GT Biopharma, Inc 10-Q for FY2022 Q3
GT Biopharma, Inc. (GTBP)
About this 10-Q
GT Biopharma, Inc filed this 10-Q on October 31, 2022, covering the quarter ended September 30, 2022 (FY2022 Q3).
Headline figures
Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $6.88M
- compared with a net loss of $5.45M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For
the quarterly period ended
| Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from __________ to ____________.
Commission
File Number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
(Address of principal executive offices and zip code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of exchange on which registered | ||
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.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller
reporting company | |
| Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As October 31, 2022, the issuer had shares of common stock outstanding.
GT Biopharma, Inc. and Subsidiaries
Table of Contents
| 2 |
GT BIOPHARMA, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except shares and par value)
| September 30 | December 31, | |||||||
| 2022 | 2021 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Short-term investments | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| Operating lease right-of-use asset | ||||||||
| Deposits | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Current operating lease liability | ||||||||
| Derivative liability | ||||||||
| Total Current Liabilities | ||||||||
| Non-current operating lease liability | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Equity | ||||||||
| Convertible Preferred stock, par value $, shares authorized | ||||||||
| Series C - shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively | ||||||||
| Common stock, par value $, shares authorized, shares and shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively | |
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| Common stock issuable shares and shares at September 30, 2022 and December 31, 2021, respectively | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
GT BIOPHARMA, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Operating Expenses | ||||||||||||||||
| Research and development (includes $ and $ of expense from stock compensation to officers, employees and directors vesting during the three months ended September 30, 2022 and 2021, and $ and $ for the nine months ended September 30, 2022 and 2021, respectively) | ||||||||||||||||
| Selling, general and administrative (includes $and $of expense from stock compensation granted to officers, employees and directors during the three months ended September 30, 2022 and 2021, and $ and $ | ||||||||||||||||
| Loss from Operations | ||||||||||||||||
| Other (Income) Expense | ||||||||||||||||
| Interest income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense | ||||||||||||||||
| Change in fair value of derivative liability | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Unrealized loss on marketable securities | ||||||||||||||||
| Total Other (Income) Expense | ( | ) | ( | ) | ( | ) | ||||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share – basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding – basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
GT BIOPHARMA, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
For The Three Months Ended September 30, 2022 (Unaudited)
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Preferred Shares | Common Shares | Common Shares Issuable | Additional Paid in | Accumulated | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Equity compensation to officers, employees, and board of directors | - | |||||||||||||||||||||||||||||||||||
| Equity compensation to consultants | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common shares in settlement of vendor payable | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
For The Nine Months Ended September 30, 2022 (Unaudited)
| Preferred Shares | Common Shares | Common Shares Issuable | Additional Paid | Accumulated | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | in Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Cancellation of common stock previously issued for services | - | ( | ) | - | ||||||||||||||||||||||||||||||||
| Cancellation of common stock previously issued to prior CEO | - | ( | ) | ( | ) | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Common stock issued upon conversion of notes payable | - |
| ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Equity compensation to officers, employees, and board of directors | - | |||||||||||||||||||||||||||||||||||
| Equity compensation to consultants | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common shares in settlement of vendor payable | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| 5 |
For The Three Months Ended September 30, 2021 (Unaudited)
| Preferred Shares | Common Shares | Common Shares Issuable | Additional Paid in | Accumulated | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Common shares issued upon mandatory conversion of notes payable and accrued interest | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Common shares issued upon exercise of warrants | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for services | - | - | ||||||||||||||||||||||||||||||||||
| Equity compensation to officers and board of directors | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
For The Nine Months Ended September 30, 2021 (Unaudited)
| Preferred Shares | Common Shares | Common Shares Issuable | Additional Paid in | Accumulated | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Extinguishment of debt discount upon adoption of ASU 2020-06 | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Conversion of Preferred Series J-1 to common stock | ( | ) | ( | ) | - | |||||||||||||||||||||||||||||||
| Common shares issued upon mandatory conversion of notes payable and accrued interest | - | |||||||||||||||||||||||||||||||||||
| Common shares issued upon exercise of warrants | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock in public offering, net of cost | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for research and development agreement | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for services | - | - | ||||||||||||||||||||||||||||||||||
| Equity compensation to officers and board of directors | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
GT BIOPHARMA, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| 2022 | 2021 | |||||||
| For the nine months ended | ||||||||
| September 31, | ||||||||
| 2022 | 2021 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock based compensation – consultants | ||||||||
| Stock based compensation - officers, employees and board of directors | ||||||||
| Convertible notes payable issued for consulting services | ||||||||
| Change in fair value of derivative liability | ( | ) | ( | ) | ||||
| Change in operating lease right-of-use assets | ||||||||
| Unrealized loss on marketable securities | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease in prepaid expenses | ||||||||
| (Increase) in deposits | ( | ) | ||||||
| (Decrease) Increase in accounts payable and accrued expenses | ( | ) | ||||||
| (Decrease) in operating lease liability | ( | ) | ||||||
| Increase in accrued interest | ||||||||
| Net Cash (Used in) Operating Activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Sales (purchases) of investments | ( | ) | ||||||
| Net Cash Provided by (Used in) Investing Activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of common stock | ||||||||
| Cancellation of common stock upon settlement with former officer | ( | ) | ||||||
| Proceeds from exercise of warrants | ||||||||
| Proceeds from issuance of notes payable | ||||||||
| Net Cash (Used in) Provided by Financing Activities | ( | ) | ||||||
| Net (Decrease) Increase in Cash | ( | ) | ||||||
| Cash at Beginning of Period | ||||||||
| Cash at End of Period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Cash paid during the year for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Right-of-use assets exchanged for lease liabilities | $ | $ | ||||||
| Extinguishment of unamortized debt discount and adjustment to accumulated deficit upon adoption of ASU 2020-06 | $ | $ | ||||||
| Common stock issued upon conversion of notes payable and accrued interest | $ | $ | ||||||
| Common stock issued upon settlement of vendor payable | $ | $ | ||||||
| Convertible notes payable issued for accrued expenses | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 7 |
GT BIOPHARMA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022 and 2021
(Unaudited)
Note 1 – Organization and Operations
In 1965, the corporate predecessor of GT Biopharma Inc. (Company), Diagnostic Data, Inc. was incorporated in the State of California. Diagnostic Data changed its incorporation to the State of Delaware in 1972 and changed its name to DDI Pharmaceuticals, Inc. in 1985. In 1994, DDI Pharmaceuticals merged with International BioClinical, Inc. and Bioxytech S.A. and changed its name to OXIS International, Inc. In July 2017, the Company changed its name to GT Biopharma, Inc.
