GT Biopharma, Inc. (filing identifies OXIS International, Inc.) — 10-Q summary
Reporting period: Quarter and six months ended June 30, 2015; filed August 14, 2015. The supplied filing names OXIS International, Inc., not GT Biopharma, Inc. Investors should verify the issuer and filing before relying on this summary.
Business context and financial performance
OXIS describes itself as a biotechnology company developing therapeutics through Oxis Biotech, including preclinical candidates for triple-negative breast cancer and multiple myeloma. The filing reports minimal revenue and substantial reliance on financing. It describes product revenue in the statements, while MD&A calls the revenue licensing revenue from a Vitamin D-related product line; the classification is not clear from the filing text.
| Metric | Three months ended June 30, 2015 | Six months ended June 30, 2015 | Comparable 2014 period |
|---|---|---|---|
| Revenue | $20,000 | $27,000 | $25,000 in each period |
| Gross profit | $20,000 | $27,000 | $8,000 in each period |
| Operating expenses | $1.451 million | $3.269 million | $112,000; $213,000 |
| Operating loss | $1.431 million | $3.242 million | $104,000; $205,000 |
| Net income (loss) | $26.860 million | $6.344 million | $(262,000); $(633,000) |
Reported profits were driven by noncash fair-value gains on warrant and derivative liabilities: $29.140 million for the quarter and $17.874 million for the six-month period. Six-month interest expense was $8.288 million, including substantial noncash costs. Accordingly, net income does not reflect positive operating performance. R&D expense was $250,000 for the six months, versus none in 2014; SG&A rose to $3.019 million from $213,000, attributed mainly to professional fees, salaries, license fees, investor relations and stock compensation.
Cash, liabilities and capital structure
- Cash was $125,000 at June 30, 2015, down $730,000 from year-end 2014. Operating cash use was $3.080 million, partly offset by $2.350 million of financing proceeds.
- Total assets were $132,000; total liabilities were $23.032 million; stockholders’ deficit was $22.900 million. Current liabilities were $21.581 million against current assets of $127,000. The resulting conventional working-capital deficit is approximately $21.454 million.
- MD&A separately cites a $6.178 million “cash basis” working-capital deficit after excluding specified noncash liabilities. It lists $6.305 million of current cash obligations and $15.276 million of noncash warrant liabilities and accrued expenses.
- The company issued $2.350 million of 10% convertible debentures in February 2015 and, after quarter-end, entered into a $500,000 convertible debenture financing. At June 30, warrant liability was $13.299 million.
- Common shares outstanding were 600 million at June 30 and August 14; the company reported 965.7 million warrants and 84.3 million options outstanding at June 30, indicating substantial potential dilution.
Outlook, risks and unusual items
- Management stated that the company needed additional equity or debt financing to sustain operations and warned that it could not assure successful financing or sufficient future product revenue. The filing says current cash usage raises substantial doubt about the company’s ability to continue as a going concern.
- The drug candidates are described in preclinical terms. The ID4 license includes royalties and up to $700,000 of development and approval milestones. The MCIT agreement includes a $500,000 license fee, up to $1.125 million in development-cost reimbursement, potential additional payments of $22.75 million if milestones and manufacturing rights are achieved, and a 3% sales royalty.
- Management concluded disclosure controls and internal control over financial reporting were not effective at June 30, 2015, citing material weaknesses including lack of segregation of duties and risk of executive override.
- Aaion Partners sued the company in May 2015 over a consulting agreement; the company filed cross-claims in July. Stockholders approved a potential reverse split ranging from 1-for-50 to 1-for-250, with the ratio to be determined by the board.
- No specific revenue, profitability or cash-flow guidance is provided.
Most important facts to verify
- Confirm issuer identity: the supplied metadata says GT Biopharma, but the filing and financial statements name OXIS International, Inc.
- Reconcile the financial presentation: statements label revenue as product revenue while MD&A calls it license revenue; MD&A also gives a cash figure of $127,000 alongside the balance-sheet cash of $125,000, and appears to refer to June 30, 2014 in its liquidity discussion.
- Verify near-term financing availability, debt terms and required cash payments given the going-concern warning and very limited cash.
- Assess the potential dilution from outstanding warrants, options and convertible securities, and the approved but not yet specified reverse split.
- Review the status and potential exposure of the Aaion Partners litigation and the company’s material control weaknesses.