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 of November 1, 2023, the registrant had shares of common stock outstanding.
GT BIOPHARMA, INC. AND SUBSIDIARIES
FORM 10-Q
For the Nine Months Ended September 30, 2023
Table of Contents
| 2 |
GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except shares and par value)
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (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 | ||||||||
| Total Current Liabilities | ||||||||
| Non-current operating lease liability | ||||||||
| Warrant liability | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Equity | ||||||||
| Convertible Preferred stock, par value $, shares authorized Series C - shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | ||||||||
| Common stock, par value $, shares authorized, shares and | ||||||||
| shares issued and outstanding as of September 30, 2023 and December 31, 2022, 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, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Operating Expenses: | ||||||||||||||||
| Research and development (including $ and $ expense from stock compensation granted to officers, directors and employees during the three months ended September 30, 2023 and 2022, and $ and $ for the nine months ended September 30, 2023 and 2022, respectively) | ||||||||||||||||
| Selling, general and administrative (including $ million and $ million expense from stock compensation granted to officers, directors and employees during the three months ended September 30, 2023 and 2022, respectively and $ million and $ million for the nine months ended September 30, 2023 and 2022, respectively) | ||||||||||||||||
| Loss from Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (Income) Expense | ||||||||||||||||
| Interest income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense | ||||||||||||||||
| Change in fair value of derivative liability | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on extinguishment of debt | ( | ) | ||||||||||||||
| Unrealized (gain) loss on short term investments | ( | ) | ( | ) | ||||||||||||
| 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, 2023 (Unaudited) | ||||||||||||||||||||||||||||||||||||
| Preferred Shares | Common Shares | Common Shares Issuable | Additional Paid in | Accumulated | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Fair value of vested stock options | - | - | - | |||||||||||||||||||||||||||||||||
| Issuance of common stock to an officer and a board member for services | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock in settlement of accounts payable and accrued expenses | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| For The Nine Months Ended September 30, 2023 (Unaudited) | ||||||||||||||||||||||||||||||||||||
| Preferred Shares | Common Shares | Common Shares Issuable | Additional Paid in | Accumulated | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Private placement of common stock | - | - | ||||||||||||||||||||||||||||||||||
| Initial recognition of fair value of warrant liability | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Fair value of vested stock options | - | - | - | |||||||||||||||||||||||||||||||||
| Issuance of common stock to officer and board member for services | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for exercise of Prefunded Warrants | - | - | ( | ) | ||||||||||||||||||||||||||||||||
| Issuance of common stock in settlement of accounts payable and accrued expenses | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| 5 |
| For The Three Months Ended September 30, 2022 (Unaudited) | ||||||||||||||||||||||||||||||||||||
| 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 | - | |||||||||||||||||||||||||||||||||||
| Issuance of common shares for services | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common shares in settlement of vendors 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 in | Accumulated | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Cancellation of common stock upon settlement with former officer | - | ( | ) | ( | ) | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Cancellation of common stock | - | ( | ) | - | ||||||||||||||||||||||||||||||||
| Common shares issued upon conversion of notes payable | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Equity compensation to officers, employees, and board of directors | - | |||||||||||||||||||||||||||||||||||
| Issuance of common shares for services | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common shares in settlement of vendors payable | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
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)
| For The Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock based compensation – common shares for services | ||||||||
| Stock based compensation – vested stock options | ||||||||
| Change in fair value of warrant liability | ( | ) | ( | ) | ||||
| Gain on extinguishment of debt | ( | ) | ||||||
| Unrealized (gain) loss on marketable securities | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease in prepaid expenses | ||||||||
| Increase in deposits | ( | ) | ||||||
| Decrease in operating lease right of use assets | ||||||||
| Increase (decrease) in accounts payable and accrued expenses | ( | ) | ||||||
| (Decrease) in operating lease liability | ( | ) | ( | ) | ||||
| 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 and prefunded warrants | ||||||||
| Cancellation of common stock upon settlement with former officer | ( | ) | ||||||
| Net Cash (Used in) Provided by Financing Activities | ( | ) | ||||||
| Net Decrease 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 | $ | $ | ||||||
| Initial recognition of fair value of warrant liability | $ | $ | ||||||
| Fair value of common stock issued to settle accounts payable and accrued expenses | $ | $ | ||||||
| Common stock issued upon conversion of notes payable and accrued interest | $ | $ | ||||||
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, 2023 and 2022
(Unaudited, in thousands, except shares data)
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 immune-oncology products based on our proprietary Tri-specific Killer Engager (TriKE®), and Tetra-specific Killer Engager (Dual 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 (NK cells).
