Ampio Pharmaceuticals(AMPE) - 2022 Q4 - Annual Report

PART I Item 1. Business. Ampio Pharmaceuticals, a pre-revenue biopharmaceutical company, has refocused on preclinical development of AR-300 for osteoarthritis pain and is evaluating strategic opportunities - Ampio is a pre-revenue biopharmaceutical company, having shifted its focus from Ampion® to the preclinical development of AR-300 for osteoarthritis-related pain[14][15] - The company is conducting studies to evaluate AR-300's efficacy in osteoarthritis-related pain, with preclinical pain and chondroprotection results expected in the first half of 2023[15][16] - Ampio is opportunistically identifying and evaluating strategic opportunities, including acquiring or licensing later-stage assets or merging with other companies, having evaluated over a dozen such opportunities in 2022[17] - A 15-to-1 reverse stock split was effected on November 9, 2022, retroactively applied to share and per share amounts in financial statements[18] - If AR-300 clinical development proceeds, it is estimated to take five-to-seven years and require significant incremental investment, involving IND-enabling preclinical studies, Phase 1 safety, Phase 2 efficacy, and likely two Phase 3 studies[20] - The company owns United States provisional patent applications for AR-300, with a single PCT application expected in Q2 2023 and national phase applications in Q3 2024, potentially extending patent protection until Q2 2043[22][23] - Starting in 2023, Ampio decided to significantly limit or discontinue much of its existing Ampion® patent portfolio to reduce economic impact and focus resources on AR-300[25][27] - Ampio has implemented a hybrid organizational model, retaining core competencies for public reporting and governance while outsourcing specialized expertise (formulation, preclinical, GMP manufacturing, clinical, regulatory, legal) to third-party independent contractors[28][29] Employee Headcount | Date | Full-time Employees | | :--------------- | :------------------ | | December 31, 2022 | 8 | | February 1, 2023 | 5 | Item 1A. Risk Factors. Ampio faces substantial risks from its sole preclinical asset AR-300, ongoing losses, limited liquidity, legal proceedings, an SEC investigation, and stock price volatility, raising going concern doubts - Ampio is dependent on the success of its AR-300 technology, which is currently its only potential product in development, and there is no certainty that preclinical data will support further development or lead to marketable products[33][34][35] - The company's history of recurring losses ($16.3 million in 2022) and significant cash usage ($21.1 million in operations in 2022), combined with limited cash resources ($12.7 million as of December 31, 2022), raise substantial doubt about its ability to continue as a going concern[44][45] - Insufficient cash to fund operations, AR-300 development, or strategic transactions could lead to further cost reductions, liquidation, or bankruptcy, making cash distributions to stockholders unlikely[36][47][49] - Exploring strategic alternatives is time-consuming and challenging due to competition, cash balance, listing uncertainty, and ongoing legal/regulatory matters, with no assurance of successful identification or completion of a value-generating transaction[37][38] - Reliance on third parties for critical services, including AR-300 development, finance, and administrative support, introduces risks of service unavailability, increased costs, delays, and challenges in managing outsourced activities[41][42][43] - The company is involved in legal proceedings (securities fraud class actions, shareholder derivative suits, SEC investigation) that are expensive, time-consuming, divert management attention, and could result in significant liabilities, potentially forcing liquidation[49][50] - Future capital requirements are substantial and depend on AR-300 development, strategic transaction costs, legal defense, intellectual property protection, and corporate overhead, with no assurance of available financing on acceptable terms[51][54] - The price of Ampio's common stock has been extremely volatile and may continue to fluctuate due to factors such as AR-300 development, strategic alternatives, regulatory announcements, legal proceedings, and compliance with NYSE American listing requirements[62][63] - Failure to satisfy NYSE American continued listing requirements (e.g., minimum share price, stockholders' equity) could lead to delisting, resulting in reduced liquidity, limited market quotations, and decreased ability to raise capital[64][65][67] Item 1B. Unresolved Staff Comments. The company has no unresolved staff comments from the SEC regarding previous filings - The company has no unresolved staff comments[70] Item 2. Properties. Ampio leases its headquarters and facilities in Englewood, Colorado, under a lease expiring September 2024, with a sublease effective March 2023 - Ampio leases its headquarters, research laboratories, and manufacturing facilities in Englewood, Colorado, with the lease set to expire in September 2024[71] - Effective March 1, 2023, the company entered into a sublease agreement for the premises, with the consent of the landlord, for a term continuing until the expiration of the original