UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2024.

☐	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to ____________.

Commission File Number 001-40023

GT BIOPHARMA, INC.

(Exact name of registrant as specified in its charter)

Delaware

94-1620407

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

(Address not applicable¹)

415-919-4040

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Trading Symbol		Name of exchange on which registered
Common Stock, $0.001 par value per share		GTBP		Nasdaq Capital Market

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 every Interactive Data File required to be submitted 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 such files). 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 an 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.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
Emerging growth company ☐

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 ☒

As of November 10, 2024, the registrant had 2,234,328 shares of common stock outstanding.

¹Effective as of July 1, 2024, the Company became a fully remote company. We do not maintain a principal executive office. For purposes of compliance with applicable requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, any stockholder communication required to be sent to the Company’s principal executive offices may be directed to 315 Montgomery Street, 10th Floor, San Francisco, California 94104, or by email to auditcommittee@gtbiopharma.com.

GT Biopharma, Inc. and Subsidiaries

FORM 10-Q

For the Nine Months Ended September 30, 2024

Table of Contents

		Page
PART I FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, 2024 (Unaudited) and December 31, 2023	3
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023 (Unaudited)	4
	Condensed Consolidated Statements of Stockholders’ Equity for the three and Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023 (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2024 and 2023 (Unaudited)	7
	Condensed Notes to Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28

PART II OTHER INFORMATION
Item 1.	Legal Proceedings	29
Item 6.	Exhibits	30

SIGNATURES		31

GT BIOPHARMA, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

	September 30, 2024			December 31, 2023
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	6,418,000		$	1,079,000
Restricted cash		93,000			—
Short-term investments		—			12,893,000
Prepaid expenses and other current assets		248,000			84,000
Total Current Assets		6,759,000			14,056,000

Operating lease right-of-use asset		—			53,000
TOTAL ASSETS	$	6,759,000		$	14,109,000

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	2,612,000		$	4,328,000
Accrued expenses		1,868,000			1,195,000
Current operating lease liability		—			58,000
Warrant liability		182,000			1,052,000
Total Current Liabilities		4,662,000			6,633,000

Stockholders’ Equity
Convertible Preferred stock, par value $0.01, 15,000,000 shares authorized Series C - 96,230 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively		1,000			1,000
Common stock, par value $0.001, 250,000,000 shares authorized, 2,234,328 and 1,380,633 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively		2,000			1,000
Additional paid in capital		693,546,000			689,539,000
Accumulated deficit		(691,452,000	)		(682,065,000	)
Total Stockholders’ Equity		2,097,000			7,476,000
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	6,759,000		$	14,109,000

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

GT BIOPHARMA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

	2024			2023			2024			2023
	For The Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2024			2023			2024			2023
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)

Operating Expenses:
Research and development	$	1,307,000		$	1,364,000		$	3,868,000		$	5,109,000

Selling, general and administrative (including $0 and $547,000 from stock compensation granted to officers, directors, and employees and for services for the three months ended September 30, 2024 and 2023, respectively, and $222,000 and $1,767,000 for the nine months ended September 30, 2024 and 2023, respectively)		2,297,000			1,758,000			6,733,000			5,299,000

Loss from Operations		(3,604,000	)		(3,122,000	)		(10,601,000	)		(10,408,000	)

Other Income (Expense)
Interest income		96,000			216,000			343,000			600,000
Interest expense		—			—			—			(213,000	)
Change in fair value of warrant liability		95,000			485,000			870,000			4,796,000
Gain on extinguishment of debt		—			—			—			547,000
Unrealized gain on marketable securities		2,000			5,000			1,000			43,000
Total Other Income, Net		193,000			706,000			1,214,000			5,773,000

Net Loss	$	(3,411,000	)	$	(2,416,000	)	$	(9,387,000	)	$	(4,635,000	)

Net Loss Per Share - Basic and Diluted	$	(1.53	)	$	(1.77	)	$	(5.28	)	$	(3.47	)

Weighted average common shares outstanding - basic and diluted		2,234,328			1,367,206			1,777,313			1,336,532

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

GT BIOPHARMA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For The Three and Nine Months Ended September 30, 2024 (Unaudited):


	Preferred Shares				Common Shares				Additional Paid in		Accumulated
	Shares		Amount		Shares		Amount		Capital		Deficit			Total