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The consolidated condensed 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 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, 2022, filed with the SEC on March 30, 2023 (the “2022 Annual Report”). The consolidated balance sheets as of December 31, 2022 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 its 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 assumptions contemplate the realization of assets and satisfaction of liabilities in the normal course of business. For the nine
months ended September 30, 2023, 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. There can be no assurances that the Company will be able to secure additional financing on acceptable terms. In the event the Company does not generate sufficient cash flows from investing and financing activities, the Company will be forced to delay, reduce, or eliminate some or all of its discretionary spending, which could adversely affect the Company’s business prospects, ability to meet long-term liquidity needs or ability to continue its operations.
| 8 |
COVID-19
The global COVID-19 pandemic continues to present uncertainty and unforeseeable risks to our operations and business plans. The Company has closely monitored recent developments, including the lifting of COVID-19 safety measures, the spread of new strains or variants of the coronavirus (such as the Delta and Omicron variants), and supply chain, raw materials and labor shortages. Thus, the full impact of the COVID-19 pandemic on the business and operations remains uncertain and will vary depending on the pandemic’s future impact on the third parties with whom the Company does business, as well as any legal or regulatory consequences resulting therefrom. The Company has been following the recommendations of health authorities to minimize exposure risk for its team members and may take further actions that alter our operations, including any required by federal, state or local authorities, or that it determines are in the best interests of its employees and other third parties with whom GT Biopharma does business.
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 warrant liabilities, valuation of equity instruments issued for debt and 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. Total cash equivalents, which consist of money market funds, totaled 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 business. Investments are carried at fair value with the unrealized holding gains and losses reported in the accompanying
condensed consolidated statements of operations. Total short-term investments totaled 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 warrant liability of $
The carrying amounts of the Company’s other financial assets and liabilities such as cash, other current assets, accounts payable and accrued expenses approximate their fair values because of the short maturity of these instruments.
Derivatives and Liability-Classified Instruments
The Company accounts for common stock warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and the guidance provided by the FASB in ASC 480, Distinguishing Liabilities from Equity (ASC 480) and ASC 815, Derivatives and Hedging (ASC 815). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own stock and whether the holders of the warrants could potentially require net cash settlement in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. The fair value of the warrant liability 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, 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 its own historical stock price volatility. The expected term of the instrument is estimated by using the simplified method to estimate expected term. The risk-free interest rate is estimated using comparable published federal funds rates.
Research and Development Costs
Costs incurred for research and development are expensed as incurred. The salaries, benefits, and overhead costs of personnel conducting research and development of the Company’s products are included in research and development costs. Purchased materials that do not have an alternative future use are also expensed.
Leases
The Company accounts for its leases in accordance with the guidance of ASC 842, Leases. The Company determines whether a contract is, or contains, a lease at inception. Right-of-use assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at lease commencement in determining the present value of unpaid lease payments (see Note 8 – Operating Leases for the Company’s lease disclosures).
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 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.
September 30, 2023 | September 30, 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Options to purchase common stock | ||||||||
| Warrants to purchase common stock | ||||||||
| Unvested restricted common stock | ||||||||
| Total anti-dilutive securities | ||||||||
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 $
The Company has a significant concentration of expenses incurred and accounts payable from a single vendor (see Note 4 – Accounts Payable for further information).
Segments
The Company determined its reporting units in accordance with ASC 280, “Segment Reporting” (“ASC 280”). Management evaluates a reporting unit by first identifying its’ operating segments under ASC 280. The Company then evaluates each operating segment to determine if it includes one or more components that constitute a business. If there are components within an operating segment that meet the definition of a business, the Company evaluates those components to determine if they must be aggregated into one or more reporting units. If applicable, when determining if it is appropriate to aggregate different operating segments, the Company determines if the segments are economically similar and, if so, the operating segments are aggregated.
| 10 |
Management has determined that the Company has one consolidated operating segment. The Company’s reporting segment reflects the manner in which its chief operating decision maker reviews results and allocates resources. The Company’s reporting segment meets the definition of an operating segment and does not include the aggregation of multiple operating segments.
