Ampio Pharmaceuticals, Inc. (Form: 10-Q, Received: 11/02/2012 17:02:02)

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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, 2012

¨	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.)

5445 DTC Parkway

Suite 925

Greenwood Village, Colorado 80111

(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 and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post 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):

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 2, 2012, there were 37,009,695 shares outstanding of Common Stock, par value $0.0001, of the registrant.

AMPIO PHARMACEUTICALS, INC.

AND SUBSIDIARIES

NINE MONTHS ENDED SEPTEMBER 30, 2012

INDEX


		Page
PART I - FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements		4

	Consolidated Balance Sheets as of September 30, 2012 (unaudited) and December 31, 2011		4

	Consolidated Statements of Operations for the three and nine months ended September 30, 2012 (unaudited), and the three and nine months ended September 30, 2011 (unaudited), and the period from December 18, 2008 (inception) through September 30, 2012 (unaudited)		5

	Consolidated Statements of Stockholders’ Equity (Deficit)		6

	Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 (unaudited), the nine months ended September 30, 2011 (unaudited), and the period from December 18, 2008 (inception) through September 30, 2012 (unaudited)		7

	Notes to Consolidated Financial Statements (unaudited)		8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		22

Item 4.	Controls and Procedures		22

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings		24

Item 1A.	Risk Factors		24

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		24

Item 3.	Defaults Upon Senior Securities		24

Item 4.	Mine Safety Disclosures		24

Item 5.	Other Information		24

Item 6.	Exhibits		24

SIGNATURES			25

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. In particular, 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 capital expenditures, research and development expense 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 and diagnostics; and

•

our future dependence on third party manufacturers or strategic partners to manufacture any of our pharmaceutical drugs and diagnostics that receive regulatory approval, and our ability to identify strategic partners and enter into license, co-development, collaboration or similar arrangements.

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 or sponsored research partners 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;

•

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;

•

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, Optina and Zertane, which are protected under applicable intellectual property laws and are our property or the property of our subsidiaries. Solely for convenience, our trademarks and tradenames 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 tradenames.

PART I—FINANCIAL INFORMATION

Item 1.

Consolidated Financial Statements

AMPIO PHARMACEUTICALS, INC. AND SUBSIDIARIES

(A Development Stage Company)

Consolidated Balance Sheets


	September 30, 2012			December 31, 2011
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	20,265,865		$	11,362,325
Prepaid expenses		142,147			43,120

Total current assets		20,408,012			11,405,445

Fixed assets, net of depreciation		63,525			76,230
In-process research and development		7,500,000			7,500,000
Patents, net of amortization		431,832			465,924
Deposits		35,000			35,000

		8,030,357			8,077,154

Total assets	$	28,438,369		$	19,482,599

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	789,417		$	630,622
Deferred revenue		50,000			50,000
Warrant derivative liability		457,852			610,911

Total current liabilities		1,297,269			1,291,533
Long-term deferred revenue		393,750			431,250

Total liabilities		1,691,019			1,722,783

Commitments and contingencies (Note 6)
Stockholders’ equity
Preferred Stock, par value $.0001; 10,000,000 shares authorized; none issued		—			—
Common Stock, par value $.0001; 100,000,000 shares authorized; shares issued and outstanding - 36,994,695 in 2012 and 31,081,434 in 2011		3,699			3,108
Additional paid-in capital		62,927,572			46,061,783
Advances to stockholders		(90,640	)		(127,523	)
(Deficit) accumulated in the development stage		(36,093,281	)		(28,177,552	)

Total stockholders’ equity		26,747,350			17,759,816

Total liabilities and stockholders’ equity	$	28,438,369		$	19,482,599

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

AMPIO PHARMACEUTICALS, INC. AND SUBSIDIARIES

(A Development Stage Company)

Consolidated Statements of Operations

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						December 18, 2008 (inception) through
	2012			2011			2012			2011			September 30, 2012
License revenue	$	12,500		$	6,250		$	37,500		$	6,250		$	56,250

Expenses
Research and development	$	2,135,385		$	1,402,038		$	5,159,721		$	3,012,302		$	14,619,934
Research and development - related party (Note 6)		—			2,112			—			34,013			230,688
General and administrative		677,928			1,371,949			2,941,293			3,543,773			12,620,273

Total operating expenses		2,813,313			2,776,099			8,101,014			6,590,088			27,470,895

Other income (expense)
Interest income		7,911			2,311			15,098			4,510			23,688
Interest expense		—			—			—			(8,358	)		(29,317	)
Unrealized loss on fair value of debt instruments		—			—			—			(5,585,422	)		(5,547,911	)
Derivative income (expense)		208,934			274,410			132,687			(1,917,687	)		(2,790,581	)

Total other expense		216,845			276,721			147,785			(7,506,957	)		(8,344,121	)

Net loss, before income tax	$	(2,583,968	)	$	(2,493,128	)	$	(7,915,729	)	$	(14,090,795	)	$	(35,758,766	)
Foreign tax expense		—			82,500			—			82,500			82,500

Net loss	$	(2,583,968	)	$	(2,575,628	)	$	(7,915,729	)	$	(14,173,295	)	$	(35,841,266	)

Weighted average number of common shares outstanding		36,477,907			28,679,942			32,967,745			25,015,924

Basic and diluted net loss per common share	$	(0.07	)	$	(0.09	)	$	(0.24	)	$	(0.57	)

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

AMPIO PHARMACEUTICALS, INC. AND SUBSIDIARIES

(A Development Stage Company)

Consolidated Statements of Stockholders’ Equity (Deficit)


	Series A Preferred Stock						Common Stock						Common Stock Subscribed			Additional Paid in Capital		Additional Issuances			Advances to Stockholders			Deficit Accumulated in the Development Stage			Total Stockholders’ Equity (Deficit)
	Shares			Amount			Shares			Amount			Common Stock Subscribed			Additional Paid in Capital		Additional Issuances			Advances to Stockholders			Deficit Accumulated in the Development Stage			Total Stockholders’ Equity (Deficit)
Balance - December 18, 2008 (date of inception)		—		$	—			—		$	—		$	—		$	—	$	—		$	—		$	—		$	—
Issuance of common stock to founder December, 2008		—			—			1,080,000			1,080			—			—		—			—			—			1,080

Balance - December 31, 2008		—			—			1,080,000			1,080			—			—		—			—			—			1,080
Issuance of common stock and assumption of liabilities in asset acquisition		—			—			3,500,000			3,500			—			—		—			—			(252,015	)		(248,515	)
Issuance of Series A Preferred Stock in exchange for cancellation of a note payable in April 2009		163,934			164			—			—			—			199,836		—			—			—			200,000
Issuance of restricted common stock in exchange for cash in April 2009		—			—			7,350,000			7,350			—			—		—			—			—			7,350
Issuance of Series A Preferred Stock in exchange for cash in April and May 2009		913,930			914			—			—			—			1,114,106		—			—			—			1,115,020

Common stock subscribed in November and December 2009		—			—			—			—			170,003			—		—			—			—			170,003
Net loss		—			—			—			—			—			—		—			—			(1,512,908	)		(1,512,908	)

Balance - December 3 1, 2009		1,077,864		$	1,078			11,930,000		$	11,930		$	170,003		$	1,313,942	$	—		$	—		$	(1,764,923	)	$	(267,970	)

Conversion of equity in reverse merger acquisition		(1,077,864	)		(1,078	)		3,068,958			(10,430	)		—			11,691		—			—			—			183
Common stock subscribed in March 2010		—			—			—			—			7,000			—		—			—			—			7,000
Issuance of common stock in exchange for cash in March and June 2010, net of offering costs of $350,000		—			—			1,078,078			108			(177,003	)		1,536,522		—			—			—			1,359,627
Issuance of common stock for services		—			—			1,030,000			103			—			1,802,397		(3,281	)		—			—			1,799,219
Stock-based compensation		—			—			—			—			—			1,297,083		—			—			—			1,297,083
Loans to shareholders		—			—			—			—			—			—		—			(150,183	)		—			(150,183	)
Net loss		—			—			—			—			—			—		—			—			(8,053,395	)		(8,053,395	)

Balance - December 31, 2010		—		$	—			17,107,036		$	1,711		$	—		$	5,961,635	$	(3,281	)	$	(150,183	)	$	(9,818,318	)	$	(4,008,436	)

Stock-based compensation		—			—			13,635			1			—			1,983,784		—			—			—			1,983,785
Issuance of common stock for services		—			—			—			—			—			—		3,281			—			—			3,281
Conversion of debentures		—			—			1,281,852			128			—			9,423,947		—			—			—			9,424,075
Shares issued for cash		—			—			1,714			—			—			3,000		—			—			—			3,000
Options exercised, net		—			—			301,604			30			—			109,015		—			—			—			109,045

Issuance of common stock for acquisition of DMI BioSciences, Inc., net of 3,500,000 shares of Ampio common stock exchanged		—			—			5,167,905			517			—			7,852,220		—			—			—			7,852,737
Issuance of common stock in exchange for cash in March and April, net of offering costs of $2,704,328		—			—			5,092,880			509			—			10,916,029		—			—			—			10,916,538
Warrants exercised		—			—			88,669			8			—			784,356		—			—			—			784,364
Shares received in exchange for options issued		—			—			(98,416	)		(9	)		—			574,009		—			—			—			574,000
Escrow shares claimed		—			—			(95,700	)		(9	)		—			9		—			—			—			—
Repayment of advance		—			—			—			—			—			—		—			22,660			—			22,660
Issuance of common stock in exchange for cash in December, net of offering costs of $982,083		—			—			2,220,255			222			—			8,453,779		—			—			—			8,454,001
Net loss		—			—			—			—			—			—		—			—			(18,359,234	)		(18,359,234	)

Balance - December 31, 2011		—		$	—			31,081,434		$	3,108		$	—		$	46,061,783	$	—		$	(127,523	)	$	(28,177,552	)	$	17,759,816

Issuance of common stock for services (unaudited)		—			—			9,072			1			—			39,999		—			—			—			40,000
Options exercised, net (unaudited)		—			—			680,809			68			—			617,932		—			—			—			618,000
Warrants exercised, net (unaudited)		—			—			19,520			2			—			32,692		—			—			—			32,694
Stock-based compensation (unaudited)		—			—			—			—			—			822,536		—			—			—			822,536
Repayment of advance (unaudited)		—			—			—			—			—			—		—			36,883			—			36,883
Issuance of common stock in exchange for cash in July, net of offering costs of $1,739,589 (unaudited)		—			—			5,203,860			520			—			15,352,630		—			—			—			15,353,150
Net loss (unaudited)		—			—			—			—			—			—		—			—			(7,915,729	)		(7,915,729	)

Balance - September 30, 2012 (unaudited)		—		$	—			36,994,695		$	3,699		$	—		$	62,927,572	$	—		$	(90,640	)	$	(36,093,281	)	$	26,747,350

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

AMPIO PHARMACEUTICALS, INC. AND SUBSIDIARIES

(A Development Stage Company)

Consolidated Statements of Cash Flows

(unaudited)


	Nine Months Ended September 30, 2012			Nine Months Ended September 30, 2011			December 18, 2008 (Inception) through September 30, 2012
Cash flows from operating activities:
Net loss	$	(7,915,729	)	$	(14,173,295	)	$	(35,841,266	)
Depreciation and amortization		46,797			26,952			89,348
Common stock issued for services		40,000			3,281			1,842,500
Stock-based compensation expense		822,536			1,805,257			4,103,404
Derivative (income) expense		(132,687	)		1,917,687			2,790,581
Unrealized loss on fair value of debt instruments		—			5,585,422			5,547,911
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:
(Increase) in prepaid expenses		(99,027	)		(56,419	)		(142,147	)
Decrease in related party receivable		—			5,711			—
Increase (Decrease) in related party payable		—			(84,032	)		109,789
Increase in accounts payable		158,795			6,577			789,419
Increase (Decrease) in deferred revenue		(37,500	)		493,750			443,750
(Decrease) in accrued salaries		—			(526,733	)		—
Increase (Decrease) in accrued interest payable		—			(2,745	)		16,948

Net cash and cash equivalents used in operating activities		(7,116,815	)		(4,998,587	)		(20,249,763	)

Cash flows used in investing activities:
Purchase of fixed assets		—			(84,705	)		(84,705	)
Deposits		—			(37,000	)		(35,000	)

Net cash and cash equivalents used in investing activities		—			(121,705	)		(119,705	)

Cash flows from financing activities:
Proceeds from related party notes payable and debentures		—			382,000			2,593,000
Proceeds from sale of common stock		17,542,867			12,953,853			41,346,424
Costs related to sale of common stock		(1,559,395	)		(1,815,664	)		(4,357,142	)
Proceeds from common stock subscribed		—			—			177,003
Proceeds from sales of Series A Preferred Stock		—			—			1,115,020
Advances (to) from shareholders		36,883			22,660			(90,640	)
Payment of liabilities assumed in asset purchase		—			—			(48,515	)
Payment of related party notes		—			(100,000	)		(100,000	)
Increase in cash from acquisition		—			—			183

Net cash and cash equivalents provided by financing activities		16,020,355			11,442,849			40,635,333

Net change in cash and cash equivalents		8,903,540			6,322,557			20,265,865
Cash and cash equivalents at beginning of period		11,362,325			671,279			—

Cash and cash equivalents at end of period	$	20,265,865		$	6,993,836		$	20,265,865

Supplementary cash flow information:
Interest paid	$	—		$	8,358		$	8,358
Income taxes paid	$	—		$	82,500		$	82,500
Non-cash transactions:
Liabilities assumed in asset purchase, recorded as a distribution	$	—		$	—		$	248,515
Conversion of notes payable to Series A Preferred Stock	$	—		$	—		$	200,000
Common stock issued for common stock subscriptions received	$	—		$	—		$	177,003
Deferred charge recorded for common stock issued in exchange for services	$	—		$	—		$	1,802,500
Common stock issued for acquisition of DMI BioSciences, Inc.	$	—		$	7,852,737		$	7,852,737
Conversion of debentures to common stock	$	—		$	9,424,075		$	9,424,075
Warrant compensation from common stock offering costs	$	180,194		$	888,664		$	1,068,858
Merger liability - shares exchanged for options	$	—		$	574,000		$	574,000

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

AMPIO PHARMACEUTICALS, INC. AND SUBSIDIARIES

(A Development Stage Company)

Notes to Consolidated Financial Statements

(unaudited)

Note 1 – Business, Basis of Presentation and Merger

These unaudited financial statements represent the consolidated financial statements of Ampio Pharmaceuticals, Inc. (“Ampio” or “the Company”), formerly known as Chay Enterprises, Inc. (“Chay”), and its wholly-owned subsidiaries, DMI Life Sciences, Inc. (“Life Sciences”), DMI Acquisition Corp. and DMI BioSciences, Inc. (“BioSciences”). These unaudited consolidated financial statements should be read in conjunction with Ampio’s annual report on Form 10-K for the year ended December 31, 2011, which included all disclosures required by generally accepted accounting principles. In the opinion of management, these unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position of Ampio and its results of operations and cash flows for the interim periods presented. The results of operations for the period ended September 30, 2012 are not necessarily indicative of expected operating results for the full year. The information presented throughout the document as of and for the period ended September 30, 2012 is unaudited.

Ampio is engaged in developing innovative, proprietary pharmaceutical drugs and diagnostic products to identify, treat and prevent a broad range of human diseases including metabolic disorders, eye disease, kidney disease, acute and chronic inflammation diseases and male sexual dysfunction.

