The accompanying notes are an integral part
of these financial statements.
The accompanying notes are an integral part
of these financial statements.
The accompanying notes are an integral part
of these financial statements.
The accompanying notes are an integral part
of these financial statements.
Notes to Financial Statements
(unaudited)
Note 1 - Basis of Presentation
These unaudited financial statements represent the financial statements
of Ampio Pharmaceuticals, Inc. (“Ampio” or “the Company”). These unaudited financial statements should
be read in conjunction with Ampio’s Annual Report on Form 10-K for the year ended December 31, 2017, which included all disclosures
required by U.S. Generally Accepted Accounting Principles (“GAAP”). In the opinion of management, these unaudited financial
statements contain all adjustments necessary to present fairly the financial position of Ampio for the balance sheet and the results
of operations and cash flows for the interim periods presented. The results of operations for the period ended March 31, 2018 are
not necessarily indicative of expected operating results for the full year. The information presented throughout this report as
of and for the period ended March 31, 2018 is unaudited.
Ampio is a biopharmaceutical company primarily focused on developing
compounds that decrease inflammation by (i) inhibiting specific pro-inflammatory compounds by affecting specific pathways
at the protein expression and at the transcription level; (ii) activating specific phosphatase or depleting available phosphate
needed for the inflammation process; and (iii) decreasing vascular permeability.
Ampio’s activities have been primarily related to research
and development and raising capital. The Company has not generated revenue to date.
Adoption of Recent Accounting Pronouncements
In May 2017, the FASB issued ASU 2017-09,
“Compensation-Stock
Compensation (Topic 718): Scope of Modification Accounting”.
The amendments provide guidance on determining which changes
to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. Under
the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of
the award changes as a result of the change in terms or conditions. For all entities, this standard is effective for financial
statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The adoption
of this guidance did not have a material impact on the Company’s financial statements.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02,
“Leases
(Topic 842)”
. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset
and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either
finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard
is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Lessees
are required to use a modified retrospective transition approach for capital and operating leases existing at, or entered after,
the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.
The Company is currently evaluating the impact of its pending adoption of this standard on its financial statements.
In July 2017, the FASB issued ASU 2017-11,
“Earnings Per
Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting
for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable
Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception”.
The amendments require companies to disregard the down round feature when assessing whether the instrument is indexed to its own
stock, for purposes of determining liability or equity classification. Companies that provide earnings per share (EPS) data will
adjust their basic EPS calculation for the effect of the feature when triggered (i.e., when the exercise price of the related equity-linked
financial instrument is adjusted downward because of the down round feature) and will also recognize the effect of the trigger
within equity. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within
those fiscal years. The Company is currently evaluating the impact of its pending adoption of this standard on its financial statements.
Other accounting standards that have been issued or proposed by
FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon
adoption.
The Company does not discuss recent pronouncements that are not anticipated to
have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
Note 2 - Going Concern
As reflected in the accompanying financial statements, the Company
had cash of $7.5 million as of March 31, 2018 with net income of $22.0 million for the period ended March 31, 2018. The net income
is attributable to the non-cash derivative gain of $25.6 million that was recognized during the first quarter of 2018. The Company
used net cash in operations of $3.6 million for the period ended March 31, 2018. The Company ended the quarter with an accumulated
deficit of $182.9 million and a deficit in stockholders’ equity of $8.9 million. In addition, the Company is a
clinical stage biopharmaceutical company and has not generated any revenues or profits to date. These factors raise substantial
doubt about the Company’s ability to continue as a going concern.
In the first quarter of 2018, the Company received a total of $3.1
million from investor warrants and stock options being exercised (see Note 7). Ampio expects that current cash resources and operating
cash flows will be sufficient to sustain operations into the third quarter of 2018. The ability of the Company to continue its
operations is dependent on management’s plans, which includes continuing to raise equity-based and debt financing, as well
as encouraging additional warrant exercises. The Company is currently in negotiation with potential investors for financing. However,
there is no assurance that the Company will be successful in raising sufficient capital.
