Note 6 – Stockholders’ Equity

The Company’s authorized capital as of September 30, 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 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 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 exercise 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 exercise date. The Shares and Common Warrants were sold at an offering price of $1.00 per Share and accompanying Common Warrant and the Pre-Funded Warrants and Common Warrants were sold at an offering price of $0.9999 per Pre-Funded Warrant and accompanying Common Warrant.

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).

In May 2023, the 2,900,000 Pre-Funded Warrants were exercised. The Company received cash consideration of $0.290 and issued 2,900,000 shares of common stock in exchange for the exercise price of $0.0001 per share.

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 already issued as of December 31, 2021. The remaining 327,298 common shares 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 and nine months ended September 30, 2023, the Company issued 400 and 473 shares of common stock with a fair value of $115 and $430, respectively to members of the Board of Directors, employees and consultants. The shares were valued at the respective date of the agreements.

During the three and nine months ended September 30, 2022, the Company issued 135 and 412 shares of common stock with a fair value of $1,200 and $2,462, respectively to members of the Board of Directors, employees and consultants. The shares were valued at the respective date of the agreements.

Common Stock Issued for Accounts Payable

During the nine months ended September 30, 2023, the Company issued a total of 1,723,094 shares of common stock with a fair value of $702 to settle accounts payable and accrued expenses of $1.2 million. As a result, the Company recorded a gain of $547 to account for the difference between the fair value of the common stock issued and the account payable settled. The common stock issued were valued at the respective date of their issuance.

Preferred Stock

Series C Preferred Stock

At September 30, 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 convertible to common stock, have no voting rights, and in the event of liquidation, the holders of the Series C Preferred Stock would not participate in any distribution of the assets or surplus funds of the Company. The holders of Series C Preferred Stock also are not currently entitled to any dividends if and when declared by the Company’s board of directors (the “Board”). No dividends to holders of the Series C Preferred Stock were declared or unpaid as of and for the period ended September 30, 2023.

Series K Preferred Stock

On February 16, 2021, the Board designated 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 an as-converted-to-common stock basis, in any distribution to holders of the Company’s common stock.

As of September 30, 2023 and December 31, 2022, there were no shares of Series K Preferred stock issued and outstanding.

Warrants and Options

Common Stock Warrants

Common stock warrant transactions for the nine months ended September 30, 2023 were as follows:

Schedule of Warrant Activity

The warrants had an exercise price greater than the market price, which resulted in no intrinsic value.

Warrants outstanding as of September 30, 2023 are exercisable as follows:

Schedule of Warrants Outstanding  

Common Stock Options

Common stock option transactions for the nine months ended September 30, 2023 were as follows:

Schedule of Options Activity

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

On January 27, 2023, the Company granted stock options to employees and members of its board of directors to purchase an aggregate of 2.0 million shares of common stock at an exercise price of $0.85 per share. The stock options expire 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 weighted average assumptions.

On May 15, 2023, the Company granted stock options to a member of its board of directors to purchase 500,000 shares of common stock at an exercise price of $0.35 per share. The stock options expire in 10 years, vest over twelve months and had a fair value of $150 on at the date of grant determined using the Black-Scholes Option Pricing model.

The Company used the following weighted average assumptions in the Black-Scholes Option Pricing model to compute the fair value of the stock options granted during the period ended September 30, 2023.

Schedule of Stock Granted Assumptions

For the three months and nine months ended September 30, 2023, the Company recognized stock compensation expense relating to the vesting of options granted in 2023 and prior years of $433 and $1,337, respectively.

Options outstanding as of September 30, 2023 are exercisable as follows:

Schedule of Options Outstanding

At September 30, 2023, fair value of unvested options totaled $904, which will be recognized as stock compensation expense in future periods based upon the remaining vesting term of the applicable grants.

There was no intrinsic value of the outstanding options as of September 30, 2023 as the exercise price of these options was greater than the market price.