Life Sciences was incorporated in the state of Delaware on December 18, 2008 and did not conduct any business activity until April 16, 2009, at which time Life Sciences purchased certain assigned intellectual property (including 107 patents and pending patent applications), business products and tangible property from BioSciences. Life Sciences issued 3,500,000 shares of its common stock to BioSciences, and assumed certain liabilities, as consideration for the assets purchased. The assets that Life Sciences acquired from BioSciences had a carrying value of zero, as BioSciences had expensed all of the research and development costs it incurred with respect to the intellectual property purchased. On March 2, 2010, Life Sciences merged with Chay Acquisitions, a wholly-owned subsidiary of Chay Enterprises, Inc., a public company (the “Merger”). Chay issued 15,068,942 shares of common stock to acquire Life Sciences, which resulted in the stockholders of Life Sciences owning approximately 95.7% of Chay’s outstanding common stock after the consummation of the Merger and before taking into account the issuance of 1,325,000 additional shares of common stock. In conjunction with the Merger, Chay purchased 263,624 shares of its common stock from the Chay Control Shareholders for $150,000 in cash.

As a result of the Merger, Life Sciences became a wholly owned subsidiary of Chay. For accounting purposes, the Merger was treated as a reverse acquisition with Life Sciences as the acquirer and Chay as the acquired party. The business and financial information included in this report is the business and financial information of Life Sciences. The accumulated deficit of Chay has been included in additional paid-in capital. Subsequent to the Merger, Chay Enterprises, Inc. was renamed Ampio Pharmaceuticals, Inc.

On March 23, 2011, Ampio acquired BioSciences (the “BioSciences Merger”). BioSciences’ principal asset consisted of the worldwide rights to Zertane, as to which BioSciences held 32 issued patents and 31 pending patent applications. Zertane is a repurposed drug to treat male sexual dysfunction pertaining to premature ejaculation (“PE”) in men. See Note 2 – Acquisition of DMI BioSciences for terms of the acquisition.

Ampio’s activities, being primarily research and development and raising capital, have not generated significant revenue to date. Ampio is considered to be a development stage company.

In July 2012, the FASB issued ASU 2012-02, “Intangibles – Goodwill and Other (Topic 350) – Testing Indefinite-Lived Intangible Assets for Impairment.” The guidance is intended to simplify impairment testing of indefinite-lived intangible assets such as In-Process Research and Development by first assessing qualitative factors to determine whether it is “more likely than not” that the fair value of an asset is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative impairment test. The more-likely-than-not threshold is defined as having a likelihood of more than 50%. This guidance is effective for annual and interim tests performed for fiscal years beginning after September 15, 2012. The adoption of this guidance is not expected to have a significant impact on the Company’s financial position or results of operations.

Note 2 – Acquisition of DMI BioSciences

On March 23, 2011, Ampio acquired all of the outstanding stock of BioSciences for 8,667,905 shares of Ampio common stock (the “merger stock”). Ampio acquired BioSciences in order to obtain all rights to Zertane, BioSciences’ male sexual dysfunction drug

for PE. The business combination occurred following the satisfaction or waiver of all conditions to closing. As called for in the merger agreement, Ampio issued 405,066 shares of merger stock to holders of BioSciences in-the-money stock options and warrants, 500,000 shares of merger stock to holders of two BioSciences promissory notes in extinguishment of the notes, and placed 250,000 shares of merger stock in an indemnification escrow until December 31, 2011. The remaining 7,512,839 shares of merger stock were issued to the holders of BioSciences common stock on a pro rata basis. As required by the merger agreement, at the closing BioSciences donated back to Ampio’s capital 3,500,000 shares of Ampio common stock formerly owned by BioSciences which were subsequently cancelled. Ampio separately issued 212,693 options in replacement of 250,850 Biosciences options that were “out-of-the-money” as of the date of execution of the merger agreement.

As a component of the purchase price, Ampio recorded a liability of $574,000 to reflect the potential settlement with three “in-the-money” option holders that threatened litigation to have their BioSciences options carried over versus being issued Ampio stock in exchange for these options. The dispute involved 263,000 options that were converted to 98,416 shares of Ampio common stock. The liability was estimated based on a fair value calculation of the difference between the Ampio stock trading price and the value of Ampio options using the Black-Scholes option price model with an exercise price of $0.90. On June 17, 2011 a formal agreement was executed whereby Ampio issued 223,024 stock options with an exercise price of $0.90 and an expiration date of February 22, 2014 in exchange for the 98,416 previously issued shares of Ampio stock. The $574,000 liability has been eliminated and credited to stockholders’ equity. Ampio subsequently filed a claim on the indemnification escrow and was awarded 95,700 shares of Ampio stock to reflect the full value of the 223,024 options issued in exchange for the shares relinquished. The remaining 154,300 indemnification escrow shares were allocated to the appropriate shareholders on December 31, 2011. The 98,416 shares relinquished with the agreement and the 95,700 escrow shares awarded were cancelled. After these adjustments, the net merger stock issued was 8,473,789.

The following table summarizes the amounts of estimated fair value of net assets acquired at the acquisition date:


Notes receivable from Ampio	$	300,000
Non-interest bearing advances and accrued interest receivable from Ampio		127,000
In-process research and development		7,500,000
Patents		500,000
Liabilities		(574,000	)

	$	7,853,000

The fair value of in-process research and development and patents was based on an independent third party appraisal.

BioSciences had Net Operating Loss (NOL) carryforwards for federal and state income tax purposes of approximately $11,200,000, which expire from 2016 through 2030. Under the provisions of the Internal Revenue Code, substantial changes in BioSciences ownership may result in limitations on the amount of the NOL carryforwards which can be utilized in future years. Ampio provided a full valuation allowance against BioSciences’ $4,600,000 deferred tax asset (primarily associated with the NOL carryforwards), based on the weight of available evidence, both positive and negative, which indicated that it is more likely than not that such benefits will not be realized.

Note 3 – License Agreement/Revenue Recognition

On September 8, 2011, Ampio entered into a license, development and commercialization agreement, effective as of August 23, 2011, with a major Korean pharmaceutical company. The agreement grants the pharmaceutical company exclusive rights to market Zertane in South Korea for the treatment of PE and for a combination drug to be developed, utilizing Zertane and an erectile dysfunction drug.

Upon signing of the agreement, Ampio received a $500,000 upfront payment, the net proceeds of which were $417,500 after withholding of Korean tax. The upfront payment has been deferred and is being recognized as license revenue over a ten year period. Milestone payments of $3,200,000 will be earned and recognized contingent upon achievement of regulatory approvals and cumulative net sales targets, which may take several years. In addition, Ampio will earn a royalty based on 25% of net sales, as defined, if the royalty exceeds the transfer price of the Zertane product.

Note 4 – Derivative Financial Instruments

Ampio issued senior convertible unsecured debentures and related warrants in five tranches between August 2010 and January 2011 (the “Senior Convertible Debentures”). On February 28, 2011, Ampio’s Senior Convertible Debentures were converted to 1,281,852 shares of common stock. The related warrants and the components of warrant derivative liability as reflected in the balance sheet as of September 30, 2012 and December 31, 2011 are as follows:


	September 30, 2012 (unaudited)				December 31, 2011 (audited)
	Indexed Shares		Fair Values		Indexed Shares		Fair Values
Ampio’s financings giving rise to derivative financial instruments:
Warrants (dates correspond to hybrid financing):
Tranche 1 - August 10, 2010		51,215	$	140,681		51,214	$	183,132
Tranche 2 - October 22, 2010-October 29, 2010		—		—		7,040		25,650
Tranche 3 - November 12, 2010-November 29, 2010		66,434		232,118		66,434		295,146
Tranche 4 - December 13, 2010-December 29, 2010		13,686		39,992		13,686		50,497
Tranche 5 - January 20, 2011-January 31, 2011		29,344		45,061		29,344		56,486

		160,679	$	457,852		167,718	$	610,911

Ampio elected to measure the Senior Convertible Debentures at fair value in their entirety, rather than bifurcating the conversion option. The fair value of the hybrid debt instrument comprises the present value of the principal and coupon enhanced by the conversion option. Both the warrants and the conversion options embedded in the hybrid debt instruments were valued using a binomial-lattice-based valuation model. The lattice-based valuation technique was utilized because it embodies all of the requisite assumptions (including the underlying price, exercise price, term, volatility, and risk-free interest-rate) that are necessary to fair value these instruments. For forward contracts that contingently require net-cash settlement as the principal means of settlement, Ampio projects and discounts future cash flows applying probability-weighting to multiple possible outcomes. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques are highly volatile and sensitive to changes in the trading market price of Ampio’s common stock, which has a high-historical volatility. Since derivative financial instruments are initially and subsequently carried at fair value, Ampio’s income will reflect the volatility in these estimate and assumption changes.

The following table summarizes the effects on Ampio’s unrealized (gain) loss associated with the warrants recorded at fair value by type of financing for the three and nine months ended September 30, 2012 and 2011, respectively:


	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Warrants (dates correspond to financing)
Tranche 1 - August 10, 2010	$	(64,288	)	$	(64,965	)	$	(42,451	)	$	256,910
Tranche 2 - October 22, 2010-October 29, 2010		(8,483	)		(5,854	)		(5,278	)		119,869
Tranche 3 - November 12, 2010-November 29, 2010		(100,357	)		(137,043	)		(63,028	)		494,162
Tranche 4 - December 13, 2010-December 29, 2010		(16,995	)		(17,165	)		(10,505	)		58,655
Tranche 5 - January 20, 2011-January 31, 2011		(18,811	)		(49,383	)		(11,425	)		62,952

		(208,934	)		(274,410	)		(132,687	)		992,548
Day-one derivative expense:
Tranche 5 - January 20, 2011-January 31, 2011		—			—			—			925,139

	$	(208,934	)	$	(274,410	)	$	(132,687	)	$	1,917,687

The following table summarizes the effects on Ampio’s unrealized loss associated with hybrid debt instruments recorded at fair value by type of financing for the three and nine months ended September 30, 2011. There are no ongoing charges since all hybrid financial instruments were converted/eliminated in the first quarter of 2011.


	Three and Nine Months Ended September 30, 2011
Hybrid debt instruments (dates correspond to financing):
Tranche 1 - August 10, 2010	$	1,245,707
Tranche 2 - October 22, 2010-October 29, 2010		578,744
Tranche 3 - November 12, 2010-November 29, 2010		2,901,987
Tranche 4 - December 13, 2010-December 29, 2010		330,829
Tranche 5 - January 20, 2011-January 31, 2011		528,155

	$	5,585,422

Note 5 – Fair Value Considerations

Ampio’s financial instruments include cash equivalents, accounts payable and warrant derivative liability. The carrying amounts of cash equivalents and accounts payable approximate their fair value due to their short maturities. Derivative financial instruments, as defined by GAAP, consist of financial instruments or other contracts that contain a notional amount and one or more underlying (e.g. interest rate, security price or other variable), require no initial net investment and permit net settlement. Derivative financial instruments may be free-standing or embedded in other financial instruments. Further, derivative financial instruments are initially, and subsequently, measured at fair value and recorded as liabilities or, in rare instances, assets, with changes in fair value recorded in earnings.

Ampio generally does not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks. However, Ampio has entered into certain other financial instruments and contracts, such as Ampio’s previously outstanding secured convertible debenture and warrant financing arrangements that are either (i) not afforded equity classification, (ii) embody risks not clearly and closely related to host contracts, or (iii) may be net-cash settled by the counterparty. As required by GAAP, these instruments are required to be carried as derivative liabilities, at fair value, in Ampio’s financial statements. However, Ampio may elect fair value measurement of the hybrid financial instruments, on a case-by-case basis, rather than bifurcate the derivative. Ampio believes that fair value measurement of the hybrid convertible debenture financing arrangements provide a more meaningful presentation.

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 developed based on market data obtained from sources independent of Ampio. Unobservable inputs are inputs that reflect our assumptions of what market participants would use in pricing the asset or liability developed 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.

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, 2012 and December 31, 2011, by level within the fair value hierarchy:


	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total
September 30, 2012 (unaudited)
ASSETS
Money market funds (included in cash and cash equivalents)	$	18,874,103	$	—	$	—	$	18,874,103

LIABILITIES
Warrant derivative liabilities		—		—		457,852		457,852

December 31, 2011 (audited)
ASSETS
Money market funds (included in cash and cash equivalents)	$	10,345,183	$	—	$	—	$	10,345,183

LIABILITIES
Warrant derivative liabilities		—		—		610,911		610,911

The warrant derivative liability for the warrants associated with debt was valued using the binomial lattice-based valuation methodology because that model embodies all of the relevant assumptions that address the features underlying these instruments. Significant assumptions in valuing the warrant liability were as follows as of September 30, 2012 and December 31, 2011:


	September 30, 2012			December 31, 2011
Warrants (All Tranches):
Exercise price	$	1.75		$	1.75
Volatility		154.88	%		174.85	%
Equivalent term (years)		0.86 - 1.33			1.61 - 2.08
Risk-free interest rate		0.16	%		0.25	%

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


	Derivative and Hybrid Debt Instruments
Balance as of December 31, 2011	$	(610,911	)
Total gain (loss) (realized or unrealized):
Included in earnings		132,687
Warrant exercises		20,372

Balance as of September 30, 2012	$	(457,852	)

Note 6 – Commitments and Contingencies

In connection with upcoming clinical trials, Ampio has a remaining commitment of $50,000 on a $500,000 contract related to the Ampion study drug production and corresponding studies and documentation. Ampio also has contracted for production of the Zertane study drug and Zertane –ED development for approximately $1,200,000, with 30%, due upon signing, which is included in accounts payable. As of September 30, 2012, the remaining unrecorded commitments for this contract and others related to this study total approximately $1,114,000.

No commitments remain under the terms of the Clinical Research Agreement with St. Michaels Hospital in Toronto, Canada or ancillary and related contracts.

As of September 30, 2012, Ampio has employment agreements with three of its executive officers. Under the employment agreements, the executive officers are collectively entitled to receive $745,000 in annual salaries. The employment agreements expire August 2013 with respect to our chief scientific officer and chief regulatory affairs officer, and January 2015 with respect to our chief executive officer.

Ampio entered into a Sponsored Research Agreement with Trauma Research LLC, a related party, in September 2009. Under the terms of the Sponsored Research Agreement, Ampio is to provide personnel and pay for leased equipment. Ampio also reimburses third party expenses incurred on its behalf. The payments for reimbursements and leased equipment were $2,112 for the three months and $34,013 for the nine months ended September 30, 2011 and none in 2012. The Sponsored Research Agreement may be terminated without cause by either party on 180 day notice. Obligations under the Sponsored Research Agreement are as follows:


2012	$	65,938
2013		263,750
2014		175,833

	$	505,521

Ampio has not recorded an accrual for compensated absences because the amount cannot be reasonably estimated.

On May 20, 2011, Ampio entered into a 38 month non-cancellable operating lease for office space effective June 1, 2011. As of September 30, 2012 the remaining obligation under this lease is $34,476 for 2012, $105,060 for 2013 and $62,118 for 2014.

Note 7 – Common Stock

Capital Stock

At September 30, 2012 and December 31, 2011, Ampio had 100,000,000 shares of common stock authorized with a par value of $0.0001per share and 10,000,000 shares of preferred stock authorized with a par value of $0.0001per share.

Shelf Registration

On September 30, 2011, Ampio filed a “shelf” registration statement on Form S-3 with the Securities and Exchange Commission to register Ampio common stock and warrants in an aggregate amount of up to $80 million for offering from time to time in the future. The registration statement also registers for possible resale up to one million shares of common stock to be sold by the selling stockholders named in the registration statement in future public offerings. On October 13, 2011 Ampio filed an amendment to identify potential selling stockholders and the number of shares they would be eligible to sell in the event of a future public offering. The shelf registration was declared effective on October 28, 2011 by the Securities and Exchange Commission. At September 30, 2012 approximately $53.7 million is left on the shelf with 519,400 remaining shares eligible for sale by selling stockholders.

