UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended: September 30, 2019
or
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☐ |
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.
(www.ampiopharma.com)
NYSE American: AMPE
(Exact name of registrant as specified in its charter)
|
Delaware |
26‑0179592 |
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(State or other jurisdiction of |
(IRS Employer |
373 Inverness Parkway, Suite 200
Englewood, Colorado 80112
(Address of principal executive offices, including zip code)
(720) 437‑6500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class: |
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Trading Symbol |
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Name of each exchange on which registered: |
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Common |
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AMPE |
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NYSE American |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b‑2 of the Exchange Act.
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Large Accelerated Filer |
☐ |
Accelerated Filer |
☒ |
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Non-Accelerated Filer |
☐ |
Smaller reporting company |
☒ |
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Emerging growth company |
☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No ☒
As of November 1, 2019, there were 158,644,757 shares of Common Stock outstanding, par value $0.0001, of the registrant.
FOR THE QUARTER ENDED SEPTEMBER 30, 2019
INDEX
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Condensed Balance Sheets as of September 30, 2019 and December 31, 2018 |
6 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
24 | |
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| 35 | ||
2
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10‑Q contains statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements included or incorporated by reference in this report, other than statements of historical fact, that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. These statements appear in a number of places, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements represent our reasonable judgment about the future based on various factors and using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause our actual results and financial position to differ materially from those contemplated by the statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts, and use words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “should,” “plan,” “potential,” “project,” “will,” “would” and other words of similar meaning, or the negatives of such terms or other variations. These include, but are not limited to, statements relating to the following:
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Projected operating or financial results, including anticipated cash flows used in operations; |
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· |
Expectations regarding clinical trials for our lead product candidate, capital expenditures, research and development expenses and other payments; |
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Our beliefs and assumptions relating to our liquidity position, including, but not limited to, our ability to obtain near-term additional financing; |
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· |
Our beliefs, assumptions and expectations about the regulatory approval pathway for Ampion including, but not limited to, our ability to obtain regulatory approval for Ampion in a timely manner, or at all; |
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· |
In the event that the we do not have redundant manufacturing capabilities, we may be forced to rely on third party manufacturers, if we receive regulatory approval; and |
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· |
Our ability to identify strategic partners and enter into beneficial license, co-development, collaboration or similar arrangements. |
Any or all of our forward-looking statements may turn out to be wrong. They may be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors including, among others:
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· |
Management has performed an analysis of our ability to continue as a going concern. In addition, our independent registered public accounting firm has expressed substantial doubt as to our ability to continue as a going concern; |
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· |
We have incurred significant losses since inception, expect to incur net losses for at least the next several years (assuming internal commercialization efforts) and may never achieve or sustain profitability; |
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We will need substantial additional capital to fund our operations. If we do not obtain the capital necessary to fund our operations, we will be unable to successfully develop, obtain regulatory approval of, and commercialize Ampion and may need to cease operations; |
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· |
Our business is highly dependent on the success of Ampion. If Ampion does not receive regulatory approval or is not successfully commercialized, our business is likely to be harmed and we may need to cease operations; |
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· |
Ampion is undergoing a Phase III clinical trial which is time-consuming, requires significant capital outlay, the outcome is unpredictable, and for which there is a risk of failure. If the current clinical trial for Ampion fails to satisfactorily demonstrate safety and efficacy to the FDA and other regulators, the FDA may require additional clinical trials and we, or our collaborators, may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of Ampion; |
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· |
Delays, suspensions and terminations in our clinical trials would likely result in increased costs to us and delay or prevent our ability to generate revenues. We rely on third parties to conduct our clinical trials and perform data collection and analysis, which may result in costs and delays that prevent us from successfully commercializing Ampion; |
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· |
If we do not receive marketing approval for Ampion, we may not realize the investment we have made in our manufacturing facility; |
3
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· |
Relying on third-party suppliers may result in delays in our clinical trials and product introduction. If we use hazardous and biological materials in a manner that causes injury or violates applicable law, we may be liable for damages or fines; |
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· |
Even if we obtain marketing approvals for Ampion, the terms of approvals and ongoing regulation of our product may limit how we, or our collaborators, manufacture and market our product, which could materially impair our ability to generate revenue; |
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· |
Ampion, for which we may obtain marketing approval in the future, could be subject to post-marketing restrictions or withdrawal from the market and we, and our collaborators, may be subject to substantial penalties if we, or they, fail to comply with regulatory requirements or if we, or they, experience unanticipated problems with our product following approval; |
