UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For
the quarterly period ended
| Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from __________ to ____________.
Commission
File Number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
(Address of principal executive offices and zip code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of exchange on which registered | ||
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company | |
| Emerging growth company |
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. Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of November 1, 2023, the registrant had shares of common stock outstanding.
GT BIOPHARMA, INC. AND SUBSIDIARIES
FORM 10-Q
For the Nine Months Ended September 30, 2023
Table of Contents
| 2 |
GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except shares and par value)
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Short-term investments | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| Operating lease right-of-use asset | ||||||||
| Deposits | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Current operating lease liability | ||||||||
| Total Current Liabilities | ||||||||
| Non-current operating lease liability | ||||||||
| Warrant liability | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Equity | ||||||||
| Convertible Preferred stock, par value $, shares authorized Series C - shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | ||||||||
| Common stock, par value $, shares authorized, shares and | ||||||||
| shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
| For The Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Operating Expenses: | ||||||||||||||||
| Research and development (including $ and $ expense from stock compensation granted to officers, directors and employees during the three months ended September 30, 2023 and 2022, and $ and $ for the nine months ended September 30, 2023 and 2022, respectively) | ||||||||||||||||
| Selling, general and administrative (including $ million and $ million expense from stock compensation granted to officers, directors and employees during the three months ended September 30, 2023 and 2022, respectively and $ million and $ million for the nine months ended September 30, 2023 and 2022, respectively) | ||||||||||||||||
| Loss from Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (Income) Expense | ||||||||||||||||
| Interest income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense | ||||||||||||||||
| Change in fair value of derivative liability | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on extinguishment of debt | ( | ) | ||||||||||||||
| Unrealized (gain) loss on short term investments | ( | ) | ( | ) | ||||||||||||
| Total Other (Income) Expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net Loss Per Share - Basic and Diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average common shares outstanding - basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
| For The Three Months Ended September 30, 2023 (Unaudited) | ||||||||||||||||||||||||||||||||||||
| Preferred Shares | Common Shares | Common Shares Issuable | Additional Paid in | Accumulated | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Fair value of vested stock options | - | - | - | |||||||||||||||||||||||||||||||||
| Issuance of common stock to an officer and a board member for services | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock in settlement of accounts payable and accrued expenses | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| For The Nine Months Ended September 30, 2023 (Unaudited) | ||||||||||||||||||||||||||||||||||||
| Preferred Shares | Common Shares | Common Shares Issuable | Additional Paid in | Accumulated | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Private placement of common stock | - | - | ||||||||||||||||||||||||||||||||||
| Initial recognition of fair value of warrant liability | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Fair value of vested stock options | - | - | - | |||||||||||||||||||||||||||||||||
| Issuance of common stock to officer and board member for services | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for exercise of Prefunded Warrants | - | - | ( | ) | ||||||||||||||||||||||||||||||||
| Issuance of common stock in settlement of accounts payable and accrued expenses | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| 5 |
| For The Three Months Ended September 30, 2022 (Unaudited) | ||||||||||||||||||||||||||||||||||||
| Preferred Shares | Common Shares | Common Shares Issuable | Additional Paid in | Accumulated | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Equity compensation to officers, employees, and board of directors | - | |||||||||||||||||||||||||||||||||||
| Issuance of common shares for services | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common shares in settlement of vendors payable | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| For The Nine Months Ended September 30, 2022 (Unaudited) | ||||||||||||||||||||||||||||||||||||
| Preferred Shares | Common Shares | Common Shares Issuable | Additional Paid in | Accumulated | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Cancellation of common stock upon settlement with former officer | - | ( | ) | ( | ) | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Cancellation of common stock | - | ( | ) | - | ||||||||||||||||||||||||||||||||
| Common shares issued upon conversion of notes payable | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Equity compensation to officers, employees, and board of directors | - | |||||||||||||||||||||||||||||||||||
| Issuance of common shares for services | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common shares in settlement of vendors payable | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
GT BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| For The Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock based compensation – common shares for services | ||||||||
| Stock based compensation – vested stock options | ||||||||
| Change in fair value of warrant liability | ( | ) | ( | ) | ||||
| Gain on extinguishment of debt | ( | ) | ||||||
| Unrealized (gain) loss on marketable securities | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease in prepaid expenses | ||||||||
| Increase in deposits | ( | ) | ||||||
| Decrease in operating lease right of use assets | ||||||||
| Increase (decrease) in accounts payable and accrued expenses | ( | ) | ||||||
| (Decrease) in operating lease liability | ( | ) | ( | ) | ||||
| Net Cash Used in Operating Activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Sales (purchases) of investments | ( | ) | ||||||
| Net Cash Provided by (Used in) Investing Activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of common stock and prefunded warrants | ||||||||
| Cancellation of common stock upon settlement with former officer | ( | ) | ||||||
| Net Cash (Used in) Provided by Financing Activities | ( | ) | ||||||
| Net Decrease in Cash | ( | ) | ( | ) | ||||
| Cash at Beginning of Period | ||||||||
| Cash at End of Period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
| Cash paid during the year for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Right-of-use assets exchanged for lease liabilities | $ | $ | ||||||
| Initial recognition of fair value of warrant liability | $ | $ | ||||||
| Fair value of common stock issued to settle accounts payable and accrued expenses | $ | $ | ||||||
| Common stock issued upon conversion of notes payable and accrued interest | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 7 |
GT BIOPHARMA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023 and 2022
(Unaudited, in thousands, except shares data)
Note 1 – Organization and Operations
In 1965, the corporate predecessor of GT Biopharma, Inc. (Company), 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.
