Some of the statements in this Annual Report on Form 10-K are "forward-looking
statements" within the meaning of the safe harbor from liability established by
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
include statements regarding our current beliefs, goals and expectations about
matters such as our expected financial position and operating results, our
business strategy and our financing plans. The forward-looking statements in
this report are not based on historical facts, but rather reflect the current
expectations of our management concerning future results and events. The
forward-looking statements generally can be identified by the use of terms such
as "believe," "expect," "anticipate," "intend," "plan," "foresee," "may,"
"guidance," "estimate," "potential," "outlook," "target," "forecast," "likely"
or other similar words or phrases. Similarly, statements that describe our
objectives, plans or goals are, or may be, forward-looking statements.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause our actual results, performance or achievements to
be different from any future results, performance and achievements expressed or
implied by these statements. We cannot guarantee that our forward-looking
statements will turn out to be correct or that our beliefs and goals will not
change. Our actual results could be very different from and worse than our
expectations for various reasons. You should carefully review all information,
including the discussion of risk factors under "Part I. Item 1A: Risk Factors"
and elsewhere in this annual report. Any forward-looking statements in the Form
10-K are made only as of the date hereof and, except as may be required by law,
we do not have any obligation to publicly update any forward-looking statements
contained in this Form 10-K to reflect subsequent events or circumstances.
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®) technology platform. Our TriKE® platform
generates 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. TriKE® is composed of recombinant fusion proteins and
interleukin 15 (IL-15), 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 $674.5 million as of December 31, 2022. On a
consolidated basis, the Company had cash and cash equivalents of $5.7 million
and short-term investments of $10.8 million at December 31, 2022. We anticipate
we will have to raise additional capital to fund our selling, general and
administrative, and research and development expenses until we have a marketable
product. 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 on Form 10-K 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.
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COVID-19
In March 2020, the World Health Organization declared coronavirus COVID-19 a
global pandemic. This contagious disease outbreak, which has continued to
spread, has adversely affected workforces, customers, economies, and financial
markets globally. It has also disrupted the normal operations of many
businesses. This outbreak could decrease spending, adversely affect demand for
the Company's products, and harm the Company's business and results of
operations.
During the year ended December 31, 2022, the Company believes the COVID-19
pandemic did impact its operating results. However, the Company has not observed
any impairments of its assets or a significant change in the fair value of its
assets due to the COVID-19 pandemic. At this time, it is not possible for the
Company to predict the duration or magnitude of the adverse results of the
outbreak and its effects on the Company's business or results of operations,
financial condition, or liquidity.
The Company has been following the recommendations of health authorities to
minimize exposure risk for its team members, including the temporary closure of
its corporate office and having team members work remotely. Most vendors have
transitioned to electronic submission of invoices and payments.
Corporate Developments
On February 14, 2022, the Company appointed Manu Ohri as our Chief Financial
Officer and Dr. Gavin Choy ceased serving as the Acting Chief Financial Officer.
Effective March 2, 2022, the Company appointed Michael Breen as Interim Chief
Executive Officer. Dr. Berk ceased serving as the Company's Interim Chief
Executive Officer, but continued to serve as its President of Research &
Development and Chief Medical Officer.
On June 9, 2022, Alan Urban joined as a member of the Company's Board of
Directors.
On December 8, 2022, Dr. Berk's employment was terminated as the President of
Research & Development and Chief Medical Officer.
On December 14, 2022, the Company appointed Dr. Jeffrey Miller as our consulting
Chief Medical Officer and consulting Chief Scientific Officer.
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Issuance of common stock in public offering
On February 16, 2021, the Company completed a public offering of 4,945,000
shares of common stock for net proceeds of $24.7 million, after deducting
underwriting discounts, commissions and other direct offering expenses. As part
of the offering, the Company also granted these investors, warrants to purchase
5,192,250 shares of common stock. The warrants are fully vested, exercisable at
$5.50 per share and will expire in five years.
As a result of the completion of the public offering and the successful listing
of its shares of common stock on the Nasdaq Capital Market, convertible notes
with an aggregate principal amount of $33.3 million and accrued interest of $5.5
million, for a total of $38.8 million, were mandatorily converted at its stated
conversion rate of $3.40 per share into 11,413,322 shares of the Company's
common stock. The Company issued 11,086,024 shares of common stock to the note
holders while the remaining 327,298 common shares, valued at $1.1 million, were
issuable at December 31, 2021.
During the year ended December 31, 2022, the Company issued the remaining
327,298 common shares. In addition, the Company also issued an additional 10,404
shares of commons stock with a fair value of $35,000 as settlement to a
noteholder.