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· |
If we do not achieve our projected development and commercialization goals in the timeframes we announce and expect, the commercialization of Ampion may be delayed, our business will be harmed, and our stock price may decline; |
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· |
Even if collaborators with which we contract in the future successfully complete clinical trials of Ampion, our product may not be commercialized successfully for other reasons; |
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· |
We might enter into agreements with collaborators to commercialize Ampion once we obtain regulatory approvals, which may affect the sales of our product and our ability to generate revenues; |
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· |
We face substantial competition from companies with considerably more resources and experience than we have, which may result in others discovering, developing, receiving approval for, or commercializing products before or more successfully than us; |
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Product liability, shareholder lawsuits, SEC or other government agency investigations and other lawsuits could divert our resources, result in substantial liabilities and reduce the commercial potential of Ampion; |
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If Ampion is commercialized, this does not assure acceptance by physicians, patients, third-party payors, or the medical community in general; |
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Government restrictions on pricing and reimbursement, as well as other healthcare payor cost-containment initiatives, may negatively impact our ability to generate revenues if we obtain regulatory approval to market our product; |
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The approval process outside the United States varies among countries and may limit our ability to develop, manufacture and sell our product internationally. Failure to obtain marketing approval in international jurisdictions would prevent Ampion from being marketed abroad; |
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Our drug development program to date has been dependent in large part upon the services of Dr. David Bar-Or, who retired as Chief Scientific Officer in September 2018; |
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· |
Business interruptions could limit our ability to operate our business; |
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While we are not aware of any cybersecurity incidents, the cybersecurity landscape continues to evolve, and we may find it necessary to make further investments to protect our data and infrastructure; |
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· |
Our ability to compete may decline if we do not adequately protect our proprietary rights; |
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· |
Confidentiality agreements with employees and others may not adequately prevent disclosure of our trade secrets and other proprietary information and may not adequately protect our intellectual property, which could limit our ability to compete; |
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· |
A dispute concerning the infringement or misappropriation of our proprietary rights or the proprietary rights of others could be time consuming and costly, and an unfavorable outcome could harm our business; |
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· |
Pharmaceutical patents and patent applications involve highly complex legal and factual questions, which, if determined adversely to us, could negatively impact our patent position; |
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· |
The price of our stock has been extremely volatile and may continue to be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock; |
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The price of our stock may be vulnerable to manipulation; |
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If we cannot continue to satisfy the NYSE American listing maintenance requirements and other rules, including the director independence requirements, our securities may be delisted, which could negatively impact the price of our securities; |
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Concentration of our ownership limits the ability of our shareholders to influence corporate matters; |
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Anti-takeover provisions in our charter and bylaws and in Delaware law could prevent or delay a change in control of Ampio; |
4
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Increased costs associated with corporate governance compliance may significantly impact our results of operations; |
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We have no plans to pay cash dividends on our common stock; |
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We received an SPA agreement from the FDA relating to our product candidate. This SPA agreement does not guarantee approval of Ampion or any other particular outcome from regulatory review; |
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· |
We had a material weakness in our internal control over disclosure reporting during the reporting period, which could result in the failure to identify information for appropriate disclosure; |
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· |
We may be limited in our ability to access sufficient funding through a public or private equity offering or convertible debt offering; |
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If we receive FDA licensure for Ampion, we will be subject to FDA post approval requirements, which could limit our financial resources available for other development activities; |
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· |
We may have difficulties obtaining and maintaining sufficient insurance coverage; |
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Ampion is regulated by the FDA, and as such, may subject it to competition sooner than anticipated; |
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We currently, and from time to time in the future may, outsource portions of our internal business functions to third-party providers. Outsourcing these functions has significant risks, and our failure to manage these risks successfully could materially adversely affect our business, results of operations, and financial condition. |
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, but not limited to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Many of these factors will be important in determining our actual future results. Consequently, no forward-looking statement should be relied upon. Our actual future results may vary materially from those expressed or implied in any forward-looking statements. All forward-looking statements contained in this report are qualified in their entirety by this cautionary statement. Forward-looking statements speak only as of the date they are made, and we disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of this report, except as otherwise required by applicable law.