The accompanying unaudited interim financial statements have been
prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal
course of business. These financial statements do not include any adjustments relating to the recovery of recorded assets or the
classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 3 - Fixed Assets
Fixed assets are recorded at cost and, once placed in service, are
depreciated on the straight-line method over the estimated useful lives. Leasehold improvements are accreted over the shorter of
the estimated economic life or related lease terms. Fixed assets consist of the following:
|
|
Estimated Useful Lives in years
|
|
As of
March 31,
2018
|
|
|
As of
December 31,
2017
|
|
|
|
|
|
|
|
|
|
|
Manufacturing facility/clean room
|
|
3 - 8
|
|
$
|
2,926,000
|
|
|
$
|
2,773,000
|
|
Leasehold improvements
|
|
10
|
|
|
6,075,000
|
|
|
|
6,075,000
|
|
Office furniture and equipment
|
|
3 - 10
|
|
|
557,000
|
|
|
|
557,000
|
|
Lab equipment
|
|
5 - 10
|
|
|
1,095,000
|
|
|
|
1,059,000
|
|
Less accumulated depreciation and amortization
|
|
|
|
|
(3,927,000
|
)
|
|
|
(3,626,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Fixed assets, net
|
|
|
|
$
|
6,726,000
|
|
|
$
|
6,838,000
|
|
Depreciation and amortization expense for the respective periods
is as follows:
|
|
Three Months Ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense
|
|
$
|
301,000
|
|
|
$
|
304,000
|
|
Note 4 - Fair Value Considerations
The Company’s financial instruments include cash and cash
equivalents, trading security in Aytu, accounts payable and accrued expenses, and warrant derivative liability. The carrying amounts
of financial instruments, including cash and cash equivalents, accounts payable and accrued expenses are carried at cost which
approximates fair value due to the short maturity of these instruments. The fair value of trading securities is based on quoted
market prices, if available, or estimated discounted future cash flows. Warrants were recorded at estimated fair value based on
a Black Scholes warrant pricing model. The valuation policies are determined by the Chief Financial Officer and approved by the
Company’s Board of Directors.
Authoritative guidance defines fair value as the price that would
be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants
at the measurement date. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of
observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.
Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained
from sources independent of Ampio. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants
would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy is broken
down into three levels based on reliability of the inputs as follows:
|
Level 1:
|
Inputs that reflect unadjusted quoted prices in active markets that are accessible to Ampio for identical assets or liabilities;
|
|
|
|
|
Level 2:
|
Inputs include quoted prices for similar assets and liabilities in active or inactive markets or that are observable for the asset or liability either directly or indirectly; and
|
|
|
|
|
Level 3:
|
Unobservable inputs that are supported by little or no market activity.
|
Ampio’s assets and liabilities, which are measured at fair
value, are classified in their entirety based on the lowest level of input that is significant to their fair value measurement.
Ampio’s policy is to recognize transfers in and/or out of fair value hierarchy as of the date in which the event or change
in circumstances caused the transfer. Ampio has consistently applied the valuation techniques discussed below in all periods presented.
The following table presents Ampio’s financial assets and
liabilities that were accounted for at fair value on a recurring basis as of March 31, 2018 and December 31, 2017, by level within
the fair value hierarchy:
|
|
Fair Value Measurements Using
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading security Aytu
|
|
$
|
3,300
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant derivative liability
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
19,461,000
|
|
|
$
|
19,461,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading security Aytu
|
|
$
|
11,400
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
11,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant derivative liability
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
45,076,000
|
|
|
$
|
45,076,000
|
|
On August 25, 2017, Aytu announced a 1-for-20 stock split which
automatically converted twenty shares of Aytu’s common stock into one new share of common stock. The Company’s investment,
the trading security in Aytu, is recorded at estimated fair value which represents Ampio’s ownership shares in Aytu of 5,111
multiplied by Aytu’s closing stock price on March 31, 2018 and December 31, 2017, which is classified as Level 1 (quoted
price is available).
|
|
|
|
Fair Value at
|
|
|
Unrealized
|
|
|
Fair Value at
|
|
|
|
Maturity in Years
|
|
December 31, 2017
|
|
|
Gains
|
|
|
Losses
|
|
|
March 31, 2018
|
|
Trading security Aytu
|
|
Less than 1 year
|
|
$
|
11,400
|
|
|
$
|
-
|
|
|
$
|
(8,100
|
)
|
|
$
|
3,300
|
|
The warrant derivative liability was valued using the Black-Scholes
valuation methodology because that model embodies all the relevant assumptions that address the features underlying these instruments.