Recent Accounting Pronouncements
In June 2016, the FASB issued Accounting Standards Update (“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 was effective for the Company beginning January 1, 2023, and early adoption is permitted. The Company adopted this standard effective January 1, 2023 and there was no material impact of adopting this standard on the Company’s financial statements and related disclosures.
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 was effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, applied prospectively to modifications or exchanges occurring on or after the effective date. Effective January 1, 2022, we adopted ASU 2021-04 using a prospective approach. It did not have a material impact on the Company’s financial statements or disclosures.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the 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 as follow:
| September 30, 2023 (Unaudited) | ||||||||||||||||
| Unrealized | Unrealized | Fair | ||||||||||||||
| Cost | Gains | Losses | Value | |||||||||||||
| Short-term investments | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| December 31, 2022 | ||||||||||||||||
| 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):
| September 30, 2023 (Unaudited) | ||||||||||||||||
| Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
| Money market funds | $ | $ | $ | $ | ||||||||||||
| Corporate notes and commercial paper | ||||||||||||||||
| Total financial assets | $ | $ | $ | $ | ||||||||||||
| December 31, 2022 | ||||||||||||||||
| Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
| Money market funds | $ | $ | $ | $ | ||||||||||||
| Corporate notes and commercial paper | ||||||||||||||||
| Total financial assets | $ | $ | $ | $ | ||||||||||||
As
of September 30, 2023, the fair value of the warrant liability amounted to $
| Three Months Ending | Nine Months Ending | |||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Beginning balance | $ | $ | $ | $ | ||||||||||||
| Fair value upon issuance of warrants | ||||||||||||||||
| Change in fair value | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Ending balance | $ | $ | $ | $ | ||||||||||||
Note 4 – Accounts Payable
Accounts payable consisted of the following:
| September 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | ||||||||
| Accounts payable to a third-party manufacturer | $ | $ | ||||||
| Other accounts payable | ||||||||
| Total accounts payable | $ | $ | ||||||
The Company relies on a third-party contract manufacturing operation to produce and/or test our compounds used in our potential product candidates.
In October 2020, the Company entered into a Master Services Agreement with a third-party product manufacturer to perform biologic development and manufacturing services on behalf of the Company. Associated with this, the Company has subsequently executed a number of Statements of Work for the research and development of products for use in clinical trials.
| 12 |
On August 24, 2022, existing agreements with the third-party product manufacturer were amended. As part of the amendment, the third-party manufacturer agreed that services to be rendered in future periods, will be paid or settled at the Company’s discretion, in a combination of cash and issuance of the Company’s common stock. The amendment also eliminated future financial commitments of the Company.
During
the nine months ended September 30, 2023 the Company incurred $
The
outstanding accounts payable balance due to the third-party product manufacturer totaled $
Note 5 – Warrant Liability
2023 Warrants
On
January 4, 2023, as part of the private placement offering, the Company issued common stock, warrants to purchase up to an aggregate
of
The
Purchase Warrant provides for a value calculation for the Purchase Warrant using the Black Scholes model in the event of certain fundamental
transactions. The fair value calculation provides for a floor on the volatility amount utilized in the value calculation at % or greater.
The Company has determined this provision introduces leverage to the holders of the Purchase Warrant that could result in a value that
would be greater than the settlement amount of a fixed-for-fixed option on the Company’s own equity shares. Therefore, pursuant
to ASC 815, the Company has classified the Purchase Warrant as a liability in its consolidated balance sheet. The classification of the
Purchase Warrant, including whether the Purchase Warrant should be recorded as liability or as equity, is evaluated at the end of each
reporting period with changes in the fair value reported in other income (expense) in the consolidated statements of operations and comprehensive
loss. The Purchase Warrant was initially recorded at a fair value at $
As
of September 30, 2023, the fair value of the warrant liability was $
All changes in the fair value of the warrant liabilities are recognized as a change in fair value of warrant liability in the Company’s condensed consolidated statements of operations until they are either exercised or expire.