This Quarterly Report on Form 10‑Q includes trademarks for Ampion, which are protected under applicable intellectual property laws and are our property. Solely for convenience, our trademarks and trade names referred to in this Quarterly Report on Form 10‑Q may appear without the ® or TM symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights to these trademarks and trade names.
5
PART I – FINANCIAL INFORMATION
AMPIO PHARMACEUTICALS, INC.
(unaudited)
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September 30, |
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December 31, |
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2019 |
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2018 |
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Assets |
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Current assets |
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Cash and cash equivalents |
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$ |
8,044,199 |
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$ |
7,585,392 |
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Prepaid expenses and other |
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|
1,836,770 |
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|
447,136 |
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Total current assets |
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|
9,880,969 |
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|
8,032,528 |
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Fixed assets, net |
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5,036,406 |
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|
5,997,582 |
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Right-of-use asset |
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|
1,045,339 |
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— |
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Total assets |
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$ |
15,962,714 |
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$ |
14,030,110 |
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Liabilities and Stockholders’ Equity |
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Current liabilities |
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Accounts payable and accrued expenses |
|
$ |
2,129,736 |
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$ |
1,324,651 |
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Lease liability-current portion |
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|
253,079 |
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|
59,579 |
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Total current liabilities |
|
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2,382,815 |
|
|
1,384,230 |
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Lease liability-long-term |
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1,276,685 |
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476,753 |
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Warrant derivative liability |
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|
8,165,955 |
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|
6,933,031 |
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Total liabilities |
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|
11,825,455 |
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|
8,794,014 |
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Commitments and contingencies (Note 7) |
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Stockholders’ equity |
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Preferred Stock, par value $0.0001; 10,000,000 shares authorized; none issued |
|
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— |
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— |
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Common Stock, par value $0.0001; 200,000,000 shares authorized; shares issued and outstanding - 142,207,862 as of September 30, 2019 and 110,941,516 as of December 31, 2018 |
|
|
14,221 |
|
|
11,094 |
|
Additional paid-in capital |
|
|
187,735,629 |
|
|
176,227,510 |
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Accumulated deficit |
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|
(183,612,591) |
|
|
(171,002,508) |
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Total stockholders’ equity |
|
|
4,137,259 |
|
|
5,236,096 |
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|
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|
|
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|
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Total liabilities and stockholders’ equity |
|
$ |
15,962,714 |
|
$ |
14,030,110 |
The accompanying notes are an integral part of these financial statements.
6
AMPIO PHARMACEUTICALS, INC.