Cancellation of common stock previously issued for services
The Company cancelled 290,999 previously issued shares of common stock during
the year ended December 31, 2022.
Issuance of common stock as equity compensation to officers, employees and board
of directors
As part of employment agreements with its former CEO and its former CFO
("Officers"), the Officers received a fully vested stock grant equal to an
aggregate of 10% and 1.5% of the fully diluted shares of common stock of the
Company (calculated with the inclusion of the current stock holdings of the CEO)
upon conversion of options, warrants and Convertible Notes in association with a
national markets qualified financing as consideration for entering into the
Agreement (with such stock to vest and be delivered within 30 days after the
national markets qualified financing). In addition, the Company also granted
similar equity compensation to members of the Company's board of directors
wherein these directors received stock grants equal to 1% and 1.25% of the fully
diluted shares of common stock of the Company. Pursuant to the agreement,
approximately 33% of the common stock to be issued vested immediately while the
remaining 67% vests over a period of two years. The Company has disputed the
grants received by both executives. The disputes with the CEO were later
resolved in a settlement. The disputes with the CFO are subject to a pending
arbitration, which includes a challenge to the validity of his employment
agreement.
On February 16, 2021, the Company completed its equity offering and listed its
shares of common stock on the Nasdaq Capital Market. As such, 4,379,407 shares
of its common stock were granted to these Officers, employees and directors,
which had a fair value of $18.6 million. Since the grant of the common stock is
subject to milestone or performance conditions, the Company measured the fair
value of the common stock on the respective date of the agreement, and such
awards were recorded as compensation expense as the milestone or performance
condition was met and in accordance with its vesting terms.
In July 2022, the Company granted 378,058 shares of fully vested common stock
with a fair value of $938,000 to certain officers of the Company for services
rendered.
During the year ended December 31, 2022,the Company issued 709,523 shares of
common stock and recognized stock compensation expense of $2,522,000 to account
the fair value of common stock that vested.
As of December 31, 2022, there were 44,818 unvested shares of common stock
issued to officers, employees and directors with a fair value of $206,035 that
will be recognized as stock compensation expense in future periods pursuant to
its vesting term.
During the year ended December 31, 2021, the Company issued 3,774,967 shares of
common stock and recognized stock compensation expense of $16,983,000 to account
the fair value of common stock that vested.
Equity compensation to consultants
As part of consulting agreements with certain consultants, the Company agreed to
grant these consultants common stock equal to 1% and 3% of the fully diluted
shares of common stock of the Company upon conversion of options, warrants and
Convertible Notes in association with a national markets qualified financing as
consideration for entering into the Agreement (with such stock to vest and be
delivered within 30 days after the national markets qualified financing).
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On February 16, 2021, the Company completed its equity offering and listed its
shares of common stock on the Nasdaq Capital Market. As a result of this
offering, the Company agreed to issue to these consultants 2,850,090 shares of
common stock with a grant date fair value of $10.7 million, of which 1,934,817
shares of common stock vested immediately while the remaining 915,273, shares of
common stock vests over two years. Pursuant to current accounting guidelines, as
the grant of the common stock is subject to milestone or performance conditions,
the Company measured the fair value of the common stock on the respective date
of the agreement, and then such award is being recorded as compensation expense
based upon the vesting term of the grant.
From January 2021 to June 2021, the Company granted a total of 1,275,032 shares
of common stock with a fair value of $7,119,000 to consultants for services
rendered.
In July 2022, the Company granted 20,882 shares of fully vested common stock
with a fair value of $51,787 to R&D consultants for services rendered.
During the year ended December 31, 2022, the Company issued 526,857 shares of
common stock and recognized stock compensation expense of $2,092,000 to account
the fair value of common stock that vested.
As of December 31, 2022, there were 46,343 unvested shares of common stock
issued to consultants with a fair value of $162,664 that will be recognized as
stock compensation expense in future periods based upon their vesting term.
During the year ended December 31, 2021, the Company issued 3,082,406 shares of
common stock and recognized stock compensation expense of $15,340,000 to account
the fair value of common stock that vested.
Cancellation of common stock upon settlement with a former Officer
On April 29, 2022, the Company entered into a settlement agreement with its
former Chief Executive Officer ("Officer") and received 1,845,000 shares of its
previously issued common stock in full and final settlement of all its claims
against the Officer. The common stock was subsequently cancelled and returned to
treasury. In addition, the Company incurred legal and professional expenses of
$224,243. The legal and professional fees incurred were accounted as costs of
the acquisition of the common stock and recorded as a reduction to additional
paid in capital. Both the Company and the Officer released each other from
claims under the settlement agreement.
