Note 6 – Stockholders’ Equity

The Company is authorized to issue 250,000,000 shares of common stock at a par value of $0.001, and 15,000,000 shares of preferred stock at par value $0.01 per share as of December 31, 2023.

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 120,000 shares of the Company’s common stock, par value $0.001 per share (the “Shares”), pre-funded warrants to purchase up to 96,667 shares of the Company’s common stock (the “Pre-Funded Warrants”), warrants to purchase up to an aggregate of 216,667 shares of the Company’s common stock (the “Common Warrants”) and placement agent warrants to purchase up to 13,000 of the Company’s common stock (the “Placement Agents Warrants”). The Common Warrants have an exercise price equal to $30.00, became exercisable commencing six months following issuance, and shall have a term of exercise equal to five years following the initial exercise date. The Pre-Funded Warrants had an exercise price of $0.003 per Share, were immediately exercisable and could be exercised at any time after their original issuance until such Pre-Funded Warrants were exercised in full. The Placement Agents Warrants have an exercise price equal to $37.50, became exercisable commencing six months following issuance, and shall 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 $30.00 per Share and accompanying Common Warrant and the Pre-Funded Warrants and Common Warrants were sold at an offering price of $29.997 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 (Note 5 – Warrant Liability).

In May 2023, the 96,667 Pre-Funded Warrants were exercised.

Common Stock Issuable

As a result of the completion of a public offering on February 16, 2021 and listing of the Company’s shares of common stock on the Nasdaq Capital Market, convertible notes payable and accrued interest totaling $38.8 million were mandatorily converted into 380,444 shares of the Company’s common stock. As of December 31, 2021, 10,909 shares of common stock were still unissued to the corresponding noteholders with a total notes payable and accrued interest of $1.1 million and was accounted as common stock issuable in the accompanying consolidated statements of stockholders’ equity.

During the year ended December 31, 2022, the Company issued the remaining 10,909 common shares issuable valued at $1.1 million. In addition, the Company also issued an additional 347 shares of commons stock with a fair value of $35,000 as settlement with a noteholder.

Cancellation of Common Stock Previously Issued for Services

The Company cancelled 9,700 previously issued shares of common stock during the year ended December 31, 2022.

Issuance of Common Stock as Equity Compensation to Officers, Employees and Board of Directors

During the year ended December 31, 2023, the Company issued 14,237 shares of common stock and recognized stock compensation expense of $267,000 to account for the fair value of common stock that vested. This included 13,333 shares with a fair value of $115,000 that were granted during the year.

During the year ended December 31, 2022, the Company issued 23,654 shares of common stock and recognized stock compensation expense of $2.5 million to account for the fair value of common stock that vested. This included 12,602 shares with a fair value of $938,000 that were granted during the year.

As of December 31, 2023 and 2022, there were no unvested shares granted to officers, employees and directors.

Equity Compensation to Consultants

During the year ended December 31, 2023, the Company issued 1,545 shares of common stock and recognized stock compensation expense of $162,000 to account for the fair value of common stock that vested.

During the year ended December 31, 2022, the Company issued 17,562 shares of common stock and recognized stock compensation expense of $2.1 million to account for the fair value of common stock that vested.

As of December 31, 2023, there were no unvested shares of common stock issued to consultants.

Cancellation of Common Stock Upon Settlement with a Former Officer

On April 29, 2022, the Company entered into a settlement agreement with its former Chief Executive Officer (“Officer”) and received 61,500 shares of its previously issued common stock in full and final settlement of all its claims against the Officer. The common stock was subsequently cancelled and returned to treasury. In addition, the Company incurred legal and professional expenses of $224,000. The legal and professional fees incurred were accounted as costs of the acquisition of the common stock and recorded as a reduction to additional paid in capital. Both the Company and the Officer released each other from claims under the settlement agreement.

Preferred Stock

Series C Preferred Stock

At December 31, 2023 and 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 December 31, 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 Stock. Shares of the Series K Preferred Stock have the same voting rights a 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 December 31, 2023 and 2022, there were no Series K Preferred stock issued and outstanding.

Warrants and Options

Common Stock Warrants

Stock warrant transactions for the years ended December 31, 2023 and 2022, were as follows:

 Schedule of Warrant Activity

As of December 31, 2023 and 2022, all issued and outstanding warrants were fully vested. There was no intrinsic value of the outstanding warrants as of December 31, 2023 and 2022, as the exercise price of these warrants was equal to or greater than the market price.

Common Stock Options

Stock option transactions for the years ended December 31, 2023 and 2022 were as follows:

 Schedule of Options Activity

Year Ended December 31, 2023

On January 27, 2023, the Company granted stock options to employees and members of its board of directors to purchase an aggregate of 66,667 shares of common stock at an exercise price of $25.50 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 weighted average assumptions below.

On May 15, 2023, the Company granted stock options to a member of its board of directors to purchase 16,666 shares of common stock at an exercise price of $10.50 per share. The stock options expire in 10 years, vest over twelve months and had a fair value of $175,000 on at the date of grant determined using the Black-Scholes Option Pricing model.

Due to the departure of certain employees during the year end December 31, 2023, 11,416 stock option were forfeited or expired unexercised.

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 year ended December 31, 2023.

 Schedule of Stock Granted Assumptions

During the year ended December 31, 2023, the Company recognized stock compensation expense relating to the vesting of options granted in 2023 totaling $1.8 million to account the fair value of stock options that vested in fiscal 2023.

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

As of December 31, 2023, unamortized fair value of the 8,085 unvested stock options amounted to $186,000 which will be recognized in future periods.

Year Ended December 31, 2022

On July 15, 2022, the Company granted certain consultants, employees, officers and directors stock options to purchase an aggregate of 51,098 shares of common stock. The stock options are exercisable at $74.40 per share and will expire in 10 years. A portion of the options vested immediately with the remaining portion vesting over a period of 5 months up to 36 months. The fair value of the options amounted to $3.4 million or an average of $66.60 per share and were calculated 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 year ended December 31, 2022.

The Company recorded forfeitures of 6,833 options to purchase common stock during 2022 due to the resignation of two employees. The forfeitures were related to shares that had not yet been vested.

During the year ended December 31, 2022, the Company recorded total stock compensation of $3.0 million to account the fair value of stock options that vested in fiscal 2022.