For significant assumptions in valuing the warrant derivative liability as of March 31, 2018 and at issuance see Note 7.
The following table sets forth a reconciliation of changes in the
fair value of financial liabilities classified as Level 3 in the fair valued hierarchy:
|
|
Derivative Instruments
|
|
|
|
|
|
Balance as of December 31, 2017
|
|
$
|
45,076,000
|
|
Warrants issuances
|
|
|
-
|
|
Warrants exercises
|
|
|
(12,981,000
|
)
|
Change in fair value
|
|
|
(12,634,000
|
)
|
Balance as of March 31, 2018
|
|
$
|
19,461,000
|
|
Note 5 - Commitments and Contingencies
Commitments and contingencies are described below and summarized
by the following table:
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
Thereafter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ampion supply agreement
|
|
$
|
7,650,000
|
|
|
$
|
2,550,000
|
|
|
$
|
2,550,000
|
|
|
$
|
2,550,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Clinical research and trial obligations
|
|
|
2,672,000
|
|
|
|
1,852,000
|
|
|
|
820,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Biologics License Application (BLA) consulting services
|
|
|
1,212,000
|
|
|
|
1,212,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Facility lease
|
|
|
2,244,000
|
|
|
|
239,000
|
|
|
|
326,000
|
|
|
|
335,000
|
|
|
|
345,000
|
|
|
|
355,000
|
|
|
|
644,000
|
|
|
|
$
|
13,778,000
|
|
|
$
|
5,853,000
|
|
|
$
|
3,696,000
|
|
|
$
|
2,885,000
|
|
|
$
|
345,000
|
|
|
$
|
355,000
|
|
|
$
|
644,000
|
|
Ampion Supply Agreement
In October 2013, Ampio entered into a human serum albumin ingredient
and purchase sale agreement which has a remaining commitment of $7.7 million. Per an amendment to the original agreement, Ampio
was not committed to purchase any product in 2017 and has extended the agreement to 2020.
Clinical Research and Trial Obligation
In November 2017, Ampio entered into an Open Label Extension study
agreement which has a remaining commitment of $2.7 million.
Biologics License Application (BLA) Consulting Services
In March 2018, Ampio entered into a BLA consulting services agreement
which has a commitment of $1.2 million.
Facility Lease
In December 2013, Ampio entered into a 125-month non-cancellable
operating lease for office space and the manufacturing facility effective May 1, 2014. The lease has initial base rent of
$23,000 per month, with the total base rent over the term of the lease of approximately $3.3 million and includes rent abatements
and leasehold incentives. The Company recognizes rental expense of the facility on a straight-line basis over the term of the lease.
Differences between the straight-line net expenses on rent payments are classified as liabilities between current deferred rent
and long-term deferred rent.
Rent expense for the respective periods is as follows:
|
|
Three Months Ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
Rent expense
|
|
$
|
65,000
|
|
|
$
|
65,000
|
|
Note 6 - Common Stock
Capital Stock
At March 31, 2018 and December 31, 2017, Ampio had 200.0 million
shares of common stock authorized with a par value of $0.0001 per share, respectively, and 10.0 million shares of preferred
stock authorized with a par value of $0.0001 per share.
At March 31, 2018 and December 31, 2017, Ampio had 86,011,751
and 80,060,345 shares of common shares outstanding, respectively. As of these same dates, Ampio had no preferred shares outstanding.