lease[71] Item 3. Legal Proceedings. Ampio is involved in securities fraud class actions, shareholder derivative suits, and an SEC investigation concerning Ampion's efficacy and internal controls, with most actions currently stayed - Ampio is a defendant in a securities fraud class action, Kain v. Ampio Pharmaceuticals, Inc., et al., filed in August 2022, alleging false and misleading statements about Ampion's efficacy, clinical trials (AP-013), and FDA communications[72][73] - Multiple shareholder derivative complaints (Maresca, Marquis, McCann v. Martino, et al.) were filed in late 2022 and early 2023, asserting claims against current and former executives and directors for breach of fiduciary duty, gross mismanagement, waste of corporate assets, unjust enrichment, and insider trading, based on similar allegations as the Kain action[74][75][77][78][80][83] - The allegations in the derivative complaints include failure to timely report unfavorable AP-013 trial results, misstating data unblinding timing, and failing to maintain adequate internal controls[75][77][80][83] - Most of the legal proceedings, including the consolidated Maresca and Marquis actions and the McCann action, are currently under a temporary stay, deferring all deadlines[79][80][82][83][84] - The Securities and Exchange Commission (SEC) initiated a private investigation in October 2022 to determine potential securities law violations, issuing subpoenas to the company and various individuals, with Ampio intending to cooperate fully[84] Item 4. Mine Safety Disclosures. This item is not applicable to Ampio Pharmaceuticals - Mine Safety Disclosures are not applicable to the registrant[85] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Ampio's common stock trades on NYSE American (AMPE), with 191 registered holders as of March 22, 2023, and no plans for cash dividends, prioritizing AR-300 development - Ampio's common stock trades on the NYSE American under the ticker symbol 'AMPE'[88] - As of March 22, 2023, there were approximately 191 registered holders of the company's common stock[88] - The company has never paid cash dividends and has no plans to do so in the near future, intending to utilize all available liquidity to develop and commercialize AR-300[89] Item 6. [Reserved] This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Ampio reported a net loss of $16.3 million in 2022, with increased operating expenses and significantly reduced cash, raising substantial doubt about its going concern ability beyond Q4 2023 Net Loss and Operating Expenses (2022 vs. 2021) | Metric | 2022 ($M) | 2021 ($M) | Change ($M) | Change (%) | | :----------------- | :-------- | :-------- | :---------- | :--------- | | Net Loss | (16.3) | (17.1) | 0.8 | -4.7% | | Operating Expenses | 22.3 | 20.6 | 1.7 | 8.3% | - The net loss decreased by $0.8 million, or 4.7%, from $17.1 million in 2021 to $16.3 million in 2022[98][165] - Operating expenses increased by $1.7 million, or 8.3%, from $20.6 million in 2021 to $22.3 million in 2022, primarily due to a $2.8 million increase in general and administrative costs and a $1.9 million impairment loss, partially offset by a $3.0 million reduction in research and development costs[98][165] Critical Accounting Policies, Estimates and Judgments Financial statement preparation involves management estimates and assumptions, especially for liquidity, clinical trial accrual, and asset impairment - The preparation of financial statements requires management to make estimates and assumptions, particularly concerning current and long-term liquidity, clinical trial accrual, and potential impairment of long-lived assets and Right-of-Use (ROU) assets[92][93] - Clinical trial accrual estimates are based on trial progress, discussions with service providers, and are adjusted if actual results differ from estimates; all Ampion clinical trials were completed in 2022, so no significant future costs are expected[93] - Share-based compensation expense is recognized based on the estimated fair value of awards using the Black-Scholes option pricing model for stock options and fair market value for restricted stock, with assumptions for volatility, risk-free interest rate, and expected option life[94] - Long-lived assets are evaluated for impairment annually or when triggering events occur; a $1.6 million impairment loss was recorded in 2022 due to the discontinuation of Ampion development[95] - Warrants that are potentially exercisable into a variable number of shares are considered derivative liabilities and are measured at fair value using the Black-Scholes pricing model[96] Results of Operations—Year Ended December 31, 2022 Compared to December 31, 2021 Operating results for 2022 compared to 2021 show changes in research and development, general and administrative expenses, and impairment losses Research and Development Research and development costs decreased by $3.0 million, or 25%, in 2022 compared to 2021, primarily due to completed clinical trials - Research and development costs decreased by approximately $3.0 million, or 25%, for the 2022 period compared to the 2021 period[99][101] - Clinical trial and sponsored research expenses decreased by $2.8 million (48%) due to the substantial completion of Ampion clinical trials (AP-017, AP-018, AP-019) and