U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 10-Q/A10-Q
 
☑            
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2016.2018.
 
☐
☐               
For the transition period from        to          ..
 
Commission File Number 0-8092
 
OXIS INTERNATIONAL,GT BIOPHARMA, INC.
(Exact name of small business issuer as specified in its charter)
 
Delaware
94-1620407
(State or other jurisdiction of
incorporation or organization)
94-1620407
(I.R.S. employer
identification number)
100 South Ashley Drive,
100 South Ashley Street, Suite 600
Tampa, FL 33602
 (Address of principal executive offices and zip code)
(800) 304-9888
(Registrant’s telephone number, including area code)
 
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes  ☑ No  ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer ☐Accelerated filer ☐
Non-accelerated filer  ☐ (Do not check if a smaller reporting company)Smaller reporting 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 ☑
 
At August 7, 2016,14, 2018, the issuer had outstanding the indicated number of shares of common stock:  26,915,959.50,117,977.

 
 
 
EXPLANATORY NOTE
GT Biopharma, Inc., formerly known as Oxis International, Inc, (the “Company”) is filing this Amendment No. 1 to its Quarterly Report on Form 10-Q for its six months ended June 30, 2016, as filed with the Securities and Exchange Commission on August 10, 2016 (the “Original June 2016 Form 10-Q”), primarily to correct an error related to the non-cash calculation of warranty liabilities.
Actual Changes in the Original June 2016 Form 10-Q. The actual changes in the Original June 2016 Form 10-Q included in this Amendment No. 1 are amendments to: (a) amended and restated Consolidated Statement of Operations for the six months ended June 30, 2016,  (b) amended and restated Consolidated Statement of Cash Flows for the six months ended June 30, 2016, and (c) the addition of Note 7.
Notwithstanding that there are no changes in most of the Notes to the Consolidated Financial Statements included in this Amendment No. 1, a complete Form 10-Q document including a complete set of the Consolidated Financial Statements (together with all of the Notes from the Original June 2016 10-Q) has been included in this Amendment No. 1, for convenient reference.
In addition, see additional amended filings of the Company for relevant subsequent events.
OXIS INTERNATIONAL, INC. AND SUBSIDIARIESSubsidiaries
FORM 10-Q
For the Six Months Ended June 30, 20162018
Table of Contents
 
PART I  FINANCIAL INFORMATION Page
   
Item 1.Financial Statements  
 
Consolidated Balance Sheets as of June 30, 20162018 (Unaudited) and December 31, 201520171
  3
Consolidated Statements of Operations for the three and six months ended June 30, 20162018 and 20152017 (Unaudited) 2
 4 
Consolidated Statements of Cash Flows for the six months ended June 30, 20162018 and 20152017 (Unaudited) 3
 5 
Condensed Notes to Consolidated Financial Statements 4
 6 
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations 13
 21 
Item 3.Quantitative and Qualitative Disclosures About Market Risk 18
 27 
Item 4.Controls and Procedures 18
 27 
PART II  OTHER INFORMATION
  
Item 1.Legal Proceedings 20
 23 
Item 1A.Risk Factors 20
 23 
Item 2.Unregistered Sales of Securities and Use of Proceeds 20
 21 
Item 3.Defaults Upon Senior Securities 21
 30 
Item 4.Mine Safety Disclosures 21
 30 
Item 5.Other Information 21
 30 
Item 6.Exhibits 21
  30 
SIGNATURES 3122
GT Biopharma, Inc. and Subsidiaries
as of June 30, 2018 and December 31, 2017
Consolidated Balance Sheets
 
 
June 30,
2018
 
 
December 31,
2017
 
ASSETS
 
(unaudited)
 
 
 
 
Current Assets:
 
 
 
 
 
 
Cash and cash equivalents
 $1,096,000 
 $576,000 
Prepaid expenses
  - 
  - 
Total Current Assets
  1,096,000 
  576,000 
 
    
    
Intangible assets
  253,777,000 
  253,777,000 
Loan costs
  126,000 
  - 
Deposits
  9,000 
  9,000 
Fixed assets, net
  6,000 
  6,000 
Total Other Assets
  253,918,000 
  253,792,000 
TOTAL ASSETS
 $255,014,000 
 $254,368,000 
LIABILITIES AND STOCKHOLDERS’ EQUITY
    
    
Current Liabilities:
    
    
Accounts payable
 $1,887,000 
 $2,546,000 
Accrued expenses
  178,000 
  102,000 
Line of credit
  31,000 
  31,000 
Convertible debentures, net of discount of $905,000
  6,856,000 
  - 
Total Current Liabilities
  8,952,000 
  2,679,000 
 
    
    
Total liabilities
  8,952,000 
  2,679,000 
 
    
    
Stockholders’ Equity:
    
    
Convertible preferred stock - $0.001 par value; 15,000,000 shares authorized:
    
    
Series C - 96,230 and 96,230 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively
  1,000 
  1,000 
Series J – 1,163,548 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively
  1,000 
  1,000 
Common stock - $0.001 par value; 750,000,000 shares authorized; and 50,117,977 and 50,117,977 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively
  50,000 
  50,000 
Additional paid-in capital
  534,849,000 
  521,305,000 
Accumulated deficit
  (288,670,000)
  (269,499,000)
Noncontrolling interest
  (169,000)
  (169,000)
Total Stockholders’ Equity
  246,062,000 
  251,689,000 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 $255,014,000 
 $254,368,000 
The accompanying notes are an integral part of these consolidated financial statements.
 

 
OXIS INTERNATIONAL,GT BIOPHARMA, INC. AND SUBSIDIARIES
Consolidated Balance SheetsStatements of Operations
As ofFor the Three Months Ended June 30, 20162018 and December 31, 20152017
 
 
 
June 30, 2016
 
 
December 31, 2015
 
 
 
(unaudited)
 
 
 
 
ASSETS
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
Cash and cash equivalents
 $355,000 
 $47,000 
Prepaid expenses
  2,000 
  2,000 
Total Current Assets
  357,000 
  49,000 
Fixed assets, net
  5,000 
  5,000 
Total Other Assets
  5,000 
  5,000 
TOTAL ASSETS
 $362,000 
 $54,000 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
    
    
Current Liabilities:
    
    
Accounts payable
  1,574,000 
  893,000 
Accrued interest
  2,853,000 
  2,391,000 
Accrued expenses
  674,000 
  4,326,000 
Line of credit
  31,000 
  31,000 
Warrant liability
  492,000 
  33,266,000 
Settlement note payable
  691,000 
  691,000 
Demand notes payable
  363,000 
  452,000 
Convertible debentures, current portion, net of discount of $1,952,000 and $1,682,000
  7,949,000 
  6,820,000 
Convertible debentures
  1,039,000 
  1,039,000 
Total current liabilities
  15,666,000 
  49,909,000 
Long term liabilities:
    
    
Convertible debt, net of discount of $767,000 and $1,097,000
  528,000 
  714,000 
Total long term liabilities
  528,000 
  714,000 
Total liabilities
  16,194,000 
  50,623,000 
 
    
    
Stockholders’ Deficit:
    
    
Convertible preferred stock - $0.001 par value; 15,000,000 shares authorized:
    
    
Series C - 96,230 and 96,230 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively
  1,000 
  1,000 
Series H – 25,000 and 25,000 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively
  - 
  - 
Series I – 1,666,667 and 1,666,667 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively
  2,000 
  2,000 
Common stock - $0.001 par value; 150,000,000 shares authorized; 25,8889,940 and 2,400,000 shares issued and outstanding at June 30, 2016 and December 31, 2015
  26,000 
  2,000 
Additional paid-in capital
  102,498,000 
  84,012,000 
Accumulated deficit
  (118,190,000)
  (134,417,000)
Noncontrolling interest
  (169,000)
  (169,000)
Total Stockholders’ Deficit
  (15,832,000)
  (50,569,000)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
 $362,000 
 $54,000 
 
 
Three Months Ended June 30,
 
 
Six Months Ended June 30,
 
 
 
2018
 
 
2017
 
 
2018
 
 
2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Product revenues
 $- 
 $- 
 $- 
 $- 
License revenue
  -  
  -  
  -  
  -  
Total revenue
  - 
  - 
  - 
  - 
Cost of product revenue
  -  
  -  
  -  
  -  
Gross profit
  -  
  -  
  -  
  -  
Operating expenses
    
    
    
    
Research and development
  3,251,000 
  241,000 
  6,724,000 
  385,000 
Selling, general and administrative expenses
  1,906,000  
  1,044,000  
  5,593,000  
  2,438,000  
Total operating expenses
  5,157,000  
  1,285,000  
  12,317,000  
  2,823,000  
Loss from operations
  (5,157,000)
  (1,285,000)
  (12,317,000)
  (2,823,000)
Other income (expense)
    
    
    
    
Interest expense
  (3,924,000)
  (1,178,000)
  (6,855,000)
  (4,698,000)
Total other income (expense)
  (3,924,000)
  (1,178,000)
  (6,855,000)
  (4,698,000)
Loss before minority interest and provision for income taxes
  (9,081,000)
  (2,463,000)
  (19,172,000)
  (7,521,000)
Plus: net (income) loss attributable to the noncontrolling interest
  -  
  -  
  -  
  -  
Loss before provision for income taxes
  (9,081,000)
  (2,463,000)
  (19,172,000)
  (7,521,000)
Provision for income tax
  -  
  -  
  -  
  -  
Net loss
  (9,081,000)
  (2,463,000)
  (19,172,000)
  (7,521,000)
Weighted average common shares outstanding – basis and diluted
    
    
    
    
Basic
  50,117,977 
  479,053 
  50,117,977 
  335,450 
Diluted
  50,117,977 
  479,053 
  50,117,977 
  335,450 
Net loss per share
    
    
    
    
Basic
 $(0.18)
 $(5.14)
 $(0.38)
 $(22.42)
Diluted
 $(0.18)
 $(5.14)
 $(0.38)
 $(22.42)
The accompanying condensed notes are an integral part of these consolidated financial statements.

GT Biopharma, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2018 and 2017
 
 
2018
 
 
2017
 
 
 
(unaudited)
 
 
(unaudited)
 
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
Net loss
 $(19,172,000)
 $(7,521,000)
Adjustments to reconcile net loss to net cash used in operating activities:
    
    
Depreciation
  2,000 
  1,000 
Stock compensation expense for options and warrants issued to employees and non-employees
  6,489,000 
  1,524,000 
Amortization of debt discounts
  6,855,000 
  1,376,000 
Note Allonge
    
  100,000 
Non-cash interest expense
  - 
  2,197,000 
Amortization of loan costs
  407,000 
  - 
Changes in operating assets and liabilities:
    
    
Other assets
  - 
  - 
Accounts payable and accrued liabilities
  (581,000)
  1,282,000 
Net cash used in operating activities
  (6,000,000)
  (1,041,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
    
    
Acquisition of fixed assets
  (2,000)
  - 
Net cash used by investing activities
  (2,000)
  0 
CASH FLOWS FROM FINANCING ACTIVITIES:
    
    
Proceeds from notes payable
  7,055,000 
  1,061,000 
Loan costs
  (533,000)
  - 
Repayment of note payable
  - 
  - 
Net cash provided by financing activities
  6,522,000 
  1,061,000 
Minority interest
  - 
  - 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
  520,000 
  20,000 
CASH AND CASH EQUIVALENTS - Beginning of period
  576,000 
  19,000 
CASH AND CASH EQUIVALENTS - End of period
 $1,096,000 
 $39,000 
 
    
    
Supplemental disclosures:
    
    
Interest paid
 $- 
 $- 
Income taxes paid
 $- 
 $- 
 
    
    
Supplemental disclosures:
    
    
Issuance of common stock upon conversion of convertible notes
 $- 
 $2,025,000 
Issuance of common stock upon conversion of accrued interest
 $- 
 $486,000 
 
The accompanying condensed notes are an integral part of these consolidated financial statements.
 

 
OXIS INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Six Months Ended June 30, 2016 and 2015
 
 
Three Months Ended June 30,
 
 
Six Months Ended June 30,
 
 
 
2016
 
 
2015
 
 
2016
 
 
2015
 
 
 
 
 
 
 
 
 
 (As restated)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Product revenues
 $- 
 $- 
 $- 
 $- 
License revenue
  - 
  20,000 
  - 
  27,000 
Total revenue
  - 
  20,000 
  - 
  27,000 
Cost of product revenue
  - 
  - 
  - 
  - 
Gross profit
  - 
  20,000 
  - 
  27,000 
Operating expenses
    
    
    
    
Research and development
  250,000 
  - 
  475,000 
  250,000 
Selling, general and administrative expenses
  1,871,000  
  1,451,000  
  5,547,000  
  3,019,000  
Total operating expenses
  2,121,000  
  1,451,000  
  6,022,000  
  3,269,000  
Loss from operations
  (2,121,000)
  (1,431,000)
  (6,022,000)
  (3,242,000)
Other income (expense)
    
    
    
    
Change in value of warrant and derivative liabilities
  5,263,000 
  29,140,000 
  25,494,000 
  17,874,000 
Interest expense
  (1,599,000)
  (849,000)
  (3,245,000)
  (8,288,000)
Total other income (expense)
  3,664,000  
  28,291,000  
  22,249,000 
  9,586,000  
Income before minority interest and
provision for income taxes
  1,543,000 
  26,860,000 
  16,227,000 
  6,344,000 
Plus: net (income) loss attributable to the noncontrolling interest
  - 
  - 
  - 
  - 
Income before provision for income taxes
  1,543,000 
  26,860,000 
  16,227,000 
  6,344,000 
Provision for income tax
  - 
  - 
  - 
  - 
Net income
  1,543,000  
  26,860,000  
  16,227,000 
  6,344,000  
Weighted average common shares outstanding – basis and diluted
    
    
    
    
Basic
  23,335,603 
  2,396,381 
  20,375,396 
  2,389,080 
Diluted
  25,407,055 
  4,907,238 
  22,446,848 
  4,899,898 
Net income per share
    
    
    
    
Basic
 $0.07 
 $11.21 
 $ 0.80 
 $2.66 
Diluted
 $0.06 
 $5.47 
 $ 0.72 
 $1.29 
The accompanying condensed notes are an integral part of these consolidated financial statements.