Shelf Registration
In March 2017, Ampio filed a shelf registration statement on
Form S-3 with the Securities and Exchange Commission (“SEC”) to register Ampio common stock and warrants in an aggregate
amount of up to $100.0 million for offerings from time to time, as well as 5.0 million shares of common stock available for
sale by selling shareholders. The shelf registration was declared effective in April 2017 by the SEC. As a result of equity raises,
approximately $78.3 million remained available under the Form S-3 as of March 31, 2018. This shelf registration statement on Form
S-3 expires in March of 2020.
Registered Direct Offering
In October 2017, the Company entered into a Securities Purchase
Agreement, with certain investors, pursuant to which the Company sold approximately 7.7 million shares of common stock at a price
per share of $0.875. The gross proceeds from the offering were approximately $6.7 million. The costs associated with the offering
were approximately $490,000. The shares were offered and sold pursuant to the Company’s shelf registration statement on Form S-3
that was declared effective by the SEC in April 2017.
In June 2017, the Company completed a registered direct offering.
In this offering, Ampio issued directly to multiple investors approximately 11.0 million shares of its common stock and approximately
11.0 million warrants to purchase shares of common stock. The common stock and warrants were sold in units, with each unit consisting
of one share of common stock and a warrant to purchase one share of common stock. Each unit was sold to the investors in this offering
at a negotiated price of $0.60 per unit generating gross proceeds of $6.6 million. There is a participation right of 35% for any
proposed or intended issuance or sale or exchange of securities being offered until the second anniversary of the closing date,
which expires on June 2, 2019. The shares and the warrants were offered and sold pursuant to the Company’s shelf registration
statement on Form S-3 that was declared effective by the SEC in April 2017.
The investor warrants have an exercise price of $0.76 per share
and were exercisable starting on December 7, 2017 with a term of five years from issuance. The investor warrants include a provision
where the warrant holder has the contractual right to request a cash exercise if the effectiveness of the registration statement
is not maintained, but securities law would prevent the Company from issuing registered shares in a cash exercise. Therefore, the
Company could be forced to cash settle the warrant. Based on this additional derivative feature of the investor warrants, they
must be accounted for as a liability at fair value under Accounting Standards Codification (“ASC”) 815 “Derivatives
and Hedging”. On the date of issuance, these warrants were valued at $4.6 million.
In connection with the offering, the placement agent received an
8% commission totaling $533,000 and approximately 879,000 warrants with an exercise price of $0.76 and a termination date of June
1, 2022. These warrants had a value of $369,000 when they were issued and are accounted for as equity-based warrants. The placement
agent warrants provide for cashless exercise, which the placement agents may elect if there is no effective registration statement.
The Company also incurred expenses related to legal, accounting, and other registration cost of $292,000.
In September 2016, the Company completed a registered direct offering.
In this offering, the Company issued directly to an institutional investor 5.0 million shares of its common stock and warrants
to purchase up to 5.0 million shares of common stock. The common stock and warrants were sold in units, with each unit consisting
of one share of common stock and a warrant to purchase one share of common stock. Each unit was sold to the investor in this offering
at a negotiated price of $0.75 per unit generating gross proceeds of $3.75 million. There was a participation right of 30% for
any proposed or intended issuance or sale or exchange of securities being offered until the first anniversary of the closing date,
which expired on September 1, 2017. The shares and the warrants were offered and sold pursuant to our shelf registration statement
on Form S-3 which was declared effective by the SEC in January 2014. The Form S-3 expired in January of 2017 and the
Company filed a new Form S-3 in April 2017.
The investor warrants had an exercise price of $1.00 per share and
were immediately exercisable with a term of five years from issuance. In addition, the investor warrants included a provision for
an adjustment to the exercise price upon subsequent issuances of common stock by the Company at a price less than the warrant exercise
price and the investor is entitled to purchase additional shares, such that the aggregate purchase price of $5.0 million for the
warrant shares remains unchanged. The investor warrants also include a provision for redemption at the Black-Scholes value at the
request of the holder upon a change of control. Based on these derivative features of the investor warrants, they must be accounted
for as a liability at fair value under ASC 480. On the date of issuance, these warrants were valued at $4.1 million.
In connection with the offering, the placement agent received a
6% commission totaling $225,000 and 150,000 warrants with an exercise price of $0.9375 and a termination date of September 1, 2021.
