GT Biopharma, Inc 10-K for FY2020
GT Biopharma, Inc. (GTBP)
10-K
2021-04-16
For: 2020-12-31
View Original
Added on
April 10, 2026
About this 10-K
GT Biopharma, Inc filed this 10-K on April 16, 2021, covering the fiscal year ended December 31, 2020 (FY2020).
Headline figures
Fiscal year ended December 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $0
- compared with $0 a year earlier
- Net loss
- $28.3M
- compared with a net loss of $38.65M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 FORM 10-K
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the
fiscal year ended December 31, 2020
Commission
File Number: 000-08092
GT BIOPHARMA, INC.
(Exact
name of Registrant as specified in its charter)
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Delaware
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94-1620407
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(State
of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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9350
Wilshire Blvd.
Suite
203
Beverly Hills, CA 90212
(Address
of principal executive offices) (Zip code)
(800) 304-9888
(Registrant’s
telephone number including area code) Securities registered
pursuant to Section 12(b) of the Act: None.
Securities
registered pursuant to section 12(g) of the Act:
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Title
of Securities
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Exchanges
on which Registered
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Common
Stock, $.001 Par Value
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None
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Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes
☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically
and posted on its corporate website, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such
files). Yes ☒ No ☐
Indicate
by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (§229.405) is not contained herein, and
will not be contained, to the best of registrant’s knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes ☐ No ☒
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting
company, or emerging growth company. See the definitions of
“large accelerated filer,” “accelerated
filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange
Act.
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Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated
filer
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☐ (Do not check if a smaller reporting
company)
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Smaller reporting company
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☒
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Emerging
growth company
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☐
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If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The
aggregate market value of the registrant’s common stock,
$0.001 par value per share, held by non-affiliates on June 30, 2020
was approximately $8.9 million. As of April 12, 2021, there were
28,393,960 shares of the registrant’s common stock, $0.001
par value, issued or issuable and outstanding.
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PART I
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This
Report, including any documents which may be incorporated by
reference into this Report, contains “Forward-Looking
Statements” within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other
than statements of historical fact are “Forward-Looking
Statements” for purposes of these provisions, including our
plans of operation, any projections of revenues or other financial
items, any statements of the plans and objectives of management for
future operations, any statements concerning proposed new products
or services, any statements regarding future economic conditions or
performance, and any statements of assumptions underlying any of
the foregoing. All Forward-Looking Statements included in this
document are made as of the date hereof and are based on
information available to us as of such date. We assume no
obligation to update any Forward-Looking Statement. In some cases,
Forward-Looking Statements can be identified by the use of
terminology such as “may,” “will,”
“expects,” “plans,”
“anticipates,” “intends,”
“believes,” “estimates,”
“potential,” or “continue,” or the negative
thereof or other comparable terminology. Although we believe that
the expectations reflected in the Forward-Looking Statements
contained herein are reasonable, there can be no assurance that
such expectations or any of the Forward-Looking Statements will
prove to be correct, and actual results could differ materially
from those projected or assumed in the Forward-Looking Statements.
Future financial condition and results of operations, as well as
any Forward-Looking Statements are subject to inherent risks and
uncertainties, including any other factors referred to in our press
releases and reports filed with the Securities and Exchange
Commission. All subsequent Forward- Looking Statements attributable
to the company or persons acting on its behalf are expressly
qualified in their entirety by these cautionary statements.
Additional factors that may have a direct bearing on our operating
results are described under “Risk Factors” and
elsewhere in this report.
Introductory Comment
Throughout
this Annual Report on Form 10-K, the terms “GTBP,”
“we,” “us,” “our,” “the
company” and “our company” refer to GT Biopharma,
Inc., a Delaware corporation formerly known as DDI Pharmaceuticals,
Inc., Diagnostic Data, Inc. and Oxis International, Inc., together
with our subsidiaries.
ITEM 1. 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™) fusion protein immune cell engager technology
platform. Our TriKE platform generate proprietary therapeutics
designed to harness and enhance the cancer killing abilities of a
patient’s own natural killer cells, or NK cells. Once bound
to an NK cell, our moieties are designed to enhance the NK cell,
and precisely direct it to one or more specifically-targeted
proteins expressed on a specific type of cancer cell or virus
infected cell, ultimately resulting in the targeted cell’s
death. TriKE can be designed to target any number of tumor antigens
on hematologic malignancies, sarcomas or solid tumors and do not
require patient-specific customization.
We are
using our TriKE platform with the intent to bring to market
immuno-oncology products that can treat a range of hematologic
malignancies, sarcoma and solid tumors. The platform is scalable,
and we are putting processes in place to be able to produce
IND-ready moieties in a timely manner after a specific TriKE
conceptual design. After conducting market and competitive
research, specific moieties can then be advanced into the clinic on
our own or through potential collaborations with larger companies.
We are also evaluating, in conjunction with our Scientific Advisory
Board, additional moieties designed to target different tumor
antigens. We believe our TriKE may have the ability, if approved
for marketing, to be used as a monotherapy, augment the current
monoclonal antibody therapeutics, be used in conjunction with more
traditional cancer therapy and potentially overcome certain
limitations of current chimeric antigen receptor, or CAR-T,
therapy.
We are
also using our TriKE platform to develop therapeutics useful for
the treatment of infectious disease such as for the treatment of
patients infected by the human immunodeficiency virus (HIV). While
the use of anti-retroviral drugs has substantially improved the
health and increased the longevity of individuals infected with
HIV, these drugs are designed to suppress virus replication to help
modulate progression to AIDS and to limit further transmission of
the virus. Despite the use of anti-retroviral drugs, infected
individuals retain reservoirs of latent HIV-infected cells that,
upon cessation of anti-retroviral drug therapy, can reactivate and
re-establish an active HIV infection. For a curative therapy,
destruction of these latent HIV infected cells must take place. The
HIV-TriKE contains the antigen binding fragment (Fab) from a
broadly-neutralizing antibody targeting the HIV-Env protein. The
HIV-TriKE is designed to target HIV while redirecting NK cell
killing specifically to actively replicating HIV infected cells.
The HIV-TriKE induced NK cell proliferation, and demonstrated the
ability in vitro to reactivate and kill HIV-infected T-cells. These
findings indicate a potential role for the HIV-TriKE in the
reactivation and elimination of the latently infected HIV reservoir
cells by harnessing the NK cell’s ability to mediate the
antibody-directed cellular cytotoxicity (ADCC).
Our
initial work has been conducted in collaboration with the Masonic
Cancer Center at the University of Minnesota under a program led by
Dr. Jeffrey Miller, the Deputy Director. Dr. Miller is a recognized
leader in the field of NK cell and IL-15 biology and their
therapeutic potential. We have exclusive rights to the TriKE
platform and are generating additional intellectual
prop
1
Immuno-Oncology Platform
Tri-specific Killer Engagers (TriKEs)
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. 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 of antigens. We
believe there is a continued medical need for targeted
immuno-oncology therapies that can 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 or be used in conjunction with more traditional cancer
therapy. We believe our TriKE 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.
GTB-3550 TriKE™ and GTB-3550 TriKE™ Phase I/II Clinical
Trial
GTB-3550 is the Company's first TriKE™ product candidate
which is a single-chain, tri-specific recombinant fusion protein
construct 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. The GTB-3550 Phase I/II clinical trial for treatment of
patients with CD33-expressing, high risk myelodysplastic syndromes,
refractory/relapsed acute myeloid leukemia or advanced systemic
mastocytosis opened for patient enrollment September 2019. The
clinical trial is being conducted at the University of
Minnesota’s Masonic Cancer Center in Minneapolis, Minnesota
under the direction of Dr. Erica Warlick. Additional clinical trial
sites planned as we progress to the Phase II expansion part of the
clinical trial.
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, TriKE constructs are composed of a
single-chain fusion protein that binds the CD16 receptor of NK
cells directly producing a potent and lasting cytotoxic killing
response, interleukin 15 (IL-15) to promote NK cell activation,
persistence and proliferation, and a cancer cell targeting moiety.
An additional benefit TriKE may have been 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, TriKE is 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.
2
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 relevant
function.
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 BiKE (1633) and TriKE
(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.
3
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 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 began the Phase 1 clinical trial in September
2019.
4
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).
5
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, TriKE is composed of a single-chain fusion
protein that binds the CD16 receptor of NK cells directly producing
a potentially more potent and lasting response as demonstrated by
preclinical studies. An additional benefit due to the smaller size
of TriKE is enhanced biodistribution which we expect to be
important in the treatment of solid tumors. In addition to these
potential advantages, TriKE is 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 2021.
Efficient Advancement of Potential Future Product Candidates
--Production and Scale Up
We are
using our TriKE platform 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 GMP production expression system
for TriKE constructs.
We
believe TriKE 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.
Immuno-Oncology Product Candidates
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).
6
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.
About High-Risk
Myelodysplastic Syndromes
MDS is
a rare form of bone marrow-related cancer caused by irregular blood
cell production within the bone marrow. As a result of this
irregular production, MDS patients do not have sufficient normal
red blood cells, white blood cells and/or platelets in circulation.
High-risk MDS is associated with poor prognosis, diminished quality
of life, and a higher chance of transformation to acute myeloid
leukemia. Approximately 40% of patients with High-Risk MDS
transform to AML, another aggressive cancer with poor
outcomes.
About Acute Myeloid Leukemia
Acute
myeloid leukemia is a type of cancer in which the bone marrow makes
abnormal myeloblasts (a type of white blood cell), red blood cells,
or platelets. According to the National Cancer Institute (NCI), the
five-year survival rate is about 35% in people under 60 years old,
and 10% in people over 60 years old. Older people whose health is
too poor for intensive chemotherapy have a typical survival of five
to ten months. AML accounts for roughly 1.8% of cancer deaths in
the United States.
About GTB-3550 TriKE™ Clinical Trial
We
opened our GTB-3550 Phase I/II clinical trial in September 2019,
and enrolled our first patient in January 2020. Patients with CD33+
malignancies (primary induction failure or relapsed AML with
failure of one reinduction attempt or high-risk MDS progressed on
two lines of therapy) age 18 and older are eligible
(ClinicalTrials.gov Identifier NCT03214666). The primary endpoint is to
identify the maximum tolerated dose (MTD) of GTB-3550 TriKE™.
Correlative objectives include the number, phenotype, activation
status and function of NK cells and T cells.
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. Key elements of our strategy are
to:
Rapidly advanced our Tri-specific Killer Engagers (TriKEs),
GTB-3550 and GTB-C3550
Our
TriKE 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 began a Phase 1 clinical trial in September 2019
and enrolled our first patient in January 2020 for 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.
7
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 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 platform 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
TriKE 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
believe our TriKE 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.
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.
"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.
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 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.
8
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
most common types of sarcoma in adults are undifferentiated
pleomorphic 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.
Employees
As of
December 31, 2020, 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.
9
ITEM 1A. RISK
FACTORS
Investing in our common stock involves a high degree of risk. You
should carefully consider the risks and uncertainties described
below in addition to the other information contained in this
prospectus before deciding whether to invest in shares of our
common stock. If any of the following risks actually occur, our
business, financial condition or operating results could be harmed.
In that case, the trading price of our common stock could decline
and you may lose part or all of your investment. In the opinion of
management, the risks discussed below represent the material risks
known to the company. Additional risks and uncertainties not
currently known to us or that we currently deem immaterial may also
impair our business, financial condition and operating results and
adversely affect the market price of our common stock.
Risks Related to Our Business
Our business is at an early stage of development and we may not
develop therapeutic products that can be
commercialized.
Our
business is at an early stage of development. We do not have
immune-oncology products in late stage clinical trials. We are
still in the early stages of identifying and conducting research on
potential therapeutic products. Our potential therapeutic products
will require significant research and development and pre-clinical
and clinical testing prior to regulatory approval in the United
States and other countries. We may not be able to obtain regulatory
approvals, enter clinical trials for any of our product candidates,
or commercialize any products. Our product candidates may prove to
have undesirable and unintended side effects or other
characteristics adversely affecting their safety, efficacy or cost
effectiveness that could prevent or limit their use. Any product
using any of our technology may fail to provide the intended
therapeutic benefits or achieve therapeutic benefits equal to or
better than the standard of treatment at the time of testing or
production.
We have a history of operating losses and we expect to continue to
incur losses for the foreseeable future and we may never generate
revenue or achieve profitability.
During
the year ended December 31, 2020, the Company reported a net loss
of $28.3 million and as of December 31, 2020, we had an accumulated
deficit of $596 million. We have not generated any significant
revenue to date and are not profitable, and have incurred losses in
each year since our inception. We do not expect to generate any
product sales or royalty revenues for at least four years. We
expect to incur significant additional operating losses for the
foreseeable future as we expand research and development and
clinical trial efforts.
Our
ability to achieve long-term profitability is dependent upon
obtaining regulatory approvals for our products and successfully
commercializing our products alone or with third parties. However,
our operations may not be profitable even if any of our products
under development are successfully developed and produced and
thereafter commercialized. Even if we achieve profitability in the
future, we may not be able to sustain profitability in subsequent
periods.
Even if
we succeed in commercializing one or more of our product
candidates, we expect to continue to incur substantial research and
development and other expenditures to develop and market additional
product candidates. The size of our future net losses will depend,
in part, on the rate of future growth of our expenses and our
ability to generate revenue. Our prior losses and expected future
losses have had and will continue to have an adverse effect on our
stockholders’ equity and working capital.
We will need additional capital to conduct our operations and
develop our products, and our ability to obtain the necessary
funding is uncertain.
We have
used a significant amount of cash since inception to finance the
continued development and testing of our product candidates, and we
expect to need substantial additional capital resources in order to
develop our product candidates going forward and launch and
commercialize any product candidates for which we receive
regulatory approval.
10
We may
not be successful in generating and/or maintaining operating cash
flow, and the timing of our capital expenditures and other
expenditures may not result in cash sufficient to sustain our
operations through the next 12 months. If financing is not
sufficient and additional financing is not available or available
only on terms that are detrimental to our long-term survival, it
could have a material adverse effect on our ability to continue to
function. The timing and degree of any future capital requirements
will depend on many factors, including:
●
the
accuracy of the assumptions underlying our estimates for capital
needs in 2021 and beyond;
●
scientific
and clinical progress in our research and development
programs;
●
the
magnitude and scope of our research and development programs and
our ability to establish, enforce and maintain strategic
arrangements for research, development, clinical testing,
manufacturing and marketing;
●
our
progress with pre-clinical development and clinical
trials;
●
the
time and costs involved in obtaining regulatory
approvals;
●
the
costs involved in preparing, filing, prosecuting, maintaining,
defending and enforcing patent claims; and
●
the
number and type of product candidates that we pursue.
Additional
financing through strategic collaborations, public or private
equity or debt financings or other financing sources may not be
available on acceptable terms, or at all. Additional equity
financing could result in significant dilution to our stockholders,
and any debt financings will likely involve covenants restricting
our business activities. Additional financing may not be available
on acceptable terms, or at all. Further, if we obtain additional
funds through arrangements with collaborative partners, these
arrangements may require us to relinquish rights to some of our
technologies, product candidates or products that we would
otherwise seek to develop and commercialize on our
own.
If
sufficient capital is not available, we may be required to delay,
reduce the scope of or eliminate one or more of our research or
product development initiatives, any of which could have a material
adverse effect on our financial condition or business
prospects.
Research and Development Investment
Our
currently projected expenditures for 2021 include approximately $12
million to $15 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.
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.
We have identified material weaknesses in our internal controls
over financial reporting and have not yet remedied these
weaknesses. If we fail to maintain an effective system of internal
control over financial reporting, we may not be able to accurately
report our financial results or prevent fraud. As a result,
stockholders could lose confidence in our financial and other
public reporting, which would harm our business and the trading
price of our common stock.
Effective
internal control over financial reporting is necessary for us to
provide reliable financial reports and, together with adequate
disclosure controls and procedures, are designed to prevent fraud.
Any failure to implement required new or improved controls, or
difficulties encountered in their implementation, could cause us to
fail to meet our reporting obligations. Ineffective internal
control could also cause investors to lose confidence in our
reported financial information, which could have a negative effect
on the trading price of our common stock.
11
We have
identified material weaknesses in our internal control over
financial reporting as a company. As defined in Regulation 12b-2
under the Securities Exchange Act of 1934, or the Exchange Act, a
“material weakness” is a deficiency, or combination of
deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement
of our annual or interim consolidated financial statements will not
be prevented, or detected on a timely basis. Specifically, we
determined that we had the following material weaknesses in our
internal control over financial reporting: (i) inadequate
segregation of duties; (ii) risks of executive override; and (iii)
insufficient written policies and procedures for accounting and
financial reporting with respect to the requirements and
application of both generally accepted accounting principles in the
United States of America, or GAAP, and the U.S. Securities and
Exchange Commission, or the SEC, guidelines.
As of
the date of this report, we have not remediated these material
weaknesses. The company intends to take measures to mitigate the
issues identified and implement a functional system of internal
controls over financial reporting. Such measures will include, but
not be limited to hiring of additional employees in its finance and
accounting department, although the timing of such hires is largely
dependent on our securing additional financing to cover such costs;
preparation of risk-control matrices to identify key risks and
develop and document policies to mitigate those risks; and
identification and documentation of standard operating procedures
for key financial activities. The implementation of these
initiatives may not fully address any material weakness or other
deficiencies that we may have in our internal control over
financial reporting.
Even if
we develop effective internal control over financial reporting,
such controls may become inadequate due to changes in conditions or
the degree of compliance with such policies or procedures may
deteriorate, which could result in the discovery of additional
material weaknesses and deficiencies. In any event, the process of
determining whether our existing internal control over financial
reporting is compliant with Section 404 of the Sarbanes-Oxley Act,
or Section 404, and sufficiently effective requires the investment
of substantial time and resources, including by certain members of
our senior management. As a result, this process may divert
internal resources and take a significant amount of time and effort
to complete. In addition, we cannot predict the outcome of this
process and whether we will need to implement remedial actions in
order to establish effective controls over financial reporting. The
determination of whether or not our internal controls are
sufficient and any remedial actions required could result in us
incurring additional costs that we did not anticipate, including
the hiring of outside consultants. We may also fail to timely
complete our evaluation, testing and any remediation required to
comply with Section 404.
We are
required, pursuant to Section 404, to furnish a report by
management on, among other things, the effectiveness of our
internal control over financial reporting. However, for as long as
we are a “smaller reporting company,” our independent
registered public accounting firm will not be required to attest to
the effectiveness of our internal control over financial reporting
pursuant to Section 404. While we could be a smaller reporting
company for an indefinite amount of time, and thus relieved of the
above-mentioned attestation requirement, an independent assessment
of the effectiveness of our internal control over financial
reporting could detect problems that our management's assessment
might not. Such undetected material weaknesses in our internal
control over financial reporting could lead to financial statement
restatements and require us to incur the expense of
remediation.
Our intellectual property may be compromised.
Part of
our value going forward depends on the intellectual property rights
that we have been and are acquiring. There may have been many
persons involved in the development of our intellectual property,
and we may not be successful in obtaining the necessary rights from
all of them. It is possible that in the future, third parties may
challenge our intellectual property rights. We may not be
successful in protecting our intellectual property rights. In
either event, we may lose the value of our intellectual property,
and if so, our business prospects may suffer.
12
If our efforts to protect the proprietary nature of the
intellectual property related to our technologies are not adequate,
we may not be able to compete effectively in our market and our
business would be harmed.
We rely
upon a combination of patents, trade secret protection and
confidentiality agreements to protect the intellectual property
related to our technologies. Any disclosure to or misappropriation
by third parties of our trade secret or other confidential
information could enable competitors to quickly duplicate or
surpass our technological achievements, thus eroding any
competitive advantage we may derive from this
information.
The
strength of patents in the biotechnology and pharmaceutical field
involves complex legal and scientific questions and can be
uncertain. The patent applications we own or license may fail to
result in issued patents in the United States or in foreign
countries. Third parties may challenge the validity, enforceability
or scope of any issued patents we own or license or any
applications that may issue as patents in the future, which may
result in those patents being narrowed, invalidated or held
unenforceable. Even if they are unchallenged, our patents and
patent applications may not adequately protect our intellectual
property or prevent others from developing similar products that do
not fall within the scope of our patents. If the breadth or
strength of protection provided by the patents we hold or pursue is
threatened, our ability to commercialize any product candidates
with technology protected by those patents could be threatened.
Further, if we encounter delays in our clinical trials, the period
of time during which we would have patent protection for any
covered product candidates that obtain regulatory approval would be
reduced. Since patent applications in the United States and most
other countries are confidential for a period of time after filing,
we cannot be certain at the time of filing that we are the first to
file any patent application related to our product
candidates.
In
addition to the protection afforded by patents, we seek to rely on
trade secret protection and confidentiality agreements to protect
proprietary know-how that is not patentable, processes for which
patents are difficult to enforce and any other elements of our
discovery platform and drug development processes that involve
proprietary know-how, information or technology that is not covered
by patents or not amenable to patent protection. Although we
require all of our employees and certain consultants and advisors
to assign inventions to us, and all of our employees, consultants,
advisors and any third parties who have access to our proprietary
know-how, information or technology to enter into confidentiality
agreements, our trade secrets and other proprietary information may
be disclosed or competitors may otherwise gain access to such
information or independently develop substantially equivalent
information. Further, the laws of some foreign countries do not
protect proprietary rights to the same extent or in the same manner
as the laws of the United States. As a result, we may encounter
significant difficulty in protecting and defending our intellectual
property both in the United States and abroad. If we are unable to
prevent material disclosure of the trade secret intellectual
property related to our technologies to third parties, we may not
be able to establish or maintain the competitive advantage that we
believe is provided by such intellectual property, which could
materially adversely affect our market position and business and
operational results.
Claims that we infringe the intellectual property rights of others
may prevent or delay our drug discovery and development
efforts.
Our
research, development and commercialization activities, as well as
any product candidates or products resulting from those activities,
may infringe or be accused of infringing a patent or other form of
intellectual property under which we do not hold a license or other
rights. Third parties may assert that we are employing their
proprietary technology without authorization. There may be
third-party patents of which we are currently unaware, with claims
that cover the use or manufacture of our product candidates or the
practice of our related methods. Because patent applications can
take many years to issue, there may be currently pending patent
applications that may later result in issued patents that our
product candidates may infringe. In addition, third parties may
obtain patents in the future and claim that use of our technologies
infringes one or more claims of these patents. If our activities or
product candidates infringe the patents or other intellectual
property rights of third parties, the holders of such intellectual
property rights may be able to block our ability to commercialize
such product candidates or practice our methods unless we obtain a
license under the intellectual property rights or until any
applicable patents expire or are determined to be invalid or
unenforceable.
Defense
of any intellectual property infringement claims against us,
regardless of their merit, would involve substantial litigation
expense and would be a significant diversion of employee resources
from our business. In the event of a successful claim of
infringement against us, we may have to pay substantial damages,
obtain one or more licenses from third parties, limit our business
to avoid the infringing activities, pay royalties and/or redesign
our infringing product candidates or methods, any or all of which
may be impossible or require substantial time and monetary
expenditure. Further, if we were to seek a license from the third
party holder of any applicable intellectual property rights, we may
not be able to obtain the applicable license rights when needed or
on commercially reasonable terms, or at all. The occurrence of any
of the above events could prevent us from continuing to develop and
commercialize one or more of our product candidates and our
business could materially suffer.
13
We may desire, or be forced, to seek additional licenses to use
intellectual property owned by third parties, and such licenses may
not be available on commercially reasonable terms or at
all.
A third
party may hold intellectual property, including patent rights, that
are important or necessary to the development of our product
candidates, in which case we would need to obtain a license from
that third party or develop a different formulation of the product
that does not infringe upon the applicable intellectual property,
which may not be possible. Additionally, we may identify product
candidates that we believe are promising and whose development and
other intellectual property rights are held by third parties. In
such a case, we may desire to seek a license to pursue the
development of those product candidates. Any license that we may
desire to obtain or that we may be forced to pursue may not be
available when needed on commercially reasonable terms or at all.
Any inability to secure a license that we need or desire could have
a material adverse effect on our business, financial condition and
prospects.
The patent protection covering some of our product candidates may
be dependent on third parties, who may not effectively maintain
that protection.
While
we expect that we will generally seek to gain the right to fully
prosecute any patents covering product candidates we may in-license
from third-party owners, there may be instances when platform
technology patents that cover our product candidates remain
controlled by our licensors. If any of our current or future
licensing partners that retain the right to prosecute patents
covering the product candidates we license from them fail to
appropriately maintain that patent protection, we may not be able
to prevent competitors from developing and selling competing
products or practicing competing methods and our ability to
generate revenue from any commercialization of the affected product
candidates may suffer.
We may be involved in lawsuits to protect or enforce our patents or
the patents of our licensors, which could be expensive, time-
consuming and unsuccessful.
Competitors
may infringe our patents or the patents of our current or potential
licensors. To attempt to stop infringement or unauthorized use, we
may need to enforce one or more of our patents, which can be
expensive and time-consuming and distract management. If we pursue
any litigation, a court may decide that a patent of ours or our
licensor’s is not valid or is unenforceable, or may refuse to
stop the other party from using the relevant technology on the
grounds that our patents do not cover the technology in question.
Further, the legal systems of certain countries, particularly
certain developing countries, do not favor the enforcement of
patents, which could reduce the likelihood of success of any
infringement proceeding we pursue in any such jurisdiction. An
adverse result in any infringement litigation or defense
proceedings could put one or more of our patents at risk of being
invalidated, held unenforceable, or interpreted narrowly and could
put our patent applications at risk of not issuing, which could
limit our ability to exclude competitors from directly competing
with us in the applicable jurisdictions.
Interference
proceedings provoked by third parties or brought by the U.S. PTO
may be necessary to determine the priority of inventions with
respect to our patents or patent applications or those of our
licensors. An unfavorable outcome could require us to cease using
the related technology or to attempt to license rights to use it
from the prevailing party. Our business could be harmed if the
prevailing party does not offer us a license on commercially
reasonable terms, or at all. Litigation or interference proceedings
may fail and, even if successful, may result in substantial costs
and distract our management and other employees.
If we are unsuccessful in obtaining or maintaining patent
protection for intellectual property in development, our business
and competitive position would be harmed.
We are
seeking patent protection for some of our technology and product
candidates. Patent prosecution is a challenging process and is not
assured of success. If we are unable to secure patent protection
for our technology and product candidates, our business may be
adversely impacted.
14
In
addition, issued patents and pending international applications
require regular maintenance. Failure to maintain our portfolio may
result in loss of rights that may adversely impact our intellectual
property rights, for example by rendering issued patents
unenforceable or by prematurely terminating pending international
applications.
If we are unable to protect the confidentiality of our trade
secrets, our business and competitive position would be
harmed.
In
addition to seeking patents for some of our technology and product
candidates, we also rely on trade secrets, including unpatented
know- how, technology and other proprietary information, to
maintain our competitive position. We currently, and expect in the
future to continue to, seek to protect these trade secrets, in
part, by entering into confidentiality agreements with parties who
have access to them, such as our employees, collaborators, contract
manufacturers, consultants, advisors and other third parties. We
also enter into confidentiality and invention or patent assignment
agreements with our employees and consultants. Despite these
efforts, any of these parties may breach the agreements and
disclose our proprietary information, including our trade secrets,
and we may not be able to obtain adequate remedies for any such
disclosure. Enforcing a claim that a party illegally disclosed or
misappropriated a trade secret is difficult, expensive and time-
consuming, and the outcome is unpredictable. In addition, some
courts inside and outside the United States are less willing or
unwilling to protect trade secrets. If any of our trade secrets
were to be lawfully obtained or independently developed by a
competitor, we would have no right to prevent them, or those to
whom they disclose the trade secrets, from using that technology or
information to compete with us. If any of our trade secrets were to
be disclosed to or independently developed by a competitor, our
competitive position would be harmed.
If we fail to meet our obligations under our license agreements, we
may lose our rights to key technologies on which our business
depends.
Our
business depends in part on licenses from third parties. These
third-party license agreements impose obligations on us, such as
payment obligations and obligations to diligently pursue
development of commercial products under the licensed patents. If a
licensor believes that we have failed to meet our obligations under
a license agreement, the licensor could seek to limit or terminate
our license rights, which could lead to costly and time-consuming
litigation and, potentially, a loss of the licensed rights. During
the period of any such litigation, our ability to carry out the
development and commercialization of potential products could be
significantly and negatively affected. If our license rights were
restricted or ultimately lost, our ability to continue our business
based on the affected technology platform could be severely
adversely affected.
We will have to hire additional executive officers and employees to
operate our business. If we are unable to hire qualified personnel,
we may not be able to implement our business strategy.
We
currently have only two fulltime employees. The loss of the
services of any of our employees could delay our product
development programs and our research and development efforts. We
do not maintain key person life insurance on any of our officers,
employees or consultants. In order to develop our business in
accordance with our business strategy, we will have to hire
additional qualified personnel, including in the areas of
manufacturing, clinical trials management, regulatory affairs,
finance, and business development. We will need to raise sufficient
funds to hire the necessary employees and have commenced our search
for additional key employees.
Moreover,
there is intense competition for a limited number of qualified
personnel among biopharmaceutical, biotechnology, pharmaceutical
and other businesses. Many of the other pharmaceutical companies
against which we compete for qualified personnel have greater
financial and other resources, different risk profiles, longer
histories in the industry and greater ability to provide valuable
cash or stock incentives to potential recruits than we do. They
also may provide more diverse opportunities and better chances for
career advancement. Some of these characteristics may be more
appealing to high quality candidates than what we are able to offer
as an early- stage company. If we are unable to continue to attract
and retain high quality personnel, the rate and success at which we
can develop and commercialize product candidates will be
limited.
15
We depend on key personnel for our continued operations and future
success, and a loss of certain key personnel could significantly
hinder our ability to move forward with our business
plan.