OXIS INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2016 and 2015
 
 
Six months Ended June 30,
 
 
 
2016
(unaudited)
 
 
2015
(unaudited)
 
CASH FLOWS FROM OPERATING ACTIVITIES:
 
(As restated)
 
 
 
 
Net income/(loss)
 $ 16,227,000 
 $6,344,000 
Adjustments to reconcile net income (loss) to net cash used in operating activities:
    
    
Depreciation
  - 
  1,000 
Amortization of intangible assets
  - 
  - 
Stock compensation expense for options and warrants issued to employees and non-employees
  4,051,000 
  231,000 
Non-cash interest expense
  1,504,000 
  6,880,000 
Amortization of debt discounts
  972,000 
  1,043,000 
Change in value of warrant and derivative liabilities
  (25,494,000)
  (17,874,000)
Changes in operating assets and liabilities:
    
    
Accounts receivable
  - 
  - 
Other assets
  - 
  25,000 
Accounts payable and accrued expenses
  1,508,000 
  270,000 
Net cash used in operating activities
  (1,232,000)
  (3,080,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
    
    
Repayment of note payable
  - 
  - 
Proceeds of notes payable
  1,540,000 
  2,350,000 
Net cash provided by financing activities
  1,540,000 
  2,350,000 
Minority interest
  - 
  - 
NET DECREASE IN CASH AND CASH EQUIVALENTS
  308,000 
  (730,000)
 
    
    
CASH AND CASH EQUIVALENTS - Beginning of period
  47,000 
  855,000 
CASH AND CASH EQUIVALENTS - End of period
 $355,000 
 $125,000 
 
    
    
Supplemental Disclosures
    
    
 
    
    
Interest paid
 $- 
 $- 
Income taxes paid
 $- 
 $- 
 
    
    
Supplemental non-cash activities:
    
    
 
    
    
Common stock issued upon conversion of convertible notes
 $1,429,000 
 $- 
Common stock issued upon conversion of accrued interest and penalty
 $270,000 
 $- 
Issuance of common stock to interest expense
 $- 
 $247,000 
 
    
    
The accompanying condensed notes are an integral part of these consolidated financial statements.
5
OXIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(UNAUDITED)
1.            
The Company and Summary of Significant Accounting Policies
 
OXIS International, Inc. (collectively, “OXIS” or the “Company”) is engaged in discovering, developing and commercializing novel therapeutics from our proprietary product platform inWe are a broad range of disease areas. Currently, OXIS develops innovative drugsclinical stage biopharmaceutical company focused on the treatmentdevelopment and commercialization of cancer.  OXIS' leadnovel immuno­oncology products based off our proprietary Tri­specific Killer Engager (TriKE), Tetra­specific Killer Engager (TetraKE) and bi­specific Antibody Drug Conjugate (ADC) technology platforms. Constructs include bispecific and trispecific scFv constructs, proprietary drug candidate, OXS-2175, is a small molecule therapeutic candidate targeting the treatment of triple-negative breast cancer.  In in vitropayloads, bispecific targeted antibody­drug conjugates, as well as tri­ and in vivo models of TNBC, OXS-2175 demonstrated the ability to inhibit metastasis.  OXIS' lead drug candidate, OXS-4235, also a small molecule therapeutic candidate, targets the treatment of multiple myelomatetra­specific antibody­directed cellular cytotoxicity, or ADCC. Our proprietary tri­ and associated osteolytic lesions.  In in vitro and in vivo models of multiple myeloma, OXS-4235 demonstrated the ability to kill multiple myelomatetra­specific ADCC platform engages natural killer cells, and decrease osteolytic lesions in bone. OXIS' lead drug candidate, OXS-1550, is a bispecific scFv recombinant fusion protein-drug conjugate composedor NK cells. NK cells are cytotoxic lymphocytes of the variable regionsinnate immune system capable of immune surveillance. NK cells mediate ADCC through the highly potent CD16 activating receptor. Upon activation, NK cells deliver a store of membrane penetrating apoptosis­ inducing molecules. Unlike T cells, NK cells do not require antigen priming.
Also, we have a CNS portfolio consisting of innovative reformulations and/or repurposing of existing therapies. We believe these new therapeutic agents address numerous unmet medical needs that can lead to improved efficacy while addressing tolerability and safety issues that tended to limit the usefulness of the heavyoriginal approved drug. These CNS drug candidates address disease states such as chronic neuropathic pain, myasthenia gravis and light chains of anti-CD19 and anti-CD22 antibodies and a modified form of diphtheria toxin as its cytotoxic drug payload. OXS-1550 has demonstrated success in early human clinical trials in patients with relapsed/refractory B-cell lymphoma or leukemia.motion sickness.
 
In 1965, the corporate predecessor of OXIS,GT Biopharma, Diagnostic Data, Inc. was incorporated in the State of California. Diagnostic Data changed its incorporation to the State of Delaware in 1972;1972. and changed its name to DDI Pharmaceuticals, Inc. in 1985. In 1994, DDI Pharmaceuticals merged with International BioClinical, Inc. and Bioxytech S.A. and changed its name to OXIS International, Inc. In July 2017, the Company changed its name to GT Biopharma, Inc.
Going Concern
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.
The financial statements of the Company have been prepared on a going­concern 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 negative cash flows from operations since its inception and has an accumulated deficit of $289 million and cash of $1.1 million as of June 30, 2018. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales 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, and licensing and/or marketing arrangements with pharmaceutical companies. Management is also implementing cost saving efforts, including reduction in executive salaries. 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 six 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 in 2018, its business, operating results, financial condition and cash flows may be materially and adversely affected.

Use of Estimates
The financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America, and have been consistently applied in the preparation of the financial statements. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities revenues and expenses and disclosures of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
Basis of Consolidation and Comprehensive Income
The accompanying consolidated financial statements include the accounts of GT Biopharma, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated. The Company's financial statements are prepared using the accrual method of accounting.
 
Basis of Presentation
 
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and disclosures required by U.S. GAAP for complete consolidated financial statements have been condensed or omitted herein. The interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Form 10-K for the year ended December 31, 2015.2017. The unaudited interim condensed consolidated financial information presented herein reflects all normal adjustments that are, in the opinion of management, necessary for a fair statement of the financial position, results of operations and cash flows for the periods presented. The Company is responsible for the unaudited interim consolidated financial statements included in this report. The results of operations of any interim period are not necessarily indicative of the results for the full year.
Going Concern
As shown in the accompanying consolidated financial statements, the Company has incurred an accumulated deficit of $118,190,000 through June 30, 2016.  On a consolidated basis, the Company had cash and cash equivalents of $355,000 at June 30, 2016. The Company's plan is to raise additional capital until such time that the Company generates sufficient revenues to cover its cash flow needs and/or it achieves profitability. However, the Company cannot assure that it will accomplish this task and there are many factors that may prevent the Company from reaching its goal of profitability.
The current rate of cash usage raises substantial doubt about the Company’s ability to continue as a going concern, absent any sources of significant cash flows.  In an effort to mitigate this near-term concern the Company intends to seek additional equity or debt financing to obtain sufficient funds to sustain operations.  However, the Company cannot provide assurance that it will successfully obtain equity or debt or other financing, if any, sufficient to finance its goals or that the Company will generate future product related revenues.  The Company’s financial statements 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 that the Company cannot continue in existence.

OXIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(UNAUDITED)
Basis of Consolidation and Comprehensive Income
The accompanying consolidated financial statements include the accounts of OXIS International, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated. The Company's financial statements are prepared using the accrual method of accounting.
 
Cash and Cash Equivalents
 
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.
 
Concentrations of Credit Risk
 
The Company's cash and cash equivalents, marketable securities and accounts receivable are monitored for exposure to concentrations of credit risk. The Company maintains substantially all of its cash balances in a limited number of financial institutions. The balances are each insured by the Federal Deposit Insurance Corporation up to $250,000. The Company does not havehad $845,000 of balances in excess of this limit at June 30, 2016.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, inventory, accounts payable and accrued expenses approximate fair value because of the short-term nature of these instruments. The fair value of debt is based upon current interest rates for debt instruments with comparable maturities and characteristics and approximates the carrying amount.2018.
 
Stock Based Compensation to Other than Employees
 
The Company accounts for equity instruments issued in exchangeits stock-based compensation for the receipt of goods or services from other than employees in accordance with ASCAccounting Standards Codification (“ASC”) 718.  Costs are measured atThe Company recognizes in the estimated fair market valuestatement of operations the consideration received or the estimatedgrant-date fair value of the equity instruments issued, whichever is more reliably determinable. The value of equity instruments issued for considerationstock options and other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services. In the case of equity instrumentsequity-based compensation issued to consultants, the fair value of the equity instrument is recognizedemployees and non-employees over the term ofrelated vesting period.
The Company granted no stock options during the consulting agreement.six months ended June 30, 2018 and 2017, respectively

 
Impairment of Long Lived Assets
 
The Company's long-lived assets currently consist of capitalized patents.patents and other indefinite lived intangible assets.  The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If any of the Company's long-lived assets are considered to be impaired, the amount of impairment to be recognized is equal to the excess of the carrying amount of the assets over the fair value of the assets.  There was no impairment of any of the indefinite lived intangibles during the six months ended June 30, 2018
 
Income Taxes
 
The Company accounts for income taxes using the asset and liability approach, whereby deferred income tax assets and liabilities are recognized for the estimated future tax effects, based on current enacted tax laws, of temporary differences between financial and tax reporting for current and prior periods. Deferred tax assets are reduced, if necessary, by a valuation allowance if the corresponding future tax benefits may not be realized.

OXIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(UNAUDITED)

Net Income (Loss) per Share
 
Basic net income (loss) per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period, plus the potential dilutive effect of common shares issuable upon exercise or conversion of outstanding stock options and warrants during the period. The weighted average number of potentially dilutive common shares excluded from the calculation of net income (loss) per share totaled in 12,900,5211,695,686 and 1,677,1441,030,951 as of June 30, 20162018 and 2015,2017, respectively.
 
Patents
 
Acquired patents are capitalized at their acquisition cost or fair value. The legal costs, patent registration fees and models and drawings required for filing patent applications are capitalized if they relate to commercially viable technologies. Commercially viable technologies are those technologies that are projected to generate future positive cash flows in the near term. Legal costs associated with patent applications that are not determined to be commercially viable are expensed as incurred. All research and development costs incurred in developing the patentable idea are expensed as incurred. Legal fees from the costs incurred in successful defense to the extent of an evident increase in the value of the patents are capitalized.
 
Capitalized cost for pending patents are amortized on a straight-line basis over the remaining twenty year legal life of each patent after the costs have been incurred. Once each patent is issued, capitalized costs are amortized on a straight-line basis over the shorter of the patent's remaining statutory life, estimated economic life or ten years.
 
Fixed Assets
 
Fixed assets areis stated at cost. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets, which are 3 to 10 years for machinery and equipment and the shorter of the lease term or estimated economic life for leasehold improvements.
 
Fair Value
 
The carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.  The three levels are defined as follows:
 

● 
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. The Company’s Level 1 assets include cash equivalents, primarily institutional money market funds, whose carrying value represents fair value because of their short-term maturities of the investments held by these funds.
 
● 
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. The Company’s Level 2 liabilities consist of liabilities arising from the issuance of convertible securities and in accordance with ASC 815-40: a warrant liability for detachable warrants, as well as an accrued derivative liability for the beneficial conversion feature. These liabilities are remeasured each reporting period. Fair value is determined using the Black-Scholes valuation model based on observable market inputs, such as share price data and a discount rate consistent with that of a government-issued security of a similar maturity. There were not such liabilities at June 30, 2018.
 
● 
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

OXIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(UNAUDITED)

The following table represents the Company’s assets and liabilities by level measured at fair value on a recurring basis at June 30, 2016.
Description
Level 1
Level 2
Level 3
Assets
$—
$—
$—
Liabilities
Warrant liability
—
492,000
—
 
Research and Development
 
Research and development costs are expensed as incurred and reported as research and development expense. Research and development costs totaling $475,000$6,724,000 and $250,000$385,000 for the six months ended June 30, 20162018 and 2015,2017, respectively.
 
Revenue Recognition
 
License Revenue
 
License arrangements may consist of non-refundable upfront license fees, exclusive licensed rights to patented or patent pending technology, and various performance or sales milestones and future product royalty payments. Some of these arrangements are multiple element arrangements.
 
Non-refundable, up-front fees that are not contingent on any future performance by us, and require no consequential continuing involvement on our part, are recognized as revenue when the license term commences and the licensed data, technology and/or compound is delivered.  We defer recognition of non-refundable upfront fees if we have continuing performance obligations without which the technology, right, product or service conveyed in conjunction with the non-refundable fee has no utility to the licensee that is separate and independent of our performance under the other elements of the arrangement. In addition, if we have continuing involvement through research and development services that are required because our know-how and expertise related to the technology is proprietary to us, or can only be performed by us, then such up-front fees are deferred and recognized over the period of continuing involvement.
 
Payments related to substantive, performance-based milestones in a research and development arrangement are recognized as revenue upon the achievement of the milestones as specified in the underlying agreements when they represent the culmination of the earnings process. As of June 30, 2018, the Company has not generated any licensing revenue.
 
Use of Estimates
2.            
Intangibles
 
The financial statementsOn September 1, 2017, the Company entered into an Agreement and notes are representationsPlan of Merger whereby it acquired 100% of the Company's management, which is responsibleissued and outstanding capital stock of Georgetown Translational Pharmaceuticals, Inc. (GTP). In exchange for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United Statesownership of America, and have been consistently applied inGTP, the preparationCompany issued a total of the financial statements. The preparation16,927,878 shares of financial statements requires management to make estimates and assumptions that affect the reported amountsits common stock, having a share price of assets, liabilities revenues and expenses and disclosures of contingent assets and liabilities at$15.00on the date of the financial statements. Actual results could differ from those estimates.transaction, to the three prior owners of GTP which represents 33% of the issued and outstanding capital stock of the Company on a fully diluted basis. $253,777,000 of the value of shares issued were allocated to intangible assets. 

 
OXIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNEAs stated in Note 1, Company's long-lived assets currently consist of capitalized patents and other indefinite lived intangible assets.  The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If any of the Company's long-lived assets are considered to be impaired, the amount of impairment to be recognized is equal to the excess of the carrying amount of the assets over the fair value of the assets.  There was no impairment of any of the indefinite lived intangibles during the six months ended June 30, 2016
(UNAUDITED)2018.
 