These warrants had a value of $89,000 when they were issued and were accounted for as equity-based warrants. The placement agent
warrants provide for cashless exercise, which the placement agents may elect if there is no effective registration statement. The
Company also incurred expenses related to legal, accounting, and other registration cost of $113,000.
The Company’s net cash proceeds from the registered direct
offering were $3.4 million. When the additional non-cash charges of $4.2 million related to the 5.0 million investor warrants and
the 150,000 placement agent warrants were offset against the net cash transaction proceeds, this exceeded 100% of the proceeds
so the Company was required to take the additional cost above the transaction proceeds and recognize a loss on the day it entered
the transaction. The loss on the transaction was $804,000 and was included in derivative expense on the statement of operations.
On March 27, 2017, the Company entered into a Waiver and Consent
Letter Agreement with the investor from September 2016, amending the terms of the warrants previously issued. Under the Waiver
and Consent Agreement, the investor waived the right to have the warrant exercise price reduced and the number of shares of common
stock underlying the warrant increased in the event the Company secures any financing, including debt, which includes issuing or
selling shares of common stock for a price per share less than the warrant exercise price. The investor also waived the prohibition
on the Company’s ability to issue or sell shares of its common stock, options or convertible securities at a price which
varies or may vary with the market price of the common stock or pursuant to an equity credit line or similar “at-the-market”
offering. The waivers are permanent. In return, the Company agreed to reduce the exercise price of the warrants from $1.00 to $0.40
and to not issue or sell any shares of its capital stock for a period of 10 trading days following the execution of the Waiver
and Consent Agreement. All other terms of the warrants remained the same. Based upon the amendment to this warrant agreement, the
Company recognized a non-cash derivative gain of $1.1 million during the quarter ended March 31, 2017.
Controlled Equity Offering
In February 2016, Ampio entered into a Controlled Equity Offering
SM
Sales Agreement (the “Agreement”) with a placement agent to implement
an “at-the-market” equity program under which Ampio, from time to time may offer and sell shares of its common stock
having an aggregate offering price of up to $25.0 million through the placement agent. The Company has no obligation to sell
any of the shares and may at any time suspend sales under the Agreement or terminate the Agreement in accordance with its terms.
The Company has provided the placement agent with customary indemnification rights. The placement agent will be entitled to a fixed
commission of 3.0% of the gross proceeds from shares sold.
No shares were sold under the Agreement during fiscal 2017 or the
three months ended March 31, 2018.
Common Stock Issued for Services
Ampio issued 17,241 and 62,478 shares of common stock valued at
$60,000 and $60,000, respectively, for non-employee directors as part of their director fees for fiscal years 2018 and 2017, respectively.
Note 7 - Equity Instruments
Options
In 2010, Ampio shareholders approved the adoption of a stock and
option award plan (the “2010 Plan”), under which shares were reserved for future issuance under restricted stock awards,
options, and other equity awards. The 2010 Plan permits grants of equity awards to employees, directors and consultants. The shareholders
have approved a total of 11.7 million shares reserved for issuance under the 2010 Plan.
During the three months ended March 31, 2018, the Company did not
grant options to officers, directors or employees. Former employees and executives exercised 249,666 options with a weighted average
exercise price of $1.61. The Company received $400,800 as of March 31, 2018 related to these option exercises. A total of 3,334
options were forfeited and 145,000 expired as of March 31, 2018.