Underwritten Public Offering

On July 18, 2012, Ampio completed an underwritten public offering for the sale of 5,203,860 shares of common stock at a price of $3.25 per share. Gross proceeds to the Company were $16,912,545 with net proceeds of $15,353,150 after underwriter fees and cash offering expenses. Ampio also issued warrants to purchase 138,462 shares of common stock to the underwriters. These warrants have an exercise price of $4.0625 and can be exercised from the period July 12, 2013 through July 12, 2017.

Registered Direct Offering

On December 27, 2011, Ampio completed a registered direct offering of its common stock A total of 2,220,255 shares were issued at $4.25 per share resulting in gross proceeds of $9,436,084, of which Ampio received net proceeds of $8,454,001, after placement agent commissions, non-accountable expenses and other offering costs.

Private Placement Offering

On March 31, April 8 and April 18, 2011, Ampio closed private placements of its common stock (the “2011 Private Placement”). A total of 5,092,880 shares of common stock were issued resulting in gross proceeds of $12,732,200, of which the Company received net proceeds of $10,916,538, after placement agent commissions, non-accountable expenses and other offering costs. In connection with the private placements, the placement agent also received 509,288 warrants to purchase common stock with a fair value of $888,664.

Note 8 – Equity Instruments

Options

Ampio adopted a stock plan in March 2010. The number of shares of common stock reserved for issuance to officers, directors, employees and consultants through various means, including incentive stock options, non-qualified stock options, restricted stock grants, and other forms of equity equivalents was increased from 2,500,000 to 4,500,000 in August 2010 and to 5,700,000 by vote of the shareholders on December 3, 2011. In May 2012, Ampio awarded grants of options to purchase 1,505,000 shares of common stock to directors, officers and employees with a weighted average exercise price of $2.76 per share. Grants of options to purchase 1,430,000 shares of common stock vest monthly over three years and options to purchase 75,000 shares of common stock vested immediately. An award of an option to purchase 50,000 shares of common stock, vesting half on February 1, 2013 and half on August 1, 2013, was granted to a consultant at an exercise price of $3.06 in July 2012.

Ampio has computed the fair value of all options granted using the Black-Scholes option pricing model. In order 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 valuation. Ampio estimated a volatility factor utilizing a weighted average of comparable published volatilities of peer companies. Due to the small number of option holders, Ampio has estimated a forfeiture rate of zero. Ampio estimates the expected term based on the average of the vesting term and the contractual term 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 of all options granted during the nine months ended September 30, 2012 using the following assumptions:


Expected volatility			72% - 92%
Risk free interest rate			0.23% - 0.29%
Expected term (years)			2.8 - 6.5
Dividend yield			0%

Stock option activity is as follows:


	Number of Options			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life
Outstanding December 31, 2010		2,930,000						9.63
Granted		840,000		$	3.95
Exercised or forfeited		(372,843	)	($	1.62	)
Issued in connection with BioSciences merger		435,717		$	1.54

Outstanding December 31, 2011		3,832,874		$	2.75			7.31
Granted		1,555,000		$	2.87
Exercised or forfeited		(907,143	)	$	1.90

Outstanding September 30, 2012		4,480,731		$	2.12			8.18

Exercisable at September 30, 2012		3,215,177		$	1.76			7.39

Stock-based compensation expense related to the fair value of stock options was included in the statement of operations as research and development expenses and general and administrative expenses as set forth in the table below. Ampio determined the fair value as of the date of grant using the Black-Scholes option pricing method and expenses the fair value ratably over the vesting period.

The following table summarizes stock-based compensation expense for the three and nine months ended September 30, 2012 and 2011:


	Three Months Ended September 30,				Nine Months Ended September 30,				December 18, 2008 (inception) through
	2012		2011		2012		2011		September 30, 2012
Research and development expenses
Stock options	$	135,069	$	143,615	$	310,685	$	258,221	$	1,007,302
General and administrative expenses
Common stock issued for services		—		—		40,000		30,000		1,842,500
Stock options		155,606		684,246		511,851		1,520,317		3,096,102

	$	290,675	$	827,861	$	862,536	$	1,808,538	$	5,945,904

Unrecognized expenses at September 30, 2012	$	2,521,375
Weighted average remaining years to vest		2.5

Warrants

Ampio issued warrants in conjunction with its Senior Convertible Debentures, 2011 Private Placements and an underwritten public offering as follows:


	Number of Warrants			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life
Outstanding December 31, 2010		206,973		$	1.75			2.99
Warrants issued to Debenture holders		49,416		$	1.75
Warrants exercised		(88,669	)	($	1.75	)
Warrants issued in connection with Private Placement		509,288		$	3.125

Outstanding December 31, 2011		677,008		$	2.78			3.69

Warrants exercised - Debenture holders		(7,041	)	($	1.75	)
Warrants exercised - Private Placement		(54,058	)	($	3.125	)
Warrants issued in connection with Underwritten Offering		138,462		$	4.0625

Outstanding September 30, 2012		754,371		$	3.00			3.26

The exercise price of the warrants associated with the Senior Convertible Debentures was fixed at $1.75 per share and the warrants expire on December 31, 2013. Warrants issued in connection with the 2011 Private Placements are at $3.125 per share and expire March 31, 2016.

In July 2012, Ampio issued warrants to purchase 138,462 shares of common stock at a price of $4.0625, exercisable from July 12, 2013 through July 12, 2017 in connection with the underwritten public offering. These warrants were valued using the Black-Scholes option pricing model. In order to calculate the fair value of the warrants, certain assumptions were made regarding components of the model, including the closing price of the underlying common stock, risk-free interest rate, volatility, expected dividend yield, and expected life. Changes to the assumptions could cause significant adjustments to valuation. Ampio estimated a volatility factor utilizing a weighted average of comparable published volatilities of peer companies. 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. The offering costs and the additional paid-in capital for the warrants associated with the common stock offering was valued at $180,194 using the Black-Scholes valuation methodology because that model embodies all of the relevant assumptions that address the features underlying these instruments. Significant assumptions were as follows:


Expected volatility	72	%
Risk free interest rate	0.25	%
Expected term (years)	3
Dividend yield	0	%

Note 9 – Related Party Transactions

Ampio has license agreements with the Institute for Molecular Medicine, Inc. (“IMM”), a nonprofit research organization founded by an officer and director of Ampio who also serves as IMM’s executive director. The license agreements were assigned to Life Sciences as a part of the asset purchase from BioSciences. Under the license agreements, Ampio pays the costs associated with maintaining intellectual property subject to the license agreements. In return, Ampio is entitled to deduct twice the amounts it has paid to maintain the intellectual property from any amounts that may become due to IMM under the license agreements, if and when the intellectual property becomes commercially viable and generates revenue. Ampio may cease funding the intellectual property costs and abandon the license agreements at any time. Ampio incurred $90,789 and $53,422 during the nine months ended September 30, 2012 and 2011, respectively, and $30,506 and $12,046 during the three months ended September 30, 2012 and 2011, respectively, in legal and patent fees to maintain the intellectual property subject to the license agreement.

Immediately prior to the Chay Merger on March 2, 2010, Chay accepted subscriptions for an aggregate of 1,325,000 shares of common stock from six officers and employees of Life Sciences, for a purchase price of $150,183. The purchase price was advanced to the six officers and employees by Chay at the time the subscriptions were accepted. These shares were issued immediately before the closing of the Chay Merger but after the shareholders of Chay had approved the merger. The advances are non-interest bearing and due on demand and are classified as a reduction to stockholders’ equity. During the year ended December 31, 2011 one advance of $22,660 was repaid. During the quarter ended March 31, 2012 an additional repayment of $36,883 was received.

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 Ampio Pharmaceuticals, Inc.’s historical financial statements filed with this report. 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 Ampio’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 9, 2012.

Overview

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

We are a development stage biopharmaceutical company engaged in discovering and developing innovative, proprietary pharmaceutical drugs and diagnostic products to identify, treat and prevent a broad range of human diseases including metabolic disorders, eye disease, kidney disease, cancer, acute and chronic inflammation and male sexual dysfunction. We intend to develop proprietary pharmaceutical drugs and diagnostic products, which capitalize on our intellectual property that includes assigned patents, pending patent applications, and trade secrets and know-how, some of which may be the subject of future patent applications. Our intellectual property is strategically focused on three primary areas: new uses for FDA-approved drugs, referred to as repositioned drugs, new molecular entities, or NMEs, and rapid point-of-care tests for diagnosis, monitoring and screening.

On March 23, 2011, we acquired all of the outstanding stock of DMI BioSciences, Inc. (“BioSciences”) for 8,667,905 shares of our common stock (the “merger stock”). We acquired BioSciences in order to obtain all rights to Zertane, BioSciences’ male sexual dysfunction drug for premature ejaculation (“PE”). The business combination occurred following the satisfaction or waiver of all conditions to closing. As called for in the merger agreement, Ampio issued 405,066 shares of merger stock to holders of BioSciences in-the-money stock options and warrants, 500,000 shares of merger stock to holders of two BioSciences promissory notes in extinguishment of the notes, and placed 250,000 shares of merger stock in an indemnification escrow until December 31, 2011. The remaining 7,512,839 shares of merger stock were issued to the holders of BioSciences common stock on a pro rata basis. As required by the merger agreement, at the closing BioSciences donated back to Ampio’s capital 3,500,000 shares of Ampio common stock formerly owned by BioSciences. Ampio separately issued 212,693 options in replacement of 250,850 Biosciences options that were “out-of-the-money” as of the date of execution of the merger agreement. On June 17, 2011, an additional 223,024 options were issued in exchange for 98,416 previously issued shares of Ampio stock pursuant to an agreement with three former BioSciences option holders. During 2011, we filed a claim on the indemnification escrow and were awarded 95,700 shares of Ampio stock to reflect the full value of the 223,024 options issued in exchange for the shares relinquished. On December 31, 2011 the remaining 154,300 indemnification escrow shares were allocated to the appropriate shareholders. All shares donated back, relinquished and escrow shares awarded to Ampio have been cancelled.

Business Update/Financing Activities

On February 28, 2011, we issued an aggregate of 1,281,852 shares of our common stock in retirement of the Senior Convertible Debentures issued to 21 holders of such debentures. The convertible debentures were previously issued in five tranches. The first tranche consisted of $430,000 in principal amount issued in August 2010 to two directors and an affiliate of one of those directors. The next three tranches consisted of $1.38 million in principal amount issued in October, November and December 2010 to 19 unaffiliated holders (seven of whom were already our shareholders), and the remaining tranche in January 2011 was an increase of $382,000 in principal amount of debentures purchased by five holders who originally purchased debentures in November 2010. The principal amount of the debentures and accrued interest were converted into our common stock at $1.75 per share. Debentures held by two directors and an affiliate of one director were converted on the same terms as debentures held by unaffiliated parties. The debenture holders were collectively issued warrants to purchase 256,389 shares of our common stock as additional consideration for the purchase of the debentures. Those warrants are exercisable at $1.75 per share.

On March 31, April 8 and April 18, 2011, we closed private placements of our common stock (the “2011 Private Placement”). A total of 5,092,880 shares of common stock were issued resulting in gross proceeds of $12,732,200, of which we received net proceeds of $10,916,538, after placement agent commissions, non-accountable expenses and other offering costs. The placement agent also received 509,288 warrants valued at $888,664 in connection with the closing. We applied a portion of the private placement proceeds in March and April 2011 to pay accrued expenses, to pay accrued salaries owed to certain of our officers, to reduce accounts payable, and to repay a $100,000 promissory note to Michael Macaluso, our chief executive officer and chairman of the board.

On September 30, 2011, we filed a “shelf” registration statement on Form S-3 with the Securities and Exchange Commission to register our common stock and warrants in an aggregate amount of up to $80 million for offering from time to time in the future. The registration statement also registers for possible resale up to one million shares of common stock to be sold by the selling stockholders named in the registration statement in future public offerings. On October 13, 2011 we filed an amendment to identify potential selling stockholders and the number of shares they would be eligible to sell in the event of a future public offering. The shelf registration was declared effective on October 28, 2011 by the Securities and Exchange Commission. At September 30, 2012 approximately $53.7 million is left on the shelf with 519,400 remaining shares eligible for sale by selling stockholders.

On December 27, 2011, we completed a registered direct offering of our common stock A total of 2,220,255 shares were issued at a price of $4.25 per share resulting in gross proceeds of $9,436,084, of which we received net proceeds of $8,454,001, after placement agent commissions, non-accountable expenses and other offering costs. No warrants were issued.

On July 18, 2012, we completed an underwritten public offering for the sale of 5,203,860 shares of common stock at a price of $3.25 per share. Gross proceeds to the Company totaled $16,912,545 with net proceeds of approximately $15,400,000 after underwriter fees and offering expenses. Ampio also issued warrants to purchase 138,462 shares of common stock to the underwriters. These warrants have an exercise price of $4.0625 with a five year term but are not exercisable until July 12, 2013.

The net proceeds of the 2011 and 2012 offerings have been or will be used for general corporate purposes and working capital, including conducting pivotal trials for Ampion and Zertane, Phase II and III trials for Optina, development of the methylphenidate family of compounds through the pre-IND submission, development of the ORP device and commercialization of Zertane and Zertane-ED.

Product Update

We continue to execute our business plan and have moved forward on our three main drug candidates and our device development. In addition, we have evaluated our methylphenidate derivatives family of compounds and have accelerated the development of these compounds. We will continue to evaluate our pre-clinical portfolio and advance drug candidates accordingly.

Ampion for Osteoarthritis of the Knee

The clinical trial has been completed and the preliminary results have been evaluated. A pre-IND meeting with the FDA to obtain clarity for a Phase III pivotal trial was held on May 10, 2012. The first batch of the study drug supply has been manufactured and is undergoing stability studies. We have identified initial sites and investigators and are assessing quotes from clinical research organizations. We anticipate that this United States trial will begin at the end of 2012.

Optina for Diabetic Macula Edema

The clinical trial was discontinued after the planned interim review indicated encouraging results. The detailed analysis of the multiple data point per patient was released on June 11, 2012. Despite the small number of patients, the results showed statistical significance. The results of data analysis of the Canadian trial also indicated important changes in study design and dosage. A successful pre-IND meeting with the FDA’s ophthalmology division of the Center for Drug Evaluation and Research (“CDER”) took place July 31, 2012. Among other things, the meeting provided guidance for approval through the 505(b)2 pathway in the United States, indicated no safety or CMC concerns, confirmed agreement that no additional non-clinical studies are necessary and provided that the measure of efficacy will be based on visual acuity end points. We anticipate that the IND will be filed by the end of 2012.

Zertane for Male Sexual Dysfunction

We reached agreement with the Australian Therapeutic Goods Administration (“TGA”) on a plan for preparation of manufacturing and common technical documents to obtain regulatory approval for Zertane in Australia. The submission is dependent upon the completion of batch processes by an independent manufacturer but is expected to be made late in the fourth quarter of 2012 or first quarter of 2013 and we hope to obtain approval in Australia as early as 2013.

A Type B pre-IND meeting was held with the FDA on June 20, 2012 to discuss the approval path for Zertane in the U.S. under the 505(b)2 regulations. We are proceeding based on the guidance received and anticipate the completion of modification of the patient reported outcome (“PRO”) measure as suggested by the FDA and the completion of protocol design for submission of the IND in the first quarter of 2013. As with the TGA submission, the IND submission is also dependent on the manufacturer.