The Company is a clinical stage biopharmaceutical company focused on the development and commercialization of novel immuno-oncology products based on our proprietary Tri-specific Killer Engager (TriKE®) fusion protein immune cell engager technology platform. The Company’s 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 a natural killer (“NK”) cell, our moieties are designed to enhance the NK cell, and precisely direct it to one or more specifically targeted proteins expressed on a specific type of cancer cell or virus infected cell, resulting in the targeted cell’s death. TriKE®s can be designed to target any number of tumor antigens on hematologic malignancies or solid tumors and do not require patient-specific customization.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Oxis Biotech, Inc. and Georgetown Translational Pharmaceuticals, Inc. All intercompany transactions and balances have been eliminated in consolidation.
The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on March 28, 2022 (the “2021 Annual Report”). The consolidated balance sheet as of December 31, 2021 included herein was derived from the audited consolidated financial statements as of that date.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all adjustments contained herein are of a normal recurring nature. Results of operations for the fiscal periods presented herein are not necessarily indicative of fiscal year-end results.
Liquidity
The
accompanying consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern.
Such assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the nine
months ended September 30, 2022, the Company recorded a net loss of $
Historically, the Company has financed its operations through public and private sales of common stock, issuance of preferred and common stock, issuance of convertible debt instruments, and strategic collaborations.
| 8 |
COVID-19
In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, has adversely affected workforces, customers, economies, and financial markets globally. It has also disrupted the normal operations of many businesses. This outbreak could adversely affect the Company’s operations.
While the pandemic has impacted the Company’s operations, during the nine months ended September 30, 2022, the Company believes the COVID-19 pandemic had limited impact on its operating results. 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 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 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, assumptions used in deriving the fair value of derivative liabilities, valuation of equity instruments issued for services and realization of deferred tax assets. Actual results could differ from those estimates.
Cash Equivalents and Short-Term Investments
The
Company considers highly liquid investments with maturities of three months or less at the date of acquisition as cash equivalents in
the accompanying condensed consolidated financial statements. As of September 30, 2022, total cash and cash equivalents which consist
of cash and money market funds, amounted to approximately $
The
Company also invested its excess cash in commercial paper and corporate notes and bonds. Management generally determines the appropriate
classification of its investments at the time of purchase. We classify these investments as short-term investments as part of current
assets, based upon our ability and intent to use any and all of these investments as necessary to satisfy liquidity requirements that
may arise from our businesses. Investments are carried at fair value with the unrealized holding gains and losses reported in the accompanying
condensed consolidated statements of operations. As of September 30, 2022, total short-term investments amounted to approximately $
Fair Value of Financial Instruments
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820-10 requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet for which it is practicable to estimate fair value. ASC 820-10 defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties.
The three levels of the fair value hierarchy are as follows:
| Level 1 | Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access. | |
| Level 2 | Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. | |
| Level 3 | Valuations based on inputs that are unobservable, supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
The
carrying amount of the Company’s derivative liability of $
The carrying amounts of the Company’s other financial assets and liabilities, such as cash, prepaid expense, accounts payable and accrued expenses approximate their fair values because of the short maturity of these instruments.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. The fair value of the embedded derivatives is determined using a Binomial valuation method at inception and on subsequent valuation dates.
| 9 |
Stock-Based Compensation
The Company accounts for share-based awards to employees, non-employees and consultants in accordance with the provisions of ASC 718, Compensation-Stock Compensation. Stock-based compensation cost is measured at fair value on the grant date and that fair value is recognized as expense over the requisite service, or vesting period.
The Company values its equity awards using the Black-Scholes option pricing model, and accounts for forfeitures when they occur. Use of the Black-Scholes option pricing model requires the input of subjective assumptions including expected volatility, expected term, and a risk-free interest rate. The Company estimates volatility using its own historical stock price volatility. The expected term of the instrument is estimated by using the simplified method. The risk-free interest rate is estimated using comparable published federal funds rates.
Research and Development Costs
Costs incurred for research and development are expensed as incurred. The salaries, benefits, and overhead costs of personnel conducting research and development of the Company’s products are included in research and development expenses. Purchased materials that do not have an alternative future use are also expensed.