Condensed Statements of Operations
(unaudited)
|
|
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Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
||||||||
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2019 |
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2018 |
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2019 |
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2018 |
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||||
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Operating expenses |
|
|
|
|
|
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|
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|
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Research and development |
|
$ |
3,427,985 |
|
$ |
1,184,194 |
|
$ |
7,128,996 |
|
$ |
5,343,452 |
|
|
General and administrative |
|
|
1,744,694 |
|
|
756,104 |
|
|
4,301,037 |
|
|
3,303,315 |
|
|
Total operating expenses |
|
|
5,172,679 |
|
|
1,940,298 |
|
|
11,430,033 |
|
|
8,646,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
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|
|
|
|
|
|
Interest income (expense) |
|
|
8,025 |
|
|
(3,190) |
|
|
52,875 |
|
|
(3,190) |
|
|
Derivative (loss) gain |
|
|
(2,054,561) |
|
|
7,744,708 |
|
|
(1,232,925) |
|
|
41,110,851 |
|
|
Total other income (expense) |
|
|
(2,046,536) |
|
|
7,741,518 |
|
|
(1,180,050) |
|
|
41,107,661 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(7,219,215) |
|
$ |
5,801,220 |
|
$ |
(12,610,083) |
|
$ |
32,460,894 |
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|
|
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|
|
|
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|
Net (loss) income per common share: |
|
|
|
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|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.05) |
|
$ |
0.06 |
|
$ |
(0.10) |
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$ |
0.37 |
|
|
Diluted |
|
$ |
(0.05) |
|
$ |
(0.02) |
|
$ |
(0.10) |
|
$ |
(0.08) |
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|
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|
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|
Weighted average number of common shares outstanding: |
|
|
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|
|
|
|
|
|
|
|
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Basic |
|
|
142,207,862 |
|
|
96,930,270 |
|
|
122,895,080 |
|
|
88,782,837 |
|
|
Diluted |
|
|
142,207,862 |
|
|
115,346,118 |
|
|
122,895,080 |
|
|
111,370,739 |
|
The accompanying notes are an integral part of these financial statements.
7
AMPIO PHARMACEUTICALS, INC.
Condensed Statements of Stockholders’ Equity (Deficit)
(unaudited)
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Additional |
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Total |
||
|
|
|
Common Stock |
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Paid-in |
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Accumulated |
|
Stockholders' |
||||||
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|
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Shares |
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Amount |
|
Capital |
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Deficit |
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Equity (Deficit) |
||||
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Balance at December 31, 2017 |
|
80,060,345 |
|
$ |
8,006 |
|
$ |
170,803,783 |
|
$ |
(204,988,674) |
|
$ |
(34,176,885) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for services |
|
17,241 |
|
|
2 |
