Commitments and Contingencies

6 Months Ended

Jun. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 7 - Commitments and Contingencies

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

	Total (1)		2020		2021		2022		2023		2024		Thereafter
Key clinical research trial obligations	$	2,251,000	$	167,000	$	2,084,000	$	—	$	—	$	—	$	—
BLA consulting services		1,145,000		—		458,000		687,000		—		—		—
Statistical analysis and programming consulting services		325,000		60,000		265,000		—		—		—		—
Employment agreements		1,704,000		442,000		783,000		466,000		13,000		—		—
Commercial insurance premium financing agreement		1,347,000		888,000		459,000		—		—		—		—
	$	6,772,000	$	1,557,000	$	4,049,000	$	1,153,000	$	13,000	$	—	$	—

(1) Not included in the commitments and contingencies table above are the monthly principal and interest payments of $23,000 that would be due under the PPP loan if it is not forgiven by the SBA (see Note 6).

Key Clinical Research Trial Obligations

AP-013 study

In March 2019, the Company entered into a contract with a 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. In April 2020, and pursuant to the FDA guidance covering ongoing clinical trials in the presence of the COVID-19 pandemic, the Company and the CRO paused all ongoing conduct associated with the AP-013 study. In June 2020, increases in COVID-19 cases across certain regions of the United States continue to be reported on a consistent basis. Due to the continued increase in reported cases, the Company has determined that the AP-013 study will remain paused.

From the inception of this contract through June 30, 2020, the Company incurred and accrued cumulative costs totaling $8.2 million against the contract. This contract had an outstanding obligation for future costs and services totaling $2.1 million as of June 30, 2020. However, this obligation assumes that the Company will continue the AP-013 study at the same point the study was paused, and that the completion of the study will be consistent with the parameters as contained in the existing contract, which may not be the case. The Company continues to explore all viable 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 the COVID-19 pandemic, 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 reflect 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:

	June 30, 2020
Original contract (based on 724 patients)	$	6,180,000
Amendment to contract (based on 1,034 patients)		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		(1,344,000)
Remaining Deposit (applied to future expenses)	$	216,000
Expenses incurred/accrued (includes expenses applied to deposit)	$	8,171,000
Total future commitment	$	2,084,000

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 an expected increase in advertising to accelerate enrollment for the AP-013 study. The Company incurred lower than expected advertising costs. Cumulative costs under the current contract totaled $550,000 and there was no outstanding future commitment as of June 30, 2020 as the patient enrollment commitment was fulfilled. Given the current status of the AP-013 and uncertainty resulting from COVID-19, the future contractual commitment amount related to patient recruitment services may change and such change would be incorporated into a fully executed change order and would be reflected as a commitment at such time.

Nebulized treatment for COVID-19 patients

In May 2020, the Company entered into a contract with a CRO in connection with an Ampion nebulized safety study totaling $207,000. The contract required a deposit of $83,000, which has been funded and recognized in full as of June 30, 2020. Therefore, the Company had an outstanding future commitment of $124,000 as of June 30, 2020 and expects this commitment to be fully settled over the remainder of fiscal 2020.

Intravenous treatment for COVID-19 patients

In June 2020, the Company entered into a contract with a CRO in connection with the FDA approved Investigational New Drug (“IND”) application covering intravenous Ampion treatment for COVID-19 patients (the “AP-016 study”) totaling $43,000. The Company commenced the AP-016 study in July 2020 and, as such, had an outstanding future commitment of $43,000 as of June 30, 2020.

In July 2020, the Company entered into a contract with a regional hospital group in connection with the FDA approved IND application for the AP-016 study totaling $50,000. As noted, above, the Company commenced the AP-016 study in July 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 which $182,000 was funded and is recorded within the “prepaid expenses and other” line item on the balance sheet. In June 2020, the Company finalized contract negotiations to increase the contract by $10,000 to include the review for the IND applications for nebulized and intravenous Ampion. The Company had incurred cumulative costs

totaling $77,000 against this contract and, as such, had outstanding future obligations totaling $1.1 million as of June 30, 2020, which will be settled at such time future services are provided to the Company related to the development and filing of the Ampion BLA. Given the uncertainty surrounding the COVID-19 pandemic and the resulting impact on the AP-013 study, at the date of this filing, the Company estimates the incurrence of the remaining costs associated with the preparation of the BLA filing will be postponed until late fiscal 2021, if not later.

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 $253,000 against the contract as of June 30, 2020 and, as such, had an outstanding obligation of $325,000 at June 30, 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 July 2020, allowed for reimbursement of reasonable commuting and relocation expenses, including the employee portion of taxes, for up to one year. The Company expects the commuting and relocation expenses to be incurred in full by September 2020.

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

Commercial Insurance Premium Financing Agreement

In July 2020, the Company entered into an insurance premium financing agreement for $1.3 million, with a term of nine months and an annual interest rate of 3.37%. Under the terms and provisions of the agreement, the Company will be required to make principal and interest payments totaling $116,000 per month over the remaining term of the agreement. The outstanding obligation as of June 30, 2020 was $1.3 million, which will be paid in full by March 2021. In addition, the Company had a remaining balance of $57,000 related to annual insurance premiums payable to the Company’s insurance broker until June 2021.

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 June 30, 2020:

	Facility Lease Payments		2020		2021		2022		2023		2024		Thereafter
Remaining Facility Lease Payments	$	1,513,000	$	169,000	$	345,000	$	355,000	$	364,000	$	280,000	$	—
Less: Discount Adjustment		(170,000)
Total lease liability	$	1,343,000
Lease liability-current portion	$	272,000
Long-term lease liability	$	1,071,000

The following table provides a reconciliation of the Company’s remaining ROU asset for its facility lease presented in the balance sheet as of June 30, 2020:

	Right-of-Use Asset
Balance as of December 31, 2019	$	1,003,000
Amortization		(88,000)
Balance as of June 30, 2020	$	915,000

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Lease expense	$	66,000	$	65,000	$	132,000	$	131,000