Significant Agreements
TriKE® Agreement
In June 2017, we entered into a co-development partnership agreement with Altor
BioScience Corporation in which we will collaborate exclusively in the clinical
development of a novel 161533 (GTB-3550) TriKE® fusion protein for cancer
therapies using our TriKE® technology. The GTB-3550 Phase 1 clinical trial for
treatment of patients with CD33-expressing, high risk myelodysplastic syndromes
and refractory/relapsed acute myeloid leukemia opened for patient enrollment
September 2019 and completed enrollment in September 2021. The results of our
first generation GTB-3550 Phase 1 clinical trial support our plans to advance
the next generation camelid nanobody into the clinic, and as such, no further
clinical development will ensue with GTB-3550.
University of Minnesota Scientific Research Agreement
We are a party to a scientific research agreement with the Regents of the
University of Minnesota, effective June 16, 2021. This scientific research
agreement aims to work with the Company with three major goals in mind: (1)
support the Company's TriKE®product development and GMP manufacturing efforts;
(2) TriKE® pharmacokinetics optimization in humans; and, (3) investigation of
the patient's native NK cell population based on insights obtained from the
analysis of the human data generated during our GTB-3550 clinical trial. The
major deliverables proposed here are: (1) creation of IND enabling data for
TriKE® constructs in support of our product development and GMP manufacturing
efforts; (2) TriKE® platform drug delivery changes to allow transition to
alternative drug delivery means and extended PK in humans; and, (3) gain an
increased understanding of changes in the patient's native NK cell population as
a result of TriKE® therapy. Most studies will use TriKE® DNA/amino acid
sequences created by us under current UMN/GTB licensing terms. The term of this
agreement shall expire on June 30, 2023. The University of Minnesota shall use
reasonable efforts to complete the project for a fixed sum of $2.1 million, of
which $1.7 million has been incurred and recorded as of December 31, 2022.
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Subcontract Manufacturing Agreement
On October 5, 2020, GT Biopharma entered into a Master Services Agreement with a
third-party product manufacturer to perform biologic development and
manufacturing services on behalf of the Company. Associated with this, the
Company has subsequently signed five Statements of Work ("SOWs") for the
research and development of products for use in clinical trials. On August 24,
2022, the Company entered into a revised agreement with this third-party
manufacturer and issued 1,222,281 shares of common stock with a fair value of
$3.2 million as part of a payment arrangement. The shares were valued at $2.66
per share based on the closing price of the Company's common stock on the date
of the agreement. As part of the revised agreement, the Company paid to this
third-party manufacturer $3.3 million in cash on specified dates. In addition,
the Company and the third-party manufacturer agreed that services to be rendered
in future periods, as specified in the agreement, will be paid or settled at the
Company's discretion, in a combination of cash and issuance of the Company's
common stock. The agreement also amended certain agreements executed in prior
years which eliminated future financial commitments of the Company.
The SOWs agreements totaled approximately $13.0 million, of which $7.5 million
was incurred at that date and an additional $5.5 million is in process. The
Company was indebted $2.3 million to this third- party manufacturer as of
December 31, 2022.
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® (CD16/IL-15/CD33) Phase 1, open-label, dose escalation clinical trial for
the treatment of CD33-expressing, high risk myelodysplastic syndromes,
refractory/relapsed acute myeloid leukemia or advanced systemic mastocytosis.
The clinical trial was conducted at the University of Minnesota's Masonic Cancer
Center in Minneapolis, Minnesota under the direction of Dr. Erica Warlick and
Dr. Mark Juckett. The primary objective of the trial was to determine safety and
tolerability as well as the maximum tolerated dose of GTB-3550 TriKE®. The
hypothesis was that GTB-3550 TriKE® would induce natural killer cell function by
targeting malignant cells as well as CD33+ myeloid derived suppressor cells
(MDSC) which contribute to tumor induced immunosuppression. Because CD16 is a
potent activating receptor on NK cells, this single agent GTB-3550
investigational agent may induce a targeted anti-CD33+ tumor response. The phase
1 trial was completed in September 2021.