the completion of AP-013[100][101] - Salaries and benefits decreased by $0.2 million (8%) due to a reduction in force (RIF) in August 2022, which reduced 11 full-time equivalents, partially offset by $0.7 million in severance costs[103] - Professional fees increased by $0.4 million (133%) due to the engagement of a Chief Medical Officer consultant and additional third-party biostatisticians for Ampion clinical study close-out[104] - Operations/manufacturing expense decreased by $0.5 million (62%) as all studies were completed, eliminating the need to purchase supplies for clinical trial product manufacturing[105] Research and Development Costs (2022 vs. 2021) | Category | 2022 ($) | 2021 ($) | Change ($) | Change (%) | | :------------------------------------- | :---------- | :----------- | :---------- | :--------- | | Clinical trial and sponsored research | 2,991,000 | 5,787,000 | (2,796,000) | -48.3% | | Salaries and benefits | 2,755,000 | 2,981,000 | (226,000) | -7.6% | | Depreciation | 1,031,000 | 1,070,000 | (39,000) | -3.6% | | Laboratory | 890,000 | 779,000 | 111,000 | 14.2% | | Professional fees | 780,000 | 335,000 | 445,000 | 132.8% | | Operations/manufacturing | 308,000 | 816,000 | (508,000) | -62.3% | | Share-based compensation | 139,000 | 46,000 | 93,000 | 202.2% | | Other | 22,000 | 86,000 | (64,000) | -74.4% | | Total Research and Development | 8,916,000 | 11,900,000 | (2,984,000) | -25.1% | General and Administrative General and administrative expenses increased by $2.8 million, or 32%, in 2022 compared to 2021, driven by higher professional fees - General and administrative expenses increased by $2.8 million, or 32%, for the 2022 period compared to the 2021 period[106][108] - Professional fees within G&A increased by $4.4 million (174%) due to legal costs related to internal investigations, an SEC investigation, and class action/derivative lawsuits, as well as costs for strategic opportunity evaluation and public/investor relations[107][109] - Salaries and benefits increased by $0.3 million (30%) due to market-based compensation adjustments for the CEO and CFO, partially offset by lower incremental headcount[111] - Share-based compensation expense decreased by $1.9 million (71%) due to adjustments for forfeitures and cancellations of unvested stock options/restricted stock awards resulting from employee terminations and board resignations[112] General and Administrative Expenses (2022 vs. 2021) | Category | 2022 ($) | 2021 ($) | Change ($) | Change (%) | | :--------------------------- | :---------- | :---------- | :---------- | :--------- | | Professional fees | 6,896,000 | 2,517,000 | 4,379,000 | 174.0% | | Salaries and benefits | 1,485,000 | 1,141,000 | 344,000 | 30.1% | | Insurance | 1,124,000 | 1,186,000 | (62,000) | -5.2% | | Share-based compensation | 814,000 | 2,758,000 | (1,944,000) | -70.5% | | Facilities | 538,000 | 512,000 | 26,000 | 5.1% | | Director fees | 312,000 | 350,000 | (38,000) | -10.9% | | Other | 297,000 | 207,000 | 90,000 | 43.5% | | Total General and Administrative | 11,466,000 | 8,671,000 | 2,795,000 | 32.2% | Impairment of Long-lived Fixed and ROU Assets Ampio recorded a $1.6 million impairment loss on long-lived assets and $0.3 million on ROU assets in 2022 due to Ampion development discontinuation - Ampio recorded a non-cash impairment loss of $1.6 million on its long-lived assets for the year ended December 31, 2022, triggered by the discontinuation of Ampion development[112] - An additional $0.3 million impairment loss was recorded on the Right-of-Use (ROU) asset for the year ended December 31, 2022[113] - There were no impairment charges for long-lived or ROU assets in the year ended December 31, 2021[113] Cash Flows Net cash used in operating activities increased to $21.1 million in 2022, while financing activities provided significantly less cash compared to 2021 Cash Flow Summary (2022 vs. 2021) | Cash Flow Activity | 2022 ($) | 2021 ($) | Change ($) | | :--------------------------------- | :------------ | :------------ | :------------ | | Net cash used in operating activities | (21,128,000) | (14,089,000) | (7,039,000) | | Net cash used in investing activities | — | (97,000) | 97,000 | | Net cash (used in) provided by financing activities | (111,000) | 30,732,000 | (30,843,000) | | Net change in cash and cash equivalents | (21,239,000) | 16,546,000 | (37,785,000) | - Net cash used in operating activities increased to $21.1 million in 2022 from $14.1 million in 2021, primarily due to a non-cash derivative gain and a decrease in accounts payable and accrued expenses, partially offset by non-cash charges[114][117][119] - Net cash used in investing activities was $0 in 2022, compared to $97,000 used for manufacturing machinery and equipment in 2021[120] - Net cash used in financing activities was $0.1 million in 2022 (for tax liability settlement and offering costs), a significant decrease from $30.7 million provided in 2021 (from equity offerings and warrant exercises)[121][122] Contractual Obligations and Commitments Primary contractual obligations as of December 31, 2022, include employment agreements and a $614,000 operating lease for facilities - As of December 31, 2022, primary contractual obligations include employment agreements and a non-cancellable operating lease