The Company is a clinical stage biopharmaceutical company focused on the development and commercialization of novel immune-oncology products based on our proprietary Tri-specific Killer Engager (TriKE®), and Tetra-specific Killer Engager (Dual Targeting TriKE®) platforms. The Company’s TriKE® and Dual Targeting TriKE® platforms generate proprietary therapeutics designed to harness and enhance the cancer killing abilities of a patient’s own natural killer cells (NK cells).
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The consolidated condensed financial statements include the accounts of the Company and its wholly-owned subsidiaries, Oxis Biotech, Inc. and Georgetown Translational Pharmaceuticals, Inc. All intercompany transactions and balances have been eliminated in consolidation.
The accompanying condensed consolidated financial statements are unaudited. These interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 30, 2023 (the “2022 Annual Report”). The consolidated balance sheets as of December 31, 2022 included herein, was derived from the audited consolidated financial statements as of that date.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company’s financial position and its results of operations for the interim periods reflected. Except as noted, all adjustments contained herein are of a normal recurring nature. Results of operations for the fiscal periods presented herein are not necessarily indicative of fiscal year-end results.
Liquidity
The
accompanying consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern.
Such assumptions contemplate the realization of assets and satisfaction of liabilities in the normal course of business. For the nine
months ended September 30, 2023, the Company recorded a net loss of $
Historically, the Company has financed its operations through public and private sales of common stock, issuance of preferred and common stock, issuance of convertible debt instruments, and strategic collaborations. There can be no assurances that the Company will be able to secure additional financing on acceptable terms. In the event the Company does not generate sufficient cash flows from investing and financing activities, the Company will be forced to delay, reduce, or eliminate some or all of its discretionary spending, which could adversely affect the Company’s business prospects, ability to meet long-term liquidity needs or ability to continue its operations.
| 8 |
COVID-19
The global COVID-19 pandemic continues to present uncertainty and unforeseeable risks to our operations and business plans. The Company has closely monitored recent developments, including the lifting of COVID-19 safety measures, the spread of new strains or variants of the coronavirus (such as the Delta and Omicron variants), and supply chain, raw materials and labor shortages. Thus, the full impact of the COVID-19 pandemic on the business and operations remains uncertain and will vary depending on the pandemic’s future impact on the third parties with whom the Company does business, as well as any legal or regulatory consequences resulting therefrom. The Company has been following the recommendations of health authorities to minimize exposure risk for its team members and may take further actions that alter our operations, including any required by federal, state or local authorities, or that it determines are in the best interests of its employees and other third parties with whom GT Biopharma does business.
Accounting Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include accruals for potential liabilities, assumptions used in deriving the fair value of warrant liabilities, valuation of equity instruments issued for debt and services and realization of deferred tax assets. Actual results could differ from those estimates.
Cash Equivalents and Short-Term Investments
The
Company considers highly liquid investments with maturities of three months or less at the date of acquisition as cash equivalents in
the accompanying condensed consolidated financial statements. Total cash equivalents, which consist of money market funds, totaled approximately
$
The
Company also invested its excess cash in commercial paper and corporate notes and bonds. Management generally determines the appropriate
classification of its investments at the time of purchase. We classify these investments as short-term investments as part of current
assets, based upon our ability and intent to use any and all of these investments as necessary to satisfy liquidity requirements that
may arise from our business. Investments are carried at fair value with the unrealized holding gains and losses reported in the accompanying
condensed consolidated statements of operations. Total short-term investments totaled approximately $
Fair Value of Financial Instruments
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820-10 requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet for which it is practicable to estimate fair value. ASC 820-10 defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties.