Leases
The Company accounts for its leases in accordance with Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASC 842”). ASC 842 requires lessees to (i) recognize a right of use asset (“ROU asset”) and a lease liability that is measured at the present value of the remaining lease payments, on the consolidated balance sheets, (ii) recognize a single lease cost, calculated over the lease term on a straight-line basis, and (iii) classify lease related cash payments within operating and financing activities. The Company has made an accounting policy election to not recognize short-term leases on the consolidated balance sheets and all non-lease components, such as common area maintenance, were excluded. At any given time during the lease term, the lease liability represents the present value of the remaining lease payments, and the ROU asset is measured as the amount of the lease liability, adjusted for pre-paid rent, unamortized initial direct costs, and the remaining balance of lease incentives received. Both the lease ROU asset and liability are reduced to zero at the end of the lease term.
The Company leases office space and equipment. At the lease inception date, the Company determines if an arrangement is, or contains a lease. Some of the Company’s leases include options to renew at similar terms. The Company assesses these options to determine if the Company is reasonably certain of exercising these options based on relevant economic and financial factors. Options that meet these criteria are included in the lease term at the lease commencement date.
During
the nine months ended September 30, 2022, the Company executed lease agreements for its office space and equipment and as a result, recorded
operating lease right-of-use assets and the related lease liabilities of $
Basic loss per share is computed using the weighted-average number of common shares outstanding during the period. Common stock issuable is included in our calculation as of the date of the underlying agreement. Diluted 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 common stock issuable for the exercise of stock options and warrants, have been excluded from the diluted loss per share calculation because their effect is anti-dilutive.
Schedule of Anti-dilutive Securities
| September 30, 2022 (Unaudited) | September 30, 2021 (Unaudited) | |||||||
| Options to purchase common stock | ||||||||
| Warrants to purchase common stock | ||||||||
| Unvested restricted common stock | ||||||||
| Convertible Series C Preferred Stock | - | | ||||||
| Total anti-dilutive securities | | |
Concentration
Cash
is deposited in one financial institution. The balances held at this financial institution at times may be more than Federal Deposit
Insurance Corporation (“FDIC”) insurance limits of up to $
The Company has a significant concentration of expenses incurred and accounts payable from a single vendor. Please see Note 4 for further information.
Segments
The Company determined its reporting units in accordance with ASC 280, “Segment Reporting”. 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.
| 10 |
Management has determined that the Company has one operating segment. The Company’s reporting segment reflects the manner in which its chief operating decision maker reviews results and allocates resources. The Company’s reporting segment meets the definition of an operating segment and does not include the aggregation of multiple operating segments.
Recent Accounting Pronouncements
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. ASU 2021-04 provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. An issuer measures the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange. ASU 2021-04 introduces a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification). ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date. Early adoption is permitted for all entities, including adoption in an interim period. Effective January 1, 2022, we adopted ASU 2021-04 using a prospective approach. The adoption of this standard did not have a material impact on the Company’s financial statements or disclosures.
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832)—Disclosures by Business Entities about Government Assistance. ASU 2021-10 increases the transparency of government assistance including the disclosure of (1) the types of assistance, (2) an entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements. The ASU is effective for fiscal years beginning after December 15, 2021. The Company adopted this ASU as of January 1, 2022 on a prospective basis. The adoption of this standard did not have any material impact on the Company’s financial statements or disclosures.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.
Note 3 – Fair Value of Financial Instruments
The estimated fair values of financial instruments outstanding were (in thousands):
Schedule of Estimated Fair Value of Financial Instrument
| September 30, 2022 (Unaudited) | ||||||||||||||||
| Unrealized | Unrealized | Fair | ||||||||||||||
| Cost | Gains | Losses | Value | |||||||||||||
| Short-term investments | $ | $ | $ | ( | ) | $ | ||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
| December 31, 2021 | ||||||||||||||||
| Unrealized | Unrealized | Fair | ||||||||||||||
| Cost | Gains | Losses | Value | |||||||||||||
| Short-term investments | $ | $ | $ | ( | ) | $ | ||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
| 11 |
The following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents and investments) (in thousands):
Schedule of Fair Value Hierarchy Financial Assets
| Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
| September 30, 2022 (Unaudited) | ||||||||||||||||
| Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
| Money market funds | $ | $ | $ | $ | ||||||||||||
| Corporate notes and commercial paper | ||||||||||||||||
| Total financial assets | $ | $ | $ | $ | ||||||||||||
| Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
| December 31, 2021 | ||||||||||||||||
| Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
| Money market funds | $ | $ | $ | $ | ||||||||||||
| Corporate notes and commercial paper | ||||||||||||||||
| Total financial assets | $ | $ | $ | $ | ||||||||||||
As
of September 30, 2022, the fair value of the derivative liability was $
Schedule of Derivative Liability Transactions
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||||
| Three Months Ending | Nine Months Ending | |||||||||||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Beginning balance | $ | $ | $ | $ | ||||||||||||
| Issuance of warrants | ||||||||||||||||
| Change in fair value | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Extinguishment | ||||||||||||||||
| Ending balance | $ | $ | $ | $ | ||||||||||||
Note 4 – Accounts Payable
Accounts payable consisted of the following (in thousands):
Schedule of Accounts Payable
| September
30, 2022 | December
31, 2021 | |||||||
| (Unaudited) | ||||||||
| Accounts payable to a third-party manufacturer | $ | $ | ||||||
| Other accounts payable | ||||||||
| Total accounts payable | $ | $ | ||||||
The Company relies on a third-party contract manufacturer to produce and/or test compounds used in our potential product candidates.
