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Ampio Pharmaceuticals, Inc. (AMPE) SEC Filing 10-Q Quarterly Report for the period ending Thursday, March 31, 2022

SEC Filings

AMPE Quarterly Reports

Ampio Pharmaceuticals, Inc.

CIK: 1411906 Ticker: AMPE

Exhibit 99.1

Ampio Pharmaceuticals Reports Fourth-Quarter and Full-Year 2021 Financial Results and Operational Highlights

Cash and Cash Equivalents of $34 Million Expected to Fund Current Operations into 2H 2023

Company to host Conference Call Tuesday, March 29, 2022, at 4:30pm EDT

ENGLEWOOD, CO, March 29, 2022 Ampio Pharmaceuticals, Inc. (NYSE American: AMPE), a biopharmaceutical company focused on the advancement of immunomodulatory therapies for the treatment of pain resulting from osteoarthritis in the knee and potentially other articular joints, today reported financial results and operational highlights for the fourth quarter and year ended December 31, 2021.

“We have made significant progress on core objectives, including the release of positive Phase 3 data and the submission of a Type C meeting request to the FDA,” said Mike Martino, Chairman and CEO of Ampio. “Additionally, we have secured incremental liquidity that improves financial strength and is expected to fund current operations into the second half of 2023. This provides strategic options as we continue discussions with the FDA and potential partners. Further, we have strengthened our corporate governance, compliance, and clinical development expertise through the expansion of our Board of Directors and appointments of key leadership positions.”

Ampio is pleased to provide recent operational highlights that are summarized below.

OAK Clinical Development

·

Phase 3 Study, AP-013: The AP-013 study, a Phase 3 trial designed to evaluate pain and function in patients with the target condition of severe osteoarthritis of the knee (OAK), was designed to confirm the efficacy observed in the first pivotal study, AP-003-A, and support an Ampion Biologics Licensing Application (BLA). The AP-013 study was found to have been impacted by COVID-19 using a blinded sensitivity analysis. To mitigate this impact, a modified-intent-to-treat (mITT) population is proposed to evaluate efficacy in AP-013.

·

Analysis of AP-013 Data: AP-013 analysis of the three efficacy analysis populations demonstrated:

o

In the mITT population, Ampion demonstrated a statistically significant reduction in pain (p=0.042) and trended toward improvement in function versus saline control.

o

In the Per Protocol population of AP-013, Ampion demonstrated statistically significant reduction in pain (p = 0.020) and a statistically significant improvement in function (p = 0.027) versus saline control.


The following information was filed by Ampio Pharmaceuticals, Inc. (AMPE) on Tuesday, March 29, 2022 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2022

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                    

Commission File Number: 001-35182

cid:image001.jpg@01CDF343.4BBAE3B0

AMPIO PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware

26-0179592

(State or other jurisdiction of
incorporation or organization)

(IRS Employer
Identification No.)

373 Inverness Parkway, Suite 200

Englewood, Colorado 80112

(Address of principal executive offices, including zip code)

(720) 437-6500

(Registrant’s telephone number, including area code)

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

Title of each class

    

Trading Symbol

    

Name of each exchange on which registered:

Common stock, par value $0.0001 per share

AMPE

NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated Filer

 

 

 

 

Non-Accelerated Filer

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes       No  

As of May 6, 2022, there were 227,186,867 outstanding shares of common stock, par value $0.0001 per share, of the registrant.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as forward-looking statements. All statements included or incorporated by reference in this report, other than statements of historical fact, that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. These statements appear in a number of places, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements represent our reasonable judgment about the future based on various factors and using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause our actual results and financial position to differ materially from those contemplated by such statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts, and use words such as “anticipate,” “forecast,” “suggest,” believe,” “continue,” “ongoing,” “opportunity,” “predicts”, “seek,” “believe,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “should,” “plan,” “potential,” “project,” “will,” “would” and other words of similar meaning, or the negatives of such terms or other variations. These include, but are not limited to, statements relating to the following:

projected operating or financial results, including anticipated cash flows used in operations;
expectations regarding clinical trials for Ampion, capital expenditures, research and development expenses and other payments;
our beliefs and assumptions relating to our liquidity position, including, but not limited to, our ability to obtain near-term additional financing;
our beliefs, assumptions and expectations about the regulatory approval pathway for Ampion including, but not limited to, our ability to obtain regulatory approval for Ampion in a timely manner, or at all; and
our ability to identify strategic partners and enter into beneficial license, co-development, collaboration or similar arrangements.