for office and manufacturing facilities, with a lease obligation of $614,000[123] Liquidity and Capital Resources Ampio, a pre-revenue company with recurring losses, faces substantial doubt about its going concern ability beyond Q4 2023 due to limited liquidity - Ampio is a pre-revenue company with recurring losses and has not generated operating revenue since inception, relying on capital raises for research and development[124][185] - Cash and cash equivalents totaled $12.7 million as of December 31, 2022, projected to fund existing business operations through the fourth quarter of 2023[125][185] - Management has expressed substantial doubt about the company's ability to continue as a going concern due to current liquidity levels and projected shortfalls to cover operating expenses for the next 12 months[130][185] - Future AR-300 clinical development is estimated to require five-to-seven years and incremental investment, which the company intends to fund through equity securities offerings, subject to market and regulatory challenges[126] - Management's plans to address going concern doubt include active monitoring of operating expenses, utilizing an outsourcing philosophy, and aligning AR-300 development expenses with future capital raising activities[131] - If cash resources are insufficient, the company may implement further cost reductions, terminate strategic alternatives, or pursue liquidation or bankruptcy, making stockholder distributions unlikely[131] Item 7A. Quantitative and Qualitative Disclosures About Market Risk. This item is not applicable to Ampio Pharmaceuticals - Quantitative and Qualitative Disclosures About Market Risk are not applicable[132] Item 8. Financial Statements and Supplementary Data. This section incorporates audited financial statements and supplementary data, including the independent auditor's report, balance sheets, statements of operations, equity, cash flows, and notes Report of Independent Registered Public Accounting Firm Moss Adams LLP issued an unqualified opinion on Ampio's 2022 and 2021 financial statements, highlighting a going concern uncertainty and critical audit matter regarding asset impairment - Moss Adams LLP issued an unqualified opinion on Ampio's financial statements for 2022 and 2021, stating they are presented fairly in all material respects[154] - The report highlights a going concern uncertainty due to recurring losses and cash used in operations, as discussed in Note 2 to the financial statements[155] - The impairment evaluation of long-lived assets and right-of-use asset was identified as a critical audit matter due to significant management judgments in estimating fair value, requiring extensive auditor judgment and involvement of valuation specialists[159][161] Balance Sheets Balance sheets show a significant decrease in total assets, cash, and stockholders' equity from 2021 to 2022, alongside reduced liabilities Balance Sheet Summary (December 31, 2022 vs. 2021) | Metric | December 31, 2022 ($) | December 31, 2021 ($) | | :--------------------------- | :-------------------- | :-------------------- | | Cash and cash equivalents | 12,653,000 | 33,892,000 | | Total current assets | 13,329,000 | 35,632,000 | | Fixed assets, net | 184,000 | 2,564,000 | | Right-of-use asset, net | 75,000 | 629,000 | | Total assets | 13,588,000 | 38,825,000 | | Accounts payable and accrued expenses | 852,000 | 4,811,000 | | Total current liabilities | 1,192,000 | 5,122,000 | | Warrant derivative liability | 44,000 | 5,805,000 | | Total liabilities | 1,799,000 | 11,541,000 | | Total stockholders' equity | 11,789,000 | 27,284,000 | - Total assets decreased significantly from $38.8 million in 2021 to $13.6 million in 2022[163] - Cash and cash equivalents declined from $33.9 million in 2021 to $12.7 million in 2022[163] - Total liabilities decreased from $11.5 million in 2021 to $1.8 million in 2022, largely due to a reduction in warrant derivative liability and accounts payable[163] - Total stockholders' equity decreased from $27.3 million in 2021 to $11.8 million in 2022[164] Statements of Operations Statements of operations indicate a slight improvement in net loss to $16.3 million in 2022, despite increased operating expenses driven by impairment charges Statements of Operations Summary (2022 vs. 2021) | Metric | 2022 ($) | 2021 ($) | | :------------------------- | :------------ | :------------ | | Research and development | 8,916,000 | 11,900,000 | | General and administrative | 11,466,000 | 8,671,000 | | Long-lived assets impairment | 1,614,000 | — | | Right-of-use asset impairment | 322,000 | — | | Total operating expenses | 22,318,000 | 20,571,000 | | Interest income | 220,000 | 4,000 | | Derivative gain | 5,761,000 | 3,492,000 | | Total other income | 5,981,000 | 3,496,000 | | Net loss | (16,337,000) | (17,075,000) | | Basic Net loss per common share | (1.08) | (1.29) | | Diluted Net loss per common share | (1.47) | (1.51) | - Net loss improved slightly to $16.3 million in 2022 from $17.1 million in 2021[165] - Total operating expenses increased to $22.3 million in 2022 from $20.6 million in 2021, driven by impairment charges[165] - Interest income significantly increased from $4,000 in 2021 to $220,000 in 2022[165] - A derivative gain of $5.8 million was recognized in 