UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the Quarterly Period Ended: ~~September 30, 2017~~March 31, 2021


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

For the transition period fromto

Commission File ~~No.~~ Number: 001-35182

cid:image001.jpg@01CDF343.4BBAE3B0

AMPIO PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

~~Delaware~~

~~26-0179592~~

Delaware

26-0179592

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

373 Inverness Parkway, Suite 200

Englewood, Colorado80112

(Address of principal executive offices, including zip code)

(720) 437-6500

~~(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 x☒ 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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x☒ 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”,~~filer,” “smaller reporting ~~company”~~company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

~~Large accelerated filer~~	¨		~~Accelerated filer~~	x
Large Accelerated Filer	☐	Accelerated Filer		☐
~~Non-accelerated filer~~	¨		~~Smaller Reporting Company~~	¨
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 x

☒

As of ~~November 2, 2017,~~April 26, 2021, there were ~~75,941,809~~195,689,128 outstanding shares of ~~Common Stock outstanding,~~common stock, par value $0.0001 per share, of the registrant.

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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” within the meaning of the Private Securities Litigation Reform Act of 1995.~~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 ofabout 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 ~~the~~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,” “believe,” “could,” “estimate,” “expect,” ~~“forecast,~~“future,” “intend,” “may,” “should,” “plan,” ~~“project”~~“potential,” “project,” “will,” “would” and other words of similar ~~meaning. In particular, these~~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 ~~our product candidates,~~Ampion, capital expenditures, research and development ~~expense~~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 ~~approvals~~approval for ~~our pharmaceutical drugs~~Ampion in a timely manner, or at all; and ~~diagnostics;~~

•●

~~our future dependence on third party manufacturers or strategic partners to manufacture any of our pharmaceutical drugs and diagnostics that receive regulatory approval, and~~ our ability to identify strategic partners and enter into beneficial license, co-development, collaboration or similar ~~arrangements; and~~

•

~~progress of our manufacturing facility/clean room.~~arrangements.

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

•●

~~the loss of key management personnel or sponsored research partners on whom we depend;~~our ability to continue as a going concern;

•●

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 sufficient funding through our “at-the-market” 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;

●

the progress and results of clinical trials for ~~our product candidates;~~Ampion and additional costs or delays associated therewith;

•●

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;

●

the risk and costs associated with our decision to suspend enrollment in the Phase III clinical trial for treatment of severe Osteoarthritis of the Knee due to considerations relating to the COVID-19 pandemic;

●

our ability to receive regulatory approval for and sell the products that we are developing for the treatment of COVID-19;

●

the significant competition in the search for a treatment for COVID-19;

●

our ability to navigate the regulatory approval process in the U.S. and other countries, and our success in obtaining required regulatory approvals for ~~our product candidates;~~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 ~~our product candidates;~~Ampion;

•●

the actual and perceived effectiveness of ~~our product candidates,~~Ampion, and how ~~those product candidates compare~~Ampion compares to competitive products;

•●

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;

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●

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 internationally;

●

our ability to realize the investment we made in our manufacturing facility if Ampion does not receive marketing approval;

●

adverse effects of the recent and ongoing COVID-19 pandemic;

●

the strength of our intellectual property protection, and our success in avoiding ~~infringing~~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 ~~our acquisition activity.~~future licensing, partnering or other strategic activities.

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 3, 2021 (the “2020 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 ~~can~~should be ~~guaranteed.~~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 ~~such as~~for Ampion ~~and Optina,~~^®, 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.

3 4

Table of Contents

PART ~~I-FINANCIAL~~I – FINANCIAL INFORMATION

~~Item 1.~~

Item 1. Financial Statements

AMPIO PHARMACEUTICALS, INC.

Condensed Balance Sheets
~~Balance Sheets~~
September 30, December 31,
2017 2016
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 1,807,149 $ 4,894,834
Trading security Aytu BioScience, Inc. (Note 4) 20,445 122,641
Prepaid expenses and other 422,970 240,890
Prepaid research and development - related party (Note 9) - 143,802
Total current assets 2,250,564 5,402,167

Fixed assets, net (Note 3) 7,102,612 7,980,011
Long-term portion of prepaid research and development - related party (Note 9) - 179,752
Deposits 33,856 33,856

Total assets $ 9,387,032 $ 13,595,786

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable and accrued expenses $ 1,027,773 $ 709,294
Accrued compensation 1,184,310 1,365,693
Deferred rent 59,579 59,579
Total current liabilities 2,271,662 2,134,566

Long-term deferred rent 550,905 588,303
Warrant derivative liability 6,763,930 4,238,606
Total liabilities 9,586,497 6,961,475

Commitments and contingencies (Note 6)

Stockholders’ equity
Preferred Stock, par value $.0001; 10,000,000 shares authorized; none issued - -
Common Stock, par value $.0001; 200,000,000 shares authorized; shares issued and outstanding - 68,232,409 in 2017 (unaudited) and 57,179,686 in 2016 6,823 5,718
Additional paid-in capital 161,656,114 159,732,194
Advance to stockholder - (25,160 )
Accumulated deficit (161,862,402 ) (153,078,441 )
Total stockholders’ equity (199,465 ) 6,634,311

Total liabilities and stockholders’ equity $ 9,387,032 $ 13,595,786
~~The accompanying notes are an integral part of these financial statements.~~
4
~~AMPIO PHARMACEUTICALS, INC.~~(unaudited)
~~Statements of Operations~~

March 31,

December 31,


2021

2020

Assets




Current assets




Cash and cash equivalents

$
15,804,000

$
17,346,000
Prepaid expenses and other

1,798,000

1,147,000
Total current assets

17,602,000

18,493,000

Fixed assets, net

3,348,000

3,561,000
Right-of-use asset

776,000

824,000
Total assets

$
21,726,000

$
22,878,000

Liabilities and Stockholders’ Equity




Current liabilities




Accounts payable and accrued expenses

$
1,351,000

$
1,550,000
Lease liability-current portion

291,000

284,000
Total current liabilities

1,642,000

1,834,000

Lease liability-long-term

851,000

925,000
Warrant derivative liability

2,456,000

2,607,000
Total liabilities

4,949,000

5,366,000

Commitments and contingencies (Note 7)





Stockholders’ equity




Preferred Stock, par value $0.0001; 10,000,000 shares authorized; NaN issued

—

—
Common Stock, par value $0.0001; 300,000,000 shares authorized; shares issued and outstanding - 195,689,128 as of March 31, 2021 and 193,378,996 as of December 31, 2020

19,000

19,000
Additional paid-in capital

220,952,000

218,020,000
Accumulated deficit

(204,194,000)

(200,527,000)
Total stockholders’ equity

16,777,000

17,512,000

Total liabilities and stockholders’ equity

$
21,726,000

$
22,878,000
~~(unaudited)~~
Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016

Operating expenses
Research and development $ 1,992,825 $ 1,752,273 $ 6,659,349 $ 8,796,848
Research and development - related party (Note 9) - 35,951 323,554 107,851
General and administrative 1,073,458 1,555,527 3,776,654 5,229,436
Total operating expenses 3,066,283 3,343,751 10,759,557 14,134,135

Other income (expense)
Interest income - 3,080 3,086 19,789
Derivative (loss) gain (1,146,772 ) (715,732 ) 2,092,994 (715,732 )
Unrealized (loss) gain on trading security (39,854 ) 64,274 (102,196 ) 64,274
Loss from equity investment in Aytu BioScience, Inc. - - - (1,043,353 )
Total other income (expense) (1,186,626 ) (648,378 ) 1,993,884 (1,675,022 )

Net loss from continuing operations $ (4,252,909 ) $ (3,992,129 ) $ (8,765,673 ) $ (15,809,157 )

Basic and diluted net loss per common share $ (0.06 ) $ (0.07 ) $ (0.14 ) $ (0.30 )

Weighted average number of common shares outstanding 68,232,409 53,842,234 62,072,354 52,629,343

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

Table of Contents

AMPIO PHARMACEUTICALS, INC.

Condensed Statements of ~~Stockholders’ Equity (Deficit)~~Operations

(unaudited)

Common Stock Additional Paid-
in Advance to Accumulated Total
Stockholders’
Shares Amount Capital Stockholder Deficit Equity

Balance - December 31, 2016 57,179,686 $ 5,718 $ 159,732,194 $ (25,160 ) $ (153,078,441 ) $ 6,634,311

Common stock issued for services (unaudited) 62,478 6 59,994 - - 60,000
Warrant modification (unaudited) - - 74,527 - - 74,527
Stock-based compensation (unaudited) - - 622,231 - - 622,231
Stock-based compensation forfeitures (see Note 1) (unaudited) - - 4,725 - (18,288 ) (13,563 )
Common stock issued in connection with registered direct offering, net of offering costs of $1,181,753 (unaudited) 10,990,245 1,099 792,978 - - 794,077
Warrants issued in connection with registered direct offering to the placement agent (unaudited) - - 369,465 - - 369,465
Write-off of advance (unaudited) - - - 25,160 - 25,160
Net loss (unaudited) - - - - (8,765,673 ) (8,765,673 )
-
Balance - September 30, 2017 (unaudited) 68,232,409 $ 6,823 $ 161,656,114 $ - $ (161,862,402 ) $ (199,465 )

Three Months Ended March 31,


2021

2020


Operating expenses





Research and development

$
2,296,000

$
4,254,000

General and administrative

1,523,000

1,767,000

Total operating expenses

3,819,000

6,021,000

Other income





Interest income

1,000

11,000

Derivative gain

151,000

831,000

Total other income

152,000

842,000

Net loss

$
(3,667,000)

$
(5,179,000)

Net loss per common share:





Basic

$
(0.02)

$
(0.03)

Diluted

$
(0.02)

$
(0.04)

Weighted average number of common shares outstanding:

Basic

195,387,047

159,053,722

Diluted

200,752,267

160,557,777

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

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AMPIO PHARMACEUTICALS, INC.

Condensed Statements of ~~Cash Flows~~Stockholders’ Equity

(unaudited)

Nine Months Ended September 30,
2017 2016

Cash flows from operating activities
Net loss $ (8,765,673 ) $ (15,809,157 )

Adjustments to reconcile net loss to net cash used in operating activities
Losses in equity investment in Aytu BioScience, Inc. - 1,043,353
Stock-based compensation and warrant modification 683,195 1,362,646
Depreciation and amortization 910,725 916,598
Write-off of advances to stockholder 25,160 -
Amortization of prepaid research and development - related party (Note 9) 323,554 107,851
Common stock issued for services 60,000 60,000
Derivative (gain) loss (2,092,994 ) 715,732
Unrealized loss (gain) on trading security 102,196 (64,274 )
Repayment of advance to stockholder - 39,987
Changes in operating assets and liabilities
Increase in prepaid expenses and other (182,080 ) (49,646 )
Increase (decrease) in accounts payable 318,479 (657,486 )
Decrease in deferred rent (37,398 ) (30,143 )
(Decrease) increase in accrued compensation (181,383 ) 320,322
Net cash used in operating activities (8,836,219 ) (12,044,217 )
Cash flows used in investing activities
Purchase of fixed assets (33,326 ) -
Net cash used in investing activities (33,326 ) -
Cash flows from financing activities
Proceeds from sale of common stock related to the Registered Direct Offering 6,594,148 3,750,000
Costs related to sale of common stock related to the Registered Direct Offering (812,288 ) (338,005 )
Proceeds from sale of common stock related to the controlled equity offering - 153,313
Costs related to sale of common stock related to the controlled equity offering - (102,530 )
Net cash provided by financing activities 5,781,860 3,462,778

Net change in cash and cash equivalents (3,087,685 ) (8,581,439 )
Cash and cash equivalents at beginning of period 4,894,834 15,998,392
Cash and cash equivalents at end of period $ 1,807,149 $ 7,416,953

Non-cash transactions:
Distribution to stockholders $ - $ 13,018,687
Warrant derivative liability - registered offering 4,618,318 4,127,130
Warrants issued to placement agent in connection with registered offering 369,465 88,530

Additional

Total

Common Stock

Paid-in

Accumulated

Stockholders'


Shares

Amount

Capital

Deficit

Equity
Balance at December 31, 2019

158,644,757

$
16,000

$
191,060,000

$
(184,633,000)

$
6,443,000

Issuance of common stock for services

136,236

0

80,000

0

80,000
Stock-based compensation, net of forfeitures

—

0

213,000

0

213,000
Issuance of common stock in connection with the "at-the-market" equity offering program

1,241,126

0

682,000

0

682,000
Offering costs related to the issuance of common stock in connection with the "at-the-market" equity offering program

—

0

(246,000)

0

(246,000)
Net loss

—

0

0

(5,179,000)

(5,179,000)

Balance at March 31, 2020

160,022,119

$
16,000

$
191,789,000

$
(189,812,000)

$
1,993,000

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

0

80,000

0

80,000
Stock-based compensation, net of forfeitures

—

0

166,000

0

166,000
Stock options exercised, net

129,500

0

33,000

0

33,000
Shares held back in settlement of tax obligation and exercise cost

(28,562)

0

(40,000)

(40,000)
Warrants exercised, net

306,705

0

114,000

0

114,000
Issuance of common stock in connection with the "at-the-market" equity offering program

1,848,437

0

2,705,000

0

2,705,000
Offering costs related to the issuance of common stock in connection with the "at-the-market" equity offering program

—

0

(126,000)

0

(126,000)
Net loss

—

0

0

(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

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

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AMPIO PHARMACEUTICALS, INC.
Condensed Statements of Cash Flows
(unaudited)


Three Months Ended March 31,



2021

2020


Cash flows used in operating activities

Net loss

$
(3,667,000)

$
(5,179,000)

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

Stock-based compensation, net of forfeitures

166,000

213,000

Depreciation and amortization

294,000

295,000

Issuance of common stock for services

80,000

80,000

Derivative gain

(151,000)

(831,000)

Changes in operating assets and liabilities

(Increase) decrease in prepaid expenses and other

(651,000)

698,000

(Decrease) increase in accounts payable and accrued expenses

(199,000)

189,000

Decrease in lease liability

(19,000)

(18,000)

Net cash used in operating activities

(4,147,000)

(4,553,000)

Cash flows used in investing activities

Purchase of fixed assets

(81,000)

0

Net cash used in investing activities

(81,000)

0

Cash flows from financing activities

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

2,705,000

682,000

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

(126,000)

(246,000)

Proceeds from warrant exercises

114,000

0

Other

(7,000)

0

Net cash provided by financing activities

2,686,000

436,000

Net change in cash and cash equivalents

(1,542,000)

(4,117,000)

Cash and cash equivalents at beginning of period

17,346,000

6,532,000

Cash and cash equivalents at end of period

$
15,804,000

$
2,415,000

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

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AMPIO PHARMACEUTICALS, INC.
Notes to Condensed Financial Statements
(unaudited)
Note 1 ~~- Basis~~– The Company and Summary of ~~Presentation~~Significant Accounting Policies
~~These unaudited financial statements represent the financial statements of~~ Ampio Pharmaceuticals, Inc. (“Ampio” or ~~“the Company”~~the “Company”). is a biopharmaceutical company focused on the development and advancement of immunology-based therapies for prevalent inflammatory conditions.
Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) 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 ~~unaudited~~ financial statements should be read in conjunction with ~~Ampio’s Annual Report on Form 10-K~~the audited financial statements and accompanying notes thereto for the year ended December 31, ~~2016, which~~2020 included ~~all disclosures required by generally accepted accounting principles (“GAAP”). In~~in the opinion of management, these unaudited financial statements contain all adjustments necessary to present fairly the financial position of Ampio for the balance sheet and the results of operations and cash flows for the interim periods presented.Company’s 2020 Annual Report. The results of operations for the interim period ~~ended September 30, 2017~~shown in this report are not necessarily indicative of the results that may be expected ~~operating results~~for any other interim period or for the full year. The information ~~presented throughout this report~~ as of and for the ~~period~~three months ended ~~September 30, 2017~~March 31, 2021 is unaudited. The balance sheet at December 31, 2020 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.
Impact of Global Pandemic
~~Ampio is~~
In January 2020, the World Health Organization (“WHO”) announced a ~~biopharmaceutical company primarily focused on developing compounds that decrease inflammation by (i) inhibiting specific pro-inflammatory compounds by affecting specific pathways at~~global health emergency because of the ~~protein expression~~novel coronavirus (“COVID-19”). In March 2020, the WHO declared the outbreak of COVID-19, a global pandemic. COVID-19 has, and atcontinues, to adversely impact the ~~transcription level; (ii) activating specific phosphatase or depleting available phosphate needed~~United States and global economies. In April 2020, and pursuant to the U.S. Food and Drug Administration (“FDA”), independent Safety Monitoring Committee (“SMC”), and Institutional Review Board guidance covering ongoing clinical trials in the presence of the COVID-19 pandemic, the Company and the clinical research organization (“CRO”) paused all ongoing conduct associated with the Phase III clinical trial (the “AP-013 study”) of Ampion for the ~~inflammation process;~~treatment of Osteoarthritis of the Knee (“OAK”). In March 2021, the Company submitted a detailed proposal to the FDA in response to the FDA’s guidance regarding the status of the AP-013 study. In April 2021, the Company received a response to the proposal from the FDA, which provides guidance and ~~(iii) decreasing vascular permeability.~~flexibility on how to maintain the Special Protocol Assessment (“SPA”), while allowing the Company to evaluate and consider several paths for moving forward. The Company is evaluating the FDA’s response and will continue to maintain an ongoing active dialog with the FDA with respect to the AP-013 study to reach agreement on the path forward considering the ongoing pandemic. The AP-013 study data will continue to remain paused and blinded to ensure clinical trial integrity and compliance with the SPA issued by the FDA in June 2019 until agreement is reached with the FDA.

~~Ampio’s activities have been primarily~~In addition, since June 2020, the Company has commenced several clinical trials to determine the safety and efficacy for new applications of Ampion (i.e., inhaled and intravenous) related to ~~research~~COVID-19 infection. Given the continued evolution of the COVID-19 pandemic and the related complexities and uncertainties associated with the additional variants, the Company’s business operations could be significantly impacted and, in addition, the business operations of third parties on which the Company relies, including organizations that conduct clinical trials and key suppliers which provide the raw materials for manufacturing Ampion for the ongoing clinical trials could also be impacted. The full extent of the potential adverse impact on the Company’s business operations and related product development, including, but not limited to, clinical trials, financing activities and ~~raising capital.~~the overall impact on the United States and the global economy will depend on future developments, which cannot be predicted at this time due to the continued uncertainty of the COVID-19 pandemic.