The warrant liabilities for the Common Warrants and the Placement Agents Warrants were valued using a Binomial pricing model with the following weighted average assumptions:
Common Warrants and Placement Agents Warrants | ||||||||
| September 30, 2023 | At Inception | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Stock price | $ | $ | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected volatility | % | % | ||||||
| Expected life (in years) | ||||||||
| Expected dividend yield | ||||||||
| Fair value of warrants (in thousands) | $ | $ | ||||||
2020 Warrants
The Company issued certain warrants during the year ended December 31, 2020 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 Condensed Consolidated Statements of Operations.
| 13 |
The warrant liabilities for the 2020 Warrants were valued using a Binomial pricing model with the following assumptions:
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| Stock price | $ | $ | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected volatility | % | % | ||||||
| Expected life (in years) | ||||||||
| Expected dividend yield | ||||||||
| Fair value of warrants | $ | $ | ||||||
During
the three months and nine months ended September 30, 2023, the Company recognized a gain of $
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 warrant securities was determined by the remaining contractual life of the warrant 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.
Note 6 – Stockholders’ Equity
The Company’s authorized capital as of September 30, 2023 was shares of common stock, par value $ per share, and shares of preferred stock, par value $ per share.
Common Stock
Private Placement of Common Stock
On
January 4, 2023, GT Biopharma received gross proceeds of $
The
Common Warrants and the Placement Agents Warrants contained a clause not considered to be within the Company’s control. The Company
determined that the provision represented a variable that is not an input to the fair value of a “fixed-for-fixed” option
as defined under ASC 815-40, and thus the Common Warrants and the Placement Agent Warrants are not considered indexed to the Company’s
own stock and not eligible for an exception from derivative accounting. Accordingly, the Common Warrants and the Placement Agent Warrants
were classified as a warrant liability, and $
| 14 |
In May 2023, the
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 three months ended March 31, 2022.
Common Stock Issued for Services
During
the three and nine months ended September 30, 2023, the Company issued and
shares of common stock with a fair value of $
During the three and nine months ended September 30, 2022, the Company issued and shares of common stock with a fair value of
$
Common Stock Issued for Accounts Payable
During
the nine months ended September 30, 2023, the Company issued a total of shares
of common stock with a fair value of $to
settle accounts payable and accrued expenses of $
| 15 |
Preferred Stock
Series C Preferred Stock
At September 30, 2023 and December 31, 2022, 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 convertible to common stock, 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 declared or unpaid as of and for the period ended September 30, 2023.
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 an as-converted-to-common stock basis, in any distribution to holders of the Company’s common stock.
As of September 30, 2023 and December 31, 2022, there were shares of Series K Preferred stock issued and outstanding.
Warrants and Options
Common Stock Warrants
Common stock warrant transactions for the nine months ended September 30, 2023 were as follows:
| Number of | Weighted Average | |||||||
| Warrants | Exercise Price | |||||||
| Warrant outstanding at December 31, 2022: | $ | |||||||
| Granted | ||||||||
| Forfeited/canceled | ( | ) | ||||||
| Exercised | ( | ) | ||||||
| Warrants outstanding at September 30, 2023 | $ | |||||||
| Warrants exercisable at September 30, 2023 | $ | |||||||
| 16 |
The warrants had an exercise price greater than the market price, which resulted in no intrinsic value.
Warrants outstanding as of September 30, 2023 are exercisable as follows:
| Warrants Outstanding | Warrants Exercisable | |||||||||||||||||||
| Range of Exercise Price | Number Outstanding | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | |||||||||||||||
| $ – | $ | $ | ||||||||||||||||||
| – | ||||||||||||||||||||
Common Stock Options
| Number of | Weighted Average | |||||||
| Options | Exercise Price | |||||||
| Options outstanding at December 31, 2022 | $ | |||||||
| Granted | ||||||||
| Forfeited/canceled | ( | ) | ||||||
| Exercised | ||||||||
| Options outstanding at September 30, 2023 | $ | |||||||
| Options vested and exercisable at September 30, 2023 | $ | |||||||
The Company recognized the corresponding stock compensation expense for options granted to certain consultants, employees, officers and directors based upon their vesting term.
On January 27, 2023, the Company granted stock options to employees and members of its board of directors to purchase an aggregate of million shares of common stock at an exercise price of $ per share. The stock options expire in years, vest over twelve months and had a fair value of $ million at the date of grant determined using the Black-Scholes Option Pricing model with the following weighted average assumptions.
| 17 |
On May 15, 2023, the Company granted stock options to a member of its board of directors to purchase shares of common stock at an exercise price of $ per share. The stock options expire in years, vest over twelve months and had a fair value of $ on at the date of grant determined using the Black-Scholes Option Pricing model.