2022, up from $3.5 million in 2021[165] - Basic net loss per common share improved to $(1.08) in 2022 from $(1.29) in 2021[165] Statements of Stockholders' Equity Statements of stockholders' equity show an increased accumulated deficit and a decrease in total equity from 2021 to 2022 Stockholders' Equity Summary (December 31, 2022 vs. 2021) | Metric | December 31, 2022 ($) | December 31, 2021 ($) | | :------------------------- | :-------------------- | :-------------------- | | Common Stock Amount | 2,000 | 2,000 | | Additional Paid-in Capital | 245,726,000 | 244,884,000 | | Accumulated Deficit | (233,939,000) | (217,602,000) | | Total Stockholders' Equity | 11,789,000 | 27,284,000 | - Accumulated deficit increased to $(233.9) million in 2022 from $(217.6) million in 2021[167] - Total stockholders' equity decreased from $27.3 million in 2021 to $11.8 million in 2022[167] - Additional paid-in capital increased by $0.84 million in 2022, primarily from share-based compensation, net of forfeitures[167] Statements of Cash Flows Statements of cash flows reveal increased cash usage in operating activities and significantly less cash from financing activities in 2022 compared to 2021 Statements of Cash Flows Summary (2022 vs. 2021) | Cash Flow Activity | 2022 ($) | 2021 ($) | | :--------------------------------- | :------------ | :------------ | | Net cash used in operating activities | (21,128,000) | (14,089,000) | | Net cash used in investing activities | — | (97,000) | | Net cash (used in) provided by financing activities | (111,000) | 30,732,000 | | Net change in cash and cash equivalents | (21,239,000) | 16,546,000 | | Cash and cash equivalents at end of period | 12,653,000 | 33,892,000 | - Net cash used in operating activities increased to $21.1 million in 2022 from $14.1 million in 2021[169] - Net cash used in financing activities was $(0.1) million in 2022, a significant decrease from $30.7 million provided in 2021, reflecting reduced equity raises[169] - Cash and cash equivalents at the end of the period decreased to $12.7 million in 2022 from $33.9 million in 2021[169] Notes to Financial Statements These notes provide detailed explanations and disclosures supporting the financial statements, covering accounting policies, assets, liabilities, and equity Note 1 – Basis of Presentation This note outlines Ampio's business as a pre-revenue biopharmaceutical company focused on AR-300 and details the 15-to-1 reverse stock split - Ampio Pharmaceuticals is a pre-revenue biopharmaceutical company focused on the preclinical development of AR-300 for osteoarthritis-related pain[171] - A 15-to-1 reverse stock split was effected on November 9, 2022, and retroactively applied to share and per share amounts in the financial statements[172] Note 2 – Summary of Significant Accounting Policies This note summarizes significant accounting policies, including GAAP conformity, estimates, cash management post-SVB, asset impairment, and the going concern assessment - The company's financial statements are prepared in conformity with U.S. GAAP, requiring management to make estimates and assumptions, particularly for liquidity, clinical trial accrual, and asset impairment[173] - Following the Silicon Valley Bank receivership in March 2023, Ampio regained access to all deposit funds and refined its cash management strategy to mitigate risks associated with balances exceeding FDIC insured limits[174] - Ampio recorded impairment charges of $1.6 million on long-lived assets and $0.3 million on Right-of-Use (ROU) assets in 2022, triggered by the discontinuation of Ampion development[179] - The company has recorded a full valuation allowance against all its net deferred tax assets, concluding that realization is not more likely than not due to a history of operating losses and lack of foreseeable taxable income[182] - Management believes current cash resources will fund operations through Q4 2023, but due to recurring losses and projected shortfalls, substantial doubt exists about the company's ability to continue as a going concern[185] Note 3 – Prepaid Expenses and Other Prepaid expenses and other decreased from $1.74 million in 2021 to $0.68 million in 2022, mainly due to reductions in deposits and professional fees Prepaid Expenses and Other Balances (December 31, 2022 vs. 2021) | Category | December 31, 2022 ($) | December 31, 2021 ($) | | :-------------------------------- | :-------------------- | :-------------------- | | Unamortized commercial insurance premiums | 610,000 | 465,000 | | Deposits | 34,000 | 884,000 | | Professional fees | 19,000 | 235,000 | | Clinical trial inventory | — | 72,000 | | Other | 13,000 | 84,000 | | Total prepaid expenses and other | 676,000 | 1,740,000 | - Total prepaid expenses and other decreased from $1.74 million in 2021 to $0.68 million in 2022, primarily due to reductions in deposits and professional fees[191] Note 4 – Fixed Assets Fixed assets, net, significantly decreased from $2.56 million in 2021 to $0.18 million in 2022, primarily due to a $1.6 million impairment loss Fixed Assets, Net (December 31, 2022 vs. 2021) | Category | December 31, 2022 ($) | December 31, 2021 ($) | | :--------------------------- | :-------------------- | :-------------------- | | Leasehold improvements | 4,965,000 | 6,075,000 | | Manufacturing facility/clean room | 2,803,000 | 2,984,000 | | Lab equipment and office furniture | 1,661,000 | 1,739,000 | | Fixed assets, gross | 9,429,000 | 10,798,000 | | Accumulated depreciation | (9,245,000) | (8,234,000) | | Fixed assets, net | 184,000 | 2,564,000 | - Fixed assets, net, decreased significantly from $2.56 million in 2021 to $0.18 million in 2022[192] - A $1.6 million non-cash impairment loss was recorded in 2022, directly reducing the cost basis of affected assets, due to the discontinuation of Ampion development[192] Depreciation and Amortization Expense (2022 vs. 2021) | Metric | 2022 ($) | 2021 ($) | | :------------------------------ | :---------- | :---------- | | Depreciation and amortization expense | 1,048,000 | 1,094,000 | Note 5 – Accounts Payable and Accrued Expenses Accounts payable and accrued expenses significantly decreased from $4.81 million in 2021 to $0.85 million in 2022, mainly due to reduced clinical trial accruals Accounts Payable and Accrued Expenses (December 31, 2022 vs. 2021) | Category | December 31, 2022 ($) | December 31, 2021 ($) | | :------------------------------------- | :-------------------- | :-------------------- | | Accounts payable | 97,000 | 427,000 | | Clinical trials | 89,000 | 2,995,000 | | Professional fees | 157,000 | 510,000 | | Commercial insurance premium financing | 189,000 | 269,000 | | Accrued severance | 143,000 | — | | Accrued compensation | — | 389,000 | | Other | 177,000 | 221,000 | | Total accounts payable and accrued expenses | 852,000 | 4,811,000 | - Total accounts payable and accrued expenses decreased significantly from $4.81 million in 2021 to $0.85 million in 2022, primarily due to a large reduction in clinical trial accruals[195] - The outstanding obligation of $189,000 from a $1.2 million commercial insurance premium financing agreement (entered June 2022) was paid in full in February 2023[196] Note 6 – Commitments and Contingencies This note details commitments and contingencies, including completed Ampion clinical trial obligations, employment agreements, terminated related party agreements, and a non-cancellable operating lease - All key clinical research trial obligations for Ampion studies (AP-013, AP-018, AP-019, AP-017) were completed as of December 31, 2022, with no commitment for future services[197][198][199][200] - The company has employment agreements with its CEO and CFO, which include severance provisions[201] - Related party research agreements with Trauma Research, LLC and an individual (a former director) were terminated in August 2022, with remaining obligations paid[202] - The company has a non-cancellable operating lease for its facility expiring in September 2024, with a total lease liability of $614,000 as of December 31, 2022[203][205] - An impairment loss of $0.3 million was recorded on the Right-of-Use (ROU) asset during 2022[206] Note 7 – Warrants This note details warrant activity, including 1.0 million liability-classified investor warrants outstanding as of December 31, 2022, with no issuances or exercises during the year - Ampio had 1.0 million liability-classified investor warrants and 0.1 million equity-classified placement agent warrants outstanding as of December 31, 2022[209] Warrant Activity (December 31, 2022 vs. 2021) | Metric | December 31, 2022 | December 31, 2021 | | :----------------------------------- | :---------------- | :---------------- | | Number of Warrants Outstanding | 1,065,137 | 1,220,194 | | Weighted Average Exercise Price ($) | 15.94 | 15.36 | | Weighted Average Remaining Contractual Life (years) | 3.80 | 4.24 | - Investor warrants from the December 2021 registered direct offering (1.0 million shares, $16.50 exercise price) were valued at $44,000 as of December 31, 2022, a significant decrease from $5.6 million in 2021[211] - No issuances or exercises of warrants occurred during the year ended December 31, 2022[214] Note 8 – Fair Value Considerations This note explains the fair value measurement of the warrant derivative liability using the Black-Scholes model, resulting in a $5.76 million derivative gain in 2022 - The company's warrant derivative liability is measured at fair value using the Black-Scholes valuation methodology, classified as Level 3 in the fair value hierarchy due to unobservable inputs[217][219] Warrant Derivative Liability Fair Value (December 31, 2022 vs. 2021) | Metric | December 31, 2022 ($) | December 31, 2021 ($) | | :------------------------- | :-------------------- | :-------------------- | | Warrant derivative liability | 44,000 | 5,805,000 | - The fair value of the warrant derivative liability decreased from $5.8 million in 2021 to $44,000 in 2022, resulting in a $5.76 million derivative gain[221] Note 9 – Common Stock This note details common stock information, including 300 million authorized shares, 15.1 million outstanding shares, and the 2021 registered direct offering - Ampio had 300 million authorized shares of common stock as of December 31, 2022 and 2021, with 15.1 million shares outstanding as of December 31, 2022[163][222][223] Common Stock Shares (December 31, 2022) | Category | Number of Shares | | :---------------------------------------- | :--------------- | | Authorized shares | 300,000,000 | | Common stock outstanding | 15,102,877 | | Options