Our sexual drug therapy portfolio was recently expanded with the allowance of the PE-ED patent in Europe and Canada. We expect the United States patent allowance to follow shortly. As a first step for the clinical study of Zertane-ED, we entered into an agreement with Syngene International to begin manufacturing, in compliance with FDA standards, the combination product for use as a study drug in clinical trials to be conducted according to FDA standards and guidelines for approval in South Korea and to support an FDA submission.

We also entered into a license and distribution agreement with a Brazilian pharmaceutical company for exclusive rights to market Zertane in Brazil.

Methylphenidate Derivatives for Cancer

We have accelerated the development of our methylphenidate derivatives family of compounds (“NCE-001”) to preclinical development for the treatment of glioblastoma multiforme (“brain tumor”), renal cell (“clear cell”) carcinoma and inflammatory breast cancer following the granting of multiple composition of matter and use patents in the USA, Canada, Europe and China. We have preliminarily agreed with Syngene International that Syngene will manufacture relevant compounds and conduct all preclinical stages of development to an IND submission to the FDA and we are in the process of finalizing a definitive agreement relating thereto. These cancers do not have adequate treatment options so NCE-001 may qualify for an accelerated approval path by regulatory agencies, including the FDA.

ORP, Point-of-Care Diagnostic Device

Enrollment of patients has been completed for our clinical trials and the analysis of the results has begun. The results will determine the clinical utility of this technology. We intend to prepare a 510(K) FDA submission upon completion of data analysis.

Management Update

On January 9, 2012, we announced that our Chief Executive Officer, Donald B. Wingerter, Jr., had requested and was granted a compassionate leave from all duties as CEO, member of the Board of Directors and an employee. Compensation and benefits totaling $634,000 have been paid to Mr. Wingerter pursuant to terms of his employment contract. This includes a lump sum payment of two years’ salary, a supplemental payment and two years of continued health benefits. All of his outstanding stock option awards vested, bringing total stock options exercisable at $1.03 per share to 600,000 shares. The 325,000 shares of Ampio common stock owned by Mr. Wingerter were subject to the terms of a lock-up agreement that has expired. Ampio’s Chairman of the Board, Michael Macaluso, was appointed Chief Executive Officer concurrent with this departure with his compensation set at $195,000 per year.

Lockups

In July 2012 two of the executive officers and directors of Ampio holding approximately 4,700,000 shares of common stock voluntarily extended their lockup restrictions to January 1, 2013. These two voluntary lockups allow for the sale of collectively up to 429,400 shares as selling stockholders should we decide to sell stock in a future public offering. These executives did not participate as selling stockholders in the July 2012 offering.

Selling stockholders in the July 2012 offering were subject to a lockup up of their remaining shares. This lockup expired on October 16, 2012.

All lockup agreements related to the stock issued in connection with the acquisition of BioSciences expired on June 30, 2012.

Known Trends or Future Events

We have not generated any significant revenues and have therefore incurred significant net losses since our inception in December 2008. The assets we purchased from BioSciences in April 2009 generated minimal revenues prior to their acquisition. Unless we secure a collaborator for one or more of our product candidates and generate substantial license revenues, we will continue to need additional capital in order to continue to implement our business strategy. Although we have raised capital in the past and raised net proceeds of approximately $15.4 million and $19.4 million through the sale of common stock in 2012 and 2011, respectively, we cannot assure you that we will be able to secure such additional financing, if needed, 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. Due to the time required to conduct clinical trials and obtain regulatory approval for any of our product candidates, we anticipate it will be some time before we generate substantial revenues, if ever. 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, such as the license agreement entered into in September 2011 with a major Korean pharmaceutical company.

At this time, due to the risks inherent in the clinical trials and the stage of development of our product candidates, we are unable to estimate with any certainty the costs we will incur for the continued development of our product candidates for commercialization

as clinical development timelines, probability of success, and development costs vary widely. While our current focus is primarily on obtaining regulatory approval for our product candidates, initiating pre-clinical development of our methylphenidate product family, and the development of the ORP device, we anticipate that we will make determinations on an ongoing basis as to which product candidates to pursue and how much funding to direct to each product candidate in response to the scientific and clinical success of each product candidate, as well as an ongoing assessment of each product candidate’s commercial potential and our financial position. We cannot forecast with any degree of certainty which product candidates will be subject to future collaborative or licensing arrangements, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our product candidate plans and capital requirements.

Significant Accounting Policies and Estimates

Our financial statements have been prepared in accordance with accounting policies 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 revenues and 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, fair value of our derivative instruments, allowances and contingencies. 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.

Results of Operations – September 30, 2012 Compared to September 30, 2011

Results of operations for the three months ended September 30, 2012 (the “2012 quarter”) and the three months ended September 30, 2011 (the “2011 quarter”) reflected losses of approximately $2,584,000 and $2,576,000, respectively. These losses include non-cash gains and charges related to derivative expense, stock based compensation and depreciation and amortization in the amount of approximately $97,000 in the 2012 quarter and $569,000 in the 2011 quarter.

Results of operations for the nine months ended September 30, 2012 (the “2012 period”) and the nine months ended September 30, 2011 (the “2011 period”) reflected losses of approximately $7,916,000 and $14,173,000 respectively. These losses include non-cash gains and charges related to derivative expense, common stock and stock based compensation, losses on the fair value of debt instruments and depreciation and amortization in the amount of approximately $777,000 in the 2012 period and $9,339,000 in the 2011 period.

Revenue

We are a development stage enterprise and have not generated material revenue in our operating history. The $37,500 license revenue recognized in the 2012 period and $6,250 in the 2011 period represents the amortization of the upfront payment received on our license agreement. The initial payment of $500,000 from the license agreement with a Korean pharmaceutical company was deferred and is being recognized over 10 years.

Expenses

Research and Development

Research and development costs are summarized as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Labor	$	387,000	$	403,000	$	1,120,000	$	981,000
Patent costs		416,000		244,000		1,092,000		577,000
Stock-based compensation		135,000		143,000		311,000		258,000
Clinical trials and sponsored research		1,159,000		514,000		2,357,000		1,085,000
Consultants		38,000		100,000		280,000		145,000

	$	2,135,000	$	1,404,000	$	5,160,000	$	3,046,000

Research and development costs consist of labor, research and development of patents and intellectual property, stock-based compensation as well as drug development and clinical trials. Costs of research and development increased $731,000 or 52% for the

2012 quarter compared to the 2011 quarter and increased $2,114,000 or 69% for the 2012 period compared to the 2011 period due to continued focus on the development of and pursuit of regulatory clarity on our primary product candidates, Ampion, Optina and Zertane, and the development of our ORP device. We also continued to maintain and strengthen our patent portfolio on our primary product candidates. Labor costs also increased as a result of the increased efforts in this area.

General and Administrative

General and administrative costs are summarized as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Labor	$	172,000	$	171,000	$	1,083,000	$	624,000
Stock-based compensation		156,000		684,000		552,000		1,520,000
Professional fees		50,000		166,000		283,000		536,000
Occupancy, travel and other		245,000		259,000		838,000		582,000
Directors fees		55,000		92,000		185,000		282,000

	$	678,000	$	1,372,000	$	2,941,000	$	3,544,000

General and administrative expenses decreased $694,000 or 51% for the 2012 quarter compared to 2011 quarter. The decrease is due primarily to the non-cash stock-based compensation award expense recognized during the 2011 quarter.

The decrease in general and administrative costs in the 2012 period compared to the 2011 period was $603,000 or 17%. Labor costs increased as the result of the employment agreement payout to our former CEO upon the granting of an indefinite compassionate leave of absence. Stock based compensation decreased in the 2012 period from the 2011 period due to the reduction of new options being issued and the majority of previously issued options having vested. Professional fees consist primarily of legal, audit and accounting costs, costs related to public company compliance costs, and consulting related to capital formation. In the 2011 period we had higher professional fees related to the filing of an S-4 document and the acquisition of BioSciences. Occupancy, travel and other expenses consist of rent, insurance, investor relations and other public company costs such as exchange listing. The increase in the 2012 period relates primarily to NASDAQ annual fees and increased investor relations activities.

Derivative income (expense)

We recorded non-cash derivative income (expense) in connection with our hybrid financial instruments consisting of debentures and related warrants. This income was approximately $209,000 in the 2012 quarter compared to $274,000 of income in the 2011 quarter, and $133,000 of income in the 2012 period compared to $1,918,000 (expense) in the 2011 period. These amounts relate to the fair value at inception and subsequent changes in fair value of the debentures issued in 2011 and 2010 stemming from the embedded derivative features (conversion options, down-round protection and mandatory conversion provisions) and the changes in fair value of warrants issued in conjunction with the debentures.

Unrealized loss on fair value of debt instruments

We recorded approximately $5.6 million in non-cash unrealized loss on fair value of debt instruments in the first quarter of 2011. The expense reflects the change in fair value of our debentures prior to their conversion to common stock in February 2011 and stemmed primarily from the increase in our common stock price between December 31, 2010 and February 28, 2011, when the debentures were converted.

Net Cash Used in Operating Activities

During the 2012 period our operating activities used approximately $7.1 million in cash. The use of cash was approximately the same as the $7.9 million net loss. Non-cash charges for common stock and stock based compensation, depreciation and amortization was approximately $777,000. Current assets in the form of prepaid expenses used cash of $99,000 and the increase in accounts payable provided cash of approximately $159,000.

During the 2011 period our operating activities used approximately $5.0 million in cash. The use of cash was significantly lower than the $14.1 million net loss, primarily as a result of non-cash charges of approximately $1.8 million for common stock issued for services and stock based compensation and $7.5 million in unrealized loss on fair value of debt instruments and derivative expense. Net cash of $417,500 was received from our licensing agreement. We used approximately $658,000 in cash from operations to pay deferred salaries, accounts payable, related party payables and net changes in other current assets and $122,000 for the purchase of fixed assets and rent deposits.

Net Cash from Financing Activities

Net cash provided by financing activities in the 2012 period was $15.4 million in net proceeds from the underwritten public offering, a cash exercise of stock options and warrants of $630,000 and a repayment of approximately $37,000 related to the stockholders advances made in 2010.

Net cash provided by our financing activities was $11.4 million for the 2011 period. During this period, we received $382,000 from the sale of additional senior unsecured debentures and $10.9 million from the sale of common stock and $219,000 from the exercise of options and warrants. We also repaid a $100,000 note to a director of Ampio and collected a $22,660 advance from one stockholder.

Liquidity and Capital Resources

At September 30, 2012, Ampio had cash of approximately $20.3 million and payables of approximately $789,000.

As a development stage biopharmaceutical company, we have not generated significant revenue as our primary activities are focused on research and development, advancing our primary product candidates, and raising capital. In the nine months ended September 30, 2012, we used net cash in operating activities of $7.1 million and inception to date of $20.3 million. We have historically funded our operations through sales of common stock and debt securities.

During the first nine months of 2012, (i) we completed three pre-IND meetings with the FDA that provided clarity for pivotal trials of Ampion and Zertane and approval of 505(b)2 pathway for Optina, and (ii) we accelerated the development of our methylphenidate family of compounds. In July 2012, we completed a public offering of 5,203,860 shares of common stock resulting in gross proceeds to the Company of $16,912,545 with proceeds net of cash offering and underwriting expenses of approximately $15,400,000. We are reviewing solicited proposals and quotes for the clinical trials, ORP device requirements and other costs associated with our development programs. We believe that we have adequate capital to execute most, if not all, of our product strategies; however, we may also enter into licensing or collaboration agreements to further leverage our capital resources. Our on-going expenses such as payroll, legal and accounting and overhead are currently anticipated to be in the range of $600,000 per month, inclusive of new patent applications and maintenance of existing patents. Assuming this cash burn rate stays the same, along with anticipated cash expenditures to execute our product strategies, we expect our cash reserves to last into 2014.

To the extent we decide to further expand our clinical trials, 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 or debt financings. We cannot be certain that financing will be available to us on acceptable terms, or at all. Over the last two 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.

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 commercialization efforts. We also may be required to relinquish greater or all 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.

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.

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

Item 4.

Controls and Procedures.

As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out by the Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports the Company files or furnishes under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations, and are operating in an effective manner.

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 has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings.

The Company is currently not party to any material pending legal proceedings, whether routine or non-routine.

Item 1A.

Risk Factors.

Certain factors exist which may affect the Company’s business and could cause actual results to differ materially from those expressed in any forward-looking statements. The Company has not experienced any material changes from those risk factors as previously disclosed in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 9, 2012 and the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 3, 2012. However, the Company will continue to require additional capital, the receipt of which is not assured.

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 October 29, 2012 the Company formally notified the NASDAQ Capital Market that (I) the Company had recently determined that it had inadvertently become non-compliant with Section 5605(c)(2)(a) of the NASDAQ Listing Rules and (2) it had immediately cured the non-compliance. Richard B. Giles has been a director of the Company and an audit committee member since August 2010. His wife, Barbara, became a non-executive employee on January 2, 2011. When the Company became aware that its interpretation of the audit committee member independence rules was incorrect, Mrs. Giles immediately resigned from the Company, effective October 24, 2012. The Company received written notification from NASDAQ dated October 31, 2012 stating that based upon Mrs. Giles’ resignation, it considers the matter closed.

Item 6.

Exhibits


Exhibit Number		Description

10.1		Clinical Batch Manufacturing Agreement between Ethypharm S.A. and Ampio Pharmaceuticals, Inc. dated September 10, 2012.*

10.2		Manufacturing and Supply Agreement between Ethypharm S.A. and Ampio Pharmaceuticals, Inc. dated September 10, 2012.*

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.INS		XBRL Instance Document+

101.SCH		XBRL Taxonomy Extension Schema Document+

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document+

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Labels Linkbase Document+

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document+

*	Confidential treatment has been applied for with respect to certain portions of these exhibits.

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.

Pursuant to applicable securities laws and regulations, the Registrant is deemed to have complied with the reporting obligation relating to the submission of interactive data files in such exhibits and is not subject to liability under any anti-fraud provisions of the federal securities laws as long as the Registrant has made a good faith attempt to comply with the submission requirements and promptly amends the interactive data files after becoming aware that the interactive data files fails to comply with the submission requirements. These interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under these sections.

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 Chief Executive Officer Date: November 2, 2012

By:		/s/ Mark D. McGregor
		Mark D. McGregor Chief Financial Officer Date: November 2, 2012

Exhibit 10.1

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934.

Clinical Batch

Manufacturing Agreement

(the “Agreement”)

ZERTANE ODT

[***]

Between

ETHYPHARM S.A. , 194 Bureaux de la Colline, Batîment D, 92213

Saint-Cloud, France (“ Ethypharm ”),

and

AMPIO PHARMACEUTICALS, INC. , 5445 DTC Parkway, Suite 925,

Greenwood Village, Colorado 80111, USA (“ Ampio ”).


Confidential		Page \| 1

1.0 BACKGROUND

Ampio has developed the Zertane ^® ODT product in [***] dosage strengths (the “Product”) and its related IMPD dossier and is in the process of registration of the Product in different countries through the world (the “Territory”);

Ampio has engaged Ethypharm, who has accepted, as its exclusive manufacturer and supplier of the Product in the Territory and for this purpose Ampio and Ethypharm are currently negotiating the terms and conditions of a Manufacturing and Supply Agreement (the “Supply Agreement”);

In this context, AMPIO requests that Ethypharm conducts an industrial validation of the manufacturing process of the Product and manufactures and supplies [***] validation batches of Product [***], and [***] pilot clinical batch of the Product in [***] together based on the relevant related technical activities and validation documentation to be supplied by Ampio to Ethypharm.

These validation batches and their pertaining data will be used by Ampio for filing the Product with Healthcare Agencies in different countries of the Territory and will be manufactured in accordance with relevant GMP (as indicated by Ampio) and specifications set in the IMPD dossier (“Specifications”).