Any or all of our forward-looking statements may turn out to be wrong. They may be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors including, among others:

the results of the independent internal investigation we announced on May 16, 2022, as well as the time and expense associated with the investigation and related matters;
the actual and perceived effectiveness of Ampion, and how Ampion compares to competitive products;
the progress and results of clinical trials for Ampion and additional costs or delays associated therewith;
our ability to receive regulatory approval for and sell the products that we are developing for the treatment of severe osteoarthritis of the knee (“OAK”) or COVID-19;
the fact that we have incurred significant losses since inception, expect to incur net losses for at least the next several years and may never achieve or sustain profitability;
our ability to fund our operations, including our ability to access funding through our “at-the-market” equity offering or through other equity or debt offerings;
our ability to retain key employees, consultants, and advisors and to attract, retain and motivate qualified personnel;
our reliance on third parties to conduct our clinical trials resulting in costs or delays that prevent us from successfully commercializing Ampion;
competition for patients in conducting clinical trials, delaying product development and straining our limited financial resources;
our ability to navigate the regulatory approval process in the U.S. and other countries, and our success in obtaining required regulatory approvals for Ampion on a timely basis;
our need to rely on third party manufacturers if we receive regulatory approval for Ampion but do not have redundant manufacturing capabilities;
commercial developments for products that compete with Ampion;
the rate and degree of market acceptance and clinical utility of Ampion or any of our other product candidates for which we receive marketing approval;

3

the possibility that, even if Ampion is approved for commercialization, the U.S. Food and Drug Administration (“FDA”) may impose limitations on its use or reduce the approved indications on the product label;
expenses and costs we will incur to comply with FDA post-approval requirements if we, or our collaborators, obtain marketing approval for Ampion;
government restrictions on pricing reimbursement, as well as other healthcare payor cost-containment initiatives;
our ability to obtain approval to develop, manufacture and sell our products in global markets;
our ability to realize the investment we made in our manufacturing facility if Ampion does not receive marketing approval;
adverse effects and the unpredictable nature of the ongoing COVID-19 pandemic;
the strength, enforceability and duration of our intellectual property protection, and the eligibility of our patent portfolio for FDA market exclusivity;
our success in avoiding infringement of the intellectual property rights of others;
adverse developments in our research and development activities;
potential liability if any of our product candidates cause illness, injury or death, or adverse publicity from any such events;
our ability to operate our business efficiently, manage capital expenditures and costs (including general and administrative expenses) and obtain financing when required; and
our expectations with respect to future licensing, partnering or other strategic activities.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on the expectations, estimates, projections, beliefs and assumptions of our management, based on information currently available to management, all of which are subject to change. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, changes in circumstances and other factors that are difficult to predict and many of which are outside our control, any of which could cause our actual results and the timing of certain events to differ materially and adversely from those expressed or implied by such forward-looking statements. Additional factors that could cause or contribute to such differences include, but are not limited to, those described in the section entitled “Risk Factors” in Part I, Item 1A of the Form 10-K. These risks are not exhaustive. Other sections of this Annual Report include additional factors that could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. 

In addition, there may be other factors that could cause our actual results to be materially different from the results referenced in the forward-looking statements, some of which are included elsewhere in this report, including, but not limited to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 29, 2022 (the “2021 Annual Report”), particularly in the “Risk Factors” sections of each report, that could cause actual results or events to differ materially from the forward-looking statements that we make herein. Many of these factors will be important in determining our actual future results. Consequently, no forward-looking statement should be relied upon. Our actual future results may vary materially from those expressed or implied in any forward-looking statements. All forward-looking statements contained in this report are qualified in their entirety by this cautionary statement. Forward-looking statements speak only as of the date they are made, and we disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of this report, except as otherwise required by applicable law.

This Quarterly Report on Form 10-Q includes trademarks for Ampion®, which are protected under applicable intellectual property laws and are our property. Solely for convenience, our trademarks and trade names referred to in this Quarterly Report on Form 10-Q may appear without the ® or TM symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights to these trademarks and trade names.

4

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

AMPIO PHARMACEUTICALS, INC.

Condensed Balance Sheets

(unaudited)

March 31, 

December 31, 

    

2022

    

2021

Assets

 

  

 

  

Current assets

 

  

 

  

Cash and cash equivalents

$

28,837,000

$

33,892,000

Prepaid expenses and other

 

1,070,000

 

1,740,000

Total current assets

 

29,907,000

 

35,632,000

Fixed assets, net

 

2,302,000

 

2,564,000

Right-of-use asset, net

577,000

629,000

Total assets

$

32,786,000

$

38,825,000

Liabilities and Stockholders’ Equity

 

  

 

  

Current liabilities

 

  

 

  

Accounts payable and accrued expenses

$

5,208,000

$

4,811,000

Lease liability-current portion

 

318,000

 

311,000

Total current liabilities

 

5,526,000

 

5,122,000

Lease liability-long-term

 

533,000

 