Because
of the specialized nature of our business, we are highly dependent
on our ability to identify, hire, train and retain highly qualified
scientific and technical personnel for the research and development
activities we conduct or sponsor. The loss of one or more key
executive officers, or scientific officers, would be significantly
detrimental to us. In addition, recruiting and retaining qualified
scientific personnel to perform research and development work is
critical to our success. Our anticipated growth and expansion into
areas and activities requiring additional expertise, such as
clinical testing, regulatory compliance, manufacturing and
marketing, will require the addition of new management personnel
and the development of additional expertise by existing management
personnel. There is intense competition for qualified personnel in
the areas of our present and planned activities. Accordingly, we
may not be able to continue to attract and retain the qualified
personnel, which would adversely affect the development of our
business.
We may be subject to claims by third parties asserting that our
employees or we have misappropriated their intellectual property,
or claiming ownership of what we regard as our own intellectual
property.
Many of
our employees were previously employed at universities or other
biotechnology or pharmaceutical companies, including our
competitors or potential competitors. Although we try to ensure
that our employees do not use the proprietary information or
know-how of others in their work for us, with contractual
provisions and other procedures, we may be subject to claims that
these employees or we have used or disclosed intellectual property,
including trade secrets or other proprietary information, of any
such employee’s former employers. Litigation may be necessary
to defend against any such claims.
In
addition, while it is our policy to require our employees and
contractors who may be involved in the development of intellectual
property to execute agreements assigning such intellectual property
to us, we may be unsuccessful in executing such an agreement with
each party who in fact contributes to the development of
intellectual property that we regard as our own. Further, the terms
of such assignment agreements may be breached and we may not be
able to successfully enforce their terms, which may force us to
bring claims against third parties, or defend claims they may bring
against us, to determine the ownership of intellectual property
rights we may regard and treat as our own.
Our employees may engage in misconduct or other improper
activities, including noncompliance with regulatory standards and
requirements, which could cause our business to
suffer.
We are
exposed to the risk of employee fraud or other misconduct.
Misconduct by employees could include intentional failures to
comply with regulations of governmental authorities, such as the
FDA or the European Medicines Agency, or EMA, to provide accurate
information to the FDA or EMA, to comply with manufacturing
standards we have established, to comply with federal, state and
international healthcare fraud and abuse laws and regulations as
they may become applicable to our operations, to report financial
information or data accurately or to disclose unauthorized
activities to us. Employee misconduct could also involve the
improper use of information obtained in the course of clinical
trials, which could result in regulatory sanctions and serious harm
to our reputation. It is not always possible to identify and deter
employee misconduct, and the precautions we currently take and the
procedures we may establish in the future as our operations and
employee base expand to detect and prevent this type of activity
may not be effective in controlling unknown or unmanaged risks or
losses or in protecting us from governmental investigations or
other actions or lawsuits stemming from a failure by our employees
to comply with such laws or regulations. If any such actions are
instituted against us, and we are not successful in defending
ourselves or asserting our rights, those actions could have a
significant impact on our business and results of operations,
including the imposition of significant fines or other
sanctions.
Our reliance on the activities of our non-employee consultants,
research institutions and scientific contractors, whose activities
are not wholly within our control, may lead to delays in
development of our proposed products.
We rely
extensively upon and have relationships with scientific consultants
at academic and other institutions, some of whom conduct research
at our request, and other consultants with expertise in clinical
development strategy or other matters. These consultants are not
our employees and may have commitments to, or consulting or
advisory contracts with, other entities that may limit their
availability to us. We have limited control over the activities of
these consultants and, except as otherwise required by our
collaboration and consulting agreements to the extent they exist,
can expect only limited amounts of their time to be dedicated to
our activities. These research facilities may have commitments to
other commercial and non-commercial entities. We have limited
control over the operations of these laboratories and can expect
only limited amounts of time to be dedicated to our research
goals.
16
It may take longer to complete our clinical trials than we project,
or we may not be able to complete them at all.
For
budgeting and planning purposes, we have projected the date for the
commencement, continuation and completion of our various clinical
trials. However, a number of factors, including scheduling
conflicts with participating clinicians and clinical institutions,
and difficulties in identifying and enrolling patients who meet
trial eligibility criteria, may cause significant delays. We may
not commence or complete clinical trials involving any of our
products as projected or may not conduct them
successfully.
We
expect to rely on medical institutions, academic institutions or
clinical research organizations to conduct, supervise or monitor
some or all aspects of clinical trials involving our products. We
will have less control over the timing and other aspects of these
clinical trials than if we conducted them entirely on our own. If
we fail to commence or complete, or experience delays in, any of
our planned clinical trials, our stock price and our ability to
conduct our business as currently planned could be
harmed.
Clinical drug development is costly, time-consuming and uncertain,
and we may suffer setbacks in our clinical development program that
could harm our business.
Clinical
drug development for our product candidates is costly,
time-consuming and uncertain. Our product candidates are in various
stages of development and while we expect that clinical trials for
these product candidates will continue for several years, such
trials may take significantly longer than expected to complete. In
addition, we, the FDA, an institutional review board, or IRB, or
other regulatory authorities, including state and local agencies
and counterpart agencies in foreign countries, may suspend, delay,
require modifications to or terminate our clinical trials at any
time, for various reasons, including:
●
discovery
of safety or tolerability concerns, such as serious or unexpected
toxicities or side effects or exposure to otherwise unacceptable
health risks, with respect to study participants;
●
lack of
effectiveness of any product candidate during clinical trials or
the failure of our product candidates to meet specified
endpoints;
●
delays
in subject recruitment and enrollment in clinical trials or
inability to enroll a sufficient number of patients in clinical
trials to ensure adequate statistical ability to detect
statistically significant treatment effects;
●
difficulty
in retaining subjects and volunteers in clinical
trials;
●
difficulty
in obtaining IRB approval for studies to be conducted at each
clinical trial site;
●
delays
in manufacturing or obtaining, or inability to manufacture or
obtain, sufficient quantities of materials for use in clinical
trials;
●
inadequacy
of or changes in our manufacturing process or the product
formulation or method of delivery;
●
delays
or failure in reaching agreement on acceptable terms in clinical
trial contracts or protocols with prospective contract research
organizations, or CROs, clinical trial sites and other third-party
contractors;
●
inability
to add a sufficient number of clinical trial sites;
●
uncertainty
regarding proper formulation and dosing;
●
failure
by us, our employees, our CROs or their employees or other
third-party contractors to comply with contractual and applicable
regulatory requirements or to perform their services in a timely or
acceptable manner;
17
●
scheduling
conflicts with participating clinicians and clinical
institutions;
●
failure
to design appropriate clinical trial protocols;
●
inability
or unwillingness of medical investigators to follow our clinical
protocols;
●
difficulty
in maintaining contact with subjects during or after treatment,
which may result in incomplete data; or
●
changes
in applicable laws, regulations and regulatory
policies.
If we experience delays or difficulties in the enrollment of
patients in clinical trials, those clinical trials could take
longer than expected to complete and our receipt of necessary
regulatory approvals could be delayed or prevented.
We may
not be able to initiate or continue clinical trials for our product
candidates if we are unable to locate and enroll a sufficient
number of eligible patients to participate in these trials as
required by U.S. Food and Drug Administration, or the FDA, or
similar regulatory authorities outside the United States. In
particular, because we are focused on patients with molecularly
defined cancers, our pool of suitable patients may be smaller and
more selective and our ability to enroll a sufficient number of
suitable patients may be limited or take longer than anticipated.
In addition, some of our competitors have ongoing clinical trials
for product candidates that treat the same indications as our
product candidates, and patients who would otherwise be eligible
for our clinical trials may instead enroll in clinical trials of
our competitors’ product candidates.
Patient
enrollment for any of our clinical trials may also be affected by
other factors, including without limitation:
●
the
severity of the disease under investigation;
●
the
frequency of the molecular alteration we are seeking to target in
the applicable trial;
●
the
eligibility criteria for the study in question;
●
the
perceived risks and benefits of the product candidate under
study;
●
the
extent of the efforts to facilitate timely enrollment in clinical
trials;
●
the
patient referral practices of physicians;
●
the
ability to monitor patients adequately during and after treatment;
and
●
the
proximity and availability of clinical trial sites for prospective
patients.
Our
inability to enroll a sufficient number of patients for our
clinical trials would result in significant delays and could
require us to abandon one or more clinical trials altogether.
Enrollment delays in our clinical trials may result in increased
development costs for our product candidates, and we may not have
or be able to obtain sufficient cash to fund such increased costs
when needed, which could result in the further delay or termination
of the trial.
18
Consistent
with our general product development strategy, we intend to design
future trials for our product candidates to include some patients
with the applicable clinical characteristics, stage of therapy,
molecular alterations, biomarkers, and/or cell surface antigens
that determine therapeutic options, or are indicators of the
disease, with a view to assessing possible early evidence of
potential therapeutic effect. If we are unable to locate and
include such patients in those trials, then our ability to make
those early assessments and to seek participation in FDA expedited
review and approval programs, including breakthrough therapy and
fast track designation, or otherwise to seek to accelerate clinical
development and regulatory timelines, could be
compromised.
We have limited clinical testing and regulatory capabilities, and
human clinical trials are subject to extensive regulatory
requirements, very expensive, time-consuming and difficult to
design and implement. Our products may fail to achieve necessary
safety and efficacy endpoints during clinical trials, which may
limit our ability to generate revenues from therapeutic
products.
We
cannot assure you that we will be able to invest or develop
resources for clinical trials successfully or as expediently as
necessary. In particular, human clinical trials can be very
expensive and difficult to design and implement, in part because
they are subject to rigorous regulatory requirements. The clinical
trial process is time consuming. We estimate that clinical trials
of our product candidates will take at least several years to
complete. Furthermore, failure can occur at any stage of the
trials, and we could encounter problems that cause us to abandon or
repeat clinical trials. The commencement and completion of clinical
trials may be affected by several factors, including:
●
unforeseen
safety issues;
●
determination
of dosing issues;
●
inability
to demonstrate effectiveness during clinical trials;
●
slower
than expected rates of patient recruitment;
●
inability
to monitor patients adequately during or after treatment;
and
●
inability
or unwillingness of medical investigators to follow our clinical
protocols.
In
addition, we or the FDA, may suspend our clinical trials at any
time if it appears that we are exposing participants to
unacceptable health risks or if the FDA finds deficiencies in our
investigational new drug application, or IND, submissions or the
conduct of these trials.
We are subject to extensive regulation, which can be costly and
time consuming and can subject us to unanticipated delays. even if
we obtain regulatory approval for some of our products, those
products may still face regulatory difficulties.
All of
our potential products, processing and manufacturing activities,
are subject to comprehensive regulation by the FDA in the United
States and by comparable authorities in other countries. The
process of obtaining FDA and other required regulatory approvals,
including foreign approvals, is expensive and often takes many
years and can vary substantially based upon the type, complexity
and novelty of the products involved. In addition, regulatory
agencies may lack experience with our technologies and products,
which may lengthen the regulatory review process, increase our
development costs and delay or prevent their
commercialization.
If we
violate regulatory requirements at any stage, whether before or
after we obtain marketing approval, the FDA may take enforcement
action(s) against us, which could include issuing a warning or
untitled letter, placing a clinical hold on an ongoing clinical
trial, product seizure, enjoining our operations, refusal to
consider our applications for pre-market approval, refusal of an
investigational new drug application, fines, or even civil or
criminal liability, any of which could materially harm our
reputation and financial results. Additionally, we may not be able
to obtain the labeling claims necessary or desirable for the
promotion of our products. We may also be required to undertake
post marketing trials to provide additional evidence of safety and
effectiveness. In addition, if we or others identify side effects
after any of our adoptive therapies are on the market, or if
manufacturing problems occur, regulators may withdraw their
approval and reformulations, additional clinical trials, changes in
labeling of our products, and additional marketing applications may
be required.
19
Any of
the following factors, among others, could cause regulatory
approval for our product candidates to be delayed, limited or
denied:
●
the
product candidates require significant clinical testing to
demonstrate safety and effectiveness before applications for
marketing approval can be filed with the FDA and other regulatory
authorities;
●
data
obtained from pre-clinical and nonclinical animal testing and
clinical trials can be interpreted in different ways, and
regulatory authorities may not agree with our respective
interpretations or may require us to conduct additional
testing;
●
negative
or inconclusive results or the occurrence of serious or unexpected
adverse events during a clinical trial could cause us to delay or
terminate development efforts for a product candidate;
and/or
●
FDA and
other regulatory authorities may require expansion of the size and
scope of the clinical trials.
Any
difficulties or failures that we encounter in securing regulatory
approval for our product candidates would likely have a substantial
adverse impact on our ability to generate product sales, and could
make any search for a collaborative partner more
difficult.
Obtaining regulatory approval even after clinical trials that are
believed to be successful is an uncertain process.
Even if
we complete our planned clinical trials and believe the results
were successful, obtaining regulatory approval is a lengthy,
expensive and uncertain process, and the FDA or other regulatory
agencies may delay, limit or deny approval of any of our
applications for pre-market approval for many reasons,
including:
●
we may
not be able to demonstrate to the FDA’s satisfaction that our
product candidates are safe and effective for any
indication;
●
the
results of clinical trials may not meet the level of statistical
significance or clinical significance required by the FDA for
approval;
●
the FDA
may disagree with the number, design, size, conduct or
implementation of our clinical trials;
●
the FDA
may not find the data from pre-clinical studies and clinical trials
sufficient to demonstrate that the clinical and other benefits of
our product candidates outweigh their safety risks;
●
the FDA
may disagree with our interpretation of data from pre-clinical
studies or clinical trials, or may not accept data generated at our
clinical trial sites;
●
the
data collected from pre-clinical studies and clinical trials of our
product candidates may not be sufficient to support the submission
of applications for regulatory approval;
●
the FDA
may have difficulties scheduling an advisory committee meeting in a
timely manner, or the advisory committee may recommend against
approval of our application or may recommend that the FDA require,
as a condition of approval, additional pre-clinical studies or
clinical trials, limitations on approved labeling, or distribution
and use restrictions;
●
the FDA
may require development of a risk evaluation and mitigation
strategy as a condition of approval;
●
the FDA
may identify deficiencies in the manufacturing processes or
facilities of third-party manufacturers with which we enter into
agreements for clinical and commercial supplies;
●
the FDA
may change their approval policies or adopt new regulations that
adversely affect our applications for pre-market approval;
and
●
the FDA
may require simultaneous approval for both adults and for children
and adolescents delaying needed approvals, or we may have
successful clinical trial results for adults but not children and
adolescents, or vice versa.
20
Before
we can submit an application for regulatory approval in the United
States, we must conduct a pivotal, Phase 3 trial. We will also need
to agree on a protocol with the FDA for a clinical trial before
commencing the trial. Phase 3 clinical trials frequently produce
unsatisfactory results even though prior clinical trials were
successful. Therefore, even if the results of our Phase 2 trials
are successful, the results of the additional trials that we
conduct may or may not be successful. Further, our product
candidates may not be approved even if they achieve their primary
endpoints in Phase 3 clinical trials. The FDA or other foreign
regulatory authorities may disagree with our trial design and our
interpretation of data from preclinical studies and clinical
trials. Any of these regulatory authorities may change requirements
for the approval of a product candidate even after reviewing and
providing comments or advice on a protocol for a clinical trial.
The FDA or other regulatory agencies may require that we conduct
additional clinical, nonclinical, manufacturing validation or drug
product quality studies and submit those data before considering or
reconsidering the application. Depending on the extent of these or
any other studies, approval of any applications that we submit may
be delayed by several years, or may require us to expend more
resources than we have available. It is also possible that
additional studies, if performed and completed, may not be
considered sufficient by the FDA or other regulatory
agencies.
In
addition, the FDA or other regulatory agencies may also approve a
product candidate for fewer or more limited indications than we
request, may impose significant limitations related to use
restrictions for certain age groups, warnings, precautions or
contraindications or may grant approval contingent on the
performance of costly post-marketing clinical trials or risk
mitigation requirements.
We will continue to be subject to extensive FDA regulation
following any product approvals, and if we fail to comply with
these regulations, we may suffer a significant setback in our
business.
Even if
we are successful in obtaining regulatory approval of our product
candidates, we will continue to be subject to the requirements of
and review by, the FDA and comparable regulatory authorities in the
areas of manufacturing processes, post-approval clinical data,
adverse event reporting, labeling, advertising and promotional
activities, among other things. In addition, any marketing approval
we receive may be limited in terms of the approved product
indication or require costly post-marketing testing and
surveillance. Discovery after approval of previously unknown
problems with a product, manufacturer or manufacturing process, or
a failure to comply with regulatory requirements, may result in
enforcement actions such as:
●
warning
letters or other actions requiring changes in product manufacturing
processes or restrictions on product marketing or
distribution;
●
product
recalls or seizures or the temporary or permanent withdrawal of a
product from the market;
●
suspending
any ongoing clinical trials;
●
temporary
or permanent injunctions against our production
operations;
●
refusal
of our applications for pre-market approval or an investigational
new drug application; and
●
fines,
restitution or disgorgement of profits or revenue, the imposition
of civil penalties or criminal prosecution.
The
occurrence of any of these actions would likely cause a material
adverse effect on our business, financial condition and results of
operations.
21
Many of our business practices are subject to scrutiny and
potential investigation by regulatory and government enforcement
authorities, as well as to lawsuits brought by private citizens
under federal and state laws. We could become subject to
investigations, and our failure to comply with applicable law or an
adverse decision in lawsuits may result in adverse consequences to
us. If we fail to comply with U.S. healthcare laws, we could face
substantial penalties and financial exposure, and our business,
operations and financial condition could be adversely
affected.
While
payment is not yet available from third-party payors (government or
commercial) for our product, our goal is to obtain such coverage as
soon as possible after product approval and commercial launch in
the U.S. If this occurs, the availability of such payment would
mean that many healthcare laws would place limitations and
requirements on the manner in which we conduct our business
(including our sales and promotional activities and interactions
with healthcare professionals and facilities) and could result in
liability and exposure to us. In some instances, our interactions
with healthcare professionals and facilities that occurred prior to
commercialization could have implications at a later date. The laws
that may affect our ability to operate include, among others: (i)
the federal healthcare programs Anti- Kickback Statute, which
prohibits, among other things, persons from knowingly and willfully
soliciting, receiving, offering or paying remuneration, directly or
indirectly, in exchange for or to induce either the referral of an
individual for, or the purchase, order or recommendation of, any
good or service for which payment may be made under federal
healthcare programs such as Medicare or Medicaid; (ii) federal
false claims laws which prohibit, among other things, individuals
or entities from knowingly presenting, or causing to be presented,
claims for payment from Medicare, Medicaid, or other third-party
payors that are false or fraudulent, and which may apply to
entities like us under theories of “implied
certification” where the government and qui tam relators may
allege that device companies are liable where a product that was
paid for by the government in whole or in part was promoted
“off-label,” lacked necessary approval, or failed to
comply with good manufacturing practices or other laws; (iii)
transparency laws and related reporting and/or disclosures such as
the Sunshine Act; and/or (iv) state law equivalents of each of the
above federal laws, such as anti-kickback and false claims laws
which may apply to items or services reimbursed by any third-party
payor, including commercial insurers, many of which differ from
their federal counterparts in significant ways, thus complicating
compliance efforts.
If our
operations are found to be in violation of any of the laws
described above or any other governmental regulations that apply to
us, we may be subject to penalties, including civil and criminal
penalties, exclusion from participation in government healthcare
programs, damages, fines and the curtailment or restructuring of
our operations. Any penalties, damages, fines, curtailment or
restructuring of our operations could adversely affect our ability
to operate our business and our financial results. The risk of our
being found in violation of these laws is increased by the fact
that their provisions are open to a variety of evolving
interpretations and enforcement discretion. Any action against us
for violation of these laws, even if we successfully defend against
it, could cause us to incur significant legal expenses and divert
our management’s attention from the operation of our
business.
Both
federal and state government agencies have heightened civil and
criminal enforcement efforts. There are numerous ongoing
investigations of healthcare pharmaceutical companies and others in
the healthcare space, as well as their executives and managers. In
addition, amendments to the Federal False Claims Act, have made it
easier for private parties to bring quitam (whistleblower) lawsuits
against companies under which the whistleblower may be entitled to
receive a percentage of any money paid to the government. In
addition, the Affordable Care Act amended the federal civil False
Claims Act to provide that a claim that includes items or services
resulting from a violation of the federal anti-kickback statute
constitutes a false or fraudulent claim for purposes of the federal
civil False Claims Act. Penalties include substantial fines for
each false claim, plus three times the amount of damages that the
federal government sustained because of the act of that person or
entity and/or exclusion from the Medicare program. In addition, a
majority of states have adopted similar state whistleblower and
false-claims provision. There can be no assurance that our
activities will not come under the scrutiny of regulators and other
government authorities or that our practices will not be found to
violate applicable laws, rules and regulations or prompt lawsuits
by private citizen "relators" under federal or state false claims
laws. Any future investigations of our business or executives, or
enforcement action or prosecution, could cause us to incur
substantial costs, and result in significant liabilities or
penalties, as well as damage to our reputation.
22
Laws
impacting the U.S. healthcare system are subject to a great deal of
uncertainty, which may result in adverse consequences to our
business.
There
have been a number of legislative and regulatory proposals to
change the healthcare system, reduce the costs of healthcare and
change medical reimbursement policies. Doctors, clinics, hospitals
and other users of our products may decline to purchase our
products to the extent there is uncertainty regarding coverage from
government or commercial payors. Further proposed legislation,
regulation and policy changes affecting third-party reimbursement
are likely. Among other things, Congress has in the past proposed
changes to and the repeal of the Patient Protection and Affordable
Care and Health Care and Education Affordability Reconciliation Act
of 2010 (collectively, the “Affordable Care Act”), and
lawsuits have been brought challenging aspects of the law at
various points. There have been repeated recent attempts by
Congress to repeal or replace the Affordable Care Act. At this
time, it remains unclear whether there will be any changes made to
or any repeal or replacement of the Affordable Care Act, with
respect to certain of its provisions or in its entirety. We are
unable to predict what legislation or regulation, if any, relating
to the health care industry or third-party coverage and
reimbursement may be enacted in the future at the state or federal
level, or what effect such legislation or regulation may have on
us. Denial of coverage and reimbursement of our products, or the
revocation or changes to coverage and reimbursement policies, could
have a material adverse effect on our business, results of
operations and financial condition.
We may not be successful in our efforts to build a pipeline of
product candidates.
A key
element of our strategy is to use and expand our product platform
to build a pipeline of product candidates, and progress those
product candidates through clinical development for the treatment
of a variety of different types of cancer. Even if we are
successful in building a product pipeline, the potential product
candidates that we identify may not be suitable for clinical
development for a number of reasons, including causing harmful side
effects or demonstrating other characteristics that indicate a low
likelihood of receiving marketing approval or achieving market
acceptance. If our methods of identifying potential product
candidates fail to produce a pipeline of potentially viable product
candidates, then our success as a business will be dependent on the
success of fewer potential product candidates, which introduces
risks to our business model and potential limitations to any
success we may achieve.
Our product candidates may cause undesirable side effects or have
other properties that could delay or prevent their regulatory
approval, limit the commercial profile of an approved label, or
result in significant negative consequences following marketing
approval, if any.
Additionally,
if one or more of our product candidates receives marketing
approval, and we or others later identify undesirable side effects
caused by such products, a number of potentially significant
negative consequences could result, including:
●
regulatory
authorities may withdraw approvals of such product;
●
regulatory
authorities may require additional warnings on the product’s
label;
●
we may
be required to create a medication guide for distribution to
patients that outlines the risks of such side effects;
●
we
could be sued and held liable for harm caused to patients;
and
●
our
reputation may suffer.
Any of
these events could prevent us from achieving or maintaining market
acceptance of the particular product candidate, if approved, and
could significantly harm our business, results of operations and
prospects.
23
We may expend our limited resources to pursue a particular product
candidate or indication that does not produce any commercially
viable products and may fail to capitalize on product candidates or
indications that may be more profitable or for which there is a
greater likelihood of success.
Because
we have limited financial and managerial resources, we must focus
our efforts on particular research programs and product candidates
for specific indications. As a result, we may forego or delay
pursuit of opportunities with other product candidates or for other
indications that later prove to have greater commercial potential.
Further, our resource allocation decisions may result in our use of
funds for research and development programs and product candidates
for specific indications that may not yield any commercially viable
products. If we do not accurately evaluate the commercial potential
or target market for a particular product candidate, we may
relinquish valuable rights to that product candidate through
collaboration, licensing or other royalty arrangements in cases in
which it would have been more advantageous for us to retain sole
development and commercialization rights to such product candidate.
Any such failure to improperly assess potential product candidates
could result in missed opportunities and/or our focus on product
candidates with low market potential, which would harm our business
and financial condition.
Our products may be expensive to manufacture, and they may not be
profitable if we are unable to control the costs to manufacture
them.
Our
products may be significantly more expensive to manufacture than we
expect or than other therapeutic products currently on the market
today. We hope to substantially reduce manufacturing costs through
process improvements, development of new methods, increases in
manufacturing scale and outsourcing to experienced manufacturers.
If we are not able to make these, or other improvements, and
depending on the pricing of the product, our profit margins may be
significantly less than that of other therapeutic products on the
market today. In addition, we may not be able to charge a high
enough price for any product we develop, even if they are safe and
effective, to make a profit. If we are unable to realize
significant profits from our potential product candidates, our
business would be materially harmed.
We currently lack manufacturing capabilities to produce our
therapeutic product candidates at commercial-scale quantities and
do not have an alternate manufacturing supply, which could
negatively impact our ability to meet any future demand for the
product.
We
expect that we would need to significantly expand our manufacturing
capabilities to meet potential demand for our therapeutic product
candidates, if approved. Such expansion would require additional
regulatory approvals. Even if we increase our manufacturing
capabilities, it is possible that we may still lack sufficient
capacity to meet demand.
We do
not currently have any alternate supply for our products. If the
facilities where our products are currently being manufactured or
equipment were significantly damaged or destroyed, or if there were
other disruptions, delays or difficulties affecting manufacturing
capacity or availability of drug supply, including, but not limited
to, if such facilities are deemed not in compliance with current
Good Manufacturing Practice, or GMP, requirements, future clinical
studies and commercial production for our products would likely be
significantly disrupted and delayed. It would be both time-
consuming and expensive to replace this capacity with third
parties, particularly since any new facility would need to comply
with the regulatory requirements.
Ultimately,
if we are unable to supply our products to meet commercial demand,
whether because of processing constraints or other disruptions,
delays or difficulties that we experience, our production costs
could dramatically increase and sales of our products and their
long-term commercial prospects could be significantly
damaged.
To be successful, our proposed products must be accepted by the
healthcare community, which can be very slow to adopt or
unreceptive to new technologies and products.
Our
proposed products and those developed by our collaborative
partners, if approved for marketing, may not achieve market
acceptance since hospitals, physicians, patients or the medical
community in general may decide not to accept and use these
products. The products that we are attempting to develop represent
substantial departures from established treatment methods and will
compete with a number of more conventional therapies manufactured
and marketed by major pharmaceutical companies. The degree of
market acceptance of any of our developed products will depend on a
number of factors, including:
●
our
establishment and demonstration to the medical community of the
clinical efficacy and safety of our proposed products;
●
our
ability to create products that are superior to alternatives
currently on the market;
●
our
ability to establish in the medical community the potential
advantage of our treatments over alternative treatment methods;
and
●
reimbursement
policies of government and third-party payers.
24
If the
healthcare community does not accept our products for any of these
reasons, or for any other reason, our business would be materially
harmed.
Our business is based on novel technologies that are inherently
expensive and risky and may not be understood by or accepted in the
marketplace, which could adversely affect our future
value.
The
clinical development, commercialization and marketing of
immuno-oncology therapies are at an early-stage, substantially
research- oriented, and financially speculative. To date, very few
companies have been successful in their efforts to develop and
commercialize an immuno-oncology therapeutic product. In general,
such products may be susceptible to various risks, including
undesirable and unintended side effects, unintended immune system
responses, inadequate therapeutic efficacy, or other
characteristics that may prevent or limit their approval or
commercial use. Furthermore, the number of people who may use such
therapies is difficult to forecast with accuracy. Our future
success is dependent on the establishment of a significant market
for such therapies and our ability to capture a share of this
market with our product candidates.
Our
development efforts with our therapeutic product candidates are
susceptible to the same risks of failure inherent in the
development and commercialization of therapeutic products based on
new technologies. The novel nature of immuno-oncology therapeutics
creates significant challenges in the areas of product development
and optimization, manufacturing, government regulation, third-party
reimbursement and market acceptance. For example, the FDA has
relatively limited experience regulating such therapies, and there
are few approved treatments using such therapy.
Our competition includes fully integrated biotechnology and
pharmaceutical companies that have significant advantages over
us.
The
market for therapeutic immuno-oncology products is highly
competitive. We expect that our most significant competitors will
be fully integrated and more established pharmaceutical and
biotechnology companies or institutions, including major
multinational pharmaceutical companies, biotechnology companies and
universities and other research institutions. These companies are
developing similar products, and they have significantly greater
capital resources and research and development, manufacturing,
testing, regulatory compliance, and marketing capabilities. Many of
these potential competitors may be further along in the process of
product development and also operate large, company-funded research
and development programs. As a result, our competitors may develop
more competitive or affordable products, or achieve earlier patent
protection or product commercialization than we are able to
achieve. Competitive products may render any products or product
candidates that we develop obsolete.
Many of
our competitors have substantially greater financial, technical and
other resources than we do, such as larger research and development
staff and experienced marketing and manufacturing organizations.