2.            
3.            
Debt
 
Convertible debenturesNotes
 
On October 25, 2006,January 22, 2018, the Company entered into a securities purchase agreementSecurities Purchase Agreement (“2006 Purchase Agreement”SPA”) with fourthe fourteen accredited investors (the “2006 Purchasers”). In conjunction with(individually, a “Buyer” and collectively, the signing of the 2006 Purchase Agreement, the Company issued secured convertible debentures (“2006 Debentures”) and Series A, B, C, D, and E common stock warrants (“2006 Warrants”) to the 2006 Purchasers, and the parties also entered into a security agreement (the “2006 Security Agreement”“Buyers”) pursuant to which the Company has agreed to grant the 2006 Purchasers, pari passu, a security interest in substantially all of the Company’s assets.
Pursuantissue to the terms of the 2006 Purchase Agreement, the Company issued the 2006 DebenturesBuyers senior convertible notes in an aggregate principal amount of $1,694,250$7,760,510 (the “Notes”), which Notes shall be convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”), and five-year warrants to purchase the Company’s Common Stock representing the right to acquire an aggregate of approximately 1,694,440 shares of Common Stock (the “Warrants”).
Pursuant to the 2006 Purchasers. The 2006 Debenturesterms of SPA the Notes are subject to an original issue discount of 20.318%10% resulting in proceeds to the Company of $1,350,000$7,055,000 from the transaction. The 2006 Debentures wereNotes are due on October 25, 2008.July 22, 2018. The 2006 DebenturesNotes are convertible, at the option of the 2006 Purchasers,Buyers, at any time prior to payment in full, into shares of common stock of the Company. AsCompany at a resultprice of the full ratchet anti-dilution provision the current conversion price is $2.50$4.58 per share (the “2006 (“Conversion Price”). Beginning onAccording to the firstterms of the month beginning February 1, 2007,note agreement, the Company was required to amortize the 2006 Debentures in equal installments on a monthly basis resulting in a complete repayment by the maturity date (the “Monthly Redemption Amounts”). The Monthly Redemption Amounts could have been paid in cash or in shares,Notes are subject to certain restrictions. If the Company chose to make any Monthly Redemption Amount payment in shares of common stock,adjustments depending upon the price per share would have been the lesserand structure of the Conversion Price then in effect and 85% of the weighted average price for the 10-trading days prior to the due date of the Monthly Redemption Amount. The Company did not make any of the required monthly redemption payments.
Pursuant to the provisions of the 2006 Debentures, such non-payment was an event of default and penalty interest has accrued on the unpaid redemption balance at an interest rate equal to the lower of 18% per annum and the maximum rate permitted by applicable law. In addition, each of the 2006 Purchasers has the right to accelerate the cash repaymenta subsequent financing, including a qualified financing with gross proceeds of at least 130%$20 million, as defined in the agreements.
Upon the purchase of the outstanding principal amount ofNotes, the 2006 Debenture (plus accrued but unpaid liquidated damages and interest) and to sell substantially all of the Company’s assets pursuant to the provisions of the 2006 Security Agreement to satisfy any such unpaid balance. On June 6, 2008, the CompanyBuyers received notification from Bristol Investment Fund, Ltd (“Bristol”), that the collateral held under the 2006 Security Agreement would be sold to the highest qualified bidder on Thursday, June 19, 2008. On June 19, 2008, the Company received a Notice of Disposition of Collateral from Bristol in which Bristol notified the Company that Bristol, acting as the agent for itself and the three other 2006 Purchasers, purchased certain assets held as collateral under the 2006 Security Agreement. Bristol purchased 111,025 shares of common stock of BioCheck, Inc., the Company’s majority owned subsidiary, on a credit bid of $50,000, and Bristol also purchased 1,000 shares of the capital stock of OXIS Therapeutics, Inc., a wholly owned subsidiary of OXIS, for a credit bid of $10,000. In December 2005, OXIS purchased the 111,025 shares of common stock of BioCheck, Inc. for $3,060,000. After crediting the aggregate amount of $60,000 to the aggregate amount due under the 2006 Debentures, plus fees and charges due through June 19, 2008, Bristol notified the Company that the Company remains obligated to the 2006 Purchasers in a deficiency in an aggregate amount of $2,688,000 as of June 19, 2008. As a result of the disposition of the collateral, the Company recorded a net loss aggregating $2,978,000.
Under the 2006 Purchase Agreement, the 2006 Purchasers also have a right of first refusal to participate in up to 100% of any future financing undertaken by the Company until the 2006 Debentures are no longer outstanding. In addition, the Company is also prohibited from effecting any subsequent financing involving a variable rate transaction until such time as no 2006 Purchaser holds any of the 2006 Debentures. Furthermore, so long as any 2006 Purchaser holds any of the securities issued under the 2006 Purchase Agreement, if the Company issues or sells any common stock or instruments convertible into common stock which a 2006 Purchaser reasonably believes is on terms more favorable to such investors than the terms pursuant to the 2006 Debentures or 2006 Warrants, the Company is obligated to permit such 2006 Purchaser the benefits of such better terms.

OXIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(UNAUDITED)
Of the 2006 Warrants issued by the Company to the 2006 Purchasers, only the Series A Warrants remain outstanding. The Series A Warrants, which now expire in July 2019, permit the holders to purchase 9,681 shares of common stock at an original exercise price of $87.50 per share. Such exercise price is adjustable pursuant to a full ratchet anti-dilution provision and upon the occurrence of a stock split or a related event.
During 2009, Bristol converted $177,900 of the principal amount of 2006 Debentures for 71,160 shares of the Company’s common stock. During 2010, Bristol converted an additional $401,000 of the principal amount of 2006 Debentures for 160,400 shares of the Company’s common stock. During 2011, an additional $605,000 of the principal amount of 2006 Debentures was converted into 242,000 shares of the Company’s common stock. During 2012, an additional $369,625 of the principal amount of 2006 Debentures was converted into 350,619 shares of the Company’s common stock.
The 2006 Debentures do not meet the definition of a “conventional convertible debt instrument” since they are not convertible into a fixed number of shares. The Monthly Redemption Amounts can be paid with common stock at a conversion price that is a percentage of the market price; therefore the number of shares that could be required to be delivered upon “net-share settlement” is essentially indeterminate. Therefore, the 2006 Debentures are considered “non-conventional,” which means that the conversion feature must be bifurcated from the debt and shown as a separate derivative liability. This beneficial conversion liability has been calculated to be $690,000 on October 25, 2006. In addition, since the 2006 Debentures are convertible into an indeterminate number of shares of common stock, it is assumed that the Company could never have enough authorized and unissued shares to settle the conversion of the 2006 Warrants issues in this transaction into common stock. Therefore, the 2006 Warrants have a fair value of $2,334,000 at October 25, 2006. The value of the 2006 Warrant was calculated using the Black-Scholes model using the following assumptions: Discount rate of 4.5%, volatility of 158% and expected term of 1 to 6 years. The fair value of the beneficial conversion feature and the 2006 Warrant liability will be adjusted to fair value on each balance sheet date with the change being shown as a component of net loss. The fair value of the beneficial conversion feature and the 2006 Warrants at the inception of the 2006 Debentures were $690,000 and $2,334,000, respectively. The first $1,350,000 of these discounts was amortized over the term of the 2006 Debenture and the excess of $1,674,000 was shown as financing costs in statement of operations.
The Company and Bristol entered into a Forbearance Agreement on December 3, 2015, pursuant to which Bristol agreed to refrain and forbear from exercising certain rights and remedies with respect the 2006 Debentures for three months. In exchange for the Forbearance Agreement, the Company issued an allonge in the amount of $250,000 increasing the principal amount if the 2006 Debentures.
On October 1, 2009, the Company entered into a financing arrangement with several accredited investors (the “2009 Investors”), pursuant to which it sold various securities in consideration of a maximum aggregate purchase price of $2,000,000 (the “2009 Financing”). In connection with the 2009 Financing, the Company issued the following securities to the 2009 Investors:
●     0% Convertible Debentures in the principal amount of $2,000,000 due 24 months from the date of issuance (the “ 2009 Debentures”), convertible into shares of the Company’s common stock at a per share conversion price equal to $12.50 per share;
●     Series A warrant to purchase such number of shares of the Company’s common stock equal to 50% of the principal amount invested by each 2009 Investor (the “2009 Class A Warrants” ) resulting in the issuance of Class A Warrants to purchase 80,0001,694,440 shares of common stock of the Company.
●    Series B warrant to purchase such number of shares of the Company’s common stock equal to 50% of the principal amount invested by each 2009 Investor (the “2009 Class B Warrants”) resulting in the issuance of Class BCommon Stock. Such Warrants to purchase 80,000 shares of common stock of the Company.
The Class A Warrants and Class B Warrants (collectively, the “ 2009 Warrants”) are exercisable for up to five(5) years from the date of issue at a per share exercise price equal to $15.625 and $18.75 for the Class A Warrants andshares underlying the Class B Warrants, respectively, on a cash or cashless basis. The 2009 Debentures and the 2009 Warrants are collectively referredfreely saleable. The initial Exercise Price is $4.58. According to herein as the “2009 Securities”.

OXIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(UNAUDITED)
In connection with the saleterms of the 2009 Securities bywarrant agreement, the Company, the Company and Bristol entered a Standstill and Forbearance Agreement, pursuant to which Bristol agreed to refrain and forbear from exercising certain rights and remedies with respect to (i) the 2006 Debentures and (ii) certain demand notes (the “Bridge Notes”) issued by the Company on October 8, 2008, March 19, 2009, April 7, 2009, April 28, 2009, May 21, 2009 and June 25, 2009 and discussed under the caption “Demand Notes” below. In connection with the sale of the 2009 Securities by the Company, the Company and Bristol have also entered into a waiver agreement (the “Waiver Agreement”) pursuant to which Bristol waived certain rights with respect to the 2006 Debentures and Bridge Notes.
The conversion price of the 2009 Debentures and the exercise price of the 2009 Warrants are subject to full ratchet anti-dilution adjustment incertain adjustments depending upon the event that the Company thereafter issues common stock or common stock equivalents at a price per share less than the conversion price or the exercise price, respectively, and to other normal and customary anti-dilution adjustment upon certain other events. So long as the 2009 Debentures are outstanding, if the Company effectsstructure of a subsequent financing, including a qualified financing with gross proceeds of at least $20 million, as defined in the October 2009 Investors may elect, in their sole discretion, to exchange all or some of the October 2009 Debentures (but not the 2009 Warrants) for any securities or units issued in a subsequent financing on a $1.00 for $1.00 basis or to have any particular provisions of the subsequent financing legal documents apply to the documents utilized for the October 2009 Financing.agreements.
 
The Company also agreed that if it determines to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others, then it shall include the shares of common stock underlying the 2009 Securities on such registration statement. The 2009 Investors have contractually agreed to restrict their ability to convert the 2009 Debentures and exercise the 2009 Warrants and receive shares of our common stock such that the number of shares of the Company common stock held by a 2009 Investor and its affiliates after such conversion or exercise does not exceed 4.9% of the Company’s then issued and outstanding shares of common stock.
During 2010, 2009 Investors converted $1,335,000 of the principal amount of 2009 Debentures for 106,800 shares of the Company’s common stock. During 2011, 2009 Investors converted $610,000 of the principal amount of 2009 Debentures for 48,800 shares of the Company’s common stock.
The Company entered into a Forbearance Agreement on December 3, 2015, pursuant to which the remaining 2009 Debenture holder agreed to refrain and forbear from exercising certain rights and remedies with respect the 2009 Debentures for three months. In exchange for the Forbearance Agreement, the Company issued an allonge in the amount of $250,000 increasing the principal amount of the 2009 Debentures to $305,000 as of March 31,2016.
On June 1, 2011, the Company entered into a financing arrangement with several accredited investors (the “June 2011 Investors”), pursuant to which it sold various securities in consideration of a maximum aggregate purchase price of $500,000 (the “June 2011 Financing”). In connection with the June 2011 Financing, the Company issued the following securities to the June 2011 Investors:
●   12% Convertible Debentures in the principal amount of $500,000 due April 15, 2012, convertible into shares of the Company’s common stock at a per share conversion price equal to $25.00 per share; and
●     Warrants to purchase 20,000 of shares of the Company’s common stock. The warrants are exercisable, on a cash or cashless basis, for up to two years from the date of issue at a per share exercise price equal to $37.50. During 2015, the exercise price was adjusted to $1.25 and the exercise date was extended to June 2019.
In November, 2011, the Company entered into a financing arrangement with several accredited investors (the “November 2011 Investors”), pursuant to which it sold various securities in consideration of a maximum aggregate purchase price of $275,000 (the “November 2011 Financing”). In connection with the November 2011 Financing, the Company issued the following securities to the November 2011 Investors:
●   8% Convertible Debentures in the principal amount of $275,000 due in two years, convertible into shares of the Company’s common stock at a per share conversion price equal to $12.50 per share; and

OXIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(UNAUDITED)

●   Warrants to purchase 22,000 of shares of the Company’s common stock. The Class A Warrants and Class B Warrants (collectively, the “Warrants”) are exercisable for up to five years from the date of issue at a per share exercise price equal to $15.625 and $18.75 for the Class A Warrants and the Class B Warrants, respectively, on a cash or cashless basis.
In March, 2012, the Company entered into a financing arrangement with several accredited investors pursuant to which it sold various securities in consideration of a maximum aggregate purchase price of $617,500 (the “March 2012 Financing”). In connection with the March 2012 Financing, the Company issued the following securities to the investors:
●   8% Convertible Debentures in the principal amount of $617,500 due in two years, convertible into shares of the Company’s common stock at a per share conversion price equal to $12.50 per share; and
●   Warrants to purchase 49,400 of shares of the Company’s common stock. The Class A Warrants and Class B Warrants (collectively, the “ March 2012 Warrants”) are exercisable for up to five years from the date of issue at a per share exercise price equal $15.625 and $18.75 for the Class A Warrants and the Class B Warrants, respectively, on a cash or cashless basis.
In April 2012, the Company agreed to an adjustment as negotiated to enable inducement of further financing of the Company. Pursuant to the anti-dilution provisions in the convertible instruments, the conversion price of certain
convertible instruments is now $2.50 (with the exception of the conversion price of the October 2006 Debenture which is already priced at the lesser of $2.50 and 60% of the average of the lowest three trading prices occurring at any time during the 20 trading days preceding conversion).
In May, 2012, the Company entered into a financing arrangement with several accredited investors pursuant to which it sold various securities in consideration of a maximum aggregate purchase price of $275,000 (the “May 2012 Financing”). In connection with the May 2012 Financing, the Company issued the following securities to the investors:
●   8% Convertible Debentures in the principal amount of $275,000 due May 2014, convertible into shares of the Company’s common stock at a per share conversion price equal to $12.50 per share; and
●   Warrants to purchase 22,000 of shares of the Company’s common stock. The Class A Warrants and Class B Warrants (collectively, the “ May 2012 Warrants”) are exercisable for up to five years from the date of issue at a per share exercise price equal to $15.625 and $18.75 for the Class A Warrants and the Class B Warrants, respectively, on a cash or cashless basis.
On August 8, 2012, a Settlement Agreement and Mutual General Release ("Agreement") was made by and between OXIS and Bristol Investment Fund, Ltd., in order to settle certain claims regarding certain convertible debentures held by Bristol.
Pursuant to the Agreement, OXIS shall pay Bristol (half of which payment would redound to Theorem Capital LLC (“Theorem”)) a total of $1,119,778 as payment in full for the losses suffered and all costs incurred by Bristol in connection with the Transaction. Payment of such $1,119,778 shall be made as follows: OXIS shall issue restricted common stock to each of Bristol and Merit, in an amount such that each Bristol and Theorem shall hold no more than 9.99% of the outstanding shares of OXIS (including any shares that each may hold as of the date of issuance). The shares so issued represent $417,475.65 of the $1,119,778 payment (111,327 shares at $3.75 per share, of which 36,675 will be retained by Bristol and 74,652 will be issued to Theorem). The remaining balance of the payment shall be made in the form of two convertible promissory notes in the respective amounts of $422,357.75 for Bristol and $279,944.60 for Theorem (collectively, the “Notes”) with a maturity of December 1, 2017 having an 8% annual interest rate, with interest only accruing until January 1, 2013, and then level payments of $3,750 each beginning January 1, 2013 until paid in full on December 1, 2017. In the event a default in the monthly payments on the Notes has occurred and is continuing each holderissuance of the Notes shall be permitted to convert the unpaid principal and interest of the Notes into shares of OXIS at $2.50 cents per share. In the absence of such continuing default no conversion of the Notes will be permitted. OXIS will have the right to repay the NotesWarrants were made in full at any time without penalty.

OXIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(UNAUDITED)

Effective April, 2013 the Company entered into a securities purchase agreement with one accredited investor to sell 10% convertible debentures with an initial principal balance of $75,000.
In October and November, 2013, the Company entered into a securities purchase agreement with four accredited investors to sell 10% convertible debentures with an initial principal balance of $172,000 and warrants to acquire up to 98,286 shares of the Company’s common stock at an exercise price of $2.50 per share.
In December, 2013, the Company entered into a convertible demand promissory note with an initial principal balance of $189,662 convertible at $1.75 per share and warrants to acquire up to 108,378 shares of the Company’s common stock at an exercise price of $2.50 per share.
In January, 2014, the Company entered into a securities purchase agreement with one accredited investor to sell 10% convertible debentures with an initial principal balance of $50,000 and warrants to acquire up to 28,571 shares of the Company’s common stock at an exercise price of $2.50 per share.
In April, 2014, the Company entered into a securities purchase agreement with three accredited investors to sell 10% convertible debentures with an initial principal balance of $49,000 and warrants to acquire up to 22,286 shares of the Company’s common stock at an exercise price of $2.50 per share.
In July 2014, the Company agreed to an adjustment as negotiated to enable inducement of further financing of the Company. Pursuant to the anti-dilution provisions in the convertible instruments, the conversion price of certain
convertible instruments is now $1.75 (with the exception of the conversion price of the October 2006 Debenture which is already priced at the lesser of $1.75 and 60% of the average of the lowest three trading prices occurring at any time during the 20 trading days preceding conversion).
On July 24, 2014, the Company entered into a securities purchase agreement with ten accredited investors to sell 10% convertible debentures, with an exercise price of $1.75, with an initial principal balance of $1,250,000 and warrants to acquire up to 714,286 shares of the Company’s common stock at an exercise price of $2.50 per share.
Also on July 24, 2014, the Company sold to Kenneth Eaton, the Company’s Chief Executive Officer, a $175,000 debenture, with an exercise price of $1.75, as payment in full for all accrued and unpaid salary and fees owed to Mr. Eaton. This note was convertedreliance on the second quarter of 2016.
On October 15, 2014, the Company entered into a securities purchase agreement with three accredited investors to sell 10% convertible debentures, with an exercise price of $2.50, with an initial principal balance of $1,250,000 and warrants to acquire up to 400,000 shares of the Company’s common stock at an exercise price of $5.00 per share.
On February 23, 2015, the Company entered into a securities purchase agreement with ten accredited investors to sell 10% convertible debentures, with an exercise price of $6.25, with an initial principal balance of $2,350,000 and warrants to acquire up to 376,000 shares of the Company’s common stock at an exercise price of $7.50 per share.
Effective July 2015, the Company entered into a securities purchase agreement with three accredited investors to sell 10% convertible debentures, with an exercise price of $5.00, with an initial principal balance of $550,000 and warrants to acquire up to 111,765 shares of the Company’s common stock at an exercise price of $6.25 per share.
Effective October 2015, the Company entered into a securities purchase agreement with three accredited investors to sell 10% convertible debentures, with an exercise price of $2.50, with an initial principal balance of $500,000 and warrants to acquire up to 200,000 shares of the Company’s common stock at an exercise price of $2.50 per share.
Effective November 2015, the Company entered into a securities purchase agreement with two accredited investors to sell 10% convertible debentures, with an exercise price of $2.50, with an initial principal balance of $100,000 and warrants to acquire up to 80,000 shares of the Company’s common stock at an exercise price of $2.50 per share.

OXIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(UNAUDITED)

Effective December 2015, the Company entered into a securities purchase agreement with two accredited investors to sell 10% convertible debentures, with and an exercise price of $1.25, with an initial principal balance of $350,000 and warrants to acquire up to 280,000 shares of the Company’s common stock at an exercise price of $1.25 per share.
In December 2015, the Company agreed to an adjustment as negotiated to enable inducement of further financing of the Company. Pursuant to the anti-dilution provisions in all the convertible instruments, the conversion price of certain convertible instruments is now $1.25 (with the exception of the conversion price of the October 2006 Debenture which is already priced at the lesser of $1.25 and 60% of the average of the lowest three trading prices occurring at any time during the 20 trading days preceding conversion).
In January 2016, the Company entered into a securities purchase agreement with one accredited investor to sell 10% convertible debentures, with and an exercise price of $1.25, with an initial principal balance of $150,000 and warrants to acquire up to 80,000 shares of the Company’s common stock at an exercise price of $1.25 per share.
In May 2016, the Company entered into a securities purchase agreement with twenty accredited investors to sell 10% convertible debentures, with and an exercise price of $0.40, with an initial principal balance of $1,390,044 and warrants to acquire up to 3,475,111 shares of the Company’s common stock at an exercise price of $0.45 per share.
Allonges
On August 18, 2015, the Company entered into a settlement agreement with three noteholders.  In accordance with the July 24, 2014 Security Purchase Agreements, The Company was required to establish and maintain a reserve of shares of its common stock from its duly authorized shares of Common Stock for issuance in an amount equal to 150% of a required minimumexemption provided by December 21, 2014 which did not occur.  As compensation for the default, the Company issued allonges to the noteholders for a total of $837,500, increasing the principal amount of the convertible notes.
On October 7, 2015, the Company entered into a settlement agreement with two noteholders.  In accordance with the July 24, 2014 Security Purchase Agreements, The Company was required to establish and maintain a reserve of shares of its common stock from its duly authorized shares of Common Stock for issuance in an amount equal to 150% of a required minimum by December 21, 2014 which did not occur.  As compensation for the default, the Company issued allonges to the noteholders for a total of $537,500, increasing the principal amount of the convertible notes.
On November 5, 2015, the Company entered into a Second Settlement Agreement with three noteholders. On August 18, 2015 the Company entered into a Settlement Agreement that required the Company to increase its authorized shares to not less 8,000,000 shares and reserve 150% of the number of shares of its Common Stock no later than the earlier of (1) two days after Oxis obtaining all corporate and regulatory approvals necessary to increase it authorized shares; or (2) September 30, 2015 which did not occur.  As compensation for the default, the Company issued additional allonges to the noteholders for a total of $837,500, increasing the principal amount of the convertible notes.
On Dec 5, 2015, the Company entered into a Second Settlement Agreement with three noteholders. On October 7, 2015 the Company entered into a Settlement Agreement that required the Company to increase its authorized shares to not less than 8,000,000 shares and reserve 150% of the number of shares of its Common Stock no later than the earlier of (1) two days after Oxis obtaining all corporate and regulatory approvals necessary to increase it authorized shares; or (2) September 30, 2015 which did not occur.  As compensation for the default, the Company issued additional allonges to the noteholders for a total of $537,500, increasing the principal amount of the convertible notes.

OXIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(UNAUDITED)

Demand Notes
On May 15, 2009, the Company entered into a convertible demand promissory note with Bristol Capital, LLC for certain consulting services totaling $100,000. The note does not provide for any interest and is due upon demand by the holder. The note has been converted into common stock of the Company.
On June 22, 2009, the Company entered into a convertible demand promissory note with Theorem Group (“Theorem”) pursuant to which Theorem purchased an aggregate principal amount of $31,375 of convertible demand promissory notes for an aggregate purchase price of $25,000 (the “ 2009 Theorem Note”). The 2009 Theorem Note was subsequently sold as described below.
Simultaneously with the issuance of the 2009 Theorem Note, the Company issued Theorem a seven-year warrant (the “2009 Theorem Warrant”) to purchase 12,550 shares of common stock of the Company at a price equal to the lower of (i) $2.50 and (ii) 60% of the average of the three (3) lowest trading prices occurring at any time during the 20 trading days preceding the issue date of the Theorem Note (the “Exercise Price”). The 2009 Theorem Warrant may be exercised on a cashless basis if the shares of common stock underlying the 2009 Theorem Warrant are not then registered pursuant to an effective registration statement. In the event the 2009 Theorem Warrant is exercised on a cashless basis, we will not receive any proceeds.
On December 1, 2009, Theorem sold the 2009 Theorem Note to Net Capital Partners, Inc. (“Net Capital”). In December 2009, Net Capital converted $24,000 of the principal for 9,600 shares of the Company’s common stock. In January 2010, Net Capital converted the remaining $7,375 of principal amount for an additional 2,950 shares of the Company’s common stock.
On February 7, 2011 the Company entered into a convertible demand promissory note with Bristol pursuant to which Bristol purchased an aggregate principal amount of $31,375 of convertible demand promissory notes for an aggregate purchase price of $25,000 (the “February 2011 Bristol Note”). The February 2011 Bristol Note is convertible into shares of common stock of the Company at a price equal to $12.50 per share.
Simultaneously with the issuance of the February 2011 Bristol Note, the Company issued Bristol a Series A Warrant (the “February 2011 Bristol Series A Warrants”) to purchase 1,255 shares of the Company’s common stock at a per share exercise price of $15.625, and a Series B Warrant (the “February 2011 Bristol Series B Warrants” and, together with the February 2011 Bristol Series A Warrants, the “February 2011 Bristol Warrants”) to purchase 1,255 shares of the Company’s common stock at a per share exercise price of $18.75. The February 2011 Warrants are exercisable for up to seven years from the date of issue. The February 2011 Warrants may be exercised on a cashless basis if the shares of common stock underlying the February 2011 Warrants are not then registered pursuant to an effective registration statement. In the event the February 2011 Bristol Warrants are exercised on a cashless basis, the Company will not receive any proceeds.
On February 7, 2011 the Company entered into a convertible demand promissory note with Net Capital pursuant to which Net Capital purchased an aggregate principal amount of $31,375 of convertible demand promissory notes for an aggregate purchase price of $25,000 (the “February 2011 Net Capital Note”). The February 2011 Net Capital Note is convertible into shares of common stock of the Company at a price equal to $12.50 per share. As of September, 2012, the February 2011 Net Capital Note had been converted into shares of the Company’s common stock.
Simultaneously with the issuance of the February 2011 Net Capital Note, the Company issued Net Capital a Series A Warrant (the “February 2011 Net Capital Series A Warrants”) to purchase 1,255 shares of the Company’s common stock at a per share exercise price of $15.625, and a Series B Warrant (the “February 2011 Net Capital Series B Warrants” and, together with the February 2011 Net Capital Series A Warrants, the “February 2011 Net Capital Warrants”) to purchase 1,255 shares of the Company’s common stock at a per share exercise price of $18.75. The February 2011 Net Capital Warrants are exercisable for up to seven years from the date of issue. The February 2011 Net Capital Warrants may be exercised on a cashless basis if the shares of common stock underlying the February 2011 Net Capital Warrants are not then registered pursuant to an effective registration statement. In the event the February 2011 Net Capital Warrants are exercised on a cashless basis, the Company will not receive any proceeds.

OXIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(UNAUDITED)

On March 4, 2011 the Company entered into a convertible demand promissory note with Bristol pursuant to which Bristol purchased an aggregate principal amount of $31,375 of convertible demand promissory notes for an aggregate purchase price of $25,000 (the “March 2011 Bristol Note”). The March 2011 Bristol Note is convertible at the option of the holder at any time into shares of common stock, at a price equal to $12.50.
Simultaneously with the issuance of the March 2011 Bristol Note, the Company issued Bristol a Series A Warrant (the “March 2011 Bristol Series A Warrants”) to purchase 1,255 shares of the Company’s common stock at a per share exercise price of $15.625, and a Series B Warrant (the “March 2011 Bristol Series B Warrants” and, together with the March 2011 Bristol Series A Warrants, (the “March 2011 Bristol Warrants”) to purchase 1,255 shares of the Company’s common stock at a per share exercise price of $18.75. The March 2011 Warrants are exercisable for up to seven years from the date of issue. The March 2011 Warrants may be exercised on a cashless basis if the shares of common stock underlying the March 2011 Warrants are not then registered pursuant to an effective registration statement. In the event the March 2011 Warrants are exercised on a cashless basis, the Company will not receive any proceeds.
On April 4, 2011 the Company entered into a convertible demand promissory note with Net Capital pursuant to which Net Capital purchased an aggregate principal amount of $31,375 of convertible demand promissory notes for an aggregate purchase price of $25,000 (the “April 2011 Net Capital Note”). The April 2011 Net Capital Note is convertible into shares of common stock of the Company, at a price equal to $12.50 per share. As of September, 2012, the April 2011 Net Capital Note had been converted into shares of the Company’s common stock.
Simultaneously with the issuance of the Net Capital Note, the Company issued Net Capital a Series A Warrant (the “April 2011 Net Capital Series A Warrants”) to purchase 1,255 shares of common stock of the Company at a per share exercise price of $15.625, and a Series B Warrant (the “April 2011 Net Capital Series B Warrants” and, together with the April 2011 Net Capital Series A Warrants, the “April 2011 Net Capital Warrants”) to purchase 1,255 shares of common stock of the Company at a per share exercise price of $18.75. The April 2011 Net Capital Warrants are exercisable for up to seven years from the date of issue. The April 2011 Net Capital Warrants may be exercised on a cashless basis if the shares of common stock underlying the April 2011 Net Capital Warrants are not then registered pursuant to an effective registration statement. In the event the April 2011 Net Capital Warrants are exercised on a cashless basis, we will not receive any proceeds.
On October 26, 2011 the Company entered into a convertible demand promissory note with Theorem pursuant to which Theorem purchased an aggregate principal amount of $200,000 of convertible demand promissory notes for an aggregate purchase price of $157,217 (the “October 2011 Theorem Note”). The October 2011 Theorem Note is convertible into shares of common stock of the Company, at a price equal to $12.50 per share.
Simultaneously with the issuance of the October 2011 Theorem Note, the Company issued Theorem a Series A Warrant (the “October 2011 Series A Warrant”) to purchase 40,000 shares of common stock of the Company at a per share exercise price of $15.625, and a Series B Warrant (the “October 2011 Series B Warrants” and, together with the October 2011 Series A Warrants, the “October 2011 Warrants”) to purchase 40,000 shares of common stock of the Company at a per share exercise price of $18.75. The October 2011 Warrants are exercisable for up to seven years from the date of issue. The October 2011 Warrants may be exercised on a cashless basis if the shares of common stock underlying the October 2011 Warrants are not then registered pursuant to an effective registration statement. In the event the October 2011 Warrants are exercised on a cashless basis, we will not receive any proceeds.
All of the foregoing securities were issued in reliance upon an exemption from the registration requirements pursuant to Section 4(2)4(a)(2) of the Securities Act of 1933, as amended.amended (the “Securities Act”) for the offer and sale of securities not involving a public offering, and Regulation D promulgated under the Securities Act.
 
