ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

INTRODUCTION

Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business and related financing activities, includes forward-looking statements that involve risks and uncertainties. You should review the Forward-Looking Statements and Risk Factors sections of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis or elsewhere in the Annual Report on Form 10-K.

Management’s discussion and analysis of financial condition and results of operations, or MD&A, is provided as a supplement to the accompanying consolidated financial statements and footnotes to help provide an understanding of our financial condition, the changes in our financial condition and our results of operations. This item should be read in connection with our Consolidated Financial Statements for the year ending December 31, 2020 and notes thereto, or Notes, included in this Annual Report on Form 10-K. See, Item 8 — Financial Statements and Supplementary Data.

Note: Information concerning the shares of our common stock and related share prices in this MD&A has been adjusted to reflect the 1-for-3 reverse split of our common stock that was made effective on April 29, 2020. (See, “Item 8 – Notes to consolidated financial statements – Note 2 - Basis of Presentation”).

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OVERVIEW

We are a clinical-stage, biopharmaceutical and medical device company focused on the development of novel therapeutics intended to address significant unmet medical needs in important acute care markets. Our development programs are primarily focused in the treatment of acute cardiovascular and acute pulmonary diseases. Our lead acute cardiovascular product candidate, istaroxime, is a first-in-class, dual-acting agent being developed to improve cardiac function in patients with acute heart failure, or AHF, with a potentially differentiated safety profile from existing treatments. Istaroxime demonstrated significant improvement in both diastolic and systolic aspects of cardiac function and was generally well tolerated in two phase 2 clinical trials. Istaroxime has been granted Fast Track designation for the treatment of AHF by the U.S. Food and Drug Administration, or FDA. Based on the profile observed in the phase 2 clinical studies in AHF, where istaroxime significantly improved cardiac function and systolic blood pressure in heart failure patients, we initiated a small clinical study to evaluate istaroxime for the treatment of early cardiogenic shock, a severe form of heart failure characterized by very low blood pressure and hypo-perfusion to critical organs. We believe that istaroxime may fulfill an unmet need in early cardiogenic shock. In addition, our drug product candidates include rostafuroxin, a novel medicine for the treatment of hypertension in patients with a specific genetic profile, for which we are pursuing potential out-licensing transactions or other strategic opportunities and not advancing on our own. Our cardiovascular portfolio also includes early exploratory research programs to evaluate potential preclinical product candidates for development, including oral and intravenous sarco (endo) plasmic reticulum Ca2+ -ATPase 2a, or SERCA2a, activator heart failure compounds.

Our lead pulmonary product candidate is our proprietary lyophilized KL4 surfactant (lucinactant), which we believe may potentially support a product pipeline, alone or in combination with our proprietary Aerosol Delivery System, or ADS, technology, to address a broad range of serious respiratory conditions in children and adults. We are developing KL4 surfactant to be delivered either as a liquid instillate or noninvasively as an aerosol. In September 2020, the FDA accepted our investigational new drug, or IND, application for a small phase 2 pilot study to assess the ability of our KL4 surfactant liquid instillate to impact key respiratory parameters in the treatment of lung injury and acute respiratory distress syndrome, or ARDS, resulting from severe acute respiratory syndrome coronavirus 2, or SARS-CoV-2, the causative agent in novel coronavirus, or COVID-19, infections. We dosed the first patient in this clinical trial in January 2021 and plan to enroll up to 20 patients with COVID-19 and ARDS who are on mechanical ventilation, with results expected mid-2021. Our aerosolized product candidate, AEROSURF® (lucinactant for inhalation), is a novel drug/medical device combination product for noninvasive delivery of aerosolized KL4 surfactant using our ADS technology for the treatment of respiratory distress syndrome, or RDS, in premature infants. Our licensee in Asia, Lee’s Pharmaceutical (HK) Ltd., or Lee’s (HK), has agreed to fund and conduct a phase 2b clinical bridging study for AEROSURF in Asia, referred to as the phase 2b bridging study, under the terms of our License, Development and Commercialization Agreement between us and Lee’s (HK) dated as of June 12, 2017, as amended, or the Asia License Agreement. Accordingly, we have suspended our AEROSURF clinical activities and ceased enrollment in the phase 2b bridging study being conducted in the European Union, or EU. To support the future development of AEROSURF and our lyophilized KL4 surfactant liquid instillate in markets outside of Asia, including the United States, or U.S., we are pursuing one or more licensing transactions, collaboration arrangements or other strategic opportunities.

Our ability to advance our development programs is dependent upon our ability to secure additional capital in both the near and long-term, through public or private equity offerings; through potential strategic opportunities, including licensing agreements, drug product development and marketing collaboration arrangements, pharmaceutical research cooperation arrangements or other similar transactions in geographic markets outside of Asia, including the U.S.; and/or through potential grants and other funding commitments from U.S. government agencies, in each case, if available. We have engaged with potential counterparties in various markets and will continue to pursue non-dilutive sources of capital as well as potential private and public offerings. There can be no assurance, however, that we will be able to identify and enter into public or private securities offerings on acceptable terms and in amounts sufficient to meet our needs, or qualify for non-dilutive funding opportunities under any grant programs sponsored by U.S. government agencies, private foundations and/or leading academic institutions, or identify and enter into any strategic transactions that will provide the additional capital that we will require. If none of these alternatives is available, or if available, we are unable to raise sufficient capital through such transactions, we potentially could be forced to limit or cease our development activities, which would have a material adverse effect on our business, financial condition and results of operations.

We have incurred operating losses since our incorporation on November 6, 1992. For the years ended December 31, 2020 and 2019, we had operating losses of $30.3 million and $24.9 million, respectively. As of December 31, 2020, we had an accumulated deficit of $717.7 million. To date, we have financed our operations primarily through private placements and public offerings of our common and preferred stock and borrowings from investors and financial institutions.

We expect to continue to incur significant research and clinical development, regulatory and other expenses as we (i) continue to develop our product candidates; (ii) seek regulatory clearances or approvals for our product candidates; (iii) conduct clinical trials on our product candidates; and (iv) manufacture, market and sell any product candidates for which we may obtain regulatory approval.

As a result, we will need additional financing to support our continuing operations. Until such time that we can generate substantial product revenues, if ever, we expect to finance our operations through public or private equity offerings; through potential strategic opportunities, including licensing agreements, drug product development and marketing collaboration arrangements, pharmaceutical research cooperation arrangements or other similar transactions in geographic markets outside of Asia, including the U.S.; and/or through potential grants and other funding commitments from U.S. government agencies, in each case, if available. There can be no assurance, however, that we will be able to identify and enter into public or private securities offerings on acceptable terms and in amounts sufficient to meet our needs, or qualify for non-dilutive funding opportunities under any grant programs sponsored by U.S. government agencies, private foundations and/or leading academic institutions, or identify and enter into any strategic transactions that will provide the additional capital that we will require. If none of these alternatives is available, or if available, we are unable to raise sufficient capital through such transactions, we potentially could be forced to limit or cease our development activities, which would have a material adverse effect on our business, financial condition and results of operations.

RESULTS OF OPERATIONS

Comparison of Years Ended December 31, 2020 and 2019

Net Loss and Operating Loss

The operating loss for the years ended December 31, 2020 and 2019 was $30.3 million and $24.9 million, respectively. The increase in operating loss from 2019 to 2020 was due to a $5.2 million increase in operating expenses and a $0.2 million decrease in revenue.

The net loss for the years ended December 31, 2020 and 2019 was $32.6 million, or $2.08 basic net loss per common share, and $27.5 million, or $2.51 basic net loss per common share, respectively. Included in the net loss is (i) $1.1 million in non-cash expense related to the modification of certain warrants in 2020; (ii) a net loss on debt extinguishment of $1.8 million in 2019; (iii) $1.2 million and $0.5 million in foreign currency losses in 2020 and 2019, respectively; and (iv) interest expense of $0.1 million and $0.5 million for 2020 and 2019, respectively.

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Research and Development Expenses

Our research and development expenses are charged to operations as incurred and we incur both direct and indirect expenses for each of our programs. We track direct research and development expenses by preclinical and clinical programs, which include third-party costs such as contract research organization, consulting and clinical trial costs. We do not allocate indirect research and development expenses, which include product development and manufacturing expenses and clinical, medical and regulatory operations expenses, to specific programs. We also account for research and development and report annually by major expense category as follows: (i) contracted services; (ii) salaries and benefits; (iii) stock-based compensation; (iv) raw materials, aerosol devices and supplies; (v) royalties; (vi) rents and utilities; (vii) depreciation; (viii) travel; and (ix) other. We expect to increase our investment in research and development in order to advance our product candidates through additional clinical trials. As a result, we expect that our research and development expenses will increase throughout the foreseeable future as we pursue clinical development of istaroxime, KL4 surfactant and our other current and future product candidates. At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from sales of our product candidates.

Research and development expenses for the years ended December 31, 2020 and 2019 are as follows:

Year Ended December 31,

Istaroxime - early cardiogenic shock $ 1,813 $ -

Preclinical studies 42 192

Total direct preclinical and clinical programs 4,404 1,907

Product development and manufacturing 4,474 4,248

Clinical, medical and regulatory operations 6,495 6,532

Total research and development expenses $ 15,373 $ 12,687

Research and development expenses include non-cash charges associated with stock-based compensation and depreciation of $2.2 million and $2.1 million for 2020 and 2019, respectively.

Direct Preclinical and Clinical Programs

Direct preclinical and clinical programs include: (i) development activities, toxicology studies and other preclinical studies; and (ii) activities associated with conducting clinical trials, including contract research organization costs, patient enrollment costs, clinical site costs, clinical device and drug supply costs, and related external costs, such as consultant fees and expenses.

Direct preclinical and clinical development programs expenses increased$2.5 million from 2019 to 2020 due to (i) the initiation of a phase 2 clinical trial of istaroxime for early cardiogenic shock in September 2020; (ii) our continued development of istaroxime for AHF; and (iii) costs related to the development of our lyophilized KL4 surfactant.

Product Development and Manufacturing

Product development and manufacturing includes (i) manufacturing operations, both in-house and with contract manufacturing organizations, or CMOs, validation activities, quality assurance and analytical chemistry capabilities that support the manufacture of our drug products used in research and development activities, and our medical devices, including our ADS, (ii) design and development activities related to our ADS for use in our AEROSURF clinical development program; and (iii) pharmaceutical and manufacturing development activities of our drug product candidates including development of istaroxime, lyophilized KL4 surfactant, and rostafuroxin. These costs include employee expenses, facility-related costs, depreciation, costs of drug substances (including raw materials), supplies, quality control and assurance activities, analytical services, and expert consultants and outside services to support pharmaceutical and device development activities.

Product development and manufacturing expenses increased$0.2 million from 2019 to 2020 due to a $0.4 million purchase of raw materials during the second quarter of 2020, partially offset by a decrease in analytical testing costs related to our AEROSURF clinical development program.

Clinical, Medical and Regulatory Operations

Clinical, medical and regulatory operations include (i) medical, scientific, preclinical and clinical, regulatory, data management and biostatistics activities in support of our research and development programs; and (ii) medical affairs activities to provide scientific and medical education support for our KL4 surfactant and aerosol delivery systems under development. These costs include personnel, expert consultants, outside services to support regulatory and data management, symposiums at key medical meetings, facilities-related costs, and other costs for the management of clinical trials.