|
|
59,998 |
|
|
— |
|
|
60,000 |
|
Options exercised, net |
|
249,666 |
|
|
25 |
|
|
400,734 |
|
|
— |
|
|
400,759 |
|
Warrants exercised, net |
|
5,684,499 |
|
|
568 |
|
|
2,699,651 |
|
|
— |
|
|
2,700,219 |
|
Stock-based compensation, net |
|
— |
|
|
— |
|
|
119,623 |
|
|
— |
|
|
119,623 |
|
Net income |
|
— |
|
|
— |
|
|
— |
|
|
22,039,472 |
|
|
22,039,472 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2018 |
|
86,011,751 |
|
$ |
8,601 |
|
$ |
174,083,789 |
|
$ |
(182,949,202) |
|
$ |
(8,856,812) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercised, net |
|
99,117 |
|
|
10 |
|
|
235,641 |
|
|
— |
|
|
235,651 |
|
Warrants exercised, net |
|
210,100 |
|
|
21 |
|
|
159,655 |
|
|
— |
|
|
159,676 |
|
Stock-based compensation, net |
|
— |
|
|
— |
|
|
72,612 |
|
|
— |
|
|
72,612 |
|
Net income |
|
— |
|
|
— |
|
|
— |
|
|
4,620,201 |
|
|
4,620,201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2018 |
|
86,320,968 |
|
$ |
8,632 |
|
$ |
174,551,697 |
|
$ |
(178,329,001) |
|
$ |
(3,768,672) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants exercised, net |
|
270,548 |
|
|
27 |
|
|
109,197 |
|
|
— |
|
|
109,224 |
|
Stock-based compensation, net |
|
— |
|
|
— |
|
|
95,105 |
|
|
— |
|
|
95,105 |
|
Issuance of common stock in connection with the public offering, net of offering costs of $844,409 |
|
20,000,000 |
|
|
2,000 |
|
|
(2,000) |
|
|
— |
|
|
— |
|
Net income |
|
— |
|
|
— |
|
|
— |
|
|
5,801,220 |
|
|
5,801,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2018 |
|
106,591,516 |
|
$ |
10,659 |
|
$ |
174,753,999 |
|
$ |
(172,527,781) |
|
$ |
2,236,877 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2018 |
|
110,941,516 |
|
$ |
11,094 |
|
$ |
176,227,510 |
|
$ |
(171,002,508) |
|
$ |
5,236,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for services |
|
136,362 |
|
|
14 |
|
|
59,986 |
|
|
— |
|
|
60,000 |
|
Warrants exercised, net |
|
50,000 |
|
|
5 |
|
|
19,995 |
|
|
— |
|
|
20,000 |
|
Stock-based compensation, net |
|
— |
|
|
— |
|
|
27,555 |
|
|
— |
|
|
27,555 |
|
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
(5,811,634) |
|
|
(5,811,634) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2019 |
|
111,127,878 |
|
$ |
11,113 |
|
$ |
176,335,046 |
|
$ |
(176,814,142) |
|
$ |
(467,983) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants exercised, net |
|
825,000 |
|
|
83 |
|
|
329,917 |
|
|
— |
|
|
330,000 |
|
Stock-based compensation, net |
|
— |
|
|
— |
|
|
72,800 |
|
|
— |
|
|
72,800 |
|
Issuance of common stock in connection with the equity distribution agreement |
|
254,984 |
|
|
25 |
|
|
142,296 |
|
|
— |
|
|
142,321 |
|
Offering costs related to the issuance of common stock in connection with the equity distribution agreement |
|
— |
|
|
— |
|
|
(144,329) |
|
|
|
|
|
(144,329) |
|
Issuance of common stock in connection with the public offering, net of offering costs of $1,243,372 |
|
30,000,000 |
|
|
3,000 |
|
|
10,753,878 |
|
|
— |
|
|
10,756,878 |
|
Net income |
|
— |
|
|
— |
|
|
— |
|
|
420,766 |
|
|
420,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2019 |
|
142,207,862 |
|
$ |
14,221 |
|
$ |
187,489,608 |
|
$ |
(176,393,376) |
|
$ |
11,110,453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation, net |
|
— |
|
|
— |
|
|
246,021 |
|
|
— |
|
|
246,021 |
|
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
(7,219,215) |
|
|
(7,219,215) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2019 |
|
142,207,862 |
|
$ |
14,221 |
|
$ |
187,735,629 |
|
$ |
(183,612,591) |
|
$ |
4,137,259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
8
AMPIO PHARMACEUTICALS, INC.