Additional mergers and acquisitions in the biotechnology and
pharmaceutical industries may result in even more resources being
concentrated in certain of our competitors. As a result, these
companies may be able to obtain regulatory approval more rapidly
than we can and may be more effective in selling and marketing
their products. Smaller or early-stage companies may also prove to
be significant competitors, particularly through collaborative
arrangements with large, established companies. Competition may
increase further as a result of advances in the commercial
applicability of technologies and greater availability of capital
for investment in these industries. Our competitors may succeed in
developing, acquiring or licensing drug products that are more
effective or less costly to produce or purchase on the market than
any product candidate we are currently developing or that we may
seek to develop in the future. If approved, our product candidates
will face competition from commercially available drugs as well as
drugs that are in the development pipelines of our
competitors.
Established
pharmaceutical companies may invest heavily to accelerate discovery
and development of or in-license novel compounds that could make
our product candidates less competitive. In addition, any new
product that competes with an approved product must demonstrate
compelling advantages in efficacy, convenience, tolerability and
safety in order to overcome price competition and to be
commercially successful. Accordingly, our competitors may succeed
in obtaining patent protection, receiving FDA, EMA or other
regulatory approval, or discovering, developing and commercializing
medicines before we do, which would have a material adverse impact
on our business and ability to achieve profitability from future
sales of our approved product candidates, if any.
25
If competitors develop and market products that are more effective,
safer or less expensive than our product candidates or offer other
advantages, our commercial prospects will be limited.
Our
therapeutic immuno-oncology development programs face, and will
continue to face, intense competition from pharmaceutical,
biopharmaceutical and biotechnology companies, as well as numerous
academic and research institutions and governmental agencies
engaged in drug discovery activities or funding, both in the United
States and abroad. Some of these competitors are pursuing the
development of drugs and other therapies that target the same
diseases and conditions that we are targeting with our product
candidates. According to a recent analysis by InVentiv Health there
are over 800 companies developing approximately 1500 cancer
immunotherapies via 4000 development projects across 535 targets.
According to the Pharmaceutical Manufacturers Research Association
Medicines in Development for Cancer 2018 Report, there were 135
drugs in development for the treatment of lymphoma, including
non-Hodgkin lymphoma, which accounts for nearly five percent of all
new cancer diagnoses.
As a
general matter, we also face competition from many companies that
are researching and developing cell therapies. Many of these
companies have financial and other resources substantially greater
than ours. In addition, many of these competitors have
significantly greater experience in testing pharmaceutical and
other therapeutic products, obtaining FDA and other regulatory
approvals, and marketing and selling. If we ultimately obtain
regulatory approval for any of our product candidates, we also will
be competing with respect to manufacturing efficiency and marketing
capabilities, areas in which we have limited or no commercial-scale
experience. Mergers and acquisitions in the pharmaceutical and
biotechnology industries may result in even more resources’
being concentrated by our competitors. Competition may increase
further as a result of advances made in the commercial
applicability of our technologies and greater availability of
capital for investment in these fields.
If we are unable to keep up with rapid technological changes in our
field or compete effectively, we will be unable to operate
profitably.
We are
engaged in activities in the biotechnology field, which is
characterized by extensive research efforts and rapid technological
progress. If we fail to anticipate or respond adequately to
technological developments, our ability to operate profitably could
suffer. Research and discoveries by other biotechnology,
agricultural, pharmaceutical or other companies may render our
technologies or potential products or services uneconomical or
result in products superior to those we develop. Similarly, any
technologies, products or services we develop may not be preferred
to any existing or newly developed technologies, products or
services.
We may not be able to obtain third-party patient reimbursement or
favorable product pricing, which would reduce our ability to
operate profitably.
Our
ability to successfully commercialize certain of our proposed
products in the human therapeutic field may depend to a significant
degree on patient reimbursement of the costs of such products and
related treatments at acceptable levels from government
authorities, private health insurers and other organizations, such
as health maintenance organizations. Reimbursement in the United
States or foreign countries may not be available for any products
we may develop, and, if available, may be decreased in the future.
Also, reimbursement amounts may reduce the demand for, or the price
of, our products with a consequent harm to our business. We cannot
predict what additional regulation or legislation relating to the
healthcare industry or third-party coverage and reimbursement may
be enacted in the future or what effect such regulation or
legislation may have on our business. If additional regulations are
overly onerous or expensive, or if healthcare-related legislation
makes our business more expensive or burdensome than originally
anticipated, we may be forced to significantly downsize our
business plans or completely abandon our business
model.
26
We may be subject to litigation that will be costly to defend or
pursue and uncertain in its outcome.
Our
business may bring us into conflict with our licensees, licensors
or others with whom we have contractual or other business
relationships, or with our competitors or others whose interests
differ from ours. If we are unable to resolve those conflicts on
terms that are satisfactory to all parties, we may become involved
in litigation brought by or against us. That litigation is likely
to be expensive and may require a significant amount of
management’s time and attention, at the expense of other
aspects of our business. The outcome of litigation is always
uncertain, and in some cases could include judgments against us
that require us to pay damages, enjoin us from certain activities,
or otherwise affect our legal or contractual rights, which could
have a significant adverse effect on our business.
We are exposed to the risk of liability claims, for which we may
not have adequate insurance.
Since
we participate in the pharmaceutical industry, we may be subject to
liability claims by employees, customers, end users and third
parties. We intend to obtain proper insurance, however, there can
be no assurance that any liability insurance we purchase will be
adequate to cover claims asserted against us or that we will be
able to maintain such insurance in the future. We intend to adopt
prudent risk-management programs to reduce these risks and
potential liabilities, however, we have not taken any steps to
create these programs and have no estimate as to the cost or time
required to do so and there can be no assurance that such programs,
if and when adopted, will fully protect us. We may not be able to
put risk management programs in place, or obtain insurance, if we
are unable to retain the necessary expertise and/or are
unsuccessful in raising necessary capital in the future. Our
failure to obtain appropriate insurance, or to adopt and implement
effective risk-management programs, as well as any adverse rulings
in any legal matters, proceedings and other matters could have a
material adverse effect on our business.
Preclinical
and clinical trials are conducted during the development of
potential products and other treatments to determine their safety
and efficacy for use by humans. Notwithstanding these efforts, when
our treatments are introduced into the marketplace, unanticipated
side effects may become evident. Manufacturing, marketing, selling
and testing our product candidates under development or to be
acquired or licensed, entails a risk of product liability claims.
We could be subject to product liability claims in the event that
our product candidates, processes, or products under development
fail to perform as intended. Even unsuccessful claims could result
in the expenditure of funds in litigation and the diversion of
management time and resources, and could damage our reputation and
impair the marketability of our product candidates and processes.
While we plan to maintain liability insurance for product liability
claims, we may not be able to obtain or maintain such insurance at
a commercially reasonable cost. If a successful claim were made
against us, and we lacked insurance or the amount of insurance were
inadequate to cover the costs of defending against or paying such a
claim or the damages payable by us, we would experience a material
adverse effect on our business, financial condition and results of
operations.
27
We could be subject to product liability lawsuits based on the use
of our product candidates in clinical testing or, if obtained,
following marketing approval and commercialization. If product
liability lawsuits are brought against us, we may incur substantial
liabilities and may be required to cease clinical testing or limit
commercialization of our product candidates.
We
could be subject to product liability lawsuits if any product
candidate we develop allegedly causes injury or is found to be
otherwise unsuitable for human use during product testing,
manufacturing, marketing or sale. Any such product liability claims
may include allegations of defects in manufacturing, defects in
design, a failure to warn of dangers inherent in the product,
negligence, strict liability and a breach of warranties. Claims
could also be asserted under state consumer protection acts. If we
cannot successfully defend ourselves against product liability
claims, we may incur substantial liabilities or be required to
limit commercialization of our product candidates, if approved.
Even successful defense would require significant financial and
management resources. Regardless of the merits or eventual outcome,
liability claims may result in:
●
decreased
demand for our product candidates;
●
withdrawal
of clinical trial participants;
●
initiation
of investigations by regulators;
●
costs
to defend the related litigation;
●
a
diversion of management’s time and our
resources;
●
substantial
monetary awards to trial participants or patients;
●
product
recalls, withdrawals or labeling, marketing or promotional
restrictions;
●
loss of
revenues from product sales; and
●
the
inability to commercialize our product candidates.
Our
inability to retain sufficient product liability insurance at an
acceptable cost to protect against potential product liability
claims could prevent or inhibit the clinical testing and
commercialization of products we develop. We may wish to obtain
additional such insurance covering studies or trials in other
countries should we seek to expand those clinical trials or
commence new clinical trials in other jurisdictions or increase the
number of patients in any clinical trials we may pursue. We also
may determine that additional types and amounts of coverage would
be desirable at later stages of clinical development of our product
candidates or upon commencing commercialization of any product
candidate that obtains required approvals. However, we may not be
able to obtain any such additional insurance coverage when needed
on acceptable terms or at all. If we do not obtain or retain
sufficient product liability insurance, we could be responsible for
some or all of the financial costs associated with a product
liability claim relating to our preclinical and clinical
development activities, in the event that any such claim results in
a court judgment or settlement in an amount or of a type that is
not covered, in whole or in part, by any insurance policies we may
have or that is in excess of the limits of our insurance coverage.
We may not have, or be able to obtain, sufficient capital to pay
any such amounts that may not be covered by our insurance
policies.
We rely on third parties to conduct preclinical and clinical trials
of our product candidates. If these third parties do not
successfully carry out their contractual duties or meet expected
deadlines, we may not be able to obtain regulatory approval for or
commercialize our product candidates and our business could be
substantially harmed.
We
rely, and expect to continue to rely, upon third-party CROs to
execute our preclinical and clinical trials and to monitor and
manage data produced by and relating to those trials. However, we
may not be able to establish arrangements with CROs when needed or
on terms that are acceptable to us, or at all, which could
negatively affect our development efforts with respect to our drug
product candidates and materially harm our business, operations and
prospects.
We will
have only limited control over the activities of the CRO we will
engage to conduct our clinical trials including the University of
Minnesota for our phase 1/2 clinical trial for GTB-3550.
Nevertheless, we are responsible for ensuring that each of our
studies is conducted in accordance with the applicable protocol,
legal, regulatory and scientific standards, and our reliance on any
CRO does not relieve us of our regulatory responsibilities. Based
on our present expectations, we, our CROs and our clinical trial
sites are required to comply with good clinical practices, or GCPs,
for all of our product candidates in clinical development.
Regulatory authorities enforce GCPs through periodic inspections of
trial sponsors, principal investigators and trial sites. If we or
any of our CROs fail to comply with applicable GCPs, the clinical
data generated in the applicable trial may be deemed unreliable and
the FDA, EMA or comparable foreign regulatory authorities may
require us to perform additional clinical trials before approving a
product candidate for marketing, which we may not have sufficient
cash or other resources to support and which would delay our
ability to generate revenue from any sales of such product
candidate. In addition, our clinical trials are required to be
conducted with product produced in compliance with current good
manufacturing practice requirements, or cGMPs. Our or our
CROs’ failure to comply with those regulations may require us
to repeat clinical trials, which would also require significant
cash expenditures and delay the regulatory approval
process.
28
Agreements
governing relationships with CROs generally provide those CROs with
certain rights to terminate a clinical trial under specified
circumstances. If a CRO that we have engaged terminates its
relationship with us during the performance of a clinical trial, we
would be forced to seek an engagement with a substitute CRO, which
we may not be able to do on a timely basis or on commercially
reasonable terms, if at all, and the applicable trial would
experience delays or may not be completed. In addition, our CROs
are not our employees, and except for remedies available to us
under any agreements we enter with them, we are unable to control
whether or not they devote sufficient time and resources to our
clinical, nonclinical and preclinical programs. If CROs do not
successfully carry out their contractual duties or obligations or
meet expected deadlines, if they need to be replaced or if the
quality or accuracy of the clinical data they obtain is compromised
due to a failure to adhere to our clinical protocols, regulatory
requirements or for other reasons, our clinical trials may be
extended, delayed or terminated and we may not be able to obtain
regulatory approval for, or successfully commercialize, the
affected product candidates. As a result, our operations and the
commercial prospects for the effected product candidates would be
harmed, our costs could increase and our ability to generate
revenues could be delayed.
We contract with third parties for the supply of product candidates
for clinical testing and expect to contract with third parties for
the manufacturing of our product candidates for large-scale testing
and commercial supply. This reliance on third parties increases the
risk that we will not have sufficient quantities of our product
candidates or products or such quantities at an acceptable cost,
which could delay, prevent or impair our development or
commercialization efforts.
We
anticipate continuing our engagement of third parties to provide
our clinical supply as we advance our product candidates into and
through clinical development, and we depend on third parties to
produce and maintain sufficient quantities of material to supply
our clinical trials. If these third parties do not produce and
maintain adequate supplies of clinical material, our development
efforts could be significantly delayed, or could incur
substantially higher costs. We expect in the future to use third
parties for the manufacture of our product candidates for clinical
testing, as well as for commercial manufacture. We plan to enter
into long-term supply agreements with several manufacturers for
commercial supplies. We may be unable to reach agreement on
satisfactory terms with contract manufacturers to manufacture our
product candidates. Additionally, the facilities to manufacture our
product candidates must be the subject of a satisfactory inspection
before the FDA or other regulatory authorities approve a marketing
authorization for the product candidate manufactured at that
facility. We will depend on these third-party manufacturers for
compliance with the FDA’s and international regulatory
authority requirements for the manufacture of our finished
products. We do not control the manufacturing process of, and are
completely dependent on, our contract manufacturers for compliance
with cGMPs. If our manufacturers cannot successfully manufacture
material that conforms to our specifications and the FDA and other
regulatory authorities’ cGMP requirements, they will not be
able to secure and/or maintain regulatory approval for their
manufacturing facilities. In addition, we have no control over the
ability of our contract manufacturers to maintain adequate quality
control, quality assurance and qualified personnel. If the FDA or a
comparable foreign regulatory authority does not approve these
facilities for the manufacture of our product candidates or if it
withdraws any such approval in the future, we may need to find
alternative manufacturing facilities, which would significantly
impact our ability to develop, obtain regulatory approval for or
market our product candidates, if approved, and may subject us to
recalls or enforcement action for products already on the
market.
If any
of our product candidates are approved and contract manufacturers
fail to deliver the required commercial quantities of finished
product on a timely basis and at commercially reasonable prices,
and we are unable to find one or more replacement manufacturers
capable of production at a substantially equivalent cost, in
substantially equivalent volumes and quality and on a timely basis,
we would likely be unable to meet demand for our products and could
lose potential revenue. It may take several years to establish an
alternative source of supply for our product candidates and to have
any such new source approved by the FDA or any other relevant
regulatory authorities.
29
We currently have no marketing and sales force. If we are unable to
establish effective marketing and sales capabilities or enter into
agreements with third parties to market and sell our product
candidates, we may not be able to effectively market and sell our
product candidates, if approved, or generate product
revenues.
We
currently do not have a marketing or sales team for the marketing,
sales and distribution of any of our product candidates that are
able to obtain regulatory approval. In order to commercialize any
product candidates, we must build on a territory-by-territory basis
marketing, sales, distribution, managerial and other non-technical
capabilities or make arrangements with third parties to perform
these services, and we may not be successful in doing so. If our
product candidates receive regulatory approval, we intend to
establish an internal sales and marketing team with technical
expertise and supporting distribution capabilities to commercialize
our product candidates, which will be expensive and time consuming
and will require significant attention of our executive officers to
manage. Any failure or delay in the development of our internal
sales, marketing and distribution capabilities would adversely
impact the commercialization of any of our products that we obtain
approval to market. With respect to the commercialization of all or
certain of our product candidates, we may choose to collaborate,
either globally or on a territory-by-territory basis, with third
parties that have direct sales forces and established distribution
systems, either to augment our own sales force and distribution
systems or in lieu of our own sales force and distribution systems.
If we are unable to enter into such arrangements when needed on
acceptable terms or at all, we may not be able to successfully
commercialize any of our product candidates that receive regulatory
approval or any such commercialization may experience delays or
limitations. If we are not successful in commercializing our
product candidates, either on our own or through collaborations
with one or more third parties, our future product revenue will
suffer and we may incur significant additional losses.
Our business and operations would suffer in the event of system
failures.
Despite
the implementation of security measures, our internal computer
systems and those of our contractors and consultants are vulnerable
to damage from computer viruses, unauthorized access, natural
disasters, terrorism, war and telecommunication and electrical
failures. While we have not experienced any such system failure,
accident or security breach to date, if such an event were to occur
and cause interruptions in our operations, it could result in a
material disruption of our drug development programs. For example,
the loss of clinical trial data from completed or ongoing or
planned clinical trials could result in delays in our regulatory
approval efforts and we may incur substantial costs to attempt to
recover or reproduce the data. If any disruption or security breach
resulted in a loss of or damage to our data or applications, or
inappropriate disclosure of confidential or proprietary
information, we could incur liability and/or the further
development of our product candidates could be
delayed.
Our operations are vulnerable to interruption by natural disasters,
power loss, terrorist activity and other events beyond our control,
the occurrence of which could materially harm our
business.
Businesses
located in California have, in the past, been subject to electrical
blackouts as a result of a shortage of available electrical power,
and any future blackouts could disrupt our operations. We are
vulnerable to a major earthquake, wildfire and other natural
disasters, and we have not undertaken a systematic analysis of the
potential consequences to our business as a result of any such
natural disaster and do not have an applicable recovery plan in
place. We do not carry any business interruption insurance that
would compensate us for actual losses from interruption of our
business that may occur, and any losses or damages incurred by us
could cause our business to materially suffer.
30
Epidemic or pandemic outbreaks such as COVID-19 (coronavirus),
natural disasters, whether or not caused by climate change, unusual
weather conditions, terrorist acts and political events, could
disrupt business and result in halting our clinical trials and
otherwise adversely affect our financial performance.
The occurrence of one or more natural disasters, such as tornadoes,
hurricanes, fires, floods and earthquakes, unusual weather
conditions, epidemic outbreaks, terrorist attacks or disruptive
political events in certain regions where our operations are
located could adversely affect our business. Epidemic or pandemic
outbreaks, such as COVID-19 (coronavirus) could impact our
management and our ability to conduct clinical trials. This also
may affect the market conditions that would limit our ability to
raise additional capital. This could have a sustained material
adverse effect on our business, financial condition and results of
operations.
We have not held regular annual meetings in the past, and if we are
required by the Delaware Court of Chancery to hold an annual
meeting pursuant to Section 211(c) of the Delaware General
Corporation Law, or the DGCL, it could result in the unanticipated
expenditure of funds, time and other Company
resources.
Section
2.2 of our bylaws provides that an annual meeting shall be held
each year on a date and at a time designated by our board of
directors, and Section 211(b) of the DGCL provides for an annual
meeting of stockholders to be held for the election of directors.
Section 211(c) of the DGCL provides that if there is a failure to
hold the annual meeting for a period of 13 months after the latest
to occur of the organization of the corporation, its last annual
meeting or last action by written consent to elect directors in
lieu of an annual meeting, the Delaware Court of Chancery may order
a meeting to be held upon the application of any stockholder or
director. Section 211(c) also provides that the failure to hold an
annual meeting shall not affect otherwise valid corporate acts or
result in a forfeiture or dissolution of the
corporation.
We have
not held regular annual meetings in the past because a substantial
majority of our stock is owned by a small number of stockholders,
making it easy to obtain written consent in lieu of a meeting when
necessary. In light of our historical liquidity constraints,
handling matters by written consent has allowed our Company to save
on the financial and administrative resources required to prepare
for and hold such annual meetings. To our knowledge, no stockholder
or director has requested our Company’s management to hold
such an annual meeting and no stockholder or director has applied
to the Delaware Court of Chancery seeking an order directing our
company to hold a meeting. However, if one or more stockholders or
directors were to apply to the Delaware Court of Chancery seeking
such an order, and if the Delaware Court of Chancery were to order
an annual meeting before we are prepared to hold one, the
preparation for the annual meeting and the meeting itself could
result in the unanticipated expenditure of funds, time, and other
Company resources.
Risks Related to Our Common Stock
There has been a limited public market for our common stock, and we
do not know whether one will develop to provide you adequate
liquidity. Furthermore, the trading price for our common stock,
should an active trading market develop, may be volatile and could
be subject to wide fluctuations in per-share price.
Our
common stock is now listed for trading on the Nasdaq Capital Market
under the trading symbol “GTBP”; historically, however,
there has been a limited public market for our common stock. We
cannot assure you that an active trading market for our common
stock will develop or be sustained. The liquidity of any market for
the shares of our common stock will depend on a number of factors,
including:
●
the
number of stockholders;
●
our
operating performance and financial condition;
●
the
market for similar securities;
●
the
extent of coverage of us by securities or industry analysts;
and
●
the
interest of securities dealers in making a market in the shares of
our common stock.
Even if
an active trading market develops, the market price for our common
stock may be highly volatile and could be subject to wide
fluctuations. In addition, the price of shares of our common stock
could decline significantly if our future operating results fail to
meet or exceed the expectations of market analysts and investors
and actual or anticipated variations in our quarterly operating
results could negatively affect our share price.
31
Other
factors may also contribute to volatility of the price of our
common stock and could subject our common stock to wide
fluctuations. These include, but are not limited to:
●
developments
in the financial markets and worldwide or regional
economies;
●
announcements
of innovations or new products or services by us or our
competitors;
●
announcements
by the government relating to regulations that govern our
industry;
●
significant
sales of our common stock or other securities in the open
market;
●
variations
in interest rates;
●
changes
in the market valuations of other comparable companies;
and
●
changes
in accounting principles.
Our outstanding warrants may affect the market price of our common
stock.
As of April 12, 2021, we had approximately 28.4 million shares
of common stock outstanding and
issued or issuable and had outstanding warrants for the purchase of up to approximately
78,400 additional shares of common stock at an exercise price of $3.40 per
share, warrants for the purchase of up to approximately 4,268,280
additional shares of common
stock at an exercise price of $5.50 per share and warrants for the
purchase of up to approximately 247,250 additional shares of common
stock at an exercise price of $6.875 per share, all of which are exercisable as of the date of
this prospectus (subject to certain beneficial ownership
limitations). The amount of common stock reserved for issuance may
have an adverse impact on our ability to raise capital and may
affect the price and liquidity of our common stock in the public market. In addition,
the issuance of these shares of common stock will have a dilutive effect on
current stockholders’ ownership.
Because our common stock may be deemed a low-priced
“penny” stock, an investment in our common stock should
be considered high- risk and subject to marketability
restrictions.
Historically,
the trading price of our common stock has been $5.00 per share or
lower, and deemed a penny stock, as defined in Rule 3a51-1 under
the Exchange Act, and subject to the penny stock rules of the
Exchange Act specified in rules 15g-1 through 15g-10. Those rules
require broker–dealers, before effecting transactions in any
penny stock, to:
●
deliver
to the customer, and obtain a written receipt for, a disclosure
document;
●
disclose
certain price information about the stock;
●
disclose
the amount of compensation received by the broker–dealer or
any associated person of the broker–dealer;
●
send
monthly statements to customers with market and price information
about the penny stock; and
●
in some
circumstances, approve the purchaser’s account under certain
standards and deliver written statements to the customer with
information specified in the rules.
Consequently,
the penny stock rules may restrict the ability or willingness of
broker–dealers to sell the common stock and may affect the
ability of holders to sell their common stock in the secondary
market and the price at which such holders can sell any such
securities. These additional procedures could also limit our
ability to raise additional capital in the future.
32
Financial Industry Regulatory
Authority (“FINRA”) sales practice requirements may
also limit a stockholder’s ability to buy and sell our common
stock, which could depress the price of our common stock.
In addition to the “penny stock” rules described above,
FINRA has adopted rules that require a broker-dealer to have
reasonable grounds for believing that the investment is suitable
for that customer before recommending an investment to a customer.
Prior to recommending speculative low-priced securities to their
non-institutional customers, broker-dealers must make reasonable
efforts to obtain information about the customer’s financial
status, tax status, investment objectives and other information.
Under interpretations of these rules, FINRA believes that there is
a high probability that speculative low-priced securities will not
be suitable for at least some customers. Thus, the FINRA
requirements make it more difficult for broker-dealers to recommend
that their customers buy our common stock, which may limit your ability to buy
and sell our shares of common
stock, have an adverse effect on the market for our shares
of common stock, and thereby
depress our price per share of common stock.
If securities or industry analysts do not publish research or
reports about our business, or if they issue an adverse or
misleading opinion regarding our stock, our stock price and trading
volume could decline.
The
trading market for our common stock may be influenced by the
research and reports that industry or securities analysts publish
about us or our business. We currently
have research coverage by only one securities analyst, and we may
never obtain research coverage by additional analysts. If no
or few securities or industry analysts commence coverage of us, the
trading price for our common stock may be negatively affected. In
the event that we receive additional securities or industry analyst
coverage, if any of the analysts who cover us issue an adverse or
misleading opinion regarding us, our business model, our
intellectual property or our stock performance, or if our operating
results fail to meet the expectations of analysts, our stock price
would likely decline. If one or more of these analysts cease
coverage of us or fail to publish reports on us regularly, we could
lose visibility in the financial markets, which in turn could cause
our stock price or trading volume to decline.
Anti-takeover provisions may limit the ability of another party to
acquire us, which could cause our stock price to
decline.
Delaware
law and our charter, bylaws, and other governing documents contain
provisions that could discourage, delay or prevent a third party
from acquiring us, even if doing so may be beneficial to our
stockholders, which could cause our stock price to decline. In
addition, these provisions could limit the price investors would be
willing to pay in the future for shares of our common
stock.
We do not currently or for the foreseeable future intend to pay
dividends on our common stock.
We have
never declared or paid any cash dividends on our common stock. We
currently anticipate that we will retain future earnings for the
development, operation and expansion of our business and do not
anticipate declaring or paying any cash dividends for the
foreseeable future. As a result, any return on your investment in
our common stock will be limited to the appreciation in the price
of our common stock, if any.
33
ITEM 1B. UNRESOLVED STAFF
COMMENTS
Not
applicable.
ITEM 2. PROPERTIES
We
currently maintain offices at 9350 Wilshire Blvd, Suite 203,
Beverly Hills, CA 90212. We previously maintained offices at 310 N.
Westlake Blvd., Suite 206, Westlake Village, CA 91362.
ITEM 3. 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. On or about June 19, 2020, the parties
settled the litigation including the execution of a settlement
agreement and mutual release. The litigation was dismissed with
prejudice on or about June 24, 2020.
On
August 28, 2019, a complaint was filed in the Superior Court of
California, County of Los Angeles, West Judicial District, Santa
Monica Courthouse, Unlimited Civil Division by Jeffrey Lion, an
individual (“Lion”), and by Daniel Vallera, an
individual (“Vallera”). Lion and Vallera are referred
to jointly as the “Plaintiffs”. The complaint was filed
against GT Biopharma, Inc. and its subsidiary Oxis Biotech, Inc.
(either of them or jointly, the “Company”). The
Plaintiffs allege breach of a license agreement between the
Plaintiffs and the Company entered into on or about September 3,
2015. Lion alleges breach of a consulting agreement between Lion
and the Company entered into on or about September 1, 2015. Vallera
alleges breach of a consulting agreement between Vallera and the
Company entered into in or around October, 2018. The complaint
seeks actual damages of $1,670,000, for the fair market value of
the number of shares of GT Biopharma, Inc. that at the time of
judgment represent 15,000,000 shares of such stock as of September
1, 2015, and that GT Biopharma, Inc. issue Lion the number of
common shares of GT Biopharma, Inc. that at the time of judgment
represent 15,000,000 such shares as of September 1, 2015. The
Company filed an answer to the complaint denying many allegations
and asserting affirmative defenses. Discovery has commenced, and
trial is scheduled for May 22, 2022.
ITEM 4. MINE SAFETY
DISCLOSURES
None.
PART II
ITEM 5. MARKET FOR
REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.
Our
common stock is traded on the Nasdaq Capital market under the
trading symbol “GTBP.” Until May 2009, our common stock
was traded on the OTC Bulletin Board (“OTCBB”) under
the symbol “OXIS.” From May 20, 2009 until March 11,
2010, our common stock was traded on Pink OTC Markets Inc. trading
platform under the symbol “OXIS.” From January 2015 to
August 2017, our common stock is quoted on the OTCQB under the
“OXIS” trading symbol. From August 2017 to February 11,
2021, our common stock has been quoted on the OTCQB under the
“GTBP” trading symbol.
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).
34
Stockholders
As of
March 22, 2021 there were 51 stockholders of record, which total
does not include stockholders who hold their shares in
“street name.” The transfer agent for our common stock
is ComputerShare, whose address is 8742 Lucent Blvd., Suite 225,
Highland Ranch, CO 80129.
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
information included under the heading “Equity Compensation
Plan Information” in Item 12 of Part III of this report,
“Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.” is hereby
incorporated by reference into this Item 5 of this
report.
Recent Issuances of Unregistered Securities
The Company made the following issuances of its unregistered
securities pursuant exemptions contained in Section 4(a)(2) or
3(a)(9) of the Securities Act and/or Rule 506 of Regulation D
promulgated thereunder:
●
In November 2020,
the Company entered into a securities purchase agreement with
certain purchasers pursuant to which the Company issues convertible
notes in an aggregate principal amount of $350,000, which notes are
convertible into the Company’s common stock at an initial
conversion price of $0.20 per share.
●
In December 2020
and January 2021, the Company entered into securities purchase
agreements with certain purchasers pursuant to which the Company
issues convertible notes in an aggregate principal amount of
$8,985,000, which notes are convertible into the Company’s
common stock at an initial conversion price of $0.20 per
share.