On August 24, 2022, the Company entered into an
agreement with this third-party manufacturer and issued shares
of common stock with a fair value of $
The Company’s accounts payable to this
third-party manufacturer amounted to $
Note 5 – Convertible Notes Payable
In
fiscal 2020, the Company recorded a note/debt discount of $
On
January 1, 2021 the Company chose to adopt ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an
Entity’s Own Equity. As a result of the adoption of ASU 2020-06, the Company extinguished the previously recorded debt discount
of $
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 is classified as a liability in the Condensed Consolidated Balance Sheets and will be re-measured at the end of every reporting period with the change in value reported in the statement of operations.
The derivative liabilities were valued using a Binomial pricing model with the following average assumptions:
Schedule of Derivative Liabilities Assumptions
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (Unaudited) | ||||||||
| Stock price | $ | $ | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected volatility | % | % | ||||||
| Expected life (in years) | ||||||||
| Expected dividend yield | ||||||||
| Fair value of warrants | $ | $ | ||||||
| 12 |
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 expected volatility. The expected life was determined by using the remaining contractual life of the derivative instrument. 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.
The
Company recognized a gain of $
The
Company recognized a gain of $
Note 7 – Stockholders’ Equity
The Company’s authorized capital as of September 30, 2022 was shares of common stock, par value $ per share, and shares of preferred stock, par value $ per share. The Company subsequently changed its authorized shares of common stock to shares (see Note 9).
Common Stock
Common Stock Issuable
On
February 16, 2021, because of the mandatory conversion of the notes payable and accrued interest in the aggregate amount of $
Cancellation of common stock
The Company cancelled previously issued shares of common stock during the nine months ended September 30, 2022.
Equity compensation to officers, employees and directors
| a. | As part of employment agreements with its former CEO and its former CFO (“Officers”), the Officers received a fully vested stock grant equal to an aggregate of and of the fully diluted shares of common stock of the Company (calculated with the inclusion of the current stock holdings of the CEO) upon conversion of options, warrants and Convertible Notes in association with a national markets qualified financing as consideration for entering into the Agreement (with such stock to vest and be delivered within 30 days after the national markets qualified financing). In addition, the Company also granted similar equity compensation to members of the Company’s board of directors wherein these directors received stock grants equal to and of the fully diluted shares of common stock of the Company. over a period of . | |
| On
February 16, 2021, the Company completed its equity offering and listed its shares of common stock on the Nasdaq Capital Market. As such,
shares of its common stock were granted to these Officers, employees and directors, which had a fair value of $ | ||
|
During the three months and nine months ended September 30, 2022, the Company recognized $ and $million of stock compensation expense related to the vesting of common shares to officers, employees and directors. | ||
During the three months and nine months ended September 30, 2021, the Company recognized $ and $ million of stock compensation expense related to the vesting of these common shares to officers, employees and directors. | ||
| b. | In July 2022, the Company granted shares of fully vested common stock with a fair value of $ | |
During the three months and nine months ended September 30, 2022, the Company recognized $ and $ of stock compensation expense related to the vesting of these common shares. | ||
| c. | During the three months and nine months ended September 30, 2022, the Company also recognized stock compensation expense of $ million and $ million, respectively, to account for the fair value of vested stock options. |
As a result, the Company recognized total stock compensation expense of $ million and $ million for the three months and nine months ended September 30, 2022.
As of September 30, 2022, there were unvested shares of common stock issued to officers, employees and directors with a fair value of $that will be recognized as stock compensation expense in future periods pursuant to its vesting term.
| 13 |
Equity compensation to consultants
| a. | As part of consulting agreements with certain consultants, the Company agreed to grant these consultants common stock equal to and of the fully diluted shares of common stock of the Company upon conversion of options, warrants and Convertible Notes in association with a national markets qualified financing as consideration for entering into the Agreement (with such stock to vest and be delivered within 30 days after the national markets qualified financing). | |
| On February 16, 2021, the
Company completed its equity offering and listed its shares of common stock on the Nasdaq Capital Market. As a result of this offering,
the Company agreed to issue to these consultants shares of common stock with a grant date
fair value of $ | ||
During the three months and nine months ended September 30, 2022, the Company recognized stock compensation expense of $and $, respectively, related to the vesting of these common shares to consultants. | ||
| b. | In July 2022, the Company
granted shares of fully vested common stock with
a fair value of $ | |
During the three months and nine months ended September 30, 2022, the Company recognized $and $of stock compensation expense related to the vesting of common shares. | ||
| c. | During the three months and nine months ended September 30, 2022, the Company also recognized stock compensation expense of $and $, respectively, to account for the fair value of all vested stock options. |
As a result, the Company recognized total stock compensation expense of $ million and $ million during the three and nine months ended September 30, 2022, respectively.
During the three months and nine months ended September 30, 2021, the Company recognized an aggregate of $ and $million of stock compensation expense related to the vesting of common shares granted to consultants.
As of September 30, 2022, there were unvested shares of common stock issued to consultants with a fair value of $that will be recognized as stock compensation expense in future periods based upon their vesting term.
