Delaware
|
94-1620407
|
(State or other jurisdiction of incorporation or
organization)
|
(I.R.S. employer identification number)
|
Large
accelerated filer ☐
|
Accelerated
filer ☐
|
Non-accelerated
filer ☐
|
Smaller
reporting company ☑
|
Emerging
growth company ☐
|
|
PART
I FINANCIAL INFORMATION
|
Page
|
|
|
3
|
|
3
|
|
4
|
|
5
|
|
6
|
|
18
|
|
24
|
|
24
|
|
PART
II OTHER INFORMATION
|
|
26
|
|
26
|
|
26
|
|
29
|
|
29
|
|
29
|
|
30
|
|
31
|
|
September 30,
2019
|
December 31,
2018
|
ASSETS
|
(unaudited)
|
|
Current
Assets:
|
|
|
Cash
and cash equivalents
|
$313
|
$60
|
Prepaid
expenses
|
24
|
30
|
Total
Current Assets
|
337
|
90
|
|
|
|
Intangible
assets
|
-
|
25,262
|
Deposits
|
12
|
12
|
Operating
lease right-to-use asset
|
133
|
-
|
Fixed
assets, net
|
-
|
35
|
Total
Other Assets
|
145
|
25,309
|
TOTAL
ASSETS
|
$482
|
$25,399
|
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
|
|
|
Current
Liabilities:
|
|
|
Accounts
payable
|
$1,720
|
$1,762
|
Accrued
expenses
|
2,276
|
1,023
|
Accrued
interest
|
1,456
|
432
|
Deferred
rent
|
8
|
8
|
Operating
lease liability
|
134
|
-
|
Note
payable to related party
|
-
|
100
|
Line
of credit
|
31
|
31
|
Convertible
debentures
|
13,143
|
10,673
|
Total
Current Liabilities
|
18,768
|
14,029
|
|
|
|
Total
liabilities
|
18,768
|
14,029
|
|
|
|
Stockholders’
(Deficit) Equity:
|
|
|
Convertible
preferred stock - $0.001 par value; 15,000,000 shares
authorized:
|
|
|
Series
C - 96,230 and 96,230 shares issued and outstanding at September
30, 2019 and December 31, 2018, respectively
|
1
|
1
|
Series
J-1 – 2,353,548 shares issued and outstanding at September
30, 2019 and December 31, 2018, respectively
|
2
|
1
|
Common
stock - $0.001 par value; 750,000,000 shares authorized; and
66,891,629 and 50,650,478 shares issued and outstanding at
September 30, 2019 and December 31, 2018, respectively
|
67
|
51
|
Additional
paid-in capital
|
547,675
|
540,171
|
Accumulated
deficit
|
(565,862)
|
(528,685)
|
Noncontrolling
interest
|
(169)
|
(169)
|
Total
Stockholders’ (Deficit) Equity
|
(18,286)
|
11,370
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
|
$482
|
$25,399
|
|
Three Months
Ended September 30,
|
Nine Months
Ended September 30,
|
||
|
2019
|
2018
|
2019
|
2018
|
Operating
expenses:
|
|
|
|
|
Research and
development
|
671
|
1,111
|
1,659
|
7,835
|
Selling, general
and administrative expenses
|
3,585
|
5,035
|
8,932
|
10,628
|
Loss on
impairment
|
4,599
|
228,514
|
4,599
|
228,514
|
Total operating
expenses
|
8,855
|
234,660
|
15,190
|
246,977
|
Loss from
operations
|
(8,855)
|
(234,660)
|
(15,190)
|
(246,977)
|
Other
income (expense):
|
|
|
|
|
Loss on disposal of
assets
|
(20,463)
|
-
|
(20,494)
|
-
|
Interest
expense
|
(560)
|
(1,123)
|
(1,493)
|
(7,978)
|
Total other income
(expense)
|
(21,023)
|
(1,123)
|
(21,987)
|
(7,978)
|
Loss before
provision for income taxes
|
(29,878)
|
(235,783)
|
(37,177)
|
(254,955)
|
Provision for
income tax
|
-
|
-
|
-
|
-
|
Net
loss
|
(29,878)
|
(235,783)
|
(37,177)
|
(254,955)
|
Net loss per common
share – basic and diluted
|
$(.51)
|
$(4.70)
|
$(.69)
|
$(5.09)
|
Weighted average
common shares outstanding – basic and diluted
|
58,805,997
|
50,154,516
|
53,967,298
|
50,130,202
|
|
2019
|
2018
|
|
(unaudited)
|
(unaudited)
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
Net
loss
|
$(37,177)
|
$(254,955)
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
Depreciation
|
10
|
5
|
Stock
compensation expense issued to employees and
non-employees
|
6,202
|
8,191
|
Amortization
of debt discounts
|
451
|
7,816
|
Non-cash
interest expense
|
1,140
|
-
|
Loss
on disposal of assets
|
20,494
|
0
|
Amortization
of loan costs
|
-
|
1,076
|
Impairment
of intangible assets
|
4,599
|
228,514
|
Changes
in operating assets and liabilities:
|
|
|
Other
assets
|
6
|
(27)
|
Accounts
payable and accrued liabilities
|
1,101
|
(53)
|
Net
cash used in operating activities
|
(3,174)
|
(9,433)
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
Acquisition
of fixed assets
|
-
|
(4)
|
Disposal
of fixed assets
|
200
|
-
|
Net
cash used by investing activities
|
200
|
(4)
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
Proceeds
from notes payable
|
3,327
|
15,045
|
Loan
costs
|
-
|
(533)
|
Repayment
of note payable
|
(100)
|
(4,419)
|
Net
cash provided by financing activities
|
3,227
|
10,093
|
Minority
interest
|
-
|
-
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
253
|
656
|
CASH
AND CASH EQUIVALENTS - Beginning of period
|
60
|
576
|
CASH
AND CASH EQUIVALENTS - End of period
|
$313
|
$1,232
|
|
|
|
Supplemental
disclosures:
|
|
|
Interest
paid
|
$-
|
$-
|
Income
taxes paid
|
$-
|
$-
|
|
|
|
Supplemental
disclosures:
|
|
|
Issuance
of common stock upon conversion of convertible notes
|
$1,150
|
$220
|
Issuance
of common stock upon conversion of accrued interest
|
$14
|
$-
|
|
Number of
Options
|
Weighted Average
Exercise Price
|
Outstanding,
December 31, 2018
|
1,133
|
$1,320.00
|
Granted
|
-
|
-
|
Exercised
|
-
|
-
|
Expired
|
(1,133)
|
1,320.00
|
Outstanding,
September 30, 2019
|
-
|
$-
|
Exercisable,
September 30, 2019
|
-
|
$-
|
|
Number
of
Warrants
|
Weighted Average
Exercise Price
|
Outstanding at
December 31, 2018:
|
1,813,053
|
$0.35
|
Granted
|
-
|
-
|
Forfeited
|
-
|
-
|
Exercised
|
-
|
-
|
Outstanding at
September 30, 2019
|
1,813,053
|
$0.35
|
Exercisable at
September 30, 2019
|
1,813,053
|
$0.35
|
Year ending
December 31:
|
|
2019
|
17,000
|
2020
|
71,000
|
2021
|
61,000
|
Total minimum lease
payments
|
$149,000
|
Exhibit
|
|
Description
|
|
Herewith
|
|
Form
|
|
SEC File No.
