Quarterly Report (10-q)

Date : 08/09/2019 @ 8:04PM
Source : Edgar (US Regulatory)
Stock : Ampio Pharmaceuticals Inc (AMPE)
Quote : 0.4401  0.0116 (2.71%) @ 3:08PM

Quarterly Report (10-q)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

 

 

 

 

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

For the Quarterly Period Ended: June 30, 2019

or

 

 

 

 

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

For the transition period from                     to                     

Commission File No. 001‑35182


CID:IMAGE001.JPG@01CDF343.4BBAE3B0

AMPIO PHARMACEUTICALS, INC.

( www.ampiopharma.com)

NYSE American: AMPE

(Exact name of registrant as specified in its charter)

 

 

Delaware

26‑0179592

(State or other jurisdiction of
incorporation or organization)

(IRS Employer
Identification No.)

 

373 Inverness Parkway, Suite 200

Englewood, Colorado 80112

(Address of principal executive offices, including zip code)

(720) 437‑6500

(Registrant’s telephone number, including area code)

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

 

 

 

 

 

Title of each class:

    

Trading Symbol

    

Name of each exchange on which registered:

Common

 

AMPE

 

NYSE American

 

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

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

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

 

 

 

 

Large Accelerated Filer

Accelerated Filer

 

 

 

 

Non-Accelerated Filer

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

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

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

As of August 1, 2019, there were 142,207,862 shares of Common Stock outstanding, par value $0.0001, of the registrant.

 

 

 

 

AMPIO PHARMACEUTICALS, INC.

FOR THE QUARTER ENDED JUNE 30, 2019

INDEX

 

 

 

 

 

Page

 

PART I-FINANCIAL INFORMATION

 

 

 

 

Item 1.  

Financial Statements

6

 

 

 

 

Balance Sheets as of June 30, 2019 (unaudited) and December 31, 2018  (unaudited)

6

 

 

 

 

Statements of Operations for the three and six months ended June 30, 2019 (unaudited) and the three and six months ended June 30, 2018 (unaudited)

7

 

 

 

 

Statements of Stockholders’ Equity (Deficit) f or the three and six months ended June 30, 2019 (unaudited) and the three and six months ended June 30, 2018 (unaudited)

8

 

 

 

 

Statements of Cash Flows for the six months ended June 30, 2019 (unaudited) and the six months ended June 30, 2018 (unaudited)

9

 

 

 

 

Notes to Financial Statements (unaudited)

10

 

 

 

Item 2.  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

 

 

 

Item 3.  

Quantitative and Qualitative Disclosures About Market Risk

26

 

 

 

Item 4.  

Controls and Procedures

27

 

 

 

 

PART II-OTHER INFORMATION

 

 

 

 

Item 1.  

Legal Proceedings

27

 

 

 

Item 1A.  

Risk Factors

27

 

 

 

Item 2.  

Unregistered Sales of Equity Securities and Use of Proceeds

30

 

 

 

Item 3.  

Defaults Upon Senior Securities

30

 

 

 

Item 4.  

Mine Safety Disclosures

30

 

 

 

Item 5.  

Other Information

30

 

 

 

Item 6.  

Exhibits

30

 

 

 

SIGNATURES  

31

 

 

2

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10‑Q contains statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements included or incorporated by reference in this report, other than statements of historical fact, that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. These statements appear in a number of places, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements represent our reasonable judgment about the future based on various factors and using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause our actual results and financial position to differ materially from those contemplated by the statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts, and use words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “should,” “plan,” “potential,” “project,” “will,” “would” and other words of similar meaning, or the negatives of such terms or other variations. These include, but are not limited to, statements relating to the following:

·

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

·

expectations regarding clinical trials for our product candidate, capital expenditures, research and development expenses and other payments;

·

our beliefs and assumptions relating to our liquidity position, including our ability to obtain additional financing;

·

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

·

our future dependence on third party manufacturers or strategic partners to manufacture Ampion if it receives regulatory approval, and our ability to identify strategic partners and enter into beneficial license, co-development, collaboration or similar arrangements.