Settlement of common stock with a former Officer
On
April 29, 2022, the Company entered into a settlement agreement with its former Chief Executive Officer (“Officer”) and received
shares of its previously issued common stock in full and final settlement of all its claims against the Officer. The common
stock was subsequently cancelled. In addition, the Company incurred legal and professional expenses of $
Preferred Stock
Series C Preferred Stock
At September 30, 2022 and December 31, 2021, there were shares of series C preferred stock, par value $ per share (the “Series C Preferred Stock”) issued and outstanding.
As a result of reverse stock splits in previous years and the agreement terms for adjusting the rights of the related shares, the shares of Series C Preferred Stock are not currently convertible, have no voting rights, and in the event of liquidation, the holders of the Series C Preferred Stock would not participate in any distribution of the assets or surplus funds of the Company. The holders of Series C Preferred Stock also are not currently entitled to any dividends if and when declared by the Company’s board of directors (the “Board”). No dividends to holders of the Series C Preferred Stock were issued or unpaid through September 30, 2022 and 2021, respectively.
| 14 |
Series K Preferred Stock
On February 16, 2021, the Board designated shares of Series K preferred stock, par value $. (the “Series K Preferred Stock”).
Shares of the Series K Preferred Stock are convertible at any time, at the option of the holders, into shares of the Company’s common stock at an effective conversion rate of shares of common stock for each share of Series K Preferred. Shares of the Series K Preferred Stock have the same voting rights as the shares of the Company’s common stock, with the holders of the Series K Preferred Stock entitled to vote on an as-converted-to-common stock basis, subject to the beneficial ownership limitation, together with the holders of the Company’s common stock on all matters presented to the Company’s stockholders. The Series K Preferred Stock are not entitled to any dividends (unless specifically declared by the Board) but will participate on an as-converted-to-common-stock basis in any dividends to the holders of the Company’s common stock. In the event of the Company’s dissolution, liquidation or winding up, the holders of the Series K Preferred Stock will be on parity with the holders of the Company’s common stock and will participate, on a on an as-converted-to-common stock basis, in any distribution to holders of the Company’s common stock.
As of September 30, 2022 and December 31, 2021, there were shares of Series K Preferred stock issued and outstanding.
Warrants and Options
Common Stock Warrants
Stock warrant transactions for the nine months ended September 30, 2022 were as follows:
Schedule of Warrant Activity
| Number of | Weighted Average | |||||||
| Warrants | Exercise Price | |||||||
| Warrants outstanding at December 31, 2021 | $ | |||||||
| Granted | ||||||||
| Forfeited/cancelled | ||||||||
| Exercised | ||||||||
| Warrants outstanding at September 30, 2022 | $ | |||||||
| Warrants exercisable at September 30, 2022 | $ | |||||||
As of September 30, 2022, all issued and outstanding warrants are fully vested, and have no intrinsic value as the exercise price of these warrants was greater than the market price.
Common Stock Options
Schedule of Options Activity
| Number of | Weighted Average | |||||||
| Options | Exercise Price | |||||||
| Options outstanding at December 31, 2021 | $ | |||||||
| Granted | ||||||||
| Forfeited/cancelled | ||||||||
| Exercised | ||||||||
| Options outstanding at September 30, 2022 | $ | |||||||
| Options exercisable at September 30, 2022 | $ | |||||||
| 15 |
On July 15, 2022, the Company granted certain consultants, employees, officers and directors stock options to purchase an aggregate of shares of common stock. The stock options are exercisable at $with a vesting term over a period of 5 months up to 36 months, will expire in ten years from grant date and with an estimated fair value of $million using the Black Scholes Option pricing model. The Company is recognizing the corresponding stock compensation expense of these options based upon the vesting term. During the three months and nine months ended September 30, 2022, the Company recognized stock compensation expense relating to the vesting of these options of $ million and $ million, respectively.
At September 30, 2022, there were unvested options with a grant date fair value of $million which will be recognized as stock compensation expense in future periods based upon the remaining vesting term of the applicable grants.
There was intrinsic value of the outstanding options as of September 30, 2022 as the exercise price of these options was greater than the market price.
Note 8 – Commitments and Contingencies
Litigation
The Company is involved in certain legal proceedings that arise from time to time in the ordinary course of our business. Except for income tax contingencies, we record accruals for contingencies to the extent that our management concludes that the occurrence is probable and that the related amounts of loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. Other than the item discussed below, there is no current or pending litigation of any significance with the exception of the matters that have arisen under, and are being handled in, the normal course of business.
On May 13, 2022, the
Company made a claim against Michael Handelman, its former Chief Financial Officer, asserting that he misappropriated Company
funds and shares of common stock, and failed to file the required SEC reports on Form 3 and Form 4 regarding each acquisition and
disposition of Company’s common stock. The Company seeks monetary damages estimated at $
As a component of Mr. Handelman’s contract with the Company, disputes shall be fully addressed and finally resolved by binding arbitration conducted by the American Arbitration Association (AAA) in New York City, New York, in accordance with its National Employment Dispute Resolution rules. In connection with any such arbitration, the Company shall bear all costs not otherwise borne by a plaintiff in a court proceeding. The Company agrees that any decisions of the Arbitration Panel will be binding and enforceable in any state that the Company conducts the operation of its business. In accordance with California Labor Laws, the Company has designated Los Angeles, California as the venue for this arbitration. The Company is awaiting to receive a date of hearing from AAA.
Significant Agreements
Research and Development Agreements
| a. | The
Company is a party to a scientific research agreement with the Regents of the University of Minnesota (“UoMN”), effective June 16, 2021.