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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 ~~not generated revenue~~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, 2021, 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 ~~date.~~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 liquidity and resulting going concern position and the projected useful lives and potential impairment of fixed assets. The Company develops these estimates using its judgment based upon the facts and circumstances known at the time.

Adoption of Recent Accounting Pronouncements

~~In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09,~~~~“Compensation -Stock Compensation (Topic 718): Improvements to Employee Share Based Payment Accounting”~~ . The standard includes multiple provisions intended to simplify various aspects of the accounting for share based payments. The amendments are expected to significantly impact net income, earnings per share, and the statement of cash flows. Implementation and administration may present challenges to companies with significant share based payment activities. These amendments were effective for public entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted in any interim or annual period, with any adjustments reflected as of the beginning of the fiscal year of adoption. The Company has not adopted ASU 2016-09 in the first quarter of 2017. The Company elected to recognize forfeitures as they occur rather than estimating the forfeiture rate on the option grant date. The cumulative-effect of the change was $18,000 which was charged to retained earningsany recent accounting pronouncements during the ~~first quarter.~~three months ended March 31, 2021.

Recent Accounting Pronouncements

In ~~February 2016,~~August 2020, the FASB issued ASU ~~2016-02,~~2020-06, “~~“Leases (Topic 842)~~Debt (Subtopic 470-20); Debt with Conversion and Other Options and Derivatives and Hedging (Subtopic 815-40) Contracts in Entity’s Own Equity”. The ~~new standard establishes a right-of-use (ROU) model that requires a lessee~~updated guidance is part of the FASB’s simplification initiative, which aims to ~~record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases~~reduce unnecessary complexity in U.S. GAAP. Consequently, more convertible debt instruments will be ~~classified~~reported as ~~either finance or operating,~~single liability instruments with ~~classification affecting~~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 ~~pattern of expense recognition~~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 ~~the income statement.~~certain areas. The ~~new standard~~updated guidance is effective for fiscal years beginning after December 15, ~~2018, including~~2023, and interim periods within those fiscal ~~years. Lessees are required to use a modified retrospective transition approach~~years, with early adoption permitted for ~~capital and operating leases existing at, or entered~~periods beginning after ~~the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.~~December 15, 2020. The Company is currently evaluating the impact of ~~its pending adoption of this standard~~ASU 2020-06 on ~~its~~the Company’s financial statements.

~~In May 2017, the FASB issued ASU 2017-09,~~~~“Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting”.~~ ~~The amendments provide guidance~~This Quarterly Report on ~~determining which changes~~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 ~~terms and conditions~~Company’s financial condition, results of share-based payment awards require an entity to apply modification accounting under Topic 718. The new standard is for annual periods, including interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company is currently evaluating the impact of its pending adoption of this standard on its financial statements.operations, cash flows or disclosures.

~~In July 2017, the FASB issued ASU 2017-11,~~“Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception”. The amendments require companies to disregard the down round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. Companies that provide earnings per share (EPS) data will adjust their basic EPS calculation for the effect of the feature when triggered (i.e., when the exercise price of the related equity-linked financial instrument is adjusted downward because of the down round feature) and will also recognize the effect of the trigger within equity. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact of its pending adoption of this standard on its financial statements.

~~In August 2017, the FASB issued ASU 2017-12,~~~~“Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities”.~~These amendments refine and expand hedge accounting for both financial (e.g., interest rate) and commodity risks. Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes. It also makes certain targeted improvements to simplify the application of hedge accounting guidance. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company currently does not apply hedge accounting so there is no impact expected from this standard on the financial statements.

Note 2 - Going Concern

As ~~reflected in~~of and for the ~~accompanying financial statements,~~three months ended March 31, 2021, the Company had cash and cash equivalents of ~~$1.8~~$15.8 million ~~as of September 30, 2017 with~~and a net loss of ~~$8.8~~$3.7 million, ~~for~~respectively. The net loss is primarily attributable to operating expenses of $3.8 million, partially offset by the ~~period ended September 30, 2017.~~non-cash derivative gain of $151,000 (see Note 9). The Company used net cash in operations of ~~$8.8~~$4.1 million for the ~~period~~three months ended ~~September 30, 2017. The Company~~March 31, 2021 and ended the quarter with an accumulated deficit ~~of $161.9 million~~ and ~~a deficit in~~ stockholders’ equity of ~~$199,000.~~$204.2 million and $16.8 million, respectively. In addition, ~~the Company is~~as a clinical stage biopharmaceutical company, ~~and~~the Company has not generated any operating revenues or profits ~~to date.~~since the inception of operations. These existing and projected on-going factors continue to raise substantial doubt about the Company’s ability to continue as a going concern.

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In ~~October 2017,~~February 2020, the Company ~~raised net~~entered into a Sales Agreement (“Sales Agreement”) with 2 agents to implement an “at-the-market” (“ATM”) equity offering program under which the Company, at its sole discretion, may issue and sell from time to time shares of its authorized common stock. During the three months ended March 31, 2021, the Company sold shares pursuant to the ATM equity offering program, which yielded gross proceeds of ~~$6.3~~$2.7 million, which was offset by offering related costs of $126,000 (see Note 10).

The Company has prepared an updated projection covering the period from ~~a Securities Purchase Agreement (See Note 11)~~May 1, 2021 through April 30, 2022 based on the requirements of ASC 205-40, “Going Concern”, which reflects cash requirements for fixed, recurring base level business expenses such as payroll, legal and accounting, patents and overhead, and incremental costs supporting the existing and projected incremental clinical development programs. The Company continues to assess the impact of the COVID-19 pandemic and the impact that it may have on the Company’s current and projected future studies. The Company anticipates using the ATM equity offering program to raise additional funds in the near term, as needed, while also considering supplementing the funds raised with separate private or public equity offering(s). ~~Ampio expects~~Based on the Company’s current cash ~~resources and the lack~~position, projection of operating ~~cash flows~~expenses, current and projected capacity under the ATM and/or other equity financing opportunities, the Company believes it will ~~not be~~have sufficient liquidity to ~~sustain~~fund operations through the second quarter of ~~2018. The ability~~2022. This projection is based on many assumptions that may prove to be incorrect. For example, despite the historically successful use of the ATM equity offering program, due to the inherent uncertainties associated with raising capital in the public markets and the fact that the ATM equity offering program is not deemed a fixed and determinable committed source of liquidity, the Company’s management is unable to conclude that it is probable that future capital will be available to satisfy its ongoing liquidity needs as they arise and in a manner that will be timely and sufficient to fund operations. As such, it is possible that the Company could exhaust its available cash and cash equivalents earlier than presently anticipated. In addition, as the global COVID-19 pandemic continues to ~~continue~~evolve, its effect on the Company’s business operations ~~is dependent on management’s plans, which include continuing~~and ability to raise ~~equity-based~~capital through the ATM equity offering program, or otherwise, remains uncertain and ~~debt financing.~~subject to change. The Company ~~is currently~~expects to seek to raise additional capital investments in ~~negotiation with potential investors~~both the near and long-term to enable it to support its business operations, including specifically (i) clinical development of Ampion, (ii) Biologics License Application (“BLA”) preparation and submission, (iii) existing base business operations and (iv) commercial development activities for ~~financing.~~Ampion. The Company will continue to closely monitor and evaluate the overall capital markets to determine the appropriate timing and funding level for any such capital raising activities, which will primarily depend on stock price and existing market conditions relative to the timing of the Company’s liquidity needs. However, ~~there is no~~the Company cannot give any assurance that ~~the Company~~it will be successful in ~~raising~~satisfying its future liquidity needs in a manner that will be sufficient ~~capital.~~to fund its base level of operations and any incremental expenses related to the further development of Ampion for OAK, therapeutic treatment of COVID-19 and other indications as they arise.

The accompanying unaudited interim financial statements ~~have been~~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 ~~recoverability~~recovery of ~~the~~ recorded assets or the classification of ~~the~~ liabilities, ~~that might~~which adjustments may be necessary in the future should the Company be unable to continue as a going concern.

Note 3 -– Prepaid Expenses and Other
Prepaid expenses and other balances as of March 31, 2021 and December 31, 2020 are as follows:

March 31, 2021

December 31, 2020

Deposits

$
1,311,000

$
266,000
Unamortized commercial insurance premiums

295,000

627,000
Annual maintenance service contracts

77,000

—
Receivable

26,000

185,000
Other

89,000

69,000
Total prepaid expenses and other

$
1,798,000

$
1,147,000

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Note 4 – Fixed Assets
Fixed assets are recorded atbased on acquisition cost and, once placed in service, are depreciated on the straight-line method over their estimated economic useful lives. Leasehold improvements are accreted over the shorter of the estimated ~~useful lives.~~economic life or related lease term. Fixed assets, net of accumulated depreciation and amortization, consist of the following:

Estimated As of September 30, As of December 31,
Useful Lives in years 2017 2016

Estimated

Useful Lives

March 31,

December 31,


in Years

2021

2020

Leasehold improvements

10

$
2,100,000

$
2,250,000
Manufacturing facility/clean room 8 $ 2,734,000 $ 2,734,000

3 - 8

931,000

998,000
Leasehold improvements 10 6,075,000 6,075,000
Office furniture and equipment 3 -10 557,000 557,000
Lab equipment 5 -10 1,060,000 1,026,000
Less accumulated depreciation and amortization (3,323,000 ) (2,412,000 )

Lab equipment and office furniture

5 - 8

317,000

313,000
Fixed assets, net $ 7,103,000 $ 7,980,000

$
3,348,000

$
3,561,000

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

Three Months Ended March 31,


2021

2020


Depreciation and amortization expense

$
294,000

$
295,000

Note 5 – Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses as of March 31, 2021 and December 31, 2020 are as follows:


March 31, 2021

December 31, 2020



Accounts payable

$
126,000

$
186,000
Clinical trials

1,050,000

558,000
Professional fees

78,000

267,000
Other insurance premium

32,000

386,000
Other

65,000

153,000
Accounts payable and accrued expenses

$
1,351,000

$
1,550,000

Note 6 – Paycheck Protection Program
In April 2020, the Company received proceeds of $544,000 via a loan from KeyBank National Association (the “Lender”) that was issued under the Paycheck Protection Program (the “PPP”) established under the Coronavirus Aid, Relief and Economic Security Act. The term of the PPP loan is two years with an annual interest rate of 1.0% and principal and interest payments will be deferred for the first six months of the loan term, which was subsequently updated in accordance with the Paycheck Protection Program Flexibility Act of 2020 (the “Flexibility Act”).

In October 2020, the Company submitted its PPP loan forgiveness application, requesting forgiveness of the full principal amount of its PPP loan of $544,000, which the Company believes to consist of qualified expenses as defined by the Flexibility Act. The loan forgiveness application has been approved by the Lender and submitted to the SBA for final review. According to the Flexibility Act, the SBA will, subject to any SBA review of the loan or loan application, remit the appropriate forgiveness amount to the Lender, plus any interest accrued thereon through the date of payment, not later than 90 days after the Lender issues its decision to the SBA. As of the date of this filing, the Company has not been notified by the Lender of the SBA’s response to the PPP loan forgiveness application, but the Lender has confirmed that repayment of the loan will be deferred until the SBA provides a response. Based on the PPP loan forgiveness application calculation, and the Lender approving the loan forgiveness application, the Company continues to assert that it is probable the PPP loan qualifies for forgiveness in full by the SBA and such forgiveness will be provided by the SBA in

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due course. However, without formal approval from the SBA, the Company cannot provide certainty that it will obtain forgiveness in whole or in part.

The Company believes that it is not likely or probable, but pursuant to the Flexibility Act, the Company’s PPP loan agreement will be amended in the event that no amount or less than all of the PPP loan is forgiven. In addition, starting in September 2021, the Company will be required to make principal and interest payments totaling $23,000 per month or an adjusted amount based on the loan amendment over the remaining term of the PPP loan until such time as the loan is fully settled.

Note 47 - ~~Trading Security Aytu BioScience, Inc.~~Commitments and Contingencies
Commitments and contingencies are described below and summarized by the following table:


Total (1)

2021

2022

2023

2024

2025

Thereafter
Key clinical research trial obligations

$
1,708,000

$
1,708,000

$
—

$
0

$
0

$
0

$
0
BLA consulting services

1,140,000

—

1,140,000

0

0

0

0
Statistical analysis and programming consulting services

326,000

326,000

—

0

0

0

0
Employment agreements

1,046,000

567,000

466,000

13,000

0

0

0

$
4,220,000

$
2,601,000

$
1,606,000

$
13,000

$
0

$
0

$
0

(1) Not included in the commitments and contingencies table above are the monthly principal and interest payments of $23,000 that would be due beginning in September 2021 and continuing for a period of 24 months in the event the loan is not forgiven by the SBA (see Note 6).

Key Clinical Research Trial Obligations
Osteoarthritis of the Knee

AP-013 study
In December 2020, the Company entered into an initial contract with a CRO in connection with the AP-013 study database totaling $1.4 million. The contract required a retainer of $465,000, which the Company funded during the three months ended March 31, 2021. In March 2021, the Company submitted a detailed proposal to the FDA in response to the FDA’s guidance regarding the status of the AP-013 study, which was paused as a result of the COVID-19 pandemic. In April 2021, the Company received a response to the proposal from the FDA. The Company is evaluating the FDA’s response and will continue to maintain an ongoing active dialog with the FDA with respect to the AP-013 study to reach agreement on the path forward considering the ongoing pandemic. Until agreement with the FDA is reached, the AP-013 study data will continue to remain paused and blinded to ensure clinical trial integrity. Depending on the FDA’s response, the future contractual commitment amount and timing of disbursement may change. The Company had an outstanding future commitment of $347,000 (net of deposit) as of March 31, 2021.

Inhaled treatment for COVID-19 patients
AP-014 study and AP-018 study
In September 2020, the Company entered into a contract with a CRO in connection with the FDA approved IND application covering inhaled Ampion treatment for COVID-19 infected patients hospitalized for respiratory distress (the “AP-014 study”) totaling $836,000. The contract scope reflected an initial estimate of 10 study sites. However, the Company was able to finalize enrollment of the AP-014 study with only 3 sites. Based on the reduction in study sites, the revised estimate for the AP-014 study was reduced to $530,000. In addition, the contract required an initial retainer of $232,000, which has been funded and will be applied to the study expenses as further defined by the contract. In March 2021, the Company entered into a new contract with a CRO in connection with a randomized, double-blinded, placebo-controlled Phase I study to evaluate the safety and efficacy of Ampion in patients with Long-COVID, or

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prolonged respiratory symptoms due to COVID-19 (“the AP-018 study”). Due to the reduction of the AP-014 contractual amount, the Company requested, and the CRO approved, that $105,000 of the AP-014 retainer be transferred to the AP-018 study retainer (see additional information below). Due to the transfer of a portion of the retainer to the AP-018 study, the remaining retainer balance for the AP-014 study is $127,000. As of March 31, 2021, the Company had incurred cumulative costs totaling $496,000 against the contract for the AP-014 study and, as such, had an outstanding obligation of $0 (net of deposit).

As noted above, in March 2021, the Company entered into a contract with a CRO totaling $318,000 for the AP-018 study for at-home treatment with inhaled Ampion for patients with Long-COVID, or prolonged respiratory symptoms due to COVID-19. The contract required an initial retainer of $105,000, which will be applied to future study expenses as further defined by the contract. The Company expects to commence enrollment of the AP-018 study during the second quarter of 2021 and, as such, had an outstanding future commitment of $213,000 (net of deposit) as of March 31, 2021.

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

AP-017 study

In December 2020, the Company entered into a contract with a CRO in connection with the FDA approved IND application covering IV Ampion treatment for COVID-19 patients for an expanded global Phase II study (the “AP-017 study”) totaling $1.8 million. The contract required an initial retainer of $495,000, which the Company funded during the three months ended March 31, 2021 and which will be applied to future study expenses as further defined by the contract. The Company expects to commence enrollment in the AP-017 study during the second quarter of 2021 and, as such, had an outstanding future commitment of $1.1 million (net of deposit) as of March 31, 2021.

BLA Consulting Services

In March 2018, the Company entered into a BLA consulting services agreement for $1.2 million. This contract required a deposit, of which $182,000 was funded and classified within the “prepaid expenses and other” line item on the balance sheet. In June 2020, the Company finalized contract negotiations to increase the contract by a nominal amount to incorporate the review of the IND applications for inhaled and IV Ampion treatment. In September 2020, the Company finalized an amendment to the existing contract, which resulted in a refund of the initial deposit and requires the Company to provide a future deposit totaling $364,000 at such time the work commences related to the preparation of the related BLA for Ampion. The Company has incurred cumulative costs totaling $82,000 against this contract and, as such, had outstanding future obligations totaling $1.1 million as of March 31, 2021, which will be settled at such time as future services are provided to the Company primarily related to the development and filing of the Ampion BLA. Due to the pause of the AP-013 study, as of the date of this filing, the Company estimates the incurrence of the remaining costs associated with the preparation of the BLA filing will be postponed until early 2022, if not later.

Statistical Analysis and Programming Consulting Services

In May 2019, Ampio entered into a statistical analysis and programming consulting services agreement for $578,000. As of March 31, 2021, the Company had incurred cumulative costs totaling $252,000 against the contract and, as such, had an outstanding obligation of $326,000, which is expected to be settled over the duration of 2021.

Employment Agreements

On December 14, 2019, the Company entered into a new three-year employment agreement with Mr. Macaluso, Chief Executive Officer, which became effective January ~~4, 2016, Ampio completed~~10, 2020, immediately following the ~~spin-off~~expiration of ~~Aytu BioScience, Inc.~~his prior employment agreement. The new employment agreement provides for an annual salary of $300,000 and term ending January 10, 2023, subject to certain automatic renewal provisions.