614,000

Warrant derivative liability

 

4,474,000

 

5,805,000

Total liabilities

 

10,533,000

 

11,541,000

Commitments and contingencies (Note 5)

 

  

 

  

Stockholders’ equity

 

  

 

  

Preferred Stock, par value $0.0001; 10,000,000 shares authorized; none issued

 

 

Common Stock, par value $0.0001; 300,000,000 shares authorized; shares issued and outstanding - 227,186,867 as of March 31, 2022 and 227,325,381 as of December 31, 2021

 

23,000

 

23,000

Additional paid-in capital

 

245,468,000

 

244,863,000

Accumulated deficit

 

(223,238,000)

 

(217,602,000)

Total stockholders’ equity

 

22,253,000

 

27,284,000

Total liabilities and stockholders’ equity

$

32,786,000

$

38,825,000

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

5

AMPIO PHARMACEUTICALS, INC.

Condensed Statements of Operations

(unaudited)

Three Months Ended March 31, 

    

2022

    

2021

    

Operating expenses

 

  

 

  

 

Research and development

$

3,687,000

$

2,296,000

General and administrative

 

3,283,000

 

1,523,000

Total operating expenses

 

6,970,000

 

3,819,000

Other income

 

  

 

  

Interest income

 

3,000

 

1,000

Derivative gain

 

1,331,000

 

151,000

Total other income

 

1,334,000

 

152,000

Net loss

$

(5,636,000)

$

(3,667,000)

Net loss per common share:

 

  

 

  

Basic

$

(0.02)

$

(0.02)

Diluted

$

(0.03)

$

(0.02)

Weighted average number of common shares outstanding:

Basic

226,083,328

195,387,047

Diluted

226,110,693

200,752,267

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

6

AMPIO PHARMACEUTICALS, INC.

Condensed Statements of Stockholders’ Equity

(unaudited)

Additional

Total

Common Stock

Paid-in

Accumulated

Stockholders'

    

Shares

    

Amount

    

Capital

Deficit

    

Equity

Balance at December 31, 2020

 

193,378,996

$

19,000

$

218,020,000

$

(200,527,000)

$

17,512,000

Issuance of common stock for services

54,052

80,000

80,000

Share-based compensation, net of forfeitures

 

 

 

166,000

 

166,000

Stock options exercised, net

129,500

33,000

33,000

Shares held back in settlement of tax obligation for shares issued in connection with restricted stock awards

(28,562)

(40,000)

(40,000)

Warrants exercised, net

306,705

114,000

114,000

Issuance of common stock in connection with the "at-the-market" equity offering program

1,848,437

2,705,000

2,705,000

Offering costs related to the issuance of common stock in connection with the "at-the-market" equity offering program

(126,000)

(126,000)

Net loss

 

 

 

(3,667,000)

 

(3,667,000)

Balance at March 31, 2021

195,689,128

$

19,000

$

220,952,000

$

(204,194,000)

$

16,777,000

Balance at December 31, 2021

227,325,381

23,000

244,863,000

(217,602,000)

27,284,000

Share-based compensation, net of forfeitures

 

 

 

716,000

 

 

716,000

Shares held back in settlement of tax obligation for shares issued in connection with restricted stock awards

(138,514)

(79,000)

(79,000)

Offering costs related to the issuance of common stock and warrants in connection with the registered direct offering

(32,000)

(32,000)

Net loss

 

 

 

 

(5,636,000)

 

(5,636,000)

Balance at March 31, 2022

227,186,867

$

23,000

$

245,468,000

$

(223,238,000)

$

22,253,000

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

7

AMPIO PHARMACEUTICALS, INC.

Condensed Statements of Cash Flows

(unaudited)

    

Three Months Ended March 31, 

    

    

2022

    

2021

    

Cash flows used in operating activities

Net loss

$

(5,636,000)

$

(3,667,000)

Adjustments to reconcile net loss to net cash used in operating activities:

Share-based compensation, net of forfeitures

 

716,000

 

166,000

Depreciation and amortization

 

262,000

 

294,000

Issuance of common stock for services

 

 

80,000

Derivative (gain) loss

 

(1,331,000)

 

(151,000)

Changes in operating assets and liabilities:

(Increase) decrease in prepaid expenses and other

 

670,000

 

(651,000)

Increase (decrease) in accounts payable and accrued expenses

 

397,000

 

(199,000)

Decrease in lease liability

 

(22,000)

 

(19,000)

Net cash used in operating activities

 

(4,944,000)

 

(4,147,000)

Cash flows used in investing activities

Purchase of fixed assets

 

 

(81,000)

Net cash used in investing activities

 

 

(81,000)

Cash flows from financing activities

Proceeds from sale of common stock in connection with the "at-the-market" equity offering program

