Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933
GT BIOPHARMA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or
organization)
2834
(Primary Standard Industrial Classification Code)
94-1620407
(I.R.S. Employer Identification Number)
310 N. Westlake Blvd, Suite 206
Westlake Village, CA 91362
(800) 304-9888
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive
offices)
The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
Telephone: (302) 658-7581
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Copies of Communications to:
Gary R. Henrie, Esq.
P.O. Box 107
315 Kimball's Garden Circle
Nauvoo, IL 62354
Tel: (309) 313-5092
Email: grhlaw@hotmail.com
Approximate date of commencement of proposed sale to
public:
From time to time after the effective date of this registration
statement.
If any securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act, check the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check
the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [
]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [
]
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.
[ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities To Be
Registered
|
|
Amount to
be
Registered
|
|
Proposed Maximum
Offering Price
Per Share
|
|
Proposed Maximum
Aggregate
Offering Price
|
|
Amount of
Registration Fee
|
Common stock, par value $.001 per share
|
|
40,216,064 shares(1)
|
|
$0.28(2)
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$11,260,498
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$1,364.77
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(1) The 40,216,064 common shares are being registered
for resale by Selling Stockholders.
(2) The closing price of the common shares on June 17,
2019.
The Registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date until
the registrant shall file a further amendment which specifically
states that this registration statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933 or until the registration statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The information in this prospectus is not complete and may be
changed. The selling stockholders may not sell these securities
until the registration statement filed with the Securities and
Exchange Commission is effective. This prospectus is not an offer
to sell these securities and the selling stockholders are not
soliciting offers to buy these securities in any state where such
offers are not permitted.
Subject to completion,
July _____, 2019
PROSPECTUS
40,216,064 Shares
GT BIOPHARMA, INC.
Common Stock
We are registering the resale of 40,216,064 shares of common stock
of GT Biopharma, Inc., a Delaware corporation (the "Company"), by
the Selling Stockholders who may acquire such shares upon the
conversion of notes or upon the conversion of Series J-1 Preferred
Stock (the "Conversion Shares"). The Selling
Stockholders will receive all of the proceeds from the sale of the
Conversion Shares. We will pay all expenses incident to the
registration of the shares under the Securities Act of 1933, as
amended.
At the present time our common stock is listed on the OTCQB under
the symbol GTBP. The Selling Stockholders will sell the shares at
prevailing market prices or at privately negotiated
prices.
Investing in our common stock involves risks, which are described
in the "Risk Factors" section beginning on page 10 of this
prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus is July _____, 2019.
TABLE OF CONTENTS
You should rely only on the information contained in this
prospectus. We have not authorized any person to provide you with
any information or represent anything not contained in this
prospectus, and, if given or made, any such other information or
representation should not be relied upon as having been authorized
by us. The selling stockholders are not offering to sell, or
seeking offers to buy, our common stock in any jurisdiction where
the offer or sale is not permitted. You should not assume that the
information provided in this prospectus is accurate as of any date
other than the date on the front cover of this
prospectus.
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Page
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PROSPECTUS SUMMARY
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2
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RISK FACTORS
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7
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USE OF PROCEEDS
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23
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MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
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23
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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24
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DESCRIPTION OF BUSINESS
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28
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MANAGEMENT
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43
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EXECUTIVE COMPENSATION
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44
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VOTING SECURITIES AND PRINCIPAL HOLDERS
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46
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SELLING STOCKHOLDERS
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48
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PLAN OF DISTRIBUTION
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49
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DESCRIPTION OF CAPITAL STOCK
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51
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LEGAL MATTERS
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53
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DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES
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53
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EXPERTS
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53
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WHERE YOU CAN FIND MORE INFORMATION
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53
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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54
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement on Form S-1
that we filed with the Securities and Exchange Commission utilizing
a “shelf” registration process. Under this shelf
registration process, the selling stockholders may offer from time
to time up to an aggregate of 40,216,064 shares of common stock in
one or more offerings. The registration statement of which this
prospectus is a part is being filed in accordance with the
registration rights agreement, dated as of May 22, 2019, by and
among GT Biopharma, Inc. and the selling stockholders party thereto
and in some cases pursuant to the preferences and designations of
the Series J-1 Preferred Stock. Pursuant to the registration rights
agreement, we have agreed to indemnify and hold harmless, to the
extent permitted by law, each of the selling stockholders party to
the registration rights agreement and each of such selling
stockholder’s directors, officers, partners, members,
employees, agents, representatives of and each other person, if
any, who controls such selling stockholder within the meaning of
the Securities Act of 1933, as amended (the “Securities
Act”), from and against certain losses, claims, damages and
liabilities, including certain liabilities under the Securities
Act.
You should rely only on the information contained in this
prospectus and any free writing prospectus prepared by or on behalf
of us that we have referred you to. We take no responsibility for,
and can provide no assurance as to the reliability of, any other
information that others may give you. No person has been authorized
to giveany information or make any representations in connection
with this offering other than those contained or incorporated by
reference in this prospectus, any accompanying prospectus
supplement and any related issuer free writing prospectus in
connection with the offering described herein and therein. Neither
this prospectus nor any prospectus supplement nor any related
issuer free writing prospectus shall constitute an offer to sell or
a solicitation of an offer to buy offered securities in any
jurisdictionin which it is unlawful for such person to make such an
offering or solicitation. This prospectus does not contain all of
the information included in the registration statement. For a more
complete understanding of the offering of the securities, you
should refer to the registration statement, including its
exhibits.
No action is being taken in any jurisdiction outside the United
States to permit a public offering of common stock or possession or
distribution of this prospectus in that jurisdiction. Persons who
come into possession of this prospectus in jurisdictions outside
the United States are required to inform themselves about and to
observe any restriction as to this offering and the distribution of
this prospectus applicable to those jurisdictions.
Unless otherwise indicated, information contained in this
prospectus concerning our industry and the markets in which we
operate, including our general expectations and market position,
market opportunity and market share, is based on information from
our own management estimates and research, as well as from industry
and general publications and research, surveys and studies
conducted by third parties. Management estimates are derived from
publicly available information, our knowledge of our industry and
assumptions based on such information and knowledge, which we
believe to be reasonable. In addition, assumptions and estimates of
our and our industry’s future performance are necessarily
subject to a high degree of uncertainty and risk due to a variety
of factors, including those described in “Risk
Factors.” These and other factors could cause our future
performance to differ materially from our assumptions and
estimates. See “Cautionary Note Regarding Forward-Looking
Statements.”
This prospectus contains summaries of certain provisions contained
in some of the documents described herein, but reference is made to
the actual documents for complete information. All of the summaries
are qualified in their entirety by the actual documents. Copies of
some of the documents referred to herein have been filed, or will
be filed as exhibits to the registration statement of which this
prospectus is a part, and you may obtain copies of those documents
as described below under the heading “Where You Can Find
Additional Information.”
All references to the number of shares issued or outstanding in
this prospectus, and all per share and other similar data, reflect
a 1for 300 reverse stock split that we effected on August 21,
2017.
All product and company names are trademarks of their respective
owners. Solely for convenience, trademarks and trade names referred
to in this prospectus, including logos, artwork and other visual
displays, may appear without the ® or TM symbols, but such
references are not intended to indicate, in any way, that their
respective owners will not assert, to the fullest extent under
applicable law, their rights thereto. We do not intend our use or
display of other companies’ trade names or trademarks to
imply a relationship with, or endorsement or sponsorship of us by,
any other companies.
Throughout this prospectus, the terms “we,”
“us,” “our,” and “our company”
refer to GT Biopharma, Inc., a Delaware corporation and its related
subsidiaries.
The information in this preliminary prospectus is not complete and
may be changed. We may not sell these securities until the
registration statement filed with the Securities and Exchange
Commission is effective. This preliminary prospectus is not an
offer to sell these securities and it is not soliciting an offer to
buy these securities in any state or jurisdiction where the offer
or sale is not permitted.
SUBJECT TO COMPLETION, DATED JUNE 19, 2019
PRELIMINARY PROSPECTUS
PROSPECTUS SUMMARY
This summary highlights certain information about us, this offering
and selected information contained elsewhere in or incorporated by
reference in this prospectus. Because this is only a summary, it
does not contain all of the information that may be important to
you or that you should consider before investing in our common
stock. You should read the entire prospectus carefully, especially
“Risk Factors” set forth in this prospectus, the other
information incorporated by reference in this prospectus, and the
information included in any free writing prospectus that we have
authorized for use in connection with this offering. This
prospectus contains forward-looking statements, based on current
expectations and related to future events and our future financial
performance, that involve risks and uncertainties. Our actual
results may vary materially from those discussed in the
forward-looking statements as a result of various factors,
including, without limitation, those set forth in “Risk
Factors” as well as other matters described in this
prospectus.
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),
Tetra-specific Killer Engager (TetraKE) and bi-specific Antibody
Drug Conjugate (ADC) technology platforms. Our TriKE and TetraKE
platforms generate proprietary moieties designed to harness and
enhance the cancer killing abilities of a patient’s own
natural killer, or NK, cells. Once bound to a NK cell, our moieties
are designed to enhance the NK cell and precisely direct it to one
or more specifically-targeted proteins (tumor antigens) expressed
on a specific type of cancer, ultimately resulting in the cancer
cell’s death. TriKEs and TetraKEs are made up of recombinant
fusion proteins, can be designed to target any number of tumor
antigens on hematologic malignancies, sarcomas or solid tumors and
do not require patient-specific customization. They are designed to
be dosed in a common outpatient setting similar to modern antibody
therapeutics and are expected to have reasonably low cost of goods.
Our ADC platform generates product candidates that are bi-specific,
ligand-directed single-chain fusion proteins that, we believe,
represent the next generation of ADCs.
Our TriKE product candidates are single-chain, tri-specific scFv
recombinant fusion proteins composed of the variable regions of the
heavy and light chains (or heavy chain only) of anti-CD16
antibodies, wild-type or a modified form of IL-15 and the variable
regions of the heavy and light chains of an antibody that precisely
targets a specific tumor antigen. We utilize the NK stimulating
cytokine human IL-15 as a crosslinker between the two scFvs
whichprovides a self-sustaining signal that leads to the
proliferation and activation of NK cells thus enhancing their
ability to kill cancer cells mediated by antibody-dependent
cell-mediated cytotoxicity (ADCC) via the highly potent CD16
activating receptor on our moieties. Our second TriKE product
candidate, GTB-C3550, is a next-generation version of GTB-3550
containing a modified CD16 component.
Our TetraKE product candidates are single-chain fusion proteins
composed of human single-domain anti-CD16 antibody, wild-type IL-15
and the variable regions of the heavy and light chains of two
antibodies that target two specific tumor antigens expressed on
specific types of cancer cells. An example of a TetraKE product
candidate is GTB-1615 which targets EpCAM and CD133 positive solid
tumors. EpCAM is found on many solid tumor cells of epithelial
origin and CD133 is a marker for cancer stem cells. GTB-1615 is
designed to enable a patient’s NK cells to kill not only the
heterogeneous population of cancer cells found in many solid tumors
but also kill the cancer stem cells that are typically responsible
for recurrences. We intend to initiate human clinical testing for
certain of our solid tumor product candidates in 2020.
Our TriKEs and TetraKEs act by binding to a patient’s NK cell
and a specific tumor antigen enabling an immune synapse between the
now IL-15-enhanced NK cell and the targeted cancer cell. The
formation of this immune synapse induces NK cell activation leading
to the death of the cancer cell. The self-sustaining signal caused
by our IL-15 cross-linker enables prolonged and enhanced
proliferation and activation of NK cells similar to the increased
proliferation of T-cells caused by 41BB-L or CD28 intracellular
domains in CAR-T therapy but without the need to enhance the
patient’s NK cells ex vivo.
We are using our TriKE and TetraKE platforms with the intent to
bring to market multiple immuno-oncology products that can treat a
wide range of hematologic malignancies, sarcoma and solid tumors.
The platforms are scalable and we are putting processes in place to
be able to produce IND-ready moieties in approximately 90-120 days
after a specific TriKE or TetraKE conceptual design. After
conducting market and competitive research, specific moieties can
then be rapidly advanced into the clinic on our own or through
potential collaborations with larger companies. We are currently
evaluating over a dozen moieties and intend to announce additional
clinical product candidates in the second half of 2019. We believe
ourTriKEs and TetraKEs will have the ability, if approved for
marketing, to be used on a stand-alone basis, augment the current
monoclonal antibody therapeutics, be used in conjunction with more
traditional cancer therapy and potentially overcome certain
limitations of current chimeric antigen receptor, or CAR-T,
therapy.
We also believe our bi-specific, ligand-directed single-chain
fusion proteins represents the next generation of ADCs. Our lead
bi-specific ADC, GTB-1550, which targets CD19+ and/or CD22+
hematological malignancies is currently in a Phase 2 trial being
conducted at the University of Minnesota Masonic Cancer Center in
patients with relapsed/refractory B-cell leukemias or lymphomas. We
believe GTB-1550 has certain properties that could result in
competitive advantages over recently approved ADC products
targeting leukemias and lymphomas. In a Phase 1 trial, of nine
patients that achieved adequate blood levels, we saw a durable
complete response, or CR, in two heavily pretreated patients. One
patient, who had failed multiple previous treatment regimens, has
been cancer free since early 2015.
Our initial work has been conducted in collaboration with the
Masonic Cancer Center at the University of Minnesota under a
program led by Dr. Jeffrey Miller, the Deputy Director. Dr. Miller
is a recognized leader in the field of NK cell and IL-15 biology
and their therapeutic potential. We have exclusive rights to the
TriKE and TetraKE platforms and are generating additional
intellectual property around specific moieties.
Also, in connection with the acquisition of Georgetown
Translational Pharmaceuticals on September 1, 2017, we acquired a
portfolio of in-process research and development central nervous
system assets consisting of innovative reformulations and/or
repurposing of existing therapies. These CNS assets address disease
states such as chronic neuropathic pain, myasthenia gravis and
motion sickness. We are currently pursuing out-licensing
opportunities related to these assets.
Immuno-Oncology Product Candidates
GTB-1550
GTB-1550 is a bispecific scFv recombinant fusion protein-drug
conjugate composed of the variable regions of the heavy and light
chains of anti-CD19 and anti-CD22 antibodies and a modified form of
diphtheria toxin (DT390) as its cytotoxic drug payload. CD19 is a
membrane glycoprotein present on the surface of all stages of
B-lymphocyte development and is also expressed on most B-cell
mature lymphoma cells and leukemia cells. CD22 is a glycoprotein
expressed on B-lineage lymphoid precursors, including precursor
acute lymphoblastic leukemia, and often is co-expressed with CD19
on mature B-cell malignancies such as lymphoma.
GTB-1550 targets cancer cells expressing the CD19 receptor or CD22
receptor or both receptors. When GTB-1550 binds to cancer cells,
the cancer cells internalize GTB-1550, and are killed due to the
action of drug’s cytotoxic diphtheria toxin payload. GTB-1550
has completed a Phase 1 human clinical trial in patients with
relapsed/refractory B-cell lymphoma or leukemia.
The initial Phase 1 study enrolled 25 patients with mature or
precursor B-cell lymphoid malignancies expressing the CD19 receptor
or CD22 receptor or both receptors. All 25 patients received at
least a single course of therapy. The treatment at the higher doses
produced objective tumor responses with one patient in continuous
partial remission and the second in complete remission. A Phase 2
trial of GTB-1550 is underway in patients with ALL/NHL. The
FDA-approved clinical trial is being conducted at the University of
Minnesota's Masonic Cancer Center. There are currently 18 patients
enrolled in this clinical trial. Patients in this trial are given
an approved increased dosage and schedule of GTB-1550.
We began enrolling patients in Phase 2 trial of GTB-1550 during the
first quarter of 2017 and the first patient began dosing in April
2017.
GTB-3550
GTB-3550 is our first TriKE product candidate. It is a
single-chain, tri-specific scFv recombinant fusion protein
conjugate composed of the variable regions of the heavy and light
chains of anti-CD16 and anti-CD33 antibodies and a modified form of
IL-15. We intend to study this anti-CD16-IL-15-anti-CD33 TriKE in
CD33 positive leukemias, a marker expressed on tumor cells in acute
myelogenous leukemia, orAML, myelodysplastic syndrome, or MDS, and
other hematopoietic malignancies. CD33 is primarily a myeloid
differentiation antigen with endocytic properties broadly expressed
on AML blasts and, possibly, some leukemic stem cells. CD33 or
Siglec-3 (sialic acid binding Ig-like lectin 3, SIGLEC3, SIGLEC3,
gp67, p67) is a transmembrane receptor expressed on cells of
myeloid lineage. It is usually considered myeloid-specific, but it
can also be found on some lymphoid cells. The anti-CD33 antibody
fragment that will be used for these studies was derived from the
M195 humanized anti-CD33 scFV and has been used in multiple human
clinical studies. It has been exploited as target for therapeutic
antibodies for many years. We believe the recent approval of the
antibody-drug conjugate gemtuzumab validates this targeted
approach.
The GTB-3550 IND will focus on AML, the most common form of adult
leukemia with 21,000 new cases expected in 2018 alone (American
Cancer Society). These patients typically receive frontline
therapy, usually chemotherapy, including cytarabine and an
anthracycline, a therapy that has not changed in over 40 years.
About half will have relapses and require alternative therapies. In
addition, MDS incidence rates have dramatically increased in the
population of the United States from 3.3 per 100,000 individuals
from 2001-2004 to 70 per 100,000 annually, MDS is especially
prevalent in elderly patients that have a median age of 76 years at
diagnosis. The survival of patients with MDS is poor due to
decreased eligibility, as a result of advanced age, for allogeneic
hematopoietic cell transplantation (Allo- HSCT), the only curative
MDS treatment (Cogle CR. Incidence and Burden of the
Myelodysplastic Syndromes. Curr Hematol Malig Rep. 2015;
10(3):272-281). We believe GTB-3550 could serve as a relatively
safe, cost-effective, and easy-to-use therapy for
resistant/relapsing AML and could also be combined with
chemotherapy as frontline therapy thus targeting the larger
market.
The IND for GTB-3550 was filed in June 2017 by the University of
Minnesota. FDA requested that additional preclinical toxicology be
conducted prior to initiating clinical trials. The FDA also
requested some additional information and clarifications on the
manufacturing (CMC) and clinical packages. The requested additional
information and clarifications were completed and incorporated by
us into the IND in eCTD format. We filed the IND amendment in June
2018 and announced on November 1, 2018 that we had received
notification from the FDA that the IND was open and the Company was
authorized to initiate a first-in-human Phase 1 study with GTB-3550
in AML, MDS and severe mastocytosis.
GTB-C3550
GTB-C3550 is a next-generation, follow-on, to our lead TriKE,
GTB-3550. GTB-C3550 contains a modified CD16 moiety which has
improved binding characteristics and enhanced tumor cell killing
based on functional assays and animal models of AML. Using our
platform technology, we substituted the anti-CD16 scFv arm in
GTB-3550 with a novel humanized single-domain anti-CD16 antibody to
create this second-generation molecule which may have improved
functionality. Single-domain antibodies, such as GTB-C3550,
typically have several advantages, including better stability and
solubility, more resistance to pH changes, can better recognize
hidden antigenic sites, lack of a VL portion thus preventing VH/VL
mispairing and are suitable for construction of larger molecules.
GTB-C3550 induced a potent increase in NK cell degranulation,
measured by CD107a expression against HL-60 AML tumor targets when
compared to our first- generation TriKE (70.75±3.65% vs.
30.75±5.05%). IFN production was similarly enhanced
(29.2±1.8% vs. 6.55±1.07%). GTB-C3550 also exhibited a
robust increase in NK cell proliferation (57.65±6.05% vs.
20.75±2.55%). GTB-3550 studies will help inform the
development of GTB-C3550 which we expect will de-risk the GTB-C3550
program as data will be generated to make an informed decision on
which, or both, will be brought into later phase
studies.
GTB-1615
GTB-1615 is an example of our first-generation TetraKEs designed
for the treatment of solid tumors. It is a single-chain fusion
protein composed of CD16-IL15-EpCAM-CD133. EpCAM is found on many
solid tumor cells of epithelial origin and CD133 is a marker for
cancer stem cells. This TetraKE is designed to target not only the
heterogeneous population of cancer cells found in solid tumors but
also the cancer stem cells that are typically responsible for
recurrences. We intend to initiate human clinical testing for
certain of our solid tumor product candidates in 2020.
Central Nervous System
Our CNS portfolio consists of in-process R&D
(“IPR&D”) assets acquired in connection with the
acquisition of Georgetown Translational Pharmaceuticals
(“GTP”) on September 1, 2017, consisting of innovative
reformulations and/or repurposing of existing therapies. These CNS
assets address disease states such as chronic neuropathic pain
(product candidate PainBrake, utilizing AccuBreak technology),
myasthenia gravis (product candidate GTP-004) and motion sickness
(product candidate GTP-011).
In the 3rd quarter of 2018, the Company experienced changes in key
senior management, led by the appointment of a CEO with extensive
experience in oncology drug development. These changes resulted in
the prioritization of immuno-oncology development candidates
relative to the CNS development candidates acquired from Georgetown
Translational Pharmaceuticals. In conjunction with these strategic
changes, limited internal resources have delayed the development of
the CNS IPR&D assets. The limited resources, changes in senior
leadership, and favorable market conditions for immuno-oncology
development candidates have resulted in the Company choosing to
focus on development of its immuno-oncology portfolio. We are
assessing our options to realize value from the CNS IPR&D
assets.
Summary Risk Factors
Investing in our common stock involves a high degree of risk.
Before deciding whether to invest in our securities, you should
consider carefully the risks and uncertainties discussed under the
section titled “Risk Factors” beginning on page 10, as
well as any amendments thereto reflected in subsequent filings with
the SEC, which are incorporated by reference into this prospectus
in their entirety, together with other information in this
prospectus, the documents incorporated by reference and any free
writing prospectus that we may authorize for use in connection with
a specific offering.
Our Offices
Our principal executive offices are located at 310 N. Westlake
Blvd, Suite 206, Westlake Village, CA 91362, and our telephone
number is (800) 304¬9888.
Our Website
Our website is located at www.gtbiopharma.com. Information
contained on or accessible through our website is not, and should
not be considered, part of, or incorporated by reference into, this
prospectus.
THE OFFERING
Securities offered by the selling stockholders: Up to 40,216,064 shares of common
stock
Offering Price: Fixed prices,
at prevailing market prices at the time of the sale, at varying
prices determined at the time of sale, or at negotiated
prices.
Use of proceeds: We will not
receive any proceeds from the sale of common stock by the selling
stockholders.
OTC Markets symbol
GTBP
Unless otherwise indicated, all information contained in this
prospectus gives effect to a 1-for-300 reverse stock split that we
effected on August 21, 2017.
Risk factors:
The purchase of our common stock involves a high degree of risk.
You should carefully review and consider "Risk Factors" beginning
on page 10.
We will pay all expenses incident to the registration of the shares
under the Securities Act.
Summary Financial Information
The tables and information below are derived from the Company's
unaudited consolidated financial statements as of March 31, 2019,
and for the three months ended March 31, 2019 and 2018 and also as
of December 31, 2018.
Balance Sheet Summary (in thousands)
|
|
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Cash
and cash equivalents
|
$51
|
$60
|
Total
assets
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25,539
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25,399
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Total
current liabilities
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15,523
|
14,029
|
Total
equity
|
10,016
|
11,370
|
Statement of Operations Summary (in thousands except per
share data)
|
|
|
|
|
|
Revenue
|
$-
|
$-
|
Selling,
general and administrative expenses
|
3,222
|
3,687
|
Research
and development
|
834
|
3,473
|
Loss
from operations
|
(4,056)
|
(7,160
|
Net
loss
|
$(4,510)
|
$(10,091
|
Net
loss per share – basic and diluted
|
$(0.09)
|
$(0.20
|
The tables and information below are derived from the Company's
audited consolidated financial statements for the years ended
December 31, 2018 and 2017.
Balance Sheet Summary (in thousands)
|
|
|
Cash
and cash equivalents
|
$60
|
$576
|
Total
assets
|
25,399
|
254,368
|
Total
current liabilities
|
14,029
|
2,679
|
Total
equity
|
11,370
|
251,689
|
Statement of Operations Summary (in thousands except per
share data)
|
|
|
|
|
|
Revenue
|
$-
|
$-
|
Selling,
general and administrative expenses
|
12,487
|
134,502
|
Research
and development
|
9,067
|
1,068
|
Loss
from operations
|
(250,069)
|
(135,570
|
Net
loss
|
$(259,186)
|
$(144,172
|
Net
loss per share – basic and diluted
|
$(5.16)
|
$(8.60
|
RISK FACTORS
Investment in our securities involves risks. Prior to making a
decision about investing in our securities, you should consider
carefully the risk factors, together with all of the other
information contained or incorporated by reference in this
prospectus and any prospectus supplement, including any additional
specific risks described in the section entitled “Risk
Factors” contained in any supplements to this prospectus, as
updated by annual, quarterly and other reports and documents we
file with the SEC after the date of this prospectus and that are
incorporated by reference herein or in the applicable prospectus
supplement. Each of these risk factors could have a material
adverse effect on our business, results of operations, financial
position or cash flows, which may result in the loss of all or part
of your investment.
Risks Related to Our Business
Our business is at an early stage of development and we may not
develop therapeutic products that can be
commercialized.
Our business is at an early stage of development. We do not have
immune-oncology products in late stage clinical trials and have
only recently begun clinical trials for our CNS product candidates.
We are still in the early stages of identifying and conducting
research on potential therapeutic products. Our potential
therapeutic products will require significant research and
development and pre-clinical and clinical testingprior to
regulatory approval in the United States and other countries. We
may not be able to obtain regulatory approvals, enter clinical
trials for any of our product candidates, or commercialize any
products. Our product candidates may prove to have undesirable and
unintended side effects or other characteristics adversely
affecting their safety, efficacy or cost effectiveness that could
prevent or limit their use. Any product using any of our technology
may fail to provide the intended therapeutic benefits or achieve
therapeutic benefits equal to or better than the standard of
treatment at the time of testing or production.
We have a history of operating losses and we expect to continue to
incur losses for the foreseeable future and we may never generate
revenue or achieve profitability.
As of March 31, 2019, we had an accumulated deficit of
approximately $533.3 million. We have not generated any significant
revenue to date and are not profitable, and have incurred losses in
each year since our inception. We do not expect to generate any
product sales or royalty revenues for at least four years. We
expect to incur significant additional operating losses for the
foreseeable future as we expand research and development and
clinical trial efforts.
Our ability to achieve long-term profitability is dependent upon
obtaining regulatory approvals for our products and successfully
commercializing our products alone or with third parties. However,
our operations may not be profitable even if any of our products
under development are successfully developed and produced and
thereafter commercialized. Even if we achieve profitability in the
future, we may not be able to sustain profitability in subsequent
periods.
Even if we succeed in commercializing one or more of our product
candidates, we expect to continue to incur substantial research and
development and other expenditures to develop and market additional
product candidates. The size of our future net losses will depend,
in part, on the rate of future growth of our expenses and our
ability to generate revenue. Our prior losses and expected future
losses have had and will continue to have an adverse effect on our
stockholders’ equity and working capital.
We will need additional capital to conduct our operations and
develop our products, and our ability to obtain the necessary
funding is uncertain.
We have used a significant amount of cash since inception to
finance the continued development and testing of our product
candidates, and we expect to need substantial additional capital
resources in order to develop our product candidates going forward
and launch and commercialize any product candidates for which we
receive regulatory approval.
We may not be successful in generating and/or maintaining operating
cash flow, and the timing of our capital expenditures and other
expenditures may not result in cash sufficient to sustain our
operations through the next 12 months. If financing is not
sufficient and additional financing is not available or available
only on terms that are detrimental to our long-term survival, it
could have a material adverse effect on our ability to continue to
function. The timing and degree of any future capital requirements
will depend on many factors, including:
●
the
accuracy of the assumptions underlying our estimates for capital
needs in 2018 and beyond;
●
scientific
and clinical progress in our research and development
programs;
●
the
magnitude and scope of our research and development programs and
our ability to establish, enforce and maintain strategic
arrangements for research, development, clinical testing,
manufacturing and marketing;
●
our
progress with pre-clinical development and clinical
trials;
●
the
time and costs involved in obtaining regulatory
approvals;
●
the
costs involved in preparing, filing, prosecuting, maintaining,
defending and enforcing patent claims; and
●
the
number and type of product candidates that we pursue.
Additional financing through strategic collaborations, public or
private equity or debt financings or other financing sources may
not be available on acceptable terms, or at all. Additional equity
financing could result in significant dilution to our stockholders,
and any debt financings will likely involve covenants restricting
our business activities. Additional financing may not be available
on acceptable terms, or at all. Further, if we obtain additional
funds through arrangements with collaborative partners, these
arrangements may require us to relinquish rights to some of our
technologies, product candidates or products that we would
otherwise seek to develop and commercialize on our
own.
If sufficient capital is not available, we may be required to
delay, reduce the scope of or eliminate one or more of our research
or product development initiatives, any of which could have a
material adverse effect on our financial condition or business
prospects.
We have identified material weaknesses in our internal control over
financial reporting have not remedied these weaknesses. If we fail
to maintain an effective system of internal control over financial
reporting, we may not be able to accurately report our financial
results or prevent fraud. As a result, stockholders could lose
confidence in our financial and other public reporting, which would
harm our business and the trading price of our common
stock.
Effective internal control over financial reporting is necessary
for us to provide reliable financial reports and, together with
adequate disclosure controls and procedures, are designed to
prevent fraud. Any failure to implement required new or improved
controls, or difficulties encountered in their implementation,
could cause us to fail to meet our reporting obligations.
Ineffective internal control could also cause investors to lose
confidence in our reported financial information, which could have
a negative effect on the trading price of our common
stock.
We have identified material weaknesses in our internal control over
financial reporting as a company. As defined in Regulation 12b-2
under the Securities Exchange Act of 1934, or the Exchange Act, a
“material weakness” is a deficiency, or combination of
deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement
of our annual or interim consolidated financial statements will not
be prevented, or detected on a timely basis. Specifically, we
determined that we had the following material weaknesses in our
internal control over financial reporting: (i) inadequate
segregation of duties; and (ii) insufficient written policies and
procedures for accounting and financial reporting with respect to
the requirements and application of both generally accepted
accounting principles in the United States of America, or GAAP, and
the U.S. Securities and Exchange Commission, or the SEC,
guidelines.
As of the date of this report, we have not remediated these
material weaknesses. We are continuing to adopt and implement
written policies and procedures for accounting and financial
reporting. We plan to hire additional qualified personnel to
address inadequate segregation of duties, although the timing of
such hires is largely dependent on our securing additional
financing to cover such costs. The implementation of these
initiatives may not fully address any material weakness or other
deficiencies that we may have in our internal control over
financial reporting.
Even if we develop effective internal control over financial
reporting, such controls may become inadequate due to changes in
conditions or the degree of compliance with such policies or
procedures may deteriorate, which could result in the discovery of
additional material weaknesses and deficiencies. In any event, the
process of determining whether our existing internal control over
financial reporting is compliant with Section 404 of the
Sarbanes-Oxley Act, or Section 404, and sufficiently effective
requires the investment of substantial time and resources,
including by certain members of our senior management. As a result,
this process may divert internal resources and take a significant
amount of time and effort to complete. In addition, we cannot
predict the outcome of this process and whether we will need to
implement remedial actions in order to establish effective controls
over financial reporting. The determination of whether or not our
internal controls are sufficient and any remedial actions required
could result in us incurring additional costs that we did not
anticipate, including the hiring of outside consultants. We may
also fail to timely complete our evaluation, testing and any
remediation required to comply with Section 404.
We are required, pursuant to Section 404, to furnish a report by
management on, among other things, the effectiveness of our
internal control over financial reporting. However, for as long as
we are a “smaller reporting company,” our independent
registered public accounting firm will not be required to attest to
the effectiveness of our internal control over financial reporting
pursuant to Section 404. While we could be a smaller reporting
company for an indefinite amount of time, and thus relieved of the
above-mentioned attestation requirement, an independent assessment
of the effectiveness of our internal control over financial
reporting could detect problems that our management's assessment
might not. Such undetected material weaknesses in our internal
control over financial reporting could lead to financial statement
restatements and require us to incur the expense of
remediation.
Our intellectual property may be compromised.
Part of our value going forward depends on the intellectual
property rights that we have been and are acquiring. There may have
been many persons involved in the development of our intellectual
property, and we may not be successful in obtaining the necessary
rights from all of them. It is possible that in the future, third
parties may challenge our intellectual property rights. We may not
be successful in protecting our intellectual property rights. In
either event, we may lose the value of our intellectual property,
and if so, our business prospects may suffer.
If our efforts to protect the proprietary nature of the
intellectual property related to our technologies are not adequate,
we may not be able to compete effectively in our market and our
business would be harmed.
We rely upon a combination of patents, trade secret protection and
confidentiality agreements to protect the intellectual property
related to our technologies. Any disclosure to or misappropriation
by third parties of our trade secret or other confidential
information could enable competitors to quickly duplicate or
surpass our technological achievements, thus eroding any
competitive advantage we may derive from this
information.
The strength of patents in the biotechnology and pharmaceutical
field involves complex legal and scientific questions and can be
uncertain. The patent applications we own or license may fail to
result in issued patents in the United States or in foreign
countries. Third parties may challenge the validity, enforceability
or scope of any issued patents we own or license or any
applications that may issue as patents in the future, which may
result in those patents being narrowed, invalidated or held
unenforceable. Even if they are unchallenged, our patents and
patent applications may not adequately protect our intellectual
property or prevent others from developing similar products that do
not fall within the scope of our patents. If the breadth or
strength of protection provided by the patents we hold or pursue is
threatened, our ability to commercialize any product candidates
with technology protected by those patents could be threatened.
Further, if we encounter delays in our clinical trials, the period
of time during which we would have patent protection for any
covered product candidates that obtain regulatory approval would be
reduced. Since patent applications in the United States and most
other countries are confidential for a period of time after filing,
we cannot be certain at the time of filing that we are the first to
file any patent application related to our product
candidates.
In addition to the protection afforded by patents, we seek to rely
on trade secret protection and confidentiality agreements to
protect proprietary know-how that is not patentable, processes for
which patents are difficult to enforce and any other elements of
our discovery platform and drug development processes that involve
proprietary know-how, information or technology that is not covered
by patents or not amenable to patent protection. Although we
require all of our employees and certain consultants and advisors
to assign inventions to us, and all of our employees, consultants,
advisors and any third parties who have access to our proprietary
know-how, information or technology to enter into confidentiality
agreements, our trade secrets and other proprietary information may
be disclosed or competitors may otherwise gain access to such
information or independently develop substantially equivalent
information. Further, the laws of some foreign countries do not
protect proprietary rights to the same extent or in the same manner
as the laws of the United States. As a result, we may encounter
significant difficulty in protecting and defendingour intellectual
property both in the United States and abroad. If we are unable to
prevent material disclosure of the trade secret intellectual
property related to our technologies to third parties, we may not
be able to establish or maintain the competitive advantage that we
believe is provided by such intellectual property, which could
materially adversely affect our market position and business and
operational results.
Claims that we infringe the intellectual property rights of others
may prevent or delay our drug discovery and development
efforts.
Our research, development and commercialization activities, as well
as any product candidates or products resulting from those
activities, may infringe or be accused of infringing a patent or
other form of intellectual property under which we do not hold a
license or other rights. Third parties may assert that we are
employing their proprietary technology without authorization. There
may be third-party patents of which we are currently unaware of,
with claims that cover the use or manufacture of our product
candidates or the practice of our related methods. Because patent
applications can take many years to issue, there may be currently
pending patent applications that may later result in issued patents
that our product candidates may infringe. In addition, third
parties may obtain patents in the future and claim that use of our
technologies infringes one or more claims of these patents. If our
activities or product candidates infringe the patents or other
intellectual property rights of third parties, the holders of such
intellectual property rights may be able to block our ability to
commercialize such product candidates or practice our methods
unless we obtain a license under the intellectual property rights
or until any applicable patents expire or are determined to be
invalid or unenforceable.
Defense of any intellectual property infringement claims against
us, regardless of their merit, would involve substantial litigation
expense and would be a significant diversion of employee resources
from our business. In the event of a successful claim of
infringement against us, we may have to pay substantial damages,
obtain one or more licenses from third parties, limit our business
to avoid the infringing activities, pay royalties and/or redesign
our infringing product candidates or methods, any or all of which
may be impossible or require substantial time and monetary
expenditure. Further, if we were to seek a license from the third
party holder of any applicable intellectual property rights, we may
not be able to obtain the applicable license rights when needed or
on commercially reasonable terms, or at all. The occurrence of any
of the above events could prevent us from continuing to develop and
commercialize one or more of our product candidates and our
business could materially suffer.
We may desire, or be forced, to seek additional licenses to use
intellectual property owned by third parties, and such licenses may
not be available on commercially reasonable terms or at
all.
A third party may hold intellectual property, including patent
rights, that are important or necessary to the development of our
product candidates, in which case we would need to obtain a license
from that third party or develop a different formulation of the
product that does not infringe upon the applicable intellectual
property, which may not be possible. Additionally, we may identify
product candidates that we believe are promising and whose
development and other intellectual property rights are held by
third parties. In such a case, we may desire to seek a license to
pursue the development of those product candidates. Any license
that we may desire to obtain or that we may be forced to pursue may
not be available when needed on commercially reasonable terms or at
all. Any inability to secure a license that we need or desire could
have a material adverse effect on our business, financial condition
and prospects.
The patent protection covering some of our product candidates may
be dependent on third parties, who may not effectively maintain
that protection.
While we expect that we will generally seek to gain the right to
fully prosecute any patents covering product candidates we may
in-license from third-party owners, there may be instances when
platform technology patents that cover our product candidates
remain controlled by our licensors. If any of our current or future
licensing partners that retain the right to prosecute patents
covering the product candidates we license from them fail to
appropriately maintain that patent protection, we may not be able
to prevent competitors from developing and selling competing
products or practicing competing methods and our ability to
generate revenue from any commercialization of the affected product
candidates may suffer.