|
|
Filing Date
|
|
Certificate
of Amendment to the Certificate of Incorporation of the Registrant,
effective as of July 19, 2017.
|
|
|
|
8-K
|
|
000-08092
|
|
03/15/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
Purchase Agreement by and among the Company and the Buyers, dated
February 4, 2019.
|
|
|
|
8-K
|
|
000-08092
|
|
02/06/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Registration Rights Agreement by and among the Company and the
Buyers, dated February 4, 2019.
|
|
|
|
8-K
|
|
000-08092
|
|
02/06/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Note.
|
|
|
|
8-K
|
|
000-08092
|
|
02/06/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Purchas Agreement.
|
|
|
|
8-K
|
|
000-08092
|
|
02/06/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Security Agreement
|
|
|
|
8-K
|
|
000-08092
|
|
02/06/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Registration Rights Agreement by and among the Company and the
Buyers, dated May 22, 2019
|
|
|
|
8-K
|
|
000-08092
|
|
05/24/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Note.
|
|
|
|
8-K
|
|
000-08092
|
|
05/24/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Purchase Agreement.
|
|
|
|
8-K
|
|
000-08092
|
|
05/24/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Registration Rights Agreement
|
|
|
|
8-K
|
|
000-08092
|
|
08/23/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Note.
|
|
|
|
8-K
|
|
000-08092
|
|
08/23/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Purchase Agreement
|
|
|
|
8-K
|
|
000-08092
|
|
08/23/19
|
|
|
|
|
|
|
|
|
|
|
|
|
10.12
|
|
Asset
Purchase Agreement
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certification
of Principal Executive Officer pursuant to Rule 13a-14 and Rule
15d-14(a), promulgated under the Securities and Exchange Act of
1934, as amended.
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certification
of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d
14(a), promulgated under the Securities and Exchange Act of 1934,
as amended.
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.1*
|
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 (Chief Executive
Officer).
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.2*
|
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 (Chief Financial
Officer).
|
|
X
|
|
|
|
|
|
|
Exhibit No.
|
|
Description
|
101.INS
|
|
XBRL Instance Document.
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension
Presentation Linkbase Document.
|
|
GT
Biopharma, Inc.
|
|
|
|
|
|
|
Dated: November 14,
2019
|
By:
|
/s/ Anthony
Cataldo
|
|
|
|
Anthony Cataldo |
|
|
|
Chief Executive
Officer and Chairman of the Board
|
|
Name
|
|
Position
|
|
Date
|
|
|
|
|
|
/s/
Anthony Cataldo
|
|
Chief
Executive Officer and Chairman of the Board
|
|
November
14, 2019
|
Anthony
Cataldo
|
|
|
|
|
|
|
|
|
|
/s/
Steven Weldon
|
|
Chief
Financial Officer (Principal Financial Officer), and
Director
|
|
November
14, 2019
|
Steven
Weldon
|
|
|
|
|
1.
|
I have
reviewed this quarterly report on Form 10-Q of GT Biopharma,
Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the
period covered by this report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
|
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the
registrant, including
its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report
is being prepared;
|
|
b)
|
Designed
such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
|
|
c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
|
|
d)
|
Disclosed
in this report any change in the registrant’s internal
control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over
financial reporting; and
|
5.
|
The
registrant’s other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and
the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions):
|
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial
information; and
|
|
b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s
internal control over financial reporting.
|
Date:
November 14, 2019
|
|
/s/ Anthony
Cataldo
|
|
|
|
Anthony
Cataldo
|
|
|
|
Chief
Executive Officer, Chairman, and Director
|
|
|
|
|
|
1.
|
I have
reviewed this quarterly report on Form 10-Q of GT Biopharma,
Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the
period covered by this report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
|
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the
registrant, including
its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report
is being prepared;
|
|
b)
|
Designed
such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
|
|
c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
|
|
d)
|
Disclosed
in this report any change in the registrant’s internal
control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over
financial reporting; and
|
5.
|
The
registrant’s other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and
the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions):
|
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial
information; and
|
|
b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s
internal control over financial reporting.
|
|
|
|
|
Date: November
14, 2019
|
|
/s/ Steven
Weldon
|
|
|
|
Steven
Weldon
|
|
|
|
CFO,
Chief Accounting Officer, and Director
|
|
|
|
|
|
Date:
November 14, 2019
|
|
/s/
Anthony Cataldo
|
|
|
|
Anthony
Cataldo
|
|
|
|
Chief
Executive Officer, Chairman, and Director
|
|
|
|
|
|
|
|
|
|
Date:
November 14, 2019
|
|
/s/ Steven
Weldon
|
|
|
|
Steven
Weldon
|
|
|
|
CFO,
Chief Accounting Officer, and Director
|
|
|
|
|
|
Note 5 - Stock Options and Warrants (Details) |
9 Months Ended |
---|---|
Sep. 30, 2019
$ / shares
shares
| |
Options Outstanding | |
Exercisable as of June 30, 2019 | shares | 0 |
Weighted Average Exercise Price | |
Exercisable as of June 30, 2019 | $ / shares | $ 0 |
Stock Options | |
Options Outstanding | |
Outstanding as of December 31, 2018 | shares | 1,133 |
Granted | shares | 0 |
Exercised | shares | 0 |
Expired | shares | (1,133) |
Outstanding as of June 30, 2019 | shares | 0 |
Weighted Average Exercise Price | |
Outstanding as of December 31, 2018 | $ / shares | $ 1,320.00 |
Granted | $ / shares | 0 |
Exercised | $ / shares | 0 |
Expired | $ / shares | 1,320.00 |
Outstanding as of June 30, 2019 | $ / shares | $ 0 |
Note 1 - The Company and Summary of Significant Accounting Policies (Policies) |
9 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Sep. 30, 2019 | |||||||
Accounting Policies [Abstract] | |||||||
Going Concern | 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.
The financial statements of the Company have been prepared on a goingconcern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the financial statements do not include any adjustments that might be necessary should the Company be unable to continue in existence.