 

 

2,705,000

Costs related to sale of common stock in connection with the "at-the-market" equity offering program

 

 

(126,000)

Proceeds from sale of common stock and warrants in connection with the registered direct offering

114,000

Costs related to the sale of common stock and warrants in connection with the registered direct offering

(32,000)

Shares held back in settlement of tax obligation for shares issued in connection with restricted stock awards

(79,000)

Other

(7,000)

Net cash (used in) provided by financing activities

 

(111,000)

 

2,686,000

Net change in cash and cash equivalents

 

(5,055,000)

 

(1,542,000)

Cash and cash equivalents at beginning of period

 

33,892,000

 

17,346,000

Cash and cash equivalents at end of period

$

28,837,000

$

15,804,000

 

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

8

AMPIO PHARMACEUTICALS, INC.

Notes to Condensed Financial Statements

(unaudited)

Note 1 – The Company and Summary of Significant Accounting Policies

Ampio Pharmaceuticals, Inc. (“Ampio” or the “Company”) is a pre-revenue stage biopharmaceutical company focused on the research, development and advancement of immunomodulatory therapies for the treatment of pain from osteoarthritis.

Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States for interim financial information and with the instructions of the SEC on Quarterly Reports on Form 10-Q and Article 8 of Regulation S-X. Accordingly, such financial statements do not include all of the information and disclosures required by GAAP for complete financial statements. In the opinion of management, the financial statements include all adjustments necessary, which are of a normal and recurring nature, for the fair presentation of the financial position and of the results of operations and cash flows of the Company for the periods presented.

These financial statements should be read in conjunction with the audited financial statements and accompanying notes thereto for the year ended December 31, 2021 included in the Company’s 2021 Annual Report. The results of operations for the interim period shown in this report are not necessarily indicative of the results that may be expected for any other interim period or for the full year. The information as of and for the three months ended March 31, 2022 is unaudited. The balance sheet at December 31, 2021 was derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company has no off-balance-sheet concentrations of credit risk, such as foreign exchange contracts, option contracts or foreign currency hedging arrangements. The Company consistently maintains its cash and cash equivalent balances in the form of bank demand deposits, United States federal government backed treasury securities and fully liquid money market fund accounts with financial institutions that management believes are creditworthy. The Company periodically monitors its cash positions with, and the credit quality of, the financial institutions with which it invests. During the three months ended March 31, 2022, and as consistent with prior reporting periods, the Company maintained balances in excess of federally insured limits.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses, and related disclosures in the financial statements and accompanying notes. The Company bases its estimates on historical experience and on assumptions believed to be reasonable under the circumstances. Actual results could differ materially from those estimates.

Significant items subject to such estimates and assumptions primarily include the Company’s projected current and long-term liquidity, the clinical trial accrual, projected useful lives and potential impairment of fixed assets. The Company develops these estimates using its judgment based upon the facts and circumstances known to it at the time.

9

Liquidity / Going Concern

We are a pre-revenue stage biopharmaceutical company that has incurred an accumulated deficit of $223.2 million as of March 31, 2022. We expect to generate continued operating losses for the foreseeable future as the Ampio board of directors is considering strategic alternatives for Ampio and Ampion, which may include the continued development and advancement of Ampion, capital raising, licensing and other partnering opportunities, positioning the Company for a strategic transaction or other alternative(s).

As of March 31, 2022, we had $28.8 million of cash and cash equivalents. Based on our current cash position and projection of operating expenses and capital expenditures, we believe we will have sufficient liquidity to fund operations into the second half of 2023. Our cash resources and our capital needs are based upon management estimates as to future operations and expense, which involve significant judgment. Additionally, given that the Ampio board of directors is considering strategic alternatives, our forecasts regarding the sufficiency of our liquidity is based upon maintaining our current operations. Accordingly, we may exhaust our available cash and cash equivalents earlier than presently anticipated and may require more capital more quickly than presently anticipated.

Additional financing may not be available in the amount or at the time we need it or may not be available on acceptable terms or at all. We may obtain future additional financing by incurring indebtedness or from an offering of our equity securities or either of these. If we raise additional equity financing, our stockholders may experience significant dilution of their ownership interests and the value of shares of our common stock could decline. Our efforts to raise additional funds from the sale of equity may be hampered by the currently depressed trading price of our common stock. If we raise additional equity financing, new investors may demand rights, preferences, or privileges senior to those of existing holders of common stock.

Based on the above, these existing and ongoing factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying unaudited interim financial statements were prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

These financial statements do not include any separate adjustments relating to the recovery of recorded assets or the classification of liabilities, which adjustments may be necessary in the future should the Company be unable to continue as a going concern.