The Company used the following weighted average assumptions in the Black-Scholes Option Pricing model to compute the fair value of the stock options granted during the period ended September 30, 2023.
| Stock price | $ | $ - $ | ||
| Risk-free interest rate | % | |||
| Expected volatility | % | |||
| Expected life (in years) | ||||
| Expected dividend yield |
For the three months and nine months ended September 30, 2023, the Company recognized stock compensation expense relating to the vesting of options granted in 2023 and prior years of $ and $, respectively.
| Options Outstanding | Options Exercisable | |||||||||||||||||||||
| Range of Exercise Price | Number Outstanding | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | |||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
At September 30, 2023, fair value of unvested options totaled $, which will be recognized as stock compensation expense in future periods based upon the remaining vesting term of the applicable grants.
There was no intrinsic value of the outstanding options as of September 30, 2023 as the exercise price of these options was greater than the market price.
Note 7 – 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. 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.
| 18 |
On May 11, 2023, our former interim Chief Executive Officer, Dr. Greg Berk, filed a complaint with the Occupational Safety and Health Administration alleging retaliation against him during his tenure at the Company for raising concerns related to the public disclosure of certain product timelines. The Company is vigorously defending this matter and believe it to be without merit. At this early stage in the proceedings, the Company is not able to determine the probability of the outcome of this matter or a range of reasonably expected losses, if any.
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 the Company’s common stock. The Company seeks monetary damages estimated at $
On May 24, 2023, TWF Global, LLC (“TWF”) filed a Complaint in the California Superior Court for the County of Los Angeles naming the Company as defendant. The Complaint alleges that TWF is the holder of two Convertible Promissory Notes (“Notes”) and that the Company did not deliver shares of common stock due on conversion in February 2021. TWF was seeking per diem liquidated damages based on the terms of alleged Notes. On July 14, 2023, the Company filed a motion to dismiss for improper forum because the terms of the Notes, as alleged, require disputes to be filed in New York state and federal courts. TWF has recently dismissed without prejudice its Complaint before the California Superior Court of Los Angeles. The Company also filed a Summons and Complaint for Interpleader against TWF and Z One LLC before the Supreme Court of the State of New York County of New York asking the Supreme Court to determine if the Company’s shares of common stock are properly registered to TWF or Z One LLC, as both of these entities have made conflicting demands for registration of the shares of common stock. The Company believes that TWF’s claims are without merit and will continue to defend vigorously against these claims.
Significant Agreements
Research and Development Agreements
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 (GTB-3550) TriKE® fusion protein for cancer therapies using our TriKE® technology. The GTB-3550 Phase 1 clinical trial for treatment of patients with CD33-expressing, high risk myelodysplastic syndromes and refractory/relapsed acute myeloid leukemia opened for patient enrollment September 2019 and completed enrollment in September 2021. The results of our first generation GTB-3550 Phase 1 clinical trial support our plans to advance the next generation camelid nanobody into the clinic, and as such, no further clinical development will ensue with GTB-3550.
