Ampio Pharmaceuticals(AMPE) - 2023 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed financial statements for Ampio Pharmaceuticals, Inc., including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, financial instrument details, and the company's liquidity position Condensed Balance Sheets Condensed Balance Sheet Data | Item | March 31, 2023 | December 31, 2022 | | :------------------------------ | :------------- | :---------------- | | Cash and cash equivalents | $10,352,000 | $12,653,000 | | Total assets | $10,735,000 | $13,588,000 | | Total liabilities | $2,857,000 | $1,799,000 | | Total stockholders' equity | $7,878,000 | $11,789,000 | Condensed Statements of Operations Condensed Statements of Operations Data | Item | Three Months 2023 | Three Months Ended March 31, 2022 | | :-------------------------- | :---------------- | :-------------------------------- | | Research and development | $524,000 | $3,687,000 | | General and administrative | $3,819,000 | $3,283,000 | | Total operating expenses | $4,399,000 | $6,970,000 | | Net loss | $(3,978,000) | $(5,636,000) | | Net loss per common share: Basic | $(0.26) | $(0.37) | Condensed Statements of Stockholders' Equity - Total stockholders' equity decreased from $11,789,000 at December 31, 2022, to $7,878,000 at March 31, 2023, primarily due to a net loss of $3,978,000[18] - The accumulated deficit increased to $(237,873,000) as of March 31, 2023, from $(233,939,000) as of December 31, 2022[18] - A reclassification of warrant derivative liability of $44,000 was made to accumulated deficit upon the adoption of ASU 2020-06[18] Condensed Statements of Cash Flows Condensed Statements of Cash Flows Data | Item | Three Months 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------ | :---------------- | :-------------------------------- | | Net cash used in operating activities | $(2,301,000) | $(4,944,000) | | Net cash used in financing activities | $— | $(111,000) | | Net change in cash and cash equivalents | $(2,301,000) | $(5,055,000) | | Cash and cash equivalents at end of period | $10,352,000 | $28,837,000 | Notes to Condensed Financial Statements Note 1 – The Company and Summary of Significant Accounting Policies Ampio Pharmaceuticals, Inc. is a pre-revenue biopharmaceutical company focused on the OA-20X program, aiming to select a small molecule formulation for clinical development in Q3 2023. The company faces significant liquidity challenges, with an accumulated deficit of $237.8 million as of March 31, 2023, raising substantial doubt about its ability to continue as a going concern, despite expecting sufficient liquidity through Q4 2023 - Ampio is a pre-revenue biopharmaceutical company focused on optimizing two potential small molecule formulations for the OA-20X program, with an intent to select one for clinical development in Q3 2023[24] - The company effected a 15-to-1 reverse stock split on November 9, 2022, retroactively applied to share and per share amounts in the financial statements[26] - As of March 31, 2023, the company had an accumulated deficit of $237.8 million and expects to generate continued operating losses, raising substantial doubt about its ability to continue as a going concern[31][34] - The company believes it has sufficient liquidity to fund operations through Q4 2023, but may require additional capital sooner or in greater amounts[32] Note 2 – Prepaid Expenses and Other Prepaid expenses and other current assets decreased from $676,000 at December 31, 2022, to $383,000 at March 31, 2023, primarily due to a reduction in unamortized commercial insurance premiums Prepaid Expenses and Other | Item | March 31, 2023 | December 31, 2022 | | :------------------------------ | :------------- | :---------------- | | Unamortized commercial insurance premiums | $277,000 | $610,000 | | Deposits | $34,000 | $34,000 | | Professional fees | $18,000 | $19,000 | | Other | $54,000 | $13,000 | | Total prepaid expenses and other | $383,000 | $676,000 | Note 3 – Fixed Assets All fixed assets were sold effective March 1, 2023, in connection with a sublease agreement, resulting in a $56,000 loss on sale and zero net fixed assets as of March 31, 2023 - The company sold all its existing fixed assets to a subtenant effective March 1, 2023, recognizing a loss on sale of $56,000[41] Fixed Assets, Net | Item | March 31, 2023 | December 31, 2022 | | :------------------------- | :------------- | :---------------- | | Fixed assets, gross | $— | $9,429,000 | | Accumulated depreciation | $— | $(9,245,000) | | Fixed assets, net | $— | $184,000 | Note 4 – Accounts Payable and Accrued Expenses Accounts payable and accrued expenses significantly increased to $2,325,000 at March 31, 2023, from $852,000 at December 31, 2022, primarily driven by a substantial rise in professional fees. The commercial insurance premium financing agreement was paid in full, and accrued severance now mainly covers COBRA benefits Accounts Payable and Accrued Expenses | Item | March 31, 2023 | December 31, 2022 | | :------------------------------ | :------------- | :---------------- | | Professional fees | $1,408,000 | $157,000 | | Accounts payable | $575,000 | $97,000 | | Preclinical and clinical trials | $175,000 | $89,000 | | Commercial insurance premium financing | $— | $189,000 | | Accrued severance | $10,000 | $143,000 | | Other | $157,000 | $177,000 | | Total accounts payable and accrued