The three levels of the fair value hierarchy are as follows:
| Level 1 | Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access. | |
| Level 2 | Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. | |
| Level 3 | Valuations based on inputs that are unobservable, supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
The
carrying amount of the Company’s warrant liability of $
The carrying amounts of the Company’s other financial assets and liabilities such as cash, other current assets, accounts payable and accrued expenses approximate their fair values because of the short maturity of these instruments.
Derivatives and Liability-Classified Instruments
The Company accounts for common stock warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and the guidance provided by the FASB in ASC 480, Distinguishing Liabilities from Equity (ASC 480) and ASC 815, Derivatives and Hedging (ASC 815). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own stock and whether the holders of the warrants could potentially require net cash settlement in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. The fair value of the warrant liability is determined using a Binomial valuation method at inception and on subsequent valuation dates.
| 9 |
Stock-Based Compensation
The Company accounts for share-based awards to employees, nonemployees, and consultants in accordance with the provisions of ASC 718, Compensation-Stock Compensation. Stock-based compensation cost is measured at fair value on the grant date and that fair value is recognized as expense over the requisite service or vesting period.
The Company values its equity awards using the Black-Scholes option pricing model, and accounts for forfeitures when they occur. Use of the Black-Scholes option pricing model requires the input of subjective assumptions including expected volatility, expected term, and a risk-free interest rate. The Company estimates volatility using its own historical stock price volatility. The expected term of the instrument is estimated by using the simplified method to estimate expected term. The risk-free interest rate is estimated using comparable published federal funds rates.
Research and Development Costs
Costs incurred for research and development are expensed as incurred. The salaries, benefits, and overhead costs of personnel conducting research and development of the Company’s products are included in research and development costs. Purchased materials that do not have an alternative future use are also expensed.
Leases
The Company accounts for its leases in accordance with the guidance of ASC 842, Leases. The Company determines whether a contract is, or contains, a lease at inception. Right-of-use assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at lease commencement in determining the present value of unpaid lease payments (see Note 8 – Operating Leases for the Company’s lease disclosures).
Basic loss per share is computed using the weighted-average number of common shares outstanding during the period. Common stock issuable is included in our calculation as of the date of the underlying agreement. Diluted loss per share is computed using the weighted-average number of common shares and the dilutive effect of contingent shares outstanding during the period. Potentially dilutive contingent shares, which primarily consist of stock issuable for the exercise of stock options and warrants, have been excluded from the diluted loss per share calculation because their effect is anti-dilutive.
September 30, 2023 | September 30, 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Options to purchase common stock | ||||||||
| Warrants to purchase common stock | ||||||||
| Unvested restricted common stock | ||||||||
| Total anti-dilutive securities | ||||||||
Concentration
Cash
is deposited in one financial institution. The balances held at this financial institution at times may be in excess of Federal Deposit
Insurance Corporation (“FDIC”) insurance limits of up to $
The Company has a significant concentration of expenses incurred and accounts payable from a single vendor (see Note 4 – Accounts Payable for further information).
Segments
The Company determined its reporting units in accordance with ASC 280, “Segment Reporting” (“ASC 280”). Management evaluates a reporting unit by first identifying its’ operating segments under ASC 280. The Company then evaluates each operating segment to determine if it includes one or more components that constitute a business. If there are components within an operating segment that meet the definition of a business, the Company evaluates those components to determine if they must be aggregated into one or more reporting units. If applicable, when determining if it is appropriate to aggregate different operating segments, the Company determines if the segments are economically similar and, if so, the operating segments are aggregated.
| 10 |
Management has determined that the Company has one consolidated operating segment. The Company’s reporting segment reflects the manner in which its chief operating decision maker reviews results and allocates resources. The Company’s reporting segment meets the definition of an operating segment and does not include the aggregation of multiple operating segments.