The
Company is a party to a scientific research agreement with the Regents of the University of Minnesota (“UofMN”),
effective June 16, 2021. This scientific research agreement aims to work with the Company with three major goals in mind: (1)
support the Company’s TriKE® product development and GMP manufacturing efforts; (2) TriKE®
pharmacokinetics optimization in humans; and (3) investigation of the patient’s native NK cell population based on insights
obtained from the analysis of the human data generated during our GTB-3550 clinical trial. The major deliverables proposed here are:
(1) creation of IND enabling data for TriKE® constructs in support of our product development and GMP manufacturing
efforts; (2) TriKE® platform drug delivery changes to allow transition to alternative drug delivery means and
extended PK in humans; and (3) gain an increased understanding of changes in the patient’s native NK cell population as a
result of TriKE® therapy. Most studies will use TriKE® DNA/amino acid sequences created by us under
current UMN/GTB licensing terms. This agreement expired on June 30, 2023. The Company and UofMN are negotiating the terms of the
scientific research agreement and expect to finalize it by December 15, 2023. The UofMN shall use reasonable
efforts to complete the project for a fixed sum of $
For
the three months and nine months ended September 30, 2023 and 2022, the Company recorded an expense of $
Patent and License Agreements
2016 Exclusive Patent License Agreement
The
Company is party to an exclusive worldwide license agreement with the Regents of the University of Minnesota, (“UofMN”),
to further develop and commercialize cancer therapies using TriKE® technology developed by researchers at the 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 $
The
Company did
| 19 |
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 $
The
Company did
Note 8 – Operating Leases
On
November 19, 2021, the Company entered into a sublease with a third party for
On
February 8, 2022, the Company entered into a copier lease which will end on February 7, 2025. As a result, the Company recognized additional
ROU asset and liability of $
As
a result of these lease agreements, the Company recognized ROU asset and liability in the aggregate of $
Rent
expense related to these leases reflected as part of selling, general and administrative expenses 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:
| September 30, 2023 | September 30, 2022 | |||||||
| (Unaudited) | (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:
| September 30, 2023 | ||||
| (Unaudited) | ||||
| Within one year | $ | |||
| After one year and within two years | ||||
| Thereafter | ||||
| Total future minimum lease payments | $ | |||
| Less – discount | ( | ) | ||
| Lease liability | $ | |||
| 20 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements regarding our current beliefs, goals and expectations about matters such as our expected financial position and operating results, our business strategy and our financing plans. The forward-looking statements in this report are not based on historical facts, but rather reflect the current expectations of our management concerning future results and events. The forward-looking statements generally can be identified by the use of terms such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “may,” “guidance,” “estimate,” “potential,” “outlook,” “target,” “forecast,” “likely” or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals are, or may be, forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be different from any future results, performance and achievements expressed or implied by these statements. We cannot guarantee that our forward-looking statements will turn out to be correct or that our beliefs and goals will not change. Our actual results could be very different from and worse than our expectations for various reasons. You should review carefully all information, including the discussion of risk factors under “Part I. Item 1A: Risk Factors” and “Part II. Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Form 10-K for the year ended December 31, 2022. 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 on 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 (“NK cells”). Once bound to an NK cell, our moieties are designed to enhance the NK cell, through induction of NK cell expansion and priming via the cytokine portion, 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 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 and solid tumors. The platform is scalable, and we are putting processes in place to be able to produce investigational new drug (IND) ready moieties in a timely manner after a specific TriKE® conceptual design. Specific drug candidates can then be advanced into the clinic on our own or through potential collaborations with partnering companies. We believe our TriKE® may have the ability, if approved for marketing, to be used as both a monotherapy and in combination with other standard-of-care therapies including combinations with off-the-shelf NK cell infusions.
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 key opinion 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 for specific moieties.
GTB-3550
GTB-3550 was our first TriKE® product candidate. It reflected our first-generation TriKE® platform. 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 studied this anti-CD16-IL-15-anti-CD33 TriKE® in CD33 positive leukemias, a marker expressed on tumor cells in acute myelogenous leukemia, or AML, and myelodysplastic syndrome, or MDS. 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 immunoglobulin-like lectin 3) 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 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 a target for therapeutic antibodies for many years. The approval of the CD33 antibody-drug conjugate gemtuzumab validates this targeted approach.
GTB-3550 is being replaced by a more potent next-generation camelid nanobody TriKE®, GTB-3650, targeting relapsed/refractory Acute Myeloid Leukemia (AML) and high-risk Myelodysplastic Syndromes (MDS).
| 21 |
GTB-3650
GTB-3650 is a CD33 targeted TriKE® which targets CD33 on the surface of myeloid leukemias and an agonistic camelid engager to the potent activating receptor on NK cells, CD16. Use of this engager enhances the activity of wild type IL-15 included in GTB-3650, no longer needing the mutant IL-15 included in GTB-3550. We have significant preclinical data to support and concluded preclinical studies, generated a cGMP batch of drug, and are in the process of filing an Investigational New Drug (IND) application in the 2nd half of 2023. The only curative therapy for AML and MDS is transplant, and relapse still occurs in many patients that undergo transplants so novel immunotherapeutic approaches that can be leveraged in this setting are highly desirable. It is also important to note that elderly frail patients cannot receive transplants and thus alternative approaches are needed. The TriKE® approach provides a novel way to specifically target these tumors by leveraging NK cells, which have been shown to mediate relapse protection in this setting, in an anti-CD33-targeted fashion. We are moving GTB-3650 clinically based on pre-clinical data showing a marked increase in potency compared to GTB-3550, which we anticipate could lead to an enhanced efficacy signal in these diseases.
