gtbp_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	For the quarterly period ended September 30, 2021.

☐	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 001-40023

GT BIOPHARMA, INC.

(Exact name of registrant as specified in its charter)

Delaware

94-1620407

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

9350 Wilshire Blvd. Suite 203

Beverly Hills, CA 90212

(Address of principal executive offices and zip code)

(800) 304-9888

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Trading Symbol		Name of exchange on which registered
Common Stock, $0.001 par value per share		GTBP		Nasdaq

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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	☐
Non-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 ☐ No ☒

As of November 12, 2021, the issuer had 30,582,354 shares of common stock outstanding.

GT Biopharma, Inc. and Subsidiaries

FORM 10-Q

For the Quarter Ended September 30, 2021

Table of Contents

PART I FINANCIAL INFORMATION		Page

Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020	3
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020 (unaudited)	4
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (unaudited)	7
	Condensed Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25

PART II OTHER INFORMATION

Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	26
Item 6.	Exhibits	27
SIGNATURES		28

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GT BIOPHARMA, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

	September 30,			December 31,
	2021			2020
ASSETS:	(unaudited)
Current assets
Cash and cash equivalents	$	9,682,000		$	5,297,000
Short-term investments		26,031,000			-
Prepaid expenses and other current assets		85,000			364,000
Total Current Assets	$	35,798,000		$	5,661,000

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities
Accounts payable	$	2,802,000		$	2,243,000
Accrued expenses		749,000			1,296,000
Accrued interest		-			4,838,000
Convertible notes payable (net of discount of $4,519,000 at December 31, 2020)		-			26,303,000
Line of Credit		31,000			31,000
Derivative liability		340,000			383,000
Total current liabilities		3,922,000			35,094,000

Stockholders' Equity (Deficit):

Convertible Preferred stock, par value $0.01, 15,000,000 shares authorized:
Series C - 96,230 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		1,000			1,000
Series J - 0 and 2,353,548 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		-			2,000
Series K- none issued and outstanding at September 30, 2021 and December 31, 2020, respectively		-			-
Common stock, par value $0.001, 2,000,000,000 shares authorized, 30,508,260 and 5,218,122 shares issued and outstanding as of September 30, 2021 and December 31, 2020 , respectively		30,000			5,000
Common stock issuable, 1,004,495 shares at September 30, 2021		3,416,000			-
Additional paid in capital		663,991,000			566,356,000
Accumulated deficit		(635,393,000	)		(595,628,000	)
Non-Controlling Interest		(169,000	)		(169,000	)
Total stockholders' equity (deficit)		31,876,000			(29,433,000	)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$	35,798,000		$	5,661,000

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GT BIOPHARMA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

	For the Three Months ended						For the Nine Months ended
	September 30,						September 30,
	2021			2020			2021			2020
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenues	$	-		$	-		$	-		$	-

Operating Expenses:
Research and development		1,008,000			(84,000	)		3,287,000			252,000
Selling, general and administrative (including $577,000 and $15,450,000 of stock compensation to officers and directors in 2021 during the three and nine months ended September 30, 2021, respectively)		4,946,000			2,029,000			36,050,000			4,321,000

Loss from Operations		5,954,000			1,945,000			39,337,000			4,573,000

Other (Income) Expense
Interest income		(32,000	)					(32,000	)
Unrealized loss on marketable securities		33,000						33,000
Change in fair value of derivative liability		(502,000	)		-			(43,000	)		-
Settlement expense		-			-			-			11,206,000
Interest expense		-			931,000			696,000			6,227,000
Total Other Expense, net		(501,000	)		931,000			654,000			17,433,000

Net Loss	$	(5,453,000	)	$	(2,876,000	)	$	(39,991,000	)	$	(22,006,000	)

Net loss per share
Basic and diluted	$	(0.17	)	$	(0.64	)	$	(1.54	)	$	(5.13	)

Weighted average common shares outstanding
Basic and diluted		31,381,282			4,513,534			25,945,827			4,288,808

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GT BIOPHARMA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders' Equity (Deficit) (unaudited)

For the three and nine months ended September 30, 2021 and 2020


																	Additional						Non
	Preferred Shares						Common Shares				Common Shares Issuable						Paid in			Accumulated			Controlling
	Shares			Amount			Shares		Amount		Shares			Amount			Capital			Deficit			Interest			Total

Balance, December 31, 2020		2,449,778		$	3,000			5,218,122	$	5,000		-		$	-		$	566,356,000		$	(595,628,000	)	$	(169,000	)	$	(29,433,000	)

Extinguishment of debt discount upon adoption of ASU 2020-06		-			-			-		-		-			-			(4,745,000	)		226,000			-			(4,519,000	)

Conversion of Preferred Series J-1 to common stock		(2,353,548	)		(2,000	)		692,220		1,000		-			-			1,000			-			-			-