Clinical, medical and regulatory operations expenses were consistent from 2019 to 2020 and were comprised of (i) an increase of $0.2 million in non-cash stock compensation expense; (ii) an increase of $0.2 in employee-related incentive bonus expense; offset by (iii) a decrease of $0.4 million in personnel costs.

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Research and Development Expense by Major Expense Category

We also account for our research and development expense by major expense category as shown in the following table:

Year Ended December 31,

Raw materials, aerosol devices and supplies 915 664

Contracted services include third-party costs of preclinical studies, clinical trial activities, certain components of our manufacturing operations, quality control and analytical stability and release testing of our drug products, consulting services, aerosol device design and engineering services, etc. The increase of $2.4 million from 2019 to 2020 is due to an increase in contracted research and clinical trials expense in 2020.

The increase in raw materials, aerosol devices and supplies of $0.3 million from 2019 to 2020 is due to costs associated with our small pilot study of our proprietary KL4 surfactant for the treatment of lung injury resulting from COVID-19 including a $0.3 million increase in raw materials in 2020.

Royalties represent minimum royalties due under our licensing agreements with Philip Morris USA Inc. and Philip Morris Products S.A. for our ADS technology.

Other consists primarily of ongoing research and development costs such as insurance, taxes, education and training, and software licenses.

Research and Development Projects

A substantial portion of our cumulative losses to date relate to investments in our research and development projects, for which we incurred $28.1 million in expenses for the two-year period ended December 31, 2020. Due to the significant risks and uncertainties inherent in the clinical development and regulatory approval processes, the nature, timing and costs of the efforts necessary to complete individual projects in development are not reasonably estimable. With every phase of a development project, there are unknowns that may significantly affect cost projections and timelines. In view of the number and nature of these factors, many of which are outside our control, the success, timing of completion and ultimate cost of development of any of our product candidates are highly uncertain and cannot be estimated with any degree of certainty. In addition to the risks and uncertainties affecting our research and development projects discussed in this MD&A (see, “Item 1A. Risk Factors”), other risks could arise that we may not foresee that could affect our ability to estimate projections and timelines.

Ultimately, if we do not successfully develop and gain marketing approval for our drug product candidates, in the U.S. or elsewhere, we will not be able to commercialize, or generate any revenues from the sale of our products and the value of our company and our financial condition and results of operations will be substantially harmed.

General and Administrative Expenses

Year Ended December 31,

General and administrative expenses $ 14,944 $ 12,404

General and administrative expenses consist of costs for executive management, business development, intellectual property, finance and accounting, legal, human resources, information technology, facility, and other administrative costs.

General and administrative expenses include non-cash charges associated with stock-based compensation of $3.6 million and $4.8 million, respectively, for the years ended December 31, 2020 and 2019. General and administrative expenses increased$2.5 million from 2019 to 2020 due to (i) an increase of $2.6 million in professional fees, taxes and insurance; (ii) severance costs of $0.9 million; and (iii) an increase in personnel costs of $0.2 million; partially offset by (iv) a decrease of $1.2 million in non-cash, stock compensation expense.

Other (Expense) Income, Net

Year Ended December 31,

Net loss on debt extinguishment $ - $ (1,794 )

Other (expense), net (2,246 ) (446 )

Total other (expense), net $ (2,249 ) $ (2,582 )

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Net Loss on Debt Extinguishment

In December 2019, as part of a private placement financing, or the December 2019 Private Placement Financing, we converted $2.95 million of existing loans payable obligations to LPH II Investments Ltd., a Cayman Islands company, or LPH II, an affiliate of Lee’s (HK), on the same terms as the investors of the December 2019 Private Placement Financing. The conversions of the loans payable are treated as extinguishments of debt and we recorded a loss on debt extinguishment of approximately $1.8 million, resulting from the difference between the fair value of the common stock and warrants issued and the carrying value of the obligations.

Interest Income

Interest income relates to income on our money market account and U.S. Treasury notes.

Interest expense

Year Ended December 31,

Cash interest expense $ 122 $ 332

Non-cash amortization of debt discounts 3 163

Total interest expense $ 125 $ 495

Cash interest expense in 2020 and 2019 consists of interest expense associated with the collaboration and device development payables and with the loans payable. The decrease of $0.2 million in cash interest expense from 2019 to 2020 is related to the repayment of $2.1 million in loans payable during the year ended December 31, 2019 and the repayment of $2.4 million in loans payable during 2020. Non-cash amortization of debt discounts related to a discount on Battelle Payables related to a restructuring agreement and was fully amortized during 2020.

Other (expense), net

Other (expense), net in 2020 primarily consists of $1.2 million in losses on foreign currency translation and $1.1 million in non-cash expense related to the modification of certain warrants. Other (expense), net in 2019 primarily consists of $0.5 million in losses on foreign currency translation.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2020, we had cash and cash equivalents of $16.9 million and current liabilities of $6.1 million.

On March 25, 2021, we completed a registered public offering of 9,230,500 shares of our common stock and warrants to purchase 9,230,500 shares of our common stock, at a combined price of $3.25 resulting in net proceeds of $27.3 million (see, Note 20 - Subsequent Event).

We also have an At-The-Market Offering Agreement with Ladenburg Thalmann & Co. Inc., or Ladenburg, pursuant to which we may offer and sell, from time to time at our sole discretion, up to a maximum of $10.0 million of shares of our common stock through Ladenburg as agent and/or principal through an at-the-market program, or the ATM Program. In February 2021, we sold 105,083 shares of our common stock under the ATM Program resulting in aggregate gross and net proceeds to us of approximately $0.6 million (see,Note 12 - Stockholders’ Equity).

We are subject to risks common to companies in the biotechnology industry, including but not limited to, the need for additional capital, risks of failure of preclinical and clinical studies, the need to obtain marketing approval and reimbursement for any drug product candidate that we may identify and develop, the need to successfully commercialize and gain market acceptance of our product candidates, dependence on key personnel, protection of proprietary technology, compliance with government regulations, development of technological innovations by competitors, and risks associated with our international locations and activities abroad, including but not limited to having foreign suppliers, manufacturers and clinical sites in support of our development activities.

We have incurred net losses since inception. Our net loss was $32.6 million and $27.5 million, respectively, for the years ended December 31, 2020 and 2019. We expect to continue to incur operating losses for at least the next several years. As of December 31, 2020, we had an accumulated deficit of $717.7 million. Our future success is dependent on our ability to identify and develop our product candidates, and ultimately upon our ability to attain profitable operations. We have devoted substantially all of our financial resources and efforts to research and development and general and administrative expense to support such research and development. Net losses and negative cash flows have had, and will continue to have, an adverse effect on our stockholders’ equity and working capital, and accordingly, our ability to execute our future operating plans.

We believe that our cash and cash equivalents as of the filing date of our Annual Report on Form 10-K for the year ended December 31, 2020 are sufficient to fund operations through at least the next 12 months. In the future, we will need to raise additional capital to continue funding our development activities and operations. We plan to obtain funding through a combination of public or private equity offerings, or strategic transactions including collaborations, licensing arrangements or other strategic partnerships. There is inherent uncertainty associated with these fundraising activities, and thus they are not considered probable.

Our funding requirements are based on estimates that are subject to risks and uncertainties and may change as a result of many factors currently unknown. Although management continues to pursue the plans described above, there is no assurance that we will be successful in obtaining sufficient funding on terms acceptable to us to fund continuing operations, if at all, including as a result of market volatility following the COVID-19 pandemic. Until such time as we can generate substantial product revenues, if ever, we expect to finance our cash needs through a combination of equity offerings, strategic partnerships and licensing arrangements. The terms of any future financing may adversely affect the holdings or the rights of our existing stockholders.

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Cash Flows

Cash flows for the years ended December 31, 2020 and 2019

Net cash outflows for 2020 consist of $25.3 million net cash used in operating activities, $0.3 million of net cash used in investing activities, and $20.0 million of net cash provided by financing activities.

Operating Activities

Net cash used in operating activities was $25.3 million and $24.7 million for the years ended December 31, 2020 and 2019, respectively. The increase in net cash used in operating activities from 2019 to 2020 is attributable to (i) a $5.2 million increase in operating expenses; and (ii) a $1.2 million increase in payments related to our collaboration and device development payable with Battelle Memorial Institute as a result of contractual milestone payments during the year ended December 31, 2020; partially offset by (iii) costs related to the CVie Acquisition, costs from the December 2018 private placement financing and the payment of pre-existing obligations with the proceeds of the December 2018 private placement financing during the year ended December 31, 2019.

Investing Activities

Net cash used in investing activities was $0.3 million for the year ended December 31, 2020 and the net cash provided by investing activities was $13.8 million for the year ended December 31, 2019. The net cash used in investing activities in 2020 is due to $0.3 million in purchases of property and equipment. The net cash provided by investing activities in 2019 is due to the sale of $14.0 million of marketable securities, partially offset by $0.2 million in purchases of property and equipment.

Financing Activities

Net cash provided by financing activities was $20.0 million and $21.8 million for the years ended December 31, 2020 and 2019, respectively, summarized as follows:

Year Ended December 31,

Proceeds from research and development funding arrangement 2,800 -

Proceeds from exercise of common stock warrants 141 -

Proceeds from Payroll Protection Program loan 547 -

Principal payments on Payroll Protection Program loan (547 ) -

Principal payments on loans payable (3,229 ) (2,063 )

Proceeds from private placement issuance of securities, net of expenses - 22,982

Proceeds from loan payable, net of expenses - 1,000

Net cash provided by financing activities $ 19,958 $ 21,768

The following sections provide a more detailed discussion of our available financing facilities.

Financings Pursuant to Common Stock Offerings

Historically, we have funded, and expect that we will continue to fund, our business operations through various sources, including financings in the form of common stock offerings. In September 2020, we filed with the SEC a "shelf" registration statement on Form S-3 (No. 333-248874), or the Universal Shelf, that was declared effective on September 29, 2020, for the proposed offering from time to time of up to $75.0 million of our securities, including common stock, preferred stock, debt securities, warrants, units, subscription rights, or any combination of the foregoing, on terms and conditions that will be determined at the time of an offering. As of December 31, 2020, approximately $75.0 million remained available under the Universal Shelf. The Universal Shelf will expire upon the earlier to occur of (i) the sale of $75.0 million of our securities or (ii) September 29, 2023.

At-The-Market Program

On September 17, 2020, we entered into an At-The-Market Offering Agreement with Ladenburg Thalmann & Co. Inc., or Ladenburg, pursuant to which we may offer and sell, from time to time at our sole discretion, up to a maximum of $10.0 million of shares of our common stock through Ladenburg as agent and/or principal under the ATM Program. When we issue sales notices to Ladenburg, we designate the maximum amount of shares to be sold by Ladenburg daily and the minimum price per share at which shares may be sold. Ladenburg may sell shares by any method permitted by law deemed to be an “at-the-market offering” as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended, or in privately negotiated transactions.

As of December 31, 2020, we had not sold any shares under the ATM Program. In February 2021, we sold 105,083 shares of our common stock under the ATM Program resulting in aggregate gross and net proceeds to us of approximately $0.6 million (see,Note 12 - Stockholders’ Equity).