The Company has incurred substantial losses and negative cash flows from operations since its inception and has an accumulated deficit of $566 million and cash of $313 thousand as of September 30, 2019. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of its products currently in development. Substantial additional financing will be needed by the Company to fund its operations and to commercially develop its product candidates. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
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.
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Use of Estimates | The financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America, and have been consistently applied in the preparation of the financial statements. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities revenues and expenses and disclosures of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
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Basis of Consolidation and Comprehensive Income | The accompanying consolidated financial statements include the accounts of GT Biopharma, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated. The Company's financial statements are prepared using the accrual method of accounting. |
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Basis of Presentation | The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and disclosures required by U.S. GAAP for complete consolidated financial statements have been condensed or omitted herein. The interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Form 10-K for the year ended December 31, 2018. The unaudited interim condensed consolidated financial information presented herein reflects all normal adjustments that are, in the opinion of management, necessary for a fair statement of the financial position, results of operations and cash flows for the periods presented. The Company is responsible for the unaudited interim consolidated financial statements included in this report. The results of operations of any interim period are not necessarily indicative of the results for the full year.
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Cash and Cash Equivalents | The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. |
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Concentrations of Credit Risk | The Company's cash and cash equivalents, marketable securities and accounts receivable are monitored for exposure to concentrations of credit risk. The Company maintains substantially all of its cash balances in a limited number of financial institutions. The balances are each insured by the Federal Deposit Insurance Corporation up to $250,000. The Company had balances totaling $63,000 in excess of this limit at September 30, 2019. |
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Stock Based Compensation to Employees | The Company accounts for its stock-based compensation for employees in accordance with Accounting Standards Codification (“ASC”) 718. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees over the related vesting period.
The Company granted no stock options during the nine months ended September 30, 2019 and 2018, respectively |
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Long-Lived Assets | Our long-lived assets include property, plant and equipment, capitalized costs of filing patent applications and other indefinite lived intangible assets. We evaluate our long-lived assets for impairment, other than indefinite lived intangible assets, in accordance with ASC 360, whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Estimates of future cash flows and timing of events for evaluating long-lived assets for impairment are based upon management’s judgment. If any of our intangible or long-lived assets are considered to be impaired, the amount of impairment to be recognized is the excess of the carrying amount of the assets over its fair value.
Applicable long-lived assets are amortized or depreciated over the shorter of their estimated useful lives, the estimated period that the assets will generate revenue, or the statutory or contractual term in the case of patents. Estimates of useful lives and periods of expected revenue generation are reviewed periodically for appropriateness and are based upon management’s judgment.
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Impairment of Long Lived Assets | The Company's long-lived assets currently consist of indefinite lived intangible assets associated with IPR&D (“In-Process Research & Development”) projects and related capitalized patents acquired in the acquisition of Georgetown Translational Pharmaceuticals, Inc. as described in Note 2 below. Intangible assets associated with IPR&D projects are not amortized until approval by the Food and Drug Administration (FDA) is obtained in a major market subject to certain specified conditions and management judgment. The useful life of an amortizing asset generally is determined by identifying the period in which substantially all of the cash flows are expected to be generated.
The Company evaluates indefinite lived intangible assets for impairment at least annually and whenever impairment indicators are present in accordance with ASC 350. When necessary, the Company records an impairment loss for the amount by which the fair value is less than the carrying value of these assets. The fair value of intangible assets other than goodwill is typically determined using the “relief from royalty method”, specifically the discounted cash flow method utilizing Level 3 fair value inputs. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, which includes the expected impact of competitive, legal and/or regulatory forces on the projections and the impact of technological risk associated with IPR&D assets, as well as the selection of a long-term growth rate; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.
The Company performs impairment testing for all other long-lived assets whenever impairment indicators are present. When necessary, the Company calculates the undiscounted value of the projected cash flows associated with the asset, or asset group, and compares this estimated amount to the carrying amount. If the carrying amount is found to be greater, we record an impairment loss for the excess of book value over fair value. |
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Income Taxes | The Company accounts for income taxes using the asset and liability approach, whereby deferred income tax assets and liabilities are recognized for the estimated future tax effects, based on current enacted tax laws, of temporary differences between financial and tax reporting for current and prior periods. Deferred tax assets are reduced, if necessary, by a valuation allowance if the corresponding future tax benefits may not be realized.
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Net Income (Loss) per Share | Basic net income (loss) per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period, plus the potential dilutive effect of common shares issuable upon exercise or conversion of outstanding stock options and warrants during the period. The weighted average number of potentially dilutive common shares excluded from the calculation of net income (loss) per share totaled in 73,520,680 and 2,977,958 as of September 30, 2019 and 2018, respectively.
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Patents | Acquired patents are capitalized at their acquisition cost or fair value. The legal costs, patent registration fees and models and drawings required for filing patent applications are capitalized if they relate to commercially viable technologies. Commercially viable technologies are those technologies that are projected to generate future positive cash flows in the near term. Legal costs associated with patent applications that are not determined to be commercially viable are expensed as incurred. All research and development costs incurred in developing the patentable idea are expensed as incurred. Legal fees from the costs incurred in successful defense to the extent of an evident increase in the value of the patents are capitalized.
Capitalized cost for pending patents are amortized on a straight-line basis over the remaining twenty year legal life of each patent after the costs have been incurred. Once each patent is issued, capitalized costs are amortized on a straight-line basis over the shorter of the patent's remaining statutory life, estimated economic life or ten years. |
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Fixed Assets | Fixed assets is stated at cost. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets, which are 3 to 10 years for machinery and equipment and the shorter of the lease term or estimated economic life for leasehold improvements. |
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Fair Value | The carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels are defined as follows:
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Research and Development | Research and development costs are expensed as incurred and reported as research and development expense. Research and development costs totaling $1.6 million and $7.8 million for the nine months ended September 30, 2019 and 2018, respectively.
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Revenue Recognition | License Revenue
License arrangements may consist of non-refundable upfront license fees, exclusive licensed rights to patented or patent pending technology, and various performance or sales milestones and future product royalty payments. Some of these arrangements are multiple element arrangements.
Non-refundable, up-front fees that are not contingent on any future performance by us, and require no consequential continuing involvement on our part, are recognized as revenue when the license term commences and the licensed data, technology and/or compound is delivered. We defer recognition of non-refundable upfront fees if we have continuing performance obligations without which the technology, right, product or service conveyed in conjunction with the non-refundable fee has no utility to the licensee that is separate and independent of our performance under the other elements of the arrangement. In addition, if we have continuing involvement through research and development services that are required because our know-how and expertise related to the technology is proprietary to us, or can only be performed by us, then such up-front fees are deferred and recognized over the period of continuing involvement.