GTB-5550
GTB-5550 is a B7-H3 targeted TriKE® which targets B7-H3 on the surface of advanced solid tumors. We are advancing GTB-5550 through preclinical studies and have initiated a GMP manufacturing campaign. We have filed a Pre-IND package with the Food and Drug Administration (FDA) in anticipation of filing an IND application and starting a study targeting patients with B7-H3 positive solid tumors thereafter. B7-H3 expression is expressed in a number of solid tumor settings as well as in multiple myeloma and is not expressed on normal tissues, making it an exciting pan-cancer tumor target. Expression of B7-H3 is also associated with disease progression and bad outcomes in many cancers. Due to these characteristics several clinical trials are ongoing leveraging targeting of B7-H3 in solid tumor. GTB-5550 would be the first modality to target B7-H3 through NK cell immunotherapy and a unique single domain camelid B7-H3. The initial study will be designed as a basket trial, targeting solid tumor malignancies with high expression of B7-H3, including prostate cancer, ovarian cancer, head and neck cancer, lung cancer, and breast cancer.
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 generally. 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 full-scale wars between Russia and Ukraine and Israel and Palestine (“Conflicts”) and global reactions thereto have increased U.S. domestic and global energy prices. Oil supply disruptions related to the Conflicts, 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.
| 22 |
Results of Operations
Comparison of the Three Months and Nine Months Ended September 30, 2023 and 2022
Research and Development Expenses (“R&D”)
We recorded $1.36 million and $2.74 million in research and development expense (“R&D”) for the three months ended September 30, 2023 and 2022, a reduction of $1.38 million over the prior year comparable period. We recorded $5.11 million and $5.79 million in R&D for the nine months ended September 30, 2023 and 2022, a reduction of $0.68 million over the prior year comparable period. R&D expenses relate to our continued development and production of our most advanced TriKE® product candidates GTB-3650 and GTB-5550 along with the progression on other promising candidates. R&D expenses decreased over the previous year primarily due to reduction of in-house staff offset with the increase in compensation to consultants as we prepare to advance our next generation GTB-3650 camelid nanobody product into the clinic.
Selling, General and Administrative Expenses (“S,G&A”)
We recorded $1.76 million and $4.28 million in selling, general and administrative expense (“SG&A”) for the three months ended September 30, 2023 and 2022, a decrease of $2.52 million over the prior year comparable period. We recorded $5.30 million and $9.51 million in SG&A for the nine months ended September 30, 2023 and 2022, a reduction of $4.21 million over the prior year comparable period. The decrease in SG&A is primarily attributable to reduction in stock-based compensation to advisory board, investor relations consultants, legal and professional fees, and payroll expenses.
Interest Income
We recorded interest income of $0.22 million and $0.11 million for the three months ended September 30, 2023 and 2022, and $0.60 million and $0.15 million for the nine months ended September 30, 2023 and 2022, respectively. The increase in interest income was due to higher interest rates offered by financial institutions in the three months and nine months ended September 30, 2023, as compared to the same comparable periods of 2022.
Interest Expense
We recorded $0 interest expense for the three months ended September 30, 2023 and 2022, and $0.21 million and $0 for the nine months ended September 30, 2023 and 2022, respectively. The increase in interest expense was due to the financing costs incurred associated with the issuance of warrants accounted as warrant liability during the current year, with no such comparable costs in the prior year.
Change in Fair Value of Warrant Liability
We recorded a gain of $0.49 million and $0.06 for the three months ended September 30, 2023 and 2022, and $4.80 million and $0.08 million for the nine months ended September 30, 2023 and 2022, respectively. The gain was recorded as a result of a change in fair value of warrant liability for the three months and nine months ended September 30, 2023 as compared to the same comparable periods of 2022.