Balance, June 30, 2024		96,230	$	1,000		2,234,328	$	2,000	$	693,546,000	$	(688,041,000	)	$	5,508,000
Net loss		-		-		-		-		-		(3,411,000	)		(3,411,000	)
Balance, September 30, 2024		96,230	$	1,000		2,234,328	$	2,000	$	693,546,000	$	(691,452,000	)	$	2,097,000

	Preferred Shares				Common Shares					Additional Paid in		Accumulated
	Shares		Amount		Shares			Amount		Capital		Deficit			Total

Balance, December 31, 2023		96,230	$	1,000		1,380,633		$	1,000	$	689,539,000	$	(682,065,000	)	$	7,476,000
Issuance of common stock and warrants for cash		-		-		740,000			1,000		2,975,000		-			2,976,000
Cancellation of common stock issued to prior CFO		-		-		(13,902	)		-		-		-			-
Issuance of common shares to settle vendor payable		-		-		127,597			-		810,000		-			810,000
Fair value of vested stock options		-		-		-			-		222,000		-			222,000
Net loss		-		-		-			-		-		(9,387,000	)		(9,387,000	)
Balance, September 30, 2024		96,230	$	1,000		2,234,328		$	2,000	$	693,546,000	$	(691,452,000	)	$	2,097,000

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

GT BIOPHARMA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For The Three and Nine Months Ended September 30, 2023 (Unaudited):


	Preferred Shares				Common Shares				Additional Paid in		Accumulated
	Shares		Amount		Shares		Amount		Capital		Deficit			Total

Balance, June 30, 2023		96,230	$	1,000		1,354,656	$	1,000	$	688,448,000	$	(676,687,000	)	$	11,763,000
Issuance of common shares for services		-		-		13,333		1,000		114,000		-			115,000
Issuance of common shares to settle vendor payable		-		-		12,644		-		110,000		-			110,000
Fair value of vested stock options		-		-		-		-		433,000		-			433,000
Net loss		-		-		-		-		-		(2,416,000	)		(2,416,000	)
Balance, September 30, 2023		96,230	$	1,000		1,380,633	$	2,000	$	689,105,000	$	(679,103,000	)	$	10,005,000

	Preferred Shares				Common Shares				Additional Paid in			Accumulated
	Shares		Amount		Shares		Amount		Capital			Deficit			Total

Balance, December 31, 2022		96,230	$	1,000		1,090,748	$	1,000	$	686,200,000		$	(674,467,000	)	$	11,734,000
Balance		96,230	$	1,000		1,090,748	$	1,000	$	686,200,000		$	(674,467,000	)	$	11,734,000
Private placement of common stock		-		-		120,000		-		6,268,000			-			6,268,000
Issuance of common stock for exercise of prefunded warrants		-		-		96,666		-		-			-			-
Initial recognition of fair value of warrant liability		-		-		-		-		(5,831,000	)		-			(5,831,000	)
Issuance of common shares for services		-		-		15,782		1,000		429,000			-			430,000
Issuance of common shares to settle vendor payable		-		-		57,437		-		701,000			-			701,000
Fair value of vested stock options		-		-		-		-		1,338,000			-			1,338,000
Net loss		-		-		-		-		-			(4,635,000	)		(4,635,000	)
Balance, September 30, 2023		96,230	$	1,000		1,380,633	$	2,000	$	689,105,000		$	(679,103,000	)	$	10,005,000
Balance		96,230	$	1,000		1,380,633	$	2,000	$	689,105,000		$	(679,103,000	)	$	10,005,000

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

GT BIOPHARMA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows


	For The Nine Months Ended
	September 30,
	2024			2023
	(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(9,387,000	)	$	(4,635,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation – services		—			430,000
Stock based compensation - officers, directors, and employees		222,000			1,337,000
Change in fair value of warrant liability		(870,000	)		(4,796,000	)
Gain on extinguishment of share settled debt		—			(547,000	)
Change in operating lease right-of-use assets		53,000			78,000
Unrealized loss (gain) on marketable securities		1,000			(43,000	)
Changes in operating assets and liabilities:
Decrease in prepaid expenses		(164,000	)		16,000
Increase (Decrease) in accounts payable and accrued expenses		(233,000	)		1,437,000
(Decrease) in operating lease liability		(58,000	)		(82,000	)
Net Cash Used in Operating Activities		(10,436,000	)		(6,805,000	)

