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Item 9A. Controls and Procedures

2022-03-11 compared with 2021-03-15 · 13 added, 100 removed, 208 unchanged (35% of the section changed)

26 unchanged sentences

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and our report dated March 15, 2021 expressed an unmodified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and our report dated March 11, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

18 unchanged sentences

Other Information.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Directors, Executive Officers and Corporate Governance.

5 unchanged sentences

Certain Relationships and Related Transactions, and Director Independence.

RELATED PERSON TRANSACTIONS

Policies and Procedures for Related Party Transactions

As set forth in our audit committee charter, our audit committee is primarily responsible for reviewing and approving related-party transactions, which consist of all transactions and series of similar transactions to which we were a party or will be a party and in which any of our directors, executive officers and holders of more than 5% of our voting securities and their respective affiliates has a direct or indirect material interest.

As used in this section, the terms “related person” and “transaction” have the meanings set forth in Item 404(a) of Regulation S-K under the Securities Act.

In the course of its review and approval of transactions with related persons, the audit committee considers:

● the nature of the related person’s interest in the transaction;

● the material terms of the transaction, including the amount involved and the type of the transaction;

● the importance of the transaction to the related person and to Amphastar;

● whether the transaction would impair the judgment of a director or executive officer to act in our best interest and the best interest of our stockholders;

● any other matters the audit committee deems appropriate.

Any member of the audit committee or, if applicable, our board of directors, who is a related person with respect to a transaction under review will not be able to participate in the discussions or vote on the approval or ratification of the transaction, other than to provide all material information regarding the transaction, including information regarding the extent of the member’s interest in the transaction, to the audit committee.

Any material changes to the terms of, or any renewal of, any of these transactions will also require the same approval.

If a related party transaction will be ongoing, the audit committee may establish guidelines or other parameters or conditions relating to our participation in the transaction.

The audit committee may from time to time pre-approve types or categories of transactions by related persons.

Related Person Transactions

We describe below transactions and series of similar transactions, since the beginning of our last fiscal year, or not

previously disclosed, to which we were a party or will be a party, in which:

● the amounts involved exceeded or will exceed $120,000;

● any of our directors, nominees for director, executive officers or holders of more than 5% of our outstanding capital stock, or any immediate family member of, or person sharing the household with, any of these individuals or entities, had or will have a direct or indirect material interest.

Employment of Related Persons

James Luo, the brother of Dr.

Mary Luo, our Chairman of the Board, Chief Operating Officer and Chief Scientist, and the brother-in-law of Dr.

Jack Zhang, our Chief Executive Officer, President, Chief Scientific Officer and director, was employed by us from 2003 until his retirement in 2020, most recently as our Senior Vice President of New Engineering Research Center, and President of Amphastar France Pharmaceuticals.

In connection with his retirement in 2020, Mr.

Luo received a retirement package that included $992,000 of cash payments over a three year period beginning in 2021 as well as $118,000 of health insurance payments over a six year period.

In addition, Mr.

Luo’s total compensation since 2014, the year of our initial public offering, was as follows:

Restricted Stock Awards (1)

Option Awards (1)

All Other Compensation (2)

(1) This amount reflects the aggregate grant fair value computed in accordance with ASC Topic 718.

All years include a company contribution under our 401(K) plan.

In addition, 2020 includes a payment of $40,800 for travel incentives in accordance with our travel policy, which had been earned but not paid during the previous five years.

We believe that Mr.

Luo’s compensation, including his retirement payment, is comparable with compensation paid to other employees with similar levels of responsibility and years of experience.

Henry Zhang (Haoning Zhang), the son of Dr.

Jack Zhang and Dr.

Mary Luo, is employed by us as the General Manager of Amphastar Nanjing Pharmaceuticals (ANP) and has been employed in that role since 2009.

Zhang’s compensation since 2014, the year of our initial public offering, was as follows:

Restricted Stock Awards (1)

Option Awards (1)

(1) This amount reflects the aggregate grant fair value computed in accordance with ASC Topic 718.

Zhang’s compensation was approved by the board of directors of ANP beginning in 2018.

Prior to that it was set by our management and was comparable with compensation paid to other general managers of our facilities.

Other Employment Relationships

Qingqing Chen, who married Henry Zhang in 2012, was employed by ANP until January 2015, when she resigned.

Chen served in an administrative role and her total annual compensation never exceeded $10,000.

Chongqing Zhang, the brother of Dr.

Jack Zhang and the brother-in-law of Dr.

Mary Luo, has worked for ANP since 2009, initially as a facilities manager, then as a support manager, and more recently, serving as labor union chairman.

At no time has his total annual compensation exceeded $80,000.

ANP Private Placement

As previously disclosed, in July 2018, ANP completed a private placement of its equity to accredited investors for aggregate gross proceeds of approximately $56.3 million.

In connection with the private placement, all of our executive officers at that time, including current executive officers Dr.

Mary Luo, Dr.

Jack Zhang, Bill Peters, Rong Zhou, and Jacob Liawatidewi, and our independent directors Howard Lee and Richard Koo and former director Stephen Shohet, entered into subscription agreements for the indirect investment in ANP (the “ANP Private Placement”).

Koo invested, in whole or in part, through other immediate family members.

These subscription agreements were transacted either through an investment in Amphastar Cayman LLC, a Cayman Islands limited liability company, or Qianqia, a Chinese partnership.