outstanding | 297,460 | | Warrants outstanding | 1,065,137 | | Reserved for issuance under 2019 Stock and Incentive Plan | 441,300 | | Available shares for future issuance | 283,093,226 | - In December 2021, the company completed a registered direct offering, issuing 1.67 million shares and 1.0 million investor warrants, generating $22.5 million in gross proceeds[224] - The investor warrants from the 2021 offering are accounted for as a liability at fair value due to certain derivative features, initially valued at $6.7 million[225] - There was no activity under the ATM equity offering program during the year ended December 31, 2022[227] Note 10 – Equity Instruments This note describes equity instruments, including the 2019 Stock and Incentive Plan, stock option activity, restricted stock awards, and share-based compensation expense - The 2019 Stock and Incentive Plan, approved in December 2019, reserved 10.0 million shares for equity awards, which was reduced to 666,667 shares due to the 15-to-1 reverse stock split[229] 2019 Plan Activity (December 31, 2022) | Metric | Shares | | :---------------------------------------------- | :---------- | | Total shares reserved for equity awards as of December 31, 2021 | 294,489 | | Options granted | (106,555) | | Forfeited, expired and/or cancelled equity option awards | 184,132 | | Forfeited, expired and/or cancelled equity restricted stock awards | 60,000 | | Shares forfeited to settle exercise price and tax obligation | 9,234 | | Remaining shares available for future equity awards as of December 31, 2022 | 441,300 | Stock Option Activity (December 31, 2022 vs. 2021) | Metric | December 31, 2022 | December 31, 2021 | | :----------------------------------- | :---------------- | :---------------- | | Number of Options Outstanding | 297,460 | 500,466 | | Weighted Average Exercise Price ($) | 14.97 | 16.81 | | Weighted Average Remaining Contractual Life (years) | 6.41 | 7.36 | | Exercisable Options | 257,216 | N/A | | Weighted Average Exercise Price for Exercisable Options ($) | 15.85 | N/A | | Weighted Average Remaining Contractual Life for Exercisable Options (years) | 6.59 | N/A | Restricted Stock Awards Activity (December 31, 2022 vs. 2021) | Metric | December 31, 2022 | December 31, 2021 | | :----------------------------------- | :---------------- | :---------------- | | Nonvested Awards | 13,400 | 97,867 | | Weighted Average Grant-Date Fair Value ($) | 24.60 | 24.60 | - Share-based compensation expense decreased from $2.8 million in 2021 to $0.95 million in 2022, primarily due to reversals for non-vested shares from director and employee forfeitures[240][241][242] Note 11 – Income Taxes This note explains Ampio's 0.0% effective tax rate due to a full valuation allowance against its $205.0 million net operating loss carryforwards - Ampio's effective tax rate was 0.0% for both 2022 and 2021, primarily due to a full valuation allowance against its deferred tax assets[244] - As of December 31, 2022, the company has approximately $205.0 million in net operating loss (NOL) carryforwards, with $74.5 million carrying forward indefinitely[245] - A full valuation allowance of $54.4 million was recorded against deferred tax assets in 2022, as management concluded it is not more likely than not that these assets will be realized[245][246] Note 12 – Earnings Per Share This note details earnings per share, showing an improvement in both basic and diluted net loss per common share in 2022 Earnings Per Share (2022 vs. 2021) | Metric | 2022 ($) | 2021 ($) | | :----------------------------------- | :------------ | :------------ | | Net loss | (16,337,000) | (17,075,000) | | Less: decrease in fair value of investor warrants | (5,761,000) | (3,492,000) | | Net loss available to common stockholders | (22,098,000) | (20,567,000) | | Basic weighted-average common shares outstanding | 15,072,308 | 13,286,605 | | Diluted weighted-average shares outstanding | 15,072,308 | 13,664,202 | | Earnings per share – basic | (1.08) | (1.29) | | Earnings per share – diluted | (1.47) | (1.51) | - Basic earnings per share improved to $(1.08) in 2022 from $(1.29) in 2021[249] - Diluted earnings per share improved to $(1.47) in 2022 from $(1.51) in 2021[249] - Potentially dilutive shares, including warrants, stock options, and restricted stock awards, were excluded from diluted EPS calculations due to their anti-dilutive effect[248][250] Note 13 – Litigation This note details Ampio's involvement in securities fraud class actions, shareholder derivative complaints, and an SEC investigation related to Ampion trial results - Ampio is involved in a securities fraud class action (Kain v. Ampio) and multiple shareholder derivative complaints (Maresca, Marquis, McCann v. Martino, et al.) alleging false statements, breach of fiduciary duty, and insider trading related to Ampion trial results[251][252][253][254][256][258][261] - The lawsuits stem from Ampio's internal investigations in 2022, which revealed issues with the statistical analysis of the AP-013 clinical trial and unauthorized provision of Ampion[252] - Most legal proceedings are currently under a temporary stay, deferring deadlines, and Ampio intends to vigorously defend itself[253][258][260][262] - The SEC initiated a private investigation in October 