Condensed Statements of Cash Flows
(unaudited)
|
|
|
Nine Months Ended September 30, |
|
||||
|
|
|
2019 |
|
2018 |
|
||
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(12,610,083) |
|
$ |
32,460,894 |
|
|
Adjustments to reconcile net (loss) income to net cash used in operating activities |
|
|
|
|
|
|
|
|
Stock-based compensation, net |
|
|
346,626 |
|
|
287,339 |
|
|
Depreciation and amortization |
|
|
975,295 |
|
|
968,034 |
|
|
Issuance of common stock for services |
|
|
60,000 |
|
|
60,000 |
|
|
Derivative loss (gain) |
|
|
1,232,925 |
|
|
(41,110,851) |
|
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
Increase in prepaid expenses and other |
|
|
(1,389,634) |
|
|
(278,666) |
|
|
Increase (decrease) in accounts payable and accrued expenses |
|
|
805,085 |
|
|
(2,154,477) |
|
|
Decrease in lease liability |
|
|
(51,907) |
|
|
(44,652) |
|
|
Net cash used in operating activities |
|
|
(10,631,693) |
|
|
(9,812,379) |
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in investing activities |
|
|
|
|
|
|
|
|
Purchase of fixed assets |
|
|
(14,120) |
|
|
(485,750) |
|
|
Net cash used in investing activities |
|
|
(14,120) |
|
|
(485,750) |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Proceeds from sale of common stock in connection with the equity distribution agreement |
|
|
142,321 |
|
|
— |
|
|
Costs related to sale of common stock in connection with the equity distribution agreement |
|
|
(144,329) |
|
|
— |
|
|
Proceeds from sale of common stock in connection with the public offering |
|
|
12,000,000 |
|
|
8,000,000 |
|
|
Costs related to sale of common stock in connection with the public offering |
|
|
(1,243,372) |
|
|
(844,409) |
|
|
Proceeds from warrant exercises |
|
|
350,000 |
|
|
2,969,119 |
|
|
Proceeds from option exercises |
|
|
— |
|
|
636,410 |
|
|
Net cash provided by financing activities |
|
|
11,104,620 |
|
|
10,761,120 |
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
|
458,807 |
|
|
462,991 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
7,585,392 |
|
|
8,209,071 |
|
|
Cash and cash equivalents at end of period |
|
$ |
8,044,199 |
|
$ |
8,672,062 |
|
|
|
|
|
|
|
|
|
|
|
Non-cash transactions: |
|
|
|
|
|
|
|
|
Initial lease liability arising from the adoption of ASU 2016-02 |
|
$ |
1,704,153 |
|
$ |
— |
|
|
Initial recognition of right-of-use asset arising from the adoption of ASU 2016-02 |
|
|
1,167,821 |
|
|
— |
|
|
Warrant derivative liability in connection with the public offering |
|
|
|
|
|
8,008,500 |
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
9
AMPIO PHARMACEUTICALS, INC.
Notes to Condensed Financial Statements
(unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions of the Securities and Exchange Commission (“SEC”) on Quarterly Reports on Form 10‑Q and Article 8 of Regulation S-X. Accordingly, such financial statements do not include all of the information and disclosures required by GAAP for complete financial statements. In the opinion of management, the financial statements include all adjustments necessary, which are of a normal and recurring nature, for the fair presentation of the financial position and of the results of operations and cash flows of Ampio Pharmaceuticals, Inc. (“Ampio” or the “Company”) for the periods presented.
These financial statements should be read in conjunction with the audited financial statements and accompanying notes thereto for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10‑K filed with the SEC on March 18, 2019 (the “2018 Annual Report”). The results of operations for the interim period shown in this report are not necessarily indicative of the results that may be expected for any other interim period or for the full year. The balance sheet at December 31, 2018 was derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company has no off-balance-sheet concentrations of credit risk, such as foreign exchange contracts, option contracts, or foreign currency hedging arrangements. The Company maintains cash and cash equivalent balances in the form of bank demand deposits and money market fund accounts with financial institutions that management believes are creditworthy. Such balances will exceed the insured amount.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses, and related disclosures in the financial statements and accompanying notes. The Company bases its estimates on historical experience and on assumptions believed to be reasonable under the circumstances. Actual results could differ materially from those estimates.
The Company has identified the clinical trial accrual as a critical accounting estimate. The clinical trial accrual involves identifying services that third parties have performed on the Company’s behalf and estimating the level of service performed and the associated cost incurred for these services as of the balance sheet date. The Company develops estimates of liabilities using its judgment based upon the facts and circumstances known at the time.
Adoption of Recent Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, “Leases (Topic 842)”. The new standard established a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. Lessees are required to use a modified retrospective transition approach for finance and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. In July 2018, the FASB issued ASU 2018-10, “Codification Improvements to Topic 842, Leases”, to clarify how to apply certain aspects of the new lease standard. In July 2018, the FASB also issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements”, to give entities other options for transition. The additional options for transition allowed an entity to apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in
10
the period of adoption or apply a practical expedient. The new standards were effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.