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March 2021 Public Offering

On March 23, 2021, we entered into an underwriting agreement with Oppenheimer & Co. Inc. as representative for the several underwriters named therein, relating to the public offering, or the Offering, of 9,230,500 shares of our common stock, or the Common Stock, and warrants to purchase 9,230,500 shares of our Common Stock, or the Warrants. The shares of Common Stock and Warrants were sold together as a fixed combination, consisting of one share of Common Stock and a Warrant to purchase one share of Common Stock, but are immediately separable and were issued separately in the offering. Each Warrant is exercisable to purchase one share of Common Stock at a price of $3.60 per share and expires five years from the date of issuance. The Company does not plan to apply to list the Warrants on The Nasdaq Capital Market, any other national securities exchange or any other nationally recognized trading system.

The closing of the Offering occurred on March 25, 2021. The combined price to the public in the Offering for each share of Common Stock and accompanying Warrant was $3.25 resulting in gross proceeds of $30.0 million. After deducting underwriting discounts and commissions and estimated offering expenses payable by us, and excluding the proceeds, if any, from the exercise of the Warrants issued pursuant to this Offering, the net proceeds to the Company are expected to be approximately $27.3 million.

May 2020 Public Offering

On May 20, 2020, we entered into an underwriting agreement, or the Underwriting Agreement, with Ladenburg as representative for the several underwriters named therein, or collectively, the Underwriters, relating to the May 2020 Offering for an aggregate of 2,758,620 units with each unit consisting of one share of our common stock and a Warrant. The Warrants are immediately exercisable for shares of common stock at a price of $7.975 per share and expire five years from the date of issuance. The shares of common stock and the Warrants were immediately separable and were issued separately in the May 2020 Offering.

In addition, we granted the Underwriters a 45-day option, or the Overallotment Option, to purchase up to 413,793 additional shares of common stock and/or Warrants to purchase up to 413,793 additional shares of common stock, which such Overallotment Option was exercised in full.

The closing of the May 2020 Offering occurred on May 22, 2020, inclusive of the Overallotment Option. The offering price to the public was $7.25 per unit. After deducting underwriting discounts and commissions and offering expenses of $2.8 million payable by us, and excluding the proceeds, if any, from the exercise of the Warrants issued pursuant to this May 2020 Offering, the net proceeds to us were approximately $20.2 million.

December 2019 Private Placement Financing

On December 6, 2019, we completed the December 2019 Private Placement Financing with select institutional investors, in which we issued and sold an aggregate of 2,916,666 shares of common stock at a price per share of $9.06, for an aggregate purchase price of approximately $26.4 million. Included in the purchase price, LPH II converted $2.95 million of existing debt obligations on the same terms as the other select institutional investors. In connection with this offering, we issued warrants, or the Series I Warrants, to purchase up to an aggregate of 1,458,334 shares of common stock at an exercise price equal to $12.09 per share, which are exercisable on the six-month anniversary of date of issuance and through the five-year anniversary of the date of issuance. The Series I Warrants (i) may be exercised for cash or on a cashless basis if there is no effective registration statement registering the resale of the warrant shares, (ii) may not be exercised to the extent that following such exercise, the holder would beneficially own more than 4.99% (or such other percent as designated by each holder not to exceed 19.99%) of our outstanding shares of common stock, and (iii) contain customary provisions that adjust the exercise price and the number of shares of common stock into which the Series I Warrants are exercisable in the event of a corporate transaction. Our Registration Statement on Form S-1, filed with the Securities and Exchange Commission, or the SEC, on January 21, 2020, registered the 2,916,666 shares of common stock sold and 1,458,334 shares of common stock underlying the Series I Warrants.

Loans Payable

Current Portion

Loan Payable to Bank Direct Capital Finance

In June 2020, we entered into an insurance premium financing and security agreement with Bank Direct Capital Finance, or Bank Direct. Under the agreement, we financed $1.1 million of certain premiums at a 4.26% annual interest rate. Payments of approximately $117,000 are due monthly from July 2020 through March 2021. As of December 31, 2020, the outstanding principal of the loan was $0.4 million. The balance of the loan was repaid during the first quarter of 2021.

In May 2019, we entered into an insurance premium financing and security agreement with Bank Direct. Under the agreement, we have financed $0.7 million of certain premiums at a 5.35% annual interest rate. As of December 31, 2019, the outstanding principal of the loan was $0.2 million. The balance of the loan was repaid during the first quarter of 2020.

2019 LPH IILoans

On October 24, 2019, we entered into a loan agreement with LPH II. Under the loan agreement, LPH II agreed to lend us $1.0 million, or the 2019 Loan, to support our operations while we sought to complete a strategic transaction (as defined in the loan agreement). The 2019 Loan, which was funded in a single installment by wire transfer on October 28, 2019, accrued interest at a rate of 6% per annum and matured upon the closing date of the December 2019 Private Placement Financing, which qualified as the strategic transaction under terms defined in the loan agreement. We repaid the 2019 Loan and related accrued interest in full upon consummation of the December 2019 Private Placement Financing.

2018 LPH II Loans

From April 24, 2018 to November 16, 2018, our subsidiary, CVie Therapeutics Limited, entered into four separate agreements to borrow an aggregate of approximately $3.5 million from LPH II on the following dates and in the following amounts $0.5 million in April 2018, or the April 2018 Loan; $0.3 million in September 2018, or the September 2018 Loan; $0.15 million in October 2018, or the October 2018 Loan; and $2.5 million in November 2018, or the November 2018 Loan. The April 2018 Loan, the September 2018 Loan, the October 2018 Loan and the September 2018 Loan were subsequently assigned to LPH II. The terms of the loan agreements were identical with interest, payable in cash upon maturity, at a rate of 4% per annum and maturing one year from the effective date of the respective loan agreement.

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During the quarter ended March 31, 2019, we made payments of $0.45 million against the April 2018 Loan and paid the remaining $50,000 balance plus accrued interest in April 2019. In December 2019, as part of the December 2019 Private Placement Financing, we converted the remaining $2.95 million related to the September 2018 Loan, October 2018 Loan, and November 2018 Loan on the same terms as the Investors of the December 2019 Private Placement Financing. In connection with the conversion of the LPH II debt, we issued: 325,607 shares of common stock based at $9.06 per share and Series I Warrants to purchase 162,804 shares of common stock, at an exercise price equal to $12.09 per share. The Series I Warrants are exercisable at any time after the six-month anniversary of the date of issuance and through the 5-year anniversary of the date of issuance. The conversion of the loan payable to LPH II is treated as an extinguishment of debt and does not represent a capital transaction as the December 2019 Private Placement Financing included third-party investors and all investors received identical terms. We recorded a loss on extinguishment of debt of approximately $1.8 million. The loss was calculated as the difference between the aggregate fair value of the common stock and Series I Warrants on December 6, 2019 and the carrying value of the debt liabilities. The accrued interest of $127,000 was paid in December 2019 and as of December 31, 2019 there are no remaining amounts outstanding.

Non-Current Portion

O-Bank Co., Ltd. Credit Facility

In September 2016, CVie Therapeutics Limited entered into a 12-month revolving credit facility of approximately $2.9 million with O-Bank Co., Ltd., or O-Bank, to finance operating activities, or the O-Bank Facility. The O-Bank Facility was later renewed and increased to approximately $5.8 million in September 2017. The O-Bank Facility is guaranteed by Lee’s Pharmaceutical Holdings Limited, or Lee’s, which pledged bank deposits in the amount of 110% of the actual borrowing amount. Interest, payable in cash on a monthly basis, was determined based on 90-day Taipei Interbank Offer Rate, or TAIBOR, plus 0.91%. The O-Bank Facility expired on September 11, 2019 and the loans were set to mature six months after the expiration date, on March 11, 2020. In March 2020, the O-Bank Facility was amended, among other things, to extend the maturity date to March 2022, to decrease the total amount of the O-Bank Facility to approximately $5.0 million, to change the applicable interest rate to the TAIBOR plus 1.17% and to adjust the term to 24-month non-revolving.

In the second quarter of 2020, we were informed by Lee’s of their desire to reduce the amount of pledged bank deposits with O-Bank by 50%. To remain in compliance with the terms of the O-Bank Facility, we repaid approximately $2.3 million of the outstanding principal in August 2020. In November 2020, Lee’s committed to maintain the required level of pledged bank deposits with O-Bank through the date of full repayment of the O-Bank Facility.

As of December 31, 2020 and 2019, the outstanding principal of the O-Bank Facility was approximately $2.4 million and $4.6 million, respectively.

Restructured Debt Liability

On October 27, 2017, we and Deerfield Management Company, L.P., or Deerfield, entered into the Exchange and Termination Agreement pursuant to which (i) promissory notes evidencing a loan with affiliates of Deerfield Management Company L.P., or the Deerfield Loan, in the aggregate principal amount of $25.0 million and (ii) warrants to purchase up to 8,333 shares of our common stock at an exercise price of $2,360.40 per share held by Deerfield were cancelled in consideration for (i) a cash payment in the aggregate amount of $2.5 million, (ii) 23,703 shares of common stock, representing 2% of fully-diluted shares outstanding (as defined in the Exchange and Termination Agreement) on the closing date, and (iii) the right to receive certain milestone payments based on achievement of specified AEROSURF development and commercial milestones, which, if achieved, could potentially total up to $15.0 million. In addition, a related security agreement, pursuant to which Deerfield held a security interest in substantially all of our assets, was terminated. We established a $15.0 million long-term liability for the contingent milestone payments potentially due to Deerfield under the Exchange and Termination Agreement. See, Note 4 to the Audited Consolidated Financial Statements contained in this Annual Report on Form 10-K. The liability has been recorded at the full value of the contingent milestones and will continue to be carried at full value until the milestones are achieved and paid or the milestones are not achieved and the liability is written off as a gain on debt restructuring.

As of December 31, 2020 and 2019, the restructured debt liability balance was $15.0 million.

OFF-BALANCE SHEET ARRANGEMENTS

We did not have any material off-balance sheet arrangements at December 31, 2020 or 2019 or during the periods then ended.

CRITICAL ACCOUNTING POLICIES

The preceding discussion and analysis of financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in conformity with U.S. generally accepted accounting principles, or GAAP. Preparing financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Estimates are based on our historical operations, our future business plans and projected financial results, the terms of existing contracts, our observance of trends in the industry, and information available from other outside sources, as appropriate. These estimates and assumptions are affected by the application of our accounting policies. Critical accounting policies and practices are both important to the portrayal of a company’s financial condition and results of operations, and require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. Actual results could differ from such estimates due to changes in economic factors or other conditions that are outside the control of management. A summary of our significant accounting policies is described in Note 5 of the Audited Consolidated Financial Statements contained in this Annual Report on Form 10-K. Of those policies, we believe that the following accounting policy is critical to aid our stockholders in fully understanding and evaluating our reported financial results.

Intangible Assets and Goodwill

We record acquired identified intangibles, which includes intangible assets (such as goodwill and other intangibles), based on estimated fair value. The acquired in-process research and development, or IPR&D, assets are considered indefinite-lived intangible assets until completion or abandonment of the associated research and development efforts. IPR&D is not amortized but reviewed for impairment at least annually, or when events or changes in the business environment indicate that the carrying value may be impaired.

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Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed in a business combination and is not amortized. It is reviewed for impairment at least annually or when events or changes in the business environment indicate that its carrying value may be impaired.

The following table represents identifiable intangible assets and goodwill as of December 31, 2020 and 2019:

December 31,

When testing our goodwill and indefinite-lived intangible assets for impairment, we can elect to perform a qualitative assessment to determine if it is more likely than not that the fair values of our reporting unit and indefinite-lived intangible assets are less than the respective carrying values. Such qualitative factors can include, among others, industry and market conditions, overall financial performance, and relevant entity-specific events. If we conclude based on our qualitative assessment that it is more likely than not that the fair value of our reporting unit or indefinite-lived intangible assets are less than their respective carrying values, we perform a quantitative assessment. When conducting our annual impairment test of goodwill and indefinite-lived intangible assets as of December 1, 2020, we elected to perform a quantitative assessment.

Our company consists of one reporting unit. In order to perform the quantitative goodwill impairment test, we compare the estimated fair value of our reporting unit to its carrying value. If the fair value exceeds the carrying value, no further evaluation is required, and no impairment exists. If the carrying amount exceeds the fair value, the difference between the carrying value and the fair value is recorded as an impairment loss, the amount of which may not exceed the total amount of goodwill. When performing our annual goodwill impairment assessment as of December 1, 2020, we determined the fair value of our reporting unit based upon the quoted market price and related market capitalization of our common stock, adjusted for an estimated control premium. Based on the quantitative test performed, the fair value of our reporting unit exceeded its carrying value and no impairment loss was recognized.

When performing the quantitative impairment assessment for our indefinite-lived IPR&D intangible assets, we estimate the fair values of the assets using the multi-period excess earnings method, or MPEEM. MPEEM is a variation of the income approach which estimates the fair value of an intangible asset based on the present value of the incremental after-tax cash flows attributable to the intangible asset. Significant factors considered in the calculation of IPR&D intangible assets include the risks inherent in the development process, including the likelihood of achieving commercial success and the cost and related time to complete the remaining development. Future cash flows for each project were estimated based on forecasted revenue and costs, taking into account the expected product life cycles, market penetration, and growth rates. Other significant estimates and assumptions inherent in this approach include (i) the amount and timing of the projected net cash flows associated with the IPR&D assets, (ii) the long-term growth rate, (iii) the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and (iv) the tax rate, which considers geographic diversity of the projected cash flows. While we use the best available information to prepare our cash flows and discount rate assumptions, actual future cash flows could differ significantly based on the commercial success of the related drug candidates and market conditions resulting in future impairment charges related to our indefinite-lived intangible asset balances.

Based on our annual quantitative impairment assessment of our indefinite-lived IPR&D intangible assets on December 1, 2020, we concluded that the assets were not impaired.

Accrued Research and Development Expenses

As part of the process of preparing our financial statements, we are required to estimate our accrued expenses. This process involves reviewing quotations and contracts, identifying services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. The significant estimates in our accrued research and development expenses are related to expenses incurred with respect to CROs, CMOs, clinical trial sites, and other vendors supporting our research and development and manufacturing activities.

We base our expenses related to CROs, CMOs and clinical trial sites on our estimates of services received and efforts expended under quotations and contracts with those vendors that conduct research and development and manufacturing activities on our behalf. The financial terms of these agreements are negotiated, vary from contract to contract and may result in uneven payment flows. At times, payments made to our vendors may exceed the level of services provided and result in a prepayment of the applicable research and development or manufacturing expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and could result in us reporting amounts that are too high or too low in any particular period. There have been no material changes in estimates for the periods presented.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The information required by this Item is set forth in the financial statements and notes thereto beginning at page F-1 of this Annual Report on Form 10-K.

None.

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ITEM 9A. CONTROLS AND PROCEDURES.

(a) Evaluation of Disclosure Controls and Procedures

Our management, including our President and Chief Executive Officer (principal executive officer) and our Senior Vice President and Chief Financial Officer and Treasurer (principal financial and accounting officer), do not expect that our disclosure controls or our internal control over financial reporting will prevent all error and all fraud. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer and Treasurer have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer and Treasurer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer and Treasurer, to allow for timely decisions regarding required disclosures, and recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

(b) Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) promulgated under the Exchange Act. Our internal control system is designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Under the supervision and with the participation of our management, including our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer and Treasurer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in Internal Control-Integrated 2013 Framework. Based on our assessment, our management believes that our internal control over financial reporting is effective based on those criteria, as of December 31, 2020.

This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report on Form 10-K.

There were no changes in our internal control over financial reporting identified in connection with the evaluation described above that occurred during the quarter ended December 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2021 Annual Meeting of Stockholders.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2021 Annual Meeting of Stockholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2021 Annual Meeting of Stockholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2021 Annual Meeting of Stockholders.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2021 Annual Meeting of Stockholders.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Financial Statements.

The consolidated financial statements required to be filed in this Annual Report on Form 10-K are listed on the Index to Consolidated Financial Statements on page F-1 hereof.

(b) Exhibits.

The following exhibits are included with this Annual Report on Form 10-K.

Exhibit No. Description

4.16* Description of Securities.

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101.INS* Instance Document

101.SCH* XBRL Taxonomy Extension Schema Document

101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF* XBRL Taxonomy Extension Definition Linkbase Document

101.LAB* XBRL Taxonomy Extension Label Linkbase Document

101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

# Compensation Related Contract.

† Confidential treatment received for certain portions of this exhibit.

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SIGNATURES

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

WINDTREE THERAPEUTICS, INC.

Date: March 29, 2021 By: /s/ Craig E. Fraser

Craig E. Fraser

Director, President, and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title Date

/s/ James Huang James Huang Director (Chairman of the Board) March 29, 2021

/s/ Daniel E. Geffken Daniel E. Geffken Director March 29, 2021

/s/ Evan Loh, M.D. Evan Loh, M.D. Director March 29, 2021

/s/ Bruce A. Peacock Bruce A. Peacock Director March 29, 2021

/s/ Robert Scott, M.D. Robert Scott, M.D. Director March 29, 2021

/s/ Leslie J. Williams Leslie J. Williams Director March 29, 2021

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WINDTREE THERAPEUTICS, INC. AND SUBSIDIARIES

Contents Page

Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm F-2

Consolidated Balance Sheets as of December 31, 2020 and 2019 F-3

Notes to consolidated financial statements F-7

F-1

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WINDTREE THERAPEUTICS, INC. AND SUBSIDIARIES

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Windtree Therapeutics, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Windtree Therapeutics, Inc. and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Fair value of indefinite-lived intangible assets

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2000.

Philadelphia, Pennsylvania

March 29, 2021

F-2

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WINDTREE THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share and per share data)

ASSETS

Current Assets:

Prepaid expenses and other current assets 1,188 1,283

Property and equipment, net 924 798

Operating lease right-of-use assets 917 1,390

LIABILITIES & STOCKHOLDERS’ EQUITY

Current Liabilities:

Collaboration and device development payable, net - 1,972

Operating lease liabilities - current portion 805 750

Loans payable - current portion 352 161

Operating lease liabilities - non-current portion 201 794

Loans payable - non-current portion 2,423 4,608

Restructured debt liability - contingent milestone payments 15,000 15,000

Other liabilities 2,800 -

Stockholders’ Equity:

Treasury stock (at cost); 24 shares (3,054 ) (3,054 )

See notes to consolidated financial statements

F-3

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WINDTREE THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except per share data)

Year Ended December 31,

Revenues:

License revenue with affiliate $ - $ 198

Total revenues - 198

Expenses:

Other (expense) income:

Net loss on debt extinguishment - (1,794 )

Other (expense), net (2,246 ) (446 )

Total other (expense), net (2,249 ) (2,582 )

Net loss per common share

Basic and diluted $ (2.08 ) $ (2.51 )

Weighted average number of common shares outstanding

See notes to consolidated financial statements

F-4

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WINDTREE THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity

(in thousands)

Common Stock Treasury Stock

Shares Amount Additional Paid-in Capital Accumulated Deficit Shares Amount Total

Issuance of common stock, placement agent 32 -

Vesting of restricted stock units 37 -

Stock-based compensation expense 6,721 6,721

Vesting of restricted stock units 35 - - -

Exercise of common stock warrants 18 - 141 141

Stock-based compensation expense 5,684 5,684

See notes to consolidated financial statements

F-5

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WINDTREE THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in thousands)

Year Ended December 31,

Cash flows from operating activities:

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

Amortization of debt discount 3 163

Non-cash expense related to warrant modifications 1,112 -

Net loss on extinguishment of debt - 1,794

Recognition of deferred revenue - (198 )

Realized gain on investments - (75 )

Unrealized loss on foreign exchange rate changes 1,142 -

Changes in:

Prepaid expenses and other current assets 1,147 688

Collaboration and device development payable (1,975 ) (767 )

Operating lease liabilities (538 ) (974 )

Other liabilities - 7

Net cash used in operating activities (25,315 ) (24,663 )

Cash flows from investing activities:

Purchase of property and equipment (291 ) (191 )

Proceeds from sale of marketable securities - 13,988

Net cash (used in) provided by investing activities (291 ) 13,797

Cash flows from financing activities:

Proceeds from research and development funding arrangement 2,800 -

Proceeds from exercise of common stock warrants 141 -

Proceeds from Payroll Protection Program loan 547 -

Principal payments on Payroll Protection Program loan (547 ) -

Principal payments on loans payable (3,229 ) (2,063 )

Proceeds from private placement issuance of securities, net of expenses - 22,982

Proceeds from loan payable, net of expenses - 1,000

Net cash provided by financing activities 19,958 21,768

Effect of exchange rate changes on cash and cash equivalents - 472

Cash, cash equivalents, and restricted cash - beginning of year 22,732 11,358

Cash, cash equivalents, and restricted cash - end of year $ 17,084 $ 22,732

Supplementary disclosure of non-cash activity:

Prepayment of insurance through third-party financing $ 1,056 $ 708

See notes to consolidated financial statements

F-6

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WINDTREE THERAPEUTICS, INC. AND SUBSIDIARIES

Note 1 - The Company and Description of Business

Note 2 - Basis of Presentation

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the US, or US GAAP, and include accounts of Windtree Therapeutics, Inc. and its wholly owned subsidiaries, or the Company. Intercompany balances and transactions have been eliminated in consolidation.

The accompanying consolidated financial statements reflect the 1-for-3 reverse split of our common stock that was approved by our Board of Directors and controlling stockholders and made effective on April 29, 2020. All share and per share information herein that relates to our common stock prior to the effective date has been retroactively restated to reflect the reverse stock split.

Note 3 - Liquidity Risks and Management’s Plans

As of December 31, 2020, we had cash and cash equivalents of $16.9 million and current liabilities of $6.1 million.

F-7

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WINDTREE THERAPEUTICS, INC. AND SUBSIDIARIES

Note 4 - Accounting Policies and Recent Accounting Pronouncements

Principles of Consolidation

The consolidated financial statements are prepared in accordance with US GAAP and include accounts of Windtree Therapeutics, Inc. and its wholly owned subsidiaries, CVie Investments Limited and its wholly owned subsidiary, CVie Therapeutics Limited; and a presently inactive subsidiary, Discovery Laboratories, Inc. (formerly known as Acute Therapeutics, Inc.).

Intangible Assets and Goodwill

The following table represents identifiable intangible assets and goodwill as of December 31, 2020 and 2019:

December 31,

F-8

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WINDTREE THERAPEUTICS, INC. AND SUBSIDIARIES

Based on our annual quantitative impairment assessment of our indefinite-lived IPR&D intangible assets on December 1, 2020, we concluded that the assets were not impaired.

Foreign Currency Transactions

The functional currency for our foreign subsidiaries is US Dollars. We remeasure monetary assets and liabilities that are not denominated in the functional currency at exchange rates in effect at the end of each period. Gains and losses from the remeasurement of foreign currency transactions are recognized in Total other (expense), net. Foreign currency transactions resulted in losses of approximately $1.2 million and $0.5 million, respectively, for the years ended December 31, 2020 and 2019.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents are held at domestic and foreign financial institutions and consist of liquid investments, money market funds, and U.S. Treasury notes with a maturity from date of purchase of 90 days or less that are readily convertible into cash.

Fair Value of Financial Instruments

Our financial instruments consist principally of cash and cash equivalents and restricted cash. The fair values of our cash equivalents are based on quoted market prices. The carrying amount of cash equivalents is equal to their respective fair values at December 31, 2020 and 2019, respectively. We determine the fair value of marketable securities on quoted market prices or other relevant information generated by market transactions involving identical or comparable assets. Accounts payable and accrued expenses are carried at cost, which approximates fair value because of their short maturity. The carrying amount of loans payable (including current installments) approximates fair value based on a comparison of interest rates on the loan to current market rates considering our credit risk.

Property and Equipment

Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets (generally three to ten years). Leasehold improvements are amortized over the shorter of the estimated useful lives or the remaining term of the lease. Repairs and maintenance costs are charged to expense as incurred.

Restricted Cash

Restricted cash consists principally of a $140,000 certificate of deposit held by our bank as collateral for a letter of credit in the same notional amount held by our landlord to secure our obligations under our lease agreement dated May 26, 2004 for our headquarters location in Warrington, Pennsylvania and $14,000 in deposits held by our landlord for our offices in Taipei, Taiwan (see, Note 16 - Commitments, for further discussion on our leases).

Leases

Leases are accounted for under ASC Topic 842, Leases, or ASC 842. At the inception of an arrangement, we determine whether an arrangement is, or contains, a lease based on the unique facts and circumstances present in the arrangement. An arrangement is, or contains, a lease if the arrangement conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Leases with a term greater than one year are generally recognized on the balance sheet as operating lease right-of-use assets and current and non-current operating lease liabilities, as applicable. It is our policy not to recognize on the balance sheet leases with terms of 12 months or less. We typically only include the initial lease term in our assessment of a lease arrangement. Options to extend a lease are not included in our assessment unless there is reasonable certainty that we will renew.

Operating lease liabilities and their corresponding operating lease right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term. Certain adjustments to the right-of-use asset may be required for items such as incentives received. The interest rate implicit in our leases is typically not readily determinable. As a result, we utilize our incremental borrowing rate, which reflects the fixed rate at which we could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

At the inception of a contract, we assess whether the contract is, or contains, a lease. The assessment is based on: (i) whether the contract involves the use of a distinct identified asset, (ii) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (iii) whether we have the right to direct the use of the asset.

We evaluate the classification of our leases as either finance leases or operating leases. A lease is classified as a finance lease if any one of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for a major part of the remaining useful life of the asset, the present value of the lease payments equals or exceeds substantially all of the fair value of the asset, or the leased asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease. A lease is classified as an operating lease if it does not meet any of these criteria. Currently, all of our leases are classified as operating leases.

Lease cost for our operating leases is recognized on a straight-line basis over the lease term. Included in lease cost are any variable lease payments incurred in the period that are not included in the initial lease liability and lease payments incurred in the period for any leases with an initial term of 12 months or less.

Long-lived Assets

Our long-lived assets, primarily consisting of property and equipment, are reviewed for impairment when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable, or its estimated useful life has changed significantly. When the undiscounted cash flows of an asset are less than its carrying value, an impairment is recorded and the asset is written down to estimated value. No impairment was recorded during the years ended December 31, 2020 and 2019 as management believes there are no circumstances that indicate the carrying amount of the assets will not be recoverable.

F-9

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WINDTREE THERAPEUTICS, INC. AND SUBSIDIARIES

Collaborative Arrangements

We account for collaborative arrangements in accordance with applicable accounting guidance provided in ASC Topic 808, Collaborative Arrangements. See,Note 14 - Collaboration, Licensing and Research Funding Agreements.

Severance

In July 2020, we entered into separation agreements with two executives, which provide that the former employees are entitled to receive: (i) a severance amount equal to the sum of their respective base salaries then in effect and their respective annual target bonus amounts, payable in equal installments through August 2021 and (ii) subject to certain exceptions, a pro rata bonus commensurate with the bonus of other contract executives for the year 2020, prorated for the number of days of their respective employment during 2020, and payable at the time that other contract executives are paid bonuses with respect to 2020. The severance amount related to the departure of these executives is approximately $0.9 million, was accrued at the date of the separations, and will be paid ratably through August 2021. During the year ended December 31, 2020, $0.4 million was paid.

Restructured Debt Liability - Contingent Milestone Payment

In conjunction with the November 2017 restructuring and retirement of long-term debt (see,Note 11 - Restructured Debt Liability), we have established a $15.0 million long-term liability for contingent milestone payments potentially due under the Exchange and Termination Agreement dated as of October 27, 2017, or Exchange and Termination Agreement, between ourselves and affiliates of Deerfield Management Company L.P., or Deerfield. The liability has been recorded at full value of the contingent milestones and will continue to be carried at full value until the milestones are achieved and paid or milestones are not achieved and the liability is written off as a gain on debt restructuring.

Research and Development

We account for research and development expense by the following categories: (a) product development and manufacturing, (b) medical and regulatory operations, and (c) direct preclinical and clinical development programs. Research and development expense includes personnel, facilities, manufacturing and quality operations, pharmaceutical and device development, research, clinical, regulatory, other preclinical and clinical activities and medical affairs. Research and development costs are charged to operations as incurred in accordance with ASC Topic 730, Research and Development.

Stock-based Compensation

Stock-based compensation is accounted for under the fair value recognition provisions of ASC Topic 718, StockCompensation, or ASC Topic 718. See, Note 13 - Stock Options and Stock-based Employee Compensation, for a detailed description of our recognition of stock-based compensation expense. The fair value of stock option grants is recognized evenly over the vesting period of the options or over the period between the grant date and the time the option becomes non-forfeitable by the employee, whichever is shorter.

Warrant Accounting

We account for common stock warrants in accordance with applicable accounting guidance provided in ASC Topic 815, Derivatives and Hedging - Contracts in Entity’s Own Equity, or ASC Topic 815, as either derivative liabilities or equity instruments depending on the specific terms of the warrant agreement.

Income Taxes

We account for income taxes in accordance with ASC Topic 740, Accounting for Income Taxes, which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities.

We use a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Because we have never realized a profit, management has fully reserved the net deferred tax asset since realization is not assured.

Net Loss per Common Share

Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per common share is computed by giving effect to all potentially dilutive securities outstanding for the period. For the years ended December 31, 2020 and 2019, the number of shares of common stock potentially issuable upon the exercise of certain stock options and warrants was 9.1 million and 6.5 million shares, respectively. As of December 31, 2020 and 2019, all potentially dilutive securities were anti-dilutive and therefore have been excluded from the computation of diluted net loss per common share.

We do not have any components of other comprehensive (loss) income.

Concentration of Suppliers

We currently obtain the active pharmaceutical ingredients of our KL4 surfactant drug products from single-source suppliers. In addition, we rely on a number of third-party institutions and laboratories that perform various studies as well as quality control release and stability testing and other activities related to our KL4 surfactant development and manufacturing activities. At the present time, several of these laboratories are single-source providers and several are located outside the U.S. The loss of one or more of our single-source suppliers or testing laboratories could have a material adverse effect upon our operations.

Segment and Geographic Information

We currently operate in one operating segment, which is the research and development of products focused on acute cardiovascular and acute pulmonary diseases, and the manufacture and commercial sales of approved products. We are managed and operated as one business. A single management team that reports to the Chief Executive Officer comprehensively manages the entire business. We do not operate separate lines of business with respect to our product candidates. We operate primarily in the U.S. and Asia. License revenue with affiliate for the years ended December 31, 2020 and 2019 are generated in the U.S. Long-lived assets, consisting of intangible assets of $77.1 million and goodwill of $15.7 million were located outside the U.S. at December 31, 2020 and 2019.

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COVID-19

The COVID-19 pandemic continues to evolve, and we continue to closely monitor its impact on our business, operations, including its potential impact on our clinical development plans and timelines, and financial condition. As of the date of the filing of this Annual Report on Form 10-K, our operations, capital and financial resources and overall liquidity position and outlook have been impacted by COVID-19, primarily due to delays experienced in our operations, including in clinical study initiation and enrollment. The potentially extended timelines may force us to expend more of our capital resources than planned to achieve our projected milestones. For example, certain of our ongoing clinical trials, including our phase 2 study of istaroxime for early cardiogenic shock in heart failure patients, have experienced delays. The full extent, duration, or impact that the COVID-19 pandemic will have, directly or indirectly, on our financial condition and operations, including ongoing and planned clinical trials, will depend on future developments that are highly uncertain and cannot be accurately predicted. These potential future developments include new information that may emerge concerning the severity of the COVID-19 outbreak, the severity and transmissibility of new variants of the virus, such as the B.1.1.7 strain first identified in the United Kingdom and the B.1.351 strain first detected in South Africa, cases of which have been confirmed in the U.S., information about any regional resurgences in one or more markets where our current or intended clinical trial sites, our principal executive offices, research and development laboratories or other facilities are located, and the actions taken to contain it or treat its impact, which may include, among others, the timing and extent of governments reopening activities and the economic impact on local, regional, national, and international markets. The strategic re-implementation of mitigating COVID-19 measures in one or more markets where our clinical trial sites, principal executive offices, research and development laboratories or other facilities are located remains possible and we believe there could be further impact on the clinical development of our product candidates, which may include potential delays, halts or modifications to our ongoing and planned trials in 2021.

We are not aware of any specific event or circumstance that would require us to update our estimates, judgments or revise the carrying value of our assets or liabilities as of the date of issuance of these consolidated financial statements. These estimates may change, as new events occur and additional information is obtained. Actual results may differ from these estimates under different assumptions or conditions and such differences may be material.

Recent Accounting Pronouncements

In December 2019, the FASB issued Accounting Standards Update, or ASU, 2019-12, Income Taxes(Topic 740): Simplifying the Accounting for Income Taxes, or ASU 2019-12. ASU 2019-12 simplifies the accounting for income taxes by removing exceptions within the general principles of Topic 740 regarding the calculation of deferred tax liabilities, the incremental approach for intra-period tax allocation, and calculating income taxes in an interim period. In addition, the ASU adds clarifications to the accounting for franchise tax (or similar tax). which is partially based on income, evaluating tax basis of goodwill recognized from a business combination, and reflecting the effect of any enacted changes in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The ASU is effective for fiscal years beginning after December 15, 2020 and will be applied either retrospectively or prospectively based upon the applicable amendments. Early adoption is permitted. We are still evaluating the impact this standard will have on our consolidated financial statements and related disclosures, but do not believe there will be a material impact upon adoption.

Note 5 - License Revenue with Affiliate

Year Ended December 31,

License revenue with affiliate $ - $ 198

License revenue with affiliate for the year ended December 31, 2019 represents revenue from the Asia License Agreement with Lee’s (HK) and constitutes a contract with a customer accounted for in accordance with ASC Topic 606, Revenue from Contracts with Customers, or ASC Topic 606. All revenue related to the $1.0 million upfront payment under the Asia License Agreement was recognized as of the second quarter of 2019 and no future material performance obligations are due.

Note 6 - Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:

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Fair Value on a Recurring Basis

The tables below categorize assets measured at fair value on a recurring basis as of December 31, 2020 and 2019:

Fair Value Fair value measurement using

December 31,

(in thousands) 2020 Level 1 Level 2 Level 3

Cash equivalents:

U.S. Treasury notes $ 9,101 $ 9,101 $ - $ -

Fair Value Fair value measurement using

December 31,

(in thousands) 2019 Level 1 Level 2 Level 3

Cash equivalents:

Note 7 – Property and Equipment

Property and equipment is comprised of the following:

December 31,

Manufacturing, laboratory & office equipment $ 4,591 $ 4,313

Accumulated depreciation and amortization (6,539 ) (6,374 )

Property and equipment, net $ 924 $ 798

Depreciation expense on property and equipment was $0.2 million for each of the years ended December 31, 2020 and 2019.

Note 8 - Collaboration and Device Development Payable

Collaboration and device development payable represents amounts due to Battelle Memorial Institute, or Battelle, under a collaboration agreement related to the development of our phase 3 ADS (see, Note 14 - Collaboration, Licensing and Research Funding Agreements) and a Research and Development Services Agreement, or RDSA, dated June 2012 for our phase 2 ADS.

In March 2020, we entered into the first amendment to the December 2018 payment restructuring agreement, or the Amendment, with Battelle in which we agreed to amend the payment terms of two milestone payments previously due no later than January 2020. Under the Amendment, we agreed that (i) the first milestone payment would continue to be due upon enrollment of the first patient in the next AEROSURF clinical study but no later than April 15, 2020; and (ii) the second milestone payment would continue to be due upon completion of the technology transfer of our device manufacturing process for the phase 3 ADS to our new medical device manufacturer but no later than September 1, 2020. The Amendment was treated as a debt modification and, in accordance with debt modification accounting, no gain or loss was recognized.

In April 2020, we made the first milestone payment of $0.8 million to Battelle and announced enrollment of the first patient into the AEROSURF phase 2 bridging study. In September 2020, we made the final milestone payment of $0.8 million to Battelle.

As of December 31, 2020, there are no remaining amounts outstanding to Battelle related to the collaboration and device development payable. As of December 31, 2019, collaboration and device development payable was $2.0 million, including accrued interest.

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Note 9 - Accrued Expenses

Accrued expenses are comprised of the following:

December 31,

Salaries, bonus and benefits $ 1,214 $ 696

Manufacturing operations 41 183

Note 10 - Loans Payable

Current Portion

Loan Payable to Bank Direct Capital Finance

2019 LPH IILoans

On October 24, 2019, we entered into a loan agreement with LPH II. Under the loan agreement, LPH II agreed to lend us $1.0 million, or the 2019 Loan, to support our operations while we sought to complete a strategic transaction (as defined in the loan agreement). The 2019 Loan, which was funded in a single installment by wire transfer on October 28, 2019, accrued interest at a rate of 6% per annum and matured upon the closing date of the December 2019 private placement, or the December 2019 Private Placement Financing, which qualified as the strategic transaction under terms defined in the loan agreement. We repaid the 2019 Loan and related accrued interest in full upon consummation of the December 2019 Private Placement Financing.

2018 LPH II Loans

Non-Current Portion

O-Bank Co., Ltd. Credit Facility

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As of December 31, 2020 and 2019, the outstanding principal of the O-Bank Facility was approximately $2.4 million and $4.6 million, respectively.

Note 11 - Restructured Debt Liability

On October 27, 2017, we and Deerfield entered into the Exchange and Termination Agreement pursuant to which (i) promissory notes evidencing a loan with affiliates of Deerfield Management Company L.P., or the Deerfield Loan, in the aggregate principal amount of $25.0 million and (ii) warrants to purchase up to 8,333 shares of our common stock at an exercise price of $2,360.40 per share held by Deerfield were cancelled in consideration for (i) a cash payment in the aggregate amount of $2.5 million, (ii) 23,703 shares of common stock, representing 2% of fully-diluted shares outstanding (as defined in the Exchange and Termination Agreement) on the closing date, and (iii) the right to receive certain milestone payments based on achievement of specified AEROSURF development and commercial milestones, which, if achieved, could potentially total up to $15.0 million. In addition, a related security agreement, pursuant to which Deerfield held a security interest in substantially all of our assets, was terminated. We established a $15.0 million long-term liability for the contingent milestone payments potentially due to Deerfield under the Exchange and Termination Agreement (see, Note 4 - Accounting Policies and Recent Accounting Pronouncements). The liability has been recorded at the full value of the contingent milestones and will continue to be carried at full value until the milestones are achieved and paid or the milestones are not achieved and the liability is written off as a gain on debt restructuring.

As of December 31, 2020 and 2019, the restructured debt liability balance was $15.0 million.

Note 12 - Stockholders’ Equity

May 2020 Public Offering

We have determined that the appropriate accounting treatment under ASC 480, Distinguishing Liabilities from Equity, or ASC 480, is to classify the common stock and the Warrants issued in the May 2020 Offering as equity. We have also determined that the Warrants are not in their entirety a derivative under the scope of ASC 815, Derivatives and Hedging, or ASC 815, due to the scope exception under ASC 815-10-15-74, nor are there any material embedded derivatives that require separate accounting. We allocated the net proceeds from the May 2020 Offering based on the relative fair value of the common stock and the Warrants.

At-The-Market Program

On September 17, 2020, we entered into an At-The-Market Offering Agreement with Ladenburg, pursuant to which we may offer and sell, from time to time at our sole discretion, up to a maximum of $10.0 million of shares of our common stock through Ladenburg as agent and/or principal under the ATM Program. When we issue sales notices to Ladenburg, we designate the maximum amount of shares to be sold by Ladenburg daily and the minimum price per share at which shares may be sold. Ladenburg may sell shares by any method permitted by law deemed to be an “at-the-market offering” as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended, or in privately negotiated transactions.

We agreed to pay Ladenburg a commission of 3% of the gross sales price of any shares sold pursuant to the ATM Program. The rate of compensation will not apply when Ladenburg acts as principal.

Warrant Amendments

On April 24, 2020, we and each of the holders of our Series F Warrants dated as of December 24, 2018, or the Series F Warrants, entered into Amendment No. 1 to the Series F Warrant to Purchase Common Stock whereby the expiration date of the Series F Warrants was extended from June 24, 2020 to December 24, 2020 in consideration for the holders agreeing to be bound by a lock-up provision with respect to any shares of our common stock or securities convertible, exchangeable or exercisable into shares of our common stock that are beneficially owned, held or acquired by the holders. The lock-up provision provides that the holders will not offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of any shares of our common stock or securities convertible, exchangeable or exercisable into shares of our common stock that are beneficially owned, held or acquired by the holders for a period of 90 days following the earlier of (i) the closing date of our next public offering of securities, or (ii) December 24, 2020. The lock-up provision commenced on May 22, 2020 upon closing of the May 2020 Offering discussed above and has expired.

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On May 6, 2020, we and certain holders of our Series I Warrants dated as of December 6, 2019, or the Series I Warrants, entered into Amendment No. 1 to the Series I Warrant to Purchase Common Stock pursuant to which the exercise price of the Series I Warrants was amended from $12.09 to $9.67 if the Series I Warrants are exercised, in whole or in part, prior to December 5, 2021. In addition, the certain holders of the Series I Warrants agreed to be bound by a lockup provision with respect to any shares of our common stock or securities convertible, exchangeable or exercisable into shares of our common stock that are beneficially owned, held or acquired by such holders for a period of 90 days following the earlier of (i) the closing date of our next public offering of securities, or (ii) December 24, 2020. During the lock-up period, the certain holders of the Series I Warrants will not offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of any shares of our common stock or securities convertible, exchangeable or exercisable into shares of our common stock. The lock-up provision commenced on May 22, 2020 upon closing of the May 2020 Offering discussed above and has expired.

While there is no specific guidance that addresses the modification of an equity-classified contract, such as the amendments to the Series F Warrants and the Series I Warrants, it is the practice to determine the accounting for such modifications based on analogy to the share-based compensation guidance. The model for a modified share-based payment award that is classified as equity and remains classified in equity after the modification is addressed in ASC 718-20, Compensation – Stock Compensation, or ASC 718-20. Pursuant to that guidance, the incremental fair value from the modification (the change in the fair value of the instrument before and after the modification) is recognized as an expense in the income statement to the extent the modified instrument has a higher fair value.

For the Series F Warrants, the amendment to the terms related to a six-month extension of the expiration date and the incremental fair value from the modification was determined by comparing the Black-Scholes value before and after the modification. The amendment to the Series I Warrants related to a reduced exercise price for an 18-month period and the reversion after that period to the initial exercise price. As a result, the incremental fair value was determined by comparing the Black-Scholes value before the modification to a Monte Carlo valuation after the modification.

We have determined, based on the guidance in ASC 718-20 and our valuation of the Series F Warrants and the Series I Warrants, that the incremental fair value resulting from the modifications is $1.1 million, which was recorded as an increase to equity, with a corresponding expense recognized in the consolidated statement of operations as other expense.

December 2019 Private Placement Financing

On December 6, 2019, we completed the December 2019 Private Placement Financing with select institutional investors, in which we issued and sold an aggregate of 2,916,666 shares of common stock at a price per share of $9.06, for an aggregate purchase price of approximately $26.4 million. Included in the purchase price, LPH II converted $2.95 million of existing debt obligations on the same terms as the other select institutional investors. In connection with this offering, we issued warrants, or the Series I Warrants, to purchase up to an aggregate of 1,458,334 shares of common stock at an exercise price equal to $12.09 per share, which are exercisable on the six-month anniversary of date of issuance and through the five-year anniversary of the date of issuance. The Series I Warrants (i) may be exercised for cash or on a cashless basis if there is no effective registration statement registering the resale of the warrant shares, (ii) may not be exercised to the extent that following such exercise, the holder would beneficially own more than 4.99% (or such other percent as designated by each holder not to exceed 19.99%) of our outstanding shares of common stock, and (iii) contain customary provisions that adjust the exercise price and the number of shares of common stock into which the Series I Warrants are exercisable in the event of a corporate transaction. Our Registration Statement on Form S-1, filed with the SEC on January 21, 2020, registered the 2,916,666 shares of common stock sold and 1,458,334 shares of common stock underlying the Series I Warrants.

