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 $595,628,000 through December 31, 2020. On a
consolidated basis, the Company had cash and cash equivalents of $5,297,000 at
December 31, 2020. 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.
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, 2020, 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
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.
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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 TriKE fusion protein for cancer therapies using
our TriKE technology.
License Agreements
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
December 31, December 31,
2020 2019
A. Notes payable issued for cash $24,085,000 $12,998,000B. Notes payable issued for settlement agreements 2,528,000 300,000
C. Notes payable issued for forbearance agreements 3,849,000 -
D. Notes payable issued for consulting services 360,000 -
$30,822,000 $13,298,000
A.
Notes Payable Issued for Cash
As part of the Company's financing activities, the Company issued convertible
notes payable in exchange for cash. These notes payable are unsecured, bear
interest at a rate of 10% per annum, mature in six months up to one year from
the date of issuance, and are convertible to common stock at an average
conversion rate of $19.65 per share, subject to certain beneficial ownership
limitations (with a maximum ownership limit of 4.99%) and standard anti-dilution
provisions. As of December 31, 2018, outstanding balance of these notes payable
amounted to $10,673,000.
During the year ended December 31, 2019, the Company issued similar notes
payable in the aggregate of $3,827,000 in exchange for cash. These notes payable
are unsecured, bear interest at a rate of 10% per annum mature in six months up
to one year from the date of issuance, and are convertible to common stock at an
average conversion rate of $5.74 per share, subject to certain beneficial
ownership limitations (with a maximum ownership limit of 4.99%) and standard
anti-dilution provisions.
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In addition, during 2019, notes payable of $1,502,000 were converted to 205,000
shares of common stock.
As of December 31, 2019, outstanding balance of these notes payable issued for
cash amounted to $12,998,000.
During the year ended December 31, 2020, the Company issued similar notes
payable in the aggregate of $12,531,000 in exchange for cash. These notes
payable are unsecured, bear interest at a rate of 10% per annum, mature in six
months up to one year from the date of issuance, and are convertible to common
stock at a conversion rate of $3.40 per share, subject to certain beneficial
ownership limitations (with a maximum ownership limit of 4.99%) and standard
anti-dilution provisions. In addition, during 2020, notes payable of $1,444,000
plus accrued interest were converted to 478,510 shares of common stock.
As of December 31, 2020, outstanding balance of these notes payable issued for
cash amounted to $24,085,000. In addition, total notes payable matured and past
due as of December 31, 2020 amounted to $16,111,000.
B. Notes Payable Issued for Settlement Agreements
During the year ended December 31, 2019, the Company issued notes payable of
$300,000 as part of a debt settlement agreement. The notes are unsecured, bear
interest at a rate of 10%, mature in six months up to one year from the date of
issuance, and are convertible to common stock at a conversion rate of $10.20 per
share, subject to certain beneficial ownership limitations (with a maximum
ownership limit of 4.99%) and standard anti-dilution provisions.
As of December 31, 2019, outstanding balance of notes payable issued for
settlement agreements amounted to $300,000.
During the year ended December 31, 2020, the Company entered into settlement
agreements with certain unrelated parties to resolve claims and disputes
pertaining to certain debt and equity instruments issued by the Company to these
parties in prior years.
As part of the agreement, the Company agreed to the following considerations:
a. Issuance of convertible notes payable in the aggregate of $2,228,000. The
notes are unsecured, bear interest at a rate of 10%, mature in six months up to
one year from the date of issuance, and are convertible to common stock at a
conversion rate of $3.40 per share, subject to certain beneficial ownership
limitations (with a maximum ownership limit of 4.99%) and standard anti-dilution
provisions;
b. Cash payment of $380,000;
c. Issuance of 262,353 shares of common stock with a fair value of $1,225,000;
and
d. Issuance of warrants to purchase 323,529 shares of common stock. The warrants
are fully vested, exercisable at $3.40 per share and will expire in five years
with an estimated fair value of $1,021,000 using a BlackScholes option price
model.
As of December 31, 2020, outstanding balance of these notes payable for
settlement agreements amounted to $2,528,000. In addition, total notes payable
matured and past due as of December 31, 2020 amounted to $518,000.