In addition, the Company made the following issuances of its
unregistered common stock
pursuant exemptions from the registration requirements of the
Securities Act:
●
11,386,435
shares of common stock in connection with (i) the conversion of the
Company’s convertible notes or debentures and (ii) payments
of interest in lieu of cash with respect to the Company’s
convertible notes or debentures;
●
83,825
shares of common stock in connection with the exercise of certain
settlement warrants on or after February 16, 2021;
●
692,220
shares of common stock in connection with the conversion of all
outstanding shares of Series J-1 Preferred Stock on February 23 and
March 17, 2021;
●
5,491,638
shares of common stock to certain of the Company’s directors,
executive officers and consultants as compensatory bonuses after
completion of the successful listing on the Nasdaq Capital Markets
on February 11, 2021;
●
576,720
shares of common stock upon exercise of warrants for cash
subsequent to December 31, 2020
●
Subsequent to
December 31, 2020, the Company issued 4,945,000 of shares of its
common stock in exchange for cash
Repurchase of Shares
We did
not repurchase any shares during the fourth quarter of the fiscal
year covered by this report.
35
ITEM 6. SELECTED FINANCIAL
DATA
This
company qualifies as a “smaller reporting company” as
defined in 17 C.F.R. §229.10(f)(1), and is not required to
provide information by this Item.
ITEM
7. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
We are
a clinical stage biopharmaceutical company focused on the
development and commercialization of novel immuno-oncology products
based off our proprietary Tri-specific Killer Engager
(TriKE™) technology platform. Our TriKE platform generates
proprietary therapeutics designed to harness and enhance the cancer
killing abilities of a patient’s own natural killer cells, or
NK cells. Once bound to an NK cell, our moieties are designed to
enhance the NK cell, and precisely direct it to one or more
specifically-targeted proteins expressed on a specific type of
cancer cell or virus infected cell, ultimately resulting in the
targeted cell’s death. TriKE is composed of recombinant
fusion proteins and interleukin 15 (IL-15), can be designed to
target any number of tumor antigens on hematologic malignancies,
sarcomas or solid tumors and do not require patient-specific
customization.
As
shown in the accompanying consolidated financial statements, the
Company has incurred an accumulated deficit of $595,628,000 through
December 31, 2020. On a consolidated basis, the Company had cash
and cash equivalents of $5,297,000 at December 31, 2020. Because
our lack of funds, we will have to raise additional capital in
order to fund our selling, general and administrative, and research
and development expenses. There are no assurances that we will be
able to raise the funds necessary to maintain our operations or to
implement our business plan. The consolidated financial statements
included in this Annual Report 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 we cannot continue our
operations.
COVID-19
In
March 2020, the World Health Organization declared coronavirus
COVID-19 a global pandemic. This contagious disease outbreak, which
has continued to spread, has adversely affected workforces,
customers, economies, and financial markets globally. It has also
disrupted the normal operations of many businesses. This outbreak
could decrease spending, adversely affect demand for the
Company’s products, and harm the Company’s business and
results of operations.
During
the year ended December 31, 2020, the Company believes the COVID-19
pandemic did impact its operating results. However, the Company has
not observed any impairments of its assets or a significant change
in the fair value of its assets due to the COVID-19 pandemic. At
this time, it is not possible for the Company to predict the
duration or magnitude of the adverse results of the outbreak and
its effects on the Company’s business or results of
operations, financial condition, or liquidity.
The
Company has been following the recommendations of health
authorities to minimize exposure risk for its team members,
including the temporary closure of its corporate office and having
team members work remotely. Most vendors have transitioned to
electronic submission of invoices and payments.
Corporate Developments
TriKE Agreements
In
March 2017, we entered a new one-year Sponsored Research Agreement
with the University of Minnesota. The purpose of this agreement is
to determine toxicities and in vivo behavior in our TriKE
technology, which we license from the University of
Minnesota.
36
In June
2017, we entered into a co-development partnership agreement with
Altor BioScience Corporation in which we will collaborate
exclusively in the clinical development of a novel 161533 TriKE
fusion protein for cancer therapies using our TriKE
technology.
License Agreements
In July
2016, we executed 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 received 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 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 FDA 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.
Clinical Trial Agreement
In
September 2019, we executed clinical trial agreement with the
Regents of the University of Minnesota, to commence enrollment in
its first-in-human GTB-3550 TriKE™ Phase I/II clinical trial
for the treatment of certain types of leukemia. The clinical trial
is being conducted at the University of Minnesota’s Masonic
Cancer Center in Minneapolis, Minnesota under the direction of Dr.
Erica Warlick. The open-label, dose-escalation Phase I portion of
the trial will evaluate GTB-3550 TriKE™ in patients with
CD33-expressing, high risk myelodysplastic syndromes,
refractory/relapsed acute myeloid leukemia or advanced systemic
mastocytosis, and will determine safety and tolerability as well as
the pharmacologically active dose and maximum tolerated dose of
GTB-3550 TriKE™.
Collaboration Agreement
On
March 10, 2020 we entered into a collaboration agreement with
Cytovance® Biologics, a USA-based contract development and
manufacturing organization (CDMO) and a subsidiary of the Shenzhen
Hepalink Pharmaceutical Group Co., Ltd. (“Hepalink”),
to provide development services for a TriKE™ therapeutic for
the treatment of coronavirus infection. Under the terms of the
collaboration agreement, the companies will focus on preparing
sufficient quantities of our coronavirus TriKE drug product for
preclinical evaluation using Cytovance’s E. coli-based Keystone Expression System™ and
subsequently, will scale-up production using Cytovance’s GMP
microbial manufacturing platform for evaluation of TriKE in humans
to treat coronavirus infection.
Financing
|
|
December
31,
2020
|
December
31,
2019
|
|
|
|
|
|
A. Notes payable
issued for cash
|
$24,085,000
|
$12,998,000
|
|
B. Notes payable
issued for settlement agreements
|
2,528,000
|
300,000
|
|
C. Notes payable
issued for forbearance agreements
|
3,849,000
|
-
|
|
D. Notes payable
issued for consulting services
|
360,000
|
-
|
|
|
$30,822,000
|
$13,298,000
|
A.
Notes Payable
Issued for Cash
As part
of the Company’s financing activities, the Company issued
convertible notes payable in exchange for cash. These notes payable
are unsecured, bear interest at a rate of 10% per annum, mature in
six months up to one year from the date of issuance, and are
convertible to common stock at an average conversion rate of $19.65
per share, subject to certain beneficial ownership limitations
(with a maximum ownership limit of 4.99%) and standard
anti-dilution provisions. As of December 31, 2018, outstanding
balance of these notes payable amounted to
$10,673,000.
During
the year ended December 31, 2019, the Company issued similar notes
payable in the aggregate of $3,827,000 in exchange for cash. These
notes payable are unsecured, bear interest at a rate of 10% per
annum mature in six months up to one year from the date of
issuance, and are convertible to common stock at an average
conversion rate of $5.74 per share, subject to certain beneficial
ownership limitations (with a maximum ownership limit of 4.99%) and
standard anti-dilution provisions.
37
In
addition, during 2019, notes payable of $1,502,000 were converted
to 205,000 shares of common stock.
As of
December 31, 2019, outstanding balance of these notes payable
issued for cash amounted to $12,998,000.
During
the year ended December 31, 2020, the Company issued similar notes
payable in the aggregate of $12,531,000 in exchange for cash. These
notes payable are unsecured, bear interest at a rate of 10% per
annum, mature in six months up to one year from the date of
issuance, and are convertible to common stock at a conversion rate
of $3.40 per share, subject to certain beneficial ownership
limitations (with a maximum ownership limit of 4.99%) and standard
anti-dilution provisions. In addition, during 2020, notes payable
of $1,444,000 plus accrued interest were converted to 478,510
shares of common stock.
As of
December 31, 2020, outstanding balance of these notes payable
issued for cash amounted to $24,085,000. In addition, total notes
payable matured and past due as of December 31, 2020 amounted to
$16,111,000.
B.
Notes Payable Issued for Settlement Agreements
During
the year ended December 31, 2019, the Company issued notes payable
of $300,000 as part of a debt settlement agreement. The notes are
unsecured, bear interest at a rate of 10%, mature in six months up
to one year from the date of issuance, and are convertible to
common stock at a conversion rate of $10.20 per share, subject to
certain beneficial ownership limitations (with a maximum ownership
limit of 4.99%) and standard anti-dilution provisions.
As of
December 31, 2019, outstanding balance of notes payable issued for
settlement agreements amounted to $300,000.
During
the year ended December 31, 2020, the Company entered into
settlement agreements with certain unrelated parties to resolve
claims and disputes pertaining to certain debt and equity
instruments issued by the Company to these parties in prior
years.
As part
of the agreement, the Company agreed to the following
considerations:
a.
Issuance of convertible notes payable in the aggregate of
$2,228,000. The notes are unsecured, bear interest at a rate of
10%, mature in six months up to one year from the date of issuance,
and are convertible to common stock at a conversion rate of $3.40
per share, subject to certain beneficial ownership limitations
(with a maximum ownership limit of 4.99%) and standard
anti-dilution provisions;
b. Cash
payment of $380,000;
c.
Issuance of 262,353 shares of common stock with a fair value of
$1,225,000; and
d.
Issuance of warrants to purchase 323,529 shares of common stock.
The warrants are fully vested, exercisable at $3.40 per share and
will expire in five years with an estimated fair value of
$1,021,000 using a BlackScholes option price model.
As of
December 31, 2020, outstanding balance of these notes payable for
settlement agreements amounted to $2,528,000. In addition, total
notes payable matured and past due as of December 31, 2020 amounted
to $518,000.
C.
Notes Payable Issued for Forbearance Agreements
On June
23, 2020, the Company entered into Standstill and Forbearance
Agreements (collectively, the “Forbearance Agreements”)
with the holders of $13.2 million aggregate principal amount of the
Convertible Notes (the “Default Notes”), which were in
default. Pursuant to the Forbearance Agreements, the holders of the
Default Notes agreed to forbear from exercising their rights and
remedies under the Default Notes (including declaring such Default
Notes (together with any default amounts and accrued and unpaid
interest) immediately due and payable) until the earlier of (i) the
date that the Company completes a future financing in the amount of
$15 million and, in connection therewith, commences listing on
NASDAQ (collectively, the “New Financing”) or (ii)
January 31, 2021 (the “Termination Date”).
38
The
obligations of the holders to forbear from exercising their rights
and remedies under the Default Notes pursuant to the Forbearance
Agreements will terminate on the earliest of (i) the Termination
Date, (ii) the date of any bankruptcy filing by the Company or its
subsidiaries, (iii) the date on which the Company defaults on any
of the terms and conditions of the Forbearance Agreements or (iv)
the date the Forbearance Agreements are otherwise terminated or
expire.
In
exchange for the forbearance agreement, the Company agreed to the
following considerations:
a.
Amendment of the $13.2 million Default Notes (together with default
amounts and accrued and unpaid interest) to include a provision
that will convert these notes payable into common stock upon the
closing of a New Financing at a conversion price equal to the
lesser of (i) the conversion price in effect for the Default Notes
on the date of such New Financing or (ii) 75% of the lowest per
share price at which common stock is or may be issued in connection
with such New Financing, in each case, subject to certain
beneficial ownership limitations (with a maximum ownership limit of
9.99%). Shares of the Company’s preferred stock, which are
convertible into the Company’s common stock, will be issued
in lieu of common stock to the extent that conversion of the
Default Notes is prohibited by such beneficial ownership
limitations.
b.
Amendment of warrants granted to certain noteholders in prior year
to include the following terms: (i) the exercise price of all
warrants to purchase common stock held by holders of the Default
Notes will be reduced to equal the conversion price of the Default
Notes and (ii) the number of shares of common stock underlying such
warrants shall be increased so that the total exercise price of all
such warrants after the decrease in the exercise price equals the
total exercise price of all such warrants prior to the decrease in
the exercise price. Further, the expiration date of all such
warrants shall be extended for three years following the closing
date of any New Financing.
c.
Issuance of notes payable in the aggregate of $3,955,000. The notes
are unsecured, bear interest at a rate of 10% per annum, mature in
six months up to one year from the date of issuance, and are
convertible to common stock at a conversion rate of $3.40 per
share, subject to certain beneficial ownership limitations (with a
maximum ownership limit of 4.99%) and standard anti-dilution
provisions.
As of
December 31, 2020, outstanding balance of the notes payable
amounted to $3,849,000. Total notes payable matured and past due as
of December 31, 2020 amounted to $135,000.
D.
Notes Payable issued for Consulting Agreements
During
the year ended December 31, 2020, the Company issued notes payable
of $360,000 in exchange for consulting services. The notes are
unsecured, bears interest at a rate of 10%, matures in one year
from the date of issuance and convertible to common stock at a
conversion rate of $3.40 per share, subject to certain beneficial
ownership limitations (with a maximum ownership limit of 4.99%) and
standard anti-dilution provisions.
As of
December 31, 2020, outstanding balance of these notes payable
amounted to $360,000. In addition, total notes payable matured and
past due as of December 31, 2020 amounted to $20,000.
Subsequent
to December 31, 2020, convertible notes and accured in interest
aggregating $38,714,000 were converted into 11,386,435 shares of
common stock at conversion prices.
Subsequent
to December 31, 2020, the Company issued 4,945,000 shares of its
common stock to investors for net cash proceeds of $24,882,000
pursuant to our February 2021 Offering Circular.
Subsequent
to December 31, 2020, the Company issued 660,545 shares of common
stock upon exercise of warrants for cash proceeds of
$3,200,000.
Subsequent
to December 31, 2020, the Company issued convertible notes payable
in the aggregate of $1,205,000 in exchange for each. The Company
also issued notes payable of $545,000 to a related party. The
Company is currently in the process of determining the appropriate
accounting for these notes payable totaling
$2,275,000.
Subsequent
to December 31, 2020, the Company issued convertible notes payable
for cash proceeds of $1,205,000. The Company is currently in the
process of determining the appropriate accounting for these notes
payable.
39
Results of Operations
Comparison of the Years Ended December 31, 2020 and
2019
Research and Development Expenses
During the year ended December 31, 2020 and 2019, we incurred $485
thousand and $1.7 million of research and development expenses,
respectively. Research and development costs decreased due
primarily to the reduction of employee, consultant and preclinical
expenses. We anticipate our direct clinical and preclinical costs
to increase significantly in 2021, totaling approximately $12 to
$15 million, as we have initiated the Phase 1 clinical trial of our
most advanced TriKe product candidate, GTB-3550 and anticipate
entering Phase II in late second quarter of 2021.
Selling, general and administrative expenses
During the year ended December 31, 2020 and 2019, we incurred $6.3
million and $9.8 million of selling, general and administrative
expenses, respectively. The decrease in selling, general
and administrative expenses is primarily attributable the reduction
of payroll and stock compensation expenses.
Loss on impairment
For the
year ended December 31, 2019, the Company entered into an Asset
Purchase Agreement (the “Agreement”), pursuant to which
the Company sold its rights, titles and interests, including
associated patents, to the pharmaceutical product designated by the
Company as GTB-004 (the “Product”). Under the
Agreement, the Product was purchased by DAS Therapeutics, Inc. who
the Company believes was well positioned to take over the clinical
development of the Product including obtaining timely approval by
the FDA.
The
Company received $200,000 at closing. The Company will also
participate in the future commercial value of the Product by
receiving $6,000,000 upon the achievement of certain sales
objectives. In addition, the Company will receive a royalty equal
to 1.5% of U.S. sales until such time as the last of the patents
associated with the Product expires. The Company reflected a loss
in the year ended December 31, 2019 totaling
$20,463,000.
As a
result of the loss reported on the sale of the Product, as well as
the response received on inquiries related to the other two
projects, the Company determined that the remaining value related
to these remaining projects should be fully impaired. During the
year ended December 31, 2019, the Company reported an impairment
charge for these projects totaling $4,599,000.
There
was no similar transaction for the year ended December 31,
2020.
Loss on disposal of assets
During the year ended December 31, 2020 and 2019, we incurred $0
and $20.5 million of loss on impairment,
respectively. For
the year ended December 31, 2019, the Company recorded an
intangible asset impairment charge of $20.5 million related to the
portfolio of CNS IPR&D assets, which represents the excess
carrying value compared to the fair value. The impairment charge
was the result of the sale of certain assets and prioritization for
immuno-oncology development candidates. 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.
There
was no similar transaction for the year ended December 31,
2020.
40
Interest Expense
Interest expenses were $3.0
million and $2.1 million for the years ended December 31, 2020 and
2019 respectively. The increase is primarily due
to the increase in
convertible notes payable as well as accrual of default
interest from 10% to 8% of past due convertible notes
payables.
Loss on legal settlements
Loss on legal settlements were $5.4 million and $0 million for the
years ended December 31, 2020 and 2019 respectively. The
increase is primarily due to legal settlements the
Company entered into during the year ended December 31, 2020 as
compared to none in the year ended December 31,
2019.
Loss on forbearance agreement
Loss on forbearance settlement were $12.6 million and $0 million
for the years ended December 31, 2020 and 2019
respectively. The increase is primarily due to
loss on extinguishment as a result of the change in fair value of
debt and equity instruments modified as a result of the forbearance
settlement
the Company entered into in during the year ended December 31, 2020
as compared to none in the year ended December 31,
2019.
Amortization of debt discount
Amortization of debt discount were $0.3 million and $0 million for
the years ended December 31, 2020 and 2019
respectively. The increase is primarily due to
the increase in debt discount recorded on new convertible notes
payable the
Company entered into in during the year ended December 31, 2020 as
compared to none in the year ended December 31,
2019.
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
year ended December 31, 2020, the Company raised $12.5 million
through a series of issuances of Convertible Notes as compared to
$3.5 million during the year ended December 31, 2019. We anticipate that cash utilized for
selling, general and administrative expenses will range between $1
and $2 million in the coming quarters, while research and
development expenses will vary depending on clinical activities.
Subsequent to December 31, 2020, the Company raised additional
funding of $27.2 million through an equity financing in February
2021.
The
financial statements of the Company have been prepared on a
going-concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of
business. Accordingly, the financial statements do not include any
adjustments that might be necessary should the Company be unable to
continue in existence.
The
Company has incurred substantial losses and has cash 5.3 million as
of December 30, 2020. The Company anticipates incurring additional
losses until such time, if ever, that it can generate significant
sales or revenue from out-licensing of its products currently in
development. Substantial additional financing will be needed by the
Company to fund its operations and to commercially develop its
product candidates. These factors raise substantial doubt about the
Company’s ability to continue as a going
concern.
Management
is currently evaluating different strategies to obtain the required
funding for future operations. These strategies may include but are
not limited to: public offerings of equity and/or debt securities,
payments from potential strategic research and development,
licensing and/or marketing arrangements with pharmaceutical
companies. Management has also implemented cost saving efforts,
including reduction in executive salaries and reduced travel.
Management believes that these ongoing and planned financing
endeavors, if successful, will provide adequate financial resources
to continue as a going concern for at least the next nine months
from the date the financial statements are issued; however, there
can be no assurance in this regard. If the Company is unable to
secure adequate additional funding, its business, operating
results, financial condition and cash flows may be materially and
adversely affected.
41
Critical Accounting Policies
We consider the following accounting policies to be critical given
they involve estimates and judgments made by management and are
important for our investors’ understanding of our operating
results and financial condition.
Basis of Presentation and Principles of Consolidation
The
accompanying consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the
United States of America. The consolidated financial statements
include the accounts of the Company and its wholly owned
subsidiaries, Oxis Biotech, Inc. and Georgetown Translational
Pharmaceuticals, Inc. Intercompany
transactions and balances have been eliminated in
consolidation.
Reverse Stock Split
On
February 10, 2021, the Company completed a 1:17 reverse stock split
of the Company's issued and outstanding shares of common stock and
all fractional shares were rounded
up. All share and per share amounts in the accompanying
financial statements have been adjusted retroactively to reflect
the reverse stock split as if it had occurred at the beginning of
the earliest period presented.
Accounting Estimates
The
preparation of financial statements in conformity with Generally
Accepted Accounting Principles (“GAAP”) requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates. Significant estimates include accruals for potential
liabilities, valuation of notes payable, assumptions used in
deriving the fair value of derivative liabilities, share-based
compensation and beneficial conversion feature of notes payable,
and valuation of deferred tax assets. Actual results could differ
from those estimates.
Stock-Based Compensation
The Company accounts for share-based awards to employees and
nonemployees and consultants in accordance with the provisions of
ASC 718, Compensation-Stock Compensation. Stock-based compensation
cost is measured at fair value on the grant date and that fair
value is recognized as expense over the requisite service, or
vesting, period.
The Company values its equity awards using the Black-Scholes option
pricing model, and accounts for forfeitures when they occur. Use of
the Black-Scholes option pricing model requires the input of
subjective assumptions including expected volatility, expected
term, and a risk-free interest rate. The Company estimates
volatility using a its own historical stock price volatility. The
expected term of the instrument is estimated by using the
simplified method to estimate expected term. The risk-free interest
rate is estimated using comparable published federal funds
rates.
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 December 31,
2020.
42
ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
This
company qualifies as a smaller reporting company, as defined in 17
C.F.R. §229.10(f) (1) and is not required to provide
information by this Item.
ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
Please
see the financial statements beginning on page F-1 located in Part
IV of this Annual Report on Form 10-K.
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND
PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our
principal executive officer and principal accounting officer
evaluated the effectiveness of our “disclosure controls and
procedures” (as such term is defined in Rules 13a-15(e) and
15d-15(e) of the United States Securities Exchange Act of 1934, as
amended), as of December 31, 2020. Based on that evaluation we have
concluded that because a material weakness in the Company’s
internal control over financial reporting existed as of December
31, 2020, that our disclosure controls and procedures were not
effective as of the end of the period covered by this Annual Report
on Form 10-K. The material weakness in the Company’s internal
control over financial reporting and the Company’s
remediation efforts are described below.
Management’s Report on Internal Control over Financial
Reporting
Management
is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial
reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated
under the Securities Exchange Act of 1934, as amended, as a process
designed by, or under the supervision of, a company’s
principal executive and principal accounting officers and effected
by a company’s board of directors, management and other
personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles and includes those policies and
procedures that:
●
Pertain
to the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of the assets
of the company;
●
Provide
reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company;
and
●
Provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the company’s
assets that could have a material effect on the financial
statements.
43
All
internal control systems, no matter how well designed, have
inherent limitations and can provide only reasonable, not absolute,
assurance that the objectives of the control system are met.
Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must
be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of
fraud, if any, within our company have been detected. Therefore,
even those systems determined to be effective can provide only
reasonable assurance with respect to financial statement
preparation and presentation.
As of
December 31, 2020, management of the company conducted an
assessment of the effectiveness of the company’s internal
control over financial reporting. In making this assessment, it
used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal
Control—Integrated Framework. In the course of the
assessment, material weaknesses were identified in the
company’s internal control over financial
reporting.
A
material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement
of our annual or interim financial statements will not be prevented
or detected on a timely basis.
Management
determined that fundamental elements of an effective control
environment were missing or inadequate as of December 31, 2020. The
most significant issues identified were:
1) lack
of segregation of duties due to very small staff and significant
reliance on outside consultants,
2)
risks of executive override also due to lack of established
policies, and limited employee staff and
3)
insufficient written policies and procedures for accounting and
financial reporting for the requirements and application of GAAP
and SEC Guidelines.
Based
on the material weaknesses identified above, management has
concluded that internal control over financial reporting was not
effective as of December 31, 2020. As the company’s
operations increase, the company intends to take measures to
mitigate the issues identified and implement a functional system of
internal controls over financial reporting. Such measures will
include, but not be limited to hiring of additional employees in
its finance and accounting department; preparation of risk-control
matrices to identify key risks and develop and document policies to
mitigate those risks; and identification and documentation of
standard operating procedures for key financial
activities.
Changes in Internal Control over Financial Reporting
Other
than as described above, no changes in our internal control over
financial reporting were made during our most recent fiscal quarter
that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
ITEM 9B. OTHER
INFORMATION
On
February 23, 2021, 5,491,638 shares of common stock were issued to
certain of the Company’s directors, executive officers and
consultants as compensatory bonuses pursuant to the exemption
contained in Section 4(a)(2) of the Securities Act after completion
of the successful listing on the Nasdaq Capital Markets on February
11, 2021.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS
AND CORPORATE GOVERNANCE
The
following table sets forth the name, age and position held by each
of our executive officers and directors as of March 31, 2021.
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
|
68
|
Chief
Executive Officer and Chairman of the Board
|
|
Michael
Handelman
|
62
|
Chief
Financial Officer
|
|
Bruce
Wendel
|
67
|
Vice
Chairman of the Board
|
|
Greg
Berk
|
62
|
Director
|
|
Michael
Breen
|
58
|
Director
|
|
Rajesh
Shrotriya
|
76
|
Director
|
44
Anthony J. Cataldo 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 2018, 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 until June 2013, Mr. Cataldo served as Chairman and
CEO/Founder of Genesis Biopharma, Inc. (now known as Iovance
Biotherapeutics, Inc.). Mr. Cataldo is credited with developing the
Stage Four Cancer treatment for melanoma known as Lion/Genesis
using assets acquired from the National Cancer Institute (NIH). 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 until July 2006.
Michael Handelman was
appointed Chief Financial Officer on November 13, 2020. Mr.
Handelman is Chairman of the Board of Directors and Secretary of
GoooGreen, Inc. He previously served as Chief Financial Officer of
Clickstream Corporation since October 2015. He served as Chief
Financial Officer of Lion Biotechnologies, Inc. from February 2011
until June 2015, and was a member of the Lion Bio Board of
Directors from February 2013 until May 2013. Mr. Handelman served
as the Chief Financial Officer and as a financial management
consultant of Oxis International, Inc., a public company engaged in
the research, development and commercialization of nutraceutical
products, from August 2009 until October 2011. From November 2004
to July 2009, Mr. Handelman served as Chief Financial Officer and
Chief Operating Officer of TechnoConcepts, Inc., formerly a public
company engaged in designing, developing, manufacturing and
marketing wireless communications semiconductors, or microchips.
Prior thereto, Mr. Handelman served from October 2002 to October
2004 as Chief Financial Officer of Interglobal Waste Management,
Inc., a manufacturing company, and from July 1996 to July 1999 as
Vice President and Chief Financial Officer of Janex International,
Inc., a children’s toy manufacturer. Mr. Handelman was also
the Chief Financial Officer from 1993 to 1996 of the Los Angeles
Kings, a National Hockey League franchise. On October 24, 2019 Mr.
Handelman filed a petition in bankruptcy, which was subsequently
dismissed on December 16, 2019. Mr. Handelman is a certified public
accountant and holds a degree in accounting from the City
University of New York.
Bruce Wendel was appointed as a director on November
12, 2020. From April 2018 to May 2019, Mr. Wendel served as the
Chief Business Development Officer for Prometic Biotherapeutics,
Inc., a pharmaceutical development company. Mr. Wendel also served
as Chief Strategic Officer of Hepalink USA, the U.S. subsidiary of
Shenzhen Hepalink Pharmaceutical Company from February 2012 to July
2017, and Chief Executive Officer of Scientific Protein
Laboratories, LLC from December 2014 to June 2015. He also served
as a director of ProMetic Life Sciences Inc. and Vice Chairman and
Chief Executive Officer at Abraxis BioScience, LLC, where he
oversaw the development and commercialization of Abraxane® and
led the negotiations that culminated in the acquisition of the
company by Celgene Corporation in 2010. He began his 14 years at
Bristol-Myers Squibb as in-house counsel before shifting to global
business and corporate development where he served in roles of
increasing responsibility. Subsequently, he was VP of Business
Development at IVAX Corporation, and at American Pharmaceutical
Partners, Inc. Mr. Wendel earned a juris doctorate degree from
Georgetown University Law School, and a B.S. from Cornell
University.
Dr. Greg Berk was appointed as a director on November
12, 2020. Prior to joining the Company, Dr. Berk has served as a
private consultant in the field of drug development and is the
Chief Medical Officer of Celularity, a privately owned company.
Previously, he served as Chief Medical Officer at Verastem as and
President, Chief Medical Officer and Board Member of Sideris
Pharmaceuticals. From May 2012 until January 2014, Dr. Berk was
Chief Medical Officer of BIND Therapeutics. Prior to this, he was
Chief Medical Officer at Intellikine, a privately held
biotechnology company focused on the discovery and development of
novel PI3 Kinase and mTOR inhibitors. Intellikine was acquired by
Takeda/Millennium in January 2012. He also served as Senior Vice
President of Global Clinical Development at Abraxis BioScience,
where he was responsible for the company’s overall clinical
strategy, including efforts to expand the indications for their
lead clinical program (Abraxane®). Dr. Berk obtained his
medical degree from Case Western Reserve University, and completed
his internship, residency and fellowship in internal medicine,
hematology and medical oncology, at the Weill Medical College of
Cornell University and New York Presbyterian Hospital, where he
also served as a faculty member from 1989-2004. During this time
Dr. Berk served as an investigator on several industry-sponsored
and cooperative group oncology clinical trials, including the
pivotal trials for Gleevec® and Avastin®.
45
Michael Breen was appointed as a director on January
13, 2021.Prior to joining the Company, Mr. Breen served as a senior
partner in the global law firm of Clyde & Co., specializing in
all aspects of corporate law, including mergers and acquisitions
and fund management regulatory issues, which included advising
clients in the biotechnology and health sciences sectors. Prior to
joining Clyde & Co., Mr. Breen served as a senior partner and
managing partner in the London law firm of Edward Lewis. Prior to
his time at Edward Lewis, he was also a partner at Robert Gore
& Company. Between 2002 and 2005, Mr. Breen was managing
director of the Sports and Entertainment Division of Insinger de
Beaufort Bank, a Dutch private banking, asset management and trust
group. From 2001 to 2007 Mr. Breen also served as a non-executive
director and co-owner of Damon Hill Holdings Limited, a multi
franchise motor dealer group. Mr. Breen also serves as a director
of a Los Angeles based hedge fund, Bristol International Fund,
Limited and a Cayman Islands fund, Bristol Investment Fund,
Limited. He also serves as a director of Wizard Brands Inc., an
OTCQB Bulletin Board company. Mr. Breen is also a non-executive
director and co-owner of Colorsport Images Limited, a sports
photographic agency and library. He is the Chair of Trustees of
Sturts Community Trust, a charity which brings together a diverse
range of social initiatives centered around a sustainable 90 acre
organic biodynamic farm offering land based work opportunities and
individualized support and dwellings for adults with a learning
disability. Mr. Breen is a U.K. qualified solicitor/attorney who
holds an Honours LL.B. degree in law from the University College of
Wales, Aberystwyth and qualified as a solicitor of the Supreme
Court of Judicature of England and Wales in 1988. Mr. Breen is a
former member of the International Bar Association, British
Association for Sport and the Law, Law Society of England and
Wales, and Holborn Law Society.