This scientific research agreement aims to work with the Company with three major goals in mind: (1) support the Company’s
TriKE® product development and good manufacturing practice (“GMP”) manufacturing efforts; (2) TriKE® pharmacokinetics optimization in
humans; and (3) investigation of the patient’s native NK cell population based on insights obtained from the analysis of the
human data generated during our GTB-3550 clinical trial. The major deliverables proposed here are: (1) creation of investigational new drug (“IND”) enabling data
for TriKE® constructs in support of our product development and GMP manufacturing efforts; (2) TriKE®
platform drug delivery changes to allow transition to alternative drug delivery means and extended PK in humans; and (3) gain an
increased understanding of changes in the patient’s native NK cell population as a result of TriKE® therapy.
Most studies will use TriKE® DNA/amino acid sequences created by us under current UoMN/GTB licensing terms. The term
of this agreement shall expire on June 30, 2023. The University of Minnesota shall use reasonable efforts to complete the project
for a fixed sum of $ | |
| For the three months and nine months ended September 30,
2022, the Company recorded an expense of $ | ||
| At September 30, 2022, the Company’s remaining commitments in relation
to this agreement amounted to approximately $ | ||
| b. | ||
| For
the three months and nine months ended September 30, 2022, the Company recorded an expense of $ | ||
| As a result of an amendment to the agreement dated August 24, 2022, the Company has no remaining commitments in relation to these Statements of Work and any related Change Orders (see Note 4). |
Patent and License Agreements
2016 Exclusive Patent License Agreement
The
Company is party to an exclusive worldwide license agreement with the Regents of the University of Minnesota, to further develop and
commercialize cancer therapies using TriKE® technology developed by researchers at the UofMN to target NK cells to
cancer. Under the terms of the 2016 agreement, the Company receives exclusive rights to conduct research and to develop, make, use,
sell, and import TriKE® technology worldwide for the treatment of any disease, state, or condition in humans. The
Company is responsible for obtaining all permits, licenses, authorizations, registrations, and regulatory approvals required or
granted by any governmental authority anywhere in the world that is responsible for the regulation of products such as the
TriKE® technology, including without limitation the FDA and the European Agency for the Evaluation of Medicinal
Products in the European Union. Under the agreement, the UofMN received an upfront payment of $
For
the three months and nine months ended September 30, 2022, the Company incurred $
| 16 |
2021 Patent License Agreement
On
March 26, 2021, the Company signed an agreement specific to the B7H3 targeted TriKE®. Under the agreement, the UofMN received
an upfront license fee of $
For
the three months and nine months ended September 30, 2022, the Company did
Lease Agreements
On
November 19, 2021 the Company entered into a sublease with a third party for approximately
Rent
expense related to these leases reflected on the Company’s condensed consolidated statements of operations totaled $
Other information related to leases and future minimum lease payments under non-cancellable operating leases were as follows:
Schedule of Other Information Related Leases Under Non-Cancellable
September 30, 2022 (Unaudited) | ||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||
| Operating cash flows from operating leases | $ | |||
| Right-of-use assets obtained in exchange for lease liabilities: | ||||
| Operating leases | $ | |||
| Weighted-average remaining lease term (in years): | ||||
| Operating leases | ||||
| Weighted-average discount rate: | ||||
| Operating leases | % | |||
Future minimum lease payments under non-cancellable operating leases were as follows:
Schedule of Future Minimum Lease Payments
Operating leases (Unaudited) | ||||
| Within one year | $ | |||
| After one year and within two years | ||||
| After two years and within three years | ||||
| Total future minimum lease payments | $ | |||
| Less – discount | ( | ) | ||
| Lease liability | $ | |||
Note 9 - Subsequent Events
On October 3, 2022, the Company issued
shares of common stock with a fair value of $
On October 10, 2022, at a special meeting of the stockholders of the Company, the stockholders ratified and approved the inclusion of discretionary votes by brokers and other nominees holding shares for beneficial owners in the tabulation of votes on the proposal presented at the Company’s annual meeting of stockholders to reduce the authorized number of shares of the Company’s common stock from shares to shares.
| 17 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements regarding our current beliefs, goals and expectations about matters such as our expected financial position and operating results, our business strategy and our financing plans. The forward-looking statements in this report are not based on historical facts, but rather reflect the current expectations of our management concerning future results and events. The forward-looking statements generally can be identified by the use of terms such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “may,” “guidance,” “estimate,” “potential,” “outlook,” “target,” “forecast,” “likely” or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals are, or may be, forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be different from any future results, performance and achievements expressed or implied by these statements. We cannot guarantee that our forward-looking statements will turn out to be correct or that our beliefs and goals will not change. Our actual results could be very different from and worse than our expectations for various reasons. You should carefully review all information, including the discussion of risk factors under “Part I. Item 1A: Risk Factors” and “Part II. Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Form 10-K for the year ended December 31, 2021. Any forward-looking statements in the Form 10-Q are made only as of the date hereof and, except as may be required by law, we do not have any obligation to publicly update any forward-looking statements contained in this Form 10-Q to reflect subsequent events or circumstances.
Throughout this Quarterly Report on Form 10-Q, the terms “GTBP,” “we,” “us,” “our,” “the company” and “our company” refer to GT Biopharma, Inc., a Delaware corporation formerly known as Oxis International, Inc., DDI Pharmaceuticals, Inc. and Diagnostic Data, Inc, together with our subsidiaries.