We may be involved in lawsuits to protect or enforce our patents or
the patents of our licensors, which could be expensive,
time-consuming and unsuccessful.
Competitors may infringe our patents or the patents of our current
or potential licensors. To attempt to stop infringement or
unauthorized use, we may need to enforce one or more of our
patents, which can be expensive and time-consuming and distract
management. If we pursue any litigation, a court may decide that a
patent of ours or our licensor’s is not valid or is
unenforceable, or may refuse to stop the other party from using the
relevant technology on the grounds that our patents do not cover
the technology in question. Further, the legal systems of certain
countries, particularly certain developing countries, do not favor
the enforcement of patents, which could reduce the likelihood of
success of any infringement proceeding we pursue in any such
jurisdiction. An adverse result in any infringement litigation or
defense proceedings could put one or more of our patents at risk of
being invalidated, held unenforceable, or interpreted narrowly and
could put our patent applications at risk of not issuing, which
could limit our ability to exclude competitors from directly
competing with us in the applicable jurisdictions.
Interference proceedings provoked by third parties or brought by
the U.S. PTO may be necessary to determine the priority of
inventions with respect to our patents or patent applications or
those of our licensors. An unfavorable outcome could require us to
cease using the related technology or to attempt to license rights
to use it from the prevailing party. Our business could be harmed
if the prevailing party does not offer us a license on commercially
reasonable terms, or at all. Litigation or interference proceedings
may fail and, even if successful, may result in substantial costs
and distract our management and other employees.
If we are unsuccessful in obtaining or maintaining patent
protection for intellectual property in development, our business
and competitive position would be harmed.
We are seeking patent protection for some of our technology and
product candidates. Patent prosecution is a challenging process and
is not assured of success. If we are unable to secure patent
protection for our technology and product candidates, our business
may be adversely impacted.
In addition, issued patents and pending international applications
require regular maintenance. Failure to maintain our portfolio may
result in loss of rights that may adversely impact our intellectual
property rights, for example by rendering issued patents
unenforceable or by prematurely terminating pending international
applications.
If we are unable to protect the confidentiality of our trade
secrets, our business and competitive position would be
harmed.
In addition to seeking patents for some of our technology and
product candidates, we also rely on trade secrets, including
unpatented know-how, technology and other proprietary information,
to maintain our competitive position. We currently, and expect in
the future to continue to, seek to protect these trade secrets, in
part, by entering into confidentiality agreements with parties who
have access to them, such as our employees, collaborators, contract
manufacturers, consultants, advisors and other third parties. We
also enter into confidentiality and invention or patent assignment
agreements with our employees and consultants. Despite these
efforts, any of these parties may breach the agreements and
disclose our proprietary information, including our trade secrets,
and we may not be able to obtain adequate remedies for any such
disclosure. Enforcing a claim that a party illegally disclosed or
misappropriated a trade secret is difficult, expensive and
time-consuming, and the outcome is unpredictable. In addition, some
courts inside and outside the United States are less willing or
unwilling to protect trade secrets. If any of our trade secrets
were to be lawfully obtained or independently developed by a
competitor, we would have no right to prevent them, or those to
whom they disclose the trade secrets, from using that technology or
information to compete with us. If any of our trade secrets were to
be disclosed to or independently developed by a competitor, our
competitive position would be harmed.
If we fail to meet our obligations under our license agreements, we
may lose our rights to key technologies on which our business
depends.
Our business depends in part on licenses from third parties. These
third-party license agreements impose obligations on us, such as
payment obligations and obligations to diligently pursue
development of commercial products under the licensed patents. If a
licensor believes that we have failed to meet our obligations under
a license agreement, the licensor could seek to limit or terminate
our license rights, which could lead to costly and time-consuming
litigation and, potentially, a loss of the licensed rights. During
the period of any such litigation, our ability to carry out the
development and commercialization of potential products could be
significantly and negatively affected. If our license rights were
restricted or ultimately lost, our ability to continue our business
based on the affected technology platform could be severely
adversely affected.
We will have to hire additional executive officers and employees to
operate our business. If we are unable to hire qualified personnel,
we may not be able to implement our business strategy.
We currently have only five full-time employees. The loss of the
services of any of our key product or business development
employees could delay our product development programs and our
research and development efforts. We do not maintain key person
life insurance on any of our officers, employees or consultants. In
order to develop our business in accordance with our business
strategy, we will have to hire additional qualified personnel,
including in the areas of manufacturing, clinical trials
management, regulatory affairs, and business development. We will
need to raise sufficient funds to hire the necessary employees and
have commenced our search for additional key
employees.
Moreover, there is intense competition for a limited number of
qualified personnel among biopharmaceutical, biotechnology,
pharmaceutical and other businesses. Many of the other
pharmaceutical companies against which we compete for qualified
personnel have greater financial and other resources, different
risk profiles, longer histories in the industry and greater ability
to provide valuable cash or stock incentives to potential recruits
than we do. They also may provide more diverse opportunities and
better chances for career advancement. Some of these
characteristics may be more appealing to high quality candidates
than what we are able to offer as an early-stage company. If we are
unable to continue to attract and retain high quality personnel,
the rate and success at which we can develop and commercialize
product candidates will be limited.
We depend on key personnel for our continued operations and future
success, and a loss of certain key personnel could significantly
hinder our ability to move forward with our business
plan.
Because of the specialized nature of our business, we are highly
dependent on our ability to identify, hire, train and retain highly
qualified scientific and technical personnel for the research and
development activities we conduct or sponsor. The loss of one or
more key executive officers, or scientific officers, would be
significantly detrimental to us. In addition, recruiting and
retaining qualified scientific personnel to perform research and
development work is critical to our success. Our anticipated growth
and expansion into areas and activities requiring additional
expertise, such as clinical testing, regulatory compliance,
manufacturing and marketing, will require the addition of new
management personnel and the development of additional expertise by
existing management personnel. There is intense competition for
qualified personnel in the areas of our present and planned
activities. Accordingly, we may not be able to continue to attract
and retain the qualified personnel, which would adversely affect
the development of our business.
We may be subject to claims by third parties asserting that our
employees or we have misappropriated their intellectual property,
or claiming ownership of what we regard as our own intellectual
property.
Many of our employees were previously employed at universities or
other biotechnology or pharmaceutical companies, including our
competitors or potential competitors. Although we try to ensure
that our employees do not use the proprietary information or
know-how of others in their work for us, with contractual
provisions and other procedures, we may be subject to claims that
these employees or we have used or disclosed intellectual property,
including trade secrets or other proprietary information, of any
such employee’s former employers. Litigation may be necessary
to defend against any such claims.
In addition, while it is our policy to require our employees and
contractors who may be involved in the development of intellectual
property to execute agreements assigning such intellectual property
to us, we may be unsuccessful in executing such an agreement with
each party who in fact contributes to the development of
intellectual property that we regard as our own. Further, the terms
of such assignment agreements may be breached and we may not be
able to successfully enforce their terms, which may force us to
bring claims against third parties, or defend claims they may bring
against us, to determine the ownership of intellectual property
rights we may regard and treat as our own.
Our employees may engage in misconduct or other improper
activities, including noncompliance with regulatory standards and
requirements, which could cause our business to
suffer.
We are exposed to the risk of employee fraud or other misconduct.
Misconduct by employees could include intentional failures to
comply with regulations of governmental authorities, such as the
FDA or the European Medicines Agency, or EMA, to provide accurate
information to the FDA or EMA, to comply with manufacturing
standards we have established, to comply with federal, state and
international healthcare fraud and abuse laws and regulations as
they may become applicable to our operations, to report financial
information or data accurately or to disclose unauthorized
activities to us. Employee misconduct could also involve the
improper use of information obtained in the course of clinical
trials, which could result in regulatory sanctions and serious harm
to our reputation. It is not always possible to identify and deter
employee misconduct, and the precautions we currently take and the
procedures we may establish in the future as our operations and
employee base expand to detect and prevent this type of activity
may not be effective in controlling unknown or unmanaged risks or
losses or in protecting us fromgovernmental investigations or other
actions or lawsuits stemming from a failure by our employees to
comply with such laws or regulations. If any such actions are
instituted against us, and we are not successful in defending
ourselves or asserting our rights, those actions could have a
significant impact on our business and results of operations,
including the imposition of significant fines or other
sanctions.
Our reliance on the activities of our non-employee consultants,
research institutions and scientific contractors, whose activities
are not wholly within our control, may lead to delays in
development of our proposed products.
We rely extensively upon and have relationships with scientific
consultants at academic and other institutions, some of whom
conduct research at our request, and other consultants with
expertise in clinical development strategy or other matters. These
consultants are not our employees and may have commitments to, or
consulting or advisory contracts with, other entities that may
limit their availability to us. We have limited control over the
activities of these consultants and, except as otherwise required
by our collaboration and consulting agreements to the extent they
exist, can expect only limited amounts of their time to be
dedicated to our activities. These research facilities may have
commitments to other commercial and non-commercial entities. We
have limited control over the operations of these laboratories and
can expect only limited amounts of time to be dedicated to our
research goals.
It may take longer to complete our clinical trials than we project,
or we may not be able to complete them at all.
For budgeting and planning purposes, we have projected the date for
the commencement, continuation and completion of our various
clinical trials. However, a number of factors, including scheduling
conflicts with participating clinicians and clinical institutions,
and difficulties in identifying and enrolling patients who meet
trial eligibility criteria, may cause significant delays. We may
not commence or complete clinical trials involving any of our
products as projected or may not conduct them
successfully.
We expect to rely on medical institutions, academic institutions or
clinical research organizations to conduct, supervise or monitor
some or all aspects of clinical trials involving our products. We
will have less control over the timing and other aspects of these
clinical trials than if we conducted them entirely on our own. If
we fail to commence or complete, or experience delays in, any of
our planned clinical trials, our stock price and our ability to
conduct our business as currently planned could be
harmed.
Clinical drug development is costly, time-consuming and uncertain,
and we may suffer setbacks in our clinical development program that
could harm our business.
Clinical drug development for our product candidates is costly,
time-consuming and uncertain. Our product candidates are in various
stages of development and while we expect that clinical trials for
these product candidates will continue for several years, such
trials may take significantly longer than expected to complete. In
addition, we, the FDA, an institutional review board, or IRB, or
other regulatory authorities, including state and local agencies
and counterpart agencies in foreign countries, may suspend, delay,
require modifications to or terminate our clinical trials at any
time, for various reasons, including:
●
discovery
of safety or tolerability concerns, such as serious or unexpected
toxicities or side effects or exposure to otherwise unacceptable
health risks, with respect to study participants;
●
lack
of effectiveness of any product candidate during clinical trials or
the failure of our product candidates to meet specified
endpoints;
●
delays
in subject recruitment and enrollment in clinical trials or
inability to enroll a sufficient number of patients in clinical
trials to ensure adequate statistical ability to detect
statistically significant treatment effects;
●
difficulty
in retaining subjects and volunteers in clinical
trials;
●
difficulty
in obtaining IRB approval for studies to be conducted at each
clinical trial site;
●
delays
in manufacturing or obtaining, or inability to manufacture or
obtain, sufficient quantities of materials for use in clinical
trials;
●
inadequacy
of or changes in our manufacturing process or the product
formulation or method of delivery;
●
delays
or failure in reaching agreement on acceptable terms in clinical
trial contracts or protocols with prospective contract research
organizations, or CROs, clinical trial sites and other third-party
contractors;
●
inability
to add a sufficient number of clinical trial sites;
●
uncertainty
regarding proper formulation and dosing;
●
failure
by us, our employees, our CROs or their employees or other
third-party contractors to comply with contractual and applicable
regulatory requirements or to perform their services in a timely or
acceptable manner;
●
scheduling
conflicts with participating clinicians and clinical
institutions;
●
failure
to design appropriate clinical trial protocols;
●
inability
or unwillingness of medical investigators to follow our clinical
protocols;
●
difficulty
in maintaining contact with subjects during or after treatment,
which may result in incomplete data; or
●
changes
in applicable laws, regulations and regulatory
policies.
If we experience delays or difficulties in the enrollment of
patients in clinical trials, those clinical trials could take
longer than expected to complete and our receipt of necessary
regulatory approvals could be delayed or prevented.
We may not be able to initiate or continue clinical trials for our
product candidates if we are unable to locate and enroll a
sufficient number of eligible patients to participate in these
trials as required by U.S. Food and Drug Administration, or the
FDA, or similar regulatory authorities outside the United States.
In particular, because we are focused on patients with molecularly
defined cancers, our pool of suitable patients may be smaller and
more selective and our ability to enroll a sufficient number of
suitable patients may be limited or take longer than anticipated.
In addition, some of our competitors have ongoing clinical trials
for product candidates that treat the same indications as our
product candidates, and patients who would otherwise be eligible
for our clinical trials may instead enroll in clinical trials of
our competitors’ product candidates.
Patient enrollment for any of our clinical trials may also be
affected by other factors, including without
limitation:
●
the
severity of the disease under investigation;
●
the
frequency of the molecular alteration we are seeking to target in
the applicable trial;
●
the
eligibility criteria for the study in question;
●
the
perceived risks and benefits of the product candidate under
study;
●
the
extent of the efforts to facilitate timely enrollment in clinical
trials;
●
the
patient referral practices of physicians;
●
the
ability to monitor patients adequately during and after treatment;
and
●
the
proximity and availability of clinical trial sites for prospective
patients.
Our inability to enroll a sufficient number of patients for our
clinical trials would result in significant delays and could
require us to abandon one or more clinical trials altogether.
Enrollment delays in our clinical trials may result in increased
development costs for our product candidates, and we may not have
or be able to obtain sufficient cash to fund such increased costs
when needed, which could result in the further delay or termination
of the trial.
Consistent with our general product development strategy, we intend
to design future trials for our product candidates to include some
patients with the applicable clinical characteristics, stage of
therapy, molecular alterations, biomarkers, and/or cell surface
antigens that determine therapeutic options, or are indicators of
the disease, with a view to assessing possible early evidence of
potential therapeutic effect. If we are unable to locate and
include such patients in those trials, then our ability to make
those early assessments and to seek participation in FDA expedited
review and approval programs, including breakthrough therapy and
fast track designation, or otherwise to seek to accelerate clinical
development and regulatory timelines, could be
compromised.
We have limited clinical testing and regulatory capabilities, and
human clinical trials are subject to extensive regulatory
requirements, very expensive, time-consuming and difficult to
design and implement. Our products may fail to achieve necessary
safety and efficacy endpoints during clinical trials, which may
limit our ability to generate revenues from therapeutic
products.
We cannot assure you that we will be able to invest or develop
resources for clinical trials successfully or as expediently as
necessary. In particular, human clinical trials can be very
expensive and difficult to design and implement, in part because
they are subject to rigorous regulatory requirements. The clinical
trial process is time consuming. We estimate that clinical trials
of our product candidates will take at least several years to
complete. Furthermore, failure can occur at any stage of the
trials, and we could encounter problems that cause us to abandon or
repeat clinical trials. The commencement and completion of clinical
trials may be affected by several factors, including:
●
unforeseen
safety issues;
●
determination
of dosing issues;
●
inability
to demonstrate effectiveness during clinical trials;
●
slower
than expected rates of patient recruitment;
●
inability
to monitor patients adequately during or after treatment;
and
●
inability
or unwillingness of medical investigators to follow our clinical
protocols.
In addition, we or the FDA, may suspend our clinical trials at any
time if it appears that we are exposing participants to
unacceptable health risks or if the FDA finds deficiencies in our
investigational new drug application, or IND, submissions or the
conduct of these trials.
We are subject to extensive regulation, which can be costly and
time consuming and can subject us to unanticipated delays. even if
we obtain regulatory approval for some of our products, those
products may still face regulatory difficulties.
All of our potential products, processing and manufacturing
activities, are subject to comprehensive regulation by the FDA in
the United States and by comparable authorities in other countries.
The process of obtaining FDA and other required regulatory
approvals, including foreign approvals, is expensive and often
takes many years and can vary substantially based upon the type,
complexity and novelty of the products involved. In addition,
regulatory agencies may lack experience with our technologies and
products, which may lengthen the regulatory review process,
increase our development costs and delay or prevent their
commercialization.
If we violate regulatory requirements at any stage, whether before
or after we obtain marketing approval, the FDA may take enforcement
action(s) against us, which could include issuing a warning or
untitled letter, placing a clinical hold on an ongoing clinical
trial, product seizure, enjoining our operations, refusal to
consider our applications for pre-market approval, refusal of an
investigational new drug application, fines, or even civil or
criminal liability, any of which could materially harm our
reputation and financial results. Additionally, we may not be able
to obtain the labeling claims necessary or desirable for the
promotion of our products. We may also be required to undertake
post-marketing trials to provide additional evidence of safety and
effectiveness. In addition, if we or others identify side effects
after any of our adoptive therapies are on the market, or if
manufacturing problems occur, regulators may withdraw their
approval and reformulations, additional clinical trials, changes in
labeling of our products, and additional marketing applications may
be required.
Any of the following factors, among others, could cause regulatory
approval for our product candidates to be delayed, limited or
denied:
●
the
product candidates require significant clinical testing to
demonstrate safety and effectiveness before applications for
marketing approval can be filed with the FDA and other regulatory
authorities;
●
data
obtained from pre-clinical and nonclinical animal testing and
clinical trials can be interpreted in different ways, and
regulatory authorities may not agree with our respective
interpretations or may require us to conduct additional
testing;
●
negative
or inconclusive results or the occurrence of serious or unexpected
adverse events during a clinical trial could cause us to delay or
terminate development efforts for a product candidate;
and/or
●
FDA
and other regulatory authorities may require expansion of the size
and scope of the clinical trials.
Any difficulties or failures that we encounter in securing
regulatory approval for our product candidates would likely have a
substantial adverse impact on our ability to generate product
sales, and could make any search for a collaborative partner more
difficult.
Obtaining regulatory approval even after clinical trials that are
believed to be successful is an uncertain process.
Even if we complete our planned clinical trials and believe the
results were successful, obtaining regulatory approval is a
lengthy, expensive and uncertain process, and the FDA or other
regulatory agencies may delay, limit or deny approval of any of our
applications for pre-market approval for many reasons,
including:
●
we
may not be able to demonstrate to the FDA’s satisfaction that
our product candidates are safe and effective for any
indication;
●
the
results of clinical trials may not meet the level of statistical
significance or clinical significance required by the FDA for
approval;
●
the
FDA may disagree with the number, design, size, conduct or
implementation of our clinical trials;
●
the
FDA may not find the data from pre-clinical studies and clinical
trials sufficient to demonstrate that the clinical and other
benefits of our product candidates outweigh their safety
risks;
●
the
FDA may disagree with our interpretation of data from pre-clinical
studies or clinical trials, or may not accept data generated at our
clinical trial sites;
●
the
data collected from pre-clinical studies and clinical trials of our
product candidates may not be sufficient to support the submission
of applications for regulatory approval;
●
the
FDA may have difficulties scheduling an advisory committee meeting
in a timely manner, or the advisory committee may recommend against
approval of our application or may recommend that the FDA require,
as a condition of approval, additional pre-clinical studies or
clinical trials, limitations on approved labeling, or distribution
and use restrictions;
●
the
FDA may require development of a risk evaluation and mitigation
strategy as a condition of approval;
●
the
FDA may identify deficiencies in the manufacturing processes or
facilities of third-party manufacturers with which we enter into
agreements for clinical and commercial supplies;
●
the
FDA may change their approval policies or adopt new regulations
that adversely affect our applications for pre-market approval;
and
●
the
FDA may require simultaneous approval for both adults and for
children and adolescents delaying needed approvals, or we may have
successful clinical trial results for adults but not children and
adolescents, or vice versa.
Before we can submit an application for regulatory approval in the
United States, we must conduct a pivotal, Phase 3 trial. We will
also need to agree on a protocol with the FDA for a clinical trial
before commencing the trial. Phase 3 clinical trials frequently
produce unsatisfactory results even though prior clinical trials
were successful. Therefore, even if the results of our Phase 2
trials are successful, the results of the additional trials that we
conduct may or may not be successful. Further, our product
candidates may not be approved even if they achieve their primary
endpoints in Phase 3 clinical trials. The FDA or other foreign
regulatory authorities may disagree with our trial design and our
interpretation of data from preclinical studies and clinical
trials. Any of these regulatory authorities may change requirements
for the approval of a product candidate even after reviewing and
providing comments or advice on a protocol for a clinical trial.
The FDA or other regulatory agencies may require that we conduct
additional clinical, nonclinical, manufacturing validation or drug
product quality studies and submit those data before considering or
reconsidering the application. Depending on the extent of these or
any other studies, approval of any applications that we submit may
be delayed by several years, or may require us to expend more
resources than we have available. It is also possible that
additional studies, if performed and completed, may not be
considered sufficient by the FDA or other regulatory
agencies.
In addition, the FDA or other regulatory agencies may also approve
a product candidate for fewer or more limited indications than we
request, may impose significant limitations related to use
restrictions for certain age groups, warnings, precautions or
contraindications or may grant approval contingent on the
performance of costly post-marketing clinical trials or risk
mitigation requirements.
We intend to pursue Section 505(b)(2) regulatory approval
filings with the FDA for at least three of our product candidates.
If the FDA concludes that certain of our product candidates fail to
satisfy the requirements under Section 505(b)(2), or if the
requirements for such product candidates under
Section 505(b)(2) are not as we expect, the approval
pathway for such product candidates may take significantly longer,
cost substantially more and entail greater complications and risks
than anticipated and, in either case, may not be successful. In
addition, if under certain circumstances, exclusivity of
competitors would delay approval of our product candidates, then we
may pursue approval through the Section 505(b)(1) regulatory
pathway, which may require us to conduct additional preclinical or
clinical trials or obtain a right to reference the preclinical or
clinical data of others.
We are currently developing three product candidates, GTP-004,
GTP-011 and PainBrake for which we intend to seek FDA approval
through the Section 505(b)(2) regulatory pathway, and may
decide to seek FDA approval for other products through the
Section 505(b)(2) regulatory pathway in the future. A
Section 505(b)(2) NDA is a special type of NDA that
enables the applicant to rely, in part, on the FDA’s findings
of safety and efficacy of an existing previously approved product,
or published literature, in support of its application.
Section 505(b)(2) NDAs often provide an alternate path to
FDA approval for new or improved formulations or new uses of
previously approved products. Such filings involve significant
filing costs, including filing fees.
Reliance on existing safety findings could expedite the development
program for our product candidates by decreasing the amount of
preclinical or clinical data that we would need to generate in
order to obtain FDA approval. If the FDA does not allow us to
pursue the Section 505(b)(2) regulatory pathway as
anticipated, or if the Section 505(b)(2) regulatory
pathway fails to significantly decrease the amount of testing we
must conduct, we may need to conduct additional preclinical or
clinical trials, provide additional data and information and meet
additional standards to obtain regulatory approval. In such case,
the time and financial resources required to obtain FDA approval
for product candidates for which we seek approval through the
Section 505(b)(2) pathway in the future, and complications and
risks associated with these product candidates, likely would
increase substantially. Moreover, our inability to pursue the
Section 505(b)(2) regulatory pathway could prevent us
from introducing our product candidates into the market prior to
our competitors, which could harm our competitive position and
prospects. Even if the FDA allows us to pursue approval through the
Section 505(b)(2), we cannot guarantee that it would
ultimately lead to faster product development, and our product
candidates may not receive the requisite approvals for
commercialization.
Furthermore, Section 505(b)(2) NDAs are subject to
special requirements designed to protect the patent rights of
sponsors of previously approved drugs referenced in a
Section 505(b)(2) NDA, and pursuing the Section 505(b)(2)
pathway could lead to patent litigation and other significant
delays if a current patent holder challenges our application for
pre-market approval. In addition, a manufacturer of an approved
referenced product to file a citizen petition with the FDA
seeking to delay approval of, or impose additional approval
requirements for, pending competing products. If successful, such
petitions can significantly delay, or even prevent, the approval of
the new product. However, even if the FDA ultimately denies such a
petition, the FDA may substantially delay approval while it
considers and responds to the petition.
Furthermore, award of three-year exclusivity by the FDA to a
competitor with a Section 505(b)(2) NDA could delay approval of a
product candidate of ours submitted pursuant to Section 505(b)(2)
of the Food, Drug, and Cosmetic Act if the FDA were to determine
that the products have overlapping conditions of approval, even if
our Section 505(b)(2) NDA does not rely on the competing Section
505(b)(2) NDA. Alternatively, we may pursue approval through the
Section 505(b)(1) regulatory pathway, which may require us to
conduct additional preclinical or clinical trials or obtain a right
to reference the preclinical or clinical data of others. These
alternatives may increase the time and/or financial resources
required to obtain approval.
We will continue to be subject to extensive FDA regulation
following any product approvals, and if we fail to comply with
these regulations, we may suffer a significant setback in our
business.
Even if we are successful in obtaining regulatory approval of our
product candidates, we will continue to be subject to the
requirements of and review by, the FDA and comparable regulatory
authorities in the areas of manufacturing processes, post-approval
clinical data, adverse event reporting, labeling, advertising and
promotional activities, among other things. In addition, any
marketing approval we receive may be limited in terms of the
approved product indication or require costly post-marketing
testing and surveillance. Discovery after approval of previously
unknown problems with a product, manufacturer or manufacturing
process, or a failure to comply with regulatory requirements, may
result in enforcement actions such as:
●
warning
letters or other actions requiring changes in product manufacturing
processes or restrictions on product marketing or
distribution;
●
product
recalls or seizures or the temporary or permanent withdrawal of a
product from the market;
●
suspending
any ongoing clinical trials;
●
temporary
or permanent injunctions against our production
operations;
●
refusal
of our applications for pre-market approval or an investigational
new drug application; and
●
fines,
restitution or disgorgement of profits or revenue, the imposition
of civil penalties or criminal prosecution.
The occurrence of any of these actions would likely cause a
material adverse effect on our business, financial condition and
results of operations.
Many of our business practices are subject to scrutiny and
potential investigation by regulatory and government enforcement
authorities, as well as to lawsuits brought by private citizens
under federal and state laws. We could become subject to
investigations, and our failure to comply with applicable law or an
adverse decision in lawsuits may result in adverse consequences to
us. If we fail to comply with U.S. healthcare laws, we could face
substantial penalties and financial exposure, and our business,
operations and financial condition could be adversely
affected.
While payment is not yet available from third-party payors
(government or commercial) for our product, our goal is to obtain
such coverage as soon as possible after product approval and
commercial launch in the U.S . If this occurs, the availability of
such payment would mean that many healthcare laws would place
limitations and requirements on the manner in which we conduct our
business (including our sales and promotional activities and
interactions with healthcare professionals and facilities) and
could result in liability and exposure to us. In some instances,
our interactions with healthcare professionals and facilities that
occurred prior to commercialization could have implications at a
later date. The laws that may affect our ability to operate
include, among others: (i) the federal healthcare programs
Anti-Kickback Statute, which prohibits,among other things, persons
from knowingly and willfully soliciting, receiving, offering or
paying remuneration, directly or indirectly, in exchange for or to
induce either the referral of an individual for, or the purchase,
order or recommendation of, any good or service for which payment
may be made under federal healthcare programs such as Medicare or
Medicaid, (ii) federal false claims laws which prohibit, among
other things, individuals or entities from knowingly presenting, or
causing to be presented, claims for payment from Medicare,
Medicaid, or other third-party payors that are false or fraudulent,
and which may apply to entities like us under theories of
“implied certification” where the government and qui
tam relators may allege that device companies are liable where a
product that was paid for by the government in whole or in part was
promoted “off-label,” lacked necessary approval, or
failed to comply with good manufacturing practices or other laws;
(iii) transparency laws and related reporting and/or disclosures
such as the Sunshine Act; and/or (iv) state law equivalents of each
of the above federal laws, such as anti-kickback and false claims
laws which may apply to items or services reimbursed by any
third-party payor, including commercial insurers, many of which
differ from their federal counterparts in significant ways, thus
complicating compliance efforts.
If our operations are found to be in violation of any of the laws
described above or any other governmental regulations that apply to
us, we may be subject to penalties, including civil and criminal
penalties, exclusion from participation in government healthcare
programs, damages, fines and the curtailment or restructuring of
our operations. Any penalties, damages, fines, curtailment or
restructuring of our operations could adversely affect our ability
to operate our business and our financial results. The risk of our
being found in violation of these laws is increased by the fact
that their provisions are open to a variety of evolving
interpretations and enforcement discretion. Any action against us
for violation of these laws, even if we successfully defend against
it, could cause us to incur significant legal expenses and divert
our management’s attention from the operation of our
business.
Both federal and state government agencies have heightened civil
and criminal enforcement efforts. There are numerous ongoing
investigations of healthcare pharmaceutical companies and others in
the healthcare space, as well as their executives and managers. In
addition, amendments to the Federal False Claims Act, have made it
easier for private parties to bring qui tam (whistleblower)
lawsuits against companies under which the whistleblower may be
entitled to receive a percentage of any money paid tothe
government. In addition, the Affordable Care Act amended the
federal civil False Claims Act to provide that a claim that
includes items or services resulting from a violation of the
federal anti-kickback statute constitutes a false or fraudulent
claimfor purposes of the federal civil False Claims Act. Penalties
include substantial fines for each false claim, plus three times
the amount of damages that the federal government sustained because
of the act of that person or entity and/or exclusion from the
Medicare program. In addition, a majority of states have adopted
similar state whistleblower and false-claims provision. There can
be no assurance that our activities will not come under the
scrutiny of regulators and other government authorities or thatour
practices will not be found to violate applicable laws, rules and
regulations or prompt lawsuits by private citizen "relators" under
federal or state false claims laws. Any future investigations of
our business or executives, or enforcement action or prosecution,
could cause us to incur substantial costs, and result in
significant liabilities or penalties, as well as damage to our
reputation.
Laws impacting the U.S. healthcare system are subject to a great
deal of uncertainty, which may result in adverse consequences to
our business.
There have been a number of legislative and regulatory proposals to
change the healthcare system, reduce the costs of healthcare and
change medical reimbursement policies. Doctors, clinics, hospitals
and other users of our products may decline to purchase our
products to the extent there is uncertainty regarding coverage from
government or commercial payors. Further proposed legislation,
regulation and policy changes affecting third-party reimbursement
are likely. Among other things, Congress has in the past proposed
changes to and the repeal of the Patient Protection and Affordable
Care and Health Care and Education Affordability Reconciliation Act
of 2010 (collectively, the “Affordable Care Act”), and
lawsuits have been brought challenging aspects of the law at
various points. There have been repeated recent attempts by
Congress to repeal or replace the Affordable Care Act. At this
time, it remains unclear whether there will be any changes made to
or any repeal or replacement of the Affordable Care Act, with
respect to certain of its provisions or in its entirety. We are
unable to predict what legislation or regulation, if any, relating
to the health care industry or third-party coverage and
reimbursement may be enacted in the future at the state or federal
level, or what effect such legislation or regulation may have on
us. Denial of coverage and reimbursement of our products, or the
revocation or changes to coverage and reimbursement policies, could
have a material adverse effect on our business, results of
operations and financial condition.
We may not be successful in our efforts to build a pipeline of
product candidates.
A key element of our strategy is to use and expand our product
platform to build a pipeline of product candidates, and progress
those product candidates through clinical development for the
treatment of a variety of different types of cancer. Even if we are
successful in building a product pipeline, the potential product
candidates that we identify may not be suitable for clinical
development for a number of reasons, including causing harmful side
effects or demonstrating other characteristics that indicate a low
likelihood of receiving marketing approval or achieving market
acceptance. If our methods of identifying potential product
candidates fail to produce a pipeline of potentially viable product
candidates, then our success as a business will be dependent on the
success of fewer potential product candidates, which introduces
risks to our business model and potential limitations to any
success we may achieve.
Our product candidates may cause undesirable side effects or have
other properties that could delay or prevent their regulatory
approval, limit the commercial profile of an approved label, or
result in significant negative consequences following marketing
approval, if any.
Additionally, if one or more of our product candidates receives
marketing approval, and we or others later identify undesirable
side effects caused by such products, a number of potentially
significant negative consequences could result,
including:
●
regulatory
authorities may withdraw approvals of such product;
●
regulatory
authorities may require additional warnings on the product’s
label;
●
we
may be required to create a medication guide for distribution to
patients that outlines the risks of such side effects;
●
we
could be sued and held liable for harm caused to patients;
and
●
our
reputation may suffer.
Any of these events could prevent us from achieving or maintaining
market acceptance of the particular product candidate, if approved,
and could significantly harm our business, results of operations
and prospects.
We may expend our limited resources to pursue a particular product
candidate or indication that does not produce any commercially
viable products and may fail to capitalize on product candidates or
indications that may be more profitable or for which there is a
greater likelihood of success.
Because we have limited financial and managerial resources, we must
focus our efforts on particular research programs and product
candidates for specific indications. As a result, we may forego or
delay pursuit of opportunities with other product candidates or for
other indications that later prove to have greater commercial
potential. Further, our resource allocation decisions may result in
our use of funds for research and development programs and product
candidates for specific indications that may not yield any
commercially viable products. If we do not accurately evaluate the
commercial potential or target market for a particular product
candidate, we may relinquish valuable rights to that product
candidate through collaboration, licensing or other royalty
arrangements in cases in which it would have been more advantageous
for us to retain sole development and commercialization rights to
such product candidate. Any such failure to improperly assess
potential product candidates could result in missed opportunities
and/or our focus on product candidates with low market potential,
which would harm our business and financial condition.
Our products may be expensive to manufacture, and they may not be
profitable if we are unable to control the costs to manufacture
them.
Our products may be significantly more expensive to manufacture
than we expect or than other therapeutic products currently on the
market today. We hope to substantially reduce manufacturing costs
through process improvements, development of new methods, increases
in manufacturing scale and outsourcing to experienced
manufacturers. If we are not able to make these, or other
improvements, and depending on the pricing of the product, our
profit margins may be significantly less than that of other
therapeutic products on the market today. In addition, we may not
be able to charge a high enough price for any product we develop,
even if they are safe and effective, to make a profit. If we are
unable to realize significant profits from our potential product
candidates, our business would be materially harmed.
For some of our products, we currently lack sufficient
manufacturing capabilities to produce our therapeutic product
candidates at commercial-scale quantities and do not have an
alternate manufacturing supply, which could negatively impact our
ability to meet any future demand for the product.
We expect that we would need to significantly expand our
manufacturing capabilities to meet potential demand for our
therapeutic product candidates, if approved. Such expansion would
require additional regulatory approvals. Even if we increase our
manufacturing capabilities, it is possible that we may still lack
sufficient capacity to meet demand.
We do not currently have any alternate supply for our products. If
our facilities where our products are currently being manufactured
or equipment were significantly damaged or destroyed, or if there
were other disruptions, delays or difficulties affecting
manufacturing capacity, including if such facilities are deemed not
in compliance with current Good Manufacturing Practice, or GMP,
requirements, future clinical studies and commercial production for
our products would likely be significantly disrupted and delayed.
It would be both time-consuming and expensive to replace this
capacity with third parties, particularly since any new facility
would need to comply with the regulatory requirements.
Ultimately, if we are unable to supply our products to meet
commercial demand, whether because of processing constraints or
other disruptions, delays or difficulties that we experience, our
production costs could dramatically increase and sales of our
products and their long-term commercial prospects could be
significantly damaged.
To be successful, our proposed products must be accepted by the
healthcare community, which can be very slow to adopt or
unreceptive to new technologies and products.
Our proposed products and those developed by our collaborative
partners, if approved for marketing, may not achieve market
acceptance since hospitals, physicians, patients or the medical
community in general may decide not to accept and use these
products. The products that we are attempting to develop represent
substantial departures from established treatment methods and will
compete with a number of more conventional therapies manufactured
and marketed by major pharmaceutical companies. The degree of
market acceptance of any of our developed products will depend on a
number of factors, including:
●
our
establishment and demonstration to the medical community of the
clinical efficacy and safety of our proposed products;
●
our
ability to create products that are superior to alternatives
currently on the market;
●
our
ability to establish in the medical community the potential
advantage of our treatments over alternative treatment methods;
and
●
reimbursement
policies of government and third-party payers.
If the healthcare community does not accept our products for any of
these reasons, or for any other reason, our business would be
materially harmed.
Our business is based on novel technologies that are inherently
expensive and risky and may not be understood by or accepted in the
marketplace, which could adversely affect our future
value.
The clinical development, commercialization and marketing of
immuno-oncology therapies are at an early-stage, substantially
research-oriented, and financially speculative. To date, very few
companies have been successful in their efforts to develop and
commercialize an immuno-oncology therapeutic product. In general,
such products may be susceptible to various risks, including
undesirable and unintended side effects, unintended immune system
responses, inadequate therapeutic efficacy, or other
characteristics that may prevent or limit their approval or
commercial use. Furthermore, the number of people who may use such
therapies is difficult to forecast with accuracy. Our future
success is dependent on the establishment of a significant market
for such therapies and our ability to capture a share of this
market with our product candidates.
Our development efforts with our therapeutic product candidates are
susceptible to the same risks of failure inherent in the
development and commercialization of therapeutic products based on
new technologies. The novel nature of immuno-oncology therapeutics
creates significant challenges in the areas of product development
and optimization, manufacturing, government regulation, third-party
reimbursement and market acceptance. For example, the FDA has
relatively limited experience regulating such therapies, and there
are few approved treatments using such therapy.
Our competition includes fully integrated biotechnology and
pharmaceutical companies that have significant advantages over
us.
The market for therapeutic immuno-oncology products is highly
competitive. We expect that our most significant competitors will
be fully integrated and more established pharmaceutical and
biotechnology companies or institutions, including major
multinational pharmaceutical companies, biotechnology companies and
universities and other research institutions. These companies are
developing similar products, and they have significantly greater
capital resources and research and development, manufacturing,
testing, regulatory compliance, and marketing capabilities. Many of
these potential competitors may be further along in the process of
product development and also operate large, company-funded research
and development programs. As a result, our competitors may develop
more competitive or affordable products, or achieve earlier patent
protection or product commercialization than we are able to
achieve. Competitive products may render any products or product
candidates that we develop obsolete.
