Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-35182
AMPIO PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
373 Inverness Parkway
Suite 200
Englewood, Colorado
(Address of principal executive offices)
26-0179592
(I.R.S. Employer
Identification Number)
80112
(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
Common Stock, par value $0.0001 per share
Trading Symbol
AMPE
Name of each exchange on which registered
NYSE American
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ⌧
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ⌧
Indicate by a 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 during the preceding
12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of
“large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☐
⌧
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧
The aggregate market value of common stock held by non-affiliates of the registrant as of June 30, 2020, the last business day of the registrant’s most recently completed second fiscal quarter, was
$106.2 million based on the closing price of $0.64 as of that date.
As of February 16, 2021, 195,629,128 shares of the registrant’s common stock, par value $0.0001 per share were outstanding.
Table of Contents
TABLE OF CONTENTS
Item 1
BUSINESS
Item 1A
RISK FACTORS
Item 1B
UNRESOLVED STAFF COMMENTS
Item 2
Item 3
Item 4
PROPERTIES
LEGAL PROCEEDINGS
MINE SAFETY DISCLOSURES
PART I
PART II
Item 5
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
Item 6
Item 7
ISSUER PURCHASES OF EQUITY SECURITIES
SELECTED FINANCIAL DATA
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Item 7A
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 8
Item 9
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Item 9A
CONTROLS AND PROCEDURES
Item 9B
OTHER INFORMATION
Item 10
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 11
EXECUTIVE COMPENSATION
PART III
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
PART IV
Item 16
FORM 10-K SUMMARY
SIGNATURES
2
Page
5
18
41
41
41
41
41
42
42
48
49
49
49
49
50
64
68
70
71
72
75
76
Table of Contents
This Annual Report on Form 10-K (“Annual Report”) refers to trademarks, such as Ampio and Ampion®, which are protected under
applicable intellectual property laws and are our property. This Form 10-K also contains trademarks, service marks, copyrights and trade
names of other companies which are the property of their respective owners. Solely for convenience, our trademarks and tradenames referred
to in this Form 10-K may appear without the ® or ™ 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 such trademarks and tradenames.
Unless otherwise indicated or unless the context otherwise requires, references in this Form 10-K to the “Company,” “Ampio,” “we,”
“us,” or “our” relate to Ampio Pharmaceuticals, Inc.
3
Table of Contents
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Forward Looking Statements
This Annual Report on Form 10-K, or Annual Report, includes forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Annual Report, including statements
regarding our anticipated future clinical and regulatory events, future financial position, business strategy and plans and objectives of
management for future operations, are intended as forward-looking statements. Forward looking statements are generally written in the
future tense and/or are preceded by words such as “may”, “will”, “should”, “forecast”, “could”, “expect”, “suggest”, “believe”, “estimate”,
“continue”, “anticipate”, “intend”, “ongoing”, “opportunity”, “potential”, “predicts”, “seek”, “plan,” or similar words, or the negatives of
such terms or other variations on such terms or comparable terminology. Such forward-looking statements include, without limitation,
statements regarding the anticipated start dates, durations and completion dates, as well as the potential future results, of our ongoing and
future clinical trials, the anticipated designs of our future clinical trials, anticipated future regulatory submissions and events, regulatory
responses to our proposals, the potential future commercialization of our product candidates, our anticipated future cash position and future
events under our current and potential future collaborations. Forward-looking statements are neither historical facts nor assurances of future
performance. Instead, they are based on the expectations, estimates, projections, beliefs and assumptions of our management, based on
information currently available to management, all of which are subject to change. Because forward-looking statements relate to the future,
they are subject to inherent uncertainties, risks, changes in circumstances and other factors that are difficult to predict and many of which are
outside our control, any of which could cause our actual results and the timing of certain events to differ materially and adversely from those
expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not
limited to, those described in the section entitled “Risk Factors” in Part I, Item 1A of this Annual Report. These risks are not exhaustive.
Other sections of this Annual Report include additional factors that could adversely impact our business and financial performance.
Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not
possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any
factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. You
should not rely upon forward-looking statements as predictions of future events. We undertake no obligation to update or revise publicly any
forward-looking statements to reflect events or circumstances after the date of such statements for any reason, except as otherwise required
by law.
This Annual Report also contains market data, research, industry forecasts and other similar information obtained from or based on
industry reports and publications, including information concerning our industry, our business, and the potential markets for our product
candidates, including data regarding the estimated size and patient populations of those and related markets, their projected growth rates and
the incidence of certain medical conditions, as well as physician and patient practices within the related markets. Such data and information
involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. While we believe that
the statistical data, market data and other industry data and forecasts used herein are reliable, we have not independently verified the data,
and we do not make any representation as to the accuracy of the information.
4
Table of Contents
Item 1. Business.
Overview
AMPIO PHARMACEUTICALS, INC.
PART I
We are a biopharmaceutical company focused on the development and advancement of immunology-based therapies for prevalent
inflammatory conditions.
Ampion, our lead product candidate, is in the process of advancing through clinical trials in the United States. Ampion is currently in
development as an intra-articular injection treatment for severe Osteoarthritis of the Knee (“OAK”); an intravenous (“IV”) treatment for
COVID-19 patients; and an inhaled treatment for COVID-19 induced respiratory distress.
In June 2019, we commenced our AP-013 study titled, “A Randomized, Controlled, Double-Blind Study to Evaluate the Efficacy and Safety
of an Intra-Articular Injection of Ampion in Adults with Pain Due to Severe Osteoarthritis of the Knee”. In January 2020, the United States
Department of Health and Human Services declared COVID-19 a public health emergency in the United States and in March 2020, the
World Health Organization (“WHO”) declared the COVID-19 outbreak a global pandemic. In April 2020, due to the impact of COVID-19,
we paused the ongoing conduct of the AP-013 study. As COVID-19 cases across the United States continue to be reported, we have
determined that the AP-013 study will remain paused, but we continue to actively explore viable options to enable us to complete the study.
Recently, the FDA has provided guidance specifically designed to assist the pharmaceutical industry with viable options for evaluating data
from clinical trials which were impacted by the COVID-19 pandemic. We are reviewing the FDA guidance as it relates to the AP-013 study
data and are working with the FDA to come to agreement on a proposal to finalize the AP-013 study. However, it is possible that the
continuation of the COVID-19 pandemic may prevent completion of the AP-013 study at this time or at all. Finally, due to the current
uncertainty resulting from the COVID-19 pandemic, the future contractual commitment amount related to the AP-013 study may
significantly change.
In June 2020, we received FDA agreement to proceed with human trials utilizing an IV Ampion treatment for COVID-19 patients, and we
commenced a Phase I study (the “AP-016 study”) for such treatment, in July 2020. In September 2020, we announced the results of the AP-
016 study, which met its primary endpoint and found Ampion to be safe and well-tolerated with no remarkable difference in the incidence,
frequency, and severity of adverse events between IV Ampion and standard of care (“SOC”). In December 2020, we initiated an expanded
Phase I / II global study of IV Ampion treatment in Israel and the United States with the focus on patient safety and efficacy, as measured by
improvement in the clinical course of the disease and related outcomes for patients with moderate to severe COVID-19.
In September 2020, we received FDA agreement to proceed with human trials utilizing Ampion by inhalation as a treatment for COVID-19
patients who have respiratory distress. In October 2020, we commenced a Phase I study (the “AP-014 study”) for such treatment. We plan to
enroll 40 patients in the AP-014 study and randomize 1:1, Ampion in addition to the SOC versus SOC alone. Each patient in the study will
inhale 8 mL doses of Ampion four times a day for five days. Safety is the primary end-point and various measurements indicative of efficacy
are secondary endpoints.
We believe the immunomodulatory action and anti-inflammatory effects of Ampion may provide a treatment for individuals with
inflammatory conditions including severe OAK and the widespread inflammation associated with COVID-19 infection.
Our therapeutic product pipeline is the result of more than two decades of research at leading hospital-based research centers. Significant
discoveries in both scientific and clinical research have been published in peer-reviewed journals, highlighting the depth of research
supporting Ampion’s therapeutic capabilities. Ampion is backed by an extensive patent portfolio and eligible for 12-year FDA market
exclusivity upon approval as a novel biologic under the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”).
5
Table of Contents
AMPION
We have developed a novel biologic drug, Ampion, which contains a blood-derived cyclized peptide and small molecules that target multiple
pathways in the innate immune response characteristic of inflammatory disease. In vitro studies have shown that Ampion represses the
transcription of proteins responsible for inflammation, while activating anti-inflammatory proteins responsible for signaling tissue growth
and healing. Ampion achieves its biological effect by targeting the over production of inflammatory cytokines, which is common in multiple
inflammatory diseases like osteoarthritis and respiratory disease, and other inflammatory conditions. Ampion has been shown to uniquely
reduce inflammation along multiple pathways, unlike other anti-inflammatory therapies that target only one mechanism.
Ampion has been developed for use, and has been cleared by the FDA for investigation, by multiple routes of administration.
● Injection places Ampion right where it is needed to locally treat inflammation. The osteoarthritis trials are evaluating the safety and
efficacy of injection into the joint.
● Inhalation provides direct application of Ampion to locally treat inflammation in the lungs. The COVID-19 clinical trial is evaluating
the safety and efficacy of Ampion inhalation in the lungs of COVID-19 patients with respiratory illness.
● Intravenous provides systemic application of Ampion to broadly treat inflammation throughout the body. The COVID-19 clinical trial
is evaluating the safety and efficacy of Ampion IV treatment in COVID-19 patients with respiratory illness.
We believe that the Ampion mechanism of action provides a therapeutic effect by interrupting the dysregulated immune system responsible
for the disease, damage, and pain attributed to many inflammatory and degenerative conditions. Ampion is considered a platform drug which
is potentially useful for several inflammatory diseases throughout the body.
Ampion for Osteoarthritis
Ampion targets the cellular pathways in the innate immune response correlated with pain, inflammation, and joint damage in osteoarthritis.
As described above, in vitro studies have shown that Ampion represses the transcription of inflammatory cytokines responsible for
inflammation, while activating anti-inflammatory proteins responsible for tissue growth and healing. We believe that this mechanism of
action interrupts the disease process responsible for the pain and disability associated with OAK while providing a market expansion
potential as a disease modifying biologic drug.
6
Table of Contents
We are currently developing Ampion as an intra-articular injection to treat the signs and symptoms of severe OAK, which continues to be a
growing epidemic in the United States and other countries worldwide. OAK is a progressive disease characterized by gradual degradation
and loss of cartilage due to inflammation of the soft tissue and bony structures of the knee joint. Progression of the most severe form of
OAK leaves patients with little or no treatment options other than a total knee arthroplasty. The FDA has asserted that severe OAK is an
“unmet medical need” with no existing licensed therapy available. While we believe that Ampion could successfully treat this “unmet
medical need”, our ability to market this product is subject to FDA approval.
Osteoarthritis Market Opportunity
Osteoarthritis (“OA”) is the most common form of arthritis, and according to the Centers for Disease Control and Prevention (the “CDC”),
OA affects over 32.5 million people in the United States. It is a progressive and incurable disease of the joints involving degradation of the
intra-articular cartilage, joint lining, ligaments, and bone. Certain risk factors in conjunction with natural wear and tear lead to the
breakdown of cartilage. Osteoarthritis is caused by inflammation of the soft tissue and bony structures of the joint, which worsens over time
and leads to progressive thinning of intra-articular cartilage. Other progressive effects include narrowing of the joint space, synovial
membrane thickening, osteophyte formation and increased density of the subchondral bone. Based on Market Insights Report’s most recently
published study on Global Osteoarthritis Therapeutics Market by Anatomy (Knee, Hand), Drug Type (NSAIDs, Analgesics,
Corticosteroids), Route of Administration (Parenteral), Distribution Channel (Hospital Pharmacies), Purchasing Pattern (Prescription Drugs)
- Global Forecast to 2026, the OA therapeutics market is projected to reach $12.4 billion by 2026 from $7.3 billion in 2020, at a compound
annual growth rate of 8.7% from 2021 to 2026. The global demand for OAK treatment is expected to be fueled by aging demographics and
increased awareness of treatment options. Despite the size and growth of the OAK market, only a few treatment options currently exist, with
none labeled specifically for the severely diseased patient population.
Ampion Development for Osteoarthritis
Since our inception, we have conducted multiple clinical trials and have advanced through late-stage clinical trials in the United States,
initially under the guidance of the FDA’s Office of Blood Research and Review and most recently under the guidance of the FDA’s Office of
Tissues and Advanced Therapies.
Study AP-003-A was a multicenter, randomized, double-blind Phase III trial of 329 patients who were randomized 1:1 to receive Ampion or
saline control via intra-articular injection. The study showed a statistically significant reduction in pain compared to the control, with an
average of greater than 40% reduction in pain from baseline at 12 weeks with Ampion treatment. Patients who received Ampion also
showed a significant improvement in function and quality of life compared to patients who received the saline control at 12 weeks. Quality
of life was assessed using Patient Global Assessment. Furthermore, the trial included severely diseased patients, defined radiographically as
Kellgren Lawrence Grade 4 (“KL 4”). From this patient population, those patients who received Ampion had a significantly greater
7
Table of Contents
reduction in pain than those who received the saline control. Ampion was well tolerated with minimal adverse events reported in either the
Ampion or saline treated groups. There were no drug-related serious adverse events in either group.
In 2018, the FDA reiterated and confirmed that our successful pivotal Phase III clinical trial, AP-003-A, was adequate and well-controlled,
provided evidence of the effectiveness of Ampion and can contribute to the substantial evidence of effectiveness necessary for the approval
of a Biologics License Application (“BLA”). The FDA provided guidance that we should complete an additional Phase III trial of KL 4
severe OAK patients with concurrent controls that would be carried out under a Special Protocol Assessment (“SPA”) to obtain FDA
concurrence on the trial design prior to initiation of the trial.
We received an SPA agreement in June 2019 from the FDA for a Phase III clinical protocol in reference to the AP-013 study. The SPA
agreement for the AP-013 study finalized patient enrollment at 1,034 patients, with a sample size assessment at an interim analysis of 724
patients to allow an adjustment up to 1,551 patients if deemed necessary. In the SPA agreement, the FDA agreed that the design and planned
analysis of the AP-013 study adequately addressed the objectives necessary to support a regulatory submission. According to the FDA’s
guidance regarding SPAs (published in April 2018), an SPA documents the FDA’s agreement that the design and planned analysis of a study
can address objectives in support of a regulatory submission; however, the final determinations for marketing application approval are made
after a complete review of the marketing application and are based on the entire data in the application. Following the receipt of the SPA
agreement, we initiated the AP-013 study, identified and engaged clinical sites for the clinical trial, and initiated dosing of patients at those
sites.
In January 2020, the United States Department of Health and Human Services declared COVID-19 a public health emergency in the United
States and the CDC indicated that older adults, age 65 years and older, are at higher risk for severe illness as a result of COVID-19. The AP-
013 study focuses on individuals with the most severely diseased OAK, which represents an underserved patient population typically
excluded from clinical studies because of the intractable nature of their condition. The AP-013 study population is comprised of elderly
patients with an average age of 65 years old and a maximum age of 87 years. Therefore, guidance from the CDC indicates the AP-013 study
population is the highest risk demographic for developing severe illness during the current COVID-19 pandemic. In March 2020, and
updated on January 27, 2021, the FDA acknowledged the impact of COVID-19 on clinical trials in published guidance, “FDA Guidance on
Conduct of Clinical Trials of Medical Products during the COVID-19 Pandemic”, which outlines the Agency’s recommendations for
ensuring clinical trial participant safety and adherence to good clinical practice guidelines and protocol requirements for clinical trials during
the outbreak. In concurrence with the FDA guidance, the Safety Monitoring Committee (“SMC”) for the AP-013 study recognized the
impact of COVID-19 on the clinical trial. In April 2020, we paused ongoing conduct of the AP-013 study, and we continue to monitor the
COVID-19 health situation and updated FDA guidance on conducting clinical trials in a pandemic. COVID-19 cases across the United
States continue to be reported, therefore, we have determined that the AP-013 study will remain paused as we continue to explore options to
enable us to complete the study. Currently, the Company is evaluating options for the AP-013 study using scientific publications and the
FDA guidance including, “Statistical Considerations for Clinical Trials During the COVID-19 Public Health Emergency”, which is
specifically designed to assist the pharmaceutical industry with viable options for evaluating data from clinical trials which were adversely
impacted by the pandemic. In order to remain in compliance with such guidance, we are working with the FDA on a proposal for the AP-013
study. However, it is possible that the COVID-19 pandemic may prevent completion of the AP-013 study at this time or at all.
Ampion for COVID-19
Nonclinical in vitro studies show Ampion decreases the production of inflammatory cytokines associated with the hyperactive inflammatory
response present during COVID-19 infection. Elevated levels of inflammatory cytokines are correlated with COVID-19 severity and may
also trigger additional complications including pneumonia, acute lung injury (“ALI”) and/or acute respiratory distress syndrome (“ARDS”),
which is a leading cause of mortality in COVID-19. By targeting and reducing the production of these inflammatory cytokines, Ampion may
improve the clinical outcome for patients with COVID-19.
Due to its mode of action, Ampion may be a viable treatment option for those infected with COVID-19 to improve clinical outcomes and
decrease the progression and severity of associated COVID-19 inflammatory conditions (i.e., COVID-19 pneumonia, ALI, ARDS, and
ultimately mortality). Accordingly, Ampion may provide an early intervention option for COVID-19 patients.
8
Table of Contents
COVID-19 Market Opportunity
The COVID-19 pandemic has resulted in millions of cases and hundreds of thousands of deaths worldwide with figures continuing to reflect
significant expansion of the pandemic. The COVID-19 infection is an acute respiratory illness caused by a novel coronavirus (SARS-COV-
2). Once infected, the COVID-19 virus moves into a patient’s respiratory tract where the lungs may become inflamed, making breathing
difficult and requiring treatment with oxygen. The CDC has estimated that approximately 20% of patients with COVID-19 will progress to a
severe disease condition, requiring hospitalization and clinical care. Complications of severe COVID-19 infection include ARDS, ALI,
pneumonia, sepsis and septic shock, cardiomyopathy and arrhythmia, acute kidney injury and prolonged hospitalization for other
complications (i.e., secondary bacterial infection). The COVID-19 pandemic continues to transform the growth of various industries and the
immediate impact varies. At the time of this filing, the ability to provide a reliable estimate of the potential global market size for COVID-19
therapeutics is in the preliminary stages and widely unknown at this time. We believe that it is imperative that effective treatments are
identified and developed to address the full spectrum of clinical features of COVID-19 infection, from the need for oxygen to the
progression to ARDS.
As an immunomodulatory agent, we believe that Ampion may be effective in improving the clinical course and outcome of COVID-19
patients.
Ampion Development for Treating COVID-19 Induced Inflammation
Ampion is in development as a novel biologic drug that regulates multiple therapeutic targets in the innate immune system responsible for
the inflammation, tissue damage and pathogenesis associated with dysregulated immune disorders. Due to its mode of action, Ampion may
be a viable treatment option for those infected with COVID-19 to improve clinical outcomes and slow the progression and severity with
associated critical COVID-19 inflammatory conditions (i.e., progression to respiratory failure, the need for assisted breathing and ultimately
mortality).
In May 2020, we submitted an Investigational New Drug (“IND”) application for the IV treatment of adults with COVID-19 requiring
supplemental oxygen. In June 2020, we received FDA agreement to proceed with human trials utilizing an IV Ampion treatment for
COVID-19 patients who require supplemental oxygen, and we commenced the Phase I AP-016 study in July 2020. In September 2020, we
announced the results of the AP-016 study, which met its primary endpoint and found Ampion to be safe and well-tolerated with no
remarkable difference in the incidence, frequency, and severity of adverse events between IV Ampion and SOC. These patients were
followed for 90-days following treatment to complete their safety assessments and the SMC found the IV treatment of Ampion to be safe
and well-tolerated. Secondary efficacy endpoints from the study suggest Ampion may improve the clinical outcome for patients with
COVID-19 as measured by the ordinal scale of clinical improvement as recommended by the WHO, and by the National Early Warning
Score, as recommended by the National Institute for Health and Care Excellence in its guidelines for the management of COVID-19 patients
in critical care. Following these results, in December 2020, the Company initiated an expanded global Phase I / II clinical trial for IV
Ampion treatment in COVID-19 patients.
In August 2020, we submitted preclinical safety data to support the IND application for inhalation treatment of adults with respiratory
distress due to COVID-19 infection. In September 2020, we received FDA agreement to proceed with human trials utilizing inhalation
Ampion as a treatment for COVID-19 patients who have respiratory distress, and we commenced the AP-014 study during the fourth quarter
of fiscal 2020.
We continue to communicate on a regular basis with the FDA to advance the development of these programs. As an immunomodulatory
agent, with anti-inflammatory effects, we believe Ampion may be effective in interrupting the inflammatory cascade associated with
COVID-19 and improving the clinical course and outcome for patients.
Due to the global pandemic, the number of COVID-19 cases, and the need for new treatments, regulatory authorities are applying emergency
approval programs. These programs include the Emergency Use Authorization (“EUA”) program in the United States. We may seek an EUA
from the FDA for the use of Ampion in respiratory distress due to COVID-19 infection. If we decide to apply for an EUA and it is granted, a
separate regulatory process will be needed in order to obtain a full marketing authorization (i.e., non-emergency authorization) for the use of
Ampion in COVID-19 patients.
9
Table of Contents
Ampion Manufacturing Facility
In May 2014, we commenced a 125-month lease of a multi-purpose facility containing approximately 19,000 square feet. This facility
includes quality control and research laboratories, our corporate offices and approximately 3,000 square feet of modular clean rooms to
manufacture Ampion.
Since the manufacturing site has been operational, we have implemented a quality system for both U.S. and European Union (“EU”)
regulatory compliance, validated the facility for human-use products, produced Ampion and placebo for use in the inception-to-date clinical
trials, and produced approximately 200,000 5mL vials of Ampion without a sterility failure. In addition, over 1,000 IV bags have been filled
for use in clinical trials with 125 mL of Ampion each without a sterility failure.
The manufacturing facility utilizes automated equipment with single use line sets and modular clean rooms designed to maximize flexibility
and scalability while meeting international quality standards to fulfill potential future global demand. We believe that the Ampion
manufacturing process delivers a competitive cost of goods that is significantly lower than the industry benchmark. Additionally, we
estimate that the maximum capacity for this turnkey facility is approximately 8 million 5 mL vials per year. An independent third-party has
conducted a quality audit of the Ampion manufacturing facility, which confirmed that our facility is expected to meet the requirements of an
FDA pre-approval inspection for the Chemistry, Manufacturing and Controls section of a BLA filing.
Competition
The biotechnology and pharmaceutical industries are highly competitive and subject to significant and rapid technological change as
researchers learn more about diseases and develop new technologies and treatments. Significant competitive factors in our industry include
product efficacy and safety; quality and breadth of an organization’s technology; skill of an organization’s employees and its ability to recruit
and retain key employees; timing and scope of regulatory approvals; government and third party reimbursement rates for, and the average
selling price of products; the availability of raw materials and qualified manufacturing capacity; manufacturing costs; intellectual property
and patent rights and their protection; and sales and marketing capabilities.
Market acceptance of Ampion will depend on a number of factors, including: (i) its potential advantages over existing or alternative
therapies; (ii) the actual or perceived safety of similar classes of products; (iii) the effectiveness of our sales, marketing, and distribution
capabilities; and (iv) the scope of any approval provided by the FDA or foreign regulatory authorities.
Although we believe Ampion possesses attractive attributes, we cannot assure that it will achieve regulatory approval or market acceptance,
or that we will be able to compete effectively in the pharmaceutical drug markets. If Ampion fails to gain regulatory approvals and
acceptance in its intended markets, we may not generate meaningful revenues or achieve profitability.
10
Table of Contents
Government Regulation
FDA Approval Process
In the United States, pharmaceutical products are subject to extensive regulation by the FDA. The Federal Food, Drug, and Cosmetic Act
(“FDCA”) and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture,
storage, record keeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and
import and export of pharmaceutical products. Failure to comply with applicable U.S. requirements may subject a company to a variety of
administrative or judicial sanctions, such as FDA refusal to approve a pending BLA, adverse facility inspection reports (Form 483), untitled
or warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil
penalties, and criminal prosecution.
Pharmaceutical and biologic product development in the United States typically involves:
● the performance of satisfactory preclinical laboratory and animal studies under the FDA’s Good Laboratory Practices (“GLP”),
regulation;
● the development and demonstration of manufacturing processes, which conform to the FDA mandated current Good
Manufacturing Practices (“cGMP”), including a quality system regulating manufacturing;
● the submission and acceptance of an IND application which must become effective before human clinical trials may begin;
● obtaining the approval of Institutional Review Boards (“IRBs”) at each clinical trial site to protect the welfare and rights of human
subjects in clinical trials;
● adequate and well-controlled clinical trials to establish the safety and effectiveness of the biologic for each indication for which
FDA approval is sought; and
● the submission to the FDA for review and approval of a BLA, depending on the product’s components, intended effect, and claims.
Satisfaction of FDA pre-market approval requirements typically takes many years and the actual time required may vary substantially based
upon the type, complexity, and novelty of the product or disease. Preclinical tests generally include laboratory evaluation of a product
candidate, its chemistry, formulation, stability and toxicity, as well as certain animal studies to assess its safety. Results of these preclinical
tests, together with manufacturing information (in compliance with GLP and cGMP), analytical data and the clinical trial protocol (detailing
the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated), must be submitted to
the FDA as part of an IND, which must become effective before human clinical trials can begin.
An IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns
or questions about the intended conduct of the trial and imposes what is referred to as a clinical hold. Preclinical studies generally take
several years to complete, and there is no guarantee that an IND based on those studies will become effective, allowing clinical testing to
begin. In addition to the FDA review of an IND, each medical site that desires to participate in a proposed clinical trial must have the
protocol reviewed and approved by an independent IRB or Ethics Committee (“EC”) for sites located outside of the United States. The IRB
considers, among other things, ethical factors, and the selection and safety of human subjects. Clinical trials must be conducted in
accordance with the FDA’s Good Clinical Practices (“GCP”) requirements. The FDA and/or IRB/EC may order the temporary, or permanent,
discontinuation of a clinical trial or a specific clinical trial site to be halted at any time, or impose other sanctions for failure to comply with
requirements under the appropriate entity jurisdiction.
Clinical trials to support BLAs for marketing approval are typically conducted in three sequential phases, but the phases may overlap.
Ampio is seeking a BLA for Ampion’s treatment of severe OAK. In Phase I clinical trials, a product candidate is typically introduced either
into healthy human subjects or patients with the medical condition for which the new drug is intended to be used. The main purpose of the
trial is to assess a product candidate’s safety and the ability of
11
Table of Contents
the human body to tolerate the product candidate. Phase I clinical trials generally include less than 50 subjects or patients. During Phase II
trials, a product candidate is studied in an exploratory trial or trials in a limited number of patients with the disease or medical condition for
which it is intended to be used in order to: (i) further identify any possible adverse side effects and safety risks, (ii) assess the preliminary or
potential efficacy of the product candidate for specific target diseases or medical conditions, and (iii) assess dosage tolerance and determine
the optimal dose for Phase III trials. Phase III trials are generally undertaken to demonstrate clinical efficacy and to further test for safety in
an expanded patient population with the goal of evaluating the overall risk-benefit relationship of the product candidate. Phase III trials will
generally be designed to reach a specific goal or endpoint, the achievement of which is intended to demonstrate the product candidate’s
clinical efficacy and provide adequate information for labeling of the biologic.
After completion of clinical testing under an IND, a BLA is prepared and submitted to the FDA. FDA approval of the BLA is required
before marketing of the product may begin in the United States. The application must include the results of all preclinical, clinical, and other
testing and a compilation of data relating to the product’s pharmacology, chemistry, manufacture, and controls. The cost of preparing and
submitting a BLA is substantial. Under federal law, the submission of most of these applications are subject to an application user fee,
currently $2.9 million. However, the FDA will waive the application user fee for the first human drug application that a small business or its
affiliate submits for review. Small businesses are defined as businesses with less than 500 employees, therefore Ampio believes that it will
be considered a small business and intends to submit a small business waiver for waiver of the BLA application user fee. The manufacturer
and/or sponsor under an approved BLA are also subject to an annual program fee, currently $325,000. The annual program fee replaced the
product and establishment user fees that the FDA charged in prior years. These fees typically increase annually.
The FDA has 60 days from its receipt of a BLA to determine whether the application will be accepted for filing based on the FDA’s
threshold determination that it is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA
begins an in-depth review. The FDA has agreed to certain performance goals in the review of BLAs. Applications for standard biologic
products are typically reviewed within ten months; most applications for priority or accelerated biologics are reviewed in six months. There
are accelerated review processes at the FDA, including Fast Track Designation and Accelerated Approval, none of which Ampio is currently
seeking.
The review process for both standard and priority review may be extended by the FDA for three additional months to consider certain late-
submitted information, or information intended to clarify information already provided in the submission. The FDA may also refer
applications for novel biologic products, or biologic products which present difficult questions of safety or efficacy, to an advisory
committee, which is typically a panel that includes clinicians and other experts, for review, evaluation, and a recommendation as to whether
the application should be approved. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such
recommendations. Before approving a BLA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP.
Additionally, the FDA will inspect the facility or the facilities where the biologic is manufactured. The FDA will not approve the product
unless compliance with cGMP is satisfactory and the BLA contains data that provide substantial evidence that the biologic is safe and
effective in the indication studied.
After the FDA evaluates the BLA and the manufacturing facilities, it will issue either an approval letter or a complete response letter. A
complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information in
order for the FDA to reconsider the application. If, or when, those deficiencies have been addressed to the FDA’s satisfaction in a
resubmission of the BLA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or
six months depending on the type of information included. An approval letter authorizes commercial marketing of the drug product with
specific prescribing information for specific indications. As a condition of the BLA approval, the FDA may require a risk evaluation and
mitigation strategy (“REMS”) to help ensure that the benefits of the biologic outweigh the potential risks. REMS can include medication
guides, communication plans for healthcare professionals, and elements to assure safe use (“ETASU”). ETASU can include, but are not
limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring,
and the use of patient registries. The requirement for a REMS can materially affect the potential market and profitability of the drug.
Product approval may require substantial post-approval testing and surveillance to monitor the drug’s safety or efficacy. Once granted,
product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial
marketing.
12
Table of Contents
We have advanced through late-stage clinical trials on Ampion for the treatment of OAK in the United States. Nevertheless, our current
regulatory strategy may not secure the final regulatory approval of Ampion for the chosen product indications. In addition, the approval(s) if
obtained, may take longer than anticipated. We can provide no assurance that Ampion will prove to be safe or effective, will receive required
regulatory approvals, or, if approved, will be successfully commercialized.
Foreign Regulatory Approval
Outside of the United States, our ability to market Ampion will be contingent upon receiving marketing authorizations from the appropriate
foreign regulatory authorities, whether or not FDA approval has been obtained. The Common Technical Document used to assemble the
Quality, Safety, and Efficacy information for submission of an Ampion BLA in the United States is currently recognized throughout Europe,
Canada and Japan. The foreign regulatory approval process in most industrialized countries generally encompasses risks similar to those we
will encounter in the FDA approval process. The requirements governing the conduct of clinical trials and marketing authorizations, and the
time required to obtain the requisite approvals, may vary widely from country to country and may differ from those required for FDA
approval.
Under EU regulatory systems, marketing authorizations may be submitted either under a centralized or decentralized procedure.
The centralized procedure provides for the grant of a single marketing authorization that is valid for all EU member states. The centralized
procedure is compulsory for human medicines that are derived from biotechnology processes, such as genetic engineering, that contain a
new active substance indicated for the treatment of certain diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative disorders or
autoimmune diseases and other immune dysfunctions, and officially designated orphan medicines. For medicines that do not fall within these
categories, an applicant has the option of submitting an application for a centralized marketing authorization to the European Commission
following a favorable opinion by the European Medicines Agency (“EMA”) as long as the medicine concerned is a significant therapeutic,
scientific or technical innovation, or if its authorization would be in the interest of public health.
The decentralized procedure provides for mutual recognition of national approval decisions. Under this procedure, the holder of a national
marketing authorization may submit an application to the remaining member states. Within 90 days of receiving the applications and
assessment report, each member state must decide whether to recognize approval. The mutual recognition process results in separate national
marketing authorizations in the reference member state and each concerned member state.
We will seek to choose the appropriate route of European regulatory filing in an attempt to accomplish the most rapid regulatory approvals
for Ampion when ready for review. However, the chosen regulatory strategy may not secure regulatory approval of Ampion for the chosen
product indications. In addition, these approvals, if obtained, may take longer than anticipated. We can provide no assurance that Ampion
will prove to be safe or effective, will receive required regulatory approvals, or, if approved, will be successfully commercialized.
BPCIA and Exclusivity
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively
referred to as the “Affordable Care Act”), which was signed into law in 2010, included a subtitle known as the BPCIA. The BPCIA grants a
novel biologic, or reference product, 12 years of market exclusivity.
We believe that Ampion is a novel biologic product and, as such, we expect it will be granted 12 years of market exclusivity as measured
from the FDA approval date.
Post-Approval Regulation
If a product candidate receives regulatory approval, the approval is typically limited to specific clinical indications. Furthermore, after
regulatory approval is obtained, subsequent discovery of previously unknown problems with a product may result in restrictions on its use or
complete withdrawal of the product from the market. Any FDA-approved products manufactured or distributed by us will be subject to
continuing regulation by the FDA, including record-keeping requirements and reporting of adverse events or experiences. Further, biologic
manufacturers and their
13
Table of Contents
subcontractors are required to register their establishments with the FDA and state agencies and are subject to periodic inspections by the
FDA and state agencies for compliance with cGMP, which impose rigorous procedural and documentation requirements upon us and our
contract manufacturers. We cannot be certain that we or our present or future contract manufacturers or suppliers will be able to comply with
cGMP regulations and other FDA regulatory requirements. Failure to comply with these requirements may result in, among other things,
total or partial suspension of production activities, failure of the FDA to grant approval for marketing, and withdrawal, suspension, or
revocation of marketing approvals.
If the FDA approves our BLA for Ampion’s treatment of severe OAK, we and the manufacturers of clinical supplies and commercial
supplies must provide certain updated safety and efficacy information. Product changes, as well as certain changes in the manufacturing
process or facilities where the manufacturing occurs, or other post-approval changes may necessitate additional FDA review and approval.
The labeling, advertising, promotion, marketing, and distribution of a biologic product must also be in compliance with FDA and Federal
Trade Commission (“FTC”) requirements which include, among others, standards and regulations for direct-to-consumer advertising,
industry sponsored scientific and educational activities, and promotional activities involving the Internet. In addition, we are prohibited from
promoting our products off-label. The FDA and FTC have very broad enforcement authority, and failure to abide by these regulations can
result in penalties, including the issuance of a warning letter or untitled letter directing us to correct deviations from regulatory requirements
and enforcement actions that can include seizures, fines, injunctions, and criminal prosecution.
Other Regulatory Requirements
We are also subject to regulation by other regional, national, state and local agencies, including the U.S. Department of Justice, the Office of
Inspector General of the U.S. Department of Health and Human Services and other regulatory bodies. Our current and future partners are
subject to many of the same requirements.
In addition, we are subject to other regulations, including regulations under the Occupational Safety and Health Act, regulations promulgated
by the U.S. Drug Enforcement Administration, the Toxic Substance Control Act, the Resource Conservation and Recovery Act, and
regulations under other federal, state, and local laws.
Violations of any of the foregoing requirements could result in penalties being assessed against us.
Privacy
Most health care providers, including research institutions from whom we or our partners obtain patient information, are subject to privacy
and security rules under the Health Insurance Portability and Accountability Act of 1996, as amended (“HIPAA”). Additionally, strict
personal privacy laws in other countries affect pharmaceutical companies’ activities in those countries. Such laws include the EU Directive
95/46/EC on the protection of individuals with regard to the processing of personal data, as well as individual EU Member States
implementing additional laws. Although our clinical development efforts are not barred by these privacy regulations, we could face
substantial criminal penalties if we knowingly receive individually identifiable health information from a health care provider that has not
satisfied HIPAA’s or the EU’s disclosure standards. Failure by EU clinical trial partners to obey requirements of national laws on private
personal data, including laws implementing the EU Data Protection Directive, might result in liability and/or adverse publicity.
Information Systems
We believe that our Information Systems (“IS”) capabilities are adequate to manage our core business. In addition, we believe our internal
controls related to IS are operating effectively.
Intellectual Property Summary
Ampion
We made the decision to focus available resources by limiting the maintenance of patent protection for Ampion based on the relative
importance of technologies covered by patents, the geographic jurisdiction of patents and remaining patent
14
Table of Contents
term. This allowed us to reduce the overall number of patents while maintaining our strategic coverage. The portfolio primarily consists of
nine families filed in the United States and throughout the world.
The first family includes U.S. patents and a European patent, validated and being maintained in Germany, Great Britain and France with
claims relating to methods of treating inflammatory disease and compositions of matter that include an active component of Ampion
(aspartyl-alanyl-diketopiperazine, or “DA-DKP”). This family also includes issued patents in China, Hong Kong, and Japan. The standard
20-year expiration for patents in this family will be on August 2, 2021.
The second family includes U.S. patents with claims directed to methods of treating inflammatory diseases with compositions of matter,
including Ampion, and claims directed to such compositions of matter. This family also includes issued patents in Australia, China, New
Zealand, Singapore, Hong Kong, Israel, Japan, South Africa, and Europe (validated in Germany, Great Britain, and France) and pending
applications in the United States and Canada. The standard 20-year expiration for patents in this family will be in 2024.
The third family includes issued patents and pending applications world-wide, including issued patents in Australia, Canada, China, Russia,
Indonesia, Israel, Japan, Korea, Mexico, Malaysia, New Zealand, Philippines, South Africa and Europe (validated in Austria, Belgium,
Switzerland, Germany, Spain, France, the United Kingdom, Hong Kong, Ireland, Italy, Netherlands, Poland, and Sweden), and pending
applications in Brazil, Singapore, and the United States. The claims in this family are directed to the treatment of degenerative joint diseases.
The standard 20-year expiration for patents in this family will be in 2032.
The fourth family includes a U.S. patent, a pending U.S. application, issued patents in Australia, Japan and Europe (validated in Germany,
Great Britain, France, Italy, and Switzerland), and pending applications in Canada, China, Hong Kong, and New Zealand with claims
directed to the use of Ampion to mobilize, attract, expand and differentiate stem cells in the treatment of subjects. The standard 20-year
expiration for patents in this family will be in 2034.
The fifth family includes two U.S. patents, a pending U.S. application, issued patents in Australia and Japan, and pending applications in
Canada, China, Europe, Hong Kong, Israel, Japan, Korea, and Russia with claims directed to the use of Ampion for the treatment of
degenerative joint diseases in a multi-dose treatment regimen. The standard 20-year expiration for patents in this family will be in 2035.
The sixth family includes a pending U.S. application and pending applications in Europe and Hong Kong with claims directed to the use of
Ampion in the absence of a cyclooxygenase-2 (“COX-2”) antagonist. The standard 20-year expiration for patents in this family will be in
2036.
The seventh family includes a pending U.S. application with claims directed to the use of N-acetyl-kynurenine for treatment of T-cell
mediated diseases, degenerative joint disease and diseases mediated by platelet activating factor and composition of matter. The standard 20-
year expiration for patents in this family will be in 2037.
The eighth family includes a pending U.S. application and issued patents in China, Japan and Europe (validated in Germany, Great Britain,
and France) with claims directed to the use of DA-DKP to treat conditions, including respiratory conditions, mediated by vascular
hyperpermeability. The standard 20-year expiration for patents in this family will be in 2031.
The ninth family includes a pending U.S. provisional application with claims directed to the use of DA-DKP to treat conditions, including
respiratory conditions, mediated by vascular hyperpermeability. The standard 20-year expiration for patents in this family will be in 2031.
Barriers to Entry – General
We also maintain trade secrets and proprietary know-how that we seek to protect through confidentiality and nondisclosure agreements and
other controls over confidential information. We have sought U.S. and foreign patent protection for our therapeutic product for multiple
indications. These patents may not provide meaningful protection or adequate remedies in the event of unauthorized use or disclosure of
confidential and proprietary information. If we do
15
Table of Contents
not adequately protect our trade secrets and proprietary know-how, our competitive position and business prospects could be materially
harmed.
The patent positions of companies such as ours involve complex legal and factual questions and, therefore, their enforceability cannot be
predicted with any certainty. Our issued patents, and those that may be issued to us in the future, may be challenged, invalidated or
circumvented, and the rights granted under the patents may not provide us with meaningful protection or competitive advantages. Our
competitors may independently develop similar technologies or duplicate any technology developed by us, which could offset any
advantages we might otherwise realize from our intellectual property. Furthermore, even if Ampion receives regulatory approval, the time
required for development, testing, and regulatory review could mean that protection afforded to us by our patents may only remain in effect
for a short period after commercialization. The expiration of patents we hold could adversely affect our ability to successfully commercialize
our biologic, thus harming our operating results and financial position.
We will be able to protect our proprietary intellectual property rights from unauthorized use by third parties only to the extent that such
rights are covered by valid and enforceable patents or are effectively maintained as trade secrets. If we must litigate to protect our
intellectual property from infringement, we may incur substantial costs and our officers may be forced to devote significant time to
litigation-related matters. The laws of certain foreign countries do not protect intellectual property rights to the same extent as the laws of the
United States.
Our pending patent applications, or those we may file or license from third parties in the future, may not result in patents being issued. Until
a patent is issued, the claims covered by an application for patent may be narrowed or removed entirely, thus depriving us of adequate
protection. As a result, we may face unanticipated competition, or conclude that without patent rights the risk of bringing Ampion to market
exceeds the returns we are likely to obtain. We are generally aware of the scientific research being conducted in the areas in which we focus
our research and development efforts, but patent applications filed by others are maintained in secrecy for at least 18 months after filing and,
in some cases in the U.S., until the patent is issued. The publication of discoveries in scientific literature often occurs substantially later than
the date on which the underlying discoveries were made. As a result, it is possible that patent applications for products similar to our
biologic candidate may have already been filed by others without our knowledge. The biotechnology and pharmaceutical industries are
characterized by extensive litigation regarding patents and other intellectual property rights, and it is possible that development of Ampion
could be challenged by other pharmaceutical or biotechnology companies. If we become involved in litigation concerning the enforceability,
scope and validity of the proprietary rights of others, we may incur significant litigation or licensing expenses, be prevented from further
developing or commercializing Ampion, be required to seek licenses that may not be available from third parties on commercially
acceptable terms, if at all, or subject us to compensatory or punitive damage awards. Any of these consequences could materially harm our
business.
Compliance with Environmental Laws
We believe we are in compliance with current environmental protection requirements that apply to us or our business. Costs attributable to
environmental compliance are not currently material.
Raw Materials and Principal Suppliers
We currently source the key components/raw materials needed to produce Ampion for our clinical trials from the following major suppliers
in the industry:
Human Serum Albumin
Line Sets
Caps/vials/stoppers
Nova Biologics/Octapharma
Sartorius Stedim and ThermoFisher
Afton Scientific
We have identified some secondary suppliers and are actively seeking additional suppliers to ensure that we can source our key
components/raw materials as we acknowledge that the COVID-19 pandemic has caused a shortage of medical supplies (particularly 5mL
vials). Due to our forecasted 12-month supply of key components/raw material, we do not currently have availability concerns.