Payments related to substantive, performance-based milestones in a research and development arrangement are recognized as revenue upon the achievement of the milestones as specified in the underlying agreements when they represent the culmination of the earnings process. As of September 30, 2019, the Company has not generated any licensing revenue. |
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Recent Accounting Pronouncements | In February 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance related to accounting for leases, Accounting Standards codification Topic 842 (ASC 842). We adopted the new guidance on January 1, 2019 using the modified retrospective approach and the optional transition method. Under this adoption method, comparative prior periods were not adjusted and continue to be reported with our historical accounting policy. The primary impact of adopting this standard was the recognition of $173 thousand in operating lease liabilities and $165 thousand in right of use assets.
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Note 4 - Stockholders' Equity |
9 Months Ended |
---|---|
Sep. 30, 2019 | |
Stockholders' Equity: | |
Stockholders' Equity | Common Stock
In the first nine months of 2019, the Company issued 2,591,152 shares of common stock upon conversion of $1,162,374 in principal and interest on senior convertible notes.
On August 14, 2019, the Company’s CEO Anthony Cataldo received as compensation a restricted stock award of 7,000,000 common shares and the Company’s CFO Steven Weldon received as compensation a restricted stock award of 4,500,000 common shares. Also, two Company consultants were paid as compensation a restricted stock award of 1,000,000 common shares each.
Preferred Stock
On September 1, 2017, the Company designated 2,000,000 shares of Series J Preferred Stock. Shares of Series J Preferred Stock will have the same voting rights as shares of common stock with each share of Series J Preferred Stock entitled to one vote at a meeting of the shareholders of the Corporation. Shares of Series J Preferred Stock will not be entitled to receive any dividends, unless and until specifically declared by our board of directors. The holders of the Series J Preferred Stock will participate, on an as-if-converted-to-common stock basis, in any dividends to the holders of common stock. Each share of the Series J Preferred Stock is convertible into one share of our common stock at any time at the option of the holder.
On the same day, the Board issued 1,513, 548 of those shares in exchange for the cancellation of debt. In the first quarter of 2019, it was discovered that a certificate of designation with respect to the Series J Preferred Stock had never been filed with the Office of the Secretary of State for the State of Delaware. Legal research determined that despite the fact the Company had issued shares of Series J Preferred Stock, those shares had, in fact, never existed.
To remedy the situation, on April 4, 2019, the Company filed a certificate of designation with the Office of the Secretary State for the State of Delaware designating a series of preferred stock as Series J-1 Preferred Stock. On April 19, 2019, the Company issued 2,353,548 of those shares. The issuance was in lieu of the preferred stock that should have been issued on September 1, 2017, and in settlement for not receiving preferred stock until 20 months after the debt for which the stock was issued was cancelled. The Company reflected an expense in general and administrative costs in the quarter ended June 30, 2019 totaling $1,140,000.
The Shares are convertible into shares of common stock of the Registrant at the rate of $0.60 per share. The issuance was exempt from the registration requirements of Section 5 of the Securities Act of 1933 pursuant to Section 4(2) of the same Act since the issuance of the Shares did not involve any public offering.
350,000 of the Series J shares of preferred stock had been previously converted into 350,000 shares of common stock in December 2017.
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Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2019 |
Nov. 14, 2019 |
|
Document And Entity Information | ||
Entity Registrant Name | GT Biopharma, Inc. | |
Entity Central Index Key | 0000109657 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 67,432,198 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2019 |
Note 6 - Commitments and Contingencies (Details Narrative) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
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Commitments and Contingencies Disclosure [Abstract] | ||
Rent expense | $ 52,000 | $ 61,000 |
Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Operating Expenses: | ||||
Research and development | $ 671 | $ 1,111 | $ 1,659 | $ 7,835 |
Selling, general and administrative | 3,585 | 5,035 | 8,932 | 10,628 |
Loss on impairment | 4,599 | 228,514 | 4,599 | 228,514 |
Total operating expenses | 8,855 | 234,660 | 15,190 | 246,977 |
Loss from Operations | (8,855) | (234,660) | (15,190) | (246,977) |
Other income (expense) | ||||
Loss on disposal of assets | (20,463) | 0 | (20,494) | 0 |
Interest expense | (560) | (1,123) | (1,493) | (7,978) |
Total Other Income (Expense) | (21,023) | (1,123) | (21,987) | (7,978) |
Loss before provision for income taxes | (29,878) | (235,783) | (37,177) | (254,955) |
Provision for income taxes | 0 | 0 | 0 | 0 |
Net loss | $ (29,878) | $ (235,783) | $ (37,177) | $ (254,955) |
Net loss per common share - basic and diluted | $ (.51) | $ (4.70) | $ (.69) | $ (5.09) |
Weighted average common shares outstanding - basic and diluted | 58,805,997 | 50,154,516 | 53,967,298 | 50,130,202 |
Note 3 - Debt |
9 Months Ended |
---|---|
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Debt | Convertible Notes
On January 22, 2018, the Company entered into a Securities Purchase Agreement (“SPA”) with fourteen accredited investors (individually, a “Buyer” and collectively, the “Buyers”) pursuant to which the Company agreed to issue to the Buyers senior convertible notes in an aggregate principal amount of $7,760,510 (the “Notes”), which Notes shall be convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”) at a price of $4.58 per share, and five-year warrants to purchase the Company’s Common Stock representing the right to acquire an aggregate of approximately 1,694,440 shares of Common Stock (the “Warrants”).
Pursuant to the terms of SPA the Notes were subject to an original issue discount of 10% resulting in proceeds to the Company of $7,055,000 from the transaction.
Upon the purchase of the Notes, the Buyers received Warrants to purchase 1,694,440 shares of Common Stock. Such Warrants are exercisable for (5) years from the date the shares underlying the Warrants are freely saleable. The initial Exercise Price is $4.58. According to the terms of the warrant agreement, the Warrants are subject to certain adjustments depending upon the price and structure of a subsequent financing, including a qualified financing with gross proceeds of at least $20 million, as defined in the agreements.
The issuance of the Notes and Warrants were made in reliance on the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) for the offer and sale of securities not involving a public offering, and Regulation D promulgated under the Securities Act.
Contemporaneously with the execution and delivery of the SPA, the Company and the Buyers executed and delivered a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which the Company has agreed to provide certain registration rights with respect to the Registrable Securities under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws.
Senior Convertible Debentures
On August 2, 2018, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement with the purchasers identified on the signature pages thereto (individually, a “Purchaser,” and collectively, the “Purchasers”) pursuant to which the Company issued to the Purchasers one year 10% Senior Convertible Debentures in an aggregate principal amount of $5,140,000 (the “Debentures”), which Debentures shall be convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a price of $2 per share. The Company used a portion of these proceeds to repay $4.4 million of the notes issued on January 22, 2018. Additionally, the remaining $3.3 million of the notes issued on January 22, 2018 were converted into the Debentures at the same terms discussed above.