Adoption of Recent Accounting Pronouncements

The Company has not adopted any recent accounting pronouncements during the three months ended March 31, 2022, as none were deemed to be applicable.

Recent Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-06, “Debt (Subtopic 470-20); Debt with Conversion and Other Options and Derivatives and Hedging (Subtopic 815-40) Contracts in Entity’s Own Equity”. The updated guidance is part of the FASB’s simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. Consequently, more convertible debt instruments will be reported as single liability instruments with no separate accounting for embedded conversion features. The ASU 2020-06 also removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for the exception. In addition, ASU 2020-06 also simplifies the diluted net income per share calculation in certain areas. The updated guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted for periods beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-06 on the Company’s financial statements and has decided to wait to implement ASU 2020-06 until its effective date.

This Quarterly Report on Form 10-Q does not discuss recent pronouncements that are not anticipated to have a current and/or future impact on or are unrelated to the Company’s financial condition, results of operations, cash flows or disclosures.

10

Note 2 – Prepaid Expenses and Other

Prepaid expenses and other balances as of March 31, 2022 and December 31, 2021 are as follows:

    

    

March 31, 2022

December 31, 2021

Deposits

$

565,000

$

884,000

Unamortized commercial insurance premiums

212,000

465,000

Professional fees

87,000

235,000

Maintenance service contracts

63,000

Clinical trial inventory

72,000

Other receivable

19,000

16,000

Other

124,000

68,000

Total prepaid expenses and other

$

1,070,000

$

1,740,000

Note 3 – Fixed Assets

Fixed assets are recorded based on acquisition cost and once placed in service, are depreciated utilizing the straight-line method over their estimated economic useful lives. Leasehold improvements are accreted over the shorter of the estimated economic life or related lease term. Fixed assets, net of accumulated depreciation and amortization, consist of the following:

Estimated

Useful Lives

    

 (in Years)

    

March 31, 2022

December 31, 2021

Leasehold improvements

 

10

$

6,075,000

$

6,075,000

Manufacturing facility/clean room

 

3 - 8

 

2,984,000

 

2,984,000

Lab equipment and office furniture

 

5 - 8

 

1,739,000

 

1,739,000

Fixed assets, gross

10,798,000

10,798,000

Accumulated depreciation

(8,496,000)

(8,234,000)

Fixed assets, net

$

2,302,000

$

2,564,000

Depreciation and amortization expense for the respective periods is as follows:

Three Months Ended March 31, 

    

2022

    

2021

    

Depreciation and amortization expense

$

262,000

$

294,000

11

Note 4 – Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses as of March 31, 2022 and December 31, 2021 are as follows:

    

March 31, 2022

December 31, 2021

    

Accounts payable

$

1,582,000

$

427,000

Clinical trials

2,919,000

2,995,000

Professional fees

 

302,000

 

510,000

Accrued compensation

292,000

389,000

Commercial insurance premium financing

 

 

269,000

Other

113,000

221,000

Accounts payable and accrued expenses

$

5,208,000

$

4,811,000

Commercial Insurance Premium Financing Agreement

In June 2021, the Company entered into an insurance premium financing agreement for $916,000, with a term of nine months and an annual interest rate of 3.57%. Under the terms and provisions of the agreement, the Company was required to make principal and interest payments totaling $82,000 per month over the remaining term of the agreement. The outstanding obligation for the Company’s annual insurance premiums were paid in full as of March 31, 2022.

Note 5 - Commitments and Contingencies

Key Clinical Research Trial Obligations

Please see Part II, Item 5 of this Form 10-Q for information regarding an internal investigation relating to our clinical studies.

Osteoarthritis of the Knee​ ​

AP-013 study

In December 2020, the Company entered into an initial contract with a CRO in reference to the AP-013 study database totaling $1.4 million. The contractual provisions required an initial retainer of $315,000, which was applied to study expenses as further defined by the contract during the first three months ended March 31, 2022. The Company entered into a change order to the initial contract in April 2022 totaling $0.7 million which reflects the estimated final costs to close out the study with expected completion in the next three to five months.

Inhaled treatment for COVID-19 patients

AP-018 study and AP-019 study

In March 2021, the Company entered into a contract with a CRO totaling $318,000 in reference to a Phase 1 study for at-home treatment utilizing inhaled Ampion to treat patients with Long-COVID, or prolonged respiratory symptoms due to COVID-19 (the “AP-018 study”). The contractual provisions required an initial retainer of $105,000 to be applied to future study expenses as further defined by the contract. Subsequent to March 2021, the Company agreed to a contractual amendment of $1.0 million. As of March 31, 2022, the contract is substantially complete and any future services to be performed are deemed to be minimal.