Overview
We are a clinical stage biopharmaceutical company focused on the development and commercialization of novel immuno-oncology products based off our proprietary Tri-specific Killer Engager (TriKE®) fusion protein immune cell engager technology platform. Our TriKE® platform generates proprietary therapeutics designed to harness and enhance the cancer killing abilities of a patient’s own natural killer cells, or NK cells. Once bound to an NK cell, our moieties are designed to enhance the NK cell, and precisely direct it to one or more specifically targeted 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.
Our initial work has been conducted in collaboration with the Masonic Cancer Center at the University of Minnesota under a program led by Dr. Jeffrey Miller, the Deputy Director. Dr. Miller is a recognized leader in the field of NK cell and IL-15 biology and their therapeutic potential. We have exclusive rights to the TriKE® platform and are generating additional intellectual property.
| 18 |
Economic Disruption
While we make our strategic planning decisions based on the assumption that the markets we are targeting will grow in the long term, our business is dependent, in large part on, and directly affected by, business cycles and other factors affecting the economy. Our industry depends on general economic conditions and other factors, including consumer spending and preferences, changes in inflation rates, supply chain issues and impediments should they arise for us, as the U.S. and various other major economies are now experiencing, consumer confidence, fuel costs, fuel availability, environmental impact, governmental incentives and regulatory requirements, and political volatility, especially in cybersecurity growth markets.
In addition, the outbreak of hostilities between Russia and Ukraine and global reactions thereto have increased U.S. domestic and global energy prices. Oil supply disruptions related to the Russia-Ukraine conflict, and sanctions and other measures taken by the U.S. and its allies, could lead to higher costs for gas, food, and goods in the U.S. and other geographies and exacerbate the inflationary pressures on the worldwide economy, with potentially adverse impacts on our business, results of operations and financial condition.
Results of Operations
Comparison of the Three Months and Nine Months Ended September 30, 2022 and 2021
Research and Development Expenses
We recorded $2.8 million and $1.0 million in research and development expense (“R&D”) for the three months ended September 30, 2022 and 2021, an increase of $1.8 million over the prior year comparable period. We recorded $5.9 million and $3.3 million in R&D for the nine months ended September 30, 2022 and 2021, an increase of $2.6 million over the prior year comparable period. The increase in R&D resulted primarily due to hiring of additional employees and professionals in 2022, and costs associated with the continued development and manufacturing of our most advanced TriKE® product candidates GTB-3650 and GTB-5550.
Selling, general and administrative expenses
We recorded $4.3 million and $4.9 million in selling, general and administrative expense (“SG&A”) for the three months ended September 30, 2022 and 2021, a decrease of $0.6 million over the prior year comparable period. We recorded $9.5 million and $36.1 million in SG&A for the nine months ended September 30, 2022 and 2021, a decrease of $26.6 million over the prior year comparable period. The decrease in SG&A resulted primarily due to a decrease in stock-based compensation to consultants, officers and directors. We recorded additional expenses during the nine months ended September 30, 2021 that consisted of legal, finance, business advisory, consulting and professional fees in support of our planned growth and new public company compliance initiatives.
Interest Income
We recorded interest income of $107,000 and $32,000 for the three months ended September 30, 2022 and 2021, and $151,000 and $32,000 for the nine months ended September 30, 2022 and 2021, respectively. The increase in interest income is due to the interest earned on short-term investments in the three months and nine months ended September 30, 2022 as compared to the same comparable periods of 2021.
Interest Expense
We recorded $0 interest expense for the three months ended September 30, 2022 and 2021, and $0 and $696,000 for the nine months ended September 30, 2022 and 2021, respectively. The decrease in interest expense is due to the conversion of convertible notes payable to common shares during 2021. The Company did not have any outstanding convertible notes payable as of and during the three months and nine months periods ended September 30, 2022.
Change in fair value of derivative liability
The change in fair value of derivative liability was due to fair value remeasurement which resulted in a gain of $58,000 and $502,000 for the three months ending September 30, 2022 and 2021, respectively. The Company recorded a gain of $81,000 for the nine months ended September 30, 2022 compared to a gain of $43,000 for nine months ending September 30, 2021.
Unrealized loss on marketable securities
The unrealized loss on marketable securities was due to fair value remeasurement of our marketable securities which resulted in a loss of $23,000 and $33,000 for the three months ended September 30, 2022 and September 30, 2021, and $53,000 and $33,000 for the nine months ended September 30, 2022 and 2021, respectively.
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. 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. We anticipate that cash utilized in the twelve months following this filing date for selling, general and administrative expenses will range between $4 million and $5 million, and research and development expenses will range between $13 million and $15 million.
The Company reported cash and cash equivalents of $2.5 million, and short-term investments of $18.3 million as of September 30, 2022. Management believes that the Company has sufficient cash and cash equivalents, and short-term investments to funds its operations for more than twelve months from the date of this filing.
Management is currently evaluating different strategies to obtain the required funding for future operations. These strategies may include but are not limited to public offerings of equity and/or debt securities, payments from potential strategic research and development grants, licensing and/or marketing arrangements with other pharmaceutical companies.
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.
| 19 |
Basis of Presentation and Principles of Consolidation
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. These condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Oxis Biotech, Inc. and Georgetown Translational Pharmaceuticals, Inc. All intercompany transactions and balances have been eliminated in consolidation.