Many of our competitors have substantially greater financial,
technical and other resources than we do, such as larger research
and development staff and experienced marketing and manufacturing
organizations. Additional mergers and acquisitions in the
biotechnology and pharmaceutical industries may result in even more
resources being concentrated in certain of our competitors. As a
result, these companies may be able to obtain regulatory approval
more rapidly than we can and may be more effective in selling and
marketing their products. Smaller or early-stage companies may also
prove to be significant competitors, particularly through
collaborative arrangements with large, established companies.
Competition may increase further as a result of advances in the
commercial applicability of technologies and greater availability
of capital for investment in these industries. Our competitors may
succeed in developing, acquiring or licensing drug products that
are more effective or less costly to produce or purchase on the
market than any product candidate we are currently developing or
that we may seek to develop in the future. If approved, our product
candidates will face competition from commercially available drugs
as well as drugs that are in the development pipelines of our
competitors.
Established pharmaceutical companies may invest heavily to
accelerate discovery and development of or in-license novel
compounds that could make our product candidates less competitive.
In addition, any new product that competes with an approved product
must demonstrate compelling advantages in efficacy, convenience,
tolerability and safety in order to overcome price competition and
to be commercially successful. Accordingly, our competitors may
succeed in obtaining patent protection, receiving FDA, EMA or other
regulatory approval, or discovering, developing and commercializing
medicines before we do, which would have a material adverse impact
on our business and ability to achieve profitability from future
sales of our approved product candidates, if any.
If competitors develop and market products that are more effective,
safer or less expensive than our product candidates or offer other
advantages, our commercial prospects will be limited.
Our therapeutic immuno-oncology development programs face, and will
continue to face, intense competition from pharmaceutical,
biopharmaceutical and biotechnology companies, as well as numerous
academic and research institutions and governmental agencies
engaged in drug discovery activities or funding, both in the United
States and abroad. Some of these competitors are pursuing the
development of drugs and other therapies that target the same
diseases and conditions that we are targeting with our product
candidates.
As a general matter, we also face competition from many companies
that are researching and developing cell therapies. Many of these
companies have financial and other resources substantially greater
than ours. In addition, many of these competitors have
significantly greater experience in testing pharmaceutical and
other therapeutic products, obtaining FDA and other regulatory
approvals, and marketing and selling. If we ultimately obtain
regulatory approval for any of our product candidates, we also will
be competing with respect to manufacturing efficiency and marketing
capabilities, areas in which we have limited or no
commercial-scale experience. Mergers and acquisitions in the
pharmaceutical and biotechnology industries may result in even more
resources’ being concentrated by our competitors. Competition
may increase further as a result of advances made in the commercial
applicability of our technologies and greater availability of
capital for investment in these fields.
Our CNS portfolio compounds also face considerable competition.
Many compounds are in development for the treatment of neuropathic
pain. Current treatments for neuropathic include narcotic
analgesics, voltage-gated sodium channel blockers, voltage-gated
calcium channel blockers, glutamate NMDA NR2B antagonists
(ketamine), drugs that increase monoamine transmission, and
cannabinoids. Some of the
key players operating in the global neuropathic pain market are
Depomed Inc. (NASDAQ:DEPO), Pfizer Inc. (NYSE:PFE), Johnson &
Johnson (NYSE:JNJ), Bristol-Myers Squibb (NYSE:BMY), Eli Lilly and
Company (NYSE:LLY), GlaxoSmithKline PLC (NYSE:GSK), Sanofi S.A.
(NYSE:SNY), Biogen Idec Inc. (NASDAQ:BIIB), and Baxter Healthcare
Corporation (NYSE:BAX). In the field of myasthenia gravis,
pharmaceutical R&D efforts focus on the discovery of a cure for
the disease. A cure would make treatment with GTP-004 obsolete. In
the field of motion sickness, research may be ongoing for better
anti-motion sickness drugs.
If we are unable to keep up with rapid technological changes in our
field or compete effectively, we will be unable to operate
profitably.
We are engaged in activities in the biotechnology field, which is
characterized by extensive research efforts and rapid technological
progress. If we fail to anticipate or respond adequately to
technological developments, our ability to operate profitably could
suffer. Research and discoveries by other biotechnology,
agricultural, pharmaceutical or other companies may render our
technologies or potential products or services uneconomical or
result in products superior to those we develop. Similarly, any
technologies, products or services we develop may not be preferred
to any existing or newly developed technologies, products or
services.
We may not be able to obtain third-party patient reimbursement or
favorable product pricing, which would reduce our ability to
operate profitably.
Our ability to successfully commercialize certain of our proposed
products in the human therapeutic field may depend to a significant
degree on patient reimbursement of the costs of such products and
related treatments at acceptable levels from government
authorities, private health insurers and other organizations, such
as health maintenance organizations. Reimbursement in the United
States or foreign countries may not be available for any products
we may develop, and, if available, may be decreased in the future.
Also, reimbursement amounts may reduce the demand for, or the price
of, our products with a consequent harm to our business. We cannot
predict what additional regulation or legislation relating to the
healthcare industry or third-party coverage and reimbursement may
be enacted in the future or what effect such regulation or
legislation may have on our business. If additional regulations are
overly onerous or expensive, or if healthcare-related legislation
makes our business more expensive or burdensome than originally
anticipated, we may be forced to significantly downsize our
business plans or completely abandon our business
model.
We may be subject to litigation that will be costly to defend or
pursue and uncertain in its outcome.
Our business may bring us into conflict with our licensees,
licensors or others with whom we have contractual or other business
relationships, or with our competitors or others whose interests
differ from ours. If we are unable to resolve those conflicts on
terms that are satisfactory to all parties, we may become involved
in litigation brought by or against us. That litigation is likely
to be expensive and may require a significant amount of
management’s time and attention, at the expense of other
aspects of our business. The outcome of litigation is always
uncertain, and in some cases could include judgments against us
that require us to pay damages, enjoin us from certain activities,
or otherwise affect our legal or contractual rights, which could
have a significant adverse effect on our business.
We are exposed to the risk of liability claims, for which we may
not have adequate insurance.
Since we participate in the pharmaceutical industry, we may be
subject to liability claims by employees, customers, end users and
third parties. We do not currently have product liability
insurance. We intend to obtain proper insurance . however, there
can be no assurance that any liability insurance we purchase will
be adequate to cover claims asserted against us or that we will
beable to maintain such insurance in the future. We intend to adopt
prudent risk-management programs to reduce these risks and
potential liabilities. however, we have not taken any steps to
create these programs and have no estimate as to the cost or time
required to do so and there can be no assurance that such programs,
if and when adopted, will fully protect us. We may not be able to
put risk management programs in place, or obtain insurance, if we
are unable to retain the necessary expertise and/or are
unsuccessful in raising necessary capital in the future. Our
failure to obtain appropriate insurance, or to adopt and implement
effective risk-management programs, as well as any adverse rulings
in any legal matters, proceedings and other matters could have a
material adverse effect on our business.
Pre-clinical and clinical trials are conducted during the
development of potential products and other treatments to determine
their safety and efficacy for use by humans. Notwithstanding these
efforts, when our treatments are introduced into the marketplace,
unanticipated side effects may become evident. Manufacturing,
marketing, selling and testing our product candidates under
development or to be acquired or licensed, entails a risk of
product liability claims. We could be subject to product liability
claims in the event that our product candidates, processes, or
products under development fail to perform as intended. Even
unsuccessful claims could result in the expenditure of funds in
litigation and the diversion of management time and resources, and
could damage our reputation and impair the marketability of our
product candidates and processes. While we plan to maintain
liability insurance for product liability claims, we may not be
able to obtain or maintainsuch insurance at a commercially
reasonable cost. If a successful claim were made against us, and we
lacked insurance or the amount of insurance were inadequate to
cover the costs of defending against or paying such a claim or the
damages payable by us, we would experience a material adverse
effect on our business, financial condition and results of
operations.
We could be subject to product liability lawsuits based on the use
of our product candidates in clinical testing or, if obtained,
following marketing approval and commercialization. If product
liability lawsuits are brought against us, we may incur substantial
liabilities and may be required to cease clinical testing or limit
commercialization of our product candidates.
We could be subject to product liability lawsuits if any product
candidate we develop allegedly causes injury or is found to be
otherwise unsuitable for human use during product testing,
manufacturing, marketing or sale. Any such product liability claims
may include allegations of defects in manufacturing, defects in
design, a failure to warn of dangers inherent in the product,
negligence, strict liability and a breach of warranties. Claims
could also be asserted under state consumer protection acts. If we
cannot successfully defendourselves against product liability
claims, we may incur substantial liabilities or be required to
limit commercialization of our product candidates, if approved.
Even successful defense would require significant financial and
management resources. Regardless of the merits or eventual outcome,
liability claims may result in:
●
decreased
demand for our product candidates;
●
withdrawal
of clinical trial participants;
●
initiation
of investigations by regulators;
●
costs
to defend the related litigation;
●
a
diversion of management’s time and our
resources;
●
substantial
monetary awards to trial participants or patients;
●
product
recalls, withdrawals or labeling, marketing or promotional
restrictions;
●
loss
of revenues from product sales; and
●
the
inability to commercialize our product candidates.
Our inability to retain sufficient product liability insurance at
an acceptable cost to protect against potential product liability
claims could prevent or inhibit the clinical testing and
commercialization of products we develop. We may wish to obtain
additional such insurance covering studies or trials in other
countries should we seek to expand those clinical trials or
commence new clinical trials in other jurisdictions or increase the
number of patients in any clinical trialswe may pursue. We also may
determine that additional types and amounts of coverage would be
desirable at later stages of clinical development of our product
candidates or upon commencing commercialization of any product
candidate that obtains required approvals. However, we may not be
able to obtain any such additional insurance coverage when needed
on acceptable terms or at all. If we do not obtain or retain
sufficient product liability insurance, we could be responsible for
some or all of the financial costs associated with a product
liability claim relating to our preclinical and clinical
development activities, in the event that any such claim results in
a court judgment or settlement in an amount or of a type that is
not covered, in whole or in part, by any insurance policies we may
have or that is in excess of the limits of our insurance coverage.
We may not have, or be able to obtain, sufficient capital to pay
any such amounts that may not be covered by our insurance
policies.
We rely on third parties to conduct preclinical and clinical trials
of our product candidates. If these third parties do not
successfully carry out their contractual duties or meet expected
deadlines, we may not be able to obtain regulatory approval for or
commercialize our product candidates and our business could be
substantially harmed.
We rely, and expect to continue to rely, upon third-party CROs to
execute our preclinical and clinical trials and to monitor and
manage data produced by and relating to those trials. However, we
may not be able to establish arrangements with CROs when needed or
on terms that are acceptable to us, or at all, which could
negatively affect our development efforts with respect to our drug
product candidates and materially harm our business, operations and
prospects.
We will have only limited control over the activities of the CRO we
will engaged to continue conduct our clinical trials including the
University of Minnesota for our phase 2 clinical trial for
OXS-1550. Nevertheless, we are responsible for ensuring that each
of our studies is conducted in accordance with the applicable
protocol, legal, regulatory and scientific standards, and our
reliance on any CRO does not relieve us of our regulatory
responsibilities. Based on our present expectations, we, our CROs
and our clinical trial sites are required to comply with good
clinical practices, or GCPs, for all of our product candidates in
clinical development. Regulatory authorities enforce GCPs through
periodic inspections of trial sponsors, principal investigators and
trial sites. If we or any of our CROs fail to comply with
applicable GCPs, the clinical data generated in the applicable
trial may be deemed unreliable and the FDA, EMA or comparable
foreign regulatory authorities may requireus to perform additional
clinical trials before approving a product candidate for marketing,
which we may not have sufficient cash or other resources to support
and which would delay our ability to generate revenue from any
sales of such product candidate. In addition, our clinical trials
are required to be conducted with product produced in compliance
with current good manufacturing practice requirements, or cGMPs.
Our or our CROs’ failure to comply with those regulations may
require us to repeat clinical trials, which would also require
significant cash expenditures and delay the regulatory approval
process.
Agreements governing relationships with CROs generally provide
those CROs with certain rights to terminate a clinical trial under
specified circumstances. If a CRO that we have engaged terminates
its relationship with us during the performance of a clinical
trial, we would be forced to seek an engagement with a substitute
CRO, which we may not be able to do on a timely basis or on
commercially reasonable terms, if at all, and the applicable trial
would experience delays or may not be completed. In addition, our
CROs are not our employees, and except for remedies available to us
under any agreements we enter with them, we are unable to control
whether or not they devote sufficient time and resources to our
clinical, nonclinical and preclinical programs. If CROs do not
successfully carry out their contractual duties or obligations or
meet expected deadlines, if they need to be replaced or if the
quality or accuracy of the clinical data they obtain is compromised
due to a failure to adhere to our clinical protocols, regulatory
requirements or for other reasons, our clinical trials may be
extended, delayed or terminated and we may not be able to obtain
regulatory approval for, or successfully commercialize, the
affected product candidates. As a result, our operations and the
commercial prospects for the effected product candidates would be
harmed, our costs could increase and our ability to generate
revenues could be delayed.
We contract with third parties for the supply of product candidates
for clinical testing and expect to contract with third parties for
the manufacturing of our product candidates for large-scale testing
and commercial supply. This reliance on third parties increases the
risk that we will not have sufficient quantities of our product
candidates or products or such quantities at an acceptable cost,
which could delay, prevent or impair our development or
commercialization efforts.
We anticipate continuing our engagement of third parties to provide
our clinical supply as we advance our product candidates into and
through clinical development. We expect in the future to use third
parties for the manufacture of our product candidates for clinical
testing, as well as for commercial manufacture. We plan to enter
into long-term supply agreements with several manufacturers for
commercial supplies. We may be unable to reach agreement on
satisfactory terms with contract manufacturers to manufactureour
product candidates. Additionally, the facilities to manufacture our
product candidates must be the subject of a satisfactory inspection
before the FDA or other regulatory authorities approve a marketing
authorization for the product candidate manufactured at that
facility. We will depend on these third-party manufacturers for
compliance with the FDA’s and international regulatory
authority requirements for the manufacture of our finished
products. We do not control the manufacturing process of, and are
completely dependent on, our contract manufacturers for compliance
with cGMPs. If our manufacturers cannot successfully manufacture
material that conforms to our specifications and the FDA and other
regulatory authorities’ cGMP requirements, they will not be
able to secure and/or maintain regulatory approval for their
manufacturing facilities. In addition, we have no control over the
ability of our contract manufacturers to maintain adequate quality
control, quality assurance and qualified personnel. If the FDA or a
comparable foreign regulatory authority does not approve these
facilities for the manufacture of our product candidates or if it
withdraws any such approval in the future, we may need to find
alternative manufacturing facilities, which would significantly
impact our ability to develop, obtain regulatory approval for or
market our product candidates, if approved, and may subject us to
recalls or enforcement action for products already on the
market.
If any of our product candidates are approved and contract
manufacturers fail to deliver the required commercial quantities of
finished product on a timely basis and at commercially reasonable
prices, and we are unable to find one or more replacement
manufacturers capable of production at a substantially equivalent
cost, in substantially equivalent volumes and quality and on a
timely basis, we would likely be unable to meet demand for our
products and could lose potential revenue. It may take several
years to establish an alternative source of supply for our product
candidates and to have any such new source approved by the FDA or
any other relevant regulatory authorities.
We currently have no marketing and sales force. If we are unable to
establish effective marketing and sales capabilities or enter into
agreements with third parties to market and sell our product
candidates, we may not be able to effectively market and sell our
product candidates, if approved, or generate product
revenues.
We currently do not have a marketing or sales team for the
marketing, sales and distribution of any of our product candidates
that are able to obtain regulatory approval. In order to
commercialize any product candidates, we must build on a
territory-by-territory basis marketing, sales, distribution,
managerial and other non-technical capabilities or make
arrangements with third parties to perform these services, and we
may not be successful in doing so. If our product candidates
receive regulatory approval, we intend to establish an internal
sales and marketing team with technical expertise and supporting
distribution capabilities to commercialize our product candidates,
which will be expensive and time consuming and will require
significant attention of our executive officers to manage. Any
failure or delay in thedevelopment of our internal sales, marketing
and distribution capabilities would adversely impact the
commercialization of any of our products that we obtain approval to
market. With respect to the commercialization of all or certain of
our product candidates, we may choose to collaborate, either
globally or on a territory-by-territory basis, with third parties
that have direct sales forces and established distribution systems,
either to augment our own sales force and distribution systems or
in lieu of our own sales force and distribution systems. If we are
unable to enter into such arrangements when needed on acceptable
terms or at all, we may not be able to successfully commercialize
any of our product candidates that receive regulatory approval or
any such commercialization may experience delays or limitations. If
we are not successful in commercializing our product candidates,
either on our own or through collaborations with one or more third
parties, our future product revenue will suffer and we may incur
significant additional losses.
Our business and operations would suffer in the event of system
failures.
Despite the implementation of security measures, our internal
computer systems and those of our contractors and consultants are
vulnerable to damage from computer viruses, unauthorized access,
natural disasters, terrorism, war and telecommunication and
electrical failures. While we have not experienced any such system
failure, accident or security breach to date, if such an event were
to occur and cause interruptions in our operations, it could result
in a material disruption of our drug development programs. For
example, the loss of clinical trial data from completed or ongoing
or planned clinical trials could result in delays in our regulatory
approval efforts and we may incur substantial costs to attempt to
recover or reproduce the data. If any disruption or security breach
resulted in a loss of or damage to our data or applications, or
inappropriate disclosure of confidential or proprietary
information, we could incur liability and/or the further
development of our product candidates could be
delayed.
Our operations are vulnerable to interruption by natural disasters,
power loss, terrorist activity and other events beyond our control,
the occurrence of which could materially harm our
business.
Businesses located in California have, in the past, been subject to
electrical blackouts as a result of a shortage of available
electrical power, and any future blackouts could disrupt our
operations. We are vulnerable to a major earthquake, wildfire and
other natural disasters, and we have not undertaken a systematic
analysis of the potential consequences to our business as a result
of any such natural disaster and do not have an applicable recovery
plan in place. We do not carry any business interruption insurance
that would compensate us for actual losses from interruption of our
business that may occur, and any losses or damages incurred by us
could cause our business to materially suffer.
We have not held regular annual meetings in the past, and if we are
required by the Delaware Court of Chancery to hold an annual
meeting pursuant to Section 211(c) of the Delaware General
Corporation Law, or the DGCL, it could result in the unanticipated
expenditure of funds, time and other Company
resources.
Section 2.2 of our bylaws provides that an annual meeting shall be
held each year on a date and at a time designated by our board of
directors, and Section 211(b) of the DGCL provides for an annual
meeting of stockholders to be held for the election of directors.
Section 211(c) of the DGCL provides that if there is a failure to
hold the annual meeting for a period of 13 months after the latest
to occur of the organization of the corporation, its last annual
meeting or last action by written consent to elect directors in
lieu of an annual meeting, the Delaware Court of Chancery may order
a meeting to be held upon the application of any stockholder or
director. Section 211(c) also provides that the failure to hold an
annual meeting shall not affect otherwise valid corporate acts or
result in a forfeiture or dissolution of the
corporation.
We have not held regular annual meetings in the past because a
substantial majority of our stock is owned by a small number of
stockholders, making it easy to obtain written consent in lieu of a
meeting when necessary. In light of our historical liquidity
constraints, handling matters by written consent has allowed our
Company to save on the financial and administrative resources
required to prepare for and hold such annual meetings. To our
knowledge, no stockholder or director has requested our
Company’s management to hold such an annual meeting and no
stockholder or director has applied to the Delaware Court of
Chancery seeking an order directing our company to hold a meeting.
However, if one or more stockholders or directors were to apply to
the Delaware Court of Chancery seeking such an order, and if the
Delaware Court of Chancery were to order an annual meeting before
we are prepared to hold one, the preparation for the annual meeting
and the meeting itself could result in the unanticipated
expenditure of funds, time, and other Company
resources.
USE OF PROCEEDS
The selling stockholders will receive all net proceeds from the
sale of the shares of common stock registered by this prospectus
and offered by any accompanying prospectus supplement. We will not
receive any proceeds from the sale of common stock by the selling
stockholders.
We, and not the selling stockholders, will pay the costs, expenses
and fees in connection with the registration of the shares covered
by this prospectus.
MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Until May 2009, our common stock was traded on the OTC Bulletin
Board (“OTCBB”) under the symbol “OXIS.”
From May 20, 2009 until March 11, 2010, our common stock was traded
on Pink OTC Markets Inc. trading platform under the symbol
“OXIS.” From January 2015 to August 2017, our common
stock is quoted on the OTCQB under the “OXIS” trading
symbol. Since August 2017, our common stock has been quoted on the
OTCQB under the “GTBP” trading symbol.
Trading in our common stock has fluctuated greatly during the past
fifteen months. Accordingly, the prices for our common stock quoted
on the OTCQB or Pink OTC Markets Inc. may not necessarily be
reliable indicators of the value of our common stock. The following
table sets forth the high and low bid prices for shares of our
common stock for the quarters noted, as reported on the OTCQB and
the Pink OTC Markets Inc. The following price information reflects
inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.
Fiscal Year 2019
|
|
|
First
Quarter
|
0.96
|
0.30
|
|
|
|
Fiscal Year 2018
|
|
|
Fourth
Quarter
|
2.16
|
0.62
|
Third
Quarter
|
2.75
|
1.42
|
Second
Quarter
|
2.52
|
1.25
|
First
Quarter
|
5.06
|
1.60
|
|
|
|
Fiscal Year 2017
|
|
|
Fourth
Quarter
|
6.99
|
4.25
|
Third
Quarter
|
29.55
|
4.66
|
Second
Quarter
|
9.90
|
3.36
|
First
Quarter
|
69.00
|
3.81
|
Our common stock is also quoted on several European based exchanges
including Berlin (GTBP.BE), Frankfurt (GTBP.DE), the Euronext
(GTBP.NX) and Paris, (GTBP.PA). The foregoing trading prices
exclude trading on these foreign stock markets.
Stockholders
As of June 15, 2019, there were 23 stockholders of record, which
total does not include stockholders who hold their shares in
“street name.” The transfer agent for our common stock
is ComputerShare, whose address is 8742 Lucent Blvd., Suite 225,
Highland Ranch, CO 80129.
Dividends
We have not paid any dividends on our common stock to date and do
not anticipate that we will pay dividends in the foreseeable
future. Any payment of cash dividends on our common stock in the
future will be dependent upon the amount of funds legally
available, our earnings, if any, our financial condition, our
anticipated capital requirements and other factors that the Board
of Directors may think are relevant. However, we currently intend
for the foreseeable future to follow a policy of retaining all of
our earnings, if any, to finance the development and expansion of
our business and, therefore, do not expect to pay any dividends on
our common stock in the foreseeable future.
Equity Compensation Plan Information
The information included under the heading “Equity
Compensation Plan Information” in “Security Ownership
of Certain Beneficial Owners and Management and Related Stockholder
Matters.” is hereby incorporated by reference into this
paragraph.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus are forward-looking
statements about what may happen in the future. 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 prospectus
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,”
“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 herein and
“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, 2018. Any
forward-looking statements in this prospectus 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 prospectus to reflect subsequent
events or circumstances.
Throughout this prospectus, 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), Tetra-specific
Killer Engager (TetraKE) and bi-specific Antibody Drug Conjugate
(ADC) technology platforms. Our immuno-oncology portfolio is based
off a proprietary technology platform consisting of single-chain
bi-, tri- and tetra-specific scFv’s, combined with
proprietary antibody-drug linkers and drug payloads. Constructs
include bispecific and trispecific scFv constructs, proprietary
drug payloads, bispecific targeted antibody-drug conjugates, or
ADCs, as well as tri- and tetra-specific antibody-directed cellular
cytotoxicity, or ADCC. Our proprietary tri- and tetra-specific ADCC
platform engages natural killer cells, or NK cells. NK cells are
cytotoxic lymphocytes of the innate immune system capable of immune
surveillance. NK cells mediate ADCC through the highly potent CD16
activating receptor. Upon activation, NK cells deliver a store of
membrane penetrating apoptosis-inducing molecules. Unlike T cells,
NK cells do not require antigen priming.
We also have a CNS portfolio consists of innovative reformulations
and/or repurposing of existing therapies. We believe these
therapeutic agents address certain unmet medical needs that can
lead to improved efficacy while addressing tolerability and safety
issues that tended to limit the usefulness of the original approved
drug. Our CNS drug candidates address disease states such as
chronic neuropathic pain, myasthenia gravis and vestibular
disorders.
Recent Developments
Financing
On May 22, 2019, GT Biopharma, Inc. (the "Company") entered into a
Securities Purchase Agreement with ten purchasers (individually, a
"Purchaser," and collectively, the "Purchasers") pursuant to which
the Company has issued to the Purchasers Convertible Debentures in
an aggregate principal amount of $1,300,000 (the "Debentures"),
which Debentures are convertible into the Company's common stock
(the "Common Stock") at a price of $0.35 per share. The
Company and each Purchaser also entered into a Registration Rights
Agreement.
The issuance of the Debentures was made in reliance on the
exemption provided by Section 4(a)(2) of the Securities Act of
1933, as amended (the "Securities Act"), for the offer and sale of
securities not involving a public offering and Regulation D
promulgated under the Securities Act.
On February 4, 2019, GT Biopharma, Inc. (the “Company”)
entered into a Securities Purchase Agreement (the “Purchase
Agreement”) with the purchasers identified on the signature
pages thereto (individually, a “Purchaser,” and
collectively, the “Purchasers”), pursuant to which the
Company issued to the Purchasers, on February 4, 2019, Secured
Convertible Notes in an aggregate principal amount of $1,352,224
(the “Notes”), consisting of gross proceeds of
$1,052,224 and settlement of existing debt of $300,000, which Notes
shall be convertible at any time after issuance into shares (the
“Conversion Shares”) of the Company’s common
stock, par value $0.001 per share (the “Common Stock”),
at a conversion price of $0.60 per share (the “Conversion
Price”).
The Notes accrue interest at the rate of 10% per annum and mature
on August 2, 2019. Interest on the Notes is payable in cash or, at
a Purchaser’s option, in shares of Common Stock at the
Conversion Price. Upon the occurrence of an event of default,
interest accrues at 18% per annum. The Notes contain customary
default provisions, including provisions for potential
acceleration, and covenants, including negative covenants regarding
additional indebtedness and dividends. The Conversion Price is
subject to adjustment due to certain events, including stock
dividends and stock splits, and is subject to reduction in certain
circumstances if the Company issues Common Stock or Common Stock
equivalents at an effective price per share that is lower than the
Conversion Price then in effect. The Company may only prepay the
Notes with the prior written consent of the respective Purchasers
thereof.
Contemporaneously with the execution and delivery of the Purchase
Agreement, on February 4, 2019, the Company and certain of its
wholly-owned subsidiaries entered into a Security Agreement (the
“Security Agreement”) with Alpha Capital Anstalt, as
collateral agent on behalf of the Purchasers, and with the
Purchasers, pursuant to which the Purchasers have been granted a
first-priority security interest in substantially all of the assets
of the Company and such subsidiaries securing (i) an aggregate
principal amount of $1,352,224 of Notes and (ii) an aggregate
principal amount of $9,058,962 of the Company’s 10% Senior
Convertible Debentures issued on August 2, 2018, September 7, 2018
and September 24, 2018 held by such Purchasers.
The Purchase Agreement contains customary representations,
warranties and covenants, including covenants, subject to certain
exceptions, that the Company, until the date on which less than 10%
of the Notes are outstanding, shall not affect any Variable Rate
Transaction (as defined in the Purchase Agreement) and that, for as
long as a Purchaser holds any Notes or Conversion Shares, the
Company shall amend the terms and conditions of the Purchase
Agreement and the transactions contemplated thereby with respect to
such Purchaser to give such Purchaser the benefit of any terms or
conditions under which the Company agrees to issue or sell any
Common Stock or Common Stock equivalents that are more favorable to
an investor than the terms and conditions granted to such Purchaser
under the Purchase Agreement and the transactions contemplated
thereby.
In addition, the Company entered into a registration rights
agreement (the “Registration Rights Agreement”) with
the Purchasers, pursuant to which the Company has agreed to file,
within 14 days after February 4, 2019, one or more registration
statements on Form S-3 (or, if Form S-3 is not then available to
the Company, such form of registration that is then available to
effect a registration for resale of the subject securities)
covering the resale of all Conversion Shares, subject to certain
penalties set forth in the Registration Rights Agreement. The Form
S-3 was filed by the Company on February 14, 2019.
On May 22, 2019, the Company consummated an additional financing in
the same format and structure as the February 4, 2019, financing.
The notes issued in the May 22, 2019, financing totaled $1,300,000
in the aggregate.
Results of Operations
Comparison of the Three Months Ended March 31, 2019 and
2018
Research and Development Expenses
During the three months ended March 31, 2019 and 2018, we incurred
$.8 million and $3.5 million of research and development
expenses. Research and development costs decreased due
primarily to the reductions employees, consultants and preclinical
expenses. We anticipate our direct clinical costs to increase in
second half of 2019 upon the initiation of a phase one clinical
trial of our most advanced TriKe product candidate,
OXS-3550.
Selling, general and administrative expenses
During the three months ended March 31, 2019 and 2018, we incurred
$3.2 million and $3.7 million of selling, general and
administrative expenses. The decrease in selling,
general and administrative expenses is primarily attributable the
reduction of salaries.
Interest Expense
Interest expense was $.5 million and $2.9 million for the three
months ended March 31, 2019 and 2018 respectively. The
decrease is primarily due to a decrease related to the amortization
of the original issue discount and the value of warrants issued
with the January 2018 financing.
Comparison of the Fiscal Years Ended December 31, 2018 and
2017
Research and Development Expenses
During the years ended December 31, 2018 and 2017, we incurred $9.1
million and $1.1 million of research and development expenses,
respectively. 2018 research and development costs increased due
primarily to the addition of new employees, increased regulatory
and preclinical consultant costs to support the GTB-3550 IND,
higher costs to advance the CNS portfolio and position the assets
for licensing efforts, and higher preclinical and clinical expenses
incurred at the University of Minnesota to continue development of
our immune-oncology assets. 2018 expenses also include non-cash
compensation of $6.8 million. We anticipate our direct clinical and
preclinical costs to continue to increase throughout 2019, totaling
approximately $12 to $15 million, as we initiate a Phase 1 clinical
trial of our most advanced TriKe product candidate, GTB-3550 in the
first half of 2019, and initiate IND-enabling activities for
GTB-C3550, and GTB-1615.
Selling, general and administrative expenses
During the years ended December 31, 2018 and 2017, we incurred
$12.5 million and $134.5 million of selling, general and
administrative expenses, respectively. Selling, general and
administrative expenses in 2017 were driven by stock compensation
related to the acquisition of Georgetown Translational
Pharmaceuticals on September 1, 2017. Stock compensation expenses
totaled $2.3 million and $129.1 million for in 2018 and 2017,
respectively. Additional selling, general, and administrative
expenses in 2018 were due to increased spending on investor
relations campaigns to broaden awareness of the Company, and
increased legal costs primarily associated with financing efforts.
We anticipate selling, general and administrative expenses,
excluding stock compensation, to range between $1 and $2 million in
the coming quarters.
Loss on impairment
For the year ended December 31, 2018, the Company recorded an
intangible asset impairment charge of $228.5 million related to the
portfolio of CNS IPR&D assets, which represents the excess
carrying value compared to fair value. The impairment charge was
the result of both internal and external factors. In the 3rd
quarter of 2018, the Company experienced changes in key senior
management, led by the appointment of a CEO with extensive
experience in oncology drug development. These changes resulted in
the prioritization for immuno-oncology development candidates
relative to the CNS development candidates acquired from Georgetown
Translational Pharmaceuticals. In conjunction with these strategic
changes, limited internal resources have delayed the development of
the CNS IPR&D assets. The limited resources, changes in senior
leadership, and favorable market conditions for immuno-oncology
development candidates have resulted in the Company choosing to
focus on development of its immuno-oncology portfolio. We are
assessing our options to realize value from the CNS IPR&D
assets. In light of this shift in market strategy, the Company
performed a commercial assessment and a valuation of the CNS
IPR&D assets, both to assess fair value and support potential
future licensing efforts. Based on the results of the independent
valuation, the Company recorded the impairment charge noted
above.
Interest Expense
Interest expense was $9.1 million and $8.6 million for the years
ended December 31, 2018 and 2017, respectively. The increase is due
to an increase in non-cash amortization of debt issuance costs
associated with convertible debentures and warrants issued in
January 2018.
Liquidity and Capital Resources
The Company’s current operations have focused on business
planning, raising capital, establishing an intellectual property
portfolio, hiring, and conducting preclinical studies and clinical
trials. The Company does not have any product candidates approved
for sale and has not generated any revenue from product sales. The
Company has sustained operating losses since inception and expects
such losses to continue over the foreseeable future. During the
three months ended March 31, 2019, the Company raised $1 million
through a series of issuances of convertible debentures in
February. Also, as noted above, the Company raised $1.3 million on
May 22, 2019, through the issuance of convertible notes. We
anticipate that cash utilized for selling, general, and
administrative expenses will range between $1 and $2 million in the
coming quarters, while research and development expenses will vary
depending on clinical activities.
The financial statements of the Company have been prepared on a
going-concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of
business. Accordingly, the financial statements do not include any
adjustments that might be necessary should the Company be unable to
continue in existence.
The Company has incurred substantial losses and negative cash flows
from operations since its inception and has an accumulated deficit
of $533.4 million and cash of $51 thousand as of March 31, 2019.
The Company anticipates incurring additional losses until such
time, if ever, that it can generate significant sales or revenue
from out-licensing of its products currently in development.
Substantial additional financing will be needed by the Company to
fund its operations and to commercially develop its product
candidates. These factors raise substantial doubt about the
Company’s ability to continue as a going
concern.
Management is currently evaluating different strategies to obtain
the required funding for future operations. These strategies may
include but are not limited to: public offerings of equity and/or
debt securities, payments from potential strategic research and
development, licensing and/or marketing arrangements with
pharmaceutical companies. Management has also implemented cost
saving efforts, including reduction in executive salaries and
reduced travel. Management believes that these ongoing and planned
financing endeavors, if successful, will provide adequate financial
resources to continue as a going concern for at least the next six
months from the date the financial statements are issued; however,
there can be no assurance in this regard. If the Company is unable
to secure adequate additional funding, its business, operating
results, financial condition and cash flows may be materially and
adversely affected.
Critical Accounting Policies
We consider the following accounting policies to be critical given
they involve estimates and judgments made by management and are
important for our investors’ understanding of our operating
results and financial condition.
Long-Lived Assets
Our long-lived assets include property, plant and equipment,
capitalized costs of filing patent applications and goodwill and
other assets. We evaluate our long-lived assets for
impairment in accordance with ASC 360, whenever events or changes
in circumstances indicate that the carrying amount of such assets
may not be recoverable. Estimates of future cash flows
and timing of events for evaluating long-lived assets for
impairment are based upon management’s
judgment. If any of our intangible or long-lived assets
are considered to be impaired, the amount of impairment to be
recognized is the excess of the carrying amount of the assets over
its fair value.
Applicable long-lived assets are amortized or depreciated over the
shorter of their estimated useful lives, the estimated period that
the assets will generate revenue, or the statutory or contractual
term in the case of patents. Estimates of useful lives
and periods of expected revenue generation are reviewed
periodically for appropriateness and are based upon
management’s judgment. Goodwill and other assets
are not amortized.
Certain Expenses and Liabilities
On an ongoing basis, management evaluates its estimates related to
certain expenses and accrued liabilities. We base our
estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about the
carrying values of liabilities that are not readily apparent from
other sources. Actual results may differ materially from
these estimates under different assumptions or
conditions.
Inflation
We believe that inflation has not had a material adverse impact on
our business or operating results during the periods
presented.
Off-balance Sheet Arrangements
We have no off-balance sheet arrangements as of June 15,
2019.
DESCRIPTION OF BUSINESS
We are
a clinical stage biopharmaceutical company focused on the
development and commercialization of novel immuno-oncology products
based off our proprietary Tri-specific Killer Engager (TriKE),
Tetra-specific Killer Engager (TetraKE) and bi-specific Antibody
Drug Conjugate (ADC) technology platforms. Our TriKE and TetraKE
platforms generate proprietary moieties designed to harness and
enhance the cancer killing abilities of a patient’s own
natural killer, or NK, cells. Once bound to an NK cell, our
moieties are designed to enhance the NK cell and precisely direct
it to one or more specifically-targeted proteins (tumor antigens)
expressed on a specific type of cancer, ultimately resulting in the
cancer cell’s death. TriKEs and TetraKEs are made up of
recombinant fusion proteins, can be designed to target any number
of tumor antigens on hematologic malignancies, sarcomas or solid
tumors and do not require patient-specific customization. They are
designed to be dosed in a common outpatient setting similar to
modern antibody therapeutics and are expected to have reasonably
low cost of goods. Our ADC platform generates product candidates
that are bi-specific, ligand-directed single-chain fusion proteins
that, we believe, represent the next generation of
ADCs.
We are
using our TriKE and TetraKE platforms with the intent to bring to
market immuno-oncology products that can treat a range of
hematologic malignancies, sarcoma and solid tumors. The platforms
are scalable, and we are putting processes in place to be able to
produce IND-ready moieties in a timely manner after a specific
TriKE or TetraKE conceptual design. After conducting market and
competitive research, specific moieties can then be advanced into
the clinic on our own or through potential collaborations with
larger companies. We are also evaluating, in conjunction with our
Scientific Advisory Board, additional moieties designed to target
different tumor antigens. We believe our TriKEs and TetraKEs may
have the ability, if approved for marketing, to be used on a
stand-alone basis, augment the current monoclonal antibody
therapeutics, be used in conjunction with more traditional cancer
therapy and potentially overcome certain limitations of current
chimeric antigen receptor, or CAR-T, therapy.
We also
believe our bi-specific, ligand-directed single-chain fusion
proteins are examples of the next generation of ADCs. We believe
GTB-1550 has certain properties that could result in competitive
advantages over recently approved ADC products targeting leukemias
andlymphomas and/or have utility in other niche populations. In a
Phase 1 trial, of nine patients that achieved adequate blood
levels, in two heavily pretreated patients a continuous partial
remission (PR) and complete remission (CR) were observed. One of
these patients, who had failed multiple previous treatment
regimens, has been in remission since early 2015.