12

In June 2021, the Company entered into a contract with a CRO totaling $2.5 million in reference to a multicenter Phase 2 clinical trial, using inhaled Ampion in the treatment of respiratory distress due to COVID-19 (the “AP-019 study”). The contractual provisions required an initial retainer of $300,000 to be applied to study expenses as further defined by the contract. The contractual amount was later amended by $0.9 million. As such, the revised contractual commitment for the AP-019 study is $3.4 million as of March 31, 2022. Enrollment of the AP-019 study was terminated on May 3, 2022, as no beneficial effect of nebulized Ampion could be documented. The Company will pay for contractually obligated services rendered and expenses incurred through the date of finalization of the study. The CRO will refund any unused portion of the retainer. As of March 31, 2022, the Company expects to spend $0.5 million related to future services expected to be performed under this contract and accordingly, does not expect any refund of any unused portion of the retainer.

Intravenous (“IV”) treatment for COVID-19 patients

AP-017 study

In December 2020, the Company entered into a contract with a CRO totaling $1.8 million in reference to a multicenter Phase 2 clinical trial utilizing IV Ampion in the treatment of patients with complications arising from COVID-19 (the “AP-017 study”). The contractual provisions required an initial retainer of $345,000 to be applied to study expenses as further defined by the contract. The Company stopped the trial after an interim enrollment of 35 subjects, which resulted in a favorable contractual adjustment of $0.5 million to reflect the lower study enrollment. As such, the revised contractual commitment for the AP-017 study is $1.3 million as of March 31, 2022. The Company has an outstanding future commitment of $324,000 as of March 31, 2022, which reflects future services related to finalizing the study.

Employment Agreements

In October 2021, the Company entered into three employment agreements that expire in October 2024 and in November 2021, the Company entered into one employment agreement that expires in November 2022. These employment agreements call for initial base salaries ranging from $335,000 to $550,000. The employment agreements provide that the employee is entitled to a discretionary bonus. Additionally, the employee is entitled to a severance payment in the event the Company terminates employee’s employment without Cause, or employee terminates his or her employment with Good Reason.

Related Party Research Agreements

In February 2022, the Company entered into a sponsored research agreement with Trauma Research, LLC, an entity owned by one of the Company’s directors. The agreement totals $400,000 for research activities to be performed over the next year. In addition, the Company also entered into an agreement with that director to provide research services. The agreement totals $250,000, which is to be paid in four equal installments payable quarterly over the one-year term. As of March 31, 2022, commitments for future services expected to be rendered for the research and research service agreements total $358,000 and $208,000, respectively.

13

Facility Lease

In December 2013, the Company entered into a 125-month non-cancellable operating lease for office space and a manufacturing facility. The effective date of the lease was May 1, 2014. The initial base rent of the lease was $23,000 per month. The total base rent over the term of the lease is approximately $3.3 million, which includes rent abatements and leasehold incentives. The Company adopted the FASB issued ASC 842, “Leases (Topic 842)” effective January 1, 2019. With the adoption of ASC 842, the Company recorded an operating right-of-use (“ROU”) asset and an operating lease liability on its balance sheet. The ROU asset represents the Company’s right to use the underlying asset for the lease term and the lease obligation represents the Company’s commitment to make the lease payments arising from the lease. ROU lease assets and obligations are recognized at the commencement date based on the present value of remaining lease payments over the lease term. As the Company’s lease does not provide an implicit rate, the Company used an estimated incremental borrowing rate of 5.75% based on the information available at the commencement date in determining the present value of the lease payments. Lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectations regarding the terms. The lease liability is classified both as current in part and long-term on the balance sheet.

The following table provides a reconciliation of the Company’s remaining undiscounted payments for its facility lease and the carrying amount of the lease liability disclosed on the balance sheet as of March 31, 2022:

    

Facility Lease Payments

    

2022

    

2023

    

2024

    

2025

    

2026

    

Thereafter

Remaining Facility Lease Payments

$

912,000

$

268,000

$

364,000

$

280,000

$

$

$

Less: Discount Adjustment

 

(61,000)

Total lease liability

$

851,000

Lease liability-current portion

$

318,000

Long-term lease liability

$

533,000

The following table provides a reconciliation of the Company’s remaining ROU asset for its facility lease presented in the balance sheet as of March 31, 2022:

    

ROU Asset

Balance as of December 31, 2021

$

629,000

Amortization

(52,000)

Balance as of March 31, 2022

$

577,000

The Company recorded lease expense in the respective periods is as follows:

Three Months Ended March 31, 

    

2022

    

2021

    

Lease expense

$

81,000

$

73,000

Note 6 – Warrants

The Company has issued both equity (“placement agent”) and liability (“investor”) classified warrants in conjunction with previous equity raises. The Company had a total of 1.1 million equity-classified warrants and 17.2 million liability-classified warrants outstanding as of March 31, 2022.