In addition, AMPIO would like to use part of these batches for clinical trials to be conducted in the USA (“Clinical Batches”). For this purpose, Ethypharm will be responsible for testing the clinical batches to assure that they conform to the Specifications and are in good and usable conditions for Clinical Trial according to the term of a Technical Specifications Agreement that will be set up and signed by both Ampio and Ethypharm before manufacturing the batches. This Technical Specifications Agreement will detail the mutually agreed quality standards including Specifications applicable to the manufacture of Clinical Batches in accordance with applicable cGMPs and the role and pharmaceutical responsibilities of each Party’s personnel in relation to quality matters.

This Agreement defines the tasks entrusted to Ethypharm for validation, manufacture and delivery of Clinical Batches of Product and the corresponding agreed financial conditions.

The Supply Agreement shall contain other terms as those provided under this Agreement and the Technical Specifications Agreement, including without limitation representation and warranties, confidentiality, indemnification and termination which shall apply to the Parties with respect to the manufacturing and supply of Clinical Batches.

2.0 SCOPE OF DELIVERY OF THIS AGREEMENT

2.1 ANALYTICAL METHODS VALIDATIONS

The four analytical methods will be validated for both dosages:

•

Method for assay

•

Dissolution method


Confidential		Page \| 2

•

Degradation Products assay

•

Residual solvents assay [***]

2.2

MANUFACTURING

Manufacturing will be performed following the process described in the Zertane IMPD dossier prepared by Ampio for UK and in compliance with GMP requirements. All batch sizes are defined in the table below.

Ethypharm will perform the following activities:

•

Sourcing of Active Pharmaceutical Ingredient & excipients

•

Analysis of Active Pharmaceutical Ingredient & all excipients according to USP.

•

Manufacturing of one technical trial batch for each dosage [***]

•

Manufacturing of [***] validation batches of the [***] Product; one of these [***] batches will also be a pilot clinical batch that will be used for phase III clinical trial in the USA

•

Manufacture of [***] pilot clinical batch of the [***] Product that will be used for clinical trial in the USA (batch size to be confirmed)

•

Manufacture of [***] Placebo batch (Batch size indicated in the table below)

•

Product final analysis testing in compliance with the Technical Specifications Agreement

•

Packaging of the [***] validation batches of each dosage and Placebo batch into Alu/Alu blister [***], 6 tablets per card (3 x 2).

•

Release/T0 testing of all batches produced (Appearance, ID, Dissolution, Assay, Content Uniformity, Impurities, Residual Solvents, Moisture, Hardness, Friability and Disintegration. Microbial Limits for info only) that complies with the Technical Specifications Agreement

The characteristics of each batch is summarized in the following table (will be applied to each dosage; only one placebo for both dosages)


	Batch A	Batch B	Batch C	Batch D	Batch E

Dose	[***]	[***]	[***]	[***]	Placebo

Size	[***] tabs	[***] tabs	[***] tabs	[***] (TBC)	[***] (TBC)

Marked /unmarked	unmarked	marked	marked	unmarked	unmarked

Used for industrial validation	Yes	Yes	Yes	No	No

Used for clinical study	Yes	No	No	Yes	Yes

Number of tablets packaged for stability studies	[***] tab (TBC)	[***] (TBC)	[***] (TBC)	TBD	TBD

Number of tablets packaged for clinical Phase III	[***] tab	0	0	[***] tab	[***] tab

Destination of the rest of the batch	TBD – will not be marketed (non marked)	Packaged for future marketing	Packaged for future marketing

TBC: to be confirmed			TBD: to be determined


Confidential		Page \| 3

2.3

STABILITY TESTING

ICH Stability program will be conducted for Zone II and Zone IV (IVa or IVb to be confirmed) on batches produced.

•

Ambient, Intermediate and accelerated conditions

•

1 configuration, i.e. blister Alu/Alu

•

Time points: T1, T2 (accelerated), T3 (accelerated), T3, T6, T9,T12, T18, T24, T36 months

•

Release/T0 testing of placebo clinical batch(es) and stability program to support duration of use in a Phase 3 study

2.4 DOCUMENTATION

Ethypharm will provide the following documentation:

•

Certificates of analysis for Active Pharmaceutical Ingredient, excipients and batches tested

•

Analytical validation protocols

•

Analytical validation reports

•

Batch records for Active Product and Placebo batches

•

Process validation protocol

•

Process validation report

•

Stability study protocols

•

Stability data/analytical reports within 2 weeks of report sign-off

•

Stability study reports

All documents related to the validation will be provided to AMPIO upon completion of manufacturing.

3.0 MANUFACTURING FEES

3.1 Fees

In consideration for the manufacturing services rendered, AMPIO shall pay to ETHYPHARM the following amount: One Million one hundred eighty four thousand six hundred sixty seven United States dollars $1,184,667)


Confidential		Page \| 4


Tablet Manufacturing - [***]		[***]
Tablet Manufacturing – [***]		[***]
Blister Packaging		[***]
Tablet Manufacturing - [***]		[***]
Stability studies – Zone II & IV		[***]
Validations (+ references)		[***]
Tooling (3 sets of punches)		[***]
Total		$1,184,667

Payment terms:

[***] upon the Effective date

[***] upon commencement of manufacturing of validation batches

[***] upon delivery of validation batches and Batch Records

These fees are payable within thirty days date of invoice.

This fee does not include:

•

Product handling and shipping to AMPIO or designated CRO

•

Any additional development work

•

Price for specific dedicated tooling and apparatus should any be required

•

Any other specific requests from AMPIO not covered under this Agreement

4.0 TIMELINES

It is estimated that it will take 12 weeks to complete the manufacturing and deliver the product to AMPIO.

Analytical validation will take place from [***]

Manufacturing will take place in [***]

Final validation report will be available by December 21 ^st 2012

5.0 CHANGES TO SCOPE

Any requests for changes to this Agreement must be in writing and must set forth specifically the requested changes. As soon as possible, ETHYPHARM shall advise of the schedule and cost implications of the requested changes and any other necessary details to allow both parties to decide whether to proceed with the requested changes. The parties shall agree in writing prior to ETHYPHARM initiating work. As used herein, “changes” are defined as work activities or work products not originally planned for or specifically defined in this Agreement (i.e., additional batches, placebo samples, additional packaging, additional stability studies or sampling points…)—any change in the respective


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responsibilities of the team set forth in this Agreement, including any reallocation of project staffing. Any rework of completed activities or accepted deliverables (i.e. re-formulation, formulation optimization…)


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IN WITNESS WHEREOF, the parties have entered into this Agreement as of the latest date noted hereunder, (the “Effective date”).


ETHYPHARM S.A.		AMPIO PHARMACEUTICALS INC.

Signature:	/s/ Hugues Lecat	Signature:	/s/ Michael Macaluso

Name:	Hugues Lecat	Name:	Michael Macaluso

Title:	Chairman & CEO Management Board	Title:	Chief Executive Officer

Date:	30/08/2012	Date:	Sep 10, 2012


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Exhibit 10.2

Execution Copy

MANUFACTURING AND SUPPLY AGREEMENT

by and between

ETHYPHARM S.A.

and

AMPIO PHARMACEUTICALS, INC.

* * *

TABLE OF CONTENTS


		Page
ARTICLE 1 DEFINITIONS			4

ARTICLE 2 APPOINTMENT OF MANUFACTURER			8
2.1	Requirements		8
2.2	Third Party Manufacturer		8
2.3	Joint Manufacturing Committee		8

ARTICLE 3 REGULATORY AND QUALITY UNDERTAKINGS			9
3.1	Regulatory		9
3.2	Import and Packaging		9
3.3	Change in Specifications		9
3.4	Advertising, Promotional Materials, and Public Statements		10
3.5	Product Complaints and Adverse Drug Experiences		10
3.6	Facility Maintenance; Inspection; Reports		10
3.7	Filing Requirements and Maintenance		10
3.8	Product Recall		11
3.9	Quality Agreement		11

ARTICLE 4 FORECAST, ORDER, SUPPLY PRICE, SUPPLY INTERRUPTION			12
4.1	Forecast Reports		12
4.2	Product Orders		12
4.3	Batch Sizes of Product		12
4.4	Inventories		12
4.5	Supply Price of the Product		13
4.6	Supply Interruption		13
4.7	Deficiency Notice		14
4.8	Determination of Deficiency		14
4.9	Rejection for Deficiency		15

ARTICLE 5 WARRANTIES AND COVENANTS			15
5.1	Certain Representations and Warranties of Ethypharm		15
5.2	Certain Representations and Warranties of Ampio		15
5.3	Certain Covenants of Ampio		16
5.4	Certain Covenants of Ethypharm		16
5.5	Storage		16


5.6	Representation and Warranties with Regard to Status	16
5.7	Compliance with Specifications and cGMP	16
5.8	Limitation of Warranty	17

ARTICLE 6 INDEMNIFICATION AND LIMITATION OF LIABILITY		17
6.1	Ethypharm’s Indemnification Obligations	17
6.2	Ampio’s Indemnification Obligations	17
6.3	Indemnification Procedures	17
6.4	Limitation of Liability	18

ARTICLE 7 INSURANCE		18

ARTICLE 8 CONFIDENTIALITY		19
8.1	Treatment of Confidential Information	19
8.2	Limits on Disclosure	19

ARTICLE 9 TERM AND TERMINATION		20
9.1	Term	20
9.2	Termination for Breach	20
9.3	Termination for Bankruptcy	20
9.4	Withdrawal of Regulatory Approval and NDA	20
9.5	No Waiver of Termination Rights	20

ARTICLE 10 FORCE MAJEURE		21
10.1	Effects of Force Majeure	21
10.2	Notice of Force Majeure	21

ARTICLE 11 Miscellaneous		21
11.1	Dispute Resolution	21
11.2	Independent Contractors	22
11.3	Assignment	22
11.4	Governing Law	22
11.5	No Implied Waiver	22
11.6	Notice	22
11.7	Amendments	23
11.8	Counterparts	23
11.9	Interpretation	24
11.10	Entire Agreement	24
11.11	Benefit; Binding Effect	24
11.12	Survival	24
11.13	Further Assurances	24
11.14	Severability	24
11.15	Use of Names; Publicity	25

MANUFACTURING AND SUPPLY AGREEMENT

THIS MANUFACTURING AND SUPPLY AGREEMENT (the “ Agreement ”), dated as of September 10, 2012 (the “Effective Date”), is entered into by and between ETHYPHARM S.A. , a corporation organized under the laws of France with an address at 194 Bureaux de la Colline, F92213 Saint-Cloud, France (“ Ethypharm ”), and AMPIO PHARMACEUTICALS, INC. , a corporation organized under the laws of the state of Delaware with an address at 5445 DTC Parkway, Suite 925, Greenwood Village, Colorado 80111, USA (“ Ampio ”).

WHEREAS, Ethypharm and Valeant International (Barbados) SRL (formerly Biovail Laboratories International, SRL) (“Valeant”) entered into that certain NDA Assignment and License Agreement dated as of February 6, 2009 (the “ License Agreement ”) under which Valeant was given rights from Ethypharm to use the Technology (as defined below) to develop and commercialize the Product (as defined below) on a worldwide basis;

WHEREAS, pursuant to that certain Contract Assignment and License Agreement, dated December 20, 2011, between Valeant and Ampio, Ampio was assigned all of Valeant’s rights under the License Agreement;

WHEREAS, pursuant to the terms of the License Agreement, Ampio has developed the Product and its related Regulatory Documentation (as defined below) and is in the process of registration of the Product in different countries of the Territory (as defined below).

WHEREAS, pursuant to the terms of the License Agreement, Ampio has engaged Ethypharm, who has accepted, as its exclusive manufacturer and supplier of the Product in the Territory;

NOW, THEREFORE, in consideration of the foregoing premises and mutual covenants of the Parties hereinafter set forth, the parties agree as follows:

ARTICLE 1

DEFINITIONS

“ Affiliate ” means, with respect to any Person, any other Person that (directly or indirectly) is controlled by, controls, or is under common control with such Person. For purposes of this definition, the term “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) as used with respect to a Person means direct or indirect beneficial or legal ownership of more than fifty percent (50%) of the voting interest in, or more than fifty percent (50%) of the equity of or the right to appoint more than fifty percent (50%) of the directors or managers of the corporation or other business entity or the power to direct or cause the direction of the management and policies of such corporation or entity, whether pursuant to the ownership of voting securities, by contract or otherwise.

“cGMP” shall mean the practices required with respect to the manufacture of the Product by the provisions of EC Commission Directive 2003/94/CE together with the Guide to Good Manufacturing Practice published by the EC Commission in 1992 (ISBN 92-826-3180-X) and by the Food and Drug Administration in the provisions of 21 C.F.R., parts 210 and 211.

“ Commercial Manufacturing Site ” means Ethypharm’s manufacturing site at Châteauneuf en Thymerais, France, or any other manufacturing site to be agreed upon by both parties pursuant to the terms of this Agreement.

“ Commercially Reasonable Efforts ” means, with respect to the efforts to be expended by a party with respect to any objective, reasonable, diligent, good faith efforts to accomplish such objective that such party would normally use to accomplish a similar objective under similar circumstances, it being understood and agreed that with respect to the research, development or commercialization of the Product, such efforts shall be substantially equivalent to those efforts and resources commonly used by a party for a similar pharmaceutical product owned by it or to which it has rights, which product is at a similar stage in its development or product life and is of similar market potential taking into account efficacy, safety, anticipated labeling, the competitiveness of alternative products in the marketplace, the patent and other proprietary position of the product, the likelihood of regulatory approval, commercial value of the product, alternative products and other relevant factors.

“ Confidential Information ” means all trade secrets, processes, formulae, data, know-how, improvements, inventions, chemical or biological materials, techniques, marketing plans, strategies, customer lists, or other information that has been created, discovered, or developed by a party or its Affiliate, or has otherwise become known to a party or its Affiliate, or to which rights have been assigned to or by a party or its Affiliate (including, without limitation all information and materials of a party’s (or its Affiliates’) customers and any other third party and their consultants), in each case that are disclosed by such party or its Affiliate to the other party, regardless of whether any of the foregoing is marked “confidential” or “proprietary” or communicated to the other by the disclosing party in oral, written or graphic, or electronic form; provided, however , that Confidential Information shall not include any information:

(A) that, at the time of its disclosure, is generally available within the industry;

(B) that, after its disclosure in connection herewith, becomes generally available within the industry, through no act or failure to act on the part of the receiving party or its Affiliates;

(C) that becomes available to the recipient of such information from a third party that does not owe a duty of confidentiality to the disclosing party in relation to that Confidential Information; or

(D) that the recipient of which can demonstrate was independently developed by or for such recipient without the aid, application or use of the Confidential Information disclosed to the recipient by the disclosing party or its Affiliates in connection herewith.


CONFIDENTIAL		5 \| Page

“ Defect ” means any flaw making the Product dangerous or unsuitable for use or otherwise unsuitable for sale.

“ Deficiency Notice ” has the meaning set forth in Section 4.7 .

“ Due Delivery Date ” has the meaning set forth in Section 4.6 .

“ Effective Date ” means the date hereof.

“EX Works” or :EXW” has the meaning provided in INCOTERM rules of the International Chamber of Commerce of 2010.

“ FDA ” means the United States Food and Drug Administration or any successor government agency.

“ First Commercial Sale ” means the first sale of the Product under this Agreement by Ampio, its Affiliates or Licenses in arms’ length transaction to an unaffiliated Person.

“ Forecast Report ” has the meaning set forth in Section 4.1 .

“ Ineligible Person ” has the meaning set forth in Section 5.6 .