Our
initial work has been conducted in collaboration with the Masonic
Cancer Center at the University of Minnesota under a program led by
Dr. Jeffrey Miller, the Deputy Director. Dr. Miller is a recognized
leader in the field of NK cell and IL-15 biology and their
therapeutic potential. We have exclusive rights to the TriKE and
TetraKE platforms and are generating additional intellectual
property around specific moieties.
Also,
in connection with the acquisition of Georgetown Translational
Pharmaceuticals on September 1, 2017, we acquired a portfolio of
in-process research and development central nervous system
(“CNS”) assets consisting of innovative reformulations
and/or repurposing of existing therapies. These CNS assets address
disease states such as chronic neuropathic pain, myasthenia gravis
and motion sickness. We are currently pursuing out-licensing
opportunities related to these assets.
Immuno-Oncology Platform
Tri-specific Killer Engagers (TriKEs) and Tetra-specific Killer
Engagers (TetraKEs)
The
generation of chimeric antigen receptor, or CAR, expressing T cells
from monoclonal antibodies has represented an important step
forward in cancer therapy. These therapies involve the genetic
engineering of T cells to express either CARs, or T cell receptors,
or TCRs, and are designed such that the modified T cells can
recognize and destroy cancer cells. While a great deal of interest
has recently been placed upon chimeric antigen receptor T, or
CAR-T, therapy, it has certain limitations for broad potential
applicability because it can require an individual approach that is
expensive and time consuming, and may be difficult to apply on a
large scale. We believe there is an unmet need for targeted
immuno-oncology therapies that have the potential to be dosed in a
patient-friendly outpatient setting, can be used on a stand-alone
basis, augment the current monoclonal antibody therapeutics and/or
be used in conjunction with more traditional cancer therapy. We
believe our TriKE and TetraKE constructs have this potential and
therefore we have generated, and intend to continue to generate, a
pipeline of product candidates to be advanced into the clinic on
our own or through potential collaborations with larger
companies.
NK
cells represent an important immunotherapeutic target as they are
involved in tumor immune-surveillance, can mediate antibody-
dependent cell-mediated cytotoxicity (ADCC), contain pre-made
granules with perforin and granzyme B and can quickly secrete
inflammatory cytokines, and unlike T cells they do not require
antigen priming and can kill cells in the absence of major
histocompatibility complex (MHC) presentation.
Unlike
full-length antibodies, TriKEs and TetraKEs are small single-chain
fusion proteins that bind the CD16 receptor of NK cells directly
producing a potent and lasting response, as demonstrated by
preclinical studies. An additional benefit they may have is
attractive biodistribution, as a consequence of their smaller size,
which we expect to be important in the treatment of solid tumors.
In addition to these advantages, TriKEs and TetraKEs are designed
to be non-immunogenic, have appropriate clearance properties and
can be engineered quickly to target a variety of tumor
antigens.
Background and Select Non-Clinical Data
In
conjunction with our research agreement with the Masonic Cancer
Center at the University of Minnesota, the exploration of targeting
NK cells to a variety of tumors initially focused on novel
bi-specific killer engagers, or BiKEs, composed of the variable
portions of antibodies targeting the CD16 activating receptor on NK
cells and CD33 (AML and MDS; see figure below), CD19/CD22 (B cell
lymphomas), or EpCAM (epithelial tumors (breast, colon, and lung))
on the tumor cells.
![](gtbp_im1.jpg)
Subsequently, a
tri-specific (TriKE) construct that replaced the linker molecule
between the CD16 scFv and the CD33 scFv with a modified IL-15
molecule, containing flanking sequences, was generated and tested.
Data indicate that the CD16 x IL-15 x CD33 and CD16 x IL-15 x EpCAM
TriKEs potently induce proliferation of healthy donor NK cells,
possibly greater than that induced by exogenous IL-15, which is
absent in the BiKE platform. Targeted delivery of the IL-15 through
the TriKE also resulted in specific expansion of the NK cells
without inducing T cell expansion on post-transplant patient
samples.
When
compared to the CD16 x CD33 BiKE, the CD16 x IL-15 x CD33 TriKE is
also capable of potently restoring killing capacity of post-
transplant NK cells against CD33-expressing HL-60 Targets and
primary AML blasts. These results demonstrated the ability to
functionally incorporate an IL-5 cytokine into the BiKE platform
and also demonstrated the possibility of targeting a variety of
cytokines directly to NK cells while reducing off-target effects
and the amount of cytokines needed to obtain biologically
relevantfunction.
The
figure below is a schematic of a BiKE construct (top) and a TriKE
construct (bottom), which has the modified IL-15 linker between the
CD16 scFv and the CD33 scFv components.
![](gtbp_im2.jpg)
The
TriKE constructs were also tested against three separate human
tumor cell lines: HL-60 (promyelocitic leukemia), Raji
(Burkitt’s lymphoma), and HT29 (colorectal adenocarcinoma),
in addition to a model for ovarian cancer. All cell lines contained
the Luc reporter to allow for in vivo imaging of the tumors. These
systems were used to show in vivo efficacy of BiKEs (1633) and
TriKEs (GTB-3550) against relevant human tumor targets (HL-60-luc)
over an extended period of time. The system consisted of initial
conditioning of mice using radiation (250-275 cGy), followed by
injection of the tumor cells (I.V. for HL-60-luc and Raji-luc,
intra-splenic for HT29-luc and IP for ovarian for MA-148-luc), a
three-day growth phase, injection of human NK cells, and repeated
injection of the drugs of interest, BiKE and TriKE (three to five
times a week). Imaging was carried out at day 7, 14, and 21, and
extended as needed.
Figure
A below shows the results (tumor burden and mortality) when dosing
NK cells alone (top panel), the BiKE version (lacking IL-15) of
GTB-3550 (middle panel; called 1633), and the TriKE, GTB-3550
(bottom panel; then called 161533) in the above described human
tumor model, HL-60-luc. In the NK-cell-only arm, two out of the
five mice were dead by day 21 with two of the surviving mice having
extensive tumor burden as depicted by the colored images. In
contrast, all five mice in each of the BiKE and TriKE arms
survived. In addition, the tumor burden in the TriKE-treated mice
was significantly less than in the BiKE-treated mice, demonstrating
the improved efficacy from NK cells in the TriKE-treated
mice.
Based
on these results, and others, the IND for GTB-3550 was filed in
June 2017 by the University of Minnesota. FDA requested that
additional preclinical toxicology be conducted prior to initiating
clinical trials. The FDA also requested some additional information
and clarifications on the manufacturing (CMC) and clinical
packages. The requested additional information and clarifications
were completed and incorporated by us into the IND in eCTD format.
We filed the IND amendment in June 2018 and announced on November
1, 2018 that we had received notification from the FDA that the IND
was open and the Company was authorized to initiate a
first-in-human Phase 1 study with GTB-3550 in AML, MDS and severe
mastocytosis. We expect to be in a position to begin the Phase 1
clinical trial in the first half of 2019.
Generation of humanized single-domain antibody targeting CD16 for
incorporation into the TriKE platform
To
develop second generation TriKEs, we designed a new humanized CD16
engager derived from a single-domain antibody. While scFvs consist
of a heavy and a light variable chain joined by a linker,
single-domain antibodies consist of a single variable heavy chain
capable of engaging without the need of a light chain counterpart
(see figure below).
These
single-domain antibodies are thought to have certain attractive
features for antibody engineering, including physical stability,
ability to bind deep grooves, and increased production yields,
amongst others. Pre-clinical studies demonstrated increased
activity (NK Cell Degranulation) and functionality (NC Cell
Cytokine Production) of the single-domain CD16 TriKE (GTB-C3550)
compared to the original TriKE (GTB-3550) (see figure below). These
data were presented at the 2017 American Society of Hematology
Conference.
Targeting Solid Tumors and Other Potentially Attractive
Characteristics
Unlike
full-length antibodies, TriKEs and TetraKEs are small single-chain
fusion proteins that bind the CD16 receptor of NK cells directly
producing a potentially more potent and lasting response as
demonstrated by preclinical studies. An additional benefit that
they may have is an attractive biodistribution, because of their
smaller size, which we expect to be important in the treatment of
solid tumors. In addition to these potential advantages, TriKEs and
TetraKEs are designed to be non-immunogenic, have appropriate
clearance properties and can be engineered quickly to target a
variety of tumor antigens. We believe these attributes make them an
ideal pharmaceutical platform for potentiated NK cell-based
immunotherapies and have the potential to overcome some of the
limitations of CAR-T therapy and other antibody
therapies.
Examples of our
earlier stage solid tumor targeting product candidates are focused
on EpCAM, Her2, Mesothelin (mesothelioma and lung adenocarcinoma),
and CD133 alone and in combination. We believe certain of these
constructs have the potential to target prostate, breast, colon,
ovarian, liver, and head and neck cancers. Depending on the
availability of drug supply, we hope to initiate human clinical
testing for certain of our solid tumor product candidates in
2020.
Efficient Advancement of Potential Future Product Candidates
--Production and Scale Up
We are
using our TriKE and TetraKE platforms with the intent to bring to
market multiple immuno-oncology products that can treat a range of
hematologic malignancies, sarcomas and solid tumors. The platforms
are scalable and we are currently working with several third
parties investigating the optimal expression system of the TriKEs
and TetraKE constructs which we expect to be part of a process in
which we are able to produce IND-ready moieties in approximately
90-120 days after the construct conceptual design.
After
conducting market and competitive research, specific moieties can
then be rapidly advanced into the clinic on our own or through
potential collaborations with larger companies. We are currently
evaluating over a dozen moieties and intend to announce additional
clinical product candidates in the second half of
2019.
We
believe our TriKEs and TetraKEs will have the ability, if approved
for marketing, to be used on a stand-alone basis, augment the
current monoclonal antibody therapeutics, or be used in conjunction
with more traditional cancer therapy and potentially overcome
certain limitations of current chimeric antigen receptor, or CAR-T,
therapy.
Bi-specific Antibody-Drug Conjugates Program
Antibody–drug
conjugates (ADCs) are a class of potent biopharmaceutical drugs
designed as a targeted therapy for the treatment of cancer. ADCs
combine the antitumor potency of highly cytotoxic small-molecule
drugs with the high selectivity, pharmacokinetic profile of mAbs.
These attributes allow sensitive discrimination between healthy and
diseased tissue. We believe our bi-specific, ligand-directed
single-chain fusion protein represents an example of the next
generation of ADCs.
We are
currently utilizing a single chain bispecific recombinant fusion
protein consisting of an anti-CD22 sFv, an anti-CD19 sFv, and DT390
(the catalytic and translocation domains of diphtheria toxin). It
is a cytotoxic molecule produced by recombinant DNA techniques
composed of a fusion gene consisting of sequences for DT390 and
also sequences encoding two separate and distinct sFvs, one
recognizing CD22 and one recognizing CD19. The anti-CD22 sFv comes
from the monoclonal antibody RFB4 and this sFv is currently in
clinical trials involving another anti-CD22 immunotoxin called
BL22. The anti-CD19 sFv is from the monoclonal antibody HD37 that
has previously been used clinically. Published preclinical studies
have shown that the presence of both sFvs on the same single chain
molecule results in a bispecific fusion toxin that has superior
activity and anti-cancer effects compared to the monospecific
fusion toxins. Between the VL and VH regions of the sFvs, we have
introduced aggregation reducing sequences (ARL) which has produced
a product which has demonstrated better activity against scid mouse
systemic models of B cell malignancy. The action of DT2219 occurs
as a result of binding to the CD22 and/or CD19 receptors,
subsequent internalization, and enzymatic inhibition of protein
synthesis leading to cell death.
We
believe that our single-chain bi-specific recombinant fusion
proteins utilizing novel linkers and innovative warheads represent
an important advance over currently marketed ADCs. Utilizing our
bi-specific ADC platform we have the ability to generate novel ADCs
with unique targets, linkers and warheads. This platform provides
us with the ability to rapidly construct novel ADCs with the
potential to treat a wide range of cancers, including hematologic
and solid tumors.
Immuno-Oncology Product Candidates
Our
most advanced bi-specific ADC, GTB-1550, which targets CD19+ and/or
CD22+ hematological malignancies, is in the Phase 2 component of a
Phase 1/2 Non-Hodgins Lymphoma (NHL)/Acute Lymphocytic Leukemia
(ALL) trial which is an open-label, investigator-led study. We are
initially targeting certain hematologic malignancies as we believe
our product candidates may have certain advantages over existing
and other in-development products.
Our
TriKE product candidates, GTB-3550 and GTB-C3550, are single-chain,
tri-specific scFv recombinant fusion proteins composed of the
variable regions of the heavy and light chains (or heavy chain
only) of anti-CD16 antibodies, wild-type or a modified form of
IL-15 and the variable regions of the heavy and light chains of an
antibody designed to precisely target a specific tumor antigen. We
utilize the NK stimulating cytokine human IL-15 as a crosslinker
between the two scFvs which is designed to provide a
self-sustaining signal leading to the proliferation and activation
of NK cells thus enhancing their ability to kill cancer cells
mediated by antibody-dependent cell-mediated cytotoxicity
(ADCC).
Our
TetraKE product candidates are single-chain fusion proteins
composed of human single-domain anti-CD16 antibody, wild-type IL-15
and the variable regions of the heavy and light chains of two
antibodies that are designed to target two specific tumor antigens
expressed on specific types of cancer cells. An example of a
TetraKE product candidate is GTB-1615 which is designed to target
EpCAM and CD133 positive solid tumors. EpCAM is found on many solid
tumor cells of epithelial origin and CD133 is a marker for cancer
stem cells. GTB-1615 is designed to enable a patient’s NK
cells to kill not only the heterogeneous population of cancer cells
found in many solid tumors but also kill the cancer stem cells that
can be responsible for recurrences.
GTB-1550
GTB-1550 is a
bispecific scFv recombinant fusion protein-drug conjugate composed
of the variable regions of the heavy and light chains of anti-CD19
and anti-CD22 antibodies and a modified form of diphtheria toxin
(DT390) as its cytotoxic drug payload. CD19 is a membrane
glycoprotein present on the surface of all stages of B-lymphocyte
development and is also expressed on most B-cell mature lymphoma
cells and leukemia cells. CD22 is a glycoprotein expressed on
B-lineage lymphoid precursors, including precursor acute
lymphoblastic leukemia, and often is co-expressed with CD19 on
mature B-cell malignancies such as lymphoma.
GTB-1550 targets
cancer cells expressing the CD19 receptor or CD22 receptor or both
receptors. When GTB-1550 binds to cancer cells, the cancer cells
internalize GTB-1550, and are killed due to the action of
drug’s cytotoxic diphtheria toxin payload. GTB-1550 has
completed a Phase 1 human clinical trial in patients with
relapsed/refractory B-cell lymphoma or leukemia.
The
initial Phase 1 study enrolled 25 patients with mature or precursor
B-cell lymphoid malignancies expressing the CD19 receptor or CD22
receptor or both receptors. All 25 patients received at least a
single course of therapy. The treatment at the higher doses
produced objective tumor responses with one patient in continuous
partial remission and the second in complete remission. A Phase 1/2
trial of GTB-1550 in 18 patients was recently completed in patients
with ALL/NHL. The FDA-approved clinical trial was conducted at the
University of Minnesota's Masonic Cancer Center. The data is
currently being analyzed. We expect to submit data from this Phase
1/2 study for presentation/publication.
GTB-3550
GTB-3550 is our
first TriKE product candidate. It is a single-chain, tri-specific
scFv recombinant fusion protein conjugate composed of the variable
regions of the heavy and light chains of anti-CD16 and anti-CD33
antibodies and a modified form of IL-15. We intend to study this
anti-CD16-IL-15-anti-CD33 TriKE in CD33 positive leukemias, a
marker expressed on tumor cells in acute myelogenous leukemia, or
AML, myelodysplastic syndrome, or MDS, and other hematopoietic
malignancies. CD33 is primarily a myeloid differentiation antigen
with endocytic properties broadly expressed on AML blasts and,
possibly, some leukemic stem cells. CD33 or Siglec-3 (sialic acid
binding Ig-like lectin 3, SIGLEC3, SIGLEC3, gp67, p67) is a
transmembrane receptor expressed on cells of myeloid lineage. It is
usually considered myeloid-specific, but it can also be found on
some lymphoid cells. The anti-CD33 antibody fragment that will be
used for these studies was derived from the M195 humanized
anti-CD33 scFV and has been used in multiple human clinical
studies. It has been exploited as target for therapeutic antibodies
for many years. We believe the recent approval of the antibody-drug
conjugate gemtuzumab validates this targeted approach.
The
GTB-3550 IND will focus on AML, the most common form of adult
leukemia with 21,000 new cases expected in 2018 alone (American
Cancer Society). These patients typically receive frontline
therapy, usually chemotherapy, including cytarabine and an
anthracycline, a therapy that has not changed in over 40 years.
About half will have relapses and require alternative therapies. In
addition, MDS incidence rates have dramatically increased in the
population of the United States from 3.3 per 100,000 individuals
from 2001-2004 to 70 per 100,000 annually, MDS is especially
prevalent in elderly patients that have a median age of 76 years at
diagnosis. The survival of patients with MDS is poor due to
decreased eligibility, as a result of advanced age, for allogeneic
hematopoietic cell transplantation (Allo- HSCT), the only curative
MDS treatment (Cogle CR. Incidence and Burden of the
Myelodysplastic Syndromes. Curr
Hematol Malig Rep. 2015; 10(3):272-281). We believe GTB-3550
could serve as a relatively safe, cost-effective, and easy-to-use
therapy for resistant/relapsing AML and could also be combined with
chemotherapy as frontline therapy thus targeting the larger
market.
The IND
for GTB-3550 was filed in June 2017 by the University of Minnesota.
FDA requested that additional preclinical toxicology be conducted
prior to initiating clinical trials. The FDA also requested some
additional information and clarifications on themanufacturing (CMC)
and clinical packages. The requested additional information and
clarifications were completed and incorporated by us into the IND
in eCTD format. We filed the IND amendment in June 2018 and
announced on November 1, 2018 that we had received notification
from the FDA that the IND was open and the Company was authorized
to initiate a first-in-human Phase 1 study with GTB-3550 in AML,
MDS and severe mastocytosis. We expect to be in a position to begin
the Phase 1 clinical trial in the first half of 2019.
GTB-C3550
GTB-C3550 is a
next-generation, follow-on, to our lead TriKE, GTB-3550. GTB-C3550
contains a modified CD16 moiety which has improved binding
characteristics and enhanced tumor cell killing based on functional
assays and animal models of AML. Using our platform technology, we
substituted the anti-CD16 scFv arm in GTB-3550 with a novel
humanized single-domain anti-CD16 antibody to create this
second-generation molecule which may have improved functionality.
Single-domain antibodies, such as GTB-C3550, typically have several
advantages, including better stability and solubility, more
resistance to pH changes, can better recognize hidden antigenic
sites, lack of a VL portion thus preventing VH/VL mispairing and
are suitable for construction of larger molecules. GTB-C3550
induced a potent increase in NK cell degranulation, measured by
CD107a expression against HL-60 AML tumor targets when compared to
our first- generation TriKE (70.75±3.65% vs.
30.75±5.05%). IFN production was similarly enhanced
(29.2±1.8% vs. 6.55±1.07%). GTB-C3550 also exhibited a
robust increase in NK cell proliferation (57.65±6.05% vs.
20.75±2.55%). GTB-3550 studies will help inform the
development of GTB-C3550 which we expect will de-risk the GTB-C3550
program as data will be generated to make an informed decision on
which, or both, will be brought into later phase
studies.
GTB-1615
GTB-1615 is an
example of our first-generation TetraKEs designed for the treatment
of solid tumors. It is a single-chain fusion protein composed of
CD16-IL15-EpCAM-CD133. EpCAM is found on many solid tumor cells of
epithelial origin and CD133 is a marker for cancer stem cells. This
TetraKE is designed to target not only the heterogeneous population
of cancer cells found in solid tumors but also the cancer stem
cells that are typically responsible for recurrences. Depending on
the availability of drug supply, we hope to initiate human clinical
testing for certain of our solid tumor product candidates in
2020.
Central Nervous System
Our CNS
portfolio consists of in-process R&D (“IPR&D”)
assets acquired in connection with the acquisition of Georgetown
Translational Pharmaceuticals (“GTP”) on September 1,
2017, consisting of innovative reformulations and/or repurposing of
existing therapies. These CNS assets address disease states such as
chronic neuropathic pain (product candidate PainBrake, utilizing
AccuBreak technology), myasthenia gravis (product candidate
GTP-004) and motion sickness (product candidate
GTP-011).
In the
3rd quarter of 2018, the Company experienced changes in key senior
management, led by the appointment of a CEO with extensive
experience in oncology drug development. These changes resulted in
the prioritization of immuno-oncology development candidates
relative to the CNS development candidates acquired from Georgetown
Translational Pharmaceuticals. In conjunction with these strategic
changes, limited internal resources have delayed the development of
the CNS IPR&D assets. The limited resources, changes in senior
leadership, and favorable market conditions for immuno-oncology
development candidates have resulted in the Company choosing to
focus on development of its immuno-oncology portfolio. We are
assessing our options to realize value from the CNS IPR&D
assets.
Our
Strategy
Our
goal is to be a leader in immuno-oncology therapies targeting a
broad range of indications including hematological malignancies,
sarcoma and solid tumors and to generate value from our CNS product
candidates. Key elements of our strategy are to:
Expedite clinical development, regulatory approval and
commercialization of our bi-specific ADC, GTB-1550, in specific
indications with a high unmet-medical need such as patients who are
resistant or refractory to conventional treatment and also assess
fast-to- market strategies in potential orphan
indications
Based
upon promising clinical results from the initial GTB-1550 Phase 1
study, we began enrolling patients in a Phase 2 trial during the
first quarter of 2017 for our most advanced oncology product
candidate, GTB-1550, for the treatment of patients with
relapsed/refractory B- cell leukemias or lymphomas. In the Phase 1
study, of the nine patients who received GTB-1550 at the higher
doses, two had durable complete responses in heavily pretreated
patients. One of these patients, who had failed multiple previous
treatment regimens, has been cancer free since the beginning of
2015.
A Phase
1/2 trial of GTB-1550 in 18 patients was recently completed in
patients with ALL/NHL. The FDA-approved clinical trial was
conducted at the University of Minnesota's Masonic Cancer Center.
The data is currently being analyzed. We expect to submit data from
this Phase 1/2 study for presentation/publication.
We will
also utilize our bi-specific ADC platform to generate novel ADCs
with unique targets, linkers and warheads. We anticipate that this
platform will give us the ability to rapidly construct novel ADCs
with the potential to treat a wide range of cancers, including
hematologic and solid tumors.
Rapidly advanced our Tri-specific Killer Engagers (TriKEs),
GTB-3550 and GTB-C3550
Our
TriKE and TetraKE product candidates have the potential to be
groundbreaking therapies targeting a broad range of hematologic
malignancies, sarcomas and solid tumors. We are preparing to study
GTB-3550, an anti-CD16-IL-15-anti-CD33 TriKE in CD33 positive
leukemias, a marker expressed on tumor cells in AML, MDS and other
myeloid malignancies. We expect to begin a Phase 1 clinical trial
in the first half of 2019 in patients with relapsed/refractory AML.
The Phase 1 trial will be a dose finding study. We expect this will
be closely followed by Phase 2 trials to determine the most
efficacious dosing and cycles with the aim to maximize efficacy
while minimizing on-target, off-disease adverse
events.
GTB-C3550 contains
a humanized single-domain anti-CD16 moiety which demonstrated
improved binding characteristics and enhanced tumor cell killing
based on functional assays and animal models of AML.
We have
designed GTB-3550 and GTB-C3550, if approved for marketing, to
serve as a relatively safe, cost-effective, and easy-to-use
therapies for resistant/relapsing AML or MDS which could also be
combined with chemotherapy as frontline therapy thus targeting a
broad AML/MDS market.
GTB-C3550 is a
next-generation, follow-on, to our lead TriKE, GTB-3550. GTB-3550
studies will help inform the development of GTB-C3550. We believe
this will de-risk the GTB-C3550 program as the data being generated
will help to make informed decisions on which, or both, will be
brought into later phase studies and in which patient
populations.
Utilize our TriKE and TetraKE platform technologies to develop a
robust pipeline of targeted immuno-oncology products targeting a
wide range of hematologic malignancies, sarcomas and solid tumors
for development on our own and through potential collaborations
with larger pharmaceutical companies
We are
using our TriKE and TetraKE platforms with the intent to bring to
market multiple, targeted, off-the-shelf therapies that can treat a
range of hematologic malignancies, sarcomas and solid tumors. The
platforms are scalable and we are currently working with several
third parties investigating the optimal expression system of the
TriKEs and TetraKE constructs which we expect to be part of a
process in which we are able to produce IND-ready moieties in
approximately 90-120 days after the construct conceptual design.
After conducting market and competitive research, specific moieties
can then be rapidly advanced into the clinic on our own or through
potential collaborations with larger pharmaceutical
companies.
We are
currently evaluating over a dozen moieties and intend to announce
additional clinical product candidates in the second half of 2019.
Depending on the availability of drug supply, we hope to initiate
human clinical testing for certain of our solid tumor product
candidates in 2020.
We
believe our TriKEs and TetraKEs will have the ability, if approved
for marketing, to be used on a stand-alone basis, augment the
current monoclonal antibody therapeutics, or be used in conjunction
with more traditional cancer therapy and potentially overcome
certain limitations of current chimeric antigen receptor, or CAR-T,
therapy.
Continue our collaborative relationship with the Masonic Cancer
Center at the University of Minnesota, under a program led by Dr.
Jeffrey Miller and become the leading NK-oriented immune-oncology
company
We
believe that the TriKE and TetraKE constructs represent potentially
groundbreaking innovations in immunotherapy. In July 2016 we
entered into an exclusive license agreement with the University of
Minnesota to develop and commercialize cancer therapies using TriKE
and TetraKE technology developed by researchers at the university
to target NK cells to cancer.
We
believe TriKE and TetraKE therapeutics have the potential to
significantly impact the standard of care for hematologic
malignancies, sarcomas, as well as solid tumors. The direct
engagement of the NK cell with the tumor cell via very specific
receptors may increase the efficacy while decrease the toxicity
seen with other forms of immunotherapies. If approved, we expect
the TriKEs and TetraKEs will be able to be administered at cancer
treatment facilities without the need for specialized centers or
product-specific trained staff.
We also
intend to selectively evaluate and potentially acquire or enter
into licensing or other agreements for technologies and/or product
candidates that we believe would complement our oncology product
candidates and platform technologies.
Monetize our CNS programs through transactions with
commercialization-oriented pharmaceutical companies and/or other
transactions
Our CNS
portfolio consists of IPR&D assets acquired in connection with
the acquisition of GTP on September 1, 2017, consisting of
innovative reformulations and/or repurposing of existing therapies.
These CNS assets address disease states such as chronic neuropathic
pain, myasthenia gravis and motion sickness.
In the
3rd quarter of 2018, the Company experienced changes in key senior
management, led by the appointment of a CEO with extensive
experience in oncology drug development. These changes resulted in
the prioritization of immuno-oncology development candidates
relative to the CNS development candidates acquired from Georgetown
Translational Pharmaceuticals. In conjunction with these strategic
changes, limited internal resources have delayed the development of
the CNS IPR&D assets. The limited resources, changes in senior
leadership, and favorable market conditions for immuno-oncology
development candidates have resulted in the Company choosing to
focus on development of its immuno-oncology portfolio.
We
expect to monetize our CNS portfolio through licensing deals with
commercialization-oriented pharmaceutical companies, which could
result in income, or enter into other transaction structures with
the intent to generate value for our shareholders.
Oncology
Markets
B-cell Lymphomas/Leukemias
B-cell
lymphoma is a type of cancer that forms in B cells (a type of
immune system cell). B-cell lymphomas may be either indolent (slow-
growing) or aggressive (fast-growing). Non- Hodgkin lymphoma has an
incidence rate of 19.4 per 100,000 per year and B-cell lymphomas
make up most (about 85%) of NHL in the United States. There are
many different types of B-cell non- Hodgkin lymphomas. These
include Burkitt lymphoma, chronic lymphocytic leukemia/small
lymphocytic lymphoma (CLL/SLL), diffuse large B-cell lymphoma,
follicular lymphoma, and mantle cell lymphoma.
Acute Lymphoblastic Leukemia
Acute
lymphoblastic leukemia, or ALL, is an acute form of leukemia, or
cancer of the white blood cells, characterized by the
overproduction and accumulation of immature white blood cells,
known as lymphoblasts. In persons with ALL, lymphoblasts are
overproduced in the bone marrow and continuously multiply, causing
damage and death by inhibiting the production of normal cells (such
as red and white blood cells and platelets) in the bone marrow and
by spreading (infiltrating) to other organs.
It is
estimated that there will be 5,930 new cases of ALL reported in the
United States in 2019 (ACS Cancer Facts & Figures 2019).
"Acute" is defined by the World Health Organization standards, in
which greater than 20% of the cells in the bone marrow are blasts.
Chronic lymphocytic leukemia is defined as having less than 20%
blasts in the bone marrow. Acute lymphoblastic leukemia is seen in
both children and adults; the highest incidence is seen between
ages 2 to 3 years (>90 cases per 1 million per year). ALL is the
most common cancer diagnosed in children and represents
approximately 25% of cancer diagnoses among children younger than
15 years. Among children with ALL, approximately 98% attain
remission, and approximately 85% of patients aged 1 to 18 years
with newly diagnosed ALL treated on current regimens are expected
to be long-term event-free survivors, with over 90% surviving at 5
years.
Multiple Myeloma
Multiple myeloma is
a type of cancer that forms in white blood cells and will affect an
estimated 32,110 people in 2019 in the U.S. causing about 12,960
deaths. Multiple myeloma causes cancer cells to accumulate in the
bone marrow, where they crowd out healthy blood cells. Multiple
myeloma is also characterized by destructive lytic bone lesions
(rounded, punched-out areas of bone), diffuse osteoporosis, bone
pain, and the production of abnormal proteins which accumulate in
the urine. Anemia is also present in most multiple myeloma patients
at the time of diagnosis and during follow-up. Anemia in multiple
myeloma is multifactorial and is secondary to bone marrow
replacement by malignant plasma cells, chronic inflammation,
relative erythropoietin deficiency, and vitamin deficiency. Plasma
cell leukemia, a condition in which plasma cells comprise greater
than 20% of peripheral leukocytes, is typically a terminal stage of
multiple myeloma and is associated with short
survival.
Myeloid Leukemias
Acute Myeloid Leukemia
AML is
a heterogeneous hematologic stem cell malignancy in adults with
incidence rate of 4.3% per 100,000 populations. The median age at
the time of diagnosis is 68 years. AML is an aggressive disease and
is fatal without anti-leukemic treatment. AML is the most common
form of adult leukemia with an estimated 21,450 new cases in 2019
in the U.S. These patients will require frontline therapy, usually
chemotherapy including cytarabine and an anthracycline, a therapy
that has not changed in over 40 years. Myelodysplastic syndromes
(MDS) are a heterogeneous group of myeloid neoplasms characterized
by dysplastic features of erythroid/myeloid/megakaryocytic
lineages, progressive bone marrow failure, a varying percentage of
blast cells, and enhanced risk to evolve into acute myeloid
leukemia. It is estimated that over 10,000 new cases of MDS are
diagnosed each year and there are minimal treatment options; other
estimates have put this number higher. In addition, the incidence
of MDS is rising for unknown reasons.
Solid Tumors
In the
United States, in 2019, it is estimated there will be approximately
1,762,450 new cases of cancer resulting in 606,880 deaths. Greater
than 80% of these cancers will be classified as solid tumors. The
most prevalent new cases of solid tumors being breast, lung,
prostate, colorectal and bladder. (American Cancer Society, Cancer
Facts & Figures 2019)
Sarcomas
A
sarcoma is a type of cancer that develops from certain tissues,
like bone or muscle. Bone and soft tissue sarcomas are the main
types of sarcoma. Soft tissue sarcomas can develop from soft
tissues like fat, muscle, nerves, fibrous tissues, blood vessels,
or deep skin tissues. They can be found in any part of the body.
Most of them develop in the arms or legs. They can also be found in
the trunk, head and neck area, internal organs, and the area in
back of the abdominal cavity (known as the retroperitoneum).
Sarcomas are not common tumors, and most cancers are the type of
tumors called carcinomas.
The
American Cancer Society's estimates for soft tissue sarcomas in the
United States for 2019 are (these statistics include both adults
and children): about 12,750 new soft tissue sarcomas will be
diagnosed (7,240 cases in males and 5,510 cases in females). 5,270
Americans (2,840 males and 2,430 females) are expected to die of
soft tissue sarcomas. The most common types of sarcoma in adults
are undifferentiatedpleomorphic sarcoma (previously called
malignant fibrous histiocytoma), liposarcoma, and leiomyosarcoma.
Certain types occur more often in certain areas of the body than
others. For example, leiomyosarcomas are the most common abdominal
sarcoma, while liposarcomas and undifferentiated pleomorphic
sarcoma are most common in legs. But pathologists (doctors who
specialize in diagnosing cancers by how they look under the
microscope), may not always agree on the exact type of sarcoma.
Sarcomas of uncertain type are very common. (American Cancer
Society, Cancer Facts & Figures 2019)
Manufacturing
We do
not currently own or operate manufacturing facilities for the
production of clinical or commercial quantities of any of our
product candidates. We rely on a small number of third-party
manufacturers to produce our compounds and expect to continue to do
so to meet the preclinical and clinical requirements of our
potential product candidates as well as for all of our commercial
needs. We do not have long-term agreements with any of these third
parties. We require in our manufacturing and processing agreements
that all third-party contract manufacturers and processors produce
active pharmaceutical ingredients, or API, and finished products in
accordance with the FDA’s current Good Manufacturing
Practices, or cGMP, and all other applicable laws and regulations.
We maintain confidentiality agreements with potential and existing
manufacturers in order to protect our proprietary rights related to
our drug candidates.
Patents
and Trademarks
Immuno-oncology platform
University of Minnesota License Agreement
We
(through our wholly owned subsidiary Oxis Biotech, Inc.) are party
to an exclusive worldwide license agreement with the Regents of the
University of Minnesota, to further develop and commercialize
cancer therapies using TriKE technology developed by researchers at
the university to target NK cells to cancer. Under the terms of the
agreement, we receive exclusive rights to conduct research and to
develop, make, use, sell, and import TriKE technology worldwide for
the treatment of any disease, state or condition in humans. We
shall be responsible for obtaining all permits, licenses,
authorizations, registrations and regulatory approvals required or
granted by any governmental authority anywhere in the world that is
responsible for the regulation of products such as the TriKE
technology, including without limitation the FDA in the United
States and the European Agency for the Evaluation of Medicinal
Products in the European Union. Under the agreement, the University
of Minnesota will receive an upfront license fee, royalty fees
ranging from 4% to 6%, minimum annual royalty payments of $250,000
beginning in 2022, $2,000,000 in 2025, and $5,000,000 in 2027 and
certain milestone payments totaling $3,100,000.
The
following is a list of the patent applications that we licensed
from the University of Minnesota:
Appl.
No.
|
Title
|
Country
|
Status
|
U.S.
Patent Application Number 62/237,835
|
Therapeutic compounds and its
uses
|
US
|
Expired
|
PCT Patent Application Number
PCT/US2016/055722
|
Therapeutic componds and methods
|
US
|
Pending
|
Daniel A. Vallera, Ph.D. License Agreement
We are
party to an exclusive worldwide license agreement with Daniel A.
Vallera, Ph.D. and his co-inventor Jeffrey Lion, or jointly, Dr.
Vallera, to further develop and commercialize DT2219ARL (GTB-1550),
a novel therapy for the treatment of various human cancers. Under
the terms of the agreement, we receive exclusive rightsto conduct
research and to develop, make, use, sell, and import DT2219ARL
worldwide for the treatment of any disease, state or condition in
humans. We shall be responsible for obtaining all permits,
licenses, authorizations, registrations and regulatory approvals
required or granted by any governmental authority anywhere in the
world that is responsible for the regulation of products such as
DT2219ARL, including without limitation the FDA in the United
States and the European Agency for the Evaluation of Medicinal
Products in the European Union. Under the agreement, Dr. Vallera
will receive an upfront license fee, royalty fees ranging from 3%
for net sales and 25% of net sublicensing revenues, and certain
milestone payments totaling $1,500,000.
The
following is a list of the patent applications and patents that we
licensed from Dr. Vallera under our license
agreements:
Pat./Pub.
No.
|
Title
|
Country
|
Status
|
U.S.
Patent Application Number 61/160,530
|
Methods
and compositions for bi-specific targeting of
cd19/cd22
|
US
|
Expired
|
U.S.
Patent Number 9,371,386
|
Methods
and compositions for bi-specific targeting of
cd19/cd22
|
US
|
Issued
|
U.S.
Patent Application Number 15/187,579
|
Methods
and compositions for bi-specific targeting of
cd19/cd22
|
US
|
Pending
|
ID4 License Agreement
Pursuant to a
patent license agreement with ID4, dated December 31, 2014, or the
ID4 License Agreement, we received an exclusive, worldwide license
to certain intellectual property, including intellectual property
related to treating a p62mediated disease (e.g., multiple myeloma).
The terms of this license require us to pay ID4 royalties equal to
3% of net sales of products and 25% royalty of net sublicensing
revenues. The license will expire upon expiration of the last
patent contained in the licensed patent rights, unless terminated
earlier. We may terminate the licensing agreement with ID4 by
providing ID4 with 30 days written notice.
We will
owe the following cash amounts to ID4 Pharma upon the attainment of
the following milestones:
(i)
Filing
of an investigational new drug application with a competent
regulatory authority anywhere in the world $50,000.
(ii)
Initiation
of Phase I Human Clinical Trial: $50,000.
(iii)
Initiation
of Phase II Human Clinical Trial: $100,000.
(iv)
Initiation
of pivotal Phase III Human Clinical Trial: $250,000.
and
(v)
Receipt
of the first marketing approval: $250,000
The
following is a list of the patent applications and patent that we
licensed from ID4 under the ID4 license agreement:
Pat./Appl.
