GT Biopharma, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. GT Biopharma is a clinical-stage biopharmaceutical company developing TriKE, TetraKE and other immuno-oncology therapies. It had no approved products and reported no revenue.
Financial results and liquidity
Amounts below are in U.S. dollars; financial-statement figures are in thousands unless otherwise indicated.
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $324 | $834 |
| Selling, general and administrative expense | $746 | $3,222 |
| Operating loss | $(1,070) | $(4,056) |
| Interest expense | $(638) | $(454) |
| Net loss | $(1,708) | $(4,510) |
| Basic and diluted loss per share | $(0.02) | $(0.09) |
| Net cash used in operating activities | $(223) | $(961) |
| Cash from financing activities | $200 | $952 |
- At March 31, cash was just $5,000, down from $28,000 at year-end 2019. Current assets were $188,000 versus current liabilities of $21.150 million, implying a working-capital deficit of approximately $20.962 million.
- Total assets were $295,000; total liabilities were $21.150 million. Current convertible debentures were $13.257 million, and the filing states that convertible notes totaling approximately $13.257 million were in default as of March 31.
- Accumulated deficit was $569.040 million. The company reported stockholders’ deficit of $20.855 million.
- Common shares outstanding were 70.599 million at quarter-end, versus 69.785 million at December 31, 2019. The company issued 814,734 shares during the quarter upon conversion of $162,943 of note principal and interest.
Changes versus prior-year quarter
- Net loss narrowed by $2.802 million, mainly as operating expenses declined by $2.986 million. Management attributed lower R&D expense to reduced employee, consultant and preclinical costs, and lower SG&A primarily to reduced salaries.
- Interest expense increased by $184,000, primarily because of interest accrued on outstanding convertible notes.
- Operating cash use improved by $738,000. The filing attributes much of the period’s cash-flow movement to changes in operating liabilities; cash remained extremely limited.
Outlook, financing, risks and unusual items
- Going concern: Management cited substantial doubt about the company’s ability to continue as a going concern, reflecting recurring losses, negative operating cash flows, minimal cash and the need for substantial additional financing. It said approximately $15 million of additional capital would be needed in 2020 to fund existing operations and pay current liabilities over the next 12 months.
- Management expected SG&A cash use of approximately $1–$2 million in coming quarters, with R&D spending dependent on clinical activity. It anticipated direct clinical costs to increase in the second half of 2020 with continuation of a Phase 1 trial of OXS-3550. Management said financing efforts, if successful, could support operations for at least six months from issuance of the financial statements, but gave no assurance.
- The company raised $200,000 through a January 2020 secured convertible note issuance. Subsequent to quarter-end, it disclosed additional convertible notes with aggregate principal of $2.067 million, issued at a stated conversion price of $0.20 per share, with 10% interest and maturities in October–November 2020. These and other convertible financings carry dilution and default-related risks.
- On March 10, 2020, the company entered a collaboration with Cytovance Biologics to develop and manufacture a coronavirus-targeting TriKE for preclinical evaluation and potential scale-up. The filing does not provide clinical or commercial outcome projections for this program.
- Two legal matters were disclosed: a New York note-and-warrant dispute involving approximately $2.2 million of principal, for which settlement discussions were ongoing without a finalized agreement; and a California complaint alleging license and consulting agreement breaches, seeking $1.670 million in actual damages plus stock-related relief.
- Management reported ineffective disclosure controls and material weaknesses in internal control over financial reporting, citing limited segregation of duties, executive-override risk, and insufficient written accounting and reporting procedures.
- The filing reports no material changes to previously disclosed risk factors and no off-balance-sheet arrangements. It also describes a $114,000 total minimum lease commitment for 2020–2021.
Most important facts for investors to verify
- Whether the company obtained sufficient financing to meet its stated $15 million 2020 funding need, and its resulting cash runway and ability to continue as a going concern.
- The status, amounts, maturity dates and default terms of the $13.257 million of convertible notes reported in default, including any creditor actions or restructuring.
- The terms and timing of the post-quarter $2.067 million financing and the potential share dilution from conversion and other securities.
- Progress and funding for the OXS-3550 Phase 1 trial and the Cytovance coronavirus TriKE collaboration.
- Developments in both disclosed legal disputes and remediation of the reported control weaknesses.
- Potential filing-text inconsistencies: the subsequent-event note describes agreements made April 20–May 7 but says notes were issued on January 30; the controls section also refers to an evaluation date of March 31, 2019 before discussing conclusions as of March 31, 2020. Confirm the intended dates against the filed exhibits or later filings.