expenses | $2,325,000 | $852,000 | - The commercial insurance premium financing agreement was paid in full as of March 31, 2023[47] - Accrued severance represents the estimated obligation for COBRA benefits elected by former employees following the final phase of the reduction in force on January 31, 2023[48] Note 5 - Commitments and Contingencies The company has employment agreements with its CEO and CFO, with the CEO's term extended to November 2023. All related party research agreements were terminated by March 31, 2023. A sublease agreement effective March 1, 2023, for its facility released the company from its asset retirement obligation, resulting in a non-cash gain of $288,000, and the Right-of-Use (ROU) asset was fully amortized - Employment agreements are in place for the CFO (term ending October 2024) and CEO (term extended to November 22, 2023)[49] - No related party research agreements were in effect as of March 31, 2023, following terminations in August 2022[50] - A sublease agreement effective March 1, 2023, released the company from its asset retirement obligation (ARO), leading to a non-cash gain of $288,000[52] - The Right-of-Use (ROU) asset related to the facility lease was fully amortized as of March 31, 2023[53][54][55] Note 6 – Warrants Upon adoption of ASU 2020-06 effective January 1, 2023, the company reclassified its 'investor' liability classified warrants to retained earnings, resulting in no warrant derivative liability as of March 31, 2023. The total number of outstanding warrants remained at 1,065,137 with a weighted average exercise price of $15.94 - The company adopted ASU 2020-06 effective January 1, 2023, reclassifying 'investor' liability classified warrants to retained earnings[58] Warrant Activity | | Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | | :------------------------------ | :----------------- | :------------------------------ | :------------------------------------------ | | Outstanding as of December 31, 2022 | 1,065,137 | $15.94 | 3.80 | | Outstanding as of March 31, 2023 | 1,065,137 | $15.94 | 3.55 | - There was no warrant derivative liability as of March 31, 2023, following the reclassification[60] Note 7 - Fair Value Considerations The company applies a three-level hierarchy for fair value measurements. Effective January 1, 2023, the warrant derivative liability of $44,000 was reclassified to stockholder's equity due to the early adoption of ASU 2020-06, eliminating this liability from the balance sheet - The company uses a fair value hierarchy (Level 1, 2, and 3) for financial instruments[61][62] - The warrant derivative liability of $44,000 as of December 31, 2022, was reclassified to stockholder's equity effective January 1, 2023, due to the early adoption of ASU 2020-06[63][66] Note 8 - Common Stock The company has 300 million authorized shares of common stock, with 15,102,877 shares outstanding as of March 31, 2023. A significant portion of authorized shares remains available for future issuance. The 'at the market' (ATM) equity offering program expired on May 6, 2023, with no sales made under it during the reported periods - The company has 300,000,000 authorized shares of common stock as of March 31, 2023[67] Common Stock Information | Item | March 31, 2023 | | :-------------------------------------------------- | :------------- | | Authorized shares | 300,000,000 | | Common stock outstanding | 15,102,877 | | Options outstanding | 283,723 | | Warrants outstanding | 1,065,137 | | Reserved for issuance under 2019 Stock and Incentive Plan | 455,037 | | Available shares for future issuance | 283,093,226 | - The ATM equity offering program expired on May 6, 2023, and no sales or related issuance costs were incurred under it during the three months ended March 31, 2023, and 2022[69][70] Note 9 - Equity The 2019 Plan has 455,037 shares available for future equity awards. Stock option activity for Q1 2023 shows 283,723 options outstanding, with 13,737 forfeited/cancelled. Total share-based compensation expense significantly decreased to $23,000 in Q1 2023 from $716,000 in Q1 2022, largely due to expense reversals from expired/forfeited awards - As of March 31, 2023, 455,037 shares remain available for future equity awards under the 2019 Plan[72] Stock Option Activity | | Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | | :------------------------------ | :---------------- | :------------------------------ | :------------------------------------------ | | Outstanding as of December 31, 2022 | 297,460 | $14.97 | 6.41 | | Forfeited, expired and/or cancelled | (13,737) | $6.83 | — | | Outstanding as of March 31, 2023 | 283,723 | $15.36 | 6.58 | - Total share-based compensation expense, net of forfeitures, was $23,000 for Q1 2023, a significant decrease from $716,000 in Q1 2022, primarily due to expense reversals from expired/forfeited stock options and restricted stock awards[80] Note 10 - Earnings Per Share Basic and diluted net loss per common share for Q1 2023 was $(0.26), an improvement from $(0.37) basic and $(0.46) diluted in Q1 2022. Potentially dilutive shares, totaling 1,357,793, were excluded from the calculation due to their anti-dilutive effect Earnings Per Share Calculation | | Three Months 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------ | :---------------- | :-------------------------------- | | Net loss | $(3,978,000) | $(5,636,000) | | Net loss available to common stockholders | $(3,978,000) | $(6,967,000) | | Basic weighted-average common shares outstanding | 15,093,894 | 15,072,222 | | Diluted weighted-average shares outstanding | 15,093,894 | 15,074,047 | | Earnings per share – basic | $(0.26) | $(0.37) | | Earnings per share – diluted | $(0.26) | $(0.46) | - A total of 1,357,793 potentially dilutive shares (warrants, stock options, restricted stock awards) were excluded from the calculation of net loss per share for Q1 2023 due to their anti-dilutive effect[84] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, highlighting a reduced net loss in Q1 2023 primarily due to decreased R&D expenses, despite an increase in G&A costs driven by legal fees. The company's liquidity remains a concern, with cash expected to last through Q4 2023, and plans to seek additional equity financing while actively managing expenses Accounting Policies - Financial statements are prepared in accordance with GAAP, requiring management estimates and assumptions[86] - Significant accounting policies and estimates have not substantially changed from those disclosed in the 2022 Annual Report[87] Results of Operations - Net loss for Q1 2023 was $4.0 million, an improvement from $5.6 million in Q1 2022[89] - Total operating expenses decreased by $2.7 million (37%) from Q1 2022 to Q1 2023[91] - Research and development costs decreased by $3.2 million (86%) to $524,000 in Q1 2023, primarily due to the discontinuation of Ampion clinical trials and a reduction in force[93][94][95] - General and administrative costs increased by $0.5 million (16%) to $3,819,000 in Q1 2023, mainly due to a $1.5 million (108%) increase in professional fees related to an SEC investigation and class action/derivative lawsuits[91][101][102] - The company recognized a $288,000 gain on the elimination of its asset retirement obligation in Q1 2023[105] Cash Flows - Net cash used in operating activities decreased to $2.3 million in Q1 2023 from $4.9 million in Q1 2022[107] - There was no change in cash related to investing or financing activities during the three months ended March 31, 2023[109] Liquidity and Capital Resources - Cash and cash equivalents were $10.4 million as of March 31, 2023[111] - The company expects its current cash balance to support existing business operations through Q4 2023[113] - The lack of revenue and current cash resources raise substantial doubt about the company's ability to continue as a going concern[116] - Future OA-20X development and general operating expenses are intended to be funded through an offering of equity securities, subject to market conditions and regulatory limitations[114] - Cost management measures include a hybrid, virtual organizational model and the recent sublease of facility space, but general and administrative expenses are expected to be negatively impacted by higher professional fees, including legal costs[115] Off Balance Sheet Arrangements - The company does not have any off-balance sheet arrangements[117] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Ampio Pharmaceuticals, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide market risk disclosures[118] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, and reported no material changes in internal control over financial reporting during the period Disclosure Controls and Procedures - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2023[121] Changes in Internal Control over Financial Reporting - There were no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting during the period[121] PART II – OTHER INFORMATION Item 1. Legal Proceedings The company refers to its 2022 Annual Report for a summary of material pending legal proceedings and confirms there were no material developments in these proceedings as of March 31, 2023 - No material developments in pending legal proceedings were reported as of March 31, 2023[122] Item 1A. Risk Factors The company directs readers to the 'Risk Factors' section in its 2022 Annual Report and other SEC filings for a comprehensive understanding of factors that could materially affect its business and financial performance - Readers should refer to the 'Risk Factors' section in the 2022 Annual Report and other SEC filings for additional information[123] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the current reporting period - This item is not applicable[123] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities during the period - No defaults upon senior securities were reported[123] Item 4. Mine Safety Disclosures This item is not applicable for the current reporting period - This item is not applicable[123] Item 5. Other Information There is no other information to report under this item - No other information is reported[123] Item 6. Exhibits This section lists all exhibits filed or furnished with the Quarterly Report on Form 10-Q, including corporate governance documents, agreements, and certifications - The exhibit index lists various documents, including the Certificate of Incorporation, Bylaws, Sublease Agreement, and CEO/CFO certifications[125] SIGNATURES The report is duly signed by Michael A. Martino, Chief Executive Officer, and Daniel G. Stokely, Chief Financial Officer, on May 8, 2023 - The report was signed by Michael A. Martino (Chief Executive Officer) and Daniel G. Stokely (Chief Financial Officer) on May 8, 2023[127]