No.
|
Title
|
Country
|
Status
|
U.S.
Patent Number 9,580,382
|
P62zz
chemical inhibitor
|
US
|
Issued
|
U.S.
Patent Application Number 61/521,287
|
P62zz
chemical inhibitor
|
US
|
Expired
|
PCT
Patent Application Number PCT/US2012/049911
|
P62zz
chemical inhibitor
|
PCT
|
Expired
|
U.S.
Patent Application Number 14/727,710
|
P62zz
chemical inhibitor
|
US
|
Pending
|
Chinese
Patent Application 201280048718
|
P62zz
chemical inhibitor
|
US
|
Pending
|
Central Nervous System
Patents for AccuBreak Tablets
We have
in-licensed the rights to use the AccuBreak patents with drugs
that, like carbamazepine, are voltage-gated sodium channel blockers
in North America. The license field includes voltage gated sodium
channels inhibitors and blockers for the treatment of epilepsy,
neuropathic pain, and bipolar disorder.
Under
the agreement, AccuBreak received an upfront license fee of
$35,000, royalty fees ranging from 2.5% to 5%, minimum annual
royalty payments, and 20% of net sublicensing
revenues.
We will
owe the following cash amounts to AccuBreak upon the attainment of
the following milestones:
●
$50,000
six months after the first approval of the first indication by the
FDA;
●
$50,000
nine months after the first approval of the first indication by the
FDA;
●
$100,000
12 months after the first approval of the first indication by the
FDA;
●
$25,000
upon achievement of $25,000,000 of cumulative net sales in the
world;
●
$50,000
upon achievement of $50,000,000 of cumulative net sales in the
world; and
●
$100,000
upon achievement of $75,000,000 of cumulative net sales in the
world.
Four
formulation patents protect the AccuBreak Technology:
Pat.
No.
|
Title
|
Country
|
Status
|
U.S.
Patent Number 7,838,031
|
Method
for administering a partial dose using a segmented pharmaceutical
tablet
|
US
|
Issued
|
U.S.
Patent Number 7,879,352
|
Scored
pharmaceutical tablets comprising a plurality of
segments
|
US
|
Issued
|
U.S.
Patent Number 8,158,148
|
Pharmaceutical
tablets comprising two or more unitary segments
|
US
|
Issued
|
U.S.
Patent Number 8,231,902 (ABT- 054)
|
Segmented
pharmaceutical dosage forms
|
US
|
Issued
|
The
core patent expires in 2025.
Patent Applications for GTP-004
Four
patent applications filed by GTP in 2017 with the U.S. PTO protect
the combination of pyridostigmine or neostigmine + an antiemetic
for the treatment of myasthenia gravis. We plan to file extensions
under the Patent Cooperation Treaty, or PCT, in 2018. All patents
list below are owned by the Company.
Pat.
No.
|
Title
|
Country
|
Status
|
U.S.
Patent Application Number 62/443,904
|
Use and
composition for treating Myasthenia Gravis
|
US
|
Expired
|
U.S.
Patent Application Number 62/449,699
|
Neostigmine
combination for treating Myasthenia Gravis
|
US
|
Expired
|
U.S.
Patent Application Number 62/536,595
|
Method
and composition for treating Myasthenia Gravis
|
US
|
Pending
|
U.S.
Patent Application Number 62/536,580
|
Neostigmine
pharmaceutical combination for treating Myasthenia
Gravis
|
US
|
Pending
|
|
|
|
|
PCT
Application Number PCT/US/18/12754
|
Use and
composition for treating Myasthenia Gravis
|
PCT
|
Claims
priority from US 62/443,904
|
Taiwan
Application Number 107100813
|
|
TW
|
Awaiting FC
Report
|
PCT
Application Number PCT/US18/014700
|
Neostigmine
pharmaceutical combination for treating Myasthenia
Gravis
|
PCT
|
Claims
priority from US 62/449,699
|
Taiwan
Application Number 101702591
|
|
TW
|
Awaiting FC
Report
|
Patent Application for GTP-011
One
patent application filed by GTP in 2017 with the U.S. PTO protects
a 72-hour patch of oxybutynin for the treatment of motion sickness.
We plan to file a PCT extension in 2018. All patents list below are
owned by the Company.
Appl.
No.
|
Title
|
Country
|
Status
|
U.S.
Patent Application Number 62/440,575
|
Use and
composition for preventing and treating motion
sickness
|
US
|
Expired
|
US
Patent Application Number 62/595,667
|
Use,
method, and device for the prevention and treatment of motion
sickness
|
US
|
Pending*
|
PCT
Application Number PCT/US/17/68944
|
Use and
composition for preventing and treating motion
sickness
|
PCT
|
Claims
priority from US 62/440,575
|
Taiwan
Application Number 107100079
|
|
TW
|
Awaiting FC
Report
|
* This
application is pending, but was used as priority document of the
PCT ‘944, including its subject matter
Employees
As of
December 31, 2018, we had three employees. Many of our activities
are outsourced to consultants who provide services to us on a
project basis. As business activities require and capital resources
permit, we will hire additional employees to fulfill our
company’s needs.
Form
and Year of Organization
In
1965, the corporate predecessor of GT Biopharma, Diagnostic Data,
Inc. was incorporated in the State of California. Diagnostic Data
changed its incorporation to the State of Delaware in 1972; and
changed its name to DDI Pharmaceuticals, Inc. in 1985. In 1994, DDI
Pharmaceuticals merged with International BioClinical, Inc. and
Bioxytech S.A. and changed its name to OXIS International, Inc. On
July 17, 2017, we amended our Certificate of Incorporation for the
purpose of changing our name from Oxis International, Inc. to GT
Biopharma, Inc.
Legal
Proceedings
On
December 24, 2018, Empery Asset Master, Empery Tax Efficient, LP,
and Empery Tax Efficient II, LP (collectively, “Plaintiffs)
filed in the N.Y. Supreme Court, Index No. 656408/2018, alleging
causes of action against the Company for Breach of Contract,
Liquidated Damages, Damages, and Indemnification. The claims arose
out of a securities purchase agreement entered into between
Plaintiffs and the Company pursuant to which the Company issued
convertible notes and warrants to Plaintiffs in or around January
2018. Plaintiffs allege, inter alia, that the Company failed to pay
Plaintiffs’ outstanding principal on or before the July 23,
2018 maturity date of said notes, failed to convert a portion of
said notes in response to Plaintiffs’ conversion notice, and
failed to timely adjust the exercise price of said warrants. At
issue are notes issued to Plaintiffs in the aggregate principal
amount of approximately $2.2 million and warrants representing the
right of Plaintiffs to acquire an aggregate of 480,352 shares of
common stock in the Company.
MANAGEMENT
The
following table sets forth the name, age and position held by each
of our executive officers and directors as of June 15, 2019.
Directors are elected for a period of one year and thereafter serve
until the next annual meeting at which their successors are duly
elected by the stockholders.
Name
|
Age
|
Position
|
Anthony
J. Cataldo
|
67
|
Chief
Executive Officer and Chairman of the Board
|
Steven
Weldon
|
43
|
Chief
Financial Officer, Principal Accounting Officer and
Director
|
Anthony J. Cataldo was appointed Chief
Executive Officer and Chairman on March 15, 2019. Previously he
served as Vice Chairman of the Board since January 2019. Mr.
Cataldo has extensive experience with the Company, having served on
the Board of Directors from July 2014 until November 2018, also
serving as Chief Executive Officer from November 2014 to September
2017 and Executive Chairman of the Board from September 2017 to
February 2018 during that time. Prior to joining the Company, from
February 2011 until June 2013, Mr. Cataldo served as Chairman and
CEO/Founder of Genesis Biopharma, Inc. (now known as Iovance
Biotherapeutics, Inc.). Mr. Cataldo is credited with developing the
Stage Four Cancer treatment for melanoma known as Lion/Genesis
using assets acquired from the National Cancer Institute (NIH). Mr.
Cataldo also served as non-executive co-chairman of the board of
directors of MultiCell Technologies, Inc., a supplier of
functional, non-tumorigenic immortalized human hepatocytes from
February 2005 until July 2006.
Steven Weldon was appointed Chief
Financial Officer and to our board of directors on March 20, 2019.
Previously Mr. Weldon was appointed to the Board of Directors of
the Company in September 2014 and as our Chief Financial Officer in
November 2014 until October 2018.. Mr. Weldon has over 15 years of
financial and accounting experience. Mr. Weldon’s financial
background includes experience in managerial, private accounting
and planning. He has served on the board of several publicly traded
companies as both, chief executive officer and chief financial
officer. Mr. Weldon was appointed as chief financial officer and as
a member of the board of directors of GB Sciences, Inc.
(OTCMKTS:GBLX) in September 2005 and served in both positions until
November 2014. Mr. Weldon also served as chief executive officer of
GB Sciences from December 2009, through May 2011, and from April
2012, through March 2014. For several years, he taught accounting
and tax courses to undergrad students at Florida Southern College.
He received his bachelor of science degree and his Master’s
in Business Administration from Florida Southern College and is a
licensed Certified Public Accountant in the State of
Florida.
Due to the
small number of directors, at the present time the duties of an
Audit Committee, Nominating and Governance Committee, and
Compensation Committee are performed by the board of directors as a
whole. At such time as we have more directors on our board of
directors, these committees will be reconstituted.
Code
of Ethics
A copy
of the company’s code of ethics is attached to this annual
report as exhibit 14.1.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires our executive
officers and directors, and persons who own more than 10% of a
registered class of the company’s equity securities, to file
reports of ownership and changes in ownership with the Securities
and Exchange Commission (“SEC”). Executive officers,
directors and greater than 10% stockholders are required by SEC
regulations to furnish the company with copies of all Section 16(a)
forms they file. All of our executive officers and directors filed
the required reports; however, Kathleen Clarence-Smith and Raymond
Urbanski filed one Form 3 late and Raymond Urbanski, Anthony J.
Cataldo and Steven Weldon each filed one Form 4 late.
EXECUTIVE COMPENSATION
The
following table sets forth certain information concerning the
annual and long-term compensation for services rendered to us in
all capacities for the fiscal years ended December 31, 2018 and
2017 of all persons who served as our principal executive officers
and as our principal financial officer during the fiscal year ended
December 31, 2018. No other executive officers received total
annual compensation during the fiscal year ended December 31, 2018
in excess of $100,000. The principal executive officer and the
other named officers are collectively referred to as the
“Named Executive Officers.”
Name and
Principal Position
|
|
|
|
|
All
Other
Compensation
($)
(2)
|
|
|
|
|
|
|
|
|
Anthony J.
Cataldo
|
2018
|
-
|
-
|
-
|
404,151
|
404,151
|
CEO
(6)
|
2017
|
310,667
|
90,000
|
77,275,253
|
-
|
77,675,920
|
|
|
|
|
|
|
Steven
Weldon
|
2018
|
230,000
|
-
|
-
|
-
|
230,000
|
CFO
(5)
|
2017
|
245,333
|
-
|
38,472,797
|
-
|
38,718,130
|
|
|
|
|
|
|
Raymond Urbanski,
M.D.
|
2018
|
321,154
|
-
|
7,644,490
|
-
|
7,965,644
|
Former CEO
(3)
|
2017
|
133,333
|
-
|
7,644,490
|
-
|
7,777,823
|
|
|
|
|
|
|
Shawn
Cross
|
2018
|
233,942
|
20,000
|
-
|
-
|
253,942
|
Former CEO
(4)
|
2017
|
104,165
|
-
|
-
|
-
|
104,165
|
|
|
|
|
|
|
Kathleen
Clarence-Smith
|
2018
|
278,846
|
-
|
-
|
-
|
278,846
|
Former CEO
(7)
|
2017
|
166,667
|
-
|
-
|
-
|
166,667
|
(1)
The
amounts in this column represent the aggregate grant date fair
value of the restricted stock awards and restricted stock units,
determined in accordance with Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC) Topic 718. GT
Biopharma determines the grant date fair value of the awards by
multiplying the number of units granted by the closing market price
of one share of GT Biopharma common stock on the award grant date.
These amounts do not reflect the actual economic value that will be
realized by the named executive officer upon the vesting or the
sale of the common stock awards.
(2)
The
amount in this column represents compensation earned under
Consultant Agreements with the Company.
(3)
Dr.
Urbanski was appointed Chief Medical Officer on September 1, 2017,
President of May 9, 2018, and Chief Executive Officer on July 3,
2018. He resigned as Chief Executive Officer on March 15,
2019.
(4)
Mr.
Cross was appointed President and Chief Operating Officer on
October 15, 2017 and Chairman and Chief Executive Officer on
February 14, 2018. Mr. Cross resigned from the Company on July 2,
2018.
(5)
Mr.
Weldon was appointed Chief Financial Officer on March 20, 2019. He
was previously the Chief Financial Officer from November 3, 2014
until October 11, 2018.
(6)
Mr.
Cataldo was appointed Chief Executive Officer on March 15, 2019.
Mr. Cataldo previously served as our Chief Executive Officer from
March 2009 to August 2011 and again in November 2014 to September
1, 2017. He was Executive Chairman from September 1, 2017 to
February 14, 2018, and has been providing services to the Company
under a Consultant Agreement since February 14, 2018.
(7)
Dr.
Clarence-Smith was Chief Executive Officer from September 1, 2017
to February 14, 2018. Dr. Clarence-Smith served as our
Vice-Chairwoman and President of the Neurology Division from
February 14, 2018 until her resignation from the Company on October
9, 2018. Employment Agreements
On
October 18, 2018, the Company entered into a Consultant Agreement
with Anthony Cataldo. The term of the Consultant Agreement shall
remain in effect until September 30, 2019. This Agreement
supersedes the Consultant Agreement dated February 14, 2018 and
will pay Mr. Cataldo $25,000 per month during the term of the
Agreement.
On
October 19, 2018, the Company entered into an Executive Employment
Agreement with Dr. Urbanski, reflecting his current position as
Chief Executive Officer of the Company. Under the terms of this
agreement, Dr. Urbanski’s annual salary is essentially
unchanged from his previous positions. Dr. Urbanski is also
entitled to participate in the Company’s bonus plans. Under
the Executive Employment Agreement, the Company has agreed that
upon shareholder approval of a Stock Option Plan, it will recommend
to the Board that the Company grant Dr. Urbanski a Non-Qualified
stock option to purchase 2,971,102 shares of the Company’s
common stock having an exercise equal to the fair market value of
the shares on the date of the Agreement. The stock option grant
would vest according to the following schedule: (i) 1,250,000 fully
vested shares upon signing of the agreement, (ii) 1,250,000 shares
on January 1, 2019, and (iii) 471,102 shares on January 1, 2020. On
March 15, 2019, Dr, Urbanski resigned his position as Chief
Executive Officer, President and Chairman of the
Board.
Stock
Option Grants
The
following table sets forth information as of December 31, 2018,
concerning unexercised options, unvested stock and equity incentive
plan awards for the executive officers named in the Summary
Compensation Table.
Name
|
Number of Securities Underlying Unexercised Options (#)
Exercisable
|
Number of Securities Underlying Unexercised Options (#)
Unexercisable
|
Equity Incentive Plan Awards: Number of Securities Underlying
Unexercised Unearned Options (#)
|
Option Exercise Price ($)
|
|
Steven
Weldon
|
-
|
-
|
-
|
$-
|
|
Anthony
Cataldo
|
358
|
-
|
-
|
$750
|
2019-7-1
|
Anthony
Cataldo
|
358
|
-
|
-
|
$1,500
|
2019-7-1
|
Anthony
Cataldo
|
358
|
-
|
-
|
$2,250
|
2019-7-1
|
Director
Compensation
Beginning in
January 2018, non-employee members of the Board of Directors are to
receive $42,500 per year, plus $15,000 annually for Chairing a
Committee and $5,000 annually as a member of a Committee. Also,
upon shareholder approval of a Stock Option Plan, Directors will be
granted 150,000 options that vest over a three-year period. Vesting
will accelerate if the Company undergoes a change of control
transaction for cash.
Name
|
Fees
Earned or Paid in Cash ($)
|
|
|
|
Dr.
John Bonfiglio (1)
|
$-
|
$-
|
$-
|
$-
|
Dr.
Peter Kiener (1)
|
$8,173
|
$-
|
$-
|
$8,173
|
Geoffrey
Davis (1)
|
$26,250
|
$-
|
$-
|
$26,250
|
Anthony
Cataldo
|
$-
|
$-
|
$-
|
$-
|
Federica
O'Brien (2)
|
$8,173
|
$-
|
$-
|
$8,173
|
(1) Dr. Bonfiglio, Dr. Kiener and Mr. Davis resigned from the Board
on March 20, 2019
|
(2) Ms. O'Brien resigned from the Board on July 2,
2018
|
VOTING SECURITIES AND PRINCIPAL HOLDERS
The
following table sets forth certain information regarding beneficial
ownership of our common stock as of June 16, 2019, (a) by each
person known by us to own beneficially 5% or more of any class of
our common stock, (b) by each of our named executive officers, (c)
by each of our directors and (d) by all our current executive
officers and directors as a group. As ofJune 16, 2019, there were
51,374,417 shares of our common stock issued and outstanding.
Shares of common stock subject to stock options and preferred stock
that are currently exercisable or exercisable within 60 days of
June 16, 2019 are deemed to be outstanding for purposes of
computing the percentage ownership of that person but are not
treated as outstanding for computing the percentage ownership of
any other person. Unless indicated below, the persons and entities
named in the table have sole voting and sole investment power with
respect to all shares beneficially owned, subject to community
property laws where applicable. Except as otherwise indicated, the
address of each stockholder is c/o GT Biopharma, Inc. at 310 N.
Westlake Blvd., Suite 206, Westlake Village, CA 91362.
Name
and Address of Beneficial Owner
|
Number of
Shares
of
Common
Stock
Benefically
Owned
|
Percent of
Shares
of
Outstanding
Common
Stock
|
Security
Ownership of Certain Beneficial Owners:
|
|
|
Kathleen
Clarence-Smith, M.D., Ph.D. (7)
|
7,521,051
|
14.66%
|
Mark Silverman
(7)
|
7,226,108
|
14.09%
|
William Heavener
(1)
|
4,674,749
|
9.11%
|
Bristol Investment
Fund, Ltd. (2)
|
4,534,795
|
8.84%
|
Adam Kasower
(3)
|
3,645,620
|
7.11%
|
Theorem Group, LLC
(4)
|
3,540,130
|
6.90%
|
Alpha Capital
Anstalt (5)
|
2,966,667
|
5.78%
|
The Rosalinde and
Arthur Gilbert Foundation (6)
|
2,739,267
|
5.34%
|
Security
Ownership of Management and Directors:
|
|
|
Anthony J. Cataldo
(7)
|
3,734,320
|
7.28%
|
Steven Weldon
(7)
|
2,269,707
|
4.43%
|
|
|
|
Executive officers
and directors as a group — 2 people
|
6,004,027
|
11.71%
|
(1)
As
reported on Schedule 13G/A filed with the SEC on February 5, 2019.
The address of William Heavener is 3300 University Blvd, Suite 218,
Winter Park, FL 32792
(2)
As
reported on Schedule 13G/A filed with the SEC on February 12, 2019.
Paul Kessler, manager of Bristol Capital Advisors, LLC, the
investment advisor to Bristol Investment Fund, Ltd., has voting and
investment control over the securities held by Bristol Investment
Fund, Ltd. Mr. Kessler disclaims beneficial ownership of these
securities except to the extent of his pecuniary interest therein.
The address of Bristol Capital Advisors, LLC is 662 N. Sepulveda
Blvd., Suite 300, Los Angeles, California 90049.
(3)
Includes
1,011,274 shares issuable upon conversion of principal on
outstanding convertible debentures and 120,088 shares available
through exercise of warrants
(4)
As
reported on Schedule 13G filed with the SEC on November 14, 2017.
The address of Theorem Group LLC is 315 Beverly Drive, Suite 502,
Beverly Hills, CA 90212
(5)
As
reported on Schedule 13G filed with the SEC on February 13, 2019.
The address of Alpha Capital Anstalt is Lettstrasse 32, FL-9490
Vaduz, Furstentums, Liechtenstein
(6)
Includes
2,655,205 shares issuable upon conversion of principal on
outstanding convertible debentures and 84,062 shares available
through exercise of warrants
(7)
Security
interest in these shares has been granted to various holders of the
Company’s senior convertible notes to secure the
Company’s obligations under these notes in accordance with a
Stock Pledge Agreement dated August 2, 2018.
Equity
Compensation Plan Information
The
following is a summary of our equity compensation plans at December
31, 2018:
Plan
Category
|
Number of
Securities
To be Issued
Upon
Exercise
of
Outstanding
Options,
Warrants, and
Rights
(a)
|
Weighted-Average
Exercise Price
of
Outstanding
Options,
Warrants, and
Rights
(b)
|
Number of
Securities
Available for
Future
Issuance Under
Equity
Compensation
Plans
(Excluding
Securities
Reflected in
Column (a))
(c)
|
|
|
|
|
Equity compensation
plans approved by security holders (1)
|
1,113
|
$1,320
|
-
|
Equity compensation
plans not approved by security holders
|
-
|
$-
|
-
|
|
|
|
|
Total
|
1,113
|
$1,320
|
-
|
(1) As
of December 31, 2018, we had options issued and outstanding to
purchase 1,113 shares of common stock under our 2014 Stock
Incentive Plan.
SELLING STOCKHOLDERS
This prospectus relates in part to our registering the resale of
40,216,064 shares of common stock of the Company by Selling
Stockholders who may acquire such shares upon the conversion of
notes and Series J-1 Preferred Stock. There can be no assurance
that the Selling Stockholders will sell any or all of their common
stock offered by this prospectus. We do not know if, when, or in
what amounts, the selling stockholders may offer the common stock
for sale.
Selling Stockholders
The following table sets forth:
●
the
names of the Selling Stockholders;
●
the
number of shares of common stock that can be acquired by each of
the Selling Stockholders through the conversion of notes and
preferred stock before the offering;
●
the
number of shares of common stock being registered with respect to
each Selling Stockholder;
●
the
number of shares of common stock owned by each of the Selling
Stockholders after the offering assuming all notes and applicable
shares of preferred stock are converted and all common shares
acquired are sold; and
●
the
person with voting or investment control if the stockholder is not
a natural person.
As of June 14, 2019, there were 51,374,417 shares of common stock
outstanding. To the extent that any successor(s) to the named
selling stockholder(s) wish to sell under this prospectus, we will
file a prospectus supplement identifying such successors as selling
stockholders.
Selling Stockholders
|
Shares Acquireable upon Conversion of Notes and Preferred
Stock
|
|
Shares Owned After the Offering Assuming all Notes and Preferred
Stock are Converted and all Shares Sold
|
Person with Voting or Investment Control
|
Bristol
Investment Fund, Ltd.
|
8,589,685
|
8,589,685
|
6,745,117
|
Paul
Kessler
|
Bristol
Capital LLC
|
2,223,498
|
2,223,498
|
*
|
Paul
Kessler
|
James
Heavener
|
5,218,013
|
5,218,013
|
3,892,882
|
|
Adam
Kasower
|
2,140,229
|
2,140,229
|
1,091,664
|
|
Red
Mango Enterprises Limited
|
2,388,486
|
2,388,486
|
1,365,180
|
Chris
Parker
|
Alpha
Capital Anstalt
|
3,406,667
|
3,406,667
|
*
|
Nicola
Feuerstein
|
The
Rosalinde and Arthur Gilbert Foundation
|
4,639,828
|
4,639,828
|
2,360,565
|
Martin
H. Blank
|
Hewlett
Fund LP
|
1,341,905
|
1,341,905
|
*
|
Martin
Chopp
|
Clearview
Bio LLC
|
1,277,500
|
1,277,500
|
*
|
Tisno
Onggara
|
Brio
Capital Master Fund, Ltd
|
1,008,810
|
1,008,810
|
*
|
Shaye
Hirsch
|
Jeffrey
Bronfman Revocable Living Trust
|
851,950
|
851,950
|
*
|
Jeffrey
Bronfman
|
Robert
H. Lipp Separate Property Trust
|
938,643
|
938,643
|
*
|
Robert
H. Lipp
|
The
RSZ Trust
|
1,778,798
|
1,778,798
|
*
|
Richard
Ziman
|
Diane
S. Lipp Separate Property Trust
|
173,656
|
173,656
|
*
|
Diane
S. Lipp
|
Lipp
Irrevocable Trust
|
173,656
|
173,656
|
*
|
Diane
S. Lipp
|
Martin
H. Blank and Linda M. Blank Rev Trust
|
135,548
|
135,548
|
*
|
Martin
H. Blank
|
The
Runnels Family Trust DTD 1-11-2000
|
1,296,429
|
1,296,429
|
*
|
G.
Tyler Runnels
|
District
2 Capital Fund LP
|
1,294,524
|
1,294,524
|
*
|
Eric
J. Schlanger
|
Michael
Breen
|
259,286
|
259,286
|
*
|
|
Greg
Suess
|
259,286
|
259,286
|
*
|
|
Jeff
Bronfman Revocable Living Trust
|
505,381
|
505,381
|
*
|
Jeffrey
Bronfman
|
Contreras
Family Trust
|
314,286
|
314,286
|
*
|
|
*It is unknown to the Company
whether the Selling Stockholder holds shares other than those being
registered.
PLAN OF DISTRIBUTION
We are registering 40,216,064 shares of our common stock for
possible sale by the selling stockholders.
We will not receive any of the proceeds from the sale by the
selling stockholders of the shares of common stock. We will bear
all fees and expenses incident to our obligation to register the
shares of common stock.
The selling stockholders may sell all or a portion of the shares of
common stock beneficially owned by them and offered hereby from
time to time directly or through one or more underwriters,
broker-dealers or agents. If the shares of common stock are sold
through underwriters or broker-dealers, the selling stockholders
will be responsible for underwriting discounts or commissions or
agent’s commissions. The shares of common stock may be sold
in one or more transactions at fixed prices, at prevailing market
prices at the time of the sale, at varying prices determined at the
time of sale, or at negotiated prices. These sales may be effected
in transactions, which may involve crosses or block
transactions,
●
on
any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of
sale;
●
in
the over-the-counter market;
●
in
transactions otherwise than on these exchanges or systems or in the
over-the- counter market;
●
through
the writing of options, whether such options are listed on an
options exchange or otherwise;
●
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
●
block
trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
●
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its account;
●
an
exchange distribution in accordance with the rules of the
applicable exchange;
●
privately
negotiated transactions;
●
sales
pursuant to Rule 144;
●
broker-dealers
may agree with the selling security holders to sell a specified
number of such shares at a stipulated price per share;
●
a
combination of any such methods of sale; and
●
any
other method permitted pursuant to applicable law.
If the selling stockholders effect such transactions by selling
shares of common stock to or through underwriters, broker-dealers
or agents, such underwriters, broker-dealers or agents may receive
commissions in the form of discounts, concessions or commissions
from the selling stockholders or commissions from purchasers of the
shares of common stock for whom they may act as agent or to whom
they may sell as principal (which discounts, concessions or
commissions as to particular underwriters, broker-dealers or agents
may be in excess of those customary in the types of transactions
involved). In connection with sales of the shares of common stock
or otherwise, the selling stockholders may enter into hedging
transactions with broker-dealers, which may in turn engage in short
sales of the shares of common stock in the course of hedging in
positions they assume. The selling stockholders may also sell
shares of common stock short and deliver shares of common stock
covered by this prospectus to close out short positions and to
return borrowed shares in connection with such short sales. The
selling stockholders may also loan or pledge shares of common stock
to broker-dealers that in turn may sell such shares.
The selling stockholders may pledge or grant a security interest in
some or all of the senior convertible notes, warrants or shares of
common stock owned by them and, if they default in the performance
of their secured obligations, the pledgees or secured parties may
offer and sell the shares of common stock from time to time
pursuant to this prospectus or any amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the
Securities Act of 1933, as amended, amending, if necessary, the
list of selling stockholders to include the pledgee, transferee or
other successors in interest as selling stockholders under this
prospectus. The selling stockholders also may transfer and donate
the shares of common stock in other circumstances in which case the
transferees, donees, pledgees or other successors in interest will
be the selling beneficial owners for purposes of this
prospectus.
The selling stockholders and any broker-dealer participating in the
distribution of the shares of common stock may be deemed to be
“underwriters” within the meaning of the Securities
Act, and any commission paid, or any discounts or concessions
allowed to, any such broker-dealer may be deemed to be underwriting
commissions or discounts under the Securities Act. At the time a
particular offering of the shares of common stock is made, a
prospectus supplement, if required, willbe distributed which will
set forth the aggregate amount of shares of common stock being
offered and the terms of the offering, including the name or names
of any broker-dealers or agents, any discounts, commissions and
other terms constituting compensation from the selling stockholders
and any discounts, commissions or concessions allowed or reallowed
or paid to broker-dealers.
Under the securities laws of some states, the shares of common
stock may be sold in such states only through registered or
licensed brokers or dealers. In addition, in some states the shares
of common stock may not be sold unless such shares have been
registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied
with.
There can be no assurance that any selling stockholder will sell
any or all of the shares of common stock registered pursuant to the
registration statement, of which this prospectus forms a
part.
The selling stockholders and any other person participating in such
distribution will be subject to applicable provisions of the
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder, including, without limitation, Regulation M
of the Exchange Act, which may limit the timing ofpurchases and
sales of any of the shares of common stock by the selling
stockholders and any other participating person. Regulation M may
also restrict the ability of any person engaged in the distribution
of the shares of common stock to engage in market-making activities
with respect to the shares of common stock. All of the foregoing
may affect the marketability of the shares of common stock and the
ability of any person or entity to engage in market-making
activities with respect to the shares of common stock.
We will pay all expenses of the registration of the shares of
common stock pursuant to the registration rights agreement,
including, without limitation, Securities and Exchange Commission
filing fees and expenses of compliance with state securities or
“blue sky” laws; provided, however, that a selling
stockholder will pay all underwriting discounts and selling
commissions, if any. We will indemnify the selling stockholders
against liabilities, including some liabilities under the
Securities Act, in accordance with the registration rights
agreements, or the selling stockholders will be entitled to
contribution. We may be indemnified by the selling stockholders
against civil liabilities, including liabilities under the
Securities Act, that may arise from any written information
furnished to us by the selling stockholder specifically for use in
this prospectus, in accordance with the related registration rights
agreement, or we may be entitled to contribution.
Once sold under the registration statement, of which this
prospectus forms a part, the shares of common stock will be freely
tradable in the hands of persons other than our
affiliates.
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock, together with any
additional information we include in any applicable prospectus
supplement or any related free writing prospectus, summarizes the
material terms and provisions of our common stock. For the complete
terms of our common stock, please refer to our amended andrestated
certificate of incorporation, the and our amended and restated
bylaws that are incorporated by reference into the registration
statement of which this prospectus is a part or may be incorporated
by reference in this prospectus or any applicable prospectus
supplement. The terms of these securities may also be affected by
Delaware General Corporation Law. The summary below and that
contained in any applicable prospectus supplement or any related
free writing prospectus are qualified in their entirety by
reference to our amended and restated certificate of incorporation
and our amended and restated bylaws.
General
As of the date of this Prospectus, our authorized capital stock
consists of 750,000,000 shares of common stock, par value $0.001
per share, and 15,000,000 shares of preferred stock, par value
$0.001 per share. As of June 15, 2019, there were approximately
51.3 million shares of our common stock issued and
outstanding.
Common Stock
Holders of our common stock are entitled to one vote for each share
of common stock held of record for the election of directors and on
all matters submitted to a vote of stockholders. Holders of our
common stock are entitled to receive dividends ratably, if any, as
may be declared by our board of directors out of legally available
funds, subject to any preferential dividend rights of any preferred
stock then outstanding. In the event of our dissolution,
liquidation or winding up, holders of our common stock are entitled
to share ratably in our net assets legally available after the
payment of all of our debts and other liabilities, subject to the
liquidation preferences of any preferred stock then outstanding.
Holders of our common stock have no preemptive, subscription,
redemption or conversion rights. The rights, preferences and
privileges of holders of common stock are subject to, and may be
adversely affected by, the rights of the holders of shares of any
series of preferred stock that we may designate and issue in the
future. All outstanding shares of our common stock are fully paid
and nonassessable. Except as described below in
“Anti-Takeover Provisions Under Our Charter and Bylaws and
Delaware Law,” a majority vote of common stockholders is
generally required to take action under our amended and restated
certificate of incorporation and amended and restated
bylaws.
Anti-Takeover Provisions Under Our Charter and Bylaws and Delaware
Law
Certain provisions of Delaware law, our amended and restated
certificate of incorporation and our bylaws contain provisions that
could have the effect of delaying, deferring or discouraging
another party from acquiring control of us. These provisions, which
are summarized below, may have the effect of discouraging coercive
takeover practices and inadequate takeover bids. These provisions
are also designed, in part, to encourage persons seeking to acquire
control of us to first negotiate with our board of directors. We
believe that the benefits of increased protection of our potential
ability to negotiate with an unfriendly or unsolicited acquirer
outweigh the disadvantages of discouraging a proposal to acquire us
because negotiation of these proposals could result in an
improvement of their terms.
Amended and Restated Certificate of Incorporation
Undesignated Preferred Stock.
Our board of directors has the ability to issue preferred stock
with voting or other rights or preferences that could impede the
success of any attempt to change control of us. These and other
provisions may have the effect of deferring hostile takeovers or
delaying changes in control or management of our
company.
Special Meetings of Stockholders. Our bylaws provide that special meetings of our
stockholders may be called only by our chairman of the board, our
president or our board of directors, thus prohibiting a stockholder
from calling a special meeting. This provision might delay the
ability of our stockholders to force consideration of a proposal or
for stockholders controlling a majority of our capital stock to
take any action, including the removal of
directors.
Board Vacancies Filled Only by Majority of
Directors. Vacancies and newly
created seats on our board may be filled only by a majority of the
directors then in office. Only our board of directors may determine
the number of directors on our board. The inability of stockholders
to determine the number of directors or to fill vacancies or newly
created seats on our board of directors makes it more difficult to
change the composition of our board of directors, but these
provisions promote a continuity of existing
management.
No Cumulative Voting. The
Delaware General Corporation Law, or DGCL, provides that
stockholders are not entitled to the right to cumulate votes in the
election of directors unless our amended and restated certificate
of incorporation provides otherwise. Our amended and restated
certificate of incorporation and bylaws do not expressly provide
for cumulative voting.
Directors Removed Only by Special Meeting of
Stockholders. A director can be
removed only by the affirmative vote of a majority of the votes of
the issued and outstanding stock entitled to vote for the election
of directors of the corporation given at a special meeting of the
stockholders called and held for this purpose.
Amendment of Charter Provisions. In order to amend certain of the above
provisions in our amended and restated certificate of incorporation
and our bylaws, the board of directors is expressly authorized to
adopt, alter or repeal the bylaws, subject to the rights of the
stockholders entitled to vote. Stockholders can vote at any
stockholder meeting and repeal, alter, or amend the bylaws by the
affirmative vote of a majority of the stockholders entitled to vote
in such meeting.
Delaware Anti-takeover Statute
We are subject to Section 203 of the DGCL. In general,
Section 203 prohibits a publicly held Delaware corporation
from engaging in a “business combination” with an
“interested stockholder” for a period of three years
after the date of the transaction in which the person became an
interest stockholder, unless the business combination is approved
in a prescribed manner. A “business combination”
includes mergers, asset sales and other transactions in which the
interested stockholder receives or could receive a financial
benefit on other than a pro rata basis with other stockholders. An
“interested stockholder” is a person who, together with
affiliates and associates, owns, or within three years did own, 15%
or more of the corporation’s outstanding voting stock. This
provision has an anti-takeover effect with respect to transactions
not approved in advance by our board of directors, including
discouraging takeover attempts that might result in a premium over
the market price for the shares of our market price. With approval
of our stockholders, we could amend our amended and restated
certificate of incorporation in the future to avoid the
restrictions imposed by this anti-takeover law.
The provisions of Delaware law and our amended and restated
certificate of incorporation could have the effect of discouraging
others from attempting hostile takeovers and, as a consequence,
they may also inhibit temporary fluctuations in the market price of
our common stock that often result from actual or rumored hostile
takeover attempts. These provisions may also have the effect of
preventing changes in our management. It is possible that these
provisions could make it more difficult to accomplish transactions
that stockholders may otherwise deem to be in their best
interests.
Transfer Agent and Registrar
Our transfer agent and registrar for our capital stock is
ComputerShare. The transfer agent’s address is 350 Indiana
Street, Golden, Colorado 80401, and its telephone number is (303)
262-0600.
Listing
Our common stock is listed on the OTCQB under the symbol
“GTBP.” The last reported sale price of our common
stock on the OTCQB on June 14, 2019, was $0.29 per share. Our
common stock is also quoted on several European-based exchanges
including Berlin (GTBP.BE), Frankfurt (GTBP.DE), the Euronext
(GTBP.NX) and Paris (GTBP.PA).
LEGAL MATTERS
Certain legal matters in connection with this offering will be
passed upon for us by Gary R. Henrie, Attorney at Law, Nauvoo,
Illinois. These legal matters include that shares of common stock
to be sold by the Selling Shareholders are validly issued, fully
paid and non-assessable. Mr. Henrie's address is P.O. Box 107, 315
Kimball's Garden Circle, Nauvoo, IL 62354. Mr. Henrie is licensed
to practice law in the states of Nevada and Utah.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or
persons controlling the registrant pursuant to the foregoing
provisions, the registrant has been informed that in the opinion of
the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore
unenforceable.
EXPERTS
The consolidated financial statements, and the related financial
statement schedule, incorporated in this Prospectus by reference to
our Annual Report on Form 10-K have been audited by Seligson &
Giannattasio, LLP, an independent registered public accounting
firm, as stated in their report, which is incorporated herein by
reference. Such financial statements and financial statement
schedule have been so incorporated in reliance upon the report of
such firm given upon their authority as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 under the
Securities Act with the Securities and Exchange Commission with
respect to the sale or resale of an aggregate of 40,216,064 shares
of common stock. This prospectus was filed as a part of that
registration statement but does not contain all of the information
contained in the registration statement and exhibits. Reference is
thus made to the omitted information. Statements made in this
prospectus are summaries of the material terms of contracts,
agreements and documents and are not necessarily complete; however,
all information we considered material has been disclosed.