On September 7, 2018, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement with the purchasers identified on the signature pages thereto (individually, a “Purchaser,” and collectively, the “Purchasers”) pursuant to which the Company has issued to the Purchasers one year 10% Senior Convertible Debentures in an aggregate principal amount of $2,050,000 (the “Debentures”), which Debentures shall be convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a price of $2 per share.
On September 24, 2018, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement with the purchasers identified on the signature pages thereto (individually, a “Purchaser,” and collectively, the “Purchasers”) pursuant to which the Company has issued to the Purchasers one year 10% Senior Convertible Debentures in an aggregate principal amount of $800,000 (the “Debentures”), which Debentures shall be convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a price of $2 per share.
On February 4, 2019, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the 15 purchasers (individually, a “Purchaser,” and collectively, the “Purchasers”), pursuant to which the Company issued to the Purchasers, on February 4, 2019, Secured Convertible Notes in an aggregate principal amount of $1,352,224 (the “Notes”), consisting of gross proceeds of $1,052,224 and settlement of existing debt of $300,000, which Notes shall be convertible at any time after issuance into shares (the “Conversion Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at an initial conversion price of $0.60 per share (the “Conversion Price”).
The Notes accrue interest at the rate of 10% per annum and mature on August 2, 2019. Interest on the Notes is payable in cash or, at a Purchaser’s option, in shares of Common Stock at the Conversion Price. Upon the occurrence of an event of default, interest accrues at 18% per annum. The Notes contain customary default provisions, including provisions for potential acceleration, and covenants, including negative covenants regarding additional indebtedness and dividends. The Conversion Price is subject to adjustment due to certain events, including stock dividends and stock splits, and is subject to reduction in certain circumstances if the Company issues Common Stock or Common Stock equivalents at an effective price per share that is lower than the Conversion Price then in effect. The Company may only prepay the Notes with the prior written consent of the respective Purchasers thereof.
Contemporaneously with the execution and delivery of the Purchase Agreement, on February 4, 2019, the Company and certain of its wholly-owned subsidiaries entered into a Security Agreement (the “Security Agreement”) with Alpha Capital Anstalt, as collateral agent on behalf of the Purchasers, and with the Purchasers, pursuant to which the Purchasers have been granted a first-priority security interest in substantially all of the assets of the Company and such subsidiaries securing (i) an aggregate principal amount of $1,352,224 of Notes and (ii) an aggregate principal amount of $9,058,962 of the Company’s 10% Senior Convertible Debentures issued on August 2, 2018, September 7, 2018 and September 24, 2018 held by such Purchasers.
The Purchase Agreement contains customary representations, warranties and covenants, including covenants, subject to certain exceptions, that the Company, until the date on which less than 10% of the Notes are outstanding, shall not effect any Variable Rate Transaction (as defined in the Purchase Agreement) and that, for as long as a Purchaser holds any Notes or Conversion Shares, the Company shall amend the terms and conditions of the Purchase Agreement and the transactions contemplated thereby with respect to such Purchaser to give such Purchaser the benefit of any terms or conditions under which the Company agrees to issue or sell any Common Stock or Common Stock equivalents that are more favorable to an investor than the terms and conditions granted to such Purchaser under the Purchase Agreement and the transactions contemplated thereby.
In addition, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the Purchasers, pursuant to which the Company has agreed to file, within 14 days after February 4, 2019, one or more registration statements on Form S-3 (or, if Form S-3 is not then available to the Company, such form of registration that is then available to effect a registration for resale of the subject securities) covering the resale of all Conversion Shares, subject to certain penalties set forth in the Registration Rights Agreement. The Form S-3 was filed by the Company on February 14, 2019 and became effective on March 11, 2019
On May 22, 2019, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the ten purchasers (individually, a “Purchaser,” and collectively, the “Purchasers”), pursuant to which the Company issued to the Purchasers, on May 22, 2019, Secured Convertible Notes in an aggregate principal amount of $1,300,000 (the “Notes”), which Notes shall be convertible at any time after issuance into shares (the “Conversion Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at an initial conversion price of $0.35 per share (the “Conversion Price”).
The Notes accrue interest at the rate of 10% per annum and mature on November 22, 2019. Interest on the Notes is payable in cash or, at a Purchaser’s option, in shares of Common Stock at the Conversion Price. Upon the occurrence of an event of default, interest accrues at 18% per annum. The Notes contain customary default provisions, including provisions for potential acceleration, and covenants, including negative covenants regarding additional indebtedness and dividends. The Conversion Price is subject to adjustment due to certain events, including stock dividends and stock splits, and is subject to reduction in certain circumstances if the Company issues Common Stock or Common Stock equivalents at an effective price per share that is lower than the Conversion Price then in effect. The Company may only prepay the Notes with the prior written consent of the respective Purchasers thereof.
The Purchase Agreement contains customary representations, warranties and covenants, including covenants, subject to certain exceptions, that the Company, until the date on which less than 10% of the Notes are outstanding, shall not effect any Variable Rate Transaction (as defined in the Purchase Agreement) and that, for as long as a Purchaser holds any Notes or Conversion Shares, the Company shall amend the terms and conditions of the Purchase Agreement and the transactions contemplated thereby with respect to such Purchaser to give such Purchaser the benefit of any terms or conditions under which the Company agrees to issue or sell any Common Stock or Common Stock equivalents that are more favorable to an investor than the terms and conditions granted to such Purchaser under the Purchase Agreement and the transactions contemplated thereby.
In addition, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the Purchasers, pursuant to which the Company has agreed to file, within 30 days after May 22, 2019, one or more registration statements on Form S-3 (or, if Form S-3 is not then available to the Company, such form of registration that is then available to effect a registration for resale of the subject securities) covering the resale of all Conversion Shares, subject to certain penalties set forth in the Registration Rights Agreement. The Form S-1 was filed by the Company on June 21, 2019 and became effective on July 12, 2019.
Between July 31 and August 28, 2019, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the eleven purchasers (individually, a “Purchaser,” and collectively, the “Purchasers”), pursuant to which the Company issued to the Purchasers, Secured Convertible Notes in an aggregate principal amount of $975,000 (the “Notes”), which Notes shall be convertible at any time after issuance into shares (the “Conversion Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at an initial conversion price of $0.20 per share (the “Conversion Price”).
The Notes accrue interest at the rate of 10% per annum and mature between January 31 and February 28, 2020. Interest on the Notes is payable in cash or, at a Purchaser’s option, in shares of Common Stock at the Conversion Price. Upon the occurrence of an event of default, interest accrues at 18% per annum. The Notes contain customary default provisions, including provisions for potential acceleration, and covenants, including negative covenants regarding additional indebtedness and dividends. The Conversion Price is subject to adjustment due to certain events, including stock dividends and stock splits, and is subject to reduction in certain circumstances if the Company issues Common Stock or Common Stock equivalents at an effective price per share that is lower than the Conversion Price then in effect. The Company may only prepay the Notes with the prior written consent of the respective Purchasers thereof.