License Agreements
See discussion of Patents and Licenses above under Item 1: Business
Results of Operations
Comparison of the Years Ended December 31, 2022 and 2021
Research and Development Expenses
During the years ended December 31, 2022 and 2021, we incurred $8.8 and $9.6
million of research and development expenses, respectively. Research and
development expenses related to our continued development and production of our
most advanced TriKE® product candidates GTB-3650 and GTB-5550 along with the
progression on other promising product candidates, decreased over the previous
year by approximately $780,000 primarily due to reduction in stock compensation
to employees and consultants. We anticipate our direct clinical and preclinical
expenses to increase significantly in 2023 as we plan to advance our next
generation GTB-3650 camelid nanobody product into the clinic.
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Selling, general and administrative expenses
During the years ended December 31, 2022 and 2021, we incurred $12.4 million and
$47.9 million of selling, general and administrative expenses, respectively. The
decrease in selling, general and administrative expenses is primarily
attributable to reduction in payroll and stock compensation expenses of
approximately $27.0 million, reduction in marketing, promotion and investor
relations expense of $3.6 million, reduction in travel expense of $484,000, and
reduction in legal, professional and advisory board fees of $1.2 million for the
year ended December 31, 2022 as compared to 2021. The Company managed to reduce
expenses by better managing and controlling its payroll costs, legal and
consulting expenses in 2022. During 2021, we incurred expenses that consisted
primarily of personnel costs from our executive, legal, finance, and information
technology organizations and related expenditures, as well as third party
professional fees and insurance for the uplisting of our common shares on
NASDAQ. Furthermore, the increase was due to the expenses incurred in support of
our planned growth and new public company compliance initiatives in fiscal year
2021.
Other Income/Expense
Interest income was $292,000 and $38,000 for the years ended December 31, 2022
and 2021, respectively. Interest income increased primarily due to the interest
earned on short-term investments due to higher interest rates.
We recorded interest expense of $8,000 and $718,000 for the years ended December
31, 2022 and 2021, respectively. The decrease in interest expense was due to the
conversion of convertible notes payable to common shares during 2021. We did not
have any outstanding convertible notes payable as of December 31, 2022.
The change in fair value of derivative liability was due to fair value
remeasurement which resulted in a gain of $119,000 and $211,000 for the years
ended December 31, 2022 and 2021, respectively.
The unrealized loss on marketable securities was due to fair value remeasurement
of our marketable securities which resulted in a loss of $30,000 and $29,000 for
the years ended December 31, 2022 and 2021, respectively.
Liquidity and Capital Resources
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. On January 4, 2023, the
Company raised $6.5 million from an institutional investor by selling 3.6
million shares of common stock, and pre-funded warrants to purchase up to 2.9
million shares of common stock. During 2021, the Company raised $24.7 million
through issuance of common stock, raised $16.4 million through the exercise of
warrants and raised $1.2 million from a series of issuances of convertible
notes. The Company reported $16.5 million of cash and short-term investments at
December 31, 2022 and raised an additional $6.5 million on January 4, 2023. We
anticipate that we will need cash of approximately $15.0 million for the next
twelve months for selling, general and administrative expenses and research and
development expenses. We expect the cash and short-term investments totaling
$23.0 million will be sufficient to fund operations for the following 12 months,
and anticipates raising additional funds when the Company embarks on Phase 1
trials.
The consolidated 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.
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The Company has incurred substantial losses since inception to December 31,
2022. The Company anticipates incurring additional losses until such time, it
can generate significant sales or revenue from out-licensing 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.
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; and payments from
potential strategic research and development, licensing and/or marketing
arrangements with other pharmaceutical companies.
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 Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, Oxis Biotech, Inc. and Georgetown
Translational Pharmaceuticals, Inc. Intercompany transactions and balances have
been eliminated in consolidation.
Accounting Estimates
The preparation of consolidated financial statements in conformity with
Generally Accepted Accounting Principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Significant
estimates include accruals for potential liabilities, assumptions used in
deriving the fair value of derivative liabilities, share-based compensation and
valuation of deferred tax assets. Actual results could differ from those
estimates.
Stock-Based Compensation
The Company accounts for share-based awards to employees and nonemployees and
consultants in accordance with the provisions of Accounting Standards
Codification 718, Compensation-Stock Compensation. Stock-based compensation cost
is measured at fair value on the grant date and that fair value is recognized as
expense over the requisite service, or vesting period.
The Company values its equity awards using the Black-Scholes option pricing
model, and accounts for forfeitures when they occur. Use of the Black-Scholes
option pricing model requires the input of subjective assumptions including
expected volatility, expected term, and a risk-free interest rate. The Company
estimates volatility using its own historical stock price volatility. The
expected term of the instrument is estimated by using the simplified method to
estimate expected term. The risk-free interest rate is estimated using
comparable published federal funds rates.
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, 2022.
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