On December 7, 2012,Contemporaneously with the execution and delivery of the SPA, the Company entered into, and made its initial $315,000 borrowing under,the Buyers executed and delivered a short-term loan agreement with two lendersRegistration Rights Agreement (the “Registration Rights Agreement”) pursuant to which it is permittedthe Company has agreed to borrow upprovide certain registration rights with respect to an aggregate of $350,000. The loans madethe Registrable Securities under the loan agreement are evidence by1933 Act and the Company’s notesrules and secured pursuant to a Security Agreement, that is junior to the Company’s existing security arrangements under the Company’s October 26, 2006 Debentures but cover the same assets of the Company.

OXIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(UNAUDITED)

Interest on the Notes is at the rate of 18% per annum, payable on the first day of each month until maturity on May 1, 2013. On April 1, 2013, the Company was required to pay 25.7143% of the Loan, with the remaining balance due on May 1, 2013.
The full principal amount of the Loans may be due upon default under the terms of the Loan Agreement, the Notes or the Security Agreement.
Under the Loan Agreement, the Company is required to issue 266.67 shares of its common stock for each $1,000 of Loans made. Accordingly, on December 7, 2012, the Company issued 84,000 shares of its common stock. Assuming the entire amounts of Loans permitted under the Loan Agreement are borrowed, the Company will issue 93,334 shares in connection with the Loan Agreement.
In March 2013, the Company entered into,regulations promulgated thereunder, and made an additional $35,000 borrowing under, a short-term loan agreement with two lenders the Company entered into in December 2012, pursuant to which it is permitted to borrow up to an aggregate of $350,000. The loans made under the loan agreement are evidence by the Company’s notes and secured pursuant to a Security Agreement, that is junior to the Company’s existing security arrangements under the Company’s October 26, 2006 Debentures but cover the same assets of the Company.applicable state securities laws.
 
Financing Agreement
 
On November 8, 2010, the Company entered into a financing arrangement with Gemini Pharmaceuticals, Inc., a product development and manufacturing partner of the Company, pursuant to which Gemini Pharmaceuticals made a $250,000 strategic equity investment in the Company and agreed to make a $750,000 purchase order line of credit facility available to the Company. The outstanding principal of all Advances under the Line of Credit will bear interest at the rate of interest of prime plus 2 percent per annum. There is $31,000 due on this credit line at June 30, 2016.2018.
 
3.            Stockholders' Equity
 
Common
4.            
Stockholders' Equity
Preferred Stock
 
In January 2015,On September 1, 2017, the Company agreed to issue 39,657authorized 2,000,000 shares of Series J Preferred Stock. Shares of Series J Preferred Stock will have the same voting rights as shares of common stock as a price protectionwith each share of Series J Preferred Stock entitled to a note holder that originally converted notesone vote at a pricemeeting of $2.50the shareholders of the Corporation. Shares of Series J Preferred Stock will not be entitled to receive any dividends, unless and continuesuntil specifically declared by our board of directors. The holders of the Series J Preferred Stock will participate, on an as-if-converted-to-common stock basis, in any dividends to hold these shares. These additional shares would have been issued if the conversion shares price was $1.75. As of December 31, 2015, 33,142 sharesholders of common stock. Each share of the Series J Preferred Stock is convertible into one share of our common stock have been issued and $247,000at any time at the option of interest expense was recorded for this issuance. During January 2016 the remaining 6,515 share were issued and $20,000 of interest expense was recorded.holder.
 
During the six months ending June 30, 2016,On September 1, 2017 the Company issued anaggregate of 12,580,183 shares of common stock to a total of 34 persons or entities 208,224 shares of Series J Preferred Stock in exchange for the conversion of debt in the total amount of $250,000.
On September 1, 2017 the Company issued a total of 700,278 shares of Series J Preferred Stock in exchange for the cancellation of debt in the total amount of $840,000.
On September 1, 2017 the Company issued 5,046 shares of Series J Preferred Stock upon the exercise of warrants on a cashless basis. The shares issued were exempt from the registration requirements of Section 5 of the Securities Act of 1933 (the “Act”) pursuant to Section 4(2) of the Act since the shares were issued to persons or entities closely associated with the Company and there was no public offering of the shares.
 
During the six months ending June 30, 2016,On September 1, 2017 the Company also issued an600,000aggregate of 2,022,230 shares of common stockSeries J Preferred Stock to a total of 17 personsone entity as payment for $720,000 of consulting services provided to the Company. The average valuation of these shares was $2.00 per share. These shares were also exempt from the registration requirements of Section 5 of the Act pursuant toSection 4(2) of the Act since the shares were also issued to persons closely associated with the Company and there was no public offering of the shares.

OXIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(UNAUDITED)

During the six months ending June 30, 2016, the Company also issued an aggregate of 4,612,341 shares of common stock to two executive officers of the Company in fulfilment of contractual rights held by the officers pursuant to their employment agreements.  These shares were also exempt from the registration requirements of Section 5 of the Act pursuant to Section 4(2) of the Act since the shares were also issued to persons closely associated with the Company and there was no public offering of the shares.
During the six months ending June 30, 2016, the Company also issued anaggregate of 4,275,186 shares of common stock to a total of 17 persons as payment for the conversion of certain note and the related accrued interest.  The conversion price of these shares was $0.40 per share. These shares were also exempt from the registration requirements of Section 5 of the Act pursuant toSection 4(2) of the Act since the shares were also issued to persons closely associated with the Company and there was no public offering of the shares.
 
Preferred StockIn December 2017, the Company converted 350,000 Series J shares of preferred stock into 350,000 shares of common stock.
 
On January 8, 2016 the Company entered into an Exchange Agreement with certain investors together holding 25,000 shares of Series H Preferred Stock and 1,666,667 shares of Series I Preferred Stock have agreed to convert all such shares of Preferred Stock into an aggregate of 4,075,000 shares of Common Stock upon successful completion by the Company of a $6 million financing.
5.            
4.            Stock Options and Warrants
 
Stock Options
 
Following is a summary of theThe following table summarizes stock option activity:transactions for the six months ended June 30, 2018:
 
 
 
Options
Outstanding
 
 
Weighted Average
Exercise Price
 
Outstanding as of December 31, 2015
  374,800 
 $4.88 
Granted
  - 
  - 
Forfeited
  - 
  - 
Exercised
  - 
  - 
Outstanding as of June 30, 2016
  374,800 
 $4.88 
 
 
Number of Options
 
 
Weighted Average Exercise Price
 
Outstanding, December 31, 2017
  1,246 
 $1,428.00 
Granted
  - 
  - 
Exercised
  - 
  - 
Expired
  - 
  - 
Outstanding, June 30, 2018
  1,246 
 $1,428.00 
Exercisable, June 30, 2018
  1,246 
 $1,428.00 
 
Warrants
Following is a summary of the warrant activity:
 
 
Warrants
Outstanding
 
 
Weighted Average
Exercise Price
 
Outstanding as of December 31, 2015
  12,525,721 
 $1.25 
Granted
  4,146,162 
  1.25 
Forfeited
  (339,932)
  1.25 
Exercised
  (12,610,183)
  1.25 
Outstanding as of June 30, 2016
  3,721,768 
 $1.25 
 

 
OXIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(UNAUDITED)Common Stock Warrants
 
6.            Subsequent EventsWarrant transactions for the six months ended June 30, 2018 are as follows:
 
 
 
Number of Warrants
 
 
Weighted Average Exercise Price
 
Outstanding at December 31, 2017:
  - 
 $- 
Granted
  1,694,440 
  4.58 
Forfeited
  - 
  - 
Exercised
  - 
  - 
Outstanding at June 30, 2018
  1,694,440 
 $4.58 
Exercisable at June 30, 2018
  1,694,440 
 $4.58 
6.            
Commitments and Contingencies
Leases
On September 1, 2017, the Company has entered into a three-year lease agreement for its office in Washington, D.C. In July 2016,addition to minimum rent, certain leases require payment of real estate taxes, insurance, common area maintenance charges and other executory costs. The Company recognizes rent expense under such arrangements on a straight-line basis over the effective term of each lease. This lease was terminated as of June 30, 2018.
Rent expense for the six months ended June 30, 2018 and 2017 was $54,000 and $6,000, respectively.
Employment Agreements
On February 14, 2018, the Company entered into the First Amendment to the Employment Agreement with Dr. Clarence-Smith, amending the Employment Agreement, dated September 1, 2017, between the Company and Dr. Clarence-Smith. Under the First Amendment, Dr. Clarence-Smith’s title has been revised to reflect her new position and she will be paid an annual salary of $500,000, paid in equal monthly installment. All other terms of her original Employment Agreement remain unchanged.
On February 14, 2018, the Company entered into a securitiesConsultant Agreement with Mr. Cataldo. The term of the Consultant Agreement lasts until August 31, 2020 and is terminable at will and is subject to automatic extension for successive one-year periods. Mr. Cataldo will be paid $41,666.67 per month during the term of the Consultant Agreement and will be entitled to participate in the Company’s bonus plans.
On February 15, 2018, the Company entered into an Executive Employment Agreement with Mr. Cross, pursuant to which Mr. Cross will be employed as the Company’s Chief Executive Officer.  The term of the Executive Employment Agreement is three years and is terminable at will by either the Company or Mr. Cross and subject to automatic extensions for successive one year periods. Mr. Cross will be paid an annual salary of $500,000, paid in equal monthly installment. Mr. Cross is also entitled to participate in the Company’s bonus plans. Under the Executive Employment Agreement, the Company has agreed that it will recommend to the Board that the Company grant Mr. Cross an option to purchase agreement with one accredited investor to sell 10% convertible debentures, with and an exercise price of $0.40, with an initial principal balance of $112,135 and warrants to acquire up to 280,3382,000,000 shares of the Company’s common stock at an exercise price equal to the fair market value of $0.45 per share.
In July 2016,each share as determined by the Company also issued anBoard as of the date of the grant. The stock option grant would vest according to the following schedule: (i) 34% of the shares on February 15, 2018, (ii) 33% of the shares on February 15, 2019, and (iii) 33% of the shares on February 15, 2020. Mr. Cross resigned as the aggregate of 1,026,019 shares of common stock to a total of three persons or entities as payment for the conversion of certain noteChief Executive Officer and the related accrued interest.  The conversion price of these shares was $0.40 per share. These shares were also exempt from the registration requirementsBoard of Section 5 of the Act pursuant toSection 4(2) of the Act since the shares were also issued to persons closely associated with the Company and there was no public offering of the shares.Directors effective July 2, 2018.
 
On July 15, 2015,
If any of our executive officers’ employment with us is terminated involuntarily, or any executive resigns with good reason as a result of a change in control, the Company entered intoexecutive will receive (i) all compensation and benefits earned through the date of termination of employment; (ii) a settlement agreement with one noteholder.  In accordance withlump-sum payment equal to the greater of (a) the bonus paid or payable to the executive for the year immediately prior to the year in which the change in control occurred and (b) the target bonus under the performance bonus plan in effect immediately prior to the year in which the change in control occurs; (iii) a 10% Convertible Debenture Due July 24, 2016, The Companylump-sum payment equivalent to the remaining base salary (as it was required pay accrued interest in case upon a conversioneffect immediately prior to the change in control) due to the executive from the date of involuntary termination to the end of the debt within three business daysterm of the employment agreement or one half of the executive’s base salary then in effect, whichever is the greater; and (iv) reimbursement for the conversion which did not occur.  As compensationcost of medical, life, disability insurance coverage at a level equivalent to that provided by us for a period expiring upon the default,earlier of (a) one year or (b) the time the executive begins alternative employment where said insurance coverage is available and offered to the executive.
7.            
Change of Accounting Method
Adoption of ASU 2017-11
In connection with the securities purchase agreements and debt transactions during and previous the year ended December 31, 2017, the Company issued allongeswarrants, to the noteholders forpurchase common stock with a total of $40,000, increasing the principal amountfive-year term. Upon issuance of the convertible notes.
In August 2016,warrants, the Company issued 1,115,000 sharesevaluated the note agreement to determine if the agreement contained any embedded components that would qualify the agreement as a derivative. The Company identified certain put features embedded in the warrants that potentially could result in a net cash settlement in the event of common stock to H.C. Wainwright and Co., LLC as payment for investment banking services provided to the Company.  
In August 2016,a fundamental transaction, requiring the Company entered intoto classify the warrants as a securities purchase agreement with one accredited investor to sell 10% convertible debentures up $1,000,000, with and an exercise pricederivative liability. The Company changed its method of $0.40, with an initial principal balance of $250,000accounting for the debt and warrants to acquire up to 2,500,000 sharesthrough the early adoption of the Company’s common stock at an exercise price of $0.45 per share.
7. ��          Restatement
The Company’s management determined that the Company needs to make adjustments to correct errors identified in the previously issued financial statementsrelated to the non-cash calculation of warranty liabilities.The error affects theperiods ending December 31, 2015, March 31, 2016, June 30, 2016, September 30, 2016 and December 31, 2016financial statements.
As a result of the error, the Company will recognize a decrease in the Change in Warrant Liability by $11,265,000 through December 31, 2016.
This change had no net effect on the balance sheet and cash flows from operations, investing or financing.
The following table presents the impact of the restatement adjustment on the Company’s Consolidated Statement of Operations forASU 2017-11 during the six months ended June 30, 2016.2018 on a retrospective basis. Accordingly, the Company recorded the warrant derivative and conversion option derivative liabilities to additional paid in capital upon issuance.
 
Liabilities and Stockholders:
 
As previously reported
 
 
Effects of restatement/ reclassification
 
 
Restated
 
 
 
 
 
 
 
 
 
 
 
Change in value of warrants and derivative liabilities
 $ 36,759,000 
 $ 25,494,000 
 $ (11,265,000)
Net Income
 $ 27,492,000 
 $ 16,227,000 
 $ (11,265,000)
Income per share – basic
 $ 1.35 
 $ 0.80 
 $ (0.85)
Income per share –diluted
 $ 1.22 
 $ 0.72 
 $ (0.50)
The following table provides a summary of the derivative liability activity as a result of the adoption of ASU 2017-11:
 
 
Consolidated Balance Sheet
 
 
 
December 31, 2017
 
 
 
Previously
Reported
 
 
 
Revisions
 
 
Revised
Report
 
Additional Paid in Capital
 $519,702,000 
 $1,603,000 
 $521,305,000 
Accumulated Deficit
 $(267,896,000)
 $(1,603,000)
 $(269,499,000)
 
 
Consolidated Statement of Operations
 
 
 
For the Three Months Ended June 30, 2017
 
 
 
Previously
Reported
 
 
 
Revisions
 
 
Revised
Report
 
Change in Warrant Liability
 $(367,000)
 $367,000 
 $- 
Earnings Per Share
 $(5.91)
 $0.77 
 $(5.14)
 
 
Consolidated Statement of Operations
 
 
 
For the Six Months Ended June 30, 2017
 
 
 
Previously
Reported
 
 
 
Revisions
 
 
Revised
Report
 
Change in Warrant Liability
 $2,376,000 
 $(2,376,000)
 $- 
Earnings Per Share
 $(15.34)
 $(7.08)
 $(22.42)
 
 

 
8.            
Subsequent Events
 Debentures
On August 2, 2018, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement with the purchasers identified on the signature pages thereto (individually, a “Purchaser,” and collectively, the “Purchasers”) pursuant to which the Company has issued to the Purchasers one year 10% Senior Convertible Debentures in an aggregate principal amount of $5,140,000 (the “Debentures”), which Debentures shall be convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a price of $2 per share.
Also on August 2, 2018, $3,315,141.74 of notes issued on January 22, 2018 were converted into the Debentures at the same terms as discussed above. In addition, the Company utilized a portion of these proceeds to repay $4.411 million of the notes issued on January 12, 2018.

Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
 
Some of the statements in the Form 10-Q are forward-looking statements about what may happen in the future. 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 the Form 10-Q 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,” “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 review carefully all information, including the discussion of risk factors under “Item 1A: Risk Factors” and “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Form 10-K for the year ended December 31, 2015.2017.  Any forward-looking statements in the Form 10-Q 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-Q to reflect subsequent events or circumstances.
 
Throughout this Quarterly Report on Form 10-Q, the terms “OXIS,“GTBP,” “we,” “us,” “our,” “the company” and “our company” refer to OXIS International,GT Biopharma, Inc., a Delaware corporation formerly known as Oxis International, Inc., DDI Pharmaceuticals, Inc. and Diagnostic Data, Inc, together with our subsidiaries.
 
Overview
 
OXIS International, Inc.We area clinical stage biopharmaceutical company predominantly focused on the development and commercialization of immuno-oncology products based off our proprietary Tri-specific Killer Engager (TriKE), through its wholly owned subsidiary Oxis Biotech, Inc, is an immuno-oncology company withTetra-specific Killer Engager (TetraKE) and bi-specific Antibody Drug Conjugate (ADC) technology platforms. Our TriKE and TetraKE platforms generate proprietary moieties designed to harness and enhance the cancer killing abilities of a robust technology platform consisting of bispecific and trispecific scFv constructs, full-length antibodies, proprietary drug payloads, proprietary antibody-drug linkers, dual-drug payload antibody-drug conjugates (ADCs), bispecific targeted ADCs, andpatient’s own natural killer, or NK, cells. Once bound to a NK cell, our moieties are designed to enhance the NK cell and T-cellprecisely direct it to one or more specifically-targeted proteins (tumor antigens) expressed on a specific type of cancer, ultimately resulting in the cancer cell’s death. TriKEs and TetraKEs are made up of recombinant fusion proteins, can be designed to target certain tumor antigens on hematologic malignancies, sarcomas or solid tumors and do not require patient-specific customization. They are designed to be dosed in a common outpatient setting similar to modern antibody directed cell-mediated cytotoxic (ADDCs) agents.therapeutics and are expected to have reasonably low cost of goods. Our ADC platform can generate product candidates that are bi-specific, ligand-directed single-chain fusion proteins that, we believe, represent the next generation of ADCs.
 
OXS-1550Our most advanced bi-specific ADC, which targets CD19+ and/or CD22+ hematological malignancies, is in the Phase 2 component of a Phase 1/2 Non-Hodgins Lymphoma (NHL)/Acute Lymphocytic Leukemia (ALL) trial which is an open-label, investigator-led study. We expect to be in a position to begin a First-in-Class, Phase 1 trial in CD33+ hematologic malignancies for our most advanced TriKE product candidate in the second half of 2018. We are initially targeting certain hematologic malignancies as we believe our product candidates may have certain advantages over existing and other in-development products. We are also focused on developing TetraKE product candidates designed to target the larger solid tumor population and are working towards beginning clinical trials in 2019.
 
OXS-1550 is a bispecificOur TriKE product candidates are single-chain, tri-specific scFv recombinant fusion protein-drug conjugateproteins composed of the variable regions of the heavy and light chains (or heavy chain only) of anti-CD19 and anti-CD22anti-CD16 antibodies, andwild-type or a modified form of diphtheria toxinIL-15 and the variable regions of the heavy and light chains of an antibody designed to precisely target a specific tumor antigen. We utilize the NK stimulating cytokine human IL-15 as its cytotoxic drug payload.  CD19a crosslinker between the two scFvs which is designed to provide a self-sustaining signal leading to the proliferation and activation of NK cells thus enhancing their ability to kill cancer cells mediated by antibody-dependent cell-mediated cytotoxicity (ADCC). Our second TriKE product candidate, OXS-C3550, is a membrane glycoprotein presentnext-generation version of OXS-3550 containing a modified CD16 component.

Our TetraKE product candidates are single-chain fusion proteins composed of human single-domain anti-CD16 antibody, wild-type IL-15 and the variable regions of the heavy and light chains of two antibodies that are designed to target two specific tumor antigens expressed on specific types of cancer cells. An example of a TetraKE product candidate is OXS-1615 which is designed to target EpCAM and CD133 positive solid tumors. EpCAM is found on many solid tumor cells of epithelial origin and CD133 is a marker for cancer stem cells. OXS-1615 is designed to enable a patient’s NK cells to kill not only the heterogeneous population of cancer cells found in many solid tumors but also kill the cancer stem cells that can be responsible for recurrences.
Our TriKEs and TetraKEs are designed to act by binding to a patient’s NK cells and a specific tumor antigen enabling an immune synapse between the now IL-15-enhanced NK cell and the targeted cancer cell. The formation of an immune synapse can induce NK cell activation which can lead to the death of the cancer cell. We believe the self-sustaining signal caused by our IL-15 cross-linker may enable prolonged and enhanced proliferation and activation of NK cells similar to the increased proliferation of T-cells caused by 41BB-L or CD28 intracellular domains in CAR-T therapy but without the need to enhance the patient’s NK cells ex vivo.
We are using our TriKE and TetraKE platforms with the intent to bring to market immuno-oncology products that can treat a range of hematologic malignancies, sarcoma and solid tumors. The platforms are scalable and we are putting processes in place to be able to produce IND-ready moieties in a timely manner after a specific TriKE or TetraKE conceptual design. After conducting market and competitive research, specific moieties can then be advanced into the clinic on our own or through potential collaborations with larger companies. We are also evaluating, in conjunction with our Scientific Advisory Board, additional moieties designed to target different tumor antigens. We believe our TriKEs and TetraKEs may have the ability, if approved for marketing, to be used on a stand-alone basis, augment the current monoclonal antibody therapeutics, be used in conjunction with more traditional cancer therapy and potentially overcome certain limitations of current chimeric antigen receptor, or CAR-T, therapy.
OXS-3550 is our first TriKE product candidate. The OXS-3550 IND will focus on AML, the most common form of adult leukemia with 21,000 new cases expected in 2018 alone (American Cancer Society). These patients typically receive frontline therapy, usually chemotherapy, including cytarabine and an anthracycline, a therapy that has not changed in over 40 years. About half will have relapses and require alternative therapies. In addition, MDS incidence rates have dramatically increased in the population of the United States from 3.3 per 100,000 individuals from 2001-2004 to 70 per 100,000 annually, MDS is especially prevalent in elderly patients that have a median age of 76 years at diagnosis. The survival of patients with MDS is poor due to decreased eligibility, as a result of advanced age, for allogeneic hematopoietic cell transplantation (Allo-HSCT), the only curative MDS treatment (Cogle CR. Incidence and Burden of the Myelodysplastic Syndromes. Curr Hematol Malig Rep. 2015; 10(3):272-281). We believe that OXS-3550 could serve as a relatively safe, cost-effective, and easy-to-use therapy for resistant/relapsing AML and MDS and could also be combined with chemotherapy as frontline therapy thus targeting the larger patient population.
The IND for OXS-3550 was filed in June 2017 by the University of Minnesota. FDA requested that additional preclinical toxicology be conducted prior to initiating clinical trials. The FDA also requested some additional information and clarifications on the surfacemanufacturing (CMC) and clinical packages. The requested additional information and clarifications have been completed and are being incorporated by us into the IND in eCTD format. We filed the IND amendment in June 2018 and expect to be in a position to begin a Phase 1 clinical trial in the second half of all stages2018.
We also believe our bi-specific, ligand-directed single-chain fusion proteins are examples of B-lymphocyte development,the next generation of ADCs. We believe OXS-1550 has certain properties that could result in competitive advantages over recently approved ADC products targeting leukemias and is also expressed on most B-cell mature lymphoma cellslymphomas and/or have utility other niche populations. In a Phase 1 trial, of nine patients that achieved adequate blood levels, in two heavily pretreated patients a continuous partial remission (PR) and leukemia cells.  CD22 is a glycoprotein expressed on B-lineage lymphoid precursors, including precursor acute lymphoblastic leukemia, and often is co-expressed with CD19 on mature B-cell malignancies such as lymphoma.complete remission (CR) were observed. One patient, who had failed multiple previous treatment regimens, has been in remission since early 2015.

 
OXS-1550 targets cancer cells expressing the CD19 receptor or CD22 receptor or both receptors.  When OXS-1550 binds to cancer cells, the cancer cells internalize OXS-1550, and are killed due to the action of drug's cytotoxic diphtheria toxin payload.  OXS-1550 has demonstrated successis being evaluated in a Phase 1 human2 component of an investigator-led Phase 1/2 clinical trial in patients with relapsed/refractory B-cell lymphomaNHL/ALL patients. We recently assembled a Bi-Specific ADC Advisory Board to work with us to assess and interpret the OXS-1550 pre-clinical and clinical data, including an interim review of the Phase 1/2 study. Eighteen patients have been enrolled to date, including 12 NHL and six ALL patients. At the time of the interim review, 13 patients met the evaluation criteria, including nine NHL and four ALL patients. More than 50% of patients (seven of 13) exhibited a clinical benefit, defined as stable disease, partial remission or leukemia.complete remission at Day 29. Of the seven patients, one demonstrated a complete remission (CR), one demonstrated a partial remission (PR) and five demonstrated stable disease (SD).
 
Oxis began enrollingThe efficacy signal was more prominent in ALL patients with 75% (three of four) exhibiting clinical benefit including one CR, one PR and one SD. In the NHL population, four of nine patients exhibited SD. Adverse events were mostly grade 1 and 2 and reversible. One patient had a grade 4 low platelet count, two patients had a grade 3 increase in liver function tests, or LFTs, and one patient had a Phase 1/Phase 2grade 3 capillary leak.
The Company currently expects final data for this trial of OXS-1550 duringto be available in the secondfourth quarter of 2016. The FDA-approved clinical trial2018 or the first quarter of 2019.
Our initial and ongoing work is being conducted in collaboration with the Masonic Cancer Center at the University of Minnesota's MasonicMinnesota under research agreements led by Dr. Jeffrey Miller, the Deputy Director and Dr. Daniel Vallera, Director, Section of Molecular Cancer Center. There are currently 32 patients whoTherapeutics.Through these research agreements we have participatedaccess to a range of capabilities and resources such as construct design and functional testing, early single-chain fusion protein GMP production, scientific and clinical expertise and experience including early phase human testing. Dr. Miller is a recognized leader in the clinical trial. The six new patients bringfield of NK cell and IL-15 biology and their therapeutic potential. We have exclusive rights to 32 the number of patients who have participated in the clinical trial. All the new patientsTriKE and TetraKE platforms and are given an approved increased dosage of OXS-1550.

generating additional intellectual property around specific moieties.
 
Trispecific Killer Engager (TriKE) Technology
The TriKE platform is designed toWe also have a CNS portfolio of three product candidates consisting of what we believe are innovative reformulations and/or repurposing of existing therapies. We believe these therapeutic agents may address the issue of making NK cells antigen specific by modifying a bispecific antibody platform and adding a third signal by inserting a modified IL-15 cross linker. IL-15 is known as a chief activator of NK cellscertain unmet medical needs that can enhance an anti-cancer immune response. This new trispecific platform is unique because it simultaneously delivers a priming, expansion, killing,lead to improved efficacy while addressing tolerability and activating signal directly tosafety issues that may have limited the immune cellusefulness of the original approved drug. Our CNS drug candidates may address disease states such as it is in contact with the cancer cell. We are now working currently working toward FDA approved clinical trials to demonstrate TriKE safetychronic neuropathic pain, myasthenia gravis and efficacy. Unlike standard anti-cancer antibodies, we believe that TriKE can mediate specificity and deliver an immune expansion signal locally (instead of systemically) which has the potential to diminish toxicity.
OXS-4235, p62/SQSTM1 (Sequestosome-1) Inhibitor Drug Development Programmotion sickness.
 
In humans, the p62/SQSTM1 protein is encoded by the SQSTM1 gene.  The p62/SQSTM1 protein isJanuary 2018, we completed a multifunctional protein involvedstudy in autophagy, cell signaling, tumorigenesis, and plays an important role at the crossroad between autophagy and cancer.  Cell-cell interactions between multiple myeloma cells and bone marrow stromal cells activate signaling pathways that result in enhanced multiple myeloma cell growth, osteoclast formation, and inhibition of osteoblast differentiation.
Multiple myeloma remains an incurable malignancy with systematic morbidity and a median survival of 3-5 years.  Multiple myeloma is characterized by aberrant proliferation of terminally differentiated plasma cells and impairment in apoptosis capacity.  Due to the interactions between myeloma cells and cells of the bone marrow microenvironment, the osteolytic bone disease associated with myeloma is inextricably linked with tumor progression.  High incidence of bone metastasis in multiple myeloma patients is frequently associated with severe bone pain and pathological bone fracture.  Activated osteoclast levels and suppressed osteoblast levels are thought to play a role in multiple myeloma associated osteolytic bone disease.
While a diverse spectrum of novel agents has shown therapeutic potentialhealthy volunteers for GTP-004, our product candidate for the treatment of multiple myeloma including bortezomib, lenalidomide and arsenic trioxide, high relapse rates and drug resistance continue to plague these therapies.  Thus, novel targets and new therapeutics for the treatmentsymptoms of multiple myeloma aremyasthenia gravis. We also announced the initiation of critical importancean investigator led study in healthy volunteers for improved patient outcomes.
It has been demonstrated that the ZZ domain of the p62/SQSTM1 protein is responsible for increased multiple myeloma cell growth and associated osteoclast mediated bone disease.  Dr. Xiang-Qun Xie and colleagues at ID4 Pharma LLC have developed novel chemical compounds (e.g., OXS-4235) which inhibit osteoclastic bone destruction in multiple myeloma.  Oxis Biotech has exclusively licensed rights to OXS-4235 and other compoundsGTP-011, for the treatmentprevention of multiple myelomamotion sickness, with data expected in the second half of 2018. We expect to take advantage of our CNS portfolio by generating what we believe to be proof-of-concept data and/or achieving other milestones, making what we believe are cost effective go/no-go decisions, and associated osteolytic bone disease.
OXS-2175, Triple-Negative Breast Cancer Drug Development Program
OXS-2175 is a small molecule therapeutic candidate which has shown promise in early-stage preclinical in vitro and in vivo models of triple-negative breast cancer.  Oxis Biotech is investigating OXS-2175 formulated as an ADC therapy for the treatment of triple-negative breast cancer.
Therapeutic Antibody-Drug Conjugates Drug Development Program
Antibody-drug conjugates (ADCs) are a new class of highly potent biopharmaceutical drugs designed as a targeted therapy for the treatment of cancer.  By combining the unique targeting capabilities of monoclonal antibodiespursuing strategic transactions with the cancer-killing ability of cytotoxic drugs, antibody-drug conjugates allow sensitive discrimination between healthy and diseased tissue.

commercialization-oriented pharmaceutical companies.
 