The Purchase Agreement contains customary representations, warranties and covenants, including covenants, subject to certain exceptions, that the Company, until the date on which less than 10% of the Notes are outstanding, shall not effect any Variable Rate Transaction (as defined in the Purchase Agreement) and that, for as long as a Purchaser holds any Notes or Conversion Shares, the Company shall amend the terms and conditions of the Purchase Agreement and the transactions contemplated thereby with respect to such Purchaser to give such Purchaser the benefit of any terms or conditions under which the Company agrees to issue or sell any Common Stock or Common Stock equivalents that are more favorable to an investor than the terms and conditions granted to such Purchaser under the Purchase Agreement and the transactions contemplated thereby.
In addition, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the Purchasers, pursuant to which the Company has agreed to file, within 30 days, one or more registration statements on Form S-3 (or, if Form S-3 is not then available to the Company, such form of registration that is then available to effect a registration for resale of the subject securities) covering the resale of all Conversion Shares, subject to certain penalties set forth in the Registration Rights Agreement. The Form S-1 was filed by the Company on September 13, 2019 and became effective in October 2, 2019.
Financing Agreement
On November 8, 2010, the Company entered into a financing arrangement with Gemini Pharmaceuticals, Inc., a product development and manufacturing partner of the Company, pursuant to which Gemini Pharmaceuticals made a $250,000 strategic equity investment in the Company and agreed to make a $750,000 purchase order line of credit facility available to the Company. The outstanding principal of all Advances under the Line of Credit will bear interest at the rate of interest of prime plus 2 percent per annum. There is $31,000 due on this credit line at September 30, 2019.
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Note 1 - The Company and Summary of Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Accounting Policies [Abstract] | ||||||
Accumulated deficit | $ (565,862) | $ (565,862) | $ (528,685) | |||
Cash and cash equivalent | 313 | $ 1,232 | $ 313 | $ 1,232 | $ 60 | $ 576 |
Diluted shares excluded from calcuation of EPS | 73,520,680 | 2,977,958 | ||||
Research and development | $ 671 | $ 1,111 | $ 1,659 | $ 7,835 |
Note 7 - Subsequent Events |
9 Months Ended |
---|---|
Sep. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | In the fourth quarter of 2019, the Company issued 540,569 shares of common stock upon conversion of $108,144 in principal and interest on senior convertible notes.
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Note 1 - The Company and Summary of Significant Accounting Policies |
9 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Sep. 30, 2019 | |||||||
Accounting Policies [Abstract] | |||||||
The Company and Summary of Significant Accounting Policies | Business
In 1965, the corporate predecessor of GT Biopharma, 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.
We are a clinical stage biopharmaceutical company focused on the development and commercialization of novel immuno-oncology products based off our proprietary Natural Killer (NK) cell engager (Tri-specific Killer Engager (TriKE) & Tetra-specific Killer Engager (TetraKE)) and bi-specific Antibody Drug Conjugate (bispecific-ADC) technology platforms. Our TriKE and TetraKE platforms generate proprietary moieties designed to harness and enhance the cancer killing abilities of a patient’s own natural killer, or NK, cells. Once bound to a NK cell, our moieties are designed to stimulate the NK cell and precisely direct it to one or more specifically-targeted proteins (tumor antigens) expressed on a specific type of cancer, ultimately resulting in the cancer cell’s death. TriKEs and TetraKEs are made up of recombinant fusion proteins, can be designed to target tumor antigens on hematologic malignancies, sarcomas or solid tumors and do not require patient-specific customization. They are designed to be dosed in an outpatient setting and are expected to have reasonably low cost of goods. Our bispecific-ADC platform can generate product candidates that are ligand-directed single-chain fusion proteins that simultaneously target two tumor antigens. We believe our bispecific-ADC moieties represents the next generation of ADCs.
Going Concern
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.
The financial statements of the Company have been prepared on a goingconcern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the financial statements do not include any adjustments that might be necessary should the Company be unable to continue in existence.
The Company has incurred substantial losses and negative cash flows from operations since its inception and has an accumulated deficit of $566 million and cash of $313 thousand as of September 30, 2019. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of its products currently in development. Substantial additional financing will be needed by the Company to fund its operations and to commercially develop its product candidates. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
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.
Use of Estimates
The financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America, and have been consistently applied in the preparation of the financial statements. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities revenues and expenses and disclosures of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
Basis of Consolidation and Comprehensive Income
The accompanying consolidated financial statements include the accounts of GT Biopharma, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated. The Company's financial statements are prepared using the accrual method of accounting.
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and disclosures required by U.S. GAAP for complete consolidated financial statements have been condensed or omitted herein. The interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Form 10-K for the year ended December 31, 2018. The unaudited interim condensed consolidated financial information presented herein reflects all normal adjustments that are, in the opinion of management, necessary for a fair statement of the financial position, results of operations and cash flows for the periods presented. The Company is responsible for the unaudited interim consolidated financial statements included in this report. The results of operations of any interim period are not necessarily indicative of the results for the full year.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.
Concentrations of Credit Risk
The Company's cash and cash equivalents, marketable securities and accounts receivable are monitored for exposure to concentrations of credit risk. The Company maintains substantially all of its cash balances in a limited number of financial institutions. The balances are each insured by the Federal Deposit Insurance Corporation up to $250,000. The Company had balances totaling $63,000 in excess of this limit at September 30, 2019.
Stock Based Compensation to Employees
The Company accounts for its stock-based compensation for employees in accordance with Accounting Standards Codification (“ASC”) 718. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees over the related vesting period.
The Company granted no stock options during the nine months ended September 30, 2019 and 2018, respectively
Long-Lived Assets
Our long-lived assets include property, plant and equipment, capitalized costs of filing patent applications and other indefinite lived intangible assets. We evaluate our long-lived assets for impairment, other than indefinite lived intangible assets, in accordance with ASC 360, whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Estimates of future cash flows and timing of events for evaluating long-lived assets for impairment are based upon management’s judgment. If any of our intangible or long-lived assets are considered to be impaired, the amount of impairment to be recognized is the excess of the carrying amount of the assets over its fair value.
Applicable long-lived assets are amortized or depreciated over the shorter of their estimated useful lives, the estimated period that the assets will generate revenue, or the statutory or contractual term in the case of patents. Estimates of useful lives and periods of expected revenue generation are reviewed periodically for appropriateness and are based upon management’s judgment.
Impairment of Long-Lived Assets
The Company's long-lived assets currently consist of indefinite lived intangible assets associated with IPR&D (“In-Process Research & Development”) projects and related capitalized patents acquired in the acquisition of Georgetown Translational Pharmaceuticals, Inc. as described in Note 2 below. Intangible assets associated with IPR&D projects are not amortized until approval by the Food and Drug Administration (FDA) is obtained in a major market subject to certain specified conditions and management judgment. The useful life of an amortizing asset generally is determined by identifying the period in which substantially all of the cash flows are expected to be generated.
The Company evaluates indefinite lived intangible assets for impairment at least annually and whenever impairment indicators are present in accordance with ASC 350. When necessary, the Company records an impairment loss for the amount by which the fair value is less than the carrying value of these assets. The fair value of intangible assets other than goodwill is typically determined using the “relief from royalty method”, specifically the discounted cash flow method utilizing Level 3 fair value inputs. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, which includes the expected impact of competitive, legal and/or regulatory forces on the projections and the impact of technological risk associated with IPR&D assets, as well as the selection of a long-term growth rate; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.
The Company performs impairment testing for all other long-lived assets whenever impairment indicators are present. When necessary, the Company calculates the undiscounted value of the projected cash flows associated with the asset, or asset group, and compares this estimated amount to the carrying amount. If the carrying amount is found to be greater, we record an impairment loss for the excess of book value over fair value.
Income Taxes
The Company accounts for income taxes using the asset and liability approach, whereby deferred income tax assets and liabilities are recognized for the estimated future tax effects, based on current enacted tax laws, of temporary differences between financial and tax reporting for current and prior periods. Deferred tax assets are reduced, if necessary, by a valuation allowance if the corresponding future tax benefits may not be realized.
Net Income (Loss) per Share
Basic net income (loss) per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period, plus the potential dilutive effect of common shares issuable upon exercise or conversion of outstanding stock options and warrants during the period. The weighted average number of potentially dilutive common shares excluded from the calculation of net income (loss) per share totaled in 73,520,680 and 2,977,958 as of September 30, 2019 and 2018, respectively.
Patents
Acquired patents are capitalized at their acquisition cost or fair value. The legal costs, patent registration fees and models and drawings required for filing patent applications are capitalized if they relate to commercially viable technologies. Commercially viable technologies are those technologies that are projected to generate future positive cash flows in the near term. Legal costs associated with patent applications that are not determined to be commercially viable are expensed as incurred. All research and development costs incurred in developing the patentable idea are expensed as incurred. Legal fees from the costs incurred in successful defense to the extent of an evident increase in the value of the patents are capitalized.
Capitalized cost for pending patents are amortized on a straight-line basis over the remaining twenty year legal life of each patent after the costs have been incurred. Once each patent is issued, capitalized costs are amortized on a straight-line basis over the shorter of the patent's remaining statutory life, estimated economic life or ten years.
Fixed Assets
Fixed assets is stated at cost. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets, which are 3 to 10 years for machinery and equipment and the shorter of the lease term or estimated economic life for leasehold improvements.
Fair Value
The carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels are defined as follows:
Research and Development
Research and development costs are expensed as incurred and reported as research and development expense. Research and development costs totaling $1.6 million and $7.8 million for the nine months ended September 30, 2019 and 2018, respectively.
Revenue Recognition
License Revenue
License arrangements may consist of non-refundable upfront license fees, exclusive licensed rights to patented or patent pending technology, and various performance or sales milestones and future product royalty payments. Some of these arrangements are multiple element arrangements.
Non-refundable, up-front fees that are not contingent on any future performance by us, and require no consequential continuing involvement on our part, are recognized as revenue when the license term commences and the licensed data, technology and/or compound is delivered. We defer recognition of non-refundable upfront fees if we have continuing performance obligations without which the technology, right, product or service conveyed in conjunction with the non-refundable fee has no utility to the licensee that is separate and independent of our performance under the other elements of the arrangement. In addition, if we have continuing involvement through research and development services that are required because our know-how and expertise related to the technology is proprietary to us, or can only be performed by us, then such up-front fees are deferred and recognized over the period of continuing involvement.
Payments related to substantive, performance-based milestones in a research and development arrangement are recognized as revenue upon the achievement of the milestones as specified in the underlying agreements when they represent the culmination of the earnings process. As of September 30, 2019, the Company has not generated any licensing revenue.
Recent Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance related to accounting for leases, Accounting Standards codification Topic 842 (ASC 842). We adopted the new guidance on January 1, 2019 using the modified retrospective approach and the optional transition method. Under this adoption method, comparative prior periods were not adjusted and continue to be reported with our historical accounting policy. The primary impact of adopting this standard was the recognition of $173 thousand in operating lease liabilities and $165 thousand in right of use assets. |
Note 5 - Stock Options and Warrants (Details 1) |
9 Months Ended |
---|---|
Sep. 30, 2019
$ / shares
shares
| |
Warrants Outstanding | |
Exercisable as of June 30, 2019 | shares | 1,813,053 |
Weighted Average Exercise Price | |
Exercisable as of June 30, 2019 | $ / shares | $ .35 |
Warrant | |
Warrants Outstanding | |
Outstanding as of December 31, 2018 | shares | 1,813,053 |
Granted | shares | 0 |
Forfeited | shares | 0 |
Exercised | shares | 0 |
Outstanding as of June 30, 2019 | shares | 1,813,053 |
Weighted Average Exercise Price | |
Outstanding as of December 31, 2018 | $ / shares | $ 0.35 |
Granted | $ / shares | 0 |
Forfeited | $ / shares | 0 |
Exercised | $ / shares | 0 |
Outstanding as of June 30, 2019 | $ / shares | $ .35 |
Note 5 - Stock Options and Warrants (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the stock option activity |
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Summary of the warrant activity |
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Note 5 - Stock Options and Warrants |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Options and Warrants | Stock Options
The following table summarizes stock option transactions for the nine months ended September 30, 2019:
Common Stock Warrants
Warrant transactions for the nine months ended September 30, 2019 are as follows:
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Note 6 - Commitments and Contingencies (Tables) |
9 Months Ended | |||||||||||||||||||||||||
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Sep. 30, 2019 | ||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||
Schedule of future minimum lease commitments |
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Note 6 - Commitments and Contingencies |
9 Months Ended | |||||||||||||||||||||||||
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Sep. 30, 2019 | ||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||
Commitments and Contingencies | Leases As described in Note 1. Nature of Operations and Summary of Significant Accounting Policies, we adopted new lease accounting guidance effective January 1, 2019.
We determine if a contractual arrangement is a lease at inception. Our lease arrangements provide the Company the right to utilize certain specified tangible assets for a period of time in exchange for consideration. Our leases primarily relate to building office space. Our leases currently consist solely of operating leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet.