16
Table of Contents
Product Liability and Insurance
The development, manufacture, and sale of pharmaceutical products involve inherent risks of adverse side effects or reactions that can cause
bodily injury or even death. Ampion, if we succeed in commercializing, could adversely affect consumers even after obtaining regulatory
approval and, if so, we could be required to withdraw our product from the market or be subject to administrative or other proceedings. We
obtain clinical trial liability coverage for human clinical trials, and, if we obtain regulatory approval of Ampion, we will obtain appropriate
product liability insurance coverage for Ampion that we manufacture and sell for human use. The amount, nature, and pricing of such
insurance coverage will likely vary due to a number of factors such as Ampion’s clinical profile, efficacy, and safety record, and other
characteristics. We may not be able to obtain sufficient insurance coverage to address our exposure to product recall or liability actions, or
the cost of that coverage may be such that we will be limited in the types or amount of coverage we can obtain. Any uninsured loss we suffer
could materially and adversely affect our business and financial position.
Human Capital Resources
In order to achieve the goals and expectations of our Company, it is crucial that we continue to attract and retain top talent. To facilitate
talent attraction and retention, we strive to make Ampio Pharmaceuticals, Inc. a safe and rewarding workplace, with opportunities for our
employees to grow and develop in their careers, supported by strong compensation and benefits. For example, we pay 100% of our
employees medical benefits. In addition, we have implemented a flexible paid time off (“PTO”) policy, which we believe is helpful and
essential for achieving work-life balance.
As of February 16, 2021, we had 18 full-time employees and utilized the services of a number of consultants on a temporary basis. We
believe that we have a good relationship with our employees and company morale is considered high. In response to the COVID-19
pandemic and the pause of the AP-013 study, we eliminated two positions. However, as of December 31, 2020, our voluntary turnover was
less than 15%.
Corporate History
Our predecessor, DMI Life Sciences, Inc. (“Life Sciences”), was incorporated in Delaware in December 2008. In March 2010, Life Sciences
was merged with a subsidiary of Chay Enterprises, Inc. As a result of this merger, Life Sciences stockholders became the controlling
stockholders of Chay Enterprises, Inc. Following the merger, we reincorporated in Delaware as Ampio Pharmaceuticals, Inc. in March 2010.
Available Information
Our principal executive offices are located at 373 Inverness Parkway, Suite 200, Englewood, Colorado 80112 USA, and our phone number is
(720) 437-6500.
You may obtain a copy of our annual reports on Form 10-K, quarterly reports on From 10-Q, current reports on Form 8-K and amendments
to those reports on our website at http://www.ampiopharma.com on the earliest practicable date following the filing with the U.S. Securities
and Exchange Commission (“SEC”). Information found on our website is not incorporated by reference into this report.
Our Code of Business Conduct and Ethics and the charters of the Nominating and Governance Committee, Audit, Compensation, and
Disclosure Committees of our Board of Directors (our “Board”) may be accessed within the Investor Relations section of our website.
Amendments and waivers of the Code of Business Conduct and Ethics will also be disclosed within four business days of issuance on the
website. Information found on our website is neither part of this annual report on Form 10-K nor any other report filed with the SEC.
17
Table of Contents
Item 1A. Risk Factors.
You should carefully consider the following risk factors and all other information contained herein as well as the information included in this
Annual Report and other reports and filings made with the SEC in evaluating our business and prospects. Risks and uncertainties, in
addition to those we describe below, that are not presently known to us or that we currently believe are immaterial may also impair our
business operations. If any of the following risks occur, our business and financial results could be harmed, and the price of our common
stock could decline. You should also refer to the other information contained in this Annual Report, including our Consolidated Financial
Statements and the related Notes.
Risk Factors Summary
Risks Related to Our Financial Position and Capital Requirements
● We are a clinical stage company without any products that are approved for commercial sale and our business is dependent on the
success of Ampion. If Ampion does not receive regulatory approval or is not successfully commercialized, our business, including
our ability to generate revenues from product sales, is likely to be harmed.
● We have incurred significant losses since inception, expect to incur net losses for the foreseeable future and may never achieve or
sustain profitability.
● We will need additional capital to fund our future 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.
● 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 may be limited in our ability to access sufficient funding through a public or private equity offering or convertible debt offering
or to raise sufficient funds without stockholder approval.
● Our business, financial condition and results of operations may be materially adversely affected by global health epidemics,
including, but not limited to, the recent COVID-19 pandemic.
Risks Related to Our Business and Industry
● We must obtain regulatory approvals before Ampion can be commercialized. If clinical trials of Ampion fail to satisfactorily
demonstrate safety and efficacy to the FDA and other regulators, the FDA or other regulators 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.
● 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 may be harmed, and our stock price may decline.
● There can be no assurance that the product we are developing for the treatment of COVID-19 would be granted an EUA by the
FDA if we were to decide to apply for an EUA. If we do not apply for an EUA or, if we do apply and no EUA is granted or, once
granted, it is terminated, we will be unable to sell our product in the near future and will be required to pursue the drug approval
process, which is lengthy and expensive.
● There is significant competition in the search for a treatment for COVID-19.
● Competition for patients in conducting clinical trials may prevent or delay product development and strain our limited financial
resources.
● 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.
● Relying on third-party suppliers may result in delays in our ongoing clinical trials and introduction of our product to the market.
● Even if we, or our collaborators, obtain marketing approvals for Ampion, in the future, Ampion 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.
The expenses and costs we will incur to comply with FDA post approval requirements could limit our financial resources for other
development activities.
18
Table of Contents
● We might enter into agreements with collaborators to commercialize Ampion, which may affect the sales of our product and our
ability to generate revenues.
● 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.
● Lawsuits or investigations could divert our resources, result in substantial liabilities and reduce the commercial potential of
Ampion.
● Ampion is regulated by the FDA, and as such, may be subject to competition sooner than anticipated.
● We could 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.
● 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.
● If we do not receive marketing approval for Ampion, we may not realize the investment we have made in our manufacturing
facility.
● We currently, and from time to time in the future may, outsource portions of our internal business functions to third-party providers.
Outsourcing these functions has significant risks, and our failure to manage these risks successfully could materially adversely
affect our business, results of operations, and financial condition.
● Our future success depends on our ability to retain key employees, consultants and advisors and to attract, retain, and motivate
qualified personnel.
● 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.
Risks Related to Our Intellectual Property
● 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.
● From time to time we may need to license patents, intellectual property and proprietary technologies from third parties, which may
be difficult or expensive to obtain.
Risks Related to Our Common Stock
● 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, including through short sales.
● 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.
General Risk Factors
● 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.
For a more complete discussion of the material risks facing our business, see below.
Risks Related to Our Financial Position and Capital Requirements
19
Table of Contents
We are a clinical stage company without any products that are approved for commercial sale and our business is dependent on the
success of Ampion. If Ampion does not receive regulatory approval or is not successfully commercialized, our business, including our
ability to generate revenues from product sales, is likely to be harmed.
We do not have any products that are approved for commercial sale and may never be able to develop marketable products. A substantial
portion of our business and future success depends solely on our ability to develop, obtain regulatory approval for and to successfully
commercialize Ampion. We are devoting all of our resources to the development of Ampion. We cannot be certain that Ampion will be
successful in ongoing or future clinical trials, receive regulatory approval or be successfully commercialized even if we receive regulatory
approval. Since we do not have any products that are approved for commercial sale, we do not expect to generate revenues from product
sales in the foreseeable future, if ever.
We have incurred significant losses since inception, expect to incur net losses for the foreseeable future and may never achieve or sustain
profitability.
We are a pre-revenue development stage biopharmaceutical company that has not generated operating revenues or profits and have therefore
incurred an accumulated deficit totaling $200.5 million as of December 31, 2020. We expect to continue generating operating losses for the
foreseeable future but intend to limit the extent of these losses by entering into licensing, collaboration or similar type of agreements with
one or more strategic partners, which may provide us with potential fixed or contingent licensing fees and/or milestone/royalty payments.
We cannot be certain that any licensing or collaboration arrangements will be obtained, or that the terms of those arrangements will result in
us receiving material revenues. To obtain revenues from Ampion, we must succeed, either alone or with others, in a range of challenging
activities, including successful completion of all requisite clinical trials, filing of the BLA with the FDA, obtaining marketing approval,
manufacturing and commercialization, satisfying any post-marketing requirements and obtaining appropriate level of reimbursement from
both private insurance and government payors. We, and/or our collaborators, may never succeed in these activities and, even if we do, or one
of our collaborators does, we may never generate revenues that are significant enough to achieve profitability.
We will need additional capital to fund our future 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.
Developing and commercializing biopharmaceutical products is a very time-consuming, expensive and uncertain process that takes years to
complete. We expect our expenses could increase in connection with our ongoing activities, particularly as we finalize our current clinical
trial, prepare to file our Ampion BLA with the FDA and seek marketing approval for Ampion.
As of December 31, 2020, we had $17.3 million of cash and cash equivalents which we expect can fund our operations through the first
quarter of 2022.
Our future capital requirements will depend on and could increase significantly as a result of many factors including:
● progress in and the costs of our clinical trials and research and development;
● progress in and the costs of applying for regulatory approval for Ampion;
● the costs of sustaining our corporate overhead requirements and hiring and retaining necessary personnel;
● the scope, prioritization, and number of our research and development programs;
● the achievement of milestones or occurrence of other developments that trigger payments under any collaboration agreements
we obtain;
● the extent to which we are obligated to reimburse, or are entitled to reimbursement of, clinical trial costs under future
collaboration agreements, if any;
20
Table of Contents
● the costs involved in filing, prosecuting, enforcing, and defending patent claims and other intellectual property rights;
● the costs of securing manufacturing arrangements for commercial production;
● the costs of defending lawsuits and other claims by third parties or responding to various government agencies that we are
required to report to or respond to inquiries from;
● the costs associated with obtaining directors and officers (“D&O”) insurance, which may be higher due to our industry and due
to our recent stockholder litigation and government investigation concerning trading in our publicly listed securities; and
● the likely increase in the future level of D&O policy retention amounts given the industry trend and the legal costs associated
with our recent litigation and government investigation.
Until we can generate operating profit on an ongoing and reliable basis, we expect to satisfy our future ongoing cash and liquidity needs
through one or more of the following: (i) third-party collaboration arrangements, (ii) private or public sales of our securities, which we
expect will include our “at-the-market” (“ATM”) equity program, or (iii) debt financings. We cannot be certain that additional funding and
incremental working capital will be available to us on acceptable terms, if at all, or that it will exist in a timely and/or adequate manner to
allow for the proper execution of our near and long-term business strategy. In addition, we are subject to certain restrictions under our
agreement with an investment banker that we entered into in June 2019 and which expires in June 2021. Under the terms and conditions of
this agreement, the investment banker is provided a right of first refusal to act as the investment banker or placement agent on certain future
transactions. Therefore, it is possible funds may not be available on terms and conditions acceptable to management and stockholders of the
Company due to this limitation.
Even if we obtain requisite financing, it may be on terms not favorable to us, it may be costly and it may require us to agree to covenants or
other provisions that will favor new investors over existing stockholders or other restrictions that may adversely affect our business.
Additional funding, if obtained, may also result in significant dilution to our stockholders.
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.
Based on their assessment, management has raised concerns about our ability to continue as a going concern. In addition, our independent
registered public accounting firm expressed substantial doubt as to our ability to continue as a going concern in their report accompanying
our audited financial statements. A “going concern” opinion could impair our ability to finance our operations through the sale and issuance
of debt or equity securities or through bank financing. We believe that we will be able to raise additional equity or debt financing in the
future; however, any future financing could be dilutive to our current stockholders. Our ability to continue as a going concern will depend on
our ability to obtain additional financing. Additional capital may not be available on reasonable terms, or at all. If adequate financing is not
available, we would be required to terminate or significantly curtail our operations or enter into arrangements with collaborative partners or
others that may require us to relinquish rights to certain aspects of Ampion, or potential markets that we would not otherwise relinquish. If
we are unable to achieve these goals, our business would be jeopardized, and we may not be able to continue operations.
We may be limited in our ability to access sufficient funding through a public or private equity offering or convertible debt offering or to
raise sufficient funds without stockholder approval.
NYSE American rules impose restrictions on our ability to raise funds through a private offering of our common stock, convertible debt or
similar instruments without obtaining stockholder approval. Under NYSE American rules, an offering of 20% or more of our total shares
outstanding at a price per share less than the greater of book or market value of the stock requires stockholder approval unless the offering
qualifies as a “public offering” for purposes of the NYSE American rules.
In addition, under current SEC regulations, if immediately following the filing of this Annual Report, our public float is less than $75
million, and for so long as our non-affiliated public float is less than $75 million, the amount we will be
21
Table of Contents
able to raise through primary public offerings of securities in a twelve-month period using our shelf registration statement on Form S-3,
which was declared effective by the SEC in May 2020, will be limited to an aggregate of one-third of our non-affiliated public float, which
are referred to as the baby shelf rules.
As of February 16, 2021, our non-affiliated public float was approximately $453.6 million, based on 193,016,078 shares of outstanding
common stock held by non-affiliates at a price of $2.35 per share, which was the last reported sale price of the Company’s common stock on
the NYSE American Market on February 16, 2021. While we do not anticipate that we will be subject to the baby shelf rules immediately
after filing our Annual Report, we have been subject to the baby shelf rules in the past and it is possible that we will be subject to the baby
shelf rules in the future. In such event, the amount of financing the Company could raise may be limited.
Our business, financial condition and results of operations may be materially adversely affected by global health epidemics, including,
but not limited to, the recent COVID-19 pandemic.
Outbreaks of epidemic, pandemic or contagious diseases such as COVID-19, could have an adverse effect on our business, financial
condition and results of operations. In January 2020, the WHO announced a global health emergency because of COVID-19. In March 2020,
the WHO declared the outbreak of COVID-19, a global pandemic, based on the rapid increase in exposure globally. The COVID-19
pandemic has and continues to significantly affect the United States and global economies. The outbreak has and may continue to affect the
Company’s operations and those of third parties on which the Company relies, including negatively impacting the conduct of current and
projected clinical trials.
More specifically, our AP-013 study has been and may continue to be significantly affected by the COVID-19 pandemic. As a result of the
continuation of the pandemic, clinical site monitoring and patient visits may continue to be delayed due to government mandated and/or
Clinical Research Organization (“CRO”) initiated travel restrictions and prioritization of clinic resources toward the COVID-19 pandemic.
Some patients may not be able to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare
services. Similarly, the ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have
heightened exposure to COVID-19, could be challenging and adversely impact our clinical trial operations. In April 2020, we paused all
ongoing conduct associated with the AP-013 study. Due to the continued steady increase in reported cases, we have determined that the AP-
013 study will remain paused. However, the FDA recently provided guidance specifically designed to assist the pharmaceutical industry with
viable options for evaluating data from clinical trials which were impacted by the pandemic. We are reviewing the FDA guidance as it
relates to the AP-013 study data and are working with the FDA to come to agreement on a proposal to approach the AP-013 study.
In addition, we believe Ampion may be able to treat the serious complications related to the COVID-19 outbreak, including the need for
supplemental oxygen and the rapid onset of respiratory failure, termed ARDS or ALI, and we are pursuing new studies related to these life-
threatening COVID-19 manifestations. Clinical trials for Ampion that address these serious complications could be impacted if the pandemic
subsides or if there is not a sufficient number of COVID-19 patients located in the area where we perform clinical trials. Even though
COVID-19 vaccinations have been approved and will most likely reduce the overall mortality rate and severity of the illness, it does not
eliminate the need for the development of a therapeutic, such as Ampion, to address the complications that arise due to the COVID-19
infection.
The full extent of potential impacts of the COVID-19 pandemic on our business and product development, including our clinical trials,
financial condition and the global economy will depend on future developments, which are highly uncertain and cannot be predicted due to
the uncertain nature of the COVID-19 pandemic and its effects, including new information which may emerge concerning the severity of
COVID-19 and the actions to contain COVID-19 or treat its impact, among others. These effects could have a material adverse impact on
our business, operations, financial condition and results of operations. Existing insurance coverage may not provide protection for all, or any,
costs that may arise from all such possible events. We continue to assess the impact of COVID-19 on our business operations, system
supports and financial condition, but there can be no assurance that this analysis will enable us to avoid part or all of any impact from the
spread of COVID-19 or its consequences, including downturns in business sentiment generally or in our sector in particular.
22
Table of Contents
There are no assurances that the PPP loan will be forgivable in whole or in part.
In April 2020, we received PPP proceeds of $544,000. The PPP loan matures in April 2022 and has an annual interest rate of 1.0%.
Payments of principal and interest are deferred until August 2021. Pursuant to Section 1106 of the CARES Act and as amended by Section
3(c) of the Flexibility Act, we have applied for and may be granted forgiveness for all or a portion of the PPP loan. Such forgiveness will be
determined, subject to limitations, based on the use of the loan proceeds for qualifying expenses, which include payroll costs, rent, and
utility costs over the 24-week measurement period following receipt of the loan proceeds.
In October 2020, we submitted the PPP loan forgiveness application, which was approved by the Lender. In accordance with the Flexibility
Act, the Lender has 60 days from receipt of the completed application to issue a decision to the SBA. If the Lender determines that the
borrower is entitled to forgiveness of some or all of the amount applied for under the statute and applicable regulations, the Lender must
request payment from the SBA at the time the Lender issues its decision to the SBA. The SBA will, subject to any SBA review of the loan or
loan application, remit the appropriate forgiveness amount to the Lender, plus any interest accrued through the date of payment, not later
than 90 days after the Lender issues its decision to the SBA. February 1, 2021 marked the 90th day since the Lender sent our PPP loan
forgiveness application to the SBA to be reviewed and, at the time of this filing, we have not received a response from the SBA. The SBA
has been unresponsive to multiple requests from both us and our Lender for a status update related to the PPP loan forgiveness application.
Based on the PPP loan forgiveness application calculation, and the Lender already approving the loan forgiveness application, we continue
to believe that it is probable the PPP loan qualifies for forgiveness in full by the SBA and such forgiveness will be provided by the SBA in
due course. However, without formal written approval from the SBA, we cannot provide certainty that we will obtain forgiveness of the PPP
loan in whole or in part.
Our ability to use our net operating loss carryforwards may be subject to limitation.
Under Section 382 of the Internal Revenue Code of 1986, as amended, substantial changes in our ownership may limit the amount of net
operating loss carryforwards that could be utilized annually in the future to offset our taxable income. Specifically, this limitation may arise
in the event of a cumulative change in ownership of our company of more than 50% within a three-year period. Any such annual limitation
may significantly reduce the utilization of our net operating loss carryforwards before they expire. We believe it is likely that transactions
that have occurred in the past, and other transactions that may occur in the future, could trigger an ownership change pursuant to
Section 382, which could limit the amount of net operating loss carryforwards that could be utilized annually in the future to offset our
taxable income, if any.
Further, The Tax Cuts and Jobs Act (the “Tax Act”) changed the federal rules governing net operating loss carryforwards. For net operating
loss carryforwards arising in tax years beginning after December 31, 2017, the Tax Act limits a taxpayer’s ability to utilize such
carryforwards to 80% of taxable income. In addition, net operating loss carryforwards arising in tax years ending after December 31, 2017
can be carried forward indefinitely, but carryback is generally prohibited. Net operating loss carryforwards generated before January 1, 2018
will not be subject to the Tax Act’s taxable income limitation and will continue to have a twenty-year carryforward period. Nevertheless, our
net operating loss carryforwards and other tax assets could expire before utilization and could be subject to limitations, which could harm
our business, revenue, and financial results.
Risks Related to Our Business and Industry
We must obtain regulatory approvals before Ampion can be commercialized. If clinical trials of Ampion fail to satisfactorily demonstrate
safety and efficacy to the FDA and other regulators, the FDA or other regulators 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.
Clinical trials are long, expensive, and unpredictable processes that can be subject to extensive delays. We cannot guarantee that any clinical
studies will be conducted as planned or completed on schedule, if at all. It may take several years to complete clinical development
necessary to commercialize a biologic, and delays or failure can occur at any stage. Success in pre-clinical testing and the results of earlier
clinical trials do not necessarily predict clinical success, and larger and later-stage clinical studies may not produce the same results as
earlier-stage clinical studies. In
23
Table of Contents
addition, clinical studies of potential products often reveal that it is not possible or practical to continue development efforts for these
product candidates. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in
advanced clinical trials even after promising results in earlier trials and we cannot be certain that we will not face similar setbacks. The
design of a clinical trial can determine whether its results will support approval of a product for a desired indication and flaws in the design
of a clinical trial may not become apparent until the clinical trial is well advanced.
In connection with clinical testing and trials, we face a number of risks, including, but not limited to the following:
● Ampion is ineffective, or is considered inferior to existing approved medicines;
● patients may die or suffer other adverse effects for reasons that may or may not be related to Ampion;
● the results may not confirm the positive results of earlier testing or trials;
● the results may not meet the level of statistical significance required by the FDA or other regulatory agencies to establish the
safety and efficacy of Ampion; and
● the FDA may require additional clinical testing and trials, which are costly and time consuming.
In April 2020, due to the impact of COVID-19, we paused the ongoing conduct of the AP-013 study. As COVID-19 cases across the United
States continue to be reported, we have determined that the AP-013 study will remain paused, but we continue to actively explore viable
options to enable us to complete the study. Recently, the FDA has provided guidance specifically designed to assist the pharmaceutical
industry with viable options for evaluating data from clinical trials which were impacted by the pandemic. We are reviewing the FDA
guidance as it relates to the AP-013 study data and are working with the FDA to come to agreement on a proposal to approach the AP-013
study. However, it is possible that the continuation of the COVID-19 pandemic may prevent completion of the AP-013 study at this time or
at all. We continue to work toward completion and analysis of clinical trials for Ampion’s treatment of severe OAK. Any unfavorable
outcome of our AP-013 study of Ampion, which we anticipate will be the last clinical trial that we conduct prior to BLA submission, would
be a major set-back for the development program and for us. Due to our limited financial resources, an unfavorable outcome in the AP-013
study may require us to delay, reduce the scope of, or eliminate our OAK product development program, which we expect would have a
material adverse effect on our business and financial condition and on the value of our common stock.
If we do not successfully complete clinical development, file our BLA and receive marketing approval from the FDA, we will be unable to
market and sell products derived from Ampion and generate revenues. Even if we do successfully complete the AP-013 study, the results
may not be sufficient for FDA approval of our BLA for Ampion’s treatment of severe OAK, the FDA may not deem the data sufficient to
support an application for regulatory approval, or if the FDA required additional clinical trials to support a BLA, the results may not
necessarily be predictive of results of additional trials that may be needed before a BLA is submitted to the FDA. Although there are a large
number of biologics in the development stage in the United States and other countries, only a small percentage result in the submission of a
BLA to the FDA, even fewer are approved for commercialization, and only a small number achieve widespread physician and consumer
acceptance following regulatory approval. If our current clinical study is substantially delayed or fails to satisfactorily address the safety and
effectiveness of Ampion in development, we may not receive regulatory approval of Ampion and our business and financial condition will
be materially harmed.
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 may be harmed, and our stock price may decline.
We sometimes estimate for planning purposes the timing of the accomplishment of various scientific, clinical, regulatory, and other product
development objectives. These milestones may include our expectations regarding the commencement or completion of scientific studies,
clinical trials, the submission of regulatory filings, or commercialization objectives. From time to time, we may publicly announce the
expected timing of some of these milestones, such as the completion of an ongoing clinical trial, the initiation of other clinical programs,
submission of a
24
Table of Contents
BLA application, receipt of marketing approval, or a commercial launch of a product. The achievement of many of these milestones may be
outside of our control. All of these milestones are based on a variety of assumptions which may cause the timing of achievement of the
milestones to vary considerably from our estimates, including:
● our available capital resources or capital constraints we experience;
● the rate of progress, costs, and results of our clinical trials and research and development activities, including the extent of
scheduling conflicts with participating clinicians and collaborators, and our ability to identify and enroll patients who meet
clinical trial eligibility criteria;
● our receipt of approvals by the FDA and other regulatory agencies and the timing thereof;
● other actions, decisions, or rules issued by regulators;
● our ability to access sufficient, reliable and affordable supplies of the compound used to manufacture Ampion;
● the efforts of our collaborators with respect to the commercialization of our product; and
● costs related to, and timing issues associated with, product manufacturing as well as sales and marketing activities.
If we fail to achieve announced milestones in the timeframes we announce and expect, our business and results of operations may be
harmed, and the price of our stock may decline.
We received an 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 requested agreement from the FDA under an SPA for our AP-013 study of Ampion, which we received in writing from the FDA in June
2019. The FDA’s SPA process is designed to facilitate the FDA’s review and approval of biologics by allowing the FDA to evaluate the
proposed design and size of certain clinical trials that are intended to form the primary basis for determining a biologic’s efficacy. Upon
specific request by a clinical trial sponsor, the FDA will evaluate the protocol and respond to a sponsor’s questions regarding, among other
things, primary efficacy endpoints, trial conduct and data analysis. The FDA ultimately assesses whether the protocol design and planned
analysis of the trial are acceptable to support regulatory approval of the product candidate with respect to the effectiveness of the indication
studied. Based on their review, the FDA will then issue an SPA Agreement letter, or an SPA No Agreement letter.
As stated in the FDA’s guidance for industry regarding SPAs (published in April 2018), an SPA agreement does not guarantee approval of a
product candidate, even if the trial is conducted in accordance with the protocol. Moreover, the FDA may revoke or alter our SPA agreement
in certain circumstances. In particular, an SPA agreement is not binding on the FDA if public health concerns emerge that were unrecognized
at the time of the SPA agreement, other new scientific concerns regarding product safety or efficacy arise, we fail to comply with the agreed
upon trial protocols, or the relevant data, assumptions, or information provided by us in our request for the SPA change or are found to be
false or omit relevant facts. In addition, even after an SPA agreement is finalized, the SPA agreement may be modified, and such
modification will be deemed binding on the FDA review division, except under the circumstances described above, if the FDA and the
sponsor agree in writing to modify the protocol and such modification is intended to improve the study. The FDA retains significant latitude
and discretion in interpreting the terms of the SPA agreement and the data and results from any study that is the subject of the SPA
agreement.
In April 2020, we paused all ongoing conduct associated with the AP-013 study as a result of the COVID-19 pandemic and the study has
remained paused as a result of COVID-19 cases, which has created an unsafe environment for continuing the study. During 2020, as a result
of the pandemic, the FDA provided guidance which was specifically designed to assist the pharmaceutical industry with potential viable
options for evaluating data obtained from clinical trials which were impacted by the pandemic. We have reviewed, and continue to review,
this guidance as it relates to the AP-013 study data and we are working with the FDA to reach agreement on a proposal to modify the
existing SPA and
25
Table of Contents
move forward with the AP-013 study in a manner which we believe makes sense while considering the pandemic. While we are diligently
addressing the best approach for the AP-013 study, we cannot assure you that we will be successful in reaching agreement with the FDA for
a modification to our SPA which could adversely impact our ability to finish the study, file the BLA and receive regulatory approval for
Ampion.
Finally, if the FDA revokes or alters its agreement under our SPA, or interprets the data collected from the AP-013 study differently than we
do, the FDA may not deem the data sufficient to support an application for regulatory approval, or the FDA may require additional clinical
trials to support a BLA for Ampion’s treatment of severe OAK, both of which could materially impact our business, financial condition, and
results of operations.
There can be no assurance that the product we are developing for the treatment of COVID-19 would be granted an EUA by the FDA if
we were to decide to apply for an EUA. If we do not apply for an EUA or, if we do apply and no EUA is granted or, once granted, it is
terminated, we will be unable to sell our product in the near future and will be required to pursue the drug approval process, which is
lengthy and expensive.
We may seek an EUA from the FDA. The FDA may issue an EUA during a Public Health Emergency if it determines that the potential
benefits of a product outweigh the potential risks and if other regulatory criteria are met. There is no guarantee that we will apply for an
EUA or, if we do apply that we will be able to obtain an EUA. If granted, we will rely on the FDA policies and guidance in connection with
the marketing and sale of our product. If these policies and guidance change unexpectedly and/or materially or if we misinterpret them,
potential sales of our product could be adversely impacted.
An EUA allowing the marketing and sale of our product will terminate upon expiration of the Public Health Emergency. The FDA may also
terminate the EUA if safety issues or other concerns about our product arise or if we fail to comply with the conditions of authorization. If
we apply for an EUA, the failure to obtain such authorization or the termination of such an authorization, if obtained, would adversely
impact our business, financial condition and results of operations.
We may apply for an EUA for the use of Ampion to treat COVID-19 induced respiratory distress in the United States, but the likelihood
to be considered for such authorization depends on the status of the COVID-19 pandemic.
A number of preventative vaccines have recently been approved for use in human populations by regulatory agencies in the U.S. and
Europe. The anticipated effectiveness of these vaccines will likely limit the spread of COVID-19 and potentially reduce the market size for a
COVID-19 treatment. Under such conditions, regulatory agencies may be less willing to consider expedited and shortened processes for
review and may require submissions to be based on more than one clinical study.
The process for submitting and obtaining FDA clearance of an EUA can be expensive and lengthy. The FDA’s review process can take
several months or longer, and we may not be able to obtain EUA for the use of Ampion to treat COVID-19 induced respiratory distress on a
timely basis, or at all. Even if a clinical trial is completed, there can be no assurance that the data generated during a clinical trial will meet
the safety and effectiveness endpoints or otherwise produce results that will lead the FDA to grant authorization. The FDA’s refusal of, or
any significant delays in receiving an EUA, would have an adverse effect on our ability to expand our business.
There is significant competition in the search for a treatment for COVID-19.
There is significant competition, including from other companies and governmental organizations, to find treatments for COVID-19. Many
of these entities have substantially greater resources (including capital and personnel) than we do and many of these entities are much further
ahead in pursuit of a treatment than we are. Even if we are successful in demonstrating that Ampion is an effective treatment for COVID-19
induced respiratory distress, there is no guarantee that we will have the only effective treatment for COVID-19 or that we will be able to get
our treatment to market prior to our competitors.
Competition for patients in conducting clinical trials may prevent or delay product development and strain our limited financial
resources.
26
Table of Contents
Many pharmaceutical companies are conducting clinical trials in patients with the disease indications that our potential drug products target.
As a result, we must compete with them for clinical sites, physicians and the limited number of patients who fulfill the stringent
requirements for participation in clinical trials. Also, due to the confidential nature of clinical trials, we do not know-how many of the
eligible patients may be enrolled in competing studies and who are consequently not available to us for our clinical trials. Our clinical trials
may be delayed or terminated due to the inability to enroll enough patients. Patient enrollment depends on many factors, including the size
of the patient population, the nature of the trial protocol, the proximity of patients to clinical sites and the eligibility criteria for the study.
The delay or inability to meet planned patient enrollment may result in increased costs and delays or termination of the trial, which could
have a harmful effect on our ability to develop products.
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.
We currently rely, and will rely in the future, on medical institutions, clinical investigators, contract research organizations, contract
laboratories, and collaborators to perform data collection and analysis and other aspects of our clinical trials.
Our clinical trials conducted by third parties may be delayed, suspended, or terminated if:
● the third parties do not successfully carry out their contractual duties or fail to meet regulatory obligations or expected
deadlines;
● we replace a third party; or
● the quality or accuracy of the data obtained by third parties is compromised due to their failure to adhere to clinical protocols,
regulatory requirements, or for other reasons.
In addition, our third parties are not our employees, and except for remedies available to us under our agreements with such third parties, we
cannot control whether or not they devote sufficient time and resources to our on-going clinical, nonclinical and preclinical programs. If
third parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if
the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory
requirements or for other reasons, our clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory
approval for or successfully commercialize Ampion. As a result, our results of operations and the commercial prospects for Ampion would
be harmed, our costs could increase and our ability to generate revenues could be delayed.
Third party performance failures may increase our development costs, delay our ability to obtain regulatory approval, and delay or prevent
the commercialization of Ampion. If we seek alternative sources to provide these services, we may not be able to enter into replacement
arrangements without incurring delays or additional costs. Though we carefully manage our relationships with our third parties, there can be
no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material
adverse impact on our business, financial condition and prospects.
Relying on third-party suppliers may result in delays in our ongoing clinical trial and introduction of our product to the market.
We currently obtain the key components/raw materials needed to produce Ampion for our clinical trials from major suppliers in the industry
and we maintain strong relationships with those suppliers. Future clinical trials, if required, and FDA approval may be delayed if we are
unable to obtain a sufficient quantity of the key components/raw materials needed to produce Ampion in a timely manner.
Once regulatory approval is obtained, a marketed product and its suppliers and manufacturers are subject to continual review. The discovery
of previously unknown problems with a product or supplier and manufacturers may result in restrictions on the product, supplier, or
manufacturing facility, including withdrawal of the product from the market. Our key component/raw material suppliers are required to
operate in accordance with cGMPs per our quality agreements with each supplier. A failure of any of our contract suppliers to establish and
follow cGMPs and to document their adherence to such practices may lead to significant delays in the launch of Ampion into the market.
Failure by third-
27
Table of Contents
party suppliers to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil
penalties, revocation or suspension of marketing approval for our product, seizures or recalls of our product, operating restrictions, and
criminal prosecutions.
Even if collaborators with which we currently contract with or may contract with in the future successfully complete clinical trials of
Ampion, our product may not be commercialized successfully for other reasons.
Even if the contractors that we currently contract with for the AP-013 study, or contractors that we may contract with in the future,
successfully complete clinical trials for Ampion, our product may not be commercialized for other reasons, including:
● failure to receive the regulatory clearances required to market Ampion;
● being subject to proprietary rights held by others;
● being difficult or expensive to manufacture on a commercial scale;
● having adverse side effects that make Ampion’s use less desirable; or
● failing to compete effectively with products or treatments commercialized by competitors.
Even if we, or our collaborators, obtain marketing approvals for Ampion, in the future, Ampion 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. The
expenses and costs we will incur to comply with FDA post approval requirements could limit our financial resources for other
development activities.
Even if we receive marketing approval for Ampion, Ampion as well as the manufacturing processes, post-approval studies and measures,
labeling, advertising, and promotional activities for our product, among other things, will be subject to continual requirements of and review
by the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and
reports, registration and listing requirements, requirements relating to manufacturing, quality control, quality assurance and corresponding
maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping.
Even if marketing approval of Ampion is granted, the approval may carry conditions that limit the market for our product or put our product
at a competitive disadvantage relative to alternative therapies. For instance, the indicated use for Ampion that we have negotiated with the
FDA is “treatment of the signs and symptoms of severe OAK”, which will mean that our OAK product will not be marketed to persons
having less than severe OAK, a regulatory approval may further limit the indicated uses for which we can market a product or the patient
population that may utilize the product. These restrictions could make it more difficult to market Ampion effectively, which would
materially impair our ability to generate revenue.
The FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy
of a product. The FDA and other agencies, including the Department of Justice, closely regulate and monitor the post-approval marketing
and promotion of products to ensure that they are manufactured, marketed, and distributed only for the approved indications and in
accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications
regarding off-label use and if we, or our collaborators, do not market Ampion in accordance with the marketing approval received for a
product’s approved indications, we, or they, may be subject to warnings or enforcement action for off-label marketing. Violation of the
FDCA, the Public Health Service Act, and other statutes, including the False Claims Act, relating to the promotion and advertising of
prescription drugs may lead to investigations or allegations of violations of federal and state health care fraud and abuse laws and state
consumer protection laws.
Discovery of previously unknown problems with a product or the failure to comply with applicable FDA requirements can have negative
consequences, including adverse publicity, judicial or administrative enforcement, warning letters from the FDA, mandated corrective
advertising or communications with doctors and civil or criminal penalties, among others. Newly discovered or developed safety or
effectiveness data may require changes to a product’s approved
28
Table of Contents
labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk management
measures. The costs and expenses we may incur to comply with FDA post approval requirements could limit our financial resources for
other development activities.
We might enter into agreements with collaborators to commercialize Ampion, which may affect the sales of our product and our ability to
generate revenues.
We are not currently established to handle sales, marketing, and distribution of pharmaceutical products and may contract with, or license,
third parties to market Ampion if we receive regulatory approvals. Outsourcing sales and marketing in this manner may subject us to a
variety of risks, including:
● our inability to exercise control over sales and marketing activities and personnel;
● failure or inability of contracted sales personnel to obtain access to or persuade adequate numbers of physicians to prescribe
our product;
● disputes with collaborators concerning sales and marketing expenses, calculation of royalties, and sales and marketing
strategies;
● unforeseen costs and expenses associated with sales and marketing;
● collaborators may not have sufficient resources or decide not to devote the necessary resources due to internal constraints such
as budget limitations, lack of human resources, or a change in strategic focus;
● collaborators may believe our intellectual property or Ampion infringes on the intellectual property rights of others;
● collaborators may dispute their responsibility to conduct commercialization activities pursuant to the applicable collaboration,
including the payment of related costs or the division of any revenues;
● collaborators may decide to pursue a competitive product developed outside of the collaboration arrangement;
● collaborators may delay the commercialization of Ampion in favor of commercializing another party’s product candidate; or
● collaborators may decide to terminate or not to renew the collaboration for these or other reasons.
If we are unable to partner with a third party that has adequate sales, marketing, and distribution capabilities, we may have difficulty
commercializing Ampion, which would adversely affect our business, financial condition, and ability to generate product revenues.
If Ampion is commercialized, this does not assure acceptance by physicians, patients, third-party payors, or the medical community in
general.
We cannot be sure that Ampion, if and when approved for marketing, will be accepted by physicians, patients, third-party payors, or the
medical community in general. Even if the medical community accepts a product as safe and efficacious for its indicated use, physicians
may choose to restrict the use of the product if we or any collaborator are unable to demonstrate that, based on experience, clinical data,
side-effect profiles, and other factors, our product is preferable to any existing medicines or treatments. We cannot predict the degree of
market acceptance of Ampion once we receive marketing approval, which will depend on a number of factors, including, but not limited to:
● the clinical efficacy and safety of our product;
● the approved labeling for our product and any required warnings;
29
Table of Contents
● the advantages and disadvantages of our product compared to alternative treatments;
● our and any collaborator’s ability to educate the medical community about the safety and effectiveness of our product;
● the reimbursement policies of government and third-party payors pertaining to our product; and
● the market price of our product relative to competing treatments.
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 commercial success of Ampion will depend on the reimbursement rates from health maintenance, managed care, pharmacy benefit,
government health administration authorities, private health coverage insurers, and other third-party payors. If reimbursement is not
available, or is available only at limited levels, we, or our collaborators, may not be able to successfully commercialize Ampion. Even if
coverage is provided, the approved reimbursement amount may not be high enough to allow us, or our collaborators, to establish or maintain
pricing to realize a sufficient return on our or their investments.
The continuing efforts of the government, insurance companies, managed care organizations, and other payors of health care costs to contain
or reduce costs of health care may adversely affect one or more of the following:
● our or our collaborators’ ability to set a price we believe is fair for Ampion, if approved;
● our ability to generate revenues and achieve profitability; and
● the availability of capital.
The 2010 enactment of the Affordable Care Act is expected to significantly impact the provision of, and payment for, health care in the
United States. Various provisions of these laws are designed to expand Medicaid eligibility, subsidize insurance premiums, provide
incentives for businesses to provide health care benefits, prohibit denials of coverage due to pre-existing conditions, establish health
insurance exchanges, and provide additional support for medical research. Additional legislative proposals to reform healthcare and
government insurance programs, along with the trend toward managed healthcare in the United States, could influence the purchase of
medicines and reduce demand and prices for our products, if approved. This could harm our or our collaborators’ ability to market our
product and generate revenues. Cost containment measures that health care payors and providers are instituting, and the effect of further
health care reform could significantly reduce potential revenues from the sale of Ampion in the future, and could cause an increase in our
compliance, manufacturing, or other operating expenses. In addition, in certain foreign markets, the pricing of prescription drugs is subject
to government control and reimbursement may in some cases be unavailable. We believe that pricing pressures at the federal and state level,
as well as internationally, will continue and may increase, which may make it difficult for us to sell our potential product that may be
approved in the future at a price acceptable to us or any of our future collaborators.
Lawsuits or investigations could divert our resources, result in substantial liabilities and reduce the commercial potential of Ampion.
We may be subject to legal or administrative proceedings and litigation in the future, which may be costly to defend and could materially
harm our business, financial condition and operations. While we do not anticipate legal or administrative proceedings, the cost of responding
to and defending ourselves in such proceedings could be costly and exceed our retention levels under our insurance program.
Additionally, the risk that we may be sued on product liability claims is inherent in the development and commercialization of
pharmaceutical products. Side effects of, or manufacturing defects in, the product that we develop which is commercialized by us, or our
collaborators could result in the deterioration of a patient’s condition, injury, or even death. Once a product is approved for sale and
commercialized, the likelihood of product liability lawsuits
30
Table of Contents
increases. Claims may be brought by individuals seeking relief for themselves or by individuals or groups seeking to represent a class. These
lawsuits may divert our management from pursuing our business strategy and may be costly to defend. In addition, if we are held liable in
any of these lawsuits, we may incur substantial liabilities and may be forced to limit or forgo further commercialization of Ampion.
As a result of a number of factors, such as prior litigation matters, certain of the insurance products that we purchase have become less
available and their cost increased significantly in 2020. Although we maintain D&O insurance as well as general liability and product
liability insurance, this insurance coverage only covers potential liabilities after our retention has been met and only to the extent of the
insurance coverage, therefore, our insurance coverage may not fully cover potential liabilities. In addition, our inability to obtain or maintain
sufficient insurance coverage at an acceptable cost or to otherwise protect against potential legal or administrative liability claims could
prevent or inhibit the commercial production and sale of Ampion, if and when it receives regulatory approval, which could in turn adversely
affect our business. Lawsuits and investigations, or threats thereof, could also harm our reputation, which may adversely affect our
collaborators’ ability to commercialize our product successfully.
Ampion is regulated by the FDA, and as such, may be subject to competition sooner than anticipated.
With the enactment of the BPCIA an abbreviated pathway for the approval of biosimilar and interchangeable biological products was
created. The abbreviated regulatory pathway established legal authority for the FDA to review and approve biosimilars, including the
possible designation of a biosimilar as “interchangeable” based on its similarity to an existing brand product. The BPCIA provides a period
of exclusivity for products granted “reference product exclusivity,” under which an application for a biosimilar product referencing such
products cannot be approved by the FDA until 12 years after the original branded product is approved under a BLA.
This period of regulatory exclusivity does not apply to companies pursuing regulatory approval via their own traditional BLA, rather than
via the abbreviated pathway. Therefore, if Ampion were to receive reference product exclusivity, a competitor may seek approval of a
product candidate under a full BLA. In such a case, although the competitor would not enjoy the benefits of the abbreviated pathway for
biosimilar approval created under the BPCIA, the FDA would not be precluded from making effective an approval of the competitor product
pursuant to a BLA prior to the expiration of our 12-year period of market exclusivity.
We could 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.