On September 16, 2019, the Company entered into a new two-year employment agreement with Ms. Cherevka, Chief Operating Officer, which by its terms cancelled the previous employment agreement on such date. The new employment

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agreement provides for an annual salary of $280,000 and a term ending September 16, 2021, subject to certain automatic renewal provisions.
The Company entered into an employment agreement with Mr. Daniel Stokely, Chief Financial Officer, on July 9, 2019, which provided for an annual salary of $285,000 and a term beginning July 31, 2019 and lasting for three years, subject to certain automatic renewal provisions.
Amounts noted above do not assume the continuation of employment beyond the contractual terms of each employee’s existing employment agreements.
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 (“~~Aytu”~~ROU”) ~~by distributing~~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 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 ~~majority~~straight-line basis over the lease term, subject to any changes in the lease or expectations regarding the terms. The lease liability is classified as current or 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 presented in the balance sheet as of March 31, 2021:


Facility Lease Payments

Remainder of
2021

2022

2023

2024

2025

Thereafter

Remaining Facility Lease Payments

$
1,259,000

$
260,000

$
355,000

$
364,000

$
280,000

$
—

$
—
Less: Discount Adjustment

(117,000)

Total lease liability

$
1,142,000

Lease liability-current portion

$
291,000

Long-term lease liability

$
851,000

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, 2021:


ROU Asset

Balance as of December 31, 2020

$
824,000
Amortization

(48,000)
Balance as of March 31, 2021

$
776,000

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

Three Months Ended March 31,


2021

2020


Lease expense

$
73,000

$
67,000

Note 8 – Warrants
The Company has issued both equity (“placement agent”) and liability classified (“investor”) warrants in conjunction with previous equity raises. The Company had a total of 1.6 million equity-classified warrants and 2.2 million liability-classified warrants outstanding as of March 31, 2021.

The following table summarizes the Company’s warrant activity during the three months ended March 31, 2021:




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 exercised

(316,174)

$
0.41

—
Outstanding as of March 31, 2021

3,814,550

$
0.68

1.75

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




Weighted

Weighted Average

Number of

Average

Remaining

Warrants

Exercise Price

Contractual Life

Investor warrants at $0.76

2,026,915

1.17
Placement agent warrants at $0.76

431,685

1.17
Placement agent warrants at $0.94

150,000

0.42
Investor warrants at $0.40

153,400

2.37
Placement agent warrants at $0.50

1,052,550

3.22
Outstanding as of March 31, 2021

3,814,550

$
0.68

1.75

During the three months ended March 31, 2021, the Company issued 284,000 shares of its common stock as a result of the exercise of investor warrants with an exercise price of $0.40. The Company received proceeds of $114,000 during the three months ended March 31, 2021 related to these investor warrant exercises. In addition, former placement agents elected to exercise 32,000 of their warrants utilizing the net exercise option, where the total number of shares of common stock issued was reduced to cover the exercise price, and the Company issued 23,000 shares of ~~Aytu~~common stock as a result. The Company did not receive any cash related to the ~~Ampio shareholders on a pro rata basis. This transaction changed Ampio’s ownership from 81.5% to 8.6%~~exercise of Aytu’s outstanding shares on that date. Due to this transaction, the financial statements of Aytu were deconsolidated in the beginning of 2016. In May 2016, Aytu completed an offering which was dilutive to the Aytu shares held by Ampio. In the beginning of July 2016, Aytu added a fifth Board member. Ampio had significant influence over Aytu subsequent to the spin-off through June 30, 2016 due to the fact that Ampio’s Chief Executive Officer was one of three and one of four Aytu Board members.
In July 2016, the Company determined that Ampio’s influence was no longer significant over Aytu’s Board of Directors. Ampio reclassified its remaining investment in Aytu to a trading security in July of 2016. The Aytu security is recorded at fair value on the accompanying balance sheet with the change in fair value recorded as an unrealized loss on the statement of operations. As of September 30, 2017, Ampio’s ownership in Aytu’s outstanding shares was less than 1.0%.
~~Note 5 - Fair Value Considerations~~
placement agent warrants.
The Company’s financial instruments include cash and cash equivalents, trading security in Aytu, accounts payable and accrued expenses, and warrant derivative liability. The carrying amounts of financial instruments, including cash and cash equivalents, receivable from Aytu, accounts payable and accrued expenses are carried at cost which approximates fairtotal value due to the short maturity of these instruments. The fair value of trading securities is based on quoted market prices, if available, or estimated discounted future cash flows. Warrants were recorded at estimated fair value based on a Monte Carol warrant pricing model. The valuation policies are determined by the Chief Financial Officer and approved by the Company’s Board of Directors.
Authoritative guidance defines fair value as the price that would be received to sell 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 are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of Ampio. 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 Ampio for identical assets or liabilities;~~
~~Level 2:~~
~~Inputs including 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.~~
Ampio’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. Ampio’s policy is to recognize transfers in and/or out of fair value hierarchy as of the date in which the event or change in circumstances caused the transfer. Ampio has consistently applied the valuation techniques discussed below in all periods presented.
The following table presents Ampio’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2017 and December 31, 2016, by level within the fair value hierarchy:
Fair Value Measurements Using
Level 1 Level 2 Level 3 Total
September 30, 2017
ASSETS
Trading security Aytu (Note 4) $ 21,000 $ - $ - $ 21,000

LIABILITIES
Warrant derivative liability $ - $ - $ 6,764,000 $ 6,764,000

December 31, 2016
ASSETS
Trading security Aytu (Note 4) $ 123,000 $ - $ - $ 123,000

LIABILITIES
Warrant derivative liability $ - $ - $ 4,239,000 $ 4,239,000
On August 25, 2017, Aytu announced a 1-for-20 stock split which automatically converted twenty shares of Aytu’s common stock into one new share of common stock. The estimated fair value of the Company’s investment, the trading security in Aytu is recorded at fair value which represents Ampio’s ownership shares in Aytu of 5,111 after the stock split, multiplied by Aytu’s closing stock price on September 30, 2017 and December 31, 2016, which is classified as Level 1 (quoted price is available).
Value at December 31, Unrealized Fair Value at
September 30,
Maturity in Years 2016 Gains Losses 2017
Trading security Aytu (Note 4) Less than 1 year $ 123,000 $ - $ (102,000 ) $ 21,000
The warrant derivative liability was valued using the Black-Scholes valuation methodology because that model embodies all the relevant assumptions that address the features underlying these instruments. Significant assumptions in valuing the warrant derivative liability ~~are based on estimates of the value of Ampio’s common stock and various factors regarding the warrants. These assumptions were as follows~~ as of ~~September 30, 2017 and at issuance:~~March 31, 2021 is approximately $2.5 million (see Note 9).

September 30, 2017 At
Issuance
Assumptions for warrants issued June 2, 2017:
Exercise price $ 0.76 $ 0.76
Volatility 93.4 % 94.6 %
Equivalent term (years) 4.67 5.00
Risk-free interest rate 1.87 % 1.71 %
Number of shares 10,990,245 10,990,245
~~The following table sets forth a reconciliation of changes in the fair value of financial liabilities classified as Level 3 in the fair valued hierarchy:~~
Derivative Instruments

Balance as of December 31, 2016 $ 4,239,000
Warrants issuances 4,618,000
Change in fair value (2,093,000 )
Balance as of September 30, 2017 $ 6,764,000
10
Note 69 - ~~Commitments~~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 ~~Contingencies~~minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

Table of Contents

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.

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.
~~Commitments~~The Company’s assets and ~~contingencies~~liabilities which are ~~described below~~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 ~~summarized by the following table:~~
Remaining
Total 2017 2018 2019 2020 2021 Thereafter

Ampion supply agreement $ 7,459,000 $ 2,359,000 $ 2,550,000 $ 2,550,000 $ - $ - $ -
Clinical research and trial obligations 1,948,000 1,948,000 �� - - - - -
Facility lease 2,398,000 77,000 316,000 326,000 335,000 345,000 999,000
$ 11,805,000 $ 4,384,000 $ 2,866,000 $ 2,876,000 $ 335,000 $ 345,000 $ 999,000
~~Ampion Supply Agreement~~
In October 2013, Ampio entered into a human serum albumin ingredient and purchase sale agreement which has a remaining commitment of $7.5 million. Per an amendment to the original agreement, Ampio was not committed to purchase any product in 2016 and has extended the agreement to 2019.
~~Clinical Research and Trial Obligations~~
~~As of September 30, 2017, Ampio has a remaining commitment of $1,948,000~~liabilities that were accounted for at fair value on a ~~contract related to~~recurring basis as of March 31, 2021 and December 31, 2020, by level within the ~~current clinical trial~~fair value hierarchy:


Fair Value Measurements Using


Level 1

Level 2

Level 3

Total
March 31, 2021








Liabilities:
��








Warrant derivative liability

$
0

$
0

$
2,456,000

$
2,456,000

December 31, 2020








Liabilities:








Warrant derivative liability

$
0

$
0

$
2,607,000

$
2,607,000

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 ~~Ampion.~~
~~Facility Lease~~
~~On December 13, 2013, Ampio entered into a 125-month non-cancellable operating lease for office space and~~changes in the ~~manufacturing facility effective May 1, 2014. The lease has initial base rent~~fair value of $23,000 per month, with the total base rent over the term of the lease of approximately $3.3 million and includes rent abatements and leasehold incentives. The Company recognizes rental expense of the facility on a straight-line basis over the term of the lease. Differences between the straight-line net expenses on rent payments arefinancial liabilities classified as ~~liabilities between current deferred rent and long-term deferred rent.~~Level 3 in the fair value hierarchy:


Derivative Instruments

Balance as of December 31, 2020

$
2,607,000
Warrant exercises

(347,000)
Change in fair value

196,000
Balance as of March 31, 2021

$
2,456,000

~~Rent expense for the respective periods is as follows:~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016

Rent expense $ 65,000 $ 64,000 $ 195,000 $ 194,000

Table of Contents

Note 710 - Common Stock
Authorized Shares
~~Capital Stock~~
~~At September 30, 2017 and December 31, 2016, Ampio~~The Company had ~~68,232,409 and 57,179,686 shares of common shares outstanding, respectively. As of these same dates, Ampio had no preferred shares outstanding. Ampio has 200.0~~300.0 million authorized shares of common stock as of March 31, 2021 and December 31, 2020.
The following table summarizes the Company’s remaining authorized ~~with a par value of $0.0001 per share and 10.0 million~~ shares ~~of preferred stock authorized with a par value of $0.0001 per share.~~available for future issuance:

March 31, 2021

Authorized shares

300,000,000

Common stock outstanding

195,689,128
Options outstanding

6,001,151
Warrants outstanding

3,814,550
Reserved for issuance under 2019 Stock and Incentive Plan

7,918,755

Available shares

86,576,416

~~Shelf Registration~~
ATM Equity Offering Program
In March 2017, Ampio filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission (“SEC”) to register Ampio common stock and warrants in an aggregate amount of up to $100.0 million for offerings from time to time, as well as 5.0 million shares of common stock available for sale by selling shareholders. The shelf registration was declared effective in April 2017 by the SEC. As a result of equity raises, approximately $85.1 million remained available under the Form S-3 as of September 30, 2017. This shelf registration statement on Form S-3 expires in March of 2020.

~~Registered Direct Offering~~
In June 2017, the Company completed a registered direct offering. In this offering, Ampio issued directly to multiple investors approximately 11.0 million shares of its common stock and approximately 11.0 million warrants to purchase shares of common stock. The common stock and warrants were sold in units, with each unit consisting of one share of common stock and a warrant to purchase one share of common stock. Each unit was sold to the investors in this offering at a negotiated price of $0.60 per unit generating gross proceeds of $6.6 million. The shares and the warrants were offered and sold pursuant to the Company’s shelf registration statement on Form S-3 that was declared effective by the SEC in April 2017.
The investor warrants have an exercise price of $0.76 per share and are exercisable starting on December 7, 2017 with a term of five years from issuance. The investor warrants include a provision where the warrant holder has the contractual right to request a cash exercise even if the effectiveness of the registration statement is not maintained, but securities law would prevent the Company from issuing registered shares in a cash exercise. Therefore, the Company presumably could be forced to cash settle the warrant. Based on this additional derivative feature of the investor warrants, they must be accounted for as a liability at fair value under Accounting Standards Codification (“ASC”) 815 “~~Derivatives and Hedging”~~ ~~. On the date of issuance, these warrants were valued at $4.6 million.~~
In connection with the offering, the placement agent received an 8% commission totaling $533,000 and approximately 879,000 warrants with an exercise price of $0.76 and a termination date of June 1, 2022. These warrants had a value of $369,000 when they were issued and are accounted for as equity based warrants. The Company also incurred expenses related to legal, accounting, and other registration cost of $292,000.
In September 2016, the Company completed a registered direct offering. In this offering, the Company issued directly to an institutional investor 5.0 million shares of its common stock and warrants to purchase up to 5.0 million shares of common stock. The common stock and warrants were sold in units, with each unit consisting of one share of common stock and a warrant to purchase one share of common stock. Each unit was sold to the investor in this offering at a negotiated price of $0.75 per unit generating gross proceeds of $3.75 million. The shares and the warrants were offered and sold pursuant to the Company’s December 2013 shelf registration statement on Form S-3.
The investor warrants had an exercise price of $1.00 per share and are immediately exercisable with a term of five years from issuance. In addition, the investor warrants included provisions for the adjustment to the exercise price upon subsequent issuances of common stock by the Company at a price less than the warrant exercise price and the investor was entitled to purchase additional shares, such that the aggregate purchase price of $5.0 million for the warrant shares would remain unchanged. The investor warrants also include a provision for cash redemption at the Black-Scholes value at the request of the holder upon a change of control. Based on these additional derivative features of the investor warrants, they must be accounted for as a liability at fair value under Accounting Standards Codification (“ASC”) 480 “~~Distinguishing Liabilities from Equity”~~~~. On the date of issuance, these warrants were valued at $4.1 million.~~
In connection with the offering the placement agent received a 6% commission totaling $225,000 and 150,000 warrants with an exercise price of $0.9375 and a termination date of September 1, 2021. These warrants had a value of $89,000 when they were issued and were accounted for as equity based warrants. The Company also incurred expenses related to legal, accounting, and other registration cost of $113,000.
The Company’s net cash proceeds from the registered direct offering were $3.4 million. The additional non-cash charges of $4.2 million related to the 5.0 million investor warrants and the 150,000 placement agent warrants were offset against the net cash transaction proceeds which exceeded 100% of the proceeds requiring the Company to take the additional cost above the transaction proceeds and recognize them as a loss on the day it entered the transaction. The loss on the transaction was $804,000 and was included in derivative expense on the statement of operations for the year ended December 31, 2016.
~~On March 27, 2017,~~February 2020, the Company entered into a Waiver and Consent Letter Agreement (the “Waiver and Consent Agreement”) with the investor, amending the terms of warrants previously issued to the investor in September 2016. Under the Waiver and Consent Agreement, the investor waived the right to have the warrant exercise price reduced and the number of shares of common stock underlying the warrant increased in the event the Company secures any financing, including debt, which includes issuing or selling shares of common stock for a price per share less than the warrant exercise price. The investor also waived the prohibition on the Company’s ability to issue or sell shares of its common stock, options or convertible securities at a price which varies or may vary with the market price of the common stock or pursuant to an equity credit line or similar “at-the-market” offering. The waivers are permanent. In return, the Company agreed to reduce the exercise price of the warrants from $1.00 to $0.40 and to not issue or sell any shares of its capital stock for a period of 10 trading days following the execution of the Waiver and Consent Agreement. All other terms of the warrants remained the same. Based upon the amendment to this warrant agreement, the Company recognized a non-cash derivative gain of $1.1 million during the quarter ended March 31, 2017.
~~Controlled Equity Offering~~
~~In February 2016, Ampio entered into a Controlled Equity Offering~~^SMSales Agreement ~~(the “Agreement”)~~ with ~~a placement agent~~2 agents to implement an ~~“at-the-market”~~ATM equity offering program under which ~~Ampio~~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 of up to ~~$25.0~~$50.0 million to the public through the ~~placement agent.~~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 ~~of the~~ 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 ~~Company has provided the placement agent with~~Sales Agreement includes customary indemnification ~~rights. The placement agent~~rights in favor of the agents, and provides that the agents will be entitled to aan aggregate fixed commission of ~~3.0%~~4.0% of the gross proceeds (2.0% to each agent) to the Company from any shares ~~sold.~~sold pursuant to the Sales Agreement.

The following table summarizes ~~Ampio’s total~~the Company’s sales and related issuance costs incurred under the Sales Agreement ~~for~~during the ~~period indicated:~~
Year Ended
December 31, 2016

Total shares of common stock sold 163,254
Average price per share $ 0.94
Gross proceeds $ 153,000
Commissions earned by placement agent $ 5,000
Other expenses $ 98,000
~~No shares were sold under the Agreement in the nine~~three months ended ~~September 30, 2017.~~March 31, 2021:

Sales Agreement

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
~~Ampio~~The Company issued ~~62,478~~54,052 and ~~18,126~~136,236 shares of common stock under the Ampio Pharmaceuticals, Inc. 2019 Stock and Incentive Plan (the “2019 Plan”), each valued at ~~$60,000 and $60,000, respectively,~~$80,000, as partial compensation for the services of non-employee directors, ~~as part~~during the three months ended March 31, 2021 and 2020, respectively.