“ Infringement Notice ” has the meaning set forth in Section 11.1 .

“ Intellectual Property ” means all (i) patent applications, continuation applications, continuation in part applications, divisional applications, any corresponding foreign patent applications to any of the foregoing, and any patents that may grant or may have been granted on any of the foregoing, including reissues, re-examinations and extensions; (ii) rights in know-how, trade secrets, inventions (whether patentable or otherwise), data, processes, techniques, procedures, compositions, devices, methods, formulas, protocols and information, whether patentable or not; (iii) copyrightable works, copyrights and applications, registrations and renewals; (iv) other intellectual proprietary rights; in each case, whether or not registered, applied for or granted; and (v) copies and tangible memorializations of any one or more of the foregoing.

“ Losses ” has the meaning set forth in Section 6.1 .

“ Notice of Observations ” has the meaning set forth in Section 3.6 .

“ Person ” means a natural person, corporation, partnership, company or other entity.

“Pain Field” means the prevention and/or treatment of pain in human beings.


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“Product ” means an oral rapid dissolve or oral disintegrating tablet formulation of TRAMADOL as the only active pharmaceutical ingredient in [***] dosage strengths for indication outside the Pain Field manufactured in accordance with the Specifications.

“ Quality Agreement ” has the meaning set forth in Section 3.9 .

“ Regulatory Approval ” means the approvals or authorizations of relevant Regulatory Authorities, necessary for the import, marketing and sale of the Product in the Territory.

“ Regulatory Authority ” means any competent regulatory authority or other governmental body responsible for approving and authorizing the import, manufacture or marketing of Product in the Territory.

“ Regulatory Documentation ” means all submissions to the FDA or other Regulatory Authorities as applicable, including, without limitation, any clinical data, clinical studies, tests, and biostudies, NDAs, as well as all correspondence with regulatory authorities, registrations and licenses, regulatory drug lists, advertising and promotion documents, adverse event files, complaint files, manufacturing records and inspection reports, in each case related to or used in connection with the Product.

“ Specifications ” means all those manufacturing, testing, packaging, labeling, storage and quality control specifications established for the Product by Ampio in compliance with the requirements of the cGMPs and other regulatory requirements, as set forth in Exhibit C hereto as may be supplemented or amended from time to time by agreement of the parties, as further defined in the Quality Agreement.

“ Supply Interruption ” has the meaning set forth in Section 4.6 .

“ Supply Price ” has the meaning set forth in Section 4.5 hereof.

“ Technology ” means Ethypharm’s proprietary [***] technology, and all patents, patent applications, trademarks, copyrights, proprietary know-how and all other related Intellectual Property rights owned by Ethypharm relating to the Product.

“ Term ” has the meaning set forth in Section 9.1 hereof.

“ Territory ” means all the different countries where the Product will be marketed by Ampio or its Licenses.

“ Third Party Manufacturer ” has the meaning set forth in Section 2.2 .


CONFIDENTIAL		7 \| Page

ARTICLE 2

APPOINTMENT OF MANUFACTURER

2.1 Requirements . During the Term, subject to Section 4.6 below, Ampio, itself or through its Affiliates or Licensees, shall purchase all of their requirements for Product exclusively from Ethypharm, or its Third Party Manufacturer as applicable, and Ethypharm, and its Third Party Manufacturer as applicable, shall manufacture and supply to Ampio, its Affiliates and Licenses all of their requirements for Product. All Product manufactured and supplied hereunder whether by Ethypharm or Third Party Manufacturer shall be performed in compliance with the Quality Agreement and Specifications including cGMP and all applicable laws, rules and regulations.

2.2 Third Party Manufacturer . Ethypharm shall not subcontract its manufacturing and supply obligations hereunder to any third party; provided, however , upon the prior written consent of Ampio, Ethypharm shall be entitled to contract with a third party for the purposes of such party’s producing part or all of the Product, and maintaining quality control with respect to such Product, in lieu of and on behalf of Ethypharm (a “ Third Party Manufacturer ”) in which case Ethypharm shall remain liable to Ampio for all of its obligations, including but not limited to the performance of the Third Party Manufacturer, herein, and Ampio shall either (at Ethypharm’s discretion) start purchasing the Product directly from the Third Party Manufacturer (according to the same terms and conditions as apply to the supply of Product by Ethypharm to Ampio hereunder), or continue purchasing the Product through Ethypharm. Ethypharm shall give Ampio reasonable notice of any proposal to appoint a Third Party Manufacturer and shall satisfy all legal and regulatory requirements relating to any variation of the Regularity Approval relating to such appointment at its own cost and shall procure for Ampio reasonable inspection and audit rights (which rights are no less favorable to Ampio than those it possesses hereunder with respect to Ethypharm) in respect of the Third Party Manufacturer’s Manufacturing Site. Ethypharm shall warrant in writing to Ampio that the Third Party Manufacturer: (i) has and will maintain the requisite capacity to satisfy Ethypharm’s production and delivery obligations, and to meet Ampio’s order requirements, hereunder with respect to the Product in accordance with the Specifications and the terms and conditions of this Agreement; (ii) complies and will comply with all applicable laws and holds all applicable licensees and permits necessary for the manufacture of the Product in compliance with cGMP; (iii) has and will have the right to use all related intellectual property and Confidential Information of Ethypharm necessary to manufacture the Product in accordance with the Specifications and the terms and conditions of this Agreement.

2.3 Joint Manufacturing Committee. On the Effective Date, the parties will establish a Joint Manufacturing Committee consisting of four members, two of whom shall be appointed by Ethypharm and two of whom shall be appointed by Ampio. Initially, Ethypharm’s representatives to the Committee shall be Hafid Touam and Antoine Poncy, and Ampio’s representative shall be Amy Poshusta and one additional to be named. The Committee shall meet, either in person or by teleconference, at least quarterly to discuss the following matters relating to the manufacture and supply of the Product:

1. coordinate forecasting, ordering and other supply-related logistics;


CONFIDENTIAL		8 \| Page

2. discuss supply-related issues, including shortfalls and quality issues;

3. discuss and coordinate manufacturing-related complaints, recalls and any other supply related issues;

4. review and discuss proposals to engage, qualify and maintain Third Party Manufacturers and Additional Manufacturing Facilities;

5. discuss the content and scope of any quality audit undertaken, or to be undertaken, relating to Third Party Manufacturers;

6. review and agree on budgets for any additional technical assistance agreed to by the parties;

7. discuss requirements for supply of Product and mechanisms to maintain supply, e.g., by increasing batch sizes and/or capacity or through additional sources;

8. discuss technology and regulatory issues including tech transfer, changes in Specifications, API sourcing, stability studies, inspections and audits; and

9. perform such other functions as may be appropriate with respect to the manufacture of the Product.

All decisions of the Joint Manufacturing Committee will be made by unanimous vote. If the Committee cannot reach agreement on any particular issue, the issue will be brought to the Chief Executive Officers of the parties, who shall have a period of 30 days to find an acceptable resolution to the issue. If the issue is not resolved during such 30 day period, either party may bring the issue to a court of competent jurisdiction for resolution, in accordance with Section 11.1 below.

ARTICLE 3

REGULATORY AND QUALITY UNDERTAKINGS

3.1 Regulatory . Ampio, as the holder of the Regulatory Approval, shall be responsible for obtaining, maintaining and fulfilling all legal and regulatory requirements in the Territory at its own cost, with respect to the Product during the Term, as required by all applicable laws and regulations in the Territory.

3.2 Import and Packaging . Ampio shall be responsible for the shipping, freight and handling of Product following its delivery to Ampio at the Commercial Manufacturing Site and shall additionally be responsible for finished product packaging operations with respect to Product and shall ensure compliance with any and all laws and regulations in the Territory to the import and export of the Product in the Territory.

3.3 Change in Specifications . In the event that a Regulatory Authority imposes any change affecting the manufacture of the Product, the parties, acting through the Joint Manufacturing Committee, shall discuss in good faith with a view to reaching agreement on the


CONFIDENTIAL		9 \| Page

actions and timing required to effect such change, which shall be at the costs and expense of Ampio. All such changes required by any Regulatory Authorities or by Ampio shall be made at Ampio’s costs and expenses. Any modifications to Specifications and /or the manufacturing instructions shall be implemented and validated in accordance with the terms of the Quality Agreement.

3.4 Advertising, Promotional Materials, and Public Statements . Ampio shall be solely responsible for all sales, marketing and advertising activities related to the Product in the Territory and shall ensure that all advertising and promotional materials comply with applicable laws, rules and regulations in the Territory.

3.5 Product Complaints and Adverse Drug Experiences . Ampio shall, at its sole cost and expense, be responsible for handling all customer Product complaints and all adverse event reporting, annual reporting, pharmacovigilance and other required, ongoing regulatory reporting activities normally and customarily associated with sales and marketing of pharmaceutical products in the Territory, in each case, in accordance with applicable laws.

3.6 Facility Maintenance; Inspection; Reports . Each party shall maintain and operate its respective facilities and implement such quality control procedures so as to meet the requirements of applicable FDA or any other relevant regulations and so as to be able to perform timely its obligations hereunder. Each party shall (and shall cause its Third Party Manufacturers and packagers, if applicable, to) permit quality assurance representatives of the other party to inspect its facilities, including the Commercial Manufacturing Site, once per calendar year upon reasonable written notice, during normal business hours and on a confidential basis; provided , that, if an inspecting party finds any non-compliance during any such inspection with respect to the Product, the party subject to inspection shall (i) use Commercially Reasonable Efforts to promptly and diligently rectify such non-compliance and implement appropriate procedures with a view to avoiding such non-compliance and (ii) permit such additional inspection(s) by the inspecting party as such inspecting party shall deem reasonably necessary to verify that such non-compliance has been rectified. Each party shall promptly provide the other party with a copy of any correspondences exchanged with any Regulatory Authorities, together with the response and corrective action taken by the party with respect to the Product.

3.7 Filing Requirements and Maintenance . Ampio shall promptly comply with all filing and reporting requirements with respect to the Product, including general reporting requirements necessary to keep and maintain the Regulatory Documentation for the Regulatory Approval current with the Regulatory Authority and any applicable clinical study. Ampio shall be responsible for conducting all stability studies at its own cost and expense that may be required for ongoing marketing and sale of the Product during the Term and such stability studies shall be conducted in compliance with the Regulatory Documentation, the Regulatory Approval and other Regulatory Authorities requirements.


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3.8 Product Recall .

(a) Ampio or its Affiliates, licensees or Licenses shall be responsible for handling the recall or seizure of any Product distributed by or on behalf of Ampio hereunder at its own costs and expense. Notwithstanding the foregoing, in the event Ampio decides to recall or seize any Product distributed under this Agreement, and such recall or seizure is found to have been caused by a failure of Ethypharm to manufacture the Product in accordance with Specifications or cGMP, Ethypharm shall reimburse Ampio for all external costs associated with such recall or seizure (including shipping, handling costs and credits to customers). Any decision to recall, withdraw or cease distribution of Product shall be made by Ampio only following consultation with Ethypharm, taking such reasonable action as it considers to be appropriate under the circumstances to limit the risk to both parties and assure compliance by the parties with the requirements of applicable laws. For purposes of this Section 3.8 , “ recall ” means (i) any action by Ethypharm, Ampio or any Affiliate of either to recover title to or possession of any Product sold or shipped (including, but not limited to, market withdrawal) and/or (ii) any decision by Ampio not to sell or ship any Products to third parties that would have been subject to recall if they had been sold or shipped, in each case taken in the good faith belief that such action was appropriate under the circumstances. For purposes of this Section 3.8 , “ seizure ” means any action by any governmental authority to detain or destroy any Product.

(b) Following the First Commercial Sale, Ethypharm and Ampio shall keep the other fully informed in writing of any notification or other information, whether received directly or indirectly, that might (i) affect the Regulatory Authority’s approval to market the Product under the Regulatory Approval or the safety or effectiveness of the Product, (ii) result in liability issues or otherwise necessitate action on the part of either party, or (iii) result in the recall or seizure of the Product. Ampio will be responsible for assuring that such recall is closed-out with relevant Regulatory Authority.

3.9 Quality Agreement . As promptly as practicable after the Effective Date, but in any event no later than six months following the date of receipt by Ampio or its distributors or licensees of the first Regulatory Approval for the Product in the Territory, the parties will negotiate in good faith and execute a Quality Agreement (the “Quality Agreement”) setting forth each party’s obligations for ensuring that the Product is manufactured and sold in compliance with cGMP and concerning the delimitation of pharmaceutical and quality responsibilities for the manufacturing operations of the Product. This agreement shall contain administrative information with responsibilities, supply and manufacturing (premises, materials, batch numbering, shelf life and other information), customary provisions, including change control, deviation, cGMP compliance, complaint handling and investigation, annual product review, QC testing (specification and method), documentations and inspections, batch release, product recalls, stability studies and other quality related items in accordance with applicable regulation and guidelines in the Territory.


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ARTICLE 4

FORECAST, ORDER, SUPPLY PRICE, SUPPLY INTERRUPTION

4.1 Forecast Reports . No later than six months following the date of receipt by Ampio or its distributors or licensees of the first Regulatory Approval for the Product in the Territory, Ampio shall provide Ethypharm with a twelve (12) month forecast of its estimated requirements of the Product, which shall be updated quarterly during the Term to ensure that Ethypharm has at all times a twelve (12) month forecast for Ampio’s estimated requirements of the Product (the “ Forecast Report ”). The Forecast Report shall be expressed in quantities of bulk tablet units of Product. Forecast Reports shall be provided to Ethypharm for information purposes only and shall not constitute a firm commitment.

4.2 Product Orders . Ampio shall provide Ethypharm with binding and non-cancellable orders of the Product four (4) months in advance, except for the first order to support the First Commercial Sale (the “ Commercial Launch Supply ”) which shall be placed six (6) months in advance. Ethypharm shall accept all orders by written notice no later than ten (10) days following receipt of each relevant order and shall deliver such quantities of Product ordered unless the quantities ordered by Ampio vary by more than twenty-five percent (25%) from the quantities indicated in the applicable Forecast Report. Ethypharm shall work with Ampio using Commercially Reasonable Efforts to deliver such quantities of Product that exceed more than twenty-five percent (25%) of the estimated quantities of Product of the concerned Forecast Report. Ampio shall provide Ethypharm in each order with the exact quantity of Product, delivery date and the address to which the Product must be sent. These binding orders shall be considered as firm offers and shall bind the Parties as soon as they are accepted in writing by Ethypharm.

4.3 Batch Sizes of Product And Inventories.

(a) Each binding order placed by Ampio shall correspond to one full batch or multiple full batches of the Product. A full batch size of Product is defined in Exhibit A of this Agreement.

(b) Any proposed change in batch size shall be discussed with the Joint Manufacturing Committee before implementation. Ethypharm shall be responsible for implementing at its own discretion, any change in batch size during the Term taking into account the Forecast Reports. Ampio shall be responsible for obtaining all regulatory approvals, required, to implement changes in full batch size required hereunder.

4.4 Inventories . Ampio shall at all times use reasonable efforts to keep adequate inventories of Product to meet the market demand in the Territory. These inventories shall be sufficient to cover the estimated requirement for at least four (4) months. At Ampio’s request, such inventories shall be kept at Ethypharm’s facility on Ampio’s behalf.


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4.5 Supply Price of the Product .