Recent Accounting Pronouncements
In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Credit Losses – Measurement of Credit Losses on Financial Instruments (“ASC 326”). ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. ASU 2016-13 was effective for the Company beginning January 1, 2023, and early adoption is permitted. The Company adopted this standard effective January 1, 2023 and there was no material impact of adopting this standard on the Company’s financial statements and related disclosures.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. ASU 2021-04 provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. An issuer measures the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange. ASU 2021-04 introduces a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification). ASU 2021-04 was effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, applied prospectively to modifications or exchanges occurring on or after the effective date. Effective January 1, 2022, we adopted ASU 2021-04 using a prospective approach. It did not have a material impact on the Company’s financial statements or disclosures.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.
Note 3 – Fair Value of Financial Instruments
The estimated fair values of financial instruments outstanding were as follow:
| September 30, 2023 (Unaudited) | ||||||||||||||||
| Unrealized | Unrealized | Fair | ||||||||||||||
| Cost | Gains | Losses | Value | |||||||||||||
| Short-term investments | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| December 31, 2022 | ||||||||||||||||
| Unrealized | Unrealized | Fair | ||||||||||||||
| Cost | Gains | Losses | Value | |||||||||||||
| Short-term investments | $ | $ | $ | ( | ) | $ | ||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
| 11 |
The following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents and investments):
| September 30, 2023 (Unaudited) | ||||||||||||||||
| Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
| Money market funds | $ | $ | $ | $ | ||||||||||||
| Corporate notes and commercial paper | ||||||||||||||||
| Total financial assets | $ | $ | $ | $ | ||||||||||||
| December 31, 2022 | ||||||||||||||||
| Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
| Money market funds | $ | $ | $ | $ | ||||||||||||
| Corporate notes and commercial paper | ||||||||||||||||
| Total financial assets | $ | $ | $ | $ | ||||||||||||
As
of September 30, 2023, the fair value of the warrant liability amounted to $
| Three Months Ending | Nine Months Ending | |||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Beginning balance | $ | $ | $ | $ | ||||||||||||
| Fair value upon issuance of warrants | ||||||||||||||||
| Change in fair value | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Ending balance | $ | $ | $ | $ | ||||||||||||
Note 4 – Accounts Payable
Accounts payable consisted of the following:
| September 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | ||||||||
| Accounts payable to a third-party manufacturer | $ | $ | ||||||
| Other accounts payable | ||||||||
| Total accounts payable | $ | $ | ||||||
The Company relies on a third-party contract manufacturing operation to produce and/or test our compounds used in our potential product candidates.
In October 2020, the Company entered into a Master Services Agreement with a third-party product manufacturer to perform biologic development and manufacturing services on behalf of the Company. Associated with this, the Company has subsequently executed a number of Statements of Work for the research and development of products for use in clinical trials.
| 12 |
On August 24, 2022, existing agreements with the third-party product manufacturer were amended. As part of the amendment, the third-party manufacturer agreed that services to be rendered in future periods, will be paid or settled at the Company’s discretion, in a combination of cash and issuance of the Company’s common stock. The amendment also eliminated future financial commitments of the Company.
During
the nine months ended September 30, 2023 the Company incurred $
The
outstanding accounts payable balance due to the third-party product manufacturer totaled $
Note 5 – Warrant Liability
2023 Warrants
On
January 4, 2023, as part of the private placement offering, the Company issued common stock, warrants to purchase up to an aggregate
of
The
Purchase Warrant provides for a value calculation for the Purchase Warrant using the Black Scholes model in the event of certain fundamental
transactions. The fair value calculation provides for a floor on the volatility amount utilized in the value calculation at % or greater.
The Company has determined this provision introduces leverage to the holders of the Purchase Warrant that could result in a value that
would be greater than the settlement amount of a fixed-for-fixed option on the Company’s own equity shares. Therefore, pursuant
to ASC 815, the Company has classified the Purchase Warrant as a liability in its consolidated balance sheet. The classification of the
Purchase Warrant, including whether the Purchase Warrant should be recorded as liability or as equity, is evaluated at the end of each
reporting period with changes in the fair value reported in other income (expense) in the consolidated statements of operations and comprehensive
loss. The Purchase Warrant was initially recorded at a fair value at $
As
of September 30, 2023, the fair value of the warrant liability was $
All changes in the fair value of the warrant liabilities are recognized as a change in fair value of warrant liability in the Company’s condensed consolidated statements of operations until they are either exercised or expire.