Table of ~~their director fees for fiscal years 2017 and 2016, respectively.~~Contents

Note 811 - Equity ~~Instruments~~
Options
In ~~2010, Ampio shareholders~~December 2019, the Company’s Board of Directors and stockholders approved the adoption of ~~a stock and option award plan (the “2010 Plan”),~~the 2019 Plan, under which shares were reserved for future issuance ~~under~~of equity related awards classified as option awards/grants, restricted stock awards ~~options,~~ and other equity related awards. The ~~2010~~2019 Plan permits grants of equity awards to employees, directors and consultants. The ~~shareholders have~~stockholders approved a total of ~~11.7~~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, 2021:

2019 Plan

Total shares reserved for equity awards

10,000,000
Options granted during previous fiscal years

(2,067,471)
Options granted during fiscal 2021

(36,000)
Forfeited, expired and/or cancelled equity awards

22,226
Remaining shares available for future equity awards

7,918,755

~~During~~The following table summarizes the nine months ended September 30, 2017, the Company granted 1,571,334 options at a weighted average exercise price of $0.65 to officers, directors and employees. Of the options granted, 628,000 options vested immediately while 943,334 vest over a one to three-year period.
~~Ampio~~Company’s stock option activity isduring the three months ended March 31, 2021:




Weighted

Weighted Average


Number of

Average

Remaining

Aggregate

Options

Exercise Price

Contractual Life

Intrinsic Value
Outstanding as of December 31, 2020

6,099,651

$
1.04

7.36

$
—
Granted

36,000

$
1.76

Exercised

(129,500)

$
0.48

Forfeited, expired and/or cancelled

(5,000)

$
1.75

Outstanding as of March 31, 2021

6,001,151

$
1.06

7.14

$
5,109,000
Exercisable as of March 31, 2021

5,692,151

$
1.06

7.00

$
4,906,000

Of the 129,500 stock options that were exercised, 8,000 were cash exercised, where the Company received proceeds to cover the option holder’s exercise price and tax obligations totaling $6,000. In addition, 60,000 stock options were exercised as ~~follows:~~cashless exercises, where the Company received proceeds to cover the option holders’ exercise price totaling $27,000. The remaining 61,500 stock options were net exercised, where the total number of shares of common stock issued was reduced to cover the option holders’ exercise price and tax obligations. The Company submitted the tax obligations totaling $40,000 on behalf of the option holders and did not receive any cash proceeds from the net stock option exercises. Shares of common stock that are held back upon exercise of a stock option to cover the option holder’s exercise price and tax obligations are added back to the shares of stock available for issuance under the 2019 Plan.
The following table summarizes the outstanding options that were issued in accordance with the 2010 Plan and the 2019 Plan:
Number of
Options Weighted
Average
Exercise Price Weighted Average
Remaining
Contractual Life
Outstanding December 31, 2016 7,175,832 $ 3.64 4.99
Granted 1,571,334 $ 0.65
Exercised - $ -
Forfeited (1,438,334 ) $ 4.02
Expired or Cancelled - $ -
Outstanding September 30, 2017 7,308,832 $ 2.85 5.41
Exercisable at September 30, 2017 6,335,494 $ 3.16 4.78
Available for grant at September 30, 2017 2,916,169

Outstanding Options by Plan

March 31, 2021

2010 Plan

3,938,180
2019 Plan

2,062,971
Outstanding as of March 31, 2021

6,001,151

Table of Contents

Stock options outstanding ~~at September 30, 2017~~as of March 31, 2021 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

602,000

$
0.44

8.31
$0.51 - $1.00

4,346,007

$
0.70

7.31
$1.01 - $1.50

194,000

$
1.38

9.62
$1.51 and above

859,144

$
3.22

4.88
Total

6,001,151

$
1.06

7.14
Range of Exercise Prices Number of
Options
Outstanding Weighted
Average
Exercise Price Weighted Average
Remaining
Contractual Lives
$0.48 - $2.00 3,196,888 $ 0.90 6.48
$2.01 - $5.00 2,731,944 $ 3.05 4.14
$5.01 - $8.93 1,380,000 $ 6.99 5.42
7,308,832 $ 2.85 5.41

~~Ampio has computed~~The Company computes the fair value offor all options granted or modified using the Black-Scholes option pricing model. To calculate the fair value of the options, certain assumptions are made regarding components of the model, including the ~~estimated~~ fair value of the underlying common stock, risk-free interest rate, volatility, expected dividend yield and expected option life. Changes to the assumptions could cause significant adjustments to the valuation. ~~Ampio~~The Company calculates its volatility assumption using the actual changes in the market value of its stock. ~~Ampio adopted ASU 2016-09 in 2017 and no longer estimates a forfeiture rate. Instead, forfeitures~~Forfeitures are recognized as they occur. ~~Ampio~~The Company’s historical option exercises do not provide a reasonable basis to estimate an expected term due to the lack of sufficient data. Therefore, the Company estimates the expected term ~~based on~~by using the simplified method. The simplified method calculates the expected term as the average of the vesting term ~~and~~plus the contractual ~~term~~life of the options. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of the grant for treasury securities of similar maturity. ~~Accordingly, Ampio has~~The Company computed the fair value of ~~all~~ options ~~granted~~granted/modified during the period ~~ending September 30, 2017,~~ended March 31, 2021, using the following assumptions:

~~Expected volatility~~

~~34.35% - 113.2~~ %

Expected volatility
127.17
%
Risk free interest rate
0.78
~~1.16% - 2.13~~
%
Expected term (years)
5.00
~~0.5 - 6.5~~
~~Dividend yield~~ ~~0.0~~ %

Stock-based compensation expense related to the fair value of stock options ~~was~~is included in the statements of operations as research and development expenses or ~~selling,~~ general and administrative expenses as set forth in the table below. The following table summarizes stock-based compensation expense (stock options and common stock issued for services) for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016:~~2020:

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016

Three Months Ended March 31,


2021

2020
Research and development expenses




Stock-based compensation $ 179,000 $ 162,000 $ 255,000 $ 317,000

$
46,000

$
59,000

General and administrative expenses




Common stock issued for services - - 60,000 60,000
Issuance of common stock for services

80,000

80,000
Stock-based compensation 127,000 281,000 354,000 1,009,000

120,000

154,000
$ 306,000 $ 443,000 $ 669,000 $ 1,386,000

Unrecognized expense at September 30, 2017 $ 378,000

Total stock-based compensation

$
246,000

$
293,000

Unrecognized expense as of March 31, 2021

165,000



Weighted average remaining years to vest 1.57

1.29


~~Warrants~~

~~Ampio has issued warrants in conjunction with private and public offerings. A summary~~Note 12 - Earnings Per Share
Basic earnings per share is computed by dividing net loss available to common stockholders by the weighted-average number of ~~all Ampio warrants is as follows:~~
Number of
Warrants Weighted
Average
Exercise Price Weighted Average
Remaining
Contractual Life

Outstanding December 31, 2016 5,648,576 $ 0.67 4.28
Warrants issued 11,869,464 $ 0.76
Warrants exercised - $ -
Outstanding September 30, 2017 17,518,040 $ 0.73 4.34
~~In connection with the June 2017 registered direct offering, Ampio issued to investors warrants to purchase an aggregate of approximately 11 million~~ shares of common stock ~~at an exercise price of $0.76~~outstanding during each period. Diluted earnings per share is based on the treasury stock method and ~~a term of five years. These warrants, due~~computed by dividing net loss available to ~~certain derivative features, are accounted for under liability accounting and are fair valued each reporting period. At September 30, 2017, these warrants had a fair value of $4,475,000 (see Note 5).~~
Incommon stockholders by the ~~2016 registered direct offering, Ampio issued to an investor warrants to purchase an aggregate of 5 million~~diluted weighted-average shares of common stock ~~at an exercise price~~outstanding during each period. The Company’s potentially dilutive shares include stock options and warrants for the shares of ~~$1.00 with a term~~common stock. The potentially dilutive shares are considered to be common stock

Table of ~~five years. These warrants due to certain derivative features are accounted for under liability accounting~~Contents

equivalents and are ~~fair valued each reporting period. At September 30, 2017, these~~only included in the calculation of diluted net loss per share when the effect is dilutive. The investor warrants ~~had a fair value~~are treated as equity in the calculation of ~~$2,289,000 (see Note 5).~~diluted earnings per share in both the computation of the numerator and denominator, if dilutive. The following table sets forth the calculations of basic and diluted earnings per share for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,


2021

2020
Net loss

$
(3,667,000)

$
(5,179,000)
Less: decrease in fair value of investor warrants

(151,000)

(831,000)
Loss available to common stockholders

$
(3,818,000)

$
(6,010,000)

Basic weighted-average common shares outstanding

195,387,047

159,053,722
Add: dilutive effect of equity instruments

5,365,220

1,504,055
Diluted weighted-average shares outstanding

200,752,267

160,557,777
Earnings per share – basic

$
(0.02)

$
(0.03)
Earnings per share – diluted

$
(0.02)

$
(0.04)

The ~~combined value for the warrant liability at September 30, 2017 is $6,764,000 (see Note 5).~~
~~During the 2017 registered direct offering, Ampio issued placement agent warrants to purchase an aggregate of approximately 879,000~~potentially dilutive shares of common stock ~~at an exercise price~~that have been excluded from the calculation of ~~$0.76 with a term~~net loss per share because of ~~five years. These warrants were accounted for as equity based awards (see Note 7). They were valued using the Black-Scholes methodology. Significant assumptions were~~their anti-dilutive effect are as follows:

~~Expected volatility~~ ~~94.6~~ %
~~Risk free interest rate~~ ~~1.71~~ %
~~Expected term (years)~~ ~~5.0~~
~~Dividend yield~~ ~~0.0~~ %

Three Months Ended March 31,

2021

2020
Outstanding stock options
1,510,485

5,948,013
Warrants to purchase shares of common stock
2,939,996

5,904,288
Total potentially dilutive shares of common stock
4,450,481

11,852,301

~~In the 2016 registered direct offering, Ampio issued~~
Note 13 – Litigation
From time to the placement agent warrants to purchase an aggregate of 150,000 shares of common stock at an exercise price of $0.9375 with a term of five years. These warrants were accounted for as equity based awards (see Note 7). They were valued using the Black-Scholes methodology.
~~In March 2017,~~time, the Company ~~modified 498,576 of its outstanding warrants which extended the expiration until June 30, 2018. The $75,000 additional expense related~~may be a party to ~~this modification was recognized~~litigation arising in the ~~quarter ended~~ordinary course of business. As of March 31, ~~2017.~~
~~In March 2017,~~2021, the Company ~~modified the five million warrants issued in conjunction with the Company’s September 2016 registered direct offering with an original strike price of $1.00 down~~is not a party to ~~$0.40. The $1.1 million gain related to this modification was recognized in the quarter ended March 31, 2017 (see Note 7).~~any ongoing lawsuits.

~~Note 9 - Related Party Transactions~~
~~Sponsored Research Agreement~~
Ampio entered into a sponsored research agreement with Trauma Research LLC, an entity controlled by Ampio’s Director and Chief Scientific Officer, Dr. Bar-Or, in September 2009, which was amended seven times with the last amendment occurring in June 2017. Under the amended terms, the agreement was terminated effective July 5, 2017. The remaining prepaid of $252,000 was expensed during the quarter ended June 30, 2017. In conjunction with terminating this agreement, the Company extended the contract for Dr. Bar-Or for an additional year. He will continue his current roles as the Chief Scientific Officer and a director.
~~Service Agreement~~
In June 2017, Ampio terminated the shared services agreement with Aytu. As of September 30, 2017, Aytu owed Ampio $10,000 under this agreement. For the nine months ended September 30, 2017 and 2016, the total shared overhead cost was $77,000 and $183,000, respectively.
15
~~Note 10 - Litigation~~
As previously disclosed, on May 8, 2015 and May 14, 2015, purported stockholders of the Company brought two putative class action lawsuits in the United States District Court in the Central District of California, Napoli v. Ampio Pharmaceuticals, Inc., et al., Case No. 2:15-cv-03474-TJH and Stein v. Ampio Pharmaceuticals, Inc., et al., Case No. 2:15-cv-03640-TJH (the “Securities Class Actions”), alleging that Ampio and certain of its current and former officers violated federal securities laws by misrepresenting and/or omitting information regarding the STEP study. The cases were consolidated, and on February 8, 2016, the plaintiffs filed a consolidated amended complaint alleging claims under Sections 10(b) and 20(a) and Rule 10b-5 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Sections 11 and 15 under the Securities Act of 1933 on behalf of a putative class of purchasers of common stock from January 13, 2014 through August 21, 2014, including purchasers in the Company’s offering on February 28, 2014. On September 27, 2016, plaintiffs filed a second amended complaint, alleging the same claims set forth in the consolidated amended complaint during the same class period. On or about November 8, 2016, the parties reached an agreement in principle on a comprehensive settlement of all claims asserted in the lawsuit with no admission of liability by any defendants and with any settlement amounts being funded by insurance. On September 29, 2017, the settlement was finally approved by the Court and all claims were dismissed with prejudice and with no admission or finding of any liability or wrongdoing by the defendants.
~~Note 11 - Subsequent Events~~
On October 15, 2017, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”), with certain investors. Pursuant to the terms of the Purchase Agreement, the Company sold approximately 7.7 million shares with total gross proceeds of $6.7 million of its common stock, $0.0001 par value per share (the “Common Stock”) at a price per share of $0.875 (the “Offering”). The Offering closed on October 18, 2017. The net proceeds to the Company from the Offering were $6.3 million, including estimated Offering expenses payable by the Company.
~~The Shares were sold pursuant to the Company’s shelf registration statement on Form S-3. The shelf registration statement was declared effective by the SEC on April 20, 2017.~~
~~Item 2.~~ ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion should be read in conjunction with our historical financial statements. The following discussion and analysis ~~contain~~contains forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. For additional information regarding these risks and uncertainties, please see “Cautionary Note Regarding Forward-Looking Statements”, above, Part II, Item 1A of this Quarterly Report on Form 10-Q, “Risk Factors,” and the risk factors included in our 2020 Annual ~~Report~~Report.

EXECUTIVE SUMMARY
We are a biopharmaceutical company focused on ~~Form 10-K filed~~the development and advancement of immunology-based therapies for prevalent inflammatory conditions. We have not generated operating revenue to date, and our operations have been substantially funded through equity raises, which have occurred from time to time since inception.
The biopharmaceutical market, both domestic and globally, is a highly competitive industry with strict regulations that are unpredictable in nature, time intensive and costly. We are committed to offering a compelling therapeutic option for

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patients most in need of new treatments for inflammatory conditions, including, but not limited to, OAK and the treatment of serious complications arising from the COVID-19 pandemic, including Post-Acute Sequelae of SARS-CoV-2 infection (“PASC”) commonly referred to as “Long-COVID”.

Moving forward, we will continue to place a disciplined focus on maintaining our business operations in a manner that is streamlined and efficient while continuing to allocate a requisite level of our liquidity, human capital and other operational resources towards the advancement of key immunology-based therapies with the ~~Securities~~ultimate goal of achieving FDA marketing approval and ~~Exchange Commission on March 16, 2017.~~

subsequent commercialization of Ampion for these conditions.

Overview

We maintain an Internet website at~~www.ampiopharma.com~~. www.ampiopharma.com. Information on or linked to our website is not incorporated by reference into this Quarterly Report on Form 10-Q. Filings with the SEC can also be obtained at the SEC’s website,~~www.sec.gov~~. www.sec.gov.

Ampion, our lead product candidate, is in the process of advancing through clinical trials in the United States. Ampion is currently in development as an intra-articular injection treatment for severe OAK, an IV treatment for COVID-19 patients, and an inhaled treatment for COVID-19 induced respiratory distress and Long-COVID. Pre-clinical and discovery work is also underway for additional applications and indications for Ampion.

We

In June 2019, we commenced the AP-013 study titled, “A Randomized, Controlled, Double-Blind Study to Evaluate the Efficacy and Safety of an Intra-Articular Injection of Ampion in Adults with Pain Due to Severe Osteoarthritis of the Knee”. In April 2020, due to the impact of COVID-19, we paused the ongoing conduct of the AP-013 study. During fiscal 2020, the FDA provided guidance specifically designed to assist the pharmaceutical industry with viable options for evaluating data from clinical trials which were impacted by the pandemic. In March 2021, the Company submitted a detailed proposal to the FDA in response to the FDA’s recent guidance regarding the status of the AP-013 study. In April 2021, we received a response to our proposal from the FDA, which we are a biopharmaceutical company focused primarily on developing compounds that decrease inflammation by (i) inhibiting specific pro-inflammatory compounds by affecting specific pathways at the protein expressioncurrently evaluating, and ~~at the transcription level; (ii) activating specific phosphatase or depleting available phosphate needed for the inflammation process; and (iii) decreasing vascular permeability.~~

~~Product Update –~~

Wewe will continue to ~~execute our business plan~~maintain an ongoing active dialog with the FDA until a decision regarding the AP-013 study is finalized. During this period, the AP-013 study will continue to remain paused and ~~advance our main drug candidates.~~blinded to ensure clinical trial integrity and compliance with the SPA. However, due to the significant uncertainty surrounding the continuation and overall impact of the pandemic, it is possible that the continuation of the pandemic may prevent completion of the AP-013 study at this time or at all. In addition, the current uncertainty resulting from the pandemic may result in a significant change to the future contractual commitment related to the AP-013 study.

16 In October 2020, we commenced the AP-014 study titled “A Randomized Controlled Trial to Evaluate the Safety and Efficacy of Nebulized Ampion In Adults with Respiratory Distress Secondary to COVID-19 Infection”. In March 2021, we finalized the enrollment of 40 patients, who were randomized 1:1, Ampion in addition to the Standard of Care (“SOC”) versus SOC alone. Patients were randomized to receive inhaled Ampion for five days. The study met its primary end-point and demonstrated the safety and tolerability of inhaled Ampion in COVID-19 patients.

In December 2020, we initiated the AP-017 expanded global study in the United States and Israel for IV Ampion therapy in patients with COVID-19. The preliminary results of the AP-014 study were shared with the FDA, at which point the FDA recommended study updates to protocol AP-017, which were implemented in the study titled “A Randomized, Double-Blinded, Placebo-Controlled Phase II Study to Evaluate the Safety and Efficacy of Intravenous Ampion in Adult COVID-19 Patients Requiring Oxygen Supplementation”. We expect to commence enrollment of the AP-017 study during the second quarter of 2021.

In March 2021, we initiated the AP-018 study titled, “A Randomized, Double-Blinded, Placebo-Controlled Phase I Study to Evaluate the Safety and Efficacy of Ampion in Patients with Prolonged Respiratory Symptoms due to COVID-19 (“Long-COVID”)”. An increasing number of people with COVID-19 are experiencing lingering effects of COVID-19 and continue to have prolonged respiratory complications months after the onset of the disease, also known as PASC, Long-COVID, and/or long-hauler symptoms. This study aims to evaluate the safety of Ampion and the clinical outcomes in patients with Long-COVID. We expect to commence enrollment of the AP-018 study during the second quarter of 2021.