If we develop an approved product, we cannot provide assurance it will be first to market, clinically superior or scientifically preferable to
existing or future products and/or treatments developed or introduced by our competitors. Our ability to succeed in the future depends on
our ability to discover, develop, and commercialize a pharmaceutical product that offers superior efficacy, convenience, tolerability, and
safety when compared to existing, or a lack of demonstrated, treatment methodologies. Because our strategy is to develop a new product
candidate primarily for the treatment of conditions that affect a large patient population, our product is likely to compete with a number of
existing medicines or treatments, and a large number of product candidates that are being developed by others.
Many of our potential competitors have substantially greater financial, technical, personnel, and marketing resources than we do. In addition,
many of these competitors have significantly greater resources devoted to product development and pre-clinical research. Our ability to
compete successfully will depend largely on our ability to:
● develop Ampion to be superior to other products in the market;
● attract and retain qualified personnel;
● obtain patent and/or other proprietary protection for Ampion;
● obtain required regulatory approvals; and
● obtain collaboration arrangements to commercialize Ampion.
31
Table of Contents
Established pharmaceutical companies devote significant financial resources to discovering, developing, or licensing novel compounds that
could make Ampion obsolete. Our competitors may obtain patent protection, receive FDA approval, and commercialize medicines before us.
Other companies are engaged in the discovery of compounds that may compete with Ampion.
Any new product that competes with a currently approved treatment or medicine must demonstrate compelling advantages in efficacy,
convenience, tolerability, and/or safety to address price competition and be commercially successful. If we are not able to compete
effectively against our current and future competitors, our business will not grow, and our financial condition and operations will suffer.
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.
In order to market and sell our product outside the United States, we, or our collaborators, may need to obtain separate marketing approvals
and comply with numerous and varying regulatory requirements in global markets which do not recognize the FDA approval process. The
approval procedures in these jurisdictions vary among countries and can require separate clinical trials and approval submission/approval
process involve additional testing. If we or our collaborators seek marketing approvals for Ampion outside the United States, we will be
subject to the regulatory requirements of health authorities in each country in which we seek approvals. With respect to marketing
authorizations in Europe, we will be required to submit a European marketing authorization application to the EMA which conducts a
validation and scientific approval process in evaluating a product for safety and efficacy. As further noted above, the approval procedure
varies among regions and countries and can involve additional testing, and the time required to obtain approvals may differ from that
required to obtain FDA approval. Obtaining regulatory approvals from health authorities in countries outside the United States is likely to
subject us to all of the risks associated with obtaining FDA approval described above. In addition, marketing approval by the FDA does not
ensure approval by the health authorities of any other country.
We may need others to market and commercialize Ampion in international markets.
In the future, if appropriate regulatory approvals are obtained, we may commercialize Ampion in international markets. However, we have
not decided how to commercialize Ampion in those markets. We may decide to build our own sales force or sell Ampion through third
parties. If we decide to sell Ampion in international markets through a third party, we may not be able to enter into any marketing
arrangements on favorable terms or at all. In addition, these arrangements could result in lower levels of income to us than if we marketed
our product candidates entirely on our own. If we are unable to enter into a marketing arrangement for Ampion in international markets, we
may not be able to develop an effective international sales force to successfully commercialize those products in international markets. If we
fail to enter into marketing arrangements for Ampion and are unable to develop an effective international sales force, our ability to generate
revenue would be limited.
If we do not receive marketing approval for Ampion, we may not realize the investment we have made in our manufacturing facility.
In May 2014, we commenced a 125-month lease of a multi-purpose facility containing approximately 19,000 square feet. We have built out
this facility in anticipation of receiving approval of our BLA and commencing commercialization of Ampion for treatment of severe OAK.
If the submission of our BLA for Ampion is significantly delayed, the FDA does not approve our BLA for Ampion, and/or does not approve
of our manufacturing operation, we will not be able to manufacture Ampion for commercial sale in our facility and we will remain obligated
to make payments under our lease, which is set to expire in 2024. Any delay or failure to receive BLA approval for Ampion could have a
material adverse effect on the carrying value of the manufacturing facility as well as on our results of operations.
While the likelihood of the use hazardous materials is deemed minimal, in the unlikely instance we use hazardous and/or biological
materials in a manner that causes injury or violates applicable law, we may be liable for damages or fines.
The use of hazardous and biological materials is deemed unlikely. However, the activities conducted at our facility (i.e., research and
development and manufacturing) may, from time to time, involve the controlled use of potentially
32
Table of Contents
hazardous substances, including, but not limited to, chemical and biological materials and hazardous waste products. Federal, state, and
local laws and regulations govern the use, manufacture, storage, handling and disposal of hazardous materials. If we experience a release of
hazardous substances, it is possible that this release could cause personal injury or death, and require decontamination of the facility. In the
unlikely event of an accident while manufacturing Ampion, we could be held liable for damages or face substantial penalties. We do not
have any insurance for liabilities arising from the procurement, handling, or discharge of hazardous materials. Compliance with applicable
environmental laws and regulations, in the event of an accident, is expensive, and current or future environmental regulations may delay our
research, development and production efforts, which could harm the financial condition of our business or impair our operations.
We currently, and from time to time in the future may, outsource portions of our internal business functions to third-party providers.
Outsourcing these functions has significant risks, and our failure to manage these risks successfully could materially adversely affect
our business, results of operations, and financial condition.
We currently, and from time to time in the future may, outsource portions of our internal business functions to third-party providers including
information technology, human resources, internal audit testing, legal services and certain calculations and other information that support our
accounting and financial reporting, among other things. Third-party providers may not comply on a timely basis with all of our requirements
or may not provide us with an acceptable level of service. In addition, our reliance on third-party providers could have significant negative
consequences, including significant disruptions in our operations and significantly increased costs to undertake our operations. For example,
any failure by the third-party providers that assist us with financial reporting to provide us with accurate information or implement and
maintain effective controls may cause us to be unable to meet our reporting obligations as a publicly traded company and we could
experience deficiencies in our operations that could have an adverse effect on the effectiveness of our internal control over financial
reporting. As a result of our outsourcing activities, it may be more difficult for us to recruit and retain qualified employees for our business
needs at any time and if we have a failure in our outsourced financial reporting activities, our independent registered public accounting firm
may not be able to provide us with an unqualified report regarding the effectiveness of our internal control over financial reporting, which
may cause investors to lose confidence in the reliability of our financial statements and could result in a decrease in the value of our common
stock. Our failure to successfully outsource any material portion of our business functions could materially adversely affect our business,
results of operations, and financial condition.
Our future success depends on our ability to retain key employees, consultants and advisors and to attract, retain, and motivate qualified
personnel.
We are highly dependent on our executive officers; the loss of whose services may adversely impact the achievement of our objectives.
Recruiting and retaining other qualified employees, consultants, and advisors for our business, including scientific and technical personnel,
will also be critical to our success. There is currently a shortage of skilled executives and scientific personnel in our industry, which is likely
to continue. As a result, competition for skilled personnel is intense and the turnover rate can be high. We may not be able to attract and
retain personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for individuals
with similar skill sets. In addition, our current financial needs and potential benefit packages at other pharmaceutical and biotechnology
companies may make it more challenging to recruit and retain qualified personnel. The inability to recruit or loss of the services of any
executive, key employee, consultant, or advisor may impede the progress of our research, development and commercialization objectives.
In order to induce valuable employees to remain employed at Ampio, in addition to salary and cash incentives, we have provided stock
options that vest over time. The value to employees of stock options that vest over time may be significantly affected by movements in our
stock price that are beyond our control and may at any time be insufficient to counteract more lucrative offers from other companies.
Despite our efforts to retain valuable employees, members of our management, scientific, and development teams have in the past and may
in the future terminate their employment with us. The loss of the services of any of our executive officers or other key employees and our
inability to find suitable replacements could potentially harm our business, prospects, financial condition or results of operations. We do not
maintain “key man” insurance policies on the lives of these individuals or any of our other employees. Our success also depends on our
ability to continue to attract, retain, and motivate highly skilled junior, mid-level, and senior managers as well as junior, mid-level, and
senior scientific and medical personnel.
33
Table of Contents
Many of the other biotechnology and pharmaceutical companies that we compete against for qualified personnel have greater financial and
other resources, different risk profiles and a longer history in the industry than we do. They may also provide more diverse opportunities and
better chances for career advancement. Some of these characteristics may be more appealing to high quality candidates than what we can
offer. If we are unable to continue to attract and retain high quality personnel, the rate and success at which we can discover, develop and
commercialize product candidates will be limited.
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.
Our drug development program to date has been dependent in large part upon the services of Dr. David Bar-Or, who retired from his full-
time role as Chief Scientific Officer effective September 30, 2018. Although Dr. Bar-Or continues to serve as a member of our Board and
our Scientific Advisory Board, the loss of his services as our full-time Chief Scientific Officer could diminish our ability to develop and
commercialize new product candidates when, and if, we have the financial resources to do so.
Our employees, principal investigators, consultants and commercial partners may engage in misconduct or other improper activities.
We are exposed to the risk that our employees, contract research organizations, principal investigators, consultants, and commercial partners
may engage in fraudulent conduct or other illegal activity or may fail to disclosure unauthorized activities to us. Misconduct by these parties
could include intentional, reckless and/or negligent failures to comply with:
● the laws and regulations of the FDA and non-U.S. regulators, including those laws requiring the reporting of true, complete
and accurate information to such regulatory bodies;
● manufacturing standards we have established;
● healthcare fraud and abuse laws and regulations in the United States and similar foreign laws; or
● laws requiring the accurate reporting of financial information or data or the disclosure of unauthorized activities to us.
In particular, sales, marketing, and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to
prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide
range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs, and other business arrangements.
Such misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory
sanctions and cause serious harm to our reputation. We have adopted a Code of Business Conduct and Ethics applicable to all of our
employees, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this
activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or
other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and
we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including
the imposition of significant fines or other sanctions.
Risks Related to Our Intellectual Property
Our ability to compete may decline if we do not adequately protect our proprietary rights.
Our commercial success depends on obtaining and maintaining proprietary rights for Ampion including its composition and uses. We must
successfully defend these rights against third-party challenges. We will only be able to protect Ampion’s proprietary composition and its uses
from unauthorized use to the extent that valid and enforceable patents, or effectively protected trade secrets, cover them.
34
Table of Contents
Our ability to obtain patent protection for Ampion and its composition is uncertain due to a number of factors, including:
● we may not be the first to make the inventions covered by pending patent applications or issued patents;
● we may not be the first to file patent applications for Ampion or for its uses;
● others may independently develop identical, similar, or alternative products or compositions;
● our disclosures in patent applications may not be sufficient to meet the legal requirements for patentability in the U.S. or
elsewhere;
● any or all of our pending patent applications may not result in issued patents;
● we may not seek or obtain patent protection in countries that may eventually provide us a significant business opportunity;
● any patents issued to us may not provide adequate protection for commercially viable products, may not provide any
competitive advantages, or may be successfully challenged by third parties;
● our proprietary compositions may not be patentable;
● others may design around our patent claims to produce competitive products which fall outside of the scope of our patents;
● others may identify prior art which could invalidate our patents; and
● the availability and length of patent term extension (“PTE”) under the Hatch-Waxman Act for approved products are subject to
a number of factors and PTE could be unavailable or less than the maximum amount of 5 years for Ampion.
Even if we have or obtain patents covering Ampion or its uses, we may still be barred from making, using and selling Ampion because of the
patent rights of others. Others have or may have filed, and in the future may file, patent applications covering compositions or products that
are similar or identical to ours. There are many issued U.S. and foreign patents and pending patent applications relating to chemical
compounds, biological compositions and therapeutic products, and some of these may relate to compositions we intend to commercialize.
These could materially affect our ability to develop Ampion or sell our product if approved. Because patent applications can take many years
to issue, there may be currently pending applications unknown to us that may later result in issued patents that Ampion or its uses may
infringe. These patent applications may have priority over patent applications filed by us.
We have conducted searches in the past to identify patents or patent applications that may prevent us from obtaining patent protection for our
compositions or that could limit the rights we have claimed in our patents and patent applications, however, currently there are no ongoing
searching efforts. Disputes may arise regarding the source or ownership of our inventions. It is difficult to determine if and how such
disputes would be resolved. Others may challenge the validity of our patents. If our patents are found to be invalid, we will lose the ability to
exclude others from making, using or selling the compositions or uses addressed in those patents.
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.
Because we operate in the highly technical field of drug discovery and development of therapies that can address inflammation and other
conditions, we rely in part on trade secret protection to protect our proprietary technology and processes. However, trade secrets are difficult
to protect. We enter into confidentiality and intellectual property assignment agreements with our employees, consultants, outside scientific
collaborators, sponsored researchers, and other advisors. These agreements generally require that the other party keep confidential, and not
disclose to third parties, all confidential information developed by the party or made known to the party by us during the party’s
35
Table of Contents
relationship with us. These agreements also generally provide that inventions conceived by the party while rendering services for us will be
our exclusive property.
However, these agreements may not be honored and may not effectively assign intellectual property rights to us. Enforcing a claim that a
party illegally obtained and is using our trade secrets is difficult, expensive, and time consuming and the outcome is unpredictable. In
addition, courts outside the United States may be less willing to protect trade secrets. The failure to obtain or maintain trade secret protection
could adversely affect our competitive position.
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.
There is significant litigation in the pharmaceutical industry regarding patent and other intellectual property rights. While we are not
currently subject to any pending intellectual property litigation, and are not aware of any such threatened litigation, we may be exposed to
future litigation by third parties based on claims that Ampion, methods of making Ampion and/or methods of using Ampion infringe the
intellectual property rights of others. There are many patents relating to pharmaceuticals used to treat inflammation. Some of these may
encompass Ampion or components of Ampion. If our development activities are found to infringe any such patents, we may have to pay
significant damages or seek licenses to such patents. A patentee could prevent us from using pharmaceuticals encompassed by their claims.
We may need to resort to litigation to enforce a patent issued to us, to protect our trade secrets, or to determine the scope and validity of
third-party proprietary rights. From time to time, we may hire scientific personnel or consultants formerly employed by other companies
involved in one or more areas similar to the activities conducted by us. Either we or these individuals may be subject to allegations of trade
secret misappropriation or other similar claims as a result of prior affiliations. If we become involved in litigation, it could consume a
substantial portion of our managerial and financial resources, regardless of whether we win or lose. We may not be able to afford the costs of
litigation. Any legal action against us or our collaborators could lead to:
● payment of damages, potentially treble damages, if we are found to have willfully infringed a party’s patent rights;
● injunctive or other equitable relief that may effectively block our ability to further develop, commercialize, and sell Ampion;
or
● us or our collaborators having to enter into license arrangements that may not be available on commercially acceptable terms,
if at all.
As a result, we could be prevented from commercializing Ampion.
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 patent positions of pharmaceutical companies can be highly uncertain and involve complex legal and factual questions. For example,
some of our patents and patent applications cover methods of use of Ampion, while other patents and patent applications cover the
composition of Ampion. The interpretation and breadth of claims allowed in some patents covering pharmaceutical compositions may be
uncertain and difficult to determine and are often affected materially by the facts and circumstances that pertain to the patented composition
and the related patent claims. The standards of the United States Patent and Trademark Office (“USPTO”) and of foreign patent offices are
sometimes uncertain and could change in the future. Consequently, the issuance and scope of patents cannot be predicted with certainty.
Patents, if issued, may be challenged, revoked, invalidated, or circumvented. U.S. patents and patent applications may also be subject to
interference proceedings, and U.S. patents may be subject to reexamination or other post-grant proceedings by the USPTO. Foreign patents
may be subject to opposition or comparable proceedings in the corresponding foreign patent offices, which could result in either loss of the
patent, rejection of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. In
addition, such interference, reexamination and opposition proceedings may be costly. Accordingly, rights under any issued patents may not
provide us with sufficient protection against competitive products or processes.
In addition, changes in, or different interpretations of patent laws in the United States and foreign countries may permit others to use our
discoveries or to develop and commercialize our technology and product without providing any
36
Table of Contents
compensation to us, or may limit the number of patents or claims we can obtain. The laws of some countries do not protect intellectual
property rights to the same extent as U.S. laws and those countries may lack adequate rules and procedures for defending our intellectual
property rights. For example, some countries do not grant patent claims directed to methods of treating humans and, in these countries,
patent protection may not be available at all to protect Ampion. In addition, U.S. patent laws may change, which could prevent or limit us
from filing patent applications or patent claims to protect our products and/or compounds.
If we fail to obtain and maintain patent protection and trade secret protection for Ampion, its proprietary composition and its uses, we could
lose our competitive advantage and the competition we face could increase, reducing any potential revenues and adversely affecting our
ability to attain or maintain profitability.
From time to time we may need to license patents, intellectual property and proprietary technologies from third parties, which may be
difficult or expensive to obtain.
We may need to obtain licenses to patents and other proprietary rights held by third parties to successfully develop, manufacture and market
Ampion. As an example, it may be necessary to use a third party’s proprietary technology to reformulate our product candidate in order to
improve upon the capabilities of the product candidate. If we are unable to timely obtain these licenses on reasonable terms, our ability to
commercially exploit Ampion may be inhibited or prevented.
Risks Related to Our Common Stock
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 common stock has been extremely volatile and may continue to be so. The stock market in general and the market for
pharmaceutical companies have experienced extreme volatility that has often been unrelated to the operating performance of a particular
company. The following factors, in addition to the other risk factors described in this section, may also have a significant impact on the
market price of our common stock:
● any actual or perceived adverse developments in clinical trials for Ampion;
● any actual or perceived difficulties or delays in obtaining regulatory approval of Ampion in the United States or other
countries;
● any finding that Ampion is not safe or effective, or any inability to demonstrate the clinical effectiveness of Ampion when
compared to existing treatments;
● any actual or perceived adverse developments in repurposed drug technologies, including any change in FDA policy or
guidance on approval of repurposed drug technologies for new indications;
● any announcements of developments with, or comments by, the FDA, the EMA, or other regulatory authorities with respect to
our development of Ampion;
● changes in laws or regulations applicable to Ampion, including but not limited to clinical trial requirements for approvals;
● any announcements concerning our retention or loss of key employees;
● our success or inability to obtain collaborators to conduct clinical trials, or commercialize Ampion once regulatory approval is
obtained;
● announcements of patent issuances or denials, product innovations, or introduction of new commercial products by our
competitors that will compete with Ampion;
37
Table of Contents
● publicity regarding actual or potential study results or the outcome of regulatory reviews relating to the development of
Ampion or our competitors’ products;
● announcements of the introduction of new products by our competitors;
● announcements concerning product development results or intellectual property rights of others;
● future issuances of common stock or other securities;
● economic and other external factors beyond our control; and
● sales of stock by us or by our stockholders.
A significant drop in the price of our stock could expose us to the risk of securities class action lawsuits, which could result in substantial
costs and divert management’s attention and resources, which could adversely affect our business.
The price of our stock may be vulnerable to manipulation, including through short sales.
We believe there has been and may continue to be substantial off-market transactions in derivatives of our stock, including short selling
activity or related similar activities, which are beyond our control and which may be beyond the full control of the SEC and Financial
Institutions Regulatory Authority (“FINRA”). Short sales are transactions in which a market participant sells a security that it does not own.
To complete the transaction, the market participant must borrow the security to make delivery to the buyer. The market participant is then
obligated to replace the security borrowed by purchasing the security at the market price at the time of required replacement. If the price at
the time of replacement is lower than the price at which the security was originally sold by the market participant, then the market
participant will realize a gain on the transaction. Thus, it is in the market participant’s interest for the market price of the underlying security
to decline as much as possible during the period prior to the time of replacement. While SEC and FINRA rules prohibit some forms of short
selling and other activities that may result in stock price manipulation, such activity may nonetheless occur without detection or
enforcement. Significant short selling or other types of market manipulation could cause our stock trading price to decline, to become more
volatile, or both.
Previous short selling efforts have impacted, and may in the future continue to impact, the value of our stock in an extreme and volatile
manner to our detriment and the detriment of our stockholders. In addition, market participants with admitted short positions in our stock
have published, and may in the future continue to publish, negative information regarding us and our management team on internet sites or
blogs that we believe is inaccurate and misleading. We believe that the publication of this negative information has led, and may in the future
continue to lead, to significant downward pressure on the price of our stock to our detriment and the further detriment of our stockholders.
These and other efforts by certain market participants to manipulate the price of our common stock for their personal financial gain may
cause our stockholders to lose a portion of their investment, may make it more difficult for us to raise equity capital when needed without
significantly diluting existing stockholders, and may reduce demand from new investors to purchase shares of our stock.
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.
Although our common stock is listed on the NYSE American, we may be unable to continue to satisfy the listing maintenance requirements
and rules. If we are unable to satisfy the NYSE American criteria for maintaining our listing, our securities could be subject to delisting. To
qualify for continued listing on the NYSE American, we must remain in compliance. There can be no assurances that we will be able to
continue to comply with the NYSE American listing requirements.
If the NYSE American delists our securities, we could face significant consequences, including:
● a limited availability for market quotations for our securities;
38
Table of Contents
● reduced liquidity with respect to our securities;
● a determination that our common stock is a “penny stock,” which will require brokers trading in our common stock to adhere
to more stringent rules and possibly result in reduced trading;
● activity in the secondary trading market for our common stock;
● limited amount of news and analyst coverage; and
● a decreased ability to issue additional securities or obtain additional financing in the future.
In addition, we would no longer be subject to the NYSE American rules, including rules requiring us to have a certain number of
independent directors and to meet other corporate governance standards.
Concentration of our ownership limits the ability of our stockholders to influence corporate matters.
As of February 16, 2021, holders of more than 5% of our common stock and our directors, executive officers and their affiliates beneficially
owned 15.8% of our outstanding common stock. These stockholders may have significant effect on the outcome of actions taken by us that
require stockholder approval.
A sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.
If our stockholders sell, or the market perceives that our stockholders intend to sell for various reasons, substantial amounts of our common
stock in the public market, including shares issued in connection with the exercise of outstanding options or warrants, the market price of our
common stock could fall. Sales of a substantial number of shares of our common stock may make it more difficult for us to sell equity or
equity-related securities in the future at a time and price that we deem reasonable or appropriate. We may become involved in securities class
action litigation that could divert management’s attention and harm our business.
The stock markets have from time to time experienced significant price and volume fluctuations that have affected the market prices for the
common stock of biotechnology and biopharmaceutical companies. These broad market fluctuations may cause the market price of our
common stock to decline. In the past, securities class action litigation has often been brought against a company following a decline in the
market price of its securities. This risk is especially relevant for us because biotechnology and biopharmaceutical companies have
experienced significant stock price volatility in recent years. We may become involved in this type of litigation again in the future. Litigation
often is expensive and diverts management’s attention and resources, which could adversely affect our business.
Anti-takeover provisions in our charter and bylaws and in Delaware law could prevent or delay a change in control of Ampio.
Provisions of our certificate of incorporation and bylaws may discourage, delay, or prevent a merger or acquisition that stockholders may
consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions
include:
● requiring supermajority stockholder voting to effect certain amendments to our certificate of incorporation and bylaws;
● restricting the ability of stockholders to call special meetings of stockholders; and
● establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that
can be acted on by stockholders at stockholder meetings.
We have no plans to pay cash dividends on our common stock.
We have no plans to pay cash dividends on our common stock. We intend to invest future earnings, if any, to fund our growth. Any payment
of future dividends will be at the discretion of our Board and will depend on, among other things,
39
Table of Contents
our earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment
of dividends, and other considerations our Board deem relevant. Any future credit facilities or preferred stock financing we obtain may
further limit our ability to pay cash dividends on our common stock.
General Risk Factors
Business interruptions could limit our ability to operate our business.
Our operations are vulnerable to damage or interruption from computer viruses, human error, natural disasters, telecommunications failures,
intentional acts of misappropriation, and similar events. We have not established a formal disaster recovery plan or back-up operations.
Additionally, our business interruption insurance may not be adequate to compensate us for losses that occur. A significant business
interruption could result in losses or damages and require us to curtail our operations.
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.
We continuously work to install new and upgrade existing information technology systems and provide employee awareness training around
phishing, malware, and other cyber risks to ensure that we are protected, to the greatest extent possible, against cyber risks and security
breaches. Any actual or suspected security breach or other compromise of our security measures or those of our third-party vendors,
whether as a result of hacking efforts, denial-of-service attacks, viruses, malicious software, break-ins, phishing attacks or otherwise, could
harm our reputation and business, require us to expend significant capital and other resources to address the breach, and result in a violation
of applicable laws, regulations or other legal obligations.
As cyber-attacks become more sophisticated, the need to develop our infrastructure to secure our business and customer data can lead to
increased cybersecurity protection costs. Such costs may include making organizational changes, deploying additional personnel and
protection technologies, training employees, and engaging third-party experts and consultants. These efforts come at the potential cost of
revenues and human resources that could be utilized to continue to enhance our product offerings.
Increased costs associated with corporate governance compliance may significantly impact our results of operations.
As a public company, we incur significant legal, accounting, and other expenses due to our compliance with regulations and disclosure
obligations applicable to us, including compliance with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), as well as
rules implemented by the SEC, and the NYSE American. The SEC and other regulators have continued to adopt new rules and regulations
and make additional changes to existing regulations that require our compliance. In July 2010, the Dodd-Frank Wall Street Reform and
Consumer Protection Act (“Dodd-Frank Act”), was enacted. There are significant corporate governance and executive compensation related
provisions in the Dodd-Frank Act that have required the SEC to adopt additional rules and regulations in these areas. Stockholder activism,
the current political environment, and the current high level of government intervention and regulatory reform may lead to substantial new
regulations and disclosure obligations, which may lead to additional compliance costs and impact, in ways we cannot currently anticipate,
the manner in which we operate our business. Our management and other personnel devote a substantial amount of time to these compliance
programs and monitoring of public company reporting obligations, and as a result of the new corporate governance and executive
compensation related rules, regulations, and guidelines prompted by the Dodd-Frank Act, and further regulations and disclosure obligations
expected in the future, we will likely need to devote additional time and costs to comply with such compliance programs and rules. These
rules and regulations will cause us to incur significant legal and financial compliance costs and will make some activities more time-
consuming and costly.
The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting.
We continuously refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by
us in the reports that we file with the SEC is recorded, processed, summarized, and reported within the time periods specified in SEC
rules and forms, and that information required to be disclosed in reports under the Exchange Act of 1934, as amended (the “Exchange Act”),
is accumulated and communicated to our principal executive and financial officers. Our current controls and any new controls that we
develop may become inadequate, and weaknesses in our internal control over financial reporting may be discovered in
40
Table of Contents
the future. Any failure to develop or maintain effective controls could adversely affect the results of periodic management evaluations and
annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial
reporting, which we may be required to include in our periodic reports that we file with the SEC under Section 404 of the Sarbanes-Oxley
Act, and could harm our operating results, cause us to fail to meet our reporting obligations, or result in a restatement of our prior period
financial statements. If we are not able to demonstrate compliance with the Sarbanes-Oxley Act, that our internal controls over financial
reporting are perceived as adequate, or that we are unable to produce timely or accurate financial statements, investors may lose confidence
in our operating results, and the price of our common stock could decline.
We are required to comply with certain of the SEC rules that implement Section 404 of the Sarbanes-Oxley Act, which requires management
to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness
of our internal control over financial reporting. This assessment needs to include the disclosure of any material weaknesses in our internal
control over financial reporting identified by our management or our independent registered public accounting firm. During the evaluation
and testing process, if we identify one or more material weaknesses in our internal control over financial reporting or if we are unable to
complete our evaluation, testing, and any required remediation in a timely fashion, we will be unable to assert that our internal controls over
financial reporting are effective.
These developments could make it more difficult for us to retain qualified members of our Board, qualified executive officers and/or
qualified internal and independent auditors. We are presently evaluating and monitoring regulatory developments and cannot estimate the
timing or magnitude of additional costs we may incur as a result. To the extent these costs are significant, our general and administrative
expenses are likely to increase.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
We maintain our headquarters, research laboratories, and manufacturing facilities in leased space located in Englewood, Colorado,
for monthly lease payments of approximately $29,000. The lease expires in September 2024. We anticipate that the lease can be renewed on
terms similar to those now in effect.
Item 3. Legal Proceedings.
Information regarding Legal Proceedings is contained in Note 15 to the Financial Statements.
Item 4. Mine Safety Disclosures.
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Data
On June 17, 2013, our common stock began trading on the NYSE American under the ticker symbol “AMPE”. It was previously quoted on
the NASDAQ Capital Market under the same ticker symbol “AMPE”.
Holders of Common Stock
As of February 16, 2021, there were approximately 250 registered holders of our common stock. A substantially greater number of holders
of our common stock are “street name” or beneficial holders, whose shares are held of record by banks, brokers, and other financial
institutions.
41
Table of Contents
Dividend Policy
We have never paid cash dividends and have no plans to pay cash dividends in the near future. We intend to utilize all current and future
available resources to develop Ampion. If we issue any preferred stock and/or obtain financing from a bank in the future, the terms of those
financings may contain restrictions on our ability to pay dividends as long as the preferred stock or bank financing is outstanding.
Unregistered Sales of Equity Securities and Use of Proceeds
During fiscal 2020, as a result of net exercises of placement agent warrants, we issued a total of 523,923 shares of common stock to former
placement agents with an exercise price of $0.50 per share of common stock, where the total number of shares of common stock issued was
reduced to cover the exercise price. We did not receive any cash related to the exercise of the placement agent warrants.
Date of Issuance
July 31, 2020
August 6, 2020
November 9, 2020
December 10, 2020
December 31, 2020
Total
Shares of Common Stock
72,441
203,223
167,458
75,699
5,102
523,923
The issuance of the above securities was exempt from the registration requirements under Rule 4(2) of the Securities Act of 1933, as
amended, and/or Rule 506 as promulgated under Regulation D.
Equity Compensation Plans Information
Information regarding our equity compensation plans is contained in Item 12 under “Securities Authorized for Issuance Under Equity
Compensation Plans” and Note 12 to the Financial Statements.
Item 6. Selected Financial Data.
We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required
under this item.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our financial
statements and the related notes appearing elsewhere in this report. Some of the information contained in this discussion and analysis,
including information with respect to our plans and strategy for our business and related financings, includes forward-looking statements
that involve risks and uncertainties. You should read the “Risk Factors” section of this 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.
EXECUTIVE SUMMARY
We are a biopharmaceutical company focused on the development and advancement of immunology-based therapies for prevalent
inflammatory conditions. We have not generated operating revenue to date, and our operations have been substantially funded through equity
raises, which have occurred from time to time since inception.
The pharmaceutical market is a highly competitive industry with strict regulations that are unpredictable in nature, time intensive and costly.
We are committed to offering a compelling therapeutic option for patients most in need of new treatments for inflammatory conditions,
including, but not limited to OAK and the treatment of serious complications arising from COVID-19, including ARDS and ALI.
42
Table of Contents
Moving forward, we will continue to place a disciplined focus on maintaining our business operations in a manner that is streamlined and
efficient while continuing to allocate a requisite level of our liquidity, human capital and other operational resources towards the
advancement of key immunology-based therapies with the ultimate goal of achieving FDA marketing approval and subsequent
commercialization of Ampion for these conditions.
Discussion regarding our business is contained in Part I, Item 1. Business.
Recent Financing Activities
Information regarding our Recent Financing Activities is contained in Note 11 to the Financial Statements.
Known Trends or Future Events; Outlook
We are a pre-revenue stage biopharmaceutical company that has incurred an accumulated deficit of $200.5 million as of December 31, 2020.
We expect to generate continued operating losses for the foreseeable future as we continue the ongoing development and advancement of
immunological-based therapies with the ultimate goal of achieving FDA marketing approval and subsequent commercialization of Ampion
for the indications noted above. In addition, while working in parallel with the continued advancement of immunology-based therapies for
Ampion, we continue to actively explore synergistic licensing and other partnering opportunities with both domestic and global-based
organizations in order to further leverage and maximize the value of Ampion to our stockholders.
As COVID-19 cases continue to be reported, we have determined that the AP-013 study will remain paused until the safety of our patients,
clinical, and monitoring staff is no longer jeopardized. The continued state and local shelter-in-place orders and our policies may continue to
negatively impact productivity, and have adverse effects on the Company’s business, operations, financial condition and results of
operations, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to
conduct our ongoing business operations.
While we continue to maintain an ongoing dialog with the FDA to explore all viable options to complete the AP-013 study under an
amended SPA agreement as a result of the COVID-19 pandemic and the adverse impact on the study, it remains possible that the ongoing
COVID-19 pandemic may prevent completion of the study over the near term or at all. The spread of COVID-19, which has caused a broad
impact globally, may materially affect the Company economically in other ways. While the potential economic impact brought by and the
duration of COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial
markets, reducing our ability to access capital. In addition, a recession or market correction resulting from the spread of COVID-19 could
have a material adverse impact on our ability to raise requisite financing to support our business operations, which would adversely impact
the value of our common stock.
As of December 31, 2020, we had $17.3 million of cash and cash equivalents. In April 2020, we received PPP proceeds of $544,000 and we
are currently awaiting a response from the SBA on their decision regarding our loan forgiveness application despite several attempts to
contact the SBA for a status update. During the year ended December 31, 2020, we sold 32.1 million shares pursuant to the ATM equity
offering program, which yielded gross proceeds of $26.2 million; offset by offering related costs of $1.4 million. We anticipate the continued
use of the ATM equity offering program in a disciplined manner based on near-term liquidity needs and may seek to supplement the funds
raised with separate private/public equity offering(s). Based on our current cash position, projection of operations and expected access to
equity financing, we believe we will have sufficient liquidity to fund operations through the first quarter of 2022. This projection is based on
many assumptions that may prove to be incorrect. For example, despite the historically successful use of the ATM equity offering program,
due to the inherent uncertainties associated with raising capital in the public markets, our management is unable to conclude that it is
probable that future capital will be available to satisfy our future liquidity needs in a manner that will be sufficient to fund operations. As
such, it is possible that the Company could exhaust its available cash and cash equivalents earlier than presently anticipated. In addition, as
the global COVID-19 pandemic continues to evolve, its effect on the Company’s operations and ability to raise capital through the ATM
equity offering program, or otherwise, remains uncertain and subject to change. These existing and on-going factors continue to raise
substantial doubt about our ability to continue as a going concern (see Note 3 to the Financial Statements).
43
Table of Contents
Our shelf registration statement, which was declared effective by the SEC in May 2020, provides us with the ability to sell up to an
aggregate amount of $100.0 million of shares of common stock, preferred stock, debt securities, warrants and units, or any combination
thereof, less any sales from the ATM equity offering program that occurred prior to May 6, 2020, which was the effective date of the shelf
registration statement. We had $77.3 million remaining under the shelf registration statement as of December 31, 2020 (see Note 11 to the
Financial Statements). However, we cannot be certain that we will be able to secure additional financing or that any funding, or securities
offered pursuant to the shelf registration statement or otherwise, will be adequate to execute our business strategy. Even if we are able to
obtain additional financing, such additional financing may be costly and may require us to agree to covenants or other provisions that favor
new investors over existing stockholders.
Authorized shares
Common stock outstanding
Options outstanding
Warrants outstanding
Shares reserved for issuance under 2019 Stock and Incentive Plan
Available shares
Effective registration statement
ATM activity
Remaining amount on registration statement
Average stock price immediately preceding December 31, 2020:
30 day
60 day
90 day
$
$
$
$
$
December 31, 2020
300,000,000
193,378,996
6,099,651
4,130,724
7,945,245
88,445,384
100,000,000
22,700,000
77,300,000
1.58
1.23
1.09
Even though the Company has 88.4 million shares of common stock authorized and available for future issuance, the Company’s ability to
raise additional funds by issuing securities pursuant to its current shelf registration statement is limited by the $77.3 million remaining on
such shelf registration statement.
Significant Accounting Policies and Estimates
Our financial statements were prepared in accordance with GAAP. The preparation of the financial statements 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 expenses incurred during the reporting period. On an on-going basis, management evaluates its estimates and judgments,
including those related to recoverability of long-lived assets, and the ability for the Company to continue as a going concern. Management
bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable and appropriate
under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The
methods, estimates, and judgments used by us in applying these most critical accounting policies have a significant impact on the results we
report in our financial statements. Additional information regarding our Significant Accounting Policies and Estimates is contained in
Notes 2, 3 and 8 to the Financial Statements.
Recent Accounting Pronouncements
Information regarding recently issued and relevant accounting standards (adopted and not adopted as of December 31, 2020) is contained in
Note 2 to the Financial Statements.
44
Table of Contents
Results of Operations—Year Ended December 31, 2020 Compared to December 31, 2019
We recognized a net loss for the year ended December 31, 2020 (the “2020 period”) of $15.9 million compared to the net loss recognized of
$13.6 million for the year ended December 31, 2019 (the “2019 period”). The net loss during fiscal 2020 was attributable to operating
expenses of $15.8 million and the non-cash derivative loss of $0.5 million, partially offset by the receipt of the Paycheck Protection Program
(“PPP”) proceeds of $0.5 million. The net loss during fiscal 2019 was attributable to operating expenses of $18.6 million, offset by the
recognition of a non-cash derivative gain of $4.9 million. The exercise of outstanding warrants for 17.3 million shares of common stock
during fiscal 2019 caused the valuation of the warrant liability to decrease, resulting in a non-cash derivative gain. This non-cash derivative
gain was slightly offset by the increase in our stock price from $0.39 as of December 31, 2018 to $0.58 as of December 31, 2019, which
caused the valuation of the warrant liability to increase. Operating expenses decreased $2.7 million from the 2019 period to the 2020 period
primarily due to a $3.4 million decrease in research and development costs, which was partially offset by a $0.7 million increase in general
and administrative costs, both of which are further explained below.
Research and Development
Research and development costs are summarized as follows and exclude an allocation of general and administrative expenses:
Clinical trial and sponsored research expenses
Salaries and benefits
Depreciation
Operations / manufacturing
Stock-based compensation
Laboratory
Regulatory / FDA
Equipment rental and repair
Professional fees
Total research and development
2020 Period Compared to 2019 Period
$
2019
Years Ended December 31,
2020
$ 3,722,000
2,771,000
1,166,000
447,000
401,000
356,000
136,000
94,000
79,000
$ 9,172,000
7,149,000
2,743,000
1,216,000
326,000
89,000
507,000
294,000
114,000
184,000
$ 12,622,000
Research and development costs decreased approximately $3.4 million, or 27.3%, for the 2020 period compared to the 2019 period.
Research and development costs with variances above $150,000 and/or 10% compared with the previous year are further explained below.
Clinical trial and sponsored research expenses
The clinical trial and sponsored research expense decreased $3.4 million or 47.9%, primarily due to the AP-013 study being temporarily
paused in April 2020 due to stay-at-home mandate(s) issued by state and federal governments in response to the COVID-19 pandemic and
travel restrictions implemented by the Company’s contracted CRO, partially offset by $1.0 million of expenses associated with the inhaled
Ampion safety study, the AP-014 study and the AP-016 study which were all initiated during the 2020 period.
Stock-based compensation
Stock-based compensation increased $312,000, or 350.6%, due to the issuance of discretionary stock options to certain employees and an
option repricing program undertaken by the Company related to previously awarded stock options to an executive officer. The option
repricing program contributed $84,000 to the increase in stock-based compensation.
45
Table of Contents
Laboratory
Laboratory expenses decreased $151,000, or 29.7%, as we finalized a quality control project related to the manufacturing of Ampion during
the 2019 period.
Regulatory/FDA
Regulatory/FDA expenses decreased $158,000, or 53.7%, as the preparation of the BLA filing was postponed as a result of pausing the AP-
013 study.
General and Administrative
General and administrative expenses are summarized as follows:
Professional fees
Insurance
Salaries and benefits
Stock-based compensation
Facilities
Director fees
Other
Travel and meetings
Depreciation
Total general and administrative
2020 Period Compared to 2019 Period
Years Ended December 31,
2020
$ 2,260,000
1,275,000
1,200,000
956,000
497,000
295,000
100,000
67,000
12,000
$ 6,662,000
2019
$ 2,475,000
826,000
1,062,000
396,000
502,000
335,000
163,000
139,000
56,000
$ 5,954,000
General and administrative costs increased $708,000, or 11.9%, for the 2020 period compared to the 2019 period. General and administrative
costs with variances above $150,000 and/or 10% compared with the previous year are further explained below.
Professional fees
Professional fees decreased $215,000, or 8.7%, due primarily to a decrease in legal fees related to litigation and other matters; partially offset
by legal costs associated with intellectual property protection attributable to new delivery methods for Ampion. During the 2020 period, the
securities class action was dismissed with prejudice and the plaintiffs did not appeal, and, as such, the case was closed. In addition, the
derivative cases were dismissed without prejudice. The decrease in legal fees was partially offset by expenses we incurred related to a
strategic advisory firm to evaluate strategic opportunities for the Company, which was terminated in August 2020.
Insurance
Insurance expense increased $449,000, or 54.4%, due primarily to an increase in our D&O insurance premiums covering our prior two
policy renewals in June 2019 and June 2020, which were significantly higher than the policy renewal in June 2018 resulting in lower
expense for the first half of the 2019 period. The consecutive year increases are consistent with increases experienced by the overall market
for public biopharmaceutical companies.
Stock-based compensation
Stock-based compensation increased $560,000, or 141.4%, due to the issuance of discretionary stock options to certain employees and an
option repricing program undertaken by the Company related to previously awarded stock options to non-employee directors and executive
officers during the 2020 period. The option repricing program contributed $277,000 to the increase in stock-based compensation.
46
Table of Contents
Cash Flows
Cash flows for the respective periods are as follows:
Net cash used in operating activities
Net cash used in investing activities
Net cash provided by financing activities
Net change in cash and cash equivalents
Net Cash Used in Operating Activities
Years Ended December 31,
2020
(14,729,000)
(63,000)
25,606,000
10,814,000
$
$
2019
(15,383,000)
(22,000)
14,352,000
(1,053,000)
$
$
During the 2020 period our operating activities used approximately $14.7 million in cash, which was less than our net loss of $15.9 million
primarily as a result of the non-cash charges related to depreciation and amortization, stock-based compensation, warrant derivative and
issuance of common stock for services totaling $3.1 million; partially offset by an increase in working capital totaling $2.0 million, resulting
primarily from the decrease in accounts payable/accrued liabilities attributable to the pause of the AP-013 study in April 2020.
During the 2019 period our operating activities used approximately $15.4 million in cash, which was more than our net loss of $13.6 million
primarily as a result of the non-cash adjustment for the warrant derivative of $4.9 million; partially off-set by non-cash charges related to
depreciation and amortization, stock-based compensation and issuance of common stock for services totaling $1.8 million, along with the
increase in working capital of $1.3 million.
Net Cash Used in Investing Activities
During the 2020 period, $63,000 in cash was used to acquire manufacturing machinery and equipment.
During the 2019 period, $22,000 in cash was used to acquire manufacturing machinery and equipment.
Net Cash from Financing Activities
During the 2020 period, we received gross proceeds of $26.2 million from the sale of 32.1 million shares of common stock pursuant to the
ATM equity offering program, which was partially offset by offering related costs of $1.4 million. In addition, we also received proceeds of
$785,000 from investor warrant exercises representing 1,962,500 shares of common stock.
During the 2019 period, we received gross proceeds from the sale of common stock in a public offering of $12.0 million,
which was partially offset by offering related costs of $1.2 million. In addition, we also received gross proceeds of $3.9 million from
investor warrant exercises representing 17,266,667 shares of common stock, which was partially offset by related offering costs of $277,000.
Contractual Obligations and Commitments
Information regarding Contractual Obligations and Commitments is contained in Note 8 to the Financial Statements.
Liquidity and Capital Resources
We have not generated operating revenue or profits. Our primary activities since inception have been focused on research and clinical
development activities for the advancement of Ampion towards multiple BLA submissions, which has required raising capital. As of
December 31, 2020, we do not have a fixed and determinable committed source of liquidity to meet our expected obligations for the next
twelve months. Specifically, we had $17.3 million of cash and cash equivalents as of December 31, 2020.
In January 2021, we received gross proceeds of $2.7 million from the sale of 1.8 million shares of common stock pursuant to the ATM
equity offering program, which was offset by offering related costs of $0.1 million.
47
Table of Contents
We anticipate using the ATM equity offering program to raise additional funds in the near term, as needed, and may seek to supplement the
funds raised with separate private or public equity offering(s). Based on our current cash position, projection of operating expenses and
expected access to the ATM and/or other equity financing programs, we believe we will have sufficient liquidity to fund operations through
the first quarter of 2022. Our projection is based on many assumptions that may prove to be incorrect. For example, despite the historically
successful use of the ATM equity offering program, due to the inherent uncertainties associated with raising capital in the public markets and
the fact that the ATM equity offering program is not deemed a fixed and determinable committed source of liquidity, our management is
unable to conclude that it is probable that future capital will be available to satisfy our future liquidity needs as they arise and in a manner
that will be sufficient to fund operations. As such, it is possible that we could exhaust our available cash and cash equivalents earlier than
presently anticipated. In addition, as the global COVID-19 pandemic continues to rapidly evolve, its effect on our business operations,
financial condition and results of operations is highly uncertain and subject to change. We anticipate that we will seek to raise additional
capital investments in both the near and long-term to enable us to primarily support (i) clinical development of Ampion, (ii) BLA
preparation and submission, (iii) existing base business operations and (iv) commercial development activities for Ampion. We intend to
continue our close evaluation of the overall capital markets to determine the appropriate timing for any such capital raising activity, which
will primarily depend on our stock price and existing market conditions relative to our need for funds at such time.
The audit report on our financial statements for the fiscal year ended December 31, 2020 contains an explanatory paragraph indicating that
there was substantial doubt about our ability continue as a going concern. In order to address the going concern, we have prepared a
projection through December 31, 2021. Our projection reflects cash requirements for fixed, recurring base business expenses such as payroll,
legal and accounting, patents and overhead, and incremental costs supporting our current and projected clinical development programs. We
continue to closely monitor and assess the impact of the COVID-19 pandemic, including the COVID-19 cases in the United States, on the
AP-013 study, and, as such, we are not currently in a position to project the required liquidity needs for completion of the study.
In May 2020, the shelf registration statement was declared effective by the SEC and, as of December 31, 2020, we had approximately $77.3
million available for issuance under the shelf registration statement with 88.4 million authorized shares of common stock remaining
available for issuance (see Note 11 of the Financial Statements). The continued volatility in the financial markets has adversely affected the
market capitalizations of many pre-revenue stage biopharmaceutical companies, particularly small capitalization companies such as Ampio,
and generally has made equity and debt financing difficult to obtain in a manner that is not significantly detrimental to the business and
without significant dilution to existing stockholders. This volatility, along with the COVID-19 pandemic and other factors, may limit our
access to additional financing.
If we cannot obtain funding through capital raises and/or partnering/licensing transactions in the future when deemed necessary, we will
likely be required to delay, reduce the scope of or eliminate our development, manufacturing and/or regulatory programs for Ampion and/or
our future commercialization efforts and/or suspend operations for a period of time until we are able to secure additional funding. If we are
not successful in raising sufficient funds to pay for further development and licensing of Ampion, we may choose to license or otherwise
relinquish greater, or all rights to Ampion, at an earlier stage of development or on less favorable terms than we would otherwise choose.
This could lead to impairment or other charges, which could materially affect our balance sheet and operating results.
Off Balance Sheet Arrangements
We do not have off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known
as “variable interest entities.”
Impact of Inflation
In general, we believe that our operating expenses can be negatively impacted by increases in the cost of clinical trials due to inflation and
rising health care costs.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required
under this item.
48
Table of Contents
Item 8. Financial Statements and Supplementary Data.
The Financial Statements and Supplementary Data required by this item are in Item 15 of Part IV, “Index to Financial Statements” at page F-
1 of this annual report on Form 10-K and are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as such terms are defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, that are
designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act are recorded,
processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and
communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of senior
management, including the CEO and the CFO, of the effectiveness of the design and operation of our disclosure controls and procedures
pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b). Based upon this evaluation, the CEO and the CFO concluded that our disclosure
controls and procedures as of the end of the period covered by this report were effective.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal controls over financial reporting (as such term is defined
in Rules 13a-15(f) under the Exchange Act). Our management assessed the effectiveness of our internal controls 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 in Internal Control-Integrated Framework (2013). Our management has concluded that, as of December 31,
2020, our internal controls over financial reporting are effective based on these criteria.
Moss Adams LLP, the independent registered public accounting firm that audited our financial statements included in this Annual Report on
Form 10-K, was not required to issue an attestation report on our internal control over financial reporting.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during
the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
Item 9B. Other Information.
None.
49
Table of Contents
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
The following table sets forth the names, ages and positions of our directors and executive officers as of February 16, 2021.
Name
Michael
Macaluso (4)
Age
69
Position With Ampio
Chief Executive Officer and
Chairman of the Board
Director/Officer Since
March 2010
Principal Occupation and Areas of
Relevant Experience For Directors
Mr. Macaluso founded DMI Life Sciences Inc. and was a
member of the board of directors of DMI Life Sciences
Inc., our predecessor, since its inception. Mr. Macaluso has
also been a member of our Board since the merger with
Chay Enterprises in March 2010, our CEO since
January 9, 2012 and the Chairman of our Board since
May 2010. In addition, Mr. Macaluso has been a member
of the board of directors of NASDAQ listed Aytu
BioScience’s (AYTU) since April 2015 and served as the
Chairman of Aytu’s Compensation Committee since 2019.
Mr. Macaluso was appointed President of Isolagen, Inc.
(ILE) and served in that position from June 2001 to
August 2001, when he was appointed CEO. In June 2003,
Mr. Macaluso was re-appointed as President of Isolagen
and served as both CEO and President until
September 2004. Mr. Macaluso also served on the board of
directors of Isolagen from June 2001 until April 2005.
From October 1998 until June 2001, Mr. Macaluso was the
owner of Page International Communications, a
manufacturing business. Mr. Macaluso was a founder and
principal of International Printing and Publishing, a
position Mr. Macaluso held from 1989 until 1997, when he
sold that business to a private equity firm.
Mr. Macaluso’s experience in executive management and
marketing within the pharmaceutical industry, monetizing
company opportunities and corporate finance led to the
conclusion of our Board that he should serve as a director
of our Company, considering our business and structure.
50
Table of Contents
Name
David Bar-
Or, MD
Age
72
Position With Ampio
Director and Former Chief
Scientific Officer
Director/Officer Since
March 2010
Principal Occupation and Areas of
Relevant Experience For Directors
Dr. Bar-Or served as our Chief Scientific Officer (“CSO”)
from March 2010 until September 2018. Dr. Bar-Or also
served as our Chairman of the Board from March 2010
until May 2010. From April 2009 until March 2010, he
served as Chairman of the Board and CSO of DMI Life
Sciences, Inc. Dr. Bar-Or is currently the owner of Trauma
Research, LLC and the director of Trauma Research at
Swedish Medical Center, Englewood, Colorado, St.
Anthony’s Hospital, Lakewood, Colorado, Penrose
Hospital, Colorado Springs, Colorado, Research Medical
Center, Kansas City, Missouri, Wesley Medical Center,
Wichita, Kansas and The Medical Center of Plano, Plano,
Texas. Dr. Bar-Or is the founder of Ampio
Pharmaceuticals, Inc. Dr. Bar-Or was principally
responsible for all patented and proprietary technologies,
which were acquired by the Company from DMI
BioSciences, Inc. in April 2009. He was also primarily
responsible for all patents issued and applied for since
then, having been awarded over 500 patents and having
been an inventor on almost 120 patent applications over
the life of the Company. Dr. Bar-Or has authored or co-
authored over 200 peer-reviewed journal articles and
several book chapters. Dr. Bar-Or is a reviewer for over 45
peer reviewed scientific and clinical journals. He is the
recipient of the Gustav Levi Award from the Mount Sinai
Hospital, New York, New York, the Kornfeld Award for an
outstanding MD Thesis, the Outstanding Resident
Research Award from the Denver General Hospital, and
the Outstanding Clinician Award from the Denver General
Medical Emergency Resident Program. Dr. Bar-Or
received his medical degree from The Hebrew University,
Hadassah Medical School, Jerusalem, Israel, following
which he completed a biochemistry fellowship at
Hadassah Hospital under Professor Alisa Gutman and
undertook post-graduate residency training at Denver
Health Medical Center, specializing in emergency
medicine, a discipline in which he is board certified. He
completed the first research fellowship in Emergency
Medicine at Denver Health Medical Center under the
direction of Professor Peter Rosen.
51
Table of Contents
Name
Age
Position With Ampio
Principal Occupation and Areas of
Relevant Experience For Directors
Director/Officer Since
Among other experience, qualifications, attributes and
skills, Dr. Bar-Or’s medical training, extensive
involvement and inventions in researching and developing
Ampion, and leadership role in his hospital affiliations led
to the conclusion of our Board that he should serve as a
director of our Company, considering our business and
structure.
52
Director/Officer Since
April 2010
Table of Contents
Name
Age
Position With Ampio
Principal Occupation and Areas of
Relevant Experience For Directors
Philip H.
Coelho (1)(2)
(3)(4)
77
Director
Mr. Coelho has served as a member of our Board since
April 2010. Mr. Coelho is the Chief Technology Officer of
ThermoGenesis Corp., a firm he founded in 1986 and
retired from in 2007, and rejoined in 2017, which invents
and commercializes products that isolate, purify and
cryopreserve stem, progenitor and immune cells derived
from a donor or the patient’s own body to treat human
disease. Prior to rejoining ThermoGenesis Corp., Mr.
Coelho founded SynGen Inc. in October 2009, and merged
that company with ThermoGenesis Corp. in 2017. Mr.
Coelho was the President and CEO of PHCMedical, Inc., a
consulting firm, from August 2008 through October 2009.
From August 2007 through May 2008, Mr. Coelho served
as the Chief Technology Architect of ThermoGenesis
Corp. From 1989 through July 2007, he was Chairman and
CEO of ThermoGenesis Corp. Mr. Coelho served as Vice
President of Research & Development of ThermoGenesis
from 1986 through 1989. Mr. Coelho has been in the
senior management of high technology consumer
electronic or medical device companies for over 30 years.
He was President of Castleton Inc. from 1982 to 1986, and
President of ESS Inc. from 1971 to 1982. Mr. Coelho has
also served as a member of the board of directors of
NASDAQ-listed company, Catalyst Pharmaceuticals
Partners, Inc. (CPRX) since October 2002, and previously
served as a member of the board of directors of NASDAQ-
listed Mediware Information Systems, Inc. (MEDW) from
December 2001 until July 2006, and commencing again in
May 2008 until it was sold in December 2012. Mr. Coelho
received a B.S. degree in thermodynamic and mechanical
engineering from the University of California, Davis and has
been awarded more than 50 U.S. patents in the areas of cell
cryopreservation, cryogenic robotics, cell selection, blood
protein harvesting, surgical homeostasis and lateral flow
immunotherapy devices.
53
Table of Contents
Name
Age
Position With Ampio
Principal Occupation and Areas of
Relevant Experience For Directors
Director/Officer Since
Richard
B. Giles (1)(2)
(3)(4)
71
Director
August 2010
Mr. Coelho’s long tenure as a CEO of a public medical
device company, as director of a public pharmaceutical
company, prior and current public company board
experience, and knowledge of corporate finance and
governance as an executive and director, as well as his
demonstrated success in developing patented technologies,
led to the conclusion of our Board that he should serve as a
director of our Company, considering our business and
structure.
Mr. Giles, CPA, has served as a member of our Board
since August 2010. Mr. Giles is the CFO and Treasurer of
Ludvik Electric Co., an electrical contractor headquartered
in Lakewood, Colorado, a position he has held since 1985.
Ludvik Electric is a private electrical contractor that has
completed electrical contracting projects throughout the
United States, South Africa and Germany. As CFO and
Treasurer of Ludvik Electric, Mr. Giles oversees
accounting, risk management, financial planning and
analysis, financial reporting, regulatory compliance, and
tax-related accounting functions. He serves also as the
trustee of Ludvik Electric Co.’s 401(k) plan. Prior to
joining Ludvik Electric, Mr. Giles was an Audit Partner for
three years with Higgins Meritt & Company, then a
Denver, Colorado CPA firm, and during the preceding
nine years he was an Audit Manager and a member of the
audit staff of Price Waterhouse, one of the legacy firms
which now comprises PricewaterhouseCoopers. While
with Price Waterhouse, Mr. Giles participated in a number
of public company audits, including one for a leading
computer manufacturer. Mr. Giles received a B.S. degree
in accounting from the University of Northern Colorado.
He is a member of the American Institute of Certified
Public Accountants, Colorado Society of Certified Public
Accountants, and Construction Financial Management
Association.
Mr. Giles’ experience in executive financial management,
accounting and financial reporting, corporate accounting
and internal controls led to the conclusion of our Board
that he should serve as a director of our Company,
considering our business and structure.
54
Director/Officer Since
June 2011
Table of Contents
Name
Age
Position With Ampio
Principal Occupation and Areas of
Relevant Experience For Directors
71
Director
David R.
Stevens,
Ph.D. (1)(2)(3)
(4)
Dr. Stevens has served as a member of our Board since
June 2011. Dr. Stevens has worked in the U.S. Food and
Drug Administration regulated life science industry since
1978. He has also been a consulting research pathologist
since December 2006 for Premier Laboratory, LLC. He
has been a board member of Cetya, Inc. since December
2013. He has served on the boards of several other public
and private life science companies, including Micro-
Imaging Solutions, LLC (from 2007 to 2018), Poniard
Pharmaceuticals, Inc. (from 2004 to 2013), Aqua Bounty
Technologies, Inc. (from 2002 to 2012), Advanced
Cosmetic Intervention, Inc. (from 2006 to 2011) and Smart
Drug Systems, Inc. (from 1999 to 2006), and was an
advisor to Bay City Capital (from 1999 to 2006). Dr.
Stevens was previously President and CEO of Deprenyl
Animal Health, Inc., a public veterinary pharmaceutical
company, from 1990 to 1998, and Vice President,
Research and Development, of Agrion Corp., a private
biotechnology company, from 1986 to 1988. He began his
career in pharmaceutical research and development at the
former Upjohn Company, where he contributed to the
preclinical evaluation of Xanax and Halcion. Dr. Stevens
received B.S. and D.V.M. degrees from Washington State
University, and a Ph.D. in Comparative Pathology from
the University of California, Davis. He is a Diplomate of
the American College of Veterinary Pathologists.
Dr. Stevens’ experience in executive management in the
pharmaceutical industry and knowledge of the medical
device industry led to the conclusion of our Board that he
should serve as a director of our Company, considering our
business and structure.
55
Table of Contents
Name
Daniel G.
Stokely (4)
Age
57
Position With Ampio
Chief Financial Officer and
Secretary
Director/Officer Since
July 2019
Principal Occupation and Areas of
Relevant Experience For Directors
Mr. Stokely has served as our CFO and Secretary since July
2019 and has more than 30 years of experience in finance and
accounting. He began his career at Deloitte & Touche and
since that time, he has spent the majority of his career in
positions of financial leadership within both publicly traded
and privately held pharmaceutical companies. Most recently,
since 2012, he served as Executive Vice President and CFO of
Sentynl Therapeutics Inc., a privately held specialty
pharmaceutical company focused on licensing, acquisition,
marketing, and distribution of development stage and
commercially marketed prescription pain products, which was
sold to Cadila Healthcare Ltd. in January 2017. From 2004 to
2012, Mr. Stokely served as Vice President of Finance and
Chief Accounting Officer (“CAO”) of Victory Pharma, a
privately-held specialty pharmaceutical company focused on
in licensing, internal product development, marketing, and
distribution of pain specialty products, which was sold to
Shionogi, Inc., a Japanese pharmaceutical company, in 2011.
From 2001 to 2004, Mr. Stokely served as the Corporate
Controller and CAO for Wireless Facilities, Inc. (currently
Kratos Defense & Security Solutions), a publicly traded,
global provider of communications and security services for
the wireless communications industry. From 1994 to 2001,
Mr. Stokely served as Corporate Controller of Dura
Pharmaceuticals, a publicly traded pharmaceutical company
that was sold to Elan Pharmaceuticals in late 2000. He has a
bachelor’s degree in accounting from San Diego State
University and is a Certified Public Accountant licensed in
California.
56
Table of Contents
Name
Age
Position With Ampio
Holli
Cherevka(4)
37
Chief Operating Officer
Director/Officer Since
September 2017
Principal Occupation and Areas of
Relevant Experience For Directors
Ms. Cherevka has served as our Chief Operating Officer
(“COO”) since September 2017. Prior to taking her current
role, Ms. Cherevka served as our Vice President of Operations
and oversaw the clinical, regulatory, and manufacturing
operations. Since starting at Ampio in January 2013, she has
held the following additional roles of increasing responsibility
including: Director of Clinical Trials (from January 2013 to
November 2013), Senior Director of Clinical Trials (from
November 2013 to May 2015), Vice President of Operations
(from May 2015 to September 2017) and COO (from
September 2017 to current). Previously, Ms. Cherevka was
the Director of Business Development at the American
College of Radiology (ACR) Image Metrix from 2011 to
2013. Ms. Cherevka earned a Bachelor of Arts from
California State University, Chico, and holds a Master of
Science in Biomedical and Molecular Sciences Research from
King’s College, London. Ms. Cherevka is a member of the
Parenteral Drug Association, Colorado Bioscience
Association and the International Society of Pharmaceutical
Engineers, and a board member of the Professional Science
Master’s in Biomedical Sciences (PSM) program at the
University of Denver. She has represented Ampio
Pharmaceuticals at conferences for the International Society
of Pharmaceutical Engineers as well as at Global Investment
Conferences and shareholder meetings.
(1) Member of our Audit Committee
(2) Member of our Compensation Committee
(3) Member of our Nominating and Governance Committee
(4) Member of our Disclosure Committee
Family Relationships
There is one family relationship to note between our directors or executive officers and employees. Raphael Bar-Or, a non-executive officer,
is the son of Dr. Bar-Or, our former CSO and a director.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics that is applicable to all our employees, officers, and directors, all of which have
read, acknowledged, and agreed to comply with such code. The code is available on our web site, www.ampiopharma.com, under the
“Investors” tab. We intend to disclose future amendments to, or waivers from, certain provisions of our Code of Business Conduct and
Ethics, if any, on the above website within four business days following the date of such amendment or waiver.
Meetings of the Board
During the year ended December 31, 2020, there were (i) six meetings of the Board, (ii) four meetings of the Audit Committee, (iii) six
meetings of the Compensation Committee, (iv) two meetings of the Nominating and Governance
57
Table of Contents
Committee, and (v) one meeting of the Disclosure Committee. No incumbent director attended fewer than seventy-five percent (75%) of the
aggregate of (1) the total number of meetings of the Board, and (2) the total number of meetings held by all committees of the Board during
the period that such director served.
Annual Meeting Attendance, Executive Sessions and Stockholder Communications
Since 2011, our policy has been that our directors attend the annual meeting of stockholders. We previously did not have a policy concerning
director attendance at annual meetings. Commencing in 2011, our policy has also been that our non-employee directors are required to meet
in separate sessions without management on a regularly scheduled basis four times a year. Generally, these meetings are expected to take
place in conjunction with regularly scheduled meetings of the Board throughout the year. Our 2020 annual meeting was held virtually as a
result of the COVID-19 pandemic on December 12, 2020 and was attended by all five of the directors serving on our Board.
We have not implemented a formal policy or procedure by which our stockholders can communicate directly with our Board. Nevertheless,
every effort has been made to ensure that the views of stockholders are heard by the Board or individual directors, as applicable, and that
appropriate responses are provided to stockholders in a timely manner. We believe that we are responsive to stockholder communications,
and therefore have not considered it necessary to adopt a formal process for stockholder communications with our Board. During the
upcoming year, our Board will continue to monitor whether it would be appropriate to adopt such a policy. Communications will be
distributed to the Board, or to any individual director or directors as appropriate, depending on the facts and circumstances outlined in the
communications. Items that are unrelated to the duties and responsibilities of the Board may be excluded, such as:
● junk mail and mass mailings;
● resumes and other forms of job inquiries;
● surveys; and
● solicitations or advertisements.
In addition, any material that is unduly hostile, threatening, or illegal in nature may be excluded, provided that any communication that is
excluded will be made available to any outside director upon request.
Involvement in Certain Legal Proceedings
There are currently no legal proceedings, and during the past ten years there have been no legal proceedings, that are material to the ability
or integrity of any of our directors, director nominees or executive officers.
We are not engaged in, nor are we aware of any pending or threatened litigation in which any of our directors, executive officers, affiliates,
or owner of more than 5% of our Common Stock is a party adverse to us or has a material interest adverse to us.
Leadership Structure of the Board
The Board does not currently have a policy on whether the same person should serve as both the CEO and Chairman of the Board. Both the
Chairman and CEO positions are currently held by Michael Macaluso. The Board believes that our CEO is best suited to serve as our
Chairman because he is the member of the Board who is most familiar with our business as a whole, and the most capable of identifying and
bringing to the attention of the full Board the strategic priorities and key issues facing the Company. The Board also believes that having Mr.
Macaluso in particular in a combined Chairman/CEO role helps provide strong, unified leadership for our management team and optimizes
communication with our Board.
To counterbalance concerns regarding our Board’s decision to have a combined Chairman and CEO, the independent directors elect a lead
independent director when the roles of the Chairman and CEO are held by the same person. Our lead independent director is Mr. Coelho. In
that role, he presides over the executive sessions of the Board, during which
58
Table of Contents
our independent directors meet without management, and he serves as the principle liaison between management and the independent
directors of the Board.
Periodically, our Board assesses these roles and the Board leadership structure to ensure the interests of the Company and its stockholders
are best served.
Risk Oversight
The Board oversees risk management directly and through its committees associated with their respective subject matter areas. Generally, the
Board oversees risks that may affect our business, including operational matters and other matters that have been adversely impacted by the
COVID-19 pandemic. In addition, as part of its oversight of our Company’s executive compensation program, the Board considers the
impact of such program, and the incentives created by the compensation awards that it administers, on our Company’s risk profile. Our
Board, based on the Compensation Committee’s review of all of our compensation policies and procedures, considers the incentives that
they create and factors that may reduce the likelihood of excessive risk taking and determines whether they present a significant risk to our
Company. The Board has determined that, for all employees, our compensation programs do not encourage excessive risk and instead
encourage behaviors that support sustainable value creation.
The Audit Committee is responsible for oversight of our accounting and financial reporting processes and discusses with management our
financial statements, internal controls and other accounting and auditing matters. The Compensation Committee oversees certain risks
related to compensation programs and the Nominating and Governance Committee oversees certain corporate governance risks. The
Disclosure Committee assists in establishing, implementing, maintaining and evaluating controls or other procedures to ensure that the
information required to be disclosed in the Company’s reports furnished or filed under the Exchange Act is properly communicated to the
CEO and the CFO. As part of their roles in overseeing risk management, these committees periodically report to the Board regarding
briefings provided by management and advisors as well as the committees’ own analysis and conclusions regarding certain risks faced by us.
Management is responsible for implementing the risk management strategy and developing policies, controls, processes and procedures to
identify and manage risks.
Committees of the Board
Our Board has an Audit Committee, a Compensation Committee, a Nominating and Governance Committee, and a Disclosure Committee,
each of which has the composition and the responsibilities described below. The Audit Committee, Compensation Committee, Nominating
and Governance Committee, and Disclosure Committee operate under separate charters approved by our Board. The charters for each
committee are available on our website at www.ampiopharma.com
Audit Committee. Our Audit Committee, established in accordance with Section 3(a)(58)(A) of the Exchange Act, oversees our corporate
accounting and financial reporting process. This committee also assists our Board in monitoring our financial systems and our legal and
regulatory compliance. Our Audit Committee is responsible for, among other things:
● selecting and hiring our independent auditors;
● appointing, compensating and overseeing the work of our independent auditors;
● approving engagements of the independent auditors to render any audit or permissible non-audit services;
● reviewing the qualifications and independence of the independent auditors;
● monitoring the rotation of partners of the independent auditors on our engagement team, as required by law;
● recommending inclusion of the audited financial statements in the Company’s Annual Report on Form 10-K and providing the
Report of the Audit Committee to be included in the Company’s annual proxy statement;
59
Table of Contents
● reviewing our financial statements and reviewing our critical accounting policies and estimates;
● reviewing the adequacy and effectiveness of our internal controls over financial reporting;
● reviewing and discussing with management, the independent auditors and any internal auditors the results of our annual audit,
reviews of our quarterly financial statements and our publicly filed reports; and
● reviewing related party transactions.
The members of our Audit Committee are Messrs. Giles, Coelho and Dr. Stevens. Mr. Giles is our Audit Committee Chairman and was
appointed to our Audit Committee in August 2010. Our Board has determined that each member of the Audit Committee meets the financial
literacy requirements of the national securities exchanges and the SEC, and Mr. Giles qualifies as our Audit Committee financial expert as
defined under SEC rules and regulations. Our Board has concluded that the composition of our Audit Committee meets the requirements for
independence under the current requirements of the NYSE American stock exchange (“NYSE American”) and SEC rules and regulations.
We believe that the function of our Audit Committee complies with the applicable requirements of SEC rules and regulations, and applicable
requirements of the NYSE American.
Compensation Committee. Our Compensation Committee oversees our corporate compensation policies, plans and programs. The
Compensation Committee is responsible for, among other things:
● reviewing and approving policies, plans and programs relating to compensation and benefits of our directors, officers and
employees;
● reviewing and approving compensation, corporate goals, and objectives relevant to compensation for our CEO and for
executive officers other than our CEO;
● evaluating the performance of our executive officers considering established goals and objectives;
● reviewing the executive compensation disclosure that is prepared by the Company for inclusion in the Company’s annual
proxy statement;
● assessing how the Company’s compensation programs encourage the taking of enterprise or other risks that may bear on the
Company’s overall financial or operational performance; and
● administering our equity compensations plans for our employees and directors.
The members of our Compensation Committee are Messrs. Coelho, Giles and Dr. Stevens. Mr. Coelho is the Chairman of our Compensation
Committee. Each member of our Compensation Committee is a non-employee director, as defined in Rule 16b-3 promulgated under the
Exchange Act, and satisfies the independence requirements of the NYSE American. We believe that the composition of our Compensation
Committee meets the requirements for independence under, and the function of our Compensation Committee complies with, the applicable
requirements of the NYSE American and SEC rules and regulations.
Our Compensation Committee meets at least once per year and on a regular basis as it deems appropriate. However, from time to time,
various members of management and other employees as well as outside advisors or consultants may be invited by the Compensation
Committee to make presentations, to provide financial or other background information or advice or to otherwise participate in
Compensation Committee meetings. Our CEO may not participate in, or be present during, any deliberations or determinations of the
Compensation Committee regarding his compensation or individual performance objectives. Our Compensation Committee has the sole
authority to retain compensation consultants to assist in its evaluation of executive and director compensation, including the authority to
approve the consultant’s reasonable fees and other retention terms. In general, the Compensation Committee has set executive compensation
to be in line with peer companies identified by the Compensation Committee and to incentivize the Company’s executive officers to achieve
the Company’s corporate goals.
60
Table of Contents
In fulfilling its responsibilities, the Compensation Committee is permitted under its charter to delegate any or all of its responsibilities to a
subcommittee comprised of members of the Compensation Committee or the Board, except that the Compensation Committee may not
delegate its responsibilities for any matters that involve compensation of any officer or any matters where it has determined such
compensation is intended to be exempt from Section 16(b) under the Exchange Act pursuant to Rule 16b-3 by virtue of being approved by a
committee of independent or nonemployee directors.
Nominating and Governance Committee. Our Nominating and Governance Committee oversees and assists our Board in reviewing and
recommending corporate governance policies and nominees for election to our Board. The Nominating and Governance Committee is
responsible for, among other things:
● evaluating and making recommendations regarding the organization and governance of the Board and its committees;
● assessing the performance of members of the Board and making recommendations regarding committee and chair
assignments;
● recommending desired qualifications for Board membership and conducting searches for potential members of the Board;
● developing and periodically reviewing with our Board a succession plan for our CEO; and
● reviewing and making recommendations for our corporate governance guidelines.
The members of our Nominating and Governance Committee are currently Messrs. Coelho, Giles and Dr. Stevens. Mr. Coelho is the
Chairman of our Nominating and Governance Committee. Our Board has determined that each member of our Nominating and Governance
Committee satisfies the independence requirements of the NYSE American.
Our Nominating and Governance Committee and the Board have not yet established a succession plan for our CEO. Mr. Macaluso is
performing to the satisfaction of the Board and, as such, the Nominating and Governance Committee does not believe there is a pressing
need to have a succession plan for the CEO position.
Disclosure Committee. Our Disclosure Committee provides assistance to the CEO and the CFO (the “Senior Officers”), in fulfilling their
responsibilities regarding the identification and disclosure of material information about the Company and the accuracy, completeness and
timeliness of such disclosures. The Disclosure Committee is responsible for, among other things:
● designing, adopting and maintaining appropriate procedures and standards that are designed to ensure that: (i) information that
we are required to disclose to the SEC, and other written information that we voluntarily disclose to the public, is recorded,
processed, summarized and reported accurately and on a timely basis; (ii) risks and risk factors are adequately evaluated and
properly disclosed; and (iii) such information is accumulated and communicated to our management, including our Senior
Officers, as appropriate, to allow timely decisions regarding required disclosure (the “Disclosure Controls”);
● monitoring the integrity and evaluating the effectiveness of the Disclosure Controls;
● reviewing our: (i) Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy
statements, material registration statements, and any other information filed with the SEC; (ii) press releases; (iii)
correspondence broadly disseminated to stockholders; (iv) presentations to analysts, rating agencies, lenders, stockholders or
the investment community; and (v) disclosure relating to results of operations and financial position, securities or clinical trial
or other material scientific results posted to the Company’s website or through social media channels (collectively, the
“Covered Reports”);
● discussing with the Senior Officers and making recommendations regarding the materiality of information known to the
Company and the Company’s disclosure obligations, if any, including (i) reviewing the Company’s disclosures in the Covered
Reports; (ii) evaluating the effectiveness of the Disclosure Controls;
61
Table of Contents
and (iii) reviewing the Covered Reports to confirm that they do not contain any false statements or omissions of material fact;
● overseeing periodic mandatory training sessions to our Board and employees, which shall include coverage of the following
topics: (i) risk assessment and compliance, (ii) our Code of Business Conduct and Ethics, (iii) any and all manuals or policies
established by us concerning legal or ethical standards of conduct to be observed in connection with work performed for the
Company, and (iv) the obligations of the Disclosure Committee and the rules, regulations and other factors that impact
disclosures contained in the Covered Reports; and
● certifying to the Senior Officers prior to the filing of each Annual Report on Form 10-K and Quarterly Report on Form 10-Q
as to the Committee’s conclusions regarding its evaluation of the effectiveness of the Company’s Disclosure Controls.
According to its charter, the Disclosure Committee shall be comprised of the Company’s CEO, CFO, COO and at least two independent
members of the Board and possibly other key accounting/auditing, business, risk management, investor relations and financial personnel
involved in preparing the Covered Reports. The Disclosure Committee’s chairperson shall be an independent director and will be designated
by the Board. The members of our Disclosure Committee are currently Messrs. Macaluso, Stokely, Coelho, Giles and Dr. Stevens, as well as
Ms. Cherevka. Dr. Stevens is the Chairman of our Disclosure Committee.
Our Board may from time to time establish other committees.
Non-Employee Director Compensation
Our Compensation Committee established the following annual fees for payment to non-employee members of our Board or committees, for
the fiscal year ended December 31, 2020:
Name
Cash Compensation
Common Stock
Board Annual Retainer:
Chairman/lead independent director
Each non-employee director
Audit Committee Annual Retainer:
Chairman
Each non-employee director
Compensation Committee Annual Retainer:
Chairman
Each non-employee director
Nominating and Governance Committee Annual Retainer:
Chairman
Each non-employee director
Disclosure Committee Annual Retainer:
Chairman
Each non-employee director
Annual Stock Award:
$
$
$
$
$
$
$
$
$
$
71,000
38,500
20,000
10,000
12,000
6,000
10,000
5,000
12,000
6,000
$
20,000
The non-employee director compensation for fiscal 2020 also includes a stock option grant to each non-employee director to purchase
36,000 shares of our common stock. The options have an exercise price equal to the fair value on the grant date, which coincides with the
date of the annual meeting of stockholders on December 14, 2019. The options vest monthly over the succeeding twelve months.
62
Table of Contents
Director Compensation
The table below summarizes the compensation paid by us to non-employee directors for the year ended December 31, 2020. Mr. Macaluso,
our employee director, does not receive additional compensation for his services as a member of our Board.
Fees Earned or
Option
Name
Paid in Cash
David Bar-Or, M.D. (3)
Philip H. Coelho (4)
Richard B. Giles (5)
David Stevens, Ph.D. (6)
$
$
$
$
38,500
109,000
75,500
71,540
Awards (1)
$ 349,184
$ 107,971
$ 142,838
45,430
$
Stock Awards
(2)
20,000
20,000
20,000
20,000
$
$
$
$
All Other
Compensation
Total
$
$
$
$
— $ 407,684
— $ 236,971
— $ 238,338
— $ 136,970
(1) The amounts reported under “Option Awards” in the above table reflect the grant date fair value of these awards as determined in
accordance with the Financial Accounting Standards Board’s Accounting Standards Codification Topic 718, Compensation – Stock
Compensation. The value of stock option awards was estimated using the Black-Scholes option pricing model. The valuation
assumptions used in the valuation of options granted may be found in Note 12 to our financial statements included in this annual report
on Form 10-K for the year ended December 31, 2020. On December 12, 2020, the date of the 2020 annual meeting, Messrs. Coelho and
Giles and Drs. Bar-Or and Stevens were each granted options to purchase 36,000 shares of common stock. These options have an
exercise price of $1.50 per share, vest over the succeeding 12 months and have a term of 10 years from the grant date. The value of each
stock option award totaled $45,000. Additional stock options were granted to Messrs. Coelho and Giles and Drs. Bar-Or, as further
described in the table notes below.
(2) On January 2, 2020, Messrs. Coelho, Giles and Dr. Stevens were each awarded 34,059 shares of common stock, at a price of $0.5872
which was the closing price of our common stock on the date of grant per share, equivalent to $20,000. Since fiscal 2012, the aggregate
number of stock awards to each of Messrs. Coelho, Giles and Dr. Stevens totaled 121,049 shares of common stock with a value of
$140,000. Since fiscal 2019, the aggregate number of stock awards to Dr. Bar-Or totaled 79,287 shares of common stock with a value of
$40,000.
(3) On July 1, 2020, Dr. Bar-Or was granted options to purchase 200,000 shares of common stock. These options have an exercise price of
$0.613, vested immediate and have a term of 10 years from the grant date. The value of the stock option award was estimated using the
Black-Scholes option pricing model and totaled $101,000. In addition, on November 10, 2020, Dr. Bar-Or was granted options to
purchase 300,000 shares of common stock. These options have an exercise price of $0.786, vest one-third on grant date, one-third on the
first anniversary of the grant date and the remaining one-third on the second anniversary of the grant date, and have a term of 10 years
from the grant date. The value of the stock option award was estimated using the Black-Scholes option pricing model and totaled
$203,000. The aggregate number of shares issuable upon exercise of option awards outstanding at December 31, 2020 for Dr. Bar-Or
was 602,000, of which 366,000 were fully vested.
(4) Pursuant to an option repricing program undertaken by the Company in July 2020, 160,554 of Mr. Coelho’s options were cancelled and,
in replacement thereof 136,471 options, which were fully vested upon grant, were issued. The value of the replacement stock option
award was estimated using the Black-Scholes option pricing model and totaled $63,000. The aggregate number of shares issuable upon
exercise of option awards outstanding at December 31, 2020 for Mr. Coelho was 668,221, of which 632,221 were fully vested.
(5) Pursuant to an option repricing program undertaken by the Company in July 2020, 250,000 of Mr. Giles’s options were cancelled and, in
replacement thereof 212,500 options, which were fully vested upon grant, were issued. The value of the replacement stock option award
was estimated using the Black-Scholes option pricing model and totaled $97,000. The aggregate number of shares issuable upon
exercise of option awards outstanding at December 31, 2020 for Mr. Giles was 740,000, of which 704,000 were fully vested.
(6) The aggregate number of shares issuable upon exercise of option awards outstanding at December 31, 2020 for Dr. Stevens was
378,750, of which 342,750 were fully vested.
63
Table of Contents
Item 11. Executive Compensation.
Executive Compensation
Named Executive Officers
For our fiscal year ended December 31, 2020, our Named Executive Officers were: (i) Michael Macaluso, our CEO, who has served as our
CEO since January 2012, (ii) Daniel G. Stokely, our CFO, who has served as our CFO and Secretary since July 2019, and (iii) Holli
Cherevka, our current COO, who has served as our COO since September 2017. We had no other executive officers serving during the year
ended December 31, 2020.
The following table shows, for the fiscal years ended December 31, 2020 and December 31, 2019, compensation awarded to, paid to, or
earned by our Named Executive Officers.
Summary Compensation of Named Executive Officers
Name and Principal Position
(a)
Named Executive Officers
Michael Macaluso
CEO, effective January 2012
Daniel G. Stokely
CFO, effective July 2019
Holli Cherevka
COO, effective September 2017
Year
(b)
2020
2019
2020
2019
2020
2019
Salary ($)
(c)
Bonus ($)
(d)
Stock
Awards ($)
(e)
Option
Awards
($)(1)
(f)
All Other
Compensation
($) (11)
(i)
Total ($)
(j)
300,000
300,000
157,040 (2)(4)
5,000 (4)
285,000
119,740 (7)
56,665 (4)(5)
5,000 (4)
280,000
223,333 (9)
7,040 (4)
55,000 (4) (10)
—
—
—
—
—
—
311,097 (3)
—
—
—
768,137
305,000
44,670 (6)
149,135 (7)
77,830 (7)
30,505 (7)
464,165
304,380
98,751 (8)
88,732 (9)
1,000
—
386,791
367,065
(1) The amounts reported under “Option Awards” in the above table reflect the grant date fair value of these awards as determined in
accordance with the Financial Accounting Standards Board’s Accounting Standards Codification Topic 718, Compensation – Stock
Compensation, rather than amounts paid to or realized by the named individual. The value of the option awards was estimated using the
Black-Scholes option pricing model. The valuation assumptions used in the valuation of options granted may be found in Note 12 to our
financial statements included in this annual report on Form 10-K for the year ended December 31, 2020.
(2) Mr. Macaluso received a $150,000 bonus related to his performance for the year ended December 31, 2020.
(3) Mr. Macaluso entered into an employment agreement with the Company, effective January 2020, to continue his position as CEO, at an
annual salary of $300,000. In connection with Mr. Macaluso’s employment, he was awarded 200,000 options. The aggregate value of
the stock option award was estimated using the Black-Scholes option pricing model and totaled $118,000. In addition, pursuant to an
option repricing program undertaken by the Company in July 2020, 300,000 of Mr. Macaluso’s options were cancelled and, in
replacement thereof 255,000 options, which were fully vested upon grant, were issued. The incremental value of the replacement stock
option award was estimated using the Black-Scholes option pricing model and totaled $117,000. In December 2020, Mr. Macaluso was
also awarded 50,000 options. The aggregate value of the stock option award was estimated using the Black-Scholes option pricing
model and totaled $76,000.
(4) Each of the Named Executive Officers received a $7,000 and $5,000 holiday bonus, respectively, during the years ended December 31,
2020 and December 31, 2019.
(5) Mr. Stokely received a $50,000 bonus related to his performance for the year ended December 31, 2020.
(6) In January 2020, Mr. Stokely was awarded 30,000 options. The aggregated value of the stock option awards was estimated using the
Black-Scholes option pricing model and totaled $15,000. In December 2020, Mr. Stokely was also awarded 20,000 options. The
aggregated value of the stock option awards was estimated using the Black-Scholes options pricing model and totaled $30,000.
(7) Mr. Stokely was appointed CFO, effective July 2019, with an annual salary of $285,000. In connection with Mr. Stokely’s employment
agreement, he was awarded 400,000 options. The aggregate value of the stock option award was estimated using the Black-Scholes
option pricing model and totaled $149,000. In addition, we agreed to
64
Table of Contents
reimburse Mr. Stokely for certain commuting and housing expenses up to a maximum of $6,000 per month for up to twelve months and
up to $43,000 for taxes related to the commuting and housing expenses. During the twelve-month period starting July 2019 and ending
July 2020, a total of $66,000 was reimbursed for commuting and housing expenses and $42,000 was reimbursed related to taxes as a
result of the commuting and relocation expense payments. Therefore, a total of $108,000 was reimbursed for commuting/relocation
expense and taxes as of December 31, 2020, in respect of the twelve-month period starting July 2019 and ending July 2020. Of the
$66,000 that was reimbursed for commuting and housing expense, $43,000 related to corporate housing, $20,000 related to traveling
expense and $3,000 related to other expenses.
(8) Pursuant to an option repricing program undertaken by the Company in December 2020, 70,598 of Ms. Cherevka’s options were
cancelled and, in replacement thereof 55,000 options, which were fully vested upon grant, were issued. The incremental value of the
replacement stock option award was estimated using the Black-Scholes option pricing model and totaled $84,000. In addition, in
December 2020, Ms. Cherevka was also awarded 10,000 options. The aggregate value of the stock option award was estimated using
the Black-Scholes option pricing model and totaled $15,000.
(9) Ms. Cherevka entered into an employment agreement with the Company, effective September 2019, to continue her position as COO, at
an annual salary of $280,000. In connection with Ms. Cherevka’s employment, she was awarded 200,000 options with a fair value of
$89,000.
(10) Ms. Cherevka received a $50,000 bonus related to her performance for the year ended December 31, 2019.
(11) The Company provides group term life insurance coverage in the amount of $20,000 for all employees, including the Named Executive
Officers, for a nominal annual premium amount.
Our executive officers are reimbursed by us for any out-of-pocket expenses incurred, reviewed and approved in connection with business
activities conducted on our behalf.