The Company elected to adopt the practical expedient permitted by ASU 2018-11 during the first quarter of 2019. As a result of the adoption, on January 1, 2019, the Company recognized a lease liability of approximately $1.7 million, which represented the present value of the remaining minimum lease payments using an estimated incremental borrowing rate of 5.75%. The Company also derecognized the lease liability as of December 31, 2018 of approximately $540,000 and recognized a ROU asset of approximately $1.2 million. Lease expense did not change materially as a result of the adoption of ASU 2016-02.
In June 2018, the FASB issued ASU 2018‑07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting”. ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions used to acquire goods and services from non-employees. Companies should apply the requirements of Topic 718 to non-employee awards except for certain exemptions specified in the amendment. The guidance was effective for fiscal years beginning after December 15, 2018, including interim reporting periods within those fiscal years. Early adoption is permitted, but no earlier than the Company’s adoption date of ASU 2014‑09 “Revenue from Contracts with Customers (Topic 606)”. The Company adopted ASU 2018‑07 during the first quarter of 2019 and the adoption of this guidance did not have a material impact on the Company’s financial statements.
In July 2018, the FASB issued ASU 2018-09, “Codification Improvements”, which facilitates amendments to a variety of topics to clarify, correct errors in, or make minor improvements to the accounting standards codification. The effective date of the standard is dependent on the facts and circumstances of each amendment. Some amendments do not require transition guidance and were effective upon the issuance of this standard. A majority of the amendments in ASU 2018-09 were effective for fiscal years beginning after December 15, 2018. The Company adopted ASU 2018-09 during the first quarter of 2019 and the adoption of this guidance did not have a material impact on the Company’s financial statements.
In July 2019, the FASB issued ASU 2019-07, “Codification Updates to SEC Sections - Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization and Miscellaneous Updates (SEC Update).” The updated guidance clarifies or improves the disclosure and presentation requirements of a variety of codification topics by aligning them with the SEC’s regulations, thereby eliminating redundancies and making the codification easier to apply. This ASU is effective upon issuance and did not have a significant impact on the Company’s financial statements and related disclosures.
Recent Accounting Pronouncements
In August 2018, the FASB issued ASU 2018‑13, “Fair Value Measurement - Disclosure Framework (Topic 820)”. The updated guidance modified the disclosure requirements on fair value measurements. The updated guidance is effective for fiscal years beginning after December 15, 2019, including interim reporting periods within those fiscal years. Early adoption is permitted for any removed or modified disclosures, however the Company has not yet adopted this ASU. When adopted, the Company does not expect the adoption of this ASU to have a significant impact on its financial statements.
This Quarterly Report on Form 10-Q does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
Note 2 - Going Concern
As of and for the nine months ended September 30, 2019, the Company had cash and cash equivalents of $8.0 million and a net loss of $12.6 million. The net loss is primarily attributable to operating expenses of $11.4 million, along with the non-cash derivative loss of $1.2 million, offset by $53,000 of interest income that was recognized during the nine months ended September 30, 2019. The Company used net cash in operations of $10.6 million for the nine months ended
11
September 30, 2019. As of September 30, 2019, the Company had an accumulated deficit of $183.6 million and stockholders’ equity of $4.1 million. In addition, as a clinical stage biopharmaceutical company, the Company has not generated any revenues or profits to date. These existing and on-going factors continue to raise substantial doubt about the Company’s ability to continue as a going concern.