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~~AMPION~~

In April 2021, we provided an update on the continued research and discovery for Ampion applications. Laboratory results suggest Ampion’s suitability for ~~Osteoarthritis~~addressing kidney diseases and ~~Other Inflammatory Conditions~~

~~Ampion is the < 5 kDa ultrafiltrate of 5% Human Serum Albumin, or HSA, an approved biologic product. Ampion~~provides further evidence that it is a ~~non-steroidal, low molecular weight, anti-inflammatory~~platform biologic ~~which has the potential to be used in~~for treatment of a wide variety of ~~acute~~inflammatory and ~~chronic~~autoimmune diseases.

We believe the immunomodulatory action and anti-inflammatory effects of Ampion may provide a treatment for individuals with inflammatory conditions including, but not limited to, severe OAK and the widespread inflammation associated with COVID-19 infection.

Our therapeutic product pipeline is the result of more than two decades of research at leading hospital-based research centers. Significant discoveries in both scientific and clinical research have been published in peer-reviewed journals, highlighting the depth of research supporting Ampion’s therapeutic capabilities. Ampion is backed by an extensive and robust United States and global patent portfolio with intellectual property protection extending through 2035. In addition, Ampion is eligible for 12-year FDA market exclusivity upon approval as ~~well as immune-mediated diseases.~~a novel biologic under the Biologics Price Competition and Innovation Act of 2009.

AMPION

We have developed a novel biologic drug, Ampion, which contains a blood-derived cyclized peptide and small molecules that target multiple pathways in the innate immune response characteristic of inflammatory disease. In vitro studies have shown that Ampion represses the transcription of proteins responsible for inflammation, while activating anti-inflammatory proteins responsible for signaling tissue growth and healing. Ampion achieves its ~~known components have demonstrated a broad spectrum~~biological effect by targeting the over production of inflammatory cytokines, which is common in multiple inflammatory diseases like osteoarthritis and respiratory disease, and other inflammatory conditions. Ampion has been shown to uniquely reduce inflammation along multiple pathways, unlike other anti-inflammatory therapies that target only one mechanism.

Ampion has been developed for use, and ~~immune modulatory activity which support~~has been cleared by the FDA for investigation, by multiple routes of administration.

●

Intra-articular injection places Ampion right where it is needed to locally treat inflammation. The osteoarthritis trials are evaluating the safety and efficacy of intra-articular injection into the joint.

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Inhalation provides direct application of Ampion to locally treat inflammation in the lungs. The COVID-19 clinical trial is evaluating the safety and efficacy of Ampion inhalation in the lungs of COVID-19 patients with respiratory illness.

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Intravenous provides systemic application of Ampion to broadly treat inflammation throughout the body. The COVID-19 clinical trial is evaluating the safety and efficacy of Ampion IV treatment in COVID-19 patients with respiratory illness.

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We believe that the Ampion mechanism of ~~action.~~action provides a therapeutic effect by interrupting the dysregulated immune system responsible for the disease, damage, and pain attributed to many inflammatory and degenerative conditions. Ampion is considered a platform drug which is potentially useful for several inflammatory diseases throughout the body.

Ampion for Osteoarthritis

Ampion targets the cellular pathways in the innate immune response correlated with pain, inflammation, and joint damage from osteoarthritis. As described above, in vitro studies have shown that Ampion represses the transcription of inflammatory cytokines responsible for inflammation, while activating anti-inflammatory proteins responsible for tissue growth and healing. We ~~have published several scientific papers and peer-reviewed publications on the~~believe that this mechanism of ~~Ampion.~~action interrupts the disease process responsible for the pain and disability associated with OAK while providing a market expansion potential as a disease modifying biologic drug.

We are currently developing Ampion as an intra-articular injection to treat ~~pain due~~the signs and symptoms of severe OAK, which continues to ~~severe osteoarthritis of the knee, or OAK. Osteoarthritis is~~be a growing epidemic in the United States and ~~symptomatic OAK is expected to impact 1 in 2 Americans.~~other countries worldwide. OAK is a progressive disease characterized by gradual degradation and loss of cartilage due to inflammation of the soft tissue and bony structures of the knee joint. Progression of the most severe form of OAK leaves patients with little toor no treatment options other than a total knee ~~arthroscopy.~~arthroplasty. The ~~Federal Drug Administration, or~~ FDA has ~~stated~~asserted that severe OAK is an ~~‘unmet~~“unmet medical ~~need’~~need” with no existing licensed ~~therapies~~therapy available. While we believe that Ampion could successfully treat this “unmet medical need”, our ability to market this product is subject to FDA approval.

Ampion Development for Osteoarthritis

Since our inception, we have conducted multiple clinical trials and have advanced through late-stage clinical trials in the United States, initially under the guidance of the FDA’s Office of Blood Research and Review and most recently under the guidance of the FDA’s Office of Tissues and Advanced Therapies.

Study AP-003-A was a multicenter, randomized, double-blind Phase III trial of 329 patients who were randomized 1:1 to receive Ampion or saline control via intra-articular injection. The study showed a statistically significant reduction in pain compared to the control, with an average of greater than 40% reduction in pain from baseline at 12 weeks with Ampion treatment. Patients who received Ampion also showed a significant improvement in function and quality of life at 12 weeks compared to patients who received the saline control at 12 weeks. Quality of life was assessed using Patient Global Assessment. Furthermore, the trial included severely diseased patients, defined radiographically as Kellgren Lawrence Grade 4 (“KL 4”). From this ~~indication.~~patient population, those patients who received Ampion had a significantly greater reduction in pain than those who received the saline control. Ampion was well tolerated with minimal adverse events reported in either the Ampion or saline treated groups. There were no drug-related serious adverse events in either group.

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In 2018, the FDA reiterated and confirmed that our successful pivotal Phase III clinical trial, AP-003-A, was adequate and well-controlled, provided evidence of the effectiveness of Ampion and can contribute to the substantial evidence of effectiveness necessary for the approval of a Biologics License Application (“BLA”). The FDA provided guidance that we should complete an additional Phase III trial of KL 4 severe OAK patients with concurrent controls that would be carried out under an SPA to obtain FDA concurrence on the trial design prior to initiation of the trial.

We ~~have completed seven trials related~~received an SPA agreement in June 2019 from the FDA for a Phase III clinical protocol in reference to ~~Ampion~~the AP-013 study. The SPA agreement for the AP-013 study finalized patient enrollment at 1,034 patients, with a sample size assessment at an interim analysis of 724 patients to allow an adjustment up to 1,551 patients if deemed necessary. In the SPA agreement, the FDA agreed that the design and ~~have closed enrollment~~planned analysis of ~~our current pivotal phase three~~the AP-013 study adequately addressed the objectives necessary to support a regulatory submission. According to the FDA’s guidance regarding SPAs (published in April 2018), an SPA documents the FDA’s agreement that the design and planned analysis of a study can address objectives in support of a regulatory submission; however, the final determinations for marketing application approval are made after a complete review of the marketing application and are based on the entire data in the application. Following the receipt of the SPA agreement, we initiated the AP-013 study, identified and engaged clinical sites for the clinical trial, ~~for this product.~~and initiated dosing of patients at those sites.

~~Clinical Development Pathway~~

In ~~September~~January 2020, the United States Department of Health and ~~December 2016, we met with~~Human Services declared COVID-19 a public health emergency in the ~~Center~~United States and the CDC indicated that older adults, age 65 years and older, are at higher risk for Biologics Evaluation and Research, or CBER, Division of the FDA to seek guidance on the best path forward to obtain a Biological License Application, or BLA, for Ampion to treat patients suffering from pain caused by severe ~~osteoarthritis of the knee. As~~illness as a result of ~~these meetings, we continued our discussions~~COVID-19. The AP-013 study focuses on individuals with the most severely diseased OAK, which represents an underserved patient population typically excluded from clinical studies because of the intractable nature of their condition. The AP-013 study population is comprised of elderly patients with an average age of 65 years old and a maximum age of 87 years. Therefore, guidance from the CDC indicates the AP-013 study population is the highest risk demographic for developing severe illness during the current COVID-19 pandemic. In March 2020, and updated on January 27, 2021, the FDA acknowledged the impact of COVID-19 on clinical trials in published guidance, “FDA Guidance on Conduct of Clinical Trials of Medical Products during the COVID-19 Pandemic”, which outlines the FDA’s recommendations for ensuring clinical trial participant safety and adherence to good clinical practice guidelines and protocol requirements for clinical trials during the outbreak. In concurrence with the FDA ~~into~~guidance, the ~~first quarter~~SMC for the AP-013 study recognized the impact of ~~fiscal 2017 while analyzing~~COVID-19 on the ~~best way~~clinical trial. In April 2020, we paused ongoing conduct of the AP-013 study. In March 2021, the Company submitted a detailed proposal to ~~proceed towards filing~~the FDA in response to the FDA’s guidance regarding the status of the AP-013 study. In April 2021, we received a response to our ~~BLA for Ampion. Based on these discussions~~proposal from the FDA, which we are currently evaluating, and we will continue to maintain an ongoing active dialog with the FDA until a decision is finalized. During this period, the AP-013 study will continue to remain paused and blinded to ensure clinical trial integrity and compliance with the SPA. However, due to the significant uncertainty surrounding the continuation and overall impact from the pandemic, it is possible that the continuation of the pandemic may prevent completion of the AP-013 study at this time or at all. In addition, the current uncertainty resulting from the pandemic may result in a significant change to the future contractual commitment related to the AP-013 study.

Ampion for COVID-19

The COVID-19 pandemic has resulted in over 145 million cases and millions of deaths worldwide with figures continuing to reflect significant expansion of the pandemic. The COVID-19 infection is an acute respiratory illness caused by a novel coronavirus (SARS-COV-2). Once infected, the COVID-19 virus moves into a patient’s respiratory tract where the lungs may become inflamed, making breathing difficult and requiring treatment with oxygen. Complications of severe COVID-19 infection include, but are not limited to, Acute Respiratory Distress Syndrome (“ARDS”), Acute Lung Injury (“ALI”), PASC, pneumonia, sepsis and septic shock, cardiomyopathy and arrhythmia, acute kidney injury and prolonged hospitalization for other complications (i.e., secondary bacterial infection). We believe that it is imperative that effective therapeutic treatments are identified and developed to address the full spectrum of clinical features of COVID-19 infection, from the need for oxygen to the progression to ARDS.

Nonclinical in vitro studies show Ampion decreases the production of inflammatory cytokines associated with the hyperactive inflammatory response present during COVID-19 infection. Elevated levels of inflammatory cytokines are correlated with COVID-19 severity and may also trigger additional complications including pneumonia, ALI and/or

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ARDS, which is a leading cause of mortality in COVID-19. By targeting and reducing the production of these inflammatory cytokines, Ampion may improve the clinical outcome for patients with COVID-19.

Due to its mode of action, Ampion may be a viable treatment option for those infected with COVID-19 to improve clinical outcomes and decrease the progression and severity of associated COVID-19 inflammatory conditions (i.e., COVID-19 pneumonia, ALI, ARDS, and ultimately mortality). Accordingly, Ampion may provide an early intervention option for COVID-19 patients.

As an immunomodulatory agent, we ~~began an~~believe that Ampion ~~trial~~may be effective in improving the clinical course and outcome of COVID-19 patients.

Ampion Development for Treating COVID-19 Induced Inflammation

Ampion is in development as a novel biologic drug that regulates multiple therapeutic targets in the innate immune system responsible for the inflammation, tissue damage and pathogenesis associated with dysregulated immune disorders. Due to its mode of action, Ampion may be a viable treatment option for those infected with COVID-19 to improve clinical outcomes and slow the progression and severity associated critical COVID-19 inflammatory conditions (i.e., progression to respiratory failure, the need for assisted breathing and ultimately mortality).

In May 2020, we submitted an Investigational New Drug (“IND”) application for the IV treatment of ~~the signs and symptoms of severe OAK and announced the close of enrollment and dosing of~~adults with COVID-19 requiring supplemental oxygen. In June 2020, we received FDA agreement to proceed with human trials utilizing an IV Ampion treatment for COVID-19 patients in this trial on September 18, 2017. This 12-week study will evaluate the responder rate of Ampion-treated patients as defined by the Osteoarthritis Research Society International (“OARSI”) Standing Committee for Clinical Trials Response Criteria Initiative (OMERACT), which includes pain, function, and patient global assessment. Based on this OMERACT-OARSI responder rate definition and the analysis proposed in this protocol, all previous Ampion single injections clinical trials would have successfully met this endpoint. We believe this trial will be completed in the fourth quarter of fiscal 2017. If the trial is successful, we plan to file the BLA thereafter, pending any partnership discussions.

We also intend to study Ampion for therapeutic applications other than osteoarthritis of the knee and hand. We may engage development partners to study Ampion in various conditions including: (i) acute and chronic inflammatory conditions; (ii) degenerative joint diseases; and (iii) respiratory disorders. Based on the continuing evaluation, we are also studying Ampion’s effects on cellular behavior to indicate potential effects on disease modification across multiple conditions. If successful, we believe these additional formulations and potential therapeutic indications will supplement the Ampion clinical portfolio, and will enable clinical applications in large therapeutic markets where there are significant unmet needs.

~~OPTINA~~

~~Optina for Diabetic Macular Edema~~

~~Optina is a low-dose formulation of danazol that we are developing to treat diabetic macular edema, or DME. Danazol is a synthetic derivative of modified testosterone ethisterone,~~who require supplemental oxygen, and we ~~believe it affects vascular endothelial cell linkage~~commenced the Phase I AP-016 study in a biphasic manner. At low doses, danazol decreases vascular permeability by increasing the barrier function of endothelial cells. The lipophilic low-molecular-weight weak androgen has the potential to treat multiple angiopathies. Steroid hormones control a variety of functions through slow genomic and rapid non-genomic mechanisms. Danazol immediately increases intracellular cyclic adenosine monophosphate through the rapid activation of membrane-associated androgen, steroid binding globulin, and calcium channel receptors. At lower concentrations, such as Optina, danazol binds to androgen and steroid binding globulin receptors stimulating the formation of a cortical actin ring. At higher concentrations, activation of the calcium channels shifts the balance towards stress fiber formation and increases vascular permeability.

~~When organized into a cortical ring, filamentous actin, or f-actin, increases the barrier function of endothelial cells by tethering adhesion molecule complexes to the cytoskeleton.~~July 2020. In ~~this orientation, increased cortical actin improves tight junctions which strengthen cell-to-cell adhesions. Formation of the cortical actin ring thereby restricts leakage across the cell membrane.~~

~~We have completed two clinical trials of Optina and met with the Division of the Transplant and Ophthalmology Products of the FDA in late 2015 to discuss~~September 2020, we announced the results of the ~~OptimEyes~~AP-016 study, which met its primary endpoint and found Ampion to be safe and well-tolerated with no remarkable difference in the incidence, frequency, and severity of adverse events between IV Ampion and SOC. These patients were followed for 90-days following treatment to complete their safety assessments and the SMC found the IV treatment of Ampion to be safe and well-tolerated. Secondary efficacy endpoints from the study suggest Ampion may improve the clinical ~~trial~~outcome for patients with COVID-19 as measured by the ordinal scale of ~~Optina~~clinical improvement as recommended by the WHO, and by the National Early Warning Score, as recommended by the National Institute for Health and Care Excellence in its guidelines for the management of COVID-19 patients in critical care. Following these results, in December 2020, the Company initiated an expanded global study, or the AP-017 study, in the United States and Israel for IV Ampion therapy in patients with COVID-19. The preliminary results of the AP-014 study were shared with the FDA, at which point the FDA recommended study updates to protocol AP-017, which were implemented in the study titled “A Randomized, Double-Blinded, Placebo-Controlled Phase II Study to Evaluate the Safety and Efficacy of Intravenous Ampion in Adult COVID-19 Patients Requiring Oxygen Supplementation”. We expect to commence enrollment of the AP-017 study during the second quarter of 2021.

In August 2020, we submitted preclinical safety data to support the IND application for inhalation treatment of adults with respiratory distress due to COVID-19 infection. In September 2020, we received FDA agreement to proceed with human trials utilizing inhaled Ampion as a treatment for COVID-19 patients who have respiratory distress and, in October 2020, we commenced the AP-014 study. In March 2021, we announced that the Company will present scientific data that supports the safety and tolerability of inhaled Ampion therapy and enabled swift progression to human clinical trials at the upcoming 23^rd International Congress of the International Society for Aerosols in Medicine (“ISAM”) in a poster titled, “Regulatory Decisions during COVID-19; Efficient Nonclinical Inhalation Toxicology for Clinical Program”. In addition, in April 2021, we announced the results from the AP-014 study. The AP-014 study not only met its primary endpoint, but the final data also showed an even greater improvement than the interim results reported, in the metric measuring all-cause mortality over patients treated using SOC. Specifically, mortality in the SOC group was 24% (interim analysis reported 21%), while in the group treated with Ampion, mortality was only 5% (interim analysis reported 8%).

Other key findings from the study continue to show a positive outcome for patients treated with Ampion including:

●

Patients who received Ampion required less hospitalization time. The average hospital length of stay was four days less for the Ampion group compared to the patients receiving SOC.

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Patients treated with Ampion were either stable or showed improvement on a scale of clinical improvement compared to patients treated using SOC. By day five, 89% of patients who received Ampion were stable or had improvement compared to 77% of patients who received SOC. This trend in improvement with Ampion treatment is noted as early as day two and continues to day five.

●

Ampion treatment was safe and well-tolerated in all patients. There were no remarkable adverse events with Ampion treatment, and no drug-related serious adverse events were reported.

We continue to communicate on a regular basis with the FDA to advance the development of these programs. As an immunomodulatory agent, with anti-inflammatory effects, we believe Ampion may be effective in interrupting the inflammatory cascade associated with COVID-19 and improving the clinical course and outcome for patients.

Due to the global pandemic and the need for new treatments, regulatory authorities are applying emergency approval programs. These programs include the Emergency Use Authorization (“EUA”) program in the United States. We may seek ~~guidance on the next steps to approval. The guidance~~an EUA from the FDA ~~was that~~for the use of Ampion in respiratory distress due to COVID-19 infection. If we ~~perform~~decide to apply for an EUA and it is granted, a ~~confirmatory study on patients with DME who are refractory~~separate regulatory process will be needed in order to obtain a full marketing authorization (i.e., non-emergency authorization) for the use of Ampion in COVID-19 patients.

Recent Financing Activities

Information regarding our recent financing activities is contained in Note 10 to the ~~currently available drugs, which if successful, would qualify Optina~~Financial Statements.

Known Trends or Future Events; Outlook

We are a pre-revenue stage biopharmaceutical company that has incurred an accumulated deficit of $204.2 million as of March 31, 2021. We expect to generate continued operating losses for the foreseeable future as we continue the ongoing development and advancement of immunological-based therapies with the ultimate goal of achieving FDA marketing approval and subsequent commercialization of Ampion for the indications noted above. In addition, while working in parallel with the continued advancement of immunology-based therapies for Ampion, we continue to actively explore synergistic licensing and other partnering opportunities with both domestic and global-based organizations in order to further leverage and maximize the value of Ampion to our stockholders.

While we continue to maintain an ongoing dialog with the FDA to explore all viable options to complete the AP-013 study under an amended SPA agreement, as a ~~rescue medication for patients who have no treatment options (failed available therapies).~~

~~The FDA has indicated that, for §505(b)(2) NDAs, complete studies~~result of the ~~safety~~COVID-19 pandemic and ~~effectiveness~~the adverse impact on the study, it remains possible that the ongoing COVID-19 pandemic may prevent completion of the study over the near term or at all. While the potential economic impact brought by and the duration of COVID-19 may be difficult to assess or predict, a ~~candidate product may not be necessary if appropriate bridging studies provide an adequate basis for reliance upon~~continued widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital in a timely and effective manner. In addition, a recession or market correction resulting from the ~~FDA’s findings~~spread of ~~safety~~COVID-19 could have a material adverse impact on our ability to raise requisite financing to support our business operations, which would adversely impact the value of our common stock.

As of March 31, 2021, we had $15.8 million of cash and ~~effectiveness~~cash equivalents. In April 2020, we received PPP loan proceeds of $544,000, and we are currently awaiting a response from the SBA on their decision regarding our PPP loan forgiveness application despite several attempts to contact the SBA for a ~~previously approved product.~~

~~Recent Financing Activities~~

~~In October 2017,~~status update. During the three months ended March 31, 2021, we ~~entered into a Securities Purchase Agreement, with certain investors. Pursuant to the terms of the Purchase Agreement, we agreed to sell~~sold approximately ~~7.7~~1.8 million shares of common stock at a price per share of $0.875 per share. The gross proceeds from the offering were approximately $6.7 million. The costs associated with the offering was approximately $419,000. The shares are being offered and sold pursuant to the ATM equity offering program, which yielded gross proceeds of $2.7 million; offset by offering related costs of $0.1 million. We anticipate the continued use of the ATM equity offering program in a disciplined manner based on near-term liquidity needs and may seek to supplement the funds raised with separate private/public equity offering(s). Based on our current cash position, projection of operations and expected access to equity financing, we believe we will have sufficient liquidity to fund operations through the second quarter of 2022. This projection is based on many assumptions that may prove to be incorrect. For example, despite the historically successful use of the ATM equity offering program, due to the inherent uncertainties associated with raising capital in the public markets, our management is unable to conclude that it is probable that future capital will be available to satisfy our future liquidity needs in a manner that will be sufficient to fund operations. As such, it is possible that the Company could exhaust its available cash and cash equivalents earlier than presently anticipated. In addition, as the global COVID-19 pandemic continues to evolve, its effect on the Company’s operations

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and ability to raise capital through the ATM equity offering program, or otherwise, remains uncertain and subject to change. These existing and on-going factors continue to raise substantial doubt about our ability to continue as a going concern (see Note 2 to the Financial Statements).

Our shelf registration statement, ~~on Form S-3 that was declared effective by the SEC on April 20, 2017.~~

In June 2017, we completed a registered direct offering. In this offering, we issued directly to multiple investors approximately 11.0 million shares of our common stock and approximately 11.0 million warrants to purchase shares of common stock. The common stock and warrants were sold in units, with each unit consisting of one share of common stock and a warrant to purchase one share of common stock. Each unit was sold to the investors in this offering at a negotiated price of $0.60 per unit generating gross proceeds of $6.6 million. The shares and the warrants were offered and sold pursuant to our shelf registration statement on Form S-3 thatwhich was declared effective by the SEC in ~~April 2017.~~

The investor warrants have an exercise price of $0.76 per share and are exercisable starting on December 7, 2017 with a term of five years from issuance. The investor warrants include a provision where the warrant holder has the contractual right to request a cash exercise even if the effectiveness of the registration statement is not maintained, but securities law would preventMay 2020, provides us from issuing registered shares in a cash exercise. Therefore, we presumably could be forced to cash settle the warrant. Based on this additional derivative feature of the investor warrants, they must be accounted for as a liability at fair value under Accounting Standards Codification (“ASC”) 815 “~~Derivatives and Hedging”~~~~. On the date of issuance, these warrants were valued at $4.6 million.~~

~~In connection~~ with the offering, the placement agent received an 8% commission totaling $533,000 and approximately 879,000 warrants with an exercise price of $0.76 and a termination date of June 1, 2022. These warrants had a value of $369,000 when they were issued and are accounted for as equity based warrants. We also incurred expenses relatedability to ~~legal, accounting, and other registration cost of $292,000.~~

~~In September 2016, we completed a registered direct offering. In this offering, we issued directly~~sell up to an ~~institutional investor 5.0~~aggregate amount of $100.0 million shares of our common stock and warrants to purchase up to 5.0 million shares of common stock. The common stock and warrants were sold in units, with each unit consisting of one share of common stock and a warrant to purchase one share of common stock. Each unit was sold to the investor in this offering at a negotiated price of $0.75 per unit generating gross proceeds of $3.75 million. The shares and the warrants were offered and sold pursuant to our December 2013 shelf registration statement on Form S-3.

The investor warrants had an exercise price of $1.00 per share and are immediately exercisable with a term of five years from issuance. In addition, the investor warrants included provisions for the adjustment to the exercise price upon subsequent issuances of our common stock at a price less than the warrant exercise price and the investor was entitled to purchase additional shares, such that the aggregate purchase price of $5.0 million for the warrant shares would remain unchanged. The investor warrants also include a provision for cash redemption at the Black-Scholes value at the request of the holder upon a change of control. Based on these additional derivative features of the investor warrants, they must be accounted for as a liability at fair value under Accounting Standards Codification (“ASC”) 480 “~~Distinguishing Liabilities from Equity”~~~~. On the date of issuance, these warrants were valued at $4.1 million.~~

In connection with the offering the placement agent received a 6% commission totaling $225,000 and 150,000 warrants with an exercise price of $0.9375 and a termination date of September 1, 2021. These warrants had a value of $89,000 when they were issued and were accounted for as equity based warrants. We also incurred expenses related to legal, accounting, and other registration cost of $113,000.

Our net cash proceeds from the registered direct offering were $3.4 million. The additional non-cash charges of $4.2 million related to the 5.0 million investor warrants and the 150,000 placement agent warrants were offset against the net cash transaction proceeds which exceeded 100% of the proceeds requiring us to take the additional cost above the transaction proceeds and recognize them as a loss on the day we entered the transaction. The loss on the transaction was $804,000 and was included in derivative expense on the statement of operations for the year ended December 31, 2016.

The Board of Directors determined that this transaction that generated net cash proceeds of $3.4 million was in our best interest as we had less than six months of cash based on our current burn rate when the transaction was completed. They believed this capital raise would give us time to advance our clinical trial efforts in the absence of more favorable alternative sources of financing.

On March 27, 2017, we entered into a Waiver and Consent Letter Agreement, or the Waiver and Consent Agreement, with the investor, amending the terms of warrants previously issued to the investor in September 2016. Under the Waiver and Consent Agreement, the investor waived the right to have the warrant exercise price reduced and the number of shares of common stock, ~~underlying~~preferred stock, debt securities, warrants and units, or any combination thereof, less any sales from the ~~warrant increased in~~ATM equity offering program that occurred prior to May 6, 2020, which was the event we secure any financing, including debt, which includes issuing or selling shares of common stock for a price per share less than the warrant exercise price. The investor also waived the prohibition on our ability to issue or sell shares of our common stock, options or convertible securities at a price which varies or may vary with the market priceeffective date of the ~~common stock or pursuant to an equity credit line or similar “at-the-market” offering. The waivers are permanent. In return, we agreed to reduce~~shelf registration statement. We had $74.6 million remaining under the ~~exercise price~~shelf registration statement as of the warrants from $1.00 to $0.40 and to not issue or sell any shares of our capital stock for a period of 10 trading days following the execution of the Waiver and Consent Agreement. All other terms of the warrants remained the same. Based upon the amendment to this warrant agreement, we recognized a non-cash derivative gain of $1.1 million during the quarter ended March 31, ~~2017.~~

We also have access to a controlled equity offering which we used to generate $153,000 of gross proceeds by selling 163,254 common shares in August 2016. The placement agent received a fixed commission of 3.0% of the gross proceeds from the shares sold. We could use the controlled equity offering to generate additional funding in the near future.

~~We did not use the controlled equity offering in the nine months ended September 30, 2017.~~

~~Known Trends or Future Events; Outlook~~

We are a clinical stage company that has not generated revenues and therefore have incurred significant net losses totaling $161.9 million since our inception in December 2008. We expect to generate operating losses for the foreseeable future, but intend to try to limit the extent of these losses by entering into co-development or collaboration agreements with one or more strategic partners. As of September 30, 2017, we had $1.8 million of cash. In October 2017, we raised net proceeds of $6.3 million from a Securities Purchase Agreement (See Note 11 to the Financial Statements). Based on this recent capital raise, we expect our capital resources will not last through the second quarter of 2018.

On September 1, 2017, we received a letter from the NYSE American, or the Exchange, stating that the Exchange had determined that we were not in compliance with Sections 1003(a)(iii) of the Exchange Company Guide and the stockholder’s equity continued listing standards applicable to us due to our recently reported stockholder’s equity of $3,734,756 as of June 30, 2017 and net losses in our five most recent fiscal years ended December 31, 2016 (See Item 1A).

We submitted a plan on October 2, 2017 advising the Exchange of the actions that will be taken to regain compliance with the continued listing standards by March 19, 2019. If our plan is accepted by the Exchange, then we will be able to continue our listing during the period ending March 1, 2019. During this period, we will be subject to periodic reviews, including quarterly monitoring, for compliance with the plan. If the plan is not accepted, delisting proceedings will commence.

~~Although we have raised capital with net proceeds of over $100 million in the past five years through the sale of common stock and warrants,~~2021. However, we cannot ~~assure you~~be certain that we will be able to secure ~~such~~ additional financing or that itany funding, or securities offered pursuant to the shelf registration statement or otherwise, will be adequate to execute our business strategy. Even if we are able to obtain additional financing, itsuch additional financing may be costly and may require us to agree to covenants or other provisions that ~~will~~ favor new investors over existing ~~shareholders.~~stockholders.

March 31, 2021

Authorized shares

300,000,000

Common stock outstanding

195,689,128
Options outstanding

6,001,151
Warrants outstanding

3,814,550
Shares reserved for issuance under 2019 Stock and Incentive Plan

7,918,755
Available shares

86,576,416

Effective registration statement

$
100,000,000
ATM activity

(25,406,000)
Remaining amount on registration statement

$
74,594,000

Average stock price immediately preceding March 31, 2021:

30 day

$
1.67
60 day

$
1.81
90 day

$
1.72

~~Our primary focus~~
Even though the Company had approximately 86.6 million shares of common stock authorized and available for future issuance as of March 31, 2021, the ~~remainder~~Company’s ability to raise additional funds by issuing securities pursuant to its current shelf registration statement is limited by the $74.6 million remaining on such shelf registration statement. In addition, the Company, at its discretion, may file a new shelf registration statement to register any remaining shares of ~~fiscal 2017 is raising additional capital and advancing~~common stock that are authorized for issuance. Based on the ~~clinical development and BLA preparation~~table above, the average stock price could represent a range of ~~our core asset, Ampion.~~the Company’s ability to draw down on the residual shelf capacity.

ACCOUNTING POLICIES
Significant Accounting Policies and Estimates
Our financial statements ~~have been~~were prepared in accordance with ~~accounting principles generally accepted in the United States of America.~~GAAP. The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to recoverability of long-lived assets ~~valuation allowance, useful lives of assets, accrued compensation, stock compensation,~~and the ~~valuation of~~ability for the ~~Aytu BioScience investment and warrant derivative liability.~~Company to continue as a going concern. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable and appropriate under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The methods, estimates and judgments used by us in applying these ~~most~~ critical accounting policies have a significant impact

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on the results we report in our financial statements. Our significant accounting policies and estimates are included in our ~~2016~~2020 Annual ~~Report on Form 10-K, filed with the SEC on March 16, 2017.~~

Report. Our significant accounting policies and estimates have not changed substantially from those previously disclosed in our 2020 Annual Report.

Newly Issued Accounting Pronouncements

Information regarding the recently issued accounting standards (adopted and not adopted as of ~~September 30, 2017)~~March 31, 2021) is contained in Note 1 to the Financial Statements.

RESULTS OF OPERATIONS

Results of ~~Operations-September 30, 2017~~Operations – March 31, 2021 Compared to ~~September 30, 2016~~March 31, 2020

~~Results of operations~~We recognized a net loss for the three months ended ~~September 30, 2017, or the “2017 quarter,” and~~March 31, 2021 (“2021 quarter”) of $3.7 million compared to a net loss of $5.2 million for the three months ended ~~September 30, 2016, or~~March 31, 2020 (“2020 quarter”). The net loss during the ~~“2016~~2021 quarter~~” reflected~~ was primarily attributable to operating expenses of $3.8 million. The net ~~losses~~loss during the 2020 quarter was primarily attributable to operating expenses of $6.0 million, partially offset by the non-cash derivative gain of $0.8 million. The decrease in our stock price from ~~continuing operations~~$0.58 as of ~~approximately $4.3~~December 31, 2019 to $0.42 as of March 31, 2020 caused the valuation of the warrant liability to decrease resulting in a derivative gain during the 2020 quarter. Operating expenses decreased $2.2 million ~~and $4.0~~from the 2020 quarter to the 2021 quarter primarily due to a $2.0 million ~~respectively. These losses include non-cash items of loss~~decrease in ~~equity investment, unrealized loss on trading security, stock-based compensation, depreciation and amortization, write off of advance to stockholders, amortization of prepaid~~ research and development ~~- related party~~costs, as well as a $0.2 million decrease in general and ~~common stock issued for services. In the 2017 quarter, there was a $1.1 million non-cash loss on the warrant derivative~~administrative costs, both of which ~~increased our loss.~~are further explained below.

Results of operations for the nine months ended September 30, 2017, or the “2017 period,” and the nine months ended September 30, 2016, or the “2016 period,” reflected net losses from continuing operations of approximately $8.8 million and $15.8 million, respectively. These losses include non-cash items of loss in equity investment, unrealized loss on trading security, stock-based compensation, depreciation and amortization, write off of advance to stockholders, amortization of prepaid research and development - related party and common stock issued for services. In the 2017 period, there was a $2.1 million non-cash gain on the warrant derivative which decreased our loss.

Operating Expenses

Research and Development

Research and development costs (benefits) are summarized as ~~follows:~~follows and exclude an allocation of general and administrative expenses:

Three Months Ended March 31,


2021

2020

Clinical trial and sponsored research expenses

$
769,000

$
3,011,000

Salaries and benefits

621,000

696,000

Operations / manufacturing

389,000

33,000

Depreciation

289,000

293,000

Laboratory

115,000

92,000

Stock-based compensation

46,000

59,000

Professional fees

35,000

25,000

Equipment rental and repair

33,000

22,000

Regulatory / FDA

(1,000)

23,000

Total research and development

$
2,296,000

$
4,254,000

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016

Clinical trials and sponsored research $ 854,000 $ 493,000 $ 3,089,000 $ 4,663,000
Labor 476,000 514,000 1,767,000 2,109,000
Consultants and other 484,000 583,000 1,548,000 1,708,000
Sponsored research - related party - 36,000 324,000 108,000
Stock-based compensation 179,000 162,000 255,000 317,000
$ 1,993,000 $ 1,788,000 $ 6,983,000 $ 8,905,000
2021 Quarter Compared to 2020 Quarter
Research and development costs ~~consist of clinical trials and sponsored research, labor, consultants and other, stock-based compensation and sponsored research - related party. Research and development expense increased $204,000,~~decreased by approximately $2.0 million, or ~~11.4%~~46.0%, for the ~~2017~~2021 quarter compared to the ~~2016~~2020 quarter. The increase is primarily due to clinical trials and sponsored research expense. The clinical trials expense is larger than the same quarter last year as we initiated our current trial during the 2017 fiscal year. Labor costs decreased in 2017 due to a reduction in headcount, as well as implementation of the new PTO policy. Consultants and other costs decreased in 2017 as we continue to focus on cost reduction measures.
Research and development ~~expense decreased $1.9 million, or 21.6%, for~~costs with variances above $75,000 and 10% compared with the ~~2017 period compared to the same period in 2016.~~ previous quarter are further explained below.
Clinical trial and sponsored research ~~cost was $1.6~~expenses
The clinical trial and sponsored research expense decreased $2.2 million, ~~higher~~or 74.5%, primarily due to the AP-013 study being temporarily paused in April 2020 and continuing through the current period as a result of the pandemic. The pause

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of the AP-013 study resulted in a reduction of expenses totaling $2.4 million, or 80%, partially offset by $0.2 million of expenses associated with the AP-014 and the AP-017 studies, which were initiated subsequent to the 2020 quarter.

Operations / manufacturing

Operations / manufacturing expenses increased $356,000, or 1,078.8%, for the 2021 quarter compared with the 2020 quarter as a result of the production of Ampion clinical trial products to be utilized in the 2016 period compared to the 2017 period because we were conducting a trial during the first three quarters of 2016. In 2017, the trial was started at the end of the second quarter. For the remainder of 2017, we expect ourcurrent and upcoming clinical trial expense to continue to increase as we finalize the Ampion trial and prepare to file the BLA with the FDA. The increase in sponsored research-related party was the result of accelerated costs due to terminating the Trauma Research Agreement.trials.