Common shares issued upon mandatory conversion of notes payable and accrued interest		-			-			10,408,827		10,000		1,004,495			3,416,000			35,373,000			-			-			38,799,000

Common shares issued upon exercise of warrants		-			-			3,073,818		3,000		-			-			16,430,000			-			-			16,433,000

Issuance of common stock in public offering, net of cost		-			-			4,945,000		5,000		-			-			24,674,000			-			-			24,679,000

Issuance of common stock for research and development agreement		-			-			189,753		-		-			-			1,355,000			-			-			1,355,000

Issuance of common stock for services		-			-			2,142,746		2,000		-			-			9,101,000			-			-			9,103,000
																											-
Equity compensation to officers and board of directors		-			-			3,837,774		4,000		-			-			15,446,000			-			-			15,450,000
																											-
Net loss																					(39,991,000	)					(39,991,000	)

Balance, September 30, 2021		96,230		$	1,000			30,508,260	$	30,000		1,004,495		$	3,416,000		$	663,991,000		$	(635,393,000	)	$	(169,000	)	$	31,876,000


Balance, June 30, 2021		96,230		$	1,000			28,144,077	$	28,000		3,152,000		$	10,716,000.00		$	655,655,000		$	(629,940,000	)	$	(169,000	)	$	36,291,000

Common shares issued upon conversion of notes payable		-			-			2,147,018		2,000		(2,147,505	)		(7,300,000	)		7,294,000			-			-			(4,000	)

Common shares issued upon exercise of warrants		-			-			26,000		-		-			-			138,000			-			-			138,000

Issuance of common stock for services		-			-			92,686		-		-			-			327,000			-			-			327,000

Equity compensation to officers and board of directors		-			-			98,479		-		-			-			577,000			-			-			577,000
																											-
Net loss																					(5,453,000	)					(5,453,000	)

Balance, September 30, 2021		96,230		$	1,000			30,508,260	$	30,000		1,004,495		$	3,416,000		$	663,991,000		$	(635,393,000	)	$	(169,000	)	$	31,876,000

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Balance, December 31, 2019	2,449,778	$	3,000	4,104,982	$	4,000	-	$	-	$	548,184,000	$	(567,332,000	)	$	(169,000	)	$	(19,310,000	)

Beneficial conversion feature of convertible notes	-		-	-		-	-		-		27,000		-			-			27,000

Issuance of common stock for settlement of litigation	-		-	205,882		-	-		-		1,909,000		-			-			1,909,000

Common shares issued upon conversion of notes payable	-		-	185,118		-	-		-		9,277,000		-			-			9,277,000

Equity compensation	-		-	63,882		-	-		-		146,000		-			-			146,000

Issuance of warrants for services	-		-	-		-	-		-		180,000		-			-			180,000

Net loss	-		-	-		-	-		-				(22,006,000	)		-			(22,006,000	)

Balance, September 30, 2020	2,449,778	$	3,000	4,559,865	$	4,000	-	$	-	$	559,723,000	$	(589,338,000	)	$	(169,000	)	$	(29,777,000	)

Balance, June 30, 2020	2,449,778	$	3,000	4,559,865	$	4,000	-	$	-	$	559,723,000	$	(586,462,000	)	$	(169,000	)	$	(26,901,000	)

Net loss	-		-	-		-	-		-				(2,876,000	)		-			(2,876,000	)

Balance, September 30, 2020	2,449,778	$	3,000	4,559,865	$	4,000	-	$	-	$	559,723,000	$	(589,338,000	)	$	(169,000	)	$	(29,777,000	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GT BIOPHARMA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

	For the Nine Months Ended
	September 30,
	2021			2020
	(unaudited)			(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(39,991,000	)	$	(22,006,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Change in fair value of derivative liability		(43,000	)		-
Stock based compensation - consultants and research and development		10,458,000			-
Stock based compensation - officers and board of directors		15,450,000			327,000
Convertible notes payable issued for consulting services		720,000			-
Amortization of debt discount		-			-
Non-cash interest expense		-			3,970,000
Settlement expense		-			11,206,000
Effect of changes in assets and liabilities:
Prepaid expenses and other current assets		279,000			3,000
Accounts payable and accrued expenses		537,000			1,165,000
Accrued interest		689,000			-
Net Cash Used in Operating Activities		(11,901,000	)		(5,335,000	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments		(26,031,000	)		-
Net Cash Used by Investing Activities		(26,031,000	)		-

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of warrants		16,433,000			-
Proceeds from issuance of common stock		24,679,000			-
Proceeds from issuance of notes payable		1,205,000			5,657,000
Net Cash Provided by Financing Activities		42,317,000			5,657,000

Net Increase in Cash		4,385,000			322,000
Cash at Beginning of Period		5,297,000			28,000
Cash at End of Period	$	9,682,000		$	350,000

Cash paid during the year for:
Interest	$	-		$	69,000
Income taxes paid	$	-		$	-

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued upon conversion of notes payable and accrued interest	$	38,799,000		$	630,000
Extinguishment of unamortized debt discount and adjustment to accumulated deficit upon adoption of ASU 2020-06	$	4,745,000		$	-

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GT BIOPHARMA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

As of and For the Nine Months Ended September 30, 2021 and 2020

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 immuno-oncology products based off our proprietary Tri-specific Killer Engager (TriKE™), Tetra-specific Killer Engager (Dual Targeting TriKEDual 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, or NK cells.