CASH FLOWS FROM INVESTING ACTIVITIES
Sale (Purchase) of investments		12,892,000			(2,487,000	)
Net Cash Provided by (Used in) Investing Activities		12,892,000			(2,487,000	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock and warrants, net		2,976,000			6,268,000
Net Cash Provided by Financing Activities		2,976,000			6,268,000

Net Increase (Decrease) in Cash and Cash Equivalents and Restricted Cash		5,432,000			(3,024,000	)
Cash and Cash Equivalents and Restricted Cash at Beginning of Period		1,079,000			5,672,000
Cash and Cash Equivalents and Restricted Cash at End of Period	$	6,511,000		$	2,648,000

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest	$	—		$	—
Income taxes	$	—		$	—

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Initial recognition of fair value of warrant liability	$	—		$	5,831,000
Fair value of common stock issued to a vendor to settle accounts payable	$	810,000		$	700,000

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

GT BIOPHARMA, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Nine Months Ended September 30, 2024 and 2023 (Unaudited)

Note 1 – Organization and Going Concern Analysis

Organization

The corporate predecessor of GT Biopharma, Inc, Diagnostic Data, Inc., was incorporated in the state of California in 1965. Diagnostic Data, Inc. changed its incorporation to the state of Delaware on December 21, 1972 and changed its name to DDI Pharmaceuticals, Inc. on March 11, 1985. On September 7, 1994, DDI Pharmaceuticals, Inc. merged with International BioClinical, Inc. and Bioxytech S.A. and changed its name to OXIS International, Inc. On July 17, 2017, OXIS International, Inc. changed its name to GT Biopharma, Inc.

Throughout this Quarterly Report on Form 10-Q, the terms “GTBP,” “we,” “us,” “our,” “the Company” and “our Company” refer to GT Biopharma, Inc.

The GT Biopharma logo, TriKE®, and other trademarks or service marks of GT Biopharma, Inc. appearing in this quarterly report are the property of the Company. This quarterly report on Form 10-Q also contains registered marks, trademarks and trade names of other companies. All other trademarks, registered marks and trade names appearing herein are the property of their respective holders.

The Company is a clinical stage biopharmaceutical company focused on the development and commercialization of novel immune-oncology products based on our proprietary Tri-specific Killer Engager (TriKE®), and Tetra-specific Killer Engager (Dual Targeting TriKE®) platforms. The Company’s TriKE® and Dual Targeting TriKE® platforms generate proprietary therapeutics designed to harness and enhance the cancer killing abilities of a patient’s own natural killer cells (NK cells).

Going Concern Analysis

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company does not have any product candidates approved for sale and has not generated any revenue from its product sales. The Company has sustained operating losses since inception, and expects such losses to continue into the foreseeable future. Historically, the Company has financed its operations through public and private sales of common stock, issuance of preferred and common stock, issuance of convertible debt instruments, and strategic collaborations. For the nine months ended September 30, 2024, the Company recorded a net loss of approximately $9.4 million and used cash in operations of approximately $10.4 million. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued.

The unaudited condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Accordingly, the unaudited condensed consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

The Company has evaluated the significance of the uncertainty regarding the Company’s financial condition in relation to its ability to meet its obligations, which has raised substantial doubt about the Company’s ability to continue as a going concern. While it is very difficult to estimate the Company’s future liquidity requirements, the Company believes if it is unable to obtain additional financing, existing cash resources will not be sufficient to enable it to fund the anticipated level of operations through one year from the date the accompanying unaudited condensed consolidated financial statements are issued. There can be no assurances that the Company will be able to secure additional financing on acceptable terms. In the event the Company does not secure additional financing, the Company will be forced to delay, reduce, or eliminate some or all of its discretionary spending, which could adversely affect the Company’s business prospects, ability to meet long-term liquidity needs and the ability to continue operations.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Oxis Biotech, Inc. and Georgetown Translational Pharmaceuticals, Inc. All intercompany transactions and balances have been eliminated in consolidation.

The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on March 26, 2024 (the “2023 Annual Report”). The consolidated balance sheet as of December 31, 2023 included herein, was derived from the audited consolidated financial statements as of that date.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all adjustments contained herein are of a normal recurring nature. Results of operations for the fiscal periods presented herein are not necessarily indicative of fiscal year-end results.

Accounting Estimates

The preparation of financial statements in conformity with 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 management’s estimates for continued liquidity, accruals for potential liabilities, assumptions used in deriving the fair value of derivative liabilities, valuation of equity instruments issued for debt and services and realization of deferred tax assets.

