Commitments and Contingencies

6 Months Ended

Jun. 30, 2022

Commitments and Contingencies.

Commitments and Contingencies

Note 5 - Commitments and Contingencies

Key Clinical Research Trial Obligations

Osteoarthritis of the Knee​ ​

AP-013 study

In December 2020, the Company entered into an initial contract with a CRO in reference to the AP-013 study database totaling $1.4 million. The contractual provisions required an initial retainer of $315,000, which was applied to study expenses as further defined by the contract during the first three months ended March 31, 2022. The Company entered into a change order to the initial contract in April 2022 totaling $0.7 million which reflects the estimated final costs to close out the study with expected completion in the next three to five months. The Company had an outstanding future contractual commitment of $0.3 million (net of the $0.1 million remaining unapplied deposit) as of June 30, 2022.

Inhaled treatment for COVID-19 patients

AP-018 study and AP-019 study

In March 2021, the Company entered into a contract with a CRO totaling $318,000 in reference to a Phase 1 study for at-home treatment utilizing inhaled Ampion to treat patients with Long-COVID, or prolonged respiratory symptoms due to COVID-19 (the “AP-018 study”). The contractual provisions required an initial retainer of $105,000 to be applied to future study expenses as further defined by the contract. Subsequent to March 2021, the Company agreed to a contractual amendment of $1.0 million. As of June 30, 2022, trial activities have been completed, and the contract is substantially complete and any future services to be performed to finalize the study closeout and documentation are deemed to be minimal.

In June 2021, the Company entered into a contract with a CRO totaling $2.5 million in reference to a multicenter Phase 2 clinical trial, using inhaled Ampion in the treatment of respiratory distress due to COVID-19 (the “AP-019 study”). The contractual provisions required an initial retainer of $300,000 to be applied to study expenses as further defined by the contract. The contractual amount was later amended by $0.9 million. As such, the revised contractual commitment for the AP-019 study was $3.4 million as of June 30, 2022. Enrollment of the AP-019 study was terminated on May 3, 2022, as no beneficial effect of nebulized Ampion could be documented in an interim analysis. The Company is obligated to pay for services rendered and expenses incurred through the date of finalization of the study. The AP-019 study is substantially complete as of June 30, 2022. As of June 30, 2022, the Company had no future contractual commitment, net of the $0.1 million remaining unapplied deposit.

Intravenous (“IV”) treatment for COVID-19 patients

AP-017 study

In December 2020, the Company entered into a contract with a CRO totaling $1.8 million in reference to a multicenter Phase 2 clinical trial utilizing IV Ampion in the treatment of patients with COVID-19 requiring oxygen supplementation (the “AP-017 study”). The contractual provisions required an initial retainer of $345,000 to be applied to study expenses as further defined by the contract. The Company stopped the trial after an interim enrollment of 35 subjects, which resulted in a favorable contractual adjustment of $0.5 million to reflect the lower study enrollment. As such, the revised contractual commitment for the AP-017 study was $1.3 million as of June 30, 2022. The AP-017 study is substantially complete as of June 30, 2022 and, as such, the obligation for future services under this contract is immaterial.

Employment Agreements

As of June 30, 2022, the Company is a party to an employment agreement dated October 11, 2021 with Daniel Stokely to serve as the Company’s Chief Financial Officer with a term ending in October 2024 and at an initial base salary of $335,000. In addition, the Company is a party to an employment agreement dated November 22, 2021 with Michael A. Martino to serve as the Company’s Chief Executive Officer with a term ending in November 2022 and at an initial base salary of $550,000. Under these employment agreements, the executive is entitled to a severance payment in the event the Company terminates employee’s employment without cause, or employee terminates his employment with good reason. In May 2022, the Company terminated employment agreements with two former executive officers and does not expect to incur any severance payments in connection with these terminations.

Related Party Research Agreements

On February 4, 2022, the Company entered into a sponsored research services agreement with Trauma Research, LLC, an entity owned by one of the Company’s former directors. The agreement totals $400,000 for research activities to be performed over the next year. In addition, the Company also entered into a personal services agreement dated February 4, 2022 with that individual to provide research services. The agreement totals $250,000, which is to be paid in four equal installments payable quarterly over the one-year term. As of June 30, 2022, commitments for future services expected to be rendered for the research and research service agreements total $239,000 and $125,000. On August 5, 2022, we delivered notice of termination of the personal services agreement, effective September 5, 2022, and our remaining obligations under this agreement are estimated to be up to $21,000. On August 5, 2022, we delivered notice of termination of the research services agreement, effective November 4, 2022, and our remaining obligations under this agreement are estimated to be up to $62,000.

Facility Lease

In December 2013, the Company entered into a 125-month non-cancellable operating lease for office space and a manufacturing facility, set to expire September 2024 with the right to renew for an additional 60 months. 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 right-of-use (“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 of 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 both as current in part and 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 disclosed on the balance sheet as of June 30, 2022:

	Facility Lease Payments		2022		2023		2024		2025		2026		Thereafter
Remaining Facility Lease Payments	$	823,000	$	179,000	$	364,000	$	280,000	$	—	$	—	$	—
Less: Discount Adjustment		(50,000)
Total lease liability	$	773,000
Lease liability-current portion	$	325,000
Long-term lease liability	$	448,000

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, 2022:

	ROU Asset
Balance as of December 31, 2021	$	629,000
Amortization		(104,000)
Balance as of June 30, 2022	$	525,000

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Lease expense	$	70,000	$	67,000	$	151,000	$	140,000