C. Notes Payable Issued for Forbearance Agreements
On June 23, 2020, the Company entered into Standstill and Forbearance Agreements
(collectively, the "Forbearance Agreements") with the holders of $13.2 million
aggregate principal amount of the Convertible Notes (the "Default Notes"), which
were in default. Pursuant to the Forbearance Agreements, the holders of the
Default Notes agreed to forbear from exercising their rights and remedies under
the Default Notes (including declaring such Default Notes (together with any
default amounts and accrued and unpaid interest) immediately due and payable)
until the earlier of (i) the date that the Company completes a future financing
in the amount of $15 million and, in connection therewith, commences listing on
NASDAQ (collectively, the "New Financing") or (ii) January 31, 2021 (the
"Termination Date").
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The obligations of the holders to forbear from exercising their rights and
remedies under the Default Notes pursuant to the Forbearance Agreements will
terminate on the earliest of (i) the Termination Date, (ii) the date of any
bankruptcy filing by the Company or its subsidiaries, (iii) the date on which
the Company defaults on any of the terms and conditions of the Forbearance
Agreements or (iv) the date the Forbearance Agreements are otherwise terminated
or expire.
In exchange for the forbearance agreement, the Company agreed to the following
considerations:
a. Amendment of the $13.2 million Default Notes (together with default amounts
and accrued and unpaid interest) to include a provision that will convert these
notes payable into common stock upon the closing of a New Financing at a
conversion price equal to the lesser of (i) the conversion price in effect for
the Default Notes on the date of such New Financing or (ii) 75% of the lowest
per share price at which common stock is or may be issued in connection with
such New Financing, in each case, subject to certain beneficial ownership
limitations (with a maximum ownership limit of 9.99%). Shares of the Company's
preferred stock, which are convertible into the Company's common stock, will be
issued in lieu of common stock to the extent that conversion of the Default
Notes is prohibited by such beneficial ownership limitations.
b. Amendment of warrants granted to certain noteholders in prior year to include
the following terms: (i) the exercise price of all warrants to purchase common
stock held by holders of the Default Notes will be reduced to equal the
conversion price of the Default Notes and (ii) the number of shares of common
stock underlying such warrants shall be increased so that the total exercise
price of all such warrants after the decrease in the exercise price equals the
total exercise price of all such warrants prior to the decrease in the exercise
price. Further, the expiration date of all such warrants shall be extended for
three years following the closing date of any New Financing.
c. Issuance of notes payable in the aggregate of $3,955,000. The notes are
unsecured, bear interest at a rate of 10% per annum, mature in six months up to
one year from the date of issuance, and are convertible to common stock at a
conversion rate of $3.40 per share, subject to certain beneficial ownership
limitations (with a maximum ownership limit of 4.99%) and standard anti-dilution
provisions.
As of December 31, 2020, outstanding balance of the notes payable amounted to
$3,849,000. Total notes payable matured and past due as of December 31, 2020
amounted to $135,000.
D. Notes Payable issued for Consulting Agreements
During the year ended December 31, 2020, the Company issued notes payable of
$360,000 in exchange for consulting services. The notes are unsecured, bears
interest at a rate of 10%, matures in one year from the date of issuance and
convertible to common stock at a conversion rate of $3.40 per share, subject to
certain beneficial ownership limitations (with a maximum ownership limit of
4.99%) and standard anti-dilution provisions.
As of December 31, 2020, outstanding balance of these notes payable amounted to
$360,000. In addition, total notes payable matured and past due as of December
31, 2020 amounted to $20,000.
Subsequent to December 31, 2020, convertible notes and accured in interest
aggregating $38,714,000 were converted into 11,386,435 shares of common stock at
conversion prices.
Subsequent to December 31, 2020, the Company issued 4,945,000 shares of its
common stock to investors for net cash proceeds of $24,882,000 pursuant to our
February 2021 Offering Circular.
Subsequent to December 31, 2020, the Company issued 660,545 shares of common
stock upon exercise of warrants for cash proceeds of $3,200,000.
Subsequent to December 31, 2020, the Company issued convertible notes payable in
the aggregate of $1,205,000 in exchange for each. The Company also issued notes
payable of $545,000 to a related party. The Company is currently in the process
of determining the appropriate accounting for these notes payable totaling
$2,275,000.
Subsequent to December 31, 2020, the Company issued convertible notes payable
for cash proceeds of $1,205,000. The Company is currently in the process of
determining the appropriate accounting for these notes payable.
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Results of Operations
Comparison of the Years Ended December 31, 2020 and 2019
Research and Development Expenses
During the year ended December 31, 2020 and 2019, we incurred $485 thousand and
$1.7 million of research and development expenses, respectively. Research and
development costs decreased due primarily to the reduction of employee,
consultant and preclinical expenses. We anticipate our direct clinical and
preclinical costs to increase significantly in 2021, totaling approximately $12
to $15 million, as we have initiated the Phase 1 clinical trial of our most
advanced TriKe product candidate, GTB-3550 and anticipate entering Phase II in
late second quarter of 2021.