 

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

·

Management has performed an analysis of our ability to continue as a going concern. In addition, our independent registered public accounting firm has expressed substantial doubt as to our ability to continue as a going concern;

·

We have incurred significant losses since inception, expect to incur net losses for at least the next several years and may never achieve or sustain profitability;

·

We will need substantial additional capital to fund our operations. If we do not obtain the capital necessary to fund our operations, we will be unable to successfully develop, obtain regulatory approval of, and commercialize Ampion and may need to cease operations;

·

Our business is highly dependent on the success of Ampion. If Ampion does not receive regulatory approval or is not successfully commercialized, our business is likely to be harmed;

·

Ampion will be undergoing clinical trials that are time-consuming and expensive, the outcomes of which are unpredictable, and for which there is a high risk of failure. If clinical trials of Ampion fail to satisfactorily demonstrate safety and efficacy to the FDA and other regulators, the FDA may require additional clinical trials and we, or our collaborators, may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of Ampion;

·

Delays, suspensions and terminations in our clinical trials could result in increased costs to us and delay or prevent our ability to generate revenues. We rely on third parties to conduct our clinical trials and perform data collection and analysis, which may result in costs and delays that prevent us from successfully commercializing Ampion;

·

If we do not receive marketing approval for Ampion, we may not realize the investment we have made in our manufacturing facility;

3

·

Relying on third-party suppliers may result in delays in our clinical trials and product introduction. If we use hazardous and biological materials in a manner that causes injury or violates applicable law, we may be liable for damages or fines;

·

Even if we obtain marketing approvals for Ampion, the terms of approvals and ongoing regulation of our product may limit how we, or our collaborators, manufacture and market our product, which could materially impair our ability to generate revenue;

·

Ampion for which we obtain marketing approval in the future could be subject to post-marketing restrictions or withdrawal from the market and we, and our collaborators, may be subject to substantial penalties if we, or they, fail to comply with regulatory requirements or if we, or they, experience unanticipated problems with our product following approval;

·

If we do not achieve our projected development and commercialization goals in the timeframes we announce and expect, the commercialization of Ampion may be delayed, our business will be harmed, and our stock price may decline;

·

Even if collaborators with which we contract in the future successfully complete clinical trials of Ampion, our product may not be commercialized successfully for other reasons;

·

We might enter into agreements with collaborators to commercialize Ampion once we obtain regulatory approvals, which may affect the sales of our product and our ability to generate revenues;

·

We face substantial competition from companies with considerably more resources and experience than we have, which may result in others discovering, developing, receiving approval for, or commercializing products before or more successfully than us;

·

Product liability and other lawsuits could divert our resources, result in substantial liabilities and reduce the commercial potential of Ampion;

·

If Ampion is commercialized, this does not assure acceptance by physicians, patients, third-party payors, or the medical community in general;

·

Government restrictions on pricing and reimbursement, as well as other healthcare payor cost-containment initiatives, may negatively impact our ability to generate revenues if we obtain regulatory approval to market our product;

·

The approval process outside the United States varies among countries and may limit our ability to develop, manufacture and sell our product internationally. Failure to obtain marketing approval in international jurisdictions would prevent Ampion from being marketed abroad;

·

Our drug development program to date has been dependent in large part upon the services of Dr. David Bar-Or, who retired as Chief Scientific Officer in September 2018;

·

Business interruptions could limit our ability to operate our business;

·

While we are not aware of any cybersecurity incidents, the cybersecurity landscape continues to evolve, and we may find it necessary to make further investments to protect our data and infrastructure;

·

Our ability to compete may decline if we do not adequately protect our proprietary rights;

·

Confidentiality agreements with employees and others may not adequately prevent disclosure of our trade secrets and other proprietary information and may not adequately protect our intellectual property, which could limit our ability to compete;

·

A dispute concerning the infringement or misappropriation of our proprietary rights or the proprietary rights of others could be time consuming and costly, and an unfavorable outcome could harm our business;

·

Pharmaceutical patents and patent applications involve highly complex legal and factual questions, which, if determined adversely to us, could negatively impact our patent position;

·

The price of our stock has been extremely volatile and may continue to be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock;

·

The price of our stock may be vulnerable to manipulation;

·

If we cannot continue to satisfy the NYSE American listing maintenance requirements and other rules, including the director independence requirements, our securities may be delisted, which could negatively impact the price of our securities;

·

Concentration of our ownership limits the ability of our shareholders to influence corporate matters.

·

Anti-takeover provisions in our charter and bylaws and in Delaware law could prevent or delay a change in control of Ampio;

4

·

Increased costs associated with corporate governance compliance may significantly impact our results of operations; and

·

We have no plans to pay cash dividends on our common stock.

