
On September 7, 2018, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement with the purchasers identified on the signature pages thereto (individually, a “Purchaser,” and collectively, the “Purchasers”) pursuant to which the Company has issued to the Purchasers one year 10% Senior Convertible Debentures in an aggregate principal amount of $2,050,000 (the “Debentures”), which Debentures shall be convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a price of $2 per share.
On September 24, 2018, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement with the purchasers identified on the signature pages thereto (individually, a “Purchaser,” and collectively, the “Purchasers”) pursuant to which the Company has issued to the Purchasers one year 10% Senior Convertible Debentures in an aggregate principal amount of $800,000 (the “Debentures”), which Debentures shall be convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a price of $2 per share.
The issuance of the Senior Convertible Debentures was made in reliance on the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), for the offer and sale of securities not involving a public offering and Regulation D promulgated under the Securities Act.
Financing Agreement
On November 8, 2010, the Company entered into a financing arrangement with Gemini Pharmaceuticals, Inc., a product development and manufacturing partner of the Company, pursuant to which Gemini Pharmaceuticals made a $250,000 strategic equity investment in the Company and agreed to make a $750,000 purchase order line of credit facility available to the Company. The outstanding principal of all Advances under the Line of Credit will bear interest at the rate of interest of prime plus 2 percent per annum. There is $31,000 due on this credit line at December 31, 2018.
Accrued Expenses are comprised of the following:
| |
| | |
Research & Development | 585,000 | - |
Accrued Interest | 432,000 | - |
Professional Fees | 162,000 | 62,000 |
Consulting and Advisory Services | 161,000 | - |
Board of Directors Service Costs | 94,000 | - |
Payroll and Benefits | 21,000 | 39,000 |
Accrued Expenses | 1,455,000 | 101,000 |
6.
Related Party Transactions
On December 21, 2018, Dr. Raymond Urbanski, Chief Executive Officer and Chairman of the Board, provided a short-term loan of $100,000 to meet immediate capital needs. The loan matured on January 20, 2019 and carries an interest rate of 5%. The loan was repaid in January, 2019.
Stock Split
In July 2017, the Company approved a one for three hundred reverse stock split.
Common Shares
In July 2017, the Company amended its articles of incorporation to change the number of authorized common shares to 750,000,000 shares of $.001 par value stock.
Common Stock
On September 1, 2017, the Company entered into an Agreement and Plan of Merger whereby it acquired 100% of the issued and outstanding capital stock of Georgetown Translational Pharmaceuticals, Inc. (GTP). GTP is a biotechnology company focused on acquiring or discovering and patenting late-stage, de-risked, and close-to-market improved treatments for CNS disease (Neurology and Pain) and shepherding the products through the FDA approval process to the NDA. In exchange for the ownership of GTP, the Company issued a total of 16,927,878 shares of its common stock to the three prior owners of GTP which represents 33% of the issued and outstanding capital stock of the Company.
During the six months ended June 30, 2017 the Registrant has issued a total of 390,279 shares of common stock to a total of eleven entities or individuals in exchange for the cancellation of debt in the total amount of $2,025,000 and interest in the total amount of $486,000.
In August 2017, the Company issued a total of 17,287,625 shares of common stock in exchange for the cancellation of debt in the total amount of $17,141,000 and interest in the total amount of $4,693,000.
In August 2017, the Company issued 496,855 shares of common stock upon the exercise of warrants on a cashless basis.
In August 2017, the Company converted 25,000 Series H and 1,666,667 Series I shares of preferred stock into 5,327,734 shares of common stock.
In December 2017, the Company converted 350,000 Series J shares of preferred stock into 350,000 shares of common stock.
During the quarter ended September 30, 2018, the Company issued 110,000 shares of common stock upon conversion of $220,000 of senior convertible notes.
During the quarter ended December 31, 2018, the Company issued 52,500 shares of common stock upon conversion of $105,000 of senior convertible notes.
During the quarter ended December 31, 2018, the Company issued a total of 245,000 shares of Rule 144 restricted common stock in full settlement of outstanding legal matters, and 125,000 shares of Rule 144 restricted common stock in connection with consulting services.
Preferred Stock
The 96,230 shares of Series C preferred stock are convertible into 111 shares of the Company's common stock at the option of the holders at any time. The conversion ratio is based on the average closing bid price of the common stock for the fifteen consecutive trading days ending on the date immediately preceding the date notice of conversion is given, but cannot be less than .20 or more than .2889 common shares for each Series C preferred share. 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 .26 divided by the average closing bid price of the Company's common stock during the fifteen consecutive trading days immediately prior to the date such shares of Series C preferred stock were purchased. In the event of liquidation, the holders of the Series C preferred stock shall participate on an equal basis with the holders of the common stock (as if the Series C preferred stock had converted into common stock) in any distribution of any of the assets or surplus funds of the Company. The holders of Series C preferred stock are entitled to noncumulative dividends if and when declared by the Company's board of directors. No dividends to Series C preferred stockholders were issued or unpaid through June 30, 2016.December 31, 2018.
On December 4, 2008, the Company entered into and closed an Agreement (the “Bristol Agreement”) with Bristol Investment Fund, Ltd. pursuant to which Bristol agreed to cancel the debt payable by the Company to Bristol in the amount of approximately $20,000 in consideration of the Company issuing Bristol 25,000 shares of Series HG Convertible Preferred Stock, which such shares carry a stated value equal to $1.00 per share (the “Series G Stock”).
The Series G Stock is convertible, at any time at the option of the holder, into common shares of the Company based on a conversion price equal to the lesser of $2.50 or 60% of the average of the three lowest trading prices occurring at any time during the 20 trading days preceding the conversion. The Series G Stock, as amended, shall have voting rights on an as converted basis multiplied by 100.
In the event of any liquidation or winding up of the Company, the holders of Series G Stock will be entitled to receive, in preference to holders of common stock, an amount equal to the stated value plus interest of 15% per year.
The Series G Stock restricts the ability of the holder to convert the Series G Stock and receive shares of the Company’s common stock such that the number of shares of the Company common stock held by Bristol and its affiliates after such conversion does not exceed 4.9% of the Company’s then issued and outstanding shares of common stock.
On October 13, 2009 the Company was informed by Theorem Group, LLC that it had purchased all of the outstanding Series G Preferred Stock and Theorem gave notice to the Company that it intended to exercise its ability to vote on all shareholder matters utilizing the super voting privileges provided by the Series G Stock.
Effective February 10, 2010, the Company issued 25,000 shares of its new Series H Convertible Preferred Stock (the "Series“Series H Preferred"Preferred”) to Theorem Group, LLC, a California limited liability company (the “Stockholder”), in exchange for the 25,000 shares of Series G Stock then owned by the Stockholder. The foregoing exchange was effected pursuant to that certain Exchange Agreement, dated February 10, 2010, between the Company and the Stockholder (the “Exchange Agreement”).
The Certificate of Designation of the Series H Preferred is based on, and substantially similar to the form and substance of the Certificate of Designation of the Series G Preferred. Some of the corrections, changes and differences between the Certificate of Designation of the Series G Preferred and the Certificate of Designation of the Series H Preferred include the following: