Quarterly Report (10-q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the Quarterly Period Ended: September 30, 2020


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

For the transition period from to

Commission File Number: 001-35182

CID:IMAGE001.JPG@01CDF343.4BBAE3B0

AMPIO PHARMACEUTICALS, INC.

(www.ampiopharma.com)

(Exact name of registrant as specified in its charter)


Delaware	26-0179592
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

373 Inverness Parkway, Suite 200

Englewood, Colorado 80112

(Address of principal executive offices, including zip code)

(720) 437-6500

(Registrant’s telephone number, including area code)

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


Title of each class:	Trading Symbol	Name of each exchange on which registered:
Common Stock	AMPE	NYSE American

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

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

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


Large Accelerated Filer	☐	Accelerated Filer	☒

Non-Accelerated Filer	☐	Smaller reporting company	☒

		Emerging growth company	☐

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

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

As of October 31, 2020, there were 185,055,000 outstanding shares of Common Stock, par value $0.0001, of the registrant.

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AMPIO PHARMACEUTICALS, INC.

FOR THE QUARTER ENDED SEPTEMBER 30, 2020

INDEX


		Page
	PART I-FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

Item 4.	Controls and Procedures	36

	PART II-OTHER INFORMATION

Item 1.	Legal Proceedings	36

Item 1A.	Risk Factors	37

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3.	Defaults Upon Senior Securities	38

Item 4.	Mine Safety Disclosures	38

Item 5.	Other Information	38

Item 6.	Exhibits	39

SIGNATURES		40

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

●

projected operating or financial results, including anticipated cash flows used in operations;

●

expectations regarding clinical trials for Ampion, capital expenditures, research and development expenses and other payments;

●

our beliefs and assumptions relating to our liquidity position, including, but not limited to, our ability to obtain near-term additional financing;

●

our beliefs, assumptions and expectations about the regulatory approval pathway for Ampion including, but not limited to, our ability to obtain regulatory approval for Ampion in a timely manner, or at all; and

●

our ability to identify strategic partners and enter into beneficial license, co-development, collaboration or similar arrangements.

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

●

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;

●

the loss of key management personnel upon whom we depend;

●

the progress and results of clinical trials for Ampion;

●

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 (“OAK”) due to considerations relating to the COVID-19 pandemic;

●

our ability to navigate the regulatory approval process in the U.S. and other countries, and our success in obtaining required regulatory approvals for Ampion on a timely basis;

●

our need to rely on third party manufacturers if we receive regulatory approval for Ampion but do not have redundant manufacturing capabilities;

●

commercial developments for products that compete with Ampion;

●

the actual and perceived effectiveness of Ampion, and how 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;

●

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

●

the strength of our intellectual property protection, and our success in avoiding infringement of the intellectual property rights of others;

●

adverse developments in our research and development activities;

●

potential liability if any of our product candidates cause illness, injury or death, or adverse publicity from any such events;

●

our ability to operate our business efficiently, manage capital expenditures and costs (including general and administrative expenses) and obtain financing when required; and

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●

our expectations with respect to 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 February 21, 2020 (the “2019 Annual Report”), particularly in the “Risk Factors” sections of each report, that could cause actual results or events to differ materially from the forward-looking statements that we make herein. Many of these factors will be important in determining our actual future results. Consequently, no forward-looking statement should be relied upon. Our actual future results may vary materially from those expressed or implied in any forward-looking statements. All forward-looking statements contained in this report are qualified in their entirety by this cautionary statement. Forward-looking statements speak only as of the date they are made, and we disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of this report, except as otherwise required by applicable law.

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

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

AMPIO PHARMACEUTICALS, INC.

Condensed Balance Sheets

(unaudited)


	September 30,		December 31,
	2020		2019

Assets
Current assets
Cash and cash equivalents	$	9,361,000	$	6,532,000
Prepaid expenses and other		1,475,000		1,718,000
Total current assets		10,836,000		8,250,000

Fixed assets, net		3,838,000		4,748,000
Right-of-use asset		870,000		1,003,000
Total assets	$	15,544,000	$	14,001,000

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable and accrued expenses	$	1,641,000	$	4,025,000
Lease liability-current portion		278,000		259,000
Total current liabilities		1,919,000		4,284,000

Lease liability-long-term		999,000		1,210,000
Warrant derivative liability		1,901,000		2,064,000
Total liabilities		4,819,000		7,558,000

Commitments and contingencies (Note 7)

Stockholders’ equity
Preferred Stock, par value $0.0001; 10,000,000 shares authorized; none issued		—		—
Common Stock, par value $0.0001; 300,000,000 shares authorized; shares issued and outstanding - 183,938,000 as of September 30, 2020 and 158,645,000 as of December 31, 2019		18,000		16,000
Additional paid-in capital		206,618,000		191,060,000
Accumulated deficit		(195,911,000)		(184,633,000)
Total stockholders’ equity		10,725,000		6,443,000

Total liabilities and stockholders’ equity	$	15,544,000	$	14,001,000

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

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AMPIO PHARMACEUTICALS, INC.

Condensed Statements of Operations

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019

Operating expenses
Research and development	$	1,655,000	$	3,428,000	$	7,027,000	$	7,129,000
General and administrative		1,647,000		1,745,000		4,896,000		4,301,000
Total operating expenses		3,302,000		5,173,000		11,923,000		11,430,000

Other (expense) income
Interest income		—		8,000		12,000		53,000
Paycheck Protection Program funding		—		—		544,000		—
Derivative gain (loss)		7,000		(2,054,000)		163,000		(1,233,000)
Loss on disposal of asset		(73,000)		—		(73,000)		—
Total other (expense) income		(66,000)		(2,046,000)		646,000		(1,180,000)

Net loss	$	(3,368,000)	$	(7,219,000)	$	(11,277,000)	$	(12,610,000)

Net loss per common share:
Basic	$	(0.02)	$	(0.05)	$	(0.07)	$	(0.10)
Diluted	$	(0.02)	$	(0.05)	$	(0.07)	$	(0.10)

Weighted average number of common shares outstanding:
Basic		178,622,000		142,208,000		168,062,000		122,895,000
Diluted		178,622,000		142,208,000		169,354,000		122,895,000

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

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AMPIO PHARMACEUTICALS, INC.

Condensed Statements of Stockholders’ Equity (Deficit)

(unaudited)


				Additional				Total
	Common Stock			Paid-in		Accumulated		Stockholders'
	Shares	Amount		Capital		Deficit		Equity (Deficit)
Balance at December 31, 2018	110,942,000	$	11,000	$	176,228,000	$	(171,003,000)	$	5,236,000

Issuance of common stock for services	136,000		—		60,000		—		60,000
Stock-based compensation, net of forfeitures	—		—		28,000		—		28,000
Warrants exercised, net	50,000		—		20,000		—		20,000
Net loss	—		—		—		(5,812,000)		(5,812,000)

Balance at March 31, 2019	111,128,000	$	11,000	$	176,336,000	$	(176,815,000)	$	(468,000)

Stock-based compensation, net of forfeitures	—		—		73,000		—		73,000
Warrants exercised, net	825,000		—		330,000		—		330,000
Issuance of common stock in connection with the "at-the-market" equity offering program	255,000		—		142,000		—		142,000
Offering costs related to the issuance of common stock in connection with the "at-the-market" equity offering program	—		—		(144,000)		—		(144,000)
Issuance of common stock in connection with public offering	30,000,000		3,000		11,997,000		—		12,000,000
Offering costs related to the issuance of common stock in connection with public offering	—		—		(1,243,000)		—		(1,243,000)
Net income	—		—		—		421,000		421,000

Balance at June 30, 2019	142,208,000	$	14,000	$	187,491,000	$	(176,394,000)	$	11,111,000

Stock-based compensation, net of forfeitures	—		—		246,000		—		246,000
Net loss	—		—		—		(7,219,000)		(7,219,000)

Balance at September 30, 2019	142,208,000	$	14,000	$	187,737,000	$	(183,613,000)	$	4,138,000


Balance at December 31, 2019	158,645,000		16,000		191,060,000		(184,633,000)		6,443,000

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

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

Stock-based compensation, net of forfeitures	—		—		64,000		—		64,000
Stock options exercised, net	1,000		—		—		—		—
Warrants exercised, net	250,000		—		100,000		—		100,000
Issuance of common stock in connection with the "at-the-market" equity offering program	13,069,000		1,000		7,230,000		—		7,231,000
Offering costs related to the issuance of common stock in connection with the "at-the-market" equity offering program	—		—		(314,000)		—		(314,000)
Net loss	—		—		—		(2,731,000)		(2,731,000)

Balance at June 30, 2020	173,342,000	$	17,000	$	198,869,000	$	(192,543,000)	$	6,343,000

Stock-based compensation, net of forfeitures	—		—		477,000		—		477,000
Settlement of employee tax liability related to stock option exercise, net	3,000		—		(2,000)		—		(2,000)
Warrants exercised, net	1,188,000		—		365,000		—		365,000
Issuance of common stock in connection with the "at-the-market" equity offering program	9,405,000		1,000		7,222,000		—		7,223,000
Offering costs related to the issuance of common stock in connection with the "at-the-market" equity offering program	—		—		(313,000)		—		(313,000)
Net loss	—		—		—		(3,368,000)		(3,368,000)

Balance at September 30, 2020	183,938,000	$	18,000	$	206,618,000	$	(195,911,000)	$	10,725,000

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

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AMPIO PHARMACEUTICALS, INC.

Condensed Statements of Cash Flows

(unaudited)


	Nine Months Ended September 30,
	2020		2019

Cash flows from operating activities
Net loss	$	(11,277,000)	$	(12,610,000)
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation, net of forfeitures		754,000		347,000
Depreciation and amortization		885,000		975,000
Loss on disposal of fixed asset		73,000		—
Paycheck Protection Program funding that offsets qualified expenses		(544,000)		—
Issuance of common stock for services		80,000		60,000
Derivative (gain) loss		(163,000)		1,233,000
Changes in operating assets and liabilities
Decrease (increase) in prepaid expenses and other		243,000		(1,390,000)
(Decrease) increase in accounts payable and accrued expenses		(2,385,000)		805,000
Decrease in lease liability		(59,000)		(52,000)
Proceeds received under the Paycheck Protection Program		544,000		—
Net cash used in operating activities		(11,849,000)		(10,632,000)

Cash flows used in investing activities
Purchase of fixed assets		(48,000)		(14,000)
Net cash used in investing activities		(48,000)		(14,000)

Cash flows from financing activities
Proceeds from sale of common stock in connection with "at-the-market" equity offering program		15,136,000		142,000
Costs related to sale of common stock in connection with the "at-the-market" equity offering program		(873,000)		(144,000)
Proceeds from sale of common stock in connection with the public offering		—		12,000,000
Costs related to sale of common stock in connection with the public offering		—		(1,243,000)
Proceeds from warrant exercises		465,000		350,000
Settlement of employee tax liability related to stock option exercise, net		(2,000)		—
Net cash provided by financing activities		14,726,000		11,105,000

Net change in cash and cash equivalents		2,829,000		459,000

Cash and cash equivalents at beginning of period		6,532,000		7,585,000
Cash and cash equivalents at end of period	$	9,361,000	$	8,044,000

Non-cash transactions:
Commercial insurance premium financing agreement	$	1,347,000	$	—
Initial lease liability arising from the adoption of ASC 842		—		1,704,000
Initial recognition of right-of-use asset arising from the adoption of ASC 842		—		1,168,000

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 – The Company and Summary of Significant Accounting Policies

Ampio Pharmaceuticals, Inc. (“Ampio” or 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 financial statements should be read in conjunction with the audited financial statements and accompanying notes thereto for the year ended December 31, 2019 included in the Company’s 2019 Annual Report. The results of operations for the interim period shown in this report are not necessarily indicative of the results that may be expected for any other interim period or for the full year. The information as of and for the three and nine months ended September 30, 2020 is unaudited. The balance sheet at December 31, 2019 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

In January 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of the novel coronavirus (“COVID-19”). In March 2020, the WHO declared the outbreak of COVID-19, a global pandemic. COVID-19 has and continues to significantly affect the 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 regulatory 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 of Ampion for the treatment of OAK, also known as the “AP-013 study”. Due to the increases in reported COVID-19 cases, the Company has determined that the AP-013 study will remain paused. However, the FDA recently provided guidance specifically designed to assist the pharmaceutical industry with viable options for evaluating data from clinical trials which were adversely impacted by the pandemic. The Company is reviewing this guidance and continues to have ongoing discussions with the CRO to determine the best approach for the AP-013 study. Since the filing of its Form 10-Q covering the three-month period ending June 30, 2020, the Company has been conducting clinical trials related to potential new applications of Ampion (i.e. inhaled and intravenous) related to the COVID-19 infection. The outbreak has and may continue to spread, which could materially impact the Company’s business operations and, in addition, those 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. The full extent of potential impacts on the Company’s business and product development, including clinical trials, financing activities and the global economy will depend on future developments, which cannot be predicted due to the uncertain nature of the continued COVID-19 pandemic, government mandated shut downs, and its adverse effects, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. These effects could have a material adverse impact on the Company’s business, operations, financial condition and results of operations.

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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 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 September 30, 2020, and as consistent with prior reporting periods, the Company maintained balances in excess of federally insured limits.

Use of Estimates

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

Significant items subject to such estimates and assumptions primarily include the Company’s projected future liquidity and resulting going concern position, warrant derivative liability and related periodic gains and losses, stock-based compensation, the projected useful lives and potential impairment of fixed assets, and the valuation allowance related to deferred tax 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 August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement - Disclosure Framework (Topic 820)”. The updated guidance modified the disclosure requirements on fair value measurements. The updated guidance is effective for fiscal years beginning after December 15, 2019, including interim reporting periods within those fiscal years. The Company adopted ASU 2018-13 during the first quarter of 2020 and the adoption of this guidance did not have a material impact on the Company’s financial statements.

Recent Accounting Pronouncements

The Company reviewed the recent accounting pronouncements and determined that none of the recent accounting pronouncements were applicable.

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

Note 2 - Going Concern

As of and for the nine months ended September 30, 2020, the Company had cash and cash equivalents of $9.4 million and a net loss of $11.3 million, respectively. The net loss is primarily attributable to operating expenses of $11.9 million, partially offset by the receipt of Paycheck Protection Program (“PPP”) proceeds of $0.5 million (see Note 6) and non-cash derivative gain of $0.2 million (see Note 9). The Company used net cash in operations of $11.9 million for the nine months ended September 30, 2020 and ended the quarter with an accumulated deficit and stockholders’ equity of $196.0 million and $10.7 million, respectively. In addition, as a clinical stage biopharmaceutical company, the Company has not generated any operating revenues or profits to date. These existing and projected on-going factors continue to raise substantial doubt about the Company’s ability to continue as a going concern.

In February 2020, the Company entered into a Sales Agreement (“Sales Agreement”) with two agents to implement an “at-the-market” (“ATM”) equity offering program under which the Company, at its sole discretion, may issue and sell

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from time to time shares of its authorized common stock. During the nine months ended September 30, 2020, the Company sold shares pursuant to the ATM equity offering program, which yielded gross proceeds of $15.1 million (see Note 10). In October 2020, the Company received additional gross proceeds of $1.0 million from the sale of 1.1 million shares of common stock under the ATM equity offering program, which was offset by offering related costs of $40,000.

The Company has prepared an updated projection covering the period from October 1, 2020 through September 30, 2021 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 clinical development programs. The Company continues to assess the impact of the COVID-19 pandemic, including the increase in COVID-19 cases in the United States and the impact that may have on the AP-013 study and any new studies related to COVID-19, and, as such, is not currently in a position to project the required liquidity needs for completion of these studies. The Company anticipates using the ATM equity offering program to raise funds in the near term, while also considering supplementing the funds raised with separate private/public equity offering(s). Based on the Company’s current cash position, projection of operations and expected access to equity financing, the Company believes it will have sufficient liquidity to fund operations through the third quarter of 2021. 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 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 rapidly evolve, its effect on the Company’s operations and ability to raise capital through the ATM equity offering program, or otherwise, remains highly uncertain and subject to change. The Company expects to seek additional capital investments in 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 Ampion. The Company will continue to closely monitor and evaluate the overall capital markets to determine the appropriate timing for sourcing such capital, which will primarily depend on existing market conditions relative to the timing of the Company’s liquidity needs. However, the Company cannot give any assurance that it will be successful in satisfying its future liquidity needs in a manner that will be sufficient to fund its base level of operations and any incremental expenses related to the further development of Ampion for OAK and other indications.

The accompanying unaudited interim financial statements were prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any separate adjustments relating to the recovery of recorded assets or the classification of liabilities, which adjustments may be necessary in the future should the Company be unable to continue as a going concern.

Note 3 – Prepaid Expenses and Other

Prepaid expenses and other balances as of September 30, 2020 and December 31, 2019 are as follows:


	September 30, 2020		December 31, 2019

Unamortized commercial insurance premiums	$	970,000	$	502,000
Deposits		214,000		1,162,000
BLA consulting services refund		182,000		-
Receivable		14,000		14,000
Other		95,000		40,000
Total prepaid expenses and other	$	1,475,000	$	1,718,000

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Note 4 – Fixed Assets

Fixed assets are recorded based 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 economic life or related lease term. Fixed assets consist of the following:


	Estimated	Weighted Average	Net Book Value								Net Book Value
	Useful Lives	Remaining Useful	December 31,						Accumulated		September 30,
	in Years	Lives in Years	2019		Additions		Disposals		Depreciation		2020

Leasehold improvements	10	4	$	2,850,000	$	—	$	—	$	(450,000)	$	2,400,000
Manufacturing facility/clean room	3 - 8	3		1,550,000		9,000		(73,000)		(370,000)		1,116,000
Lab equipment and office furniture	5 - 8	3		348,000		39,000		—		(65,000)		322,000
Fixed assets, net			$	4,748,000	$	48,000	$	(73,000)	$	(885,000)	$	3,838,000

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019

Depreciation and amortization expense	$	294,000	$	320,000	$	885,000	$	975,000

Note 5 – Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses as of September 30, 2020 and December 31, 2019 are as follows:


	September 30, 2020		December 31, 2019

Accounts payable	$	398,000	$	151,000
Commercial insurance premium financing agreement		721,000		21,000
Clinical trials		225,000		3,288,000
Professional fees		181,000		317,000
Other		116,000		176,000
Accrued incentive compensation		—		72,000
Accounts payable and accrued expenses	$	1,641,000	$	4,025,000

Note 6 – Paycheck Protection Program

In response to the COVID-19 pandemic, the PPP was established under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and administered by the U.S. Small Business Administration (“SBA”). Companies who met the eligibility requirements set forth by the PPP could qualify for PPP loans provided by local lenders, which supports payroll, rent and utility expenses (“qualified expenses”). If the loan proceeds are fully utilized to pay qualified expenses over the covered period, as further defined by the PPP, the full principal amount of the PPP loan may qualify for loan forgiveness, subject to potential reduction based on the level of full-time employees maintained by the organization during the covered period as compared to a baseline period.

In April 2020, the Company received proceeds of $544,000 under the PPP provided by KeyBank National Association (the “Lender”). Based on the term and conditions of the loan agreement, 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 has been updated according to the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility Act”).

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In June 2020, the Flexibility Act was signed into law, which amended the CARES Act. The Flexibility Act changed key provisions of the PPP, including, but not limited to, (i) provisions relating to the maturity of PPP loans, (ii) the deferral period covering of PPP loan payments and (iii) the process for measurement of loan forgiveness. More specifically, the Flexibility Act provides a minimum maturity of five years for all PPP loans made on or after June 5, 2020, the date of the enactment of the Flexibility Act, and permits lenders and borrowers to extend the maturity date of earlier PPP loans by mutual agreement. As of the date of this filing, the Company has not approached the Lender to request an extension of the maturity date from two years to five years. The Flexibility Act also provides that if a borrower does not apply for forgiveness of a loan within 10 months after the last day of the measurement period (the “covered period”), the PPP loan is no longer deferred and the borrower must begin paying principal and interest. Therefore, the Company’s deferral period for principal and interest payments was updated from six months according to the terms and conditions of the loan agreement to ten months. In addition, the Flexibility Act extended the length of the covered period from eight weeks to 24 weeks from receipt of proceeds, while allowing borrowers that received PPP loans before June 5, 2020 to determine, at their sole discretion, a covered period of either eight weeks or 24-weeks.

After reviewing the applicable terms and conditions of the Flexibility Act, the Company has elected to extend the length of the covered period from eight weeks to the lesser of (i) the period whereby qualified expenses equal loan proceeds or (ii) 24 weeks. The Company has performed initial calculations of its PPP loan forgiveness eligibility according to the terms and conditions of the SBA’s Loan Forgiveness Application (Revised June 16, 2020) and, based on such calculations, expects that the PPP loan will be forgiven in full over a period of less than 24 weeks. In addition, the Company has determined that it is probable that the Company will meet all the conditions of the PPP loan forgiveness program. As such, the Company has determined that the PPP loan should be accounted for as a government grant which analogizes with International Accounting Standards (“IAS”) 20, Accounting for Government Grants and Disclosure of Government Assistance. Under the provisions of IAS 20, “a forgivable loan from government is treated as a government grant when there is reasonable assurance that the entity will meet the terms for forgiveness of the loan.” IAS 20 does not define “reasonable assurance”, however, based on certain interpretations, it is analogous to “probable” in GAAP under FASB ASC 450-20-20, which is the definition the Company has applied to its expectations of the Company’s eligibility for PPP loan forgiveness. In addition, in accordance with the provisions of IAS 20, government grants shall be recognized in profit or loss on a systematic basis over the periods in which the Company recognizes costs for which the grant is intended to compensate (i.e. qualified expenses). Therefore, the Company recognized PPP funding during the periods when qualified expenses were incurred. The balance and activity related to the PPP loan is as follows as of September 30, 2020:


	September 30, 2020

PPP loan proceeds	$	544,000
Qualified expenses eligible for forgiveness		(544,000)
PPP loan balance	$	—

In October 2020, the Company submitted the PPP loan forgiveness application, which has been approved by the Lender. In accordance with the terms and conditions of the Flexibility Act, the Lender has 60 days from receipt of the completed application to issue a decision to the SBA. If the Lender determines that the borrower is entitled to forgiveness of some or all of the amount applied for under the statue and applicable regulations, the Lender must request payment from the SBA at the time the Lender issues its decision to the SBA. 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 through the date of payment, not later than 90 days after the Lender issues its decision to the SBA. Although the Company believes it is probable that the PPP loan will be forgiven, the Company cannot currently provide any objective assurance that it will obtain forgiveness in whole or in part.

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 August 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. The Company may prepay the PPP loan at any time without penalty and the loan agreement evidencing the PPP loan contains customary events of default relating to, among other things, payment defaults, or breaches of representations and warranties, or other provisions of the loan

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agreement. The occurrence of an event of default may trigger an acceleration of the maturity date for all amounts outstanding, collection of all amounts owing from the Company and/or the Lender filing suit and obtaining a judgment against the Company.

Note 7 - Commitments and Contingencies

Commitments and contingencies are described below and summarized by the following table:


	Total (1)		2020		2021		2022		2023		2024		Thereafter
Key clinical research trial obligations	$	2,915,000	$	675,000	$	2,240,000	$	—	$	—	$	—	$	—
BLA consulting services		1,143,000		—		457,000		686,000		—		—		—
Statistical analysis and programming consulting services		318,000		30,000		288,000		—		—		—		—
Employment agreements		1,478,000		216,000		783,000		466,000		13,000		—		—
Commercial insurance premium financing agreement		721,000		474,000		247,000		—		—		—		—
	$	6,575,000	$	1,395,000	$	4,015,000	$	1,152,000	$	13,000	$	—	$	—

(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 August 2021 under the PPP loan if it is not forgiven by the SBA (see Note 6).

Key Clinical Research Trial Obligations

AP-013 study

In March 2019, the Company entered into a contract with a CRO in connection with the AP-013 study totaling $6.2 million and covering an initial clinical trial size of 724 patients, which was increased by $4.1 million in January 2020 as a result of an increase in the number of participating patients to 1,034, resulting in the CRO contract commitment totaling $10.3 million. In April 2020, and pursuant to the FDA guidance covering ongoing clinical trials in the presence of the COVID-19 pandemic, the Company and the CRO paused all ongoing conduct associated with the AP-013 study. Increases in COVID-19 cases across certain regions of the United States continue to be reported on a consistent basis. Due to the continued increase in reported cases, the Company has determined that the AP-013 study will remain paused. However, the FDA recently provided guidance specifically designed to assist the pharmaceutical industry with viable options for evaluating data from clinical trials which were adversely impacted by the pandemic. The Company is reviewing this guidance and continues to have ongoing discussions with the CRO to determine the best approach for the AP-013 study.

From the inception of this contract through September 30, 2020, the Company incurred and accrued cumulative costs totaling $8.2 million against the contract. This contract had an outstanding obligation for future costs and services totaling $2.1 million as of September 30, 2020. However, this obligation assumes that the Company will continue the AP-013 study at the same point the study was paused, and that the completion of the study will be consistent with the parameters as contained in the existing contract, which may not be the case. The Company continues to explore all viable options to enable it to complete the AP-013 study; however, it is possible that the COVID-19 pandemic may prevent completion of the AP-013 study at this time or at all. Due to the uncertainty resulting from the COVID-19 pandemic, the future contractual commitment amount related to the AP-013 study may change. The following table provides further detail of the Company’s current contractual obligations for the conduct of the AP-013 study, which does

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not reflect any changes related to the potential impact of COVID-19, as such impacts are unknown and cannot be reasonably estimated at the date of this filing:


	September 30, 2020

Original contract (based on 724 patients)	$	6,180,000
Amendment to contract (based on 1,034 patients)		4,075,000
Total contract	$	10,255,000

Initial deposit (included in original contract amount)	$	861,000
Amendment to deposit		699,000
Expenses incurred applied to deposit		(1,386,000)
Remaining deposit (applied to future expenses)	$	174,000

Expenses incurred/accrued (includes expenses applied to deposit)	$	8,182,000

Total future commitment	$	2,073,000

Inhaled treatment for COVID-19 patients

In May 2020, the Company entered into a contract with a CRO in connection with a pre-clinical inhaled safety study for Ampion totaling $207,000. In August 2020, the Company finalized contract negotiations to increase the contract to $250,000 as a result of additional pre-study work and reporting. In September 2020, the safety study was completed and, as such, the Company had no outstanding future commitment as of September 30, 2020. The data from the safety study was submitted to the FDA to support the Investigational New Drug (“IND”) application covering inhaled Ampion treatment for COVID-19 patients, which was granted in September 2020.

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 Company expects to commence the AP-014 study during the fourth quarter of fiscal 2020 and, as such, had an outstanding future commitment of $836,000 as of September 30, 2020.

In October 2020, the Company entered into a contract with a regional hospital group in connection with the FDA approved IND application for the AP-014 study totaling $30,000. As noted above, the Company expects to commence the AP-014 study during the fourth quarter of fiscal 2020.

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

In June 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 (the “AP-016 study”) totaling $43,000. In September 2020, the AP-016 study was completed. However, the Company will continue to monitor the patients enrolled in the AP-016 study for a 90-day period subsequent to the completion of the study and costs are expected to be minimal during this period.

In July 2020, the Company entered into a contract with a regional hospital group in connection with the FDA approved IND application for the AP-016 study totaling $50,000. As noted above, the Company completed the AP-016 study in September 2020 and, as such, had no outstanding future commitment as of September 30, 2020.

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 recorded 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

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finalized contract negotiations to provide a refund of the deposit totaling $182,000 due to the pause of the AP-013 study and the delay in filing of the BLA. The Company is required to provide a deposit totaling $364,000 once the work commences related to the preparation of the related BLA for Ampion. The Company had incurred cumulative costs totaling $79,000 against this contract and, as such, had outstanding future obligations totaling $1.1 million as of September 30, 2020, which will be settled at such time future services are provided to the Company primarily related to the development and filing of the Ampion BLA. Given the uncertainty surrounding the COVID-19 pandemic and the resulting impact on the AP-013 study, at 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 late fiscal 2021, 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 September 30, 2020, the Company had incurred cumulative costs totaling $260,000 against the contract and, as such, had an outstanding obligation of $318,000.

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 10, 2020, immediately following the expiration of 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 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. The employment agreement, as amended in July 2020, allowed for reimbursement of reasonable commuting and relocation expenses, including the employee portion of taxes, for up to one year. The commuting and relocation expenses were substantially incurred as of September 30, 2020 with the residual expected to be incurred during the fourth quarter of fiscal 2020.

Amounts noted above do not assume the continuation of employment beyond the contractual terms of each employee’s existing employment agreements.

Commercial Insurance Premium Financing Agreement

In July 2020, the Company entered into an insurance premium financing agreement for $1.0 million, with a term of nine months and an annual interest rate of 3.37%. Under the terms and provisions of the agreement, the Company will be required to make principal and interest payments totaling $116,000 per month over the remaining term of the agreement. The outstanding obligation as of September 30, 2020 was $683,000, which will be paid in full by March 2021. In addition, as of September 30, 2020, the Company had a remaining balance of $38,000 related to annual insurance premiums payable to the Company’s insurance broker, which will be paid in full by June 2021.

Facility Lease

In December 2013, the Company entered into a 125-month non-cancellable operating lease for office space and a manufacturing facility. The effective date of the lease was May 1, 2014. The initial base rent of the lease was $23,000 per month. The total base rent over the term of the lease is approximately $3.3 million, which includes rent abatements and leasehold incentives. The Company adopted the FASB issued ASC 842, “Leases (Topic 842)” effective January 1, 2019. With the adoption of ASC 842, the Company recorded an operating right-of-use (“ROU”) asset and an operating lease liability on its balance sheet. The ROU asset represents the Company’s right to use the underlying asset for the

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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 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 September 30, 2020:


	Facility Lease Payments		Remainder of 2020		2021		2022		2023		2024		Thereafter

Remaining Facility Lease Payments	$	1,429,000	$	85,000	$	345,000	$	355,000	$	364,000	$	280,000	$	—
Less: Discount Adjustment		(152,000)
Total lease liability	$	1,277,000

Lease liability-current portion	$	278,000

Long-term lease liability	$	999,000

The following table provides a reconciliation of the Company’s remaining ROU asset for its facility lease presented in the balance sheet as of September 30, 2020:


	ROU Asset

Balance as of December 31, 2019	$	1,003,000
Amortization		(133,000)
Balance as of September 30, 2020	$	870,000

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019

Lease expense	$	66,000	$	65,000	$	198,000	$	196,000

Note 8 – Warrants

The Company has issued equity-classified warrants and liability warrants in conjunction with previous equity raises. The Company had a total of 2.2 million equity-classified warrants and 3.2 million liability warrants outstanding as of September 30, 2020.

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The following table summarizes the Company’s warrant activity during the nine months ended September 30, 2020:


		Weighted		Weighted Average
	Number of	Average		Remaining
	Warrants	Exercise Price		Contractual Life

Outstanding as of December 31, 2019	7,116,000	$	0.57	3.41
Warrants issued	—	$	—
Warrants exercised	(1,668,000)	$	0.42
Warrants expired	—	$	—
Outstanding as of September 30, 2020	5,448,000	$	0.61	2.52

During the nine months ended September 30, 2020, the Company issued 1.2 million 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 $465,000 during the nine months ended September 30, 2020 related to these investor warrant exercises. In addition, former placement agents elected to exercise 506,000 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 276,000 shares of common stock as a result. The Company did not receive any cash related to the exercise of placement agent warrants.

The total value for the warrant derivative liability as of September 30, 2020 is approximately $1.9 million. See Note 9 for additional information regarding the warrant derivative liability.

Note 9 - Fair Value Considerations

Authoritative guidance defines fair value as the price that would be received upon the sale of an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are 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.

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

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The following table presents the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2020 and December 31, 2019, by level within the fair value hierarchy:


	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total
September 30, 2020
Liabilities:
Warrant derivative liability	$	—	$	—	$	1,901,000	$	1,901,000

December 31, 2019
Liabilities:
Warrant derivative liability	$	—	$	—	$	2,064,000	$	2,064,000

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

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


	Derivative Instruments

Balance as of December 31, 2019	$	2,064,000
Warrant exercises		(912,000)
Change in fair value		749,000
Balance as of September 30, 2020	$	1,901,000

Note 10 - Common Stock

Authorized Shares

The Company had 300.0 million authorized shares of common stock as of September 30, 2020 and December 31, 2019.

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


	September 30, 2020

Authorized shares		300,000,000

Common stock outstanding		183,938,000
Options outstanding		5,484,000
Warrants outstanding		5,448,000
Reserved for issuance under 2019 Stock and Incentive Plan		8,643,000

Available shares		96,487,000

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Shelf Registration

In March 2017, the Company filed a shelf registration statement on Form S-3 (the “Prior Shelf Registration Statement”) with the SEC to register the offering by the Company, from time to time, of up to $100.0 million of the Company’s common stock, preferred stock, debt securities, warrants and units, as well as, the sale by selling stockholders of 5.0 million shares of common stock. The Prior Shelf Registration Statement was declared effective by the SEC in April 2017 and was terminated in May 2020. In April 2020, the Company filed a shelf registration statement on Form S-3 (the “New Shelf Registration Statement”) with the SEC to register the offering by the Company, from time to time, of up to $100.0 million of the Company’s common stock, preferred stock, debt securities, warrants and units, which was declared effective by the SEC in May 2020. The Company had $88.4 million remaining under the New Shelf Registration Statement as of September 30, 2020. However, the Company’s ability to issue and sell securities under the New Shelf Registration Statement may be limited, based on many factors including, but not limited to, the Company’s stock price and related volatility, the trading volume of the Company’s common stock, and the number of remaining authorized shares available for the Company to issue.

ATM Equity Offering Program

Sales Agreement

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

The following table summarizes the Company’s sales and related issuance costs incurred under the Sales Agreement as of September 30, 2020:


	Three months ended		Three months ended		Three months ended
	March 31, 2020		June 30, 2020		September 30, 2020		Total

Total shares of common stock sold		1,241,000		13,069,000		9,405,000		23,715,000

Average price per share	$	0.58	$	0.54	$	0.78	$	0.64

Gross Proceeds	$	682,000	$	7,231,000	$	7,223,000	$	15,136,000
Commissions earned by placement agents		(27,000)		(290,000)		(290,000)		(607,000)
Issuance / subsequent recurring fees		(219,000)		(24,000)		(23,000)		(266,000)
Net Proceeds	$	436,000	$

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