Reference is made to each exhibit for a more complete description
of the matters involved and these statements are qualified in their
entirety by the reference. You may inspect the registration
statement, exhibits and schedules filed with the Securities and
Exchange Commission at the Securities and Exchange Commission's
principle office in Washington, D.C. Copies of all or any part of
the registration statement may be obtained from the Public
Reference Section of the Securities and Exchange Commission, 100 F.
Street, N.E., Washington, D.C. 20549. The Securities and Exchange
Commission also maintains a web site (http://www.sec.gov) that
contains this filed registration statement, reports, proxy
statements and information regarding us that we have filed
electronically with the Commission. For more information pertaining
to our company and the sale or resale of an aggregate of 40,216,064
shares of common stock, reference is made to the registration
statement.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2019 AND DECEMBER
31, 2019 (Unaudited)
|
F-1
|
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS - THREE MONTHS ENDED MARCH
31, 2019 AND 2018 (Unaudited)
|
F-2
|
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS - SIX MONTHS ENDED
SEPTEMBER 30, 2018 AND 2017 (Unaudited)
|
F-3
|
|
|
NOTES TO FINANCIAL STATEMENTS (Unaudited)
|
F-4
|
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
|
F-14
|
|
|
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2018 AND DECEMBER
31, 2017
|
F-15
|
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS - YEARS ENDED DECEMBER 31,
2018 AND 2017
|
F-16
|
|
|
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY/(DEFICIT) - YEARS
ENDED DECEMBER 31, 2018 AND 2017
|
F-17
|
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS - YEARS ENDED DECEMBER 31,
2018 AND 2017
|
F-18
|
|
|
NOTES TO FINANCIAL STATEMENTS
|
F-19
|
GT Biopharma, Inc. and Subsidiaries
|
as of March 31,2019 and December 31, 2018
|
Consolidated Balance Sheets
|
(in Thousands, Except Par Value and Share Data)
|
|
|
|
|
|
|
ASSETS
|
|
|
Current
Assets:
|
|
|
Cash
and cash equivalents
|
$51
|
$60
|
Prepaid
expenses
|
27
|
30
|
Total
Current Assets
|
78
|
90
|
|
|
|
Intangible
assets
|
25,262
|
25,262
|
Deposits
|
12
|
12
|
Operating
lease right-to-use asset
|
153
|
-
|
Fixed
assets, net
|
34
|
35
|
Total
Other Assets
|
25,461
|
25,309
|
TOTAL
ASSETS
|
$25,539
|
$25,399
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
Current
Liabilities:
|
|
|
Accounts
payable
|
$1,898
|
$1,762
|
Accrued
expenses
|
2,136
|
1,455
|
Deferred
rent
|
-
|
8
|
Operating
lease liability
|
161
|
-
|
Note
payable to related party
|
-
|
100
|
Line
of credit
|
31
|
31
|
Convertible
debentures
|
11,297
|
10,673
|
Total
Current Liabilities
|
15,523
|
14,029
|
|
|
|
Total
liabilities
|
15,523
|
14,029
|
|
|
|
Stockholders’
Equity:
|
|
|
Convertible
preferred stock - $0.001 par value; 15,000,000 shares
authorized:
|
|
|
Series
C - 96,230 and 96,230 shares issued and outstanding at March 31,
2019 and December 31, 2018, respectively
|
1
|
1
|
Series
J – 1,163,548 shares issued and outstanding at March 31, 2019
and December 31, 2018, respectively
|
1
|
1
|
Common stock - $0.001 par value; 750,000,000
shares authorized; and 51,374,417 and 50,650,478 shares issued and outstanding at
March 31, 2019 and December 31, 2018,
respectively
|
51
|
51
|
Additional
paid-in capital
|
543,327
|
540,171
|
Accumulated
deficit
|
(533,195)
|
(528,685)
|
Noncontrolling
interest
|
(169)
|
(169)
|
Total
Stockholders’ Equity
|
10,016
|
11,370
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$25,539
|
$25,399
|
|
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
|
GT Biopharma, Inc. and
Subsidiaries
|
|
|
(in Thousands, Except per Share Data)
|
|
|
|
|
|
Revenue:
|
|
|
License
revenues
|
$-
|
$-
|
TOTAL
REVENUE
|
-
|
-
|
Cost
of License Revenue
|
-
|
-
|
Gross
profit
|
-
|
-
|
Operating
Expenses:
|
|
|
Research
and development
|
834
|
3,473
|
Selling,
general and administrative
|
3,222
|
3,687
|
Total
operating expenses
|
4,056
|
7,160
|
Loss
from Operations
|
(4,056)
|
(7,160)
|
Other
income (expense)
|
|
|
Interest
expense/income
|
(454)
|
(2,931)
|
Total
Other Income (Expense)
|
(454)
|
(2,931)
|
Loss
before minority interest and provision for income
taxes
|
(4,510)
|
(10,091)
|
Less:
Loss attributable to the noncontrolling interests
|
-
|
-
|
Loss
before provision for income taxes
|
(4,510)
|
(10,091)
|
Provision
for income taxes
|
-
|
-
|
Net
loss
|
(4,510)
|
(10,091)
|
Loss
per share
|
|
|
Basic
|
$(0.09)
|
$(0.20)
|
Diluted
|
$(0.09)
|
$(0.20)
|
|
|
|
Weighted
Average Shares Outstanding – basic and diluted
|
|
|
Basic
|
51,092,886
|
50,117,977
|
Diluted
|
51,092,886
|
50,117,977
|
|
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
|
GT Biopharma, Inc. and
Subsidiaries
|
Consolidated Statements of Cash Flows
|
For the Three Months Ended March 31, 2019 and 2018
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
Net
loss
|
$(4,510)
|
$(10,091)
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
Depreciation
|
1
|
1
|
Stock
compensation expense for options and warrants issued to
employees and non-employees
|
2,565
|
3,060
|
Amortization
of debt discounts
|
163
|
2,665
|
Non-cash
interest expense
|
-
|
266
|
Amortization
of loan costs
|
-
|
407
|
Changes
in operating assets and liabilities:
|
|
|
Other
assets
|
3
|
-
|
Accounts
payable and accrued liabilities
|
817
|
(534)
|
Net
cash used in operating activities
|
(961)
|
(4,226)
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
Acquisition
of fixed assets
|
-
|
(2)
|
Net
cash used by investing activities
|
0
|
(2)
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
Proceeds
from notes payable
|
1,052
|
7,055
|
Loan
costs
|
-
|
(533)
|
Repayment
of note payable
|
(100)
|
-
|
Net
cash provided by financing activities
|
952
|
6,522
|
Minority
interest
|
-
|
-
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(9)
|
2,294
|
CASH
AND CASH EQUIVALENTS - Beginning of period
|
60
|
576
|
CASH
AND CASH EQUIVALENTS - End of period
|
$51
|
$2,870
|
|
|
|
Supplemental
disclosures:
|
|
|
Interest
paid
|
$-
|
$-
|
Income
taxes paid
|
$-
|
$-
|
|
|
|
Supplemental
disclosures:
|
|
|
Issuance
of common stock upon conversion of convertible notes
|
$430
|
$-
|
Issuance
of common stock upon conversion of accrued interest
|
$4
|
$-
|
|
|
|
The
accompanying condensed notes are an integral part of these
consolidated financial statements.
|
GT BIOPHARMA, INC. AND
SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019
(UNAUDITED)
1.
The Company and Summary of Significant Accounting
Policies
Business
In 1965, the
corporate predecessor of GT Biopharma, Diagnostic Data, Inc. was
incorporated in the State of California. Diagnostic Data changed
its incorporation to the State of Delaware in 1972. and changed its
name to DDI Pharmaceuticals, Inc. in 1985. In 1994, DDI
Pharmaceuticals merged with International BioClinical, Inc. and
Bioxytech S.A. and changed its name to OXIS International, Inc. In
July 2017, the Company changed its name to GT Biopharma,
Inc.
We are a clinical
stage biopharmaceutical company focused on the development and
commercialization of novel immuno-oncology products based off our
proprietary Natural Killer (NK) cell engager (Tri-specific Killer
Engager (TriKE) & Tetra-specific Killer Engager (TetraKE)) and
bi-specific Antibody Drug Conjugate (bispecific-ADC) technology
platforms. Our TriKE and TetraKE platforms generate proprietary
moieties designed to harness and enhance the cancer killing
abilities of a patient’s own natural killer, or NK, cells.
Once bound to a NK cell, our moieties are designed to stimulate the
NK cell and precisely direct it to one or more
specifically-targeted proteins (tumor antigens) expressed on a
specific type of cancer, ultimately resulting in the cancer
cell’s death. TriKEs and TetraKEs are made up of recombinant
fusion proteins, can be designed to target tumor antigens on
hematologic malignancies, sarcomas or solid tumors and do not
require patient-specific customization. They are designed to be
dosed in an outpatient setting and are expected to have reasonably
low cost of goods. Our bispecific-ADC platform can generate product
candidates that are ligand-directed single-chain fusion proteins
that simultaneously target two tumor antigens. We believe our
bispecific-ADC moieties represents the next generation of
ADCs.
Going Concern
The Company’s
current operations have focused on business planning, raising
capital, establishing an intellectual property portfolio, hiring,
and conducting preclinical studies and clinical trials. The Company
does not have any product candidates approved for sale and has not
generated any revenue from product sales. The Company has sustained
operating losses since inception and expects such losses to
continue over the foreseeable future.
The financial
statements of the Company have been prepared on a
goingconcern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of
business. Accordingly, the financial statements do not include any
adjustments that might be necessary should the Company be unable to
continue in existence.
The Company has
incurred substantial losses and negative cash flows from operations
since its inception and has an accumulated deficit of $533.3
million and cash of $51 thousand as of March 31, 2019. The Company
anticipates incurring additional losses until such time, if ever,
that it can generate significant sales of its products currently in
development. Substantial additional financing will be needed by the
Company to fund its operations and to commercially develop its
product candidates. These factors raise substantial doubt about the
Company’s ability to continue as a going
concern.
GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019
(UNAUDITED)
Management is
currently evaluating different strategies to obtain the required
funding for future operations. These strategies may include but are
not limited to: public offerings of equity and/or debt securities,
payments from potential strategic research and development, and
licensing and/or marketing arrangements with pharmaceutical
companies. Management has also implemented cost saving efforts,
including reduction in executive salaries and reduced travel.
Management believes that these ongoing and planned financing
endeavors, if successful, will provide adequate financial resources
to continue as a going concern for at least the next six months
from the date the financial statements are issued. however, there
can be no assurance in this regard. If the Company is unable to
secure adequate additional funding, its business, operating
results, financial condition and cash flows may be materially and
adversely affected.
Use of Estimates
The
financial statements and notes are representations of the Company's
management, which is responsible for their integrity and
objectivity. These accounting policies conform to accounting
principles generally accepted in the United States of America, and
have been consistently applied in the preparation of the financial
statements. The preparation of financial statements requires
management to make estimates and assumptions that affect the
reported amounts of assets, liabilities revenues and expenses and
disclosures of contingent assets and liabilities at the date of the
financial statements. Actual results could differ from those
estimates.
Basis of Consolidation and Comprehensive Income
The
accompanying consolidated financial statements include the accounts
of GT Biopharma, Inc. and its subsidiaries. All intercompany
balances and transactions have been eliminated. The Company's
financial statements are prepared using the accrual method of
accounting.
Basis of Presentation
The
accompanying unaudited interim condensed consolidated financial
statements have been prepared in accordance with accounting
principles generally accepted in the U.S. (“U.S. GAAP”)
and the rules and regulations of the U.S. Securities and Exchange
Commission (“SEC”). Certain information and disclosures
required by U.S. GAAP for complete consolidated financial
statements have been condensed or omitted herein. The interim
condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and
notes thereto included in the Company's Form 10-K for the year
ended December 31, 2018. The unaudited interim condensed
consolidated financial information presented herein reflects all
normal adjustments that are, in the opinion of management,
necessary for a fair statement of the financial position, results
of operations and cash flows for the periods presented. The Company
is responsible for the unaudited interim consolidated financial
statements included in this report. The results of operations of
any interim period are not necessarily indicative of the results
for the full year.
Cash and Cash Equivalents
The
Company considers all highly liquid investments with original
maturities of three months or less to be cash
equivalents.
Concentrations of Credit Risk
The
Company's cash and cash equivalents, marketable securities and
accounts receivable are monitored for exposure to concentrations of
credit risk. The Company maintains substantially all of its cash
balances in a limited number of financial institutions. The
balances are each insured by the Federal Deposit Insurance
Corporation up to $250,000. The Company had no balances in excess
of this limit at March 31, 2019.
GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019
(UNAUDITED)
Stock Based Compensation to Employees
The Company
accounts for its stock-based compensation for employees in
accordance with Accounting Standards Codification
(“ASC”) 718. The Company recognizes in the
statement of operations the grant-date fair value of stock options
and other equity-based compensation issued to employees and
non-employees over the related vesting period.
The Company granted
no stock options during the quarters ended March 31, 2019 and 2018,
respectively
Long-Lived Assets
Our long-lived
assets include property, plant and equipment, capitalized costs of
filing patent applications and other indefinite lived intangible
assets. We evaluate our long-lived assets for impairment, other
than indefinite lived intangible assets, in accordance with ASC
360, whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. Estimates of
future cash flows and timing of events for evaluating long-lived
assets for impairment are based upon management’s judgment.
If any of our intangible or long-lived assets are considered to be
impaired, the amount of impairment to be recognized is the excess
of the carrying amount of the assets over its fair
value.
Applicable
long-lived assets are amortized or depreciated over the shorter of
their estimated useful lives, the estimated period that the assets
will generate revenue, or the statutory or contractual term in the
case of patents. Estimates of useful lives and periods of expected
revenue generation are reviewed periodically for appropriateness
and are based upon management’s judgment.
Impairment of Long-Lived Assets
The Company's long-lived assets currently consist
of indefinite lived intangible assets associated with
IPR&D (“In-Process Research & Development”)
projects and related capitalized patents acquired in the
acquisition of Georgetown Translational Pharmaceuticals, Inc. as
described in Note 2 below.
Intangible assets associated with IPR&D projects
are not amortized until approval by the Food and Drug
Administration (FDA) is obtained in a major market subject to
certain specified conditions and management judgment. The useful
life of an amortizing asset generally is determined by identifying
the period in which substantially all of the cash flows are
expected to be generated.
The Company
evaluates indefinite lived intangible assets for impairment at
least annually and whenever impairment indicators are present in
accordance with ASC 350. When necessary, the Company records an
impairment loss for the amount by which the fair value is less than
the carrying value of these assets. The fair value of intangible assets other than
goodwill is typically determined using the “relief from
royalty method”, specifically the discounted cash flow
method utilizing Level 3 fair value
inputs. Some of the more significant estimates and
assumptions inherent in this approach include: the amount and
timing of the projected net cash flows, which includes the expected
impact of competitive, legal and/or regulatory forces on the
projections and the impact of technological risk associated with
IPR&D assets, as well as the selection of a long-term growth
rate; the discount rate, which seeks to reflect the various risks
inherent in the projected cash flows; and the tax rate, which seeks
to incorporate the geographic diversity of the projected cash
flows.
The Company
performs impairment testing for all other long-lived assets
whenever impairment indicators are present. When necessary, the
Company calculates the undiscounted value of the projected cash
flows associated with the asset, or asset group, and compares this
estimated amount to the carrying amount. If the carrying amount is
found to be greater, we record an impairment loss for the excess of
book value over fair value.
GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019
(UNAUDITED)
Income Taxes
The
Company accounts for income taxes using the asset and liability
approach, whereby deferred income tax assets and liabilities are
recognized for the estimated future tax effects, based on current
enacted tax laws, of temporary differences between financial and
tax reporting for current and prior periods. Deferred tax assets
are reduced, if necessary, by a valuation allowance if the
corresponding future tax benefits may not be realized.
Net Income (Loss) per Share
Basic net income (loss) per share is computed by
dividing the net loss for the period by the weighted average number
of common shares outstanding during the period. Diluted net income
(loss) per share is computed by dividing the net loss for the
period by the weighted average number of common shares outstanding
during the period, plus the potential dilutive effect of common
shares issuable upon exercise or conversion of outstanding stock
options and warrants during the period. The weighted average number
of potentially dilutive common shares excluded from the calculation
of net income (loss) per share totaled in 22,731,781 and
4,553,668 as of March 31, 2019 and 2018, respectively.
Patents
Acquired
patents are capitalized at their acquisition cost or fair value.
The legal costs, patent registration fees and models and drawings
required for filing patent applications are capitalized if they
relate to commercially viable technologies. Commercially viable
technologies are those technologies that are projected to generate
future positive cash flows in the near term. Legal costs associated
with patent applications that are not determined to be commercially
viable are expensed as incurred. All research and development costs
incurred in developing the patentable idea are expensed as
incurred. Legal fees from the costs incurred in successful defense
to the extent of an evident increase in the value of the patents
are capitalized.
Capitalized
cost for pending patents are amortized on a straight-line basis
over the remaining twenty year legal life of each patent after the
costs have been incurred. Once each patent is issued, capitalized
costs are amortized on a straight-line basis over the shorter of
the patent's remaining statutory life, estimated economic life or
ten years.
Fixed Assets
Fixed
assets is stated at cost. Depreciation is computed on a
straight-line basis over the estimated useful lives of the assets,
which are 3 to 10 years for machinery and equipment and the
shorter of the lease term or estimated economic life for leasehold
improvements.
Fair Value
The
carrying amounts reported in the balance sheets for receivables and
current liabilities each qualify as financial instruments and are a
reasonable estimate of fair value because of the short period of
time between the origination of such instruments and their expected
realization and their current market rate of interest. The
three levels are defined as follows:
●
Level 1 inputs to
the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active markets. The
Company’s Level 1 assets include cash equivalents, primarily
institutional money market funds, whose carrying value represents
fair value because of their short-term maturities of the
investments held by these funds.
●
Level 2 inputs to
the valuation methodology include quoted prices for similar assets
and liabilities in active markets, and inputs that are observable
for the asset or liability, either directly or indirectly, for
substantially the full term of the financial instrument. The
Company’s Level 2 liabilities consist of liabilities arising
from the issuance of convertible securities and in accordance with
ASC 815-40: a warrant liability for detachable warrants, as well as
an accrued derivative liability for the beneficial conversion
feature. These liabilities are remeasured each reporting period.
Fair value is determined using the Black-Scholes valuation model
based on observable market inputs, such as share price data and a
discount rate consistent with that of a government-issued security
of a similar maturity. There were not such liabilities at March 31,
2019.
●
Level 3 inputs to
the valuation methodology are unobservable and significant to the
fair value measurement.
GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019
(UNAUDITED)
Research and Development
Research
and development costs are expensed as incurred and reported as
research and development expense. Research and development costs
totaling $.8 million and $3.5 million for the years ended March 31,
2019 and 2018, respectively.
Revenue Recognition
License Revenue
License
arrangements may consist of non-refundable upfront license fees,
exclusive licensed rights to patented or patent pending technology,
and various performance or sales milestones and future product
royalty payments. Some of these arrangements are multiple element
arrangements.
Non-refundable,
up-front fees that are not contingent on any future performance by
us, and require no consequential continuing involvement on our
part, are recognized as revenue when the license term commences and
the licensed data, technology and/or compound is
delivered. We defer recognition of non-refundable
upfront fees if we have continuing performance obligations without
which the technology, right, product or service conveyed in
conjunction with the non-refundable fee has no utility to the
licensee that is separate and independent of our performance under
the other elements of the arrangement. In addition, if we have
continuing involvement through research and development services
that are required because our know-how and expertise related to the
technology is proprietary to us, or can only be performed by us,
then such up-front fees are deferred and recognized over the period
of continuing involvement.
Payments related to
substantive, performance-based milestones in a research and
development arrangement are recognized as revenue upon the
achievement of the milestones as specified in the underlying
agreements when they represent the culmination of the earnings
process. As of March 31, 2019, the Company has not generated any
licensing revenue.
Recent Accounting
Pronouncements
In February 2016,
the Financial Accounting Standards Board (“FASB”)
issued new guidance related to accounting for leases, Accounting
Standards codification Topic 842 (ASC 842). We adopted the new
guidance on January 1, 2019 using the modified retrospective
approach and the optional transition method. Under this adoption
method, comparative prior periods were not adjusted and continue to
be reported with our historical accounting policy. The primary
impact of adopting this standard was the recognition of $173
thousand in operating lease liabilities and $165 thousand in right
of use assets.
On
September 1, 2017, the Company entered into an Agreement and Plan
of Merger whereby it acquired 100% of the issued and outstanding
capital stock of Georgetown Translational Pharmaceuticals, Inc.
(GTP). In exchange for the ownership of GTP, the Company issued a
total of 16,927,878 shares of its common stock, having a share
price of $15.00 on the date of the transaction, to the three prior
owners of GTP which represented 33% of the issued and outstanding
capital stock of the Company on a fully diluted basis. $253.8
million of the value of shares issued was allocated to intangible
assets consisting of a portfolio of three CNS development
candidates, which are classified as IPR&D.
As of September 30, 2018, the Company recorded an
intangible asset impairment charge of $228.5 million related to the
portfolio of CNS IPR&D assets within Operating Expenses, which
represents the excess carrying value compared to fair value. The
impairment charge was the result of both internal and external
factors. In the 3rd
quarter of 2018, the Company
experienced changes in key senior management, led by the
appointment of a new CEO with extensive experience in oncology drug
development. These changes resulted in the prioritization of
immuno-oncology development candidates relative to CNS development
candidates. In conjunction with these strategic changes, limited
internal resources have delayed the development of the CNS
IPR&D assets. The limited resources, changes in senior
leadership, and favorable market conditions for immuno-oncology
development candidates have resulted in the Company choosing to
focus on development of its immuno-oncology portfolio. In light of
this shift in market strategy, the Company performed a commercial
assessment and a valuation of the CNS IPR&D assets, both to
assess fair value and support potential future licensing efforts.
The valuation indicated an excess carrying value over the fair
value of these assets, resulting in the impairment charge noted
above.
GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019
(UNAUDITED)
The fair value of the CNS IPR&D assets was
determined using the discounted cash flow method
which utilized significant estimates
and assumptions surrounding the amount and timing of the
projected net cash flows, which includes the probability of commercialization, the assumption
that the assets would be out-licensed to third-parties for
continued development for upfront licensing fees and downstream
royalty payments based on net sales, and expected impact of
competitive, legal and/or regulatory forces on the projections, as
well as the selection of a long-term growth rate; the discount
rate, which seeks to reflect the various risks inherent in the
projected cash flows; and the tax rate, which seeks to incorporate
the geographic diversity of the projected cash flows.
Convertible Notes
On
January 22, 2018, the Company entered into a Securities Purchase
Agreement (“SPA”) with fourteen accredited investors
(individually, a “Buyer” and collectively, the
“Buyers”) pursuant to which the Company agreed to issue
to the Buyers senior convertible notes in an aggregate principal
amount of $7,760,510 (the “Notes”), which Notes shall
be convertible into the Company’s common stock, par value
$0.001 per share (the “Common Stock”) at a price of
$4.58 per share, and five-year warrants to purchase the
Company’s Common Stock representing the right to acquire an
aggregate of approximately 1,694,440 shares of Common Stock (the
“Warrants”).
Pursuant to the terms of SPA the Notes were subject to an original
issue discount of 10% resulting in proceeds to the Company of
$7,055,000 from the transaction.
Upon the purchase
of the Notes, the Buyers received Warrants to purchase 1,694,440 shares of Common Stock. Such
Warrants are exercisable for (5) years from the date the shares
underlying the Warrants are freely saleable. The initial Exercise
Price is $4.58. According to the terms
of the warrant agreement, the Warrants are subject to certain
adjustments depending upon the price and structure of a subsequent
financing, including a qualified financing with gross proceeds of
at least $20 million, as defined in the
agreements.
The
issuance of the Notes and Warrants were made in reliance on the
exemption provided by Section 4(a)(2) of the Securities Act of
1933, as amended (the “Securities Act”) for the offer
and sale of securities not involving a public offering, and
Regulation D promulgated under the Securities Act.
Contemporaneously
with the execution and delivery of the SPA, the Company and the
Buyers executed and delivered a Registration Rights Agreement (the
“Registration Rights Agreement”) pursuant to which the
Company has agreed to provide certain registration rights with
respect to the Registrable Securities under the 1933 Act and the
rules and regulations promulgated thereunder, and applicable state
securities laws.
Senior Convertible Debentures
On
August 2, 2018, GT Biopharma, Inc. (the “Company”)
entered into a Securities Purchase Agreement with the purchasers
identified on the signature pages thereto (individually, a
“Purchaser,” and collectively, the
“Purchasers”) pursuant to which the Company issued to
the Purchasers one year 10% Senior Convertible Debentures in an
aggregate principal amount of $5,140,000 (the
“Debentures”), which Debentures shall be convertible
into the Company’s common stock, par value $0.001 per share
(the “Common Stock”), at a price of $2 per share. The
Company used a portion of these proceeds to repay $4.4 million of
the notes issued on January 22, 2018. Additionally, the remaining
$3.3 million of the notes issued on January 22, 2018 were converted
into the Debentures at the same terms discussed above.
GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019
(UNAUDITED)
On
September 7, 2018, GT Biopharma, Inc. (the “Company”)
entered into a Securities Purchase Agreement with the purchasers
identified on the signature pages thereto (individually, a
“Purchaser,” and collectively, the
“Purchasers”) pursuant to which the Company has issued
to the Purchasers one year 10% Senior Convertible Debentures in an
aggregate principal amount of $2,050,000 (the
“Debentures”), which Debentures shall be convertible
into the Company’s common stock, par value $0.001 per share
(the “Common Stock”), at a price of $2 per
share.
On
September 24, 2018, GT Biopharma, Inc. (the “Company”)
entered into a Securities Purchase Agreement with the purchasers
identified on the signature pages thereto (individually, a
“Purchaser,” and collectively, the
“Purchasers”) pursuant to which the Company has issued
to the Purchasers one year 10% Senior Convertible Debentures in an
aggregate principal amount of $800,000 (the
“Debentures”), which Debentures shall be convertible
into the Company’s common stock, par value $0.001 per share
(the “Common Stock”), at a price of $2 per
share.
On
February 4, 2019, GT Biopharma, Inc. (the “Company”)
entered into a Securities Purchase Agreement (the “Purchase
Agreement”) with the purchasers identified on the signature
pages thereto (individually, a “Purchaser,” and
collectively, the “Purchasers”), pursuant to which the
Company issued to the Purchasers, on February 4, 2019, Secured
Convertible Notes in an aggregate principal amount of $1,352,224
(the “Notes”), consisting of gross proceeds of
$1,052,224 and settlement of existing debt of $300,000, which Notes
shall be convertible at any time after issuance into shares (the
“Conversion Shares”) of the Company’s common
stock, par value $0.001 per share (the “Common Stock”),
at a conversion price of $0.60 per share (the “Conversion
Price”).
The
Notes accrue interest at the rate of 10% per annum and mature on
August 2, 2019. Interest on the Notes is payable in cash or, at a
Purchaser’s option, in shares of Common Stock at the
Conversion Price. Upon the occurrence of an event of default,
interest accrues at 18% per annum. The Notes contain customary
default provisions, including provisions for potential
acceleration, and covenants, including negative covenants regarding
additional indebtedness and dividends. The Conversion Price is
subject to adjustment due to certain events, including stock
dividends and stock splits, and is subject to reduction in certain
circumstances if the Company issues Common Stock or Common Stock
equivalents at an effective price per share that is lower than the
Conversion Price then in effect. The Company may only prepay the
Notes with the prior written consent of the respective Purchasers
thereof.
Contemporaneously
with the execution and delivery of the Purchase Agreement, on
February 4, 2019, the Company and certain of its wholly-owned
subsidiaries entered into a Security Agreement (the “Security
Agreement”) with Alpha Capital Anstalt, as collateral agent
on behalf of the Purchasers, and with the Purchasers, pursuant to
which the Purchasers have been granted a first-priority security
interest in substantially all of the assets of the Company and such
subsidiaries securing (i) an aggregate principal amount of
$1,352,224 of Notes and (ii) an aggregate principal amount of
$9,058,962 of the Company’s 10% Senior Convertible Debentures
issued on August 2, 2018, September 7, 2018 and September 24, 2018
held by such Purchasers.
The
Purchase Agreement contains customary representations, warranties
and covenants, including covenants, subject to certain exceptions,
that the Company, until the date on which less than 10% of the
Notes are outstanding, shall not effect any Variable Rate
Transaction (as defined in the Purchase Agreement) and that, for as
long as a Purchaser holds any Notes or Conversion Shares, the
Company shall amend the terms and conditions of the Purchase
Agreement and the transactions contemplated thereby with respect to
such Purchaser to give such Purchaser the benefit of any terms or
conditions under which the Company agrees to issue or sell any
Common Stock or Common Stock equivalents that are more favorable to
an investor than the terms and conditions granted to such Purchaser
under the Purchase Agreement and the transactions contemplated
thereby.
In
addition, the Company entered into a registration rights agreement
(the “Registration Rights Agreement”) with the
Purchasers, pursuant to which the Company has agreed to file,
within 14 days after February 4, 2019, one or more registration
statements on Form S-3 (or, if Form S-3 is not then available to
the Company, such form of registration that is then available to
effect a registration for resale of the subject securities)
covering the resale of all Conversion Shares, subject to certain
penalties set forth in the Registration Rights Agreement. The Form
S-3 was filed by the Company on February 14, 2019.
GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019
(UNAUDITED)
Financing Agreement
On November 8,
2010, the Company entered into a financing arrangement with Gemini
Pharmaceuticals, Inc., a product development and manufacturing
partner of the Company, pursuant to which Gemini Pharmaceuticals
made a $250,000 strategic equity investment in the Company and
agreed to make a $750,000 purchase order line of credit facility
available to the Company. The outstanding principal of all Advances
under the Line of Credit will bear interest at the rate of interest
of prime plus 2 percent per annum. There is $31,000 due on this
credit line at March 31, 2019.
Common Stock
In
the first quarter of 2019, the Company issued 723,940 shares of
common stock upon conversion of $434,271 in principal and interest
on senior convertible notes.
Preferred Stock
On September 1, 2017, the Company authorized
2,000,000 shares of Series J Preferred Stock. Shares of
Series J Preferred Stock will have the same voting rights as shares
of common stock with each share of Series J Preferred Stock
entitled to one vote at a meeting of the shareholders of the
Corporation. Shares of Series J Preferred Stock will not be
entitled to receive any dividends, unless and until specifically
declared by our board of directors. The holders of the Series J
Preferred Stock will participate, on an as-if-converted-to-common
stock basis, in any dividends to the holders of common stock. Each
share of the Series J Preferred Stock is convertible into one share
of our common stock at any time at the option of the
holder.
On September 1, 2017
the Company issued a total of 208,224 shares of Series J
Preferred Stock in exchange for the
conversion of debt in the total amount of
$250,000.
On September 1, 2017
the Company issued a total of 700,278 shares of Series J
Preferred Stock in exchange for the
cancellation of debt in the total amount of
$840,000.
On September 1, 2017
the Company issued 5,046 shares of Series J Preferred Stock
upon the
exercise of warrants on a cashless basis.
On September 1, 2017
the Company also issued 600,000 shares of Series J Preferred
Stock to one entity as
payment for $720,000 of consulting services provided to the
Company.
In December 2017, the Company converted 350,000 Series J shares of
preferred stock into 350,000 shares of common stock.
GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019
(UNAUDITED)
5.
Stock Options and Warrants
Stock Options
The following table
summarizes stock option transactions for the quarter ended March
31, 2018:
|
|
Weighted Average
Exercise Price
|
Outstanding,
December 31, 2018
|
1,133
|
$1,320.00
|
Granted
|
-
|
-
|
Exercised
|
-
|
-
|
Expired
|
-
|
-
|
Outstanding, March
31, 2019
|
1,133
|
$1,320.00
|
Exercisable, March
31, 2019
|
1,133
|
$1,320.00
|
Common Stock Warrants
Warrant
transactions for the quarter ended March 31, 2019 are as
follows:
|
|
Weighted Average
Exercise Price
|
Outstanding at
December 31, 2018:
|
1,813,053
|
$2.00
|
Granted
|
-
|
-
|
Forfeited
|
-
|
-
|
Exercised
|
-
|
-
|
Outstanding at
March 31, 2019
|
1,813,053
|
$2.00
|
Exercisable at
March 31, 2019
|
1,813,053
|
$2.00
|
6.
Commitments and Contingencies
Leases
As described in Note 1. Nature of Operations
and Summary of Significant Accounting Policies, we adopted new lease accounting guidance
effective January 1, 2019.
We
determine if a contractual arrangement is a lease at inception. Our
lease arrangements provide the Company the right to utilize certain
specified tangible assets for a period of time in exchange for
consideration. Our leases primarily relate to building office
space. Our leases currently consist solely of operating leases.
Leases with an initial term of 12 months or less are not recorded
on the balance sheet.
We
recognize a lease liability and a right of use asset at the lease
commencement date based on the present value of the future lease
payments over the lease term discounted using our incremental
borrowing rate. Implicit interest rates within our lease
arrangements are rarely determinable. Right of use assets also
include, if applicable, prepaid lease payments and initial direct
costs, less incentives received.
We
recognize operating lease expense on a straight-line basis over the
term of the lease within selling general and administrative
expenses.
Our
leases do not contain any material residual value guarantees or
material restrictive covenants. Some of our leases include optional
renewal periods or termination provisions which we assess at
inception to determine the term of the lease, subject to
reassessment in certain circumstances.
The
following table summarizes the Company’s future
minimumpayments under operating leases as of December 31,
2018:
Year ending
December 31:
|
|
2019
|
69,000
|
2020
|
71,000
|
2021
|
61,000
|
Total minimum lease
payments
|
$201,000
|
Lease
expense for the quarters ended March 31,
2019 and 2018 was $17,000 and $24,000,
respectively.
GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019
(UNAUDITED)
Employment Agreements
On
October 18, 2018, the Company entered into a Consultant Agreement
with Anthony Cataldo. The term of the Consultant Agreement shall
remain in effect until September 30, 2019. This Agreement
supersedes the Consultant Agreement dated February 14, 2018 and
will pay Mr. Cataldo $25,000 per month during the term of the
Agreement.
On
October 19, 2018, the Company entered into an Executive Employment
Agreement with Dr. Urbanski, reflecting his current position as
Chief Executive Officer of the Company. Under the terms of this
agreement, Dr. Urbanski’s annual salary is essentially
unchanged from his previous positions. Dr. Urbanski is also
entitled to participate in the Company’s bonus plans. Under
the Executive Employment Agreement, the Company has agreed that
upon shareholder approval of a Stock Option Plan, it will recommend
to the Board that the Company grant Dr. Urbanski a Non-Qualified
stock option to purchase 2,971,102 shares of the Company’s
common stock having an exercise equal to the fair market value of
the shares on the date of the Agreement. The stock option grant
would vest according to the following schedule: (i) 1,250,000 fully
vested shares upon signing of the agreement, (ii) 1,250,000 shares
on January 1, 2019, and (iii) 471,102 shares on January 1, 2020. On
March 15, 2019, Dr, Urbanski resigned his position as Chief
Executive Officer, President and Chairman of the
Board.
Preferred
Stock
On April 4, 2019, the Company filed a Certificate of Designation
with the Office of the Secretary of State of the State of
Delaware. The Certificate of Designation designated 3,000,000
shares of preferred stock as Series J-1 Preferred Stock. A
copy of the Certificate of Designation detailing the rights and
preferences of the stock is attached hereto as Exhibit 3.1.
In the State of Delaware, the Certificate of Designation has the
effect of amending the Certificate of Incorporation by adding to
the Certificate of Incorporation the terms and conditions of the
Designation and the stock designated.
On April 19, 2019, the
Company issued a total of
2,353,548 shares of Series J-1 Preferred Stock (the "Shares") to a
total of two entities. The Shares are convertible into shares
of common stock of the Registrant at the rate of $0.60 per share.
The issuance was exempt from the registration requirements of
Section 5 of the Securities Act of 1933 pursuant to Section 4(2) of
the same Act since the issuance of the Shares did not involve any
public offering.
In addition, the Company entered into a letter
agreement with the two entities, pursuant to which the Company has
agreed to include the shares of common stock issuable upon
full conversion of the Series J-1 Preferred Stock in the next
registration statement that the Company files (the "Piggyback
Registration Statement"). The Company must file the Piggyback
Registration Statement on or before August 30, 2019.
Common Stock
In
April 2019, the Company issued 656,181 shares of common stock upon
conversion of $393,709 in principal and interest on convertible
notes.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders of GT Biopharma,
Inc.
Opinion on the Financial Statements
We have
audited the accompanying consolidated balance sheets of GT
Biopharma, Inc. and subsidiaries ,(the "Company") as of December
31, 2018 and 2017, and the related consolidated statements of
operations, stockholders’ equity and cash flows for each of
the years in the two-year period ended December 31, 2018, and the
related notes (collectively referred to as the financial
statements). In our opinion, the consolidated financial statements
present fairly, in all material respects, the consolidated
financial position of the Company and subsidiaries as of December
31, 2018 and 2017 and the consolidated results of its operations
and its consolidated cash flows for each of the years in the
two-year period ended December 31, 2018, in conformity with
accounting principles generally accepted in the United States of
America.
Basis of Opinion
These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s consolidated financial statements based on our
audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States)
(“PCAOB”) and are required to be independent with
respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due
to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an
understanding of internal control over financial reporting, but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
The
accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed
in Note 1 to the financial statements, the Company has incurred
significant recurring losses. The realization of a major portion of
its assets is dependent upon its ability to meet its future
financing needs and the success of its future operations. These
factors raise substantial doubt about the Company’s ability
to continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from
this uncertainty.
/s/
Seligson & Giannattasio, LLP
Seligson
& Giannattasio, LLP
We have
served as the Company’s auditor since 2008.