Dr. Rajesh Shrotriya was appointed as a director on
January 13, 2021. Prior to joining the Company, until 2017,
Dr. Shrotriya served as Chairman of the Board and Chief
Executive Officer of Spectrum Pharmaceuticals, Inc. from August
2002 and a director since June 2001. From September 2000 to April
2014, Dr. Shrotriya also served as President of Spectrum
Pharmaceuticals, Inc. and from September 2000 to August 2002,
Dr. Shrotriya also served as Chief Operating Officer of
Spectrum. Prior to joining Spectrum, Dr. Shrotriya held the
position of Executive Vice President and Chief Scientific Officer
from November 1996 until August 2000, and as Senior Vice President
and Special Assistant to the President from November 1996 until May
1997, for SuperGen, Inc., a publicly-held pharmaceutical company
focused on drugs for life-threatening diseases, particularly
cancer. From August 1994 to October 1996, Dr. Shrotriya held the
positions of Vice President, Medical Affairs and Vice President,
Chief Medical Officer of MGI Pharma, Inc., an oncology-focused
biopharmaceutical company. Dr. Shrotriya spent 18 years
at Bristol-Myers Squibb Company, an NYSE-listed pharmaceutical
company, in a variety of positions, most recently as Executive
Director, Worldwide CNS Clinical Research. Previously,
Dr. Shrotriya held various positions at
Hoechst Pharmaceuticals, most recently as Medical Advisor. Dr.
Shrotriya was an attending physician and held a courtesy
appointment at St. Joseph Hospital in Stamford, Connecticut.
In addition, he received a certificate for Advanced Biomedical
Research Management from Harvard University. Dr. Shrotriya received
an M.D. from Grant Medical College, Bombay, India, in 1974; a
D.T.C.D. (Post Graduate Diploma in Chest Diseases) from Delhi
University, V.P. Chest Institute, Delhi, India, in 1971; an
M.B.B.S. (Bachelor of Medicine and Bachelor of Surgery —
equivalent to an M.D. in the U.S.) from the Armed Forces Medical
College, Poona, India, in 1967; and a B.S. in Chemistry from Agra
University, Aligarh, India, in 1962. Currently, Dr. Shrotriya is a
member of the Board of Directors of CASI Pharmaceuticals, Inc., a
NASDAQ-listed biopharmaceutical company, and on the Board of
Trustees at the UNLV Foundation.
Board Committees, Compensation Committee Interlocks and Insider
Participation.
The Audit
Committee consists of Mr. Breen, as Chair and as audit committee
financial expert, Dr. Shrotriya and Mr. Wendel. The Compensation
Committee consists of Dr. Berk as Chair, Mr. Wendel and Mr. Breen.
The Nominating and Governance Committee consists of Mr. Wendel, as
Chair, Dr. Shrotriya and Mr. Breen.
Director Independence.
Mr.
Wendel, Dr. Berk, Mr. Breen and Dr. Shrotriya each qualify as
an “independent director” as defined by Item 407 of
Regulation S-K.
We have
elected to use the definition for “director
independence” under the Nasdaq Stock Market’s listing
standards, which defines an “independent director” as
“a person other than an officer or employee of us or its
subsidiaries or any other individual having a relationship, which
in the opinion of our Board, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a
director.” The definition further provides that, among
others, employment of a director by us (or any parent or subsidiary
of ours) at any time during the past three years is considered a
bar to independence regardless of the determination of our
Board.
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, each of Mr. Handelman, Mr. Wendel,
Dr. Berk, Mr. Breen and Dr. Shrotriya filed their Form 3 and Form 4
late.
46
ITEM 11. EXECUTIVE
COMPENSATION
The
following table sets 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, 2020 and
2019 of all persons who served as our principal executive officers
and as our principal financial officer during the fiscal year ended
December 31, 2019. No other executive officers received total
annual compensation during the fiscal year ended December 31, 2020
in excess of $100,000. The principal executive officer and the
other named officers are collectively referred to as the
“Named Executive Officers.”
|
Name and Principal Position
|
Year
|
Salary ($)
|
Bonus ($)
|
Stock Awards ($) (1)
|
Option Awards ($) (2)
|
Non-Equity Incentive Plan Compensation ($)
|
Nonqualified Deferred Compensation Earnings ($)
|
All Other Compensation ($) (3)
|
Total ($)
|
|
Anthony J. Cataldo (5)
|
20
|
$362,000
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
$362,000
|
|
Chief
Executive Officer
|
19
|
$225,000
|
$-
|
$1,281,000
|
$-
|
$-
|
$-
|
$75,000
|
$1,581,000
|
|
Michael Handelman (7)
|
20
|
$74,833
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
$74,833
|
|
Chief
Financial Officer
|
19
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
Weldon (6)
|
20
|
$219,662
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
$219,662
|
|
Former Chief
Financial Officer
|
19
|
$230,000
|
$-
|
$823,500
|
$-
|
$-
|
$-
|
$-
|
$1,053,500
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond Urbanski, M.D., Ph.D. (4)
|
20
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
|
Former Chief
Executive Officer
|
19
|
$318,000
|
$-
|
$-
|
$-
|
$-
|
$-
|
|
$318,000
|
47
|
(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)
|
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.
|
|
(3)
|
The
amount in this column represents compensation earned under
Consultant Agreements with the Company.
|
|
(4)
|
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.
|
|
(5)
|
Mr.
Weldon was appointed Chief Financial Officer on March 20, 2019 and
resigned as Chief Financial Officer and member of the Board of
Directors November 10, 2020. 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)
|
Mr.
Handelman was appointed Chief Financial Officer on November 11,
2020
|
Employment Agreements
Effective August 11, 2020, the
Company and Mr. Cataldo entered into the Cataldo Agreement with
respect to Mr. Cataldo’s continued employment as Chief
Executive Officer of the Company. The Initial Term of the Cataldo
Agreement is three years with the option of automatic one-year
renewals thereafter. Mr. Cataldo will be paid a cash salary of
$30,000 per month, together with customary benefits, expense
reimbursement and the possibility of performance bonuses. Mr.
Cataldo will receive a stock grant equal to ten percent of the
fully diluted shares of common stock of the Company (calculated
with the inclusion of the current stock holdings of Mr. Cataldo)
upon conversion of options, warrants and Convertible Notes in
association with a national markets qualified financing as
consideration for entering into the Cataldo Agreement (with such
stock to vest and be delivered within 30 days after the national
markets qualified financing). Mr. Cataldo will be entitled to
certain additional severance payments and other benefits in
connection with a Change in Control Period Involuntary Termination
or a Non Change in Control Period Involuntary Termination (each as
defined in the Cataldo Agreement) or his resignation as a result of
a Change in Control Period Good Reason or Non Change in Control
Period Good Reason (each as defined in the Cataldo Agreement).
Following the Effective Date, Mr. Cataldo will also continue to
serve as the chairman of the board of the
Company.
48
Effective August 11, 2020, the Company and Mr. Weldon entered into
the Weldon Agreement with respect to Mr. Weldon’s continued
employment as the Chief Financial Officer of the Company. The
Initial Term of the Weldon Agreement was three years with the
option of automatic one-year renewals thereafter. Mr. Weldon was
paid a cash salary of $25,000 per month, together with customary
benefits, expense reimbursement and the possibility of performance
bonuses. Mr. Cataldo received a stock grant equal to seven percent
of the fully diluted shares of common stock of the Company
(calculated with the inclusion of the current stock holdings of Mr.
Weldon) upon conversion of options, warrants and Convertible Notes
in association with a national markets qualified financing as
consideration for entering into the Weldon Agreement (with such
stock to vest and be delivered within 30 days after the national
markets qualified financing). Mr. Weldon was entitled to certain
additional severance payments and other benefits in connection with
a Change in Control Period Involuntary Termination or a Non Change
in Control Period Involuntary Termination (each as defined in the
Weldon Agreement) or his registration as a result of a Change in
Control Period Good Reason or Non Change in Control Period Good
Reason (each as defined in the Weldon Agreement). Mr. Weldon
resigned as Chief Financial Officer and as a director of the
Company on November 11, 2020. Mr. Weldon had no disagreement
relating to the Company’s financial reports or corporate
filings.
In July
2016, we executed 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 received 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 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 FDA 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.
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.
49
Stock Option Grants
The
following table sets forth information as of December 31, 2020,
concerning unexercised options, unvested stock and equity incentive
plan awards for the executive officers named in the Summary
Compensation Table.
|
|
Option 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
|
|
Michael
Handelman
|
-
|
-
|
-
|
$-
|
|
Anthony
Cataldo
|
-
|
-
|
-
|
$-
|
Director Compensation
Mr. Wendel and Dr. Berk will
each receive an annual stipend of $20,000.00 for director
compensation, with Mr. Wendel receiving an additional $5,000.00
annually for chairing the Nominating Committee and $5,000.00
annually as a member of the Audit Committee, and Dr. Berk receiving
an additional $5,000.00 annually for chairing the Compensation
Committee and $5,000.00 annually as a member of the Nominating
Committee. The Company will also grant stock awards of shares of
common stock of the Company equal to 1.25%, in the case of Mr.
Wendel, and 1.00%, in the case of Dr. Berk, of the number of fully
diluted shares of common stock of the Company, calculated on the
fully diluted equity of the Company upon the Company’s
national exchange financing date.
50
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
The
following table sets forth certain information regarding beneficial
ownership of our common stock as of April 12, 2021, (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, (c)
by each of our directors and (d) by all our current executive
officers and directors as a group. As of April 12, 2021, there were
28, 572,770 shares of our
common stock issued or issuable. Shares of common stock subject to
warrants that are currently exercisable or exercisable within 60
days of April 12, 2021 are deemed to be outstanding for purposes of
computing the percentage ownership of that person but are not
treated as outstanding for 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 GT Biopharma, Inc. at 9350
Wilshire Blvd., Suite 203, Beverly Hills, CA 90212. We have prepared the following table and the
related notes based on information filed with the SEC, supplied to
us by the relevant stockholder or estimated based on our internal
records, which may not include shares held by a stockholder in
“street name.”
|
|
Shares
Beneficially Owned
|
|
|
Name
and Address of Beneficial Owner
|
Number
|
Percentage
|
|
Certain Beneficial Owners
|
|
|
|
Bristol Capital,
LLC (1)
|
972,418
|
3.5%
|
|
Bristol Investment
Fund Ltd. (1)
|
1,192,292
|
4.3%
|
|
Michael Bigger
(2,3)
|
2,303,281
|
8.0%
|
|
Red Mango
Enterprises Limited (3,4)
|
1,737,365
|
6.2%
|
|
|
|
|
|
Directors and Executive Officers
|
|
|
|
Anthony J.
Cataldo
|
3,162,928
|
11.3%
|
|
Michael
Handelman
|
417,086
|
1.5%
|
|
Bruce
Wendel
|
350,840
|
1.3%
|
|
Greg
Berk
|
278,058
|
1.0%
|
|
Michael
Breen
|
278,058
|
1.0%
|
|
Rajesh
Shrotriya
|
278,058
|
1.0%
|
|
Directors and
Executive Officers as a Group – 6 persons
|
4,765,027
|
21.0%
|
(1)
The
address of record is 662 N. Sepulveda Blvd., Ste 300, Los Angeles,
CA 90049. Paul Kessler, as manager of Bristol Capital Advisors,
LLC, the investment advisor to Bristol Investment Fund, Ltd.
(“BIF”) and Bristol Capital, LLC (“BC”),
has voting and investment control over the securities held by BIF
and BC. Mr. Kessler disclaims beneficial ownership of these
securities except to the extent of his pecuniary interest
therein.
(2)
The
address of record is 11434 Glowing Sunset Lane, Las Vegas, NV
89135. Based on the beneficial owner’s Schedule 13G filed
February 17, 2021, shares beneficially owned consist of 729,029
shares of common stock owned by Bigger Capital Fund, LP, 425,000
shares of common stock issuable upon exercise of warrants owned by
Bigger Capital Fund, LP, 724,252 shares of common stock owned by
District 2 Capital Fund LP, and 425,000 shares of common stock
issuable upon exercise of warrants owned by District 2 Capital Fund
LP. The warrants are subject to a 4.99% beneficial ownership limit.
The percentage set forth above assumes the exercise of all such
warrants does not give effect to the beneficial ownership limit.
Mr. Bigger disclaims beneficial ownership of these securities
except to the extent of his pecuniary interest
therein.
(3)
The
address of record is Pictet & Cie (Europe) S.A. Hong Kong
Branch, 9/F Chater House 8 Connaught Road Central, Hong Kong. We
have been advised that Chi Kan Tang exercises voting and investment
power over the securities held by Red Mango Enterprises
Limited.
51
Equity Compensation Plan Information
The
following is a summary of our equity compensation plans at December
31, 2019:
|
|
Number of Securities to be Issued Upon Exercise of Outstanding
Options, Warrants, and Rights
|
Weighted-Average Exercise Price of Outstanding Options, Warrants,
and Rights
|
Number of Securities Available for Future Issuance Under Equity
Compensation Plans (Excluding Securities Reflected in Column
(a))
|
|
Plan Category
|
(a)
|
(b)
|
(c)
|
|
Equity
compensation plans approved by security holders (1)
|
40
|
$877.50
|
-
|
|
Equity
compensation plans not approved by security holders
|
-
|
$-
|
-
|
|
Total
|
40
|
$877.50
|
-
|
|
(1)
|
As of
December 31, 2019, we had options issued and outstanding to
purchase 40 shares of common stock under our 2014 Stock Incentive
Plan.
|
52
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Director Independence
Mr.
Wendel, Dr. Berk, Mr. Breen and Dr. Shrotriya each qualify as
an “independent director” as defined by Item 407 of
Regulation S-K.
We have
elected to use the definition for “director
independence” under the Nasdaq Stock Market’s listing
standards, which defines an “independent director” as
“a person other than an officer or employee of us or its
subsidiaries or any other individual having a relationship, which
in the opinion of our Board of Directors, would interfere with the
exercise of independent judgment in carrying out the
responsibilities of a director.” The definition further
provides that, among others, employment of a director by us (or any
parent or subsidiary of ours) at any time during the past three
years is considered a bar to independence regardless of the
determination of our Board of Directors.
Related Party Transactions
During
the year ended December 31, 2020, the Company recorded consulting
expense of $1,160,000 for services rendered by a consultant who was
also an owner of approximately 10% of the Company’s issued
and outstanding common stock.
During
the year ended December 31, 2019, the Company recorded consulting
expense of $1,140,000 to a consultant who was also an owner of
approximately 10 % of the Company’s issued and outstanding
common stock.
53
ITEM 14. PRINCIPAL ACCOUNTING FEES AND
SERVICES
Seligson
& Giannattasio, LLP was our independent registered public
accounting firm for the fiscal years ending December 31, 2019. The
following table shows the fees that were paid or accrued by us for
audit and other services provided by Seligson & Giannattasio,
LLP for the 2020 and 2019 fiscal years.
|
|
2020
|
2019
|
|
Audit
Fees (1)
|
$75,000
|
$70,500
|
|
Audit-Related
Fees (2)
|
$-
|
$-
|
|
Tax
Fees (3)
|
$-
|
$4,000
|
|
All
Other Fees
|
$-
|
$-
|
|
Total
|
$75,000
|
$74,500
|
|
(1)
|
Audit
fees represent fees for professional services provided in
connection with the audit of our annual financial statements and
the review of our financial statements included in our Form 10-Q
quarterly reports and services that are normally provided in
connection with statutory or regulatory filings for the 2020 and
2019 fiscal years.
|
|
(2)
|
Audit-related
fees represent fees for assurance and related services that are
reasonably related to the performance of the audit or review of our
financial statements and not reported above under “Audit
Fees.”
|
|
(3)
|
Tax
fees represent fees for professional services related to tax
compliance, tax advice and tax planning.
|
All
audit related services, tax services and other services rendered by
Seligson & Giannattasio, LLP were pre-approved by our Board of
Directors or Audit Committee. The Audit Committee has adopted a
pre-approval policy that provides for the pre-approval of all
services performed for us by Seligson & Giannattasio, LLP. The
policy authorizes the Audit Committee to delegate to one or more of
its members pre-approval authority with respect to permitted
services. Pursuant to this policy, the Board delegated such
authority to the Chairman of the Audit Committee. All pre-approval
decisions must be reported to the Audit Committee at its next
meeting. The Audit Committee has concluded that the provision of
the non-audit services listed above is compatible with maintaining
the independence Seligson & Giannattasio, LLP.
On
December 28, 2020, Seligson & Giannattasio, LLP resigned as our
independent registered public accounting firm. On December 31,
2020, the Board appointed Weinberg & Company, P.A. to serve as
our independent registered public accounting firm for the fiscal
year ending December 31, 2020.
No fees
were paid or accrued by us for audit or other services provided by
Weinberg & Company, P.A. for the 2020 fiscal year, other than
payment of a retainer towards the $75,000 for the upcoming audit of
the financial statements for the year ended December 31,
2020.
54
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES
The
Company’s financial statements and related notes thereto are
listed and included in this Annual Report beginning on page F-1.
The following documents are furnished as exhibits to this Annual
Report on Form 10-K.
EXHIBIT
INDEX
|
|
|
|
|
Incorporated by Reference
|
||||||
|
Exhibit Number
|
|
Exhibit Description
|
|
Form
|
|
Date
|
|
Number
|
|
Filed
Herewith
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restated
Certificate of Incorporation as filed in Delaware September 10,
1996 and as thereafter amended through March 1, 2002
|
|
10-KSB
|
|
04/01/02
|
|
3.A
|
|
|
|
|
|
Certificate of Amendment to the
Restated Certificate of Incorporation of GT Biopharma, Inc., dated
February 9, 2011
|
|
10-K
|
|
03/31/2011
|
|
3.2
|
|
|
|
|
|
Certificate of Amendment to the
Restated Certificate of Incorporation of GT Biopharma, Inc.,
effective as of July 19, 2017
|
|
8-K/A
|
|
03/15/2018
|
|
3.1
|
|
|
|
|
|
Certificate of Amendment to the
Restated Certificate of Incorporation of GT Biopharma, Inc.,
effective as of February 10, 2021
|
|
8-K
|
|
02/11/2021
|
|
3.1
|
|
|
|
|
|
Bylaws,
as restated effective September 7, 1994 and as amended through
April 29, 2003
|
|
10-QSB
|
|
08/13/03
|
|
3
|
|
|
|
|
|
Certificate of Designation of
Preferences, Rights and
Limitations of Series J-1 Preferred Stock of GT Biopharma, Inc., dated April
3, 2019
|
|
8-K
|
|
04/04/2019
|
|
3.1
|
|
|
|
|
|
Certificate of Designation of
Preferences, Rights and
Limitations of Series K Preferred Stock of GT Biopharma, Inc., dated April
3, 2019
|
|
|
|
|
|
|
|
X
|
|
|
|
Exclusive License Agreement, dated July 18, 2016, between the
Regents of the University of Minnesota and Oxis Biotech,
Inc.
|
|
10-Q
|
|
08/11/17
|
|
10.3
|
|
|
|
|
|
License Agreement, dated September 3, 2015, among Daniel A.
Vallera, Jeffrey Lion and Oxis Biotech, Inc.
|
|
10-Q
|
|
08/11/17
|
|
10.4
|
|
|
|
|
|
Clinical Trial Agreement, dated
September 2019, between the Regents of the University of Minnesota
and GT Biopharma, Inc.
|
|
10-Q
|
|
5/15/20
|
|
10.7
|
|
|
|
|
|
Note Conversion Agreement, dated as of August 29, 2017, among GT
Biopharma, Inc. and the holders of the convertible
notes and debentures named therein
|
|
10-Q
|
|
11/14/17
|
|
10.5
|
|
|
|
|
|
Amendment Agreement related to Note Conversion Agreement, dated October 10, 2017,
among GT Biopharma, Inc. and the holders of the convertible
notes and debentures named therein
|
|
10-Q
|
|
11/14/17
|
|
10.8
|
|
|
|
|
|
Warrant Exercise Agreement, dated August 29, 2017, among GT
Biopharma, Inc. and the warrant
holders named therein
|
|
10-Q
|
|
11/14/17
|
|
10.6
|
|
|
|
|
|
Amendment Agreement related to Warrant Exercise Agreement, dated October 10,
2017, among GT Biopharma, Inc. and the warrant holders named therein
|
|
10-Q
|
|
11/14/17
|
|
10.9
|
|
|
|
|
|
Preferred Stock Exchange Agreement, dated as of August 29, 2017,
among GT Biopharma, Inc. and the holders of preferred stock named
therein
|
|
10-Q
|
|
11/14/17
|
|
10.7
|
|
|
|
|
|
Amendment Agreement related to Preferred Stock Exchange Agreement, dated October
10, 2017, among GT Biopharma, Inc. and the holders of preferred
stock named therein
|
|
10-Q
|
|
11/14/17
|
|
10.10
|
|
|
|
|
|
Securities Purchase Agreement, dated January 9, 2017, among OXIS
International, Inc. and the purchasers named therein
|
|
8-K
|
|
01/13/17
|
|
10.1
|
|
|
|
|
|
Form of 10% Senior Convertible
Debenture (related to Securities Purchase Agreement, dated January
9, 2017)
|
|
8-K
|
|
01/13/17
|
|
10.2
|
|
|
|
|
|
Form of Common Stock Purchase
Warrant (related to Securities Purchase Agreement, dated January 9,
2017)
|
|
8-K
|
|
01/13/17
|
|
10.3
|
|
|
|
|
|
Securities Purchase Agreement, dated January 22, 2018, among GT
Biopharma, Inc. and the buyers named therein
|
|
8-K
|
|
1/23/18
|
|
10.1
|
|
|
|
|
|
Registration Rights Agreement, dated January 22, 2018, among GT
Biopharma, Inc. and the buyers named therein
|
|
8-K
|
|
1/23/18
|
|
10.2
|
|
|
|
|
|
Form of Senior Convertible Note
(related to Securities Purchase Agreement, dated January 22,
2018)
|
|
8-K
|
|
1/23/18
|
|
10.3
|
|
|
55
|
|
Form of Warrant to Purchase
Common Stock (related to Securities Purchase Agreement, dated
January 22, 2018)
|
|
8-K
|
|
1/23/18
|
|
10.4
|
|
|
|
|
|
Securities Purchase Agreement, dated August 2, 2018, among GT
Biopharma, Inc. and the purchasers named therein
|
|
8-K
|
|
08/03/18
|
|
10.1
|
|
|
|
|
|
Form of 10% Senior Convertible
Debenture (related to Securities Purchase Agreement, dated August
2, 2018)
|
|
8-K
|
|
08/03/18
|
|
4.1
|
|
|
|
|
|
Stock Pledge Agreement, dated
August 2, 2018, by the Pledgors
named therein for the benefit of Grushko & Mittman,
P.C.
|
|
10-Q
|
|
08/14/18
|
|
10.10
|
|
|
|
|
|
Security Purchase Agreement, dated September 7, 2018, among GT
Biopharma, Inc. and the purchasers named therein
|
|
8-K
|
|
09/07/18
|
|
10.1
|
|
|
|
|
|
Form of 10% Senior Convertible
Debenture (related to Securities Purchase Agreement, dated
September 7, 2018)
|
|
8-K
|
|
09/07/18
|
|
4.1
|
|
|
|
|
|
Security Purchase Agreement, dated September 24, 2018, among GT
Biopharma, Inc. and the purchasers named therein
|
|
8-K
|
|
09/28/18
|
|
10.1
|
|
|
|
|
|
Form of 10% Senior Convertible
Debenture (related to Securities Purchase Agreement, dated
September 24, 2018)
|
|
8-K
|
|
09/28/18
|
|
4.1
|
|
|
|
|
|
Securities Purchase Agreement, dated February 4, 2019, among GT
Biopharma, Inc. and the purchasers named therein
|
|
8-K
|
|
02/06/19
|
|
10.1
|
|
|
|
|
|
Registration Rights Agreement, dated February 4, 2019, among GT
Biopharma, Inc. and the purchasers named therein
|
|
8-K
|
|
02/06/19
|
|
10.3
|
|
|
|
|
|
Form of Secured Convertible
Note (related to Securities Purchase Agreement, dated February 4,
2019)
|
|
8-K
|
|
02/06/19
|
|
4.1
|
|
|
|
|
|
Security Agreement, dated February 4, 2019, among GT Biopharma,
Inc. and Alpha Capital Anstalt,
as collateral agent
|
|
8-K
|
|
02/06/19
|
|
10.2
|
|
|
|
|
|
Securities Purchase Agreement, dated May 22, 2019, among GT
Biopharma, Inc. and the purchasers named therein
|
|
8-K
|
|
05/24/19
|
|
10.1
|
|
|
|
|
|
Registration Rights Agreement, dated May 22, 2019, among GT
Biopharma, Inc. and the purchasers named therein
|
|
8-K
|
|
05/24/19
|
|
10.2
|
|
|
|
|
|
Form of Convertible Note
(related to Securities Purchase Agreement, dated August 20,
2019)
|
|
8-K
|
|
05/24/19
|
|
4.1
|
|
|
|
|
10.31
|
|
Securities Purchase Agreement, dated August 20, 2019, among GT
Biopharma, Inc. and the purchasers named therein
|
|
8-K
|
|
05/24/19
|
|
10.1
|
|
|
|
10.32
|
|
Registration Rights Agreement, dated August 20, 2019, among GT
Biopharma, Inc. and the purchasers named therein
|
|
8-K
|
|
05/24/19
|
|
10.2
|
|
|
|
10.33
|
|
Form of Convertible Note
(related to Securities Purchase Agreement, dated May 22,
2019)
|
|
8-K
|
|
05/15/20
|
|
4.1
|
|
|
|
|
Securities Purchase Agreement, dated January 30, 2020, among GT
Biopharma, Inc. and the purchaser named therein
|
|
10-Q
|
|
05/15/20
|
|
10.1
|
|
|
|
|
|
Registration Rights Agreement, dated January 30, 2020, among GT
Biopharma, Inc. and the purchaser named therein
|
|
10-Q
|
|
05/15/20
|
|
10.2
|
|
|
|
|
|
Form of Convertible Note
(related to Securities Purchase Agreement, dated January 30,
2020)
|
|
10-Q
|
|
05/15/20
|
|
10.3
|
|
|
|
|
10.37
|
|
Form Securities Purchase Agreement among GT Biopharma, Inc. and the
purchaser named therein (executed in April/May 2020)
|
|
10-Q
|
|
05/15/20
|
|
10.1
|
|
|
|
10.38
|
|
Form of Registration Rights Agreement among GT Biopharma, Inc. and
the purchaser named therein (executed in April/May
2020)
|
|
10-Q
|
|
05/15/20
|
|
10.2
|
|
|
|
10.39
|
|
Form of Convertible Note
(related to Securities Purchase Agreement executed in April/May
2020)
|
|
10-Q
|
|
05/15/20
|
|
10.3
|
|
|
|
|
Securities Purchase Agreement, dated July 7, 2020, among GT
Biopharma, Inc. and the purchaser named therein
|
|
8-K
|
|
07/09/20
|
|
10.1
|
|
|
|
|
|
Registration Rights Agreement, dated July 7, 2020, among GT
Biopharma, Inc. and the purchaser named therein
|
|
8-K
|
|
07/09/20
|
|
10.3
|
|
|
|
|
|
Form of Convertible Note (related to Securities Purchase Agreement,
dated July 7, 2020)
|
|
8-K
|
|
07/09/20
|
|
4.1
|
|
|
|
|
|
Form of Standstill and
Forbearance Agreement, dated June 23, 2020, between the Company and
certain holders of convertible notes and debentures
|
|
8-K
|
|
06/23/20
|
|
10.1
|
|
|
|
|
|
Settlement Agreement, dated June 19, 2020, among GT Biopharma,
Inc., Empery Asset Master Ltd., Empery Tax Efficient, LP and Empery
Tax Efficient II, LP, Anthony Cataldo and Paul
Kessler.
|
|
8-K
|
|
06/19/20
|
|
10.1
|
|
|
|
|
|
Form of Convertible Note, dated
June 19, 2020 (related to Settlement Agreement, dated June 19,
2020)
|
|
8-K
|
|
06/19/20
|
|
10.2
|
|
|
|
|
|
Form of Pre-Funded Warrant to
Purchase Common Stock, dated June 19, 2020 (related to Settlement
Agreement, dated June 19, 2020)
|
|
8-K
|
|
06/19/20
|
|
10.3
|
|
|
|
|
|
Executive Employment Agreement, dated October 19, 2018, among GT
Biopharma, Inc. and Raymond W. Urbanski
|
|
10-Q
|
|
11/14/18
|
|
10.17
|
|
|
|
|
|
Consultant Agreement, dated February 14, 2018, among GT Biopharma,
Inc., Georgetown Translational Pharmaceuticals, Inc. and Anthony J.