We recognize a lease liability and a right of use asset at the lease commencement date based on the present value of the future lease payments over the lease term discounted using our incremental borrowing rate. Implicit interest rates within our lease arrangements are rarely determinable. Right of use assets also include, if applicable, prepaid lease payments and initial direct costs, less incentives received.
We recognize operating lease expense on a straight-line basis over the term of the lease within selling general and administrative expenses.
Our leases do not contain any material residual value guarantees or material restrictive covenants. Some of our leases include optional renewal periods or termination provisions which we assess at inception to determine the term of the lease, subject to reassessment in certain circumstances. The following table summarizes the Company’s future minimum lease commitments as of September 30, 2019:
Rent expense for the nine months ended September 30, 2019 and 2018 was $52,000 and $61,000, respectively.
Employment Agreements
On October 18, 2018, the Company entered into a Consultant Agreement with Anthony Cataldo. The term of the Consultant Agreement shall remain in effect until September 30, 2019. This Agreement supersedes the Consultant Agreement dated February 14, 2018 and will pay Mr. Cataldo $25,000 per month during the term of the Agreement.
On October 19, 2018, the Company entered into an Executive Employment Agreement with Dr. Urbanski, reflecting his current position as Chief Executive Officer of the Company. Under the terms of this agreement, Dr. Urbanski’s annual salary is essentially unchanged from his previous positions. Dr. Urbanski is also entitled to participate in the Company’s bonus plans. Under the Executive Employment Agreement, the Company has agreed that upon shareholder approval of a Stock Option Plan, it will recommend to the Board that the Company grant Dr. Urbanski a Non-Qualified stock option to purchase 2,971,102 shares of the Company’s common stock having an exercise equal to the fair market value of the shares on the date of the Agreement. The stock option grant would vest according to the following schedule: (i) 1,250,000 fully vested shares upon signing of the agreement, (ii) 1,250,000 shares on January 1, 2019, and (iii) 471,102 shares on January 1, 2020. On March 15, 2019, Dr, Urbanski resigned his position as Chief Executive Officer, President and Chairman of the Board.
On April 3, 2019, the Company entered into the Separation Agreement with Dr. Urbanski in connection with his resignation as the Company’s Chief Executive Officer. Pursuant to the terms of the Separation Agreement Dr. Urbanski will receive six months’ salary of $212,500 paid in two installments and the Company will reimburse the premiums associated with Dr. Urbanski’s continuation health coverage for six months following his resignation. The Settlement Agreement also contains a release by Mr. Urbanski of any claims against the Company arising from or relating to his employment and customary confidentiality, non-disparagement and cooperation covenants.
|
Note 6 - Commitments and Contingencies (Details) $ in Thousands |
Sep. 30, 2019
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
2019 | $ 17,000 |
2020 | 71,000 |
2021 | 61,000 |
Total minimum lease payments | $ 149,000 |
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Note 2 - Intangibles |
9 Months Ended |
---|---|
Sep. 30, 2019 | |
Intangible Assets, Net (Including Goodwill) [Abstract] | |
Intangibles | On September 1, 2017, the Company entered into an Agreement and Plan of Merger whereby it acquired 100% of the issued and outstanding capital stock of Georgetown Translational Pharmaceuticals, Inc. (GTP). In exchange for the ownership of GTP, the Company issued a total of 16,927,878 shares of its common stock, having a share price of $15.00 on the date of the transaction, to the three prior owners of GTP which represented 33% of the issued and outstanding capital stock of the Company on a fully diluted basis. $253.8 million of the value of shares issued was allocated to intangible assets consisting of a portfolio of three CNS development candidates, which are classified as IPR&D.
As of September 30, 2018, the Company recorded an intangible asset impairment charge of $228.5 million related to the portfolio of CNS IPR&D assets within Operating Expenses, which represents the excess carrying value compared to fair value. The impairment charge was the result of both internal and external factors. In the 3rd quarter of 2018, the Company experienced changes in key senior management, led by the appointment of a new CEO with extensive experience in oncology drug development. These changes resulted in the prioritization of immuno-oncology development candidates relative to CNS development candidates. In conjunction with these strategic changes, limited internal resources have delayed the development of the CNS IPR&D assets. The limited resources, changes in senior leadership, and favorable market conditions for immuno-oncology development candidates have resulted in the Company choosing to focus on development of its immuno-oncology portfolio. In light of this shift in market strategy, the Company performed a commercial assessment and a valuation of the CNS IPR&D assets, both to assess fair value and support potential future licensing efforts. The valuation indicated an excess carrying value over the fair value of these assets, resulting in the impairment charge noted above.
The fair value of the CNS IPR&D assets was determined using the discounted cash flow method which utilized significant estimates and assumptions surrounding the amount and timing of the projected net cash flows, which includes the probability of commercialization, the assumption that the assets would be out-licensed to third-parties for continued development for upfront licensing fees and downstream royalty payments based on net sales, and expected impact of competitive, legal and/or regulatory forces on the projections, as well as the selection of a long-term growth rate; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.
On September 19, 2019, the Company entered into an Asset Purchase Agreement (the “Agreement”), pursuant to which the Company sold its rights, titles and interests, including associated patents, to the pharmaceutical product designated by the Company as GTB-004 (the “Product”). Under the Agreement, the Product was purchased by DAS Therapeutics, Inc. who the Company believes is well positioned to take over the clinical development of the Product including obtaining timely approval by the FDA.
The Company received $200,000 at closing. The Company will also participate in the future commercial value of the Product by receiving $6,000,000 upon the achievement of certain sales objectives. In addition, the Company will receive a royalty equal to 1.5% of U.S. sales until such time as the last of the patents associated with the Product expires. The Company reflected a loss in the quarter ended September 30, 2019 totaling $20,463,000.
As a result of the loss reported on the sale of the Product, as well as the response received on inquiries related to the other two projects, the Company determined that the remaining value related to these remaining projects should be impaired. During the quarter ended September 30, 2019, the Company reported an impairment charge for these projects totaling $4,599,000. |
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Consolidated Balance Sheets (Parenthetical) - $ / shares |
Sep. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Stockholders' Deficit: | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, authorized | 15,000,000 | 15,000,000 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, authorized | 750,000,000 | 750,000,000 |
Common stock, issued | 66,891,629 | 50,650,478 |
Common stock, outstanding | 66,891,629 | 50,650,478 |
Series C | ||
Stockholders' Deficit: | ||
Preferred stock, issued | 96,230 | 96,230 |
Preferred stock, outstanding | 96,230 | 96,230 |
Series J | ||
Stockholders' Deficit: | ||
Preferred stock, issued | 2,353,548 | 2,353,548 |
Preferred stock, outstanding | 2,353,548 | 2,353,548 |