2022, issuing subpoenas to the company and various individuals, with Ampio cooperating fully[263] Note 14 – Employee Benefit Plan This note reports Ampio provided $67,000 in matching employee contributions to its 401(k) plan in 2022 - Ampio provided $67,000 in matching employee contributions to its 401(k) plan during the year ended December 31, 2022[264] Note 15 – Subsequent Event This note discloses a subsequent event: Ampio entered into a sublease agreement for its facilities effective March 1, 2023, until September 2024 - Effective March 1, 2023, Ampio entered into a sublease agreement for its office and manufacturing premises, with the sublease term continuing until the original lease expires on September 30, 2024[265] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. There have been no changes in or disagreements with accountants on accounting and financial disclosure - There were no changes in or disagreements with accountants on accounting and financial disclosure[132] Item 9A. Controls and Procedures. Ampio's disclosure controls were ineffective as of March 31, 2022, but corrective actions led to their effectiveness by December 31, 2022, with internal controls over financial reporting also deemed effective - Disclosure controls and procedures were deemed ineffective as of March 31, 2022, due to matters identified during internal investigations into the AP-013 clinical trial and unauthorized Ampion provision[133] - Corrective actions taken included terminating two executive officers, restructuring the Board of Directors, reconstituting the Disclosure Committee, enhancing policies, and conducting company-wide training[133][135] - As of December 31, 2022, the company's disclosure controls and procedures were deemed effective[135] - Management concluded that internal controls over financial reporting were effective as of December 31, 2022[136] - There have been no material changes in internal controls over financial reporting during the period covered by this report[137] Item 9B. Other Information. This item contains no other information - No other information is reported under this item[137] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. This item is not applicable to Ampio Pharmaceuticals - Disclosure Regarding Foreign Jurisdictions that Prevent Inspections is not applicable[137] PART III Item 10. Directors, Executive Officers and Corporate Governance. Information on directors, executive officers, corporate governance, and the Code of Business Conduct and Ethics is incorporated by reference from the 2023 Proxy Statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2023 Proxy Statement[138] - The company's Code of Business Conduct and Ethics applies to all employees, directors, and officers and is available on its website[140] Item 11. Executive Compensation. Information regarding executive compensation is incorporated by reference from the 2023 Proxy Statement - Information on executive compensation is incorporated by reference from the 2023 Proxy Statement[141] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Information on equity compensation plans and security ownership of beneficial owners and management is incorporated by reference from the 2023 Proxy Statement - Information on equity compensation plans and security ownership is incorporated by reference from the 2023 Proxy Statement[142] Item 13. Certain Relationships and Related Transactions, and Director Independence. Information on certain relationships, related party transactions, and director independence is incorporated by reference from the 2023 Proxy Statement - Information on certain relationships, related party transactions, and director independence is incorporated by reference from the 2023 Proxy Statement[143] Item 14. Principal Accountant Fees and Services. Information regarding principal accountant fees and services is incorporated by reference from the 2023 Proxy Statement - Information on principal accountant fees and services is incorporated by reference from the 2023 Proxy Statement[144] PART IV Item 15. Exhibits and Financial Statement Schedules. This section lists financial statements and a comprehensive array of exhibits, including corporate governance documents, equity plans, employment agreements, and SEC certifications - The section lists the financial statements filed as part of the Form 10-K, including the Report of Independent Registered Public Accounting Firm, Balance Sheets, Statements of Operations, Statements of Stockholders' Equity, Statements of Cash Flows, and Notes to Financial Statements[145] - A comprehensive list of exhibits is provided, including corporate governance documents (Certificate of Incorporation, Bylaws), equity compensation plans (2010 and 2019 Stock Incentive Plans), employment agreements, and SEC certifications (302 and 906)[146][147] Item 16. FORM 10-K SUMMARY. This item indicates that no Form 10-K summary is provided - No Form 10-K summary is provided under this item[147] SIGNATURES The report is duly signed by Ampio Pharmaceuticals' CEO, CFO, and other directors on March 27, 2023 - The report is duly signed on behalf of Ampio Pharmaceuticals, Inc. by its Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial and Accounting Officer), along with other directors, on March 27, 2023[148][149][150]