Common Shares Reserved for Future Issuance

Common shares reserved for potential future issuance upon exercise of warrants

The chart below summarizes shares of our common stock reserved for future issuance upon the exercise of warrants:

December 31, Expiration

(in thousands, except price per share data) 2020 2019 Exercise Price Date

Common shares reserved for potential future issuance upon granting of additional equity incentive awards

As of December 31, 2020 and 2019, we had 0.2 million and 0.1 million shares, respectively, available for potential future issuance under our 2011 long-term incentive plan, or 2011 Plan.

The 2011 Plan was suspended upon the effective date of the 2020 Equity Incentive Plan, or the 2020 Plan, in January 2021; therefore, no shares are available for future grants under the 2011 Plan. The 2020 Plan allows for up to a maximum of 1,535,500 shares of common stock to be available for issuance pursuant to stock-based awards granted under the 2020 Plan. See, Note 13 - Stock Options and Stock-based Employee Compensation.

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Note 13 - Stock Options and Stock-based Employee Compensation

Long-term Incentive Plans

On November 23, 2020, our Board of Directors adopted our 2020 Plan, which was subsequently approved by our majority stockholders by written consent on December 24, 2020 and became effective on January 20, 2021, or the effective date. On the effective date, the 2020 Plan replaced our 2011 Plan and the 2020 Plan became our primary plan for providing equity-based compensation to our eligible employees, consultants, and non-employee directors. The 2020 Plan allows for up to a maximum of 1,535,500 shares of common stock to be available for issuance pursuant to stock-based awards granted under the 2020 Plan. The 2020 Plan continues many of the features of the 2011 Plan but is updated to reflect changes to Nasdaq rules regarding equity compensation, other regulatory changes, and market and corporate governance developments. Awards outstanding under the 2011 Plan will continue to be governed by the terms of that plan and the agreements under which they were granted, although any shares returnable to the 2011 Plan as a result of cancellations, expirations and forfeitures will be returned to, and become available for issuance under, the 2020 Plan.

There were 1.9 million shares of our common stock authorized under the 2011 Plan, of which 0.2 million shares remained available for issuance as of December 31, 2020. Awards under the Plan may include stock options, stock appreciation rights, or SARs, restricted stock awards, or RSAs, restricted stock units, or RSUs, other performance and stock-based awards, and dividend equivalents.

An administrative committee, or the Committee - currently the Compensation Committee of the Board of Directors, or Committee delegates may determine the types, the number of shares covered by, and the terms and conditions of, such awards. Eligible participants may include any of our employees, directors, advisors or consultants.

Stock options and RSUs outstanding and available for future issuance are as follows:

December 31,

Stock Options and RSUs Outstanding

Available for Future Grants under 2011 Plan 230 149

No SARs, RSAs, other performance and stock-based awards, or dividend equivalents have been granted under the 2011 Plan. Although individual grants may vary, option awards generally are exercisable upon vesting, vest in a series of three successive, equal installments beginning with the first anniversary of the grant date and have a 10-year term. Non-Plan stock options outstanding are in connection with the hiring of our Chief Financial Officer, Mr. Hamill, on July 20, 2020, and the hiring of our Chief Executive Officer, Mr. Fraser, on February 1, 2016. Inducement grants were awarded in accordance with Nasdaq Listing Rule 5635(c)(4) and the inducement grants vest in a series of three successive, equal installments beginning with the first anniversary of the grant date and have a 10-year term.

A summary of activity under our long-term incentive plans is presented below:

(in thousands, except for weighted-average data)

During the year ended December 31, 2020, 35,000 RSUs vested at a weighted-average grant date fair value of $11.85. As of December 31, 2020, there were no unvested RSUs.

Based upon application of the Black-Scholes option-pricing formula described below, the weighted-average grant-date fair value of options granted during the years ended December 31, 2020 and 2019 was $5.98 and $10.02, respectively. The weighted-average grant-date fair value of RSUs granted during the year ended December 31, 2019 was $11.85. There were no RSUs granted during the year ended December 31, 2020. The total intrinsic value of options outstanding, vested, and exercisable as of December 31, 2020 are each $0.

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Stock-Based Compensation

We recognized stock-based compensation expense in accordance with ASC Topic 718 of $5.7 million and $6.7 million, respectively, for each of the years ended December 31, 2020 and 2019.

Stock-based compensation expense was classified as follows:

Year Ended December 31,

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing formula that uses assumptions noted in the following table. Expected volatilities are based upon the historical volatility of our common stock and other factors. We also use historical data and other factors to estimate option exercises, employee terminations and forfeiture rates. The risk-free interest rates are based upon the U.S. Treasury yield curve in effect at the time of the grant.

Year Ended December 31,

Weighted average expected volatility 103 % 95 %

Weighted average expected term 7.0 6.6

Weighted average risk-free interest rate 0.54 % 2.60 %

Expected dividends - -

The total fair value of the underlying shares of the options vested during 2020 and 2019 equals $7.1 million and $5.6 million, respectively. As of December 31, 2020, there was $5.2 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the 2011 Plan. That cost is expected to be recognized over a weighted-average vesting period of 1.8 years.

Note 14 - Collaboration, Licensing and Research Funding Agreements

Collaboration Agreement

Battelle Memorial Institute

In October 2014, we entered into a Collaboration Agreement with Battelle, or the Battelle Collaboration Agreement, for the development of our new ADS for use in our phase 3 program. We had previously worked with Battelle, which has expertise in developing and integrating aerosol devices using innovative and advanced technologies, in connection with development of our phase 2 ADS used in the AEROSURF phase 2b clinical trial. Under the Battelle Collaboration Agreement, we and Battelle shared the costs of development for a three-stage development plan that included planning, executing the project plan and testing and completing verification and documentation of a new phase 3 ADS, putting us in a position to manufacture a new phase 3 ADS for use in the remaining AEROSURF development activities, including a potential phase 3 clinical program, and, if approved, initial commercial activities. We retained final decision-making authority over all matters related to the design, registration, manufacture, packaging, marketing, distribution and sale of the phase 3 ADS. We and Battelle shared the costs of the project plan equally. Battelle agreed to bear the cost of any cost overruns associated with the project plan and we agreed to bear the cost of any increase in cost resulting from changes in the scope of the product requirements. We also agreed that, if Battelle successfully completed the project plan in a timely manner, we would pay Battelle royalties equal to a low single-digit percentage of the worldwide net sales and license royalties on sales of AEROSURF for the treatment of RDS in premature infants, up to an initial aggregate limit of $25.0 million, which under a payment restructuring agreement (discussed below), was increased to $35.0 million. The Battelle Collaboration Agreement will end at the time we fulfill our payment obligations to Battelle, unless sooner terminated by a party as provided therein.

In December 2018, we entered into a payment restructuring agreement with Battelle, or the Battelle Payment Restructuring Agreement, in which we agreed, among other things, as follows: (i) the outstanding amounts then due to Battelle, or the Battelle Payables, under the RDSA and the Battelle Collaboration Agreement would continue to accrue interest at a rate of 6% per annum; (ii) AEROSURF development activities thereafter would be performed under the RDSA; (iii) Battelle would participate in a December 2018 private placement offering and exchange $1.0 million of the debt for shares of our common stock; and (iv) upon the closing of the December 2018 private placement, we paid Battelle cash in the amount of $1.0 million and thereafter initiated payments totaling an aggregate $1.25 million in 2019. In addition, we agreed to make two milestone payments to Battelle as follows: (i) upon enrollment of the first patient in the next AEROSURF clinical study, or the First Milestone, an amount equal to one half of the then-outstanding Battelle Payables, including unpaid interest, and (ii) upon completion of the device technology transfer for the new ADS to Mack, or the Second Milestone, an amount equal to the then-outstanding Battelle Payables, including unpaid interest. If any amounts of the Battelle Payables remained unpaid by December 31, 2019, then all unpaid Battelle Payables would be due on January 7, 2020. Neither milestone was achieved as of December 31, 2019.

On March 30, 2020, we and Battelle entered into an amendment to the Battelle Payment Restructuring Agreement such that the First Milestone and Second Milestone payments would be payable no later than April 15, 2020 and September 1, 2020, respectively. In April 2020, we made the First Milestone payment of $0.8 million to Battelle and announced enrollment of the first patient into the AEROSURF phase 2 bridging study. In September 2020, we made the final Second Milestone payment of $0.8 million to Battelle (see,Note 8 - Collaboration and Device Development Payable).

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Licensing and Research Funding Agreements

Lee’s Pharmaceutical (HK) Ltd.

In June 2017, we entered into a License, Development and Commercialization Agreement, or the Asia License Agreement, with Lee’s (HK) and an affiliate of Lee’s and thereafter amended it effective August 2017. Under the Asia License Agreement, as amended, we granted to Lee’s (HK) and an affiliate an exclusive license with a right to sublicense (i) to develop, manufacture, and commercialize our KL4 surfactant products, including SURFAXIN, which was approved by the FDA in 2012 for RDS in premature infants, SURFAXIN LSTM, the lyophilized dosage form of SURFAXIN, and AEROSURF, including the ADS, and (ii) to register and manufacture SURFAXIN and SURFAXIN LS for use in the licensed territory, which includes the People’s Republic of China, or China, Hong Kong, Thailand, Taiwan and 12 other countries.

Under the Asia License Agreement, Lee’s (HK) made an upfront payment to us of $1.0 million. We also may receive up to $35.8 million in potential clinical, regulatory and commercial milestone payments and will share in any sublicense income Lee’s (HK) may receive at a rate equal to low double digits. In addition, Lee’s (HK) is responsible for all costs and expenses in and for the licensed territory related to development activities, including a planned AEROSURF phase 3 clinical program, regulatory activities, and commercialization activities.

We will be eligible to receive tiered royalties based on a percent of Net Sales (as defined in the Asia License Agreement), depending on the product, in the range of high single to low-to-mid double-digit percentages. Royalties are payable on a country-by-country basis until the latest of (i) the expiration of the last valid patent claim covering the product in the country of sale, (ii) the expiration or revocation of any applicable regulatory exclusivity in the country of sale, and (iii) ten (10) years after the first commercial sale in the country of sale. Thereafter, in consideration of licensed rights other than patent rights, royalties shall continue for the commercial life of each product and, for the initial three years, shall be in the range of low-to-mid single digits. In addition, in the event that one or more generic products are introduced, the royalty rates will be reduced, subject to certain minimums if we are subject to continuing obligations at the time to pay royalties under our in-license agreements.

Under the Asia License Agreement, Lee’s (HK) is responsible for all activities related to development, regulatory approval and commercialization of KL4 surfactant and drug/medical device combination products in the licensed territory. Lee’s (HK) will hold the product licenses for all non-aerosolized products in the licensed territory and will seek regulatory approval initially for SURFAXIN and SURFAXIN LS for RDS. We will hold the product license in the licensed territory (except where prohibited by law) for all aerosolized products and will designate Lee’s (HK) our exclusive agent and representative to develop and register AEROSURF and other aerosolized products in our name and on our behalf. Lee’s (HK) also has agreed that, except as provided in the Asia License Agreement, for a period of ten (10) years beginning with the later of the first commercial sale of the first aerosolized product and the first commercial sale of the first non-aerosolized product in China, it will not develop, register, manufacture, or commercialize any product for the prevention and/or treatment of RDS in premature infants or other diseases and conditions in humans, in either case, that administers, utilizes or contains pulmonary surfactant without our prior written consent.

The Asia License Agreement is accounted for in accordance with ASC Topic 606 and constitutes a contract with a customer. All revenue related to the $1.0 million upfront payment was recognized as of the second quarter of 2019 and no future material performance obligations are due. Regulatory and commercialization milestones were excluded from the transaction price, as all milestone amounts were fully constrained under the guidance. Consideration related to sales-based milestones and royalties will be recognized when the related sales occur, provided that the reported sales are reliably measurable and that we have no remaining performance obligations, as such sales were determined to relate predominantly to the license granted to Lee’s (HK) and therefore have also been excluded from the transaction price. We will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

In March 2020, we entered into the Term Sheet with Lee’s (HK), pursuant to which Lee’s (HK) had agreed to provide financing for the development of AEROSURF. In August 2020, we entered into the PF Agreement with Lee’s (HK), formalizing the terms of the Term Sheet, and under which we received payments totaling $2.8 million through October 2020. Pursuant to the PF Agreement, Lee’s (HK) agreed to pay additional amounts to be set forth in an updated development budget to be agreed between the parties by September 1, 2020 and updated every six months thereafter, to fund the continued development of AEROSURF and to be paid with the payment schedule to be set forth in each updated development budget. In partial satisfaction of our obligations under the PF Agreement, we agreed to pay Lee’s (HK) 50% of any Commercialization Net Revenues (as defined in the PF Agreement) up to an amount that is equal to 125% of the Project Expenses (as defined in the PF Agreement) funded by Lee’s (HK). On November 12, 2020, Lee’s (HK) provided notice of termination of additional funding under the PF Agreement. Thereafter, we and Lee’s (HK) revised our plans for the continued development of AEROSURF. Lee’s (HK) agreed to continue the development of AEROSURF in Asia at its cost. Lee’s (HK) will fund an additional $1.0 million to us in 2021 for certain transition and analytical services to be provided by us with respect to the development of AEROSURF, which will be considered “Project Expenses” under the terms of the PF Agreement.

To repay the funds provided under the terms of the PF Agreement, until such time as we have repaid 125% of the amounts funded by Lee’s (HK) for the development of AEROSURF, we will pay to Lee’s (HK) 50% of all revenue amounts and payments received by us for any sale, divestiture, license or other development and/or commercialization of the KL4/AEROSURF patent portfolio, excluding (i) payments for bona fide research and development services; (ii) reimbursement of patent expenses and (iii) all amounts paid to us under the Asia License Agreement, minus certain deductions and certain reductions for any payments made by us with respect to third party intellectual property not previously funded by Lee’s (HK).

As of December 31, 2020, the liability balance related to the payments under the PF Agreement was $2.8 million and is recorded in other liabilities.

We have determined that the Term Sheet and the PF Agreement are within the scope of ASC 730-20, Research and Development Arrangements, or ASC 730-20. We concluded that there has not been a substantive and genuine transfer of risk related to the Term Sheet or the PF Agreement as there is a presumption that we are obligated to repay Lee’s (HK) based on the significant related party relationship that exists at the time the parties entered into the Term Sheet and the PF Agreement, including Lee’s (HK)'s approximate 29% ownership of the outstanding shares of our common stock as of December 31, 2020.

We have determined that the appropriate accounting treatment under ASC 730-20 is to record the proceeds received from Lee’s (HK) as cash and cash equivalents, as we have the ability to direct the usage of funds, and a long-term liability on our consolidated balance sheet when received. The liability will remain on the balance sheet until we repay such amounts as a result of any revenues and payments received by us for any sale, divestiture, license or other development and/or commercialization of the KL4/AEROSURF patent portfolio.

We have also determined that the Term Sheet and the PF Agreement are not in their entirety a derivative under the scope of ASC 815, due to the scope exception under ASC 815-10-15-59, nor are there any embedded derivatives that require separate accounting.

F-18

Table of Contents

WINDTREE THERAPEUTICS, INC. AND SUBSIDIARIES

Philip Morris USA Inc. and Philip Morris Products S.A.

Under license agreements with Philip Morris USA Inc., or PMUSA, and Philip Morris Products S.A., or PMPSA, we hold exclusive worldwide licenses to the ADS technology for use with pulmonary surfactants (alone or in combination with any other pharmaceutical compound(s)) for all respiratory diseases and conditions (the foregoing uses in each territory, the Exclusive Field), and an exclusive license in the US for use with certain non-surfactant drugs to treat specified respiratory indications in humans in designated hospital settings. We generally are obligated to pay royalties at a rate equal to a low single-digit percent of sales of products sold in the Exclusive Field (as defined in the license agreements) in the territories, including sales of aerosol devices that are not based on the ADS technology (unless we exercise our right to terminate the license with respect to a specific indication). We also agreed to pay minimum royalties quarterly beginning in 2014 but are entitled to a reduction of future royalties in an amount equal to the excess of any minimum royalty paid over royalties actually earned in prior periods. For 2020 and 2019, we paid the minimum royalty of $400,000 to each of PMUSA and to PMPSA.

Johnson & Johnson and Ortho Pharmaceutical Corporation

We, Johnson & Johnson, or J&J, and its wholly owned subsidiary, Ortho Pharmaceutical Corporation, are parties to a license agreement granting to us an exclusive worldwide license to the J&J KL4 surfactant technology. Under the license agreement, we are obligated to pay fees of up to $2.5 million in the aggregate upon our achievement of certain milestones, primarily upon receipt of marketing regulatory approvals for certain designated products. We have paid $1.0 million to date for milestones that have been achieved including a $0.5 million milestone payment in 2012 that became due as a result of the FDA’s approval of SURFAXIN. In addition, the license agreement requires that we make royalty payments at different rates, depending upon type of revenue and country, in amounts in the range of a high single-digit percent of net sales (as defined in the license agreement) of licensed products sold by us or sublicensees, or, if greater, a percentage of royalty income from sublicensees in the low double digits.

Laboratorios del Dr. Esteve, S.A.

We have a strategic alliance with Laboratorios del Dr. Esteve, S.A., or Esteve, for the development, marketing and sales of a broad portfolio of potential KL4 surfactant products in Andorra, Greece, Italy, Portugal, and Spain. Antonio Esteve, Ph.D., a principal of Esteve, served as a member of our Board of Directors from May 2002 until January 2013. Esteve will pay us a transfer price on sales of our KL4 surfactant products. We will be responsible for the manufacture and supply of all of the covered products and Esteve will be responsible for all sales and marketing in the territory. Esteve is obligated to make stipulated cash payments to us upon our achievement of certain milestones, primarily upon receipt of marketing regulatory approvals for the covered products. In addition, Esteve has agreed to contribute to phase 3 clinical trials for the covered products by conducting and funding development performed in the territory. As part of a 2004 restructuring in which Esteve returned certain rights to us in certain territories, or the Former Esteve Territories, we agreed to pay Esteve 10% of any cash up front and milestone fees (up to a maximum aggregate of $20.0 million) that we receive in connection with any strategic collaborations for the development and/or commercialization of certain of our KL4 surfactant products in the Former Esteve Territories.

Universita degli Studi di Milano-Bicocca

Effective April 13, 2015, CVie Therapeutics, entered into an Agreement for Scientific Collaboration with the Universita degli Studi di Milano-Bicocca, or Bicocca, in Milan, Italy, focused on defining the role of SERCA2a and phospholamban, or PLN, in modulating cardiac contraction, and discovering new small molecules to modulate SERCA2a activity or new drugs for treating chronic and acute human heart failure. The term of the collaboration agreement would have expired after three years but was extended for approximately an additional year, with option for further renewal.

Under the collaboration agreement, intellectual property resulting from the collaboration, including patents and know-how, will be jointly owned by the parties. For the development of any new SERCA2a compounds and diagnostic products suitable for further clinical development, we have the option to purchase Bicocca’s interest for up to 12 months after the filing of a patent application. If the option is not exercised, then the parties shall remain joint owners and each can use the intellectual property with consent of the other on terms to be defined. If we exercise an option, we have agreed to pay Bicocca (corresponding to stage of development): (i) € 0.1 million (approximately $0.1 million) upon completion and the proof of concept of biological efficacy for new compounds modulating the SERCA2a activity caused by PLN mutations; and (ii) € 1.5 million (approximately $1.7 million) upon obtaining marketing authorization in the US, EU, or China of new compounds with the corresponding companion diagnostic assay. We have also agreed to pay royalties for any purchased intellectual property arising out of the collaboration in the range of a low- to mid-single digit percent of net sales for any products sold in any country for a period of ten years from the date of the first commercial sale.

Also, under the collaboration agreement, we have provided funds aggregating € 0.2 million (approximately $0.2 million) to date to upgrade equipment and pay laboratory expenses for the renewal term expiring in 2019. We also funded several related research contracts for the period covered by the collaboration agreement. In connection with our research activities, Bicocca agreed to provide us exclusive use of a research laboratory for the collaboration, and nonexclusive access to a physiology laboratory within the university. Bicocca serves as our primary location in Milan.

On March 19, 2021, we entered into an Agreement for Scientific Collaboration, or the New SERCA2a Agreement, with Bicocca, which extends our collaboration. The New SERCA2a Agreement amends and restates the recently expired terms of the prior collaboration agreement. Under the New SERCA2a Agreement, we will provide Bicocca with approximately € 0.2 million (approximately $0.2 million) for research activities and to cover laboratory space and operation costs. Results obtained from the collaboration will be jointly owned by the parties. However, Bicocca will assign to us its interest in patent applications and patents covering any new SERCA2a compounds and diagnostic products suitable for further clinical development. We have agreed to pay Bicocca (corresponding to stage of development): (i) € 25,000 (approximately $30,000) for execution of an assignment to the Company of Bicocca’s interest in the patent at issue, (ii) € 75,000 (approximately $90,000) for new SERCA2a compounds developed up to phase 1 studies in humans upon the completion and availability of the proof of concept of biological efficacy of new compounds on modulating the SERCA2a activity in cell-free systems, or its functional counterpart in isolated cells and (iii) € 1.5 million (approximately $1.8 million) upon obtaining marketing authorization in the U.S., EU, or China of new compounds with the corresponding companion diagnostic assay. We have also agreed to pay royalties on products generated from the collaboration in the range of a fraction of a single digit to a low single digit percent of net sales for any products sold in any country for a period of ten years from the date of the first commercial sale or until the expiry of patent(s) covering the products.

Note 15 - Related Party Transactions

Lee’s Pharmaceutical Holdings Limited

As of December 31, 2020 and 2019, Lee’s beneficial ownership of our issued and outstanding shares of common stock was 29% and 35%, respectively.

WINT US Equity

WINT · 10-K · period ended 2020-12-31

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

ITEM 9A. CONTROLS AND PROCEDURES.

ITEM 9B. OTHER INFORMATION.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

WINT US Equity☆

WINT · 10-K · period ended 2020-12-31

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

ITEM 9A. CONTROLS AND PROCEDURES.

ITEM 9B. OTHER INFORMATION.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

WINT US Equity