General and Administrative

General and administrative ~~costs~~expenses are summarized as follows:

Three Months Ended March 31,


2021

2020

Professional fees

$
479,000

$
739,000

Insurance

340,000

273,000

Salaries and benefits

237,000

237,000

Stock-based compensation

200,000

234,000

Facilities

128,000

127,000

Director fees

92,000

84,000

Other

37,000

26,000

Travel and meetings

5,000

44,000

Depreciation

5,000

3,000

Total general and administrative

$
1,523,000

$
1,767,000

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016

Occupancy, travel and other $ 575,000 $ 308,000 $ 1,373,000 $ 1,200,000
Labor 202,000 346,000 743,000 1,083,000
Professional fees 94,000 278,000 573,000 942,000
Patent costs 12,000 282,000 447,000 764,000
Stock-based compensation 127,000 281,000 414,000 1,069,000
Directors fees 63,000 61,000 227,000 171,000
$ 1,073,000 $ 1,556,000 $ 3,777,000 $ 5,229,000

~~General and administrative costs decreased $483,000, or 31.0%, for the 2017 quarter compared~~2021 Quarter Compared to the 2016 quarter. Professional fees have decreased due to a reduction in legal fees from the class action lawsuits. The decrease in stock-based compensation is the result of option awards being granted at a lower strike price and previously awarded high priced options becoming fully vested during the 2016 quarter. Labor cost has decreased in 2017 because of a reduction in headcount and not recording a monthly bonus accrual. Patent costs have decreased due to us delaying non-essential patent renewals until 2018 as we focus on Ampion, in addition to a credit memo received from the patent attorney related to Aytu.
2020 Quarter
General and administrative costs decreased ~~$1.5 million,~~$244,000, or ~~27.8%~~13.8%, for the ~~2017 period~~2021 quarter compared to the ~~2016 period~~ 2020 quarter. General and administrative costs with variances above $75,000 and 10% are explained below.
Professional fees
Professional fees decreased $260,000, or 35.2%, for the 2021 quarter compared to the 2020 quarter due ~~to our focus on cost reduction measures. Occupancy, travel and other expenses increased due~~primarily to a contractual agreement to grow potential partnerships. During the nine months ended September 30, 2017, we did not have expenses relating to stock-based compensation from the acceleration of the Aytu stock options held by Ampio employees and professionaldecrease in legal fees related to ~~shareholder lawsuits~~litigation. The decrease in litigation related expenses is directly attributable to both the securities class action and derivative cases that were ~~experienced~~dismissed during the ~~same time period in 2016. We expect our general and administrative expenses to continue to decrease during the remainder~~third quarter of ~~2017 as we focus on cost reduction measures.~~2020.

20
Cash Flows
~~Loss from Operations –~~
~~The loss from operations~~Cash flows for the quarter ended September 30, 2017 of $4.3 million is greater than the loss from operations of $4.0 million for the same quarter in 2016. The loss from operations during the nine months ended September 30, 2017 of $8.8 million is less than the loss from operations of $15.8 million for the same period in 2016. As stated previously, we expect our clinical trial expense to continue to increaserespective periods are as ~~we conduct a new Ampion trial and prepare to file the BLA with the FDA.~~follows:

Three Months Ended March 31,


2021

2020
Net cash used in operating activities

$
(4,147,000)

$
(4,553,000)
Net cash used in investing activities

(81,000)

—
Net cash provided by financing activities

2,686,000

436,000
Net change in cash and cash equivalents

$
(1,542,000)

$
(4,117,000)

Net Cash Used in Operating Activities
During the ~~2017 period,~~three months ended March 31, 2021 our operating activities used approximately ~~$8.8~~$4.1 million in cash and cash equivalents, which was ~~equal to the~~more than our reported net loss of ~~$8.8~~$3.7 million. The difference is primarily a result of an increase

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in working capital, excluding cash and cash equivalents, totaling $0.8 million and non-cash adjustment for the warrant derivative gain totaling $0.2 million; partially off-set by recurring non-cash charges related to depreciation and amortization, stock-based compensation and issuance of common stock for services totaling $0.5 million.

During the three months ended March 31, 2020 our operating activities used approximately $4.5 million in cash and cash equivalents, which was less than our net loss of $5.2 million primarily as a result of ~~the~~a decrease in working capital totaling $0.9 million and recurring non-cash ~~gain in the warrant derivatives which was offset by an increase in accounts payable, stock based compensation,~~charges related to depreciation and ~~the acceleration of the related party amortization.~~

In the 2016 period, our operating activities used approximately $12.0 million in cash which was less than the net loss of $15.8 million primarily as a result of the non-cash items such as losses in equity investments in Aytu,amortization, stock-based compensation and ~~depreciation and amortization~~issuance of common stock for services totaling $0.6 million; partially offset by ~~decrease in accounts payable.~~a non-cash adjustment for the warrant derivative gain totaling $0.8 million.

Net Cash Used in Investing Activities

During the ~~2017 period,~~three months ended March 31, 2021, $81,000 in cash and cash equivalents was used to acquire ~~$33,000 of~~ manufacturing machinery and equipment.

During the three months ended March 31, 2020, $0 in cash and cash equivalents was used to acquire manufacturing machinery and equipment.

Net Cash ~~from~~Provided by Financing Activities

During the ~~2017 period, there were~~three months ended March 31, 2021, we received gross proceeds of $2.7 million from the sale of approximately 1.8 million shares of common stock ~~in a registered direct~~pursuant to the ATM equity offering ~~of $6.6 million~~program, which was partially offset by offering related costs of ~~$812,000.~~

$126,000. In addition, we also received proceeds of $114,000 from investor warrant exercises representing 284,000 shares of common stock.

During the ~~2016 period, there were~~three months ended March 31, 2020, we received gross proceeds of $0.7 million from the ~~registered direct offering and controlled~~sale of approximately 1.2 million shares of common stock pursuant to the ATM equity offering program, which was partially offset by offering related costs of ~~$3.9 million with net proceeds of $3.5~~$0.2 million.

Liquidity and Capital Resources

~~To date,~~Since inception, we have not generated ~~revenues~~operating revenue or profits. ~~Our primary activities are~~Over this period, we have continued to be focused on research and clinical development ~~advancing our primary product candidates, and~~activities for the advancement of Ampion towards multiple BLA submissions; all of which has required raising a substantial amount of capital. As of ~~September 30, 2017,~~March 31, 2021, we do not have a fixed and determinable committed source of liquidity to meet our expected obligations over the next twelve months. Specifically, we had ~~$1.8~~$15.8 million of ~~cash. In October 2017, we~~cash and cash equivalents as of March 31, 2021.

We currently anticipate using the ATM equity offering program to raise additional funds in the near term, as needed, and may seek to supplement the funds raised ~~net proceeds of $6.3 million from a Securities Purchase Agreement (See Note 11 to the Financial Statements)~~with separate private or public equity offering(s). Based on ~~this recent capital raise,~~our current cash position, projection of operating expenses and expected access to the ATM and/or other equity financing programs, we ~~expect our capital resources~~believe we will ~~not last~~have sufficient liquidity to fund operations through the second quarter of ~~2018. This~~2022. Our projection is based on ~~several~~many assumptions that may prove to be ~~incorrect,~~incorrect. For example, despite the historically successful use of the ATM equity offering program, due to the inherent uncertainties associated with raising capital in the public markets and the fact that the ATM equity offering program is not deemed a fixed and determinable committed source of liquidity, our management is unable to conclude that it is probable that future capital will be available to satisfy our ongoing liquidity needs as they arise and in a manner that will be timely and sufficient to fund operations. As such, it is possible that we could exhaust our available cash and cash equivalents earlier than presently anticipated. In addition, as the global COVID-19 pandemic continues to evolve, its effect on our business operations and ability to raise capital through the ATM equity offering, or otherwise, remains uncertain and subject to change. We anticipate that we will ~~be required~~seek to ~~seek~~raise additional capital investments in both the near and long-term to ~~continue our~~enable us to primarily support (i) clinical development of Ampion, (ii) BLA preparation and submission, (iii) existing base business operations and (iv) commercial development activities for Ampion. We intend to ~~evaluate~~continue our close evaluation of the overall capital markets ~~from time to time~~ to determine ~~whether to raise additional~~the appropriate timing and funding level for any such capital ~~in the form of equity, convertible debt or otherwise, depending~~raising activities, which will primarily depend on our stock price and existing market conditions relative to our need for funds at such ~~time, and~~time.

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The audit report on our financial statements for the fiscal year ended December 31, 2020 contains an explanatory paragraph indicating that there was substantial doubt about our ability continue as a going concern. In order to address the going concern, we ~~are in negotiations with potential investors for near-term financing.~~

We have prepared a ~~budget for 2017 which~~projection through April 30, 2022. Our projection reflects cash requirements for fixed, ~~on-going~~recurring base business expenses such as payroll, legal and accounting, patents and overhead, ~~at an average cash burn rate~~and incremental costs supporting our current and projected clinical development programs. We continue to closely monitor and assess the impact of the COVID-19 pandemic and, as such, we are not currently in a position to project the required liquidity needs for completion of ongoing clinical studies.

In May 2020, the shelf registration statement was declared effective by the SEC and, as of March 31, 2021, we had approximately ~~$700,000 per month. Additional funds are planned~~$74.6 million available for regulatory approvals, clinical trials, outsourced research and development and commercialization consulting. Accordingly, it will be necessary to raise additional capital and/or enter into licensing or collaboration agreements. At this time, we expect to satisfy our future cash needs through private or public salesissuance under the shelf registration statement with approximately 86.6 million authorized shares of ~~our securities, debt financings, partnering/licensing transaction or our Controlled Equity Offering Sales Agreement~~common stock remaining available for issuance.

In the event that we ~~entered into in February 2016. We cannot be certain that financing will be available~~are unable to us on acceptable terms, or at all. Over the last three years, volatility in the financial markets has adversely affected the market capitalizations of many pharmaceutical companies and generally made equity and debt financing more difficult to obtain. This volatility, coupled with other factors, may limit our access to additional financingobtain funding through capital raises and/or ~~make the additional financing dilutive to our current shareholders.~~

~~If we cannot raise adequate additional capital~~partnering/licensing transactions in the future when ~~we require it,~~deemed necessary, we will likely be required to delay, reduce the scope of or eliminate ~~one~~ our development, manufacturing and/or ~~more of our research or development~~regulatory programs for Ampion and/or our future commercialization efforts and/or suspend operations for a period of time until we are able to ~~raise~~secure additional ~~capital. We also~~funding. If we are not successful in raising sufficient funds to pay for further development and licensing of Ampion, we may ~~be required~~choose to license or otherwise relinquish greater, or all rights to ~~product candidates~~Ampion, at an earlier stage of development or on less favorable terms than we would otherwise choose. This ~~may~~could lead to impairment or other charges, which could materially affect our balance sheet and operating results.

Off Balance Sheet Arrangements

We do not have off-balance sheet arrangements, financings or other relationships with unconsolidated entities or other persons, also known as “variable interest entities”.

~~Item 3.~~
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are not currently exposed to material market risk arising from financial instruments, changes in interest rates or commodity prices, or fluctuations in foreign currencies. We have no need to hedge against anya smaller reporting company, as defined by Rule 12b-2 of the ~~foregoing risks~~Exchange Act, and ~~therefore currently engage in no hedging activities.~~are not required to provide the information required under this item.
~~Item 4.~~ ~~Controls and Procedures.~~
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as such ~~term is~~terms are defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, or the Exchange Act, that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act isare recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our ~~chief executive officer~~Chief Executive Officer (“CEO”) and ~~chief financial officer,~~Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of senior management, including the ~~chief executive officer~~CEO and the ~~chief financial officer,~~CFO, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(b) and ~~15d-15(b)~~15d-15(b). Based upon this evaluation, the ~~chief executive officer~~CEO and the ~~chief financial officer~~CFO concluded that our disclosure controls and procedures as of the end of the period covered by this report were ~~effective at the reasonable assurance level.~~
effective.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART ~~II.~~II – OTHER INFORMATION
Item 1. Legal Proceedings.
Information regarding our Legal Proceedings is contained in Note 13 to the Financial Statements.
~~Item 1.~~ ~~Legal Proceedings.~~
As previously disclosed, on May 8, 2015 and May 14, 2015, purported stockholders of the Company brought two putative class action lawsuits in the United States District Court in the Central District of California, Napoli v. Ampio Pharmaceuticals, Inc., et al., Case No. 2:15-cv-03474-TJH and Stein v. Ampio Pharmaceuticals, Inc., et al., Case No. 2:15-cv-03640-TJH (the “Securities Class Actions”), alleging that Ampio and certain of its current and former officers violated federal securities laws by misrepresenting and/or omitting information regarding the STEP study. The cases were consolidated, and on February 8, 2016, the plaintiffs filed a consolidated amended complaint alleging claims under Sections 10(b) and 20(a) and Rule 10b-5 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Sections 11 and 15 under the Securities Act of 1933 on behalf of a putative class of purchasers of common stock from January 13, 2014 through August 21, 2014, including purchasers in the Company’s offering on February 28, 2014. On September 27, 2016, plaintiffs filed a second amended complaint, alleging the same claims set forth in the consolidated amended complaint during the same class period. On or about November 8, 2016, the parties reached an agreement in principle on a comprehensive settlement of all claims asserted in the lawsuit with no admission of liability by any defendants and with any settlement amounts being funded by insurance. On September 29, 2017, the settlement was finally approved by the Court and all claims were dismissed with prejudice and with no admission or finding of any liability or wrongdoing by the defendants.

~~Item 1A.~~
Item 1A. Risk Factors.
We operate in a rapidly changing environment that involves a number of risks that could materially affect our business, financial condition or future results, some of which are beyond our control. In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors in Part I, “Item 1A. Risk Factors” in our 2020 Annual Report ~~on Form 10-K for the year ended December 31, 2016, as~~and other reports that we have filed with the SEC, which could materially affect our business, financial condition or future results. During the period covered by this Quarterly Report on Form 10-Q, ~~except as noted below,~~ there ~~were~~have been no material changes ~~to the~~in our risk factors ~~described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.~~
~~Risks Related to Our Common Stock~~
~~We may not be able to comply with the listing requirements of, and may be delisted from, the NYSE American~~
Our common stock trades on the NYSE American, or the Exchange. The Exchange imposes various quantitative and qualitative requirements to maintain listing, including minimum stockholders’ equity requirements. On September 1, 2017, we received a letter from the Exchange stating that the Exchange had determined that we were not in compliance with Sections 1003(a)(iii) of the Exchange Company Guide and the stockholder’s equity continued listing standards applicable to us due to our recently reported stockholder’s equity of $3,734,756 as ~~of June 30, 2017 and net losses in our five most recent fiscal years ended December 31, 2016.~~previously disclosed.
We submitted a plan on October 2, 2017 advising the Exchange of the actions that will be taken to regain compliance with the continued listing standards by March 19, 2019. If our plan is accepted by the Exchange, then we will be able to continue listing during the period ending March 1, 2019. During this period, we will be subject to periodic reviews, including quarterly monitoring for compliance with the plan. If the plan is not accepted, delisting proceedings will commence. Furthermore, if the plan is accepted by the Exchange, but we are not in compliance with the continued listing standards of the Exchange Company Guide by March 1, 2019, or if we do not make progress consistent with the plan, then the Exchange staff will initiate delisting proceedings as appropriate. Although following receipt of the proceeds from our registered direct offering in October 2017, we believe we are in compliance with the stockholders’ equity continued listing standards applicable to us, there can be no assurances that we will be able to continue to comply with the Exchange listing requirements.
Item 2. Unregistered Sales of Securities and Use of Proceeds.
During the three months ended March 31, 2021, we issued 23,000 shares of common stock to former placement agents as a result of net exercises of placement agent warrants, with exercise prices ranging from $0.50 to $0.76 per share of common stock, where the total number of shares of common stock issued was reduced to cover the exercise price. We did not receive any cash related to the exercise of the placement agent warrants.
The issuance of the above securities was exempt from the registration requirements under Rule 4(2) of the Securities Act of 1933, as amended, and/or Rule 506 as promulgated under Regulation D.
~~Item 2.~~ ~~Unregistered Sales of Securities and Use of Proceeds.~~
~~None.~~
Item 3. Defaults Upon Senior Securities.
Not Applicable.
~~Item 3.~~ ~~Defaults Upon Senior Securities.~~
~~None.~~
Item 4. Mine Safety Disclosures.
Not Applicable.
~~Item 4.~~ ~~Mine Safety Disclosures.~~
~~None.~~
Item 5. Other Information.
The Board of Directors of the Company has set the date of the 2021 Annual Meeting of Stockholders (the “2021 Annual Meeting”) for August 14, 2021 at 10:00 a.m. Mountain Time to be held entirely virtually by means of remote communication. The deadlines for the receipt of any stockholder proposals and director nominations to be considered at the 2021 Annual Meeting are set forth below.

Any stockholder proposal submitted pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Rule 14a-8”), for inclusion in the Company’s proxy materials for the 2021 Annual Meeting must be received by our Secretary at our principal executive offices no later than the close of business on May 16, 2021, which the Company has determined to be a reasonable time before it expects to begin to print and send its proxy materials. Such proposals also need to comply with the SEC stockholder proposal rules.

In addition, any stockholder seeking to nominate a director or to bring other business before the 2021 Annual Meeting outside of Rule14a-8 under the advance notice provisions included in the Company’s Amended and Restated Bylaws (the “Bylaws”) must provide timely notice, as set forth in the Bylaws. Specifically, written notice of any such proposed business or nomination must be received by the Company’s Secretary at our principal executive offices no later than the close of business on May 16, 2021. Any notice of proposed business or nomination also must comply with the notice and other requirements set forth in our Bylaws and with any applicable law.

33
Table of Contents
For purposes of stockholder proposals, the “close of business” shall mean 6:00 p.m. local time at the principal executive offices of the Corporation on any calendar day, whether or not the day is a business day.