Selling, general and administrative expenses
During the year ended December 31, 2020 and 2019, we incurred $6.3 million and
$9.8 million of selling, general and administrative expenses, respectively. The
decrease in selling, general and administrative expenses is primarily
attributable the reduction of payroll and stock compensation expenses.
Loss on impairment
For the year ended December 31, 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 was 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.
There was no similar transaction for the year ended December 31, 2020.
Loss on disposal of assets
During the year ended December 31, 2020 and 2019, we incurred $0 and $20.5
million of loss on impairment, respectively. For the year ended December 31,
2019, the Company recorded an intangible asset impairment charge of $20.5
million related to the portfolio of CNS IPR&D assets, which represents the
excess carrying value compared to the fair value. The impairment charge was the
result of the sale of certain assets and prioritization for immuno-oncology
development candidates. 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.
There was no similar transaction for the year ended December 31, 2020.
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Interest Expense
Interest expenses were $3.0 million and $2.1 million for the years ended
December 31, 2020 and 2019 respectively. The increase is primarily due to the
increase in convertible notes payable as well as accrual of default interest
from 10% to 8% of past due convertible notes payables.
Loss on legal settlements
Loss on legal settlements were $5.4 million and $0 million for the years ended
December 31, 2020 and 2019 respectively. The increase is primarily due to legal
settlements the Company entered into during the year ended December 31, 2020 as
compared to none in the year ended December 31, 2019.
Loss on forbearance agreement
Loss on forbearance settlement were $12.6 million and $0 million for the years
ended December 31, 2020 and 2019 respectively. The increase is primarily due
toloss on extinguishment as a result of the change in fair value of debt and
equity instruments modified as a result of the forbearance settlement the
Company entered into in during the year ended December 31, 2020 as compared to
none in the year ended December 31, 2019.
Amortization of debt discount
Amortization of debt discount were $0.3 million and $0 million for the years
ended December 31, 2020 and 2019 respectively. The increase is primarily due
tothe increase in debt discount recorded on new convertible notes payable the
Company entered into in during the year ended December 31, 2020 as compared to
none in the year ended December 31, 2019.
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. During the year ended
December 31, 2020, the Company raised $12.5 million through a series of
issuances of Convertible Notes as compared to $3.5 million during the year ended
December 31, 2019. 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. Subsequent to December 31, 2020, the Company raised
additional funding of $27.2 million through an equity financing in February
2021.
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 has cash 5.3 million as of
December 30, 2020. The Company anticipates incurring additional losses until
such time, if ever, that 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. 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, licensing and/or marketing arrangements with
pharmaceutical companies. Management has also implemented cost saving efforts,
including reduction in executive salaries and reduced travel. Management
believes that these ongoing and planned financing endeavors, if successful, will
provide adequate financial resources to continue as a going concern for at least
the next nine months from the date the financial statements are issued; however,
there can be no assurance in this regard. If the Company is unable to secure
adequate additional funding, its business, operating results, financial
condition and cash flows may be materially and adversely affected.
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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.
Reverse Stock Split
On February 10, 2021, the Company completed a 1:17 reverse stock split of the
Company's issued and outstanding shares of common stock and all fractional
shares were rounded up. All share and per share amounts in the accompanying
financial statements have been adjusted retroactively to reflect the reverse
stock split as if it had occurred at the beginning of the earliest period
presented.
Accounting Estimates
The preparation of financial statements in conformity with Generally Accepted
Accounting Principles ("GAAP") requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Significant
estimates include accruals for potential liabilities, valuation of notes
payable, assumptions used in deriving the fair value of derivative liabilities,
share-based compensation and beneficial conversion feature of notes payable, 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 ASC 718, Compensation-Stock
Compensation. Stock-based compensation cost is measured at fair value on the
grant date and that fair value is recognized as expense over the requisite
service, or vesting, period.
The Company values its equity awards using the Black-Scholes option pricing
model, and accounts for forfeitures when they occur. Use of the Black-Scholes
option pricing model requires the input of subjective assumptions including
expected volatility, expected term, and a risk-free interest rate. The Company
estimates volatility using a 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-balanceSheet Arrangements
We have no off-balance sheet arrangements as of December 31, 2020.
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