(a) All Product manufactured by Ethypharm or a Third Party Manufacturer, shall be supplied in bulk tablet form ready for packaging and shall be delivered EX WORKS Ethypharm’s Commercial Manufacturing Site. Ethypharm Supply Price to Ampio is defined in Exhibit B of this Agreement. Ampio or its designated distributor or sublicensee shall be responsible for the shipping, freight and handling of the Product from Ethypharm’s Commercial Manufacturing Site and finished dosage packaging. Ampio (a) shall pay Product invoices within thirty (30) days of date of invoice. Ethypharm shall supply the Product in bulk tablet forms ready for packaging and shall deliver the Product to Ampio, EX WORKS (Ethypharm’s Commercial Manufacturing Site) (Incoterm 2010). The Supply Price as determined above includes the active ingredient, excipients, testing and manufacturing workmanship according to Ethypharm’s usual standards and in compliance with cGMPs.

(b) [***]

(c) Ampio shall be responsible for all duties, tariffs, import and similar charges other than sales and use taxes arising out of or related to the manufacture of the Product. None of these costs shall be subject to recoupment by Ampio from Ethypharm under this Agreement.

(d) At any time during the Term of this Agreement, in the event that one of the Parties produces the written proof that an unforeseeable event beyond the control of the Parties affects the economical conditions of the present Agreement so as to modify substantially the contractual balance of this Agreement for the sole benefit of one of the Party, the Parties agree to revise the Supply Prices in good faith, taking into consideration the market of the Product in the Territory, in order to put back both Parties in a situation similar to the existing situation at the date of signature of the Agreement. Each Party reserves the right to terminate this Agreement if the Parties are unable to reach an agreement within three (3) months starting from the first demand of conciliation by the most diligent Party.

4.6 Supply Interruption . A “ Supply Interruption ” shall be deemed to have occurred if Ampio has not received ordered Product for more than sixty (60) days past the scheduled and agreed upon due delivery date (“ Due Delivery Date ”) and Ampio holds no saleable stock of the Product after attempting to maintain at least four (4) months of sealable stock through binding orders made pursuant to Section 4.3 (subject to Ethypharm’s delivery thereof), unless such Supply Interruption is caused by (a) a delay due to a shortage in supply of usable active pharmaceutical ingredient or any other manufacturing material supplied by a third party through no fault of Ethypharm, (b) a material breach of this Agreement by Ampio for which Ethypharm has provided written notice thereof to Ampio or (c) a Force Majeure Event. During a Supply Interruption, Ampio, shall be entitled to claim from Ethypharm a penalty of one per cent (1%) of the amount of the late deliveries value of Product from the third week of delay, per each week of delay. The total amount of penalty to be paid by Ethypharm shall not exceed twenty per cent (20%) of the late deliveries value of Bulk Product not delivered. Such payment shall be made to Ampio within thirty (30) days date of Ampio’s invoice. Notwithstanding the other provisions of


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this Agreement, if a Supply Interruption lasts for more than three (3) months, Ampio shall be permitted, at its discretion, (i) to require Ethypharm to use a different supplier for the Product, once Ampio has provided reasonable notice to Ethypharm of such requirement and/or (ii) to thereafter purchase some or all of its requirement for the Product from a third party of its choosing and Ethypharm shall grant all necessary licenses and provide all necessary and reasonable cooperation to effect such transfer to the new manufacturing site, on conditions to be agreed in writing by the Parties and subject to appropriate confidentiality agreements being entered into by such third party.

4.7 Deficiency Notice . Ampio shall have the right to reject any portion of any delivery of Product that deviates from Specifications without invalidating any remainder of such delivery. Ampio shall inspect the Product upon receipt thereof and shall give Ethypharm written notice (a “ Deficiency Notice ”) of all claims for Product that deviates from the Specifications within thirty (30) days after Ampio’s receipt thereof (or, in the case of any Defect not reasonably susceptible to discovery upon receipt by Ampio, within thirty (30) days after discovery thereof by Ampio, up until the final release of the Product in its commercial packaging). Should Ampio fail to provide Ethypharm with a Deficiency Notice within the applicable period, then the delivery shall be deemed to have been accepted by Ampio upon the expiration of such period. Notwithstanding the foregoing, if Ampio discovers that any Product materially deviates from Specifications after final release of the Product in its commercial packaging, such deviation was not reasonably susceptible to discovery upon receipt of the Product from Ethypharm, and Ampio reasonably determines that such deviation was due to Ethypharm’s manufacturing, Ampio may reject the delivery of such Product within thirty (30) days after discovery thereof by Ampio, up until the final expiration date of the Product.

4.8 Determination of Deficiency . Upon receipt of a Deficiency Notice, Ethypharm shall have ten (10) business days to advise Ampio by notice in writing that it disagrees with the contents of such Deficiency Notice. Should Ethypharm fail to provide Ampio with a response to such Deficiency Notice within the applicable period, then the delivery shall be deemed to have deviated from the Specifications upon the expiration of such period. If Ethypharm responds to such Deficiency Notice during such period and Ampio and Ethypharm fail to agree within ten (10) business days of the date of Ethypharm’s response to Ampio as to whether any Product identified in the Deficiency Notice deviates from the Specifications, the parties shall mutually select an independent laboratory to analyze the Product for compliance with the Specifications. Such analysis shall be binding on the parties, and Ampio may reject such Product if such analysis determines that the Product in question deviates from the Specifications. If such analysis certifies that the Product does not deviate from the Specifications, Ampio shall be deemed to have accepted delivery of such Product on the fortieth (40th) day after delivery (or, in the case of any Defect not reasonably susceptible to discovery upon receipt of the Product or Defect discovered after final release by Ampio of the Product in its commercial packaging pursuant to Section 4.7 above, on the fortieth (40th) day after discovery by Ampio, but in no event after the expiration date of the Product).


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4.9 Rejection for Deficiency . If any delivery of Product is deemed or agreed upon to deviate from the Specifications, at Ampio’s option, Ethypharm shall either (a) accept a return of such delivery, correct such delivery with replacement Product, if required, as soon as reasonably practicable and reimburse Ampio for its shipping costs in connection with such delivery and such returns within thirty (30) days, or (b) shall reimburse Ampio for Ampio’s costs (including the purchase price of the Product and shipping costs with respect thereto within thirty (30) days.

ARTICLE 5

WARRANTIES AND COVENANTS

5.1 Certain Representations and Warranties of Ethypharm . Ethypharm represents and warrants to Ampio that as of the Effective Date (i) Ethypharm is duly organized and validly existing under the laws of the jurisdiction of its incorporation or organization; (ii) Ethypharm has the full right, power and authority to enter into this Agreement and to perform the activities required to be performed by it in accordance with this Agreement; (iii) this Agreement is legally binding upon Ethypharm and enforceable in accordance with its terms, and the execution, delivery and performance of this Agreement by Ethypharm does not conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by which it may be bound, nor violate any material law or regulation or order of any court, governmental body or administrative or other agency having jurisdiction over it; (iv) there is no action, suit, proceeding or investigation pending or threatened, against Ethypharm that questions the validity of this Agreement or the right of Ethypharm to enter into this Agreement or consummate the transactions contemplated hereby, nor does Ethypharm have knowledge that there is any basis for the foregoing; (v) Ethypharm is not in violation of any law or regulation, nor is it aware of any violation of any law or regulation by any other person, which violation could reasonably be expected to adversely affect its performance of its obligations hereunder and (vi) Ethypharm is the owner or licensee of its Intellectual Property and Technology pertaining to the Product, which is free and clear of any liens, charges and encumbrances.

5.2 Certain Representations and Warranties of Ampio . Ampio represents and warrants to Ethypharm that as of the Effective Date (i) Ampio is duly organized and validly existing under the laws of the jurisdiction of its incorporation or organization; (ii) Ampio has the full right, power and authority to enter into this Agreement, to perform the activities required to be performed by it in accordance with this Agreement; (iii) this Agreement is legally binding upon Ampio and enforceable in accordance with its terms, and the execution, delivery, and performance of this Agreement by Ampio does not conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by which it may be bound, nor violate any material law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it; (iv) there is no action, suit, proceeding or investigation pending or threatened against Ampio that questions the validity of this Agreement or the right of Ampio to enter into this Agreement or consummate the transactions contemplated hereby, nor does Ampio have knowledge that there is any basis for the foregoing; (v) Ampio is not in violation of any law or regulation, nor is it aware of any violation of any law or regulation by any other person, which violation could reasonably be expected to adversely affect its performance of its obligations


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hereunder; (vi) Prior to First Commercial Sale in any particular jurisdiction, Ampio or its distributor or licensee shall secure the right under the relevant Regulatory Approval to pursue marketing and sale of the Product in such jurisdiction.

5.3 Certain Covenants of Ampio . Ampio covenants and agrees, on behalf of itself and its Affiliates, that during the Term (i) any Intellectual Property of Ampio, including in particular trademarks of Ampio that are to be utilized by Ampio in connection with the labeling and packaging of the Product are (or will be) the property of Ampio, may be lawfully used as directed by Ampio; (ii) it will not develop or perform any formulation or any developmental or other work or studies on or with respect to the Product for its own use or benefit or for the use or benefit of any Person in the Territory, other than pursuant to the development and commercialization of the Product pursuant to the terms of the License Agreement.

5.4 Certain Covenants of Ethypharm . Ethypharm covenants and agrees on behalf of itself and its Affiliates and Third Party Manufacturer that it will not during the Term, directly or indirectly alone, with or through a Third Party, sell, develop, manufacture or market a product containing tramadol anywhere in the world that is a dosage strength that is not a multiple of 25mg or not in the Pain Field, without the prior written consent of Ampio.

5.5 Storage . Tablets of the Product under Ethypharm’s or Ampio’s control (as the case may be) prior to distribution by Ampio in the Territory shall be stored by Ethypharm or Ampio in a compliant manner and handled in accordance with the Regulatory Documentation and applicable cGMP requirements.

5.6 Representation and Warranties with Regard to Status . Ampio and Ethypharm each hereby represent and warrant to the other that, subject to the receipt by Ampio or its distributors or sublicensees of relevant Regulatory Approvals, neither it, their Affiliates, nor in the case of Ethypharm the Third Party Manufacturer nor any of the officers, directors or employees of the foregoing is prohibited by any law, rule or regulation or by any order, directive or policy from selling the Product or other pharmaceutical products within the Territory and that neither it nor any of its officers, directors, employees or Affiliates or Third Party Manufacturer is a Person that is listed by a United States federal agency as debarred, suspended or otherwise ineligible for federal programs in the United States, its territories and protectorates (an “ Ineligible Person ”) or proposed for such debarment or suspension.

5.7 Compliance with Specifications and cGMP . Ethypharm covenants and agrees that the Product, when delivered to Ampio, will be manufactured, controlled and supplied in accordance with the Specifications and with cGMP; the Product will meet Ethypharm’s quality assurance standards; Product ingredients and contents will conform with the list and Specifications for ingredients set forth in the Regulatory Approval. Ethypharm will sell the Product to Ampio free of all liens and encumbrances. Ethypharm and Ampio shall execute the Quality Agreement in accordance with the terms hereof.


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5.8 Limitation of Warranty . EITHER PARTY GIVES NO OTHER WARRANTY UNDER THIS AGREEMENT, EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF NON-INFRINGEMENT, OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE.

ARTICLE 6

INDEMNIFICATION AND LIMITATION OF LIABILITY

6.1 Ethypharm’s Indemnification Obligations . Ethypharm shall indemnify and hold Ampio and its Affiliates and their respective officers, directors, stockholders, employees and agents harmless from and against, and pay or reimburse, any claim, action, suit, proceeding, loss, liability, damage or expense (including reasonable attorneys’ fees) (collectively, “ Losses ”) related to claims asserted by any third party, directly or indirectly, as a result of Ethypharm’s or its Affiliates’ or Third Party Manufacturer’s failure to manufacture the Product in accordance with the Specifications or cGMP or of Ethypharm’s breach of any of its representations, warranties, covenants hereunder; provided, however , that Ethypharm shall not be required to indemnify Ampio with respect to any such Losses to the extent such Losses arise from or relate to Ampio’s or its Affiliates’ negligent acts or omissions, willful wrongful acts or Ampio’s breach of its representations, warranties, covenants or other obligations hereunder.

6.2 Ampio’s Indemnification Obligations . Ampio shall indemnify and hold Ethypharm and its Affiliates and their respective officers, directors, stockholders, employees and agents harmless from and against, and pay or reimburse, any Losses related to claims asserted by any third party, directly or indirectly, as a result of: (a) Ampio’s or its Affiliates’ negligent acts or omissions, willful wrongful acts or breach of any of its representations, warranties, covenants or other obligations hereunder; (b) liabilities, expenses or damages arising from the actions of Ampio to promote, market, commercialize, distribute and sell the Product in the Territory; and (d) liabilities, expenses or damages arising from the actions of Ampio’s distributors, Affiliates and Licenses or brought by such distributors, Affiliates or Licenses; provided, however , that Ampio shall not be required to indemnify Ethypharm with respect to any such Losses to the extent such Losses arise from or relate to Ethypharm’s, its Affiliates’ or subcontractors’ negligent acts or omissions, willful wrongful acts or Ethypharm’s breach of its representations, warranties, covenants or other obligations hereunder.

6.3 Indemnification Procedures . A party that intends to claim indemnification under this Article 6 (the “ indemnitee ”) with respect to any third-party action, claim or liability shall notify the other party (the “ indemnitor ”) promptly in writing of any action, claim or liability in respect of which the indemnitee believes it is entitled to claim indemnification; provided , that the failure to give timely notice to the indemnitor shall not release the indemnitor from any liability to the indemnitee except to the extent the indemnitor is materially prejudiced thereby. The indemnitor shall have the right, by written notice to the indemnitee, to assume the defense of any such action or claim, within the fifteen (15) day period after the indemnitor’s receipt of written notice of any action or claim, with counsel of the indemnitor’s choice and at the sole cost of the indemnitor. If the indemnitor so assumes such defense, the indemnitee may


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participate therein through counsel of its choice, but at the sole cost of the indemnitee; provided, however , if the defendants in any such action include both the party seeking indemnification and the indemnifying party, and the party seeking indemnification shall reasonably conclude that there may be legal defenses available to it which are different from or additional to, or inconsistent with, those available to the indemnifying party, the party seeking indemnification shall have the right to select separate counsel to participate in the defense of such action on behalf of such party seeking indemnification, at the indemnifying party’s expense. If the indemnitor fails to assume such defense and/or to diligently prosecute the same, the indemnitee may assume such defense at the indemnitor’s sole expense. The party not assuming the defense of any such claim shall render all reasonable assistance to the party assuming such defense, and all reasonable out-of-pocket costs of such assistance shall be for the account of the indemnitor. No such claim shall be settled other than by the party defending the same, and then only with the prior written consent of the other party, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however , that the indemnitee shall have (i) no obligation to consent to any settlement of any such action or claim that (a) imposes on the indemnitee any monetary or other liability or obligation that is not assumed and agreed to be performed in full by the indemnitor or (b) adversely affects the indemnitee’s rights hereunder or damages its reputation or business, and (ii) no right to withhold its consent to any settlement of any such action or claim if the settlement involves only the payment of money by the indemnitor or its insurer without admission of liability by the indemnitee and the indemnitor or its insurer irrevocably agrees in writing to make such payment. If the parties are unable to agree as to the application of Sections 6.1 and 6.2 to any claim, pending resolution of the dispute in accordance with Section 11.1 , the parties may conduct separate defenses of such claims, with each party retaining the right to claim indemnification from the other party in accordance with Sections 6.1 and 6.2 upon resolution of the underlying action.