Cataldo
|
|
8-K
|
|
2/21/18
|
|
10.3
|
|
|
56
|
|
Employment agreement with Anthony Cataldo
|
|
10-Q
|
|
8/14/20
|
|
10.11
|
|
|
|
|
|
Employment agreement with Steven Weldon
|
|
10-Q
|
|
8/14/20
|
|
10.12
|
|
|
|
|
|
Form of Convertible Note (related to Securities Purchase Agreement,
dated September 16, 2020)
|
|
8-K
|
|
9/22/20
|
|
4.1
|
|
|
|
|
|
Securities Purchase Agreement, dated September 16, 2020, among GT
Biopharma, Inc. and the purchasers named therein
|
|
8-K
|
|
9/22/20
|
|
10.1
|
|
|
|
|
|
Master Services Agreement, dated October 5, 2020, between Gt
Biopharma, Inc. and Cytovance Biologics, Inc.
|
|
8-K
|
|
10/6/20
|
|
10.1
|
|
|
|
|
|
Form of
First Amendment and Extension of Standstill and Forbearance
Agreement
|
|
8-K
|
|
11/4/20
|
|
10.1
|
|
|
|
|
|
Form of Secured Convertible Note
|
|
8-K
|
|
11/9/20
|
|
4.1
|
|
|
|
|
|
Securities
Purchase Agreement
|
|
8-K
|
|
11/9/20
|
|
10.1
|
|
|
|
|
|
Settlement
Agreement, dated as of November 9, 2020, by and among Adam Kasower,
East Ventures, Inc., A British Virgin Islands company, SV Booth
Investments III, LLC, a Delaware limited liability company and
Theorem Group, LLC, a California LLC and GT Biopharma Inc., a
Delaware corporation.
|
|
10-Q
|
|
11/13/20
|
|
10.19
|
|
|
|
|
|
Form of
Settlement Note, dated November 9, 2020.
|
|
10-Q
|
|
11/13/20
|
|
10.20
|
|
|
|
|
|
Steve
Weldon Letter of Resignation, dated November 11, 2020
|
|
10-Q
|
|
11/13/20
|
|
10.21
|
|
|
|
|
|
Board
Service Agreement with Bruce Wendel, dated November 11,
2020
|
|
10-Q
|
|
11/13/20
|
|
10.22
|
|
|
|
|
|
Board
Service Agreement with Greg Berk, dated November 11,
2020
|
|
10-Q
|
|
11/13/20
|
|
10.23
|
|
|
|
|
|
Consultant
Agreement with Michael Handelman, dated November 13,
2020
|
|
10-Q
|
|
11/13/20
|
|
10.24
|
|
|
|
|
|
Form of
Amendment to Convertible Note & Standstill
Agreement
|
|
8-K
|
|
12/23/20
|
|
10.1
|
|
|
|
|
|
Settlement
Agreement, dated as of December 22, 2020, by and among Alto
Opportunity Master Fund, SPC - Segregated Master Portfolio B,
Anthony Cataldo, Paul Kessler and GT Biopharma Inc., a Delaware
corporation.
|
|
8-K
|
|
12/28/20
|
|
10.1
|
|
|
|
|
|
Settlement
Note, dated December 22, 2020, by GT Biopharma Inc. payable to Alto
Opportunity Master Fund, SPC - Segregated Master Portfolio
B.
|
|
8-K
|
|
12/28/20
|
|
10.2
|
|
|
|
|
|
Form of Second Amendment and Extension of Standstill and
Forbearance Agreement.
|
|
8-K
|
|
2/1/20
|
|
10.1
|
|
|
|
|
|
Form of Amendment to Convertible Note, dated January 31,
2021
|
|
8-K
|
|
2/1/20
|
|
10.2
|
|
|
|
|
|
Board Service Agreement with Rajesh Shrotriya, dated January 12,
2021.
|
|
S-1/A
|
|
02/08/2021
|
|
10.69
|
|
|
|
|
|
Board Service Agreement with Michael Breen, dated January 12,
2021.
|
|
S-1/A
|
|
02/08/2021
|
|
10.70
|
|
|
|
|
|
Amendment to Settlement Note with Alto Opportunity Master Fund, SPC
- Segregated Master Portfolio B.
|
|
S-1/A
|
|
02/08/2021
|
|
10.71
|
|
|
|
|
|
Form of Securities Purchase Agreement - December 2020 / January
2021 Notes
|
|
S-1/A
|
|
02/08/2021
|
|
10.72
|
|
|
|
|
|
Form of December 2020 / January 2021 Note
|
|
S-1/A
|
|
02/08/2021
|
|
10.73
|
|
|
|
|
14.1
|
|
Code of
Ethics
|
|
10-K
|
|
03/31/16
|
|
14.1
|
|
|
|
21.1
|
|
Subsidiaries
of GT Biopharma, Inc.
|
|
10-K
|
|
03/31/16
|
|
21.1
|
|
|
|
|
Certification
of the Principal Executive Officer pursuant to Rule
13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
X
|
|
|
|
Certification
of the Principal Financial Officer pursuant to Rule
13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
X
|
|
|
|
Certification of
the Principal Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
|
|
|
|
X
|
|
|
|
Certification
of the Principal Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|
|
|
|
|
|
|
|
X
|
|
|
101
|
|
Interactive
Data File
|
|
|
|
|
|
|
|
X
|
57
SIGNATURES
Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly
authorized.
|
|
GT Biopharma, Inc.
|
|
|
|
|
|
|
|
|
Dated:
April 16, 2021
|
By:
|
/s/ Anthony
Cataldo
|
|
|
|
|
Anthony
Cataldo
|
|
|
|
|
|
|
Pursuant to the
requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates
indicated.
|
Name
|
|
Position
|
|
Date
|
|
|
|
|
|
|
|
/s/ Anthony J.
Cataldo
|
|
Chief
Executive Officer and Chairman of the Board
|
|
April
16, 2021
|
|
Anthony
J. Cataldo
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Michael
Handelman
|
|
Chief
Financial Officer(Principal Accounting Officer)
|
|
April
16, 2021
|
|
Michael
Handelman
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Bruce
Wendel
|
|
Vice
Chairman of the Board
|
|
April
16, 2021
|
|
Bruce
Wendel
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Greg
Berk
|
|
Director
|
|
April
16, 2021
|
|
Greg
Berk
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Michael
Breen
|
|
Director
|
|
April
16, 2021
|
|
Michael
Breen
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Rajesh
Shrotriva
|
|
Director
|
|
April
16, 2021
|
|
Rajesh
Shrotriva
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The
Stockholders and Board of Directors of
GT
Biopharma, Inc.
Beverly
Hills, CA
Opinion on the Financial Statements
We have
audited the accompanying consolidated balance sheet of GT
Biopharma, Inc. (the “Company”) as of December 31, 2020
and the related consolidated statements of operations, changes in
stockholders’ deficit, and cash flows for the year then
ended, 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 financial position of the Company as of December 31,
2020, and the results of its operations and its cash flows for the
year then ended, in conformity with accounting principles generally
accepted in the United States of America.
Going Concern
The
accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note
1 to the financial statements, during the year ended December 31,
2020, the Company incurred a net loss and utilized cash in
operations, and at December 31, 2020, had a stockholders' deficit.
Also, at December 31, 2020, the Company is in default on notes
payable and convertible notes payable in the aggregate amount of
$16.8 million. These conditions raise substantial doubt about the
Company’s ability to continue as a going concern.
Management’s plans in regards to these matters are also
described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
Basis for Opinion
These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audit. 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 audit 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 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 audit 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
audit 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 audit 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 audit provides a reasonable basis
for our opinion.
F-1
Critical Audit Matters
The
critical audit matters communicated below are matters arising from
the current period audit of the financial statements that were
communicated or required to be communicated to the audit committee
and that (1) relate to accounts or disclosures that are material to
the financial statements and (2) involved especially challenging,
subjective, or complex judgments.
The
communication of critical audit matters does not alter in any way
our opinion on the consolidated financial statements, taken as a
whole, and we are not, by communicating the critical audit matters
below, providing separate opinions on the critical audit matters or
on the accounts or disclosures to which they relate.
Accounting
for Issuance of Convertible Debt
During
the year ended December 31, 2020, the Company issued $19.1 million
of principal in convertible debt as described in Note 4 to the
consolidated financial statements. The accounting for the
transaction required management to assess as to whether any
embedded features required bifurcation and separate valuation.
Additionally, the transaction required management to perform an
analysis on the embedded conversion features to discern whether
such conversion features were beneficial conversion features
requiring separate classification within equity in the consolidated
financial statements. During the year ended December 31, 2020, the
Company recognized a total of approximately $5.3 million related to
the determined beneficial conversion features.
Auditing
management’s determination of the accounting for these
transactions was challenging due to the complexity and significant
judgement involved in assessing the embedded features of the
convertible notes for separate accounting, and assessing the
determination of whether the conversion feature should be accounted
for as a beneficial conversion feature within equity in the
consolidated financial statements.
To test
the Company’s determination of the accounting for the
convertible debt, our audit procedures included, among others,
inspection of the related debt agreements and testing
management’s application of the relevant accounting guidance.
We tested the value of the recognized beneficial conversion
features by assessing the reasonableness of the assumptions used in
the valuation and recalculated such amounts. In addition, we tested
the completeness and accuracy of the underlying data supporting the
significant assumptions and estimates.
Accounting
for Extinguishment of Past Due Convertible Debt
In June
2020, the Company entered into the Forbearance Agreements with the
holders of $13.2 million of convertible debt that was past due as
described in Note 4 to the
consolidated financial statements. Under the terms of the
Forbearance Agreements, the holders were issued an additional $4
million worth of convertible notes and the conversion feature of
the instruments was modified so that the instrument was convertible
at the lower of $3.40 or 75% of the stock price in the next
qualified offering. The accounting for
the transaction was complex, as it required management to assess
these modifications and discern whether such modifications were
significant enough to require extinguishment accounting, which
management concluded was required. Extinguishment accounting
required the fair value measurement of the post modification
convertible notes and recognition of the difference between such
fair value and the carrying value of the premodification
convertible notes as a loss on extinguishment of debt. The Company
recognized a loss on extinguishment of debt of approximately $12.6
million related to this modification. The Company also
utilized a valuation specialist in the determination and valuation
of the fair value of this new debt instrument.
F-2
We
identified the evaluation of the accounting treatment for these
transactions and the corresponding valuation of the new debt
instruments as a critical
audit matter, because of the significance of the account balance
and the significant judgements used in determining the appropriate
accounting model to recognize these transactions and in the
determination of the fair value of the new debt instruments.
Complex auditor judgment and specialized skills and knowledge were
involved in evaluating the Company’s interpretation of
applicable accounting rules and the valuation of the new debt
instrument.
The
primary procedures we performed to address this critical audit
matter included the following. We inspected relevant documentation
related to the forbearance agreement to evaluate the
Company’s determination of the appropriate accounting model,
including assessing and evaluating management’s application
of relevant accounting standards to the transaction. We evaluated
and assessed the reasonableness of the valuation models used by the
third-party specialist to value the convertible debt instruments.
We tested the reasonableness of the significant assumptions used in
the valuation model, including testing the accuracy and
completeness of the data used to determine such assumptions. We
developed an independent expectation using market data sources,
models and key assumptions determined to be relevant and reliable
and compared such independent expectation to the Company’s
estimate. In addition, we ascertained the competence and
objectivity of the third-party valuation specialist engaged by the
Company to calculate the fair values, as well as independently
assessing the professional competence, experience and objectivity
of the Company’s third-party valuation
specialist.
Professionals
with specialized skill and knowledge were utilized by the Firm to
assist in the evaluation of the Company estimate of fair value and
the development of our own independent expectation.
We have
served as the Company’s auditor since December
2020.
Weinberg
& Company, P.A.
Los
Angeles, California
April
16, 2021
F-3
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 sheet of GT Biopharma, Inc. and
subsidiaries (the "Company") as of December 31, 2019, and the
related consolidated statements of operations, stockholders’
equity and cash flows for the year the ended, 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, 2019 and the
consolidated results of its operations and its consolidated cash
flows for the year ended December 31, 2019, 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
audit. 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
audit 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 audit, 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 audit 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 audit 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 audit
provides 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 2 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 served as the
Company’s auditor from 2008 through December 28,
2020.
White Plains, New
York
March 30,
2020
F-4
GT BIOPHARMA, INC AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands, Except Par Value and Share Data)
|
|
December 31,
|
December 31,
|
|
|
2020
|
2019
|
|
ASSETS:
|
|
|
|
Current
assets
|
|
|
|
Cash
and cash equivalents
|
$5,297
|
$28
|
|
Prepaid
expenses
|
364
|
246
|
|
Total
Current Assets
|
5,661
|
274
|
|
|
|
|
|
Deposits
|
-
|
12
|
|
Operating
lease right-to-use asset
|
-
|
110
|
|
TOTAL
ASSETS
|
$5,661
|
$396
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
Accounts
payable
|
$2,243
|
$1,940
|
|
Accrued
expenses
|
1,296
|
2,379
|
|
Accrued
interest
|
4,838
|
2,029
|
|
Convertible
notes payable, of which $16.8 were past due at December 31, 2020
(net of discount of $4,519 and $91)
|
26,303
|
13,207
|
|
Operating
lease liability
|
-
|
120
|
|
Line
of Credit
|
31
|
31
|
|
Derivative
liability
|
383
|
-
|
|
Total
current liabilities
|
35,094
|
19,706
|
|
|
|
|
|
|
|
|
|
Stockholders'
Deficit:
|
|
|
|
|
|
|
|
Convertible
Preferred stock, par value $0.01, 15,000,000 shares
authorized:
|
|
|
|
Series
C - 96,230 shares issued and outstanding at December 31, 2020 and
2019, respectively
|
1
|
1
|
|
Series
J - 2,353,548 shares issued and outstanding at December 31, 2020
and 2019, respectively
|
2
|
2
|
|
Common stock, par value $0.0001, 2,000,000,000 shares authorized,
5,218,122 and 4,104,982 shares issued
|
|
|
|
and
outstanding as of December 31, 2020 and 2019,
respectively
|
52
|
41
|
|
Additional
paid in capital
|
566,309
|
548,147
|
|
Accumulated
deficit
|
(595,628)
|
(567,332)
|
|
Noncontrolling
interest
|
(169)
|
(169)
|
|
Total
stockholders' deficit
|
(29,433)
|
(19,310)
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
$5,661
|
$396
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
GT BIOPHARMA, INC AND SUBSIDIARIES
Consolidated Statements of Operations
(In Thousands, Except Share Data)
|
|
For the Year Ended
|
|
|
|
December 31,
|
|
|
|
2020
|
2019
|
|
|
|
|
|
Revenues
|
$-
|
$-
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
Research
and development
|
485
|
1,667
|
|
Selling,
general and administrative
|
6,279
|
9,790
|
|
Loss
on impairment
|
|
4,599
|
|
Loss
from Operations
|
6,764
|
16,056
|
|
|
|
|
|
Other (Income) Expense
|
|
|
|
Loss
on disposal of assets
|
-
|
20,463
|
|
Interest
expense
|
3,003
|
2,128
|
|
Loss
on legal settlements
|
5,384
|
-
|
|
Loss
on forbearance agreement
|
12,598
|
-
|
|
Change
in fair value of derivative liability
|
230
|
-
|
|
Amortization
of debt discount
|
317
|
-
|
|
Total Other Expense, net
|
21,532
|
22,591
|
|
|
|
|
|
Net Loss
|
$(28,296)
|
$(38,647)
|
|
|
|
|
|
Net
loss per share
|
|
|
|
Basic
and diluted
|
$(6.45)
|
$(0.01)
|
|
|
|
|
|
Weighted
average common shares outstanding
|
|
|
|
Basic
and diluted
|
4,385,222
|
3,383,941
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-6
GT BIOPHARMA, INC AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(Deficit)
(In Thousands)
|
|
|
|
Additional
|
|
Non
|
|
||
|
|
Preferred Shares
|
Common Shares
|
Paid
in
|
Accumulated
|
Controlling
|
|
||
|
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Interest
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2018
|
1,260
|
$2
|
2,979
|
$22
|
$540,200
|
$(528,685)
|
$(169)
|
$11,370
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of preferred shares
|
1,190
|
1
|
|
|
1,139
|
|
|
1,140
|
|
|
|
|
|
|
|
|
|
|
|
Common share issued upon conversion of notes
|
|
205
|
3
|
1,357
|
|
|
1,360
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial conversion feature on convertible
notes
|
|
|
|
158
|
|
|
158
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for compensation
|
|
921
|
16
|
5,293
|
|
|
5,309
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
(38,647)
|
|
(38,647)
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2019
|
2,450
|
3
|
4,105
|
41
|
548,147
|
(567,332)
|
(169)
|
(19,310)
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of amended convertible notes and
warrants
|
|
|
|
8,643
|
|
|
8,643
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares and warrants for settlement of
litigation
|
262
|
10
|
2,236
|
|
|
2,246
|
||
|
|
|
|
|
|
|
|
|
|
|
Beneficial conversion feature on convertible notes
payable
|
|
-
|
5,274
|
|
|
5,274
|
||
|
|
|
|
|
|
|
|
|
|
|
Common shares issued upon conversion of notes
payable
|
512
|
1
|
1,740
|
|
|
1,741
|
||
|
|
|
|
|
|
|
|
|
|
|
Common shares issued upon exercise of warrants
|
|
240
|
-
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for compensation
|
|
99
|
-
|
269
|
|
|
269
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
(28,296)
|
|
(28,296)
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2020
|
2,450
|
$3
|
5,218
|
$52
|
$566,309
|
$(595,628)
|
$(169)
|
$(29,433)
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-7
GT BIOPHARMA, INC AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
|
|
For the Year Ended
|
|
|
|
December 31,
|
|
|
|
2020
|
2019
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
Net
loss
|
$(28,296)
|
$(38,647)
|
|
Adjustments
to reconcile net loss to net cash
|
|
|
|
used
in operating activities:
|
|
|
|
Depreciation
|
-
|
4
|
|
Amortization
of debt discount
|
317
|
505
|
|
Stock
based compensation
|
269
|
5,308
|
|
Loss
on impairment of long-lived assets
|
-
|
4,599
|
|
Loss
on disposal of assets
|
-
|
20,494
|
|
Convertible
notes payable issued and fair value of amended convertible notes
payable and warrants as part of forbearance agreements
|
12,598
|
-
|
|
Convertible
notes payable issued and fair value of common shares and warrants
issued as part of legal settlements
|
5,003
|
-
|
|
Loss
on abandonment of lease
|
60
|
-
|
|
Change
in fair value of derivative liability
|
230
|
|
|
Issuance
of warrants accounted as derivative liability
|
153
|
|
|
Effect
of changes in:
|
|
|
|
Prepaid
expenses
|
242
|
(216)
|
|
Accounts
payable and accrued expenses
|
(838)
|
3,154
|
|
Accounts
payable - related parties
|
-
|
-
|
|
Accrued
interest
|
3,000
|
1,140
|
|
Net
Cash Used in Operating Activities
|
(7,262)
|
(3,659)
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
Disposal
of fixed assets
|
-
|
200
|
|
Net
Cash Used in Investing Activities
|
-
|
200
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
Proceeds
from issuance of notes payable
|
12,531
|
3,527
|
|
Payment
of notes payable
|
-
|
(100)
|
|
Net
Cash Provided by Financing Activities
|
12,531
|
3,427
|
|
|
|
|
|
Net
Increase (Decrease) in Cash
|
5,269
|
(32)
|
|
Cash
at Beginning of Period
|
28
|
60
|
|
Cash
at End of Period
|
$5,297
|
$28
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
Cash
paid during the year for:
|
|
|
|
Interest
|
$-
|
$-
|
|
Income
taxes paid
|
$-
|
$-
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
|
|
|
|
Beneficial
conversion feature of notes payable issued for cash
|
$4,745
|
$-
|
|
Common
stock issued upon conversion of notes payable and accrued
interest
|
$1,741
|
$1,381
|
|
Convertible
notes payable issued for consulting services
|
$360
|
$-
|
|
Reclassification
of lease liability to accrued expenses
|
$58
|
$-
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-8
GT BIOPHARMA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019
Note
1 – Organization and Operations
In
1965, the corporate predecessor of GT Biopharma Inc. (the Company),
Diagnostic Data, Inc. was incorporated in the State of California.
Diagnostic Data changed its incorporation to the State of Delaware
in 1972 and changed its name to DDI Pharmaceuticals, Inc. in 1985.
In 1994, DDI Pharmaceuticals merged with International BioClinical,
Inc. and Bioxytech S.A. and changed its name to OXIS International,
Inc. In July 2017, the Company changed its name to GT Biopharma,
Inc.
The Company is a clinical stage biopharmaceutical company focused
on the development and commercialization of novel immuno-oncology
products based off our proprietary Tri-specific Killer Engager
(TriKE™), Tetra-specific Killer Engager (Dual Targeting
TriKEDual Targeting TriKE) platforms. The Company’s TriKE and
Dual Targeting TriKE platforms generate proprietary therapeutics
designed to harness and enhance the cancer killing abilities of a
patient’s own natural killer cells, or NK cells.
Note 2 –Going Concern
The
accompanying consolidated financial statements have been prepared
on a going concern basis, which contemplates the realization of
assets and the settlement of liabilities and commitments in the
normal course of business. As reflected in the accompanying
consolidated financial statements, for the year ended December 31,
2020, the Company incurred a net loss of $28.3 million and used
cash in operating activities of $7.3 million, and at December 31,
2020, the Company had a stockholders’ deficit of $29.4
million. Also, at December 31, 2020, the Company is in default on
notes payable and convertible notes payable in the aggregate amount
of $16.8 million. These factors raise substantial doubt about the
Company’s ability to continue as a going concern within one
year of the date that these financial statements are issued. The
consolidated financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a
going concern.
At
December 31, 2020, the Company had cash on hand in the amount of
$5.3 million. Subsequent to December
31, 2020, the Company received cash of $24.9 million from
the sale of 4,945,000 shares of its common stock pursuant to a
public offering and $4.4 million from issuance of convertible notes
payable and exercise of warrants for a total cash proceeds of $29.3
million. The Company’s current operations have focused on
business planning, raising capital, establishing an intellectual
property portfolio, hiring, and conducting preclinical studies and
clinical trials. The Company does not have any product candidates
approved for sale and has not generated any revenue from product
sales. The Company has sustained operating losses since inception
and expects such losses to continue over the foreseeable future.
Management is currently evaluating
different strategies to obtain the required funding for future
operations. These strategies may include but are not limited to:
public offerings of equity and/or debt securities, payments from
potential strategic research and development, and licensing and/or
marketing arrangements with pharmaceutical companies. If the
Company is unable to secure adequate
additional funding, its business, operating results, financial
condition and cash flows may be materially and adversely
affected. Management estimates that the current funds on
hand will be sufficient to continue operations through the next six
months. The Company’s
ability to continue as a going concern is dependent upon its
ability to continue to implement its business plan.
Note 3 – Summary of Significant Accounting
Policies
Basis of Presentation and Principles of Consolidation
The
accompanying consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the
United States of America. The consolidated financial statements
include the accounts of the Company and its wholly owned
subsidiaries, Oxis Biotech, Inc. and Georgetown Translational
Pharmaceuticals, Inc. Intercompany
transactions and balances have been eliminated in
consolidation.
F-9
Reverse Stock Split
On
February 10, 2021, the Company completed a 1:17 reverse stock split
of the Company's issued and outstanding shares of common stock and
all fractional shares were rounded
up. All share and per share amounts in the accompanying
financial statements have been adjusted retroactively to reflect
the reverse stock split as if it had occurred at the beginning of
the earliest period presented.
COVID-19
In
March 2020, the World Health Organization declared coronavirus
COVID-19 a global pandemic. This contagious disease outbreak, which
has continued to spread, has adversely affected workforces,
customers, economies, and financial markets globally. It has also
disrupted the normal operations of many businesses. This outbreak
could decrease spending, adversely affect demand for the
Company’s products, and harm the Company’s business and
results of operations.
During
the year ended December 31, 2020, the Company believes the COVID-19
pandemic did impact its operating results. However, the Company has
not observed any impairments of its assets or a significant change
in the fair value of its assets due to the COVID-19 pandemic. At
this time, it is not possible for the Company to predict the
duration or magnitude of the adverse results of the outbreak and
its effects on the Company’s business or results of
operations, financial condition, or liquidity.
The
Company has been following the recommendations of health
authorities to minimize exposure risk for its team members,
including the temporary closure of its corporate office and having
team members work remotely. Most vendors have transitioned to
electronic submission of invoices and payments.
Accounting Estimates
The
preparation of financial statements in conformity with Generally
Accepted Accounting Principles (“GAAP”) requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates. Significant estimates include accruals for potential
liabilities, valuation of notes payable, assumptions used in
deriving the fair value of derivative liabilities, share-based
compensation and beneficial conversion feature of notes payable,
and valuation of deferred tax assets. Actual results could differ
from those estimates.
Stock-Based Compensation
The Company accounts for share-based awards to employees and
nonemployees and consultants in accordance with the provisions of
ASC 718, Compensation-Stock Compensation. Stock-based compensation
cost is measured at fair value on the grant date and that fair
value is recognized as expense over the requisite service, or
vesting, period.
The Company values its equity awards using the Black-Scholes option
pricing model, and accounts for forfeitures when they occur. Use of
the Black-Scholes option pricing model requires the input of
subjective assumptions including expected volatility, expected
term, and a risk-free interest rate. The Company estimates
volatility using a its own historical stock price volatility. The
expected term of the instrument is estimated by using the
simplified method to estimate expected term. The risk-free interest
rate is estimated using comparable published federal funds
rates.
Fair Value of Financial Instruments
FASB
Accounting Standards Codification ("ASC") 820-10 requires entities
to disclose the fair value of financial instruments, both assets
and liabilities recognized and not recognized on the balance sheet
for which it is practicable to estimate fair value. ASC 820-10
defines the fair value of a financial instrument as the amount at
which the instrument could be exchanged in a current transaction
between willing parties.
F-10
The
three levels of the fair value hierarchy are as
follows:
|
Level
1
|
Valuations based on unadjusted quoted prices in active markets for
identical assets or liabilities that the entity has the ability to
access.
|
|
Level
2
|
Valuations based on quoted prices for similar assets or
liabilities, quoted prices in markets that are not active, or other
inputs that are observable or can be corroborated by observable
data for substantially the full term of the assets or
liabilities.
|
|
Level
3
|
Valuations based on inputs that are unobservable, supported by
little or no market activity and that are significant to the fair
value of the assets or liabilities.
|
The
carrying amount of the Company’s derivative liability of
$383,000 as of December 31, 2020 was based on Level 2
measurements.
The
carrying amounts of the Company’s other financial assets and
liabilities, such as cash, accounts receivables, inventory, prepaid
expense, accounts payable and accrued payables and notes payable,
approximate their fair values because of the short maturity of
these instruments.
Derivative Financial Instruments
The
Company evaluates its financial instruments to determine if such
instruments are derivatives or contain features that qualify as
embedded derivatives. For derivative financial instruments that are
accounted for as liabilities, the derivative instrument is
initially recorded at its fair value and is then re-valued at each
reporting date, with changes in the fair value reported in the
consolidated statements of operations. The classification of
derivative instruments, including whether such instruments should
be recorded as liabilities or as equity, is evaluated at the end of
each reporting period. Derivative instrument liabilities are
classified in the balance sheet as current or non-current based on
whether or not net-cash settlement of the derivative instrument
could be required within 12 months of the balance sheet date.
The fair value of the embedded
derivatives are determined using a Binomial valuation method at
inception and on subsequent valuation dates.
Cash Equivalents
The
Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash
equivalents.
Advertising Costs
The
Company has marketing relationship agreements with various online
companies such as portal networks, contextual sites, search engines
and affiliate partners. Advertising costs are generally charged to
the Company monthly per vendor agreements, which typically are
based on visitors and/or registrations delivered to the site or at
a set fee. Agreements do not provide for guaranteed renewal and may
be terminated by the Company without cause. Such advertising costs
are charged to expense as incurred. There were no advertising
expenses incurred during the years ended December 31, 2020 and
2019, respectively.
Research and Development Costs
Costs
incurred for research and development are expensed as incurred. The
salaries, benefits, and overhead costs of personnel conducting
research and development of the Company’s software products
comprise research and development expenses. Purchased materials
that do not have an alternative future use are also
expensed.
F-11
Leases
We lease our corporate office space under a lease agreement with
monthly payments over a period of 60 months. Pursuant to ASC 842,
Leases, lease assets are presented as operating lease right-of-use
assets and the related liabilities are presented as lease
liabilities in our consolidated balance sheets (see Note
7).
Net Loss Per Share
Basic
earnings (loss) per share is computed using the weighted-average
number of common shares outstanding during the period. Diluted
earnings (loss) per share is computed using the weighted-average
number of common shares and the dilutive effect of contingent
shares outstanding during the period. Potentially dilutive
contingent shares, which primarily consist of convertible notes,
stock issuable to the exercise of stock options and warrants have
been excluded from the diluted loss per share calculation because
their effect is anti-dilutive.
These
following shares were excluded in the computation of the net loss
per share because their effect is anti-dilutive.
|
|
December 31,
2020
|
December 31,
2019
|
|
|
|
|
|
A. Options to purchase
common stock
|
-
|
3
|
|
B. Warrants to
purchase common stock
|
221,041
|
106,650
|
|
C. Convertible notes
payable
|
9,065,262
|
3,911,176
|
|
D. Convertible Series
J Preferred stock
|
692,220
|
692,220
|
|
E. Convertible Series
C Preferred stock
|
7
|
7
|
|
|
9,978,530
|
4,710,056
|
Concentration
Cash
is deposited in one financial institution. The balances held at
this financial institution at times may be in excess of Federal
Deposit Insurance Corporation (“FDIC”) insurance limits
of up to $250,000.
Segments
The
Company determined its reporting units in accordance with ASC 280,
“Segment Reporting” (“ASC 280”). Management
evaluates a reporting unit by first identifying its’
operating segments under ASC 280. The Company then evaluates each
operating segment to determine if it includes one or more
components that constitute a business. If there are components
within an operating segment that meet the definition of a business,
the Company evaluates those components to determine if they must be
aggregated into one or more reporting units. If applicable, when
determining if it is appropriate to aggregate different operating
segments, the Company determines if the segments are economically
similar and, if so, the operating segments are
aggregated.