Recent Developments
 
Restructuring AgreementsFinancing
 
EffectiveIn January 8, 2016,22, 2018, the Company entered into agreementsa Securities Purchase Agreement (“SPA”) with the fourteen accredited investors (individually, a “Buyer” and collectively, the “Buyers”) pursuant to effectwhich the restructuringCompany has agreed to issue to the Buyers senior convertible notes in an aggregate principal amount of $7,760,510 (the “Restructuring”“Notes”), which Notes shall be convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”), and five-year warrants to purchase the Company’s Common Stock representing the right to acquire an aggregate of certain unregistered debt and equity securitiesapproximately 1,694,440 shares of Common Stock (the “Warrants”).
Pursuant to the terms of SPA the Notes are subject to an original issue discount of 10% resulting in proceeds to the Company of $7,055,000 from the transaction. The Notes are due on July 22, 2018. The Notes are convertible, at the option of the Company that will resultBuyers, at any time prior to payment in an issuance of up to 28,389,193full, into shares of common stock of the Company (the “Common Stock”).  In connection with the Restructuring, the Company entered into a note conversion agreement (the “Conversion Agreement”), a warrant exercise agreement (the “Exercise Agreement”) and a preferred stock exchange agreement (the “Exchange Agreement” and, collectively with the Conversion Agreement and the Exercise Agreement, the “Restructuring Agreements”), pursuant to which the Company and certain of the Company’s creditors and investors have agreed that (i) certain outstanding debt of the Company (collectively, the “Debt”) will be converted into shares of Common Stock; (ii) certain outstanding warrants to purchase shares of capital stock of the Company (collectively, the “Warrants”) will be exercised on a cashless basis for shares of Common Stock;  and (iii) certain outstanding shares of Series H Convertible Preferred Stock of the Company (the “Series H Preferred Stock”) and Series I Convertible Preferred Stock of the Company (the “Series I Preferred Stock” and together with the Series H Preferred Stock, the “Preferred Stock”) will be exchanged for shares of Common Stock.  The Conversion Agreement, Exercise Agreement and Exchange Agreement and the transactions contemplated thereby are described in further detail below.  
Under the Conversion Agreement, certain creditors of the Company holding an aggregate of approximately $15,056,000 (including accrued interest and penalties) of outstanding Debt agreed to convert all such outstanding Debt into shares of Common Stock at a conversion price of $1.25$4.58 per share upon successful completion by the Company of a $6 million financing. However, since the financing did not occur by March 15, 2016, the (“Conversion Agreement was terminated.
In addition, under the Exercise Agreement, certain investors together holding warrantsPrice”). According to purchase 12,269,240 shares of capital stock of the Company exchanged such warrants and received one share of Common Stock in exchange for each share of capital stock of the Company underlying the warrants.
Finally, under the Exchange Agreement, certain investors together holding 25,000 shares of Series H Preferred Stock and 1,666,667 shares of Series I Preferred Stock have agreed to convert all such shares of Preferred Stock into an aggregate of 4,075,000 shares of Common Stock upon successful completion by the Company of a $6 million financing.
The Restructuring Agreements terminated the warrants and any anti-dilution protection thereunder.  In addition, all creditor and investor parties to the Restructuring Agreements provided a waiver of any and all past defaults and breaches under the Warrants and Preferred Stock, in consideration of the shares issued pursuant to the Restructuring Agreements.
License Agreements
University of Minnesota License Agreement. Oxis executed an exclusive worldwide license agreement with the Regents of the University of Minnesota, to further develop and commercializecancer therapies using Trispecific Killer Engager (TriKE) technology developed by researchers at the university to target NK cells to cancer.Under the terms of the note agreement, OXIS receives exclusive rightsthe Notes are subject to conduct researchcertain adjustments depending upon the price and to develop, make, use, sell, and import TriKe technology worldwide for the treatmentstructure of any disease, state or condition in humans. OXIS shall own all permits, licenses, authorizations, registrations and regulatory approvals required or granted by any governmental authority anywherea subsequent financing, including a qualified financing with gross proceeds of at least $20 million, as defined in the world that is responsible for the regulation of products such as the TriKe technology, including without limitation the Food and Drug Administration in the United States 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.
Daniel A. Vallera, Ph.D. License Agreement. Oxis executed an exclusive worldwide license agreement with Daniel A. Vallera, Ph.D. and his associate (jointly "Dr. Vallera"), to further develop and commercialize DT2219ARL (OXS-1550), a novel therapy for the treatment of various human cancers. Under the terms of the agreement, OXIS receives exclusive rights to conduct research and to develop, make, use, sell, and import DT2219ARL worldwide for the treatment of any disease, state or condition in humans. OXIS 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 DT2219ARL, including without limitation the Food and Drug Administration in the United States and the European Agency for the Evaluation of Medicinal Products in the European Union. Under the agreement, Dr. Vallera will receive an upfront license fee, royalty fees, and certain milestone payments.agreements.
 

 
ID4 Pharma, LLC License Agreement. Pursuant to a patent license agreement with ID4 Pharma LLC, dated January 2, 2015 (the “ID4 License Agreement”), we received an exclusive, worldwide license to certain intellectual property, including intellectual property related to treating a p62-mediated disease including but not limited to multiple myeloma and other cancers. The terms of this license require us to pay ID4 Pharma royalties equal to three percent (3%) of net sales of products and twenty-five percent royalty of net sublicensing revenues. The license will expire upon expirationUpon the purchase of the last patent contained inNotes, the licensed patent rights, unless terminated earlier. We may terminateBuyers received Warrants to purchase 1,694,440 shares of Common Stock. Such Warrants are exercisable for (5) years from the licensing agreement with ID4 Pharma by providing ID4 Pharma with a 30 day written notice.
Oxis shall paydate the following cash amountsshares underlying the Warrants are freely saleable. The initial Exercise Price is $4.58. According to ID4 upon the attainment of the following milestones:
(i)   filing of an investigational new drug application with a competent regulatory authority anywhere in the world -- $50,000;
(ii)    Initiation of Phase I Human Clinical Trial -- $50,000;
(iii)   Initiation of Phase II Human Clinical Trial -- $100,000;
(iv)    Initiation of pivotal Phase III Human Clinical Trial -- $250,000; and
(v)    Receipt of the first marketing approval -- $250,000
MultiCell Immunotherapeutics, Inc. (MCIT) License Agreement. Oxis licensed exclusive rights to three antibody-drug conjugates (ADCs) that MCIT will prepare for further evaluation by Oxis as prospective therapeutics for the treatment of triple-negative breast cancer, and multiple myeloma and associated osteolytic bone disease. Under the terms of the warrant agreement, MCIT will develop three ADC product candidatesthe Warrants are subject to certain adjustments depending upon the price and structure of a subsequent financing, including a qualified financing with gross proceeds of at least $20 million, as defined in the agreements.
The issuance of the Notes and Warrants were made in reliance on the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) for the offer and sale of securities not involving a public offering, and Regulation D promulgated under the Securities Act.
Contemporaneously with the execution and delivery of the SPA, the Company and the Buyers executed and delivered a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which contain Oxis’ lead drug candidates OXS-2175 and OXS-4235.  Oxis paid MCIT a license fee of $500,000 and will reimburse MCIT upthe Company has agreed to $1.125 million for its development costs to make the three ADCs exclusively licensed to Oxis.  Assuming all clinical development milestones are achieved and manufacturingprovide certain registration rights with respect to the three ADCs purchased, Oxis will pay MCITRegistrable Securities under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws.
On August 2, 2018, $3,315,141.74 of notes issued on January 22, 2018 were converted into new Debentures and $4,410,748.14 was repaid in cash.
On August 2, 2018, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement with the purchasers identified on the signature pages thereto (individually, a “Purchaser,” and collectively, the “Purchasers”) pursuant to which the Company has issued to the Purchasers 10% Senior Convertible Debentures in an additional sumaggregate principal amount of $22.75 million and pay$5,140,000 (the “Debentures”), which Debentures shall be convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a royaltyprice of 3% of net yearly worldwide sales upon marketing approval of the ADCs. $2 per share.
 
Results of Operations
 
Comparison of the Three Months Ended June 30, 20162018 and 2015
License revenue
During the three months ended June 30, 2016 and 2015, we received $-0- and $20,000 of licensing revenue related to a Vitamin D producing line of sun care and skin care products under a license from ESLLC.2017
 
Research and Development Expenses
 

During the three months ended June 30, 20162018 and 2015,2017, we incurred $250,000$3,251,000 and $-0-$241,000 of research and development expenses. Research and development costs increased due primarily to the addition of new employees, consultant costs and preclinical and clinical expenses and include $2.9 million of the expenses related to non-cash compensation. We anticipate our direct clinical costs to increase in second half of 2018 upon the initiation of a Phase 1 clinical trial of our most advanced TriKe product candidate, OXS-3550.
 
Selling, general and administrative expenses
 
During the three months ended June 30, 20162018 and 2015,2017, we incurred $1,871,000$1,906,000 and $1,451,000$1,044,000 of selling, general and administrative expenses.  The increase in selling, general and administrative expenses is primarily attributable to an increase in$.4 million of professional fees license fees investor relations and stock compensation.
Change in value$0.5 million of warrant and derivative liabilities
During the three months ended June 30, 2016, we recorded a gain as a result of a decrease in the fair market value of outstanding warrants and beneficial conversion features of $5,263,000, compared to a gain of $29,140,000 during the three months ended June 30, 2015. This reduction is a result of a decrease in the fair market value of outstanding debt and equity securities accounted for as derivative liabilities and the conversion of warrants to common stock.loan costs.
 
Interest Expense
 
Interest expense was $1,599,000$3,924,000 and $849,000$1,178,000 for the three months ended June 30, 20162018 and 20152017 respectively.  The increase is primarily due to an increase in the non-cash amortization of the debt issuance costs associatedoriginal issue discount and the value of warrants issued with the convertible debentures and demand notes payable and expenses related the issuance of additional sharesJanuary 2018 financing.
 
Comparison of the Six Months Ended June 30, 20162018 and 2015
License revenue
During the six months ended June 30, 2016 and 2015, we received $-0- and $27,000 of licensing revenue related to a Vitamin D producing line of sun care and skin care products under a license from ESLLC.2017
 
Research and Development Expenses
 
During the six months ended June 30, 20162018 and 2015,2017, we incurred $475,000$5,593,000 and $250,000$2,438,000 of research and development expenses. Research and development costs increased due primarily to the addition of new employees, consultant costs and preclinical and clinical expenses and include $6.0 million of the expenses related to non-cash compensation. We anticipate our direct clinical costs to increase in second half of 2018 upon the initiation of a Phase 1 clinical trial of our most advanced TriKe product candidate, OXS-3550.

 
Selling, general and administrative expenses
 
During the six months ended June 30, 201631, 2018 and 2015,2017, we incurred $5,547,000$6,724,000 and $3,019,000$385,000 of selling, general and administrative expenses.  The increase in selling, general and administrative expenses is primarily attributable to an increase in$1.3 million of professional fees, license fees$1.2 million of public and investor relations expenses and stock compensation.$1.0 million of loan costs.
 
Change in value of warrant and derivative liabilities
During the six months ended June 30, 2016, we recorded a gain as a result of a decrease in the fair market value of outstanding warrants and beneficial conversion features of $25,494,000, compared to a gain of $17,874,000 during the six months ended June 30, 2015.
Interest Expense
 
Interest expense was $3,245,000$6,855,000 and $8,288,000$4,698,000 for the six months ended June 30, 20162018 and 20152017 respectively.  The decreaseincrease is primarily due to a decrease in the non-cashcurrent interest expense relates to the amortization of the debt issuance costs associatedoriginal issue discount and the value of warrants issued with the convertible debentures and demand notes payable, non-cash interest related to the beneficial conversion feature of new debt and expenses related the issuance of additional shares

January 2018 financing.
 
Liquidity and Capital Resources
 
OnThe 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.
The financial statements of the Company have been prepared on a consolidatedgoing-concern basis, we hadwhich 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 negative cash flows from operations since its inception and has an accumulated deficit of $289 million and cash equivalents of $355,000 at June 30, 2015 and $15,666,000 of current liabilities (of which $15,174,000 represented current cash obligations and $492,000 represented non-cash warrant liabilities and accrued expenses).  As a result, on a cash basis,$1.1 million as of June 30, 2016, we had2018. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales 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 working capital deficit of $14,819,000.  In addition, we have an accumulated deficit of $118,190,000 through June 30, 2016.going concern.
 
In January 2016,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, and licensing and/or marketing arrangements with pharmaceutical companies. Management is also implementing cost saving efforts, including reduction in executive salaries. 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 six months from the date the financial statements are issued; however, there can be no assurance in this regard. If the Company entered into convertible debentures totaling $150,000.
In May 2016, the Company entered into convertible debentures totaling $1,390,044.
In July 2016, the Company entered into convertible debentures totaling$112,135.
In August 2016, the Company entered into convertible debentures totaling$250,000.is unable to secure adequate additional funding in 2018, its business, operating results, financial condition and cash flows may be materially and adversely affected.
 