Cash Equivalents and Short-Term Investments

The Company considers highly liquid investments with maturities of three months or less at the date of acquisition as cash equivalents in the accompanying unaudited condensed consolidated financial statements. At September 30, 2024 total cash equivalents which consist of money market funds and US treasuries, amounted to approximately $6.2 million. At December 31, 2023 total cash equivalents which consist of money market funds, amounted to approximately $443,000.

Management generally determines the appropriate classification of its investments at the time of purchase. We classify these investments as short-term investments, as part of current assets, based upon our ability and intent to use any and all of these investments as necessary to satisfy liquidity requirements that may arise from our business. Investments are carried at fair value with the unrealized holding gains and losses reported in the accompanying unaudited condensed consolidated statements of operations. At September 30, 2024 and December 31, 2023, total short-term investments which consist of US treasuries and US government agencies, amounted to approximately $0 and $12.9 million, respectively.

Restricted Cash

As of September 30, 2024, the Company has classified certain cash balances as restricted cash in its unaudited condensed consolidated balance sheets. The Company’s restricted cash is deposited in a financial institution and held as a collateral for a credit card agreement with the same financial institution.

Fair Value of Financial Instruments

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820-10 requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet for which it is practicable to estimate fair value. ASC 820-10 defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties.

The three levels of the fair value hierarchy are as follows:

Level 1 Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

Level 2 Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

Level 3 Valuations based on inputs that are unobservable, supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amounts of the Company’s other financial assets and liabilities, such as cash and cash equivalents, short term investments, prepaid expenses and other current assets, accounts payable, accrued expenses, approximate their fair values because of the short maturity of these instruments.

The carrying amount of the Company’s warrant liability of $182,000 and $1.1 million at September 30, 2024 and December 31, 2023, respectively, was based on Level 3 measurements.

Warrant Liability

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations.

The Company’s use of derivative financial instruments is generally limited to warrants issued by the Company that do not meet the criteria for equity treatment and are recorded as liabilities. We do not use financial instruments or derivatives for any trading purposes.

Common Stock (February 2024 Reverse Stock Split)

On February 2, 2024, the Company effectuated a reverse stock-split of its common stock, par value $0.001 per share, at a ratio of 1 for 30. The Company’s common stock began trading on a reverse stock-split-adjusted basis on The Nasdaq Capital Market on February 5, 2024 under the existing trading symbol “GTBP.”

As a result of the reverse stock-split, every thirty (30) shares of issued and outstanding common stock were automatically combined into one issued and outstanding share of common stock, without any change in the par value per share. No fractional shares will be issued in connection with the reverse stock split. Stockholders who otherwise would be entitled to receive fractional shares of common stock will be entitled to receive their pro-rata portion of the net proceeds obtained from the aggregation and sale by the exchange agent of the fractional shares resulting from the reverse stock-split (reduced by any customary brokerage fees, commission and other expenses). The reverse stock split reduced the number of shares of common stock outstanding on the effective date of the reverse stock-split from 41,419,000 shares to 1,380,633 shares, subject to minor adjustments due to the treatment of fractional shares. The number of authorized shares of common stock remains unchanged at 250,000,000 shares.

Proportionate adjustments have been made to the per share exercise price and the number of shares of common stock that may be purchased upon exercise of outstanding stock options and warrants for the Company’s common stock, and to the number of shares of common stock reserved for future issuance pursuant to the Company’s 2022 Omnibus Incentive Plan.

All share and per share information within this report have been adjusted to retroactively reflect the reverse stock-split as of the earliest period presented.

Stock-Based Compensation

The Company periodically issues stock-based compensation to officers, directors, employees, and consultants for services rendered. Such issuances vest and expire according to terms established at the issuance date.

Stock-based payments to officers, directors, employees, and consultants in exchange for goods and services, which include grants of employee stock options, are recognized in the financial statements based on their grant date fair values in accordance with ASC 718, Compensation-Stock Compensation. Stock based payments to officers, directors, employees, and consultants, which are generally time vested, are measured at the grant date fair value and depending on the conditions associated with the vesting of the award, compensation cost is recognized on a straight-line or graded basis over the vesting period. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services. The fair value of stock options granted is estimated using the Black-Scholes option-pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life, and future dividends. The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods.

Research and Development Expenses

Costs incurred for research and development are expensed as incurred. The salaries, benefits, and overhead costs of personnel conducting research and development of the Company’s products are included in research and development expenses. Purchased materials that do not have an alternative future use are also expensed.

Leases

The Company accounts for its lease in accordance with the guidance of ASC 842, Leases. The Company determines whether a contract is, or contains, a lease at inception. Right-of-use assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at lease commencement in determining the present value of unpaid lease payments.

In June 2024, the Company’s lease expired and was not renewed.

Net Loss Per Share

Basic earnings (loss) per share is computed using the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed using the weighted-average number of common shares and the dilutive effect of contingent shares outstanding during the period. Potentially dilutive contingent shares, which primarily consist of stock issuable upon exercise of stock options and warrants have been excluded from the diluted loss per share calculation because their effect is anti-dilutive.

The following common stock equivalents were excluded in the computation of the net loss per share because their effect is anti-dilutive:

Schedule of Anti-dilutive Securities

	September 30, 2024 (Unaudited)		September 30, 2023 (Unaudited)
Options to purchase common stock		101,264		124,599
Warrants to purchase common stock		1,133,762		304,962
Total anti-dilutive securities		1,235,026		429,561

Concentration

Cash is deposited in one financial institution. The balances held at this financial institution at times may be in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits of up to $250,000. Management believes that the financial institutions that hold the Company’s cash are financially sound and, accordingly, minimal credit risk exists.

The Company has a significant concentration of expenses incurred from and accounts payable and accrued expenses to Cytovance, a related party, and the University of Minnesota, see Note 4 – Accounts Payable and Related Party.

Segments

The Company determined its reporting units in accordance with “Segment Reporting” (“ASC 280”). Management evaluates a reporting unit by first identifying its operating segments under ASC 280. The Company then evaluates each operating segment to determine if it includes one or more components that constitute a business. If there are components within an operating segment that meet the definition of a business, the Company evaluates those components to determine if they must be aggregated into one or more reporting units. If applicable, when determining if it is appropriate to aggregate different operating segments, the Company determines if the segments are economically similar and, if so, the operating segments are aggregated.

Management has determined that the Company has one consolidated operating segment. The Company’s reporting segment reflects the manner in which its chief operating decision maker reviews results and allocates resources. The Company’s reporting segment meets the definition of an operating segment and does not include the aggregation of multiple operating segments. As a result no further segment information is presented in these consolidated financial statements.

Recent Accounting Pronouncements

In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which introduces new reportable segment disclosure requirements related to significant segment expenses and also expands reportable segment disclosure requirements for interim reporting. The amendment will require public entities to disclose significant segment expenses that are regularly provided to the chief operating decision maker and are included within each reportable segment’s profits and losses. This standard became effective for the Company on January 1, 2024. The adoption of this standard did not have a material impact on the Company’s results of operations, financial position or cash flows.

The Company’s management has evaluated all the recently issued, but not yet effective, accounting standards and guidance that have been issued or proposed by the FASB or other standards-setting bodies through the filing date of these financial statements and does not believe the future adoption of any such pronouncements will have a material effect on the Company’s financial position and results of operations.

Note 3 – Fair Value of Financial Instruments

Financial Assets

The following table represents the estimated fair values of the Company’s financial instruments:

September 30, 2024 (Unaudited)

Unrealized

Fair

Cost

Gains

Losses

Value

Short-term investments

—

Total

—

	December 31, 2023
			Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Short-term investments	$	12,845,000	$	48,000	$	—	$	12,893,000
Total	$	12,845,000	$	48,000	$	—	$	12,893,000

The following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents and investments):

	Fair Value		Level 1		Level 2		Level 3
	September 30, 2024 (Unaudited)
	Fair Value		Level 1		Level 2		Level 3

Cash equivalents:
Money market funds	$	1,220,000	$	1,220,000	$	—	$	—
US treasuries		4,987,000		—		4,987,000		—
Short-term investments:
US treasuries		—		—		—		—
Total financial assets	$	6,207,000	$	1,220,000	$	4,987,000	$	—

	Fair Value		Level 1		Level 2		Level 3
	December 31, 2023
	Fair Value		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	443,000	$	443,000	$	—	$	—
Short-term investments:
US treasuries and US gov’t. agencies		12,893,000		—		12,893,000		—
Total financial assets	$	13,336,000	$	443,000	$	12,893,000	$	—

Warrant Liability

For the details of warrant liability transactions see Note 5 – Warrant Liability.

Note 4 – Accounts Payable and Related Party

Accounts payable consists of the following:

Schedule of Accounts Payable

	As of		As of
	September 30, 2024		December 31, 2023
	(Unaudited)
Accounts payable to Cytovance, a related party ¹	$	638,000	$	3,515,000
Accounts payable to University of Minnesota		697,000		130,000
Other accounts payable		1,277,000		683,000
Total accounts payable	$	2,612,000	$	4,328,000

¹	Accounts Payable to Cytovance Biologics, Inc. (“Cytovance”), a Related Party, since Cytovance owns greater than 5% of the Company’s issued and outstanding common stock

See Note 8 – Commitments and Contingencies, Significant Agreements.

The details of the Company’s accounts payable to Cytovance Biologics, Inc., were as follows:

	September 30, 2024			September 30, 2023
	Nine Months Ending
	September 30, 2024			September 30, 2023
	(Unaudited)			(Unaudited)
Beginning balance	$	3,515,000		$	2,283,000
Invoices, net		1,365,000			3,691,000
Payments in cash		(3,432,000	)		(1,710,000	)
Payments in common stock, at fair value		(810,000	)		(1,120,000	)
Ending balance	$	638,000		$	3,144,000

University of Minnesota

See Note 8 – Commitments and Contingencies, Significant Agreements.

Note 5 – Warrant Liability

2023 Warrants

On January 4, 2023, as part of the private placement offering, the Company issued common stock, warrants to purchase up to an aggregate of 216,667 shares of the Company’s common stock (the “2023 Common Warrants”), and placement agent warrants to purchase up to 13,000 shares of the Company’s common stock (the “2023 Placement Agents Warrants”).

The 2023 Common Warrants and the 2023 Placement Agents Warrants (collectively the “2023 Warrants”), provide for a value calculation for the warrants using the Black Scholes model in the event of certain fundamental transactions. The fair value calculation provides for a floor on the volatility amount utilized in the value calculation at 100% or greater. The Company has determined this provision introduces leverage to the holders that could result in a value that would be greater than the settlement amount of a fixed-for-fixed option on the Company’s own equity shares. Therefore, pursuant to ASC 815, the Company has classified the 2023 Warrants as a liability in its consolidated balance sheet. The classification of the 2023 Warrants, including whether they should be recorded as liability or as equity, is evaluated at the end of each reporting period.

The 2023 Warrants were initially recorded at a fair value at $5.8 million at the grant date, and upon the closing of placement, was recorded as a cost of capital. The fair value of the 2023 Warrants classified as a liability in the Company’s unaudited condensed consolidated balance sheets and will be re-measured at the end of every reporting period with the change in value reported in the unaudited condensed consolidated statements of operations until they are either exercised or expired.

The 2023 Warrant liability is valued using a Binomial pricing model with the following assumptions:

	2023 Warrants
	September 30, 2024			December 31, 2023
	(Unaudited)			(Unaudited)
Stock price	$	2.31		$	7.20
Risk-free interest rate ¹		3.58	%		4.6	%
Expected volatility ²		114	%		119.7	%
Expected life (in years) ³		3.25 – 3.75			4.5
Expected dividend yield ⁴		—			—
Fair value of warrants	$	182,000		$	1,051,000

¹	Based on rates established by the Federal Reserve Bank

²	Historical volatility of the Company’s common stock is used to estimate the future volatility of its common stock

³	Determined by the remaining contractual life of the derivative instrument

⁴	Based on no dividends paid or expected to be paid

2020 Warrants

The Company issued warrants underlying 58,824 shares of common stock during the year ended December 31, 2020 (the “2020 Warrants”), that contained a fundamental transaction provision that could give rise to an obligation to pay cash to the warrant holder upon occurrence of certain change in control type events. In accordance with ASC 480, the fair value of the 2020 Warrants is classified as a liability in the Company’s unaudited condensed consolidated balance sheets and will be re-measured at the end of every reporting period with the change in value reported in the unaudited condensed consolidated statements of operations until they are either exercised or expire.

The 2020 Warrant liability is valued using a Binomial pricing model with the following assumptions:

	2020 Warrants
	September 30, 2024			September 30, 2023
	(Unaudited)
Stock price	$	2.31		$	7.20
Risk-free interest rate ¹		3.98	%		5.0	%
Expected volatility ²		114	%		89.0	%
Expected life (in years) ³		0.8			1.8
Expected dividend yield ⁴		—			—
Fair value of warrants	$	—		$	2,000

¹	Based on rates established by the Federal Reserve Bank
²	Historical volatility of the Company’s common stock is used to estimate the future volatility of its common stock
³	Determined by the remaining contractual life of the derivative instrument
⁴	Based on no dividends paid or expected to be paid

Warrant Liability

The details of warrant liability transactions were as follows:

	September 30, 2024			September 30, 2023
	Nine Months Ending
	September 30, 2024			September 30, 2023
	(Unaudited)			(Unaudited)
Beginning balance	$	1,052,000		$	18,000
Issuance of warrants at fair value		—			5,831,000
Change in fair value		(870,000	)		(4,796,000	)
Extinguishment		—			—
Ending balance	$	182,000		$	1,053,000

Note 6 – Stockholders’ Equity

The Company’s authorized capital as of September 30, 2024 was 250,000,000 shares of common stock, par value $0.001 per share, and 15,000,000 shares of preferred stock, par value $0.01 per share.

Common Stock

2024 Common Stock Offering

On May 23, 2024, the Company received gross proceeds of approximately $3.2 million, before deducting placement agent fees and other offering expenses of $243,000 in relation to a purchase agreement (the “Purchase Agreement”) signed on May 21, 2024, between the Company and institutional investors (the “Purchasers”) for the issuance and sale, in a registered direct offering, of 740,000 shares of the Company’s common stock, par value $0.001 per share (the “2024 Shares”). In a concurrent private placement, the Company issued and sold to the Purchasers warrants to purchase 740,000 shares of the Company’s common stock (the “2024 Common Warrants”). In addition, the Company issued warrants to the placement agent to purchase 88,800 shares of common stock (the “2024 Placement Agents Warrants”). The 2024 Common Warrants have an exercise price equal to $4.35 per share, and the 2024 Placement Agents Warrants have an exercise price equal to $5.4375 per share, both are exercisable commencing six months following issuance, and have a term of exercise equal to five years following the initial exercise date. The 2024 Shares and 2024 Common Warrants were sold at an offering price of $4.35 per share and accompanying 2024 Common Warrant.

Pursuant to the Purchase Agreement, the Company agreed, with certain exceptions, for a period of 60 days following the closing of the offering not to issue, enter into an agreement to issue or announce the issuance or proposed issuance of the 2024 Shares or any other securities convertible into, or exercisable or exchangeable for, shares of the Company’s common stock. The Company has also agreed for a period of one year following the closing date of the offering not to (i) issue or agree to issue equity or debt securities convertible into, or exercisable or exchangeable for, shares at a conversion price, exercise price or exchange price which floats with the trading price of the 2024 Shares or which may be adjusted after issuance upon the occurrence of certain events or (ii) enter into any agreement, including an equity line of credit, whereby the Company may issue securities at a future-determined price.

The Company determined that under ASC 815-40, the 2024 Common Warrants and the 2024 Placement Agent Warrants do not contain a clause that adjusts the exercise price based on circumstances not considered to be within the Company’s control and are considered indexed to the Company’s own stock and eligible for an exception from derivative accounting. Accordingly, the fair value of the 2024 Common Warrants and the 2024 Placement Agent Warrants are classified as equity.

2023 Private Placement of Common Stock

On January 4, 2023, the Company received gross proceeds of $6.5 million, before deducting placement agent fees and other offering expenses of $232,000 in relation to a purchase agreement signed on December 30, 2022, between the Company and an institutional investor for the issuance and sale, in a registered direct offering, of 120,000 shares of the Company’s common stock, par value $0.001 per share (the “2023 Shares”), pre-funded warrants to purchase up to 96,667 shares of the Company’s common stock (the “Pre-Funded Warrants”), warrants to purchase up to an aggregate of 216,667 shares of the Company’s common stock (the “2023 Common Warrants”) and placement agent warrants to purchase up to 13,000 of the Company’s common stock (the “2023 Placement Agents Warrants”). The 2023 Common Warrants have an exercise price equal to $30.00 per share, are exercisable commencing six months following issuance, and have a term of exercise equal to five years following the initial issuance date. The Pre-Funded Warrants had an exercise price of $0.003 per share, are immediately exercisable and could be exercised at any time after their original issuance until such Pre-Funded Warrants were exercised in full. The 2023 Placement Agents Warrants have an exercise price equal to $

SEC Form 10-Q filed by GT Biopharma Inc.