The following table summarizes Ampio’s stock option activity:
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted Average
Remaining
Contractual Life
|
|
|
Aggregated
Intrinsic Value
|
|
Outstanding December 31, 2017
|
|
|
7,247,165
|
|
|
$
|
2.87
|
|
|
|
5.16
|
|
|
|
12,739,512
|
|
Granted
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(249,666
|
)
|
|
$
|
1.61
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(3,334
|
)
|
|
$
|
8.37
|
|
|
|
|
|
|
|
|
|
Expired or Cancelled
|
|
|
(145,000
|
)
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Outstanding March 31, 2018
|
|
|
6,849,165
|
|
|
$
|
2.81
|
|
|
|
5.11
|
|
|
|
8,528,722
|
|
Exercisable at March 31, 2018
|
|
|
6,135,830
|
|
|
$
|
3.04
|
|
|
|
4.65
|
|
|
|
6,634,118
|
|
Available for grant at March 31, 2018
|
|
|
3,042,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options outstanding at March 31, 2018 are summarized in the
table below:
Range of Exercise Prices
|
|
Number of
Options
Outstanding
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted Average
Remaining
Contractual Lives
|
|
$0.48 - $2.00
|
|
|
2,975,221
|
|
|
$
|
0.91
|
|
|
|
6.19
|
|
$2.01 - $5.00
|
|
|
2,638,944
|
|
|
$
|
3.06
|
|
|
|
3.70
|
|
$5.01 - $8.93
|
|
|
1,235,000
|
|
|
$
|
6.86
|
|
|
|
5.51
|
|
|
|
|
6,849,165
|
|
|
$
|
2.81
|
|
|
|
5.11
|
|
Ampio computes the fair value of all options granted using the Black-Scholes
option pricing model. To calculate the fair value of the options, certain assumptions are made regarding components of the model,
including the estimated fair value of the underlying common stock, risk-free interest rate, volatility, expected dividend yield
and expected option life. Changes to the assumptions could cause significant adjustments to valuation. Ampio calculates its volatility
assumption using the actual changes in the market value of its stock. Ampio adopted ASU 2016-09 in 2017 and no longer estimates
a forfeiture rate. Instead, forfeitures are recognized as they occur. 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 did not grant any options but did compute the fair
value for an option modification during the period ending March 31, 2018, using the following assumptions:
Expected volatility
|
|
|
100.66
|
%
|
Risk free interest rate
|
|
|
1.86
|
%
|
Expected term (years)
|
|
|
0.32
|
|
Dividend yield
|
|
|
0.0
|
%
|
Stock-based compensation expense related to the fair value of stock
options was included in the statements of operations as research and development expenses or general and administrative expenses
as set forth in the table below. The following table summarizes stock-based compensation expense for the three months ended March
31, 2018 and 2017:
|
|
Three Months Ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Research and development expenses
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
$
|
23,000
|
|
|
$
|
42,000
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
|
|
60,000
|
|
|
|
60,000
|
|
Stock-based compensation
|
|
|
96,000
|
|
|
|
89,000
|
|
|
|
$
|
179,000
|
|
|
$
|
191,000
|
|
|
|
|
|
|
|
|
|
|
Unrecognized expense at March 31, 2018
|
|
$
|
176,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining years to vest
|
|
|
1.13
|
|
|
|
|
|
Warrants
In connection with the June 2017 registered direct offering, Ampio
issued to investors warrants to purchase an aggregate of approximately 11.0 million shares of common stock at an exercise price
of $0.76 and a term of five years. Due to certain derivative features, these warrants are accounted for under liability accounting
and are recorded at fair value each reporting period. As of March 31, 2018, these warrants had a fair value of $19,461,000 (see
Note 4). Significant assumptions as of March 31, 2018 and at issuance were as follows:
|
|
March 31, 2018
|
|
|
At
Issuance
|
|
Assumptions for warrants issued June 2, 2017:
|
|
|
|
|
|
|
|
|
Exercise price
|
|
$
|
0.76
|
|
|
$
|
0.76
|
|
Volatility
|
|
|
105.6
|
%
|
|
|
94.6
|
%
|
Equivalent term (years)
|
|
|
4.17
|
|
|
|
5.00
|
|
Risk-free interest rate
|
|
|
2.49
|
%
|
|
|
1.71
|
%
|
Number of shares
|
|
|
6,421,082
|
|
|
|
10,990,245
|
|
In connection with the 2016 registered direct offering, Ampio issued
to an investor warrants to purchase an aggregate of 5.0 million shares of common stock at an exercise price of $1.00 and a term
of five years. Due to certain derivative features, these warrants are accounted for under liability accounting and are fair valued
at each reporting period. As March 31, 2018, no fair value was recorded as these warrants were exercised in full during the 2018
quarter (see Note 4).