White
Plains, New York
March
29, 2019
GT Biopharma, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except par value and share data)
|
|
|
ASSETS
|
|
|
Current
Assets:
|
|
|
Cash
and cash equivalents
|
$60
|
$576
|
Prepaid
expenses
|
30
|
-
|
Total
Current Assets
|
90
|
576
|
|
|
|
Intangible
assets
|
25,262
|
253,777
|
Deposits
|
12
|
9
|
Fixed
assets, net
|
35
|
6
|
Total
Other Assets
|
25,309
|
253,792
|
TOTAL
ASSETS
|
$25,399
|
$254,368
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
Current
Liabilities:
|
|
|
Accounts
payable
|
$1,762
|
$2,546
|
Accrued
expenses
|
1,455
|
102
|
Line
of credit
|
31
|
31
|
Note
Payable to Related Party
|
100
|
-
|
Deferred
Rent
|
8
|
-
|
Convertible
debentures
|
10,673
|
-
|
Total
Current Liabilities
|
14,029
|
2,679
|
|
|
|
Total
liabilities
|
14,029
|
2,679
|
|
|
|
Stockholders’
Equity:
|
|
|
Convertible
preferred stock - $0.001 par value; 15,000,000 shares
authorized:
|
|
|
Series
C - 96,230 and 96,230 shares issued and outstanding at December 31,
2018 and December 31, 2017, respectively
|
1
|
1
|
Series
J – 1,163,548 shares issued and outstanding at December 31,
2018 and December 31, 2017, respectively
|
1
|
1
|
Common
stock - $0.001 par value; 750,000,000 shares authorized; and
50,650,478 and 50,117,977 shares issued and outstanding at December
31, 2018 and December 31, 2017, respectively
|
51
|
50
|
Additional
paid-in capital
|
540,171
|
521,305
|
Accumulated
deficit
|
(528,685)
|
(269,499)
|
Noncontrolling
interest
|
(169)
|
(169)
|
Total
Stockholders’ Equity
|
11,370
|
251,689
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$25,399
|
$254,368
|
The accompanying notes are an integral part of these consolidated
financial statements.
GT Biopharma, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands except per share data)
|
|
|
|
|
Operating expenses:
|
|
|
Research
and development
|
$9,067
|
$1,068
|
Selling,
general and administrative expenses
|
12,487
|
134,502
|
Loss
on impairment
|
228,515
|
-
|
Total
operating expenses
|
250,069
|
135,570
|
Loss
from operations
|
(250,069)
|
(135,570)
|
Other income (expense):
|
|
|
Interest
expense
|
(9,117)
|
(8,602)
|
Total
other income (expense)
|
(9,117)
|
(8,602)
|
Loss
before provision for income taxes
|
(259,186)
|
(144,172)
|
Provision
for income tax
|
-
|
-
|
Net
loss
|
$(259,186)
|
$(144,172)
|
Net
loss per common share – basic and diluted
|
$(5.16)
|
$(8.60)
|
Weighted
average common shares outstanding – basic and
diluted
|
50,240
|
16,769
|
The accompanying notes are an integral part of these consolidated
financial statements.
GT Biopharma, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity
For the Years Ended December 31, 2018 and 2017
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2016
|
1,788
|
$2
|
104
|
$0
|
$105,891
|
$(124,649)
|
Issuance of common
stock for acquisition
|
|
|
16,928
|
17
|
253,901
|
|
Issuance of common and
preferred stock for convertible notes and
interest
|
909
|
1
|
17,678
|
18
|
25,254
|
|
Issuance of common and
preferred stock for warrants
|
5
|
0
|
497
|
0
|
5,819
|
|
Issuance of common for
preferred stock
|
(2,042)
|
(2)
|
5,678
|
6
|
(4)
|
|
Issuance of common and
preferred stock for compensation
|
600
|
1
|
9,233
|
9
|
129,766
|
|
Change in accounting
method for debt and warrants
|
|
|
|
|
678
|
(678)
|
Net
loss
|
|
|
|
|
|
(144,172)
|
Balance
at December 31, 2017
|
1,260
|
$2
|
50,118
|
$50
|
$521,305
|
$(269,499)
|
Issuance of
warrants
|
|
|
|
|
8,304
|
|
Issuance of common
stock for convertible notes
|
|
|
162
|
0
|
325
|
|
Beneficial conversion
feature on convertible notes
|
|
|
|
|
544
|
|
Issuance of common
stock for compensation
|
|
|
370
|
1
|
9,693
|
|
Net
loss
|
|
|
|
|
|
(259,186)
|
Balance
at December 31, 2018
|
1,260
|
$2
|
50,650
|
$51
|
$540,171
|
$(528,685)
|
The accompanying notes are an integral part of these consolidated
financial statements.
GT Biopharma, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
|
Twelve Months Ended
December 31,
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
Net
loss
|
$(259,186)
|
$(144,172)
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
Depreciation
|
7
|
2
|
Loss
on impairment of long-lived assets
|
228,515
|
-
|
Stock
compensation expense for options and warrants issued to
employees and non-employees
|
9,696
|
130,124
|
Amortization
of debt discounts
|
8,663
|
4,914
|
Note
Allonge
|
-
|
100
|
Non-cash
interest expense
|
441
|
2,197
|
Amortization
of loan costs
|
1,076
|
-
|
Changes
in operating assets and liabilities:
|
|
|
Prepaid
Expenses
|
(30)
|
-
|
Other
assets
|
(3)
|
(7)
|
Other
liabilities
|
8
|
|
Accounts
payable and accrued liabilities
|
136
|
1,412
|
Net
cash used in operating activities
|
(10,677)
|
(5,430)
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
Acquisition
of fixed assets
|
(36)
|
(4)
|
Net
cash used by investing activities
|
(36)
|
(4)
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
Proceeds
from notes payable
|
15,145
|
5,991
|
Loan
costs
|
(533)
|
-
|
Repayment
of note payable
|
(4,415)
|
-
|
Net
cash provided by financing activities
|
10,197
|
5,991
|
NET
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
|
(516)
|
557
|
CASH
AND CASH EQUIVALENTS - Beginning of period
|
576
|
19
|
CASH
AND CASH EQUIVALENTS - End of period
|
$60
|
$576
|
|
|
|
Supplemental cash flow disclosures:
|
|
|
Issuance
of common stock upon conversion of convertible notes
|
$325
|
$-
|
Acquisition
of intangibles through issuance of common stock
|
$-
|
$253,777
|
Issuance
of common stock for interest expense
|
$-
|
$5,179
|
Issuance
of common stock for debt
|
$-
|
$19,166
|
The accompanying condensed notes are an integral part of these
consolidated financial statements.
Business
In
1965, the corporate predecessor of GT Biopharma, Diagnostic Data,
Inc. was incorporated in the State of California. Diagnostic Data
changed its incorporation to the State of Delaware in 1972; and
changed its name to DDI Pharmaceuticals, Inc. in 1985. In 1994, DDI
Pharmaceuticals merged with International BioClinical, Inc. and
Bioxytech S.A. and changed its name to OXIS International, Inc. In
July 2017, the Company changed its name to GT Biopharma,
Inc.
We are
a clinical stage biopharmaceutical company focused on the
development and commercialization of novel immuno-oncology products
based off our proprietary Natural Killer (NK) cell engager
(Tri-specific Killer Engager (TriKE) & Tetra-specific Killer
Engager (TetraKE)) and bi-specific Antibody Drug Conjugate
(bispecific-ADC) technology platforms. Our TriKE and TetraKE
platforms generate proprietary moieties designed to harness and
enhance the cancer killing abilities of a patient’s own
natural killer, or NK, cells. Once bound to an NK cell, our
moieties are designed to stimulate the NK cell and precisely direct
it to one or more specifically-targeted proteins (tumor antigens)
expressed on a specific type of cancer, ultimately resulting in the
cancer cell’s death. TriKEs and TetraKEs are made up of
recombinant fusion proteins, can be designed to target tumor
antigens on hematologic malignancies, sarcomas or solid tumors and
do not require patient-specific customization. They are designed to
be dosed in an outpatient setting and are expected to have
reasonably low cost of goods. Our bispecific-ADC platform can
generate product candidates that are ligand-directed single-chain
fusion proteins that simultaneously target two tumor antigens. We
believe our bispecific-ADC moieties represents the next generation
of ADCs.
Also,
in connection with the acquisition of Georgetown Translational
Pharmaceuticals on September 1, 2017, we acquired a portfolio of
IPR&D CNS assets consisting of innovative reformulations and/or
repurposing of existing therapies. These CNS assets address disease
states such as chronic neuropathic pain, myasthenia gravis and
motion sickness.
Basis of Consolidation and Comprehensive Income
The
accompanying consolidated financial statements include the accounts
of GT Biopharma, Inc. and its subsidiaries. All intercompany
balances and transactions have been eliminated. The Company's
financial statements are prepared using the accrual method of
accounting.
Going Concern
As
shown in the accompanying consolidated financial statements, the
Company has incurred an accumulated deficit of $528,685,000 through
December 31, 2018. On a consolidated basis, the Company had cash
and cash equivalents of $60,000 at December 31, 2018. The Company's
plan is to raise additional capital until such time that the
Company generates sufficient revenues to cover its cash flow needs
and/or it achieves profitability. However, the Company cannot
assure that it will accomplish this task and there are many factors
that may prevent the Company from reaching its goal of
profitability.
The
current rate of cash usage raises substantial doubt about the
Company’s ability to continue as a going concern, absent any
sources of significant cash flows. In an effort to mitigate this
near-term concern the Company intends to seek additional equity or
debt financing to obtain sufficient funds to sustain operations.
However, the Company cannot provide assurance that it will
successfully obtain equity or debt or other financing, if any,
sufficient to finance its goals or that the Company will generate
future product related revenues. The Company’s financial
statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the
amounts and classification of liabilities that might be necessary
in the event that the Company cannot continue in
existence.
Use of Estimates
The
financial statements and notes are representations of the Company's
management, which is responsible for their integrity and
objectivity. These accounting policies conform to accounting
principles generally accepted in the United States of America and
have been consistently applied in the preparation of the financial
statements. The preparation of financial statements requires
management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses and
disclosures of contingent assets and liabilities at the date of the
financial statements. Actual results could differ from those
estimates.
Segment Information
Operating segments
are identified as components of an enterprise about which separate
discrete financial information is available for evaluation by the
chief operating decision-maker in making decisions regarding
resource allocation and assessing performance. To date, the Company
has viewed its operations and manages its business as one segment
operating in the United States of America.
2.
Summary
of Significant Accounting Policies
Advertising and promotional fees
Advertising
expenses consist primarily of costs incurred in the design,
development, and printing of Company literature and marketing
materials. The Company expenses all advertising expenditures as
incurred. There were no advertising expenses for the years ended
December 31, 2018 and 2017, respectively.
Cash and Cash Equivalents
The
Company considers all highly liquid investments with original
maturities of three months or less to be cash
equivalents.
Concentrations of Credit Risk
The
Company's cash and cash equivalents, marketable securities and
accounts receivable are monitored for exposure to concentrations of
credit risk. The Company maintains substantially all of its cash
balances in a limited number of financial institutions. The
balances are each insured by the Federal Deposit Insurance
Corporation up to $250,000. The Company had no balances in excess
of this limit at December 31, 2018.
Stock Based Compensation to Employees
The
Company accounts for its stock-based compensation for employees in
accordance with Accounting Standards Codification
(“ASC”) 718. The Company recognizes in the statement of
operations the grant-date fair value of stock options and other
equity-based compensation issued to employees and non-employees
over the related vesting period.
The
Company granted no stock options during the years ended December
31, 2018 and 2017, respectively.
Long-Lived Assets
Our
long-lived assets include property, plant and equipment,
capitalized costs of filing patent applications and other
indefinite lived intangible assets. We evaluate our long-lived
assets for impairment, other than indefinite lived intangible
assets, in accordance with ASC 360, whenever events or changes in
circumstances indicate that the carrying amount of such assets may
not be recoverable. Estimates of future cash flows and timing of
events for evaluating long-lived assets for impairment are based
upon management’s judgment. If any of our intangible or
long-lived assets are considered to be impaired, the amount of
impairment to be recognized is the excess of the carrying amount of
the assets over its fair value.
Applicable
long-lived assets are amortized or depreciated over the shorter of
their estimated useful lives, the estimated period that the assets
will generate revenue, or the statutory or contractual term in the
case of patents. Estimates of useful lives and periods of expected
revenue generation are reviewed periodically for appropriateness
and are based upon management’s judgment.
Impairment of Long-Lived Assets
The
Company's long-lived assets currently consist of indefinite lived
intangible assets associated with IPR&D (“In-Process
Research & Development”) projects and related capitalized
patents acquired in the acquisition of Georgetown Translational
Pharmaceuticals, Inc. as described in Note 3 below. Intangible
assets associated with IPR&D projects are not amortized until
approval by the Food and Drug Administration (FDA) is obtained in a
major market subject to certain specified conditions and management
judgment. The useful life of an amortizing asset generally is
determined by identifying the period in which substantially all of
the cash flows are expected to be generated.
The
Company evaluates indefinite lived intangible assets for impairment
at least annually and whenever impairment indicators are present in
accordance with ASC 350. When necessary, the Company records an
impairment loss for the amount by which the fair value is less than
the carrying value of these assets. The fair value of intangible
assets other than goodwill is typically determined using the
“relief from royalty method”, specifically the
discounted cash flow method utilizing Level 3 fair value inputs.
Some of the more significant estimates and assumptions inherent in
this approach include: the amount and timing of the projected net
cash flows, which includes the expected impact of competitive,
legal and/or regulatory forces on the projections and the impact of
technological risk associated with IPR&D assets, as well as the
selection of a long-term growth rate; the discount rate, which
seeks to reflect the various risks inherent in the projected cash
flows; and the tax rate, which seeks to incorporate the geographic
diversity of the projected cash flows.
The
Company performs impairment testing for all other long-lived assets
whenever impairment indicators are present. When necessary, the
Company calculates the undiscounted value of the projected cash
flows associated with the asset, or asset group, and compares this
estimated amount to the carrying amount. If the carrying amount is
found to be greater, we record an impairment loss for the excess of
book value over fair value.
Income Taxes
The
Company accounts for income taxes using the asset and liability
approach, whereby deferred income tax assets and liabilities are
recognized for the estimated future tax effects, based on current
enacted tax laws, of temporary differences between financial and
tax reporting for current and prior periods. Deferred tax assets
are reduced, if necessary, by a valuation allowance if the
corresponding future tax benefits may not be realized.
Net Income (Loss) per Share
Basic
net income (loss) per share is computed by dividing the net loss
for the period by the weighted average number of common shares
outstanding during the period. Diluted net income (loss) per share
is computed by dividing the net loss for the period by the weighted
average number of common shares outstanding during the period, plus
the potential dilutive effect of common shares issuable upon
exercise or conversion of outstanding stock options and warrants
during the period.
The
computation of basic and diluted net loss per share for the years
ended December 31, 2018 and 2017 excludes the common stock
equivalents of the following potentially dilutive securities
because their inclusion would be anti-dilutive:
|
|
|
|
|
Exercise
of common stock warrants
|
1,813,053
|
-
|
Conversion
of preferred stock into common stock
|
1,163,659
|
1,163,659
|
Conversion
of convertible debentures into common stock
|
5,704,543
|
-
|
Exercise
of common stock options
|
1,113
|
1,246
|
|
8,682,368
|
1,164,905
|
Patents
Acquired patents
are capitalized at their acquisition cost or fair value. The legal
costs, patent registration fees and models and drawings required
for filing patent applications are capitalized if they relate to
commercially viable technologies. Commercially viable technologies
are those technologies that are projected to generate future
positive cash flows in the near term. Legal costs associated with
patent applications that are not determined to be commercially
viable are expensed as incurred. All research and development costs
incurred in developing the patentable idea are expensed as
incurred. Legal fees from the costs incurred in successful defense
to the extent of an evident increase in the value of the patents
are capitalized.
Capitalized costs
for pending patents are amortized on a straight-line basis over the
remaining twenty-year legal life of each patent after the costs
have been incurred. Once each patent is issued, capitalized costs
are amortized on a straight-line basis over the shorter of the
patent's remaining statutory life, estimated economic life or ten
years.
Fixed Assets
Fixed
assets are stated at cost. Depreciation is computed on a
straight-line basis over the estimated useful lives of the assets,
which are 3 to 10 years for machinery and equipment and the shorter
of the lease term or estimated economic life for leasehold
improvements.
Fair Value
The
carrying amounts reported in the balance sheets for receivables and
current liabilities each qualify as financial instruments and are a
reasonable estimate of fair value because of the short period of
time between the origination of such instruments and their expected
realization and their current market rate of interest. The three
levels are defined as follows:
●
Level 1 inputs to
the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active markets. The
Company’s Level 1 assets include cash equivalents, primarily
institutional money market funds, whose carrying value represents
fair value because of their short-term maturities of the
investments held by these funds.
●
Level 2 inputs to
the valuation methodology include quoted prices for similar assets
and liabilities in active markets, and inputs that are observable
for the asset or liability, either directly or indirectly, for
substantially the full term of the financial instrument. The
Company’s Level 2 liabilities consist of liabilities arising
from the issuance of convertible securities and in accordance with
ASC 815-40: a warrant liability for detachable warrants, as well as
an accrued derivative liability for the beneficial conversion
feature. These liabilities are remeasured each reporting period.
Fair value is determined using the Black-Scholes valuation model
based on observable market inputs, such as share price data and a
discount rate consistent with that of a government-issued security
of a similar maturity. There were no such liabilities at December
31, 2018.
●
Level 3 inputs to
the valuation methodology are unobservable and significant to the
fair value measurement.
Research and Development
Research and
development costs are expensed as incurred and reported as research
and development expense. Research and development costs totaled
$9.1 million and $1.1 million for the years ended December 31, 2018
and 2017, respectively. Research and development costs for the year
ended December 31, 2018 included non-cash compensation of $6.8
million.
Recently Issued Accounting Standards
In
February 2016, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standard Update
(“ASU”) No. 2016-02, “Leases.” This ASU
requires all lessees to be recognized on the balance sheet as right
to use assets and lease liabilities for the rights and obligations
created by lease arrangements with terms greater than 12 months.
The amendments in this ASU are effective for fiscal years beginning
after December 15, 2018 and for interim periods therein. The
Company is in the process of assessing the impact the adoption this
ASU will have on its consolidated financial position, results of
operations and cash flows. At a minimum, total assets and total
liabilities will increase in the period the ASU is adopted. Early
adoption of this ASU is permitted. At December 31, 2018, the
Company’s undiscounted future minimum payments outstanding
for lease obligations (including those currently included as
capital lease obligations) were approximately
$200,878.
In May
2014, the FASB issued ASU No. 2014-09, “Revenue from
Contracts with Customers: Topic 606.” This ASU replaces
nearly all existing U.S. GAAP guidance on revenue recognition. The
standard prescribes a five-step model for recognizing revenue, the
application of which will require significant judgment. The
amendments in this ASU are effective for fiscal years beginning
after December 15, 2017, and for interim periods therein. The
provisions of this ASU may be applied retroactively or on a
modified retrospective (cumulative effect) basis. The Company
adopted the standard using the modified retrospective approach
beginning January 1, 2018. Adoption of this ASU did not have a
significant impact on the Company’s consolidated financial
position, results of operations and cash flows.
On
September 1, 2017, the Company entered into an Agreement and Plan
of Merger whereby it acquired 100% of the issued and outstanding
capital stock of Georgetown Translational Pharmaceuticals, Inc.
(GTP). In exchange for the ownership of GTP, the Company issued a
total of 16,927,878 shares of its common stock, having a share
price of $15.00 on the date of the transaction, to the three prior
owners of GTP which represented 33% of the issued and outstanding
capital stock of the Company on a fully diluted basis. $253.8
million of the value of shares issued was allocated to intangible
assets consisting of a portfolio of three CNS development
candidates, which are classified as IPR&D.
For the
year ended December 31, 2018, the Company recorded an intangible
asset impairment charge of $228.5 million related to the portfolio
of CNS IPR&D assets within Operating Expenses, which represents
the excess carrying value compared to fair value. The impairment
charge was the result of both internal and external factors. In the
3rd quarter of 2018, the Company experienced changes in key senior
management, led by the appointment of a new CEO with extensive
experience in oncology drug development. These changes resulted in
the prioritization of immuno-oncology development candidates
relative to CNS development candidates. In conjunction with these
strategic changes, limited internal resources have delayed the
development of the CNS IPR&D assets. The limited resources,
changes in senior leadership, and favorable market conditions for
immuno-oncology development candidates have resulted in the Company
choosing to focus on development of its immuno-oncology portfolio.
In light of this shift in market strategy, the Company performed a
commercial assessment and a valuation of the CNS IPR&D assets,
both to assess fair value and support potential future licensing
efforts. The valuation indicated an excess carrying value over the
fair value of these assets, resulting in the impairment charge
noted above.
The
fair value of the CNS IPR&D assets was determined using the
discounted cash flow method which utilized significant estimates
and assumptions surrounding the amount and timing of the projected
net cash flows, which includes the probability of
commercialization, the assumption that the assets would be
out-licensed to third-parties for continued development for upfront
licensing fees and downstream royalty payments based on net sales,
and expected impact of competitive, legal and/or regulatory forces
on the projections, as well as the selection of a long-term growth
rate; the discount rate, which seeks to reflect the various risks
inherent in the projected cash flows; and the tax rate, which seeks
to incorporate the geographic diversity of the projected cash
flows.
Convertible Notes
On
January 22, 2018, the Company entered into a Securities Purchase
Agreement (“SPA”) with fourteen accredited investors
(individually, a “Buyer” and collectively, the
“Buyers”) pursuant to which the Company agreed to issue
to the Buyers senior convertible notes in an aggregate principal
amount of $7,760,510 (the “Notes”), which Notes shall
be convertible into the Company’s common stock, par value
$0.001 per share (the “Common Stock”) at a price of
$4.58 per share, and five-year warrants to purchase the
Company’s Common Stock representing the right to acquire an
aggregate of approximately 1,694,440 shares of Common Stock (the
“Warrants”).
Pursuant to the
terms of SPA the Notes were subject to an original issue discount
of 10% resulting in proceeds to the Company of $7,055,000 from the
transaction.
Upon
the purchase of the Notes, the Buyers received Warrants to purchase
1,694,440 shares of Common Stock. Such Warrants are exercisable for
(5) years from the date the shares underlying the Warrants are
freely saleable. The initial Exercise Price is $4.58. According to
the terms of the warrant agreement, the Warrants are subject to
certain adjustments depending upon the price and structure of a
subsequent financing, including a qualified financing with gross
proceeds of at least $20 million, as defined in the
agreements.
The
issuance of the Notes and Warrants were made in reliance on the
exemption provided by Section 4(a)(2) of the Securities Act of
1933, as amended (the “Securities Act”) for the offer
and sale of securities not involving a public offering, and
Regulation D promulgated under the Securities Act.
Contemporaneously
with the execution and delivery of the SPA, the Company and the
Buyers executed and delivered a Registration Rights Agreement (the
“Registration Rights Agreement”) pursuant to which the
Company has agreed to provide certain registration rights with
respect to the Registrable Securities under the 1933 Act and the
rules and regulations promulgated thereunder, and applicable state
securities laws.
Senior Convertible Debentures
On
August 2, 2018, GT Biopharma, Inc. (the “Company”)
entered into a Securities Purchase Agreement with the purchasers
identified on the signature pages thereto (individually, a
“Purchaser,” and collectively, the
“Purchasers”) pursuant to which the Company issued to
the Purchasers one year 10% Senior Convertible Debentures in an
aggregate principal amount of $5,140,000 (the
“Debentures”), which Debentures shall be convertible
into the Company’s common stock, par value $0.001 per share
(the “Common Stock”), at a price of $2 per share. The
Company used a portion of these proceeds to repay $4.4 million of
the notes issued on January 22, 2018. Additionally, the remaining
$3.3 million of the notes issued on January 22, 2018 were converted
into the Debentures at the same terms discussed above.
On
September 7, 2018, GT Biopharma, Inc. (the “Company”)
entered into a Securities Purchase Agreement with the purchasers
identified on the signature pages thereto (individually, a
“Purchaser,” and collectively, the
“Purchasers”) pursuant to which the Company has issued
to the Purchasers one year 10% Senior Convertible Debentures in an
aggregate principal amount of $2,050,000 (the
“Debentures”), which Debentures shall be convertible
into the Company’s common stock, par value $0.001 per share
(the “Common Stock”), at a price of $2 per
share.
On
September 24, 2018, GT Biopharma, Inc. (the “Company”)
entered into a Securities Purchase Agreement with the purchasers
identified on the signature pages thereto (individually, a
“Purchaser,” and collectively, the
“Purchasers”) pursuant to which the Company has issued
to the Purchasers one year 10% Senior Convertible Debentures in an
aggregate principal amount of $800,000 (the
“Debentures”), which Debentures shall be convertible
into the Company’s common stock, par value $0.001 per share
(the “Common Stock”), at a price of $2 per
share.
The
issuance of the Senior Convertible Debentures was made in reliance
on the exemption provided by Section 4(a)(2) of the Securities Act
of 1933, as amended (the “Securities Act”), for the
offer and sale of securities not involving a public offering and
Regulation D promulgated under the Securities Act.
Financing Agreement
On
November 8, 2010, the Company entered into a financing arrangement
with Gemini Pharmaceuticals, Inc., a product development and
manufacturing partner of the Company, pursuant to which Gemini
Pharmaceuticals made a $250,000 strategic equity investment in the
Company and agreed to make a $750,000 purchase order line of credit
facility available to the Company. The outstanding principal of all
Advances under the Line of Credit will bear interest at the rate of
interest of prime plus 2 percent per annum. There is $31,000 due on
this credit line at December 31, 2018.
Accrued
Expenses are comprised of the following:
|
|
|
|
|
Research
& Development
|
585,000
|
-
|
Accrued
Interest
|
432,000
|
-
|
Professional
Fees
|
162,000
|
62,000
|
Consulting
and Advisory Services
|
161,000
|
-
|
Board
of Directors Service Costs
|
94,000
|
-
|
Payroll
and Benefits
|
21,000
|
39,000
|
Accrued Expenses
|
1,455,000
|
101,000
|
6.
Related
Party Transactions
On
December 21, 2018, Dr. Raymond Urbanski, Chief Executive Officer
and Chairman of the Board, provided a short-term loan of $100,000
to meet immediate capital needs. The loan matured on January 20,
2019 and carries an interest rate of 5%. The loan was repaid in
January, 2019.
Stock Split
In July
2017, the Company approved a one for three hundred reverse stock
split.
Common Shares
In July
2017, the Company amended its articles of incorporation to change
the number of authorized common shares to 750,000,000 shares of
$.001 par value stock.
Common Stock
On
September 1, 2017, the Company entered into an Agreement and Plan
of Merger whereby it acquired 100% of the issued and outstanding
capital stock of Georgetown Translational Pharmaceuticals, Inc.
(GTP). GTP is a biotechnology company focused on acquiring or
discovering and patenting late-stage, de-risked, and
close-to-market improved treatments for CNS disease (Neurology and
Pain) and shepherding the products through the FDA approval process
to the NDA. In exchange for the ownership of GTP, the Company
issued a total of 16,927,878 shares of its common stock to the
three prior owners of GTP which represents 33% of the issued and
outstanding capital stock of the Company.
During
the six months ended June 30, 2017 the Registrant has issued a
total of 390,279 shares of common stock to a total of eleven
entities or individuals in exchange for the cancellation of debt in
the total amount of $2,025,000 and interest in the total amount of
$486,000.
In
August 2017, the Company issued a total of 17,287,625 shares of
common stock in exchange for the cancellation of debt in the total
amount of $17,141,000 and interest in the total amount of
$4,693,000.
In
August 2017, the Company issued 496,855 shares of common stock upon
the exercise of warrants on a cashless basis.
In
August 2017, the Company converted 25,000 Series H and 1,666,667
Series I shares of preferred stock into 5,327,734 shares of common
stock.
In
December 2017, the Company converted 350,000 Series J shares of
preferred stock into 350,000 shares of common stock.
During
the quarter ended September 30, 2018, the Company issued 110,000
shares of common stock upon conversion of $220,000 of senior
convertible notes.
During
the quarter ended December 31, 2018, the Company issued 52,500
shares of common stock upon conversion of $105,000 of senior
convertible notes.
During
the quarter ended December 31, 2018, the Company issued a total of
245,000 shares of Rule 144 restricted common stock in full
settlement of outstanding legal matters, and 125,000 shares of Rule
144 restricted common stock in connection with consulting
services.
Preferred Stock
The
96,230 shares of Series C preferred stock are convertible into 111
shares of the Company's common stock at the option of the holders
at any time. The conversion ratio is based on the average closing
bid price of the common stock for the fifteen consecutive trading
days ending on the date immediately preceding the date notice of
conversion is given, but cannot be less than .20 or more than .2889
common shares for each Series C preferred share. The conversion
ratio may be adjusted under certain circumstances such as stock
splits or stock dividends. The Company has the right to
automatically convert the Series C preferred stock into common
stock if the Company lists its shares of common stock on the Nasdaq
National Market and the average closing bid price of the Company's
common stock on the Nasdaq National Market for 15 consecutive
trading days exceeds $3,000.00. Each share of Series C preferred
stock is entitled to the number of votes equal to .26 divided by
the average closing bid price of the Company's common stock during
the fifteen consecutive trading days immediately prior to the date
such shares of Series C preferred stock were purchased. In the
event of liquidation, the holders of the Series C preferred stock
shall participate on an equal basis with the holders of the common
stock (as if the Series C preferred stock had converted into common
stock) in any distribution of any of the assets or surplus funds of
the Company. The holders of Series C preferred stock are entitled
to noncumulative dividends if and when declared by the Company's
board of directors. No dividends to Series C preferred stockholders
were issued or unpaid through December 31, 2018.
On
December 4, 2008, the Company entered into and closed an Agreement
(the “Bristol Agreement”) with Bristol Investment Fund,
Ltd. pursuant to which Bristol agreed to cancel the debt payable by
the Company to Bristol in the amount of approximately $20,000 in
consideration of the Company issuing Bristol 25,000 shares of
Series G Convertible Preferred Stock, which such shares carry a
stated value equal to $1.00 per share (the “Series G
Stock”).
The
Series G Stock is convertible, at any time at the option of the
holder, into common shares of the Company based on a conversion
price equal to the lesser of $2.50 or 60% of the average of the
three lowest trading prices occurring at any time during the 20
trading days preceding the conversion. The Series G Stock, as
amended, shall have voting rights on an as converted basis
multiplied by 100.
In the
event of any liquidation or winding up of the Company, the holders
of Series G Stock will be entitled to receive, in preference to
holders of common stock, an amount equal to the stated value plus
interest of 15% per year.
The
Series G Stock restricts the ability of the holder to convert the
Series G Stock and receive shares of the Company’s common
stock such that the number of shares of the Company common stock
held by Bristol and its affiliates after such conversion does not
exceed 4.9% of the Company’s then issued and outstanding
shares of common stock.
On
October 13, 2009 the Company was informed by Theorem Group, LLC
that it had purchased all of the outstanding Series G Preferred
Stock and Theorem gave notice to the Company that it intended to
exercise its ability to vote on all shareholder matters utilizing
the super voting privileges provided by the Series G
Stock.
Effective February
10, 2010, the Company issued 25,000 shares of its new Series H
Convertible Preferred Stock (the “Series H Preferred”)
to Theorem Group, LLC, a California limited liability company (the
“Stockholder”), in exchange for the 25,000 shares of
Series G Stock then owned by the Stockholder. The foregoing
exchange was effected pursuant to that certain Exchange Agreement,
dated February 10, 2010, between the Company and the Stockholder
(the “Exchange Agreement”).
The
Certificate of Designation of the Series H Preferred is based on,
and substantially similar to the form and substance of the
Certificate of Designation of the Series G Preferred. Some of the
corrections, changes and differences between the Certificate of
Designation of the Series G Preferred and the Certificate of
Designation of the Series H Preferred include the
following:
a.
As previously
disclosed, the holder of the Series H Preferred is entitled to vote
with the common stock, and is entitled to a number of votes equal
to (i) the number of shares of common stock it can convert into
(without any restrictions or limitations on such conversion), (ii)
multiplied by 100.
b.
The holder of the
Series H Preferred cannot convert such preferred stock into shares
of common stock if the holder and its affiliates after such
conversion would own more than 9.9% of the Company’s then
issued and outstanding shares of common stock.
c.
The Series G
Preferred contained a limitation that the holder of the Series G
Preferred could not convert such preferred shares into more than
19.999% of the issued and outstanding shares of common stock
without the approval of the stockholders if the rules of the
principal market on which the common stock is traded would prohibit
such a conversion. Since the rules of the Company’s principal
market did not require such a limitation, that provision has been
deleted.
In
August 2017, the Company converted 25,000 Series H stock into
5,119,401 shares of common stock.
On
November 8, 2010, the Company sold 1,666,667 shares of the
Company’s Series I Preferred Stock, $.001 par value, at a
price of $0.15 per share ($250,000).
The
holder of the Series I Preferred Stock will be entitled to receive,
out of funds legally available, dividends in cash at the annual
rate of 8.0% of the Preference Amount ($0.15), when, as, and if
declared by the Board. No dividends or other distributions shall be
made with respect to any shares of junior stock until dividends in
the same amount per share on the Series I Preferred Stock shall
have been declared and paid or set apart during that fiscal year.
Dividends on the Series I Preferred Stock shall not be cumulative
and no right shall accrue to the Series I Preferred Stock by reason
of the fact that the Company may fail to declare or pay dividends
on the Series I Preferred Stock in the amount of the Dividend Rate
per share or in any amount in any previous fiscal year of the
Company, whether or not the earnings of the Company in that
previous fiscal year were sufficient to pay such dividends in whole
or in part.
Each
share of Series I Preferred Stock shall entitle the holder thereof
to such number of votes per share as shall equal the number of
shares of Common Stock (rounded to the nearest whole number) into
which such share of Series I Preferred Stock is then
convertible.
Upon
any liquidation of the Company, subject to the rights of any series
of Preferred Stock that may from time to time come into existence,
before any distribution or payment shall be made to the holders of
any Junior Stock, the holders of the shares of Series I Preferred
Stock then outstanding shall be entitled to receive and be paid out
of the assets of the Company legally available for distribution to
its stockholders liquidating distributions in cash or property at
its fair market value as determined by the Board in the amount of
$0.15 per share (as adjusted for any stock dividends, combinations
or splits with respect to such shares).
Shares
of Series I Preferred Stock may, at the option of the holder
thereof, be converted at any time or from time to time into fully
paid and non-assessable shares of Common Stock. The number of
shares of Common Stock which a holder of shares of Series I
Preferred Stock shall be entitled to receive upon conversion of
such shares shall be the product obtained by multiplying the
Conversion Rate by the number of shares of Series I Preferred Stock
being converted. Initially, the Series I Preferred Stock is
convertible into 6,667 shares of common stock.
In the
event that the per-share Market Price of the Common Stock over a
period of 20 consecutive trading days is equal to at least 130% of
the initial conversion price (130% of $0.15), all outstanding
shares of Series I Preferred Stock shall be converted automatically
into the number of shares of Common Stock into which such shares of
Series I Preferred Stock are then convertible without any further
action by the holders of such shares and whether or not the
certificates representing such shares of Series I Preferred Stock
are surrendered to the Company or its transfer agent.
In
August 2017, the Company converted 1,666,667 Series I shares of
preferred stock into 208,333 shares of common stock.
On
September 1, 2017, the Company authorized 2,000,000 shares of
Series J Preferred Stock. Shares of Series J Preferred Stock will
have the same voting rights as shares of common stock with each
share of Series J Preferred Stock entitled to one vote at a meeting
of the shareholders of the Corporation. Shares of Series J
Preferred Stock will not be entitled to receive any dividends,
unless and until specifically declared by our board of directors.
The holders of the Series J Preferred Stock will participate, on an
as-if-converted-to-common stock basis, in any dividends to the
holders of common stock. Each share of the Series J Preferred Stock
is convertible into one share of our common stock at any time at
the option of the holder.
On
September 1, 2017 the Company issued a total of 700,278 shares of
Series J Preferred Stock in exchange for the cancellation of debt
in the total amount of $840,000.
On
September 1, 2017 the Company issued 5,046 shares of Series J
Preferred Stock upon the exercise of warrants on a cashless
basis.
On
September 1, 2017 the Company also issued 600,000 shares of Series
J Preferred Stock to one entity as payment for $720,000 of
consulting services provided to the Company.
In
December 2017, the Company converted 350,000 Series J shares of
preferred stock into 350,000 shares of common stock.
Common Stock Warrants
Warrant
transactions for the years ended December 31, 2018 and 2017 are as
follows:
|
|
Weighted-Average Exercise Price
|
Outstanding,
December 31, 2016
|
15,550
|
135.00
|
Granted
|
486,351
|
15.00
|
Exercised
|
(501,901)
|
15.00
|
Expired
|
-
|
-
|
Outstanding,
December 31, 2017
|
-
|
-
|
Granted
|
1,813,053
|
2.00
|
Exercised
|
-
|
|
Expired
|
-
|
|
Outstanding,
December 31, 2018
|
1,813,053
|
2.00
|
|
|
|
Exercisable
Warrants:
|
|
|
December
31, 2018
|
1,813,053
|
2.00
|
December
31, 2017
|
-
|
-
|
Stock Options
The
Company reserved 1,333 shares of its common stock at December 31,
2014 for issuance under the 2014 Stock Incentive Plan (the
“2014 Plan”). The 2014 Plan, approval by stockholders
in May 2015, permits the Company to grant stock options to acquire
shares of the Company's common stock, award stock bonuses of the
Company's common stock, and grant stock appreciation rights. At
December 31, 2018, 87 shares of common stock were available for
grant and options to purchase 1,246 shares of common stock are
outstanding under the 2014 Plan.