·

We received a SPA agreement from the FDA relating to our product candidate. This SPA agreement does not guarantee approval of Ampion or any other particular outcome from regulatory review.

·

We had a material weakness in our internal control over disclosure reporting during the reporting period, which could result in the failure to identify information for appropriate disclosure.

·

We may be limited in our ability to access sufficient funding through a public or private equity offering or convertible debt offering;

·

If we receive FDA licensure for Ampion, we will be subject to FDA post approval requirements, which could limit our financial resources available for other development activities.

·

We may have difficulties obtaining and maintaining sufficient insurance coverage.

 

In addition, there may be other factors that could cause our actual results to be materially different from the results referenced in the forward-looking statements, some of which are included elsewhere in this report, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Many of these factors will be important in determining our actual future results. Consequently, no forward-looking statement should be relied upon. Our actual future results may vary materially from those expressed or implied in any forward-looking statements. All forward-looking statements contained in this report are qualified in their entirety by this cautionary statement. Forward-looking statements speak only as of the date they are made, and we disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of this report, except as otherwise required by applicable law.

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

5

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

AMPIO PHARMACEUTICALS, INC.

Balance Sheets

(unaudited)

 

 

 

 

 

 

 

 

 

 

June 30, 

 

December 31, 

 

    

2019

    

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

  

 

 

  

Current assets

 

 

  

 

 

  

Cash and cash equivalents

 

$

12,782,758

 

$

7,585,392

Prepaid expenses and other

 

 

1,629,265

 

 

413,280

Total current assets

 

 

14,412,023

 

 

7,998,672

 

 

 

 

 

 

 

Fixed assets, net

 

 

5,355,788

 

 

5,997,582

Deposits

 

 

33,856

 

 

33,856

Right-of-use asset

 

 

1,087,009

 

 

 —

Total assets

 

$

20,888,676

 

$

14,030,110

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

  

 

 

  

Current liabilities

 

 

  

 

 

  

Accounts payable and accrued expenses

 

$

1,879,898

 

$

1,324,651

Accrued compensation

 

 

197,120

 

 

 —

Lease liability - current portion

 

 

247,069

 

 

59,579

Total current liabilities

 

 

2,324,087

 

 

1,384,230

 

 

 

 

 

 

 

Long-term lease liability

 

 

1,342,742

 

 

476,753

Warrant derivative liability

 

 

6,111,394

 

 

6,933,031

Total liabilities

 

 

9,778,223

 

 

8,794,014

 

 

 

 

 

 

 

Commitments and contingencies (Note 5)

 

 

  

 

 

  

 

 

 

 

 

 

 

Stockholders’ equity

 

 

  

 

 

  

Preferred Stock, par value $0.0001; 10,000,000 shares authorized; none issued

 

 

 —

 

 

 —

Common Stock, par value $0.0001; 200,000,000 shares authorized; shares issued and outstanding - 142,207,862 as of June 30, 2019 and 110,941,516 as of  December 31, 2018

 

 

14,221

 

 

11,094

Additional paid-in capital

 

 

187,489,608

 

 

176,227,510

Accumulated deficit

 

 

(176,393,376)

 

 

(171,002,508)

Total stockholders’ equity

 

 

11,110,453

 

 

5,236,096

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

20,888,676

 

$

14,030,110

 

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

6

AMPIO PHARMACEUTICALS, INC.

Statements of Operations

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 

 

Six Months Ended June 30, 

 

 

    

2019

    

2018

    

2019

    

2018

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

  

 

 

  

 

 

  

 

 

  

 

Research and development

 

$

2,136,834

 

$

2,114,783

 

$

3,701,012

 

$

4,159,259

 

General and administrative

 

 

1,444,654

 

 

1,016,854

 

 

2,556,343

 

 

2,547,211

 

Total operating expenses

 

 

3,581,488

 

 

3,131,637

 

 

6,257,355

 

 

6,706,470

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income

 

 

  

 

 

  

 

 

  

 

 

  

 

Interest income

 

 

21,085

 

 

 —

 

 

44,850

 

 

 —

 

Derivative gain (Note 4)

 

 

3,981,169

 

 

7,751,838

 

 

821,637

 

 

33,366,143

 

Total other income

 

 

4,002,254

 

 

7,751,838

 

 

866,487

 

 

33,366,143

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

420,766

 

$

4,620,201

 

$

(5,390,868)

 

$

26,659,673

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share:

 

 

  

 

 

  

 

 

  

 

 

  

 

Basic

 

$

0.00

 

$

0.05

 

$

(0.05)

 

$

0.32

 

Diluted

 

$

(0.03)

 

$

(0.03)

 

$

(0.05)

 

$

(0.07)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

115,031,289

 

 

86,300,054

 

 

113,078,639

 

 

84,630,970

 

Diluted

 

 

118,770,096

 

 

92,999,810

 

 

117,349,516

 

 

91,534,677

 

 

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

7

AMPIO PHARMACEUTICALS, INC.

Statements of Stockholders’ Equity (Deficit)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

Total

 

 

Common Stock

 

Paid-in

 

Accumulated

 

Stockholders'

 

    

Shares

    

Amount

    

Capital

    

Deficit

    

Equity (Deficit)

Balance at December 31, 2017

 

80,060,345

 

$

8,006

 

$

170,803,783

 

$

(204,988,674)

 

$

(34,176,885)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for services

 

17,241

 

 

 2

 

 

59,998

 

 

 —

 

 

60,000

Options exercised, net

 

249,666

 

 

25

 

 

400,734

 

 

 —

 

 

400,759

Warrants exercised, net

 

5,684,499

 

 

568

 

 

2,699,651

 

 

 —

 

 

2,700,219

Stock-based compensation, net

 

 —

 

 

 —

 

 

119,623

 

 

 —

 

 

119,623

Net income

 

 —

 

 

 —

 

 

 —

 

 

22,039,472

 

 

22,039,472

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2018

 

86,011,751

 

$

8,601

 

$

174,083,789

 

$

(182,949,202)

 

$

(8,856,812)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options exercised, net

 

99,117

 

 

10

 

 

235,641

 

 

 —

 

 

235,651

Warrants exercised, net

 

210,100

 

 

21

 

 

159,655

 

 

 —

 

 

159,676

Stock-based compensation, net

 

 —

 

 

 —

 

 

72,612

 

 

 —

 

 

72,612

Net income

 

 —

 

 

 —

 

 

 —

 

 

4,620,201

 

 

4,620,201

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2018

 

86,320,968

 

$

8,632

 

$

174,551,697

 

$

(178,329,001)

 

$

(3,768,672)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2018

 

110,941,516

 

$

11,094

 

$

176,227,510

 

$

(171,002,508)

 

$

5,236,096

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for services

 

136,362

 

 

14

 

 

59,986

 

 

 —

 

 

60,000

Warrants exercised, net

 

50,000

 

 

 5

 

 

19,995

 

 

 —

 

 

20,000

Stock-based compensation

 

 —

 

 

 —

 

 

27,555

 

 

 —

 

 

27,555

Net loss

 

 —

 

 

 —

 

 

 —

 

 

(5,811,634)

 

 

(5,811,634)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2019

 

111,127,878

 

$

11,113

 

$

176,335,046

 

$

(176,814,142)

 

$

(467,983)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants exercised, net

 

825,000

 

 

83

 

 

329,917

 

 

 —

 

 

330,000

Stock-based compensation, net

 

 —

 

 

 —

 

 

72,800

 

 

 —

 

 

72,800

Issuance of common stock in connection with the equity distribution agreement

 

254,984

 

 

25

 

 

142,296

 

 

 —

 

 

142,321

Offering costs related to the issuance of common stock in connection with the equity distribution agreement

 

 —

 

 

 —

 

 

(144,329)

 

 

 

 

 

(144,329)

Issuance of common stock in connection with the public offering

 

30,000,000

 

 

3,000

 

 

11,997,000

 

 

 —

 

 

12,000,000

Offering costs related to the issuance of common stock in connection with the public offering

 

 —

 

 

 —

 

 

(1,243,122)

 

 

 —

 

 

(1,243,122)

Net income

 

 —

 

 

 —

 

 

 —

 

 

420,766

 

 

420,766

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2019

 

142,207,862

 

$

14,221

 

$

187,489,608

 

$

(176,393,376)

 

$

11,110,453

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

8

AMPIO PHARMACEUTICALS, INC.

