Note 7 - Commitments and Contingencies

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


	Total		2019		2020		2021		2022		2023		Thereafter
Clinical research trial obligations	$	4,319,000	$	3,240,000	$	1,079,000	$	—	$	—	$	—	$	—
BLA consulting services		1,142,000		571,000		571,000		—		—		—		—
Statistical analysis and programming consulting services		435,000		218,000		217,000		—		—		—		—
Employment agreements		1,482,000		249,000		584,000		483,000		166,000		—		—
Insurance premium financing agreement & commitments		294,000		262,000		32,000		—		—		—		—
	$	7,672,000	$	4,540,000	$	2,483,000	$	483,000	$	166,000	$	—	$	—

Clinical Research Trial Obligations

In March 2019, the Company entered into a contract with a clinical research organization (“CRO”) in connection with a clinical trial for Ampion totaling $6.2 million, which had an outstanding commitment of approximately $4.0 million as of September 30, 2019. As of September 30, 2019, this contract required a deposit of $861,000, of which $148,000 has been applied against prior invoice payments and the remaining balance of $713,000 is recorded within the prepaids and other expense line item on the balance sheet and will be utilized to offset future payments in accordance with the contract. The Company had incurred cumulative costs totaling $2.2 million against the contract as of September 30, 2019. In October 2019, the Company finalized contract negotiations with the CRO to increase its contractual deposit requirements from $861,000 to $1.2 million as a result of an increased number of patients, from 724 to 1,034, required for the current trial; however, an amended contract and resulting change orders were not finalized as of September 30, 2019. The Company estimates that the associated cost increase over the initial CRO contract will be approximately $3.5 million.

In June 2019, the Company entered into a contract with a patient recruitment services company in connection with the current clinical trial for Ampion totaling $264,000. In September 2019, the Company finalized contract negotiations with the patient recruitment services company to increase the contract from $264,000 to $377,000 as a result of an increased number of patients, from 724 to 1,034, required for the current trial. Therefore, the Company had an outstanding obligation of $209,000 as of September 30, 2019. The Company incurred cumulative costs totaling $168,000 against the contract as of September 30, 2019.

In July 2019, the Company entered into contracts with a laboratory to perform urine analysis for patients enrolled in the clinical trial and for consulting services associated with the trial for Ampion totaling $150,000, which had outstanding obligations totaling $130,000 as of September 30, 2019. The Company had incurred cumulative costs totaling $20,000 against the contract as of September 30, 2019. In October, the laboratory contract was amended as a result of an increase in the number of patients required for the clinical trial, which increased the contractual amount by $40,000.

BLA Consulting Services

In March 2018, the Company entered into a BLA consulting services agreement for $1.2 million, which had an outstanding commitment of approximately $1.1 million as of September 30, 2019. This contract required a deposit of $364,000, of which $182,000 was funded and is recorded within the prepaids and other expense line item on the balance sheet. The Company incurred cumulative costs totaling $71,000 against this contract as of September 30, 2019. This contract does not have an expiration date. The Company incurs costs under the contract as sections of the BLA are drafted for the submission of the complete BLA to the U.S. Food and Drug Administration (“FDA”).

Statistical Analysis and Programming Consulting Services

In May 2019, Ampio entered into a statistical analysis and programming consulting services agreement for $579,000, which had an outstanding obligation of $435,000 as of September 30, 2019. The Company has incurred cumulative costs totaling $144,000 against the contract as of September 30, 2019.

Employment Agreements

The Company entered into an employment agreement with Mr. Michael Macaluso, Chief Executive Officer, effective January 9, 2012. This agreement provided for an annual salary of $195,000, with an initial term ending January 9, 2015. On October 1, 2013, the Company increased Mr. Macaluso’s annual salary from $195,000 to $300,000. On December 20, 2014, the Company extended the employment agreement of Mr. Macaluso for three additional years, expiring January 9, 2017. On March 9, 2017, the Company extended his employment agreement with an expiration date of January 9, 2020.

The Company entered into an employment agreement with Ms. Holli Cherevka, Chief Operating Officer, on September 19, 2017, which provided for an annual salary of $200,000, with an initial term ending September 19, 2019. On September 16, 2019, the Company entered into a new employment agreement with Ms. Cherevka, which by its terms cancelled the previous employment agreement on this date. The new employment agreement provides for an annual salary of $280,000 and a term ending September 16, 2021, subject to certain automatic renewal provisions.

The Company entered into an employment agreement with Mr. Daniel Stokely, Chief Financial Officer, on July 9, 2019, which provided for an annual salary of $285,000 and a term ending July 31, 2022, subject to certain automatic renewal provisions. The employment agreement allows reimbursement of reasonable commuting and relocation expenses for up to six months.

Amounts noted above do not assume the continuity of employment beyond the contractual terms of each employee’s existing employment agreements.

Insurance Premium Financing Agreement

In June 2019, Ampio entered into an insurance premium financing agreement with a third-party financing organization for a term of six months with an interest rate of 7.75% for $470,000. The outstanding obligation as of September 30, 2019 was $240,000, which will be paid in full by December 2019. The Company also has a remaining balance of $54,000 related to annual insurance premiums payable to the Company’s insurance broker.

Facility Lease

In December 2013, the Company entered into a 125-month non-cancellable operating lease for office space and a manufacturing facility. The effective date of the lease was May 1, 2014. The initial base rent of the lease was $23,000 per month. The total base rent over the term of the lease is approximately $3.3 million, which includes rent abatements and leasehold incentives. As discussed further within Note 1, the Company adopted the FASB issued ASU 2016-02, “Leases (Topic 842)” effective January 1, 2019. With the adoption of ASU 2016-02, the Company recorded an operating ROU asset and an operating lease liability on its balance sheet. The ROU asset represents the Company’s right to use the underlying asset for the lease term and the lease obligation represents the Company’s commitment to make the lease payments arising from the lease. ROU lease assets and obligations are recognized at the commencement date based on the present value of remaining lease payments over the lease term. As the Company’s lease does not provide an implicit rate, the Company used an estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of the lease payments. Rent expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectations regarding the terms. The lease liability is classified as current or long-term on the balance sheet.

The following table provides a reconciliation of the Company’s remaining undiscounted payments for its facility lease and the carrying amount of the lease liability presented in the balance sheet as of September 30, 2019:


	Facility Lease Payments		2019		2020		2021		2022		2023		Thereafter

Remaining Facility Lease Payments	$	1,761,000	$	82,000	$	335,000	$	345,000	$	355,000	$	364,000	$	280,000
Less: Discount Adjustment		(231,000)
Total lease liability	$	1,530,000

Lease liability-current portion	$	253,000

Long-term lease liability	$	1,277,000

The following table provides a reconciliation of the Company’s remaining ROU asset for its facility lease presented in the balance sheet as of September 30, 2019:


	Right-of-Use Asset

Initial recognition as of January 1, 2019	$	1,168,000
Amortization		(123,000)
Balance as of September 30, 2019	$	1,045,000

Prior to the adoption of ASU 2016-02, the Company recognized deferred rent when the straight-line rent expense exceeded the actual lease payments and reduced deferred rent when the actual lease payments exceeded the straight-line rent expense. Deferred rent was also classified between current and long-term on the balance sheet.

Rent expense for the respective periods is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018

Rent expense	$	65,000	$	65,000	$	196,000	$	195,000