Accounting Estimates
The preparation of financial statements in conformity with Generally Accepted Accounting Principles 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, assumptions used in deriving the fair value of derivative liabilities, valuation of equity instruments issued for services, and valuation of deferred tax assets. Actual results could differ from those estimates.
Stock-Based Compensation
The Company accounts for share-based awards to employees, 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.
Inflation
We believe that inflation has not had a material adverse impact on our business or operating results during the periods presented other than the impact of inflation on the general economy. However, there is a risk that the Company’s operating costs could become subject to inflationary pressures in the future, which would have the effect of increasing the Company’s operating costs, and which would put additional stress on the Company’s working capital resources.
Off-balance Sheet Arrangements
We have no off-balance sheet arrangements as of September 30, 2022.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
This Company qualifies as a smaller reporting company, as defined in 17 C.F.R. §229.10(f)(1) and is not required to provide information for this Item
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Principal Executive Officer, Principal Financial 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 September 30, 2022. Based on that evaluation, we have concluded that our disclosure controls and procedures were not effective as of September 30, 2022 as a result of material weaknesses in internal control over financial reporting due to (i) inadequate segregation of duties, (ii) risks of executive override and (iii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both U.S. GAAP and SEC regulation, in each case, as described in “Item 9A. Controls and Procedures” in the Company’s Form 10-K for the year ended December 31, 2021.
The Company has continued to take measures to mitigate the issues identified and implement a functional system of internal controls over financial reporting. Specifically, the Company has brought on board an experienced Chief Financial Officer, and retained the services of outside consultants to review the Company’s accounting practices, bank records, transactions with affiliates and/or related parties, expense reimbursement practices and vendor payment practices. In addition, the Company’s board of directors previously designated a Special Committee in August 2021 charged with, among other duties, evaluating the current compliance, compensation, operations and personnel of the Company, and determining actions appropriate to address any deficiencies or inefficiencies identified through such evaluation. The Special Committee completed its assigned directives on April 29, 2022. The directives included measures that included or will include, but not be limited to, hiring of additional employees in the Company’s accounting department; preparation of risk-control matrices to identify key risks and develop and document policies to mitigate those risks; and identification and documentation of standard operating procedures for key financial activities, with additional oversight by the Company’s board of directors.
Changes in Internal Control over Financial Reporting
Except for the ongoing remediation of the material weaknesses in internal controls over financial reporting noted above, no changes in our internal control over financial reporting were made during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On May 13, 2022, the Company made a claim against Michael Handelman, its former Chief Financial Officer, asserting that he misappropriated Company funds and shares of common stock, and failed to file the required SEC reports on Form 3 and Form 4 regarding each acquisition and disposition of Company’s common stock. The Company seeks monetary damages estimated at $370,000; the return of shares of common stock received without authorization and the disgorgement of any profits earned from the sale of those shares; a full accounting for all sums charged on the Company’s debit card, with payment to the Company for any charges that cannot be demonstrated to have a corporate purpose; an order directing Michael Handelman to make all filings required by Section 16(a) of the 1934 Act; an award of all sums and shares improperly issued to members of Handelman’s family; and an award of the Company’s attorneys’ fees and any forum and arbitration fees.
As a component of Mr. Handelman’s contract with the Company, disputes shall be fully addressed and finally resolved by binding arbitration conducted by the American Arbitration Association (AAA) in New York City, New York, in accordance with its National Employment Dispute Resolution rules. In connection with any such arbitration, the Company shall bear all costs not otherwise borne by a plaintiff in a court proceeding. The Company agrees that any decisions of the Arbitration Panel will be binding and enforceable in any state that the Company conducts the operation of its business. In accordance with California Labor Laws, GT Biopharma has designated Los Angeles, California as the venue for this arbitration. The Company is awaiting to receive a date of hearing from AAA.
Item 6. Exhibits
| * | This certification shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that Section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act. |
| + | The Registrant has omitted portions of this exhibit that are both not material and the type of information that the Registrant treats as private or confidential. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| GT Biopharma, Inc. | ||
| Dated: October 31, 2022 | By: | /s/ Manu Ohri |
| Manu Ohri | ||
| Chief Financial Officer | ||
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Exhibit 10.1
Exhibit 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
I, Michael Breen, certify that:
| a. | I have reviewed this report on Form 10-Q 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: October 31, 2022 | By: | /s/ Michael Breen |
| Name: | Michael Breen | |
| Title: | Interim Chief Executive Officer, | |
| Chairman and Director |
Exhibit 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
I, Manu Ohri, certify that:
| a. | I have reviewed this report on Form 10-Q 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: October 31, 2022 | By: | /s/ Manu Ohri |
| Name: | Manu Ohri | |
| Title: | 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, Michael Breen, Interim Chief Executive Officer of GT Biopharma, Inc. (the “Company”), hereby certify that, to the best of my knowledge:
(i) the Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended September 30, 2022 (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: October 31, 2022 | By: | /s/ Michael Breen |
| Name: | Michael Breen | |
| Title: | Interim 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, Manu Ohri, Chief Financial Officer and Principal Accounting Officer of GT Biopharma, Inc. (the “Company”), hereby certify that, to the best of my knowledge:
(i) the Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended September 30, 2022 (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: October 31, 2022 | By: | /s/ Manu Ohri |
| Name: | Manu Ohri | |
| Title: | Chief Financial Officer and Principal Accounting Officer |