Statements of Cash Flows

(unaudited)

 

 

 

 

 

 

 

 

 

    

Six Months Ended June 30, 

    

 

    

2019

    

2018

    

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

Net (loss) income

 

$

(5,390,868)

 

$

26,659,673

 

Adjustments to reconcile net (loss) income to net cash used in operating activities

 

 

 

 

 

 

 

Stock-based compensation, net

 

 

100,354

 

 

192,235

 

Depreciation and amortization

 

 

736,196

 

 

621,204

 

Issuance of common stock for services

 

 

60,000

 

 

60,000

 

Derivative gain (Note 4)

 

 

(821,637)

 

 

(33,366,143)

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

Increase in prepaid expenses and other

 

 

(1,215,985)

 

 

(83,755)

 

Increase (decrease) in accounts payable and accrued expenses

 

 

555,247

 

 

(610,435)

 

Decrease in lease liability (Note 5)

 

 

(114,341)

 

 

(28,693)

 

Increase (decrease) in accrued compensation

 

 

197,120

 

 

(46,401)

 

Net cash used in operating activities

 

 

(5,893,914)

 

 

(6,602,315)

 

 

 

 

 

 

 

 

 

Cash flows used in investing activities

 

 

 

 

 

 

 

Purchase of fixed assets

 

 

(13,590)

 

 

(442,132)

 

Net cash used in investing activities

 

 

(13,590)

 

 

(442,132)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

Proceeds from sale of common stock in connection with the equity distribution agreement

 

 

142,321

 

 

 —

 

Costs related to sale of common stock in connection with the equity distribution agreement

 

 

(144,329)

 

 

 —

 

Proceeds from sale of common stock in connection with the public offering

 

 

12,000,000

 

 

 —

 

Costs related to sale of common stock in connection with the public offering

 

 

(1,243,122)

 

 

 —

 

Proceeds from warrant exercises

 

 

350,000

 

 

2,859,895

 

Proceeds from option exercises

 

 

 —

 

 

636,410

 

Net cash provided by financing activities

 

 

11,104,870

 

 

3,496,305

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

5,197,366

 

 

(3,548,142)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 

7,585,392

 

 

8,209,071

 

Cash and cash equivalents at end of period

 

$

12,782,758

 

$

4,660,929

 

 

 

 

 

 

 

 

 

Non-cash transactions:

 

 

 

 

 

 

 

Lease liability arising from the adoption of ASU 2016-02 (Note 5)

 

$

1,704,153

 

$

 —

 

Initial recognition of right-of-use asset (Note 5)

 

 

1,167,821

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

9

AMPIO PHARMACEUTICALS, INC.

Notes to Financial Statements

(unaudited)

Note 1 - Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions of the Securities and Exchange Commission (“SEC”) on Quarterly Reports on Form 10‑Q and Article 8 of Regulation S-X. Accordingly, such financial statements do not include all of the information and disclosures required by GAAP for complete financial statements. In the opinion of management, the financial statements include all adjustments necessary, which are of a normal and recurring nature, for the fair presentation of the financial position and of the results of operations and cash flows of Ampio Pharmaceuticals, Inc. (“Ampio” or the “Company”) for the periods presented.

These financial statements should be read in conjunction with the audited financial statements and accompanying notes thereto for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10‑K filed with the SEC on March 18, 2019 (the “2018 Annual Report”). The results of operations for the interim period shown in this report are not necessarily indicative of the results that may be expected for any other interim period or for the full year. The balance sheet at December 31, 2018 was derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

Adoption of Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, “Leases (Topic 842)” . The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. Lessees are required to use a modified retrospective transition approach for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. In July 2018, the FASB issued ASU 2018-10, “Codification Improvements to Topic 842, Leases”, to clarify how to apply certain aspects of the new lease standard. In July 2018, the FASB also issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements”, to give entities other options for transition. The additional options for transition allow an entity to apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption or apply a practical expedient. The new standards were effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. 

 

The Company elected to adopt the practical expedient permitted by ASU 2018-11 during the first quarter of 2019. As a result of the adoption, on January 1, 2019, the Company recognized a lease liability of approximately $1.7 million, which represented the present value of the remaining minimum lease payments using an estimated incremental borrowing rate of 5.75%. The Company also derecognized the deferred rent balance, which included deferred tenant improvements, as of December 31, 2018 of approximately $540,000 and recognized a ROU asset of approximately $1.2 million. Lease expense did not change materially as a result of the adoption of ASU 2016-02.

 

In June 2018, the FASB issued ASU 2018‑07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” .  ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions used to acquire goods and services from nonemployees. Companies should apply the requirements of Topic 718 to nonemployee awards except for certain exemptions specified in the amendment. The guidance was effective for fiscal years beginning after December 15, 2018, including interim reporting periods within those fiscal years. Early adoption is permitted, but no earlier than the Company’s adoption date of ASU 2014‑09 “ Revenue from Contracts with Customers (Topic 606)” .  The Company adopted ASU 2018‑07 during the first quarter of 2019 and the adoption of this guidance did not have a material impact on the Company’s financial statements as all outstanding non-employee share-based awards have fully vested.

 

10

In July 2018, the FASB issued ASU 2018-09, “Codification Improvements” , which facilitates amendments to a variety of topics to clarify, correct errors in, or make minor improvements to the accounting standards codification. The effective date of the standard is dependent on the facts and circumstances of each amendment. Some amendments do not require transition guidance and were effective upon the issuance of this standard. A majority of the amendments in ASU 2018-09 were effective for fiscal years beginning after December 15, 2018. The Company adopted ASU 2018-09 during the first quarter of 2019 and the adoption of this guidance did not have a material impact on the Company’s financial statements.

 

Recent Accounting Pronouncements

In August 2018, the FASB issued ASU 2018‑13, “ Fair Value Measurement - Disclosure Framework (Topic 820) ”. The updated guidance modified the disclosure requirements on fair value measurements. The updated guidance is effective for fiscal years beginning after December 15, 2019, including interim reporting periods within those fiscal years. Early adoption is permitted for any removed or modified disclosures, however the Company has not yet adopted this ASU. When adopted, the Company does not expect the adoption of this ASU to have a significant impact on its financial statements.

 

This Quarterly Report on Form 10-Q does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

Note 2 - Going Concern

As of and for the six months ended June 30, 2019, the Company had cash and cash equivalents of $12.8 million and a net loss of $5.4 million. The net loss is primarily attributable to operating expenses of $6.3 million, which were offset by the non-cash derivative gain of $822,000 that was recognized during the six months ended June 30, 2019. The Company used net cash in operations of $5.9 million for the six months ended June 30, 2019. As of June 30, 2019, the Company had an accumulated deficit of $176.4 million and stockholders’ equity of $11.1 million. In addition, as a clinical stage biopharmaceutical company, the Company has not generated any revenues or profits to date. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

During the six months ended June 30, 2019, the Company conducted a public offering of its securities through which it raised gross proceeds of $12.0 million (see Note 7 ). In addition, the Company received a total of $350,000 from the exercise of investor warrants (see Note 6 ). The Company has prepared an updated projection covering the period from July 1, 2019 through September 30, 2020 based on the requirements of ASU 2014-15, “ Going Concern ”, which reflects cash requirements for fixed, on-going expenses such as payroll, legal and accounting, patents and overhead at an average cash burn rate of approximately $0.6 million per month. The Company’s projection also reflects an appropriation of additional funds for regulatory approvals, clinical trials, outsourced research and development and commercialization consulting of approximately $0.7 million per month.  Based on the current projections, the Company expects that current cash resources and operating cash flows will be sufficient to sustain operations into the second quarter of 2020. The ability of the Company to continue its operations is dependent on its ability to satisfy the Company’s future cash needs through private or public sales of securities, debt financings or partnering/licensing transactions. However, there is no assurance that the Company will be successful in satisfying its future cash needs such that the Company will be able to continue operations.

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

11

Note 3 - Fixed Assets

Fixed assets are recorded at cost and, once placed in service, are depreciated on the straight-line method over their estimated useful lives. Leasehold improvements are accreted over the shorter of the estimated economic life or related lease term. Fixed assets consist of the following:

 

 

 

 

 

 

 

 

 

 

 

 

Estimated

 

As of June 30, 

 

As of December 31, 

    

 

    

Useful Lives in Years

    

2019

    

2018

 

 

 

 

 

 

 

 

 

 

 

Manufacturing facility/clean room

 

3 - 8

 

$

3,081,000

 

$

3,076,000

 

Leasehold improvements

 

10

 

 

6,075,000

 

 

6,075,000

 

Office furniture and equipment

 

5 - 10

 

 

511,000

 

 

511,000

 

Lab equipment

 

5 - 8

 

 

1,137,000

 

 

1,128,000

 