Gain on Extinguishment of Debt
We recorded $0 gain on extinguishment of debt for the three months ended September 30, 2023 and 2022, respectively, and a gain of $0.55 million and $0 for the nine months ended September 30, 2023 and 2022, respectively. The gain in the nine months ended September 30, 2023 resulted due to share settlement of a greater amount of vendor accounts payable than the fair value of the shares on the date of settlement.
| 23 |
Unrealized Gain or Loss on Marketable Securities
We recorded unrealized gains on marketable securities of $0.01 million and $0.04 million for the three months and nine months ended September 30, 2023, respectively, compared to unrealized losses of $0.02 and $0.05 million for the three and nine months ended September 30, 2022, respectively. This resulted from an improved mix of investments combined with higher interest rates for the three months and nine months ended September 30, 2023 as compared to prior year comparable periods of 2022.
As a result of the above changes, the Company recorded a net loss of $2.42 million and $4.70 million for the three months and nine months ended September 30, 2023, as compared to a net loss of $6.88 million and $15.30 million for the same comparable periods in 2022.
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. On January 4, 2023, the Company raised $6.50 million from an institutional investor by selling 3,600,000 shares of common stock, and pre-funded warrants to purchase up to 2,900,000 shares of common stock. The Company does not have any product candidates approved for sale and has not generated any revenue from its product sales. The Company has sustained operating losses since inception and expects such losses to continue into 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 $3.0 million and $4.0 million, and research and development expenses will range between $10.0 million and $12.0 million.
The Company reported cash and cash equivalents of $2.65 million and short-term investments of $13.37 million as of September 30, 2023. 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, licensing and/or marketing arrangements with 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.
| 24 |
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 (“GAAP”). These condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Oxis Biotech, Inc. and Georgetown Translational Pharmaceuticals, Inc. Intercompany transactions and balances have been eliminated in consolidation.
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 warrant 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. 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 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 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, 2023.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our 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, 2023. Based on that evaluation, we have concluded that our disclosure controls and procedures were effective as of September 30, 2023.
| 25 |
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 consolidated 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 consolidated 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 consolidated financial statements. |
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 September 30, 2023, our management, including our interim Chief Executive Officer and Chief Financial Officer conducted an assessment of the effectiveness of the Company’s internal control over financial reporting. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in internal control integrated framework. Based upon our evaluation, we concluded that our internal controls over financial reporting were operating effectively with a significant level of precision as of September 30, 2023.
Changes in Internal Control Over Financial Reporting
Except for the ongoing remediation of previously disclosed material weaknesses in internal controls over financial reporting, 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.
| 26 |
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On May 11, 2023, our former interim Chief Executive Officer, Dr. Greg Berk, filed a complaint with the Occupational Safety and Health Administration alleging retaliation against him during his tenure at the Company for raising concerns related to the public disclosure of certain product timelines. The Company is vigorously defending this matter and believe it to be without merit. At this early stage in the proceedings, the Company is not able to determine the probability of the outcome of this matter or a range of reasonably expected losses, if any.
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 the Company’s common stock. The Company seeks monetary damages estimated at $0.37 million; the return of shares of our 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 Mr. 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 Mr. 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 in which 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 claims have been heard by an arbitrator in Los Angeles and the decision of the arbitrator is currently pending. Mr. Handelman has not asserted any counterclaims against the Company.
On May 24, 2023, TWF Global, LLC (“TWF”) filed a Complaint in the California Superior Court for the County of Los Angeles naming the Company as defendant. The Complaint alleges that TWF is the holder of two Convertible Promissory Notes (“Notes”) and that the Company did not deliver shares of common stock due on conversion in February 2021. TWF was seeking per diem liquidated damages based on the terms of alleged Notes. On July 14, 2023, the Company filed a motion to dismiss for improper forum because the terms of the Notes, as alleged, require disputes to be filed in New York state and federal courts. TWF has recently dismissed without prejudice its Complaint before the California Superior Court of Los Angeles. The Company also recently filed a Summons and Complaint for Interpleader against TWF and Z One LLC before the Supreme Court of the State of New York County of New York asking the Supreme Court to determine if the Company’s shares of common stock are properly registered to TWF or Z One LLC, as both of these entities have made conflicting demands for registration of the shares of common stock . The Company believes that TWF’s claims are without merit and will continue to defend vigorously against these claims.
| 27 |
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. |
| 28 |
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: November 1, 2023 | By: | /s/ Manu Ohri |
| Manu Ohri | ||
Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) | ||
| 29 |