GT BIOPHARMA, INC.
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 FORM 10-K
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the
fiscal year ended December 31, 2019
Commission
File Number: 000-08092
GT BIOPHARMA, INC.
(Exact
name of Registrant as specified in its charter)
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Delaware
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94-1620407
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(State
of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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9350
Wilshire Blvd.
Suite
203
Beverly Hills, CA 90212
(Address of
principal executive offices) (Zip code)
(800) 304-9888
(Registrant’s
telephone number including area code) Securities registered
pursuant to Section 12(b) of the Act: None.
Securities
registered pursuant to section 12(g) of the Act:
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Title
of Securities
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Exchanges
on which Registered
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Common
Stock, $.001 Par Value
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None
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Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes
☐
No
☒
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes
☐
No
☒
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
and posted on its corporate website, if any, every Interactive Data
File required to be submitted and posted 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 and post such
files). Yes
☒
No
☐
Indicate
by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (§229.405) is not contained herein, and
will not be contained, to the best of registrant’s knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. 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 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.
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Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated
filer
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☐
(Do not check if a smaller reporting
company)
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Smaller reporting company
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☒
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Emerging
growth company
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☐
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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
☒
The
aggregate market value of the registrant’s common stock,
$0.001 par value per share, held by non-affiliates on June 30, 2019
was approximately $7.2 million. As of March 23, 2019, there were
70,602,433 shares of the registrant’s common stock, $0.001
par value, issued and outstanding.
Table of Contents
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PART
I
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1
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Item
1.
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Business
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1
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Item
1A.
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Risk
Factors
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11
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Item
1B.
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Unresolved Staff
Comments
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28
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Item
2.
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Properties
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28
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Item
3.
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Legal
Proceedings
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28
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Item
4.
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Mine
Safety Disclosures
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28
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PART
II
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29
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Item
5.
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Market
for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
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29
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Item
6.
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Selected Financial
Data
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30
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Item
7.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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36
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Item
7A.
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Quantitative and
Qualitative Disclosures About Market Risk
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36
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Item
8.
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Financial
Statements and Supplementary Data
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36
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Item
9.
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Changes
in and Disagreements With Accountants on Accounting and Financial
Disclosure
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36
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Item
9A.
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Controls and
Procedures
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37
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Item
9B.
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Other
Information
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37
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PART
III
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38
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Item
10.
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Directors,
Executive Officers and Corporate Governance
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38
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Item
11.
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Executive
Compensation
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38
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Item
12.
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Security Ownership
of Certain Beneficial Owners and Management and Related Stockholder
Matters
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41
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Item
13.
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Certain
Relationships and Related Transactions, and Director
Independence
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42
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Item
14.
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Principal
Accounting Fees and Services
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43
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PART
IV
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44
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Item
15.
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Exhibits, Financial
Statement Schedules
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44
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PART
I
CAUTIONARY
NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This
Report, including any documents which may be incorporated by
reference into this Report, contains “Forward-Looking
Statements” within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other
than statements of historical fact are “Forward-Looking
Statements” for purposes of these provisions, including our
plans of operation, any projections of revenues or other financial
items, any statements of the plans and objectives of management for
future operations, any statements concerning proposed new products
or services, any statements regarding future economic conditions or
performance, and any statements of assumptions underlying any of
the foregoing. All Forward-Looking Statements included in this
document are made as of the date hereof and are based on
information available to us as of such date. We assume no
obligation to update any Forward-Looking Statement. In some cases,
Forward-Looking Statements can be identified by the use of
terminology such as “may,” “will,”
“expects,” “plans,”
“anticipates,” “intends,”
“believes,” “estimates,”
“potential,” or “continue,” or the negative
thereof or other comparable terminology. Although we believe that
the expectations reflected in the Forward-Looking Statements
contained herein are reasonable, there can be no assurance that
such expectations or any of the Forward-Looking Statements will
prove to be correct, and actual results could differ materially
from those projected or assumed in the Forward-Looking Statements.
Future financial condition and results of operations, as well as
any Forward-Looking Statements are subject to inherent risks and
uncertainties, including any other factors referred to in our press
releases and reports filed with the Securities and Exchange
Commission. All subsequent Forward- Looking Statements attributable
to the company or persons acting on its behalf are expressly
qualified in their entirety by these cautionary statements.
Additional factors that may have a direct bearing on our operating
results are described under “Risk Factors” and
elsewhere in this report.
Introductory
Comment
Throughout this
Annual Report on Form 10-K, the terms “GTBP,”
“we,” “us,” “our,” “the
company” and “our company” refer to GT Biopharma,
Inc., a Delaware corporation formerly known as DDI Pharmaceuticals,
Inc., Diagnostic Data, Inc. and Oxis International, Inc., together
with our subsidiaries.
ITEM
1. BUSINESS
We are
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 (TetraKE™) and
bi-specific ligand-directed single-chain fusion protein technology
platforms. Our TriKE and TetraKE platforms generate proprietary
therapeutics designed to harness and enhance the cancer killing
abilities of a patient’s own natural killer cells, or NK
cells. Once bound to an NK cell, our moieties are designed to
enhance the NK cell, and precisely direct it to one or more
specifically-targeted proteins expressed on a specific type of
cancer cell or virus infected cell, ultimately resulting in the
targeted cell’s death. TriKEs and TetraKEs are made up of
recombinant fusion proteins, can be designed to target any number
of tumor antigens on hematologic malignancies, sarcomas or solid
tumors and do not require patient-specific
customization.
We are
using our TriKE and TetraKE platforms with the intent to bring to
market immuno-oncology products that can treat a range of
hematologic malignancies, sarcoma and solid tumors. The platforms
are scalable, and we are putting processes in place to be able to
produce IND-ready moieties in a timely manner after a specific
TriKE or TetraKE conceptual design. After conducting market and
competitive research, specific moieties can then be advanced into
the clinic on our own or through potential collaborations with
larger companies. We are also evaluating, in conjunction with our
Scientific Advisory Board, additional moieties designed to target
different tumor antigens. We believe our TriKEs and TetraKEs may
have the ability, if approved for marketing, to be used on a
stand-alone basis, augment the current monoclonal antibody
therapeutics, be used in conjunction with more traditional cancer
therapy and potentially overcome certain limitations of current
chimeric antigen receptor, or CAR-T, therapy.
We are
also using our TriKE and TetraKE platforms to develop therapeutics
useful for the treatment of infectious disease such as for the
treatment of patients infected by the human immunodeficiency virus
(HIV). While the use of anti-retroviral drugs has substantially
improved the health and increased the longevity of individuals
infected with HIV, these drugs are designed to suppress virus
replication to help modulate progression to AIDS and to limit
further transmission of the virus. Despite the use of
anti-retroviral drugs, infected individuals retain reservoirs of
latent HIV-infected cells that, upon cessation of anti-retroviral
drug therapy, can reactivate and re-establish an active HIV
infection. For a curative therapy, destruction of these latent HIV
infected cells must take place. The HIV-TriKE contains the antigen
binding fragment (Fab) from a broadly-neutralizing antibody
targeting the HIV-Env protein. The HIV-TriKE is designed to target
HIV while redirecting NK cell killing specifically to actively
replicating HIV infected cells. The HIV-TriKE induced NK cell
proliferation, and demonstrated the ability in vitro to reactivate
and kill HIV-infected T-cells. These findings indicate a potential
role for the HIV-TriKE in the reactivation and elimination of the
latently infected HIV reservoir cells by harnessing the NK
cell’s ability to mediate the antibody-directed cellular
cytotoxicity (ADCC).
We also
believe our bi-specific, ligand-directed single-chain fusion
proteins are examples of the next generation of antibody-drug
conjugates (ADCs). We believe GTB-1550 has certain properties that
could result in competitive advantages over recently FDA-approved
ADC products targeting leukemias and lymphomas and/or have utility
in other niche populations. In a Phase 1 trial, of nine patients
that achieved adequate blood levels, in two heavily pretreated
patients a continuous partial remission (PR) and complete remission
(CR) were observed. One of these patients, who had failed multiple
previous treatment regimens, has been in remission since early
2015.
Our
initial work has been conducted in collaboration with the Masonic
Cancer Center at the University of Minnesota under a program led by
Dr. Jeffrey Miller, the Deputy Director. Dr. Miller is a recognized
leader in the field of NK cell and IL-15 biology and their
therapeutic potential. We have exclusive rights to the TriKE and
TetraKE platforms and are generating additional intellectual
property around specific moieties.
1
Immuno-Oncology Platform
Tri-specific Killer Engagers (TriKEs) and Tetra-specific Killer
Engagers (TetraKEs)
The
generation of chimeric antigen receptor, or CAR, expressing T cells
from monoclonal antibodies has represented an important step
forward in cancer therapy. These therapies involve the genetic
engineering of T cells to express either CARs, or T cell receptors,
or TCRs, and are designed such that the modified T cells can
recognize and destroy cancer cells. While a great deal of interest
has recently been placed upon chimeric antigen receptor T, or
CAR-T, therapy, it has certain limitations for broad potential
applicability because it can require an individual approach that is
expensive and time consuming, and may be difficult to apply on a
large scale. NK cells represent an important immunotherapeutic
target as they are involved in tumor immune-surveillance, can
mediate antibody- dependent cell-mediated cytotoxicity (ADCC),
contain pre-made granules with perforin and granzyme B and can
quickly secrete inflammatory cytokines, and unlike T cells they do
not require antigen priming and can kill cells in the absence of
major histocompatibility complex (MHC) presentation of antigens. We
believe there is a continued unmet medical need for targeted
immuno-oncology therapies that can have the potential to be dosed
in a patient-friendly outpatient setting, can be used on a
stand-alone basis, augment the current monoclonal antibody
therapeutics or be used in conjunction with more traditional cancer
therapy. We believe our TriKE and TetraKE constructs have this
potential and therefore we have generated, and intend to continue
to generate, a pipeline of product candidates to be advanced into
the clinic on our own or through potential collaborations with
larger companies.
GTB-3550 TriKE™ and GTB-3550 TriKE™ Phase I/II Clinical
Trial
GTB-3550
is the Company's first TriKE™ product candidate which is a
single-chain, tri-specific recombinant fusion protein construct
composed of the variable regions of the heavy and light chains of
anti-CD16 and anti-CD33 antibodies and a modified form of IL-15.
The GTB-3550 Phase I/II clinical trial for treatment of patients
with CD33-expressing, high risk myelodysplastic syndromes,
refractory/relapsed acute myeloid leukemia or advanced systemic
mastocytosis opened for patient enrollment September 2019. The
clinical trial is being conducted at the University of
Minnesota’s Masonic Cancer Center in Minneapolis, Minnesota
under the direction of Dr. Erica Warlick.
NK
cells represent an important immunotherapeutic target as they are
involved in tumor immune-surveillance, can mediate antibody-
dependent cell-mediated cytotoxicity (ADCC), contain pre-made
granules with perforin and granzyme B and can quickly secrete
inflammatory cytokines, and unlike T cells they do not require
antigen priming and can kill cells in the absence of major
histocompatibility complex (MHC) presentation.
Unlike
full-length antibodies, TriKEs and TetraKEs are small single-chain
fusion proteins that bind the CD16 receptor of NK cells directly
producing a potent and lasting response, as demonstrated by
preclinical studies. An additional benefit they may have is
attractive biodistribution, as a consequence of their smaller size,
which we expect to be important in the treatment of solid tumors.
In addition to these advantages, TriKEs and TetraKEs are designed
to be non-immunogenic, have appropriate clearance properties and
can be engineered quickly to target a variety of tumor
antigens.
Background and Select Non-Clinical Data
In
conjunction with our research agreement with the Masonic Cancer
Center at the University of Minnesota, the exploration of targeting
NK cells to a variety of tumors initially focused on novel
bi-specific killer engagers, or BiKEs, composed of the variable
portions of antibodies targeting the CD16 activating receptor on NK
cells and CD33 (AML and MDS; see figure below), CD19/CD22 (B cell
lymphomas), or EpCAM (epithelial tumors (breast, colon, and lung))
on the tumor cells.
2
Subsequently, a
tri-specific (TriKE) construct that replaced the linker molecule
between the CD16 scFv and the CD33 scFv with a modified IL-15
molecule, containing flanking sequences, was generated and tested.
Data indicate that the CD16 x IL-15 x CD33 and CD16 x IL-15 x EpCAM
TriKEs potently induce proliferation of healthy donor NK cells,
possibly greater than that induced by exogenous IL-15, which is
absent in the BiKE platform. Targeted delivery of the IL-15 through
the TriKE also resulted in specific expansion of the NK cells
without inducing T cell expansion on post-transplant patient
samples.
When
compared to the CD16 x CD33 BiKE, the CD16 x IL-15 x CD33 TriKE is
also capable of potently restoring killing capacity of post-
transplant NK cells against CD33-expressing HL-60 Targets and
primary AML blasts. These results demonstrated the ability to
functionally incorporate an IL-5 cytokine into the BiKE platform
and also demonstrated the possibility of targeting a variety of
cytokines directly to NK cells while reducing off-target effects
and the amount of cytokines needed to obtain biologically relevant
function.
The
figure below is a schematic of a BiKE construct (top) and a TriKE
construct (bottom), which has the modified IL-15 linker between the
CD16 scFv and the CD33 scFv components.
The
TriKE constructs were also tested against three separate human
tumor cell lines: HL-60 (promyelocitic leukemia), Raji
(Burkitt’s lymphoma), and HT29 (colorectal adenocarcinoma),
in addition to a model for ovarian cancer. All cell lines contained
the Luc reporter to allow for in vivo imaging of the tumors. These
systems were used to show in vivo efficacy of BiKEs (1633) and
TriKEs (GTB-3550) against relevant human tumor targets (HL-60-luc)
over an extended period of time. The system consisted of initial
conditioning of mice using radiation (250-275 cGy), followed by
injection of the tumor cells (I.V. for HL-60-luc and Raji-luc,
intra-splenic for HT29-luc and IP for ovarian for MA-148-luc), a
three-day growth phase, injection of human NK cells, and repeated
injection of the drugs of interest, BiKE and TriKE (three to five
times a week). Imaging was carried out at day 7, 14, and 21, and
extended as needed.
Figure
A below shows the results (tumor burden and mortality) when dosing
NK cells alone (top panel), the BiKE version (lacking IL-15) of
GTB-3550 (middle panel; called 1633), and the TriKE, GTB-3550
(bottom panel; then called 161533) in the above described human
tumor model, HL-60-luc. In the NK-cell-only arm, two out of the
five mice were dead by day 21 with two of the surviving mice having
extensive tumor burden as depicted by the colored images. In
contrast, all five mice in each of the BiKE and TriKE arms
survived. In addition, the tumor burden in the TriKE-treated mice
was significantly less than in the BiKE-treated mice, demonstrating
the improved efficacy from NK cells in the TriKE-treated
mice.
3
Based
on these results, and others, the IND for GTB-3550 was filed in
June 2017 by the University of Minnesota. FDA requested that
additional preclinical toxicology be conducted prior to initiating
clinical trials. The FDA also requested some additional information
and clarifications on the manufacturing (CMC) and clinical
packages. The requested additional information and clarifications
were completed and incorporated by us into the IND in eCTD format.
We filed the IND amendment in June 2018 and announced on November
1, 2018 that we had received notification from the FDA that the IND
was open and the Company was authorized to initiate a
first-in-human Phase 1 study with GTB-3550 in AML, MDS and severe
mastocytosis. We began the Phase 1 clinical trial in January
2020.
Generation of humanized single-domain antibody targeting CD16 for
incorporation into the TriKE platform
To
develop second generation TriKEs, we designed a new humanized CD16
engager derived from a single-domain antibody. While scFvs consist
of a heavy and a light variable chain joined by a linker,
single-domain antibodies consist of a single variable heavy chain
capable of engaging without the need of a light chain counterpart
(see figure below).
4
These
single-domain antibodies are thought to have certain attractive
features for antibody engineering, including physical stability,
ability to bind deep grooves, and increased production yields,
amongst others. Pre-clinical studies demonstrated increased
activity (NK Cell Degranulation) and functionality (NC Cell
Cytokine Production) of the single-domain CD16 TriKE (GTB-C3550)
compared to the original TriKE (GTB-3550) (see figure below). These
data were presented at the 2017 American Society of Hematology
Conference.
5
Targeting Solid Tumors and Other Potentially Attractive
Characteristics
Unlike
full-length antibodies, TriKEs and TetraKEs are small single-chain
fusion proteins that bind the CD16 receptor of NK cells directly
producing a potentially more potent and lasting response as
demonstrated by preclinical studies. An additional benefit that
they may have is an attractive biodistribution, because of their
smaller size, which we expect to be important in the treatment of
solid tumors. In addition to these potential advantages, TriKEs and
TetraKEs are designed to be non-immunogenic, have appropriate
clearance properties and can be engineered quickly to target a
variety of tumor antigens. We believe these attributes make them an
ideal pharmaceutical platform for potentiated NK cell-based
immunotherapies and have the potential to overcome some of the
limitations of CAR-T therapy and other antibody
therapies.
Examples of our
earlier stage solid tumor targeting product candidates are focused
on EpCAM, Her2, Mesothelin (mesothelioma and lung adenocarcinoma),
and CD133 alone and in combination. We believe certain of these
constructs have the potential to target prostate, breast, colon,
ovarian, liver, and head and neck cancers. Depending on the
availability of drug supply, we hope to initiate human clinical
testing for certain of our solid tumor product candidates in
2020.
Efficient Advancement of Potential Future Product Candidates
--Production and Scale Up
We are
using our TriKE and TetraKE platforms with the intent to bring to
market multiple immuno-oncology products that can treat a range of
hematologic malignancies, sarcomas and solid tumors. The platforms
are scalable and we are currently working with several third
parties investigating the optimal expression system of the TriKEs
and TetraKE constructs which we expect to be part of a process in
which we are able to produce IND-ready moieties in approximately
90-120 days after the construct conceptual design.
After
conducting market and competitive research, specific moieties can
then be rapidly advanced into the clinic on our own or through
potential collaborations with larger companies. We are currently
evaluating over a dozen moieties and intend to announce additional
clinical product candidates.
We
believe our TriKEs and TetraKEs will have the ability, if approved
for marketing, to be used on a stand-alone basis, augment the
current monoclonal antibody therapeutics, or be used in conjunction
with more traditional cancer therapy and potentially overcome
certain limitations of current chimeric antigen receptor, or CAR-T,
therapy.
Bi-specific Antibody-Drug Conjugates Ligand-Directed Single-Chain
Fusion Therapeutic Protein Program
Antibody–drug
conjugates (ADCs) are a class of potent biopharmaceutical drugs
designed as a targeted therapy for the treatment of cancer. ADCs
combine the antitumor potency of highly cytotoxic small-molecule
drugs with the high selectivity, pharmacokinetic profile of mAbs.
These attributes allow sensitive discrimination between healthy and
diseased tissue. We believe our bi-specific, ligand-directed
single-chain fusion protein represents an example of the next
generation of ADCs.
We are
currently utilizing a single chain bispecific recombinant fusion
protein consisting of an anti-CD22 sFv, an anti-CD19 sFv, and DT390
(the catalytic and translocation domains of diphtheria toxin). It
is a cytotoxic molecule produced by recombinant DNA techniques
composed of a fusion gene consisting of sequences for DT390 and
also sequences encoding two separate and distinct sFvs, one
recognizing CD22 and one recognizing CD19. The anti-CD22 sFv comes
from the monoclonal antibody RFB4 and this sFv is currently in
clinical trials involving another anti-CD22 immunotoxin called
BL22. The anti-CD19 sFv is from the monoclonal antibody HD37 that
has previously been used clinically. Published preclinical studies
have shown that the presence of both sFvs on the same single chain
molecule results in a bispecific fusion toxin that has superior
activity and anti-cancer effects compared to the monospecific
fusion toxins. Between the VL and VH regions of the sFvs, we have
introduced aggregation reducing sequences (ARL) which has produced
a product which has demonstrated better activity against scid mouse
systemic models of B cell malignancy. The action of DT2219 occurs
as a result of binding to the CD22 and/or CD19 receptors,
subsequent internalization, and enzymatic inhibition of protein
synthesis leading to cell death.
We
believe that our single-chain bi-specific recombinant fusion
proteins utilizing novel linkers and innovative warheads represent
an important advance over currently marketed ADCs. Utilizing our
bi-specific ADC platform we have the ability to generate novel ADCs
with unique targets, linkers and warheads. This platform provides
us with the ability to rapidly construct novel ADCs with the
potential to treat a wide range of cancers, including hematologic
and solid tumors.
GTB-1550
is a novel, multi-target bispecific cytotoxic therapeutic agent
consisting of diphtheria toxin and bispecific single-chain variable
fragments (scFV) of antibodies targeting human CD19 and CD22. By
simultaneously targeting cancer cells that express either CD19 or
CD22 or both, GTB-1550 is capable of killing a broader variety of
hematological malignancies than either a traditional a CD19
antibody drug conjugate or a CD19 CAR-T immunotherapy which are
only able to target and attack CD19 expressing hematological
malignancies. Simultaneously targeting multiple cancer targets such
as CD19 and CD22 using a single therapeutic agent potentially makes
GT Biopharma’s multi-target bispecific drug conjugate therapy
the next generation of advanced cancer therapies.
To
date, GTB-1550 has completed one dose escalation Phase I-II
expansion clinical trial, and one fixed dose Phase I-II expansion
clinical trial which collectively enrolled a combined 43
patients.
6
Top-line
Consolidated Results:
●
Two
patients exhibited a Complete Remission (CR) with one patient
currently disease-free at 50 months post treatment.
●
Five
patients exhibited Stable Disease (SD) with the longest response
lasting 12 months post treatment.
●
Two
patients with transformed lymphoma showed transient tumor
shrinkage, however, therapy was discontinued due to dose-limiting
toxicities after the 1st cycle.
●
Greater
than 50% of evaluable patients receiving 60 mg/kg dose had positive
clinical response defined as stable disease, partial remission, or
complete remission.
Immuno-Oncology Product Candidates
Our
most advanced bi-specific ADC, GTB-1550, which targets CD19+ and/or
CD22+ hematological malignancies, is in the Phase 2 component of a
Phase 1/2 Non-Hodgins Lymphoma (NHL)/Acute Lymphocytic Leukemia
(ALL) trial which is an open-label, investigator-led study. We are
initially targeting certain hematologic malignancies as we believe
our product candidates may have certain advantages over existing
and other in-development products.
Our TriKE product candidates, GTB-3550 and
GTB-C3550, are single-chain, tri-specific scFv recombinant fusion
proteins composed of the variable regions of the heavy and light
chains (or heavy chain only) of anti-CD16 antibodies, wild-type or
a modified form of IL-15 and the variable regions of the heavy and
light chains of an antibody designed to precisely target a
specific
tumor antigen.
We
utilize
the NK stimulating cytokine human IL-15 as a
crosslinker between the two scFvs which is designed to provide a
self-sustaining signal leading to the proliferation and activation
of NK cells thus enhancing their ability to kill cancer cells
mediated by
antibody-dependent
cell-mediated cytotoxicity (ADCC).
Our TetraKE product candidates are single-chain
fusion proteins composed of human single-domain anti-CD16 antibody,
wild-type IL-15 and the variable regions of the heavy and light
chains of two antibodies that are designed to target two
specific
tumor antigens expressed on specific types of
cancer cells.
An example of a TetraKE
product candidate is GTB-1615 which is designed to target EpCAM and
CD133 positive solid tumors. EpCAM is found on many solid tumor
cells of epithelial origin and CD133 is a marker for cancer stem
cells. GTB-1615 is designed to enable a patient’s NK cells to
kill not only the heterogeneous population of cancer cells found in
many solid tumors but also kill the cancer stem cells that can be
responsible for recurrences.
GTB-1550
GTB-1550 is a
bispecific scFv recombinant fusion protein-drug conjugate composed
of the variable regions of the heavy and light chains of anti-CD19
and anti-CD22 antibodies and a modified form of diphtheria toxin
(DT390) as its cytotoxic drug payload. CD19 is a membrane
glycoprotein present on the surface of all stages of B-lymphocyte
development and is also expressed on most B-cell mature lymphoma
cells and leukemia cells. CD22 is a glycoprotein expressed on
B-lineage lymphoid precursors, including precursor acute
lymphoblastic leukemia, and often is co-expressed with CD19 on
mature B-cell malignancies such as lymphoma.
GTB-1550 targets
cancer cells expressing the CD19 receptor or CD22 receptor or both
receptors. When GTB-1550 binds to cancer cells, the cancer cells
internalize GTB-1550, and are killed due to the action of
drug’s cytotoxic diphtheria toxin payload. GTB-1550 has
completed a Phase 1 human clinical trial in patients with
relapsed/refractory B-cell lymphoma or leukemia.
The
initial Phase 1 study enrolled 25 patients with mature or precursor
B-cell lymphoid malignancies expressing the CD19 receptor or CD22
receptor or both receptors. All 25 patients received at least a
single course of therapy. The treatment at the higher doses
produced objective tumor responses with one patient in continuous
partial remission and the second in complete remission. A Phase 1/2
trial of GTB-1550 in 18 patients was recently completed in patients
with ALL/NHL. The FDA-approved clinical trial was conducted at the
University of Minnesota's Masonic Cancer Center. The data is
currently being analyzed. We expect to submit data from this Phase
1/2 study for presentation/publication.
GTB-3550
GTB-3550 is our
first TriKE product candidate. It is a single-chain, tri-specific
scFv recombinant fusion protein conjugate composed of the variable
regions of the heavy and light chains of anti-CD16 and anti-CD33
antibodies and a modified form of IL-15. We intend to study this
anti-CD16-IL-15-anti-CD33 TriKE in CD33 positive leukemias, a
marker expressed on tumor cells in acute myelogenous leukemia, or
AML, myelodysplastic syndrome, or MDS, and other hematopoietic
malignancies. CD33 is primarily a myeloid differentiation antigen
with endocytic properties broadly expressed on AML blasts and,
possibly, some leukemic stem cells. CD33 or Siglec-3 (sialic acid
binding Ig-like lectin 3, SIGLEC3, SIGLEC3, gp67, p67) is a
transmembrane receptor expressed on cells of myeloid lineage. It is
usually considered myeloid-specific, but it can also be found on
some lymphoid cells. The anti-CD33 antibody fragment that will be
used for these studies was derived from the M195 humanized
anti-CD33 scFV and has been used in multiple human clinical
studies. It has been exploited as target for therapeutic antibodies
for many years. We believe the recent approval of the antibody-drug
conjugate gemtuzumab validates this targeted approach.
7
The
GTB-3550 IND will focus on AML. These patients typically receive
frontline therapy, usually chemotherapy, including cytarabine and
an anthracycline, a therapy that has not changed in over 40 years.
About half will have relapses and require alternative therapies. In
addition, MDS incidence rates have dramatically increased in the
population of the United States from 3.3 per 100,000 individuals
from 2001-2004 to 70 per 100,000 annually, MDS is especially
prevalent in elderly patients that have a median age of 76 years at
diagnosis. The survival of patients with MDS is poor due to
decreased eligibility, as a result of advanced age, for allogeneic
hematopoietic cell transplantation (Allo- HSCT), the only curative
MDS treatment (Cogle CR. Incidence and Burden of the
Myelodysplastic Syndromes.
Curr
Hematol Malig Rep
. 2015; 10(3):272-281). We believe GTB-3550
could serve as a relatively safe, cost-effective, and easy-to-use
therapy for resistant/relapsing AML and could also be combined with
chemotherapy as frontline therapy thus targeting the larger
market.
The IND
for GTB-3550 was filed in June 2017 by the University of Minnesota.
FDA requested that additional preclinical toxicology be conducted
prior to initiating clinical trials. The FDA also requested some
additional information and clarifications on the manufacturing
(CMC) and clinical packages. The requested additional information
and clarifications were completed and incorporated by us into the
IND in eCTD format. We filed the IND amendment in June 2018 and
announced on November 1, 2018 that we had received notification
from the FDA that the IND was open and the Company was authorized
to initiate a first-in-human Phase 1 study with GTB-3550 in AML,
MDS and severe mastocytosis. We began the Phase 1 clinical trial in
January 2020.
GTB-C3550
GTB-C3550 is a
next-generation, follow-on, to our lead TriKE, GTB-3550. GTB-C3550
contains a modified CD16 moiety which has improved binding
characteristics and enhanced tumor cell killing based on functional
assays and animal models of AML. Using our platform technology, we
substituted the anti-CD16 scFv arm in GTB-3550 with a novel
humanized single-domain anti-CD16 antibody to create this
second-generation molecule which may have improved functionality.
Single-domain antibodies, such as GTB-C3550, typically have several
advantages, including better stability and solubility, more
resistance to pH changes, can better recognize hidden antigenic
sites, lack of a V
L
portion
thus preventing V
H
/V
L
mispairing and are suitable for construction of larger molecules.
GTB-C3550 induced a potent increase in NK cell degranulation,
measured by CD107a expression against HL-60 AML tumor targets when
compared to our first- generation TriKE (70.75±3.65% vs.
30.75±5.05%). IFN production was similarly enhanced
(29.2±1.8% vs. 6.55±1.07%). GTB-C3550 also exhibited a
robust increase in NK cell proliferation (57.65±6.05% vs.
20.75±2.55%). GTB-3550 studies will help inform the
development of GTB-C3550 which we expect will de-risk the GTB-C3550
program as data will be generated to make an informed decision on
which, or both, will be brought into later phase
studies.
GTB-1615
GTB-1615 is an
example of our first-generation TetraKEs designed for the treatment
of solid tumors. It is a single-chain fusion protein composed of
CD16-IL15-EpCAM-CD133. EpCAM is found on many solid tumor cells of
epithelial origin and CD133 is a marker for cancer stem cells. This
TetraKE is designed to target not only the heterogeneous population
of cancer cells found in solid tumors but also the cancer stem
cells that are typically responsible for recurrences. Depending on
the availability of drug supply, we hope to initiate human clinical
testing for certain of our solid tumor product candidates in
2020.
Our
Strategy
Our
goal is to be a leader in immuno-oncology therapies targeting a
broad range of indications including hematological malignancies,
sarcoma and solid tumors. Key elements of our strategy are
to:
Expedite clinical development, regulatory approval and
commercialization of our bi-specific ADC, GTB-1550, in specific
indications with a high unmet-medical need such as patients who are
resistant or refractory to conventional treatment and also assess
fast-to- market strategies in potential orphan
indications
Based
upon promising clinical results from the initial GTB-1550 Phase 1
study, we began enrolling patients in a Phase 2 trial during the
first quarter of 2017 for our most advanced oncology product
candidate, GTB-1550, for the treatment of patients with
relapsed/refractory B- cell leukemias or lymphomas. In the Phase 1
study, of the nine patients who received GTB-1550 at the higher
doses, two had durable complete responses in heavily pretreated
patients. One of these patients, who had failed multiple previous
treatment regimens, has been cancer free since the beginning of
2015.
Rapidly advanced our Tri-specific Killer Engagers (TriKEs),
GTB-3550 and GTB-C3550
Our
TriKE and TetraKE product candidates have the potential to be
groundbreaking therapies targeting a broad range of hematologic
malignancies, sarcomas and solid tumors. We are preparing to study
GTB-3550, an anti-CD16-IL-15-anti-CD33 TriKE in CD33 positive
leukemias, a marker expressed on tumor cells in AML, MDS and other
myeloid malignancies. We began a Phase 1 clinical trial in the
fourth quater of 2019 in patients with relapsed/refractory AML. The
Phase 1 trial will be a dose finding study. We expect this will be
closely followed by Phase 2 trials to determine the most
efficacious dosing and cycles with the aim to maximize efficacy
while minimizing on-target, off-disease adverse
events.
GTB-C3550 contains
a humanized single-domain anti-CD16 moiety which demonstrated
improved binding characteristics and enhanced tumor cell killing
based on functional assays and animal models of AML.
We have
designed GTB-3550 and GTB-C3550, if approved for marketing, to
serve as a relatively safe, cost-effective, and easy-to-use
therapies for resistant/relapsing AML or MDS which could also be
combined with chemotherapy as frontline therapy thus targeting a
broad AML/MDS market.
GTB-C3550 is a
next-generation, follow-on, to our lead TriKE, GTB-3550. GTB-3550
studies will help inform the development of GTB-C3550. We believe
this will de-risk the GTB-C3550 program as the data being generated
will help to make informed decisions on which, or both, will be
brought into later phase studies and in which patient
populations.
8
Utilize our TriKE and TetraKE platform technologies to develop a
robust pipeline of targeted immuno-oncology products targeting a
wide range of hematologic malignancies, sarcomas and solid tumors
for development on our own and through potential collaborations
with larger pharmaceutical companies
We are
using our TriKE and TetraKE platforms with the intent to bring to
market multiple, targeted, off-the-shelf therapies that can treat a
range of hematologic malignancies, sarcomas and solid tumors. The
platforms are scalable and we are currently working with several
third parties investigating the optimal expression system of the
TriKEs and TetraKE constructs which we expect to be part of a
process in which we are able to produce IND-ready moieties in
approximately 90-120 days after the construct conceptual design.
After conducting market and competitive research, specific moieties
can then be rapidly advanced into the clinic on our own or through
potential collaborations with larger pharmaceutical
companies.
We
believe our TriKEs and TetraKEs will have the ability, if approved
for marketing, to be used on a stand-alone basis, augment the
current monoclonal antibody therapeutics, or be used in conjunction
with more traditional cancer therapy and potentially overcome
certain limitations of current chimeric antigen receptor, or CAR-T,
therapy.
Oncology
Markets
B-cell Lymphomas/Leukemias
B-cell
lymphoma is a type of cancer that forms in B cells (a type of
immune system cell). B-cell lymphomas may be either indolent (slow-
growing) or aggressive (fast-growing). Non- Hodgkin lymphoma has an
incidence rate of 19.4 per 100,000 per year and B-cell lymphomas
make up most (about 85%) of NHL in the United States. There are
many different types of B-cell non- Hodgkin lymphomas. These
include Burkitt lymphoma, chronic lymphocytic leukemia/small
lymphocytic lymphoma (CLL/SLL), diffuse large B-cell lymphoma,
follicular lymphoma, and mantle cell lymphoma.
Acute Lymphoblastic Leukemia
Acute
lymphoblastic leukemia, or ALL, is an acute form of leukemia, or
cancer of the white blood cells, characterized by the
overproduction and accumulation of immature white blood cells,
known as lymphoblasts. In persons with ALL, lymphoblasts are
overproduced in the bone marrow and continuously multiply, causing
damage and death by inhibiting the production of normal cells (such
as red and white blood cells and platelets) in the bone marrow and
by spreading (infiltrating) to other organs.
"Acute"
is defined by the World Health Organization standards, in which
greater than 20% of the cells in the bone marrow are blasts.
Chronic lymphocytic leukemia is defined as having less than 20%
blasts in the bone marrow. Acute lymphoblastic leukemia is seen in
both children and adults; the highest incidence is seen between
ages 2 to 3 years (>90 cases per 1 million per year). ALL is the
most common cancer diagnosed in children and represents
approximately 25% of cancer diagnoses among children younger than
15 years. Among children with ALL, approximately 98% attain
remission, and approximately 85% of patients aged 1 to 18 years
with newly diagnosed ALL treated on current regimens are expected
to be long-term event-free survivors, with over 90% surviving at 5
years.
Multiple Myeloma
Multiple myeloma is
a type of cancer that forms in white blood cells. Multiple myeloma
causes cancer cells to accumulate in the bone marrow, where they
crowd out healthy blood cells. Multiple myeloma is also
characterized by destructive lytic bone lesions (rounded,
punched-out areas of bone), diffuse osteoporosis, bone pain, and
the production of abnormal proteins which accumulate in the urine.
Anemia is also present in most multiple myeloma patients at the
time of diagnosis and during follow-up. Anemia in multiple myeloma
is multifactorial and is secondary to bone marrow replacement by
malignant plasma cells, chronic inflammation, relative
erythropoietin deficiency, and vitamin deficiency. Plasma cell
leukemia, a condition in which plasma cells comprise greater than
20% of peripheral leukocytes, is typically a terminal stage of
multiple myeloma and is associated with short
survival.
Myeloid Leukemias
Acute Myeloid Leukemia
AML is
a heterogeneous hematologic stem cell malignancy in adults with
incidence rate of 4.3% per 100,000 populations. The median age at
the time of diagnosis is 68 years. AML is an aggressive disease and
is fatal without anti-leukemic treatment. AML is the most common
form of adult leukemia in the U.S. These patients will require
frontline therapy, usually chemotherapy including cytarabine and an
anthracycline, a therapy that has not changed in over 40 years.
Myelodysplastic syndromes (MDS) are a heterogeneous group of
myeloid neoplasms characterized by dysplastic features of
erythroid/myeloid/megakaryocytic lineages, progressive bone marrow
failure, a varying percentage of blast cells, and enhanced risk to
evolve into acute myeloid leukemia. It is estimated that over
10,000 new cases of MDS are diagnosed each year and there are
minimal treatment options; other estimates have put this number
higher. In addition, the incidence of MDS is rising for unknown
reasons.
Sarcomas
A
sarcoma is a type of cancer that develops from certain tissues,
like bone or muscle. Bone and soft tissue sarcomas are the main
types of sarcoma. Soft tissue sarcomas can develop from soft
tissues like fat, muscle, nerves, fibrous tissues, blood vessels,
or deep skin tissues. They can be found in any part of the body.
Most of them develop in the arms or legs. They can also be found in
the trunk, head and neck area, internal organs, and the area in
back of the abdominal cavity (known as the retroperitoneum).
Sarcomas are not common tumors, and most cancers are the type of
tumors called carcinomas.
9
The
most common types of sarcoma in adults are undifferentiated
pleomorphic sarcoma (previously called malignant fibrous
histiocytoma), liposarcoma, and leiomyosarcoma. Certain types occur
more often in certain areas of the body than others. For example,
leiomyosarcomas are the most common abdominal sarcoma, while
liposarcomas and undifferentiated pleomorphic sarcoma are most
common in legs. But pathologists (doctors who specialize in
diagnosing cancers by how they look under the microscope), may not
always agree on the exact type of sarcoma. Sarcomas of uncertain
type are very common. (American Cancer Society, Cancer Facts &
Figures 2019)
Manufacturing
We do
not currently own or operate manufacturing facilities for the
production of clinical or commercial quantities of any of our
product candidates. We rely on a small number of third-party
manufacturers to produce our compounds and expect to continue to do
so to meet the preclinical and clinical requirements of our
potential product candidates as well as for all of our commercial
needs. We do not have long-term agreements with any of these third
parties. We require in our manufacturing and processing agreements
that all third-party contract manufacturers and processors produce
active pharmaceutical ingredients, or API, and finished products in
accordance with the FDA’s current Good Manufacturing
Practices, or cGMP, and all other applicable laws and regulations.
We maintain confidentiality agreements with potential and existing
manufacturers in order to protect our proprietary rights related to
our drug candidates.
Patents
and Trademarks
Immuno-oncology platform
University of Minnesota License Agreement
We
(through our wholly owned subsidiary Oxis Biotech, Inc.) are party
to an exclusive worldwide license agreement with the Regents of the
University of Minnesota, to further develop and commercialize
cancer therapies using TriKE technology developed by researchers at
the university to target NK cells to cancer. Under the terms of the
agreement, we receive exclusive rights to conduct research and to
develop, make, use, sell, and import TriKE technology worldwide for
the treatment of any disease, state or condition in humans. We
shall be responsible for obtaining all permits, licenses,
authorizations, registrations and regulatory approvals required or
granted by any governmental authority anywhere in the world that is
responsible for the regulation of products such as the TriKE
technology, including without limitation the FDA in the United
States and the European Agency for the Evaluation of Medicinal
Products in the European Union. Under the agreement, the University
of Minnesota will receive an upfront license fee, royalty fees
ranging from 4% to 6%, minimum annual royalty payments of $250,000
beginning in 2022, $2,000,000 in 2025, and $5,000,000 in 2027 and
certain milestone payments totaling $3,100,000.
Daniel A. Vallera, Ph.D. License Agreement
We are
party to an exclusive worldwide license agreement with Daniel A.
Vallera, Ph.D. and his co-inventor Jeffrey Lion, or jointly, Dr.
Vallera, to further develop and commercialize DT2219ARL (GTB-1550),
a novel therapy for the treatment of various human cancers. Under
the terms of the agreement, we receive exclusive rights to conduct
research and to develop, make, use, sell, and import DT2219ARL
worldwide for the treatment of any disease, state or condition in
humans. We shall be responsible for obtaining all permits,
licenses, authorizations, registrations and regulatory approvals
required or granted by any governmental authority anywhere in the
world that is responsible for the regulation of products such as
DT2219ARL, including without limitation the FDA in the United
States and the European Agency for the Evaluation of Medicinal
Products in the European Union. Under the agreement, Dr. Vallera
will receive an upfront license fee, royalty fees ranging from 3%
for net sales and 25% of net sublicensing revenues, and certain
milestone payments totaling $1,500,000.
Employees
As of
December 31, 2019, we had two employees. Many of our activities are
outsourced to consultants who provide services to us on a project
basis. As business activities require and capital resources permit,
we will hire additional employees to fulfill our company’s
needs.
Form
and Year of Organization
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. On
July 17, 2017, we amended our Certificate of Incorporation for the
purpose of changing our name from Oxis International, Inc. to GT
Biopharma, Inc.
10
ITEM
1A. RISK FACTORS
Investing in our common stock involves a high degree of risk. You
should carefully consider the risks and uncertainties described
below in addition to the other information contained in this
prospectus before deciding whether to invest in shares of our
common stock. If any of the following risks actually occur, our
business, financial condition or operating results could be harmed.
In that case, the trading price of our common stock could decline
and you may lose part or all of your investment. In the opinion of
management, the risks discussed below represent the material risks
known to the company. Additional risks and uncertainties not
currently known to us or that we currently deem immaterial may also
impair our business, financial condition and operating results and
adversely affect the market price of our common stock.
Risks
Related to Our Business
Our business is at an early stage of development and we may not
develop therapeutic products that can be
commercialized.
Our
business is at an early stage of development. We do not have
immune-oncology products in late stage clinical trials. We are
still in the early stages of identifying and conducting research on
potential therapeutic products. Our potential therapeutic products
will require significant research and development and pre-clinical
and clinical testing prior to regulatory approval in the United
States and other countries. We may not be able to obtain regulatory
approvals, enter clinical trials for any of our product candidates,
or commercialize any products. Our product candidates may prove to
have undesirable and unintended side effects or other
characteristics adversely affecting their safety, efficacy or cost
effectiveness that could prevent or limit their use. Any product
using any of our technology may fail to provide the intended
therapeutic benefits or achieve therapeutic benefits equal to or
better than the standard of treatment at the time of testing or
production.
We have a history of operating losses and we expect to continue to
incur losses for the foreseeable future and we may never generate
revenue or achieve profitability.
As of
December 31, 2019, we had an accumulated deficit of $567,332,000.
We have not generated any significant revenue to date and are not
profitable, and have incurred losses in each year since our
inception. We do not expect to generate any product sales or
royalty revenues for at least four years. We expect to incur
significant additional operating losses for the foreseeable future
as we expand research and development and clinical trial
efforts.
Our
ability to achieve long-term profitability is dependent upon
obtaining regulatory approvals for our products and successfully
commercializing our products alone or with third parties. However,
our operations may not be profitable even if any of our products
under development are successfully developed and produced and
thereafter commercialized. Even if we achieve profitability in the
future, we may not be able to sustain profitability in subsequent
periods.
Even if
we succeed in commercializing one or more of our product
candidates, we expect to continue to incur substantial research and
development and other expenditures to develop and market additional
product candidates. The size of our future net losses will depend,
in part, on the rate of future growth of our expenses and our
ability to generate revenue. Our prior losses and expected future
losses have had and will continue to have an adverse effect on our
stockholders’ equity and working capital.
We will need additional capital to conduct our operations and
develop our products, and our ability to obtain the necessary
funding is uncertain.
We have
used a significant amount of cash since inception to finance the
continued development and testing of our product candidates, and we
expect to need substantial additional capital resources in order to
develop our product candidates going forward and launch and
commercialize any product candidates for which we receive
regulatory approval.
We may
not be successful in generating and/or maintaining operating cash
flow, and the timing of our capital expenditures and other
expenditures may not result in cash sufficient to sustain our
operations through the next 12 months. If financing is not
sufficient and additional financing is not available or available
only on terms that are detrimental to our long-term survival, it
could have a material adverse effect on our ability to continue to
function. The timing and degree of any future capital requirements
will depend on many factors, including:
●
the accuracy of the
assumptions underlying our estimates for capital needs in 2020 and
beyond;
●
scientific and
clinical progress in our research and development
programs;
●
the magnitude and
scope of our research and development programs and our ability to
establish, enforce and maintain strategic arrangements for
research, development, clinical testing, manufacturing and
marketing;
●
our progress with
pre-clinical development and clinical trials;
●
the time and costs
involved in obtaining regulatory approvals;
●
the costs involved
in preparing, filing, prosecuting, maintaining, defending and
enforcing patent claims; and
●
the number and type
of product candidates that we pursue.
11
Additional
financing through strategic collaborations, public or private
equity or debt financings or other financing sources may not be
available on acceptable terms, or at all. Additional equity
financing could result in significant dilution to our stockholders,
and any debt financings will likely involve covenants restricting
our business activities. Additional financing may not be available
on acceptable terms, or at all. Further, if we obtain additional
funds through arrangements with collaborative partners, these
arrangements may require us to relinquish rights to some of our
technologies, product candidates or products that we would
otherwise seek to develop and commercialize on our
own.
If
sufficient capital is not available, we may be required to delay,
reduce the scope of or eliminate one or more of our research or
product development initiatives, any of which could have a material
adverse effect on our financial condition or business
prospects.
Research and Development Investment
Our
currently projected expenditures for 2020 include approximately $12
million to $15 million for research and development. The actual
cost of our programs could differ significantly from our current
projections if we change our planned development process. In the
event that actual costs of our clinical program, or any of our
other ongoing research activities, are significantly higher than
our current estimates, we may be required to significantly modify
our planned level of operations.
The
successful development of any product candidate is highly
uncertain. It is difficult to reasonably estimate or know the
nature, timing and costs of the efforts necessary to complete the
development of, or the period in which material net cash inflows
are expected to commence from any product candidate, due to the
numerous risks and uncertainties associated with developing drugs.
Any failure to complete any stage of the development of products in
a timely manner could have a material adverse effect on our
operations, financial position and liquidity.
We have identified material weaknesses in our internal controls
over financial reporting and have not yet remedied these
weaknesses. If we fail to maintain an effective system of internal
control over financial reporting, we may not be able to accurately
report our financial results or prevent fraud. As a result,
stockholders could lose confidence in our financial and other
public reporting, which would harm our business and the trading
price of our common stock.
Effective internal
control over financial reporting is necessary for us to provide
reliable financial reports and, together with adequate disclosure
controls and procedures, are designed to prevent fraud. Any failure
to implement required new or improved controls, or difficulties
encountered in their implementation, could cause us to fail to meet
our reporting obligations. Ineffective internal control could also
cause investors to lose confidence in our reported financial
information, which could have a negative effect on the trading
price of our common stock.
We have
identified material weaknesses in our internal control over
financial reporting as a company. As defined in Regulation 12b-2
under the Securities Exchange Act of 1934, or the Exchange Act, a
“material weakness” is a deficiency, or combination of
deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement
of our annual or interim consolidated financial statements will not
be prevented, or detected on a timely basis. Specifically, we
determined that we had the following material weaknesses in our
internal control over financial reporting: (i) inadequate
segregation of duties; (ii) risks of executive override; and (iii)
insufficient written policies and procedures for accounting and
financial reporting with respect to the requirements and
application of both generally accepted accounting principles in the
United States of America, or GAAP, and the U.S. Securities and
Exchange Commission, or the SEC, guidelines.
As of
the date of this report, we have not remediated these material
weaknesses. The company intends to take measures to mitigate the
issues identified and implement a functional system of internal
controls over financial reporting. Such measures will include, but
not be limited to hiring of additional employees in its finance and
accounting department, although the timing of such hires is largely
dependent on our securing additional financing to cover such costs;
preparation of risk-control matrices to identify key risks and
develop and document policies to mitigate those risks; and
identification and documentation of standard operating procedures
for key financial activities. The implementation of these
initiatives may not fully address any material weakness or other
deficiencies that we may have in our internal control over
financial reporting.
Even if
we develop effective internal control over financial reporting,
such controls may become inadequate due to changes in conditions or
the degree of compliance with such policies or procedures may
deteriorate, which could result in the discovery of additional
material weaknesses and deficiencies. In any event, the process of
determining whether our existing internal control over financial
reporting is compliant with Section 404 of the Sarbanes-Oxley Act,
or Section 404, and sufficiently effective requires the investment
of substantial time and resources, including by certain members of
our senior management. As a result, this process may divert
internal resources and take a significant amount of time and effort
to complete. In addition, we cannot predict the outcome of this
process and whether we will need to implement remedial actions in
order to establish effective controls over financial reporting. The
determination of whether or not our internal controls are
sufficient and any remedial actions required could result in us
incurring additional costs that we did not anticipate, including
the hiring of outside consultants. We may also fail to timely
complete our evaluation, testing and any remediation required to
comply with Section 404.
We are
required, pursuant to Section 404, to furnish a report by
management on, among other things, the effectiveness of our
internal control over financial reporting. However, for as long as
we are a “smaller reporting company,” our independent
registered public accounting firm will not be required to attest to
the effectiveness of our internal control over financial reporting
pursuant to Section 404. While we could be a smaller reporting
company for an indefinite amount of time, and thus relieved of the
above-mentioned attestation requirement, an independent assessment
of the effectiveness of our internal control over financial
reporting could detect problems that our management's assessment
might not. Such undetected material weaknesses in our internal
control over financial reporting could lead to financial statement
restatements and require us to incur the expense of
remediation.
12
Our intellectual property may be compromised.
Part of
our value going forward depends on the intellectual property rights
that we have been and are acquiring. There may have been many
persons involved in the development of our intellectual property,
and we may not be successful in obtaining the necessary rights from
all of them. It is possible that in the future, third parties may
challenge our intellectual property rights. We may not be
successful in protecting our intellectual property rights. In
either event, we may lose the value of our intellectual property,
and if so, our business prospects may suffer.
If our efforts to protect the proprietary nature of the
intellectual property related to our technologies are not adequate,
we may not be able to compete effectively in our market and our
business would be harmed.
We rely
upon a combination of patents, trade secret protection and
confidentiality agreements to protect the intellectual property
related to our technologies. Any disclosure to or misappropriation
by third parties of our trade secret or other confidential
information could enable competitors to quickly duplicate or
surpass our technological achievements, thus eroding any
competitive advantage we may derive from this
information.
The
strength of patents in the biotechnology and pharmaceutical field
involves complex legal and scientific questions and can be
uncertain. The patent applications we own or license may fail to
result in issued patents in the United States or in foreign
countries. Third parties may challenge the validity, enforceability
or scope of any issued patents we own or license or any
applications that may issue as patents in the future, which may
result in those patents being narrowed, invalidated or held
unenforceable. Even if they are unchallenged, our patents and
patent applications may not adequately protect our intellectual
property or prevent others from developing similar products that do
not fall within the scope of our patents. If the breadth or
strength of protection provided by the patents we hold or pursue is
threatened, our ability to commercialize any product candidates
with technology protected by those patents could be threatened.
Further, if we encounter delays in our clinical trials, the period
of time during which we would have patent protection for any
covered product candidates that obtain regulatory approval would be
reduced. Since patent applications in the United States and most
other countries are confidential for a period of time after filing,
we cannot be certain at the time of filing that we are the first to
file any patent application related to our product
candidates.
In
addition to the protection afforded by patents, we seek to rely on
trade secret protection and confidentiality agreements to protect
proprietary know-how that is not patentable, processes for which
patents are difficult to enforce and any other elements of our
discovery platform and drug development processes that involve
proprietary know-how, information or technology that is not covered
by patents or not amenable to patent protection. Although we
require all of our employees and certain consultants and advisors
to assign inventions to us, and all of our employees, consultants,
advisors and any third parties who have access to our proprietary
know-how, information or technology to enter into confidentiality
agreements, our trade secrets and other proprietary information may
be disclosed or competitors may otherwise gain access to such
information or independently develop substantially equivalent
information. Further, the laws of some foreign countries do not
protect proprietary rights to the same extent or in the same manner
as the laws of the United States. As a result, we may encounter
significant difficulty in protecting and defending our intellectual
property both in the United States and abroad. If we are unable to
prevent material disclosure of the trade secret intellectual
property related to our technologies to third parties, we may not
be able to establish or maintain the competitive advantage that we
believe is provided by such intellectual property, which could
materially adversely affect our market position and business and
operational results.
Claims that we infringe the intellectual property rights of others
may prevent or delay our drug discovery and development
efforts.
Our
research, development and commercialization activities, as well as
any product candidates or products resulting from those activities,
may infringe or be accused of infringing a patent or other form of
intellectual property under which we do not hold a license or other
rights. Third parties may assert that we are employing their
proprietary technology without authorization. There may be
third-party patents of which we are currently unaware, with claims
that cover the use or manufacture of our product candidates or the
practice of our related methods. Because patent applications can
take many years to issue, there may be currently pending patent
applications that may later result in issued patents that our
product candidates may infringe. In addition, third parties may
obtain patents in the future and claim that use of our technologies
infringes one or more claims of these patents. If our activities or
product candidates infringe the patents or other intellectual
property rights of third parties, the holders of such intellectual
property rights may be able to block our ability to commercialize
such product candidates or practice our methods unless we obtain a
license under the intellectual property rights or until any
applicable patents expire or are determined to be invalid or
unenforceable.
Defense
of any intellectual property infringement claims against us,
regardless of their merit, would involve substantial litigation
expense and would be a significant diversion of employee resources
from our business. In the event of a successful claim of
infringement against us, we may have to pay substantial damages,
obtain one or more licenses from third parties, limit our business
to avoid the infringing activities, pay royalties and/or redesign
our infringing product candidates or methods, any or all of which
may be impossible or require substantial time and monetary
expenditure. Further, if we were to seek a license from the third
party holder of any applicable intellectual property rights, we may
not be able to obtain the applicable license rights when needed or
on commercially reasonable terms, or at all. The occurrence of any
of the above events could prevent us from continuing to develop and
commercialize one or more of our product candidates and our
business could materially suffer.
13
We may desire, or be forced, to seek additional licenses to use
intellectual property owned by third parties, and such licenses may
not be available on commercially reasonable terms or at
all.
A third
party may hold intellectual property, including patent rights, that
are important or necessary to the development of our product
candidates, in which case we would need to obtain a license from
that third party or develop a different formulation of the product
that does not infringe upon the applicable intellectual property,
which may not be possible. Additionally, we may identify product
candidates that we believe are promising and whose development and
other intellectual property rights are held by third parties. In
such a case, we may desire to seek a license to pursue the
development of those product candidates. Any license that we may
desire to obtain or that we may be forced to pursue may not be
available when needed on commercially reasonable terms or at all.
Any inability to secure a license that we need or desire could have
a material adverse effect on our business, financial condition and
prospects.
The patent protection covering some of our product candidates may
be dependent on third parties, who may not effectively maintain
that protection.
While
we expect that we will generally seek to gain the right to fully
prosecute any patents covering product candidates we may in-license
from third-party owners, there may be instances when platform
technology patents that cover our product candidates remain
controlled by our licensors. If any of our current or future
licensing partners that retain the right to prosecute patents
covering the product candidates we license from them fail to
appropriately maintain that patent protection, we may not be able
to prevent competitors from developing and selling competing
products or practicing competing methods and our ability to
generate revenue from any commercialization of the affected product
candidates may suffer.
We may be involved in lawsuits to protect or enforce our patents or
the patents of our licensors, which could be expensive, time-
consuming and unsuccessful.
Competitors may
infringe our patents or the patents of our current or potential
licensors. To attempt to stop infringement or unauthorized use, we
may need to enforce one or more of our patents, which can be
expensive and time-consuming and distract management. If we pursue
any litigation, a court may decide that a patent of ours or our
licensor’s is not valid or is unenforceable, or may refuse to
stop the other party from using the relevant technology on the
grounds that our patents do not cover the technology in question.
Further, the legal systems of certain countries, particularly
certain developing countries, do not favor the enforcement of
patents, which could reduce the likelihood of success of any
infringement proceeding we pursue in any such jurisdiction. An
adverse result in any infringement litigation or defense
proceedings could put one or more of our patents at risk of being
invalidated, held unenforceable, or interpreted narrowly and could
put our patent applications at risk of not issuing, which could
limit our ability to exclude competitors from directly competing
with us in the applicable jurisdictions.
Interference
proceedings provoked by third parties or brought by the U.S. PTO
may be necessary to determine the priority of inventions with
respect to our patents or patent applications or those of our
licensors. An unfavorable outcome could require us to cease using
the related technology or to attempt to license rights to use it
from the prevailing party. Our business could be harmed if the
prevailing party does not offer us a license on commercially
reasonable terms, or at all. Litigation or interference proceedings
may fail and, even if successful, may result in substantial costs
and distract our management and other employees.
If we are unsuccessful in obtaining or maintaining patent
protection for intellectual property in development, our business
and competitive position would be harmed.
We are
seeking patent protection for some of our technology and product
candidates. Patent prosecution is a challenging process and is not
assured of success. If we are unable to secure patent protection
for our technology and product candidates, our business may be
adversely impacted.
In
addition, issued patents and pending international applications
require regular maintenance. Failure to maintain our portfolio may
result in loss of rights that may adversely impact our intellectual
property rights, for example by rendering issued patents
unenforceable or by prematurely terminating pending international
applications.
If we are unable to protect the confidentiality of our trade
secrets, our business and competitive position would be
harmed.
In
addition to seeking patents for some of our technology and product
candidates, we also rely on trade secrets, including unpatented
know- how, technology and other proprietary information, to
maintain our competitive position. We currently, and expect in the
future to continue to, seek to protect these trade secrets, in
part, by entering into confidentiality agreements with parties who
have access to them, such as our employees, collaborators, contract
manufacturers, consultants, advisors and other third parties. We
also enter into confidentiality and invention or patent assignment
agreements with our employees and consultants. Despite these
efforts, any of these parties may breach the agreements and
disclose our proprietary information, including our trade secrets,
and we may not be able to obtain adequate remedies for any such
disclosure. Enforcing a claim that a party illegally disclosed or
misappropriated a trade secret is difficult, expensive and time-
consuming, and the outcome is unpredictable. In addition, some
courts inside and outside the United States are less willing or
unwilling to protect trade secrets. If any of our trade secrets
were to be lawfully obtained or independently developed by a
competitor, we would have no right to prevent them, or those to
whom they disclose the trade secrets, from using that technology or
information to compete with us. If any of our trade secrets were to
be disclosed to or independently developed by a competitor, our
competitive position would be harmed.
14
If we fail to meet our obligations under our license agreements, we
may lose our rights to key technologies on which our business
depends.
Our
business depends in part on licenses from third parties. These
third-party license agreements impose obligations on us, such as
payment obligations and obligations to diligently pursue
development of commercial products under the licensed patents. If a
licensor believes that we have failed to meet our obligations under
a license agreement, the licensor could seek to limit or terminate
our license rights, which could lead to costly and time-consuming
litigation and, potentially, a loss of the licensed rights. During
the period of any such litigation, our ability to carry out the
development and commercialization of potential products could be
significantly and negatively affected. If our license rights were
restricted or ultimately lost, our ability to continue our business
based on the affected technology platform could be severely
adversely affected.
We will have to hire additional executive officers and employees to
operate our business. If we are unable to hire qualified personnel,
we may not be able to implement our business strategy.
We
currently have only two fulltime employees. The loss of the
services of any of our employees could delay our product
development programs and our research and development efforts. We
do not maintain key person life insurance on any of our officers,
employees or consultants. In order to develop our business in
accordance with our business strategy, we will have to hire
additional qualified personnel, including in the areas of
manufacturing, clinical trials management, regulatory affairs,
finance, and business development. We will need to raise sufficient
funds to hire the necessary employees and have commenced our search
for additional key employees.
Moreover, there is
intense competition for a limited number of qualified personnel
among biopharmaceutical, biotechnology, pharmaceutical and other
businesses. Many of the other pharmaceutical companies against
which we compete for qualified personnel have greater financial and
other resources, different risk profiles, longer histories in the
industry and greater ability to provide valuable cash or stock
incentives to potential recruits than we do. They also may provide
more diverse opportunities and better chances for career
advancement. Some of these characteristics may be more appealing to
high quality candidates than what we are able to offer as an early-
stage company. If we are unable to continue to attract and retain
high quality personnel, the rate and success at which we can
develop and commercialize product candidates will be
limited.
We depend on key personnel for our continued operations and future
success, and a loss of certain key personnel could significantly
hinder our ability to move forward with our business
plan.
Because
of the specialized nature of our business, we are highly dependent
on our ability to identify, hire, train and retain highly qualified
scientific and technical personnel for the research and development
activities we conduct or sponsor. The loss of one or more key
executive officers, or scientific officers, would be significantly
detrimental to us. In addition, recruiting and retaining qualified
scientific personnel to perform research and development work is
critical to our success. Our anticipated growth and expansion into
areas and activities requiring additional expertise, such as
clinical testing, regulatory compliance, manufacturing and
marketing, will require the addition of new management personnel
and the development of additional expertise by existing management
personnel. There is intense competition for qualified personnel in
the areas of our present and planned activities. Accordingly, we
may not be able to continue to attract and retain the qualified
personnel, which would adversely affect the development of our
business.
We may be subject to claims by third parties asserting that our
employees or we have misappropriated their intellectual property,
or claiming ownership of what we regard as our own intellectual
property.
Many of
our employees were previously employed at universities or other
biotechnology or pharmaceutical companies, including our
competitors or potential competitors. Although we try to ensure
that our employees do not use the proprietary information or
know-how of others in their work for us, with contractual
provisions and other procedures, we may be subject to claims that
these employees or we have used or disclosed intellectual property,
including trade secrets or other proprietary information, of any
such employee’s former employers. Litigation may be necessary
to defend against any such claims.
In
addition, while it is our policy to require our employees and
contractors who may be involved in the development of intellectual
property to execute agreements assigning such intellectual property
to us, we may be unsuccessful in executing such an agreement with
each party who in fact contributes to the development of
intellectual property that we regard as our own. Further, the terms
of such assignment agreements may be breached and we may not be
able to successfully enforce their terms, which may force us to
bring claims against third parties, or defend claims they may bring
against us, to determine the ownership of intellectual property
rights we may regard and treat as our own.
Our employees may engage in misconduct or other improper
activities, including noncompliance with regulatory standards and
requirements, which could cause our business to
suffer.
We are
exposed to the risk of employee fraud or other misconduct.
Misconduct by employees could include intentional failures to
comply with regulations of governmental authorities, such as the
FDA or the European Medicines Agency, or EMA, to provide accurate
information to the FDA or EMA, to comply with manufacturing
standards we have established, to comply with federal, state and
international healthcare fraud and abuse laws and regulations as
they may become applicable to our operations, to report financial
information or data accurately or to disclose unauthorized
activities to us. Employee misconduct could also involve the
improper use of information obtained in the course of clinical
trials, which could result in regulatory sanctions and serious harm
to our reputation. It is not always possible to identify and deter
employee misconduct, and the precautions we currently take and the
procedures we may establish in the future as our operations and
employee base expand to detect and prevent this type of activity
may not be effective in controlling unknown or unmanaged risks or
losses or in protecting us from governmental investigations or
other actions or lawsuits stemming from a failure by our employees
to comply with such laws or regulations. If any such actions are
instituted against us, and we are not successful in defending
ourselves or asserting our rights, those actions could have a
significant impact on our business and results of operations,
including the imposition of significant fines or other
sanctions.
15
Our reliance on the activities of our non-employee consultants,
research institutions and scientific contractors, whose activities
are not wholly within our control, may lead to delays in
development of our proposed products.
We rely
extensively upon and have relationships with scientific consultants
at academic and other institutions, some of whom conduct research
at our request, and other consultants with expertise in clinical
development strategy or other matters. These consultants are not
our employees and may have commitments to, or consulting or
advisory contracts with, other entities that may limit their
availability to us. We have limited control over the activities of
these consultants and, except as otherwise required by our
collaboration and consulting agreements to the extent they exist,
can expect only limited amounts of their time to be dedicated to
our activities. These research facilities may have commitments to
other commercial and non-commercial entities. We have limited
control over the operations of these laboratories and can expect
only limited amounts of time to be dedicated to our research
goals.
It may take longer to complete our clinical trials than we project,
or we may not be able to complete them at all.
For
budgeting and planning purposes, we have projected the date for the
commencement, continuation and completion of our various clinical
trials. However, a number of factors, including scheduling
conflicts with participating clinicians and clinical institutions,
and difficulties in identifying and enrolling patients who meet
trial eligibility criteria, may cause significant delays. We may
not commence or complete clinical trials involving any of our
products as projected or may not conduct them
successfully.
We
expect to rely on medical institutions, academic institutions or
clinical research organizations to conduct, supervise or monitor
some or all aspects of clinical trials involving our products. We
will have less control over the timing and other aspects of these
clinical trials than if we conducted them entirely on our own. If
we fail to commence or complete, or experience delays in, any of
our planned clinical trials, our stock price and our ability to
conduct our business as currently planned could be
harmed.
Clinical drug development is costly, time-consuming and uncertain,
and we may suffer setbacks in our clinical development program that
could harm our business.
Clinical drug
development for our product candidates is costly, time-consuming
and uncertain. Our product candidates are in various stages of
development and while we expect that clinical trials for these
product candidates will continue for several years, such trials may
take significantly longer than expected to complete. In addition,
we, the FDA, an institutional review board, or IRB, or other
regulatory authorities, including state and local agencies and
counterpart agencies in foreign countries, may suspend, delay,
require modifications to or terminate our clinical trials at any
time, for various reasons, including:
●
discovery of safety
or tolerability concerns, such as serious or unexpected toxicities
or side effects or exposure to otherwise unacceptable health risks,
with respect to study participants;
●
lack of
effectiveness of any product candidate during clinical trials or
the failure of our product candidates to meet specified
endpoints;
●
delays in subject
recruitment and enrollment in clinical trials or inability to
enroll a sufficient number of patients in clinical trials to ensure
adequate statistical ability to detect statistically significant
treatment effects;
●
difficulty in
retaining subjects and volunteers in clinical trials;
●
difficulty in
obtaining IRB approval for studies to be conducted at each clinical
trial site;
●
delays in
manufacturing or obtaining, or inability to manufacture or obtain,
sufficient quantities of materials for use in clinical
trials;
●
inadequacy of or
changes in our manufacturing process or the product formulation or
method of delivery;
●
delays or failure
in reaching agreement on acceptable terms in clinical trial
contracts or protocols with prospective contract research
organizations, or CROs, clinical trial sites and other third-party
contractors;
●
inability to add a
sufficient number of clinical trial sites;
●
uncertainty
regarding proper formulation and dosing;
●
failure by us, our
employees, our CROs or their employees or other third-party
contractors to comply with contractual and applicable regulatory
requirements or to perform their services in a timely or acceptable
manner;
●
scheduling
conflicts with participating clinicians and clinical
institutions;
●
failure to design
appropriate clinical trial protocols;
●
inability or
unwillingness of medical investigators to follow our clinical
protocols;
●
difficulty in
maintaining contact with subjects during or after treatment, which
may result in incomplete data; or
●
changes in
applicable laws, regulations and regulatory policies.
16
If we experience delays or difficulties in the enrollment of
patients in clinical trials, those clinical trials could take
longer than expected to complete and our receipt of necessary
regulatory approvals could be delayed or prevented.
We may
not be able to initiate or continue clinical trials for our product
candidates if we are unable to locate and enroll a sufficient
number of eligible patients to participate in these trials as
required by U.S. Food and Drug Administration, or the FDA, or
similar regulatory authorities outside the United States. In
particular, because we are focused on patients with molecularly
defined cancers, our pool of suitable patients may be smaller and
more selective and our ability to enroll a sufficient number of
suitable patients may be limited or take longer than anticipated.
In addition, some of our competitors have ongoing clinical trials
for product candidates that treat the same indications as our
product candidates, and patients who would otherwise be eligible
for our clinical trials may instead enroll in clinical trials of
our competitors’ product candidates.
Patient
enrollment for any of our clinical trials may also be affected by
other factors, including without limitation:
●
the severity of the
disease under investigation;
●
the frequency of
the molecular alteration we are seeking to target in the applicable
trial;
●
the eligibility
criteria for the study in question;
●
the perceived risks
and benefits of the product candidate under study;
●
the extent of the
efforts to facilitate timely enrollment in clinical
trials;
●
the patient
referral practices of physicians;
●
the ability to
monitor patients adequately during and after treatment;
and
●
the proximity and
availability of clinical trial sites for prospective
patients.
Our
inability to enroll a sufficient number of patients for our
clinical trials would result in significant delays and could
require us to abandon one or more clinical trials altogether.
Enrollment delays in our clinical trials may result in increased
development costs for our product candidates, and we may not have
or be able to obtain sufficient cash to fund such increased costs
when needed, which could result in the further delay or termination
of the trial.
Consistent with our
general product development strategy, we intend to design future
trials for our product candidates to include some patients with the
applicable clinical characteristics, stage of therapy, molecular
alterations, biomarkers, and/or cell surface antigens that
determine therapeutic options, or are indicators of the disease,
with a view to assessing possible early evidence of potential
therapeutic effect. If we are unable to locate and include such
patients in those trials, then our ability to make those early
assessments and to seek participation in FDA expedited review and
approval programs, including breakthrough therapy and fast track
designation, or otherwise to seek to accelerate clinical
development and regulatory timelines, could be
compromised.
We have limited clinical testing and regulatory capabilities, and
human clinical trials are subject to extensive regulatory
requirements, very expensive, time-consuming and difficult to
design and implement. Our products may fail to achieve necessary
safety and efficacy endpoints during clinical trials, which may
limit our ability to generate revenues from therapeutic
products.
We
cannot assure you that we will be able to invest or develop
resources for clinical trials successfully or as expediently as
necessary. In particular, human clinical trials can be very
expensive and difficult to design and implement, in part because
they are subject to rigorous regulatory requirements. The clinical
trial process is time consuming. We estimate that clinical trials
of our product candidates will take at least several years to
complete. Furthermore, failure can occur at any stage of the
trials, and we could encounter problems that cause us to abandon or
repeat clinical trials. The commencement and completion of clinical
trials may be affected by several factors, including:
●
unforeseen safety
issues;
●
determination of
dosing issues;
●
inability to
demonstrate effectiveness during clinical trials;
●
slower than
expected rates of patient recruitment;
●
inability to
monitor patients adequately during or after treatment;
and
●
inability or
unwillingness of medical investigators to follow our clinical
protocols.
In
addition, we or the FDA, may suspend our clinical trials at any
time if it appears that we are exposing participants to
unacceptable health risks or if the FDA finds deficiencies in our
investigational new drug application, or IND, submissions or the
conduct of these trials.
17
We are subject to extensive regulation, which can be costly and
time consuming and can subject us to unanticipated delays. even if
we obtain regulatory approval for some of our products, those
products may still face regulatory difficulties.
All of
our potential products, processing and manufacturing activities,
are subject to comprehensive regulation by the FDA in the United
States and by comparable authorities in other countries. The
process of obtaining FDA and other required regulatory approvals,
including foreign approvals, is expensive and often takes many
years and can vary substantially based upon the type, complexity
and novelty of the products involved. In addition, regulatory
agencies may lack experience with our technologies and products,
which may lengthen the regulatory review process, increase our
development costs and delay or prevent their
commercialization.
If we
violate regulatory requirements at any stage, whether before or
after we obtain marketing approval, the FDA may take enforcement
action(s) against us, which could include issuing a warning or
untitled letter, placing a clinical hold on an ongoing clinical
trial, product seizure, enjoining our operations, refusal to
consider our applications for pre-market approval, refusal of an
investigational new drug application, fines, or even civil or
criminal liability, any of which could materially harm our
reputation and financial results. Additionally, we may not be able
to obtain the labeling claims necessary or desirable for the
promotion of our products. We may also be required to undertake
postmarketing trials to provide additional evidence of safety and
effectiveness. In addition, if we or others identify side effects
after any of our adoptive therapies are on the market, or if
manufacturing problems occur, regulators may withdraw their
approval and reformulations, additional clinical trials, changes in
labeling of our products, and additional marketing applications may
be required.
Any of
the following factors, among others, could cause regulatory
approval for our product candidates to be delayed, limited or
denied:
●
the product
candidates require significant clinical testing to demonstrate
safety and effectiveness before applications for marketing approval
can be filed with the FDA and other regulatory
authorities;
●
data obtained from
pre-clinical and nonclinical animal testing and clinical trials can
be interpreted in different ways, and regulatory authorities may
not agree with our respective interpretations or may require us to
conduct additional testing;
●
negative or
inconclusive results or the occurrence of serious or unexpected
adverse events during a clinical trial could cause us to delay or
terminate development efforts for a product candidate;
and/or
●
FDA and other
regulatory authorities may require expansion of the size and scope
of the clinical trials.
Any
difficulties or failures that we encounter in securing regulatory
approval for our product candidates would likely have a substantial
adverse impact on our ability to generate product sales, and could
make any search for a collaborative partner more
difficult.
Obtaining regulatory approval even after clinical trials that are
believed to be successful is an uncertain process.
Even if
we complete our planned clinical trials and believe the results
were successful, obtaining regulatory approval is a lengthy,
expensive and uncertain process, and the FDA or other regulatory
agencies may delay, limit or deny approval of any of our
applications for pre-market approval for many reasons,
including:
●
we may not be able
to demonstrate to the FDA’s satisfaction that our product
candidates are safe and effective for any indication;
●
the results of
clinical trials may not meet the level of statistical significance
or clinical significance required by the FDA for
approval;
●
the FDA may
disagree with the number, design, size, conduct or implementation
of our clinical trials;
●
the FDA may not
find the data from pre-clinical studies and clinical trials
sufficient to demonstrate that the clinical and other benefits of
our product candidates outweigh their safety risks;
●
the FDA may
disagree with our interpretation of data from pre-clinical studies
or clinical trials, or may not accept data generated at our
clinical trial sites;
●
the data collected
from pre-clinical studies and clinical trials of our product
candidates may not be sufficient to support the submission of
applications for regulatory approval;
●
the FDA may have
difficulties scheduling an advisory committee meeting in a timely
manner, or the advisory committee may recommend against approval of
our application or may recommend that the FDA require, as a
condition of approval, additional pre-clinical studies or clinical
trials, limitations on approved labeling, or distribution and use
restrictions;
●
the FDA may require
development of a risk evaluation and mitigation strategy as a
condition of approval;
●
the FDA may
identify deficiencies in the manufacturing processes or facilities
of third-party manufacturers with which we enter into agreements
for clinical and commercial supplies;
●
the FDA may change
their approval policies or adopt new regulations that adversely
affect our applications for pre-market approval; and
●
the FDA may require
simultaneous approval for both adults and for children and
adolescents delaying needed approvals, or we may have successful
clinical trial results for adults but not children and adolescents,
or vice versa.
18
Before
we can submit an application for regulatory approval in the United
States, we must conduct a pivotal, Phase 3 trial. We will also need
to agree on a protocol with the FDA for a clinical trial before
commencing the trial. Phase 3 clinical trials frequently produce
unsatisfactory results even though prior clinical trials were
successful. Therefore, even if the results of our Phase 2 trials
are successful, the results of the additional trials that we
conduct may or may not be successful. Further, our product
candidates may not be approved even if they achieve their primary
endpoints in Phase 3 clinical trials. The FDA or other foreign
regulatory authorities may disagree with our trial design and our
interpretation of data from preclinical studies and clinical
trials. Any of these regulatory authorities may change requirements
for the approval of a product candidate even after reviewing and
providing comments or advice on a protocol for a clinical trial.
The FDA or other regulatory agencies may require that we conduct
additional clinical, nonclinical, manufacturing validation or drug
product quality studies and submit those data before considering or
reconsidering the application. Depending on the extent of these or
any other studies, approval of any applications that we submit may
be delayed by several years, or may require us to expend more
resources than we have available. It is also possible that
additional studies, if performed and completed, may not be
considered sufficient by the FDA or other regulatory
agencies.
In
addition, the FDA or other regulatory agencies may also approve a
product candidate for fewer or more limited indications than we
request, may impose significant limitations related to use
restrictions for certain age groups, warnings, precautions or
contraindications or may grant approval contingent on the
performance of costly post-marketing clinical trials or risk
mitigation requirements.
We will continue to be subject to extensive FDA regulation
following any product approvals, and if we fail to comply with
these regulations, we may suffer a significant setback in our
business.
Even if
we are successful in obtaining regulatory approval of our product
candidates, we will continue to be subject to the requirements of
and review by, the FDA and comparable regulatory authorities in the
areas of manufacturing processes, post-approval clinical data,
adverse event reporting, labeling, advertising and promotional
activities, among other things. In addition, any marketing approval
we receive may be limited in terms of the approved product
indication or require costly post-marketing testing and
surveillance. Discovery after approval of previously unknown
problems with a product, manufacturer or manufacturing process, or
a failure to comply with regulatory requirements, may result in
enforcement actions such as:
●
warning letters or
other actions requiring changes in product manufacturing processes
or restrictions on product marketing or distribution;
●
product recalls or
seizures or the temporary or permanent withdrawal of a product from
the market;
●
suspending any
ongoing clinical trials;
●
temporary or
permanent injunctions against our production
operations;
●
refusal of our
applications for pre-market approval or an investigational new drug
application; and
●
fines, restitution
or disgorgement of profits or revenue, the imposition of civil
penalties or criminal prosecution.
The
occurrence of any of these actions would likely cause a material
adverse effect on our business, financial condition and results of
operations.
Many of our business practices are subject to scrutiny and
potential investigation by regulatory and government enforcement
authorities, as well as to lawsuits brought by private citizens
under federal and state laws. We could become subject to
investigations, and our failure to comply with applicable law or an
adverse decision in lawsuits may result in adverse consequences to
us. If we fail to comply with U.S. healthcare laws, we could face
substantial penalties and financial exposure, and our business,
operations and financial condition could be adversely
affected.
While
payment is not yet available from third-party payors (government or
commercial) for our product, our goal is to obtain such coverage as
soon as possible after product approval and commercial launch in
the U.S. If this occurs, the availability of such payment would
mean that many healthcare laws would place limitations and
requirements on the manner in which we conduct our business
(including our sales and promotional activities and interactions
with healthcare professionals and facilities) and could result in
liability and exposure to us. In some instances, our interactions
with healthcare professionals and facilities that occurred prior to
commercialization could have implications at a later date. The laws
that may affect our ability to operate include, among others: (i)
the federal healthcare programs Anti- Kickback Statute, which
prohibits, among other things, persons from knowingly and willfully
soliciting, receiving, offering or paying remuneration, directly or
indirectly, in exchange for or to induce either the referral of an
individual for, or the purchase, order or recommendation of, any
good or service for which payment may be made under federal
healthcare programs such as Medicare or Medicaid; (ii) federal
false claims laws which prohibit, among other things, individuals
or entities from knowingly presenting, or causing to be presented,
claims for payment from Medicare, Medicaid, or other third-party
payors that are false or fraudulent, and which may apply to
entities like us under theories of “implied
certification” where the government and qui tam relators may
allege that device companies are liable where a product that was
paid for by the government in whole or in part was promoted
“off-label,” lacked necessary approval, or failed to
comply with good manufacturing practices or other laws; (iii)
transparency laws and related reporting and/or disclosures such as
the Sunshine Act; and/or (iv) state law equivalents of each of the
above federal laws, such as anti-kickback and false claims laws
which may apply to items or services reimbursed by any third-party
payor, including commercial insurers, many of which differ from
their federal counterparts in significant ways, thus complicating
compliance efforts.
19
If our
operations are found to be in violation of any of the laws
described above or any other governmental regulations that apply to
us, we may be subject to penalties, including civil and criminal
penalties, exclusion from participation in government healthcare
programs, damages, fines and the curtailment or restructuring of
our operations. Any penalties, damages, fines, curtailment or
restructuring of our operations could adversely affect our ability
to operate our business and our financial results. The risk of our
being found in violation of these laws is increased by the fact
that their provisions are open to a variety of evolving
interpretations and enforcement discretion. Any action against us
for violation of these laws, even if we successfully defend against
it, could cause us to incur significant legal expenses and divert
our management’s attention from the operation of our
business.
Both
federal and state government agencies have heightened civil and
criminal enforcement efforts. There are numerous ongoing
investigations of healthcare pharmaceutical companies and others in
the healthcare space, as well as their executives and managers. In
addition, amendments to the Federal False Claims Act, have made it
easier for private parties to bring qui tam (whistleblower)
lawsuits against companies under which the whistleblower may be
entitled to receive a percentage of any money paid to the
government. In addition, the Affordable Care Act amended the
federal civil False Claims Act to provide that a claim that
includes items or services resulting from a violation of the
federal anti-kickback statute constitutes a false or fraudulent
claim for purposes of the federal civil False Claims Act. Penalties
include substantial fines for each false claim, plus three times
the amount of damages that the federal government sustained because
of the act of that person or entity and/or exclusion from the
Medicare program. In addition, a majority of states have adopted
similar state whistleblower and false-claims provision. There can
be no assurance that our activities will not come under the
scrutiny of regulators and other government authorities or that our
practices will not be found to violate applicable laws, rules and
regulations or prompt lawsuits by private citizen "relators" under
federal or state false claims laws. Any future investigations of
our business or executives, or enforcement action or prosecution,
could cause us to incur substantial costs, and result in
significant liabilities or penalties, as well as damage to our
reputation.
Laws
impacting the U.S. healthcare system are subject to a great deal of
uncertainty, which may result in adverse consequences to our
business.
There
have been a number of legislative and regulatory proposals to
change the healthcare system, reduce the costs of healthcare and
change medical reimbursement policies. Doctors, clinics, hospitals
and other users of our products may decline to purchase our
products to the extent there is uncertainty regarding coverage from
government or commercial payors. Further proposed legislation,
regulation and policy changes affecting third-party reimbursement
are likely. Among other things, Congress has in the past proposed
changes to and the repeal of the Patient Protection and Affordable
Care and Health Care and Education Affordability Reconciliation Act
of 2010 (collectively, the “Affordable Care Act”), and
lawsuits have been brought challenging aspects of the law at
various points. There have been repeated recent attempts by
Congress to repeal or replace the Affordable Care Act. At this
time, it remains unclear whether there will be any changes made to
or any repeal or replacement of the Affordable Care Act, with
respect to certain of its provisions or in its entirety. We are
unable to predict what legislation or regulation, if any, relating
to the health care industry or third-party coverage and
reimbursement may be enacted in the future at the state or federal
level, or what effect such legislation or regulation may have on
us. Denial of coverage and reimbursement of our products, or the
revocation or changes to coverage and reimbursement policies, could
have a material adverse effect on our business, results of
operations and financial condition.
We may not be successful in our efforts to build a pipeline of
product candidates.
A key
element of our strategy is to use and expand our product platform
to build a pipeline of product candidates, and progress those
product candidates through clinical development for the treatment
of a variety of different types of cancer. Even if we are
successful in building a product pipeline, the potential product
candidates that we identify may not be suitable for clinical
development for a number of reasons, including causing harmful side
effects or demonstrating other characteristics that indicate a low
likelihood of receiving marketing approval or achieving market
acceptance. If our methods of identifying potential product
candidates fail to produce a pipeline of potentially viable product
candidates, then our success as a business will be dependent on the
success of fewer potential product candidates, which introduces
risks to our business model and potential limitations to any
success we may achieve.
Our product candidates may cause undesirable side effects or have
other properties that could delay or prevent their regulatory
approval, limit the commercial profile of an approved label, or
result in significant negative consequences following marketing
approval, if any.
Additionally, if
one or more of our product candidates receives marketing approval,
and we or others later identify undesirable side effects caused by
such products, a number of potentially significant negative
consequences could result, including:
●
regulatory
authorities may withdraw approvals of such product;
●
regulatory
authorities may require additional warnings on the product’s
label;
●
we may be required
to create a medication guide for distribution to patients that
outlines the risks of such side effects;
●
we could be sued
and held liable for harm caused to patients; and
●
our reputation may
suffer.
Any of
these events could prevent us from achieving or maintaining market
acceptance of the particular product candidate, if approved, and
could significantly harm our business, results of operations and
prospects.
20
We may expend our limited resources to pursue a particular product
candidate or indication that does not produce any commercially
viable products and may fail to capitalize on product candidates or
indications that may be more profitable or for which there is a
greater likelihood of success.
Because
we have limited financial and managerial resources, we must focus
our efforts on particular research programs and product candidates
for specific indications. As a result, we may forego or delay
pursuit of opportunities with other product candidates or for other
indications that later prove to have greater commercial potential.
Further, our resource allocation decisions may result in our use of
funds for research and development programs and product candidates
for specific indications that may not yield any commercially viable
products. If we do not accurately evaluate the commercial potential
or target market for a particular product candidate, we may
relinquish valuable rights to that product candidate through
collaboration, licensing or other royalty arrangements in cases in
which it would have been more advantageous for us to retain sole
development and commercialization rights to such product candidate.
Any such failure to improperly assess potential product candidates
could result in missed opportunities and/or our focus on product
candidates with low market potential, which would harm our business
and financial condition.
Our products may be expensive to manufacture, and they may not be
profitable if we are unable to control the costs to manufacture
them.
Our
products may be significantly more expensive to manufacture than we
expect or than other therapeutic products currently on the market
today. We hope to substantially reduce manufacturing costs through
process improvements, development of new methods, increases in
manufacturing scale and outsourcing to experienced manufacturers.
If we are not able to make these, or other improvements, and
depending on the pricing of the product, our profit margins may be
significantly less than that of other therapeutic products on the
market today. In addition, we may not be able to charge a high
enough price for any product we develop, even if they are safe and
effective, to make a profit. If we are unable to realize
significant profits from our potential product candidates, our
business would be materially harmed.
We currently lack manufacturing capabilities to produce our
therapeutic product candidates at commercial-scale quantities and
do not have an alternate manufacturing supply, which could
negatively impact our ability to meet any future demand for the
product.
We
expect that we would need to significantly expand our manufacturing
capabilities to meet potential demand for our therapeutic product
candidates, if approved. Such expansion would require additional
regulatory approvals. Even if we increase our manufacturing
capabilities, it is possible that we may still lack sufficient
capacity to meet demand.
We do
not currently have any alternate supply for our products. If the
facilities where our products are currently being manufactured or
equipment were significantly damaged or destroyed, or if there were
other disruptions, delays or difficulties affecting manufacturing
capacity or availability of drug supply, including, but not limited
to, if such facilities are deemed not in compliance with current
Good Manufacturing Practice, or GMP, requirements, future clinical
studies and commercial production for our products would likely be
significantly disrupted and delayed. It would be both time-
consuming and expensive to replace this capacity with third
parties, particularly since any new facility would need to comply
with the regulatory requirements.
Ultimately, if we
are unable to supply our products to meet commercial demand,
whether because of processing constraints or other disruptions,
delays or difficulties that we experience, our production costs
could dramatically increase and sales of our products and their
long-term commercial prospects could be significantly
damaged.
To be successful, our proposed products must be accepted by the
healthcare community, which can be very slow to adopt or
unreceptive to new technologies and products.
Our
proposed products and those developed by our collaborative
partners, if approved for marketing, may not achieve market
acceptance since hospitals, physicians, patients or the medical
community in general may decide not to accept and use these
products. The products that we are attempting to develop represent
substantial departures from established treatment methods and will
compete with a number of more conventional therapies manufactured
and marketed by major pharmaceutical companies. The degree of
market acceptance of any of our developed products will depend on a
number of factors, including:
●
our establishment
and demonstration to the medical community of the clinical efficacy
and safety of our proposed products;
●
our ability to
create products that are superior to alternatives currently on the
market;
●
our ability to
establish in the medical community the potential advantage of our
treatments over alternative treatment methods; and
●
reimbursement
policies of government and third-party payers.
If the
healthcare community does not accept our products for any of these
reasons, or for any other reason, our business would be materially
harmed.
21
Our business is based on novel technologies that are inherently
expensive and risky and may not be understood by or accepted in the
marketplace, which could adversely affect our future
value.
The
clinical development, commercialization and marketing of
immuno-oncology therapies are at an early-stage, substantially
research- oriented, and financially speculative. To date, very few
companies have been successful in their efforts to develop and
commercialize an immuno-oncology therapeutic product. In general,
such products may be susceptible to various risks, including
undesirable and unintended side effects, unintended immune system
responses, inadequate therapeutic efficacy, or other
characteristics that may prevent or limit their approval or
commercial use. Furthermore, the number of people who may use such
therapies is difficult to forecast with accuracy. Our future
success is dependent on the establishment of a significant market
for such therapies and our ability to capture a share of this
market with our product candidates.
Our
development efforts with our therapeutic product candidates are
susceptible to the same risks of failure inherent in the
development and commercialization of therapeutic products based on
new technologies. The novel nature of immuno-oncology therapeutics
creates significant challenges in the areas of product development
and optimization, manufacturing, government regulation, third-party
reimbursement and market acceptance. For example, the FDA has
relatively limited experience regulating such therapies, and there
are few approved treatments using such therapy.
Our competition includes fully integrated biotechnology and
pharmaceutical companies that have significant advantages over
us.
The
market for therapeutic immuno-oncology products is highly
competitive. We expect that our most significant competitors will
be fully integrated and more established pharmaceutical and
biotechnology companies or institutions, including major
multinational pharmaceutical companies, biotechnology companies and
universities and other research institutions. These companies are
developing similar products, and they have significantly greater
capital resources and research and development, manufacturing,
testing, regulatory compliance, and marketing capabilities. Many of
these potential competitors may be further along in the process of
product development and also operate large, company-funded research
and development programs. As a result, our competitors may develop
more competitive or affordable products, or achieve earlier patent
protection or product commercialization than we are able to
achieve. Competitive products may render any products or product
candidates that we develop obsolete.
Many of
our competitors have substantially greater financial, technical and
other resources than we do, such as larger research and development
staff and experienced marketing and manufacturing organizations.
Additional mergers and acquisitions in the biotechnology and
pharmaceutical industries may result in even more resources being
concentrated in certain of our competitors. As a result, these
companies may be able to obtain regulatory approval more rapidly
than we can and may be more effective in selling and marketing
their products. Smaller or early-stage companies may also prove to
be significant competitors, particularly through collaborative
arrangements with large, established companies. Competition may
increase further as a result of advances in the commercial
applicability of technologies and greater availability of capital
for investment in these industries. Our competitors may succeed in
developing, acquiring or licensing drug products that are more
effective or less costly to produce or purchase on the market than
any product candidate we are currently developing or that we may
seek to develop in the future. If approved, our product candidates
will face competition from commercially available drugs as well as
drugs that are in the development pipelines of our
competitors.
Established
pharmaceutical companies may invest heavily to accelerate discovery
and development of or in-license novel compounds that could make
our product candidates less competitive. In addition, any new
product that competes with an approved product must demonstrate
compelling advantages in efficacy, convenience, tolerability and
safety in order to overcome price competition and to be
commercially successful. Accordingly, our competitors may succeed
in obtaining patent protection, receiving FDA, EMA or other
regulatory approval, or discovering, developing and commercializing
medicines before we do, which would have a material adverse impact
on our business and ability to achieve profitability from future
sales of our approved product candidates, if any.
If competitors develop and market products that are more effective,
safer or less expensive than our product candidates or offer other
advantages, our commercial prospects will be limited.
Our
therapeutic immuno-oncology development programs face, and will
continue to face, intense competition from pharmaceutical,
biopharmaceutical and biotechnology companies, as well as numerous
academic and research institutions and governmental agencies
engaged in drug discovery activities or funding, both in the United
States and abroad. Some of these competitors are pursuing the
development of drugs and other therapies that target the same
diseases and conditions that we are targeting with our product
candidates. According to a recent analysis by InVentiv Health there
are over 800 companies developing approximately 1500 cancer
immunotherapies via 4000 development projects across 535 targets.
According to the Pharmaceutical Manufacturers Research Association
Medicines in Development for Cancer 2018 Report, there were 135
drugs in development for the treatment of lymphoma, including
non-Hodgkin lymphoma, which accounts for nearly five percent of all
new cancer diagnoses.
As a
general matter, we also face competition from many companies that
are researching and developing cell therapies. Many of these
companies have financial and other resources substantially greater
than ours. In addition, many of these competitors have
significantly greater experience in testing pharmaceutical and
other therapeutic products, obtaining FDA and other regulatory
approvals, and marketing and selling. If we ultimately obtain
regulatory approval for any of our product candidates, we also will
be competing with respect to manufacturing efficiency and marketing
capabilities, areas in which we have limited or no commercial-scale
experience. Mergers and acquisitions in the pharmaceutical and
biotechnology industries may result in even more resources’
being concentrated by our competitors. Competition may increase
further as a result of advances made in the commercial
applicability of our technologies and greater availability of
capital for investment in these fields.
22
If we are unable to keep up with rapid technological changes in our
field or compete effectively, we will be unable to operate
profitably.
We are
engaged in activities in the biotechnology field, which is
characterized by extensive research efforts and rapid technological
progress. If we fail to anticipate or respond adequately to
technological developments, our ability to operate profitably could
suffer. Research and discoveries by other biotechnology,
agricultural, pharmaceutical or other companies may render our
technologies or potential products or services uneconomical or
result in products superior to those we develop. Similarly, any
technologies, products or services we develop may not be preferred
to any existing or newly developed technologies, products or
services.
We may not be able to obtain third-party patient reimbursement or
favorable product pricing, which would reduce our ability to
operate profitably.
Our
ability to successfully commercialize certain of our proposed
products in the human therapeutic field may depend to a significant
degree on patient reimbursement of the costs of such products and
related treatments at acceptable levels from government
authorities, private health insurers and other organizations, such
as health maintenance organizations. Reimbursement in the United
States or foreign countries may not be available for any products
we may develop, and, if available, may be decreased in the future.
Also, reimbursement amounts may reduce the demand for, or the price
of, our products with a consequent harm to our business. We cannot
predict what additional regulation or legislation relating to the
healthcare industry or third-party coverage and reimbursement may
be enacted in the future or what effect such regulation or
legislation may have on our business. If additional regulations are
overly onerous or expensive, or if healthcare-related legislation
makes our business more expensive or burdensome than originally
anticipated, we may be forced to significantly downsize our
business plans or completely abandon our business
model.
We may be subject to litigation that will be costly to defend or
pursue and uncertain in its outcome.
Our
business may bring us into conflict with our licensees, licensors
or others with whom we have contractual or other business
relationships, or with our competitors or others whose interests
differ from ours. If we are unable to resolve those conflicts on
terms that are satisfactory to all parties, we may become involved
in litigation brought by or against us. That litigation is likely
to be expensive and may require a significant amount of
management’s time and attention, at the expense of other
aspects of our business. The outcome of litigation is always
uncertain, and in some cases could include judgments against us
that require us to pay damages, enjoin us from certain activities,
or otherwise affect our legal or contractual rights, which could
have a significant adverse effect on our business.
We are exposed to the risk of liability claims, for which we may
not have adequate insurance.
Since
we participate in the pharmaceutical industry, we may be subject to
liability claims by employees, customers, end users and third
parties. We intend to obtain proper insurance, however, there can
be no assurance that any liability insurance we purchase will be
adequate to cover claims asserted against us or that we will be
able to maintain such insurance in the future. We intend to adopt
prudent risk-management programs to reduce these risks and
potential liabilities, however, we have not taken any steps to
create these programs and have no estimate as to the cost or time
required to do so and there can be no assurance that such programs,
if and when adopted, will fully protect us. We may not be able to
put risk management programs in place, or obtain insurance, if we
are unable to retain the necessary expertise and/or are
unsuccessful in raising necessary capital in the future. Our
failure to obtain appropriate insurance, or to adopt and implement
effective risk-management programs, as well as any adverse rulings
in any legal matters, proceedings and other matters could have a
material adverse effect on our business.
Preclinical and
clinical trials are conducted during the development of potential
products and other treatments to determine their safety and
efficacy for use by humans. Notwithstanding these efforts, when our
treatments are introduced into the marketplace, unanticipated side
effects may become evident. Manufacturing, marketing, selling and
testing our product candidates under development or to be acquired
or licensed, entails a risk of product liability claims. We could
be subject to product liability claims in the event that our
product candidates, processes, or products under development fail
to perform as intended. Even unsuccessful claims could result in
the expenditure of funds in litigation and the diversion of
management time and resources, and could damage our reputation and
impair the marketability of our product candidates and processes.
While we plan to maintain liability insurance for product liability
claims, we may not be able to obtain or maintain such insurance at
a commercially reasonable cost. If a successful claim were made
against us, and we lacked insurance or the amount of insurance were
inadequate to cover the costs of defending against or paying such a
claim or the damages payable by us, we would experience a material
adverse effect on our business, financial condition and results of
operations.
23
We could be subject to product liability lawsuits based on the use
of our product candidates in clinical testing or, if obtained,
following marketing approval and commercialization. If product
liability lawsuits are brought against us, we may incur substantial
liabilities and may be required to cease clinical testing or limit
commercialization of our product candidates.
We
could be subject to product liability lawsuits if any product
candidate we develop allegedly causes injury or is found to be
otherwise unsuitable for human use during product testing,
manufacturing, marketing or sale. Any such product liability claims
may include allegations of defects in manufacturing, defects in
design, a failure to warn of dangers inherent in the product,
negligence, strict liability and a breach of warranties. Claims
could also be asserted under state consumer protection acts. If we
cannot successfully defend ourselves against product liability
claims, we may incur substantial liabilities or be required to
limit commercialization of our product candidates, if approved.
Even successful defense would require significant financial and
management resources. Regardless of the merits or eventual outcome,
liability claims may result in:
●
decreased demand
for our product candidates;
●
withdrawal of
clinical trial participants;
●
initiation of
investigations by regulators;
●
costs to defend the
related litigation;
●
a diversion of
management’s time and our resources;
●
substantial
monetary awards to trial participants or patients;
●
product recalls,
withdrawals or labeling, marketing or promotional
restrictions;
●
loss of revenues
from product sales; and
●
the inability to
commercialize our product candidates.
Our
inability to retain sufficient product liability insurance at an
acceptable cost to protect against potential product liability
claims could prevent or inhibit the clinical testing and
commercialization of products we develop. We may wish to obtain
additional such insurance covering studies or trials in other
countries should we seek to expand those clinical trials or
commence new clinical trials in other jurisdictions or increase the
number of patients in any clinical trials we may pursue. We also
may determine that additional types and amounts of coverage would
be desirable at later stages of clinical development of our product
candidates or upon commencing commercialization of any product
candidate that obtains required approvals. However, we may not be
able to obtain any such additional insurance coverage when needed
on acceptable terms or at all. If we do not obtain or retain
sufficient product liability insurance, we could be responsible for
some or all of the financial costs associated with a product
liability claim relating to our preclinical and clinical
development activities, in the event that any such claim results in
a court judgment or settlement in an amount or of a type that is
not covered, in whole or in part, by any insurance policies we may
have or that is in excess of the limits of our insurance coverage.
We may not have, or be able to obtain, sufficient capital to pay
any such amounts that may not be covered by our insurance
policies.
We rely on third parties to conduct preclinical and clinical trials
of our product candidates. If these third parties do not
successfully carry out their contractual duties or meet expected
deadlines, we may not be able to obtain regulatory approval for or
commercialize our product candidates and our business could be
substantially harmed.
We
rely, and expect to continue to rely, upon third-party CROs to
execute our preclinical and clinical trials and to monitor and
manage data produced by and relating to those trials. However, we
may not be able to establish arrangements with CROs when needed or
on terms that are acceptable to us, or at all, which could
negatively affect our development efforts with respect to our drug
product candidates and materially harm our business, operations and
prospects.
We will
have only limited control over the activities of the CRO we will
engage to conduct our clinical trials including the University of
Minnesota for our phase 2 clinical trial for GTB-1550 and phase 1
clinical trial for GTB-3550. Nevertheless, we are responsible for
ensuring that each of our studies is conducted in accordance with
the applicable protocol, legal, regulatory and scientific
standards, and our reliance on any CRO does not relieve us of our
regulatory responsibilities. Based on our present expectations, we,
our CROs and our clinical trial sites are required to comply with
good clinical practices, or GCPs, for all of our product candidates
in clinical development. Regulatory authorities enforce GCPs
through periodic inspections of trial sponsors, principal
investigators and trial sites. If we or any of our CROs fail to
comply with applicable GCPs, the clinical data generated in the
applicable trial may be deemed unreliable and the FDA, EMA or
comparable foreign regulatory authorities may require us to perform
additional clinical trials before approving a product candidate for
marketing, which we may not have sufficient cash or other resources
to support and which would delay our ability to generate revenue
from any sales of such product candidate. In addition, our clinical
trials are required to be conducted with product produced in
compliance with current good manufacturing practice requirements,
or cGMPs. Our or our CROs’ failure to comply with those
regulations may require us to repeat clinical trials, which would
also require significant cash expenditures and delay the regulatory
approval process.
24
Agreements
governing relationships with CROs generally provide those CROs with
certain rights to terminate a clinical trial under specified
circumstances. If a CRO that we have engaged terminates its
relationship with us during the performance of a clinical trial, we
would be forced to seek an engagement with a substitute CRO, which
we may not be able to do on a timely basis or on commercially
reasonable terms, if at all, and the applicable trial would
experience delays or may not be completed. In addition, our CROs
are not our employees, and except for remedies available to us
under any agreements we enter with them, we are unable to control
whether or not they devote sufficient time and resources to our
clinical, nonclinical and preclinical programs. If CROs do not
successfully carry out their contractual duties or obligations or
meet expected deadlines, if they need to be replaced or if the
quality or accuracy of the clinical data they obtain is compromised
due to a failure to adhere to our clinical protocols, regulatory
requirements or for other reasons, our clinical trials may be
extended, delayed or terminated and we may not be able to obtain
regulatory approval for, or successfully commercialize, the
affected product candidates. As a result, our operations and the
commercial prospects for the effected product candidates would be
harmed, our costs could increase and our ability to generate
revenues could be delayed.
We contract with third parties for the supply of product candidates
for clinical testing and expect to contract with third parties for
the manufacturing of our product candidates for large-scale testing
and commercial supply. This reliance on third parties increases the
risk that we will not have sufficient quantities of our product
candidates or products or such quantities at an acceptable cost,
which could delay, prevent or impair our development or
commercialization efforts.
We
anticipate continuing our engagement of third parties to provide
our clinical supply as we advance our product candidates into and
through clinical development, and we depend on third parties to
produce and maintain sufficient quantities of material to supply
our clinical trials. If these third parties do not produce and
maintain adequate supplies of clinical material, our development
efforts could be significantly delayed, or could incur
substantially higher costs. We expect in the future to use third
parties for the manufacture of our product candidates for clinical
testing, as well as for commercial manufacture. We plan to enter
into long-term supply agreements with several manufacturers for
commercial supplies. We may be unable to reach agreement on
satisfactory terms with contract manufacturers to manufacture our
product candidates. Additionally, the facilities to manufacture our
product candidates must be the subject of a satisfactory inspection
before the FDA or other regulatory authorities approve a marketing
authorization for the product candidate manufactured at that
facility. We will depend on these third-party manufacturers for
compliance with the FDA’s and international regulatory
authority requirements for the manufacture of our finished
products. We do not control the manufacturing process of, and are
completely dependent on, our contract manufacturers for compliance
with cGMPs. If our manufacturers cannot successfully manufacture
material that conforms to our specifications and the FDA and other
regulatory authorities’ cGMP requirements, they will not be
able to secure and/or maintain regulatory approval for their
manufacturing facilities. In addition, we have no control over the
ability of our contract manufacturers to maintain adequate quality
control, quality assurance and qualified personnel. If the FDA or a
comparable foreign regulatory authority does not approve these
facilities for the manufacture of our product candidates or if it
withdraws any such approval in the future, we may need to find
alternative manufacturing facilities, which would significantly
impact our ability to develop, obtain regulatory approval for or
market our product candidates, if approved, and may subject us to
recalls or enforcement action for products already on the
market.
If any
of our product candidates are approved and contract manufacturers
fail to deliver the required commercial quantities of finished
product on a timely basis and at commercially reasonable prices,
and we are unable to find one or more replacement manufacturers
capable of production at a substantially equivalent cost, in
substantially equivalent volumes and quality and on a timely basis,
we would likely be unable to meet demand for our products and could
lose potential revenue. It may take several years to establish an
alternative source of supply for our product candidates and to have
any such new source approved by the FDA or any other relevant
regulatory authorities.
We currently have no marketing and sales force. If we are unable to
establish effective marketing and sales capabilities or enter into
agreements with third parties to market and sell our product
candidates, we may not be able to effectively market and sell our
product candidates, if approved, or generate product
revenues.
We
currently do not have a marketing or sales team for the marketing,
sales and distribution of any of our product candidates that are
able to obtain regulatory approval. In order to commercialize any
product candidates, we must build on a territory-by-territory basis
marketing, sales, distribution, managerial and other non-technical
capabilities or make arrangements with third parties to perform
these services, and we may not be successful in doing so. If our
product candidates receive regulatory approval, we intend to
establish an internal sales and marketing team with technical
expertise and supporting distribution capabilities to commercialize
our product candidates, which will be expensive and time consuming
and will require significant attention of our executive officers to
manage. Any failure or delay in the development of our internal
sales, marketing and distribution capabilities would adversely
impact the commercialization of any of our products that we obtain
approval to market. With respect to the commercialization of all or
certain of our product candidates, we may choose to collaborate,
either globally or on a territory-by-territory basis, with third
parties that have direct sales forces and established distribution
systems, either to augment our own sales force and distribution
systems or in lieu of our own sales force and distribution systems.
If we are unable to enter into such arrangements when needed on
acceptable terms or at all, we may not be able to successfully
commercialize any of our product candidates that receive regulatory
approval or any such commercialization may experience delays or
limitations. If we are not successful in commercializing our
product candidates, either on our own or through collaborations
with one or more third parties, our future product revenue will
suffer and we may incur significant additional losses.
25
Our business and operations would suffer in the event of system
failures.
Despite
the implementation of security measures, our internal computer
systems and those of our contractors and consultants are vulnerable
to damage from computer viruses, unauthorized access, natural
disasters, terrorism, war and telecommunication and electrical
failures. While we have not experienced any such system failure,
accident or security breach to date, if such an event were to occur
and cause interruptions in our operations, it could result in a
material disruption of our drug development programs. For example,
the loss of clinical trial data from completed or ongoing or
planned clinical trials could result in delays in our regulatory
approval efforts and we may incur substantial costs to attempt to
recover or reproduce the data. If any disruption or security breach
resulted in a loss of or damage to our data or applications, or
inappropriate disclosure of confidential or proprietary
information, we could incur liability and/or the further
development of our product candidates could be
delayed.
Our operations are vulnerable to interruption by natural disasters,
power loss, terrorist activity and other events beyond our control,
the occurrence of which could materially harm our
business.
Businesses located
in California have, in the past, been subject to electrical
blackouts as a result of a shortage of available electrical power,
and any future blackouts could disrupt our operations. We are
vulnerable to a major earthquake, wildfire and other natural
disasters, and we have not undertaken a systematic analysis of the
potential consequences to our business as a result of any such
natural disaster and do not have an applicable recovery plan in
place. We do not carry any business interruption insurance that
would compensate us for actual losses from interruption of our
business that may occur, and any losses or damages incurred by us
could cause our business to materially suffer.
Epidemic or pandemic outbreaks such as COVID-19 (coronavirus),
natural disasters, whether or not caused by climate change, unusual
weather conditions, terrorist acts and political events, could
disrupt business and result in halting our clinical trials and
otherwise adversely affect our financial performance.
The occurrence of one or more natural disasters, such as tornadoes,
hurricanes, fires, floods and earthquakes, unusual weather
conditions, epidemic outbreaks, terrorist attacks or disruptive
political events in certain regions where our operations are
located could adversely affect our business. Epidemic or pandemic
outbreaks, such as COVID-19 (coronavirus) could impact our
management and our ability to conduct clinical trials. This also
may affect the market conditions that would limit our ability to
raise additional capital. This could have a sustained material
adverse effect on our business, financial condition and results of
operations.
We have not held regular annual meetings in the past, and if we are
required by the Delaware Court of Chancery to hold an annual
meeting pursuant to Section 211(c) of the Delaware General
Corporation Law, or the DGCL, it could result in the unanticipated
expenditure of funds, time and other Company
resources.
Section
2.2 of our bylaws provides that an annual meeting shall be held
each year on a date and at a time designated by our board of
directors, and Section 211(b) of the DGCL provides for an annual
meeting of stockholders to be held for the election of directors.
Section 211(c) of the DGCL provides that if there is a failure to
hold the annual meeting for a period of 13 months after the latest
to occur of the organization of the corporation, its last annual
meeting or last action by written consent to elect directors in
lieu of an annual meeting, the Delaware Court of Chancery may order
a meeting to be held upon the application of any stockholder or
director. Section 211(c) also provides that the failure to hold an
annual meeting shall not affect otherwise valid corporate acts or
result in a forfeiture or dissolution of the
corporation.
We have
not held regular annual meetings in the past because a substantial
majority of our stock is owned by a small number of stockholders,
making it easy to obtain written consent in lieu of a meeting when
necessary. In light of our historical liquidity constraints,
handling matters by written consent has allowed our Company to save
on the financial and administrative resources required to prepare
for and hold such annual meetings. To our knowledge, no stockholder
or director has requested our Company’s management to hold
such an annual meeting and no stockholder or director has applied
to the Delaware Court of Chancery seeking an order directing our
company to hold a meeting. However, if one or more stockholders or
directors were to apply to the Delaware Court of Chancery seeking
such an order, and if the Delaware Court of Chancery were to order
an annual meeting before we are prepared to hold one, the
preparation for the annual meeting and the meeting itself could
result in the unanticipated expenditure of funds, time, and other
Company resources.
26
Risks
Related to Our Common Stock
There has been a limited public market for our common stock, and we
do not know whether one will develop to provide you adequate
liquidity. Furthermore, the trading price for our common stock,
should an active trading market develop, may be volatile and could
be subject to wide fluctuations in per-share price.
Our
common stock is listed for trading on the OTCQB under the trading
symbol “GTBP”; historically, however, there has been a
limited public market for our common stock. We cannot assure you
that an active trading market for our common stock will develop or
be sustained. The liquidity of any market for the shares of our
common stock will depend on a number of factors,
including:
●
the number of
stockholders;
●
our operating
performance and financial condition;
●
the market for
similar securities;
●
the extent of
coverage of us by securities or industry analysts; and
●
the interest of
securities dealers in making a market in the shares of our common
stock.
Even if
an active trading market develops, the market price for our common
stock may be highly volatile and could be subject to wide
fluctuations. In addition, the price of shares of our common stock
could decline significantly if our future operating results fail to
meet or exceed the expectations of market analysts and investors
and actual or anticipated variations in our quarterly operating
results could negatively affect our share price.
Other
factors may also contribute to volatility of the price of our
common stock and could subject our common stock to wide
fluctuations. These include, but are not limited to:
●
developments in the
financial markets and worldwide or regional economies;
●
announcements of
innovations or new products or services by us or our
competitors;
●
announcements by
the government relating to regulations that govern our
industry;
●
significant sales
of our common stock or other securities in the open
market;
●
variations in
interest rates;
●
changes in the
market valuations of other comparable companies; and
●
changes in
accounting principles.
Because our common stock may be deemed a low-priced
“penny” stock, an investment in our common stock should
be considered high- risk and subject to marketability
restrictions.
Historically, the
trading price of our common stock has been $5.00 per share or
lower, and deemed a penny stock, as defined in Rule 3a51-1 under
the Exchange Act, and subject to the penny stock rules of the
Exchange Act specified in rules 15g-1 through 15g-10. Those rules
require broker–dealers, before effecting transactions in any
penny stock, to:
●
deliver to the
customer, and obtain a written receipt for, a disclosure
document;
●
disclose certain
price information about the stock;
●
disclose the amount
of compensation received by the broker–dealer or any
associated person of the broker–dealer;
●
send monthly
statements to customers with market and price information about the
penny stock; and
●
in some
circumstances, approve the purchaser’s account under certain
standards and deliver written statements to the customer with
information specified in the rules.
Consequently, the
penny stock rules may restrict the ability or willingness of
broker–dealers to sell the common stock and may affect the
ability of holders to sell their common stock in the secondary
market and the price at which such holders can sell any such
securities. These additional procedures could also limit our
ability to raise additional capital in the future.
27
If securities or industry analysts do not publish research or
reports about our business, or if they issue an adverse or
misleading opinion regarding our stock, our stock price and trading
volume could decline.
The
trading market for our common stock may be influenced by the
research and reports that industry or securities analysts publish
about us or our business. We do not currently have and may never
obtain research coverage by securities and industry analysts. If no
or few securities or industry analysts commence coverage of us, the
trading price for our common stock may be negatively affected. In
the event that we receive securities or industry analyst coverage,
if any of the analysts who cover us issue an adverse or misleading
opinion regarding us, our business model, our intellectual property
or our stock performance, or if our operating results fail to meet
the expectations of analysts, our stock price would likely decline.
If one or more of these analysts cease coverage of us or fail to
publish reports on us regularly, we could lose visibility in the
financial markets, which in turn could cause our stock price or
trading volume to decline.
Anti-takeover provisions may limit the ability of another party to
acquire us, which could cause our stock price to
decline.
Delaware law and
our charter, bylaws, and other governing documents contain
provisions that could discourage, delay or prevent a third party
from acquiring us, even if doing so may be beneficial to our
stockholders, which could cause our stock price to decline. In
addition, these provisions could limit the price investors would be
willing to pay in the future for shares of our common
stock.
We do not currently or for the foreseeable future intend to pay
dividends on our common stock.
We have
never declared or paid any cash dividends on our common stock. We
currently anticipate that we will retain future earnings for the
development, operation and expansion of our business and do not
anticipate declaring or paying any cash dividends for the
foreseeable future. As a result, any return on your investment in
our common stock will be limited to the appreciation in the price
of our common stock, if any.
ITEM
1B. UNRESOLVED STAFF COMMENTS
Not
applicable.
ITEM
2. PROPERTIES
We
currently maintain offices at 9350 Wilshire Blvd, Suite 203,
Beverly Hills, CA 90212. We previously maintained offices at 310 N.
Westlake Blvd., Suite 206, Westlake Village, CA 91362.
ITEM
3. LEGAL PROCEEDINGS
On
December 24, 2018, Empery Asset Master, Empery Tax Efficient, LP,
and Empery Tax Efficient II, LP (collectively, “Plaintiffs)
filed in the N.Y. Supreme Court, Index No. 656408/2018, alleging
causes of action against the Company for Breach of Contract,
Liquidated Damages, Damages, and Indemnification. The claims arose
out of a securities purchase agreement entered into between
Plaintiffs and the Company pursuant to which the Company issued
convertible notes and warrants to Plaintiffs in or around January
2018. Plaintiffs allege, inter alia, that the Company failed to pay
Plaintiffs’ outstanding principal on or before the July 23,
2018 maturity date of said notes, failed to convert a portion of
said notes in response to Plaintiffs’ conversion notice, and
failed to timely adjust the exercise price of said warrants. At
issue are notes issued to Plaintiffs in the aggregate principal
amount of approximately $2.2 million and warrants representing the
right of Plaintiffs to acquire an aggregate of 480,352 shares of
common stock in the Company. The Company and Plaintiffs are in the
process of negotiating a settlement that would fully resolve
Plaintiffs’ asserted claims, but no formal agreement has been
finalized.
On
August 28, 2019, a complaint was filed in the Superior Court of
California, County of Los Angeles, West Judicial District, Santa
Monica Courthouse, Unlimited Civil Division by Jeffrey Lion, an
individual (“Lion”), and by Daniel Vallera, an
individual (“Vallera”). Lion and Vallera are referred
to jointly as the “Plaintiffs”. The complaint was filed
against GT Biopharma, Inc. and its subsidiary Oxis Biotech, Inc.
(either of them or jointly, the “Company”). The
Plaintiffs allege breach of a license agreement between the
Plaintiffs and the Company entered into on or about September 3,
2015. Lion alleges breach of a consulting agreement between Lion
and the Company entered into on or about September 1, 2015. Vallera
alleges breach of a consulting agreement between Vallera and the
Company entered into in or around October, 2018. The Complaint
seeks actual damages of $1,670,000, for the fair market value of
the number of shares of GT Biopharma, Inc. that at the time of
judgment represent 15,000,000 shares of such stock as of September
1, 2015, and that GT Biopharma, Inc. issue Lion the number of
common shares of GT Biopharma, Inc. that at the time of judgment
represent 15,000,000 such shares as of September 1,
2015.
ITEM
4. MINE SAFETY DISCLOSURES
None.
28
ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES.
Until
May 2009, our common stock was traded on the OTC Bulletin Board
(“OTCBB”) under the symbol “OXIS.” From May
20, 2009 until March 11, 2010, our common stock was traded on Pink
OTC Markets Inc. trading platform under the symbol
“OXIS.” From January 2015 to August 2017, our common
stock is quoted on the OTCQB under the “OXIS” trading
symbol. Since August 2017, our common stock has been quoted on the
OTCQB under the “GTBP” trading symbol.
Trading
in our common stock has fluctuated greatly during the past year.
Accordingly, the prices for our common stock quoted on the OTCQB or
Pink OTC Markets Inc. may not necessarily be reliable indicators of
the value of our common stock. The following table sets forth the
high and low bid prices for shares of our common stock for the
quarters noted, as reported on the OTCQB and the Pink OTC Markets
Inc. The following price information reflects inter-dealer prices,
without retail mark-up, mark-down or commission and may not
represent actual transactions.
|
YEAR
|
|
PERIOD
|
|
HIGH
|
|
LOW
|
|
Fiscal Year 2018
|
|
First Quarter
|
|
5.06
|
|
1.60
|
|
|
|
Second Quarter
|
|
2.52
|
|
1.25
|
|
|
|
Third Quarter
|
|
2.75
|
|
1.42
|
|
|
|
Fourth Quarter
|
|
2.16
|
|
0.62
|
|
Fiscal Year 2019
|
|
First Quarter
|
|
0.84
|
|
0.32
|
|
|
|
Second Quarter
|
|
0.57
|
|
0.21
|
|
|
|
Third Quarter
|
|
0.26
|
|
0.14
|
|
|
|
Fourth Quarter
|
|
0.24
|
|
0.08
|
Our
common stock is also quoted on several European based exchanges
including Berlin (GTBP.BE), Frankfurt (GTBP.DE), the Euronext
(GTBP.NX) and Paris, (GTBP.PA). The foregoing trading prices
exclude trading on these foreign stock markets.
Stockholders
As of
December 31, 2019, there were 23 stockholders of record, which
total does not include stockholders who hold their shares in
“street name.” The transfer agent for our common stock
is ComputerShare, whose address is 8742 Lucent Blvd., Suite 225,
Highland Ranch, CO 80129.
Dividends
We have
not paid any dividends on our common stock to date and do not
anticipate that we will pay dividends in the foreseeable future.
Any payment of cash dividends on our common stock in the future
will be dependent upon the amount of funds legally available, our
earnings, if any, our financial condition, our anticipated capital
requirements and other factors that the Board of Directors may
think are relevant. However, we currently intend for the
foreseeable future to follow a policy of retaining all of our
earnings, if any, to finance the development and expansion of our
business and, therefore, do not expect to pay any dividends on our
common stock in the foreseeable future.
Equity
Compensation Plan Information
The
information included under the heading “Equity Compensation
Plan Information” in Item 12 of Part III of this report,
“Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.” is hereby
incorporated by reference into this Item 5 of this
report.
Recent
Issuances of Unregistered Securities
In
accordance with a consulting agreement dated November 25, 2019, the
Company issued 2,000,000 shares of unregistered, Rule 144
restricted Common Stock.
Repurchase
of Shares
We did
not repurchase any shares during the fourth quarter of the fiscal
year covered by this report.
ITEM
6. SELECTED FINANCIAL DATA
This
company qualifies as a “smaller reporting company” as
defined in 17 C.F.R. §229.10(f)(1), and is not required to
provide information by this Item.
29
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
We are
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 (TetraKE™) and
bi-specific ligand-directed single-chain fusion protein technology
platforms. Our TriKE and TetraKE platforms generate proprietary
therapeutics designed to harness and enhance the cancer killing
abilities of a patient’s own natural killer cells, or NK
cells. Once bound to an NK cell, our moieties are designed to
enhance the NK cell, and precisely direct it to one or more
specifically-targeted proteins expressed on a specific type of
cancer cell or virus infected cell, ultimately resulting in the
targeted cell’s death. TriKEs and TetraKEs are made up of
recombinant fusion proteins, can be designed to target any number
of tumor antigens on hematologic malignancies, sarcomas or solid
tumors and do not require patient-specific
customization.
As
shown in the accompanying consolidated financial statements, the
Company has incurred an accumulated deficit of $567,332,000 through
December 31, 2019. On a consolidated basis, the Company had cash
and cash equivalents of $28,000 at December 31, 201
9
. Because our lack of funds,
we will have to raise additional capital in order to fund our
selling, general and administrative, and research and development
expenses. There are no assurances that we will be able to raise the
funds necessary to maintain our operations or to implement our
business plan. The consolidated financial statements included in
this Annual Report do not include any adjustments relating to the
recoverability and classification of recorded assets, or the
amounts and classification of liabilities that might be necessary
in the event we cannot continue our operations.
Corporate
Developments
Employment Contracts
On
February 14, 2018, the Company entered into the First Amendment to
the Employment Agreement with Dr. Clarence-Smith, amending the
Employment Agreement, dated September 1, 2017, between the Company
and Dr. Clarence-Smith. Under the First Amendment, Dr.
Clarence-Smith’s title was revised to reflect her new
position and included an annual salary of $500,000, paid in equal
monthly installments. All other terms of her original Employment
Agreement remain unchanged. In October 2018, Dr. Clarence-Smith
resigned from her position with the Company. In connection with
this resignation, the Company entered into a separation agreement
which superseded the Employment Agreement.
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. Raymond 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.
TriKE Agreements
In
March 2017, we entered a new one-year Sponsored Research Agreement
with the University of Minnesota. The purpose of this agreement is
to determine toxicities and in vivo behavior in our TriKE
technology, which we license from the University of
Minnesota.
In June
2017, we entered into a co-development partnership agreement with
Altor BioScience Corporation in which the we will collaborate
exclusively in the clinical development of a novel 161533 TriKE
fusion protein for cancer therapies using our TriKE
technology.
License Agreements
Pursuant to a
patent license agreement with the ID4, dated December 31, 2014, we
received a non-exclusive, worldwide license to certain intellectual
property, including intellectual property related to
treating a p62-mediated disease (e.g., multiple
myeloma)
.
On
February 25, 2015, we licensed exclusive rights to three
antibody-drug conjugates, or ADCs, that MCIT will prepare for
further evaluation by GTBP as prospective therapeutics for the
treatment of triple-negative breast cancer, and multiple myeloma
and associated osteolytic bone disease. Under the terms of the
agreement, MCIT will develop three ADC product candidates which
contain GTBP’s lead drug candidates OXS-2175 and
OXS-4235.
30
We
executed an exclusive worldwide license agreement with Daniel A.
Vallera, Ph.D. and his associate (jointly "Dr. Vallera"), to
further develop and commercialize DT2219ARL (GTB-1550), a novel
therapy for the treatment of various human cancers. Under the terms
of the agreement, we receive exclusive rights to conduct research
and to develop, make, use, sell, and import DT2219ARL worldwide for
the treatment of any disease, state or condition in humans. GTBP
shall own all permits, licenses, authorizations, registrations and
regulatory approvals required or granted by any governmental
authority anywhere in the world that is responsible for the
regulation of products such as DT2219ARL, including without
limitation the FDA and the European Agency for the Evaluation of
Medicinal Products in the European Union. Under the agreement, Dr.
Vallera will receive an upfront license fee, royalty fees, and
certain milestone payments.
In July
2016, we executed an exclusive worldwide license agreement with the
Regents of the University of Minnesota, to further develop and
commercialize cancer therapies using TriKE technology developed by
researchers at the university to target NK cells to cancer. Under
the terms of the agreement, we received exclusive rights to conduct
research and to develop, make, use, sell, and import TriKe
technology worldwide for the treatment of any disease, state or
condition in humans. We shall own all permits, licenses,
authorizations, registrations and regulatory approvals required or
granted by any governmental authority anywhere in the world that is
responsible for the regulation of products such as the TriKe
technology, including without limitation the FDA and the European
Agency for the Evaluation of Medicinal Products in the European
Union. Under the agreement, the University of Minnesota will
receive an upfront license fee, royalty fees, and certain milestone
payments.
Clinical
Trial Agreement
In
September 2019, we executed clinical trial agreement with the
Regents of the University of Minnesota, to commence enrollment in
its first-in-human GTB-3550 TriKE™ Phase I/II clinical trial
for the treatment of certain types of leukemia. The clinical trial
is being conducted at the University of Minnesota’s Masonic
Cancer Center in Minneapolis, Minnesota under the direction of Dr.
Erica Warlick. The open-label, dose-escalation Phase I portion of
the trial will evaluate GTB-3550 TriKE™ in patients with
CD33-expressing, high risk myelodysplastic syndromes,
refractory/relapsed acute myeloid leukemia or advanced systemic
mastocytosis, and will determine safety and tolerability as well as
the pharmacologically active dose and maximum tolerated dose of
GTB-3550 TriKE™.
Collaboration
Agreement
On
March 10, 2020 we entered into a collaboration agreement with
Cytovance® Biologics, a USA-based contract development and
manufacturing organization (CDMO) and a subsidiary of the Shenzhen
Hepalink Pharmaceutical Group Co., Ltd. (“Hepalink”),
to provide development services for a TriKE™ therapeutic for
the treatment of coronavirus infection. Under the terms of the
collaboration agreement, the companies will focus on preparing
sufficient quantities of our coronavirus TriKE drug product for
preclinical evaluation using Cytovance’s
E. coli
-based
Keystone Expression System
™ and
subsequently, will scale-up production using Cytovance’s GMP
microbial manufacturing platform for evaluation of TriKE in humans
to treat coronavirus infection.
Financing
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.
31
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 an initial 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 an initial price of $2 per
share.
The
issuance of the Senior Convertible Debentures was 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.
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.
32
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.
On
December 19, 2019, GT Biopharma, Inc. (the “Company”)
entered into a Securities Purchase Agreement (the “Purchase
Agreement”) with the one purchaser (individually, a
“Purchaser,” and collectively, the
“Purchasers”), pursuant to which the Company issued to
the Purchasers, on December 19, 2019, Secured Convertible Notes in
an aggregate principal amount of $200,000 (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 on
August 19, 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.
33
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 December 19, 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.
On
January 30, 2020 GT Biopharma, Inc. (the “Company”)
entered into a Securities Purchase Agreement (the “Purchase
Agreement”) with the one purchaser (individually, a
“Purchaser,” and collectively, the
“Purchasers”), pursuant to which the Company issued to
the Purchasers, on January 30, 2020, Secured Convertible Notes in
an aggregate principal amount of $200,000 (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 on
September 30, 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 after January 30, 2020, 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.
Results
of Operations
Research and Development Expenses
During
the years ended December 31, 2019 and 2018, we incurred $1.7
million and $9.1 million of research and development expenses,
respectively. 2018 research and development costs were high due
primarily to the addition of new employees, increased regulatory
and preclinical consultant costs to support the GTB-3550 IND,
higher costs to advance the CNS portfolio and position the assets
for licensing efforts, and higher preclinical and clinical expenses
incurred at the University of Minnesota to continue development of
our immune-oncology assets. 2018 expenses also include non-cash
compensation of $6.8 million. We anticipate our direct clinical and
preclinical costs to continue to increase throughout 2020, totaling
approximately $12 to $15 million, as we have initiated the Phase 1
clinical trial of our most advanced TriKe product candidate,
GTB-3550 in January 2020, and initiate IND-enabling activities for
GTB-C3550, and GTB-1615 later in 2020.
Selling, general and administrative expenses
During
the years ended December 31, 2019 and 2018, we incurred $9.7
million and $12.5 million of selling, general and administrative
expenses, respectively. Additional selling, general, and
administrative expenses in 2018 were due to increased spending on
investor relations campaigns to broaden awareness of the Company,
and increased legal costs primarily associated with regulatory and
financing efforts. We anticipate selling, general and
administrative expenses, excluding stock compensation, to range
between $1 and $2 million in the coming quarters.
Loss on impairment
For the
year ended December 31, 2018, the Company recorded an intangible
asset impairment charge of $228.5 million related to the portfolio
of CNS IPR&D assets, 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 CEO with extensive experience in oncology drug
development. These changes resulted in the prioritization for
immuno-oncology development candidates relative to the CNS
development candidates acquired from Georgetown Translational
Pharmaceuticals. 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.
34
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 year ended December 31, 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 fully impaired. During the
year ended December 31, 2019, the Company reported an impairment
charge for these projects totaling $4,599,000.
Interest Expense
Interest expense
was $2.1 million and $9.1 million for the years ended December 31,
2019 and 2018, respectively. The decrease is due to an decrease in
non-cash amortization of debt issuance costs associated with
convertible debentures and warrants issued in January
2018.
Liquidity
and Capital Resources
As of
December 31, 201
9
, we had cash and cash
equivalents of $28,000. 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. During the year ended December 31, 2019, the Company raised
$3.5 million through a series of issuances of convertible
debentures.. We anticipate that cash utilized for selling, general,
and administrative expenses will range between $1 and $2 million in
the coming quarters, while research and development expenses will
vary depending on clinical activities. The Company is pursuing
several alternatives to address this situation, including the
raising of additional funding through equity or debt financings. In
order to finance existing operations and pay current liabilities
over the next twelve months, the Company will need to raise an
additional $15 million of capital in 2020.
Critical
Accounting Policies
We
consider the following accounting policies to be critical given
they involve estimates and judgments made by management and are
important for our investors’ understanding of our operating
results and financial condition.
Basis of Consolidation
The
consolidated financial statements contained in this report include
the accounts of GT Biopharma, Inc. and its subsidiaries. All
intercompany balances and transactions have been
eliminated.
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.
35
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.
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.
Research and Development
Research
and development costs are expensed as incurred and reported as
research and development expense. Research and development costs
totaled $1.7 million and $9.1 million for the years ended December
31, 2018 and 2017, respectively. Research and development costs for
the year ended December 31, 2018 included non-cash compensation of
$6.8 million.
Certain Expenses and Liabilities
On an
ongoing basis, management evaluates its estimates related to
certain expenses and accrued liabilities. We base our estimates on
historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values
of liabilities that are not readily apparent from other sources.
Actual results may differ materially from these estimates under
different assumptions or conditions.
Inflation
We
believe that inflation has not had a material adverse impact on our
business or operating results during the periods
presented.
Off-balance
Sheet Arrangements
We have
no off-balance sheet arrangements as of December 31,
201
9
.
ITEM
7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
This
company qualifies as a smaller reporting company, as defined in 17
C.F.R. §229.10(f) (1) and is not required to provide
information by this Item.
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Please
see the financial statements beginning on page F-1 located in Part
IV of this Annual Report on Form 10-K.
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
36
ITEM
9A. CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures
Our
principal executive officer and principal accounting officer
evaluated the effectiveness of our “disclosure controls and
procedures” (as such term is defined in Rules 13a-15(e) and
15d-15(e) of the United States Securities Exchange Act of 1934, as
amended), as of December 31, 2019. Based on that evaluation we have
concluded that because a material weakness in the Company’s
internal control over financial reporting existed as of December
31, 2019, that our disclosure controls and procedures were not
effective as of the end of the period covered by this Annual Report
on Form 10-K. The material weakness in the Company’s internal
control over financial reporting and the Company’s
remediation efforts are described below.
Management’s
Report on Internal Control over Financial Reporting
Management is
responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial
reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated
under the Securities Exchange Act of 1934, as amended, as a process
designed by, or under the supervision of, a company’s
principal executive and principal accounting officers and effected
by a company’s board of directors, management and other
personnel, 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 and includes those policies and
procedures that:
●
Pertain to the
maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the assets of
the company;
●
Provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures
of the company are being made only in accordance with
authorizations of management and directors of the company;
and
●
Provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the company’s assets that
could have a material effect on the financial
statements.
All
internal control systems, no matter how well designed, have
inherent limitations and can provide only reasonable, not absolute,
assurance that the objectives of the control system are met.
Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must
be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of
fraud, if any, within our company have been detected. Therefore,
even those systems determined to be effective can provide only
reasonable assurance with respect to financial statement
preparation and presentation.
As of
December 31, 2019, management of the company conducted an
assessment of the effectiveness of the company’s internal
control over financial reporting. In making this assessment, it
used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal
Control—Integrated Framework. In the course of the
assessment, material weaknesses were identified in the
company’s internal control over financial
reporting.
A
material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement
of our annual or interim financial statements will not be prevented
or detected on a timely basis.
Management
determined that fundamental elements of an effective control
environment were missing or inadequate as of December 31, 2019. The
most significant issues identified were: 1) lack of segregation of
duties due to very small staff and significant reliance on outside
consultants, 2) risks of executive override also due to lack of
established policies, and small employee staff and 3) insufficient
written policies and procedures for accounting and financial
reporting for the requirements and application of GAAP and SEC
Guidelines. Based on the material weaknesses identified above,
management has concluded that internal control over financial
reporting was not effective as of December 31, 2019. As the
company’s operations increase, the company intends to take
measures to mitigate the issues identified and implement a
functional system of internal controls over financial reporting.
Such measures will include, but not be limited to hiring of
additional employees in its finance and accounting department;
preparation of risk-control matrices to identify key risks and
develop and document policies to mitigate those risks; and
identification and documentation of standard operating procedures
for key financial activities.
Changes
in Internal Control over Financial Reporting
Other
than as described above, no changes in our internal control over
financial reporting were made during our most recent fiscal quarter
that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
ITEM
9B. OTHER INFORMATION
None.
37
PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
The
following table sets forth the name, age and position held by each
of our executive officers and directors as of February 28, 2019.
Directors are elected for a period of one year and thereafter serve
until the next annual meeting at which their successors are duly
elected by the stockholders.
|
Name
|
Age
|
Position
|
|
Anthony
J. Cataldo
|
68
|
Chief
Executive Officer and Chairman of the Board
|
|
Steven
Weldon
|
44
|
Chief
Financial Officer, Principal Accounting Officer and
Director
|
Anthony J. Cataldo
was appointed Chief
Executive Officer and Chairman on March 15, 2019. Previously he
served as Vice Chairman of the Board since January 2019. Mr.
Cataldo has extensive experience with the Company, having served on
the Board of Directors from July 2014 until November 2018, also
serving as Chief Executive Officer from November 2014 to September
2017 and Executive Chairman of the Board from September 2017 to
February 2018 during that time. Prior to joining the Company, from
February 2011 until June 2013, Mr. Cataldo served as Chairman and
CEO/Founder of Genesis Biopharma, Inc. (now known as Iovance
Biotherapeutics, Inc.). Mr. Cataldo is credited with developing the
Stage Four Cancer treatment for melanoma known as Lion/Genesis
using assets acquired from the National Cancer Institute (NIH). Mr.
Cataldo also served as non-executive co-chairman of the board of
directors of MultiCell Technologies, Inc., a supplier of
functional, non-tumorigenic immortalized human hepatocytes from
February 2005 until July 2006.
Steven Weldon
was appointed Chief
Financial Officer and to our board of directors on March 20, 2019.
Previously Mr. Weldon was appointed to the Board of Directors of
the Company in September 2014 and as our Chief Financial Officer in
November 2014 until October 2018.. Mr. Weldon has over 15 years of
financial and accounting experience. Mr. Weldon’s financial
background includes experience in managerial, private accounting
and planning. He has served on the board of several publicly traded
companies as both, chief executive officer and chief financial
officer. Mr. Weldon was appointed as chief financial officer and as
a member of the board of directors of GB Sciences, Inc.
(OTCMKTS:GBLX) in September 2005 and served in both positions until
November 2014. Mr. Weldon also served as chief executive officer of
GB Sciences from December 2009, through May 2011, and from April
2012, through March 2014. For several years, he taught accounting
and tax courses to undergrad students at Florida Southern College.
He received his bachelor of science degree and his Master’s
in Business Administration from Florida Southern College and is a
licensed Certified Public Accountant in the State of
Florida.
Due to
the small number of directors, at the present time the duties of an
Audit Committee, Nominating and Governance Committee, and
Compensation Committee are performed by the board of directors as a
whole. At such time as we have more directors on our board of
directors, these committees will be reconstituted.
Code
of Ethics
A copy
of the company’s code of ethics is attached to this annual
report as exhibit 99.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires our executive
officers and directors, and persons who own more than 10% of a
registered class of the company’s equity securities, to file
reports of ownership and changes in ownership with the Securities
and Exchange Commission (“SEC”). Executive officers,
directors and greater than 10% stockholders are required by SEC
regulations to furnish the company with copies of all Section 16(a)
forms they file. All of our executive officers and directors filed
the required reports; however, Kathleen Clarence-Smith and Raymond
Urbanski filed one Form 3 late and Raymond Urbanski, Anthony J.
