Note 6 - Commitments and Contingencies

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


	Total		2020		2021		2022		2023		2024		Thereafter
Key clinical research trial obligations	$	2,193,000	$	2,193,000	$	—	$	—	$	—	$	—	$	—
BLA consulting services		1,143,000		—		1,143,000		—		—		—		—
Statistical analysis and programming consulting services		350,000		350,000		—		—		—		—		—
Employment agreements		1,911,000		649,000		783,000		466,000		13,000		—		—
	$	5,597,000	$	3,192,000	$	1,926,000	$	466,000	$	13,000	$	—	$	—

Key Clinical Research Trial Obligations

In March 2019, the Company entered into a contract with a clinical research organization (“CRO”) in connection with the AP-013 study totaling $6.2 million and covering an initial clinical trial size of 724 patients, which was increased by $4.1 million in January 2020 as a result of an increase in number of patients to 1,034 resulting in the CRO contract commitment totaling $10.3 million. From the inception of this contract through March 31, 2020, the Company incurred and accrued cumulative costs totaling $8.3 million against the contract. This contract had an outstanding obligation for future costs and services totaling $1.9 million as of March 31, 2020. In March 2020, recognizing the challenges due to the global COVID-19 pandemic, the Company announced the close of patient enrollment in the AP-013 study. The Company is exploring options to enable it to complete the AP-013 study; however, it is possible that the COVID-19 pandemic may prevent completion of the AP-013 study at this time or at all. Due to the uncertainty resulting from COVID-19, the future contractual commitment amount related to the AP-013 study may change. The following table provides further detail of the Company’s current contractual obligations for the conduct of the AP-013 study, which does not include any changes related to the potential impact of COVID-19, as such impacts are unknown and cannot be reasonably estimated at the date of this filing:


	March 31, 2020

Original contract	$	6,180,000
Amendment to contract		4,075,000
Total Contract	$	10,255,000

Initial deposit (included in original contract amount)	$	861,000
Amendment to deposit		699,000
Expenses incurred applied to deposit		(1,212,000)
Remaining Deposit	$	348,000

Expenses incurred/accrued (includes expenses applied to deposit)	$	8,314,000

Total future commitment	$	1,941,000

In June 2019, the Company entered into a contract with a patient recruitment services company in connection with the AP-013 study totaling $264,000. In September 2019, the Company finalized contract negotiations to increase the contract to $377,000 as a result of an increased number of patients, from 724 to 1,034, required for the study. In January 2020, the Company finalized contract negotiations to increase the contract to $698,000 as a result of increased advertising for the AP-013 study. The Company estimates that it incurred an additional $20,000 of expense relating to printing supplies for this contract. Therefore, the Company expects the contract to total $718,000. The Company had incurred cumulative costs under the current contract totaling $718,000 and had no outstanding obligation as of March 31, 2020.

In November 2019, the Company entered into a contract with a clinical staff outsourcing firm to assist with the AP-013 study, with an adjusted estimated cost totaling approximately $463,000 as of March 31, 2020. The Company had incurred and accrued cumulative costs under the current contract totaling $211,000 and had outstanding future obligations totaling $252,000 as of March 31, 2020.

BLA Consulting Services

In March 2018, the Company entered into a BLA consulting services agreement for $1.2 million. This contract required a deposit of $364,000, of which $182,000 was funded and is recorded within the “prepaid expenses and other” line item on the balance sheet. The Company incurred cumulative costs totaling $69,000 against this contract and had outstanding obligations totaling $1.1 million as of March 31, 2020. 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”). Due to the unknown impact of COVID-19 on the AP-013 study specifically, and the Company’s operations generally, at the date of this filing, the Company expects the incurrence of the remaining costs associated with the preparation of the BLA filing to be postponed until fiscal 2021.

Statistical Analysis and Programming Consulting Services

In May 2019, Ampio entered into a statistical analysis and programming consulting services agreement for $578,000. The Company had incurred cumulative costs totaling $228,000 against the contract as of March 31, 2020 and, as such, had an outstanding obligation of $350,000 at March 31, 2020.

Employment Agreements

On December 14, 2019, the Company entered into a new three-year employment agreement with Mr. Macaluso, Chief Executive Officer, which became effective January 10, 2020, immediately following the expiration of his prior employment agreement. The new employment agreement provides for an annual salary of $300,000 and term ending January 10, 2023, subject to certain automatic renewal provisions.

On September 16, 2019, the Company entered into a new two-year employment agreement with Ms. Cherevka, Chief Operating Officer, which by its terms cancelled the previous employment agreement on such 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 beginning July 31, 2019 and lasting for three years, subject to certain automatic renewal provisions. The employment agreement, as amended in December 2019, allowed for reimbursement of reasonable commuting and relocation expenses for up to eight months. The commuting and relocation expenses were incurred in full as of March 31, 2020.

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

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. The Company adopted the FASB issued ASC 842, “Leases (Topic 842)” effective January 1, 2019. With the adoption of ASC 842, 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 5.75% based on the information available at the commencement date in determining the present value of the lease payments. Lease 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 March 31, 2020:


	Facility Lease Payments		2020		2021		2022		2023		2024		Thereafter

Remaining Facility Lease Payments	$	1,597,000	$	253,000	$	345,000	$	355,000	$	364,000	$	280,000	$	—
Less: Discount Adjustment		(190,000)
Total lease liability	$	1,407,000

Lease liability-current portion	$	265,000

Long-term lease liability	$	1,142,000

The following table provides a reconciliation of the Company’s remaining ROU asset for its facility lease presented in the balance sheet as of March 31, 2020:


	Right-of-Use Asset

Balance as of December 31, 2019	$	1,003,000
Amortization		(44,000)
Balance as of March 31, 2020	$	959,000

The Company recorded lease expense in the respective periods is as follows:


	Three Months Ended March 31,
	2020		2019

Lease expense	$	67,000	$	66,000