Management has
determined that the Company has one consolidated operating segment.
The Company’s reporting segment reflects the manner in which
its chief operating decision maker reviews results and allocates
resources. The Company’s reporting segment meets the
definition of an operating segment and does not include the
aggregation of multiple operating segments.
Restatement
The
Company identified an accounting error related to the recognition
of loss on extinguishment of debt reported in prior quarterly
periods. As a result, the Company is restating its unaudited
condensed consolidated balance sheets and the statements of
operations as of June 30, 2020 and September 30, 2020 (see Note
13)
Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU No.
2016-13, Credit Losses - Measurement of
Credit Losses on Financial Instruments ("ASC
326"). ASU 2016-13 requires
entities to use a forward-looking approach based on current
expected credit losses (“CECL”) to estimate credit
losses on certain types of financial instruments, including trade
receivables. This may result in the earlier recognition of
allowances for losses. ASU 2016-13 is effective for the Company
beginning July 1, 2023, and early adoption is permitted. The
Company does not believe the potential impact of the new guidance
and related codification improvements will be material to its
financial position, results of operations and cash
flows.
In
August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other
Options (Subtopic 470-20) and Derivatives and
Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40): Accounting for Convertible Instruments and Contracts in an
Entity’s Own Equity. ASU 2020-06 will simplify the
accounting for convertible instruments by reducing the number of
accounting models for convertible debt instruments and convertible
preferred stock. Limiting the accounting models will result in
fewer embedded conversion features being separately recognized from
the host contract as compared with current GAAP. Convertible
instruments that continue to be subject to separation models are
(1) those with embedded conversion features that are not clearly
and closely related to the host contract, that meet the definition
of a derivative, and that do not qualify for a scope exception from
derivative accounting and (2) convertible debt instruments issued
with substantial premiums for which the premiums are recorded as
paid-in capital. ASU 2020-06 also amends the guidance for the
derivatives scope exception for contracts in an entity’s own
equity to reduce form-over-substance-based accounting conclusions.
ASU 2020-06 will be effective January 1, 2024, for the Company.
Early adoption is permitted, but no earlier than January 1, 2021,
including interim periods within that year. Management is currently
evaluating the effect of the adoption of ASU 2020-06 on the
consolidated financial statements, but currently does not believe
ASU 2020-06 will have a significant impact on the Company’s
accounting for its convertible debt instruments as they are not
considered indexed to the Company’s own stock. The effect
will largely depend on the composition and terms of the financial
instruments at the time of adoption.
F-12
Other
recent accounting pronouncements issued by the FASB, including its
Emerging Issues Task Force, the American Institute of Certified
Public Accountants, and the Securities and Exchange Commission (the
“SEC”) did not or are not believed by management to
have a material impact on the Company’s present or future
consolidated financial statements.
Note 4 – Convertible Notes Payable
Convertible
notes payable consisted of the following:
|
|
December
31,
2020
|
December
31,
2019
|
|
|
|
|
|
A. Notes payable
issued for cash
|
$24,085,000
|
$12,998,000
|
|
B. Notes payable
issued for settlement agreements
|
2,528,000
|
300,000
|
|
C. Notes payable
issued for forbearance agreements
|
3,849,000
|
-
|
|
D. Notes payable
issued for consulting services
|
360,000
|
-
|
|
|
30,822,000
|
13,298,000
|
|
Less unamortized
debt discount
|
(4,519,000)
|
(91,000)
|
|
Convertible
notes, net of discount
|
$26,303,000
|
$13,207,000
|
A.
Notes Payable Issued for Cash
As part of the Company’s financing activities, the Company
issued convertible notes payable in exchange for cash. These notes
payable are unsecured, bears interest at a rate of 10% per annum
matures in six months up to one year from the date of issuance and
convertible to common stock at an average conversion rate of $19.65
per share, subject
to certain beneficial ownership limitations (with a maximum
ownership limit of 4.99%) and standard anti-dilution
provisions. As of December
31, 2018, outstanding balance of these notes payable amounted to
$10,673,000.
During the year ended December 31, 2019, the Company issued similar
notes payable in the aggregate of $3,827,000 in exchange for
cash. These notes payable are
unsecured, bears interest at a rate of 10% per annum matures in six
months up to one year from the date of issuance and convertible to
common stock at an average conversion rate of $5.74 per
share, subject to
certain beneficial ownership limitations (with a maximum
ownership limit of 4.99%) and standard anti-dilution
provisions. The Company
also determined that certain of
these notes payable contained a beneficial conversions feature
(BCF) cost of $158,000 since these notes’ were issued when
the trading price of the Company’s stock was greater than the
average conversion price of $5.74 per share. The BCF was accounted
as a debt discount and is being amortized over the corresponding
term of the notes payable to interest expense. In addition, during
2019, notes payable of $1,502,000 were converted to 205,000 shares
of common stock and the Company amortized the debt discount of
$505,000.
As of December 31, 2019, outstanding balance of these notes payable
issued for cash amounted to $12,998,000 and unamortized debt
discount of $91,000.
During the year ended December 31, 2020, the Company issued similar
notes payable in the aggregate of $12,531,000 in exchange for
cash. These notes payable are
unsecured, bears interest at a rate of 10% per annum matures in six
months up to one year from the date of issuance and convertible to
common stock at a conversion rate of $3.40 per share,
subject to certain
beneficial ownership limitations (with a maximum ownership
limit of 4.99%) and standard anti-dilution provisions. The Company also determined
that certain of these notes
payable contained a beneficial conversions feature (BCF) cost of
$4,745,000 since certain of these notes’ were issued when the
trading price of the Company’s stock was greater than the
average conversion price of $3.40 per share. The BCF was accounted
as a debt discount and is being amortized over the corresponding
term of the notes payable to interest expense. In addition, during
2020, notes payable of $1,444,000 plus accrued interest were
converted to 478,510 shares of common stock and the Company
amortized the debt discount of $317,000.
In addition, in June 2020, the Company entered in a forbearance
agreement with certain noteholders of past due notes payable in the
aggregate of $13.2 million (see discussion at
“C”).
As of December 31, 2020, outstanding balance of these notes payable
issued for cash amounted to $24,085,000 and unamortized debt
discount of $4,519,000.
F-13
B.
Notes Payable Issued for Settlement Agreements
During the year ended December 31, 2019, the Company issued notes
payable of $300,000 as part of a debt settlement agreement. The
notes are unsecured, bears interest at a rate of 10%, matures in
six months up to one year from the date of issuance and convertible
to common stock at a conversion rate of $10.20 per share,
subject to certain
beneficial ownership limitations (with a maximum ownership
limit of 4.99%) and standard anti-dilution provisions.
As of December 31, 2019, outstanding balance of notes payable
issued for settlement agreements amounted to $300,000.
During the year ended December 31, 2020, the Company entered into
settlement agreements with certain parties such as Empery Asset
Master Ltd., Empery Tax Efficient, LP, Empery Tax Efficient II, LP,
Adam Kasower, East Ventures, Inc., SV Booth Investments III, LLC,
and Theorem Group, LLC to resolve claims and disputes pertaining to
certain debt and equity instruments issued by the Company to these
parties in prior years.
As part of the agreement, the Company agreed to the following
considerations:
a.
Issuance of convertible notes payable in the
aggregate of $2,228,000. The notes are unsecured, bears interest at
a rate of 10%, matures in six months up to one year from the date
of issuance and convertible to common stock at a conversion rate of
$3.40 per share, subject to certain beneficial ownership
limitations (with a maximum ownership limit of 4.99%) and
standard anti-dilution provisions. The Company also determined
that certain of these notes
payable contained a beneficial conversions feature cost of $530,000
since these notes’ were issued when the trading price of the
Company’s stock was greater than the conversion price of
$3.40 per share;
b.
Cash
payment of $380,000;
c.
Issuance
of 262,353 shares of common stock with a fair value of $1,225,000;
and
d.
Issuance
of warrants to purchase 323,529 shares of common stock. The
warrants are fully vested, exercisable at $3.40 per share and will
expire in five years with an estimated fair value of $1,021,000
using a BlackScholes option price model.
Pursuant to current accounting guidelines, the Company recorded a
loss of $5,384,000 to account the cash paid and the fair value of
debt and equity instruments issued in these settlement
agreements.
As of December 31, 2020, outstanding balance of these notes payable
for settlement agreements amounted to $2,528,000.
C.
Notes Payable Issued for Forbearance Agreements
On June 23, 2020, the Company entered into Standstill and
Forbearance Agreements (collectively, the “Forbearance
Agreements”) with the holders of $13.2 million aggregate
principal amount of the Convertible Notes (the “Default
Notes”), which are currently in default. Pursuant to the
Forbearance Agreements, the holders of the Default Notes have
agreed to forbear from exercising their rights and remedies under
the Default Notes (including declaring such Default Notes (together
with any default amounts and accrued and unpaid interest)
immediately due and payable) until the earlier of (i) the date that
the Company completes a future financing in the amount of $15
million and, in connection therewith, commences listing on NASDAQ
(collectively, the “New Financing”) or (ii) January 31,
2021 (the “Termination Date”).
The obligations of the holders to forbear from exercising their
rights and remedies under the Default Notes pursuant to the
Forbearance Agreements will terminate on the earliest of (i) the
Termination Date, (ii) the date of any bankruptcy filing by the
Company or its subsidiaries, (iii) the date on which the Company
defaults on any of the terms and conditions of the Forbearance
Agreements or (iv) the date the Forbearance Agreements are
otherwise terminated or expire.
In
exchange for the forbearance agreement, the Company agreed to the
following considerations:
|
a.
|
Amendment of the $13.2 million Default Notes (together with default
amounts and accrued and unpaid interest) to include a provision
that will convert these notes payable into common stock upon the
closing of a New Financing at a conversion price equal to the
lesser of (i) the conversion price in effect for the Default Notes
onthe date of such New Financing or (ii) 75% of the lowest per
share price at which common stock is or may be issued in connection
with such New Financing, in each case, subject to certain
beneficial ownership limitations (with a maximum ownership limit of
9.99%). Shares of the Company’s preferred stock, which are
convertible into the Company’s common stock, will be issued
in lieu of common stock to the extent that conversion of the
Default Notes is prohibited by such beneficial ownership
limitations.
|
|
b.
|
Amendment of warrants granted to certain noteholders in prior year
to include the following terms: (i) the exercise price of all
warrants to purchase common stock held by holders of the Default
Notes will be reduced to equal the conversion price of the Default
Notes and (ii) the number of shares of common stock underlying such
warrants shall be increased so that the total exercise price of all
such warrants after the decrease in the exercise price equals the
total exercise price of all such warrants prior to the decrease in
the exercise price. Further, the expiration date of all such
warrants shall be extended for three years following the closing
date of any New Financing.
|
|
c.
|
Issuance of notes payable in the aggregate of $3,955,000.
The notes are unsecured, bears
interest at a rate of 10% per annum, matures in six months up to
one year from the date of issuance and convertible to common stock
at a conversion rate of $3.40 per share, subject to certain beneficial ownership
limitations (with a maximum ownership limit of 4.99%) and
standard anti-dilution provisions.
|
In accordance with ASC 450-70, modifications or exchanges are
considered extinguishments with gains or losses recognized in
current earnings if the terms of the new debt and original
instrument are substantially different. The instruments are
considered “substantially different” when the present
value of the cash flows under the terms of the new debt instrument
is at least 10% different from the present value of the remaining
cash flows under the terms of the original instrument. Pursuant to
ASC 470, the Company accounted the forbearance transaction as an
extinguishment of debt which acquires the measurement of the
modified debt and additional consideration to be at fair
value.
F-14
The Company determined the fair value of amended notes payable and
warrants at the date of the agreement to be $28,976,000. The fair
value of the host component of the notes payable was determined by
discounting the future cash flows related to the notes at a market
rate of interest. The conversion features of the notes payable were
determined using a Monte Carlo valuation which uses certain
assumptions related to risk-free interest rates, expected
volatility, expected life of the conversion features, and future
dividends. The fair value of the warrants was determined using a
binomial option pricing model. The incremental difference between
the old debt deemed extinguished and the fair value of the new debt
recognized amounted to $8,643,000 and was accounted loss on
forbearance agreement and additional paid in capital. In addition,
the Company also accounted the issuance of the new notes payable of
$3,955,000 as part of loss on forbearance agreement for a total
loss of $12,598,000.
In addition, during 2020, notes payable of $106,000 plus accrued
interest were converted to 33,369 shares of common
stock.
As of December 31, 2020, outstanding balance of the notes payable
amounted to $3,849,000.
D.
Notes Payable issued for Consulting Agreements
During the year ended December 31, 2020, the Company issued notes
payable of $360,000 in exchange for consulting services. The notes
are unsecured, bears interest at a rate of 10%, matures in one year
from the date of issuance and convertible to common stock at a
conversion rate of $3.40 per share, subject to certain beneficial ownership
limitations (with a maximum ownership limit of 4.99%) and
standard anti-dilution provisions.
As of December 31, 2020, outstanding balance of these notes payable
amounted to $360,000.
As of December 31, 2020, total outstanding convertible notes
payable that are matured and past due amounted to
$16,824,000.
On February 11, 2021, all outstanding notes payable in the
aggregate of $32 million and accrued interest of $5.5 million were
converted to 11million shares of common stock (see Note
12)
F-15
Note 5 – Line of Credit
On
November 8, 2010, the Company entered into a financing arrangement
with Gemini Pharmaceuticals, Inc., a product development and
manufacturing partner of the Company, pursuant to which Gemini
Pharmaceuticals made a $250,000 strategic equity investment in the
Company and agreed to make a $750,000 purchase order line of credit
facility available to the Company. The outstanding principal of all
advances under the line of credit will bear interest at the rate of
interest of prime plus 2% per annum.
As of
December 31, 2020 and 2019, outstanding balance of this credit line
amounted to $31,000, respectively and is past due.
Note 6 – Derivative Liability
During the year ended December 31, 2020, the Company issued certain
warrants that contained a fundamental
transaction provision that could give rise to an obligation to pay
cash to the warrant holder upon occurrence of certain change in
control type events.
In accordance with ASC 480, the fair value of these warrants are
classified as a liability in the Consolidated Balance Sheet and
will be re-measured at the end of every reporting period with the
change in value reported in the statement of
operations.
The
derivative liabilities were valued using a Binomial pricing model
with the following average assumptions:
|
|
December
31,
2020
|
July
2020
(date of
inception)
|
|
|
|
|
|
Stock
Price
|
$7.21
|
$3.06
|
|
Risk-free interest
rate
|
0.36%
|
0.26%
|
|
Expected
volatility
|
135%
|
134%
|
|
Expected life (in
years)
|
4.6 years
|
5 years
|
|
Expected dividend
yield
|
-
|
-
|
|
|
|
|
|
Fair
Value:
|
|
|
|
Warrants
|
$383,000
|
$153,000
|
The
risk-free interest rate was based on rates established by the
Federal Reserve Bank. The Company uses the historical volatility of
its common stock to estimate the future volatility for its common
stock. The expected life of the derivative securities was
determined by the remaining contractual life of the derivative
instrument. For derivative instruments that already matured, the
Company used the estimated life. The expected dividend yield was
based on the fact that the Company has not paid dividends to its
common stockholders in the past and does not expect to pay
dividends to its common stockholders in the future.
During
the year ended December 31, 2020, the Company recognized a loss of
$230,000 to account the change in fair value of the derivative
liability.
F-16
Note
7 – Lease
In
September 2018, the Company signed a three year lease agreement for
its corporate office in Westlake Village, Ventura County. Monthly
lease payment amounted to $5,000 up to $6,000 over the term of the
lease.
The
Company accounted the lease pursuant to ASC 842, Lease. Pursuant to
ASC 842, Operating lease right-of-use (“ROU”) assets
and liabilities are recognized at commencement date based on the
present value of lease payments over the lease term. ROU assets
represent our right to use an underlying asset for the lease term
and lease liabilities represent the Company’s obligation to
make lease payments arising from the lease. Generally, the implicit
rate of interest in arrangements is not readily determinable and
the Company utilizes its incremental borrowing rate in determining
the present value of lease payments. The operating lease ROU asset
includes any lease payments made and excludes lease
incentives
As a
result, the Company recorded right-of-use assets of $174,000 and
lease liabilities of $174,000. In accordance with ASC 842, the
right-of-use assets are being depreciated over the life of the
underlying lease, and monthly lease payments are being recorded as
reductions to the lease liability and imputed interest
expense.
The
components of lease expense and supplemental cash flow information
related to leases for the period are as follows:
|
|
Year
ended
December
31,
2020
|
Year
ended
December
31,
2019
|
|
Lease
Cost
|
|
|
|
Operating lease
cost (included in general and administration in the Company’s
statement of operations)
|
$-
|
$118,000
|
|
|
|
|
|
Other
Information
|
|
|
|
Cash paid for
amounts included in the measurement of lease liabilities for the
years ended December 31, 2020 and 2019
|
$-
|
$120,000
|
|
Weighted average
remaining lease term – operating leases (in
years)
|
-
|
4.1
|
|
Average discount
rate – operating leases
|
-%
|
10.0%
|
During
fiscal 2020, as a result of the Covid-19 pandemic and various
disputes with the landlord, the Company abandoned the leased area.
Subsequently, the Company was sued by the landlord for $250,000
(see Note 10). As a result of abandonment of the facility and the
existing lawsuit with the landlord, at December 31, 2020, the
Company wrote off the unamortized ROU asset of $56,000 and
reclassified the $58,000 operating lease liability as part of
accrued expenses. As of December 31, 2020, the Company believes it
has made adequate provision for any settlement of this
matter.
The
Company has no other leases at December 31, 2020 that requires to
be accounted in accordance with ASC 842.
Note 8 – Stockholders’ Deficit
Common Stock
The following were transactions during the year ended December 31,
2020:
Issuance of Common Stock upon conversion of notes
payable
During the year ended December 31, 2020, the Company issued 511,879
shares of common stock upon
conversion of $1,740,000 in principal and interest on
convertible notes
payable.
Issuance of Common Stock for services
During
the year ended December 31, 2019, the Company issued 920,588 shares
of common stock with a fair value of $5,309,000 to officers of the
Company for services rendered.
F-17
Issuance of Common Stock for legal settlements
During the year ended December 31, 2020, the
Company issued 262,353 shares of common stock pursuant to
Settlement Agreements with a fair value of $2,246,000. The common
shares were valued on the market price at the date of
grant.
Issuance of Common Stock upon exercise of warrants
During the year ended December 31, 2020, the Company issued
239,706 shares of common stock upon cashless exercise of
warrants.
The following were transactions during the year ended December 31,
2019:
Issuance of Common Stock for settlement of debt
During
the year ended December 31, 2019, the Company issued a total
204,954 shares of common stock upon conversion of $1,361,000 in
principal and interest on senior convertible
notes.
Issuance of Common Stock for services
During
the year ended December 31, 2019, the Company issued 920,588 shares
of common stock with a fair value of $5,309,000 to officers of the
Company for services rendered.
Preferred Stock
A.
Series J Preferred Stock
On September 1, 2017, the Board designated 2,000,000 shares
of Series J preferred stock
(the “Series J Preferred Stock”). On the same day, the Board issued 1,513,548 shares of Series J Preferred Stock in exchange for
the cancellation of certain
indebtedness.
In the first quarter of 2019, it was discovered that a certificate
of designation with respect to the Series J Preferred Stock had never been filed with
the Office of the Secretary of
State for the State of Delaware. Despite the fact the Company
had issued shares of Series J
Preferred Stock, the issuance of those shares was not valid and was
of no legal effect.
To remedy the situation, on April 4, 2019, the Company filed a
certificate of designation with the Office of the Secretary State for the State of Delaware
designating a series of preferred stock as the Series J-1 preferred stock, par value $0.01 per share (the
“Series J-1 Preferred Stock”). On April 19, 2019,
the Company issued 840,000 shares of Series J-1 Preferred
Stock. The issuance was in lieu of the Series J Preferred
Stock that should have been issued on September 1, 2017, and in
settlement for not receiving preferred stock until 20 months after
the debt for which the stock was issued was cancelled. The Company
reflected the fair value of this Series J Preferred stock of
$1,140,000 as part of general and administrative costs in fiscal
2019.
Shares of the Series J-1 Preferred Stock are convertible at any
time, at the option of the holders, into shares of the
Company’s common stock at an effective conversion price of
$3.40 per share, subject to adjustment for, among other things,
stock dividends, stock splits, combinations, reclassifications of
our capital stock and mergers or consolidations, and subject to a
beneficial ownership limitation which prohibits conversion if such
conversion would result in the holder (together with its
affiliates) being the beneficial owner of in excess of 9.99% of the
Company’s common stock or 692,220 shares of common stock.
Shares of the Series J-1 Preferred Stock have the same voting
rights a shares of the Company’s common stock, with the
holders of the Series J-1 Preferred Stock entitled to vote on an
as-converted-to-common stock basis, subject to the beneficial
ownership limitation described above, together with the holders of
the Company’s common stock on all matters presented to the
Company’s stockholders. The Series J-1 Preferred Stock are
not entitled to any dividends (unless specifically declared by the
Board), but will participate on an as-converted-to-common-stock
basis in any dividends to the holders of the Company’s common
stock. In the event of the Company’s dissolution, liquidation
or winding up, the holders of the Series J-1 Preferred Stock will
be on parity with the holders of the Company’s common stock
and will participate, on a on an as-converted-to-common stock
basis, in any distribution to holders of the Company’s common
stock.
F-18
B.
Series C Preferred Stock
The 96,230 shares of Series C
preferred stock, par value $0.01 per share (the “Series C
Preferred Stock”), are convertible into 7 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 $3.40 or
more than $4.9113 common shares
for each share of Series C Preferred Stock. The conversion ratio
may be adjusted under certain circumstances such as stock splits or
stock dividends. The Company has the right to automatically convert
the Series C Preferred Stock
into common stock if the
Company lists its shares of common stock on the Nasdaq National Market and the average closing bid
price of the Company’s common stock on the Nasdaq National Market for 15 consecutive trading
days exceeds $3,000.00. Each share of Series C Preferred Stock is entitled to the number
of votes equal to 0.26 divided
by the average closing bid price of the Company’s common stock during the fifteen consecutive
trading days immediately prior to the date such shares of Series C
Preferred Stock were purchased. In the event of liquidation, the
holders of the Series C Preferred Stock shall participate on an
equal basis with the holders of the common stock (as if the Series
C Preferred Stock had converted into common stock) in any distribution of any of the
assets or surplus funds of the Company. The holders of
Series C Preferred Stock are entitled
to noncumulative dividends if and when declared by the
Company’s board of directors
(the “Board”). No dividends to holders of the Series C
Preferred Stock were issued or unpaid through December 31, 2020 and
2019.
Stock Options
Stock
option transactions for the years ended December 31, 2020 and
2019:
|
|
Number of
Options
|
Weighted Average
Exercise Price
|
|
Outstanding,
December 31, 2018
|
66
|
$22,440
|
|
Granted
|
-
|
-
|
|
Exercised
|
-
|
-
|
|
Expired
|
(63)
|
17,340
|
|
Outstanding,
December 31, 2019
|
3
|
$22,440
|
|
Granted
|
-
|
-
|
|
Exercised
|
-
|
-
|
|
Expired
|
(3)
|
-
|
|
Outstanding,
December 31, 2020
|
-
|
-
|
|
Exercisable,
December 31, 2020
|
-
|
-
|
Stock Warrants
Stock
warrant transactions for the years ended December 31, 2020 and
2019:
|
|
Number of
Warrants
|
Weighted Average
Exercise Price
|
|
Outstanding at
December 31, 2018:
|
106,650
|
$3.40
|
|
Granted
|
-
|
-
|
|
Forfeited/canceled
|
-
|
-
|
|
Exercised
|
-
|
-
|
|
Outstanding at
December 31, 2019:
|
106,650
|
$3.40
|
|
Granted
|
382,353
|
3.40
|
|
Forfeited/canceled
|
(28,256)
|
3.40
|
|
Exercised
|
(239,706)
|
-
|
|
Outstanding at
December 31, 2020
|
221,041
|
$3.40
|
|
Exercisable at
December 31, 2020
|
221,041
|
$3.40
|
F-19
As of
December 31. 2020, the intrinsic value of these warrants amounted
to $842,000.
The following were transactions during the year ended December 31,
2020:
On July 28, 2020, the Company issued a warrant to purchase up to an
aggregate of 58,824 shares of common stock at an exercise price of
$3.40 per share, subject to adjustment in certain circumstances
with a fair value of $153,000 (see Note 6). The warrant expires on
July 28, 2025. The warrant was issued as compensation for certain
services provided to the Company.
In July 2020, pursuant to the Settlement Agreement, the Company
issued pre-funded warrants to purchase up to an aggregate of
323,529 shares of common stock (the “Settlement Warrants”) at an
exercise price of $3.40 per share, subject to adjustment in certain
circumstances and will expire on June 19, 2025 (see Note
4).
There was no warrant transactions during the year ended December
31, 2019.
Note 9 – Loss on Impairment and Disposal of
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.
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 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.
On September 19, 2019, the Company entered into an Asset Purchase
Agreement (the “Agreement”), pursuant to which the
Company sold its rights, titles and interests, including associated
patents, to the pharmaceutical product designated by the Company as
GTB-004 (the “Product”). Under the Agreement, the
Product was purchased by DAS Therapeutics, Inc. who the Company
believes is well positioned to take over the clinical development
of the Product including obtaining timely approval by the
FDA.
The Company received $200,000 at closing. The Company will also
participate in the future commercial value of the Product by
receiving$6,000,000 upon the achievement of certain sales
objectives. In addition, the Company will receive a royalty equal
to 1.5% of U.S. sales until such time as the last of the patents
associated with the Product expires. The Company reflected a loss
in the year ended December 31, 2019 totaling
$20,463,000.
F-20
As a result of the loss reported on the sale of the Product, as
well as the response received on inquiries related to the other two
projects, the Company determined that the remaining value related
to these remaining projects should be fully impaired. During the
year ended December 31, 2019, the Company reported an impairment
charge for these projects totaling $4,599,000.
Note 10 – Commitments and Contingencies
1.
Litigation
We are
involved in certain legal proceedings that arise from time to time
in the ordinary course of our business. Except for income tax
contingencies, we record accruals for contingencies to the extent
that our management concludes that the occurrence is probable and
that the related amounts of loss can be reasonably estimated. Legal
expenses associated with the contingency are expensed as incurred.
There is no current or pending litigation of any significance with
the exception of the matters that have arisen under, and are being
handled in, the normal course of business.
a.
On
August 28, 2019, a complaint was filed in the Superior Court of
California, County of Los Angeles, West Judicial District, Santa
Monica Courthouse, Unlimited Civil Division by Jeffrey Lion, an
individual (“Lion”), and by Daniel Vallera, an
individual (“Vallera”). Lion and Vallera are referred
to jointly as the “Plaintiffs”. The complaint was filed
against GT Biopharma, Inc. and its subsidiary Oxis Biotech, Inc.
(either of them or jointly, the “Company”). The
Plaintiffs allege breach of a license agreement between the
Plaintiffs and the Company entered into on or about September 3,
2015. Lion alleges breach of a consulting agreement between Lion
and the Company entered into on or about September 1, 2015. Vallera
alleges breach of a consulting agreement between Vallera and the
Company entered into in or around October, 2018. The Complaint
seeks actual damages of $1,670,000, for the fair market value of
the number of shares of GT Biopharma, Inc. that at the time of
judgment represent 15,000,000 shares of such stock as of September
1, 2015, and that GT Biopharma, Inc. issue Lion the number of
common shares of GT Biopharma, Inc. that at the time of judgment
represent 15,000,000 such shares as of September 1, 2015.The
Company filed an answer to the complaint denying many allegations
and asserting affirmative defenses. Discovery has commenced and
trial is scheduled for May, 2022. The Company believes the case is
without merit and will defend it vigorously.
b.
On
March 3, 2021 a complaint was filed by Sheffield Properties in the
superior Court of California. County of Ventura. The litigation
arises from a commercial lease entered into by GT Biopharma for
office space in Westlake Village. GT Biopharma has been served but
has not yet answered the complaint. Sheffield Properties seeks
damages in excess of $250,000. We intend to vigorously defend
against these claims (see Note 7).
2.
Employment
Commitments
a.
Effective August
11, 2020, the Company and Mr. Cataldo, CEO, entered into the
Cataldo Agreement with respect to Mr. Cataldo’s continued
employment as Chief Executive Officer of the Company. The Initial
Term of the Cataldo Agreement is three years with the option of
automatic one-year renewals thereafter. Mr. Cataldo will be paid a
cash salary of $30,000 per month, together with customary benefits,
expense reimbursement and the possibility of performance bonuses.
Mr. Cataldo will receive a stock grant equal to ten percent of the
fully diluted shares of common stock of the Company (calculated
with the inclusion of the current stock holdings of Mr. Cataldo)
upon conversion of options, warrants and Convertible Notes in
association with a national markets qualified financing as
consideration for entering into the Cataldo Agreement (with such
stock to vest and be delivered within 30 days after the national
markets qualified financing). Mr. Cataldo will be entitled to
certain additional severance payments and other benefits in
connection with a Change in Control Period Involuntary Termination
or a Non Change in Control Period Involuntary Termination (each as
defined in the Cataldo Agreement) or his resignation as a result of
a Change in Control Period Good Reason or Non Change in Control
Period Good Reason (each as defined in the Cataldo Agreement).
Following the Effective Date, Mr. Cataldo will also continue to
serve as the chairman of the board of the
Company.
b.