During the 2017 registered direct offering, Ampio issued placement
agent warrants to purchase an aggregate of approximately 879,000 shares of common stock at an exercise price of $0.76 with a term
of five years. These warrants were accounted for as equity-based awards (see Note 6). They were valued using the Black-Scholes
methodology.
During the 2016 registered direct offering, Ampio issued to the
placement agent warrants to purchase an aggregate of 150,000 shares of common stock at an exercise price of $0.9375 with a term
of five years. These warrants were accounted for as equity-based awards (see Note 6). They were valued using the Black-Scholes
methodology.
The following table summarizes Ampio’s warrant activity:
|
|
Number of
Warrants
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted Average
Remaining
Contractual Life
|
|
Outstanding December 31, 2017
|
|
|
13,332,243
|
|
|
$
|
0.73
|
|
|
|
4.01
|
|
Warrants issued
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
Warrants exercised
|
|
|
(5,684,499
|
)
|
|
$
|
0.48
|
|
|
|
|
|
Outstanding March 31, 2018
|
|
|
7,647,744
|
|
|
$
|
0.93
|
|
|
|
3.90
|
|
During the quarter ending March 31, 2018, the Company issued 1,184,499
shares of common stock from the exercise of investor warrants with an exercise price of $0.76. In addition, the Company issued
4,500,000 shares of common stock from the exercise of investor warrants at an exercise price of $0.40. After this exercise, the
Company no longer has outstanding $0.40 warrants. The Company received $2.7 million as of March 31, 2018 related to these investor
warrant exercises.
In March 2017, the Company modified 498,576 of its outstanding warrants
which extended the expiration until June 30, 2018. The
$75,000 additional expense related to this modification was recognized
in the quarter ended March 31, 2017.
In March 2017, the Company modified the five million warrants issued
in conjunction with the Company’s September 2016 registered direct offering with an original strike price of $1.00 down to
$0.40. The $1.1 million gain related to this modification was recognized in the quarter ended March 31, 2017 (see Note 6). As noted
above, these warrants have been exercised in full as of March 31, 2018.
Note 8 - Related Party Transactions
Sponsored Research Agreement
Ampio entered into a sponsored research agreement with Trauma Research
LLC, an entity controlled by Ampio’s Director and Chief Scientific Officer, Dr. Bar-Or, in September 2009, which
was amended seven times with the last amendment occurring in June 2017. The agreement was terminated effective July 5, 2017. The
remaining prepaid of $252,000 was expensed during the quarter ended June 30, 2017. In conjunction with terminating this agreement,
the Company extended the contract for Dr. Bar-Or for an additional year. He will continue his current roles as the Chief Scientific
Officer and a director.
Service Agreement
In June 2017, Ampio terminated the shared services agreement with
Aytu. For the three months ended March 31, 2018 and 2017, the total shared overhead cost was $0 and $39,000, respectively.
Note 9 - Litigation
From time to time, the Company is party to litigation arising in
the ordinary course of its business. As of March 31, 2018, the Company is not currently a party to any material litigation.
Note 10 - Subsequent Events
The Company received option exercise notices from former employees
after the close of market on March 29, 2018, with a weighted average exercise price of $2.75. Due to the market being closed on
March 30, 2018, the shares of common stock were not transferred to the former employees until April 2018. The Company recorded
a receivable of $82,350 related to the exercise cost and an accrued liability for the trade in transfer for $82,350 as of March
31, 2018.
The Company received a cashless option exercise notice from a former
executive after the close of market on March 29, 2018. Due to the market being closed on March 30, 2018, the net shares of common
stock totaling 14,117 shares were not transferred to the former executive until April 2018.
As of May 10, 2018, a total
of 55,000 options were exercised by former employees at a weighted average exercise price of $2.79. The Company received $153,000
from the option exercises.
As of May 10, 2018, the Company
issued 210,100 shares of common stock from the exercise of investor warrants with an exercise price of $0.76. The Company received
$160,000 related to investor warrant exercises.