The
following table summarizes stock option transactions for the years
ended December 31, 2018 and 2017:
|
|
Weighted-Average Exercise Price
|
Outstanding,
December 31, 2016
|
1,246
|
1,320.00
|
Granted
|
-
|
-
|
Exercised
|
-
|
-
|
Expired
|
-
|
-
|
Outstanding,
December 31, 2017
|
1,246
|
1,320.00
|
Granted
|
-
|
-
|
Exercised
|
-
|
-
|
Expired
|
(133)
|
1,020.00
|
Outstanding,
December 31, 2018
|
1,113
|
1,320.00
|
|
|
|
Exercisable
Options:
|
|
|
December
31, 2018
|
1,113
|
1,320.00
|
December
31, 2017
|
1,246
|
1,428.00
|
The
weighted-average fair value of options granted was approximately
$1,469,000 and $1,780,000 for 2018 and 2017,
respectively.
The
following table summarizes information about all outstanding and
exercisable stock options at December 31, 2018:
|
|
|
|
|
Weighted-Average
Remaining
Contractual
Life
|
Weighted-Average
Exercise Price
|
|
Weighted-Average
Exercise Price
|
$750.00 to $2,225.00
|
1,113
|
0.49
|
$1,320.00
|
1,113
|
$1,320.00
|
Deferred Taxes
Deferred taxes
reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, and
operating losses and tax credit carryforwards. The significant
components of net deferred income tax assets for the Company are
(in thousands):
|
|
|
|
|
Deferred
tax assets:
|
|
|
Federal
net operating loss carryforward
|
25,306,000
|
15,949,000
|
Intellectual
Property
|
61,787,000
|
|
Accrued
Interest
|
129,000
|
-
|
Patent
amortization
|
5,000
|
6,000
|
Deferred
tax asseets before valuation
|
87,227,000
|
15,955,000
|
Valuation
allowance
|
(87,227,000)
|
(15,955,000)
|
Net
deferred income tax assets
|
-
|
-
|
Generally accepted
accounting principles requires that the tax benefit of net
operating losses, temporary differences and credit carryforwards be
recorded as an asset to the extent that management assesses that
realization is “more likely than not.” Realization of
the future tax benefits is dependent on the Company's ability to
generate sufficient taxable income within the carryforward period.
Because of the Company's history of operating losses, management
has provided a valuation allowance equal to its net deferred tax
assets. The valuation allowance increased by approximately
$71,270,000 during the year ended December 31, 2018.
Tax Carryforward
At
December 31, 2018, the Company had net operating loss carryforwards
of approximately $84,354,000 to reduce United States federal
taxable income in future years. These carryforwards expire from
2019 through 2038.
The
Company is no longer subject to U.S. and state tax examinations for
years ending before the fiscal year ended December 31, 2014.
Management does not believe there will be any material changes in
our unrecognized tax positions over the next twelve
months.
The
Company's policy is to recognize interest and penalties accrued on
any unrecognized tax benefits as a component of income tax expense.
There was no accrued interest or penalties associated with any
unrecognized tax benefits, nor was any interest expense recognized
during the years ended December 31, 2018 and 2017.
9.
Commitments
and Contingencies
On
October 18, 2018, the Company entered into a Consultant Agreement
with Anthony Cataldo. The term of the Consultant Agreement shall
remain in effect until September 30, 2019. This Agreement
supersedes the Consultant Agreement dated February 14, 2018 and
will pay Mr. Cataldo $25,000 per month during the term of the
Agreement.
On
October 19, 2018, the Company entered into an Executive Employment
Agreement with Dr. Urbanski, reflecting his current position as
Chief Executive Officer of the Company. Under the terms of this
agreement, Dr. Urbanski’s annual salary is essentially
unchanged from his previous positions. Dr. Urbanski is also
entitled to participate in the Company’s bonus plans. Under
the Executive Employment Agreement, the Company has agreed that
upon shareholder approval of a Stock Option Plan, it will recommend
to the Board that the Company grant Dr. Urbanski a Non-Qualified
stock option to purchase 2,971,102 shares of the Company’s
common stock having an exercise equal to the fair market value of
the shares on the date of the Agreement. The stock option grant
would vest according to the following schedule: (i) 1,250,000 fully
vested shares upon signing of the agreement, (ii) 1,250,000 shares
on January 1, 2019, and (iii) 471,102 shares on January 1, 2020. On
March 15, 2019, Dr, Urbanski resigned his position as Chief
Executive Officer, President and Chairman of the
Board.
Leases
On
September 1, 2017, the Company entered into a three-year lease
agreement for its office in Washington, D.C. In addition to minimum
rent, certain leases require payment of real estate taxes,
insurance, common area maintenance charges and other executory
costs. The Company recognizes rent expense under such arrangements
on a straight-line basis over the effective term of each lease.
This lease was terminated as of June 30, 2018.
On
October 1, 2018, the Company entered into a three-year lease
agreement for its office in Westlake Village, CA. In addition to
minimum rent, certain leases require payment of real estate taxes,
insurance, common area maintenance charges and other executory
costs. The Company recognizes rent expense under such arrangements
on a straight-line basis over the effective term of each
lease.
The
following table summarizes the Company’s future minimum lease
commitments as of December 31, 2018 (in thousands):
Year
ending December 31:
|
2019
|
69,000
|
2020
|
71,000
|
2021
|
61,000
|
Total
minimum lease payments
|
201,000
|
Rent
expense for the years ended December 31, 2018 and 2017 was $69,000
and $9,000, respectively.
Employment Agreements
On
October 18, 2018, the Company entered into a Consultant Agreement
with Anthony Cataldo. The term of the Consultant Agreement shall
remain in effect until September 30, 2019. This Agreement
supersedes the Consultant Agreement dated February 14, 2018 and
will pay Mr. Cataldo $25,000 per month during the term of the
Agreement.
On
October 19, 2018, the Company entered into an Executive Employment
Agreement with Dr. Urbanski, reflecting his current position as
Chief Executive Officer of the Company. Under the terms of this
agreement, Dr. Urbanski’s annual salary is essentially
unchanged from his previous positions. Dr. Urbanski is also
entitled to participate in the Company’s bonus plans. Under
the Executive Employment Agreement, the Company has agreed that
upon shareholder approval of a Stock Option Plan, it will recommend
to the Board that the Company grant Dr. Urbanski a Non-Qualified
stock option to purchase 2,971,102 shares of the Company’s
common stock having an exercise equal to the fair market value of
the shares on the date of the Agreement. The stock option grant
would vest according to the following schedule: (i) 1,250,000 fully
vested shares upon signing of the agreement, (ii) 1,250,000 shares
on January 1, 2019, and (iii) 471,102 shares on January 1, 2020. On
March 15, 2019, Dr, Urbanski resigned his position as Chief
Executive Officer, President and Chairman of the
Board.
10.
Change
of Accounting Method
Adoption of ASU 2017-11
In
connection with the securities purchase agreements and debt
transactions during the year ended December 31, 2017, the Company
issued warrants to purchase common stock with a five-year term.
Upon issuance of the warrants, the Company evaluated the note
agreement to determine if the agreement contained any embedded
components that would qualify the agreement as a derivative. The
Company identified certain put features embedded in the warrants
that potentially could result in a net cash settlement in the event
of a fundamental transaction, requiring the Company to classify the
warrants as a derivative liability. The Company changed its method
of accounting for the debt and warrants through the early adoption
of ASU 2017-11 on January 1, 2018 on a retrospective basis.
Accordingly, the Company recorded the warrant derivative and
conversion option derivative liabilities to additional paid in
capital upon issuance.
The
following table provides a summary of the derivative liability
activity as a result of the adoption of ASU 2017-11 (in thousands,
except per share data):
|
Consolidated Balance Sheet
|
|
|
|
|
|
|
Additional
Paid-in Capital
|
$519,702,000
|
$1,603,000
|
$521,305,000
|
Accumulated
Deficit
|
$(267,896,000)
|
$(1,603,000)
|
$(269,499,000)
|
|
Consolidated Statement of Operations
|
|
For the Year Ended December 31, 2017
|
|
|
|
|
Change
in Warrant Liability
|
$925,000
|
$(925,000)
|
$-
|
Earnings
per Share
|
$(8.54)
|
$(0.06)
|
$(8.60)
|
During
2018, the down round provisions of certain of the notes was
triggered. The Company calculated the value of the down round
feature on that date and determined there to be no additional cost
to be reported.
Financing
On
February 4, 2019, GT Biopharma, Inc. (the “Company”)
entered into a Securities Purchase Agreement (the “Purchase
Agreement”) with the purchasers identified on the signature
pages thereto (individually, a “Purchaser,” and
collectively, the “Purchasers”), pursuant to which the
Company issued to the Purchasers, on February 4, 2019, Secured
Convertible Notes in an aggregate principal amount of $1,352,224
(the “Notes”), consisting of gross proceeds of
$1,052,224 and settlement of existing debt of $300,000, which Notes
shall be convertible at any time after issuance into shares (the
“Conversion Shares”) of the Company’s common
stock, par value $0.001 per share (the “Common Stock”),
at a conversion price of $0.60 per share (the “Conversion
Price”).
The
Notes accrue interest at the rate of 10% per annum and mature on
August 2, 2019. Interest on the Notes is payable in cash or, at a
Purchaser’s option, in shares of Common Stock at the
Conversion Price. Upon the occurrence of an event of default,
interest accrues at 18% per annum. The Notes contain customary
default provisions, including provisions for potential
acceleration, and covenants, including negative covenants regarding
additional indebtedness and dividends. The Conversion Price is
subject to adjustment due to certain events, including stock
dividends and stock splits, and is subject to reduction in certain
circumstances if the Company issues Common Stock or Common Stock
equivalents at an effective price per share that is lower than the
Conversion Price then in effect. The Company may only prepay the
Notes with the prior written consent of the respective Purchasers
thereof.
Contemporaneously
with the execution and delivery of the Purchase Agreement, on
February 4, 2019, the Company and certain of its wholly-owned
subsidiaries entered into a Security Agreement (the “Security
Agreement”) with Alpha Capital Anstalt, as collateral agent
on behalf of the Purchasers, and with the Purchasers, pursuant to
which the Purchasers have been granted a first-priority security
interest in substantially all of the assets of the Company and such
subsidiaries securing (i) an aggregate principal amount of
$1,352,224 of Notes and (ii) an aggregate principal amount of
$9,058,962 of the Company’s 10% Senior Convertible Debentures
issued on August 2, 2018, September 7, 2018 and September 24, 2018
held by such Purchasers.
The
Purchase Agreement contains customary representations, warranties
and covenants, including covenants, subject to certain exceptions,
that the Company, until the date on which less than 10% of the
Notes are outstanding, shall not effect any Variable Rate
Transaction (as defined in the Purchase Agreement) and that, for as
long as a Purchaser holds any Notes or Conversion Shares, the
Company shall amend the terms and conditions of the Purchase
Agreement and the transactions contemplated thereby with respect to
such Purchaser to give such Purchaser the benefit of any terms or
conditions under which the Company agrees to issue or sell any
Common Stock or Common Stock equivalents that are more favorable to
an investor than the terms and conditions granted to such Purchaser
under the Purchase Agreement and the transactions contemplated
thereby.
In
addition, the Company entered into a registration rights agreement
(the “Registration Rights Agreement”) with the
Purchasers, pursuant to which the Company has agreed to file,
within 14 days after February 4, 2019, one or more registration
statements on Form S-3 (or, if Form S-3 is not then available to
the Company, such form of registration that is then available to
effect a registration for resale of the subject securities)
covering the resale of all Conversion Shares, subject to certain
penalties set forth in the Registration Rights Agreement. The Form
S-3 was filed by the Company on February 14, 2019.
Common Stock
In the first
quarter of 2019, the Company issued 723,940 shares of common stock
upon conversion of $437,271 in principal and interest on senior
convertible notes.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses expected to be incurred
in connection with the issuance and distribution of common stock
registered hereby, all of which expenses, except for the Securities
and Exchange Commission registration fee, are
estimated.
Securities and Exchange Commission registration fee
|
|
$
|
1,177.16
|
|
Miscellaneous expenses
|
|
|
500.00
|
|
Legal
|
|
|
10,000.00
|
|
Accounting fees and expenses
|
|
|
5,000.00
|
|
Total
|
|
$
|
16,677.16
|
|
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND
SERVICES
Seligson & Giannattasio, LLP was our independent registered
public accounting firm for the fiscal years ending December 31,
2018 and 2017. The following table shows the fees that were paid or
accrued by us for audit and other services provided by Seligson
& Giannattasio, LLP for the 2018 and 2017 fiscal
years.
|
|
Fiscal 2018
|
|
|
Fiscal 2017
|
|
Audit Fees(1)
|
|
$
|
69,000
|
|
|
$
|
64,000
|
|
Audit-Related Fees(2)
|
|
|
-
|
|
|
|
-
|
|
Tax Fees(3)
|
|
|
4,000
|
|
|
|
4,000
|
|
Subtotal
|
|
$
|
73,000
|
|
|
|
68,000
|
|
All other Fees(4)
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
73,000
|
|
|
$
|
68,000
|
|
(1)Audit fees represent fees for professional services provided in
connection with the audit of our annual financial statements and
the review of our financial statements included in our Form 10-Q
quarterly reports and services that are normally provided in
connection with statutory or regulatory filings for the 2018 and
2017 fiscal years.
(2) Audit-related fees represent fees for assurance and related
services that are reasonably related to the performance of the
audit or review of our financial statements and not reported above
under “Audit Fees.”
(3) Tax fees represent fees for professional services related to
tax compliance, tax advice and tax planning.
All audit related services, tax services and other services
rendered by Seligson & Giannattasio, LLP were pre-approved by
our Board of Directors or Audit Committee. The Audit Committee has
adopted a pre-approval policy that provides for the pre-approval of
all services performed for us by Seligson & Giannattasio, LLP.
The policy authorizes the Audit Committee to delegate to one or
more of its members pre-approval authority with respect to
permitted services. Pursuant to this policy, the Board delegated
such authority to the Chairman of the Audit Committee. All
pre-approval decisions must be reported to the Audit Committee at
its next meeting. The Audit Committee has concluded that the
provision of the non-audit services listed above is compatible with
maintaining the independence Seligson & Giannattasio,
LLP.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In January 2015, the Company agreed to issue 39,657 shares of
common stock as a price protection to a note holder that originally
converted notes at a price of $2.50 and continues to hold these
shares. These additional shares would have been issued if the
conversion shares price was $1.75. As of December 31,
2015, 33,142 shares of common stock have been issued and
$247,000 of interest expense was recorded for this issuance. During
January 2016 the remaining 6,515 share were issued and $20,000 of
interest expense was recorded.
During the six months ending June 30, 2016, the Company issued
an aggregate of 12,580,183
shares of common stock to a total of 34 persons or entities in
exchange of the cancellation of warrants on a cashless
basis. The shares issued were exempt from the
registration requirements of Section 5 of the Securities Act of
1933 (the “Act”) pursuant to Section
4(2)
of the Act since the shares were issued to persons or entities
closely associated with the Company and there was no public
offering of the shares.
During the six months ending June 30, 2016, the Company also issued
an aggregate of 2,022,230
shares of common stock to a total of 17 persons as payment for
consulting services provided to the Company. The average
valuation of these shares was $2.00 per share. These shares were
also exempt from the registration requirements of Section 5 of the
Act pursuant to Section 4(2) of the Act
since the shares were also issued to persons closely associated
with the Company and there was no public offering of the
shares.
During the six months ending June 30, 2016, the Company also issued
an aggregate of 4,612,341 shares of common stock to two executive
officers of the Company in fulfilment of contractual rights held by
the officers pursuant to their employment
agreements. These shares were also exempt from the
registration requirements of Section 5 of the Act pursuant to
Section 4(2) of the Act since the shares were also issued to
persons closely associated with the Company and there was no public
offering of the shares.
During the six months ending June 30, 2016, the Company also issued
an aggregate of 4,275,186
shares of common stock to a total of 17 persons as payment for the
conversion of certain note and the related accrued
interest. The conversion price of these shares was $0.40
per share. These shares were also exempt from the registration
requirements of Section 5 of the Act pursuant to
Section
4(2) of the Act since the shares were also issued to persons
closely associated with the Company and there was no public
offering of the shares.
In August 2016, the Company issued 1,115,000 shares of common stock to H.C. Wainwright
and Co., LLC as payment for investment banking services provided to
the Company.
In August 2016, the Company entered into a securities purchase
agreement with one accredited investor to sell 10% convertible
debentures up $1,000,000, with and an exercise price of $0.40, with
an initial principal balance of $250,000 and warrants to acquire up
to 2,500,000 shares of the Company’s common stock at an
exercise price of $0.45 per share.
In October 2016 the Company issued an aggregate of 453,431 shares of common stock to one
noteholder as payment for the conversion of certain accrued
interest. The conversion price of these shares was $0.40
per share. These shares were also exempt from the registration
requirements of Section 5 of the Act pursuant to
Section
4(2) of the Act since the shares were also issued to persons
closely associated with the Company and there was no public
offering of the shares.
In October 2016 the Company issued an aggregate of 594,530 shares of common stock to one
noteholder as payment for the conversion of a certain
note. The conversion price of these shares was $0.0841
per share based on 60% of the average of the lowest three trading
prices occurring at any time during the 20 trading days preceding
conversion These shares were also exempt from the registration
requirements of Section 5 of the Act pursuant to
Section
4(2) of the Act since the shares were also issued to persons
closely associated with the Company and there was no public
offering of the shares.
In November 2016 the Company issued an aggregate of 975,039 shares
of common stock to one noteholder as payment for the conversion of a certain note. The
conversion price of these shares was $0.0513 per
share based on 60% of the average of the lowest three
trading prices occurring at any time during the 20 trading
days preceding conversion These shares were also exempt
from the registration requirements of Section 5 of
the Act pursuant to Section 4(2) of the Act since the
shares were also issued to persons closely associated with
the Company and there was no public offering of the
shares.
In January 2017, the Company entered into a securities purchase
agreement with eight accredited investors to sell 10% convertible
debentures with and an exercise price of the lesser of (i)
$15.00 or (ii) the average of the three (3) lowest intra-day
trading prices of the Common Stock during the 20 Trading Days
immediately prior to the date on which the Notice of Conversion is
delivered to the Company, with
an initial principal balance of $633,593 and warrants to acquire up
to 42,240 shares of the Company's common stock at an exercise price
of $15.00 per share.
In March 2017, the Company entered into a securities purchase
agreement with two accredited investors to sell 10% convertible
debentures with and an exercise price of the lesser of (i)
$15.00 or (ii) the average of the three (3) lowest intra-day
trading prices of the Common Stock during the 20 Trading Days
immediately prior to the date on which the Notice of Conversion is
delivered to the Company, with
an initial principal balance of $232,313 and warrants to acquire up
to 15,487 shares of the Company's common stock at an exercise price
of $15.00 per share.
In April 2017, the Company entered into a securities purchase
agreement with two accredited investors to sell 10% convertible
debentures with and an exercise price of the lesser of (i) $15.00
or (ii) the average of the three (3) lowest intra-day trading
prices of the Common Stock during the 20 Trading Days immediately
prior to the date on which the Notice of Conversion is delivered to
the Company, with an initial principal balance of $70,000 and
warrants to acquire up to 46,666 shares of the Company's common
stock at an exercise price of $15.00 per share.
In May 2017, the Company entered into a securities purchase
agreement with two accredited investors to sell 10% convertible
debentures with and an exercise price of the lesser of (i) $15.00
or (ii) the average of the three (3) lowest intra-day trading
prices of the Common Stock during the 20 Trading Days immediately
prior to the date on which the Notice of Conversion is delivered to
the Company, with an initial principal balance of $125,000 and
warrants to acquire up to 8,333 shares of the Company's common
stock at an exercise price of $15.00 per share.
In May 2017, the Company entered into a securities purchase
agreement with two accredited investors to sell 10% convertible
debentures with and an exercise price of the lesser of (i) $15.00
or (ii) the average of the three (3) lowest intra-day trading
prices of the Common Stock during the 20 Trading Days immediately
prior to the date on which the Notice of Conversion is delivered to
the Company, with an initial principal balance of $125,000 and
warrants to acquire up to 8,333 shares of the Company's common
stock at an exercise price of $15.00 per share.
In July 2017, the Company entered into a securities purchase
agreement with one accredited investors to sell 10% convertible
debentures with and an exercise price of the lesser of (i) $15.00
or (ii) the average of the three (3) lowest intra-day trading
prices of the Common Stock during the 20 Trading Days immediately
prior to the date on which the Notice of Conversion is delivered to
the Company, with an initial principal balance of $650,000 and
warrants to acquire up to 43,333 shares of the Company's common
stock at an exercise price of $15.00 per share.
In August 2017, the Company entered into a securities purchase
agreement with three accredited investors to sell 10% convertible
debentures with and an exercise price of the lesser of (i) $15.00
or (ii) the average of the three (3) lowest intra-day trading
prices of the Common Stock during the 20 Trading Days immediately
prior to the date on which the Notice of Conversion is delivered to
the Company, with an initial principal balance of $3,890,000 and
warrants to acquire up to 259,333 shares of the Company's common
stock at an exercise price of $15.00 per share.
In January 22, 2018, the Company entered into a Securities Purchase
Agreement (“SPA”) with the fourteen accredited
investors (individually, a “Buyer” and collectively,
the “Buyers”) pursuant to which the Company has agreed
to issue to the Buyers senior convertible notes in an aggregate
principal amount of $7,760,510 (the “Notes”), which
Notes shall be convertible into the Company’s common stock,
par value $0.001 per share (the “Common Stock”), and
five-year warrants to purchase the Company’s Common Stock
representing the right to acquire an aggregate of approximately
1,694,440 shares of Common Stock (the
“Warrants”).
Pursuant to the terms of SPA the Notes are subject to an original
issue discount of 10% resulting in proceeds to the Company of
$7,055,000 from the transaction. The Notes are due on July 22,
2018. The Notes are convertible, at the option of the Buyers, at
any time prior to payment in full, into shares of common stock of
the Company at a price of $4.58 per share (“Conversion
Price”). According to the terms of the note agreement, the
Notes are subject to certain adjustments depending upon the price
and structure of a subsequent financing, including a qualified
financing with gross proceeds of at least $20 million, as defined
in the agreements.
Upon the purchase of the Notes, the Buyers received Warrants to
purchase 1,694,440 shares of Common Stock. Such Warrants are
exercisable for (5) years from the date the shares underlying the
Warrants are freely saleable. The initial Exercise Price is $4.58.
According to the terms of the warrant agreement, the Warrants are
subject to certain adjustments depending upon the price and
structure of a subsequent financing, including a qualified
financing with gross proceeds of at least $20 million, as defined
in the agreements.
The issuance of the Notes and Warrants were made in reliance on the
exemption provided by Section 4(a)(2) of the Securities Act of
1933, as amended (the “Securities Act”) for the offer
and sale of securities not involving a public offering, and
Regulation D promulgated under the Securities Act.
Contemporaneously with the execution and delivery of the SPA, the
Company and the Buyers executed and delivered a Registration Rights
Agreement (the “Registration Rights Agreement”)
pursuant to which the Company has agreed to provide certain
registration rights with respect to the Registrable Securities
under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws. All descriptions
of the SPA, the Registration Rights Agreement, the Notes and the
Warrants contained herein are qualified in their entirety by
reference to the exhibits filed herewith.
On August 2, 2018, GT Biopharma, Inc. (the “Company”)
entered into a Securities Purchase Agreement with the purchasers
identified on the signature pages thereto (individually, a
“Purchaser,” and collectively, the
“Purchasers”) pursuant to which the Company has issued
to the Purchasers 10% Senior Convertible Debentures in an aggregate
principal amount of $5,140,000 (the “Debentures”),
which Debentures shall be convertible into the Company’s
common stock, par value $0.001 per share (the “Common
Stock”), at a price of $2 per share. The Company used a
portion of these proceeds to repay $4.4 million of the notes issued
on January 22, 2018. Additionally, the remaining $3.3 million of
the notes issued on January 22, 2018 were converted into the
Debentures at the same terms discussed above.
On September 7, 2018, GT Biopharma, Inc. (the
“Company”) entered into a Securities Purchase Agreement
with the purchasers identified on the signature pages thereto
(individually, a “Purchaser,” and collectively, the
“Purchasers”) pursuant to which the Company has issued
to the Purchasers one year 10% Senior Convertible Debentures in an
aggregate principal amount of $2,050,000 (the
“Debentures”), which Debentures shall be convertible
into the Company’s common stock, par value $0.001 per share
(the “Common Stock”), at a price of $2 per
share.
n February 4, 2019, GT Biopharma, Inc. (the “Company”)
entered into a Securities Purchase Agreement (the “Purchase
Agreement”) with the purchasers identified on the signature
pages thereto (individually, a “Purchaser,” and
collectively, the “Purchasers”), pursuant to which the
Company issued to the Purchasers, on February 4, 2019, Secured
Convertible Notes in an aggregate principal amount of $1,352,224
(the “Notes”), consisting of gross proceeds of
$1,052,224 and settlement of existing debt of $300,000, which Notes
shall be convertible at any time after issuance into shares (the
“Conversion Shares”) of the Company’s common
stock, par value $0.001 per share (the “Common Stock”),
at a conversion price of $0.60 per share (the “Conversion
Price”).
The Notes accrue interest at the rate of 10% per annum and mature
on August 2, 2019. Interest on the Notes is payable in cash or, at
a Purchaser’s option, in shares of Common Stock at the
Conversion Price. Upon the occurrence of an event of default,
interest accrues at 18% per annum. The Notes contain customary
default provisions, including provisions for potential
acceleration, and covenants, including negative covenantsregarding
additional indebtedness and dividends. The Conversion Price is
subject to adjustment due to certain events, including stock
dividends and stock splits, and is subject to reduction in certain
circumstances if the Company issues Common Stock or Common Stock
equivalents at an effective price per share that is lower than the
Conversion Price then in effect. The Company may only prepay the
Notes with the prior written consent of the respective Purchasers
thereof.
Contemporaneously with the execution and delivery of the Purchase
Agreement, on February 4, 2019, the Company and certain of its
wholly-owned subsidiaries entered into a Security Agreement (the
“Security Agreement”) with Alpha Capital Anstalt, as
collateral agent on behalf of the Purchasers, and with the
Purchasers, pursuant to which the Purchasers have been granted a
first-priority security interest in substantially all of the assets
of the Company and such subsidiaries securing (i) an aggregate
principal amount of $1,352,224 of Notes and (ii) an aggregate
principal amount of $9,058,962 of the Company’s 10% Senior
Convertible Debentures issued on August 2, 2018, September 7, 2018
and September 24, 2018 held by such Purchasers.
The Purchase Agreement contains customary representations,
warranties and covenants, including covenants, subject to certain
exceptions, that the Company, until the date on which less than 10%
of the Notes are outstanding, shall not effect any Variable Rate
Transaction (as defined in the Purchase Agreement) and that, for as
long as a Purchaser holds any Notes or Conversion Shares, the
Company shall amend the terms and conditions of the Purchase
Agreement and the transactions contemplated thereby with respect to
such Purchaser to give such Purchaser the benefit of any terms or
conditions under which the Company agrees to issue or sell any
Common Stock or Common Stock equivalents that are more favorable to
an investor than the terms and conditions granted to such Purchaser
under the Purchase Agreement and the transactions contemplated
thereby.
In addition, the Company entered into a registration rights
agreement (the “Registration Rights Agreement”) with
the Purchasers, pursuant to which the Company has agreed to file,
within 14 days after February 4, 2019, one or more registration
statements on Form S-3 (or, if Form S-3 is not then available to
the Company, such form of registration that is then available to
effect a registration for resale of the subject securities)
covering the resale of all Conversion Shares, subject to certain
penalties set forth in the Registration Rights Agreement. The Form
S-3 was filed by the Company on February 14, 2019.
On May 22, 2019, GT Biopharma, Inc. (the "Company") entered into a
Securities Purchase Agreement with ten purchasers (individually, a
"Purchaser," and collectively, the "Purchasers") pursuant to which
the Company has issued to the Purchasers Convertible Debentures in
an aggregate principal amount of $1,300,000 (the "Debentures"),
which Debentures are convertible into the Company's common stock
(the "Common Stock") at a price of $0.35 per share. The
Company and each Purchaser also entered into a Registration Rights
Agreement.
The abovementioned equity securities were issued in reliance on the
exemption from registration provided by Section 4(2) of
the Securities Act of 1933 (the "Securities
Act") and/or Rule 506 of
Regulation D under the Securities Act, as
amended.
ITEM
16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
Exhibits
The following exhibits are filed with this registration
statement:
Exhibit Number
|
Exhibit Description
|
Form
|
Date
|
Number
|
Filed Herewith
|
|
Agreement and Plan of Merger
|
10-Q
|
11/14/17
|
2.1
|
|
|
Restated Certificate of Incorporation as filed in Delaware
September 10, 1996 and as thereafter amended through March 1,
2002
|
10-KSB
|
04/01/02
|
3.A
|
|
3.2
|
Certificate of Amendment to Amended and Restated Certificate of
Incorporation of GT Biopharma, Inc.
|
10-K
|
03/31/11
|
3.2
|
|
|
Certificate of Designation of Preferences, Rights and Limitations
of Series H Convertible Preferred Stock of GT Biopharma, Inc.,
dated February 5, 2010
|
8-K
|
02/16/10
|
3.1
|
|
|
Certificate of Designation of Preferences, Rights and Limitations
of Series I Convertible Preferred Stock of GT Biopharma, Inc.,
dated March 18, 2011.
|
10-K
|
03/31/11
|
3.4
|
|
|
Bylaws, as restated effective September 7, 1994 and as amended
through April 29, 2003
|
10-QSB
|
08/13/03
|
3
|
|
|
Certificate of Amendment to the Certificate of Incorporation of the
Registrant, effective as of July 19, 2017.
|
8-K
|
03/15/18
|
|
|
|
License Agreement with ID4 Pharma LLC
|
10-Q
|
08/11/17
|
10.1
|
|
|
License Agreement with MultiCell Immunotherapeutics,
Inc.
|
10-Q
|
08/11/17
|
10.2
|
|
|
License Agreement with the University of Minnesota
|
10-Q
|
08/11/17
|
10.3
|
|
|
License Agreement with Daniel A. Vallera, Ph.D.
|
10-Q
|
08/11/17
|
10.4
|
|
|
Warrant Conversion Agreement
|
10-Q
|
11/14/17
|
10.6
|
|
|
Preferred Conversion Agreement
|
10-Q
|
11/14/17
|
10.7
|
|
|
Amended Note Conversion Agreement
|
10-Q
|
11/14/17
|
10.8
|
|
|
Amended Warrant Conversion Agreement
|
10-Q
|
11/14/17
|
10.9
|
|
|
Amended Preferred Conversion Agreement
|
10-Q
|
11/14/17
|
10.10
|
|
|
Securities Purchase Agreement
|
8-K
|
01/13/17
|
10.1
|
|
|
10% Senior Convertible Debenture
|
8-K
|
01/13/17
|
10.2
|
|
|
Common Stock Purchase Warrant
|
8-K
|
01/13/17
|
10.3
|
|
|
Securities Purchase Agreement by and among the Company and the
Buyers, dated January 22, 2018.
|
8-K
|
01/23/18
|
10.1
|
|
|
Form of Registration Rights Agreement by and among the Company and
the Buyers, dated January 22, 2018
|
8-K
|
01/23/18
|
10.2
|
|
|
Form of Note
|
8-K
|
01/23/18
|
10.3
|
|
|
Form of Warrant
|
8-K
|
01/23/18
|
10.4
|
|
|
First Amendment to the Employment Agreement, dated as of February
14, 2018, between the Company and Dr. Clarence-Smith.
|
8-K
|
02/21/18
|
2
|
|
|
Consultant Agreement, dated as of February 14, 2018, between the
Company and Mr. Cataldo.
|
8-K
|
02/21/18
|
3
|
|
|
Form of 10% Senior Convertible Debenture
|
8-K
|
08/03/18
|
4.1
|
|
|
Security Purchase Agreement
|
8-K
|
08/03/18
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10.1
|
|
|
Form of 10% Senior Convertible Debenture
|
8-K
|
09/07/18
|
4.1
|
|
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Security Purchase Agreement
|
8-K
|
09/07/18
|
10.1
|
|
|
Form of 10% Senior Convertible Debenture
|
8-K
|
09/24/18
|
4.1
|
|
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Security Purchase Agreement
|
8-K
|
09/24/18
|
10.1
|
|
|
Separation Agreement between the Company and Dr.
Clarence-Smith
|
8-K
|
10/12/18
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10.1
|
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10.26
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Resignation of Steven Weldon
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8-K
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10/16/18
|
|
|
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Stock Pledge Agreement
|
10-Q
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08/14/18
|
10.10
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|
|
Executive Employment Agreement with Dr. Urbanski
|
10-Q
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11/14/18
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10.17
|
|
10.29
|
Secured Convertible Note
|
8-K
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02/06/19
|
4.1
|
|
|
Security Purchase Agreement
|
8-K
|
02/06/19
|
10.1
|
|
|
Security Agreement
|
8-K
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02/06/19
|
10.2
|
|
|
Registration Rights Agreement
|
8-K
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02/06/19
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10.3
|
|
|
Form of Note
|
8-K
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05/24/19
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4.1
|
|
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Security Purchase Agreement
|
8-K
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05/24/19
|
10.1
|
|
|
Form of Registration Rights Agreement
|
8-K
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05/24/19
|
10.2
|
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14.1
|
Code of Ethics
|
10-K
|
03/31/16
|
14.1
|
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21.1
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Subsidiaries of GT Biopharma, Inc.
|
10-K
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03/31/16
|
21.1
|
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23.1
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Opinion of Gary R. Henrie
|
|
|
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X
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|
Consent of Seligson & Giannattasio, LLP, Independent Registered
Public Accounting Firm, relating to the Registrant
|
|
|
|
X
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Consent of Gary R. Henrie (included in Exhibit 5.1)
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|
|
|
X
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24.1
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Power of Attorney (included on signature page hereto)
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|
|
|
X
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101
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Interactive Data File
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|
|
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X
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(b) Financial Statement Schedules
See the Index to Financial Statements included on page 58 for a
list of the financial statements included in this
prospectus.
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our officers and directors are indemnified as provided by Delaware
Corporation Law and our bylaws. Under the Delaware Corporation Law,
director immunity from liability to a company or its shareholders
for monetary liabilities applies automatically unless it is
specifically limited by a company's articles of incorporation that
is not the case with our articles of incorporation. Excepted from
that immunity are:
(1)
a
willful failure to deal fairly with the company or its shareholders
in connection with a matter in which the director has a material
conflict of interest;
(2)
a
violation of criminal law (unless the director had reasonable cause
to believe that his or her conduct was lawful or no reasonable
cause to believe that his or her conduct was
unlawful);
(3)
a
transaction from which the director derived an improper personal
profit; and
Our bylaws provide that we will indemnify our directors and
officers to the fullest extent not prohibited by Delaware law;
provided, however, that we may modify the extent of such
indemnification by individual contracts with our directors and
officers; and, provided, further, that we shall not be required to
indemnify any director or officer in connection with any proceeding
(or part thereof) initiated by such person unless:
(1)
such
indemnification is expressly required to be made by
law;
(2)
the
proceeding was authorized by our Board of Directors;
(3)
such
indemnification is provided by us, in our sole discretion, pursuant
to the powers vested us under Delaware law; or
(4)
such
indemnification is required to be made pursuant to the
bylaws.
Our bylaws provide that we will advance all expenses incurred to
any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was our director
or officer, or is or was serving at our request as a director or
executive officer of another company, partnership, joint venture,
trustor other enterprise, prior to the final disposition of the
proceeding, promptly following request. This advanced of expenses
is to be made upon receipt of an undertaking by or on behalf of
such person to repay said amounts should it be ultimately
determined that the person was not entitled to be indemnified under
our bylaws or otherwise.
Our bylaws also provide that no advance shall be made by us to any
officer in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, if a determination is reasonably
and promptly made: (a) by the board of directors by a majority vote
of a quorum consisting of directors who were not parties to the
proceeding; or (b) if such quorum is not obtainable, or, even if
obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, that the facts
known to the decision-making party at the time such determination
is made demonstrate clearly and convincingly that such person acted
in bad faith or in a manner that such person did not believe to be
in or not opposed to our best interests.
ITEM 28. UNDERTAKINGS
The undersigned registrant hereby undertakes:
1.
To file, during any period in which
offers or sales are being made, a post-effective amendment to this
registration statement:
(1)
To
include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(2)
To
reflect in the prospectus any facts or events arising after the
effective date of this registration statement, or most recent
post-effective amendment, which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement; and
(3)
To
include any material information with respect to the plan of
distribution not previously disclosed in this registration
statement or any material change to such information in the
registration statement.
2. That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered hereby, which
remain unsold at the termination of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to our directors, officers
and controlling persons pursuant to the provisions above, or
otherwise, we have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act of 1933, and is,
therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities, other than the payment by us of expenses incurred or
paid by one of our directors, officers, or controlling persons in
the successful defense of any action, suit or proceeding, is
asserted by one of our directors, officers, or controlling persons
in connection with the securities being registered, we will, unless
in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification is against
public policy as expressed in the Securities Act of 1933, and we
will be governed by the final adjudication of such
issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the
City of Las Vegas, State of California, on June 19, 2019.
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GT BIOPHARMA, INC.
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By:
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/s/ Anthony J. Cataldo
|
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Anthony J. Cataldo
|
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Chief Executive Officer
|
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POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Anthony J. Cataldo his true and lawful attorney-in-fact
and agent with full power of substitution and re-substitution, for
him or her and in his or her name, place, and stead, in any and all
capacities, to sign any and all (1) amendments (including
post-effective amendments) and additions to this Registration
Statement and (2) Registration Statements, and any and all
amendments thereto (including post-effective amendments), relating
to the offering contemplated pursuant to Rule 462(b) under the
Securities Act of 1933, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, and hereby grants to such
attorney-in-fact and agent full power and authority to do and
perform each and every actand thing requisite and necessary to be
done, as fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or his or her substitute or
substitutes may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following
persons in the capacities and on the dates indicated.
/s/
Anthony J. Cataldo
Anthony J. Cataldo, CEO and Director
June 19, 2019
/s/ Steven Weldon
Steven Weldon, CFO, Chief Accounting Officer and
Director
June 19, 2019