Effective
November, 11, 2020, the Company appointed Mr. Handelman as Chief
Financial Officer on an interim basis. Effective November 13, 2020,
the Company and Mr. Handelman entered into the Handelman Agreement
with respect to Mr. Handelman’s service as Chief Financial
Officer of the Company. The term of the Handelman Agreement is
indefinite, subject to ninety days prior written notice of
termination. Pursuant to the Handelman Agreement, Mr. Handelman
will receive a monthly consulting fee of $15,000, along with the
opportunity to earn a discretionary bonus. Mr. Handelman will also
serve as the principal accounting officer of the Company. On
December 14, 2020 the Company and Mr. Handelman entered into an
Agreement with respect to Mr. Handelman’s continued
employment as Chief Financial Officer of the Company. The Initial
Term of the Handelman Agreement is three years with the option of
automatic one-year renewals thereafter. Mr. Handelman will be paid
a cash salary of $21,000 per month, together with customary
benefits, expense reimbursement and the possibility of performance
bonuses. The cash salary will increase to $25,000 with the
successful up list onto the NASDAQ stock exchange. Mr. Handelman
will receive a stock grant equal to one and half percent of the
fully diluted shares of common stock of the Company (calculated
with the inclusion of the current stock holdings) upon conversion
of options, warrants and Convertible Notes in association with a
national markets qualified financing as consideration for entering
into the Cataldo Agreement (with such stock to vest and be
delivered within 30days after the national markets qualified
financing). Mr. Handelman will be entitled to certain additional
severance payments and other benefits in connection with a Change
in Control Period Involuntary Termination or a Non Change in
Control Period Involuntary Termination (each as defined in the
Agreement) or his resignation as a result of a Change in Control
Period Good Reason or Non Change in Control Period Good Reason
(each as defined in the Agreement).
3.
Research
and Development Agreement:
We 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 are 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. We are presently
evaluating GTB-3550, our lead TriKE therapeutic product candidate
in a Phase I/II clinical trial. Under the agreement, the University
of Minnesota received an upfront license fee which was recorded in
prior year, royalty fees ranging from 4% to 6%, minimum annual
royalty payments of $0.25 million beginning in 2022, $2.0 million
in 2025, and $5.0 million in 2027 and certain milestone payments
totaling $3.1 million.
F-21
Note 11 – Income Tax
The
Company did not record any income tax provision for the years ended
December 31, 2020 and 2019 due to the Company’s net losses.
The Company files income tax returns in the United States
(“Federal”) and California (“State”)
jurisdictions. The Company is subject to Federal and State income
tax examinations by tax authorities for all years since its
inception. At December 31, 2020, the Company had Federal and State
net operating loss carry forwards available to offset future
taxable income of approximately $39 million. These carry forwards
will begin to expire in the year ending December 31, 2030, subject
to IRS limitations, including change in ownership. The Company
periodically evaluates the likelihood of the realization of
deferred tax assets, and adjusts the carrying amount of the
deferred tax assets by a valuation allowance to the extent the
future realization of the deferred tax assets is not judged to be
more likely than not. The Company considers many factors when
assessing the likelihood of future realization of our deferred tax
assets, including recent cumulative earnings experience by taxing
jurisdiction, expectations of future taxable income or loss, the
carry-forward periods available to us for tax reporting purposes,
and other relevant factors.
At
December 31, 2020 and 2019, based on the weight of available
evidence, including cumulative losses in recent years and
expectations of future taxable income, the Company determined that
it was more likely than not that its deferred tax assets would not
be realized. Accordingly, the Company has recorded a valuation
allowance for 100% of its cumulative deferred tax assets. The
components of our deferred tax assets are as follows.
|
|
December 31,
|
|
|
|
2020
|
2019
|
|
Deferred
tax assets:
|
|
|
|
Federal net
operating loss carryforward
|
39,340,000
|
36,803,000
|
|
Stock based
compensation and other items
|
4,779,000
|
|
|
Intellectual
property
|
58,504,000
|
58,504,000
|
|
Accrued
expense
|
-
|
1,262,000
|
|
Patent
amortization
|
4,000
|
4,000
|
|
Deferred
tax assets before valuation
|
102,627,000
|
96,573,000
|
|
Valuation
allowance
|
(102,627,000)
|
(96,573,000)
|
|
Net
deferred income tax assets
|
-
|
-
|
Generally
accepted accounting principles requires that the tax benefit of net
operating losses, temporary differences and credit carryforwards be
recorded as an asset to the extent that management assesses that
realization is “more likely than not.” Realization of
the future tax benefits is dependent on the Company's ability to
generate sufficient taxable income within the carryforward period.
Because of the Company's history of operating losses, management
has provided a valuation allowance equal to its net deferred tax
assets.
A reconciliation of the federal statutory income tax rate and the
effective income tax rate as a percentage of income before income
tax provision is as follows for the year ended:
|
|
December 31,
2020
|
December 31,
2019
|
|
|
|
|
|
Federal
statutory income tax rate
|
21%
|
21%
|
|
State
tax, net of federal benefit
|
7%
|
7%
|
|
|
|
|
|
Change
in valuation allowance on net operating loss
carry-forwards
|
(28%)
|
(28%)
|
|
|
|
|
|
Effective
income tax rate
|
0%
|
0%
|
F-22
Note 12 – Related Party Transactions
During
the year ended December 31, 2020, the Company recorded consulting
expense of $1,133,000 for services rendered, of which, $525,000 was
included as part of accrued expenses as of December 31, 2020 for a
consultant who is also an owner of approximately 10% of the
Company’s issued and outstanding common stock.
During
the year ended December 31, 2019, the Company recorded consulting
expense of $1,140,000 to a consultant who is also an owner of
approximately 10 % of the Company’s issued and outstanding
common stock. There was no outstanding balance due to the
consultant as of December 31, 2019.
Note 13- Restatement of Prior Quarters (unaudited)
Management
of GT Biopharma, Inc. and its
audit committee, identified an
accounting error in the recognition of an additional loss on
extinguishment of debt of $8,643,000 as a result of the June 2020
forbearance agreements that was not previously recorded (see Note
4). As a result, the previously filed unaudited condensed
consolidated balance sheets as of June 30, 2020 and September 30,
2020, and the related condensed
consolidated statements of operations and stockholders’
deficiency, may no longer be relied upon. The Company has
restated its unaudited condensed consolidated balance sheets as of
June 30, 2020 and September 30, 2020 and the related condensed consolidated statements of
operations and stockholders’ deficiency. The restatement did
not affect the previously reported assets and liabilities in the
corresponding financial statements.
The effects of the discrepancy discovered related to
the accounting error on the previously filed Form 10-Q's are
summarized as follows:
Condensed Consolidated Statement of Operations for the three months
ended June 30, 2020 (unaudited)
|
|
Previously Reported
|
Adjustment
|
As Restated
|
|
Other
income (expense)
|
$ (7,221)
|
$(8,643)
|
$(15,864)
|
|
Net
loss
|
(8,779)
|
(8,643)
|
(17,422)
|
|
Net
loss per common share - basic and diluted
|
$(0.12)
|
$(0.12)
|
$(0.24)
|
Condensed Consolidated Statement of Operations for the six months
ended June 30, 2020 (unaudited)
|
|
Previously Reported
|
Adjustment
|
As Restated
|
|
Other
income (expense)
|
$(7,859)
|
$(8,643)
|
$(16,502)
|
|
Net
loss
|
(10,487)
|
(8,643)
|
(19,130)
|
|
Net
loss per common share - basic and diluted
|
$(0.15)
|
$(0.12)
|
$(0.27)
|
Condensed Consolidated Statement of Stockholders’ Deficit as
of June 30, 2020 (unaudited)
|
|
Previously Reported
|
Adjustment
|
As Restated
|
|
Preferred
share
|
$25
|
$-
|
$24
|
|
Common
share
|
75
|
-
|
75
|
|
Additional
paid-in capital
|
550,411
|
8,643
|
559,054
|
|
Noncontrolling
interest
|
(169)
|
-
|
(169)
|
|
Accumulated
deficit
|
(577,819)
|
(8,643)
|
(586,462)
|
|
Total
Shareholder deficit
|
$(27,499)
|
$-
|
$(27,499)
|
F-23
The effects of the discrepancy discovered related to
the accounting error on the previously filed Form 10-Q for the
three and nine months ended September 30, 2020 are summarized as
follows:
Condensed Consolidated Statement of Operations for the three months
ended September 30, 2020 (unaudited)
|
|
Previously Reported
|
Adjustment
|
As Restated
|
|
Other
income (expense)
|
$(931)
|
$(8,643)
|
$(9,574)
|
|
Net
loss
|
(2,876)
|
(8,643)
|
(11,519)
|
|
Net
loss per common share - basic and diluted
|
$(0.04)
|
$(1.13)
|
$(1.16)
|
Condensed Consolidated Statement of Operations for the nine months
ended September 30, 2020 (unaudited)
|
|
Previously Reported
|
Adjustment
|
As Restated
|
|
Other
income (expense)
|
$(8,790)
|
$(8,643)
|
$(17,433)
|
|
Net
loss
|
(13,363)
|
(8,643)
|
(22,006)
|
|
Net
loss per common share - basic and diluted
|
$(0.18)
|
$(0.12)
|
$(0.30)
|
Condensed Consolidated Statement of Stockholders’ Deficit as
of September 30, 2020 (unaudited)
|
|
Previously Reported
|
Adjustment
|
As Restated
|
|
Preferred
share
|
25
|
-
|
25
|
|
Common
share
|
78
|
-
|
78
|
|
Additional
paid-in capital
|
550,984
|
8,643
|
559,627
|
|
Noncontrolling
interest
|
(169)
|
-
|
(169)
|
|
Accumulated
deficit
|
(580,695)
|
(8,643)
|
(589,338)
|
|
Total
Shareholder deficit
|
(29,777)
|
|
(29,777)
|
F-24
Note 14- Subsequent Events
Subsequent to December 31, 2020, convertible notes and accrued in
interest aggregating $38,714,000 were converted into 11,386,435
shares of common stock at conversion prices. Of
this amount $35,660,000 was principal and accrued interest as of
December 31, 2020. The remaining $3,054,000 was principal, and
accrued interest subsequent to December 31,
2020
Subsequent to December 31, 2020, the Company issued
4,945,000 shares of its common stock to investors for net cash
proceeds of $24,882,000 pursuant to our February 2021 Offering
Circular.
Subsequent
to December 31, 2020, the Company issued 660,545 shares of common
stock upon exercise of warrants for cash proceeds of
$3,200,000.
The
following unaudited proforma information are based on the
Company’s historical financial statements as of December 31,
2020 after giving effect to the subsequent conversion notes payable
to equity and sale of common shares for cash.
|
Account
|
December
31, 2020 – As reported
|
December
31, 2020 – Proforma
(unaudited)
|
|
Cash
and cash equivalents
|
$5,297
|
$33,379
|
|
Total
Assets
|
5,661
|
33,743
|
|
|
|
|
|
Convertible
notes
|
26,303
|
-
|
|
Accrued
interest
|
4,838
|
-
|
|
Total
Current Liabilities
|
35,094
|
3,953
|
|
|
|
|
|
Preferred
stock
|
3
|
3
|
|
Common
stock
|
52
|
67
|
|
Additional
paid in capital
|
566,309
|
625,517
|
|
Ammulated
deficit
|
(595,628)
|
(595,628)
|
|
Non
controlling interest
|
(169)
|
(169)
|
|
Total
Stockholders' Equity (Deficit)
|
$(29,433)
|
$29,790
|
Subsequent
to December 31, 2020, the Company issued 5,491,638 shares of common
stock with a fair value of $34,762,000 to officers and directors as
incentive for the completion of our February 2021 Offering
Circular.
Subsequent
to December 31, 2020, the Company issued convertible notes payable
in the aggregate of $1,205,000 in exchange for cash. The Company
also issued notes payable of $545,000 in exchange for consulting
services. In addition, accrued expenses of $525,000 from a related
party that was recorded as of December 31, 2020 (Note 12) was
cancelled in exchange for a convertible note payable. The Company
is currently in the process of determining the appropriate
accounting for these notes payable totaling
$2,275,000.
F-25
Exhibit 4.2
CERTIFICATE OF DESIGNATION OF
PREFERENCES, RIGHTS AND LIMITATIONS OF
SERIES K PREFERRED STOCK OF
GT BIOPHARMA, INC.
GT
BIOPHARMA, INC. (the “Corporation”), a corporation
organized and existing under the General Corporation Law of the
State of Delaware, DOES HEREBY CERTIFY that, pursuant to authority
conferred upon the Board of Directors by the Restated Certificate
of Incorporation of the Corporation, as amended, and pursuant to
the provisions of Section 151 of the General Corporation Law of the
State of Delaware, the Board of Directors, by resolutions adopted
to be effective on February 22, 2021, duly determined that 115,000
of the authorized shares of Preferred Stock, $0.01 par value per
share, of the Corporation shall be designated “Series K
Preferred Stock,” and duly adopted a resolution providing for
the voting powers, designations, preferences and relative,
participating, optional or other rights, and the qualifications,
limitations and restrictions, of the Series K Preferred Stock,
which resolution is as follows:
“RESOLVED, that the
Board of Directors, pursuant to the authority vested in it by the
provisions of the Restated Certificate of Incorporation of the
Corporation, as amended, hereby authorizes the issuance of 115,000
shares of Preferred Stock, $.01 par value, of the Corporation (and
fractions thereof in one-one hundredth increments), which shall be
designated as “Series K Preferred Stock” (the
“Series K Preferred Stock”), with each share of Series
K Preferred Stock having a stated value of $1.00 (the “Stated
Value”) and having the following designations, powers,
preferences and relative, participating, optional and other special
rights, and the qualifications, limitations and
restrictions:
1.
Definitions.
As used herein, the following terms shall have the following
meanings:
(a)
“Board”
shall mean the Board of Directors of the Corporation
(b)
“Common
Stock” shall mean the Corporation’s common stock, par
value $0.001 per share.
(c)
“Issuance
Date” shall mean the date on which the first share of Series
K Preferred Stock is
issued.
(d)
“Liquidation”
shall mean any voluntary or involuntary liquidation, dissolution
or winding-up of the
Corporation.
(e)
“Preferred
Stock” shall mean the Corporation’s preferred stock,
par value $0.01 per share.
(f)
“Securities
Act” shall mean the Securities Act of 1933, as
amended.
2.
Rank. The Series K Preferred
Stock will rank on parity to any class or series of our capital
stock hereafter created specifically ranking by its terms on parity
with the Series K Preferred Stock.
3.
Dividends. Shares of Series K
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 K Preferred Stock will participate, on an
as-if-converted-to-common stock basis (without giving effect to the
“Beneficial Ownership Limitation” set forth in Section
6L), in any dividends to the holders of common stock.
4.
Voting Rights. Shares of Series
K Preferred Stock will have the same voting rights as shares of
common stock with each share of Series K Preferred Stock entitled
to vote on an as-converted basis (after giving effect to the
“Beneficial Ownership Limitation” set forth in Section
6L) at a meeting of the shareholders of the
Corporation.
5.
Liquidation Preference. In the
event of our liquidation, dissolution or winding up, holders of the
Series K Preferred Stock will have a liquidation preference equal
to $0.01 per share of Series K Preferred Stock and thereafter shall
be on parity with the holders of our common stock and will
participate, on an as-if-converted-to-common stock basis (without
giving effect to the “Beneficial Ownership Limitation”
set forth in Section 6L), in any distributions to the holders of
common stock.
6.
Conversion Rights. The holders
of shares of Series K Preferred Stock shall have the following
conversion rights:
A.
Conversion Rate. Each share of the
Series K Preferred Stock is convertible into 100 shares of Common
Stock (the “Conversion Rate”) at any time at the option
of the holder.
B.
Upon Extraordinary Common Stock Event.
Upon the happening of an Extraordinary Common Stock Event, shares
of Series K Preferred Stock shall be impacted in the same way our
shares of common stock were impacted by the Extraordinary Common
Stock Event. An “Extraordinary Common Stock Event”
shall mean: (i) the issuance of additional shares of Common Stock
as a dividend or other distribution on the outstanding shares of
Common Stock, (ii) the subdivision of outstanding shares of Common
Stock into a greater number of shares of Common Stock, or (iii) the
combination of the outstanding shares of Common Stock into a
smaller number of shares of Common Stock, in each case other than
pursuant to a transaction provided for in Section 6C or
6D.
C.
Capital Reorganization or
Reclassification. If the shares of Common Stock issuable
upon conversion of Series K Preferred Stock shall be changed into
the same or a different number of shares of any class or classes of
stock, whether by reorganization, reclassification or otherwise
(other than a subdivision or combination of shares or stock
dividend provided for in Section 6B, or a reorganization, merger,
consolidation or sale of assets provided for in Section 6D), then
and in each such event, the holders of shares of Series K Preferred
Stock shall have the right thereafter to convert such shares into
the kind and amount of shares of stock and other securities and
property receivable upon such reorganization, reclassification or
other change by the holders of the number of shares of Common Stock
into which such shares of Series K Preferred Stock were convertible
immediately prior to such reorganization, reclassification or other
change, all subject to further adjustment as provided
herein.
D.
Reorganization, Merger or
Consolidation. If at any time or from time to time there
shall be a reorganization, reclassification or recapitalization of
the capital stock (other than a subdivision, combination,
reorganization, reclassification or exchange of shares provided for
elsewhere in this Section 6) (a “Reorganization”), then
as a part of such Reorganization, provision shall be made so that
each holder of Series K Preferred Stock shall thereafter be
entitled to receive upon conversion of such shares of Series K
Preferred Stock, the number of shares of stock or other securities
or property to which a holder of the number of shares of Common
Stock into which such holder’s shares of Series K Preferred
Stock were convertible immediately prior to such Reorganization
would have been entitled upon consummation of such Reorganization.
In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 6 with respect to the
rights of the holders of Series K Preferred Stock after the
Reorganization to the end that the provisions of this Section 6
(including adjustment of the Conversion Value then in effect, and
the number of shares of Common Stock issuable upon conversion of
the Series K Preferred Stock) shall be applicable after that event
in as nearly equivalent a manner as may be
practicable.
E.
Exercise of Conversion Privilege. To
exercise the conversion right set forth in Section 6A, a holder of
shares of Series K Preferred Stock shall surrender the certificates
representing the shares being converted to the Corporation at its
principal office, and shall give written notice to the Corporation
at that office that such holder elects to convert such shares. Such
notice shall also state the name or names (with address or
addresses) in which the certificates for shares of Common Stock
issuable upon such conversion shall be issued. The certificates for
shares of Series K Preferred Stock surrendered for conversion shall
be accompanied by proper assignment thereof to the Corporation or
in blank. The date when such written notice is received by the
Corporation, together with the certificates representing the shares
of Series K Preferred Stock being converted, shall be deemed the
“Conversion Date.” As promptly as practicable after the
Conversion Date, the Corporation shall issue and deliver
certificates to each holder of shares of Series K Preferred Stock
so converted, or on its written order, such certificates as it may
request, for the number of whole shares of Common Stock issuable
upon the conversion of such shares of Series K Preferred Stock in
accordance with the provisions of this Section 6, and cash as
provided in Section 6J, in respect of any fraction of a share of
Common Stock issuable upon such conversion. Such conversion shall
be deemed to have been effected immediately prior to the close of
business on the Conversion Date, and at such time the rights of the
holder as holder of the converted shares of Series K Preferred
Stock shall cease and the person or persons in whose name or names
any certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become the holder or
holders of record of the shares of Common Stock represented
thereby.
F.
Cash in Lieu of Fractional Shares. No
fractional shares of Common Stock or scrip representing fractional
shares shall be issued upon any conversion of shares of Series K
Preferred Stock. Instead of any fractional shares of Common Stock
which would otherwise be issuable upon conversion of shares of
Series K Preferred Stock, the Corporation shall pay to the holder
of shares of Series K Preferred Stock which were converted a cash
adjustment in respect of such fractional shares in an amount equal
to the same fraction of the Market Price per share of the Common
Stock at the close of business on the Conversion Date. The
determination as to whether or not any fractional shares are
issuable shall be based upon the total number of shares of Series K
Preferred Stock so converted at any one time by any holder thereof,
and not upon each share of Series K Preferred Stock so
converted.
G.
Partial Conversion. In the event some
but not all of the shares of Series K Preferred Stock represented
by a certificate surrendered by a holder are converted, the
Corporation shall execute and deliver to or on the order of the
holder, at the expense of the Corporation, a new certificate
representing the number of shares of Series K Preferred Stock which
were not converted.
H.
Reservation of Common Stock. The
Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion of shares of Series K Preferred
Stock, such number of shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding
shares of Series K Preferred Stock, and if at any time the number
of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares
of Series K Preferred Stock, the Corporation shall take such
corporate action as may be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
I.
No Reissuance of Series K Preferred
Stock. Shares of Series K Preferred Stock which are
converted into shares of Common Stock as provided herein shall not
be reissued.
J.
Issue Tax. The issuance of certificates
for shares of Common Stock upon conversion of any shares of Series
K Preferred Stock shall be made without charge to the holders
thereof for any issuance tax in respect thereof; provided that the
Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the holder
of the shares of Series K Preferred Stock which are being
converted.
K.
Closing of Books. The Corporation will
at no time close its transfer books against the transfer of any
shares of Series K Preferred Stock or of any shares of Common Stock
issued or issuable upon the conversion of any shares of Series K
Preferred Stock in any manner which interferes with the timely
conversion of such shares of Series K Preferred Stock, except as
may otherwise be required to comply with applicable securities
laws.
L.
Beneficial Ownership Limitation. The
Corporation shall not effect any conversion of the Series K
Preferred Stock, and a Holder shall not have the right to convert
any portion of the Preferred Stock, to the extent that, after
giving effect to the conversion set forth on the applicable Notice
of Conversion, such Holder (together with such Holder’s
Affiliates, and any Persons acting as a group together with such
Holder or any of such Holder’s Affiliates (such Persons,
“Attribution Parties”)) would beneficially own in
excess of the Beneficial Ownership Limitation (as defined below).
For purposes of the foregoing sentence, the number of shares of
Common Stock beneficially owned by such Holder and its Affiliates
and Attribution Parties shall include the number of shares of
Common Stock issuable upon conversion of the Series K Preferred
Stock with respect to which such determination is being made, but
shall exclude the number of shares of Common Stock which are
issuable upon (i) conversion of the remaining, unconverted Stated
Value of Preferred Stock beneficially owned by such Holder or any
of its Affiliates or Attribution Parties and (ii) exercise or
conversion of the unexercised or unconverted portion of any other
securities of the Corporation subject to a limitation on conversion
or exercise analogous to the limitation contained herein
(including, without limitation, the Preferred Stock or the
Warrants) beneficially owned by such Holder or any of its
Affiliates or Attribution Parties. Except as set forth in the
preceding sentence, for purposes of this Section 6L, beneficial
ownership shall be calculated in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated
thereunder. To the extent that the limitation contained in this
Section 6L applies, the determination of whether the Preferred
Stock is convertible (in relation to other securities owned by such
Holder together with any Affiliates and Attribution Parties) and of
how many shares of Preferred Stock are convertible shall be in the
sole discretion of such Holder, and the submission of a Notice of
Conversion shall be deemed to be such Holder’s determination
of whether the shares of Preferred Stock may be converted (in
relation to other securities owned by such Holder together with any
Affiliates and Attribution Parties) and how many shares of the
Preferred Stock are convertible, in each case subject to the
Beneficial Ownership Limitation. To ensure compliance with this
restriction, each Holder wall be deemed to represent to the
Corporation each time it delivers a Notice of Conversion that such
Notice of Conversion has not violated the restrictions set forth in
this paragraph and the Corporation shall have no obligation to
verify or confirm the accuracy of such determination. In addition,
a determination as to any group status as contemplated above shall
be determined in accordance with Section 13(d) of the Exchange Act
and the rules and regulations promulgated thereunder. For purposes
of this Section 6L, in determining the number of outstanding shares
of Common Stock, a Holder may rely on the number of outstanding
shares of Common Stock as stated in the most recent of the
following: (i) the Corporation’s most recent periodic or
annual report filed with the Commission, as the case may be, (ii) a
more recent public announcement by the Corporation or (iii) a more
recent written notice by the Corporation or the Transfer Agent
setting forth the number of shares of Common Stock outstanding.
Upon the written or oral request (which may be via email) of a
Holder, the Corporation shall within two Trading Days confirm
orally and in writing to such Holder the number of shares of Common
Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Corporation,
including the Preferred Stock, by such Holder or its Affiliates or
Attribution Parties since the date as of which such number of
outstanding shares of Common Stock was reported. The
“Beneficial Ownership Limitation” shall be 9.99% of the
number of shares of the Common Stock outstanding immediately after
giving effect to the issuance of shares of Common Stock issuable
upon conversion of Series K Preferred Stock held by the applicable
Holder. A Holder, upon notice to the Corporation, may increase or
decrease the Beneficial Ownership Limitation provisions of this
Section 6L applicable to its Preferred Stock provided that the
Beneficial Ownership Limitation in no event exceeds 9.99% of the
number of shares of the Common Stock outstanding immediately after
giving effect to the issuance of shares of Common Stock upon
conversion of this Series K Preferred Stock held by the Holder and
the provisions of this Section 6L shall continue to apply. Any such
increase in the Beneficial Ownership Limitation will not be
effective until the 61st day after such notice is delivered to the
Corporation and shall only apply to such Holder and no other
Holder. The provisions of this paragraph shall be construed and
implemented in a manner otherwise than in strict conformity with
the terms of this Section 6L to correct this paragraph (or any
portion hereof) which may be defective or inconsistent with the
intended Beneficial Ownership Limitation contained herein or to
make changes or supplements necessary or desirable to properly give
effect to such limitation. The limitations contained in this
paragraph shall apply to a successor holder of Preferred
Stock.
7.
Miscellaneous.
(a)
The Corporation
covenants that all shares of Common Stock which may be issued upon
conversions of shares of Series K Preferred Stock will upon
issuance be duly and validly issued, fully paid and nonassessable,
free of all liens and charges and not subject to any preemptive
rights.
(b)
No share or shares
of Series K Preferred Stock acquired by the Corporation by reason
of redemption, purchase, conversion or otherwise, shall be
reissued, and all such shares shall be cancelled, retired and
eliminated from the shares which the Corporation shall be
authorized to issue.”
The
number of shares of Series K Preferred Stock authorized is 115,000,
none of which have been issued.
IN
WITNESS WHEREOF, this Certificate of Designation has been signed by
an authorized officer of the Corporation as of the date first
written above.
By:
/s/ Anthony
Cataldo
Name:
Anthony Cataldo
Title:
Chief Executive Officer
Exhibit 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY
ACT
I, Anthony
Cataldo, certify that:
a.
I have reviewed
this report on Form 10-K of GT Biopharma, Inc.;
b.
Based on my
knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period
covered by this report;
c.
Based on my
knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
d.
I am responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f) for the registrant and
have:
i)
Designed such
disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
ii)
Designed such
internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
iii)
Evaluated the
effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
iv)
Disclosed in this
report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting;
and
e.
I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit
committee of the registrant’s board of directors (or persons
performing the equivalent functions):
i)
all significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information;
and
ii)
any fraud, whether
or not material, that involves management or other employees who
have a significant role in the registrant’s internal control
over financial reporting.
|
Date: April 16,
2021
|
By:
|
/s/ Anthony
Cataldo
|
|
|
|
Name:
|
Anthony
Cataldo
|
|
|
|
Title:
|
Chief Executive
Officer, Chairman and Director
|
|
Exhibit 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY
ACT
I, Michael
Handelman, certify that:
a.
I have reviewed
this report on Form 10-K of GT Biopharma, Inc.;
b.
Based on my
knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period
covered by this report;
c.
Based on my
knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
d.
I am responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f) for the registrant and
have:
i)
Designed such
disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
ii)
Designed such
internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
iii)
Evaluated the
effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
iv)
Disclosed in this
report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting;
and
e.
I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit
committee of the registrant’s board of directors (or persons
performing the equivalent functions):
i)
all significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information;
and
ii)
any fraud, whether
or not material, that involves management or other employees who
have a significant role in the registrant’s internal control
over financial reporting.
|
Date: April 16,
2021
|
By:
|
/s/ Michael
Handelman
|
|
|
|
|
Michael
Handelman
|
|
|
|
|
Chief Financial
Officer and Principal Accounting Officer
|
|
Exhibit 32.1
CERTIFICATION TO SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002
Pursuant
to 18 U.S.C. § 1350, as created by Section 906 of the
Sarbanes-Oxley Act of 2002, I, Anthony Cataldo, Chief
Executive Officer of GT Biopharma, Inc. (the
“Company”), hereby certify that, to the best of my
knowledge:
(i) the
Annual Report on Form 10-K of the Company for the fiscal year ended
December 31, 2020 (the “Report”) fully complies with
the requirements of Section 13(a) or Section 15(d), as applicable,
of the Securities Exchange Act of 1934, as amended;
and
(ii)
the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operation
of the Company.
|
Date: April 16,
2021
|
By:
|
/s/ Anthony
Cataldo
|
|
|
|
Name:
|
Anthony
Cataldo
|
|
|
|
Title:
|
Chief Executive
Officer, Chairman and Director
|
|
Exhibit 32.2
CERTIFICATION TO SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002
Pursuant
to 18 U.S.C. § 1350, as created by Section 906 of the
Sarbanes-Oxley Act of 2002, I, Michael Handelman, Chief
Financial Officer and Principal Accounting Officer of GT Biopharma,
Inc. (the “Company”), hereby certify that, to the best
of my knowledge:
(i) the
Annual Report on Form 10-K of the Company for the fiscal year ended
December 31, 2020 (the “Report”) fully complies with
the requirements of Section 13(a) or Section 15(d), as applicable,
of the Securities Exchange Act of 1934, as amended;
and
(ii)
the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operation
of the Company.
|
Date: April 16,
2021
|
By:
|
/s/ Michael
Handelman
|
|
|
|
|
Michael
Handelman
|
|
|
|
|
Chief Financial
Officer and Principal Accounting Officer
|
|