6.4 Limitation of Liability . NEITHER PARTY SHALL BE LIABLE WITH RESPECT TO ANY CLAIM RELATED TO THIS AGREEMENT FOR ANY SPECIAL, INCIDENTAL OR INDIRECT DAMAGES, INCLUDING ANY LOSS OF INCOME, LOSS OF PROFITS, COSTS OF SUBSTITUTION, COSTS OF COVER OR INCREASED CAPITAL COSTS, REGARDLESS OF THE FORM OR NATURE OF ACTION, WHETHER IN CONTRACT, BREACH OF WARRANTY, STRICT LIABILITY, EQUITY, INDEMNITY, NEGLIGENCE, INTENTIONAL CONDUCT, TORT OR OTHERWISE, EVEN IF SUCH DAMAGES WERE FORESEEABLE OR IF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

ARTICLE 7

INSURANCE

Each of Ampio and Ethypharm shall (and shall cause their respective Affiliates and Sub-licensees, as required, to), upon the Effective Date, carry or be subject to coverage (as a named insured) under product liability insurance in an amount of not less than [***] combined single limit, which insurance shall be written on a “claims-made” policy basis with an insurance carrier rated at least A- by Bests Rating Service or a comparable rating by a comparable rating service.


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Each party shall provide the other party with evidence of coverage contemplated hereby, in the form of certificates of insurance, as reasonably requested in writing. Each party shall provide written notice to the other party fifteen (15) days prior to any material change, cancellation or non-renewal of the policy.

ARTICLE 8

CONFIDENTIALITY

8.1 Treatment of Confidential Information . Except as required by applicable laws and regulations or as otherwise provided in this Article 8 , during the Term, and for ten (10) years thereafter, each party shall hold in confidence, and may not disclose, in whole or in part, to a third party (except as specifically set forth herein or with the express prior written consent of the other party) any and all Confidential Information of the other party and its Affiliates. During the Term, the parties may not use any Confidential Information of the other party and its Affiliates for purposes other than those permitted by this Agreement and the License Agreement.

8.2 Limits on Disclosure . Without limiting the generality of the foregoing, each party may, with the exercise of reasonable discretion, (i) disclose Confidential Information to those employees or agents who need to receive the Confidential Information in order to further the activities contemplated by this Agreement; and (ii) make disclosures of such portions of Confidential Information to third-party consultants, attorneys, contractors, advisors, Affiliates and governmental authorities where, in such party’s judgment, such disclosure is beneficial to the development, approval or marketing of the Product pursuant to this Agreement; provided, that such party shall take reasonable precautions to safeguard the Confidential Information, including by obtaining appropriate commitments and enforceable confidentiality agreements having provisions no less stringent than those contained herein.

(a) Each party understands and agrees that the wrongful disclosure of Confidential Information may result in serious and irreparable damage to the other party, that the remedy at law for any breach of this covenant may be inadequate, and that the party seeking redress hereunder shall be entitled to injunctive relief, without prejudice to any other rights and remedies to which such party may be entitled.

(b) Except as otherwise set forth in this Agreement, upon the termination or expiration of this Agreement and at the written request of the disclosing party, the receiving party shall return all Confidential Information of the disclosing party (including all copies, excerpts and summaries thereof contained on any media) or destroy such Confidential Information at the option of the receiving party; provided, that the receiving party may retain one copy of all Confidential Information of the disclosing party for its legal records.


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ARTICLE 9

TERM AND TERMINATION

9.1 Term . This Agreement shall be effective immediately upon the Effective Date and shall remain into effect for a period of ten (10) years from the Effective Date (the “ Term ”). Upon the expiry of the Term, this Agreement will be automatically renewed for one or more additional three (3) year periods, unless terminated by any of the Parties six (6) months prior to the end of the initial period, or any of the renewed period, by proper notice.

9.2 Termination for Breach . If either party commits a material breach or default in the performance or observance of any of its obligations under this Agreement, other than nonpayment of a monetary obligation, and such breach or default continues for a period of sixty (60) days after delivery by the other party of written notice reasonably detailing such breach or default, or, if the non-performing party shall promptly, within such sixty (60) days, proceed with all due diligence to cure such failure, and such failure is not cured within such longer period (not to exceed one hundred eighty (180) additional days) as shall be reasonably necessary for such party to cure the same with all due diligence, then the non-breaching or non-defaulting party shall have the right to terminate this Agreement, with immediate effect, by giving written notice to the breaching or defaulting party. Nonpayment of a monetary obligation is deemed a material breach hereunder and the non-breaching party may terminate this Agreement if such breach continues for a period of thirty (30) days after delivery to the breaching party of written notice of non-payment, with termination effective on the date provided for in that. If either Ethypharm, its Third Party Manufacturer or Ampio becomes an Ineligible Person, such status shall constitute a material breach hereunder, and the non-breaching party may terminate this Agreement if such breach continues for a period of thirty (30) days after delivery to the breaching party of written notice of termination, with termination effective on the date provided for in that notice.

9.3 Termination for Bankruptcy . To the extent permitted by law, this Agreement shall automatically terminate upon the initiation of any proceeding in bankruptcy, reorganization or arrangement for the appointment of a receiver or trustee to take possession of the assets of either party or a similar proceeding under law for the release of creditors by or against either party, or if either party makes a general assignment for the benefit of its creditors.

9.4 Withdrawal of Regulatory Approval and NDA . This Agreement may be terminated with respect to relevant countries in the Territory by either party in the event that a Regulatory Authority in the Territory withdraws the concerned Regulatory Approval for future marketing of Product in the concerned country of the Territory.

9.5 No Waiver of Termination Rights . The right of either party to terminate this Agreement, as provided in this Article 9 , shall not be affected in any way by its waiver of, or failure to take action with respect to, any previous default.


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ARTICLE 10

FORCE MAJEURE

10.1 Effects of Force Majeure . A party hereto shall be excused and shall not be held liable or responsible for failure or delay in fulfilling or performing any of its obligations under this Agreement (other than the payment of money) if such failure or delay is caused by acts of God, acts of the public enemy, fire, explosion, flood, epidemic or other natural physical disaster, drought, war, terrorists, riot, unavailability of raw material, sabotage, embargo, strikes or other labor disputes, intervention of governmental authority, impossibility of the use of railways, shipping, aircraft, motor transport or other means of public or private transport, failure or suspension of utilities, and political interference with the normal operation of either party or by any other event or circumstance of like or different character to the foregoing beyond the reasonable control and without the fault or negligence of the affected party (a “ Force Majeure Event ”). Such excuse shall continue as long as the Force Majeure Event continues. Upon cessation of such Force Majeure Event, such party shall promptly resume performance hereunder.

10.2 Notice of Force Majeure . Each party agrees to give the other party prompt written notice of the occurrence of any Force Majeure Event, the nature thereof and the extent to which the affected party will be unable to perform its obligations hereunder. Each party further agrees to use reasonable efforts to correct or otherwise address the Force Majeure Event as soon as practicable and to give the other parties prompt written notice when it is again fully able to perform such obligations.

ARTICLE 11

Miscellaneous

11.1 Dispute Resolution . Ethypharm and Ampio agree to irrevocably submit to the exclusive jurisdiction of (i) the Supreme Court of the State of New York, New York County, U.S.A., or (ii) the United States District Court for the Southern District of New York U.S.A., for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each Party agrees to commence any such action, suit or proceeding either in the United States District Court for the Southern District of New York, U.S.A. or, if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the Supreme Court of the State of New York, New York County, U.S.A.

EACH PARTY HERETO WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, AND EACH PARTY HERETO (i) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THAT FOREGOING WAIVER, AND (ii) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HERETO HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS PARAGRAPH.


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11.2. Independent Contractors . The relationship between Ethypharm, on the one hand, and Ampio, on the other hand, is that of independent contractors and nothing herein shall be deemed to constitute or create the relationship of partners, joint venturers nor of principal and agent between Ethypharm on the one hand and Ampio on the other hand. Neither party shall have any express or implied right or authority to assume or create any obligations on behalf of or in the name of the other party or to bind the other party to any contract, agreement or undertaking with any third party.

11.3. Assignment . This Agreement may be assigned and/or delegated by either party to an Affiliate of such party or in connection with any sale, merger or other business combination involving all or substantially all of such party’s assets or capital stock or of the assets to which this Agreement relates. Except as otherwise provided in this Agreement, neither this Agreement nor any other rights or obligations hereunder shall be assigned, transferred or delegated by either party without the prior written consent of the other party, not to be unreasonably withheld, conditioned or delayed. Any permitted assignee shall, upon the request of the other party hereto, expressly acknowledge, by written agreement, its assumption of all obligations and liabilities under this Agreement. Any attempted assignment in violation of the foregoing shall be null and void. This Agreement shall inure to the benefit of each party’s permitted successors and assigns.

11.4. Governing Law . This contract shall be governed by, and construed in accordance with, the laws of the State of New York without reference to that state’s conflicts of laws rules. The parties expressly reject the application of the United Nations Convention on Contracts for the International Sale of Goods and all implementing legislation thereunder.

11.5. No Implied Waiver . No failure or delay on the part of either party hereto to exercise any right, power or privilege hereunder or under any instrument executed pursuant hereto shall, in itself, operate as a waiver; nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

11.6. Notice . All notices required to be given hereunder shall be in writing and shall be given by personal delivery, via facsimile transmission followed by U.S. mail, by a nationally recognized overnight carrier or by registered or certified mail, postage prepaid with return receipt requested. Notices shall be addressed to the parties as follows:

If to Ethypharm:

Ethypharm S.A.

194 Bureaux de la Colline

F92213 Saint-Cloud


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France

Attn: Hugues LECAT—Chairman of the Board—CEO

Facsimile No.: +33 1 41 12 17 30

With a copy (which shall not constitute notice) to:

Ethypharm USA Corp.

1500 Market Street, 12th Floor, East Tower

Philadelphia, PA 19102

Attn: Hafid Touam-CEO

Facsimile No.: (610) 994-2302

If to Ampio:

Ampio Pharmaceuticals, Inc.

The Quadrant

5445 DTC Parkway, Suite 925

Greenwood Village, CO 80111

U.S.A.

Attn: Michael Macaluso—Chairman of the Board and CEO

Facsimile (720) 437-6501

With a copy (which shall not constitute notice) to:

Goodwin Procter LLP

Exchange Place

Boston, MA 02109

Attention: Larry Wittenberg

Facsimile: 617-523-1231

Notices delivered personally shall be deemed communicated as of actual receipt; notices sent via facsimile transmission shall be deemed communicated as of receipt by the sender of written confirmation of transmission thereof; notices sent via overnight courier shall be deemed received as of one business day following sending; and notices mailed shall be deemed communicated as of three (3) business days after proper mailing. A party may change his or its address by written notice sent in accordance with this Section 12.6 .

11.7. Amendments . Any amendment or modification of this Agreement shall be valid only if made in writing and signed by both parties hereto.

11.8. Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original and both of which shall constitute a single document. A facsimile signature of an authorized signatory of either party shall be valid and binding and constitute due execution and delivery of this Agreement by such party.


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11.9. Interpretation . The Section headings contained in this Agreement are for the convenience of reference only and shall not affect the meaning or interpretation of this Agreement. As used in this Agreement, any reference to the masculine, feminine or neuter gender shall include all genders, the plural shall include the singular, and the singular shall include the plural. Unless the context otherwise requires, the term “ party ” when used herein means a party hereto. References herein to a party or other Person include its respective successors and permitted assigns. The words “ includes ” and “ including ” when used herein shall be deemed to be followed by the phrase “ without limitation ” unless such phrase otherwise appears. Unless the context otherwise requires, references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement. Unless the context otherwise requires, the words “ hereof ,” “ hereby ,” “ hereunder ” and “ herein ” and words of similar meaning when used in this Agreement refer to this Agreement in its entirety and not to any particular Section or provision hereof. All monetary amounts in this Agreement are expressed and shall be paid in U.S. dollars. With regard to each and every term and condition of this Agreement, the parties understand and agree that the same has or have been mutually negotiated, prepared and drafted, and that, if, at any time, the parties desire or are required to interpret or construe any such term or condition or any agreement or instrument subject thereto, no consideration shall be given to the issue of which party actually prepared, drafted or requested any term or condition of this Agreement.

11.10. Entire Agreement . This Agreement and the License Agreement constitutes the entire understanding between the parties with respect to the subject matter hereof and supersedes all prior contracts, agreements and understandings related to the same subject matter between the parties. In particular, in case of inconstancies between the terms of the License Agreement and the terms of this Agreement with respect to the manufacture and supply of the Product, the terms of this Agreement shall prevail. The parties intend this Agreement to be a complete statement of the terms of their understanding.

11.11. Benefit; Binding Effect . This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

11.12. Survival . Notwithstanding anything to the contrary contained in this Agreement, the provisions of Article 3 (to the extent of post-termination complaints and reporting obligations) and Articles 1 , 5 , 6 , 7 , 8 11 and 12 shall survive, in accordance with their respective terms, any termination or expiration of this Agreement.

11.13. Further Assurances . The parties agree that they shall take all appropriate actions, including the execution or filing of any documents or instruments, that may be reasonably necessary or advisable to carry out the intent and accomplish the purposes of any of the provisions hereof.

11.14. Severability . In the event that any provision of this Agreement shall be held invalid or unenforceable for any reason by a court of competent jurisdiction, such provision or part thereof shall be considered separate from the remaining provisions of this Agreement, which shall remain in full force and effect. Such invalid or unenforceable provision shall be deemed revised to effect, to the fullest extent permitted by applicable law, the intent of the parties as set forth herein.


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11.15. Use of Names; Publicity . Neither party will use the name of the other party or issue any press release or other publicity relating to this Agreement in any form without the written permission of the other, except as may be required by applicable law (including securities exchange rules) or as otherwise contemplated hereunder. Neither party will unreasonably withhold its written permission if the other party desires to issue such a press release or other publicity with respect to this Agreement.


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IN WITNESS WHEREOF , the parties have caused this Agreement to be executed as of the Effective Date.

Date:


ETHYPHARM S.A.

By:		/s/ Hugues LECAT
Name:		Hugues LECAT
Title:		CEO—Chairman of Management Board


AMPIO PHARMACEUTICALS, INC.

By:		/s/ Michael Macaluso
Name:		Michael Macaluso
Title:		Chairman of the Board and CEO


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EXHIBIT A

BATCH SIZE DEFINITION

A full batch size of Product represents [***].


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EXHIBIT B

SUPPLY PRICES

Ethypharm Supply prices of Product expressed EX WORKS (Ethypharm Commercial Manufacturing Site) taxes excluded, in bulk tablets, to Ampio shall be:

[***]

The Supply Price as determined above includes the supply of excipients and active drug, the analysis of active drug and excipient, the manufacturing operations according to the standards of ETHYPHARM and the delivery in bulk packaging Ex Works as indicated.


CONFIDENTIAL		28 \| Page

EXHIBIT C

PRODUCT SPECIFICATIONS


CONFIDENTIAL		29 \| Page

Exhibit 31.1

AMPIO PHARMACEUTICALS, INC. AND SUBSIDIARIES

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;

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:

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, including its consolidated subsidiaries, is made known to us by others within those entities particularly during the period in which this report is being prepared;

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;

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

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):

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

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 2, 2012		/s/ Michael Macaluso
	By:	Michael Macaluso
	Title:	Chief Executive Officer

Exhibit 31.2

AMPIO PHARMACEUTICALS, INC. AND SUBSIDIARIES

Certification by Chief Financial Officer

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

I, Mark D. McGregor, 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;

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):

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 2, 2012		/s/ Mark D. McGregor
	By:	Mark D. McGregor
	Title:	Chief Financial Officer

Exhibit 32.1

AMPIO PHARMACEUTICALS, INC. AND SUBSIDIARIES

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, 2012 (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 2, 2012		/s/ Michael Macaluso
		Michael Macaluso Chief Executive Officer

Dated: November 2, 2012		/s/ Mark D. McGregor
		Mark D. McGregor Chief Financial Officer

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller Reporting Company