~~Item 5.~~
~~Other Information.~~
~~None.~~
~~Item 6.~~ ~~Exhibits.~~
Item 6. Exhibits.
The exhibits listed on the “Exhibit Index” set forth below are filed or furnished with this Quarterly Report on Form 10-Q or incorporated by reference as set forth therein.
~~Exhibit~~
~~Number~~
~~Description~~
Exhibit
Number
Description
3.1

~~Certificate of Amendment to the~~ Certificate of Incorporation of the Company ~~effective as of September 25, 2017 (1)~~(incorporated by reference to Exhibit 3.3 from Registrant’s Form 8-K filed on March 30, 2010).
3.2

Certificate of Amendment to Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.4 from Registrant’s Form 8-K filed on March 30, 2010).
~~10.1~~
3.3

~~Employment Agreement, dated August 23, 2017,~~Plan of Conversion of Chay Enterprises, Inc. to a Delaware corporation (incorporated by ~~and between~~reference to Exhibit 2.1 from Registrant’s Form 8-K filed on March 30, 2010).
3.4

Certificate of Amendment of Certificate of Incorporation of the Company ~~and Thomas E. Chilcott, III (2)~~(incorporated by reference to Exhibit 3.1 from Registrant’s Form 8-K filed on December 18, 2019).
3.5

Amended and Restated Bylaws of the Registrant, as currently in effect (incorporated by reference to Exhibit 3.1 from Registrant’s Form 10-Q filed on November 14, 2018).
~~10.2~~
31.1
~~Employment Agreement, dated September 19, 2017, by and between the Company and Holli Cherevka (3).~~
~~31.1~~ Certificate of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2
~~31.2~~
Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1
~~32.1~~
Certificate of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002*.~~2002.*
101
XBRL (eXtensible Business Reporting Language). The following ~~materials~~financial statements from Ampio Pharmaceuticals, Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2017~~March 31, 2021, formatted in Inline XBRL: (i) the Condensed Balance Sheets, (ii) the Condensed Statements of Operations, (iii) the Condensed Statements of Stockholders’ Equity (Deficit), (iv) the Condensed Statements of Cash Flows, and (v) the Notes to Financial Statements.
104
*

~~The certification attached~~
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 32.1 accompanying this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
101)
~~(1)~~ ~~Incorporated by reference from the Company’s Current Report on Form 8-K filed on September 27, 2017.~~
~~(2)~~ ~~Incorporated by reference from the Company’s Current Report on Form 8-K filed on August 29, 2017.~~
~~(3)~~ ~~Incorporated by reference from the Company’s Current Report on Form 8-K filed on September 22, 2017.~~

Table of Contents

SIGNATURES
Pursuant to the requirements of the Securities ~~and~~ Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AMPIO PHARMACEUTICALS, INC.
By:
/s/ Michael Macaluso
Michael Macaluso
Chairman and Chief Executive Officer
Date: ~~November 7, 2017~~May 5, 2021
By:
/s/ ~~Thomas E. Chilcott, III~~Daniel G. Stokely
~~Thomas E. Chilcott, III~~
Daniel G. Stokely
Chief Financial Officer ~~Treasurer~~ and Secretary
Date: ~~November 7, 2017~~May 5, 2021

35

		~~Page~~
		Page
	PART I-FINANCIAL INFORMATION

Item 1.	~~Financial Statements~~	4

	~~Balance Sheets as of September 30, 2017 (unaudited) and December 31, 2016~~	4

	~~Statements of Operations for the three and nine months ended September 30, 2017 (unaudited) and the three and nine months ended September 30, 2016 (unaudited)~~	5

	~~Statements of Stockholders’ Equity (Deficit) (unaudited)~~	6

	~~Statements of Cash Flows for the nine months ended September 30, 2017 (unaudited) and the nine months ended September 30, 2016 (unaudited)~~	7

	~~Notes to~~ Financial Statements (unaudited)	8 5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16 21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22 32

Item 4.	Controls and Procedures	22 32

	PART II-OTHER INFORMATION

Item 1.	Legal Proceedings	22 33

Item 1A.	Risk Factors	23 33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23 33

Item 3.	Defaults Upon Senior Securities	23 33

Item 4.	Mine Safety Disclosures	23 33

Item 5.	Other Information	23 33

Item 6.	Exhibits	23 34

SIGNATURES		24 35

	September 30,			December 31,
	2017			2016
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	1,807,149		$	4,894,834
Trading security Aytu BioScience, Inc. (Note 4)		20,445			122,641
Prepaid expenses and other		422,970			240,890
Prepaid research and development - related party (Note 9)		-			143,802
Total current assets		2,250,564			5,402,167


Fixed assets, net (Note 3)		7,102,612			7,980,011
Long-term portion of prepaid research and development - related party (Note 9)		-			179,752
Deposits		33,856			33,856

Total assets	$	9,387,032		$	13,595,786

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable and accrued expenses	$	1,027,773		$	709,294
Accrued compensation		1,184,310			1,365,693
Deferred rent		59,579			59,579
Total current liabilities		2,271,662			2,134,566

Long-term deferred rent		550,905			588,303
Warrant derivative liability		6,763,930			4,238,606
Total liabilities		9,586,497			6,961,475

Commitments and contingencies (Note 6)

Stockholders’ equity
Preferred Stock, par value $.0001; 10,000,000 shares authorized; none issued		-			-
Common Stock, par value $.0001; 200,000,000 shares authorized; shares issued and outstanding - 68,232,409 in 2017 (unaudited) and 57,179,686 in 2016		6,823			5,718
Additional paid-in capital		161,656,114			159,732,194
Advance to stockholder		-			(25,160	)
Accumulated deficit		(161,862,402	)		(153,078,441	)
Total stockholders’ equity		(199,465	)		6,634,311

Total liabilities and stockholders’ equity	$	9,387,032		$	13,595,786


	March 31,		December 31,
	2021		2020

Assets
Current assets
Cash and cash equivalents	$	15,804,000	$	17,346,000
Prepaid expenses and other		1,798,000		1,147,000
Total current assets		17,602,000		18,493,000

Fixed assets, net		3,348,000		3,561,000
Right-of-use asset		776,000		824,000
Total assets	$	21,726,000	$	22,878,000

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable and accrued expenses	$	1,351,000	$	1,550,000
Lease liability-current portion		291,000		284,000
Total current liabilities		1,642,000		1,834,000

Lease liability-long-term		851,000		925,000
Warrant derivative liability		2,456,000		2,607,000
Total liabilities		4,949,000		5,366,000

Commitments and contingencies (Note 7)

Stockholders’ equity
Preferred Stock, par value $0.0001; 10,000,000 shares authorized; NaN issued		—		—
Common Stock, par value $0.0001; 300,000,000 shares authorized; shares issued and outstanding - 195,689,128 as of March 31, 2021 and 193,378,996 as of December 31, 2020		19,000		19,000
Additional paid-in capital		220,952,000		218,020,000
Accumulated deficit		(204,194,000)		(200,527,000)
Total stockholders’ equity		16,777,000		17,512,000

Total liabilities and stockholders’ equity	$	21,726,000	$	22,878,000

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016

Operating expenses
Research and development	$	1,992,825		$	1,752,273		$	6,659,349		$	8,796,848
Research and development - related party (Note 9)		-			35,951			323,554			107,851
General and administrative		1,073,458			1,555,527			3,776,654			5,229,436
Total operating expenses		3,066,283			3,343,751			10,759,557			14,134,135

Other income (expense)
Interest income		-			3,080			3,086			19,789
Derivative (loss) gain		(1,146,772	)		(715,732	)		2,092,994			(715,732	)
Unrealized (loss) gain on trading security		(39,854	)		64,274			(102,196	)		64,274
Loss from equity investment in Aytu BioScience, Inc.		-			-			-			(1,043,353	)
Total other income (expense)		(1,186,626	)		(648,378	)		1,993,884			(1,675,022	)

Net loss from continuing operations	$	(4,252,909	)	$	(3,992,129	)	$	(8,765,673	)	$	(15,809,157	)

Basic and diluted net loss per common share	$	(0.06	)	$	(0.07	)	$	(0.14	)	$	(0.30	)

Weighted average number of common shares outstanding		68,232,409			53,842,234			62,072,354			52,629,343

	Common Stock				Additional Paid- in		Advance to			Accumulated			Total Stockholders’
	Shares		Amount		Capital		Stockholder			Deficit			Equity

Balance - December 31, 2016		57,179,686	$	5,718	$	159,732,194	$	(25,160	)	$	(153,078,441	)	$	6,634,311

Common stock issued for services (unaudited)		62,478		6		59,994		-			-			60,000
Warrant modification (unaudited)		-		-		74,527		-			-			74,527
Stock-based compensation (unaudited)		-		-		622,231		-			-			622,231
Stock-based compensation forfeitures (see Note 1) (unaudited)		-		-		4,725		-			(18,288	)		(13,563	)
Common stock issued in connection with registered direct offering, net of offering costs of $1,181,753 (unaudited)		10,990,245		1,099		792,978		-			-			794,077
Warrants issued in connection with registered direct offering to the placement agent (unaudited)		-		-		369,465		-			-			369,465
Write-off of advance (unaudited)		-		-		-		25,160			-			25,160
Net loss (unaudited)		-		-		-		-			(8,765,673	)		(8,765,673	)
						-
Balance - September 30, 2017 (unaudited)		68,232,409	$	6,823	$	161,656,114	$	-		$	(161,862,402	)	$	(199,465	)


	Three Months Ended March 31,
	2021		2020

Operating expenses
Research and development	$	2,296,000	$	4,254,000
General and administrative		1,523,000		1,767,000
Total operating expenses		3,819,000		6,021,000

Other income
Interest income		1,000		11,000
Derivative gain		151,000		831,000
Total other income		152,000		842,000

Net loss	$	(3,667,000)	$	(5,179,000)

Net loss per common share:
Basic	$	(0.02)	$	(0.03)
Diluted	$	(0.02)	$	(0.04)

Weighted average number of common shares outstanding:
Basic		195,387,047		159,053,722
Diluted		200,752,267		160,557,777


				Additional				Total
	Common Stock			Paid-in		Accumulated		Stockholders'
	Shares	Amount		Capital		Deficit		Equity
Balance at December 31, 2019	158,644,757	$	16,000	$	191,060,000	$	(184,633,000)	$	6,443,000

Issuance of common stock for services	136,236		0		80,000		0		80,000
Stock-based compensation, net of forfeitures	—		0		213,000		0		213,000
Issuance of common stock in connection with the "at-the-market" equity offering program	1,241,126		0		682,000		0		682,000
Offering costs related to the issuance of common stock in connection with the "at-the-market" equity offering program	—		0		(246,000)		0		(246,000)
Net loss	—		0		0		(5,179,000)		(5,179,000)

Balance at March 31, 2020	160,022,119	$	16,000	$	191,789,000	$	(189,812,000)	$	1,993,000


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		0		80,000		0		80,000
Stock-based compensation, net of forfeitures	—		0		166,000		0		166,000
Stock options exercised, net	129,500		0		33,000		0		33,000
Shares held back in settlement of tax obligation and exercise cost	(28,562)		0		(40,000)				(40,000)
Warrants exercised, net	306,705		0		114,000		0		114,000
Issuance of common stock in connection with the "at-the-market" equity offering program	1,848,437		0		2,705,000		0		2,705,000
Offering costs related to the issuance of common stock in connection with the "at-the-market" equity offering program	—		0		(126,000)		0		(126,000)
Net loss	—		0		0		(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


	March 31, 2021		December 31, 2020

Deposits	$	1,311,000	$	266,000
Unamortized commercial insurance premiums		295,000		627,000
Annual maintenance service contracts		77,000		—
Receivable		26,000		185,000
Other		89,000		69,000
Total prepaid expenses and other	$	1,798,000	$	1,147,000

	Estimated	As of September 30,			As of December 31,
	Useful Lives in years	2017			2016


								Estimated
								Useful Lives	March 31,		December 31,
								in Years	2021		2020

Leasehold improvements								10	$	2,100,000	$	2,250,000
Manufacturing facility/clean room	8	$	2,734,000		$	2,734,000		3 - 8		931,000		998,000
Leasehold improvements	10		6,075,000			6,075,000
Office furniture and equipment	3 -10		557,000			557,000
Lab equipment	5 -10		1,060,000			1,026,000
Less accumulated depreciation and amortization			(3,323,000	)		(2,412,000	)

Lab equipment and office furniture								5 - 8		317,000		313,000
Fixed assets, net		$	7,103,000		$	7,980,000			$	3,348,000	$	3,561,000


	March 31, 2021		December 31, 2020

Accounts payable	$	126,000	$	186,000
Clinical trials		1,050,000		558,000
Professional fees		78,000		267,000
Other insurance premium		32,000		386,000
Other		65,000		153,000
Accounts payable and accrued expenses	$	1,351,000	$	1,550,000


	Total (1)		2021		2022		2023		2024		2025		Thereafter
Key clinical research trial obligations	$	1,708,000	$	1,708,000	$	—	$	0	$	0	$	0	$	0
BLA consulting services		1,140,000		—		1,140,000		0		0		0		0
Statistical analysis and programming consulting services		326,000		326,000		—		0		0		0		0
Employment agreements		1,046,000		567,000		466,000		13,000		0		0		0
	$	4,220,000	$	2,601,000	$	1,606,000	$	13,000	$	0	$	0	$	0


	Facility Lease Payments		Remainder of 2021		2022		2023		2024		2025		Thereafter

Remaining Facility Lease Payments	$	1,259,000	$	260,000	$	355,000	$	364,000	$	280,000	$	—	$	—
Less: Discount Adjustment		(117,000)
Total lease liability	$	1,142,000

Lease liability-current portion	$	291,000

Long-term lease liability	$	851,000


	ROU Asset

Balance as of December 31, 2020	$	824,000
Amortization		(48,000)
Balance as of March 31, 2021	$	776,000


		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 exercised	(316,174)	$	0.41	—
Outstanding as of March 31, 2021	3,814,550	$	0.68	1.75

~~Level 1:~~	~~Inputs that reflect unadjusted quoted prices in active markets that are accessible to Ampio for identical assets or liabilities;~~

~~Level 2:~~	~~Inputs including 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.~~

	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total
September 30, 2017
ASSETS
Trading security Aytu (Note 4)	$	21,000	$	-	$	-	$	21,000

LIABILITIES
Warrant derivative liability	$	-	$	-	$	6,764,000	$	6,764,000

December 31, 2016
ASSETS
Trading security Aytu (Note 4)	$	123,000	$	-	$	-	$	123,000

LIABILITIES
Warrant derivative liability	$	-	$	-	$	4,239,000	$	4,239,000

		Value at December 31,		Unrealized					Fair Value at September 30,
	Maturity in Years	2016		Gains		Losses			2017
Trading security Aytu (Note 4)	Less than 1 year	$	123,000	$	-	$	(102,000	)	$	21,000

	September 30, 2017			At Issuance
Assumptions for warrants issued June 2, 2017:
Exercise price	$	0.76		$	0.76
Volatility		93.4	%		94.6	%
Equivalent term (years)		4.67			5.00
Risk-free interest rate		1.87	%		1.71	%
Number of shares		10,990,245			10,990,245

	Derivative Instruments

Balance as of December 31, 2016	$	4,239,000
Warrants issuances		4,618,000
Change in fair value		(2,093,000	)
Balance as of September 30, 2017	$	6,764,000


	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.

			Remaining
	Total		2017			2018		2019		2020		2021		Thereafter

Ampion supply agreement	$	7,459,000	$	2,359,000		$	2,550,000	$	2,550,000	$	-	$	-	$	-
Clinical research and trial obligations		1,948,000		1,948,000	��		-		-		-		-		-
Facility lease		2,398,000		77,000			316,000		326,000		335,000		345,000		999,000
	$	11,805,000	$	4,384,000		$	2,866,000	$	2,876,000	$	335,000	$	345,000	$	999,000


		Fair Value Measurements Using
		Level 1		Level 2		Level 3		Total
March 31, 2021
Liabilities:	��
Warrant derivative liability		$	0	$	0	$	2,456,000	$	2,456,000

December 31, 2020
Liabilities:
Warrant derivative liability		$	0	$	0	$	2,607,000	$	2,607,000


	Derivative Instruments

Balance as of December 31, 2020	$	2,607,000
Warrant exercises		(347,000)
Change in fair value		196,000
Balance as of March 31, 2021	$	2,456,000


	March 31, 2021

Authorized shares		300,000,000

Common stock outstanding		195,689,128
Options outstanding		6,001,151
Warrants outstanding		3,814,550
Reserved for issuance under 2019 Stock and Incentive Plan		7,918,755

Available shares		86,576,416

	Year Ended
	December 31, 2016

Total shares of common stock sold		163,254
Average price per share	$	0.94
Gross proceeds	$	153,000
Commissions earned by placement agent	$	5,000
Other expenses	$	98,000


	Sales Agreement

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


	2019 Plan

Total shares reserved for equity awards		10,000,000
Options granted during previous fiscal years		(2,067,471)
Options granted during fiscal 2021		(36,000)
Forfeited, expired and/or cancelled equity awards		22,226
Remaining shares available for future equity awards		7,918,755

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
Outstanding December 31, 2016		7,175,832		$	3.64		4.99
Granted		1,571,334		$	0.65
Exercised		-		$	-
Forfeited		(1,438,334	)	$	4.02
Expired or Cancelled		-		$	-
Outstanding September 30, 2017		7,308,832		$	2.85		5.41
Exercisable at September 30, 2017		6,335,494		$	3.16		4.78
Available for grant at September 30, 2017		2,916,169


Outstanding Options by Plan	March 31, 2021

2010 Plan		3,938,180
2019 Plan		2,062,971
Outstanding as of March 31, 2021		6,001,151

Range of Exercise Prices	Number of Options Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Lives
$0.48 - $2.00		3,196,888	$	0.90		6.48
$2.01 - $5.00		2,731,944	$	3.05		4.14
$5.01 - $8.93		1,380,000	$	6.99		5.42
		7,308,832	$	2.85		5.41

~~Expected volatility~~		~~34.35% - 113.2~~	%
Expected volatility	127.17	%
Risk free interest rate	0.78	~~1.16% - 2.13~~	%
Expected term (years)	5.00	~~0.5 - 6.5~~
~~Dividend yield~~		~~0.0~~	%