Note 6 – Stockholders’ Equity

The Company’s authorized capital as of March 31,2023 was 250,000,000 shares of common stock, par value $0.001 per share, and 15,000,000 shares of preferred stock, par value $0.01 per share.

Common Stock

Private Placement of Common Stock

On January 4, 2023, GT Biopharma received gross proceeds of $6.5 million, before deducting placement agent fees and other offering expenses of $232,000 in relation to a purchase agreement (the “Purchase Agreement”) signed on December 30, 2022, between the Company and an institutional investor (the “Purchaser”) for the issuance and sale, in a registered direct offering (the “Offering”), of 3,600,000 shares of the Company’s common stock, par value $0.001 per share (the “Shares”), pre-funded warrants to purchase up to 2,900,000 shares of the Company’s common stock (the “Pre-Funded Warrants”), warrants to purchase up to an aggregate of 6,500,000 shares of the Company’s common stock (the “Common Warrants”) and placement agent warrants to purchase up to 390,000 shares of the Company’s common stock (the “Placement Agents Warrants”). The Common Warrants have an exercise price equal to $1.00, will be exercisable commencing six months following issuance, and will have a term of exercise equal to five years following the initial exercisable date. The Pre-Funded Warrants have an exercise price of $0.0001 per Share, are immediately exercisable and can be exercised at any time after their original issuance until such Pre-Funded Warrants are exercised in full. The Placement Agents Warrants have an exercise price equal to $1.25, will be exercisable commencing six months following issuance, and will have a term of exercise equal to five years following the initial exercisable date.

The Common Warrants and the Placement Agents Warrants contained a clause not considered to be within the Company’s control. The Company determined that the provision represented a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under ASC 815-40, and thus the Common Warrants and the Placement Agent Warrants are not considered indexed to the Company’s own stock and not eligible for an exception from derivative accounting. Accordingly, the Common Warrants and the Placement Agent Warrants were classified as a warrant liability, and $5.8 million of the initial common stock offering was classified as a warrant liability (see Note 5 - Warrant Liability).

Common Stock Issuable

On February 16, 2021, because of the mandatory conversion of the notes payable and accrued interest in the aggregate amount of $38.8 million, the Company issued a total of 11,413,322 shares of common stock to the respective noteholders, of which 11,086,024 were issued as of December 31, 2021. The remaining 327,298 common shares issuable at December 31, 2021 valued at $1.1 million, were issued during the three months ended March 31, 2022.

Cancellation of common stock

The Company cancelled 290,999 previously issued shares of common stock during the three months ended March 31, 2022.

Common stock issued for services

During the three months ended March 31, 2023, and pursuant to the vesting term of a 2021 agreement, the Company issued 73,454 shares of common stock with a fair value of $315,000 to members of the Board of Directors, employees and consultants. The shares were valued at the respective date of the agreements. During the three months ended March 31, 2022, the Company issued 247,429 shares of common stock with a fair value of $1.3 million to members of the Board of Directors, employees and consultants.

Common stock issued for vendor payable

On March 13, 2023, the Company issued 486,819 shares of common stock with a fair value of $287,000 as settlement of accounts payable of $820,000. As a result, the Company recognized a gain of $533,000 to account the difference between the fair value of the common stock issued and the accounts payable settled.

Preferred Stock

Series C Preferred Stock

At March 31, 2023 and December 31, 2022, there were 96,230 shares of series C preferred stock, par value $0.01 per share (the “Series C Preferred Stock”) issued and outstanding.

As a result of reverse stock splits in previous years and the agreement terms for adjusting the rights of the related shares, the 96,230 shares of Series C Preferred Stock are not currently convertible, have no voting rights, and in the event of liquidation, the holders of the Series C Preferred Stock would not participate in any distribution of the assets or surplus funds of the Company. The holders of Series C Preferred Stock also are not currently entitled to any dividends if and when declared by the Company’s board of directors (the “Board”). No dividends to holders of the Series C Preferred Stock were issued or unpaid through March 31, 2023 and 2022, respectively.

Series K Preferred Stock

On February 16, 2021, the Board designated 115,000 shares of Series K preferred stock, par value $.01 (the “Series K Preferred Stock”).

Shares of the Series K Preferred Stock are convertible at any time, at the option of the holders, into shares of the Company’s common stock at an effective conversion rate of 100 shares of common stock for each share of Series K Preferred. Shares of the Series K Preferred Stock have the same voting rights as the shares of the Company’s common stock, with the holders of the Series K Preferred Stock entitled to vote on an as-converted-to-common stock basis, subject to the beneficial ownership limitation, together with the holders of the Company’s common stock on all matters presented to the Company’s stockholders. The Series K Preferred Stock are not entitled to any dividends (unless specifically declared by the Board) but will participate on an as-converted-to-common-stock basis in any dividends to the holders of the Company’s common stock. In the event of the Company’s dissolution, liquidation or winding up, the holders of the Series K Preferred Stock will be on parity with the holders of the Company’s common stock and will participate, on a on an as-converted-to-common stock basis, in any distribution to holders of the Company’s common stock.

As of March 31, 2023 and December 31, 2022, there were no shares of Series K Preferred stock issued and outstanding.

Warrants and Options

Common Stock Warrants

Stock warrant transactions for the three months ended March 31, 2023 were as follows:

 Schedule of Warrant Activity 

As of March 31, 2023, all issued and outstanding warrants are fully vested, with the exception of 6.5 million Common Warrants and the 390,000 Placement Agent Warrants which vest in July 2023. The prefunded warrants of 2,900,000 warrants have a nominal exercise price of $0.0001. The remaining vested warrants had an exercise price greater than the market price, which resulted in no intrinsic value.

Warrants outstanding as of March 31, 2023 are exercisable as follows:

Schedule of Warrants Outstanding 

Common Stock Options

Common stock option transactions for the three months ended March 31, 2023 were as follows:

 Schedule of Options Activity 

The Company is recognizing the corresponding stock compensation expense for options granted to certain consultants, employees, officers and directors based upon their vesting term.

On January 27, 2023, the Company granted stock options to employees and members of its board of directors to purchase an aggregate of 2,000,000 shares of common stock. The stock options are exercisable to $0.85 per share, expires in 10 years, vest over twelve months and had a fair value of $1.4 million at the date of grant. determined using the Black-Scholes Option Pricing model with the following assumptions:

 Schedule of Stock Granted Assumptions

For the three months ended March 31, 2023, the Company recognized stock compensation expense relating to the vesting of options granted on January 27, 2023 and prior years of $507,000. For the three months ended March 31, 2022, the Company recognized stock compensation expense related to the vesting options of $46,000.

Options outstanding as of March 31, 2023 are exercisable as follows:

 Schedule of Options Outstanding

At March 31, 2023 and 2022, there were 1,596,744 and 191,285 unvested options with a grant date fair value of $1.3 million and $511,000, respectively, which will be recognized as stock compensation expense in future periods based upon the remaining vesting term of the applicable grants.

There was no intrinsic value of the outstanding options as of March 31, 2023 as the exercise price of these options was greater than the market price.