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 Consolidation
The consolidated financial statements contained in this report include the accounts of OXIS International, Inc. and its subsidiaries.  All intercompany balances and transactions have been eliminated.
Revenue Recognition
Product Revenue
The Company manufactures, or has manufactured on a contract basis, fine chemicals and nutraceutical products, which are its primary products to be sold to customers. Revenue from the sale of its products, including shipping fees, will be recognized when title to the products is transferred to the customer which usually occurs upon shipment or delivery, depending upon the terms of the sales order and when collectability is reasonably assured. Revenue from sales to distributors of its products will be recognized, net of allowances, upon delivery of product to the distributors. According to the terms of individual distributor contracts, a distributor may return product up to a maximum amount and under certain conditions contained in its contract. Allowances are calculated based upon historical data, current economic conditions and the underlying contractual terms.
License Revenue
License arrangements may consist of non-refundable upfront license fees and various performance or sales milestones and future product royalty payments.  Some of these arrangements are multiple element arrangements.  Non-refundable, up-front fees that are not contingent on any future performance by us, and require no consequential continuing involvement on our part, are recognized as revenue when the license term commences and the licensed data, technology and/or compound is delivered.  We defer recognition of non-refundable upfront fees if we have continuing performance obligations without which the technology, right, product or service conveyed in conjunction with the non-refundable fee has no utility to the licensee that is separate and independent of our performance under the other elements of the arrangement.  In addition, if we have continuing involvement through research and development services that are required because our know-how and expertise related to the technology is proprietary to us, or can only be performed by us, then such up-front fees are deferred and recognized over the period of continuing involvement.

OXIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(UNAUDITED)
  
Long-Lived Assets
 
Our long-lived assets include property, plant and equipment, capitalized costs of filing patent applications and goodwill and other assets.  We evaluate our long-lived assets for impairment in accordance with ASC 360, whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.  Estimates of future cash flows and timing of events for evaluating long-lived assets for impairment are based upon management’s judgment.  If any of our intangible or long-lived assets are considered to be impaired, the amount of impairment to be recognized is the excess of the carrying amount of the assets over its fair value.

 
Applicable long-lived assets are amortized or depreciated over the shorter of their estimated useful lives, the estimated period that the assets will generate revenue, or the statutory or contractual term in the case of patents.  Estimates of useful lives and periods of expected revenue generation are reviewed periodically for appropriateness and are based upon management’s judgment.  Goodwill and other assets are not amortized.
 
Certain Expenses and Liabilities
 
On an ongoing basis, management evaluates its estimates related to certain expenses and accrued liabilities.  We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of liabilities that are not readily apparent from other sources.  Actual results may differ materially from these estimates under different assumptions or conditions.
 
Derivative Financial Instruments
During the normal course of business, from time to time, we issue warrants as part of a debt or equity financing. We do not enter into any derivative contracts for speculative purposes. We recognize all derivatives as assets or liabilities measured at fair value with changes in fair value of derivatives reflected as current period income or loss unless the derivatives qualify for hedge accounting and are accounted for as such. During the six months ended June 30, 2016 and 2015, we issued warrants to purchase 3,475,111 and 376,000 shares of common stock, respectively, in connection with equity transactions. In accordance with ASC Topic 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Stock” (“ASC 815-40”), the value of these warrants is required to be recorded as a liability, as the holders have an option to put the warrants back to us in certain events, as defined.
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 June 30, 2016.2018.
 
Item 3.  Quantitative and Qualitative Disclosures About Market Risk
 
This company qualifies as a smaller reporting company, as defined in 17 C.F.R. §229.10(f) (1) and is not required to provide information by this Item.
 
Item 4. Controls and Procedures
 
Evaluation of Disclosure Controls and Procedures
 
Our principal executive officer and principal financial officer evaluated the effectiveness of our “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the United States Securities Exchange Act of 1934, as amended), as of June 30, 2016.2018.  Based on that evaluation we have concluded that our disclosure controls and procedures were not effective as of June 30, 2016.2018.
 

OXIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(UNAUDITED)

Management’s Report on Internal Control over Financial Reporting
 
Management is responsible for establishing and maintaining adequate internal control over financial reporting.  Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, a company’s principal executive and principal financial officers and effected by a company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
 
 ●Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
 
 ●Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
 
 ●Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
 

All internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
 
As of June 30, 2016,2018, management of the company conducted an assessment of the effectiveness of the company’s internal control over financial reporting.  In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework.  In the course of the assessment, material weaknesses were identified in the company’s internal control over financial reporting.
 
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
 
Management determined that fundamental elements of an effective control environment were missing or inadequate as of June 30, 2016.2018.  The most significant issues identified were: 1) lack of segregation of duties due to very small staff and significant reliance on outside consultants, and 2) risks of executive override also due to lack of established policies, and small employee staff.  Based on the material weaknesses identified above, management has concluded that internal control over financial reporting was not effective as of June 30, 2016.2018.  As the company’s operations increase, the company intends to hire additional employees in its accounting department.
 
Changes in Internal Control over Financial Reporting
 
Other than as described above, no changes in our internal control over financial reporting were made during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 
PART II.  OTHER INFORMATION
 
Item 1.  Legal Proceedings
 
In May, 2015, Aaion Partners Inc, a consulting firm, filed a breach of contract action against the Company in the Superior Court of California County of Los Angeles, Case No:  BC581098.  The lawsuit seeks payment under a consulting agreement.  In July, 2015, the Company filed a cross-claim against Aaion Partners Inc. for breach of contract and tort claims. In December 2015, we settled this claim for $150,000 to be made in three cash payments and 11,429 shares of restricted common stock. The Company paid $50,000 of the cash due and issued the stock owed. As of this filing, the Company has not made the 2 remaining cash payments and is in default in the settlement agreement.
On June 23, 2016, the Company waswe were served with a complaint filed in the Circuit Court of the 13th13th Judicial Circuit in and for Hillsborough County, FL,Florida, Case No. 16-CA-004791. Suit was brought against the Company16-CA-004791, by Lippert/Heilshorn and Associates, Inc. whoLippert/Heilshorn and Associates, Inc. is alleging they areit is owed compensation for consulting services provided to the company. They areus and is seeking payment of $73,898. The Company hasWe have engaged legal counsel to answer the complaint.
 
On February 15, 2017, MultiCell Immunotherapeutics, or MultiCell, filed an arbitration proceeding against us with the American Health Lawyers Association, Claim #3821.  MultiCell is seeking $207,783 plus interest and costs of arbitration pursuant to alleged contract rights against us under a research agreement between MultiCell and us.  Following a hearing held September 1, 2017, the arbitrator awarded MultiCell the payment amount of $207,783 plus interest in the amount of $34,699. We have engaged legal counsel to advise us in connection with this matter. 
Item 1A.  Risk Factors
 
This company qualifies as a “smaller reporting company” as definedInformation regarding risk factors appears under “Risk Factors” included in 17 C.F.R. §229.10(f)(1), and is not required to provide information by this Item.Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2017. There have been no material changes from the risk factors previously disclosed in the above-mentioned periodic report.
 
Item 2.  Unregistered Sales of Securities and Use of Proceeds
 
On August 2, 2018, GT Biopharma, Inc. (the “Company”) entered into a Securities Purchase Agreement with the purchasers identified on the signature pages thereto (individually, a “Purchaser,” and collectively, the “Purchasers”) pursuant to which the Company has issued to the Purchasers 10% Senior Convertible Debentures in an aggregate principal amount of $5,140,000 (the “Debentures”), which Debentures shall be convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a price of $2 per share.
In January 2015,22, 2018, the Company entered into a Securities Purchase Agreement (“SPA”) with the fourteen accredited investors (individually, a “Buyer” and collectively, the “Buyers”) pursuant to which the Company has agreed to issue 39,657to the Buyers senior convertible notes in an aggregate principal amount of $7,760,510 (the “Notes”), which Notes shall be convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”), and five-year warrants to purchase the Company’s Common Stock representing the right to acquire an aggregate of approximately 1,694,440 shares of Common Stock (the “Warrants”).
Pursuant to the terms of SPA the Notes are subject to an original issue discount of 10% resulting in proceeds to the Company of $7,055,000 from the transaction. The Notes are due on July 22, 2018. The Notes are convertible, at the option of the Buyers, at any time prior to payment in full, into shares of common stock as a price protection to a note holder that originally converted notesof the Company at a price of $2.50$4.58 per share (“Conversion Price”). According to the terms of the note agreement, the notes are subject to certain adjustments depending upon the price and continues to hold these shares. These additional shares would have been issued ifstructure of a subsequent financing, including a qualified financing with gross proceeds of at least $20 million, as defined in the conversion shares price was $1.75. As of December 31, 2015, 33,142 shares of common stock have been issued and $247,000 of interest expense was recorded for this issuance. During January 2016 the remaining 6,515 share were issued and $20,000 of interest expense was recorded.agreements.
 
DuringUpon the six months ending June 30, 2016,purchase of the Company issued anNotes, the Buyers received Warrants to purchase aggregate of 12,580,1831,694,440 shares of common stockCommon Stock. Such Warrants are exercisable for (5) years from the date the shares underlying the Warrants are freely saleable. The initial Exercise Price is $4.58. According to a total of 34 persons or entities in exchangethe terms of the cancellationwarrant agreement, the notes are subject to certain adjustments depending upon the price and structure of warrantsa subsequent financing, including a qualified financing with gross proceeds of at least $20 million, as defined in the agreements.
The issuance of the Notes and Warrants were made in reliance on a cashless basis.  The shares issued were exempt from the registration requirements ofexemption provided by Section 54(a)(2) of the Securities Act of 1933, as amended (the “Act”“Securities Act”) for the offer and sale of securities not involving a public offering, and Regulation D promulgated under the Securities Act.
Contemporaneously with the execution and delivery of the SPA, the Company and the Buyers executed and delivered a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to Section 4(2) of the Act since the shares were issued to persons or entities closely associated withwhich the Company has agreed to provide certain registration rights with respect to the Registrable Securities under the 1933 Act and there was no public offering of the shares.rules and regulations promulgated thereunder, and applicable state securities laws.
 
During the six months ending June 30, 2016, the Company alsoOn August 2, 2018, $3,315,141.74 of notes issued anaggregate of 2,022,230 shares of common stock to a total of 17 persons as payment for consulting services provided to the Company.  The average valuation of these shareson January 22, 2018 were converted into new Debentures and $4,410,748.14 was $2.00 per share. These shares were also exempt from the registration requirements of Section 5 of the Act pursuant toSection 4(2) of the Act since the shares were also issued to persons closely associated with the Company and there was no public offering of the shares.
During the six months ending June 30, 2016, the Company also issued an aggregate of 4,612,341 shares of common stock to two executive officers of the Companyrepaid in fulfilment of contractual rights held by the officers pursuant to their employment agreements.  These shares were also exempt from the registration requirements of Section 5 of the Act pursuant to Section 4(2) of the Act since the shares were also issued to persons closely associated with the Company and there was no public offering of the shares.
During the six months ending June 30, 2016, the Company also issued anaggregate of 4,275,186 shares of common stock to a total of 17 persons as payment for the conversion of certain note and the related accrued interest.  The conversion price of these shares was $0.40 per share. These shares were also exempt from the registration requirements of Section 5 of the Act pursuant toSection 4(2) of the Act since the shares were also issued to persons closely associated with the Company and there was no public offering of the shares.cash.
 

 
In July 2016, the Company entered into a securities purchase agreement with one accredited investor to sell 10% convertible debentures, with and an exercise price of $0.40, with an initial principal balance of $112,135 and warrants to acquire up to 280,338 shares of the Company’s common stock at an exercise price of $0.45 per share.
In July 2016, the Company also issued anaggregate of 1,026,019 shares of common stock to a total of three persons or entities as payment for the conversion of certain note and the related accrued interest.  The conversion price of these shares was $0.40 per share. These shares were also exempt from the registration requirements of Section 5 of the Act pursuant toSection 4(2) of the Act since the shares were also issued to persons closely associated with the Company and there was no public offering of the shares.
In August 2016, the Company issued 1,115,000 shares of common stock to H.C. Wainwright and Co., LLC as payment for investment banking services provided to the Company.  
In August 2016, the Company entered into a securities purchase agreement with one accredited investor to sell 10% convertible debentures up $1,000,000, with and an exercise price of $0.40, with an initial principal balance of $250,000 and warrants to acquire up to 2,500,000 shares of the Company’s common stock at an exercise price of $0.45 per share.
Item 3.  Defaults Upon Senior Securities.Securities.
 
There have been no material changes from the disclosure provided in Part I, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2015.None
 
Item 4.  Mine Safety Disclosures
 
None.
 
Item 5. Other Information.
 
None.
 
Item 6.  Exhibits
 
Exhibit Number DescriptionHerewithFormSEC File No.Filing Date
3.1
Certificate of ExhibitAmendment to the Certificate of Incorporation of the Registrant, effective as of July 19, 2017.8-K000-0809203/15/18
10.1
Securities Purchase Agreement by and among the Company and the Buyers, dated January 22, 2018.8-K000-0809201/23/18
10.2
Form of Registration Rights Agreement by and among the Company and the Buyers, dated January 22, 2018.8-K000-0809201/23/18
10.3
Form of Note.8-K000-0809201/23/18
10.4
Form of Warrant.8-K000-0809201/23/18
10.5
Executive Employment Agreement, dated as of February 15, 2018, between the Company and Cross.8-K000-0809202/21/18
10.6
First Amendment to the Employment Agreement, dated as of February 14, 2018, between the Company and Dr. Clarence-Smith.8-K000-0809202/21/18
10.7
Consultant Agreement, dated as of February 14, 2018, between the Company and Mr. Cataldo.8-K000-0809202/21/18
10.8
Form of 10% Senior Convertible Debenture 8-K 000-08092 08/03/18 
10.9
Security Purchase Agreement
8-K 000-0809208/03/18 
10.10
Stock Pledge Agreement
X   
31.1
 Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.X
31.2
 Certification of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a), promulgated under the Securities and Exchange Act of 1934, as amended.X
32.1*
 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).X
32.2*
 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).X
Exhibit No.Description
101.INS XBRL Instance DocumentDocument.
101.SCH XBRL Taxonomy Extension Schema Document.
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB XBRL Taxonomy Extension Label Linkbase Document.
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.
*
This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Act of 1934, or otherwise subject to the liability of that Section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

 
SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 GT Biopharma, Inc.
 
    
Dated: February 28,August 14, 2018
By:
/s/ Shawn Cross
Dr. Raymond Urbanski  
 
  Shawn Cross
Dr. Raymond Urbanski  		 
  Chief Executive Officer and Chairman of the Board
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
Name
 
Position
 
Date
     
/s/ Shawn CrossDr. Raymond Urbanski
Shawn Cross
 Chief Executive Officer and Chairman of the Board February 28,August 14, 2018
Dr. Raymond Urbanski
/s/ Steven Weldon
Steven Weldon
 Chief Financial Officer (Principal Financial Officer), and Director February 28,August 14, 2018
Steven Weldon
/s/ Dr. Kathleen Clarence-Smith
Dr. Kathleen Clarence-Smith
 Vice Chairwoman and Director February 28,August 14, 2018
Dr. Kathleen Clarence-Smith
/s/Anthony J. Cataldo
Anthony J. Cataldo
 Director February 28,August 14, 2018
Anthony J. Cataldo
/s/ Geoffrey Davis
Geoffrey Davis
 Director February 28,August 14, 2018
Geoffrey Davis
/s/ Dr. John Bonfiglio
DirectorAugust 14, 2018
Dr. John Bonfiglio
/s/ Dr. Peter Kiener
DirectorAugust 14, 2018
Dr. Peter Kiener
 
 
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