| Commitments and Contingencies |
1. Litigation
We are involved in certain legal
proceedings that arise from time to time in the ordinary course of our business. Except for income tax contingencies, we record
accruals for contingencies to the extent that our management concludes that the occurrence is probable and that the related amounts
of loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. There is no current
or pending litigation of any significance with the exception of the matters that have arisen under, and are being handled in, the
normal course of business.
| a. |
On August 28, 2019, a complaint was filed in the Superior Court of California, County of Los Angeles, West Judicial District, Santa Monica Courthouse, Unlimited Civil Division by Jeffrey Lion, an individual (“Lion”), and by Daniel Vallera, an individual (“Vallera”). Lion and Vallera are referred to jointly as the “Plaintiffs”. The complaint was filed against GT Biopharma, Inc. and its subsidiary Oxis Biotech, Inc. (either of them or jointly, the “Company”). The Plaintiffs allege breach of a license agreement between the Plaintiffs and the Company entered into on or about September 3, 2015. Lion alleges breach of a consulting agreement between Lion and the Company entered into on or about September 1, 2015. Vallera alleges breach of a consulting agreement between Vallera and the Company entered into in or around October, 2018. The Complaint seeks actual damages of $1,670,000, for the fair market value of the number of shares of GT Biopharma, Inc. that at the time of judgment represent 15,000,000 shares of such stock as of September 1, 2015, and that GT Biopharma, Inc. issue Lion the number of common shares of GT Biopharma, Inc. that at the time of judgment represent 15,000,000 such shares as of September 1, 2015.The Company filed an answer to the complaint denying many allegations and asserting affirmative defenses. Discovery has commenced and trial is scheduled for May, 2022. The Company believes the case is without merit and will defend it vigorously. |
| b. |
On March 3, 2021 a complaint was filed by Sheffield Properties in the superior Court of California. County of Ventura. The litigation arises from a commercial lease entered into by GT Biopharma for office space in Westlake Village. GT Biopharma has been served but has not yet answered the complaint. Sheffield Properties seeks damages in excess of $250,000. We intend to vigorously defend against these claims (see Note 7). |
| 2. |
Employment Commitments |
| a. |
Effective August 11, 2020, the Company and Mr. Cataldo, CEO, entered into the Cataldo Agreement with respect to Mr. Cataldo’s continued employment as Chief Executive Officer of the Company. The Initial Term of the Cataldo Agreement is three years with the option of automatic one-year renewals thereafter. Mr. Cataldo will be paid a cash salary of $30,000 per month, together with customary benefits, expense reimbursement and the possibility of performance bonuses. Mr. Cataldo will receive a stock grant equal to ten percent of the fully diluted shares of common stock of the Company (calculated with the inclusion of the current stock holdings of Mr. Cataldo) upon conversion of options, warrants and Convertible Notes in association with a national markets qualified financing as consideration for entering into the Cataldo Agreement (with such stock to vest and be delivered within 30 days after the national markets qualified financing). Mr. Cataldo will be entitled to certain additional severance payments and other benefits in connection with a Change in Control Period Involuntary Termination or a Non Change in Control Period Involuntary Termination (each as defined in the Cataldo Agreement) or his resignation as a result of a Change in Control Period Good Reason or Non Change in Control Period Good Reason (each as defined in the Cataldo Agreement). Following the Effective Date, Mr. Cataldo will also continue to serve as the chairman of the board of the Company. |
| b. |
Effective November, 11, 2020, the Company appointed Mr. Handelman as Chief Financial Officer on an interim basis. Effective November 13, 2020, the Company and Mr. Handelman entered into the Handelman Agreement with respect to Mr. Handelman’s service as Chief Financial Officer of the Company. The term of the Handelman Agreement is indefinite, subject to ninety days prior written notice of termination. Pursuant to the Handelman Agreement, Mr. Handelman will receive a monthly consulting fee of $15,000, along with the opportunity to earn a discretionary bonus. Mr. Handelman will also serve as the principal accounting officer of the Company. On December 14, 2020 the Company and Mr. Handelman entered into an Agreement with respect to Mr. Handelman’s continued employment as Chief Financial Officer of the Company. The Initial Term of the Handelman Agreement is three years with the option of automatic one-year renewals thereafter. Mr. Handelman will be paid a cash salary of $21,000 per month, together with customary benefits, expense reimbursement and the possibility of performance bonuses. The cash salary will increase to $25,000 with the successful up list onto the NASDAQ stock exchange. Mr. Handelman will receive a stock grant equal to one and half percent of the fully diluted shares of common stock of the Company (calculated with the inclusion of the current stock holdings) upon conversion of options, warrants and Convertible Notes in association with a national markets qualified financing as consideration for entering into the Cataldo Agreement (with such stock to vest and be delivered within 30days after the national markets qualified financing). Mr. Handelman will be entitled to certain additional severance payments and other benefits in connection with a Change in Control Period Involuntary Termination or a Non Change in Control Period Involuntary Termination (each as defined in the Agreement) or his resignation as a result of a Change in Control Period Good Reason or Non Change in Control Period Good Reason (each as defined in the Agreement). |
| 3. |
Research and Development Agreement: |
We are party to an exclusive worldwide
license agreement with the Regents of the University of Minnesota, to further develop and commercialize cancer therapies using
TriKE technology developed by researchers at the university to target NK cells to cancer. Under the terms of the agreement, we
receive exclusive rights to conduct research and to develop, make, use, sell, and import TriKE technology worldwide for the treatment
of any disease, state or condition in humans. We are responsible for obtaining all permits, licenses, authorizations, registrations
and regulatory approvals required or granted by any governmental authority anywhere in the world that is responsible for the regulation
of products such as the TriKE technology, including without limitation the FDA in the United States and the European Agency for
the Evaluation of Medicinal Products in the European Union. We are presently evaluating GTB-3550, our lead TriKE therapeutic product
candidate in a Phase I/II clinical trial. Under the agreement, the University of Minnesota received an upfront license fee which
was recorded in prior year, royalty fees ranging from 4% to 6%, minimum annual royalty payments of $0.25 million beginning in 2022,
$2.0 million in 2025, and $5.0 million in 2027 and certain milestone payments totaling $3.1 million.
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