Cataldo and Steven Weldon each filed one Form 4 late.
ITEM
11. EXECUTIVE COMPENSATION
The
following table sets forth certain information concerning the
annual and long-term compensation for services rendered to us in
all capacities for the fiscal years ended December 31,
201
9
and
201
8
of all
persons who served as our principal executive officers and as our
principal financial officer during the fiscal year ended December
31, 201
9
. No
other executive officers received total annual compensation during
the fiscal year ended December 31, 201
9
in excess of $100,000. The
principal executive officer and the other named officers are
collectively referred to as the “Named Executive
Officers.”
38
|
Name and Principal Position
|
|
Year
|
Salary ($)
|
Bonus ($)
|
Stock Awards ($)
(1)
|
Option Awards ($)
(2)
|
Non-Equity Incentive Plan Compensation ($)
|
Nonqualified Deferred Compensation Earnings ($)
|
All Other Compensation ($)
(3)
|
Total ($)
|
|
Anthony J. Cataldo
(7)
|
|
2019
|
$
225,000
|
$
-
|
$
1,281,000
|
$
-
|
$
-
|
$
-
|
$
75,000
|
$
1,581,000
|
|
Chief
Executive Officer
|
|
2018
|
$
190,000
|
$
-
|
$
-
|
$
-
|
$
-
|
$
-
|
$
404,151
|
$
594,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
Weldon
(6)
|
|
2019
|
$
230,000
|
$
-
|
$
823,500
|
$
-
|
$
-
|
$
-
|
$
-
|
$
1,053,500
|
|
Chief
Financial Officer
|
|
2018
|
$
230,000
|
$
-
|
$
-
|
$
-
|
$
-
|
$
-
|
$
-
|
$
230,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond Urbanski, M.D., Ph.D.
(4)
|
|
2019
|
$
318,000
|
$
-
|
$
-
|
$
-
|
$
-
|
$
-
|
|
$
318,000
|
|
Former Chief
Executive Officer
|
|
2018
|
$
321,154
|
$
-
|
$
7,644,490
|
$
-
|
$
-
|
$
-
|
$
-
|
$
7,965,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shawn
Cross
(5)
|
|
2018
|
$
233,942
|
$
20,000
|
$
-
|
$
-
|
$
-
|
$
-
|
$
-
|
$
253,942
|
|
Former Chief
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kathleen Clarence-Smith
(8)
|
|
2018
|
$
278,846
|
$
-
|
$
-
|
$
-
|
$
-
|
$
-
|
$
-
|
$
278,846
|
|
Former
Chief Executive Officer
|
|
|
|
|
|
|
|
|||
(1)
The amounts in this
column represent the aggregate grant date fair value of the
restricted stock awards and restricted stock units, determined in
accordance with Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) Topic 718. GT Biopharma
determines the grant date fair value of the awards by multiplying
the number of units granted by the closing market price of one
share of GT Biopharma common stock on the award grant date. These
amounts do not reflect the actual economic value that will be
realized by the named executive officer upon the vesting or the
sale of the common stock awards.
(2)
This column
represents option awards computed in accordance with FASB ASC Topic
718, excluding the effect of estimated forfeitures related to
service-based vesting conditions. For additional information on the
valuation assumptions with respect to the option grants, refer to
Note 1 of our financial statements in this Annual Report. These
amounts do not correspond to the actual value that will be
recognized by the named executives from these awards.
(3)
The amount in this
column represents compensation earned under Consultant Agreements
with the Company.
(4)
Dr. Urbanski was
appointed Chief Medical Officer on September 1, 2017, President of
May 9, 2018, and Chief Executive Officer on July 3, 2018. He
resigned as Chief Executive Officer on March 15, 2019.
(5)
Mr. Cross was
appointed President and Chief Operating Officer on October 15, 2017
and Chairman and Chief Executive Officer on February 14, 2018. Mr.
Cross resigned from the Company on July 2, 2018.
(6)
Mr. Weldon was
appointed Chief Financial Officer on March 20, 2019. He was
previously the Chief Financial Officer from November 3, 2014 until
October 11, 2018.
(7)
Mr. Cataldo was
appointed Chief Executive Officer on March 15, 2019. Mr. Cataldo
previously served as our Chief Executive Officer from March 2009 to
August 2011 and again in November 2014 to September 1, 2017. He was
Executive Chairman from September 1, 2017 to February 14, 2018, and
has been providing services to the Company under a Consultant
Agreement since February 14, 2018.
(8)
Dr.
Clarence-Smith was Chief Executive Officer from September 1, 2017
to February 14, 2018. Dr. Clarence-Smith served as our
Vice-Chairwoman and President of the Neurology Division from
February 14, 2018 until her resignation from the Company on October
9, 2018.
39
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 $25,000 per month during the term of the
Agreement.
On
October 19, 2018, the Company entered into an Executive Employment
Agreement with Dr. Urbanski, reflecting his current position as
Chief Executive Officer of the Company. Under the terms of this
agreement, Dr. Urbanski’s annual salary is essentially
unchanged from his previous positions. Dr. Urbanski is also
entitled to participate in the Company’s bonus plans. Under
the Executive Employment Agreement, the Company has agreed that
upon shareholder approval of a Stock Option Plan, it will recommend
to the Board that the Company grant Dr. Urbanski a Non-Qualified
stock option to purchase 2,971,102 shares of the Company’s
common stock having an exercise equal to the fair market value of
the shares on the date of the Agreement. The stock option grant
would vest according to the following schedule: (i) 1,250,000 fully
vested shares upon signing of the agreement, (ii) 1,250,000 shares
on January 1, 2019, and (iii) 471,102 shares on January 1, 2020. On
March 15, 2019, Dr, Urbanski resigned his position as Chief
Executive Officer, President and Chairman of the
Board.
Stock
Option Grants
The
following table sets forth information as of December 31,
201
9
, concerning
unexercised options, unvested stock and equity incentive plan
awards for the executive officers named in the Summary Compensation
Table.
|
|
Option
Awards
|
|||
|
Name
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options (#)
|
Option
Exercise Price ($) Option Expiration Date
|
|
Steven
Weldon
|
-
|
-
|
-
|
$
-
|
|
Anthony
Cataldo
|
-
|
-
|
-
|
$
-
|
Director
Compensation
Beginning in
January 2018, non-employee members of the Board of Directors are to
receive $42,500 per year, plus $15,000 annually for Chairing a
Committee and $5,000 annually as a member of a Committee. Also,
upon shareholder approval of a Stock Option Plan, Directors will be
granted 150,000 options that vest over a three-year period. Vesting
will accelerate if the Company undergoes a change of control
transaction for cash.
|
Name
|
Fees Earned or Paid in Cash ($)
|
Option Awards ($)
|
Stock Awards ($)
|
Total ($)
|
|
Dr.
John Bonfiglio (1)
|
$
15,325
|
$
-
|
$
-
|
$
15,325
|
|
Dr.
Peter Kiener (1)
|
$
15,325
|
$
-
|
$
-
|
$
15,325
|
|
Geoffrey
Davis (1)
|
$
15,325
|
$
-
|
$
-
|
$
15,325
|
(1)
Dr.
Bonfiglio, Dr. Kiener and Mr. Davis resigned from the Board on
March 20, 2019
40
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
The
following table sets forth certain information regarding beneficial
ownership of our common stock as of March 24, 2020, (a) by each
person known by us to own beneficially 5% or more of any class of
our common stock, (b) by each of our named executive officers, (c)
by each of our directors and (d) by all our current executive
officers and directors as a group. As of March 24, 2020, there were
70,602,433 shares of our common stock issued and outstanding.
Shares of common stock subject to stock options and preferred stock
that are currently exercisable or exercisable within 60 days of
March 24, 2019 are deemed to be outstanding for purposes of
computing the percentage ownership of that person but are not
treated as outstanding for computing the percentage ownership of
any other person. Unless indicated below, the persons and entities
named in the table have sole voting and sole investment power with
respect to all shares beneficially owned, subject to community
property laws where applicable. Except as otherwise indicated, the
address of each stockholder is c/o GT Biopharma, Inc. at 9350
Wilshire Blvd., Suite 203, Beverly Hills, CA 90212.
|
|
Number
of
Shares
of
Common
Stock
Beneficially
|
Percent
of
Shares
of
Outstanding
Common
|
|
Name and Address
of Beneficial Owner
|
Owned
|
Stock
|
|
Security
Ownership of Certain Beneficial Owners:
|
|
|
|
Kathleen
Clarence-Smith, M.D., Ph.D. (4)
|
7,521,051
|
10.65
%
|
|
Mark Silverman
(4)
|
7,226,108
|
10.23
%
|
|
Bristol Investment
Fund, Ltd. (1)
|
6,989,641
|
9.99
%
|
|
Adam Kasower
(2)
|
3,645,620
|
5.16
%
|
|
Alpha Capital
Anstalt (3)
|
6,736,475
|
9.54
%
|
|
Security
Ownership of Management and Directors:
|
|
|
|
Anthony J. Cataldo
(5)
|
10,734,320
|
15.20
%
|
|
Steven Weldon
(6)
|
6,769,707
|
9.59
%
|
|
|
|
|
|
Executive officers
and directors as a group — 2 people
|
17,504,027
|
24.79
%
|
|
|
|
|
(1)
As reported on
Schedule 13G/A filed with the SEC on January 16, 2020. Paul
Kessler, manager of Bristol Capital Advisors, LLC, the investment
advisor to Bristol Investment Fund, Ltd., has voting and investment
control over the securities held by Bristol Investment Fund, Ltd.
Mr. Kessler disclaims beneficial ownership of these securities
except to the extent of his pecuniary interest therein. The address
of Bristol Capital Advisors, LLC is 662 N. Sepulveda Blvd., Suite
300, Los Angeles, California 90049.
(2)
Includes 1,011,274
shares issuable upon conversion of principal on outstanding
convertible debentures and 120,088 shares available through
exercise of warrants
(3)
As reported on
Schedule 13G filed with the SEC on February 4, 2020 The address of
Alpha Capital Anstalt is Lettstrasse 32, FL-9490 Vaduz,
Furstentums, Liechtenstein
(4)
Security interest
in these shares has been granted to various holders of the
Company’s senior convertible notes to secure the
Company’s obligations under these notes in accordance with a
Stock Pledge Agreement dated August 2, 2018.
(5)
Security interest
in 3,234,320 shares has been granted to various holders of the
Company’s senior convertible notes to secure the
Company’s obligations under these notes in accordance with a
Stock Pledge Agreement dated August 2, 2018.
(6)
Security interest
in 2,269,707 shares has been granted to various holders of the
Company’s senior convertible notes to secure the
Company’s obligations under these notes in accordance with a
Stock Pledge Agreement dated August 2, 2018.
41
Equity
Compensation Plan Information
The
following is a summary of our equity compensation plans at December
31, 201
9
:
|
|
Number of Securities to be Issued Upon Exercise of Outstanding
Options, Warrants, and Rights
|
Weighted-Average Exercise Price of Outstanding Options, Warrants,
and Rights
|
Number of Securities Available for Future Issuance Under Equity
Compensation Plans (Excluding Securities Reflected in Column
(a))
|
|
Plan Category
|
(a)
|
(b)
|
(c)
|
|
Equity
compensation plans approved by security holders (1)
|
40
|
$
877.50
|
-
|
|
Equity
compensation plans not approved by security holders
|
-
|
$
-
|
-
|
|
Total
|
40
|
$
877.50
|
-
|
(1)
As of December 31,
2019, we had options issued and outstanding to purchase 40 shares
of common stock under our 2014 Stock Incentive Plan.
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
Director
Independence
None of
our directors qualify as “independent directors” as
defined by Item 407 of Regulation S-K.
We have
elected to use the definition for “director
independence” under the Nasdaq Stock Market’s listing
standards, which defines an “independent director” as
“a person other than an officer or employee of us or its
subsidiaries or any other individual having a relationship, which
in the opinion of our Board of Directors, would interfere with the
exercise of independent judgment in carrying out the
responsibilities of a director.” The definition further
provides that, among others, employment of a director by us (or any
parent or subsidiary of ours) at any time during the past three
years is considered a bar to independence regardless of the
determination of our Board of Directors.
Transactions
with Dr. Raymond Urbanski
On
December 21, 2018, Dr. Raymond Urbanski, the former Chief Executive
Officer and Chairman of the Board, provided a short-term loan of
$100,000 to the Company to meet immediate capital needs. The loan
matured on January 20, 2019 and carried an interest rate of 5%. The
loan plus accrued interest has been repaid.
42
ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Seligson &
Giannattasio, LLP was our independent registered public accounting
firm for the fiscal years ending December 31, 201
9
and 201
8
. The following table shows
the fees that were paid or accrued by us for audit and other
services provided by Seligson & Giannattasio, LLP for the
201
9
and
201
8
fiscal
years.
|
|
2019
|
2018
|
|
Audit
Fees (1)
|
$
70,500
|
$
69,000
|
|
Audit-Related
Fees (2)
|
$
-
|
$
-
|
|
Tax
Fees (3)
|
$
4,000
|
$
4,000
|
|
All
Other Fees
|
$
-
|
$
-
|
|
Total
|
$
74,500
|
$
73,000
|
(1)
Audit fees
represent fees for professional services provided in connection
with the audit of our annual financial statements and the review of
our financial statements included in our Form 10-Q quarterly
reports and services that are normally provided in connection with
statutory or regulatory filings for the 201
9
and 201
8
fiscal years.
(2)
Audit-related fees
represent fees for assurance and related services that are
reasonably related to the performance of the audit or review of our
financial statements and not reported above under “Audit
Fees.”
(3)
Tax fees represent
fees for professional services related to tax compliance, tax
advice and tax planning.
All
audit related services, tax services and other services rendered by
Seligson & Giannattasio, LLP were pre-approved by our Board of
Directors or Audit Committee. The Audit Committee has adopted a
pre-approval policy that provides for the pre-approval of all
services performed for us by Seligson & Giannattasio, LLP. The
policy authorizes the Audit Committee to delegate to one or more of
its members pre-approval authority with respect to permitted
services. Pursuant to this policy, the Board delegated such
authority to the Chairman of the Audit Committee. All pre-approval
decisions must be reported to the Audit Committee at its next
meeting. The Audit Committee has concluded that the provision of
the non-audit services listed above is compatible with maintaining
the independence Seligson & Giannattasio, LLP.
43
PART
IV
ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The
Company’s financial statements and related notes thereto are
listed and included in this Annual Report beginning on page F-1.
The following documents are furnished as exhibits to this Annual
Report on Form 10-K.
EXHIBIT
INDEX
|
|
|
|
|
Incorporated by
Reference
|
||||||
|
Exhibit
Number
|
|
Exhibit
Description
|
|
Form
|
|
Date
|
|
Number
|
|
Filed
Herewith
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agreement and Plan of
Merger
|
|
10-Q
|
|
11/14/17
|
|
2.1
|
|
|
|
|
|
Restated Certificate of
Incorporation as filed in Delaware September 10, 1996 and as
thereafter amended through March 1, 2002
|
|
10-KSB
|
|
04/01/02
|
|
3.A
|
|
|
|
|
|
Certificate of Amendment to Amended
and Restated Certificate of Incorporation of GT Biopharma,
Inc.
|
|
10-K
|
|
03/31/11
|
|
3.2
|
|
|
|
|
|
Certificate of Designation of
Preferences, Rights and Limitations of Series H Convertible
Preferred Stock of GT Biopharma, Inc., dated February 5,
2010
|
|
8-K
|
|
02/16/10
|
|
3.1
|
|
|
|
|
|
Certificate of Designation of
Preferences, Rights and Limitations of Series I Convertible
Preferred Stock of GT Biopharma, Inc., dated March 18,
2011.
|
|
10-K
|
|
03/31/11
|
|
3.4
|
|
|
|
|
|
Bylaws, as restated effective
September 7, 1994 and as amended through April 29,
2003
|
|
10-QSB
|
|
08/13/03
|
|
3
|
|
|
|
|
|
Certificate of Amendment to the
Certificate of Incorporation of the Registrant, effective as of
July 19, 2017.
|
|
8-K
|
|
3/15/18
|
|
|
|
|
|
|
|
License Agreement with ID4 Pharma
LLC
|
|
10-Q
|
|
08/11/17
|
|
10.1
|
|
|
|
|
|
License Agreement with MultiCell
Immunotherapeutics, Inc.
|
|
10-Q
|
|
08/11/17
|
|
10.2
|
|
|
|
|
|
License Agreement with the
University of Minnesota
|
|
10-Q
|
|
08/11/17
|
|
10.3
|
|
|
|
|
|
License Agreement with Daniel A.
Vallera, Ph.D.
|
|
10-Q
|
|
08/11/17
|
|
10.4
|
|
|
|
|
|
Warrant Conversion
Agreement
|
|
10-Q
|
|
11/14/17
|
|
10.6
|
|
|
|
|
|
Preferred Conversion
Agreement
|
|
10-Q
|
|
11/14/17
|
|
10.7
|
|
|
|
|
|
Amended Note Conversion
Agreement
|
|
10-Q
|
|
11/14/17
|
|
10.8
|
|
|
|
|
|
Amended Warrant Conversion
Agreement
|
|
10-Q
|
|
11/14/17
|
|
10.9
|
|
|
|
|
|
Amended Preferred Conversion
Agreement
|
|
10-Q
|
|
11/14/17
|
|
10.10
|
|
|
|
|
|
Securities Purchase
Agreement
|
|
8-K
|
|
01/13/17
|
|
10.1
|
|
|
|
|
|
10% Senior Convertible
Debenture
|
|
8-K
|
|
01/13/17
|
|
10.2
|
|
|
|
|
|
Common Stock Purchase
Warrant
|
|
8-K
|
|
01/13/17
|
|
10.3
|
|
|
|
|
|
Securities Purchase Agreement by
and among the Company and the Buyers, dated January 22,
2018.
|
|
8-K
|
|
1/23/18
|
|
10.1
|
|
|
|
|
|
Form of Registration Rights
Agreement by and among the Company and the Buyers, dated January
22, 2018.
|
|
8-K
|
|
1/23/18
|
|
10.2
|
|
|
|
|
|
Form of Note.
|
|
8-K
|
|
1/23/18
|
|
10.3
|
|
|
|
|
|
Form of
Warrant.
|
|
8-K
|
|
1/23/18
|
|
10.4
|
|
|
|
|
|
First Amendment to the Employment
Agreement, dated as of February 14, 2018, between the Company and
Dr. Clarence-Smith.
|
|
8-K
|
|
2/21/18
|
|
10.2
|
|
|
|
|
|
Consultant Agreement, dated as of
February 14, 2018, between the Company and Mr.
Cataldo.
|
|
8-K
|
|
2/21/18
|
|
10.3
|
|
|
|
|
|
Form of 10% Senior Convertible
Debenture
|
|
8-K
|
|
08/03/18
|
|
4.1
|
|
|
|
|
|
Security Purchase
Agreement
|
|
8-K
|
|
08/03/18
|
|
10.1
|
|
|
|
|
|
Form of 10% Senior Convertible
Debenture
|
|
8-K
|
|
09/07/18
|
|
4.1
|
|
|
|
|
|
Security Purchase
Agreement
|
|
8-K
|
|
09/07/18
|
|
10.1
|
|
|
|
|
|
Form of 10% Senior Convertible
Debenture
|
|
8-K
|
|
09/24/18
|
|
4.1
|
|
|
|
|
|
Security Purchase
Agreement
|
|
8-K
|
|
09/24/18
|
|
10.1
|
|
|
|
|
|
Separation Agreement between the
Company and Dr. Clarence-Smith
|
|
8-K
|
|
10/12/18
|
|
10.1
|
|
|
|
|
|
Resignation of Steven
Weldon
|
|
8-K
|
|
10/16/18
|
|
|
|
|
|
|
|
Stock Pledge
Agreement
|
|
10-Q
|
|
08/14/18
|
|
10.10
|
|
|
|
|
|
Executive Employment Agreement with
Dr. Urbanski
|
|
10-Q
|
|
11/14/18
|
|
10.17
|
|
|
|
|
|
Code of Ethics
|
|
10-K
|
|
03/31/16
|
|
14.1
|
|
|
|
|
|
Subsidiaries of GT Biopharma,
Inc.
|
|
10-K
|
|
03/31/16
|
|
21.1
|
|
|
|
|
|
Certification of the Principal
Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
|
|
|
|
X
|
|
|
|
Certification of the Principal
Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
|
|
|
|
X
|
|
|
|
Certification of the Principal
Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
|
|
|
|
X
|
|
|
|
Certification of the Principal
Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
|
|
|
|
X
|
|
|
101
|
|
Interactive Data
File
|
|
|
|
|
|
|
|
X
|
44
SIGNATURES
Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly
authorized.
|
|
GT Biopharma, Inc.
|
|
|
|
|
|
|
|
|
Dated:
March 27, 2020
|
By:
|
/s/
Anthony Cataldo
|
|
|
|
|
Anthony
Cataldo
|
|
|
|
|
|
|
Pursuant to the
requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates
indicated.
|
Name
|
|
Postion
|
|
Date
|
|
|
|
|
|
|
|
/s/
Anthony J. Cataldo
|
|
Chief
Executive Officer and Chairman of the Board
|
|
March
27, 2020
|
|
Anthony
J. Cataldo
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Steven Weldon
|
|
Chief
Financial Officer
|
|
March
27, 2020
|
|
Steven
Weldon
|
|
(Principal
Accounting Officer) and Director
|
|
|
|
|
|
|
|
|
45
GT
BIOPHARMA, INC. AND SUBSIDIARIES
CONSOLIDATED
FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2019 AND 2018
Contents
|
|
Page
|
|
Report of Independent Registered Public Accounting
Firm
|
|
|
Seligson & Giannattasio, LLP
|
F-1
|
|
Consolidated Financial Statements
|
|
|
Balance
Sheets as of December 31, 2019 and 2018
|
F-2
|
|
Statements of Operations For Years Ended December 31, 2019 and
2018
|
F-3
|
|
Statement of Stockholders’ Equity For Years Ended December
31, 2019 and 2018
|
F-4
|
|
Statements of Cash Flows For Years Ended December 31, 2019 and
2018
|
F-5
|
|
Notes To Consolidated Financial Statements
|
F-6
|
46
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders of GT Biopharma,
Inc.
Opinion on the Financial Statements
We have
audited the accompanying consolidated balance sheets of GT
Biopharma, Inc. and subsidiaries (the "Company") as of December 31,
2019 and 2018, and the related consolidated statements of
operations, stockholders’ equity and cash flows for each of
the years in the two-year period ended December 31, 2019, and the
related notes (collectively referred to as the financial
statements). In our opinion, the consolidated financial statements
present fairly, in all material respects, the consolidated
financial position of the Company as of December 31, 2019 and 2018
and the consolidated results of its operations and its consolidated
cash flows for each of the years in the two-year period ended
December 31, 2019 , in conformity with accounting principles
generally accepted in the United States of America.
Basis of Opinion
These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s consolidated financial statements based on our
audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States)
(“PCAOB”) and are required to be independent with
respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due
to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an
understanding of internal control over financial reporting, but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
The
accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed
in Note 1 to the financial statements, the Company has incurred
significant recurring losses. The realization of a major portion of
its assets is dependent upon its ability to meet its future
financing needs and the success of its future operations. These
factors raise substantial doubt about the Company’s ability
to continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from
this uncertainty.
/s/
Seligson & Giannattasio, LLP
Seligson &
Giannattasio, LLP
We have
served as the Company’s auditor since 2008.
White
Plains, New York
March
27, 2020
F-1
GT Biopharma, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except par value and share data)
|
|
December 31,
2019
|
December 31,
2018
|
|
ASSETS
|
|
|
|
Current
Assets:
|
|
|
|
Cash
and cash equivalents
|
$
28
|
$
60
|
|
Prepaid
expenses
|
246
|
30
|
|
Total
Current Assets
|
274
|
90
|
|
|
|
|
|
Intangible
assets
|
-
|
25,262
|
|
Operating
lease right-to use asset
|
110
|
-
|
|
Deposits
|
12
|
12
|
|
Fixed
assets, net
|
-
|
35
|
|
Total
Other Assets
|
122
|
25,309
|
|
TOTAL
ASSETS
|
$
396
|
$
25,399
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
Current
Liabilities:
|
|
|
|
Accounts
payable
|
$
1,940
|
$
1,762
|
|
Accrued
expenses
|
2,379
|
1,023
|
|
Accrued
interest
|
2,029
|
432
|
|
Line
of credit
|
31
|
31
|
|
Note
Payable to Related Party
|
-
|
100
|
|
Deferred
Rent
|
-
|
8
|
|
Operating
lease liability
|
120
|
|
|
Convertible
debentures
|
13,207
|
10,673
|
|
Total
Current Liabilities
|
19,706
|
14,029
|
|
|
|
|
|
Total
liabilities
|
19,706
|
14,029
|
|
|
|
|
|
Commitments and
Contingencies
|
|
|
|
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 December 31,
2019 and December 31, 2018, respectively
|
1
|
1
|
|
Series
J – 2,353,548 and 1,163,548 shares issued and outstanding at
December 31, 2019 and December 31, 2018, respectively
|
2
|
1
|
|
Common
stock - $0.001 par value; 750,000,000 shares authorized; and
69,784,699 and 50,650,478 shares issued and outstanding at December
31, 2019 and December 31, 2018, respectively
|
70
|
51
|
|
Additional
paid-in capital
|
548,118
|
540,171
|
|
Accumulated
deficit
|
(567,332
)
|
(528,685
)
|
|
Noncontrolling
interest
|
(169
)
|
(169
)
|
|
Total
Stockholders’ (deficit) Equity
|
(19,310
)
|
11,370
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
396
|
$
25,399
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-2
GT Biopharma, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands except per share data)
|
|
December 31
|
|
|
|
2019
|
2018
|
|
Operating expenses:
|
|
|
|
Research
and development
|
$
1,667
|
$
9,067
|
|
Selling,
general and administrative expenses
|
9,790
|
12,487
|
|
Loss
on impairment
|
4,599
|
228,515
|
|
Total
operating expenses
|
16,056
|
250,069
|
|
Loss
from operations
|
(16,056
)
|
(250,069
)
|
|
Other income (expense):
|
|
|
|
Loss
on disposal of assets
|
(20,463
)
|
-
|
|
Interest
expense
|
(2,128
)
|
(9,117
)
|
|
Total
other income (expense)
|
(22,591
)
|
(9,117
)
|
|
Loss
before provision for income taxes
|
(38,647
)
|
(259,186
)
|
|
Provision
for income tax
|
-
|
-
|
|
Net
loss
|
$
(38,647
)
|
$
(259,186
)
|
|
Net
loss per common share – basic and diluted
|
$
(0.67
)
|
$
(5.16
)
|
|
Weighted
average common shares outstanding – basic and
diluted
|
57,527
|
50,240
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
GT Biopharma, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity
For the Years Ended December 31, 2019 and 2018
|
|
Preferred Shares
|
Common Shares
|
Paid-in
|
Accumulated
|
||
|
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
|
Balance at December 31, 2018
|
1,260
|
$
2
|
50,118
|
$
50
|
$
521,305
|
$
(269,499
)
|
|
Issuance of
warrants
|
|
|
|
|
8,304
|
|
|
Issuance of
common stock for convertible notes
|
|
|
162
|
0
|
325
|
|
|
Beneficial
conversion feature on convertible notes
|
|
|
|
|
544
|
|
|
Issuance of
common stock for compensation
|
|
|
370
|
1
|
9,693
|
|
|
Net
loss
|
|
|
|
|
|
(259,186
)
|
|
Balance at December 31, 2018
|
1,260
|
$
2
|
50,650
|
$
51
|
$
540,171
|
$
(528,685
)
|
|
Issuance of
preferred stock
|
1,190
|
1
|
|
|
1,139
|
|
|
Issuance of
common stock for convertible notes
|
|
|
3,484
|
3
|
1,357
|
|
|
Beneficial
conversion feature on convertible notes
|
|
|
|
|
158
|
|
|
Issuance of
common stock for compensation
|
|
|
15,650
|
16
|
5,293
|
|
|
Net
loss
|
|
|
|
|
|
(38,647
)
|
|
Balance at December 31, 2019
|
2,450
|
$
3
|
69,784
|
$
70
|
$
548,118
|
$
(567,332
)
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
GT Biopharma, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
|
|
Twelve Months Ended
December 31,
|
|
|
|
2019
|
2018
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
Net
loss
|
$
(38,647
)
|
$
(259,186
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
Depreciation
|
4
|
7
|
|
Loss
on impairment of long-lived assets
|
4,599
|
228,515
|
|
Loss
on the disposal of assets
|
20,494
|
-
|
|
Stock
compensation expense for options and warrants issued to
employees and non-employees
|
5,308
|
9,696
|
|
Amortization
of debt discounts
|
505
|
8,663
|
|
Non-cash
interest expense
|
1,140
|
441
|
|
Amortization
of loan costs
|
-
|
1,076
|
|
Changes
in operating assets and liabilities:
|
|
|
|
Prepaid
Expenses
|
(216
)
|
(30
)
|
|
Other
assets
|
-
|
(3
)
|
|
Other
liabilities
|
-
|
8
|
|
Accounts
payable and accrued liabilities
|
3,154
|
136
|
|
Net
cash used in operating activities
|
(3,659
)
|
(10,677
)
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
Acquisition
of fixed assets
|
|
(36
)
|
|
Disposal
of fixed assets
|
200
|
-
|
|
Net
cash used by investing activities
|
200
|
(36
)
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
Proceeds
from notes payable
|
3,527
|
15,145
|
|
Loan
costs
|
-
|
(533
)
|
|
Repayment
of note payable
|
(100
)
|
(4,415
)
|
|
Net
cash provided by financing activities
|
3,427
|
10,197
|
|
NET
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
|
(32
)
|
(516
)
|
|
CASH
AND CASH EQUIVALENTS - Beginning of period
|
60
|
576
|
|
CASH
AND CASH EQUIVALENTS - End of period
|
$
28
|
$
60
|
|
|
|
|
|
Supplemental cash flow disclosures:
|
|
|
|
Issuance
of common stock upon conversion of convertible notes
|
$
1,360
|
$
325
|
|
Issuance
of common stock for interest expense
|
$
21
|
$
-
|
The accompanying condensed notes are an integral part of these
consolidated financial statements.
F-5
1.
The Company
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 Tri-specific Killer Engager
(TriKE™), Tetra-specific Killer Engager (TetraKE™) and
bi-specific ligand-directed single-chain fusion protein technology
platforms. Our TriKE and TetraKE platforms generate proprietary
therapeutics designed to harness and enhance the cancer killing
abilities of a patient’s own natural killer cells, or NK
cells. Once bound to an NK cell, our moieties are designed to
enhance the NK cell, and precisely direct it to one or more
specifically-targeted proteins expressed on a specific type of
cancer cell or virus infected cell, ultimately resulting in the
targeted cell’s death. TriKEs and TetraKEs are made up of
recombinant fusion proteins, can be designed to target any number
of tumor antigens on hematologic malignancies, sarcomas or solid
tumors and do not require patient-specific
customization.
Basis of Consolidation
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.
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
going- concern 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 $567 million and cash of $28 thousand as of December 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.
Segment Information
Operating segments
are identified as components of an enterprise about which separate
discrete financial information is available for evaluation by the
chief operating decision-maker in making decisions regarding
resource allocation and assessing performance. To date, the Company
has viewed its operations and manages its business as one segment
operating in the United States of America.
2.
Summary of Significant Accounting Policies
Advertising and promotional fees
Advertising
expenses consist primarily of costs incurred in the design,
development, and printing of Company literature and marketing
materials. The Company expenses all advertising expenditures as
incurred. There were no advertising expenses for the years ended
December 31, 2019 and 2018, respectively.
F-6
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 no balances in excess
of this limit at December 31, 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 years ended December
31, 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 3 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.
During
2019, there were three repricings related to the conversion
price of the convertible debt and the exercise price of the
warrants. The Company prepared the calculations of the change in
value pursuant to ASU 2017-11, and determined there was no deemed
dividend to include in the calculation of earnings per
share.
F-7
The
computation of basic and diluted net loss per share for the years
ended December 31, 2019 and 2018 excludes the common stock
equivalents of the following potentially dilutive securities
because their inclusion would be anti-dilutive:
|
|
December 31,
|
|
|
|
2019
|
2018
|
|
Exercise
of common stock warrants
|
9,065,265
|
1,813,053
|
|
Conversion
of preferred stock into common stock
|
11,768,295
|
1,163,659
|
|
Conversion
of convertible debentures into common stock
|
66,136,870
|
5,704,543
|
|
Exercise
of common stock options
|
40
|
1,113
|
|
|
86,970,470
|
8,682,368
|
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 costs
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 are 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 current
liabilities 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:
●
Level 1 inputs to
the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active markets. The
Company’s Level 1 assets include cash equivalents, primarily
institutional money market funds, whose carrying value represents
fair value because of their short-term maturities of the
investments held by these funds.
●
Level 2 inputs to
the valuation methodology include quoted prices for similar assets
and liabilities in active markets, and inputs that are observable
for the asset or liability, either directly or indirectly, for
substantially the full term of the financial instrument. The
Company’s Level 2 liabilities consist of liabilities arising
from the issuance of convertible securities and in accordance with
ASC 815-40: These liabilities are remeasured each reporting period
if required by ASC 815-40. Fair value is determined using the
Black-Scholes valuation model based on observable market inputs,
such as share price data and a discount rate consistent with that
of a government-issued security of a similar maturity. There were
no such liabilities at December 31, 2019 .
●
Level 3 inputs to
the valuation methodology are unobservable and significant to the
fair value measurement. The Company does not have any assets or
liabilities measured using Level 3 inputs.
Research and Development
Research and
development costs are expensed as incurred and reported as research
and development expense. Research and development costs totaled
$1.7 million and $9.1 million for the years ended December 31, 2019
and 2018, respectively. Research and development costs for the year
ended December 31, 2018 included non-cash compensation of $6.8
million.
Leases
In
February 2016, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standard Update
(“ASU”) No. 2016-02, “Leases.” This ASU
requires all lessees to be recognized on the balance sheet as right
to use assets and lease liabilities for the rights and obligations
created by lease arrangements with terms greater than 12 months.
The Company adopted the ASU as of January 1, 2019. The effect of
the adoption of the ASU was to increase the other assets and
liabilities by approximately $174,000.
F-8
3.
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.
For the
year ended December 31, 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 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 year ended December 31, 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 fully impaired. During the
year ended December 31, 2019, the Company reported an impairment
charge for these projects totaling $4,599,000.
4.
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.
F-9
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 an initial 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 an initial 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”).
F-10
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.
On
December 19, 2019, GT Biopharma, Inc. (the “Company”)
entered into a Securities Purchase Agreement (the “Purchase
Agreement”) with the one purchaser (individually, a
“Purchaser,” and collectively, the
“Purchasers”), pursuant to which the Company issued to
the Purchasers, on December 19, 2019, Secured Convertible Notes in
an aggregate principal amount of $200,000 (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 on
August 19, 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.
F-11
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 December 19, 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.
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 December 31, 2019 .
5.
Accrued Expenses
Accrued
Expenses are comprised of the following:
|
|
2019
|
2018
|
|
Rent
|
52,000
|
-
|
|
License
Fee
|
50,000
|
-
|
|
Research
& Development
|
1,675,000
|
585,000
|
|
Professional
Fees
|
95,000
|
162,000
|
|
Consulting
and Advisory Services
|
161,000
|
161,000
|
|
Board
of Directors Service Costs
|
101,000
|
94,000
|
|
Payroll
and Benefits
|
245,000
|
21,000
|
|
Accrued Expenses
|
2,379,000
|
1,023,000
|
6.
Related Party Transactions
On
December 21, 2018, Dr. Raymond Urbanski, Chief Executive Officer
and Chairman of the Board, provided a short-term loan of $100,000
to meet immediate capital needs. The loan matured on January 20,
2019 and carries an interest rate of 5%. The loan was repaid in
January, 2019.
7.
Stockholders' Equity
Common Stock
For the
year ended December 31, 2018, the Company issued 162,500 shares of
common stock upon conversion of $325,000 of senior convertible
notes.
For the
year ended December 31, 2018, the Company issued a total of 245,000
shares of Rule 144 restricted common stock in full settlement of
outstanding legal matters, and 125,000 shares of Rule 144
restricted common stock in connection with consulting
services.
For the
year ended December 31, 2019, the Company issued a total 3,484,222
shares of common stock upon conversion of $1,361,034 in principal
and interest on senior convertible notes.
F-12
For the
year ended December 31, 2019, the Company issued CEO Anthony
Cataldo
a total of
7,000,000 and
the
Company’s CFO Steven Weldon
a total of 4,500,000
shares of Rule 144 restricted common stock as compensation, and
4,150,000 shares of Rule 144 restricted common stock in connection
with consulting services.
Preferred Stock
The
96,230 shares of Series C preferred stock are convertible into 111
shares of the Company's common stock at the option of the holders
at any time. The conversion ratio is based on the average closing
bid price of the common stock for the fifteen consecutive trading
days ending on the date immediately preceding the date notice of
conversion is given, but cannot be less than .20 or more than .2889
common shares for each Series C preferred share. The conversion
ratio may be adjusted under certain circumstances such as stock
splits or stock dividends. The Company has the right to
automatically convert the Series C preferred stock into common
stock if the Company lists its shares of common stock on the Nasdaq
National Market and the average closing bid price of the Company's
common stock on the Nasdaq National Market for 15 consecutive
trading days exceeds $3,000.00. Each share of Series C preferred
stock is entitled to the number of votes equal to .26 divided by
the average closing bid price of the Company's common stock during
the fifteen consecutive trading days immediately prior to the date
such shares of Series C preferred stock were purchased. In the
event of liquidation, the holders of the Series C preferred stock
shall participate on an equal basis with the holders of the common
stock (as if the Series C preferred stock had converted into common
stock) in any distribution of any of the assets or surplus funds of
the Company. The holders of Series C preferred stock are entitled
to noncumulative dividends if and when declared by the Company's
board of directors. No dividends to Series C preferred stockholders
were issued or unpaid through December 31, 2019 .
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 year ended December 31, 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.
Common Stock Warrants
Warrant
transactions for the years ended December 31, 2019 and 2018 are as
follows:
|
|
Number of Warrants
|
Weighted-Average Exercise Price
|
|
Outstanding,
December 31, 2018
|
-
|
-
|
|
Granted
|
1,813,053
|
0.20
|
|
Exercised
|
-
|
-
|
|
Expired
|
-
|
-
|
|
Outstanding,
December 31, 2019
|
1,813,053
|
-
|
|
Granted
|
-
|
-
|
|
Exercised
|
-
|
|
|
Expired
|
-
|
|
|
Outstanding,
December 31, 2019
|
1,813,053
|
0.20
|
|
|
|
|
|
Exercisable
Warrants:
|
|
|
|
December
31, 2019
|
1,813,053
|
0.20
|
|
December
31, 2018
|
1,813,053
|
0.20
|
F-13
Stock Options
The
Company reserved 1,333 shares of its common stock at December 31,
2014 for issuance under the 2014 Stock Incentive Plan (the
“2014 Plan”). The 2014 Plan, approval by stockholders
in May 2015, permits the Company to grant stock options to acquire
shares of the Company's common stock, award stock bonuses of the
Company's common stock, and grant stock appreciation rights. At
December 31, 2019 , 87 shares of common stock were available for
grant and options to purchase 40 shares of common stock are
outstanding under the 2014 Plan.
The
following table summarizes stock option transactions for the years
ended December 31, 2019 and 2018:
|
|
Number of Options
|
Weighted-Average Exercise Price
|
|
Outstanding,
December 31, 2017
|
1,246
|
1,320.00
|
|
Granted
|
-
|
-
|
|
Exercised
|
-
|
-
|
|
Expired
|
(133
)
|
1,020.00
|
|
Outstanding,
December 31, 2018
|
1,113
|
1,320.00
|
|
Granted
|
-
|
-
|
|
Exercised
|
-
|
-
|
|
Expired
|
(1,073
)
|
1,500.00
|
|
Outstanding,
December 31, 2019
|
40
|
877.50
|
|
|
|
|
|
Exercisable
Options:
|
|
|
|
December
31, 2019
|
40
|
877.50
|
|
December
31, 2018
|
1,113
|
1,320.00
|
The
following table summarizes information about all outstanding and
exercisable stock options at December 31, 2019 :
|
|
Outstanding
Options
|
Exercisable
Options
|
|||
|
Range of
Exercise Prices
|
Number of
Options
|
Weighted-Average
Remaining
Contractual
Life
|
Weighted-Average
Exercise Price
|
Number of
Options
|
Weighted-Average
Exercise Price
|
|
$
750.00 to$2,225.00
|
40
|
0.89
|
$
877.50
|
40
|
$
877.50
|
8.
Income Taxes
Deferred Taxes
Deferred taxes
reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, and
operating losses and tax credit carryforwards. The significant
components of net deferred income tax assets for the Company are
(in thousands):
|
|
December 31,
|
|
|
|
2019
|
2018
|
|
Deferred
tax assets:
|
|
|
|
Federal
net operating loss carryforward
|
36,803,000
|
25,306,000
|
|
Intellectual
property
|
58,504,000
|
61,787,000
|
|
Accrued
expense
|
1,262,000
|
129,000
|
|
Patent
amortization
|
4,000
|
5,000
|
|
Deferred
tax asseets before valuation
|
96,573,000
|
87,227,000
|
|
Valuation
allowance
|
(96,573,000
)
|
(87,227,000
)
|
|
Net
deferred income tax assets
|
-
|
-
|
Generally accepted
accounting principles requires that the tax benefit of net
operating losses, temporary differences and credit carryforwards be
recorded as an asset to the extent that management assesses that
realization is “more likely than not.” Realization of
the future tax benefits is dependent on the Company's ability to
generate sufficient taxable income within the carryforward period.
Because of the Company's history of operating losses, management
has provided a valuation allowance equal to its net deferred tax
assets. The valuation allowance increased by approximately
$9,346,000 during the year ended December 31, 2019 .
F-14
Tax Carryforward
At
December 31, 2019 , the Company had net operating loss
carryforwards of approximately $122,676,000 to reduce United States
federal taxable income in future years. These carryforwards expire
from 2020 through 2039.
The
Company is no longer subject to U.S. and state tax examinations for
years ending before the fiscal year ended December 31, 2015.
Management does not believe there will be any material changes in
our unrecognized tax positions over the next twelve
months.
The
Company's policy is to recognize interest and penalties accrued on
any unrecognized tax benefits as a component of income tax expense.
There was no accrued interest or penalties associated with any
unrecognized tax benefits, nor was any interest expense recognized
during the years ended December 31, 2019 and 2018.
9.
Commitments and Contingencies
Leases
On
September 1, 2017, the Company entered into a three-year lease
agreement for its office in Washington, D.C. In addition to minimum
rent, certain leases require payment of real estate taxes,
insurance, common area maintenance charges and other executory
costs. The Company recognizes rent expense under such arrangements
on a straight-line basis over the effective term of each lease.
This lease was terminated as of June 30, 2018.
On
October 1, 2018, the Company entered into a three-year lease
agreement for its office in Westlake Village, CA. In addition to
minimum rent, certain leases require payment of real estate taxes,
insurance, common area maintenance charges and other executory
costs. The Company recognizes rent expense under such arrangements
on a straight-line basis over the effective term of each
lease.
The
following table summarizes the Company’s future minimum lease
commitments as of December 31, 2019 (in thousands):
|
Year
ending December 31:
|
|
|
2020
|
71,000
|
|
2021
|
61,000
|
|
Total
minimum lease payments
|
132,000
|
Rent
expense for the years ended December 31, 2019 and 2018 was $69,000
and $9,000, respectively.
Employment Agreements
On
February 14, 2018, the Company entered into the First Amendment to
the Employment Agreement with Dr. Clarence-Smith, amending the
Employment Agreement, dated September 1, 2017, between the Company
and Dr. Clarence-Smith. Under the First Amendment, Dr.
Clarence-Smith’s title was revised to reflect her new
position and included an annual salary of $500,000, paid in equal
monthly installments. All other terms of her original Employment
Agreement remain unchanged. In October 2018, Dr. Clarence-Smith
resigned from her position with the Company. In connection with
this resignation, the Company entered into a separation agreement
which superseded the Employment Agreement.
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. Raymond 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.
F-15
10.
Subsequent Events
Financing
On
January 30, 2020 GT Biopharma, Inc. (the “Company”)
entered into a Securities Purchase Agreement (the “Purchase
Agreement”) with the one purchaser (individually, a
“Purchaser,” and collectively, the
“Purchasers”), pursuant to which the Company issued to
the Purchasers, on January 30, 2020, Secured Convertible Notes in
an aggregate principal amount of $200,000 (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 on
September 30, 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 after January 30, 2020, 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.
On
March 24, 2020 GT Biopharma, Inc. (the “Company”)
entered into a Securities Purchase Agreement (the “Purchase
Agreement”) with the one purchaser (individually, a
“Purchaser,” and collectively, the
“Purchasers”), pursuant to which the Company issued to
the Purchasers, on January 30, 2020, Secured Convertible Notes in
an aggregate principal amount of $200,000 (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 on
September 30, 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 after March 24, 2020, 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.
Common Stock
In the
first quarter of 2020, the Company issued 814,733 shares of common
stock upon conversion of $162,947 in principal and interest on
senior convertible notes.
F-16
TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Mine Safety DisclosuresPart IIItem 5. Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 6. Selected Financial DataItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions and Director IndependenceItem 14. Principal Accounting Fees and ServicesPart IVItem 15. Exhibits, Financial Statement Schedules