Note 2 –Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, for the nine months ended September 30, 2021, the Company incurred a net loss of $40.0 million and used cash in operating activities of $11.9 million. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that these financial statements are issued. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

During the nine months ended September 30, 2021, the Company received net cash of $24.7 million from the sale of 4,945,000 shares of its common stock pursuant to a public offering, issuance of notes payable for cash of $1.2 million and $16.4 million in cash from exercise of warrants for a total cash received of $42.3 million. At September 30, 2021, the Company had cash on hand and short-term investments in the amount of $35.7 million. The Company’s current operations have focused on business planning, raising capital, establishing an intellectual property portfolio, hiring, and conducting preclinical studies and clinical trials. The Company does not have any product candidates approved for sale and has not generated any revenue from product sales. The Company has sustained operating losses since inception and expects such losses to continue over the foreseeable future. Management is currently evaluating different strategies to obtain the required funding for future operations. These strategies may include but are not limited to: public offerings of equity and/or debt securities, payments from potential strategic research and development, and licensing and/or marketing arrangements with pharmaceutical companies. If the Company is unable to secure adequate additional funding, its business, operating results, financial condition and cash flows may be materially and adversely affected. Management estimates that the current funds on hand will be sufficient to continue operations through the next six months. The Company’s ability to continue as a going concern is dependent upon its ability to continue to implement its business plan.

Note 3 – Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying condensed consolidated financial statements are unaudited. These unaudited 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, 2020 filed with the SEC on April 16, 2021 (the “2020 Annual Report”). The consolidated balance sheet as of December 31, 2020 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 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.

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The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Oxis Biotech, Inc. and Georgetown Translational Pharmaceuticals, Inc. Intercompany transactions and balances have been eliminated in consolidation.

Reverse Stock Split

On February 10, 2021, the Company completed a 1:17 reverse stock split of the Company’s issued and outstanding shares of common stock and all fractional shares were rounded up. All share and per share amounts in the accompanying financial statements have been adjusted retroactively to reflect the reverse stock split as if it had occurred at the beginning of the earliest period presented.

COVID-19

In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, has adversely affected workforces, customers, economies, and financial markets globally. It has also disrupted the normal operations of many businesses. This outbreak could decrease spending, adversely affect demand for the Company’s products, and harm the Company’s business and results of operations.

During the nine months ended September 30, 2021, the Company believes the COVID-19 pandemic did impact its operating results. However, the Company has not observed any impairments of its assets or a significant change in the fair value of its assets due to the COVID-19 pandemic. At this time, it is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or results of operations, financial condition, or liquidity.

The Company has been following the recommendations of health authorities to minimize exposure risk for its team members, including the temporary closure of its corporate office and having team members work remotely. Most vendors have transitioned to electronic submission of invoices and payments.

Accounting Estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (“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, valuation of notes payable, assumptions used in deriving the fair value of derivative liabilities, valuation of equity instruments issued for 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 consolidated financial statements. As of September 30, 2021, total cash equivalents, which consists of money market funds, amounted to approximately $3.9 million.

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 businesses. Investments are carried at fair value with the unrealized holding gains and losses reported in the accompanying consolidated statements of operations. As of September 30, 2021, total short-term investments amounted to approximately $26 million.

Stock-Based Compensation

The Company accounts for share-based awards to employees and 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.

Fair Value of Financial Instruments

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.

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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 derivative liability of $340,000 at September 30, 2021 and $383,000 at December 31, 2020 was based on Level 2 measurements.

The carrying amounts of the Company’s other financial assets and liabilities, such as cash, short-term investments, prepaid expense, accounts payable and accrued expenses approximate their fair values because of the short maturity of these instruments.

Derivative Financial Instruments

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. The fair value of the embedded derivatives are determined using a Binomial valuation method at inception and on subsequent valuation dates.

Net Loss Per Share

Basic earnings (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 earnings (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 convertible notes, stock issuable to the exercise of stock options and warrants have been excluded from the diluted loss per share calculation because their effect is anti-dilutive.

These following common stock equivalents were excluded in the computation of the net loss per share because their effect is anti-dilutive.

	September 30, 2021		September 30, 2020

A. Options to purchase common stock		-		3
B. Warrants to purchase common stock		2,337,274		106,650
C. Convertible notes payable		-		4,678,823
D. Convertible Series J Preferred stock		-		692,220
E. Convertible Series C Preferred stock		7

SEC Form 10-Q filed by GT Biopharma Inc.