In addition, certain immediate family members of Dr.

Jack Zhang and Dr.

Mary Luo invested indirectly in the ANP Private Placement as set forth below:

Relationship to Dr.

Jack Zhang and Dr.

Henry Zhang and Qingqing Chen

Son and daughter-in-law, respectively

Chongqing Zhang

Brother of Dr.

Jack Zhang, brother-in-law of Dr.

Brother of Dr.

Mary Luo, brother-in-law of Dr.

The total aggregate gross proceeds received from such executive officers, directors and related parties were approximately $36.4 million.

After the private placement, we retained approximately 58% of the equity interest of ANP immediately after the private placement.

Huilu Health Products LLC

Lu Zhang and Guohui Zhang, the daughter and son-in-law of Dr.

Jack Zhang and Dr.

Mary Luo, are the owners of Huilu Health Products LLC, or Huilu.

In 2020, Huilu resold our Primatene Mist product on Amazon.com pursuant to a distribution arrangement on terms consistent with those we have entered into with other similar-sized distribution partners.

In connection with this arrangement, we recognized revenue of $224,000 in 2020 relating to Huilu’s purchase of our Primatene Mist product, the pricing of which was negotiated in good faith and was consistent with the price at which we sold to other distribution partners.

Nanjing Baiziya Biotechnology Co., Ltd.

Henry Zhang, the son of Dr.

Jack Zhang and Dr.

Mary Luo, holds a majority interest in Baiziya, which was formed and organized in 2019.

In 2020, Baiziya entered into a series of transactions with ANP through which ANP supplied non-prescription healthcare products and cosmetics to Baiziya.

We believe that the pricing agreed to with Baiziya was negotiated in good faith.

The net total of the transactions in 2020, after giving effect to certain cancellations, was $90,000.

Other Transactions

We have granted stock options and RSUs to our executive officers and certain of our directors.

We have entered into employment agreements with certain of our executive officers that, among other things, provides for certain severance and change in control benefits.

Additional information related to these transactions will be set forth in our 2021 Proxy Statement which is incorporated by reference in Part III, Item 11 of this Annual Report on Form 10-K.

Indemnification Agreements

We have entered into indemnification agreements with each of our directors and executive officers.

The indemnification agreements, our amended and restated certificate of incorporation and our amended and restated bylaws require us to indemnify our directors to the fullest extent permitted by Delaware law.

Information required by this item will be included in our 2022 Proxy Statement and is incorporated by reference into this Annual Report on Form 10-K.

Principal Accountant Fees and Services.

8 unchanged sentences

1 to the Company’s Registration Statement on Form S-1 filed with the SEC on June 5, 2014)

Description of Securities Registered Under Section 12 of the Exchange Act

Description of Securities Registered Under Section 12 of the Exchange Act (incorporated by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K filed with the SEC on March 15, 2021)

Amended and Restated 2005 Equity Incentive Award Plan (incorporated by reference to Exhibit 10.4 to the Company’s Registration Statement on Form S-1 filed with the SEC on May 20, 2014)

73 unchanged sentences

(incorporated by reference to Exhibit 10.39 to the Company’s Annual Report on Form 10-K filed with the SEC on March 16, 2020)

Separation Agreement and General Release of Claims by and between the Amphastar Pharmaceuticals, Inc.

and Jason Shandell dated as of April 13, 2020.

(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 7, 2020)

Eighth Modification to the Revolving Line of Credit Agreement, dated June 15, 2020, between Amphastar Pharmaceuticals, Inc.

7 unchanged sentences

Eight Modification to the Revolving Line of Credit Agreement, dated March 7, 2016, between International Medication Systems, Limited and East West Bank in the principal sum of $15,000,000.

(incorporated by reference to Exhibit 10.40 to the Company’s Annual Report on Form 10-K filed with the SEC on March 15, 2021)

Sixth Amendment to the Supply Agreement by and between MannKind Corporation and Amphastar Pharmaceuticals, Inc., dated May 24, 2021 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 9, 2021)

Share Purchase Agreement by and between Amphastar Pharmaceuticals, Inc., Nanjing Zhongpan Enterprise Management Consulting Center (LLP), Nanjing Zhanrun Enterprise Management Consulting Center (LLP), and Listening Dragon Investment Company Limited, dated May 6, 2021 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 9, 2021)

Share Repurchase Agreement by and between Amphastar Pharmaceuticals, Inc., Nanjing Qianqia Enterprise Management Consulting (LLP), Nanjing Zhongpan Enterprise Management Consulting Center (LLP), and Nanjing Zhanrun Enterprise Management Consulting Center (LLP), dated May 6, 2021 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 9, 2021)

Credit Agreement dated August 4, 2021, between Amphastar Pharmaceuticals, Inc.

and Capital One N.A.

in the original sum of $140,000,000 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 9, 2021)

Share Purchase Agreement by and between Amphastar Pharmaceuticals, Inc.

and Nanjing Quanqia Enterprise Management Consulting, LLP, dated August 19, 2021 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 9, 2021)

Subsidiaries of the Company

46 unchanged sentences

Financial and Accounting Officer)

/s/ RICHARD KOO

March 11, 2022

10 unchanged sentences

March 11, 2022

/s/ DAVID MARIS

March 15, 2021

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures