UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

   

FORM 10-Q

  

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

 

For the Quarterly Period Ended: September 30, 2018

 

or

 

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

 

For the transition period from                      to                      

 

Commission File No. 001-35182

 

AMPIO PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

  

Delaware 26-0179592

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

 

373 Inverness Parkway, Suite 200

Englewood, Colorado 80112

(Address of principal executive offices, including zip code)

 

(720) 437-6500

(Registrant’s telephone number, including area code)

 

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

 

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

 

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

 

Large Accelerated Filer ¨ Accelerated Filer ¨
       
Non-Accelerated Filer x Smaller reporting company x
       
    Emerging growth company ¨

 

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

 

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

  

As of November 12, 2018, there were 106,716,516 shares of Common Stock outstanding, par value $0.0001, of the registrant.  

 

 

 

 

 

  

AMPIO PHARMACEUTICALS, INC.

 

FOR THE QUARTER ENDED SEPTEMBER 30, 2018

INDEX

 

    Page
  PART I-FINANCIAL INFORMATION  
     
Item 1. Financial Statements 4
     
  Balance Sheets as of September 30, 2018 (unaudited) and December 31, 2017 4
     
  Statements of Operations for the three and nine months ended September 30, 2018 (unaudited) and the three and nine months ended September 30, 2017 (unaudited) 5
     
  Statements of Stockholders’ Equity (Deficit) (unaudited) 6
     
  Statements of Cash Flows for the nine months ended September 30, 2018 (unaudited) and the nine months ended September 30, 2017 (unaudited) 7
     
  Notes to Financial Statements (unaudited) 8
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 18
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 26
     
Item 4. Controls and Procedures 26
     
  PART II-OTHER INFORMATION  
     
Item 1. Legal Proceedings 26
     
Item 1A. Risk Factors 27
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 27
     
Item 3. Defaults Upon Senior Securities 27
     
Item 4. Mine Safety Disclosures 27
     
Item 5. Other Information 27
     
Item 6. Exhibits 28
   
SIGNATURES 29

 

  2  

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

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

 

projected operating or financial results, including anticipated cash flows used in operations;
expectations regarding clinical trials for our product candidates, capital expenditures, research and development expenses and other payments;
our beliefs and assumptions relating to our liquidity position, including our ability to obtain additional financing;
our ability to obtain regulatory approvals for our pharmaceutical drugs;
our future dependence on third party manufacturers or strategic partners to manufacture any of our pharmaceutical drugs that receive regulatory approval, and our ability to identify strategic partners and enter into beneficial license, co-development, collaboration or similar arrangements; and
progress of our manufacturing facility/clean room.

 

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

 

the loss of key management personnel on whom we depend;
the progress and results of clinical trials for our product candidates;
our ability to navigate the regulatory approval process in the U.S. and other countries, and our success in obtaining required regulatory approvals for our product candidates on a timely basis;
commercial developments for products that compete with our product candidates;
the actual and perceived effectiveness of our product candidates, and how those product candidates compare to competitive products;
the strength of our intellectual property protection, and our success in avoiding infringing the intellectual property rights of others;
adverse developments in our research and development activities;
potential liability if our product candidates cause illness, injury or death, or adverse publicity from any such events;
our ability to operate our business efficiently, manage capital expenditures and costs (including general and administrative expenses) and obtain financing when required; and
our expectations with respect to our acquisition activity.

 

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

 

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

 

  3  

 

  

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

AMPIO PHARMACEUTICALS, INC.

Balance Sheets

 

    September 30,     December 31,  
    2018     2017  
    (unaudited)        
Assets                
Current assets                
Cash and cash equivalents   $ 8,672,062     $ 8,209,071  
Prepaid expenses and other     512,481       233,815  
Total current assets     9,184,543       8,442,886  
                 
Fixed assets, net (Note 3)     6,355,577       6,837,861  
Deposits     33,856       33,856  
                 
Total assets   $ 15,573,976     $ 15,314,603  
                 
Liabilities and Stockholders' Equity                
Current liabilities                
Accounts payable and accrued expenses   $ 1,534,259     $ 2,785,529  
Accrued compensation     130,054       1,033,261  
Deferred rent - current portion     59,579       59,579  
Total current liabilities     1,723,892       3,878,369  
                 
Long-term deferred rent     492,712       537,364  
Warrant derivative liability     11,120,495       45,075,755  
Total liabilities     13,337,099       49,491,488  
                 
Commitments and contingencies (Note 5)                
                 
Stockholders' equity                
Preferred Stock, par value $0.0001; 10,000,000 shares authorized; none issued     -       -  
Common Stock, par value $0.0001; 200,000,000 shares authorized; shares issued and outstanding - 106,591,516 in 2018 (unaudited) and 80,060,345 in 2017     10,659       8,006  
Additional paid-in capital     174,753,998       170,803,783  
Accumulated deficit     (172,527,780 )     (204,988,674 )
Total stockholders' equity     2,236,877       (34,176,885 )
                 
Total liabilities and stockholders' equity   $ 15,573,976     $ 15,314,603  

 

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

 

  4  

 

   

AMPIO PHARMACEUTICALS, INC.

Statements of Operations

(unaudited)

 

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2018     2017     2018     2017  
                         
Operating expenses                                
Research and development   $ 1,184,194     $ 1,992,825     $ 5,343,452     $ 6,659,349  
Research and development - related party (Note 8)     -       -       -       323,554  
General and administrative     756,104       1,113,312       3,303,315       3,878,850  
Total operating expenses     1,940,298       3,106,137       8,646,767       10,861,753  
                                 
Other income (expense)                                
Interest (expense) income     (3,190 )     -       (3,190 )     3,086  
Derivative gain (loss)     7,744,708       (1,146,772 )     41,110,851       2,092,994  
Total other income (expense)     7,741,518       (1,146,772 )     41,107,661       2,096,080  
                                 
Net income (loss)   $ 5,801,220     $ (4,252,909 )   $ 32,460,894     $ (8,765,673 )
                                 
Basic and diluted net income (loss) per common share   $ 0.06     $ (0.06 )   $ 0.37     $ (0.14 )
                                 
Weighted average number of Ampio common shares outstanding     96,930,270       68,232,409       88,782,837       62,072,354  

 

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

 

  5  

 

 

AMPIO PHARMACEUTICALS, INC.

Statements of Stockholders’ Equity (Deficit)

 

    Common Stock     Additional
Paid-in
    Accumulated     Total
Stockholders'
 
    Shares     Amount     Capital     Deficit     Equity  
                               
Balance at December 31, 2017     80,060,345     $ 8,006     $ 170,803,783     $ (204,988,674 )   $ (34,176,885 )
                                         
Common stock issued for services (unaudited)     17,241       2       59,998       -       60,000  
Options exercised, net (unaudited)     348,783       35       636,375       -       636,410  
Warrants exercised, net (unaudited)     6,165,147       616       2,968,503       -       2,969,119  
Stock-based compensation, net (unaudited)     -       -       287,339       -       287,339  
Common stock issued in connection with the confidentially marketed public offering, net of offering costs of $844,409 (unaudited)     20,000,000       2,000       (2,000 )     -       -  
Net income (unaudited)     -       -       -       32,460,894       32,460,894  
                                         
Balance at September 30, 2018 (unaudited)     106,591,516     $ 10,659     $ 174,753,998     $ (172,527,780 )   $ 2,236,877  

 

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

 

  6  

 

  

AMPIO PHARMACEUTICALS, INC.

Statements of Cash Flows

(unaudited)

   

    Nine Months Ended September 30,  
    2018     2017  
             
Cash flows from operating activities                
Net income (loss)   $ 32,460,894     $ (8,765,673 )
                 
Adjustments to reconcile net income (loss) to net cash used in operating activities                
Stock-based compensation and warrant modification     287,339       683,195  
Depreciation and amortization     968,034       910,725  
Write-off of advances to stockholder     -       25,160  
Amortization of prepaid research and development - related party (Note 8)     -       323,554  
Common stock issued for services     60,000       60,000  
Derivative gain     (41,110,851 )     (2,092,994 )
Changes in operating assets and liabilities                
Increase in prepaid expenses and other     (278,666 )     (79,884 )
(Decrease) increase in accounts payable and accrued expenses     (1,251,270 )     318,479  
Decrease in deferred rent     (44,652 )     (37,398 )
Decrease in accrued compensation     (903,207 )     (181,383 )
Net cash used in operating activities     (9,812,379 )     (8,836,219 )
Cash flows used in investing activities                
Purchase of fixed assets     (485,750 )     (33,326 )
Net cash used in investing activities     (485,750 )     (33,326 )
Cash flows from financing activities                
Proceeds from sale of common stock related to the Equity Offering     8,000,000       6,594,148  
Costs related to sale of common stock related to the Equity Offering     (844,409 )     (812,288 )
Proceeds from option and warrant exercises     3,605,529       -  
Net cash provided by financing activities     10,761,120       5,781,860  
                 
Net change in cash and cash equivalents     462,991       (3,087,685 )
Cash and cash equivalents at beginning of period     8,209,071       4,894,834  
Cash and cash equivalents at end of period   $ 8,672,062     $ 1,807,149  
                 
                 
Non-cash transactions:                
Warrant derivative liability in connection with the confidentially marketed public offering   $ 8,008,500     $ 4,618,318  
Warrants issued to placement agent in connection with the registered offering     -       369,465  

  

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

 

  7  

 

 

AMPIO PHARMACEUTICALS, INC.

Notes to Financial Statements

(unaudited)

 

Note 1 - Basis of Presentation

 

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions of the Securities and Exchange Commission (SEC) on Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. In the opinion of management, the financial statements include all adjustments necessary, which are of a normal and recurring nature, for the fair presentation of the financial position and of the results of operations and cash flows of Ampio Pharmaceuticals, Inc. (“Ampio” or the “Company”) for the periods presented.

 

These financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2017 included in the Company’s Annual Report on Form 10-K filed with the SEC. The results of operations for the interim period shown in this report are not necessarily indicative of the results that may be expected for any other interim period or for the full year. The balance sheet at December 31, 2017 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

 

Ampio is a biopharmaceutical company primarily focused on developing compounds that decrease inflammation by (i) inhibiting specific pro-inflammatory compounds by affecting specific pathways at the protein expression and at the transcription level; (ii) activating specific phosphatase or depleting available phosphate needed for the inflammation process; and (iii) decreasing vascular permeability.

 

Ampio’s activities have been primarily related to research and development and raising capital. The Company has not generated revenue to date.

 

Adoption of Recent Accounting Pronouncements

 

In May 2017, the FASB issued ASU 2017-09, “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting”. The amendments provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award changes as a result of the change in terms or conditions. For all entities, this standard is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company adopted ASU 2017-09 during the first quarter of 2018 and the adoption of this guidance did not have a material impact on the Company’s financial statements.

 

Recent Accounting Pronouncements

 

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” . The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. Lessees are required to use a modified retrospective transition approach for capital and operating leases existing at, or entered after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. In July 2018, the FASB issued ASU 2018-10, “Codification Improvements to Topic 842, Leases,” to clarify how to apply certain aspects of the new lease standard. In July 2018, the FASB also issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” to give entities another option for transition. The additional option for transition allows an entity to apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The new standards are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact of its pending adoption of this standard on its financial statements and plans to finalize implementation by the end of fiscal 2018. As of September 30, 2018, the Company had minimum operating lease payments of $2.1 million that are being evaluated. The Company is working on gathering all key lease data elements to meet the requirements of the new guidance.

 

  8  

 

 

In June 2018, the FASB issued ASU 2018-07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” . The amendment expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. Companies should apply the requirements of Topic 718 to nonemployee awards except for certain exemptions specified in the amendment. The guidance is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within those fiscal years. Early adoption is permitted, but no earlier than the Company’s adoption date of ASU 2014-09 “ Revenue from Contracts with Customers (Topic 606)” . The Company does not expect the adoption of this ASU will have a significant impact on its financial statements.

 

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

 

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

 

The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

 

Note 2 - Going Concern

 

As reflected in the accompanying financial statements, the Company had cash of $8.7 million as of September 30, 2018 with net income of $32.5 million for the nine months ended September 30, 2018. The net income is primarily attributable to the non-cash derivative gain of $41.1 million that was recognized, which was offset by the operating expenses of $8.6 million during the period ended September 30, 2018. The Company used net cash in operations of $9.8 million for the period ended September 30, 2018. As of September 30, 2018, the Company ended with an accumulated deficit of $172.5 million and stockholders’ equity of $2.2 million.  In addition, the Company is a clinical stage biopharmaceutical company and has not generated any revenues or profits to date. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

During the nine months ending September 30, 2018, the Company received a total of $3.6 million from investor warrants and stock options being exercised (see Note 7). In addition, the Company raised gross proceeds of $8.0 million in a confidentially marketed public offering (see Note 6). Ampio expects that current cash resources and operating cash flows will be sufficient to sustain operations into the second quarter of 2019. The ability of the Company to continue its operations is dependent on management’s plans, which includes continuing to raise equity-based and debt financing, as well as encouraging additional warrant exercises. The Company is currently in negotiation with potential investors for financing. However, there is no assurance that the Company will be successful in raising sufficient capital.

 

The accompanying unaudited interim 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 the liabilities that might be necessary should the Company be unable to continue as a going concern.

 

  9  

 

 

Note 3 - Fixed Assets

 

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

 

    Estimated   As of September 30,     As of December 31,  
    Useful Lives in Years   2018     2017  
                 
Manufacturing facility/clean room   3 - 8   $ 3,197,000     $ 2,773,000  
Leasehold improvements   10     6,075,000       6,075,000  
Office furniture and equipment   3 - 10     511,000       557,000  
Lab equipment   5 - 8     1,095,000       1,059,000  
Less accumulated depreciation and amortization         (4,522,000 )     (3,626,000 )
                     
Fixed assets, net       $ 6,356,000     $ 6,838,000  

 

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

 

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2018     2017     2018     2017  
                         
Depreciation and amortization expense   $ 347,000     $ 304,000     $ 968,000     $ 911,000  

 

Note 4 - Fair Value Considerations

 

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

 

Authoritative guidance defines fair value as the price that would be received to sell 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 independent of Ampio. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy is broken down into three levels based on reliability of the inputs as follows:

 

  Level 1:   Inputs that reflect unadjusted quoted prices in active markets that are accessible to Ampio for identical assets or liabilities;
     
  Level 2:   Inputs 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.

 

Ampio’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. Ampio’s policy is to recognize transfers in and/or out of fair value hierarchy as of the date in which the event or change in circumstances caused the transfer. Ampio has consistently applied the valuation techniques discussed below in all periods presented.

 

  10  

 

  

The following table presents Ampio’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2018 and December 31, 2017, by level within the fair value hierarchy:

 

    Fair Value Measurements Using  
    Level 1     Level 2     Level 3     Total  
September 30, 2018                                
LIABILITIES                                
Warrant derivative liability   $ -     $ -     $ 11,120,000     $ 11,120,000  
                                 
December 31, 2017                                
LIABILITIES                                
Warrant derivative liability   $ -     $ -     $ 45,076,000     $ 45,076,000  

 

The warrant derivative liability was valued using the Black-Scholes valuation methodology because that model embodies all the relevant assumptions that address the features underlying these instruments. For significant assumptions in valuing the warrant derivative liability as of September 30, 2018 and at issuance see Note 7.

 

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

 

    Derivative Instruments  
       
Balance as of December 31, 2017   $ 45,076,000  
Warrants issuances     8,008,000  
Warrants exercises     (13,925,000 )
Change in fair value     (28,039,000 )
Balance as of September 30, 2018   $ 11,120,000  

 

  11  

 

  

Note 5 - Commitments and Contingencies

 

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

 

          Remaining                                
    Total     2018     2019     2020     2021     2022     Thereafter  
                                           
Ampion supply agreement   $ 7,650,000     $ 2,550,000     $ 2,550,000     $ 2,550,000     $ -     $ -     $ -  
Clinical research and trial obligations     327,000     277,000       50,000       -       -       -       -  
Biologics License Application (BLA) consulting services     1,166,000       45,000       1,121,000       -       -       -       -  
Facility lease     2,085,000       80,000       326,000       335,000       345,000       355,000       644,000  
    $ 11,228,000     $ 2,952,000     $ 4,047,000     $ 2,885,000     $ 345,000     $ 355,000     $ 644,000  

  

Ampion Supply Agreement

 

In October 2013, Ampio entered into a human serum albumin ingredient and purchase sale agreement which has a remaining commitment of $7.7 million. In November 2017, Ampio amended this agreement, which extended the contractual terms to 2020.

 

Clinical Research and Trial Obligations

 

In November 2017, Ampio entered into an Open Label Extension (OLE) study agreement. In August 2018, the Company canceled the OLE study. The Company will continue to incur close-out costs for the study through the beginning of fiscal 2019. As of September 30, 2018, there is an outstanding commitment of $327,000.

 

Biologics License Application (BLA) Consulting Services

 

In March 2018, Ampio entered into a BLA consulting services agreement, which has an outstanding commitment of $1.2 million. This contract is an open-ended contract and the Company incurs costs as sections of the BLA are completed.

 

Facility Lease

 

In December 2013, Ampio entered into a 125-month non-cancellable operating lease for office space and a manufacturing facility. The effective date for 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 recognizes rent expense on a straight-line basis over the term of the lease. The Company recognizes deferred rent when the straight-line rent expense exceeds the actual lease payments and reduces deferred rent when the actual lease payments exceed the straight-line rent expense. Deferred rent is classified between current and long-term.

 

Rent expense for the respective periods is as follows:

 

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2018     2017     2018     2017  
                         
Rent expense   $ 65,000     $ 65,000     $ 195,000     $ 195,000  

 

Note 6 - Common Stock

 

Capital Stock

 

At September 30, 2018 and December 31, 2017, Ampio had 200.0 million shares of common stock authorized with a par value of $0.0001 per share, and 10.0 million shares of preferred stock authorized with a par value of $0.0001 per share.

 

At September 30, 2018 and December 31, 2017, Ampio had 106,591,516 and 80,060,345 shares of common stock outstanding, respectively. As of these same dates, Ampio had no preferred shares outstanding.

 

  12  

 

 

Shelf Registration 

 

In March 2017, Ampio filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission (“SEC”) to register Ampio common stock and warrants in an aggregate amount of up to $100.0 million for offerings from time to time, as well as 5.0 million shares of common stock available for sale by selling shareholders. The shelf registration was declared effective in April 2017 by the SEC. As a result of equity raises, approximately $78.7 million remained available under the Form S-3 as of September 30, 2018. This shelf registration statement on Form S-3 expires in March of 2020.

 

Confidentially Marketed Public Offering

 

In August 2018, the Company completed a confidentially marketed public offering. In this offering, the Company issued 20.0 million shares of its common stock and warrants to purchase up to 20.0 million shares of common stock. The common stock and warrants were sold in units, with each unit consisting of one share of common stock and a warrant to purchase one share of common stock. Each unit was sold to the investors in this offering at a negotiated price of $0.40 per unit generating gross proceeds of $8.0 million. In connection with the offering, the underwriter received a 7% commission totaling $560,000. The Company also incurred expenses related to legal, accounting, and other registration costs of $284,000. The shares and the warrants were offered and sold pursuant to the Company’s shelf registration statement on Form S-3 that was declared effective by the SEC in April 2017.

 

The warrants have an exercise price of $0.40 per share and are exercisable immediately with a term of five years from issuance. The warrants include a provision where the warrant holder has the contractual right to request a cash exercise if the effectiveness of the registration statement is not maintained, but securities law would prevent the Company from issuing registered shares in a cash exercise. Therefore, the Company could be forced to cash settle the warrants. Based on this derivative feature, these warrants must be accounted for as a liability at fair value under Accounting Standards Codification (“ASC”) 815 “Derivatives and Hedging”. On the date of issuance, these warrants were valued at $8.0 million.

 

The Company’s net cash proceeds from the confidentially marketed public offering totaled $7.2 million. When the additional non-cash charges of $8.0 million related to the 20.0 million warrants are offset against the net cash transaction proceeds, the non-cash charges exceeded 100% of the proceeds. Therefore, the Company is required to take the additional cost above the transaction proceeds and recognize a loss on the day it entered into the transaction. The loss on the transaction was $853,000 and this amount is included in the derivative gain on the statement of operations.

 

Registered Direct Offering

 

In October 2017, the Company entered into a Securities Purchase Agreement, with certain investors, pursuant to which the Company sold approximately 7.7 million shares of common stock at a price per share of $0.875. The gross proceeds from the offering were approximately $6.7 million. The costs associated with the offering were approximately $490,000. The shares were offered and sold pursuant to the Company’s shelf registration statement on Form S-3 that was declared effective by the SEC in April 2017. 

 

In June 2017, the Company completed a registered direct offering. In this offering, Ampio issued directly to multiple investors approximately 11.0 million shares of its common stock and approximately 11.0 million warrants to purchase shares of common stock. The common stock and warrants were sold in units, with each unit consisting of one share of common stock and a warrant to purchase one share of common stock. Each unit was sold to the investors in this offering at a negotiated price of $0.60 per unit generating gross proceeds of $6.6 million. In connection with the offering, the placement agent received an 8% commission totaling $533,000 and approximately 879,000 warrants with an exercise price of $0.76. The expiration date of these warrants is June 1, 2022. At issuance, these warrants had a value of $369,000 and were accounted for as equity-based warrants. The placement agent warrants provide for cashless exercise, which the placement agents may elect if there is no effective registration statement. The Company also incurred expenses related to legal, accounting, and other registration costs of $292,000.

 

There was a participation right of 35% for any proposed or intended issuance or sale or exchange of securities being offered until the second anniversary of the closing date, which would have expired on June 2, 2019. However, in July 2018, the Company obtained the required number of waivers necessary to eliminate the participation rights from the June 2017 registered direct offering. The shares and the warrants were offered and sold pursuant to the Company’s shelf registration statement on Form S-3 that was declared effective by the SEC in April 2017.

 

The investor warrants have an exercise price of $0.76 per share and were exercisable starting on December 7, 2017 with a term of five years from issuance. The investor warrants include a provision where the warrant holder has the contractual right to request a cash exercise if the effectiveness of the registration statement is not maintained, but securities law would prevent the Company from issuing registered shares in a cash exercise. Therefore, the Company could be forced to cash settle the warrant. Based on this derivative feature, these warrants must be accounted for as a liability at fair value under ASC 815 “Derivatives and Hedging”. On the date of issuance, these warrants were valued at $4.6 million.

 

In September 2016, the Company completed a registered direct offering. In this offering, the Company issued directly to an institutional investor 5.0 million shares of its common stock and warrants to purchase up to 5.0 million shares of common stock. The common stock and warrants were sold in units, with each unit consisting of one share of common stock and a warrant to purchase one share of common stock. Each unit was sold to the investor in this offering at a negotiated price of $0.75 per unit generating gross proceeds of $3.75 million. In connection with the offering, the placement agent received a 6% commission totaling $225,000 and 150,000 warrants with an exercise price of $0.9375. The expiration date of these warrants is September 1, 2021. At issuance, these warrants had a value of $89,000 and were accounted for as equity-based warrants. The placement agent warrants provide for cashless exercise, which the placement agents may elect if there is no effective registration statement. The Company also incurred expenses related to legal, accounting, and other registration costs of $113,000. 

 

  13  

 

 

There was a participation right of 30% for any proposed or intended issuance or sale or exchange of securities being offered until the first anniversary of the closing date, which expired on September 1, 2017. The shares and the warrants were offered and sold pursuant to the Company’s shelf registration statement on Form S-3 which was declared effective by the SEC in January 2014. The Form S-3 expired in January of 2017 and the Company filed a new Form S-3 in April 2017.

 

The investor warrants had an exercise price of $1.00 per share and were immediately exercisable with a term of five years from issuance. In addition, the investor warrants included a provision for an adjustment to the exercise price upon subsequent issuances of common stock by the Company at a price less than the warrant exercise price and the investor was entitled to purchase additional shares, such that the aggregate purchase price of $5.0 million for the warrant shares remained unchanged. The investor warrants also included a provision for redemption at the Black-Scholes value at the request of the holder upon a change of control. Based on these derivative features, these warrants were accounted for as a liability at fair value under ASC 480 “Distinguishing Liabilities from Equity”. On the date of issuance, these warrants were valued at $4.1 million.

 

The Company’s net cash proceeds from the registered direct offering were $3.4 million. When the additional non-cash charges of $4.2 million related to the 5.0 million investor warrants and the 150,000 placement agent warrants were offset against the net cash transaction proceeds, this exceeded 100% of the proceeds so the Company was required to take the additional cost above the transaction proceeds and recognize a loss on the day of the transaction. The loss on the transaction was $804,000 and was included in derivative loss on the statement of operations.

 

On March 27, 2017, the Company entered into a Waiver and Consent Letter Agreement with the investor from the September 2016 registered direct offering, amending the terms of the warrants previously issued. Under the Waiver and Consent Agreement, the investor waived the right to have the warrant exercise price reduced and the number of shares of common stock underlying the warrant increased in the event the Company secures any financing, including debt, which includes issuing or selling shares of common stock for a price per share less than the warrant exercise price. The investor also waived the prohibition on the Company’s ability to issue or sell shares of its common stock, options or convertible securities at a price which varies or may vary with the market price of the common stock or pursuant to an equity credit line or similar “at-the-market” offering. The waivers are permanent. In return, the Company agreed to reduce the exercise price of the warrants from $1.00 to $0.40 and to not issue or sell any shares of its capital stock for a period of 10 trading days following the execution of the Waiver and Consent Agreement. All other terms of the warrants remained the same. Based upon the amendment to this warrant agreement, the Company recognized a non-cash derivative gain of $1.1 million during the quarter ended March 31, 2017.

 

Controlled Equity Offering

 

In February 2016, Ampio entered into a Controlled Equity Offering SM Sales Agreement (the “Agreement”) with a placement agent to implement an “at-the-market” equity program under which Ampio, from time to time may offer and sell shares of its common stock having an aggregate offering price of up to $25.0 million through the placement agent. The Company has no obligation to sell any of the shares and may at any time suspend sales under the Agreement or terminate the Agreement in accordance with its terms. The Company has provided the placement agent with customary indemnification rights. The placement agent will be entitled to a fixed commission of 3.0% of the gross proceeds from shares sold.

 

No shares were sold under the Agreement during fiscal 2017 or the nine months ended September 30, 2018.

 

Common Stock Issued for Services

 

Ampio issued 17,241 and 62,478 shares of common stock valued at $60,000 and $60,000, respectively, for non-employee directors as part of their director fees for fiscal years 2018 and 2017, respectively.

 

  14  

 

 

Note 7 - Equity Instruments  

 

Options

 

In 2010, Ampio shareholders approved the adoption of a stock and option award plan (the “2010 Plan”), under which shares were reserved for future issuance under restricted stock awards, options, and other equity awards. The 2010 Plan permits grants of equity awards to employees, directors and consultants. The shareholders have approved a total of 11.7 million shares reserved for issuance under the 2010 Plan.

 

During the nine months ended September 30, 2018, the Company granted 115,000 options at a weighted average exercise price of $0.51 to an officer and five employees. Former employees and executives exercised 409,666 options with a weighted average exercise price of $2.06. The Company received $636,400 as of September 30, 2018 related to these option exercises. A total of 3,334 options were forfeited and 355,000 expired as of September 30, 2018.

 

The following table summarizes Ampio’s stock option activity:

 

    Number of
Options
    Weighted
Average
Exercise Price
    Weighted Average
Remaining
Contractual Life
    Aggregated
Intrinsic Value
 
Outstanding at December 31, 2017     7,247,165     $ 2.87       5.16       12,739,512  
Granted     115,000     $ 0.51       -       -  
Exercised     (409,666 )   $ 2.06       -       -  
Forfeited     (3,334 )   $ 1.02       -       -  
Expired or Cancelled     (355,333 )   $ 5.09       -       -  
Outstanding at September 30, 2018     6,593,832     $ 2.77       4.13       7,784  
Exercisable at September 30, 2018     6,242,164     $ 2.88       3.89       7,411  
Available for grant at September 30, 2018     3,198,478                          

 

Stock options outstanding at September 30, 2018 are summarized in the table below:

 

Range of Exercise Prices   Number of
Options
Outstanding
    Weighted
Average
Exercise Price
    Weighted Average
Remaining
Contractual Lives
 
$0.48 - $2.00     3,083,554     $ 0.89       5.28  
$2.01 - $5.00     2,285,278     $ 3.10       3.43  
$5.01 - $8.93     1,225,000     $ 6.86       2.56  
      6,593,832     $ 2.77       4.13  

  

Ampio 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 estimated 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. Ampio calculates its volatility assumption using the actual changes in the market value of its stock. Ampio adopted ASU 2016-09 in fiscal 2017 and no longer estimates a forfeiture rate. Instead, 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 time to vest and 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 maturity. Ampio has computed the fair value for options granted and modified during the period ended September 30, 2018, using the following assumptions:

 

Expected volatility     100.66% - 127.60 %
Risk free interest rate     1.86% - 2.96 %
Expected term (years)      0.32 - 5.00  
Dividend yield     0.0 %

 

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Stock-based compensation expense related to the fair value of stock options is included in the statements of operations as research and development expenses or general and administrative expenses as set forth in the table below. The following table summarizes stock-based compensation expense for the three and nine months ended September 30, 2018 and 2017:

 

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2018     2017     2018     2017  
Research and development expenses                                
Stock-based compensation   $ 20,000     $ 179,000     $ 73,000     $ 255,000  
                                 
General and administrative expenses                                
Common stock issued for services     -       -       60,000       60,000  
Stock-based compensation     75,000       127,000       214,000       354,000  
    $ 95,000     $ 306,000     $ 347,000     $ 669,000  
                                 
Unrecognized expense at September 30, 2018   $ 68,000                          
                                 
Weighted average remaining years to vest     1.26                          

   

Warrants

 

In connection with the August 2018 confidentially marketed public offering, Ampio issued 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 are accounted for under liability accounting and are recorded at fair value each reporting period. As of September 30, 2018, these warrants had a fair value of $8.7 million. Significant assumptions as of September 30, 2018 and at issuance were as follows:

 

    September 30, 2018     At Issuance  
Exercise Price   $ 0.40     $ 0.40  
Volatility     123.7 %     121.8 %
Equivalent term (years)     4.87       5.00  
Risk-free interest rate     2.94 %     2.75 %
Number of shares     19,950,000       20,000,000  

 

In connection with the June 2017 registered direct offering, Ampio issued investor warrants to purchase an aggregate of approximately 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 September 30, 2018, these warrants had a fair value of $2.4 million. Significant assumptions as of September 30, 2018 and at issuance were as follows:

 

    September 30, 2018     At Issuance  
Exercise Price   $ 0.76     $ 0.76  
Volatility     137.2 %     94.6 %
Equivalent term (years)     3.67       5.00  
Risk-free interest rate     2.90 %     1.71 %
Number of shares     6,093,582       10,990,245  

  

The combined value for the warrant liability as of September 30, 2018 is $11.1 million (see Note 4).

 

In connection with the 2016 registered direct offering, Ampio issued to an investor warrants to purchase an aggregate of 5.0 million shares of common stock at an exercise price of $1.00 with a term of five years. In March 2017, the exercise price of these warrants was reduced from $1.00 to $0.40. Due to certain derivative features, these warrants were accounted for under liability accounting and are recorded at fair value each reporting period. As of September 30, 2018, no fair value was recorded as these warrants were exercised in full during the first quarter of 2018.

 

During the 2017 registered direct offering, Ampio issued placement agent warrants to purchase an aggregate of approximately 879,000 shares of common stock at an exercise price of $0.76 with a term of five years. These warrants were accounted for as equity-based awards (see Note 6). They were valued using the Black-Scholes methodology. 

 

During the 2016 registered direct offering, Ampio issued to the placement agent warrants to purchase an aggregate of 150,000 shares of common stock at an exercise price of $0.9375 with a term of five years. These warrants were accounted for as equity-based awards (see Note 6). They were valued using the Black-Scholes methodology. 

 

  16  

 

  

The following table summarizes Ampio’s warrant activity:

 

    Number of
Warrants
    Weighted
Average
Exercise Price
    Weighted Average
Remaining
Contractual Life
 
Outstanding at December 31, 2017     13,332,243     $ 0.73       4.01  
Warrants issued     20,000,000     $ 0.40          
Warrants exercised     (6,200,476 )   $ 0.50          
Warrants expired     (498,576 )   $ 3.24          
Outstanding at September 30, 2018     26,633,191     $ 0.49       4.56  

  

During the nine months ended September 30, 2018, the Company issued 50,000 shares of common stock from the exercise of investor warrants with an exercise price of $0.40 from the 2018 confidentially marketed public offering. The Company also issued 1,511,999 shares of common stock from the exercise of investor warrants with an exercise price of $0.76 from the 2017 registered direct offering. In addition, the Company issued 4,500,000 shares of common stock from the exercise of investor warrants at an exercise price of $0.40 from the 2016 registered direct offering. After this warrant exercise, the Company no longer has outstanding $0.40 warrants from the 2016 registered direct offering. The Company has received approximately $3.0 million as of September 30, 2018 related to these investor warrant exercises.

 

In July 2018, 138,477 of the placement agent warrants from the 2017 direct offering were cashlessly exercised, which resulted in the issuance of 103,148 shares of common stock.

 

In March 2017, the Company modified 498,576 of its outstanding warrants which extended the expiration until June 30, 2018. The $75,000 additional expense related to this modification was recognized in the quarter ended March 31, 2017. These warrants all expired as of June 30, 2018.

 

In March 2017, the Company modified the five million warrants issued in conjunction with the Company’s September 2016 registered direct offering with an original strike price of $1.00 down to $0.40. The $1.1 million gain related to this modification was recognized in the quarter ended March 31, 2017 (see Note 6). As noted above, these warrants were exercised in full during the first quarter of 2018.

 

Note 8 - Related Party Transactions

 

Sponsored Research Agreement

 

Ampio entered into a sponsored research agreement with Trauma Research LLC, an entity controlled by Ampio’s Director and former Chief Scientific Officer (“CSO”), Dr. Bar-Or, in September 2009, which was amended seven times with the last amendment occurring in June 2017. The agreement was terminated effective July 5, 2017. The remaining prepaid of $252,000 was expensed during the quarter ended June 30, 2017. In conjunction with terminating this agreement, the Company extended the employment agreement for Dr. Bar-Or until July 2018. In July 2018, the Company extended Dr. Bar-Or’s employment agreement for an additional month. On August 29, 2018, Dr. Bar-Or notified the Company of his decision to retire from his role as CSO, effective September 30, 2018. Dr. Bar-Or will continue to serve as a member of the Board of Directors and the Scientific Advisory Board of the Company.

 

Service Agreement

 

In June 2017, Ampio terminated the shared services agreement with Aytu. For the nine months ended September 30, 2018 and 2017, the total shared overhead cost was $0 and $77,000, respectively.

 

  17  

 

  

Note 9 - Litigation

 

On August 25, 2018 and August 31, 2018, two purported stockholders of the Company brought putative class action lawsuits in the United States District Court for the Central District of California, Shi v. Ampio Pharmaceuticals, Inc., et al., Case No. 2:18-cv-07476-SJO-RAO, and in the United States District Court for the District of Colorado, Shaffer v. Ampio Pharmaceuticals, Inc., et al., Case No. 1:18-cv-02252-KLM (the “Securities Class Actions”). Plaintiffs in the Securities Class Actions allege that the Company and certain of its current officers violated federal securities laws by misrepresenting and/or omitting information regarding the AP-003 Phase III clinical trials of Ampion. Plaintiffs in the Securities Class Actions assert claims under Sections 10(b) and 20(a) and Rule 10b-5 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) on behalf of a putative class of purchasers of the Company’s common stock from December 14, 2017 through August 7, 2018. The Securities Class Actions seek unspecified damages, pre-judgment and post-judgment interest, and attorneys’ fees and costs.

 

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, Cetrone v. Macaluso et al., Case No. 2:18-cv-05970-SJO-RAO (the “Cetrone Action”), alleging primarily that the directors and officers of Ampio breached their fiduciary duties because of their alleged misstatements and/or omissions regarding the AP-003 Phase III clinical trials of Ampion.

 

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., 1:18-cv-02558, which closely parallels the allegations in the Cetrone Action.

 

The Company believes these claims are without merit and intends to defend these lawsuits vigorously. The Company currently believes the likelihood of a loss contingency related to these matters is remote and, therefore, no provision for a loss contingency is required. 

 

Note 10 - Subsequent Events

   

As of November 14, 2018, the Company issued 125,000 shares of common stock from the exercise of investor warrants with an exercise price of $0.40. The Company has received $50,000 related to these warrant exercises.

 

See Note 9 for litigation updates.

 

Effective October 1, 2018, EKS&H LLLP (“EKS&H”), the independent registered public accounting firm for the Company combined with Plante & Moran PLLC (“Plante Moran”). As a result of this transaction, on October 1, 2018, EKS&H resigned as the independent registered public accounting firm for the Company. Concurrent with such resignation, the Company’s audit committee approved the engagement of Plante Moran as the new independent registered public accounting firm for the Company.

 

On October 1, 2018, the Compensation Committee of the Board of Directors of the Company approved a one-time option repricing (the “Option Repricing”) where the exercise price of each Relevant Option (as defined below) was amended to reduce such exercise price to $0.75 per share, 44% above the closing price of the Company’s common stock on October 1, 2018 and 88% above the price per share of common stock sold in the Company’s recently completed public offering (not including the value of the accompanying warrants). “Relevant Options” are all outstanding stock options as of October 1, 2018 (vested or unvested) to acquire shares of the Company’s common stock that had exercise prices above $0.75 per share; provided, however, that the maximum dollar value of the repricing for any individual did not exceed $500,000 (with such value calculated by multiplying (i) the difference between the initial exercise price and $0.75 by (ii) the number of options being repriced). In conjunction with the repricing, the Compensation Committee determined to eliminate all outstanding accrued bonuses, which amount to approximately $813,000. The Compensation Committee believes that the Option Repricing is in the best interests of the Company, as the amended stock options will provide added incentives to retain and motivate key contributors of the Company at this critical juncture without incurring the stock dilution resulting from significant option grants. The Compensation Committee also believes that the repricing better aligns the interests of the key contributors with the goals of the Company. The Company’s Board of Directors, along with the Chairman and Chief Executive Officer, Michael Macaluso, did not participate in the Option Repricing.

 

In October 2018, the Company retained a law firm to represent its interests in a lobbying effort with the Food and Drug Administration, or FDA.

 

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

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

This discussion should be read in conjunction with our historical financial statements. The following discussion and analysis contain forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. For additional information regarding these risks and uncertainties, please see Part II, Item 1A of this Form 10-Q, “Risk Factors,” and the risk factors included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 6, 2018.

 

EXECUTIVE SUMMARY

 

We are an innovative drug discovery and development company combining scientific, regulatory, and business capabilities to efficiently develop our main therapeutic candidate, Ampion. If approved, Ampion will address significant inflammatory conditions for which limited treatment options exist. Ampion has been developed through more than two decades of study at leading hospital-based research centers.

 

The pharmaceutical market is a competitive industry with strict regulations that are time intensive and costly. However, we are committed to offer compelling therapeutic options for the patients most in need of new treatment options, and we operate every day to advance our product candidates.

 

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Since we are in the research and development phase, we have not generated revenue to date. Our operations are funded through equity raises, which occur from time to time. To proceed with our operations, we will need to raise additional funds to support the advancement of our therapeutic candidates.

 

Moving forward, we plan on creating a leaner and more efficient operating model by streamlining our operations and reallocating resources towards commercializing our lead product candidate, Ampion.

 

Overview

 

We maintain an Internet website at www.ampiopharma.com . Information on or linked to our website is not incorporated by reference into this Quarterly Report on Form 10-Q. Filings with the SEC can also be obtained at the SEC’s website, www.sec.gov .

  

We focus primarily on developing compounds that decrease inflammation by (i) inhibiting specific pro-inflammatory compounds by affecting specific pathways at the protein expression and at the transcription level; (ii) activating specific phosphatase or depleting available phosphate needed for the inflammation process; and (iii) decreasing vascular permeability.

 

We have a lead product candidate, which has advanced through late-stage clinical trials in the United States. On August 3, 2018, the FDA informed us that our latest trial, AP-003-C, was not considered an adequate and well-controlled clinical trial. The FDA recommended that we design a randomized trial with a concurrent control group to gather additional evidence necessary to support a Biologics License Application, or BLA. In addition, the FDA recommended that we request a Special Protocol Assessment, or SPA, to obtain FDA concurrence on the trial design before beginning the study. We are in the process of designing a new pivotal clinical trial and requesting a SPA, but we do not agree with the FDA’s initial conclusion regarding the insufficiency of AP-003-C. Consequently, we are engaged in a formal dispute with the FDA and will provide them with additional information in an effort to persuade them to reconsider their decision of rejecting the AP-003-C clinical trial, which they considered not adequate and well-controlled. The FDA has agreed to consider this additional information in a Type C meeting before the end of November 2018.

 

Product Update –

 

We continue to execute our business plan and advance our main drug candidates.

 

AMPION

 

Ampion for Osteoarthritis and Other Inflammatory Conditions

 

Ampion is the < 5 kDa ultrafiltrate of 5% Human Serum Albumin, an FDA approved biologic product. Ampion is a non-steroidal, low molecular weight, anti-inflammatory biologic, which has the potential to be used in a wide variety of acute and chronic inflammatory conditions, as well as immune-mediated diseases. Ampion and its known components have demonstrated a broad spectrum of anti-inflammatory and immune modulatory activity which support the mechanism of action. We have published several scientific papers and peer-reviewed publications on Ampion’s mechanism of action.

 

We are currently developing Ampion as an intra-articular injection to treat the signs and symptoms of severe osteoarthritis of the knee, or OAK. Osteoarthritis is a growing epidemic in the United States and symptomatic OAK is expected to impact 1 in 2 Americans. 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 to no treatment options other than total knee arthroplasty. The FDA has stated that severe OAK is an ‘unmet medical need’ with no licensed therapies for this indication.

 

We have conducted multiple clinical studies which have included over 2,000 patients in the development of Ampion.

 

Clinical Development Pathway

 

In September 2018, the FDA provided a response to our Chemistry, Manufacturing, and Controls (CMC) request. The FDA agreed on the CMC data requirements and analytical characterization of Ampion based the limited data that was provided to them. In addition, the FDA notified us that the potency control and commercial release specifications of Ampion are questions that will be addressed during the BLA review.

 

In August 2018, the FDA reaffirmed that clinical study AP-003-A is an adequate and well-controlled pivotal trial and provides evidence of effectiveness of Ampion and can contribute to the substantial evidence of effectiveness necessary for the approval of a BLA. The FDA has requested two pivotal trials in support of an Ampion BLA. Despite our belief that the AP-003-C trial design was based on FDA guidance and feedback, and consistent with FDA precedent for similar products (in intended use, in origin, and in regulatory pathway), which we reiterated with the FDA multiple times, the FDA does not consider the AP-003-C trial to be an adequate and well-controlled pivotal clinical trial. The FDA recommended that we perform an additional randomized trial with a concurrent control group. Discussions are on-going with the FDA regarding the necessity of conducting an additional trial, as we believe the current body of data is sufficient to submit the BLA. Should another trial be required, we will move quickly to meet the FDA requirements under a SPA. The SPA will provide written agreement between us and the FDA indicating concurrence by the FDA with the adequacy and acceptability of critical elements of the overall protocol design for a study intended to support a BLA for Ampion. These elements of the protocol are critical to ensure the study can be considered an adequate and well-controlled pivotal trial in support of marketing approval. Under the Prescription Drug User Fee Act and Biosimilar User Fee Amendments, the FDA has committed to send a SPA letter to the sponsor within 45 calendar days of receipt of the SPA submission. As of the filing date of this quarterly report, we have not submitted a SPA.

 

In November 2017, we started the Open Label Extension, or OLE, study of the AP-003-C trial, which was designed to support the safety and tolerability of repeat injections of Ampion (up to five injections) over the course of one year. No serious drug-related adverse events have been reported, and all patients have demonstrated a sustained reduction in pain over the course of the trial. In August 2018, we canceled the OLE study. We will continue to incur close-out costs for the study through the beginning of fiscal 2019.

 

We also intend to study Ampion for therapeutic applications other than osteoarthritis of the knee. We may engage development partners to study Ampion in various conditions including: (i) acute and chronic inflammatory conditions; (ii) degenerative joint diseases; and (iii) respiratory disorders. We are also studying Ampion’s effects on cellular behavior to indicate potential effects on disease modification across multiple conditions. If successful, we believe these additional formulations and potential therapeutic indications will supplement the Ampion clinical portfolio and will enable clinical applications in large therapeutic markets where there are significant unmet needs.

 

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OPTINA  

 

Optina for Diabetic Macular Edema

 

Optina is a low-dose formulation of danazol to treat diabetic macular edema, or DME. Danazol is a synthetic derivative of modified testosterone ethisterone, and we believe it affects vascular endothelial cell leakage in a biphasic manner. At low doses, danazol decreases vascular permeability by increasing the barrier function of endothelial cells. The lipophilic low-molecular-weight weak androgen has the potential to treat multiple angiopathies. Steroid hormones control a variety of functions through slow genomic and rapid non-genomic mechanisms. Danazol immediately increases intracellular cyclic adenosine monophosphate through the rapid activation of membrane-associated androgen, steroid binding globulin, and calcium channel receptors. At lower concentrations danazol binds to androgen and steroid binding globulin receptors stimulating the formation of a cortical actin ring. At higher concentrations, activation of the calcium channels shifts the balance towards stress fiber formation and increases vascular permeability. 

 

When filamentous actin is organized into a cortical ring, Optina increases the barrier function of endothelial cells by tethering adhesion molecule complexes to the cytoskeleton. In this orientation, increased cortical actin improves tight junctions which strengthen cell-to-cell adhesions. Formation of the cortical actin ring thereby restricts leakage across the cell membrane. 

 

Clinical Development Pathway

 

We met with the Division of the Transplant and Ophthalmology Products of the FDA in late 2015 to discuss the results of the OptimEyes clinical trial of Optina and to seek guidance on the next steps for approval. The guidance from the FDA was that we perform a confirmatory study on patients with DME who are refractory to the currently available drugs, which if successful, would qualify Optina as a rescue medication for patients who have no treatment options (failed available therapies). We have also considered conducting a trial in combination with other anti-vascular endothelial growth factor, or anti-VEGF, drugs as we believe the effect of Optina with the anti-VEGF drugs could be cumulative.

 

The FDA has indicated that, for §505(b)(2) NDAs, complete studies of the safety and effectiveness of a product candidate may not be necessary if appropriate bridging studies provide an adequate basis for reliance upon the FDA’s findings of safety and effectiveness for a previously approved product.

 

While Optina shows promise, we are currently focusing our resources and clinical development efforts on Ampion to treat osteoarthritis of the knee, which is our highest priority. We plan to explore partnerships and/or development agreements related to Optina, pending further progress on Ampion related to osteoarthritis of the knee.

 

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Recent Financing Activities  

 

In August 2018, we completed a confidentially marketed public offering. In this offering, we issued 20.0 million shares of common stock and warrants to purchase up to 20.0 million shares of common stock. The common stock and warrants were sold in units, with each unit consisting of one share of common stock and a warrant to purchase one share of common stock. Each unit was sold to the investors in this offering at a negotiated price of $0.40 per unit generating gross proceeds of $8.0 million. In connection with the offering, the underwriter received an 7% commission totaling $560,000. We also incurred expenses related to legal, accounting, and other registration costs of $284,000. The shares and the warrants were offered and sold pursuant to our shelf registration statement on Form S-3 that was declared effective by the SEC in April 2017.

 

The warrants have an exercise price of $0.40 per share and are exercisable immediately with a term of five years from issuance. The warrants include a provision where the warrant holder has the contractual right to request a cash exercise if the effectiveness of the registration statement is not maintained, but securities law would prevent us from issuing registered shares in a cash exercise. Therefore, we could be forced to cash settle the warrants. Based on this derivative feature, these warrants must be accounted for as a liability at fair value under Accounting Standards Codification (“ASC”) 815 “Derivatives and Hedging”. On the date of issuance, these warrants were valued at $8.0 million.

 

Our net cash proceeds from the confidentially marketed public offering totaled $7.2 million. When the additional non-cash charges of $8.0 million related to the 20.0 million investor warrants are offset against the net cash transaction proceeds, the non-cash charges exceeded 100% of the proceeds. Therefore, we are required to take the additional cost above the transaction proceeds and recognize a loss on the day it entered into the transaction. The loss on the transaction was $853,000 and this amount is included in the derivative gain on the statement of operations.

 

In October 2017, we entered into a Securities Purchase Agreement, with certain investors, pursuant to which we sold approximately 7.7 million shares of common stock at a price per share of $0.875. The gross proceeds from the offering were approximately $6.7 million. The costs associated with the offering were approximately $490,000. The shares were offered and sold pursuant to our shelf registration statement on Form S-3 that was declared effective by the SEC in April 2017. 

 

In June 2017, we completed a registered direct offering. In this offering, we issued directly to multiple investors approximately 11.0 million shares of our common stock and approximately 11.0 million warrants to purchase shares of common stock. The common stock and warrants were sold in units, with each unit consisting of one share of common stock and a warrant to purchase one share of common stock. Each unit was sold to the investors in this offering at a negotiated price of $0.60 per unit generating gross proceeds of $6.6 million. In connection with the offering, the placement agent received an 8% commission totaling $533,000 and approximately 879,000 warrants with an exercise price of $0.76. The expiration date of these warrants is June 1, 2022. At issuance, these warrants had a value of $369,000 and were accounted for as equity-based warrants. The placement agent warrants provide for cashless exercise, which the placement agents may elect if there is no effective registration statement. We also incurred expenses related to legal, accounting, and other registration costs of $292,000.

 

There was a participation right of 35% for any proposed or intended issuance or sale or exchange of securities being offered until the second anniversary of the closing date, which would have expired on June 2, 2019. However, in July 2018, we obtained the required number of waivers necessary to eliminate the participate rights from the June 2017 registered direct offering. The shares and the warrants were offered and sold pursuant to our shelf registration statement on Form S-3 that was declared effective by the SEC in April 2017.

 

The investor warrants have an exercise price of $0.76 per share and were exercisable starting on December 7, 2017 with a term of five years from issuance. The investor warrants include a provision where the warrant holder has the contractual right to request a cash exercise if the effectiveness of the registration statement is not maintained, but securities law would prevent us from issuing registered shares in a cash exercise. Therefore, we could be forced to cash settle the warrant. Based on this derivative feature, these warrants must be accounted for as a liability at fair value under ASC 815 “Derivatives and Hedging”. On the date of issuance, these warrants were valued at $4.6 million.

  

In September 2016, we completed a registered direct offering. In this offering, we issued directly to an institutional investor 5.0 million shares of our common stock and warrants to purchase up to 5.0 million shares of common stock. The common stock and warrants were sold in units, with each unit consisting of one share of common stock and a warrant to purchase one share of common stock. Each unit was sold to the investor in this offering at a negotiated price of $0.75 per unit generating gross proceeds of $3.75 million. In connection with the offering, the placement agent received a 6% commission totaling $225,000 and 150,000 warrants with an exercise price of $0.9375. The expiration date of these warrants is September 1, 2021. At issuance, these warrants had a value of $89,000 and were accounted for as equity-based warrants. The placement agent warrants provide for cashless exercise, which the placement agents may elect if there is no effective registration statement. We also incurred expenses related to legal, accounting, and other registration costs of $113,000.

 

There was a participation right of 30% for any proposed or intended issuance or sale or exchange of securities being offered until the first anniversary of the closing date, which expired on September 1, 2017. The shares and the warrants were offered and sold pursuant to our shelf registration statement on Form S-3 which was declared effective by the SEC in January 2014. The Form S-3 expired in January of 2017 and we filed a new Form S-3 in April 2017.

 

The investor warrants had an exercise price of $1.00 per share and were immediately exercisable with a term of five years from issuance. In addition, the investor warrants included a provision for an adjustment to the exercise price upon subsequent issuances of common stock by us at a price less than the warrant exercise price and the investor was entitled to purchase additional shares, such that the aggregate purchase price of $5.0 million for the warrant shares remained unchanged. The investor warrants also included a provision for redemption at the Black-Scholes value at the request of the holder upon a change of control. Based on these derivative features, these warrants were accounted for as a liability at fair value under ASC 480 “Distinguishing Liabilities from Equity”. On the date of issuance, these warrants were valued at $4.1 million.

 

Our net cash proceeds from the registered direct offering were $3.4 million. When the additional non-cash charges of $4.2 million related to the 5.0 million investor warrants and the 150,000 placement agent warrants were offset against the net cash transaction proceeds, this exceeded 100% of the proceeds so we were required to take the additional cost above the transaction proceeds and recognize a loss on the day of the transaction. The loss on the transaction was $804,000 and was included in derivative loss on the statement of operations.

 

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On March 27, 2017, we entered into a Waiver and Consent Letter Agreement with the investor from the September 2016 registered direct offering, amending the terms of the warrants previously issued. Under the Waiver and Consent Agreement, the investor waived the right to have the warrant exercise price reduced and the number of shares of common stock underlying the warrant increased in the event we secure any financing, including debt, which includes issuing or selling shares of common stock for a price per share less than the warrant exercise price. The investor also waived the prohibition on our ability to issue or sell shares of our common stock, options or convertible securities at a price which varies or may vary with the market price of the common stock or pursuant to an equity credit line or similar “at-the-market” offering. The waivers are permanent. In return, we agreed to reduce the exercise price of the warrants from $1.00 to $0.40 and to not issue or sell any shares of our capital stock for a period of 10 trading days following the execution of the Waiver and Consent Agreement. All other terms of the warrants remained the same. Based upon the amendment to this warrant agreement, we recognized a non-cash derivative gain of $1.1 million during the quarter ended March 31, 2017.

  

Known Trends or Future Events; Outlook

 

We are a clinical stage company that has not generated revenues and therefore have incurred significant net losses totaling $172.5 million since our inception in December 2008. We expect to generate operating losses for the foreseeable future but intend to try to limit the extent of these losses by entering into co-development or collaboration agreements with one or more strategic partners. As of September 30, 2018, we had $8.7 million in cash. We expect our capital resources will last into the second quarter of 2019.

 

On September 1, 2017, we received a letter from the NYSE American stating that they had determined that we were not in compliance with Sections 1003(a)(ii) and (iii) of the NYSE American Company Guide, or the Guide, since we reported stockholders’ equity of $3,734,756 as of June 30, 2017 and net losses in our five most recent fiscal years ended December 31, 2016. Prior to this, we were exempt from Section 1003(a) of the Guide since our market capitalization was above $50 million. We submitted a plan on October 2, 2017 advising the NYSE American of the actions that will be taken to regain compliance with the continued listing standards by March 19, 2019. On November 9, 2017, we received a letter from the NYSE American stating that the NYSE American had accepted our plan to regain compliance with the continued listing standards. On April 12, 2018, we received a letter from NYSE American stating that we are again in compliance with all the NYSE American continued listing standards set forth in Part 10 of the Guide, specifically Sections 1003(a)(ii) and (iii). Going forward, we will be subject to continued listing monitoring.

 

With respect to FDA review of Ampion and our completed and ongoing clinical trials, including the AP-003-A and AP-003-C trials, we have been and expect to continue to be engaged in meetings and correspondence with the FDA about the product, its manufacturing, and the preclinical and clinical testing necessary to support Ampion’s safety and efficacy. We met with the FDA in July 2018 and have received a letter in response thereto. In the letter, the FDA stated that it considers the AP-003-A trial to be an adequate and well-controlled clinical trial that provides evidence of the effectiveness of Ampion and can contribute to the substantial evidence of effectiveness necessary for approval of a BLA, but that as a single trial the AP-003-A study alone does not appear to provide sufficient evidence of effectiveness to support a BLA. Despite our belief that the APC-003-C trial design was based on FDA guidance and feedback and consistent with FDA precedent for similar products (in intended use, in origin, and in regulatory pathway), which we reiterated with the FDA multiple times, the FDA does not consider the AP-003-C trial to be an adequate and well-controlled clinical trial. The FDA recommended that we perform an additional randomized trial with a concurrent control group and that we request a Special Protocol Assessment to obtain FDA concurrence of the trial design before beginning the study. We plan to continue to discuss with the FDA the necessity of conducting this additional trial, as we believe the current body of data is sufficient to submit the BLA.

 

Although we have raised capital with net proceeds of over $138 million in the past ten years through the sale of common stock and warrants, we cannot assure you that we will be able to secure such additional financing or that it will be adequate to execute our business strategy. Even if we obtain additional financing, it may be costly and may require us to agree to covenants or other provisions that will favor new investors over existing shareholders.

 

Our primary focus for the remainder of fiscal 2018 is raising additional capital and advancing the clinical development and BLA preparation of our core asset, Ampion.

 

ACCOUNTING POLICIES

 

Significant Accounting Policies and Estimates

 

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. 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 during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to recoverability of long-lived assets, valuation allowance, useful lives of assets, accrued compensation, stock compensation, warrant derivative liability and going concern. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable 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. Our significant accounting policies and estimates are included in our 2017 Annual Report on Form 10-K, filed with the SEC on March 6, 2018.

 

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Newly Issued Accounting Pronouncements

 

Information regarding the recently issued accounting standards (adopted and not adopted as of September 30, 2018) is contained in Note 1 to the Financial Statements.

  

RESULTS OF OPERATIONS

 

Results of Operations – September 30, 2018 Compared to September 30, 2017

 

We recognized net income for the quarter ended September 30, 2018 of $5.8 million compared to a net loss of $4.3 million for the same quarter in 2017. The net income during the 2018 quarter was attributable to the non-cash derivative gain of $7.7 million that was recognized, which was offset by the operating expenses of $1.9 million. The net loss during the 2017 quarter was primarily attributable to the $3.1 million in operating expenses, as well as the $1.1 million non-cash derivative loss. The investor warrant exercises and decrease in our stock price from $2.20 as of June 30, 2018 to $0.51 as of September 30, 2018 caused the valuation of the warrant liability to decrease resulting in a derivative gain during the 2018 quarter. The increase in our stock price from $0.52 as of June 30, 2017 to $0.61 as of September 30, 2017 caused the valuation of the warrant liability to increase resulting in a derivative loss during the 2017 quarter. The operating expenses decreased $1.2 million from the 2017 quarter to the 2018 quarter primarily due to a $809,000 decrease in research and development costs and a $357,000 decrease in general and administrative costs, which is further explained below.

 

We recognized net income for the period ended September 30, 2018 of $32.5 million compared to a net loss of $8.8 million for the same period in 2017. The net income during the 2018 period is attributable to the non-cash derivative gain of $41.1 million that was recognized, which was offset by the operating expenses of $8.6 million. The net loss during the 2017 period was attributable to $10.9 million in operating expenses, which was offset by the $2.1 million non-cash derivative gain. The investor warrant exercises and decrease in our stock price from $4.07 as of December 31, 2017 to $0.51 as of September 30, 2018 caused the valuation of the warrant liability to decrease resulting in a derivative gain during the 2018 period. The decrease in our stock price from $0.90 as of December 31, 2016 to $0.61 as of September 30, 2017 caused the valuation of the warrant liability to decrease resulting in a derivative gain during the 2017 period. The operating expenses decreased $2.2 million from the 2017 period to the 2018 period primarily due to a $1.6 million decrease in research and development costs and a $576,000 decrease in general and administrative costs, which is further explained below.

 

Operating Expenses

 

Research and Development

 

Research and development costs are summarized as follows:

 

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2018     2017     2018     2017  
                         
Clinical trials and sponsored research   $ 557,000     $ 854,000     $ 2,363,000     $ 3,089,000  
Labor     105,000       476,000       1,277,000       1,767,000  
Consultants and other     502,000       484,000       1,630,000       1,548,000  
Stock-based compensation     20,000       179,000       73,000       255,000  
Sponsored research - related party     -       -       -       324,000  
    $ 1,184,000     $ 1,993,000     $ 5,343,000     $ 6,983,000  

 

Research and development costs consist of clinical trials and sponsored research, labor, consultants and other, stock-based compensation and sponsored research - related party. Research and development costs decreased $809,000, or 40.6%, for the 2018 quarter compared to the 2017 quarter. This decrease is primarily attributable to clinical trials and sponsored research expense, labor costs and stock-based compensation. During the 2017 quarter, we incurred expenses related to the AP-003-C study. During the 2018 quarter, we were conducting the Open Label Extension (OLE) study, which was an extension of the AP-003-C study. However, the number of patients enrolled in the OLE study was approximately 40% less than the number of patients that were enrolled in the AP-003-C study, causing the expenses for the OLE study to be lower. Labor costs decreased for the 2018 quarter compared to the 2017 quarter primarily due to the elimination of the bonus accrual related to the option repricing discussed within the Subsequent Event footnote. Consultants and other costs are consistent for the 2018 quarter compared to the 2017 quarter. The decrease in stock-based compensation is a result of fewer options being granted at lower stock prices and previously awarded high priced options becoming fully vested during 2017.

 

Research and development costs decreased $1.6 million, or 23.5%, for the nine months ended September 30, 2018 compared to the same period in 2017. The decrease is primarily attributable to clinical trials and sponsored research expense, labor costs and stock-based compensation, as well as the sponsored research-related party. We incurred initial costs and clinical trial development expenses related to the AP-003-C study during the 2017 period. These costs were not incurred during the 2018 period, as the OLE study was an extension of the AP-003-C study. In addition, the number of patients enrolled in the OLE study was less than the AP-003-C study, causing the expenses for the OLE study to be lower. As noted above, labor costs for the 2018 period decreased from the 2017 period primarily due to the elimination of the bonus accrual related to the option repricing discussed within the Subsequent Event footnote. The decrease in stock-based compensation is a result of fewer options being granted at lower stock prices and previously awarded high priced options becoming fully vested during 2017. In addition, the sponsored research – related party expense also contributed to the decrease in the research and development costs due to the termination of the Trauma Research Agreement. Consultants and other costs increased as we incurred costs related to discussions with the FDA surrounding our clinical trials.

 

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General and Administrative

 

General and administrative costs are summarized as follows:

 

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2018     2017     2018     2017  
                         
Occupancy, travel and other   $ 390,000     $ 615,000     $ 1,463,000     $ 1,475,000  
Labor     (109,000 )     202,000       344,000       743,000  
Professional fees     244,000       94,000       645,000       573,000  
Patent costs     99,000       12,000       412,000       447,000  
Stock-based compensation     75,000       127,000       274,000       414,000  
Directors fees     57,000       63,000       165,000       227,000  
    $ 756,000     $ 1,113,000     $ 3,303,000     $ 3,879,000  

 

General and administrative costs consist of occupancy, travel and other, labor, professional fees, patent costs, stock-based compensation and director fees. General and administrative costs decreased $357,000, or 32.1%, for the 2018 quarter compared to the 2017 quarter. The decrease is primarily attributable to occupancy, travel and other expenses and labor costs. The decrease in occupancy, travel and other expenses relates to the termination of a contractual agreement that was supposed to assist us with potential partnerships, as well as a decrease in insurance premiums from the 2018 quarter compared to the 2017 quarter. Labor costs decreased for the 2018 quarter compared to the 2017 quarter primarily due to the elimination of the bonus accrual related to the option repricing, which is discussed within the Subsequent Event footnote. The decrease in stock-based compensation is a result of fewer options being granted at lower stock prices and previously awarded high priced options becoming fully vested during 2017. Professional fees increased for the 2018 quarter compare to the 2017 quarter due to an increase in legal fees related to current litigation, as well as amortization of a retainer related to a debt financing deal that is not expected to occur. Patent costs for the 2018 quarter have increased compared to the 2017 quarter due to a credit memo received from the patent attorney during the 2017 quarter.

 

General and administrative costs decreased $576,000, or 14.8%, for the nine months ended September 30, 2018 compared to the same period in 2017. The decrease is primarily attributable to labor, stock-based compensation and directors fees. As noted above, labor costs decreased for the 2018 period compared to the 2017 period primarily due to the elimination of the bonus accrual related to the option repricing, which is discussed within the Subsequent Event footnote. The decrease in stock-based compensation is a result of fewer options being granted at lower stock prices and previously awarded high priced options becoming fully vested during 2017. Director fees also decreased as there have been fewer board meetings during the 2018 period. There was an increase in professional fees due to an increase in legal fees related to current litigation, as well as the amortization of a retainer related to a debt financing deal that is not expected to occur.

 

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Net Cash Used in Operating Activities

 

During the nine months ended September 30, 2018, our operating activities used approximately $9.8 million in cash, which was less than the net income of $32.4 million primarily as a result of the non-cash gain in the warrant derivatives, a decrease in accounts payable and accrued compensation and an increase in prepaid expenses, which was offset by stock-based compensation, depreciation and amortization and common stock issued for services.

 

During the nine months ended September 30, 2017, our operating activities used approximately $8.8 million in cash, which was equal to the net loss of $8.8 million primarily as a result of the non-cash gain in the warrant derivative, a decrease in accrued compensation and an increase in prepaid expenses, which was offset by increases in accounts payable, stock-based compensation, depreciation and the acceleration of the related-party amortization.

 

Net Cash Used in Investing Activities

 

During the nine months ended September 30, 2018, cash was used to acquire $486,000 of manufacturing machinery and equipment.

 

During the nine months ended September 30, 2017, cash was used to acquire $33,000 of manufacturing machinery and equipment.

 

Net Cash from Financing Activities

 

During the nine months ended September 30, 2018, we received $3.6 million from option and warrant exercises. We also received gross proceeds from the sale of common stock in a confidentially marketed public offering of $8.0 million, which was offset by offering costs of $844,000.

 

During the nine months ended September 30, 2017, we received gross proceeds from the sale of common stock in a registered direct offering of $6.6 million, which was offset by offering costs of $812,000.

 

Liquidity and Capital Resources

 

To date, we have not generated revenues or profits. Our primary activities are focused on research and development, advancing our primary product candidates, and raising capital. As of September 30, 2018, we had $8.7 million of cash. We expect our capital resources will last into the second quarter of 2019. This projection is based on several assumptions that may prove to be incorrect, and we could exhaust our available cash and cash equivalents earlier than presently anticipated. We will be required to seek additional capital to continue our clinical and commercial development activities for Ampion. We intend to evaluate the capital markets from time to time to determine whether to raise additional capital in the form of equity, convertible debt or otherwise, depending on market conditions relative to our need for funds at such time, and we are in negotiations with potential investors for near-term financing.

 

We have prepared a budget for 2018 which reflects cash requirements for routine monthly expenses such as payroll, legal, accounting, patents and overhead costs at an average cash burn rate of approximately $800,000 per month. Additional funds are planned for regulatory approvals, clinical trials, outsourced research and development and commercialization consulting. Accordingly, it will be necessary to raise additional capital and/or enter into licensing or collaboration agreements. At this time, we expect to satisfy our future cash needs through private or public sales of our securities, debt financings, partnering/licensing transaction or our Controlled Equity Offering Sales Agreement that we entered into in February 2016. We cannot be certain that financing will be available to us on acceptable terms, or at all. Over the last couple of years, volatility in the financial markets has adversely affected the market capitalizations of many pharmaceutical companies and generally made equity and debt financing more difficult to obtain. This volatility, coupled with other factors, may limit our access to additional financing and/or make the additional financing dilutive to our current shareholders.

 

If we cannot raise adequate additional capital in the future when we require it, we will be required to delay, reduce the scope of, or eliminate one or more of our research or development programs or our future commercialization efforts or suspend operations for a period until we are able to raise additional capital. We also may be required to relinquish our rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. This may lead to impairment or other charges, which could materially affect our balance sheet and operating results.

 

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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”.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

We are not currently exposed to material market risk arising from financial instruments, changes in interest rates or commodity prices, or fluctuations in foreign currencies. We have no need to hedge against any of the foregoing risks and therefore currently engage in no hedging activities.

 

Item 4. 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 Securities Exchange Act of 1934, or 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 chief executive officer and chief financial officer, 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 chief executive officer and the chief financial officer, 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 chief executive officer and the chief financial officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective at the reasonable assurance level.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal controls over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

On August 25, 2018 and August 31, 2018, two purported stockholders of the Company brought putative class action lawsuits in the United States District Court for the Central District of California, Shi v. Ampio Pharmaceuticals, Inc., et al., Case No. 2:18-cv-07476-SJO-RAO, and in the United States District Court for the District of Colorado, Shaffer v. Ampio Pharmaceuticals, Inc., et al., Case No. 1:18-cv-02252-KLM (the “Securities Class Actions”). Plaintiffs in the Securities Class Actions allege that the Company and certain of its current officers violated federal securities laws by misrepresenting and/or omitting information regarding the AP-003 Phase III clinical trials of Ampion. Plaintiffs in the Securities Class Actions assert claims under Sections 10(b) and 20(a) and Rule 10b-5 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) on behalf of a putative class of purchasers of the Company’s common stock from December 14, 2017 through August 7, 2018. The Securities Class Actions seek unspecified damages, pre-judgment and post-judgment interest, and attorneys’ fees and costs.

 

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, Cetrone v. Macaluso et al., Case No. 2:18-cv-05970-SJO-RAO (the “Cetrone Action”), alleging primarily that the directors and officers of Ampio breached their fiduciary duties because of their alleged misstatements and/or omissions regarding the AP-003 Phase III clinical trials of Ampion. 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., 1:18-cv-02558, which closely parallels the allegations in the Cetrone Action.

 

The Company believes these claims are without merit and intends to defend these lawsuits vigorously. The Company currently believes the likelihood of a loss contingency related to these matters is remote and, therefore, no provision for a loss contingency is required.

 

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Item 1A. Risk Factors.  

 

We operate in a rapidly changing environment that involves a number of risks that could materially affect our business, financial condition or future results, some of which are beyond our control. In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the SEC and as updated by our Quarterly Reports on Form 10Q filed with the SEC, which could materially affect our business, financial condition or future results. During the period covered by this Quarterly Report on Form 10-Q, except as noted below, there were no material changes to the risk factors described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

 

Risks Related to Our Business

 

The FDA is requiring an additional clinical trial of Ampion for OAK.

 

We have been engaged in discussions with the FDA relating to the nonclinical development and clinical evaluation of Ampion. Following our meeting with the FDA in July 2018, we received a response letter thereto. In the letter, the FDA stated that it considers the AP-003-A trial to be an adequate and well-controlled clinical trial that provides evidence of the effectiveness of Ampion and can contribute to the substantial evidence of effectiveness necessary for approval of a BLA, but that as a single trial the AP-003-A study alone does not appear to provide sufficient evidence of effectiveness to support a BLA. The FDA did not consider the AP-003-C trial to be an adequate and well-controlled clinical trial and recommended that we perform an additional randomized trial with a concurrent control group and that we request a Special Protocol Assessment to obtain FDA concurrence of the trial design before beginning the study. We plan to continue to discuss the data and our BLA with the FDA and we cannot ensure the outcome of such subsequent discussions with the FDA. We also cannot ensure that the data derived from a subsequent trial will be sufficient to support a submission to the FDA of a BLA for Ampion. We will also continue to address with the FDA the validation of manufacturing processes and controls and we cannot ensure when or whether we will receive validation.

 

Risks Related to Our Common Stock

 

We may not be able to comply with the listing requirements of, and may be delisted from, the NYSE American

 

Our common stock trades on the NYSE American, or the Exchange. The Exchange imposes various quantitative and qualitative requirements to maintain listing, including minimum stockholders’ equity requirements. On September 1, 2017, we received a letter from the Exchange stating that the Exchange had determined that we were not in compliance with Sections 1003(a)(iii) of the Exchange Company Guide and the stockholder’s equity continued listing standards applicable to us due to our recently reported stockholder’s equity of $3,734,756 as of June 30, 2017 and net losses in our five most recent fiscal years ended December 31, 2016. Prior to this, we were exempt from Section 1003(a) of the Guide since our market capitalization was above $50 million. We submitted a plan on October 2, 2017 advising the NYSE American of the actions that will be taken to regain compliance with the continued listing standards by March 19, 2019. On November 9, 2017, we received a letter from the NYSE American stating that the NYSE American had accepted our plan to regain compliance with the continued listing standards. On April 12, 2018, we received a letter from NYSE American stating that we are back in compliance with all the NYSE American continued listing standards set forth in Part 10 of the Guide, specifically Sections 1003(a)(ii) and (iii). Even though we are back in compliance with the Exchange’s listing standards, there can be no assurances that we will be able to continue to comply with the Exchange listing requirements.

 

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

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

None.

 

Item 5. Other Information.

 

On November 12, 2018, the Board of Directors approved an amendment to our bylaws providing for a disclosure committee. 

 

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Item 6. Exhibits.

 

Exhibit
Number
  Description
1.1   Underwriting Agreement, dated August 9, 2018, by and between the Company and Canaccord Genuity LLC (1).
     
1.2   Amendment No. 1, dated August 10, 2018, to the Underwriting Agreement by and between the Company and Canaccord Genuity LLC (1).
     
3.1   Amended and Restated Bylaws.
     
4.1   Form of Warrant (1).
     
31.1   Certificate of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
31.2   Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1   Certificate of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*.
     
101   XBRL (eXtensible Business Reporting Language). The following materials from Ampio Pharmaceuticals, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 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 Financial Statements.

 

* The certification attached as Exhibit 32.1 accompanying this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

 

(1) Incorporated by reference from the Company’s Current Report on 8-K filed on August 13, 2018.

 

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SIGNATURES

 

Pursuant to the requirements 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.

  

  AMPIO PHARMACEUTICALS, INC.
     
  By: /s/ Michael Macaluso
    Michael Macaluso
    Chairman and Chief Executive Officer
    Date: November 14, 2018
     
  By: /s/ Thomas E. Chilcott, III
    Thomas E. Chilcott, III
    Chief Financial Officer, Treasurer and Secretary
    Date: November 14, 2018

 

  29  

 

Exhibit 3.1

 

 

BYLAWS OF

 

AMPIO PHARMACEUTICALS, INC.

 

AS Amended

 


BYLAWS

OF

AMPIO PHARMACEUTICALS, INC.

(A DELAWARE CORPORATION)

 

ARTICLE I

OFFICES

 

Section 1.   Registered Office. The registered office of the corporation in the State of Delaware shall be in the City of Wilmington, County of New Castle.

 

Section 2.   Other Offices. The corporation shall also have and maintain an office or principal place of business at such place as may be fixed by the Board of Directors, and may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors may from time to time determine or the business of the corporation may require.

 

ARTICLE II

CORPORATE SEAL

 

Section 3.   Corporate Seal. The Board of Directors may adopt a corporate seal. The corporate seal shall consist of a die bearing the name of the corporation and the inscription, “Corporate Seal Delaware.” Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

 

ARTICLE III

STOCKHOLDERS’ MEETINGS

 

Section 4.   Place of Meetings. Meetings of the stockholders of the corporation may be held at such place, either within or without the State of Delaware, as may be determined from time to time by the Board of Directors. The Board may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the Delaware General Corporation Law (the “DGCL”). In the absence of any such designation or determination, stockholders’ meetings shall be held at the Company’s principal executive office.

 

Section 5.   Annual Meeting.

 

(a)  The annual meeting of the stockholders of the corporation, for the purpose of election of directors and for such other business as may lawfully come before it, shall be held on such date and at such time as may be designated from time to time by the Board of Directors. Nominations of persons for election to the Board of Directors of the corporation and the proposal o f business to be considered by the stockholders may be made at an annual meeting of stockholders: (i) pursuant to the corporation’s notice of meeting of stockholders; (ii) by or at the direction of the Board of Directors; or (iii) by any stockholder of the corporation who was a stockholder of record at the time of giving of notice provided for in the following paragraph, who is entitled to vote at the meeting and who complied with the notice procedures set forth in Section 5.

 

 

 

 

(b)  At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of Section 5(a) of these Bylaws, (i) the stockholder must have given timely notice thereof in writing to the Secretary of the corporation, (ii) such other business must be a proper matter for stockholder action under the DGCL, (iii) if the stockholder, or the beneficial owner on whose behalf any such proposal or nomination is made, has provided the corporation with a Solicitation Notice (as defined in this Section 5(b)), such stockholder or beneficial owner must, in the case of a proposal, have delivered a proxy statement and form of proxy to holders of at least the percentage of the corporation’s voting shares required under applicable law to carry any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and form of proxy to holders of a percentage of the corporation’s voting shares reasonably believed by such stockholder or beneficial owner to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder, and must, in either case, have included in such materials the Solicitation Notice, and (iv) if no Solicitation Notice relating thereto has been timely provided pursuant to this section, the stockholder or beneficial owner proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this Section 5. To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the ninetieth (90th) day nor earlier than the close of business on the one hundred twentieth (120th) day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder’s notice as described above. Such stockholder’s notice shall set forth: (A) as to each person whom the stockholder proposed to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “1934 Act”) and Rule 14a-4(d) thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (B) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (C) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the corporation’s books, and of such beneficial owner, (ii) the class and number of shares of the corporation which are owned beneficially and of record by such stockholder and such beneficial owner, and (iii) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of the proposal, at least the percentage of the corporation’s voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the corporation’s voting shares to elect such nominee or nominees (an affirmative statement of such intent, a “Solicitation Notice”).

 

(c)  Notwithstanding anything in the second sentence of Section 5(b) of these Bylaws to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the corporation at least one hundred (100) days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Section 5 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the corporation.

 

(d)  Only such persons who are nominated in accordance with the procedures set forth in this Section 5 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 5. Except as otherwise provided by law, the Chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made, or proposed, as the case may be, in accordance with the procedures set forth in these Bylaws and, if any proposed nomination or business is not in compliance with these Bylaws, to declare that such defective proposal or nomination shall not be presented for stockholder action at the meeting and shall be disregarded.

 

 

 

 

(e)  Notwithstanding the foregoing provisions of this Section 5, in order to include information with respect to a stockholder proposal in the proxy statement and form of proxy for a stockholders’ meeting, stockholders must provide notice as required by the regulations promulgated under the 1934 Act. Nothing in these Bylaws shall be deemed to affect any rights of stockholders to request inclusion of proposals in the corporation proxy statement pursuant to Rule 14a-8 under the 1934 Act.

 

(f)  For purposes of this Section 5, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the 1934 Act.

 

Section 6.   Special Meetings.

 

(a)  Special meetings of the stockholders of the corporation may be called, for any purpose or purposes, by (i) the Chairman of the Board of Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board of Directors for adoption) or (iv) by the holders of shares entitled to cast not less than twenty percent (20%) of the votes at the meeting, and shall be held at such place, on such date, and at such time as the Board of Directors shall fix.

 

(b)  If a special meeting is properly called by any person or persons other than the Board of Directors, the request shall be in writing, specifying the general nature of the business proposed to be transacted, and shall be delivered personally or sent by certified or registered mail, return receipt requested, or by telegraphic or other facsimile transmission to the Chairman of the Board of Directors, the Chief Executive Officer, or the Secretary of the corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The Board of Directors shall determine the time and place of such special meeting, which shall be held not less than thirty-five (35) nor more than one hundred twenty (120) days after the date of the receipt of the request. Upon determination of the time and place of the meeting, the officer receiving the request shall cause notice to be given to the stockholders entitled to vote, in accordance with the provisions of Section 7 of these Bylaws. Nothing contained in this paragraph (b) shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board of Directors may be held.

 

Section 7.   Notice of Meetings. Except as otherwise provided by law, notice, given in writing or by electronic transmission, of each meeting of stockholders shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting, such notice to specify the place, if any, date and hour, in the case of special meetings, the purpose or purposes of the meeting, and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at any such meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the corporation. Notice of the time, place, if any, and purpose of any meeting of stockholders may be waived in writing, signed by the person entitled to notice thereof or by electronic transmission by such person, either before or after such meeting, and will be waived by any stockholder by his attendance thereat in person, by remote communication, if applicable, or by proxy, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Any stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given.

 

 

 

 

Section 8.   Quorum. At all meetings of stockholders, except where otherwise provided by statute or by the Certificate of Incorporation, or by these Bylaws, the presence, in person, by remote communication, if applicable, or by proxy duly authorized, of the holders of a majority of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business. In the absence of a quorum, any meeting of stockholders may be adjourned, from time to time, either by the chairman of the meeting or by vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting. The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Except as otherwise provided by statute, or by the Certificate of Incorporation or these Bylaws, in all matters other than the election of directors, the affirmative vote of a majority of shares present in person, by remote communication, if applicable, or represented by proxy duly authorized at the meeting and entitled to vote generally on the subject matter shall be the act of the stockholders. Except as otherwise provided by statute, the Certificate of Incorporation or these Bylaws, directors shall be elected by a plurality of the votes of the shares present in person, by remote communication, if applicable, or represented by proxy duly authorized at the meeting and entitled to vote generally on the election of directors. Where a separate vote by a class or classes or series is required, except where otherwise provided by the statute or by the Certificate of Incorporation or these Bylaws, a majority of the outstanding shares of such class or classes or series, present in person, by remote communication, if applicable, or represented by proxy duly authorized, shall constitute a quorum entitled to take action with respect to the vote on that matter. Except where otherwise provided by statute or by the Certificate of Incorporation or these Bylaws, the affirmative vote of the majority (plurality, in the case of the election of directors) of shares of such class or classes or series present in person, by remote communication, if applicable, or represented by proxy at the meeting shall be the act of such class or classes or series.

 

Section 9.   Adjournment and Notice of Adjourned Meetings. Any meeting of stockholders, whether annual or special, may be adjourned from time to time either by the chairman of the meeting or by the vote of a majority of the shares present in person, by remote communication, if applicable, or represented by proxy. When a meeting is adjourned to another time or place, if any, notice need not be given of the adjourned meeting if the time and place, if any, thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

 

Section 10.   Voting Rights. For the purpose of determining those stockholders entitled to vote at any meeting of the stockholders, except as otherwise provided by law, only persons in whose names shares stand on the stock records of the corporation on the record date, as provided in Section 12 of these Bylaws, shall be entitled to vote at any meeting of stockholders. Every person entitled to vote or execute consents shall have the right to do so either in person, by remote communication, if applicable, or by an agent or agents authorized by a proxy granted in accordance with Delaware law. An agent so appointed need not be a stockholder. No proxy shall be voted after three (3) years from its date of creation unless the proxy provides for a longer period.

 

Section 11.   Joint Owners of Stock. If shares or other securities having voting power stand of record in the names of two (2) or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two (2) or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (a) if only one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the majority so voting binds all; (c) if more than one (1) votes, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally, or may apply to the Delaware Court of Chancery for relief as provided in the DGCL, Section 217(b). If the instrument filed with the Secretary shows that any such tenancy is held in unequal interests, a majority or even split for the purpose of subsection (c) shall be a majority or even split in interest.

 

Section 12.   List of Stockholders. The Secretary shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or during ordinary business hours, at the principal place of business of the corporation. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. The list shall be open to examination of any stockholder during the time of the meeting as provided by law.

 

 

 

 

Section 13.   Action Without Meeting.

 

(a)  Unless otherwise provided in the Certificate of Incorporation, any action required by statute to be taken at any annual or special meeting of the stockholders, or any action which may be taken at any annual or special meeting of the stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, or by electronic transmission setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.

 

(b)  Every written consent or electronic transmission shall bear the date of signature of each stockholder who signs the consent, and no written consent or electronic transmission shall be effective to take the corporate action referred to therein unless, within sixty (60) days of the earliest dated consent delivered to the corporation in the manner herein required, written consents or electronic transmissions signed by a sufficient number of stockholders to take action are delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to a corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested.

 

(c)  Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing or by electronic transmission and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of stockholders to take action were delivered to the corporation as provided in Section 228(c) of the DGCL. If the action which is consented to is such as would have required the filing of a certificate under any section of the DGCL if such action had been voted on by stockholders at a meeting thereof, then the certificate filed under such section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written consent has been given in accordance with Section 228 of the DGCL.

 

(d)  A telegram, cablegram or other electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxyholder, shall be deemed to be written, signed and dated for the purposes of this section, provided that any such telegram, cablegram or other electronic transmission sets forth or is delivered with information from which the corporation can determine (i) that the telegram, cablegram or other electronic transmission was transmitted by the stockholder or proxyholder or by a person or persons authorized to act for the stockholder and (ii) the date on which such stockholder or proxyholder or authorized person or persons transmitted such telegram, cablegram or electronic transmission. The date on which such telegram, cablegram or electronic transmission is transmitted shall be deemed to be the date on which such consent was signed. No consent given by telegram, cablegram or other electronic transmission shall be deemed to have been delivered until such consent is reproduced in paper form and until such paper form shall be delivered to the corporation by delivery to its registered office in the state of Delaware, its principal place of business or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to a corporation’s registered office shall be made by hand or by certified or registered mail, return receipt requested. Notwithstanding the foregoing limitations on delivery, consents given by telegram, cablegram or other electronic transmission may be otherwise delivered to the principal place of business of the corporation or to an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded if, to the extent and in the manner provided by resolution of the board of directors of the corporation. Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing.

 

Section 14.   Organization.

 

(a)  At every meeting of stockholders, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the President, or, if the President is absent, a chairman of the meeting chosen by a majority in interest of the stockholders entitled to vote, present in person or by proxy, shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary directed to do so by the President, shall act as secretary of the meeting.

 

 

 

 

(b)  The Board of Directors of the corporation shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the corporation and their duly authorized and constituted proxies and such other persons as the chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on matters which are to be voted on by ballot. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure.

 

ARTICLE IV

DIRECTORS

 

Section 15.  N umber and Term of Office. The authorized number of directors of the corporation shall be fixed by the Board of Directors from time to time. Directors need not be stockholders unless so required by the Certificate of Incorporation. If for any cause, the directors shall not have been elected at an annual meeting, they may be elected as soon thereafter as convenient.

 

Section 16.   Powers. The powers of the corporation shall be exercised, its business conducted and its property controlled by the Board of Directors, except as may be otherwise provided by statute or by the Certificate of Incorporation.

 

Section 17.   Term of Directors.

 

(a)  Directors shall be elected at each annual meeting of stockholders for a term of one year. Each director shall serve until his or her successor is duly elected and qualified or until his or her death, resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

 

(b)  No person entitled to vote at an election for directors may cumulate votes to which such person is entitled to vote.

 

Section 18.   Vacancies. Unless otherwise provided in the Certificate of Incorporation, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors shall, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by stockholders, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director’s successor shall have been elected and qualified. A vacancy in the Board of Directors shall be deemed to exist under this Bylaw in the case of the death, removal or resignation of any director.

 

Section 19.   Resignation. Any director may resign at any time by delivering his or her notice in writing or by electronic transmission to the Secretary, such resignation to specify whether it will be effective at a particular time, upon receipt by the Secretary or at the pleasure of the Board of Directors. If no such specification is made, it shall be deemed effective at the pleasure of the Board of Directors. When one or more directors shall resign from the Board of Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each Director so chosen shall hold office for the unexpired portion of the term of the Director whose place shall be vacated and until his successor shall have been duly elected and qualified.

 

 

 

 

Section 20.   Removal. Subject to any limitations imposed by applicable law, the Board of Directors or any director may be removed from office at any time (i) with cause by the affirmative vote of the holders of a majority of the voting power of all then-outstanding shares of capital stock of the corporation entitled to vote generally at an election of directors or (ii) without cause by the affirmative vote of the holders of a majority of the voting power of all then-outstanding shares of capital stock of the corporation, entitled to vote generally at an election of directors.

 

Section 21.   Meetings

 

(a)   Regular Meetings. Unless otherwise restricted by the Certificate of Incorporation, regular meetings of the Board of Directors may be held at any time or date and at any place within or without the State of Delaware which has been designated by the Board of Directors and publicized among all directors, either orally or in writing, including a voice-messaging system or other system designated to record and communicate messages, facsimile, telegraph or telex, or by electronic mail or other electronic means. No further notice shall be required for a regular meeting of the Board of Directors.

 

(b)   Special Meetings. Unless otherwise restricted by the Certificate of Incorporation, special meetings of the Board of Directors may be held at any time and place within or without the State of Delaware whenever called by the Chairman of the Board, the President or any director.

 

(c)   Meetings by Electronic Communications Equipment. Any member of the Board of Directors, or of any committee thereof, may participate in a meeting by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting.

 

(d)   Notice of Special Meetings. Notice of the time and place of all special meetings of the Board of Directors shall be orally or in writing, by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, facsimile, telegraph or telex, or by electronic mail or other electronic means, during normal business hours, at least twenty-four (24) hours before the date and time of the meeting. If notice is sent by U.S. mail, it shall be sent by first class mail, postage prepaid at least three (3) days before the date of the meeting. Notice of any meeting may be waived in writing or by electronic transmission at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

 

(e)   Waiver of Notice. The transaction of all business at any meeting of the Board of Directors, or any committee thereof, however called or noticed, or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present and if, either before or after the meeting, each of the directors not present who did not receive notice shall sign a written waiver of notice or shall waive notice by electronic transmission. All such waivers shall be filed with the corporate records or made a part of the minutes of the meeting.

 

Section 22.   Quorum and Voting.

 

(a)  Unless the Certificate of Incorporation requires a greater number, a quorum of the Board of Directors shall consist of a majority of the exact number of directors fixed from time to time by the Board of Directors in accordance with the Certificate of Incorporation; provided, however, at any meeting, whether a quorum be present or otherwise, a majority of the directors present may adjourn from time to time until the time fixed for the next regular meeting of the Board of Directors, without notice other than by announcement at the meeting.

 

(b)  At each meeting of the Board of Directors at which a quorum is present, all questions and business shall be determined by the affirmative vote of a majority of the directors present, unless a different vote be required by law, the Certificate of Incorporation or these Bylaws.

 

Section 23.   Action Without Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission, and such writing or writings or transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

 

 

 

 

Section 24.   Fees and Compensation. Directors shall be entitled to such compensation for their services as may be approved by the Board of Directors, including, if so approved, by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, for attendance at each regular or special meeting of the Board of Directors and at any meeting of a committee of the Board of Directors. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise and receiving compensation therefor.

 

Section 25.   Committees.

 

(a)   Executive Committee. The Board of Directors may appoint an Executive Committee to consist of one (1) or more members of the Board of Directors. The Executive Committee, to the extent permitted by law and provided in the resolution of the Board of Directors shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopting, amending or repealing any bylaw of the corporation.

 

(b)   Disclosure Committee. The corporation shall appoint and maintain a Disclosure Committee. The Disclosure Committee shall consist of the corporation’s chief financial officer and at least two (2) other members and shall have such powers and perform such duties as may be prescribed by the resolution or resolutions creating such committee, but in no event shall it have the powers denied to the Executive Committee in these Bylaws.

 

(c)   Other Committees. The Board of Directors may, from time to time, appoint such other committees as may be permitted by law. Such other committees appointed by the Board of Directors shall consist of one (1) or more members of the Board of Directors and shall have such powers and perform such duties as may be prescribed by the resolution or resolutions creating such committees, but in no event shall any such committee have the powers denied to the Executive Committee in these Bylaws.

 

(d)   Term. The Board of Directors, subject to the provisions of subsections (a) or (b) of this Bylaw, may at any time increase or decrease the number of members of a committee or terminate the existence of a committee. The membership of a committee member shall terminate on the date of his death or voluntary resignation from the committee or from the Board of Directors. The Board of Directors may at any time for any reason remove any individual committee member and the Board of Directors may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee, and, in addition, in the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.

 

(e)   Meetings. Unless the Board of Directors shall otherwise provide, regular meetings of the Executive Committee or any other committee appointed pursuant to this Section 25 shall be held at such times and places as are determined by the Board of Directors, or by any such committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter. Special meetings of any such committee may be held at any place which has been determined from time to time by such committee, and may be called by any director who is a member of such committee, upon notice to the members of such committee of the time and place of such special meeting given in the manner provided for the giving of notice to members of the Board of Directors of the time and place of special meetings of the Board of Directors. Notice of any special meeting of any committee may be waived in writing at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends such special meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Unless otherwise provided by the Board of Directors in the resolutions authorizing the creation of the committee, a majority of the authorized number of members of any such committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting at which a quorum is present shall be the act of such committee.

 

 

 

 

Section 26.   Organization. At every meeting of the directors, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the President, or if the President is absent, the most senior Vice President, (if a director) or, in the absence of any such person, a chairman of the meeting chosen by a majority of the directors present, shall preside over the meeting. The Secretary, or in his absence, any Assistant Secretary directed to do so by the President, shall act as secretary of the meeting.

 

ARTICLE V

OFFICERS

 

Section 27.   Officers Designated. The officers of the corporation shall include, if and when designated by the Board of Directors, the Chairman of the Board of Directors, the Chief Executive Officer, the President, one or more Vice Presidents, the Secretary, the Chief Financial Officer, and the Treasurer, all of whom shall be appointed at the annual organizational meeting of the Board of Directors. The Board of Directors may also appoint one or more Assistant Secretaries, Assistant Treasurers and such other officers and agents with such powers and duties as it shall deem necessary. The Board of Directors may assign such additional titles to one or more of the officers as it shall deem appropriate. Any one person may hold any number of offices of the corporation at any one time unless specifically prohibited therefrom by law. The salaries and other compensation of the officers of the corporation shall be fixed by or in the manner designated by the Board of Directors.

 

Section 28.   Tenure and Duties of Officers.

 

(a)   General. All officers shall hold office at the pleasure of the Board of Directors and until their successors shall have been duly elected and qualified, unless sooner removed. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors.

 

(b)   Duties of Chairman of the Board of Directors. The Chairman of the Board of Directors, when present, shall preside at all meetings of the stockholders and the Board of Directors. The Chairman of the Board of Directors shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time. If there is no President, then the Chairman of the Board of Directors shall also serve as the Chief Executive Officer of the corporation and shall have the powers and duties prescribed in paragraph (c) of this Section 28.

 

(c)   Duties of President. The President shall preside at all meetings of the stockholders and at all meetings of the Board of Directors, unless the Chairman of the Board of Directors has been appointed and is present. Unless some other officer has been elected Chief Executive Officer of the corporation, the President shall be the chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the corporation. The President shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time.

 

(d)   Duties of Vice Presidents. The Vice Presidents may assume and perform the duties of the President in the absence or disability of the President or whenever the office of President is vacant. The Vice Presidents shall perform other duties commonly incident to their office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.

 

(e)   Duties of Secretary. The Secretary shall attend all meetings of the stockholders and of the Board of Directors and shall record all acts and proceedings thereof in the minute book of the corporation. The Secretary shall give notice in conformity with these Bylaws of all meetings of the stockholders and of all meetings of the Board of Directors and any committee thereof requiring notice. The Secretary shall perform all other duties provided for in these Bylaws and other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time. The President may direct any Assistant Secretary to assume and perform the duties of the Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.

 

 

 

 

(f)   Duties of Chief Financial Officer. The Chief Financial Officer shall keep or cause to be kept the books of account of the corporation in a thorough and proper manner and shall render statements of the financial affairs of the corporation in such form and as often as required by the Board of Directors or the President. The Chief Financial Officer, subject to the order of the Board of Directors, shall have the custody of all funds and securities of the corporation. The Chief Financial Officer shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. The President may direct the Treasurer or any Assistant Treasurer to assume and perform the duties of the Chief Financial Officer in the absence or disability of the Chief Financial Officer, and the Treasurer and any Assistant Treasurer shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.

 

Section 29.   Delegation of Authority. The Board of Directors may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding any provision hereof.

 

Section 30.   Resignations. Any officer may resign at any time by giving notice in writing or by electronic transmission notice to the Board of Directors or to the President or to the Secretary. Any such resignation shall be effective when received by the person or persons to whom such notice is given, unless a later time is specified therein, in which event the resignation shall become effective at such later time. Unless otherwise specified in such notice, the acceptance of any such resignation shall not be necessary to make it effective. Any resignation shall be without prejudice to the rights, if any, of the corporation under any contract with the resigning officer.

 

Section 31.   Removal. Any officer may be removed from office at any time, either with or without cause, by the affirmative vote of a majority of the directors in office at the time, or by the unanimous written consent of the directors in office at the time, by the Chief Executive Officer or by any committee or superior officers upon whom such power of removal may have been conferred by the Board of Directors.

  

ARTICLE VI

EXECUTION OF CORPORATE INSTRUMENTS AND VOTING

OF SECURITIES OWNED BY THE CORPORATION

 

Section 32.   Execution of Corporate Instruments. The Board of Directors may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute on behalf of the corporation any corporate instrument or document, or to sign on behalf of the corporation the corporate name without limitation, or to enter into contracts on behalf of the corporation, except where otherwise provided by law or these Bylaws, and such execution or signature shall be binding upon the corporation. All checks and drafts drawn on banks or other depositaries on funds to the credit of the corporation or in special accounts of the corporation shall be signed by such person or persons as the Board of Directors shall authorize so to do. Unless authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

 

Section 33.   Voting of Securities Owned by the Corporation. All stock and other securities of other corporations owned or held by the corporation for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person authorized so to do by resolution of the Board of Directors, or, in the absence of such authorization, by the Chairman of the Board of Directors, the Chief Executive Officer, the President, or any Vice President.

 

ARTICLE VII

SHARES OF STOCK

 

Section 34.   Form and Execution of Certificates. Certificates for the shares of stock of the corporation shall be in such form as is consistent with the Certificate of Incorporation and applicable law. Every holder of stock in the corporation shall be entitled to have a certificate signed by or in the name of the corporation by the Chairman of the Board of Directors, or the President or any Vice President and by the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary, certifying the number of shares owned by him in the corporation. Any or all of the signatures on the certificate may be facsimiles. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. Each certificate shall state upon the face or back thereof, in full or in summary, all of the powers, designations, preferences, and rights, and the limitations or restrictions of the shares authorized to be issued or shall, except as otherwise required by law, set forth on the face or back a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional, or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to this section or otherwise required by law or with respect to this section a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

 

 

 

 

Section 35.   Lost Certificates. A new certificate or certificates shall be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. The corporation may require, as a condition precedent to the issuance of a new certificate or certificates, the owner of such lost, stolen, or destroyed certificate or certificates, or the owner’s legal representative, to agree to indemnify the corporation in such manner as it shall require or to give the corporation a surety bond in such form and amount as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen, or destroyed.

 

Section 36.   Transfers.

 

(a)  Transfers of record of shares of stock of the corporation shall be made only upon its books by the holders thereof, in person or by attorney duly authorized, and upon the surrender of a properly endorsed certificate or certificates for a like number of shares.

 

(b)  The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.

 

Section 37.   Fixing Record Dates.

 

(a)  In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall, subject to applicable law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

 

(b)  In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within ten (10) days after the date on which such a request is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board of Directors within ten (10) days of the date on which such a request is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.

 

(c)  In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

 

 

 

 

Section 38.   Registered Stockholders. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

 

ARTICLE VIII

OTHER SECURITIES OF THE CORPORATION

 

Section 39.   Execution of Other Securities. All bonds, debentures and other corporate securities of the corporation, other than stock certificates (covered in Section 34), may be signed by the Chairman of the Board of Directors, the President or any Vice President, or such other person as may be authorized by the Board of Directors, and the corporate seal impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary or an Assistant Secretary, or the Chief Financial Officer or Treasurer or an Assistant Treasurer; provided, however, that where any such bond, debenture or other corporate security shall be authenticated by the manual signature, or where permissible facsimile signature, of a trustee under an indenture pursuant to which such bond, debenture or other corporate security shall be issued, the signatures of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the corporation or such other person as may be authorized by the Board of Directors, or bear imprinted thereon the facsimile signature of such person. In case any officer who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or on any such interest coupon, shall have ceased to be such officer before the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the corporation.

 

ARTICLE IX

DIVIDENDS

 

Section 40.   Declaration of Dividends. Dividends upon the capital stock of the corporation, subject to the provisions of the Certificate of Incorporation and applicable law, if any, may be declared by the Board of Directors pursuant to law at any regular or special meeting. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation and applicable law.

 

Section 41.   Dividend Reserve. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the Board of Directors shall think conducive to the interests of the corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.

 

ARTICLE X

FISCAL YEAR

 

Section 42.   Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.

 

 

 

 

ARTICLE XI

INDEMNIFICATION

 

Section 43.   Indemnification of Directors, Executive Officers, Other Officers, Employees and Other Agents.

 

(a) Directors and Executive Officers . The corporation shall indemnify its directors and executive officers (for the purposes of this Article XI, “executive officers” shall have the meaning defined in Rule 3b-7 promulgated under the 1934 Act) to the fullest extent not prohibited by the DGCL or any other applicable law; provided, however, that the corporation may modify the extent of such indemnification by individual contracts with its directors and executive officers; and, provided, further, that the corporation shall not be required to indemnify any director or executive officer in connection with any proceeding (or part thereof) initiated by such person unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the Board of Directors of the corporation, (iii) such indemnification is provided by the corporation, in its sole discretion, pursuant to the powers vested in the corporation under the Delaware General Corporation Law or any other applicable law or (iv) such indemnification is required to be made under subsection (d). In addition, the corporation shall not be required to indemnify any director or executive officer in connection with any proceeding (i) for which payment has actually been made to or on behalf of such person under any statute, insurance policy, indemnity provision, vote or otherwise, except with respect to any excess beyond the amount paid; (ii) for an accounting or disgorgement of profits pursuant to Section 16(b) of the 1934 Act, or similar provisions of federal, state or local statutory law or common law, if such person is held liable therefor (including pursuant to any settlement arrangements); (iii) for any reimbursement of the corporation by such person of any bonus or other incentive-based or equity-based compensation or of any profits realized by such person from the sale of securities of the corporation, as required in each case under the 1934 Act (including any such reimbursements that arise from an accounting restatement of the corporation pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the payment to the corporation of profits arising from the purchase and sale by such person of securities in violation of Section 306 of the Sarbanes-Oxley Act), if such person is held liable therefor (including pursuant to any settlement arrangements); and (iv) initiated by such person, including any proceeding (or any part of any proceeding) initiated by such person against the corporation or its directors, officers, employees, agents or other indemnitees, unless (a) the Board authorized the proceeding (or the relevant part of the proceeding) prior to its initiation, (b) the corporation provides the indemnification, in its sole discretion, pursuant to the powers vested in the corporation under applicable law, (c) the indemnification is otherwise required to be made under applicable law.

 

(b) Other Officers, Employees and Other Agents . The corporation shall have power to indemnify its other officers, employees and other agents as set forth in the DGCL or any other applicable law. The Board of Directors shall have the power to delegate the determination of whether indemnification shall be given to any such person except executive officers to such officers or other persons as the Board of Directors shall determine.

 

(c)   Expenses. The corporation shall advance to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or executive officer, of the corporation, or is or was serving at the request of the corporation as a director or executive officer of another corporation, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request therefor, all expenses incurred by any director or executive officer in connection with such proceeding, provided, however, that, if the DGCL requires, an advancement of expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such indemnitee is not entitled to be indemnified for such expenses under this Section 43 or otherwise.

 

Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph (e) of this Bylaw, no advance shall be made by the corporation to an executive officer of the corporation (except by reason of the fact that such executive officer is or was a director of the corporation, in which event this paragraph shall not apply) in any action, suit or proceeding, whether civil, criminal, administrative or investigative, if a determination is reasonably and promptly made (i) by a majority vote of a quorum consisting of directors who were not parties to the proceeding, even if not a quorum, or (ii) by a committee of such directors designated by a majority of such directors, even though less than a quorum, or (iii) if there are no such directors, or such directors so direct, by independent legal counsel in a written opinion, that the facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation.

 

 

 

 

(d)   Enforcement. Without the necessity of entering into an express contract, all rights to indemnification and advances to directors and executive officers under this Bylaw shall be deemed to be contractual rights and be effective to the same extent and as if provided for in a contract between the corporation and the director or executive officer. Any right to indemnification or advances granted by this Bylaw to a director or executive officer shall be enforceable by or on behalf of the person holding such right in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within ninety (90) days of request therefor. The claimant in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting the claim. In connection with any claim for indemnification, the corporation shall be entitled to raise as a defense to any such action that the claimant has not met the standards of conduct that make it permissible under the DGCL or any other applicable law for the corporation to indemnify the claimant for the amount claimed. In connection with any claim by an executive officer of the corporation (except in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such executive officer is or was a director of the corporation) for advances, the corporation shall be entitled to raise a defense as to any such action clear and convincing evidence that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation, or with respect to any criminal action or proceeding that such person acted without reasonable cause to believe that his conduct was lawful. Neither the failure of the corporation (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in the DGCL or any other applicable law, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct. In any suit brought by a director or executive officer to enforce a right to indemnification or to an advancement of expenses hereunder, the burden of proving that the director or executive officer is not entitled to be indemnified, or to such advancement of expenses, under this Article XI or otherwise shall be on the corporation.

 

(e)   Non Exclusivity of Rights. The rights conferred on any person by this Bylaw shall not be exclusive of any other right which such person may have or hereafter acquire under any applicable statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office. The corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advances, to the fullest extent not prohibited by the DGCL or any other applicable law.

 

(f)   Survival of Rights. The rights conferred on any person by this Bylaw shall continue as to a person who has ceased to be a director, officer, employee or other agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

 

(g)   Insurance. To the fullest extent permitted by the DGCL, or any other applicable law, the corporation, upon approval by the Board of Directors, may purchase insurance on behalf of any person required or permitted to be indemnified pursuant to this Bylaw.

 

(h)   Amendments. Any repeal or modification of this Bylaw shall only be prospective and shall not affect the rights under this Bylaw in effect at the time of the alleged occurrence of any action or omission to act that is the cause of any proceeding against any agent of the corporation.

 

(i)   Saving Clause. If this Bylaw or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each director and executive officer to the full extent not prohibited by any applicable portion of this Bylaw that shall not have been invalidated, or by any other applicable law. If this Section 43 shall be invalid due to the application of the indemnification provisions of another jurisdiction, then the corporation shall indemnify each director and executive officer to the full extent under applicable law.

 

(j)   Certain Definitions. For the purposes of this Bylaw, the following definitions shall apply:

 

 

 

 

(1)  The term “proceeding” shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative.

 

(2)  The term “expenses” shall be broadly construed and shall include, without limitation, court costs, attorneys’ fees, witness fees, fines, amounts paid in settlement or judgment and any other costs and expenses of any nature or kind incurred in connection with any proceeding.

 

(3)  The term the “corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Bylaw with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.

 

(4)  References to a “director,” “executive officer,” “officer,” “employee,” or “agent” of the corporation shall include, without limitation, situations where such person is serving at the request of the corporation as, respectively, a director, executive officer, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise.

 

(5)  References to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the corporation” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation” as referred to in this Bylaw.

 

ARTICLE XII

NOTICES

 

Section 44. Notices.

 

(a)   Notice to Stockholders. Written notice to stockholders of stockholder meetings shall be given as provided in Section 7 herein. Without limiting the manner by which notice may otherwise be given effectively to stockholders under any agreement or contract with such stockholder, and except as otherwise required by law, written notice to stockholders for purposes other than stockholder meetings may be sent by United States mail or nationally recognized overnight courier, or by facsimile, telegraph or telex or by electronic mail or other electronic means.

 

(b)   Notice to Directors. Any notice required to be given to any director may be given by the method stated in subsection (a), or as provided for in Section 21 of these Bylaws. If such notice is not delivered personally, it shall be sent to such address as such director shall have filed in writing with the Secretary, or, in the absence of such filing, to the last known post office address of such director.

 

(c)   Affidavit of Mailing. An affidavit of mailing, executed by a duly authorized and competent employee of the corporation or its transfer agent appointed with respect to the class of stock affected or other agent, specifying the name and address or the names and addresses of the stockholder or stockholders, or director or directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall in the absence of fraud, be prima facie evidence of the facts therein contained.

 

(d)   Methods of Notice. It shall not be necessary that the same method of giving notice be employed in respect of all recipients of notice, but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others.

 

 

 

 

(e)   Notice to Person with Whom Communication Is Unlawful. Whenever notice is required to be given, under any provision of law or of the Certificate of Incorporation or Bylaws of the corporation, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the corporation is such as to require the filing of a certificate under any provision of the DGCL, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.

 

ARTICLE XIII

AMENDMENTS

 

Section 45.   Amendments. The Board of Directors is expressly empowered to adopt, amend or repeal Bylaws of the corporation. The stockholders shall also have power to adopt, amend or repeal the Bylaws of the corporation; provided, however, that, in addition to any vote of the holders of any class or series of stock of the corporation required by law or by the Certificate of Incorporation, the affirmative vote of the holders of at least a majority of the voting power of all of the then-outstanding shares of the capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt, amend or repeal any provision of the Bylaws of the corporation.

 

ARTICLE XIV

MISCELLANEOUS

 

Section 46.   Annual Report.

 

(a)  Subject to the provisions of paragraph (b) of this Bylaw, the Board of Directors shall cause an annual report to be sent to each stockholder of the corporation not later than one hundred twenty (120) days after the close of the corporation’s fiscal year. Such report shall include a balance sheet as of the end of such fiscal year and an income statement and statement of changes in financial position for such fiscal year, accompanied by any report thereon of independent accounts or, if there is no such report, the certificate of an authorized officer of the corporation that such statements were prepared without audit from the books and records of the corporation.

 

(b)  If and so long as there are fewer than 100 holders of record of the corporation’s shares, the requirement of sending of an annual report to the stockholders of the corporation is hereby expressly waived.

 

 

 

 

Exhibit 31.1

 

AMPIO PHARMACEUTICALS, INC.

Certification by Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Michael Macaluso certify that:

 

1. I have reviewed this report on Form 10-Q of Ampio Pharmaceuticals, Inc.;

 

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 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 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.

 

5. The registrant’s other certifying officer 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 registrant’s board of directors (or persons performing the equivalent functions):

 

a) All significant deficiencies or 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: November 14, 2018   /s/ Michael Macaluso 
  By: Michael Macaluso
  Title: Chairman and Chief Executive Officer

 

 

 

Exhibit 31.2

 

AMPIO PHARMACEUTICALS, INC.

Certification by Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Thomas E. Chilcott, III, certify that:

 

1. I have reviewed this report on Form 10-Q of Ampio Pharmaceuticals, Inc.;

 

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 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 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.

 

5. The registrant’s other certifying officer 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 registrant’s board of directors (or persons performing the equivalent functions):

 

a) All significant deficiencies or 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: November 14, 2018   /s/ Thomas E. Chilcott, III 
  By: Thomas E. Chilcott, III
  Title: Chief Financial Officer, Treasurer and Secretary

 

 

 

Exhibit 32.1

 

AMPIO PHARMACEUTICALS, INC.

 

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted

 

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

In connection with the filing of the quarterly report on Form 10-Q for the quarter ended September 30, 2018 (the “Report”) by Ampio Pharmaceuticals, Inc. (the “Company”), each of the undersigned hereby certifies that:

 

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

 

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: November 14, 2018 /s/ Michael Macaluso
  Michael Macaluso
  Chairman and Chief Executive Officer
   
Dated: November 14, 2018 /s/ Thomas E. Chilcott, III
  Thomas E. Chilcott, III
  Chief Financial Officer, Treasurer and Secretary