Employment Agreements
We entered into an employment agreement with Mr. Michael Macaluso, CEO, 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, we increased Mr. Macaluso’s annual salary from
$195,000 to $300,000. On December 20, 2014, we extended the employment agreement of Mr. Macaluso for three additional years, expiring
January 9, 2017. On March 9, 2017, we extended his employment agreement for another three years until January 9, 2020. In connection
with his 2017 Amendment, Mr. Macaluso was awarded 400,000 options to purchase our common stock at an exercise price of $0.81 vesting
annually over three years beginning on March 9, 2018.
On December 14, 2019, we entered into a new three-year employment agreement with Mr. Macaluso (the “Macaluso Employment
Agreement”), which became effective on January 10, 2020 (“Start Date”) immediately following the expiration of his prior employment
agreement. In connection with his continued service as the Company’s CEO and as a member of the Board, Mr. Macaluso will continue to
receive an annual base salary of $300,000 with a term ending January 10, 2023, subject to certain automatic renewal provisions. At the Start
Date, Mr. Macaluso received a one-time equity award of 200,000 stock options at an exercise price per share equal to the closing price of the
Company’s Common Stock as reported on the NYSE American on the Start Date (50% of which vested on the Start Date and 50% of which
will vest on January 10, 2021). Mr. Macaluso will also be able to allocate incentive compensation to others through (i) a special cash bonus
pool of $50,000, which he shall be able to allocate in his reasonable discretion to employees of the Company, and (ii) recommendations to
the Compensation Committee of the issuance of up to 100,000 stock options, pursuant to the terms of the Company’s 2019 Stock and
Incentive Plan. Each of the cash and stock option bonus pools have been substantially allocated by the date of this proxy statement. As
consideration for the incentive compensation pools, on the Start Date, Mr. Macaluso forfeited previously granted options to purchase
100,000 shares of Common Stock, which were originally granted on August 12, 2010 with an exercise price of $1.70 and which were fully
vested.
We entered into a three-year employment agreement with Mr. Daniel G. Stokely, CFO, and Corporate Secretary (as amended, the “Stokely
Employment Agreement”), on July 9, 2019 for his services beginning on July 31, 2019, which provided for an annual salary of $285,000 and
a term ending July 31, 2022, subject to certain automatic renewal provisions. In connection with his employment, Mr. Stokely was awarded
400,000 options to purchase Common Stock at an exercise price of $0.43, as determined pursuant to that certain Stock Option Cancellation
and Grant Agreement for Executive, dated August 20, 2019, with 50% of these options vesting upon grant and the remaining 50% vesting
one year from the effective start date of employment. In December 2019, an amendment to Mr. Stokely’s employment agreement awarded
him an
65
Table of Contents
additional 30,000 options to purchase Common Stock, which were granted in January 2020, at an exercise price of $0.5872, with 50%
vesting upon grant and 50% vesting on July 31, 2020. In addition, we initially agreed to reimburse Mr. Stokely for certain commuting and
housing expense up to a maximum of $6,000 per month for up to six months. In December 2019, we extended the period of reimbursement
for commuting and housing expenses for an additional two months, which was subsequently extended for an additional four months through
July 2020. In addition, Mr. Stokely’s employment agreement amendment also provides for additional reimbursement of taxes paid by Mr.
Stokely as a result of commuting and relocation expense payments.
We entered into an employment agreement with Ms. Holli Cherevka, COO, on September 19, 2017, which provided for an annual salary of
$200,000 and a term ending September 16, 2019. In connection with the employment agreement, Ms. Cherevka was awarded 200,000
options to purchase Common Stock at an exercise price of $0.55, with 50% vesting upon grant and 50% vesting one year from the effective
start date of employment. We entered into a new two-year employment agreement with Ms. Cherevka (the “Cherevka Employment
Agreement” and collectively with the Macaluso Employment Agreement and the Stokely Employment Agreement, the “Executive
Employment Agreements”) on September 16, 2019, which provides for an annual salary of $280,000 and has a term ending September 16,
2021, subject to certain automatic renewal provisions. In connection with this new employment agreement, Ms. Cherevka was awarded
200,000 options to purchase Common Stock at an exercise price of $0.51, with 50% vesting upon grant and 50% vesting one year from the
effective start date of employment.
Each officer is eligible to receive a discretionary annual bonus each year that will be determined by the Compensation Committee of the
Board based on individual achievement and Company performance objectives established by the Compensation Committee. Included in
those objectives, as applicable for the responsible officer, are (i) obtaining successful clinical trial results, and (ii) preparation and
compliance with a fiscal budget. The targeted amount of the annual bonus for Mr. Macaluso, Mr. Stokely, and Ms. Cherevka is 50% of the
applicable base salary, although the actual bonus may be higher or lower.
Outstanding Equity Awards
The following table provides a summary of equity awards outstanding for each of the Named Executive Officers as of December 31, 2020:
Number of
Securities
Underlying
Unexercised
Options Exercisable
(#)
(b)
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
(c)
Option Awards
Equity Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
(d)
50,000
255,000 (1)
100,000
400,000
250,000
180,000
20,000
30,000
400,000
55,000 (3)
10,000
200,000
200,000
30,000
170,000
30,000
9,402
45,000
35,000
—
—
100,000 (2)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Option
Exercise
Price ($)
(e)
Option
Expiration
Date
(f)
1.78
0.65
0.68
0.81
2.76
1.70
1.78
0.59
0.43
1.78
1.78
0.51
0.55
0.51
0.75
0.75
0.75
0.75
0.75
12/17/2030
7/10/2030
1/10/2030
3/9/2027
5/7/2022
8/27/2020
12/17/2030
1/2/2030
8/20/2029
12/17/2030
12/17/2030
9/16/2029
9/19/2027
8/8/2027
7/15/2026
10/6/2024
11/8/2023
4/2/2023
1/14/2023
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Name
(a)
Named Executive Officers
Michael Macaluso
Michael Macaluso
Michael Macaluso
Michael Macaluso
Michael Macaluso
Michael Macaluso
Daniel G. Stokely
Daniel G. Stokely
Daniel G. Stokely
Holli Cherevka
Holli Cherevka
Holli Cherevka
Holli Cherevka
Holli Cherevka
Holli Cherevka
Holli Cherevka
Holli Cherevka
Holli Cherevka
Holli Cherevka
(1) Pursuant to an option repricing program undertaken by the Company in July 2020, 300,000 of Mr. Macaluso’s options were cancelled
and, in replacement thereof 255,000 options, which were fully vested upon grant, were
66
Table of Contents
issued. The incremental value of the replacement stock option award was estimated using the Black-Scholes option pricing model and
totaled $117,000.
(2) The unexercisable options vest annually starting on the first anniversary of the grant date and became fully vested on January 10, 2021.
The option awards remain exercisable until their expiration on the ten-year anniversary of the date of grant subject to earlier forfeiture
following termination of employment.
(3) Pursuant to an option repricing program undertaken by the Company in December 2020, 70,598 of Ms. Cherevka’s options were
cancelled and, in replacement thereof 55,000 options, which were fully vested upon grant, were issued. The incremental value of the
replacement stock option award was estimated using the Black-Scholes option repricing model and totaled $84,000.
Potential Payments upon Termination or Change in Control
Under each of our Executive Employment Agreements, the respective member of our executive team (each, an “Executive”), if their
employment is terminated by the Company without Cause or by the Executive for Good Reason, will be entitled to a lump sum severance
payment equal to six months of his or her base salary in effect at the date of termination, less applicable withholding and certain offsetting
payments (including offsets for any and all compensation that he or she may receive from other employment subsequent to his or her
employment with the Company pursuant to a duty to mitigate such severance payment). In addition, the vesting and exercisability of all then
outstanding equity awards (excluding the performance-based awards) held by our Executive will accelerate in full. Any performance-based
award held by such Executive shall become vested and exercisable only if the applicable performance-based criteria are satisfied at the end
of the applicable period relating to such award, at which time such performance-based award shall become vested and exercisable on a pro-
rated basis by multiplying such award by a fraction, the numerator of which is the number of full months such executive was employed by
the Company during the applicable performance period, and the denominator of which is the total number of months in such performance
period. Any performance-based award for which the performance criteria are not satisfied within the applicable performance period shall
terminate at the end of such period. All severance payments, less applicable taxes and withholdings, are subject to our Executive’s execution
and delivery of a general release in a form acceptable to us, and is further conditioned upon complying with the confidentiality, non-
solicitation, non-competition, intellectual property and post-termination cooperation obligations under his employment agreement. If the
employment is terminated by the Company for Cause or by the Executive without Good Reason, no severance shall be payable by us.
“Good Reason” means, without the Executive’s written consent:
● a material reduction of his or her compensation (except where there is a general reduction also applicable to the other members
of the senior executive team); or
● a material reduction in his or her overall responsibilities or authority or scope of duties (it being understood that the occurrence
of a change in control shall not, by itself, necessarily constitute a reduction in his or her responsibilities or authority).
“Cause” means, in the sole discretion of a majority of the Board:
● The Executive’s failure or refusal to substantially perform his or her duties;
● personal or professional dishonesty that could reasonably be expected to have a materially adverse impact on the financial
interests or business reputation of the Company;
● incompetence, willful misconduct, breach of fiduciary duty (including duties involving personal profit);
● breach of the Company’s Code of Business Conduct and Ethics and personnel policies or compliance policies;
● material violation of the Sarbanes-Oxley requirements for officers of public companies that in the reasonable opinion of the
Board will likely cause substantial financial harm or substantial injury to the reputation of the Company;
67
Table of Contents
● willfully engaging in actions that in the reasonable opinion of the Board will likely cause substantial financial harm or
substantial injury to the business reputation of the Company;
● willful violation of any law, rule, or regulation, or final cease-and-desist order (other than routine traffic violations or similar
offenses);
● the unauthorized use or disclosure of any trade secret, proprietary, or confidential information of the Company (or any other
party as to which our Executive owes an obligation of nondisclosure as a result of his or her relationship with the Company);
● failure to follow the reasonable and lawful directives of the CEO or the Board pertaining to his or her duties with the
Company;
● commission of an act of fraud, embezzlement, or misappropriation by our Executive with respect to his or her relations with
the Company or any of its employees, customers, agents, or representatives; or
● any material breach of any provision of the employment agreement with our Executive.
Our employment agreements with our Executives do not provide for the payment of a “gross-up” payment under Section 280G of the Code.
The following table provides a summary of potential payments upon termination or change in control for each of the Named Executive
Officers as of December 31, 2020 (rounded to the nearest thousand):
Recipient and Benefit
Michael Macaluso
Salary
Stock Options (1)
Total
Daniel G. Stokely
Salary
Stock Options (1)
Total
Holli Cherevka
Salary
Stock Options (1)
Total
Cause; Without Good Without Cause; Good
Reason;
Reason
Death; Disability
Change in Control
$
$
$
$
$
$
— $
—
— $
— $
—
— $
— $
—
— $
150,000
734,000
884,000
142,500
494,000
636,500
140,000
699,000
839,000
$
$
$
$
$
$
— $
—
— $
— $
—
— $
— $
—
— $
—
—
—
—
—
—
—
—
—
(1) Amounts represent the intrinsic value (that is, the value based upon the company’s stock price on December 31, 2020 of $1.59 per
share), minus the exercise price of the equity awards that would have become exercisable as of December 31, 2020.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth information regarding beneficial ownership of our Common Stock as of February 16, 2021 by:
● each person or group of affiliated persons known by us to be the beneficial owner of more than 5% of our Common Stock;
68
Table of Contents
● each of our named executive officers;
● each of our directors and director nominees; and
● all executive officers and directors as a group.
We have determined beneficial ownership in accordance with SEC rules. The information does not necessarily indicate beneficial ownership
for any other purpose. Under these rules, the number of shares of Common Stock deemed outstanding includes shares issuable upon exercise
of options and warrants held by the respective person or group which may be exercised or converted within 60 days after February 16, 2021.
For purposes of calculating each person’s or group’s percentage ownership, stock options and warrants exercisable within 60 days after
February 16, 2021 are included for that person or group but not the stock options or warrants of any other person or group. Ownership is
based on 195,629,128 shares of Common Stock outstanding on February 16, 2021.
The Company is not aware of any arrangements that have resulted, or may at a subsequent date result, in a change of control of the
Company.
Unless otherwise indicated and subject to any applicable community property laws, to our knowledge, each stockholder named in the
following table possesses sole voting and investment power over the shares listed. Unless otherwise noted below, the address of each
stockholder listed on the table is c/o Ampio Pharmaceuticals, Inc., 373 Inverness Parkway, Suite 200, Englewood, Colorado 80112.
Name and Address of Beneficial Owner
Number of Shares Beneficially
Owned
Percentage of Shares
Beneficially Owned
5% Stockholders
CVI Investments, Inc. (1)
C/O Heights Capital Management, Inc.
101 California Street, Suite 3250
San Francisco, CA 94111
Bruce E. Terker (2)
950 W. Valley Road, Suite 2900
Wayne, PA 19087
Directors and Name Executive Officers
Michael Macaluso (3)
David Bar-Or (4)
Richard B. Giles (5)
Philip H. Coelho (6)
Holli Cherevka (7)
David R. Stevens (8)
Daniel G. Stokely (9)
Directors and executive officers as a group
12,454,835
11,525,331
3,121,752
469,800
1,083,121
847,721
784,402
489,312
425,815
7,221,923
6.3 %
5.9 %
1.6 %
0.2 %
0.6 %
0.4 %
0.4 %
0.2 %
0.2 %
3.6 %
(1) Based on a Schedule 13G/A filed by CVI Investments, Inc. (“CVI Investments”) and Heights Capital Management, Inc. (“Heights
Capital”) with the SEC on February 14, 2019. The amount indicated in the table includes 6,250,000 shares of Common Stock issued as
a result of a warrant exercise on October 29, 2019 and also includes warrants to purchase 600,000 shares that are exercisable within 60
days of February 16, 2021. Based on the above Schedule 13G/A, CVI Investments and Heights Capital have shared voting and
dispositive power with respect to the shares.
(2) Based solely on a Schedule 13G/A filed by Bruce E. Terker, Ballyshannon Partners, L.P., Ballyshannon Family Partnership, L.P.,
Insignia Partners, L.P. and Odyssey Capital Group, L.P. (collectively the “Bruce E. Terker and Related Companies”) with the SEC on
January 20, 2021, reporting beneficial ownership as of December 31, 2020. Based on the above Schedule 13G/A, Bruce E. Terker and
Related Companies have shared voting and dispositive power with respect to the shares.
(3) Includes options to purchase 1,335,000 shares that are exercisable within 60 days of February 16, 2021.
(4) Includes options to purchase 377,000 shares that are exercisable within 60 days of February 16, 2021.
69
Table of Contents
(5) Includes options to purchase 716,000 shares that are exercisable within 60 days of February 16, 2021.
(6) Includes options to purchase 644,221 shares that are exercisable within 60 days of February 16, 2021.
(7) Includes options to purchase 784,402 shares that are exercisable within 60 days of February 16, 2021.
(8) Includes options to purchase 354,750 shares that are exercisable within 60 days of February 16, 2021.
(9) Includes options to purchase 397,500 shares that are exercisable within 60 days of February 16, 2021.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table sets forth information regarding securities authorized for issuance under equity compensation plans as of December 31,
2020:
Plan Category
Equity compensation plans approved by stockholders
Equity compensation plans not approved by stockholders
Total
(a) Number of securities
to be issued upon
exercise of outstanding
options, warrants and
rights
(#)
(b) Weighted
average exercise
price of
outstanding options,
warrants and rights
($)
(c) Number of
securities remaining
available for future
issuance under equity
compensation plans
(excluding securities reflected
in column (a)) (#)
6,099,651
-
6,099,651
1.04
-
1.04
7,945,245
-
7,945,245
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Related Party Transactions
Other than the director and executive compensation arrangements discussed above within the “Executive Compensation” section, we have
not been a party to any transactions since January 1, 2019 in which the amount involved exceeded or will exceed the lesser of $120,000 or
1% of the average of our total assets at year-end for the last two completed fiscal years, and in which any director, executive officer, or
holder of more than 5% of any class of our voting stock, or any member of the immediate family of or entities affiliated with any of them,
had or will have a material interest.
Director Independence
Our Common Stock is listed on the NYSE American. The listing rules of the NYSE American require that a majority of the members of the
Board be independent. The rules of the NYSE American require that, subject to specified exceptions, each member of our Audit,
Compensation, and Nominating and Governance be independent. Audit Committee members must also satisfy the independence criteria set
forth in Rule 10A-3 under the Exchange Act. Under the rules of the NYSE American, a director will only qualify as an “independent
director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the
exercise of independent judgment in carrying out the responsibilities of a director.
In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than
in his or her capacity as a member of the audit committee, the board of directors or any other board committee: (1) accept, directly or
indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries; or (2) be an affiliated
person of the listed company or any of its subsidiaries.
In October 2020, our Board undertook a review of its composition, the composition of its committees and the independence of each director.
Based upon information provided by each director concerning his or her background, employment and affiliations, including family
relationships, our Board has determined that none of Messrs. Coelho, Giles or Dr. Stevens, representing three of our five directors, has a
relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of
these directors is “independent” as that term is defined by the NYSE American. Our Board also determined that Messrs. Giles, Coelho and
Dr. Stevens, who comprise our Audit Committee, our Compensation Committee, and our Nominating and Governance Committee, satisfy
the independence standards for those committees established by applicable SEC rules and the NYSE American rules. In making this
determination, our Board considered the relationships that each non-employee director has with our
70
Table of Contents
company and all other facts and circumstances our Board deemed relevant in determining their independence, including the beneficial
ownership of our capital stock by each non-employee director.
Item 14. Principal Accountant Fees and Services.
We appointed Moss Adams LLP as the Company’s independent registered public accounting firm for the Company’s fiscal year ended
December 31, 2019. In conjunction with the appointment of Moss Adams LLP on July 10, 2019, Plante Moran PLLC (“Plante Moran”)
notified the Company of its resignation as the Company’s independent registered public accounting firm, effective July 10, 2019.
The following tables present aggregate fees accrued for professional services rendered by our independent registered public accounting
firms, both Moss Adams LLP and Plante Moran for the respective periods.
Year Ended December 31,
2020
2019
Moss Adams LLP
Audit fees (1)
Audit-related fees (2)
Tax fees (3)
Total fees
$ 273,000
$
—
—
$
$ 273,000
212,000
—
—
212,000
(1) Audit services includes fees related to the audit of our annual financial statements; the review of our quarterly financial statements;
comfort letters, consents, and assistance with and review of documents filed with the SEC; and financial reporting consultation and
research work billed as audit fees or necessary to comply with the standards of the Public Company Accounting Oversight Board
(United States).
(2) Audit-related services fees would include employee benefit plan audits, due diligence related to mergers and acquisitions,
accounting consultations and audits in connection with acquisitions, attest services related to financial reporting that are not
required by statue or regulation and consultation concerning financial accounting and reporting standards. The Company did not
incur expenses related to audit related services fees for the years ended December 31, 2020 or 2019.
(3) Tax service fees are comprised of federal and state services related to tax compliance, consulting and preparation.
Policy on Audit Committee Pre-Approval of Services of Independent Registered Public Accounting Firm
Our Audit Committee has responsibility for appointing, setting compensation, and overseeing the work of the independent registered public
accounting firm. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible
non-audit services provided by the independent registered public accounting firm. Prior to engagement of the independent registered public
accounting firm for the following year’s audit, management will submit to the Audit Committee for approval an engagement letter which
provides the description and estimated cost of services expected to be rendered during that year for each of following four categories of
services:
Audit services include fees for services that generally only the auditor can reasonably provide, such as statutory audits required domestically
and internationally (including statutory audits required for insurance companies for purposes of state law); comfort letters; consents;
assistance with and review of documents filed with the SEC; section 404 attestation services; other attest services that generally only the
auditor can provide; work done by tax professionals for the audit or quarterly review; and accounting consultations billed as audit services,
as well as other accounting and financial reporting consultation and research work necessary to comply with the standards of the PCAOB.
Audit-related services include, but are not limited to: employee benefit plan audits, due diligence related to mergers and acquisitions,
accounting consultations and audits in connection with acquisitions, internal control reviews, attest services related to financial reporting that
are not required by statute or regulation and consultation concerning financial accounting and reporting standards.
71
Table of Contents
Tax services consist principally of assistance with federal and state tax compliance and reporting, as well as certain tax planning
consultations.
Other services are those associated with services not captured in the other categories. We generally do not request such services from our
independent auditor.
Prior to the engagement of the independent registered public accounting firm, the Audit Committee pre-approves these services by category
of service and estimated cost as further noted in the engagement letter. The fees are budgeted as part of the Company’s annual/periodic
budgeting and forecasting process, and the Audit Committee requires the independent registered public accounting firm and management to
report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when
it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original
pre-approval. In those instances, the Audit Committee requires specific pre-approval before engaging the independent registered public
accounting firm for such services.
The Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated
must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.
All of the services of Moss Adams LLP and Plante Moran described above were pre-approved by the Audit Committee in advance of such
services being provided.
Item 15. Exhibits and Financial Statement Schedules.
(a)(1) Financial Statements
PART IV
The following documents are filed as part of this Form 10-K, as set forth on the Index to Financial Statements found on page F-1.
● Report of Independent Registered Public Accounting Firm
● Balance Sheets as of December 31, 2020 and 2019
● Statements of Operations for the years ended December 31, 2020 and 2019
● Statements of Stockholders’ Equity for the years ended December 31, 2020 and 2019
● Statements of Cash Flows for the years ended December 31, 2020 and 2019
● Notes to Financial Statements
(a)(2) Financial Statement Schedules
Not Applicable.
72
Table of Contents
(a)(3) Exhibits
Exhibit
number
Exhibit title
3.1
3.2
3.3
3.4
3.5
4.1*
4.3
4.4
4.5
4.6
4.7
10.1
10.2**
10.3**
Certificate of Incorporation of the Registrant. (Incorporated by reference from Registrant’s Form 8-K filed March 30,
2010)
Certificate of Amendment to Certificate of Incorporation of the Registrant. (Incorporated by reference from Registrant’s
Form 8-K filed March 30, 2010)
Plan of Conversion of Chay Enterprises, Inc. to a Delaware corporation. (Incorporated by reference from Registrant’s
Form 8-K filed March 30, 2010)
Certificate of Amendment to Certificate of Incorporation of the Registrant. (Incorporated by reference from Registrant’s
Form 8-K filed December 18, 2019)
Amended and Restated Bylaws of the Registrant, as currently in effect. (Incorporated by reference from Registrant’s Form
10-Q filed November 14, 2018)
Specimen Common Stock Certificate of the Registrant.
Form of Warrant to Purchase Common Stock. (Incorporated by reference from Registrant’s Form 8-K filed on August 29,
2016)
Form of Warrant to Purchase Common Stock. (Incorporated by reference from Exhibit 4.1 to the Registrant’s Form 8-K
filed on June 6, 2017)
Form of Warrant to Purchase Common Stock. (Incorporated by reference from Exhibit 4.2 to the Registrant’s Form 8-K
filed on June 6, 2017)
Form of Warrant. (Incorporated by reference from Registrant’s Form 8-K filed on August 13, 2018)
Description of Capital Stock of Ampio Pharmaceuticals, Inc. (Incorporated by reference from Registrant’s Form 10-K
filed on February 21, 2020)
Form of Director and Executive Officer Indemnification Agreement. (Incorporated by reference from Registrant’s Form 8-
K/A filed March 17, 2010)
2010 Stock Incentive Plan and forms of option agreements. (Incorporated by reference from Registrant’s Form 8-K/A filed
March 17, 2010)
Amendment of 2010 Stock and Incentive Plan. (Incorporated by reference from Registrant’s Proxy Statement on Form
14A filed November 1, 2013)
10.4*,**
2019 Stock Incentive Plan and forms of option agreements.
10.5**
10.6
10.7**
10.8**
Employment Agreement, effective January 10, 2020 by and between Ampio Pharmaceuticals, Inc. and Michael
Macaluso. (Incorporated by reference from Registrant’s Form 8-K filed December 18, 2019)
Lease Agreement by and between Ampio Pharmaceuticals, Inc. and NCWP – Inverness Business Park, LLC, dated
December 13, 2013. (Incorporated by reference from Registrant’s Form 8-K filed December 19, 2013)
Employment Agreement between Ampio Pharmaceuticals, Inc. and Holli Cherevka, dated September 16, 2019.
(Incorporated by reference from Registrant's Form 8-K filed September 20, 2019)
Employment Agreement between Ampio Pharmaceuticals, Inc. and Daniel Stokely, dated July 9, 2019. (Incorporated by
reference from Registrant's Form 8-K filed July 10, 2019)
73
Table of Contents
10.9**
Amendment to Employment Agreement between Ampio Pharmaceuticals, Inc. and Daniel Stokely, dated August 20, 2019.
(Incorporated by reference from Registrant's Form 8-K filed August 23, 2019)
10.10**
10.11**
10.12**
10.13**
10.14
10.15
10.16
23.1*
31.1*
31.2*
32.1*
101
Amendment No. 2 to Employment Agreement, dated December 14, 2019, by and between Ampio Pharmaceuticals, Inc.
and Daniel Stokely. (Incorporated by reference from Registrant’s Form 8-K filed December 18, 2019)
Amendment No. 3 to Employment Agreement, dated July 13, 2020, by and between Ampio Pharmaceuticals, Inc. and
Daniel Stokely. (Incorporated by reference from Registrant’s Form 8-K filed July 14, 2020)
Stock Option Cancellation and Grant Agreement for Executive between Ampio Pharmaceuticals, Inc. and Daniel Stokely,
dated August 20, 2019. (Incorporated by reference from Registrant's Form 8-K filed August 23, 2019)
Letter dated November 7, 2019 re: Administrative Error in the Stock Option Cancellation and Grant Agreement for
Executive between Ampio Pharmaceuticals, Inc. and Daniel Stokely, dated August 20, 2019. (Incorporated by reference
from Registrant's Form 10-Q filed November 7, 2019)
Placement Agency Agreement, dated June 17, 2019, by and among Ampio Pharmaceuticals, Inc. and ThinkEquity, a
division of Fordham Financial Management, Inc. (Incorporated by reference from Registrant’s Form 8-K filed June 17,
2019)
Sales Agreement, dated February 20, 2020, by and among ThinkEquity, a division of Fordham Financial Management,
Inc., Roth Capital Partners LLC and Ampio Pharmaceuticals, Inc. (Incorporated by reference from the Registrant’s Form
8-K filed on February 20, 2020)
Loan Agreement, dated April 16, 2020, by and between Key Bank National Association and Ampio Pharmaceuticals, Inc.
(Incorporated by reference from the Registrant’s Form 8-K filed on April 22, 2020)
Consent of Moss Adams LLP.
Certificate of the Chief Executive Officer of Ampio Pharmaceuticals, Inc. pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
Certificate of the Chief Financial Officer of Ampio Pharmaceuticals, Inc. pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
Certificate of the Chief Executive Officer and the Chief Financial Officer of Ampio Pharmaceuticals, Inc. pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
XBRL (extensible Business Reporting Language). The following materials from Ampio Pharmaceuticals, Inc.’s Annual
Report on Form 10-K for the year ended December 31, 2020 formatted in XBRL: (i) the Balance Sheets, (ii) the
Statements of Operations, (iii) the Statements of Stockholders’ Equity (Deficit), (iv) the Statements of Cash Flows, and (v)
the Notes to the Financial Statements.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*
**
Filed herewith.
This exhibit is a management contract or compensatory plan or arrangement.
***
Confidential treatment has been applied for with respect to certain portions of these exhibits.
74
Table of Contents
Item 16. Form 10-K Summary.
None.
75
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
AMPIO PHARMACEUTICALS, INC.
Date: March 3, 2021
By:
/s/ Michael Macaluso
Michael Macaluso
Chief Executive Officer
(Principal 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 in the capacities indicated, on March 3, 2021.
Signature
Title
/s/ Michael Macaluso
Michael Macaluso
/s/ Daniel G. Stokely
Daniel G. Stokely
/s/ David Bar-Or
David Bar-Or
/s/ Philip H. Coelho
Philip H. Coelho
/s/ Richard B. Giles
Richard B. Giles
/s/ David R. Stevens
David R. Stevens
Chairman of the Board and Chief Executive Officer
Chief Financial Officer (Principal Financial and
Accounting Officer) and Secretary
Director
Director
Director
Director
76
Table of Contents
INDEX TO FINANCIAL STATEMENTS
AMPIO PHARMACEUTICALS, INC.
Report of Independent Registered Public Accounting Firm
Balance Sheets
Statements of Operations
Statements of Stockholders’ Equity
Statements of Cash Flows
Notes to Financial Statements
F-1
Page
F-2
F-4
F-5
F-6
F-7
F-8
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of
Ampio Pharmaceuticals, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Ampio Pharmaceuticals, Inc. (the Company) as of December 31, 2020 and 2019, the
related statements of operations, stockholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to
as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the
Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.
Going Concern Uncertainty
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in
Note 3 to the financial statements, the Company has suffered recurring losses from operations and negative cash flows from operations and
has an accumulated deficit that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to
these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of
this uncertainty.
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 to 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.
F-2
Table of Contents
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be
communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2)
involved especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ Moss Adams LLP
Denver, Colorado
March 3, 2021
We have served as the Company’s auditor since 2019.
F-3
Table of Contents
Current assets
Cash and cash equivalents
Prepaid expenses and other
Total current assets
Fixed assets, net
Right-of-use asset
Total assets
AMPIO PHARMACEUTICALS, INC.
Balance Sheets
Assets
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable and accrued expenses
Lease liability-current portion
Total current liabilities
Lease liability-long-term
Warrant derivative liability
Total liabilities
Commitments and contingencies (Note 8)
Stockholders’ equity
December 31,
2020
December 31,
2019
$
$
$
$
$
$
17,346,000
1,147,000
18,493,000
3,561,000
824,000
22,878,000
1,550,000
284,000
1,834,000
925,000
2,607,000
5,366,000
6,532,000
1,718,000
8,250,000
4,748,000
1,003,000
14,001,000
4,025,000
259,000
4,284,000
1,210,000
2,064,000
7,558,000
Preferred Stock, par value $0.0001; 10,000,000 shares authorized; none issued
Common Stock, par value $0.0001; 300,000,000 shares authorized; shares issued and
outstanding - 193,378,996 as of December 31, 2020 and 158,644,757 as of December 31, 2019
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity
—
—
19,000
218,020,000
(200,527,000)
17,512,000
16,000
191,060,000
(184,633,000)
6,443,000
Total liabilities and stockholders’ equity
$
22,878,000
$
14,001,000
The accompanying notes are an integral part of these financial statements.
F-4
Table of Contents
AMPIO PHARMACEUTICALS, INC.
Statements of Operations
Operating expenses
Research and development
General and administrative
Total operating expenses
Other (expense) income
Interest income
Paycheck Protection Program funding
Derivative (loss) gain
Loss on disposal of fixed asset
Total other (expense) income
Net loss
Net loss per common share:
Basic
Diluted
Weighted average number of common shares outstanding:
Basic
Diluted
Year Ended December 31,
2019
2020
$
$
9,172,000
6,662,000
15,834,000
12,622,000
5,954,000
18,576,000
12,000
544,000
(543,000)
(73,000)
(60,000)
77,000
—
4,869,000
—
4,946,000
$
(15,894,000) $
(13,630,000)
$
$
(0.09) $
(0.09) $
(0.10)
(0.14)
172,846,773
172,846,773
130,601,500
131,135,178
The accompanying notes are an integral part of these financial statements.
F-5
Table of Contents
AMPIO PHARMACEUTICALS, INC.
Statements of Stockholders’ Equity
Common Stock
Balance at December 31, 2018
Issuance of common stock for services
Stock-based compensation, net of forfeitures
Warrants exercised
Offering costs related to warrant exercises
Issuance of common stock in connection with the "at-the-market" equity
offering program
Offering costs related to the issuance of common stock in connection with
the "at-the-market" equity offering program
Issuance of common stock in connection with public offering
Offering costs related to the issuance of common stock in connection with
public offering
Net loss
Shares
110,941,516
Amount
$
11,000
$
176,228,000
$
Additional
Paid-in
Capital
181,590
—
17,266,667
—
254,984
—
30,000,000
—
—
—
2,000
—
—
—
3,000
—
—
80,000
405,000
3,872,000
(277,000)
142,000
(144,000)
11,997,000
(1,243,000)
—
Accumulated
Deficit
(171,003,000)
Total
Stockholders'
Equity (Deficit)
$
5,236,000
—
—
—
—
—
—
—
—
(13,630,000)
80,000
405,000
3,874,000
(277,000)
142,000
(144,000)
12,000,000
(1,243,000)
(13,630,000)
Balance at December 31, 2019
158,644,757
$
16,000
$
191,060,000
$
(184,633,000)
$
6,443,000
Issuance of common stock for services
Stock-based compensation, net of forfeitures
Stock options exercised, net
Warrants exercised, net
Issuance of common stock in connection with the "at-the-market" equity
offering program
Offering costs related to the issuance of common stock in connection with
the "at-the-market" equity offering program
Net loss
136,236
—
11,903
2,486,423
32,099,677
—
—
—
—
80,000
1,277,000
(2,000)
785,000
—
—
—
—
80,000
1,277,000
(2,000)
785,000
3,000
26,188,000
—
26,191,000
—
—
—
—
(1,368,000)
—
—
(15,894,000)
(1,368,000)
(15,894,000)
Balance at December 31, 2020
193,378,996
$
19,000
$
218,020,000
$
(200,527,000)
$
17,512,000
The accompanying notes are an integral part of these financial statements.
F-6
Table of Contents
AMPIO PHARMACEUTICALS, INC.
Statements of Cash Flows
Cash flows used in operating activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation, net of forfeitures
Depreciation and amortization
Loss on disposal of fixed asset
Paycheck Protection Program funding that offsets qualified expenses
Issuance of common stock for services
Derivative loss (gain)
Changes in operating assets and liabilities
Decrease (increase) in prepaid expenses and other
(Decrease) increase in accounts payable and accrued expenses
Decrease in lease liability
Proceeds received under the Paycheck Protection Program
Net cash used in operating activities
Cash flows used in investing activities
Purchase of fixed assets
Net cash used in investing activities
Cash flows from financing activities
Proceeds from sale of common stock in connection with "at-the-market" equity offering program
Costs related to sale of common stock in connection with the "at-the-market" equity offering program
Proceeds from sale of common stock in connection with the public offering
Costs related to sale of common stock in connection with the public offering
Proceeds from warrant exercises
Costs related to warrant exercises
Other
Net cash provided by financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Non-cash transactions:
Initial commercial insurance premium financing agreement
Initial lease liability arising from the adoption of ASC 842
Initial recognition of right-of-use asset arising from the adoption of ASC 842
Year Ended December 31,
2019
2020
$
(15,894,000)
$
(13,630,000)
1,277,000
1,177,000
73,000
(544,000)
80,000
543,000
571,000
(2,475,000)
(81,000)
544,000
(14,729,000)
405,000
1,272,000
—
—
80,000
(4,869,000)
(1,271,000)
2,700,000
(70,000)
—
(15,383,000)
(63,000)
(63,000)
(22,000)
(22,000)
26,191,000
(1,368,000)
—
—
785,000
—
(2,000)
25,606,000
142,000
(144,000)
12,000,000
(1,243,000)
3,874,000
(277,000)
—
14,352,000
10,814,000
(1,053,000)
$
$
6,532,000
17,346,000
1,347,000
—
—
$
$
7,585,000
6,532,000
1,081,000
1,704,000
1,168,000
The accompanying notes are an integral part of these financial statements.
F-7
Table of Contents
AMPIO PHARMACEUTICALS, INC.
Notes to Financial Statements
Note 1 – Basis of Presentation
The accompanying financial statements have been prepared in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”).
Ampio Pharmaceuticals, Inc. (“Ampio” or “the Company”) is a biopharmaceutical company, located in Englewood, CO, that is focused on
the development and advancement of immunology-based therapies for prevalent inflammatory conditions.
The Company’s activities relate to research and development and raising capital. The Company has not generated revenue to date.
Note 2 – Summary of Significant Accounting Policies
Impact of Global Pandemic
In January 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of the novel
coronavirus (“COVID-19”). In March 2020, the WHO declared the outbreak of COVID-19, a global pandemic. COVID-19 has, and
continues, to adversely impact the United States and global economies. In April 2020, and pursuant to the U.S. Food and Drug
Administration (“FDA”), independent Safety Monitoring Committee (“SMC”), and regulatory Institutional Review Board guidance covering
ongoing clinical trials in the presence of the COVID-19 pandemic, the Company and the clinical research organization (“CRO”) paused all
ongoing conduct associated with the Phase III clinical trial (the “AP-013 study”) of Ampion for the treatment of Osteoarthritis of the Knee
(“OAK”). Recently, the FDA has provided guidance specifically designed to assist the pharmaceutical industry with viable options for
evaluating data from clinical trials which were, and continue to be, impacted by the pandemic. The Company has reviewed the FDA
guidance as it relates to the AP-013 study data and is working with the FDA to evaluate viable options with the ultimate goal to reach
agreement on an amendment to the existing SPA for the AP-013 study. In addition, since June 2020, the Company has commenced clinical
trials to determine the safety and efficacy for new applications of Ampion (i.e., inhaled and intravenous) related to the COVID-19 infection.
As the outbreak continues to spread, the Company’s business operations could be significantly impacted and, in addition, the business
operations of third parties on which the Company relies, including organizations that conduct clinical trials and key suppliers which provide
the raw materials for manufacturing Ampion for the ongoing clinical trials. The full extent of the potential adverse impact on the Company’s
business and related product development, including, but not limited to, clinical trials, financing activities and the global economy will
depend on future developments, which cannot be predicted at this time due to the uncertain nature of the continued COVID-19 pandemic,
government mandated shut downs, and its adverse effects, including new information which may emerge concerning the severity of COVID-
19 and the actions to contain COVID-19 or treat its impact, among others. These effects could have a material adverse impact on the
Company’s business, operations, financial condition and results of operations.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities and expenses, and related disclosures in the financial statements and accompanying notes. The
Company bases its estimates on historical experience and on assumptions believed to be reasonable under the circumstances. Actual results
could differ materially from those estimates.
Significant items subject to such estimates and assumptions primarily include the Company’s projected future liquidity and resulting going
concern position and the projected useful lives and potential impairment of fixed assets. The Company develops these estimates using its
judgment based upon the facts and circumstances known at the time.
F-8
Table of Contents
Cash and Cash Equivalents
The Company considers instruments purchased with an original maturity of three months or less to be cash equivalents. The Company’s
investment policy is to preserve principal and maintain liquidity.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash
equivalents. The Company has no off-balance-sheet concentrations of credit risk, such as foreign exchange contracts, option contracts or
foreign currency hedging arrangements. The Company consistently maintains its cash and cash equivalent balances in the form of bank
demand deposits, United States federal government backed treasury securities and liquid money market fund accounts with financial
institutions that management believes are creditworthy. The Company periodically monitors its cash positions with, and the credit quality of,
the financial institutions with which it invests. During the years ended December 31, 2020 and 2019, the Company has maintained balances
in excess of federally insured limits.
Concentration of Supplier
The Company currently contracts with a limited number of suppliers to obtain each of the key components/raw materials needed to produce
Ampion for clinical trials, including Human Serum Albumin, the line sets and the vials/caps and stoppers. The Company believes there are
numerous other suppliers that could be substituted should the suppliers for the key components/raw materials become non-competitive.
Fixed Assets
Fixed assets are stated at cost less accumulated depreciation and amortization. Cost includes expenditures for equipment, leasehold
improvements, replacements, and renewals and the related cost required to get certain equipment in operating condition. The Company
charges routine and ongoing maintenance and repairs to expense as incurred. When assets are sold, retired, or otherwise disposed of, the cost
and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations. The cost of property
and equipment is depreciated using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are
amortized over the remaining life of the lease.
Impairment of Long-Lived Assets
The Company performs an annual evaluation of the recoverability of the carrying value of its long-lived assets to determine if facts and
circumstances indicate that the carrying value of assets may be impaired and if any adjustment is warranted. Based on the Company’s
evaluation as of December 31, 2020 and 2019, no impairment existed for long-lived assets.
Fair Value of Financial Instruments
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, accounts payable and accrued expenses are carried at cost, which approximates
fair value due to the short maturity of these instruments. The warrant derivative liability is recorded at estimated fair value based on
utilization of the Black-Scholes warrant pricing model depending on facts and circumstances. See Note 9 and Note 10 for additional
information on the warrant derivative liability.
Stock-Based Compensation
The Company accounts for stock-based payments by recognizing compensation expense based upon the estimated fair value of the stock
options on the date of grant. The Company determines the estimated fair value of the stock options granted using the Black-Scholes option
pricing model and recognizes compensation costs ratably over the requisite
F-9
Table of Contents
service period which approximates the vesting period using the graded method. See Note 12 for additional information on stock-based
compensation.
Income Taxes
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. The
overall change in deferred tax assets and liabilities for the period measures the deferred tax expense or benefit for the period. The
measurement of deferred tax assets may be reduced by a valuation allowance based on judgmental assessment of available evidence if
deemed more likely than not that some or all of the deferred tax assets will not be realized. The Company has recorded a valuation allowance
against all of its deferred tax assets, as management has concluded that it is more likely than not that the net deferred tax asset will not be
realized through projected future taxable income, based primarily on the Company’s ongoing history of operating losses and the lack of
taxable income in the foreseeable future. See Note 13 for additional information on income taxes.
Clinical Trial Accruals
The Company is currently conducting three different clinical trials which are at various stages of completion. The clinical trial accrual
covering each of the studies involve identifying services that third parties, contracted by the Company, have performed and estimating the
associated cost incurred for these services which remain uninvoiced as of the balance sheet date. In addition, the clinical trial accrual
involves the measurement of milestone achievements achieved by the patients participating in the clinical trial and the associated costs
which have not been invoiced as of the balance sheet date. The Company develops an estimate of liability using its judgment based upon the
facts and circumstances known at the time.
Research and Development
Research and development costs are expensed as incurred in the respective periods.
Adoption of Recent Accounting Pronouncements
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement - Disclosure Framework (Topic 820)”. The updated guidance
modified the disclosure requirements on fair value measurements. The updated guidance is effective for fiscal years beginning after
December 15, 2019, including interim reporting periods within those fiscal years. The Company adopted ASU 2018-13 during the first
quarter of 2020 and the adoption of this guidance did not have a material impact on the Company’s financial statements.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, “Debt (Subtopic 470-20); Debt with Conversion and Other Options and Derivatives and
Hedging (Subtopic 815-40) Contracts in Entity’s Own Equity”. The updated guidance is part of the FASB’s simplification initiative, which
aims to reduce unnecessary complexity in U.S. GAAP. Consequently, more convertible debt instruments will be reported as single liability
instruments with no separate accounting for embedded conversion features. The ASU 2020-06 also removes certain settlement conditions
that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for the
exception. In addition, ASU 2020-06 also simplifies the diluted net income per share calculation in certain areas. The updated guidance is
effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted for
periods beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-06 on the Company’s financial
statements.
F-10
Table of Contents
This Annual Report on Form 10-K does not discuss recent pronouncements that are not anticipated to have a current and/or future impact on
or are unrelated to the Company’s financial condition, results of operations, cash flows or disclosures.
Note 3 – Going Concern
As of the year ended December 31, 2020, the Company had cash and cash equivalents of $17.3 million and a net loss of $15.9 million,
respectively. The net loss is primarily attributable to operating expenses of $15.8 million and the non-cash derivative loss of $0.5 million
(see Note 10), partially offset by the receipt of Paycheck Protection Program (“PPP”) proceeds of $0.5 million (see Note 7). The Company
used net cash in operations of $14.7 million for the year ended December 31, 2020 and ended the year with an accumulated deficit and
stockholders’ equity of $200.5 million and $17.5 million, respectively. In addition, as a pre-revenue clinical stage biopharmaceutical
company, the Company has not generated any operating revenues or profits to date. These historic, existing and projected on-going factors
continue to raise substantial doubt about the Company’s ability to continue as a going concern.
In February 2020, the Company entered into a Sales Agreement (“Sales Agreement”) with two agents to implement an “at-the-market”
(“ATM”) equity offering program under which the Company, at its sole discretion, may issue and sell from time to time shares of its
authorized common stock. During the year ended December 31, 2020, the Company sold shares pursuant to the ATM equity offering
program, which yielded gross proceeds of $26.2 million, offset by costs of $1.4 million (see Note 11).
The Company has prepared an updated projection covering the period from January 1, 2021 through December 31, 2021 based on the
requirements of ASC 205-40, “Going Concern”, which reflects cash requirements for fixed, recurring base level business expenses such as
payroll, legal and accounting, patents and overhead, and incremental costs supporting the current and projected clinical development
programs. The Company continues to assess the impact of the COVID-19 pandemic, including the continued COVID-19 cases in the United
States and the impact that it may have on current and projected future studies. The Company anticipates using the ATM equity offering
program to raise funds in the near term and as needed, while also considering supplementing the funds raised with separate private/public
equity offering(s). Based on the Company’s current cash position, projection of operating expenses and expected access to the ATM and/or
other equity financing programs, the Company believes it will have sufficient liquidity to fund operations through the first quarter of 2022.
This projection is based on many assumptions that may prove to be incorrect. For example, despite the historically successful use of the
ATM equity offering program, due to the inherent uncertainties associated with raising capital in the public markets and the fact that the
ATM equity offering program is not deemed a fixed and determinable committed source of liquidity, the Company’s management is unable
to conclude that it is probable that future capital will be available to satisfy future liquidity needs as they arise and in a manner that will be
sufficient to fund operations. As such, it is possible that the Company could exhaust its available cash and cash equivalents earlier than
presently anticipated. In addition, as the global COVID-19 pandemic continues to rapidly evolve, its effect on the Company’s business
operations and ability to raise capital through the ATM equity offering program, or otherwise, remains uncertain and subject to change. The
Company expects to seek additional capital investments in both the near and long-term to enable it to support its business operations,
including specifically (i) clinical development of Ampion, (ii) Biologics License Application (“BLA”) preparation and submission, (iii)
existing base business operations and (iv) commercial development activities for Ampion. The Company will continue to closely monitor
and evaluate the overall capital markets to determine the appropriate timing and funding level for such capital, which will primarily depend
on existing market conditions relative to the timing of the Company’s liquidity needs. However, the Company cannot give any assurance that
it will be successful in satisfying its future liquidity needs in a manner that will be sufficient to fund its base level of operations and any
incremental expenses related to the further development of Ampion for OAK, therapeutic treatment of COVID-19 and other indications.
The accompanying financial statements have been 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 liabilities, that might be necessary in the future should the Company be unable to continue as a
going concern.
F-11
Table of Contents
Note 4 – Prepaid Expenses and Other
Prepaid expenses and other balances as of December 31, 2020 and 2019 are as follows:
Unamortized commercial insurance premiums
Deposits
Receivable
Other
Total prepaid expenses and other
Note 5 – Fixed Assets
Fixed assets balances as of December 31, 2020 and 2019 are as follows:
Leasehold improvements
Manufacturing facility/clean room
Lab equipment and office furniture
Fixed assets, net
Depreciation expense as of December 31, 2020 and 2019 is as follows:
Depreciation and amortization expense
Note 6 – Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses as of December 31, 2020 and 2019 is as follows:
Accounts payable
Clinical trials
Commercial insurance premium financing agreement
Professional fees
Other
Accrued incentive compensation
Accounts payable and accrued expenses
F-12
December 31, 2020
December 31, 2019
$
$
627,000
266,000
185,000
69,000
1,147,000
$
$
502,000
1,162,000
18,000
36,000
1,718,000
Estimated
Useful Lives
in Years
10
3 - 8
5 - 8
December 31,
2020
2019
$
$
2,250,000
998,000
313,000
3,561,000
$
$
2,850,000
1,550,000
348,000
4,748,000
Year Ended December 31,
2019
2020
$
1,177,000
$
1,272,000
December 31, 2020
December 31, 2019
$
$
186,000
558,000
386,000
267,000
153,000
—
1,550,000
$
$
151,000
3,288,000
21,000
317,000
176,000
72,000
4,025,000
Table of Contents
Note 7 – Paycheck Protection Program
In response to the COVID-19 pandemic, the PPP was established under the Coronavirus Aid, Relief, and Economic Security Act (“CARES
Act”) and administered by the U.S. Small Business Administration (“SBA”). Companies who met the eligibility requirements set forth by
the PPP could qualify for PPP loans provided by local lenders, which supports payroll, rent and utility expenses (“qualified expenses”). If
the loan proceeds are fully utilized to pay qualified expenses over the covered period, as further defined by the PPP, the full principal amount
of the PPP loan may qualify for loan forgiveness, subject to potential reduction based on the level of full-time employees maintained by the
organization during the covered period as compared to a baseline period.
In April 2020, the Company received proceeds of $544,000 under the PPP provided by KeyBank National Association (the “Lender”). The
term of the PPP loan is two years with an annual interest rate of 1.0% and principal and interest payments will be deferred for the first six
months of the loan term, which has been updated according to the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility Act”).
In June 2020, the Flexibility Act was signed into law, which amended the CARES Act. The Flexibility Act changed key provisions of the
PPP, including, but not limited to, (i) provisions relating to the maturity of PPP loans, (ii) the deferral period covering of PPP loan payments
and (iii) the process for measurement of loan forgiveness. More specifically, the Flexibility Act provides a minimum maturity of five years
for all PPP loans made on or after June 5, 2020, the date of the enactment of the Flexibility Act, and permits lenders and borrowers to extend
the maturity date of earlier PPP loans by mutual agreement. As of the date of this filing, the Company has not approached the Lender to
request an extension of the maturity date from two years to five years. The Flexibility Act also provides that if a borrower does not apply for
forgiveness of a loan within 10 months after the last day of the measurement period (the “covered period”), the PPP loan is no longer
deferred and the borrower must begin paying principal and interest. Therefore, the Company’s deferral period for principal and interest
payments was updated from six months according to the terms and conditions of the loan agreement to ten months. In addition, the
Flexibility Act extended the length of the covered period from eight weeks to 24 weeks from receipt of proceeds, while allowing borrowers
that received PPP loans before June 5, 2020 to determine, at their sole discretion, a covered period of either eight weeks or 24-weeks.
After reviewing the applicable terms and conditions of the Flexibility Act, the Company has elected to extend the length of the covered
period from eight weeks to the lesser of (i) the period whereby qualified expenses equal loan proceeds or (ii) 24 weeks. The Company has
performed initial calculations of its PPP loan forgiveness eligibility according to the terms and conditions of the SBA’s Loan Forgiveness
Application (Revised June 16, 2020) and, based on such calculations, expects that the PPP loan will be forgiven in full over a period of less
than 24 weeks. In addition, the Company has determined that it is probable that the Company will meet all the conditions of the PPP loan
forgiveness program. As such, the Company has determined that the PPP loan should be accounted for as a government grant which
analogizes with International Accounting Standards (“IAS”) 20, Accounting for Government Grants and Disclosure of Government
Assistance. Under the provisions of IAS 20, “a forgivable loan from government is treated as a government grant when there is reasonable
assurance that the entity will meet the terms for forgiveness of the loan.” IAS 20 does not define “reasonable assurance”, however, based on
certain interpretations, it is analogous to “probable” in GAAP under FASB ASC 450-20-20, which is the definition the Company has applied
to its expectations of the Company’s eligibility for PPP loan forgiveness. In addition, in accordance with the provisions of IAS 20,
government grants shall be recognized in profit or loss on a systematic basis over the periods in which the Company recognizes costs for
which the grant is intended to compensate (i.e., qualified expenses). Therefore, the Company recognized PPP funding during the periods
when qualified expenses were incurred.
In October 2020, the Company submitted the PPP loan forgiveness application, which reflected the $544,000 of what the Company believes
to be qualified expenses as defined by the Flexibility Act. The loan forgiveness application has been approved by the Lender and submitted
to the SBA for final review. According to the Flexibility Act, the SBA will, subject to any SBA review of the loan or loan application, remit
the appropriate forgiveness amount to the Lender, plus any interest accrued through the date of payment, not later than 90 days after the
Lender issues its decision to the SBA. February 1, 2021 marked the 90th day since the Lender sent the Company’s PPP loan forgiveness
application to the SBA to be reviewed and, at the time of this filing, the Company has not received a response from the SBA. The SBA has
been
F-13
Table of Contents
unresponsive to multiple requests from both the Company and the Lender for a status update related to the PPP loan forgiveness application.
Based on the PPP loan forgiveness application calculation, and the Lender approving the loan forgiveness application, the Company
continues to believe that it is probable the PPP loan qualifies for forgiveness in full by the SBA and such forgiveness will be provided by the
SBA in due course. However, without formal approval from the SBA, the Company cannot provide certainty that it will obtain forgiveness
in whole or in part.
Pursuant to the Flexibility Act, the Company’s PPP loan agreement will be amended in the event that no amount or less than all of the PPP
loan is forgiven. In addition, starting in August 2021, the Company will be required to make principal and interest payments totaling $23,000
per month or an adjusted amount based on the loan amendment over the remaining term of the PPP loan until such time as the loan is fully
settled. The Company may prepay the PPP loan at any time without penalty and the loan agreement evidencing the PPP loan contains
customary events of default relating to, among other things, payment defaults, or breaches of representations and warranties, or other
provisions of the loan agreement. The occurrence of an event of default may trigger an acceleration of the maturity date for all amounts
outstanding, collection of all amounts owing from the Company and/or the Lender filing suit and obtaining a judgment against the Company.
Note 8 – Commitments and Contingencies
Commitments and contingencies as of December 31, 2020 are described below and summarized in the following table:
Key clinical research trial obligations
BLA consulting services
Statistical analysis and programming consulting
services
Employment agreements
Total (1)
3,275,000
1,143,000
319,000
1,262,000
5,999,000
$
$
2021
3,275,000
—
319,000
783,000
4,377,000
$
$
$
$
2022
2023
2024
2025
— $ — $ — $
—
—
—
Thereafter
—
—
— $
1,143,000
—
466,000
1,609,000
—
13,000
$ 13,000
—
—
—
—
$ — $ — $
—
—
—
(1) Not included in the commitments and contingencies table above are the monthly principal and interest payments of $23,000 that
would be due beginning in August 2021 under the PPP loan if it is not forgiven by the SBA (see Note 7).
Key Clinical Research Trial Obligations
AP-013 study
In March 2019, the Company entered into a contract with a CRO (“Prior CRO”) in connection with the AP-013 study totaling $6.2 million
and covering an initial clinical trial size of 724 patients, which was increased by $4.1 million in January 2020 as a result of an increase in the
number of participating patients to 1,034, resulting in the CRO contract commitment totaling $10.3 million. In April 2020, and pursuant to
the FDA guidance covering ongoing clinical trials in the presence of the COVID-19 pandemic, the Company and the Prior CRO paused all
ongoing conduct associated with the AP-013 study. In December 2020, the Company terminated the contract with the Prior CRO. Under the
terms and conditions of the contract, the Prior CRO will refund the remaining deposit of $165,000, which is classified within the “prepaid
expenses and other” line item on the balance sheet. From the inception of this contract through December 31, 2020, the Company incurred
and accrued cumulative costs totaling $8.1 million against the contract. The contract was terminated prior to December 31, 2020.
In December 2020, the Company entered into an initial contract with a CRO (“New CRO”) in connection with the AP-013 study totaling
$1.4 million. The contract requires an initial retainer of $465,000, which had not been funded as of December 31, 2020. Recently, the FDA
has provided guidance specifically designed to assist the pharmaceutical industry with viable options for evaluating data from clinical trials
which were impacted by the pandemic. The Company reviewed the FDA guidance as it relates to the AP-013 study data and is diligently
working with the FDA to come to agreement on an amendment to the existing SPA, which will formally define the direction for proceeding
forward with
F-14
Table of Contents
the AP-013 study. Due to the current and projected near term uncertainty resulting from the ongoing COVID-19 pandemic, the future
contractual commitment amount and timing of disbursement may change. The Company had an outstanding future commitment of $1.4
million as of December 31, 2020 and will incur costs when the study commences.
Inhaled treatment for COVID-19 patients
In September 2020, the Company entered into a contract with a CRO in connection with the FDA approved IND application covering
inhaled Ampion treatment for COVID-19 infected patients hospitalized for respiratory distress (the “AP-014 study”) totaling $836,000. The
contract required an initial retainer of $232,000, which has been funded and will be applied to the future study expenses as further defined by
the contract. As of December 31, 2020, the Company had incurred cumulative costs totaling $559,000 against the contract and, as such, had
an outstanding obligation of $277,000, offset by the initial retainer.
In October 2020, the Company entered into a contract with a regional hospital group and principal investigator in connection with the AP-
014 study totaling $78,000. As of December 31, 2020, the Company had incurred cumulative costs totaling $39,000 against the contract and,
as such, had an outstanding obligation of $39,000.
Intravenous (“IV”) treatment for COVID-19 patients
In December 2020, the Company entered into a contract with a CRO in connection with the FDA approved IND application covering IV
Ampion treatment for COVID-19 patients for an expanded global Phase I / II study (the “AP-017 study”) totaling $1.8 million. The contract
requires an initial retainer of $495,000, which had not been funded as of December 31, 2020. The Company expects to commence
enrollment of the AP-017 study during the first quarter of fiscal 2021 and, as such, had an outstanding future commitment of $1.8 million as
of December 31, 2020.
BLA Consulting Services
In March 2018, the Company entered into a BLA consulting services agreement for $1.2 million. This contract required a deposit, of which
$182,000 was funded and classified within the “prepaid expenses and other” line item on the balance sheet. In June 2020, the Company
finalized contract negotiations to increase the contract by a nominal amount to incorporate the review of the IND applications for inhaled
and IV Ampion treatment. In September 2020, the Company finalized an amendment to the existing contract, which resulted in a refund of
the initial deposit and requires the Company to provide a future deposit totaling $364,000 at such time the work commences related to the
preparation of the related BLA for Ampion. The Company had incurred cumulative costs totaling $79,000 against this contract and, as such,
had outstanding future obligations totaling $1.1 million as of December 31, 2020, which will be settled at such time future services are
provided to the Company primarily related to the development and filing of the Ampion BLA. Given the current uncertainty surrounding the
COVID-19 pandemic and the resulting impact on the AP-013 study, at the date of this filing, the Company estimates the incurrence of the
remaining costs associated with the preparation of the BLA filing will be postponed until early 2022, if not later.
Statistical Analysis and Programming Consulting Services
In May 2019, Ampio entered into a statistical analysis and programming consulting services agreement for $578,000. As of December 31,
2020, the Company had incurred cumulative costs totaling $259,000 against the contract and, as such, had an outstanding obligation of
$319,000.
Employment Agreements
On December 14, 2019, the Company entered into a new three-year employment agreement with Mr. Macaluso, Chief Executive Officer,
which became effective January 10, 2020, immediately following the expiration of his prior employment agreement. The new employment
agreement provides for an annual salary of $300,000 and term ending January 10, 2023, subject to certain automatic renewal provisions.
F-15
Table of Contents
On September 16, 2019, the Company entered into a new two-year employment agreement with Ms. Cherevka, Chief Operating Officer,
which by its terms cancelled the previous employment agreement on such date. The new employment agreement provides for an annual
salary of $280,000 and a term ending September 16, 2021, subject to certain automatic renewal provisions.
On July 9, 2019, the Company entered into an employment agreement with Mr. Daniel Stokely, Chief Financial Officer. The employment
agreement provides for an annual salary of $285,000 with a term beginning July 31, 2019 and lasting for three years, subject to certain
automatic renewal provisions. On July 13, 2020, the employment agreement was amended, which allowed for reimbursement of reasonable
commuting and relocation expenses, including the employee portion of taxes, for up to one year. The commuting and relocation expenses, as
well as the related taxes, were incurred in full as of December 31, 2020.
Amounts noted above do not assume the continuation of employment beyond the contractual terms of each employee’s existing employment
agreements.
Commercial Insurance Premium Financing Agreement
In July 2020, the Company entered into an insurance premium financing agreement for $1.0 million, with a term of nine months and an
annual interest rate of 3.37%. Under the terms and provisions of the agreement, the Company will be required to make principal and interest
payments totaling $116,000 per month over the remaining term of the agreement. The outstanding obligation as of December 31, 2020 was
$334,000, which will be paid in full by March 2021. In addition, as of December 31, 2020, the Company had a remaining balance of $19,000
related to annual insurance premiums payable to the Company’s insurance broker, which will be paid in full by June 2021.
Facility Lease
In December 2013, the Company entered into a 125-month non-cancellable operating lease for office space and a manufacturing facility. The
effective date of the lease was May 1, 2014. The initial base rent of the lease was $23,000 per month. The total base rent over the term of the
lease is approximately $3.3 million, which includes rent abatements and leasehold incentives. The Company adopted the FASB issued ASC
842, “Leases (Topic 842)” effective January 1, 2019. With the adoption of ASC 842, the Company recorded an operating right-of-use
(“ROU”) asset and an operating lease liability on its balance sheet. The ROU asset represents the Company’s right to use the underlying
asset for the lease term and the lease obligation represents the Company’s commitment to make the lease payments arising from the lease.
ROU lease assets and obligations are recognized at the commencement date based on the present value of remaining lease payments over the
lease term. As the Company’s lease does not provide an implicit rate, the Company used an estimated incremental borrowing rate 5.75%
based on the information available at the commencement date in determining the present value of the lease payments. Lease expense is
recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectations regarding the terms. The lease
liability is classified as current or long-term on the balance sheet.
The following table provides a reconciliation of the Company’s remaining undiscounted payments for its facility lease and the carrying
amount of the lease liability presented in the balance sheet as of December 31, 2020:
F-16
Table of Contents
Facility Lease Payments
2021
2022
2023
2024
2025 Thereafter
Remaining Facility Lease
Payments
Less: Discount Adjustment
Total lease liability
Lease liability-current portion
Long-term lease liability
$
$
$
$
1,344,000
(135,000)
1,209,000
284,000
925,000
$ 345,000
$ 355,000
$ 364,000
$ 280,000
$ — $
—
The following table provides a reconciliation of the Company’s remaining ROU asset for its facility lease presented in the balance sheet as
of December 31, 2020:
Balance as of December 31, 2019
Amortization
Balance as of December 31, 2020
The Company recorded lease expense in the respective periods is as follows:
Lease expense
Note 9 – Warrants
ROU Asset
$
$
1,003,000
(179,000)
824,000
Year Ended December 31,
2020
2019
$
264,000
$
261,000
The Company has issued both equity (“placement agent”) and liability classified (“investor”) warrants in conjunction with previous equity
raises. The Company had a total of 1.6 million equity-classified warrants and 2.5 million liability-classified warrants outstanding as of
December 31, 2020.
The following table summarizes the Company’s warrant activity:
Outstanding as of December 31, 2018
Warrants issued in connection with the public offering
Warrant exercised
Outstanding as of December 31, 2019
Warrants exercised
Outstanding as of December 31, 2020
Number of
Warrants
Weighted
Average
Exercise Price
Weighted Average
Remaining
Contractual Life
$
22,283,191
2,100,000
$
(17,266,667) $
$
7,116,524
(2,985,800) $
4,130,724
$
0.51
0.50
0.22
0.57
0.42
0.66
4.25
4.47
—
3.41
—
2.05
The following table summarizes the Company’s outstanding warrants between placement agent and investor warrant classifications:
F-17
Table of Contents
Investor warrants at $0.76
Placement agent warrants at $0.76
Placement agent warrants at $0.94
Investor warrants at $0.40
Placement agent warrants at $0.50
Outstanding as of December 31, 2020
Number of
Warrants
Weighted
Average
Exercise Price
Weighted Average
Remaining
Contractual Life
2,026,915
439,609
150,000
437,500
1,076,700
4,130,724
$
0.66
1.42
1.42
0.67
2.61
3.46
2.05
In connection with the June 2019 public offering, the Company issued Placement Agent Warrants to purchase an aggregate of 2.1 million
shares of common stock at an exercise price of $0.50 with a term of five years. These warrants were accounted for as equity-based warrants
(see Note 11).
In connection with the August 2018 confidentially marketed public offering, the Company issued investor warrants to purchase an aggregate
of 20.0 million shares of common stock at an exercise price of $0.40 with a term of
five years. Due to certain derivative features, these warrants were accounted for under liability accounting and are recorded at fair value each
reporting period. As of December 31, 2020 and 2019, these warrants had a fair value of $600,000 and $1.2 million, respectively. Significant
assumptions, using the Black-Scholes valuation model, as of
December 31, 2020, December 31, 2019, and at issuance were as follows:
Assumptions for warrants issued August 13, 2018:
December 31, 2020 December 31, 2019
Exercise Price
Volatility
Equivalent term (years)
Risk-free interest rate
Number of warrants
Derivative liability
$
$
0.40
$
131 %
2.61
0.15 %
0.40
132 %
3.62
1.64 %
437,500
606,000
$
2,400,000
821,000
In connection with the June 2017 registered direct offering, the Company issued investor warrants to purchase an aggregate of 11.0 million
shares of common stock at an exercise price of $0.76 with a term of five years. Due to certain derivative features, these warrants are
accounted for under liability accounting and are recorded at fair value each reporting period. As of December 31, 2020 and 2019, these
warrants had a fair value of $2.0 million and $800,000, respectively. Significant assumptions as of December 31, 2020 and 2019 were as
follows:
Assumptions for warrants issued June 2, 2017:
December 31, 2020
December 31, 2019
Exercise Price
Volatility
Equivalent term (years)
Risk-free interest rate
Number of warrants
Derivative liability
$
$
0.76
$
90 %
1.42
0.11 %
0.76
139 %
2.42
1.60 %
2,026,915
2,001,000
$
2,026,915
1,243,000
During the year ended December 31, 2020, the Company has issued 2.0 million shares of its common stock as a result of the exercise of
investor warrants with an exercise price of $0.40 and received proceeds of $785,000 related to these investor warrant exercises. In addition,
during the year ended December 31, 2020, former placement agents elected to exercise 1.0 million of their warrants utilizing the net exercise
option, where the total number of shares of common stock
F-18
Table of Contents
issued was reduced to cover the exercise price, resulting with the Company issuing 524,000 shares of common stock. The Company did not
receive any cash related to the exercise of placement agent warrants.
The total value for the warrant derivative liability as of December 31, 2020 is approximately $2.6 million. See Note 10 for additional
information regarding the warrant derivative liability.
In October 2019, the Company entered into warrant exercise agreements with certain warrant holders from the 2017 and 2018 public
offerings, which reduced the exercise price of the investor warrants from $0.76 (2017 public offering) and $0.40 (2018 public offering) to
$0.215 per warrant. A total of 16.4 million warrants were exercised, which generated gross proceeds of $3.5 million. In connection with the
warrant repricing, the Company paid its investment banker a fee of 7% of the gross proceeds plus reasonable out-of-pocket expenses, which
totaled $277,000, and resulted in net proceeds of $3.2 million.
In addition to the warrant exercises referenced above, the Company had other warrant exercises during the year ended December 31, 2019.
The Company issued 875,000 shares of common stock as a result of the exercise of
investor warrants with an exercise price of $0.40 and received $350,000 related to these investor warrant exercises.
The combined net proceeds for the investor warrant exercises at December 31, 2019 was approximately $3.6 million.
Note 10 – Fair Value Considerations
Authoritative guidance defines fair value as the price that would be received upon the sale of an asset or paid to transfer a liability (an exit
price) in an orderly transaction between market participants at the measurement date. The guidance establishes a hierarchy for inputs used in
measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most
observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability
based on market data obtained from sources not affiliated with the Company. Unobservable inputs are inputs that reflect the Company’s
assumptions of what market participants would use in pricing the asset or liability based on the best information available in the
circumstances. The hierarchy is broken down into three levels based on reliability of the inputs as follows:
Level 1:
Inputs that reflect unadjusted quoted prices in active markets that are accessible to the Company for identical assets
or liabilities;
Level 2:
Inputs that include quoted prices for similar assets and liabilities in active or inactive markets or that are observable
for the asset or liability either directly or indirectly; and
Level 3:
Unobservable inputs that are supported by little or no market activity.
The Company’s financial instruments include cash and cash equivalents, accounts payable and accrued expenses, and warrant derivative
liability. Warrants are recorded at estimated fair value utilizing the Black-Scholes warrant pricing model.
The Company’s assets and liabilities which are measured at fair value are classified in their entirety based on the lowest level of input that is
significant to their fair value measurement. The Company’s policy is to recognize transfers in and/or out of the fair value hierarchy as of the
date in which the event or change in circumstances caused the transfer. The Company has consistently applied the valuation techniques in all
periods presented.
F-19
Table of Contents
The following table presents the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of
December 31, 2020 and 2019, by level within the fair value hierarchy:
December 31, 2020
Liabilities:
Warrant derivative liability
December 31, 2019
Liabilities:
Warrant derivative liability
Level 1 Level 2
Level 3
Total
Fair Value Measurements Using
$
$
— $
— $
2,607,000
$
2,607,000
— $
— $
2,064,000
$
2,064,000
The recurring 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 December 31, 2020, December 31, 2019, and at issuance are disclosed in Note 9.
The following table sets forth a reconciliation of changes in the fair value of financial liabilities classified as Level 3 in the fair valued
hierarchy:
Balance as of December 31, 2019
Warrant exercises
Change in fair value
Balance as of December 31, 2020
Note 11 – Common Stock
Authorized Shares
Derivative Instruments
$
$
2,064,000
(2,928,000)
3,471,000
2,607,000
The Company had 300.0 million authorized shares of common stock as of December 31, 2020 and 2019.
The following table summarizes the Company’s remaining authorized shares available for future issuance:
Authorized shares
Common stock outstanding
Options outstanding
Warrants outstanding
Reserved for issuance under 2019 Stock and Incentive Plan
Available shares
F-20
December 31, 2020
300,000,000
193,378,996
6,099,651
4,130,724
7,945,245
88,445,384
Table of Contents
Public Offerings
In June 2019, the Company completed a public offering whereby it issued 30.0 million shares of its common stock at a price of $0.40 per
share, generating gross proceeds of $12.0 million. In connection with this offering, we entered into a Placement Agent Agreement with the
placement agent. Pursuant to the Placement Agent Agreement, the placement agent received a 7% commission of $840,000, and $230,000 as
compensation for other costs related to the offering and also received 2.1 million warrants with an exercise price of $0.50 and an expiration
date of June 17, 2024 (“Placement Agent Warrants”). Such Placement Agent Warrants provide for cashless exercise, which the placement
agent may elect if the Company does not have an effective registration statement registering, or the prospectus contained therein is not
available for the issuance of, the shares underlying the warrants. Additionally, the Placement Agent Agreement contained certain restrictions
that may prevent the Company from conducting an at-the-market offering or continuous equity financing in the near term and granted the
placement agent a right of first refusal, that covers a period through June 2021, to act as the investment banker or placement agent on certain
future transactions. The Company also incurred expenses related to legal, accounting, and other registration costs of $173,000. The shares
were offered and sold pursuant to the Company’s shelf registration statement.
ATM Equity Offering Program
Sales Agreement
In February 2020, the Company entered into a Sales Agreement with two agents to implement an ATM equity offering program under which
the Company, from time to time and at its sole discretion, may offer and sell shares of its common stock having an aggregate offering price
up to $50.0 million to the public through the agents until (i) each agent declines to accept the terms for any reason, (ii) the entire amount of
shares has been sold, or (iii) the Company suspends or terminates the Sales Agreement. Subject to the terms and conditions of the Sales
Agreement, the agents shall use their commercially reasonable efforts to sell shares from time to time, based upon the Company’s
instructions as documented on a purchase notification form. If an agent declines to accept the purchase notification form, the agent must
promptly notify the Company and the other agent then has the ability to accept or decline the purchase notification form. The Company has
no obligation to sell any shares and may, at any time and in its sole discretion, suspend sales under the Sales Agreement or terminate the
Sales Agreement in accordance with its terms. The Sales Agreement includes customary indemnification rights in favor of the agents and
provides that the agents will be entitled to an aggregate fixed commission of 4.0% of the gross proceeds (2.0% to each agent) to the
Company from any shares sold pursuant to the Sales Agreement.
The following table summarizes the Company’s sales and related issuance costs incurred under the Sales Agreement as of December 31,
2020:
Total shares of common stock sold
Gross Proceeds
Commissions earned by placement agents
Issuance / subsequent recurring fees
Net proceeds
Equity Distribution Agreement
Sales Agreement
32,099,677
26,191,000
(1,050,000)
(318,000)
24,823,000
$
$
In April 2019, the Company entered into an Equity Distribution Agreement with a placement agent to implement an “at-the-market” equity
program under which the Company, from time to time could offer and sell shares of its common stock, having an aggregate offering price of
up to $24.65 million (the “Shares”) through the placement agent. The
F-21
Table of Contents
Company had no obligation to sell any of the Shares and could at any time suspend sales under the Equity Distribution Agreement or
terminate the Equity Distribution Agreement in accordance with its terms. The Company provided the placement agent with customary
indemnification rights. The placement agent was entitled to a fixed commission of 3.0% of the gross proceeds from shares sold. The
Company terminated the Equity Distribution Agreement in June 2019.
The following table summarizes the Company’s sales under the terminated Equity Distribution Agreement:
Total shares of common stock sold
Gross Proceeds
Commissions earned by placement agents
Issuance / subsequent recurring fees
Net loss
Common Stock Issued for Services
Equity Distribution Agreement
254,984
142,000
(4,000)
(140,000)
(2,000)
$
$
The Company issued 136,236 shares of common stock under the Ampio Pharmaceuticals, Inc. 2019 Stock and Incentive Plan (the “2019
Plan) and 181,590 shares of common stock under the Company’s 2010 Stock and Incentive Plan (the “2010 Plan”), each valued at $80,000,
as partial compensation for the services of non-employee directors, during the years ended December 31, 2020 and 2019, respectively.
Note 12 – Equity Instruments
Options
In December 2019, the Company’s Board of Directors and stockholders approved the adoption of the 2019 Plan, under which shares were
reserved for future issuance of equity related awards classified as option awards/grants, restricted stock awards and other equity related
awards. The 2019 Plan permits grants of equity awards to employees, directors and consultants. The stockholders approved a total of
10.0 million shares to be reserved for issuance under the 2019 Plan. The Company’s 2010 Plan was cancelled concurrently with the adoption
of the 2019 Plan.
The following table summarizes the activity of the 2019 Plan and the shares available for future equity awards as of December 31, 2020:
Total shares reserved for equity awards
Options granted during fiscal 2019
Options granted during fiscal 2020
Add back: expired, forfeited and/or cancelled equity awards
Remaining shares available for future equity awards
F-22
2019 Plan
10,000,000
(144,000)
(1,923,471)
12,716
7,945,245
Table of Contents
The following table summarizes the Company’s stock option activity:
Outstanding December 31, 2018
Granted
Exercised
Forfeited
Expired and/or cancelled
Outstanding as of December 31, 2019
Granted
Exercised
Forfeited
Expired and/or cancelled
Outstanding as of December 31, 2020
Exercisable as of December 31, 2020
Number of
Options
5,426,465
2,226,500
Weighted
Average
Exercise Price
$
$
— $
— $
1.99
0.57
—
—
Weighted Average
Remaining
Contractual Life
Aggregate
Intrinsic Value
—
4.89 $
(1,652,333)
6,000,632
1,923,471
$
$
(32,500) $
(100,000) $
(1,691,652) $
6,099,951
$
5,642,151
$
2.51
1.33
0.90
0.33
1.70
1.87
1.04
1.05
5.40 $
—
7.36 $
7.17 $
4,739,000
4,464,000
The following table summarizes the outstanding options that were issued in accordance with the 2010 Plan and 2019 Plan:
Outstanding Options by Plan
December 31, 2020
2010 Plan
2019 Plan
Outstanding as of December 31, 2020
Stock options outstanding at December 31, 2020 are summarized in the table below:
Range of Exercise Prices
Up to $0.50
$0.51 - $1.00
$1.01 - $1.50
$1.51 and above
Total
Number of
Options
Outstanding
704,000
4,373,507
194,000
828,144
6,099,651
4,053,180
2,046,471
6,099,651
Weighted Average
Remaining
Contractual Lives
8.52
7.53
9.86
4.87
7.36
Weighted
Average
Exercise Price
$
$
$
$
$
0.44
0.70
1.38
3.27
1.04
The Company computes the fair value for all options granted or modified using the Black-Scholes option pricing model. To calculate the fair
value of the options, certain assumptions are made regarding components of the model, including the fair value of the underlying common
stock, risk-free interest rate, volatility, expected dividend yield and expected option life. Changes to the assumptions could cause significant
adjustments to the valuation. The Company calculates its volatility assumption using the actual changes in the market value of its stock.
Forfeitures are recognized as they occur. The Company’s historical option exercises do not provide a reasonable basis to estimate an
expected term due to the lack of sufficient data. Therefore, the Company estimates the expected term by using the simplified method. The
simplified method calculates the expected term as the average of the vesting term plus the contractual life of the options. The risk-free
interest rate is based on the U.S. Treasury yield in effect at the time of the grant for treasury securities of similar
F-23
Table of Contents
maturity. The Company computed the fair value of options granted and modified during the period ended December 31, 2020 and December
31, 2019, using the following assumptions:
Expected volatility
Risk free interest rate
Expected term (years)
120.80% - 134.44%
0.19% - 1.67%
3.00 - 6.00
Stock-based compensation expense related to the fair value of stock options was included in the statements of operations as research and
development expenses and general and administrative expenses as set forth in the table below. The Company determined the fair value as of
the date of grant using the Black-Scholes option pricing model and expenses the fair value ratably over the vesting period. The following
table summarizes stock-based compensation for the years ended December 31, 2020 and December 31, 2019:
Research and development expenses
Stock-based compensation
General and administrative expenses
Issuance of common stock for services
Stock-based compensation
Total stock-based compensation
Unrecognized expense as of December 31, 2020
Weighted average remaining years to vest
Note 13 – Income Taxes
Year Ended December 31,
2019
2020
$
401,000
$
89,000
80,000
876,000
80,000
316,000
$
1,357,000
$
485,000
277,000
1.11
Income tax expense (benefit) resulting from applying statutory rates in jurisdictions in which the Company is taxed (Federal and State of
Colorado) differs from the income tax provision (benefit) in the Company’s financial statements. The following table reflects the
reconciliation for the respective periods:
(Benefit) expense at federal statutory rate
State, net of federal income tax impact
Stock-based compensation
Registered offering gain / warrant expense
Paycheck Protection Program funding
Change in state deferred tax rate
Expiration of tax attribute carryforwards
Other
Change in valuation allowance
Effective tax rate
F-24
Years Ended December 31,
2020
2019
(21.0)%
(2.9)%
4.7 %
0.4 %
(0.7)%
0.7 %
1.5 %
0.0
17.3 %
0.0 %
(21.0)%
(4.1)%
4.8 %
(7.5)%
0.0 %
0.0 %
0.0 %
0.0 %
27.8 %
0.0 %
Table of Contents
Deferred income taxes arise from temporary differences in the recognition of certain items for income tax and financial reporting purposes.
The approximate tax effects of significant temporary differences which comprise the deferred tax assets and liabilities are as follows for the
respective periods:
Long-term deferred income tax assets (liabilities):
Accrued liabilities
Interest expense carryforward
Deferred rent
Net operating loss carryforward
Share-based compensation
Unrealized loss on trading security
Property and equipment
Warrants
Other
Less: Valuation allowance
Total long-term deferred income tax assets (liabilities)
Years Ended December 31,
2019
2020
$
— $
—
95,000
43,515,000
1,030,000
772,000
9,000
152,000
1,000
(45,574,000)
$
— $
18,000
—
115,000
40,248,000
1,592,000
774,000
(131,000)
67,000
—
(42,683,000)
—
As of December 31, 2020, Ampio has approximately $176.9 million in net operating loss (“NOL”) carryforwards that, subject to limitation,
may be available in future tax years to offset taxable income. These net operating loss carryforwards expire from 2021 through 2037.
Approximately $45.1 million of the NOL carryforward carries forward indefinitely. Under the provisions of the Internal Revenue Code,
substantial changes in the Company’s ownership may result in limitations on the amount of NOL carryforwards that can be utilized in
future years.
The Company has provided a full valuation allowance against its deferred tax assets as it has determined that it is not more likely than not
that recognition of such deferred tax assets will be utilized in the foreseeable future. The amount of income taxes and related income tax
positions taken are subject to audits by federal and state tax authorities. The Company has adopted accounting guidance for uncertain tax
positions which provides that in order to recognize an uncertain tax benefit, the taxpayer must be more likely than not of sustaining the
position, and the measurement of the benefit is calculated as the largest amount that is more than 50% likely to be realized upon recognition
of the benefit. The Company believes that it has no material uncertain tax positions and has fully reserved against its future tax benefit with a
valuation allowance and does not expect significant changes in the amount of unrecognized tax benefits to occur within the next
twelve months. The Company’s policy is to record a liability for the difference between benefits that are both recognized and measured
pursuant to GAAP and tax positions taken or expected to be taken on the tax return. Then, to the extent that the assessment of such tax
positions changes, the change in estimate is recorded in the period in which the determination is made. The Company reports tax-related
interest and penalties as a component of income tax expense. During the periods reported, management of the Company has concluded that
no significant tax position requires recognition. The Company files income tax returns in the United States federal and various state
jurisdictions. The Company is no longer subject to income tax examinations for federal income taxes before 2017 or for Colorado before
2016. Net operating loss carryforwards are subject to examination in the year they are utilized regardless of whether the tax year in which
they are generated has been closed by statute. The amount subject to disallowance is limited to the NOL utilized. Accordingly, the Company
may be subject to examination for prior NOL’s generated as such NOL’s are utilized.
Note 14 – Earnings Per Share
Basic earnings per share is computed by dividing net loss available to common stockholders by the weighted-average number of shares of
common stock outstanding during each period. Diluted earnings per share is based on the treasury stock method and computed by dividing
net loss available to common stockholders by the diluted weighted-average shares of common stock outstanding during each period. The
Company’s potentially dilutive shares include stock options and warrants for the shares of common stock. The potentially dilutive shares are
considered to be common stock
F-25
Table of Contents
equivalents and are only included in the calculation of diluted net loss per share when the effect is dilutive. The investor warrants are treated
as equity in the calculation of diluted earnings per share in both the computation of the numerator and denominator, if dilutive. The
following table sets forth the calculations of basic and diluted earnings per share for the year ended December 31, 2020 and 2019:
Net loss
Less: decrease in fair value of investor warrants
Loss available to common stockholders
Basic weighted-average common shares outstanding
Add: dilutive effect of equity instruments
Diluted weighted-average shares outstanding
Earnings per share – basic
Earnings per share – diluted
Year Ended December 31,
2020
(15,894,000)
—
(15,894,000)
172,846,773
—
172,846,773
(0.09)
(0.09)
$
$
$
$
$
$
$
$
2019
(13,630,000)
(4,869,000)
(18,499,000)
130,601,500
533,678
131,135,178
(0.10)
(0.14)
The potentially dilutive shares of common stock that have been excluded from the calculation of net loss per share because of the anti-
dilutive effect as of December 31, 2020 and 2019 are as follows:
Outstanding stock options
Warrants to purchase shares of common stock
Total potentially dilutive shares of common stock
Note 15 – Litigation
Year Ended December 31,
2019
2020
6,099,651
4,130,724
10,230,375
5,916,982
6,666,196
12,583,178
On August 25, 2018, a purported stockholder of the Company commenced a putative class action lawsuit in the United States District Court
for the Central District of California (the “Court”), captioned Shi v. Ampio Pharmaceuticals, Inc., et al., Case No. 18-cv-07476 (the
“Securities Class Action”). The plaintiff in the Securities Class Action alleged that the Company and certain of its current and former
officers had violated the federal securities laws by misrepresenting and/or omitting material information regarding the AP-003 Phase III
clinical trial of Ampion. The plaintiff asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), and Securities and Exchange Commission Rule 10b-5, on behalf of a putative class of purchasers of the Company’s
common stock from December 14, 2017 through August 7, 2018. The plaintiff in the Securities Class Action sought unspecified damages,
pre-judgment and post-judgment interest, and attorneys’ fees and costs. On September 27, 2019, the Court presiding over the Securities
Class Action issued an order appointing a Lead Plaintiff and Lead Counsel, pursuant to the Private Securities Litigation Reform Act. The
Lead Plaintiff filed an amended complaint in late 2019. The Company filed a motion to dismiss the amended complaint on February 10,
2020. On March 26, 2020, the Lead Plaintiff filed a brief in opposition to the Company’s motion to dismiss. The Company filed a reply to
the Lead Plaintiff’s brief in opposition on April 27, 2020. On June 19, 2020, the Court granted the Company’s motion to dismiss and
dismissed the Securities Class Action with prejudice. The plaintiff did not file a notice of appeal, and the case is now concluded.
On September 10, 2018, a purported stockholder of the Company brought a derivative action in the United States District Court for the
Central District of California, captioned Cetrone v. Macaluso, et al., Case No. 18-cv-07855 (the “Cetrone Action”), alleging primarily that
the directors and officers of Ampio had breached their fiduciary duties in connection with alleged misstatements and omissions regarding the
AP-003 Phase III clinical trial of Ampion. The plaintiff sought unspecified damages, certain governance reforms, pre-judgment and post-
judgment interest, attorneys’ fees and costs.
F-26
Table of Contents
On October 5, 2018, a purported stockholder of the Company brought a derivative action in the United States District Court for the District
of Colorado, Theise v. Macaluso, et al., Case No. 18-cv-02558 (the “Theise Action”), which closely paralleled the allegations in the Cetrone
Action. A second derivative action was filed in the United States District Court for the District of Colorado and was consolidated with the
Theise Action under the caption In re: Ampio Pharmaceuticals Inc. Stockholder Derivative Actions, Case No. 18-cv-02558. The plaintiffs
sought unspecified damages, pre-judgment and post-judgment interest, attorneys’ fees and costs. On August 28, 2020, the District Court for
the Central District of California dismissed the Cetrone Action in its entirety and without prejudice, pursuant to a Stipulation of Dismissal
between the parties. On August 31, 2020, the United States District Court for the District of Colorado similarly dismissed the Theise Action
in its entirety and without prejudice, pursuant to a Stipulation of Dismissal between the parties.
As of December 31, 2020, each of the Securities Class Action, the Cetrone Action and the Theise Action have been dismissed. As of the date
hereof, the Company is not a party to any ongoing lawsuits.
Note 16 – Employee Benefit Plan
The Company has a 401(k) plan that allows participants to contribute a portion of their salary, subject to eligibility requirements and annual
IRS limits. However, the Company does not match employee contributions.
Note 17 – Subsequent Events
In January 2021, the Company received additional gross proceeds of $2.7 million from the sale of 1.8 million shares of common stock in an
ATM offering pursuant to the Sales Agreement, which was offset by offering related costs of $0.1 million.
In January 2021, the Company issued 284,100 shares of common stock as a result of the exercise of investor warrants with an exercise price
of $0.40. The Company received proceeds of $114,000 related to these warrant exercises.
F-27
Exhibit 4.1
This Certifies That BY
INCORPORATED
UNDER THE LAWS OF
THE STATE OF
DELAWARE
AUTHORIZED:
300,000,000 COMMON
SHARES, $0.0001 PAR
VALUE PER SHARE
Fully Paid and Non-
Assessable Common
Stock, $0.0001 Par Value
of AMPIO
PHARMACEUTICALS,
INC. CUSIP 03209T 10
9 SEE REVERSE FOR
CERTAIN
DEFINITIONS
COUNTERSIGNED
AND REGISTERED:
EQUINITI TRUST
COMPANY IN
WITNESS WHEREOF,
the Corporation has
caused this Certificate to
be signed by the
facsimile signatures of its
duly authorized officers
and to be sealed with the
facsimile seal of the
Corporation.
TRANSFER AGENT
AND REGISTRAR
AUTHORIZED
SIGNATURE . .
AMERICAN
FINANCIAL
PRINTING, INC.
THE BOARD OF THIS CORPORATION HAS THE AUTHORITY TO CREATE
AND DETERMINE THE RELATIVE RIGHTS AND PREFERENCES OF CLASSES
OR SERIES OF SHARES OF CAPITAL STOCK OTHER THAN COMMON
STOCK. THIS CORPORATION WILL FURNISH TO ANY SHAREHOLDER UPON
WRITTEN REQUEST SENT TO ITS PRINCIPAL EXECUTIVE OFFICES, AND
WITHOUT CHARGE, A FULL STATEMENT OF THE BOARD’S AUTHORITY TO
CREATE AND DETERMINE THE RELATIVE RIGHTS AND PREFERENCES OF
CLASSES OR SERIES OF SHARES OF CAPITAL STOCK AS WELL AS THE
DESIGNATIONS, PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF
THE SHARES OF EACH CLASS OR SERIES THEN OUTSTANDING OR
AUTHORIZED TO BE ISSUED. The following abbreviations, when used in the
inscription on the face of this certificate, shall be construed as though they were written
out in full according to applicable laws or regulations: TEN COM – as tenants in
commonUTMA – (Cust) Custodian (Minor) TEN ENT– as tenants by entiretiesunder
Uniform Transfers to Minors JT TEN– as joint tenants with right of survivorshipAct
and not as tenants in common(State) Additional abbreviations may also be used though
not in the above list. For value received hereby sell, assign, and transfer unto PLEASE
INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF
ASSIGNEE (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS
INCLUDING POSTAL ZIP CODE OF ASSIGNEE) Shares of the capital stock
represented by the within Certificate, and do hereby irrevocably constitute and appoint
Attorney to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises. Dated X X NOTICE: THE SIGNATURE TO
THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. ALL
GUARANTEES MUST BE MADE BY A FINANCIAL INSTITUTION (SUCH AS A
BANK OR BROKER) WHICH IS A PARTICIPANT IN THE SECURITIES
TRANSFER AGENTS MEDALLION PROGRAM (“STAMP”), THE NEW YORK
STOCK EXCHANGE, INC. MEDALLION SIGNATURE PROGRAM (“MSP”), OR
THE STOCK EXCHANGES MEDALLION PROGRAM (“SEMP”) AND MUST
NOT BE DATED. GUARANTEES BY A NOTARY PUBLIC ARE NOT
ACCEPTABLE.
AMPIO PHARMACEUTICALS, INC.
2019 STOCK AND INCENTIVE PLAN
Exhibit 10.4
GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the Ampio Pharmaceuticals, Inc. (the “Company”) 2019 Stock Option and Incentive Plan (the “Plan”). The purpose of the
Plan is to encourage and enable the officers, employees, Non-Employee Directors and other key persons (including Consultants and prospective employees)
of the Company and its Subsidiaries upon whose judgment, initiative and efforts the Company largely depends for the successful conduct of its business to
acquire a proprietary interest in the Company. It is anticipated that providing such persons with a direct stake in the Company’s welfare will assure a closer
identification of their interests with those of the Company and its stockholders, thereby stimulating their efforts on the Company’s behalf and strengthening
their desire to remain with the Company.
The following terms shall be defined as set forth below:
“Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.
“Administrator” means either the Board or the compensation committee of the Board or a similar committee performing the functions of the
compensation committee. At such time as the Company’s common stock is listed on a national securities exchange, the compensation committee will be
comprised of not less than two Non-Employee Directors who are independent.
“Award” or “Awards,” except where referring to a particular category of grant under the Plan, shall include Incentive Stock Options, Non-Qualified
Stock Options, Stock Appreciation Rights, Restricted Stock Units, Restricted Stock Awards, Unrestricted Stock Awards and Cash-Based Awards.
“Award Certificate” means a written or electronic document setting forth the terms and provisions applicable to an Award granted under the Plan.
Each Award Certificate is subject to the terms and conditions of the Plan.
“Board” means the Board of Directors of the Company.
“Cash-Based Award” means an Award entitling the recipient to receive a cash-denominated payment.
“Code” means the Internal Revenue Code of 1986, as amended, and any successor Code, and related rules, regulations and interpretations.
“Consultant” means any natural person that provides bona fide services to the Company, and such services are not in connection with the offer or
sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities.
“Disability” means a permanent and total disability within the meaning of Section 22(e)(3) of the Code.
“Effective Date” means December 14, 2019.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.
“Fair Market Value” of the Stock on any given date means the fair market value of the Stock determined in good faith by the Administrator;
provided, however, that if the Stock is admitted to quotation on the OTC Bulletin Board, the National Association of Securities Dealers Automated
Quotation System (“NASDAQ”), NASDAQ Global Market or another national securities exchange, the determination shall be made by reference to market
quotations. If there are no market quotations for such date, the determination shall be made by reference to the last date preceding such date for which there
are market quotations.
“Incentive Stock Option” means any Stock Option designated and qualified as an “incentive stock option” as defined in Section 422 of the Code.
“Non-Employee Director” means a member of the Board who is not also an employee of the Company or any Subsidiary.
“Non-Qualified Stock Option” means any Stock Option that is not an Incentive Stock Option.
“Option” or “Stock Option” means any option to purchase shares of Stock granted pursuant to Section 5.
“Restricted Stock Award” means an Award entitling the recipient to acquire, at such purchase price (which may be zero) as determined by the
Administrator, shares of Stock subject to such restrictions and conditions as the Administrator may determine at the time of grant.
“Restricted Stock Units” means an Award of phantom stock units to a grantee.
“Sale Event” shall mean (i) the sale of all or substantially all of the assets of the Company on a consolidated basis to an unrelated person or entity,
(ii) a merger, reorganization or consolidation pursuant to which the holders of the Company’s outstanding voting power immediately prior to such
transaction do not own a majority of the outstanding voting power of the resulting or successor entity (or its ultimate parent, if applicable) immediately upon
completion of such transaction, or (iii) the sale of all of the Stock of the Company to an unrelated person or entity.
“Sale Price” means the value as determined by the Administrator of the consideration payable, or otherwise to be received by stockholders, per
share of Stock pursuant to a Sale Event.
“Section 409A” means Section 409A of the Code and the regulations and other guidance promulgated thereunder.
“Stock” means the Common Stock, par value $0.0001 per share, of the Company, subject to adjustments pursuant to SECTION 3.
“Stock Appreciation Right” means an Award entitling the recipient to receive shares of Stock having a value equal to the excess of the Fair Market
Value of the Stock on the date of exercise over the exercise price of the Stock Appreciation Right multiplied by the number of shares of Stock with respect to
which the Stock Appreciation Right shall have been exercised.
“Subsidiary” means any corporation or other entity (other than the Company) in which the Company has at least a 50 percent interest, either
directly or indirectly.
“Ten Percent Owner” means an employee who owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more
than 10 percent of the combined voting power of all classes of stock of the Company or any parent or subsidiary corporation.
“Unrestricted Stock Award” means an Award of shares of Stock free of any restrictions.
ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT GRANTEES AND DETERMINE AWARDS
Administration of Plan. The Plan shall be administered by the Administrator.
Powers of Administrator. The Administrator shall have the power and authority to grant Awards consistent with the terms of the Plan, including the
power and authority:
to select the individuals to whom Awards may from time to time be granted;
to determine the time or times of grant, and the extent, if any, of Incentive Stock Options, Non-Qualified Stock Options, Stock
Appreciation Rights, Restricted Stock Awards, Restricted Stock Units, Unrestricted Stock Awards and Cash-Based Awards, or any combination of the
foregoing, granted to any one or more grantees;
to determine the number of shares of Stock to be covered by any Award;
any Award, which terms and conditions may differ among individual Awards and grantees, and to approve the forms of Award Certificates;
to determine and modify from time to time the terms and conditions, including restrictions, not inconsistent with the terms of the Plan, of
to accelerate at any time the exercisability or vesting of all or any portion of any Award;
subject to the provisions of SECTION 5(b), to extend at any time the period in which Stock Options may be exercised; and (vii) at any
time to adopt, alter and repeal such rules, guidelines and practices for administration of the Plan and for its own acts and proceedings as it shall deem
advisable; to interpret the terms and provisions of the Plan and any Award (including related written instruments); to make all determinations it deems
advisable for the administration of the Plan; to decide all disputes arising in connection with the Plan; and to otherwise supervise the administration of the
Plan.
All decisions and interpretations of the Administrator shall be binding on all persons, including the Company and Plan grantees.
Delegation of Authority to Grant Options. Subject to applicable law, the Administrator, in its discretion, may delegate to the Chief Executive
Officer of the Company all or part of the Administrator’s authority and duties with respect to the granting of Options to individuals who are not subject to
the reporting and other provisions of Section 16 of the Exchange Act. Any such delegation by the Administrator shall include a limitation as to the amount
of Options that may be granted during the period of the delegation and shall contain guidelines as to the determination of the exercise price and the vesting
criteria. The Administrator may revoke or amend the terms of a delegation at any time but such action shall not invalidate any prior actions of the
Administrator’s delegate or delegates that were consistent with the terms of the Plan.
Award Certificate. Awards under the Plan shall be evidenced by Award Certificates that set forth the terms, conditions and limitations for each
Award which may include, without limitation, the term of an Award and the provisions applicable in the event employment or service terminates.
Indemnification. Neither the Board nor the Administrator, nor any member of either or any delegate thereof, shall be liable for any act, omission,
interpretation, construction or determination made in good faith in connection with the Plan, and the members of the Board and the Administrator (and any
delegate thereof) shall be entitled in all cases to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense
(including, without limitation, reasonable attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or under the Company’s
certificate of incorporation or bylaws or any directors’ and officers’ liability insurance coverage which may be in effect from time to time and/or any
indemnification agreement between such individual and the Company.
Foreign Award Recipients. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries in which
the Company and its Subsidiaries may operate or have employees or other individuals eligible for Awards, the Administrator, in its sole discretion, shall
have the power and authority to: (i) determine which Subsidiaries shall be covered by the Plan; (ii) determine which individuals outside the United States are
eligible to participate in the Plan; (iii) modify the terms and conditions of any Award granted to individuals outside the United States to comply with
applicable foreign laws; (iv) establish subplans and modify exercise procedures and other terms and procedures, to the extent the Administrator determines
such actions to be necessary or advisable (and such subplans and/or modifications shall be attached to this Plan as appendices); provided, however, that no
such subplans and/or modifications shall increase the share limitations contained in SECTION 3(b) hereof; and (v) take any action, before or after an Award
is made, that the Administrator determines to be necessary or advisable to obtain approval or comply with any local governmental regulatory exemptions or
approvals. Notwithstanding the foregoing, the Administrator may not take any actions hereunder, and no Awards shall be granted, that would violate the
Exchange Act or any other applicable United States securities law, the Code, or any other applicable United States governing statute or law.
STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
Stock Issuable. The maximum number of shares of Stock reserved and available for issuance under the Plan shall be 10,000,000 shares of Stock,
subject in all cases to adjustment as provided in SECTION 3(b). For purposes of this limitation, the shares of Stock underlying any Awards that are
forfeited, canceled, held back upon exercise of an Option or settlement of an Award to cover the exercise price or tax withholding, reacquired by the
Company prior to vesting, satisfied without the issuance of Stock or otherwise terminated (other than by exercise) shall be added back to the shares of Stock
available for issuance under the Plan. In the event the Company repurchases shares of Stock on the open market, such shares shall not be added to the shares
of Stock available for issuance under the Plan.
Subject to such overall limitations, shares of Stock may be issued up to such maximum number pursuant to any type or types of Award; provided,
however, that Stock Options or Stock Appreciation Rights with respect to no more than 750,000 shares of Stock
may be granted to any one individual grantee during any one calendar year period. The shares available for issuance under the Plan may be authorized but
unissued shares of Stock or shares of Stock reacquired by the Company.
Changes in Stock. Subject to SECTION 3(c) hereof, if, as a result of any reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split or other similar change in the Company’s capital stock, the outstanding shares of Stock are increased or decreased or are exchanged
for a different number or kind of shares or other securities of the Company, or additional shares or new or different shares or other securities of the Company
or other non-cash assets are distributed with respect to such shares of Stock or other securities, or, if, as a result of any merger or consolidation, sale of all or
substantially all of the assets of the Company, the outstanding shares of Stock are converted into or exchanged for securities of the Company or any
successor entity (or a parent or subsidiary thereof), the Administrator shall make an appropriate or proportionate adjustment in (i) the maximum number of
shares reserved for issuance under the Plan, including the maximum number of shares that may be issued in the form of Incentive Stock Options, (ii) the
number of Stock Options or Stock Appreciation Rights that can be granted to any one individual grantee, (iii) the number and kind of shares or other
securities subject to any then outstanding Awards under the Plan, (iv) the repurchase price, if any, per share subject to each outstanding Restricted Stock
Award, and (v) the exercise price for each share subject to any then outstanding Stock Options and Stock Appreciation Rights under the Plan, without
changing the aggregate exercise price (i.e., the exercise price multiplied by the number of Stock Options and Stock Appreciation Rights) as to which such
Stock Options and Stock Appreciation Rights remain exercisable. The Administrator shall also make equitable or proportionate adjustments in the number
of shares subject to outstanding Awards and the exercise price and the terms of outstanding Awards to take into consideration cash dividends paid other than
in the ordinary course or any other extraordinary corporate event. The adjustment by the Administrator shall be final, binding and conclusive. No fractional
shares of Stock shall be issued under the Plan resulting from any such adjustment, but the Administrator in its discretion may make a cash payment in lieu of
fractional shares.
Mergers and Other Transactions. Except as the Administrator may otherwise specify with respect to particular Awards in the relevant Award
Certificate, in the case of and subject to the consummation of a Sale Event, the Plan and all outstanding Awards granted hereunder shall terminate, unless
provision is made in connection with the Sale Event in the sole discretion of the parties thereto for the assumption or continuation of Awards theretofore
granted by the successor entity, or the substitution of such Awards with new Awards of the successor entity or parent thereof, with appropriate adjustment as
to the number and kind of shares and, if appropriate, the per share exercise prices, as such parties shall agree (after taking into account any acceleration
hereunder). In the event of such termination, (i) the Company shall have the option (in its sole discretion) to make or provide for a cash payment to the
grantees holding Options and Stock Appreciation Rights, in exchange for the cancellation thereof, in an amount equal to the difference between (A) the Sale
Price multiplied by the number of shares of Stock subject to outstanding Options and Stock Appreciation Rights (to the extent then exercisable (after taking
into account any acceleration hereunder) at prices not in excess of the Sale Price) and (B) the aggregate exercise price of all such outstanding Options and
Stock Appreciation Rights; or (ii) each grantee shall be permitted, within a specified period of time prior to the consummation of the Sale Event as
determined by the Administrator, to exercise all outstanding Options and Stock Appreciation Rights held by such grantee. The Administrator shall also have
the discretion to accelerate the vesting of all other Awards.
Substitute Awards. The Administrator may grant Awards under the Plan in substitution for stock and stock based awards held by employees,
directors or other key persons of another corporation in connection with the merger or consolidation of the employing corporation with the Company or a
Subsidiary or the acquisition by the Company or a Subsidiary of property or stock of the employing corporation. The Administrator may direct that the
substitute awards be granted on such terms and conditions as the Administrator considers appropriate in the circumstances. Any substitute Awards granted
under the Plan shall not count against the share limitation set forth in SECTION 3(a).
ELIGIBILITY
Grantees under the Plan will be such full or part-time officers and other employees, Non-Employee Directors and key persons (including
Consultants and prospective employees) of the Company and its Subsidiaries as are selected from time to time by the Administrator in its sole discretion.
STOCK OPTIONS
Any Stock Option granted under the Plan shall be in such form as the Administrator may from time to time approve.
Stock Options granted under the Plan may be either Incentive Stock Options or Non-Qualified Stock Options. Incentive Stock Options may be
granted only to employees of the Company or any Subsidiary that is a “subsidiary corporation” within the meaning of Section 424(f) of the Code. To the
extent that any Option does not qualify as an Incentive Stock Option, it shall be deemed a Non-Qualified Stock Option.
Stock Options granted pursuant to this SECTION 5 shall be subject to the following terms and conditions and shall contain such additional terms
and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable. If the Administrator so determines, Stock Options
may be granted in lieu of cash compensation at the optionee’s election, subject to such terms and conditions as the Administrator may establish.
Exercise Price. The exercise price per share for the Stock covered by a Stock Option granted pursuant to this SECTION 5 shall be determined by
the Administrator at the time of grant but shall not be less than 100 percent of the Fair Market Value on the date of grant. In the case of an Incentive Stock
Option that is granted to a Ten Percent Owner, the option price of such Incentive Stock Option shall be not less than 110 percent of the Fair Market Value on
the grant date.
Option Term. The term of each Stock Option shall be fixed by the Administrator, but no Stock Option shall be exercisable more than ten years after
the date the Stock Option is granted. In the case of an Incentive Stock Option that is granted to a Ten Percent Owner, the term of such Stock Option shall be
no more than five years from the date of grant.
Exercisability; Rights of a Stockholder. Stock Options shall become exercisable at such time or times, whether or not in installments, as shall be
determined by the Administrator at or after the grant date. The Administrator may at any time accelerate the exercisability of all or any portion of any Stock
Option. An optionee shall have the rights of a stockholder only as to shares acquired upon the exercise of a Stock Option and not as to unexercised Stock
Options.
Method of Exercise. Stock Options may be exercised in whole or in part, by giving written or electronic notice of exercise to the Company,
specifying the number of shares to be purchased. Payment of the purchase price may be made by one or more of the following methods to the extent
provided in the Option Award Certificate:
In cash, by certified or bank check or other instrument acceptable to the Administrator;
A “cashless” exercise program established with a broker;
Through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the optionee on the open market or
that have been beneficially owned by the optionee for at least six months and that are not then subject to restrictions under any Company plan. Such
surrendered shares shall be valued at Fair Market Value on the exercise date;
By the optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable to the Company for the purchase price; provided that in the event the optionee
chooses to pay the purchase price as so provided, the optionee and the broker shall comply with such procedures and enter into such agreements of
indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure; or (iv) With respect to Stock Options that are
not Incentive Stock Options, by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Stock issuable upon
exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price. Payment instruments will be
received subject to collection. The transfer to the optionee on the records of the Company or of the transfer agent of the shares of Stock to be purchased
pursuant to the exercise of a Stock Option will be contingent upon receipt from the optionee (or a purchaser acting in his stead in accordance with the
provisions of the Stock Option) by the Company of the full purchase price for such shares and the fulfillment of any other requirements contained in the
Option Award Certificate or applicable provisions of laws (including the satisfaction of any withholding taxes that the Company is obligated to withhold
with respect to the optionee). In the event an optionee chooses to pay the purchase price by previously-owned shares of Stock through the delivery and
attestation method, the number of shares of Stock transferred to the optionee upon the exercise of the Stock Option shall be net of the number of delivered
and attested shares. In the event that the Company establishes, for itself or using the services of a third party, an automated system for the exercise of Stock
Options, such as a system using an internet website or interactive voice response, then the paperless exercise of Stock Options may be permitted through the
use of such an automated system.
Annual Limit on Incentive Stock Options. To the extent required for “incentive stock option” treatment under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the shares of Stock with respect to which Incentive Stock Options granted under this
Plan and any other plan of the Company or its parent and subsidiary corporations become exercisable for the first time by an optionee during any calendar
year shall not exceed $100,000. To the extent that any Stock Option exceeds this limit, it shall constitute a Non-Qualified Stock Option.
Share Limits. Notwithstanding anything in this SECTION 5 or elsewhere in this Plan to the contrary, and subject to adjustments as provided in
SECTION 3 of this Plan, the limits specified below shall apply to any grants of the following types of Awards:
No participant shall be granted, in the aggregate during any calendar year, Awards of Options covering more than a total of 750,000 shares.
No Participant shall be granted, in the aggregate during the life of the Plan, Awards of Options covering more than a total of 2,500,000
shares.
Termination of Employment. No Incentive Stock Option may be exercised more than three (3) months after the participant’s termination of
employment for any reason other than Disability or death, unless (a) the participant dies during such three (3) month period, and (b) the Option agreement
and/or the Administrator permits later exercise. No Incentive Stock Option may be exercised more than one year after the participant’s termination of
employment on account of Disability, unless (a) the participant dies during such one-year period, and (b) the Award agreement and/or the Administrator
permits later exercise.
Disqualifying Dispositions. If shares acquired upon exercise of an Incentive Stock Option are disposed of within two (2) years following the date
of grant or one (1) year following the transfer of such shares to a participant upon exercise, the participant shall, promptly following such disposition, notify
the Administrator in writing of the date and terms of such disposition and provide such other information regarding the disposition as the Administrator may
reasonably require.
STOCK APPRECIATION RIGHTS
Exercise Price of Stock Appreciation Rights. The exercise price of a Stock Appreciation Right shall not be less than 100 percent of the Fair Market
Value of the Stock on the date of grant.
Grant and Exercise of Stock Appreciation Rights. Stock Appreciation Rights may be granted by the Administrator independently of any Stock
Option granted pursuant to SECTION 5 of the Plan.
Terms and Conditions of Stock Appreciation Rights. Stock Appreciation Rights shall be subject to such terms and conditions as shall be
determined from time to time by the Administrator. The term of a Stock Appreciation Right may not exceed ten years.
RESTRICTED STOCK AWARDS
Nature of Restricted Stock Awards. The Administrator shall determine the restrictions and conditions applicable to each Restricted Stock Award at
the time of grant. Conditions may be based on continuing employment (or other service relationship) and/or achievement of pre-established performance
goals and objectives. The terms and conditions of each such Award Certificate shall be determined by the Administrator, and such terms and conditions may
differ among individual Awards and grantees.
Rights as a Stockholder. Upon the grant of the Restricted Stock Award and payment of any applicable purchase price, a grantee shall have the
rights of a stockholder with respect to the voting of the Restricted Stock, subject to such conditions contained in the Restricted Stock Award Certificate.
Unless the Administrator shall otherwise determine, (i) uncertificated Restricted Stock shall be accompanied by a notation on the records of the Company or
the transfer agent to the effect that they are subject to forfeiture until such Restricted Stock are vested as provided in SECTION 7(d) below, and (ii)
certificated Restricted Stock shall remain in the possession of the Company until such Restricted Stock is vested as provided in SECTION 7(d) below, and
the grantee shall be required, as a condition of the grant, to deliver to the Company such instruments of transfer as the Administrator may prescribe.
Restrictions. Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as specifically
provided herein or in the Restricted Stock Award Certificate. Except as may otherwise be provided by the Administrator either in the Award Certificate or,
subject to SECTION 15 below, in writing after the Award is issued, if a grantee’s employment (or other service relationship) with the Company and its
Subsidiaries terminates for any reason, any Restricted Stock that has not vested at the time of termination shall automatically and without any requirement of
notice to such grantee from or other action by or on behalf of, the Company be deemed to have been reacquired by the Company at its original purchase
price (if any) from such grantee or such grantee’s legal representative simultaneously with such termination of employment (or other service relationship),
and thereafter shall cease to represent any ownership of the Company by the grantee or rights of the grantee as a stockholder. Following such deemed
reacquisition of unvested Restricted Stock that is represented by physical certificates, a grantee shall surrender such certificates to the Company upon
request without consideration.
Vesting of Restricted Stock. The Administrator at the time of grant shall specify the date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which the non-transferability of the Restricted Stock and the Company’s right of repurchase or
forfeiture shall lapse. Subsequent to such date or dates and/or the attainment of such pre-established performance goals, objectives and other conditions, the
shares on which all restrictions have lapsed shall no longer be Restricted Stock and shall be deemed “vested.” Except as may otherwise be provided by the
Administrator either in the Award Certificate or, subject to
SECTION 15 below, in writing after the Award is issued, a grantee’s rights in any shares of Restricted Stock that have not vested shall automatically
terminate upon the grantee’s termination of employment (or other service relationship) with the Company and its Subsidiaries and such shares shall be
subject to the provisions of SECTION 7(c) above.
RESTRICTED STOCK UNITS
Nature of Restricted Stock Units. The Administrator shall determine the restrictions and conditions applicable to each Restricted Stock Unit at the
time of grant. Conditions may be based on continuing employment (or other service relationship) and/or achievement of pre-established performance goals
and objectives. The terms and conditions of each such Award Certificate shall be determined by the Administrator, and such terms and conditions may differ
among individual Awards and grantees. At the end of the deferral period, the Restricted Stock Units, to the extent vested, shall be settled in the form of
shares of Stock. To the extent that an award of Restricted Stock Units is subject to Section 409A, it may contain such additional terms and conditions as the
Administrator shall determine in its sole discretion in order for such Award to comply with the requirements of Section 409A.
Election to Receive Restricted Stock Units in Lieu of Compensation. The Administrator may, in its sole discretion, permit a grantee to elect to
receive a portion of future cash compensation otherwise due to such grantee in the form of an award of Restricted Stock Units. Any such election shall be
made in writing and shall be delivered to the Company no later than the date specified by the Administrator and in accordance with Section 409A and such
other rules and procedures established by the Administrator. Any such future cash compensation that the grantee elects to defer shall be converted to a fixed
number of Restricted Stock Units based on the Fair Market Value of Stock on the date the compensation would otherwise have been paid to the grantee if
such payment had not been deferred as provided herein. The Administrator shall have the sole right to determine whether and under what circumstances to
permit such elections and to impose such limitations and other terms and conditions thereon as the Administrator deems appropriate. Any Restricted Stock
Units that are elected to be received in lieu of cash compensation shall be fully vested.
Rights as a Stockholder. A grantee shall have the rights as a stockholder only as to shares of Stock acquired by the grantee upon settlement of
Restricted Stock Units.
Termination. Except as may otherwise be provided by the Administrator either in the Award Certificate or, subject to SECTION 15 below, in
writing after the Award is issued, a grantee’s right in all Restricted Stock Units that have not vested shall automatically terminate upon the grantee’s
termination of employment (or cessation of service relationship) with the Company and its Subsidiaries for any reason.
UNRESTRICTED STOCK AWARDS
Grant or Sale of Unrestricted Stock. The Administrator may, in its sole discretion, grant (or sell at par value or such higher purchase price
determined by the Administrator) an Unrestricted Stock Award under the Plan. Unrestricted Stock Awards may be granted in respect of past services or
other valid consideration, or in lieu of cash compensation due to such grantee.
CASH-BASED AWARDS
Grant of Cash-Based Awards. The Administrator may, in its sole discretion, grant Cash-Based Awards to any grantee in such number or amount
and upon such terms, and subject to such conditions, as the Administrator shall determine at the time of grant. The Administrator shall determine the
maximum duration of the Cash-Based Award, the amount of cash to which the Cash-Based Award pertains, the conditions upon which the Cash-Based
Award shall become vested or payable, and such other provisions as the Administrator shall determine. Each Cash-Based Award shall specify a cash-
denominated payment amount, formula or payment ranges as determined by the Administrator. Payment, if any, with respect to a Cash-Based Award shall
be made in accordance with the terms of the Award and may be made in cash or in shares of Stock, as the Administrator determines.
TRANSFERABILITY OF AWARDS
Transferability. Except as provided in SECTION 11(b) below, during a grantee’s lifetime, his or her Awards shall be exercisable only by the
grantee, or by the grantee’s legal representative or guardian in the event of the grantee’s incapacity. No Awards shall be sold, assigned, transferred or
otherwise encumbered or disposed of by a grantee other than by will or by the laws of descent and distribution or pursuant to a domestic relations order. No
Awards shall be subject, in whole or in part, to attachment, execution, or levy of any kind, and any purported transfer in violation hereof shall be null and
void.
Administrator Action. Notwithstanding SECTION 11(a), the Administrator, in its discretion, may provide either in the Award Certificate regarding
a given Award or by subsequent written approval that the grantee (who is an employee or director) may transfer his or her Awards (other than any Incentive
Stock Options or Restricted Stock Units) to his or her immediate family members, to trusts
for the benefit of such family members, or to partnerships in which such family members are the only partners, provided that the transferee agrees in writing
with the Company to be bound by all of the terms and conditions of this Plan and the applicable Award. In no event may an Award be transferred by a
grantee for value.
Family Member. For purposes of SECTION 11(b), “family member” shall mean a grantee’s child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law,
including adoptive relationships, any person sharing the grantee’s household (other than a tenant of the grantee), a trust in which these persons (or the
grantee) have more than 50 percent of the beneficial interest, a foundation in which these persons (or the grantee) control the management of assets, and any
other entity in which these persons (or the grantee) own more than 50 percent of the voting interests.
Designation of Beneficiary. Each grantee to whom an Award has been made under the Plan may designate a beneficiary or beneficiaries to exercise
any Award or receive any payment under any Award payable on or after the grantee’s death. Any such designation shall be on a form provided for that
purpose by the Administrator and shall not be effective until received by the Administrator. If no beneficiary has been designated by a deceased grantee, or
if the designated beneficiaries have predeceased the grantee, the beneficiary shall be the grantee’s estate.
TAX WITHHOLDING
Payment by Grantee. Each grantee shall, no later than the date as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the grantee for Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Administrator regarding payment of, any Federal, state, or local taxes of any kind required by law to be withheld by the Company with
respect to such income. The Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of
any kind otherwise due to the grantee. The Company’s obligation to deliver evidence of book entry (or stock certificates) to any grantee is subject to and
conditioned on tax withholding obligations being satisfied by the grantee.
Payment in Stock. Subject to approval by the Administrator, a grantee may elect to have the Company’s minimum required tax withholding
obligation as it relates to a grantee satisfied, in whole or in part, by authorizing the Company to withhold from shares of Stock to be issued pursuant to any
Award a number of shares with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due.
SECTION 409A AWARDS
To the extent that any Award is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A (a “409A
Award”), the Award shall be subject to such additional rules and requirements as specified by the Administrator from time to time in order to comply with
Section 409A. In this regard, if any amount under a 409A Award is payable upon a “separation from service” (within the meaning of Section 409A) to a
grantee who is then considered a “specified employee” (within the meaning of Section 409A), then no such payment shall be made prior to the date that is
the earlier of (i) six months and one day after the grantee’s separation from service, or (ii) the grantee’s death, but only to the extent such delay is necessary
to prevent such payment from being subject to interest, penalties and/or additional tax imposed pursuant to Section 409A. Further, the settlement of any
such Award may not be accelerated except to the extent permitted by Section 409A.
TRANSFER, LEAVE OF ABSENCE, ETC.
For purposes of the Plan, the following events shall not be deemed a termination of employment:
a transfer to the employment of the Company from a Subsidiary or from the Company to a Subsidiary, or from one Subsidiary to another; or
an approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the employee’s right to re-
employment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Administrator
otherwise so provides in writing.
AMENDMENTS AND TERMINATION
The Board may, at any time, amend or discontinue the Plan and the Administrator may, at any time, amend or cancel any outstanding Award for the
purpose of satisfying changes in law or for any other lawful purpose, but no such action shall adversely affect
rights under any outstanding Award without the holder’s consent. The Administrator is specifically authorized to exercise its discretion to reduce the
exercise price of outstanding Stock Options or Stock Appreciation Rights or effect the repricing of such Awards through cancellation and re-grants. To the
extent required under the rules of any securities exchange or market system on which the Stock is listed, to the extent determined by the Administrator to be
required by the Code to ensure that Incentive Stock Options granted under the Plan are qualified under Section 422 of the Code, Plan amendments shall be
subject to approval by the Company stockholders entitled to vote at a meeting of stockholders. Nothing in this SECTION 15 shall limit the Administrator’s
authority to take any action permitted pursuant to SECTION 3(b) or SECTION 3(c).
STATUS OF PLAN
With respect to the portion of any Award that has not been exercised and any payments in cash, Stock or other consideration not received by a
grantee, a grantee shall have no rights greater than those of a general creditor of the Company unless the Administrator shall otherwise expressly determine
in connection with any Award or Awards. In its sole discretion, the Administrator may authorize the creation of trusts or other arrangements to meet the
Company’s obligations to deliver Stock or make payments with respect to Awards hereunder, provided that the existence of such trusts or other arrangements
is consistent with the foregoing sentence.
GENERAL PROVISIONS
No Distribution. The Administrator may require each person acquiring Stock pursuant to an Award to represent to and agree with the Company in
writing that such person is acquiring the shares without a view to distribution thereof.
Delivery of Stock Certificates. Stock certificates to grantees under this Plan shall be deemed delivered for all purposes when the Company or a
stock transfer agent of the Company shall have mailed such certificates in the United States mail, addressed to the grantee, at the grantee’s last known
address on file with the Company. Uncertificated Stock shall be deemed delivered for all purposes when the Company or a Stock transfer agent of the
Company shall have given to the grantee by electronic mail (with proof of receipt) or by United States mail, addressed to the grantee, at the grantee’s last
known address on file with the Company, notice of issuance and recorded the issuance in its records (which may include electronic “book entry” records).
Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates evidencing shares of Stock pursuant
to the exercise of any Award, unless and until the Administrator has determined, with advice of counsel (to the extent the Administrator deems such advice
necessary or applicable), that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authorities
and, if applicable, the requirements of any exchange on which the shares of Stock are listed, quoted or traded. All Stock certificates delivered pursuant to
the Plan shall be subject to any stop-transfer orders and other restrictions as the Administrator deems necessary or advisable to comply with federal, state or
foreign jurisdiction, securities or other laws, rules and quotation system on which the Stock is listed, quoted or traded. The Administrator may place legends
on any Stock certificate to reference restrictions applicable to the Stock. In addition to the terms and conditions provided herein, the Administrator may
require that an individual make such reasonable covenants, agreements, and representations as the Administrator, in its discretion, deems necessary or
advisable in order to comply with any such laws, regulations, or requirements. The Administrator shall have the right to require any individual to comply
with any timing or other restrictions with respect to the settlement or exercise of any Award, including a window-period limitation, as may be imposed in the
discretion of the Administrator.
Stockholder Rights. Until Stock is deemed delivered in accordance with SECTION 17(b), no right to vote or receive dividends or any other rights
of a stockholder will exist with respect to shares of Stock to be issued in connection with an Award, notwithstanding the exercise of a Stock Option or any
other action by the grantee with respect to an Award.
Other Compensation Arrangements; No Employment Rights. Nothing contained in this Plan shall prevent the Board from adopting other or
additional compensation arrangements, including trusts, and such arrangements may be either generally applicable or applicable only in specific cases. The
adoption of this Plan and the grant of Awards do not confer upon any employee any right to continued employment with the Company or any Subsidiary.
Trading Policy Restrictions. Option exercises and other Awards under the Plan shall be subject to the Company’s insider trading policies and
procedures, as in effect from time to time.
Forfeiture of Awards under Sarbanes-Oxley Act. If the Company is required to prepare an accounting restatement due to the material
noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, then any grantee who is one of
the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002 shall reimburse the Company for the amount of any
Award received by such individual under the Plan during the 12-month period following the first public issuance or filing with the United States Securities
and Exchange Commission, as the case may be, of the financial document embodying such financial reporting requirement.
Severability. In the event any provision of this Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the
remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
Governing Law. This Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the State of Delaware.
Captions. Captions are provided herein for convenience only, and shall not serve as a basis for interpretation or construction of this Plan.
Unfunded Plan. The Plan shall be unfunded, and the Company shall not be required to create a trust or segregate any assets that may at any time be
represented by Awards under the Plan. The Plan shall not establish any fiduciary relationship between the Company or any Subsidiary and any participant
or other person. Neither a participant nor any other person shall, by reason of the Plan, acquire any right in or title to any assets, funds, or property of the
Company or any Subsidiary, including, without limitation, any specific funds, assets, or other property which the Company or any Subsidiary, in its
discretion, may set aside in anticipation of a liability under the Plan. A participant shall have only a contractual right to the Shares, cash, or other amounts, if
any, payable under the Plan, unsecured by any assets of the Company or any Subsidiary. Nothing contained in the Plan shall constitute a guarantee that the
assets of such entities shall be sufficient to pay any amounts to any person.
Other Benefits. No compensation or benefit awarded to or realized by any participant under the Plan shall be included for the purpose of
computing such participant’s compensation under any compensation-based retirement, disability, or similar plan of the Company unless required by law or
otherwise provided by such other plan.
EFFECTIVE DATE OF PLAN
This Plan shall become effective on December 14, 2019, contingent upon approval by the Board of Directors prior to such date.
TERMINATION OF OLD PLAN
Upon the approval of the Plan by the Company’s stockholders, the Company’s 2010 Stock and Incentive Plan (“2010 Plan”) will terminate so that
no new awards may be granted pursuant to the 2010 Plan. The termination of the 2010 Plan will not affect the rights of holders of awards previously granted
and outstanding under the 2010 Plan.
GOVERNING LAW
This Plan and all Awards and actions taken thereunder shall be governed by, and construed in accordance with, the laws of the State of Delaware,
applied without regard to conflict of law principles.
DATE APPROVED BY BOARD OF DIRECTORS:
December 13, 2019
DATE APPROVED BY STOCKHOLDERS:
December 14, 2019
AMPIO PHARMACEUTICALS, INC. 2019 STOCK OPTION AND INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT FOR EMPLOYEE
To: [Insert Name]
Ampio Pharmaceuticals, Inc. (the “Company” or “we”) is pleased to memorialize the grant to you of a stock option award
(the “Award” or the “Option”), effective ____________________ (the “Grant Date”) under the terms of the Ampio
Pharmaceuticals, Inc. 2019 Stock Option and Incentive Plan (the “Plan”). Initially capitalized terms used in this Agreement and
defined in the Plan shall have the meanings given to such terms in the Plan. Copies of the Plan are available upon written request
to the Company.
1.
Option Grant. Your Option permits you to purchase, on the terms and conditions set forth in this Agreement, the
number of shares (the “Option Shares”) of the Company’s common stock (the “Common Stock”), at the exercise price (the
“Exercise Price”) set forth in the following table.
Number of Option Shares
[Insert #]
Exercise Price Per Option Share
$[Insert #]
2.
Option Type. Your Option is not intended to qualify as an incentive stock option within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the “Code”).
3.
Term of Option. As a general matter, your right to exercise the Option will expire on the tenth anniversary of the
Grant Date (the “Expiration Date”). As provided below, your right to exercise the Option may expire prior to the Expiration Date,
if you die or your employment with the Company terminates.
4.
Vesting. You may exercise the Option only to the extent that the Option is vested. If applicable to you, the Option
may vest over time. If so, your right to exercise the Option will vest over time in accordance with the following schedule,
provided you are employed with the Company or any of its Subsidiaries (collectively, the “Ampio Companies”) on the applicable
date listed below.
Date
[Insert Date]
Vested Percentage of Award
[Insert %]
Your Option may also be subject to performance vesting criteria. If so, the terms under which your Option will vest are set
forth in a schedule attached hereto and incorporated by reference into this Award. To the extent performance vesting criteria apply
to your Award, the determination of whether subjective performance vesting criteria have been met is in the sole discretion of the
Compensation Committee of the Company’s Board of Directors (the “Committee”). The attaining of the objective performance
criteria shall be determined in
accordance with the terms of the attached schedule. If the attaining of objective performance criteria is subject to interpretation,
you and we agree that any judgment as to whether the objective performance criteria have been met shall be in the sole, but
reasonably exercised, discretion of the Committee.
Except as otherwise provided in Section 7 below, if your employment with the Ampio Companies terminates you will
forfeit that portion of the Award that is not vested on the date of your termination.
5.
Sale Event Vesting. In the event that a Sale Event occurs with respect to the Company prior to your termination of
employment with Ampio Companies, any portion of your Option that is not vested shall vest, and become exercisable, upon such
Sale Event.
6.
Exercise. Prior to the Expiration Date and during your employment with the Ampio Companies, you may exercise
all or a portion of your Option, to the extent vested, by designation the number of Option Shares to be acquired in accordance with
the exercise procedures established by the Committee from time to time. Your right to exercise the Option, to the extent vested,
following the date your employment terminates will depend on the reason for such termination, as described in Section 7 below.
You must pay to the Company at the time of exercise the sum of (i) the full amount of the Exercise Price for the number of
Option Shares to be acquired and (ii) an amount equal to the aggregate minimum federal, state and local income and employment
taxes that the Company is required to withhold and deposit on behalf of you with respect to your exercise (“Tax Obligation”).
You may elect to pay the Exercise Price or your Tax Obligation by having the Company reduce the number of Option
Shares you receive upon such exercise. Alternatively, you may pay the Exercise Price and your Tax Obligation:
a.
b.
c.
in cash;
a “cashless” exercise program established with a broker;
by surrendering to the Company previously acquired shares of Common Stock having a Fair Market Value
at the time of exercise equal to the Exercise Price or Tax Obligation; or
d.
to the extent permitted by applicable law, by delivery of irrevocable instructions to a broker to (1) promptly
deliver to the Company the amount of sale proceeds from the Option Shares or other proceeds to pay the Exercise Price or the Tax
Obligation, and (2) deliver to you the balance of the Option Share proceeds in the form of cash or shares of Common Stock.
If you pay the Exercise Price or your Tax Obligation by surrender of shares of Common Stock, you must also submit proof
acceptable to the Company substantiating your ownership of those shares. The value of previously acquired shares of Common
Stock used to pay the Exercise Price (either directly or by attestation) of the Option Shares to be acquired or your Tax
12
Obligation shall be equal to the aggregate Fair Market Value of such previously acquired shares of Common Stock on the date of
the exercise. Your Option will be considered finally exercised on the date on which your payment of the Exercise Price and Tax
Obligation is received by the Company. By exercising any portion of the Option, you are accepting all of the terms and conditions
specified in this Agreement.
7.
Impact of Termination of Employment on Option. Except as otherwise expressly provided in this Section 7 or
otherwise agreed to by the Committee, if your employment with the Ampio Companies terminates, (i) you will forfeit that portion
of your Option that is not vested on the date of your termination and (ii) you will have a limited period in which to exercise such
portion of any Option as was vested on the date of your termination. The Committee, in its sole discretion, shall be authorized to
determine the nature of any termination of employment and your rights under this Section 7 as a result of such termination and
such determination shall be binding for all purposes under this Section 7.
a.
Death or Disability. If you die or if the Company elects to terminate your employment with the Ampio
Companies due to your Disability, (i) your Option (to the extent not previously vested) will vest and become non-forfeitable as of
the date of your death or the date your employment terminates due to your Disability and (ii) your Option may be exercised
thereafter at any time that is both before the Expiration Date and within one year of the date of your death or termination. To the
extent not previously exercised, your Option will terminate and may not be exercised after the earlier of the Expiration Date or the
first anniversary of the termination of your employment due to your death or your Disability.
b.
Voluntary Termination other than for Good Reason. If you voluntarily terminate your employment with
the Ampio Companies other than for Good Reason, (i) your Option (to the extent not previously vested) will terminate and be
forfeited as of the date your employment terminates, and (ii) your Option, to the extent vested, may be exercised during the 90-day
period immediately following the date your employment terminates. Any vested portion of the Option which remains unexercised
will be forfeited, and your right to exercise that portion of the Option shall terminate, on the 91st day following the date your
employment terminates. [For purposes of this Award, “Good Reason” shall have the meaning set forth in the employment
agreement between you and any of the Ampio Companies. In the event that you are not party to an employment
agreement or your employment agreement does not contain a definition of “Good Reason,” it shall mean, without your
written consent: (i) there is a material reduction in the level of your compensation (excluding any bonuses) (except where
there is a reduction applicable to the management team generally, provided, however, that in no case may your base salary
be reduced below your starting base salary), (ii) there is a material reduction in your overall responsibilities or authority,
or scope of duties (it being understood that the occurrence of a Sale Event shall not, by itself, necessarily constitute a
reduction in your responsibilities or authority); or (iii) there is a material change in the principal geographic location at
which you must perform services for the Ampio Companies (it being understood that your relocation to a facility or a
location within forty (40) miles of the State Capitol Building in Denver, Colorado shall not be deemed material for
purposes of this Award). No event shall be deemed to be “Good Reason” if the Company has cured the event (if
susceptible to cure) within 30 days of
13
receipt of written notice from you specifying the event or events which, absent cure, would constitute “Good Reason.”]
c.
Voluntary Termination for Good Reason. If you voluntarily terminate your employment with the Ampio
Companies for Good Reason, (i) any portion of your Option that is not vested shall vest, and become exercisable, upon the date
your employment terminates, and (ii) your Option may be exercised during the one-year period immediately following the date
your employment terminates or until the Expiration Date, if earlier. Any vested portion of the Option which remains unexercised
will be forfeited, and your right to exercise that portion of the Option shall terminate, on the earlier of the Expiration Date or the
first day following the one-year anniversary of the date your employment terminates.
d.
Involuntary Termination. If your employment with Ampio Companies is terminated by the Company
other than for Cause, (i) any portion of your Option that is not vested shall vest, and become exercisable, upon the date your
employment terminates, and (ii) your Option may be exercised during the one-year period immediately following the date your
employment terminates or until the Expiration Date, if earlier. Any vested portion of the Option which remains unexercised will
be forfeited, and your right to exercise that portion of the Option shall terminate, on the earlier of the Expiration Date or the first
day following the one-year anniversary of the date your employment terminates. [For purposes of this Award, “Cause” shall
have the meaning set forth in the employment agreement between you and any of the Ampio Companies. In the event that
you are not party to an employment agreement or your employment agreement does not contain a definition of “Cause,” it
shall mean (i) your willful malfeasance or willful misconduct in connection with your employment; (ii) your gross
negligence in performing any of your duties to the Ampio Companies; (iii) your conviction of, or entry of a plea of guilty
to, or entry of a plea of nolo contendre with respect to, any crime other than a traffic violation or infraction which is a
misdemeanor; (iv) your willful and deliberate violation of an Ampio Company policy, (v) your unintended but material
breach of any written policy applicable to all employees adopted by an Ampio Company which is not cured to the
reasonable satisfaction of the Board within thirty (30) business days after notice thereof; (vi) your unauthorized use or
disclosure of any proprietary information or trade secrets of the Ampio Companies or any other party as to which you owe
an obligation of nondisclosure as a result of your relationship with the Ampio Companies, (vii) your willful and deliberate
breach of your obligations under any employment agreement with any of the Ampio Companies, or (viii) any other
material breach by you of any of your obligations in any employment agreement with any of the Ampio Companies which
is not cured to the reasonable satisfaction of the Board within thirty (30) business days after notice thereof.]
e.
Termination for Cause. If your employment with the Ampio Companies is terminated for Cause, your
Option will be forfeited and your rights to exercise the Option, whether or not vested, shall terminate as of the date your
employment terminates.
8.
Adjustments In Capitalization. In the event of any dividend or other distribution (in whatever form),
recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase,
or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase
14
Common Stock or other securities of the Company, or other similar transaction or event that affects the Common Stock, the
Committee shall adjust the terms of the Option, to the extent necessary, in its sole discretion, in order to prevent dilution or
enlargement of the benefits or potential benefits of the Option. However, in no event shall the Committee adjust the terms of the
Option in a manner which could cause the Option to be treated as the grant of a new Option for purposes of Section 409A of the
Code and Treas. Reg. §§ 1.409A-2 through 1.409A-6 or cause the Company to incur a new compensation charge for financial
reporting purposes.
9.
Rights as a Stockholder. You will have no rights as a stockholder with respect to any Option Shares until and
unless you exercise the Option and shares of Common Stock have been issued to you.
10.
Public Offer Waiver. By executing this Agreement, you acknowledge and confirm your understanding that your
rights under the Plan arise strictly from your status as an employee of or service provider to the Ampio Companies and that the
Company’s grant of the Option to you is not an offer of securities made to the general public.
11.
Transferability of Option Shares. You hereby agree not to offer, sell or otherwise attempt to dispose of any
Common Stock covered by the Option Shares in a way which would: (i) require the Company to file any registration statement
with the Securities and Exchange Commission (or any similar filing under state law or the laws of any other country) or to amend
or supplement any such filing, or (ii) violate or cause the Company to violate the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, any other state or federal law, or
the laws of any other country. The Company reserves the right to place restrictions on any Common Stock you may receive as a
result of your exercise of the Option.
12.
Conformity with the Plan. This Option is intended to conform in all respects with, and is subject to, all applicable
provisions of the Plan. Inconsistencies between this Agreement and the Plan shall be resolved in accordance with the terms of the
Plan. By accepting your Option, you agree to be bound by the terms and conditions of this Agreement, the Plan, and any and all
conditions established by the Company in connection with Options issued under the Plan. You also understand that this
Agreement does not give you any legal or equitable right (other than those rights constituting the Agreement itself) against the
Ampio Companies directly or indirectly or give rise to any cause of action at law or in equity against the Ampio Companies.
13.
Interpretations. Any dispute, disagreement or question which arises under, or as a result of, or in any way relates
to the interpretation, construction or application of terms of this Agreement or the Plan will be determined and resolved by the
Committee or its authorized delegate. The Committee’s determination or resolution will be final, binding and conclusive for all
purposes.
14.
No Rights to Continued Employment or Future Awards. You hereby acknowledge and understand that this
Option shall not form part of any contract of employment between you and any of the Ampio Companies. Nothing in the
Agreement or the Plan confers on you any right to continue in the employ of the Ampio Companies or in any way affects the
Ampio Companies’ right to terminate your employment without prior notice at any time or for
15
any reason, whether you have an employment agreement or whether you are an “at-will” employee. You further acknowledge that
the Option is being granted to you in consideration of your performance of services for the Ampio Companies and is not under any
circumstances to be considered compensation for past services.
You acknowledge and agree that the granting of your Option is at the discretion of the Committee and that acceptance of
your Option is no guarantee that future Options will be granted under the Plan. Notwithstanding anything in this Agreement or the
Plan to the contrary, the Company may amend this Agreement or the Plan, including but not limited to modifications to any of the
rights granted to you under this Agreement, without your consent, at such time and in such manner as the Company may consider
necessary or desirable, to reflect changes in law. You also understand that the Company may amend, resubmit, alter, change,
suspend, cancel, or discontinue the Plan at any time without limitation.
15.
Consent to Transfer Personal Data. You hereby acknowledge and consent to the collection, use, processing and
transfer of your personal data as described in this Section 15. You are not obligated to consent to such a collection, use,
processing and transfer of personal data. However, failure to provide your consent may affect your ability to participate in the
Plan. As part of your employment with the Ampio Companies, the Company may maintain certain personal information about
you, that may include your name, home address and telephone number, fax number, email address, family size, marital status, sex,
beneficiary information, emergency contacts, passport/visa information, age, language skills, driver’s license information, date of
birth, birth certificate, social security number or other employee identification number, nationality, C.V. (or resume), wage history,
employment references, job title, employment or severance contract, current wage and benefits information, personal bank
account number, tax related information, plan or benefit enrollment forms and elections, options or benefit statements, any shares
of stock or directorships in the Company, and details of all options or any other entitlements to shares of stock awarded, canceled,
purchased, vested, unvested or outstanding in your favor (the “Data”). The Company maintains the Data for the purpose of
managing and administering the Plan. The Ampio Companies may transfer Data amongst themselves as needed to implement,
administer and manage your participation in the Plan, and the Company may also transfer Data to third parties assisting the
Company in the implementation, administration and management of the Plan. These third parties may be located throughout the
world, including within the United States. By voluntarily acknowledging receipt of the Option Shares, you are authorizing these
third parties to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing,
administering and managing your participation in the Plan, including any transfer of the Data that may be required to administer
the Plan and/or to permit a broker, or other third party you have chosen to hold any shares of Company Common Stock you may
acquire pursuant to the Plan. You may, at any time, review the Data, require any necessary amendments to it or withdraw your
consent to its collection by contacting the Company in writing; however, withdrawing your consent may affect your ability to
participate in the Plan.
16. Miscellaneous.
a.
Modification. The Committee (or its authorized delegate) shall make all determinations regarding the
number of Option Shares granted to you and the conditions set forth
16
in this Agreement. The Committee shall maintain a copy of your Agreement in its records. The Committee may amend or modify
this Agreement in any manner, provided that the Committee would have had the authority to do so under the Plan. However, no
amendment or modification of this Agreement shall impair your rights under this Agreement without your express consent. Any
such amendment, modification or supplementation of this Agreement must be in writing and signed by both you and a
representative of the Company.
b.
Governing Law. This Agreement and the Plan shall be construed in accordance with the laws of the State
of Delaware, without reference to any conflict of law principals.
c.
Successors and Assigns. Except as otherwise provided herein, this Agreement will bind and inure to the
benefit of the respective successors and permitted assigns of you and the Company, whether so expressed or not.
d.
Waiver. The failure of the Company to enforce at any time any provision of this Agreement shall in no
way be construed to be a waiver of such provision or any other provision hereof.
e.
Severability. Whenever feasible, each provision of this Agreement will be interpreted in such a manner as
to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under
applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invaliding the
remainder of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Stock Option Agreement effective as of the day and year
first above written, which constitutes the date upon which the Committee authorized the issuance of the Option.
Company:
AMPIO PHARMACEUTICALS, INC.
By:
Name:
Title:
Grantee:
[Insert Name]
17
AMPIO PHARMACEUTICALS, INC. 2019 STOCK OPTION AND INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT FOR
NON-EMPLOYEE CONSULTANTS/BOARD MEMBERS OF THE COMPANY
To: [Insert Name]
Ampio Pharmaceuticals, Inc. (the “Company” or “we”) is pleased to memorialize the grant to you of a stock option award
(the “Award” or the “Option”), effective _________________ (the “Grant Date”) under the terms of the Ampio Pharmaceuticals,
Inc. 2019 Stock Option and Incentive Plan (the “Plan”). Initially capitalized terms used in this Agreement and defined in the Plan
shall have the meanings given to such terms in the Plan. Copies of the Plan are available upon written request to the Company.
1.
Option Grant.
Your Option permits you to purchase, on the terms and conditions set forth in this Agreement, the number of shares (the
“Option Shares”) of the Company’s common stock (the “Common Stock”), at the exercise price (the “Exercise Price”) set
forth in the following table.
Number of Option Shares
[Insert #]
Exercise Price Per Option Share
$[Insert #]
2.
Option Type.
Your Option is not intended to qualify as an incentive stock option within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the “Code”).
3.
Term of Option.
As a general matter, your right to exercise the Option will expire on the tenth anniversary of the Grant Date (the
“Expiration Date”). As provided below, your right to exercise the Option may expire prior to the Expiration Date, if you
die or your service with the Company terminates.
4.
Vesting.
You may exercise the Option only to the extent that the Option is vested. If applicable to you, the Option may vest over
time. If so, your right to exercise the Option will vest over time in accordance with the following schedule, provided you
are engaged to provide services to the Company or any of its Subsidiaries (collectively, the “Ampio Companies”) on the
applicable date listed below.
Date
[INSERT DATE]
Vested Percentage of Award
[Insert %]
18
Your Option may also be subject to performance vesting criteria. If so, the terms under which your Option will vest are set
forth in a schedule to your services agreement with Ampio Companies, if you have a services agreement with Ampio
Companies. We and you agree that these performance criteria, if any, are hereby incorporated by reference into this
Award. To the extent performance vesting criteria apply to your Award, the determination of whether subjective
performance vesting criteria have been met is in the sole discretion of the Compensation Committee of the Company’s
Board of Directors (the “Committee”). The attaining of the objective performance criteria shall be determined in
accordance with the terms of the schedule to your services agreement. If the attaining of objective performance criteria is
subject to interpretation, you and we agree that any judgment as to whether the objective performance criteria have been
met shall be in the sole, but reasonably exercised, discretion of the Committee.
Except as otherwise provided in Section 7 below, if your services with the Ampio Companies terminates you will forfeit
that portion of the Award that is not vested on the date of your termination.
5.
Sale Event Vesting.
In the event that a Sale Event occurs with respect to the Company prior to your termination of services with Ampio
Companies, any portion of your Option that is not vested shall vest, and become exercisable, upon such Sale Event.
6.
Exercise.
Prior to the Expiration Date, unless your Option is terminated or forfeited pursuant to Section 7, you may exercise all or a
portion of your Option, to the extent vested, by designation the number of Option Shares to be acquired in accordance with
the exercise procedures established by the Committee from time to time. Your right to exercise the Option, to the extent
vested, following the date your services end will depend on the reason such services end, as described in Section 7 below.
You must pay to the Company at the time of exercise the sum of (i) the full amount of the Exercise Price for the number of
Option Shares to be acquired and (ii) an amount equal to the aggregate minimum federal, state and local income and
employment taxes, if any, that the Company is required to withhold and deposit on behalf of you with respect to your
exercise (“Tax Obligation”).
You may elect to pay the Exercise Price or your Tax Obligation by having the Company reduce the number of Option
Shares you receive upon such exercise. Alternatively, you may pay the Exercise Price and your Tax Obligation:
(a)
(b)
in cash;
a “cashless” exercise program established with a broker;
19
(c)
(d)
by surrendering to the Company previously acquired shares of Common Stock having a Fair Market Value at the
time of exercise equal to the Exercise Price or Tax Obligation; or
to the extent permitted by applicable law, by delivery of irrevocable instructions to a broker to (1) promptly deliver
to the Company the amount of sale proceeds from the Option Shares or other proceeds to pay the Exercise Price or
the Tax Obligation, and (2) deliver to you the balance of the Option Share proceeds in the form of cash or shares of
Common Stock.
If you pay the Exercise Price or your Tax Obligation by surrender of shares of Common Stock, you must also submit proof
acceptable to the Company substantiating your ownership of those shares. The value of previously acquired shares of
Common Stock used to pay the Exercise Price (either directly or by attestation) of the Option Shares to be acquired or your
Tax Obligation shall be equal to the aggregate Fair Market Value of such previously acquired shares of Common Stock on
the date of the exercise. Your Option will be considered finally exercised on the date on which your payment of the
Exercise Price and Tax Obligation is received by the Company. By exercising any portion of the Option, you are accepting
all of the terms and conditions specified in this Agreement.
7.
Impact of Termination of Service on Option.
Except as otherwise expressly provided in this Section 7 or otherwise agreed to by the Committee, if your service
relationship with the Ampio Companies terminates, (i) you will forfeit that portion of your Option that is not vested on the
date of your termination and (ii) you will have a limited period in which to exercise such portion of any Option as was
vested on the date of your termination. The Committee, in its sole discretion, shall be authorized to determine the nature of
any termination of services and your rights under this Section 7 as a result of such termination and such determination shall
be binding for all purposes under this Section 7.
(a)
(b)
Death or Disability. If you die or if the Company elects to terminate your services with the Ampio Companies due
to your Disability, (i) your Option (to the extent not previously vested) will vest and become non-forfeitable as of
the date of your death or the date your services terminate due to your Disability and (ii) your Option may be
exercised thereafter at any time that is both before the Expiration Date and within one year of the date of your death
or termination. To the extent not previously exercised, your Option will terminate and may not be exercised after
the earlier of the Expiration Date or the first anniversary of the termination of your services due to your death or
your Disability.
Voluntary Termination. If you voluntarily terminate your services with the Ampio Companies, (i) your Option
(to the extent not previously vested) will terminate and be forfeited as of the date your services terminates, and (ii)
your Option, to the extent vested, may be exercised during the 90 day period immediately following the date your
services terminate. Any vested portion of the Option which remains unexercised will be forfeited, and your right to
exercise
20
that portion of the Option shall terminate, on the 91st day following the date your services terminate.
(c)
(d)
Involuntary Termination. If your services with Ampio Companies are terminated by the Company other than for
Cause, (i) your Option (to the extent not previously vested) will terminate and be forfeited as of the day your
services terminate and (ii) your Option, to the extent vested, may be exercised during the 90 day period
immediately following the date your services terminate or until the Expiration Date, if earlier. Any vested portion
of the Option which remains unexercised will be forfeited, and your right to exercise that portion of the Option
shall terminate, on the earlier of the Expiration Date or the 91st day following the date your services terminate.
Termination for Cause. If your services with the Ampio Companies are terminated for Cause, your Option will
be forfeited and your rights to exercise the Option, whether or not vested, shall terminate as of the date your
services terminate.
For purposes of this Award, “Cause” shall have the meaning set forth in the service agreement between you and any
of the Ampio Companies. In the event that you are not party to a services agreement or your services agreement
does not contain a definition of “Cause,” it shall mean (i) your willful malfeasance or willful misconduct in
connection with your services; (ii) your gross negligence in performing any of your duties to the Ampio
Companies; (iii) your conviction of, or entry of a plea of guilty to, or entry of a plea of nolo contendre with respect
to, any crime other than a traffic violation or infraction which is a misdemeanor; (iv) your willful and deliberate
violation of an Ampio Company policy, (v) your unintended but material breach of any written policy applicable to
all Consultants/Board Members adopted by an Ampio Company which is not cured to the reasonable satisfaction of
the Board within thirty (30) business days after notice thereof; (vi) your unauthorized use or disclosure of any
proprietary information or trade secrets of the Ampio Companies or any other party as to which you owe an
obligation of nondisclosure as a result of your relationship with the Ampio Companies, (vii) your willful and
deliberate breach of your obligations under any services agreement with any of the Ampio Companies, or (viii) any
other material breach by you of any of your obligations in any services agreement with any of the Ampio
Companies which is not cured to the reasonable satisfaction of the Board within thirty (30) business days after
notice thereof.
8.
Adjustments In Capitalization.
In the event of any dividend or other distribution (in whatever form), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Common Stock or other
securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the
Company, or other similar transaction or event that affects the Common Stock, the Committee shall adjust the terms of the
Option, to the extent necessary, in its sole discretion, in order to prevent dilution or enlargement of the benefits or potential
21
benefits of the Option. However, in no event shall the Committee adjust the terms of the Option in a manner which could
cause the Option to be treated as the grant of a new Option for purposes of Section 409A of the Code and Treas. Reg. §§
1.409A-2 through 1.409A-6 or cause the Company to incur a new compensation charge for financial reporting purposes.
9.
Rights as a Stockholder.
You will have no rights as a stockholder with respect to any Option Shares until and unless you exercise the Option and
shares of Common Stock have been issued to you.
10.
Public Offer Waiver.
By executing this Agreement, you acknowledge and confirm your understanding that your rights under the Plan arise
strictly from your status as a service provider to the Ampio Companies and that the Company's grant of the Option to you
is not an offer of securities made to the general public.
11.
Transferability of Option Shares.
You hereby agree not to offer, sell or otherwise attempt to dispose of any Common Stock covered by the Option Shares in
a way which would: (i) require the Company to file any registration statement with the Securities and Exchange
Commission (or any similar filing under state law or the laws of any other country) or to amend or supplement any such
filing, or (ii) violate or cause the Company to violate the Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, the rules and regulations promulgated thereunder, any other state or federal law, or the laws of any
other country. The Company reserves the right to place restrictions on any Common Stock you may receive as a result of
your exercise of the Option.
12.
Conformity with the Plan.
This Option is intended to conform in all respects with, and is subject to, all applicable provisions of the Plan.
Inconsistencies between this Agreement and the Plan shall be resolved in accordance with the terms of the Plan. By
accepting your Option, you agree to be bound by the terms and conditions of this Agreement, the Plan, and any and all
conditions established by the Company in connection with Options issued under the Plan. You also understand that this
Agreement does not give you any legal or equitable right (other than those rights constituting the Agreement itself) against
the Ampio Companies directly or indirectly, or give rise to any cause of action at law or in equity against the Ampio
Companies.
13.
Interpretations.
Any dispute, disagreement or question which arises under, or as a result of, or in any way relates to the interpretation,
construction or application of terms of this Agreement or the Plan will be determined and resolved by the Committee or its
authorized
22
delegate. The Committee's determination or resolution will be final, binding and conclusive for all purposes.
14.
No Rights to Continued Services or Future Awards.
You hereby acknowledge and understand that this Option shall not form part of any contract of services between you and
any of the Ampio Companies. Nothing in the Agreement or the Plan confers on you any right to continue in the service of
the Ampio Companies or in any way affects the Ampio Companies' right to terminate your services without prior notice at
any time or for any reason, whether you have an services agreement. You further acknowledge that the Option is being
granted to you in consideration of your performance of services for the Ampio Companies and is not under any
circumstances to be considered compensation for past services.
You acknowledge and agree that the granting of your Option is at the discretion of the Committee and that acceptance of
your Option is no guarantee that future Options will be granted under the Plan. Notwithstanding anything in this
Agreement or the Plan to the contrary, the Company may amend this Agreement or the Plan, including but not limited to
modifications to any of the rights granted to you under this Agreement, without your consent, at such time and in such
manner as the Company may consider necessary or desirable, to reflect changes in law. You also understand that the
Company may amend, resubmit, alter, change, suspend, cancel, or discontinue the Plan at any time without limitation.
15.
Consent to Transfer Personal Data.
You hereby acknowledge and consent to the collection, use, processing and transfer of your personal data as described in
this Section 15. You are not obligated to consent to such a collection, use, processing and transfer of personal data.
However, failure to provide your consent may affect your ability to participate in the Plan. As part of your service to the
Ampio Companies, the Company may maintain certain personal information about you, that may include your name, home
address and telephone number, fax number, email address, family size, marital status, sex, beneficiary information,
emergency contacts, passport/visa information, age, language skills, driver’s license information, date of birth, birth
certificate, social security number or other identification number, nationality, C.V. (or resume), wage history, references,
job title, service contract, current wage and benefits information, personal bank account number, tax related information,
plan or benefit enrollment forms and elections, options or benefit statements, any shares of stock or directorships in the
Company, and details of all options or any other entitlements to shares of stock awarded, canceled, purchased, vested,
unvested or outstanding in your favor (the “Data”). The Company maintains the Data for the purpose of managing and
administering the Plan. The Ampio Companies may transfer Data amongst themselves as needed to implement, administer
and manage your participation in the Plan, and the Company may also transfer Data to third parties assisting the Company
in the implementation, administration and management of the Plan. These third parties may be located throughout the
world, including within the United States. By voluntarily acknowledging receipt of the Option Shares, you are authorizing
these third parties to receive, possess, use, retain and transfer the Data, in electronic or other form, for the
23
purposes of implementing, administering and managing your participation in the Plan, including any transfer of the Data
that may be required to administer the Plan and/or to permit a broker, or other third party you have chosen to hold any
shares of Company Common Stock you may acquire pursuant to the Plan. You may, at any time, review the Data, require
any necessary amendments to it or withdraw your consent to its collection by contacting the Company in writing; however,
withdrawing your consent may affect your ability to participate in the Plan.
16. Miscellaneous.
Modification. The Committee (or its authorized delegate) shall make all determinations regarding the number of Option
Shares granted to you and the conditions set forth in this Agreement. The Committee shall maintain a copy of your
Agreement in its records. The Committee may amend or modify this Agreement in any manner, provided that the
Committee would have had the authority to do so under the Plan. However, no amendment or modification of this
Agreement shall impair your rights under this Agreement without your express consent. Any such amendment,
modification or supplementation of this Agreement must be in writing and signed by both you and a representative of the
Company.
(a)
(b)
Governing Law. This Agreement and the Plan shall be construed in accordance with the laws of the State of
Delaware, without reference to any conflict of law principals.
Successors and Assigns. Except as otherwise provided herein, this Agreement will bind and inure to the benefit of
the respective successors and permitted assigns of you and the Company, whether so expressed or not.
(c) Waiver. The failure of the Company to enforce at any time any provision of this Agreement shall in no way be
construed to be a waiver of such provision or any other provision hereof.
(d)
Severability. Whenever feasible, each provision of this Agreement will be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity,
without invaliding the remainder of this Agreement.
24
IN WITNESS WHEREOF, the undersigned have executed this Stock Option Agreement effective as of the day and year first
above written, which constitutes the date upon which the Committee authorized the issuance of the Option.
Company:
AMPIO PHARMACEUTICALS, INC.
By:
Name:
Title:
Grantee:
25
AMPIO PHARMACEUTICALS, INC. 2019 STOCK OPTION AND INCENTIVE PLAN
INCENTIVE STOCK OPTION AGREEMENT
To: [Insert name]
Ampio Pharmaceuticals, Inc. (the “Company” or “we”) is pleased to memorialize the grant to you of a stock option award
(the “Award” or the “Option”), effective ________________ (the “Grant Date”) under the terms of the Ampio Pharmaceuticals,
Inc. 2019 Stock Option and Incentive Plan (the “Plan”). Initially capitalized terms used in this Agreement and defined in the Plan
shall have the meanings given to such terms in the Plan. Copies of the Plan are available upon written request to the Company.
1.
Option Grant.
Your Option permits you to purchase, on the terms and conditions set forth in this Agreement, the number of shares (the
“Option Shares”) of the Company’s common stock (the “Common Stock”), at the exercise price (the “Exercise Price”) set
forth in the following table.
Number of Option Shares
[Insert #]
Exercise Price Per Option Share
$[Insert #]
2.
Option Type.
Your Option is intended to qualify as an incentive stock option within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the “Code”).
3.
Term of Option.
As a general matter, your right to exercise the Option will expire on the tenth anniversary [Note—change to fifth
anniversary if the individual is a Ten Percent Owner] of the Grant Date (the “Expiration Date”). As provided below,
your right to exercise the Option may expire prior to the Expiration Date, if you die or your employment with the
Company terminates.
4.
Vesting.
You may exercise the Option only to the extent that the Option is vested. If applicable to you, the Option may vest over
time. If so, your right to exercise the Option will vest over time in accordance with the following schedule, provided you
are employed with the Company or any of its Subsidiaries (collectively, the “Ampio Companies”) on the applicable date
listed below.
Date
[INSERT DATE]
Vested Percentage of Award
[Insert #]%
26
Your Option may also be subject to performance vesting criteria. If so, the terms under which your Option will vest are set
forth in a schedule to your employment agreement, if you have an employment agreement with the Company. We and you
agree that these performance criteria, if any, are hereby incorporated by reference into this Award. To the extent
performance vesting criteria apply to your Award, the determination of whether subjective performance vesting criteria
have been met is in the sole discretion of the Compensation Committee of the Company’s Board of Directors (the
“Committee”). [The attaining of the objective performance criteria shall be determined in accordance with the terms of the
schedule to your employment agreement or offer letter with the Company] If the attaining of objective performance criteria
is subject to interpretation, you and we agree that any judgment as to whether the objective performance criteria have been
met shall be in the sole, but reasonably exercised, discretion of the Committee.
Except as otherwise provided in Section 7 below, if your employment with the Ampio Companies terminates you will
forfeit that portion of the Award that is not vested on the date of your termination.
5.
Sale Event Vesting.
In the event that a Sale Event occurs with respect to the Company prior to your termination of employment with Ampio
Companies, any portion of your Option that is not vested shall vest, and become exercisable, upon such Sale Event.
6.
Exercise.
Prior to the Expiration Date and during your employment with the Ampio Companies, you may exercise all or a portion of
your Option, to the extent vested, by designation the number of Option Shares to be acquired in accordance with the
exercise procedures established by the Committee from time to time. Your right to exercise the Option, to the extent
vested, following the date your employment terminates will depend on the reason for such termination, as described in
Section 7 below.
You must pay to the Company at the time of exercise the sum of (i) the full amount of the Exercise Price for the number of
Option Shares to be acquired and (ii) an amount equal to the aggregate minimum federal, state and local income and
employment taxes that the Company is required to withhold and deposit on behalf of you with respect to your exercise
(“Tax Obligation”).
You may elect to pay the Exercise Price or your Tax Obligation by having the Company reduce the number of Option
Shares you receive upon such exercise. Alternatively, you may pay the Exercise Price and your Tax Obligation:
(a)
(b)
in cash;
a “cashless” exercise program established with a broker;
27
(c)
(d)
by surrendering to the Company previously acquired shares of Common Stock having a Fair Market Value at the
time of exercise equal to the Exercise Price or Tax Obligation; or
to the extent permitted by applicable law, by delivery of irrevocable instructions to a broker to (1) promptly deliver
to the Company the amount of sale proceeds from the Option Shares or other proceeds to pay the Exercise Price or
the Tax Obligation, and (2) deliver to you the balance of the Option Share proceeds in the form of cash or shares of
Common Stock.
If you pay the Exercise Price or your Tax Obligation by surrender of shares of Common Stock, you must also submit proof
acceptable to the Company substantiating your ownership of those shares. The value of previously acquired shares of
Common Stock used to pay the Exercise Price (either directly or by attestation) of the Option Shares to be acquired or your
Tax Obligation shall be equal to the aggregate Fair Market Value of such previously acquired shares of Common Stock on
the date of the exercise. Your Option will be considered finally exercised on the date on which your payment of the
Exercise Price and Tax Obligation is received by the Company. By exercising any portion of the Option, you are accepting
all of the terms and conditions specified in this Agreement.
7.
Impact of Termination of Employment on Option.
Except as otherwise expressly provided in this Section 7 or otherwise agreed to by the Committee, if your employment
with the Ampio Companies terminates, (i) you will forfeit that portion of your Option that is not vested on the date of your
termination and (ii) you will have a limited period in which to exercise such portion of any Option as was vested on the
date of your termination. The Committee, in its sole discretion, shall be authorized to determine the nature of any
termination of employment and your rights under this Section 7 as a result of such termination and such determination
shall be binding for all purposes under this Section 7.
(a)
(b)
Death or Disability. If you die or if the Company elects to terminate your employment with the Ampio Companies
due to your Disability, (i) your Option (to the extent not previously vested) will vest and become non-forfeitable as
of the date of your death or the date your employment terminates due to your Disability and (ii) your Option may
be exercised thereafter at any time that is both before the Expiration Date and within one year of the date of your
death or termination. To the extent not previously exercised, your Option will terminate and may not be exercised
after the earlier of the Expiration Date or the first anniversary of the termination of your employment due to your
death or Disability.
Voluntary Termination. If you voluntarily terminate your employment with the Ampio Companies, (i) your
Option (to the extent not previously vested) will terminate and be forfeited as of the date your employment
terminates, and (ii) your Option, to the extent vested, may be exercised during the 90 day period immediately
following the date your employment terminates. Any vested portion
28
of the Option which remains unexercised will be forfeited, and your right to exercise that portion of the Option
shall terminate, on the 91st day following the date your employment terminates.
(c)
(d)
Involuntary Termination other than for Cause. If your employment with Ampio Companies is terminated by
the Company other than for Cause, (i) your Option (to the extent not previously vested) will terminate and be
forfeited as of the day your employment terminates and (ii) your Option, to the extent vested, may be exercised
during the 90 day period immediately following the date your employment terminates. Any vested portion of the
Option which remains unexercised will be forfeited, and your right to exercise that portion of the Option shall
terminate, on the 91st day following the date your employment terminates.
Termination for Cause. If your employment with the Ampio Companies is terminated for Cause, your Option
will be forfeited and your rights to exercise the Option, whether or not vested, shall terminate as of the date your
employment terminates.
For purposes of this Award, “Cause” shall have the meaning set forth in the employment agreement between you
and any of the Ampio Companies. In the event that you are not party to an employment agreement or your
employment agreement does not contain a definition of “Cause,” it shall mean (i) your willful malfeasance or
willful misconduct in connection with your employment; (ii) your gross negligence in performing any of your
duties to the Ampio Companies; (iii) your conviction of, or entry of a plea of guilty to, or entry of a plea of nolo
contendre with respect to, any crime other than a traffic violation or infraction which is a misdemeanor; (iv) your
willful and deliberate violation of an Ampio Company policy, (v) your unintended but material breach of any
written policy applicable to all employees adopted by an Ampio Company which is not cured to the reasonable
satisfaction of the Board within thirty (30) business days after notice thereof; (vi) your unauthorized use or
disclosure of any proprietary information or trade secrets of the Ampio Companies or any other party as to which
you owe an obligation of nondisclosure as a result of your relationship with the Ampio Companies, (vii) your
willful and deliberate breach of your obligations under any employment agreement with any of the Ampio
Companies, or (viii) any other material breach by you of any of your obligations in any employment agreement
with any of the Ampio Companies which is not cured to the reasonable satisfaction of the Board within thirty (30)
business days after notice thereof.
8.
Adjustments In Capitalization.
In the event of any dividend or other distribution (in whatever form), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Common Stock or other
securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the
Company, or other similar transaction or event that affects the Common Stock, the Committee shall adjust the terms of the
Option, to the extent necessary, in its sole discretion, in order to prevent dilution or enlargement of the benefits or potential
29
benefits of the Option. However, in no event shall the Committee adjust the terms of the Option in a manner which could
cause the Option to be treated as the grant of a new Option for purposes of Section 409A of the Code and Treas. Reg. §§
1.409A-2 through 1.409A-6 or cause the Company to incur a new compensation charge for financial reporting purposes.
9.
Rights as a Stockholder.
You will have no rights as a stockholder with respect to any Option Shares until and unless you exercise the Option and
shares of Common Stock have been issued to you.
10.
Public Offer Waiver.
By executing this Agreement, you acknowledge and confirm your understanding that your rights under the Plan arise
strictly from your status as an employee of the Ampio Companies and that the Company's grant of the Option to you is not
an offer of securities made to the general public.
11.
Transferability of Option Shares.
You hereby agree not to offer, sell or otherwise attempt to dispose of any Common Stock covered by the Option Shares in
a way which would: (i) require the Company to file any registration statement with the Securities and Exchange
Commission (or any similar filing under state law or the laws of any other country) or to amend or supplement any such
filing, or (ii) violate or cause the Company to violate the Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, the rules and regulations promulgated thereunder, any other state or federal law, or the laws of any
other country. The Company reserves the right to place restrictions on any Common Stock you may receive as a result of
your exercise of the Option.
12.
Conformity with the Plan.
This Option is intended to conform in all respects with, and is subject to, all applicable provisions of the Plan.
Inconsistencies between this Agreement and the Plan shall be resolved in accordance with the terms of the Plan. By
accepting your Option, you agree to be bound by the terms and conditions of this Agreement, the Plan, and any and all
conditions established by the Company in connection with Options issued under the Plan. You also understand that this
Agreement does not give you any legal or equitable right (other than those rights constituting the Agreement itself) against
the Ampio Companies directly or indirectly, or give rise to any cause of action at law or in equity against the Ampio
Companies.
13.
Interpretations.
Any dispute, disagreement or question which arises under, or as a result of, or in any way relates to the interpretation,
construction or application of terms of this Agreement or the Plan will be determined and resolved by the Committee or its
authorized
30
delegate. The Committee's determination or resolution will be final, binding and conclusive for all purposes.
14.
No Rights to Continued Employment or Future Awards.
You hereby acknowledge and understand that this Option shall not form part of any contract of employment between you
and any of the Ampio Companies. Nothing in the Agreement or the Plan confers on you any right to continue in the
employ of the Ampio Companies or in any way affects the Ampio Companies' right to terminate your employment without
prior notice at any time or for any reason, whether you have an employment agreement or whether you are an "at-will"
employee. You further acknowledge that the Option is being granted to you in consideration of your performance of
services for the Ampio Companies and is not under any circumstances to be considered compensation for past services.
You acknowledge and agree that the granting of your Option is at the discretion of the Committee and that acceptance of
your Option is no guarantee that future Options will be granted under the Plan. Notwithstanding anything in this
Agreement or the Plan to the contrary, the Company may amend this Agreement or the Plan, including but not limited to
modifications to any of the rights granted to you under this Agreement, without your consent, at such lime and in such
manner as the Company may consider necessary or desirable, to reflect changes in law. You also understand that the
Company may amend, resubmit, alter, change, suspend, cancel, or discontinue the Plan at any time without limitation.
15.
Consent to Transfer Personal Data.
You hereby acknowledge and consent to the collection, use, processing and transfer of your personal data as described in
this Section 15. You are not obligated to consent to such a collection, use, processing and transfer of personal data.
However, failure to provide your consent may affect your ability to participate in the Plan. As part of your employment
with the Ampio Companies, the Company may maintain certain personal information about you, that may include your
name, home address and telephone number, fax number, email address, family size, marital status, sex, beneficiary
information, emergency contacts, passport/visa information, age, language skills, driver’s license information, date of birth,
birth certificate, social security number or other employee identification number, nationality, C.V. (or resume), wage
history, employment references, job title, employment or severance contract, current wage and benefits information,
personal bank account number, tax related information, plan or benefit enrollment forms and elections, options or benefit
statements, any shares of stock or directorships in the Company, and details of all options or any other entitlements to
shares of stock awarded, canceled, purchased, vested, unvested or outstanding in your favor (the “Data”). The Company
maintains the Data for the purpose of managing and administering the Plan. The Ampio Companies may transfer Data
amongst themselves as needed to implement, administer and manage your participation in the Plan, and the Company may
also transfer Data to third parties assisting the Company in the implementation, administration and management of the
Plan. These third parties may be located throughout the world, including within the United States. By voluntarily
31
acknowledging receipt of the Option Shares, you are authorizing these third parties to receive, possess, use, retain and
transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing your
participation in the Plan, including any transfer of the Data that may be required to administer the Plan and/or to permit a
broker, or other third party you have chosen to hold any shares of Company Common Stock you may acquire pursuant to
the Plan. You may, at any time, review the Data, require any necessary amendments to it or withdraw your consent to its
collection by contacting the Company in writing; however, withdrawing your consent may affect your ability to participate
in the Plan.
16. Miscellaneous.
(a) Modification. The Committee (or its authorized delegate) shall make all determinations regarding the number of
Option Shares granted to you and the conditions set forth in this Agreement. The Committee shall maintain a copy
of your Agreement in its records. The Committee may amend or modify this Agreement in any manner, provided
that the Committee would have had the authority to do so under the Plan. However, no amendment or modification
of this Agreement shall impair your rights under this Agreement without your express consent. Any such
amendment, modification or supplementation of this Agreement must be in writing and signed by both you and a
representative of the Company.
(b)
(c)
Governing Law. This Agreement and the Plan shall be construed in accordance with the laws of the State of
Delaware, without reference to any conflict of law principals.
Successors and Assigns. Except as otherwise provided herein, this Agreement will bind and inure to the benefit of
the respective successors and permitted assigns of you and the Company, whether so expressed or not.
(d) Waiver. The failure of the Company to enforce at any time any provision of this Agreement shall in no way be
construed to be a waiver of such provision or any other provision hereof.
(e)
(f)
Severability. Whenever feasible, each provision of this Agreement will be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity,
without invaliding the remainder of this Agreement.
Disqualifying Disposition. If you dispose of the shares of Common Stock prior to the expiration of either two (2)
years from the Grant Date or one (1) year from the date the shares are transferred to you pursuant to the exercise of
the Option (a “Disqualifying Disposition”), you shall notify the Company in writing within thirty (30) days after
such disposition of the date and terms of such disposition. You also agree to provide the Company with any
information concerning any such dispositions as the Company requires for tax purposes.
32
IN WITNESS WHEREOF, the undersigned have executed this Stock Option Agreement effective as of the day and year
first above written, which constitutes the date upon which the Committee authorized the issuance of the Option.
Company:
AMPIO PHARMACEUTICALS, INC.
By:
Name:
Title:
Grantee:
33
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-237723) and Form S-8 (No. 333-235853) of our report
dated March 3, 2021, relating to the financial statements of Ampio Pharmaceuticals, Inc. (which report expresses an unqualified opinion and includes an
explanatory paragraph regarding the Company’s going concern uncertainty), appearing in this Annual Report on Form 10-K for the year ended December
31, 2020.
EXHIBIT 23.1
/s/ Moss Adams LLP
Denver, Colorado
March 3, 2021
EXHIBIT 31.1
I, Michael Macaluso, certify that:
CERTIFICATION
1. I have reviewed this Annual Report on Form 10-K of Ampio Pharmaceuticals, Inc. for the year ended December 31, 2020;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: March 3, 2021
/s/ Michael Macaluso
Michael Macaluso
Chief Executive Officer
EXHIBIT 31.2
I, Daniel G. Stokely, certify that:
CERTIFICATION
1. I have reviewed this Annual Report on Form 10-K of Ampio Pharmaceuticals, Inc. for the year ended December 31, 2020;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
/s/ Daniel G. Stokely
Daniel G. Stokely
Chief Financial Officer and Secretary
Date: March 3, 2021
CERTIFICATIONS
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.1
In connection with the Annual Report of Ampio Pharmaceuticals, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2020, as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company, certifies to his
knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 906), the following:
(1) The Report fully complies with the requirements of section 13(a) and 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company for the period covered by the Report.
/s/ Michael Macaluso
Michael Macaluso
Chief Executive Officer
/s/ Daniel G. Stokely
Daniel G. Stokely
Chief Financial Officer and Secretary
Date: March 3, 2021
This certification accompanies the annual report on Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission
and is not to be incorporated by reference into any filing of Ampio Pharmaceuticals, Inc. under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained
in such filing. A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Ampio
Pharmaceuticals, Inc. and will be retained by Ampio Pharmaceuticals, Inc. and furnished to the Securities and Exchange Commission or its staff upon
request.