The warrant liabilities for the Common Warrants and the Placement Agents Warrants were valued using a Binomial pricing model with the following weighted average assumptions:
Common Warrants and Placement Agents Warrants | ||||||||
| September 30, 2023 | At Inception | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Stock price | $ | $ | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected volatility | % | % | ||||||
| Expected life (in years) | ||||||||
| Expected dividend yield | ||||||||
| Fair value of warrants (in thousands) | $ | $ | ||||||
2020 Warrants
The Company issued certain warrants during the year ended December 31, 2020 that contained a fundamental transaction provision that could give rise to an obligation to pay cash to the warrant holder upon occurrence of certain change in control type events. In accordance with ASC 480, the fair value of these warrants is classified as a liability in the Condensed Consolidated Balance Sheets and will be re-measured at the end of every reporting period with the change in value reported in the Condensed Consolidated Statements of Operations.
| 13 |
The warrant liabilities for the 2020 Warrants were valued using a Binomial pricing model with the following assumptions:
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| Stock price | $ | $ | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected volatility | % | % | ||||||
| Expected life (in years) | ||||||||
| Expected dividend yield | ||||||||
| Fair value of warrants | $ | $ | ||||||
During
the three months and nine months ended September 30, 2023, the Company recognized a gain of $
The risk-free interest rate was based on rates established by the Federal Reserve Bank. The Company uses the historical volatility of its common stock to estimate the future volatility for its common stock. The expected life of the warrant securities was determined by the remaining contractual life of the warrant instrument. The expected dividend yield was based on the fact that the Company has not paid dividends to its common stockholders in the past and does not expect to pay dividends to its common stockholders in the future.
Note 6 – Stockholders’ Equity
The Company’s authorized capital as of September 30, 2023 was shares of common stock, par value $ per share, and shares of preferred stock, par value $ per share.
Common Stock
Private Placement of Common Stock
On
January 4, 2023, GT Biopharma received gross proceeds of $
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 $
| 14 |
In May 2023, the
Common Stock Issuable
On
February 16, 2021, because of the mandatory conversion of the notes payable and accrued interest in the aggregate amount of $
Cancellation of Common Stock
The Company cancelled 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 and
shares of common stock with a fair value of $
During the three and nine months ended September 30, 2022, the Company issued and shares of common stock with a fair value of
$
Common Stock Issued for Accounts Payable
During
the nine months ended September 30, 2023, the Company issued a total of shares
of common stock with a fair value of $to
settle accounts payable and accrued expenses of $
| 15 |
Preferred Stock
Series C Preferred Stock
At September 30, 2023 and December 31, 2022, there were shares of series C preferred stock, par value $ 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 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 shares of Series K preferred stock, par value $ (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 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 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:
| Number of | Weighted Average | |||||||
| Warrants | Exercise Price | |||||||
| Warrant outstanding at December 31, 2022: | $ | |||||||
| Granted | ||||||||
| Forfeited/canceled | ( | ) | ||||||
| Exercised | ( | ) | ||||||
| Warrants outstanding at September 30, 2023 | $ | |||||||
| Warrants exercisable at September 30, 2023 | $ | |||||||
| 16 |
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:
| Warrants Outstanding | Warrants Exercisable | |||||||||||||||||||
| Range of Exercise Price | Number Outstanding | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | |||||||||||||||
| $ – | $ | $ | ||||||||||||||||||
| – | ||||||||||||||||||||
Common Stock Options
| Number of | Weighted Average | |||||||
| Options | Exercise Price | |||||||
| Options outstanding at December 31, 2022 | $ | |||||||
| Granted | ||||||||
| Forfeited/canceled | ( | ) | ||||||
| Exercised | ||||||||
| Options outstanding at September 30, 2023 | $ | |||||||
| Options vested and exercisable at September 30, 2023 | $ | |||||||
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 million shares of common stock at an exercise price of $ per share. The stock options expire in years, vest over twelve months and had a fair value of $ million at the date of grant determined using the Black-Scholes Option Pricing model with the following weighted average assumptions.
| 17 |
On May 15, 2023, the Company granted stock options to a member of its board of directors to purchase shares of common stock at an exercise price of $ per share. The stock options expire in years, vest over twelve months and had a fair value of $ 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.
| Stock price | $ | $ - $ | ||
| Risk-free interest rate | % | |||
| Expected volatility | % | |||
| Expected life (in years) | ||||
| Expected dividend yield |
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 $ and $, respectively.
| Options Outstanding | Options Exercisable | |||||||||||||||||||||
| Range of Exercise Price | Number Outstanding | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | |||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
At September 30, 2023, fair value of unvested options totaled $