During the nine months ended September 30, 2019, the Company conducted a public offering of its securities through which it raised gross proceeds of $12.0 million (see Note 9). In addition, the Company received a total of $350,000 from the exercise of investor warrants (see Note 8). The Company has prepared an updated projection covering the period from October 1, 2019 through December 31, 2020 based on the requirements of ASU 2014-15, “Going Concern”, which reflects cash requirements for fixed, on-going expenses such as payroll, legal and accounting, patents and overhead at an average cash burn rate of approximately $800,000 per month. The Company’s projection also reflects an appropriation of additional funds for regulatory approvals, clinical trials, outsourced research and development and commercialization consulting of approximately $1.1 million per month. Based on the current projections, the Company expects that current cash resources and operating cash flows will be sufficient to sustain operations into the first quarter of 2020. The ability of the Company to continue its operations beyond this point is dependent on its ability to satisfy the Company’s future cash needs, including but not limited to, private or public sales of securities, option/warrant exercises, structured debt financings and/or partnering/licensing transactions. However, there is no assurance that the Company will be successful in satisfying its future cash needs such that the Company will be able to continue operations.
The accompanying unaudited interim financial statements were prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 3 – Prepaid Expenses and Other
Prepaid expenses and other balances as of September 30, 2019 and December 31, 2018 are as follows:
|
|
|
September 30, 2019 |
|
December 31, 2018 |
||
|
|
|
|
|
|
|
|
|
Insurance premiums |
|
$ |
775,000 |
|
$ |
164,000 |
|
Clinical trial deposit |
|
|
713,000 |
|
|
— |
|
Biologics License Application ("BLA") consulting services deposit |
|
|
182,000 |
|
|
182,000 |
|
Director Fees |
|
|
48,000 |
|
|
— |
|
Annual service agreements |
|
|
39,000 |
|
|
19,000 |
|
Lease deposit |
|
|
34,000 |
|
|
34,000 |
|
Other |
|
|
46,000 |
|
|
48,000 |
|
Total prepaid expenses and other |
|
$ |
1,837,000 |
|
$ |
447,000 |
12
Note 4- Fixed Assets
Fixed assets are recorded at cost and, once placed in service, are depreciated on the straight-line method over their estimated useful lives. Leasehold improvements are accreted over the shorter of the estimated economic life or related lease term. Fixed assets consist of the following:
|
|
|
Estimated |
|
As of December 31, |
|
|
|
|
|
|
|
As of September 30, |
|
||
|
|
|
Useful Lives in Years |
|
2018 |
|
Additions |
|
Disposals |
|
2019 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing facility/clean room |
|
3 - 8 |
|
$ |
3,076,000 |
|
$ |
5,000 |
|
$ |
— |
|
$ |
3,081,000 |
|
|
Leasehold improvements |
|
10 |
|
|
6,075,000 |
|
|
— |
|
|
— |
|
|
6,075,000 |
|
|
Office furniture and equipment |
|
5 - 10 |
|
|
511,000 |
|
|
— |
|
|
— |
|
|
511,000 |
|
|
Lab equipment |
|
5 - 8 |
|
|
1,128,000 |
|
|
9,000 |
|
|
— |
|
|
1,137,000 |
|
|
Less accumulated depreciation and amortization |
|
|
|
|
(4,793,000) |
|
|
(975,000) |
|
|
— |
|
|
(5,768,000) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed assets, net |
|
|
|
$ |
5,997,000 |
|
$ |
(961,000) |
|
$ |
— |
|
$ |
5,036,000 |
|
Depreciation expense for the respective periods is as follows:
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
||||||||
|
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation Expense |
|
$ |
320,000 |
|
$ |
347,000 |
|
$ |
975,000 |
|
$ |
968,000 |
|
Note 5 – Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses as of September 30, 2019 and December 31, 2018 are as follows:
|
|
|
September 30, 2019 |
|
December 31, 2018 |
||
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
542,000 |
|
$ |
707,000 |
|
|
|
|
|
|
|
|
|
Clinical trial |
|
$ |
870,000 |
|
$ |
407,000 |
|
Insurance premiums |
|
|
294,000 |
|
|
— |
|
Professional fees |
|
|
130,000 |
|
|
|