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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