14

There was no warrant activity during the three months ended March 31, 2022:

    

    

Weighted

    

Weighted Average

Number of

Average

Remaining

Warrants

Exercise Price

Contractual Life

Outstanding as of December 31, 2020

4,130,724

$

0.66

2.05

Warrants issued in connection with the registered direct offering

15,000,000

$

1.10

4.96

Warrant exercised

(812,827)

$

0.58

Warrants expired

(15,000)

Outstanding as of December 31, 2021

18,302,897

$

1.02

4.24

Warrants issued in connection with the registered direct offering

$

Warrants exercised

$

Warrants expired

$

Outstanding as of March 31, 2022

 

18,302,897

$

1.02

 

3.99

The following table summarizes the Company’s outstanding warrants between placement agent and investor warrant classifications:

    

    

    

    

Weighted

    

Weighted Average

Number of

Average

Remaining

Date

Exercise Price

Type

Warrants

Exercise Price

Contractual Life

December 2021 registered direct offering

$

1.10

Investor

15,000,000

4.71

August 2018 public offering

$

0.40

Investor

153,400

1.37

June 2017 registered direct offering

$

0.76

Investor

2,026,915

0.17

June 2019 public offering

$

0.50

Placement agent

823,650

2.22

June 2017 registered direct offering

$

0.76

Placement agent

298,932

0.17

Outstanding as of March 31, 2022

 

18,302,897

$

1.02

 

3.99

The total value for the warrant derivative liability as of March 31, 2022 is approximately $4.5 million (see Note 7).

Note 7 - Fair Value Considerations

Authoritative guidance defines fair value as the price that would be received upon the sale of an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs reflect inputs that market participants would use in pricing the asset or liability based on market data obtained from sources not affiliated with the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy is broken down into three levels based on reliability of the inputs as follows:

 

Level 1:  

Inputs that reflect unadjusted quoted prices in active markets that are accessible to the Company for identical assets or liabilities;

 

 

 

 

Level 2:  

Inputs that include quoted prices for similar assets and liabilities in active or inactive markets or that are observable for the asset or liability either directly or indirectly; and

 

 

 

 

Level 3:  

Unobservable inputs that are supported by little or no market activity.

15

The Company’s financial instruments include cash and cash equivalents, accounts payable and accrued expenses, and warrant derivative liability. Warrants are recorded at estimated fair value utilizing the Black-Scholes warrant pricing model.

The Company’s assets and liabilities which are measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. The Company’s policy is to recognize transfers in and/or out of the fair value hierarchy as of the date in which the event or change in circumstances caused the transfer. The Company has consistently applied the valuation techniques in all periods presented.

The following table presents the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2022 and December 31, 2021, by level within the fair value hierarchy:

    

Fair Value Measurements Using

    

Level 1

    

Level 2

    

Level 3

    

Total

March 31, 2022

  

 

  

 

  

 

  

Liabilities:

 

  

 

  

 

  

 

  

Warrant derivative liability

$

$

$

4,474,000

$

4,474,000

December 31, 2021

 

  

 

  

 

  

 

  

Liabilities:

 

  

 

  

 

  

 

  

Warrant derivative liability

$

$

$

5,805,000

$

5,805,000

The warrant derivative liability for both periods presented was valued using the Black-Scholes valuation methodology because that model embodies all the relevant assumptions that address the features underlying these instruments.

The following table sets forth a reconciliation of changes in the fair value of financial liabilities classified as Level 3 in the fair value hierarchy:

    

Derivative Instruments

Balance as of December 31, 2021

$

5,805,000

Warrant issuances

 

Warrant exercises

 

Change in fair value

 

(1,331,000)

Balance as of March 31, 2022

$

4,474,000

Note 8 - Common Stock

Authorized Shares

The Company had 300.0 million authorized shares of common stock as of March 31, 2022 and December 31, 2021.

The following table summarizes the Company’s remaining authorized shares available for future issuance:

16

March 31, 2022

Authorized shares

300,000,000

Common stock outstanding

227,186,867

Options outstanding

9,010,312

Warrants outstanding

18,302,897

Reserved for issuance under 2019 Stock and Incentive Plan

2,984,023

Available shares

42,515,901

ATM Equity Offering Program

In February 2020, the Company entered into a Sales Agreement with two agents to implement an “at the market” (ATM) equity offering program under which the Company, from time to time and at its sole discretion, may offer and sell shares of its common stock having an aggregate offering price up to $50.0 million to the public through the agents until (i) each agent declines to accept the terms for any reason, (ii) the entire amount of shares has been sold, or (iii) the Company suspends or terminates the Sales Agreement. Subject to the terms and conditions of the Sales Agreement, the agents shall use their commercially reasonable efforts to sell shares from time to time, based upon the Company’s instructions as documented on a purchase notification form. If an agent declines to accept the purchase notification form, the agent must promptly notify the Company and the other agent then has the ability to accept or decline the purchase notification form. The Company has no obligation to sell any shares and may, at any time and in its sole discretion, suspend sales under the Sales Agreement or terminate the Sales Agreement in accordance with its terms. The Sales Agreement includes customary indemnification rights in favor of the agents and provides that the agents will be entitled to an aggregate fixed commission of 4.0% of the gross proceeds (2.0% to each agent) to the Company from any shares sold pursuant to the Sales Agreement.

The following table summarizes the Company’s sales and related issuance costs incurred under the Sales Agreement during the three months ended March 31, 2022 and 2021:

Three Months Ended March 31, 

2022

    

2021

Total shares of common stock sold

1,848,437

Gross proceeds

$

$

2,705,000

Commissions earned by placement agents

(109,000)

Issuance fees

(17,000)

Net proceeds

$

$

2,579,000

Common Stock Issued for Services

The Company issued an aggregate of 54,052 shares of common stock under the Ampio Pharmaceuticals, Inc. 2019 Stock and Incentive Plan (the “2019 Plan”), valued at an aggregate of $80,000 as partial compensation for the services of four non-employee directors, during the three months ended March 31, 2021. During the three months ended March 31, 2022, the Company did not issue any shares of common stock as partial compensation for the services of non-employee directors.

17

Note 9 - Equity

Options

In December 2019, the Company’s Board of Directors and stockholders approved the adoption of the 2019 Plan, under which shares were reserved for future issuance of equity related awards classified as option awards, restricted stock awards and other equity related awards. The 2019 Plan permits grants of equity awards to employees, directors and consultants. The stockholders approved a total of 10.0 million shares to be reserved for issuance under the 2019 Plan. The Company’s previous 2010 Stock and Incentive Plan (the “2010 Plan”) was cancelled concurrently with the adoption of the 2019 Plan.

The following table summarizes the activity of the 2019 Plan and the shares available for future equity awards as of March 31, 2022:

    

2019 Plan

Total shares reserved for equity awards

10,000,000

Options granted, net of forfeitures during previous fiscal years

 

(3,933,471)

Options granted during fiscal 2022

(1,598,323)

Restricted stock awards, net of settlement granted during fiscal 2021

(1,785,000)

Restricted stock awards, net of settlement granted during fiscal 2022

0

Forfeited, expired and/or cancelled equity awards, prior year

5,500

Forfeited, expired and/or cancelled equity awards, during 2022

26,500

Shares forfeited to settle exercise price and tax obligation during fiscal 2021

130,303

Shares forfeited to settle exercise price and tax obligation during 2022

 

138,514

Remaining shares available for future equity awards

2,984,023

The following table summarizes the Company’s restricted stock awards activity during the three months ended March 31, 2022:

    

    

Weighted

    

Average Grant-Date

Aggregate

Awards

Fair Value

Intrinsic Value

Nonvested as of December 31, 2021

 

1,468,000

$

1.64

 

Granted

 

 

Vested

 

(367,000)

$

1.64

 

$

Nonvested as of March 31, 2022

 

1,101,000

$

1.64

 

Of the vested restricted stock awards reported above, the Company withheld 138,514 common shares which represented the fair value of the tax settlement.

The following table summarizes the Company’s stock option activity during the three months ended March 31, 2022:

    

    

Weighted

    

Weighted Average

    

Number of

Average

Remaining

Aggregate

Options

Exercise Price

Contractual Life

Intrinsic Value

Outstanding as of December 31, 2021

 

7,506,989

$

1.04

 

7.36

 

$

Granted

 

1,598,323

$

0.48

 

 

Exercised

 

$

 

 

Forfeited, expired and/or cancelled

 

(95,000)

$

0.89

 

 

Outstanding as of March 31, 2022

 

9,010,312

$

1.01

 

7.50

 

$

36,000

Exercisable as of March 31, 2022

 

6,624,442

$

1.12

 

6.69

 

$

17,000

18

The following table summarizes the outstanding options that were issued in accordance with the 2010 Plan and the 2019 Plan:

Outstanding Options by Plan

March 31, 2022

2010 Plan

3,561,518

2019 Plan

5,448,794

Outstanding as of March 31, 2022

9,010,312

Stock options outstanding as of March 31, 2022 are summarized in the table below:

    

Number of

    

Weighted

    

Weighted Average

Options

Average

Remaining

Range of Exercise Prices

Outstanding

Exercise Price

Contractual Lives

Up to $0.50

 

1,767,823

$

0.45

 

9.22

$0.51 - $1.00

 

4,697,345

$

0.69