Less accumulated depreciation and amortization

 

 

 

 

(5,448,000)

 

 

(4,793,000)

 

 

 

 

 

 

 

 

 

 

 

Fixed assets, net

 

 

 

$

5,356,000

 

$

5,997,000

 

 

Depreciation expense for the respective periods is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 

 

Six Months Ended June 30, 

 

 

    

2019

    

2018

    

2019

    

2018

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation Expense

 

$

330,000

 

$

320,000

 

$

655,000

 

$

621,000

 

 

 

Note 4 - Fair Value Considerations

Authoritative guidance defines fair value as the price that would be received upon the sale of an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources not affiliated with the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy is broken down into three levels based on reliability of the inputs as follows:

 

 

 

 

Level 1:  

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

 

 

 

 

Level 2:  

Inputs that include quoted prices for similar assets and liabilities in active or inactive markets or that are observable for the asset or liability either directly or indirectly; and

 

 

 

 

Level 3:  

Unobservable inputs that are supported by little or no market activity.

 

The Company’s financial instruments include cash and cash equivalents, accounts payable and accrued expenses, and warrant derivative liability. The carrying amounts of cash and cash equivalents and accounts payable and accrued expenses are carried at cost, which approximates fair value due to the short maturity of these instruments. Warrants are recorded at estimated fair value based on a Black-Scholes warrant pricing model.

12

The following table presents Ampio’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2019 and December 31, 2018, by level within the fair value hierarchy:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Fair Value Measurements Using

 

    

Level 1

    

Level 2

    

Level 3

    

Total

June 30, 2019

 

 

  

 

 

  

 

 

  

 

 

  

LIABILITIES

 

 

  

 

 

  

 

 

  

 

 

  

Warrant derivative liability

 

$

 —

 

$

 —

 

$

6,111,000

 

$

6,111,000

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

 

  

 

 

  

 

 

  

 

 

  

LIABILITIES

 

 

  

 

 

  

 

 

  

 

 

  

Warrant derivative liability

 

$

 —

 

$

 —

 

$

6,933,000

 

$

6,933,000

 

The warrant derivative liability was valued using the Black-Scholes valuation methodology because that model embodies all the relevant assumptions that address the features underlying these instruments. The significant assumptions in valuing the warrant derivative liability as of June 30, 2019 and at issuance are discussed in Note 6 .

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

 

 

 

 

 

    

Derivative Instruments

 

 

 

 

Balance as of December 31, 2018

 

$

6,933,000

Warrant exercises

 

 

(353,000)

Change in fair value

 

 

(469,000)

Balance as of June 30, 2019

 

$

6,111,000

 

 

Note 5 - Commitments and Contingencies

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Total

    

2019

    

2020

    

2021

    

2022

    

2023

    

Thereafter

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Clinical research and trial obligations

 

$

6,028,000

 

$

3,014,000

 

$

3,014,000

 

$

 —

 

$

 —

 

$

 —

 

$

 —

Biologics License Application ("BLA") consulting services

 

 

1,134,000

 

 

567,000

 

 

567,000

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Statistical analysis and programming consulting services

 

 

522,000

 

 

261,000

 

 

261,000

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Employment agreements

 

 

826,000

 

 

356,000

 

 

304,000

 

 

166,000

 

 

 

 

 

 

 

 

 

Insurance premium financing agreement

 

 

470,000

 

 

470,000

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

$

8,980,000

 

$

4,668,000

 

$

4,146,000

 

$

166,000

 

$

 —

 

$

 —

 

$

 —

 

Clinical Research and Trial Obligations

In March 2019, the Company entered into a contract with a clinical research organization (“CRO”) in connection with a clinical trial for Ampion for $6.2 million, which had an outstanding commitment of approximately $5.8 million as of June 30, 2019. The Company has incurred cumulative costs totaling $405,000 against the contract as of June 30, 2019. The Company is currently engaged in ongoing contract negotiations with the CRO as a result of an increased number of patients required for the current trial; however, an amended contract has not yet been finalized. The Company estimates that the associated cost increase over the existing CRO contract will be approximately $2.6 million. In June 2019, the Company also entered into a contract with a patient recruitment services company in connection with the current clinical trial for Ampion for $264,000, which had an outstanding commitment of $251,000 as of June 30, 2019. The Company incurred cumulative costs totaling $13,000 against the contract as of June 30, 2019. The Company estimates the amount

13

of the patient recruiting services contract to increase proportionately as a result of an increased number of patients required for the current trial; however, an amended contract has not yet been finalized.

Biologics License Application (“BLA”) Consulting Services

In March 2018, the Company entered into a BLA consulting services agreement for $1.2 million, which had an outstanding commitment of approximately $1.1 million as of June 30, 2019. The Company had incurred cumulative costs totaling $79,000 against this contract as of June 30, 2019. This contract does not have an expiration date as the Company incurs costs as sections of the BLA are drafted for the submission of the complete BLA to the U.S. Food and Drug Administration (“FDA”).

Statistical Analysis and Programming Consulting Services

In May 2019, Ampio entered into a statistical analysis and programming consulting services agreement for $579,000, which had an outstanding commitment of $522,000 as of June 30, 2019. The Company had incurred cumulative costs totaling $57,000 against the contract as of June 30, 2019.

Employment Agreements

The Company entered into an employment agreement with Mr. Michael Macaluso, Chief Executive Officer, effective January 9, 2012.  This agreement provided for an annual salary of $195,000, with an initial term ending January 9, 2015. On October 1, 2013, the Company increased Mr. Macaluso’s annual salary from $195,000 to $300,000. On December 20, 2014, the Company extended the employment agreement of Mr. Macaluso for three additional years, expiring January 9, 2017. On March 9, 2017, the Company extended his employment agreement for another three years until January 9, 2020.

The Company entered into an employment agreement with Ms. Holli Cherevka, Chief Operating Officer, on September 19, 2017, which provided for an annual salary of $200,000 and a term ending September 19, 2019.

The Company entered into an employment agreement with Mr. Daniel Stokely, Chief Financial Officer, on July 9, 2019, which provided for an annual salary of $285,000 and a term ending July 31, 2022.

Insurance Premium Financing Agreement

In June 2019, Ampio entered into an insurance premium financing agreement for a term of six months with an interest rate of 7.75% for $470,000. The outstanding commitment as of June 30, 2019 was $470,000.

Facility Lease

In December 2013, the Company entered into a 125-month non-cancellable operating lease for office space and a manufacturing facility. The effective date of the lease was May 1, 2014. The initial base rent of the lease was $23,000 per month. The total base rent over the term of the lease is approximately $3.3 million, which includes rent abatements and leasehold incentives. As discussed within Note 1 , the Company adopted the FASB issued ASU 2016-02, “Leases (Topic 842)” as of January 1, 2019. With the adoption of ASU 2016-02, the Company recorded an operating right-of-use asset and an operating lease liability on its balance sheet. The right-of-use asset represents the Company’s right to use the underlying asset for the lease term and the lease obligation represents the Company’s commitment to make the lease payments arising from the lease. Right-of-use lease assets and obligations are recognized at the commencement date based on the present value of remaining lease payments over the lease term. As the Company’s lease does not provide an implicit rate, the Company used an estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of the lease payments. Rent expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectations regarding the terms. The lease liability is classified as current or long-term on the balance sheet.

14

The following table provides a reconciliation of the Company’s undiscounted payments for its facility lease and the carrying amount of the lease liability presented in the balance sheet as of June 30, 2019:  

 

 

 

 

 

 

 

 

 

 

 

    

Facility Lease Payments

2019

2020

2021

2022

2023

Thereafter

 

 

 

 

 

 

 

 

 

 

Remaining Facility Lease Payments

 

$

1,843,000

164,000

335,000

345,000

355,000

364,000

280,000

Less: Discount Adjustment

 

 

(254,000)

 

 

 

 

 

 

Total lease liability

 

$

1,589,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease liability - current portion

 

$

247,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term lease liability

 

$

1,343,000

 

 

 

 

 

 

 

Amortization expense related to the right-of-use asset for the respective periods is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 

 

Six Months Ended June 30, 

 

    

2019

    

2018

    

2019

    

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

Right-of-use Asset Amortization Expense

 

$

41,000

 

$

 —

 

$

81,000

 

$

 —

 

Prior to the adoption of ASU 2016-02, the Company recognized deferred rent when the straight-line rent expense exceeded the actual lease payments and reduced deferred rent when the actual lease payments exceeded the straight-line rent expense. Deferred rent was also classified between current and long-term on the balance sheet.

Rent expense for the respective periods is as follows: