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Commitments and Contingencies | 6 Months Ended
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Jun. 30, 2024
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | (6) Commitments and Contingencies The Company has or is subject to the following commitments and contingencies. As of the date of this filing, one complaint has been filed by a purported ARCA stockholder against ARCA and its board of directors in connection with the proposed Merger. On May 20, 2024, a purported stockholder filed a complaint, captioned Wynter v. ARCA biopharma, Inc., et al., No.: 1:24-cv-1418-STV (D. Colo.) (the “Complaint”), against ARCA and its board of directors. The Complaint alleges that the defendants filed or caused to be filed a materially incomplete and misleading preliminary registration statement with the U.S. Securities and Exchange Commission (the “SEC”) and asserts claims under Sections 14(a) and 20(a) of the Exchange Act. The Complaint seeks an order enjoining the proposed Merger, or in the event that the proposed Merger is consummated, an order rescinding the Merger or awarding rescissory damages, as well as costs, including attorneys’ and experts’ fees. ARCA cannot predict the outcome of the Complaint. ARCA believes that the allegations and claims asserted in the Complaint are without merit and intends to defend against them vigorously. Additional lawsuits arising out of the Merger may be filed. Employment Agreements and Reduction of Workforce The Company maintains employment agreements with several key executive employees. The agreements may be terminated at any time by the Company with or without cause upon written notice to the employee, and entitle the employee to wages in lieu of notice for periods not exceeding one calendar year from the date of termination without cause or by the employee for good reason. Certain of these agreements also provide for payments to be made under certain conditions related to a change in control of the Company. In December 2022, the Company’s Board of Directors approved retention bonuses for certain employees, subject to continued employment with the Company through the earlier of a change in control of the Company or certain clinical development decisions totaling $265,000. In November 2023, the retention bonuses were amended to increase the aggregate amount of the retention bonus by 50% and in order to assist with tax obligations associated with the vesting of certain Company restricted stock unit awards in December 2023, a total of $86,000 was paid in December 2023. In April 2024, the retention bonuses were again amended to increase the aggregate amount of the retention bonus, as discussed in Note 10. As of June 30, 2024, the unpaid retention bonuses totaled $444,000, none of which was accrued as of June 30, 2024, since there had not been a change in control or clinical development decision. The Company and Christopher D. Ozeroff, the former Secretary, Senior Vice President and General Counsel of ARCA mutually agreed to conclude Mr. Ozeroff’s employment effective March 31, 2023. Pursuant to Mr. Ozeroff’s existing employment agreement, as previously amended, ARCA provided Mr. Ozeroff severance benefits pursuant to the terms of his existing employment agreement with the Company, as previously amended. The severance benefits included severance payments and reimbursement to cover out-of-pocket costs to continue group health insurance benefits under COBRA, whether he elects or is eligible to receive COBRA. During the year ended December 31, 2023, the Company recorded an expense of $159,000 for these severance benefits, none of which remains unpaid. The Company and Dr. Michael Bristow, former President, Chief Executive Officer and a member of the board of directors of ARCA mutually agreed to conclude Dr. Bristow’s employment and service as a director, effective April 3, 2024. See Note 5. Operating Leases On August 29, 2020 the Company entered into a lease agreement for approximately 5,200 square feet of office facilities in Westminster, Colorado which serves as the Company’s primary business office effective October 1, 2020 (October 2020 Lease). The lease term was 42 months beginning October 1, 2020. In March 2024, the Company entered into an amendment to extend the lease term six (6) months through September 2024. If the Company elects to stay in the property after September 2024, it will pay rent month to month equal to 125% of the base rent paid in September 2024. In June 2021, the Company entered into a sublease agreement for approximately 3,000 square feet of additional office facilities in the Company’s primary business office (2021 Lease). The sublease term was 29 months and terminated in October 2023. The leases include real estate taxes and insurance, which is not a lease component and is not included in the lease obligation. In addition, common area maintenance charges are based on actual costs incurred and are a non-lease component that is not included in the lease obligation. Future minimum commitments due under the October 2020 Lease agreement, as amended, as of June 30, 2024 are as follows (in thousands):
Remaining in 2024 | $ | 25 |
Total remaining lease payments |  | 25 |
Less: imputed lease interest |  | (1 | )
Less: Current portion |  | (24 | )
Operating lease liability, net of current portion | $ | — |
Rent expense, which is included in general and administrative expense, for the six months ended June 30, 2024 and 2023 was $31,000 and $63,000, respectively. As of June 30, 2024, the lease liability was $24,000, it is all current and is included in accrued expenses and other liabilities in the accompanying balance sheet. Cash paid for amounts included in the measurement of lease liabilities and the operating cash flows from operating leases for the six months ended June 30, 2024 and 2023 were $47,000 and $67,000, respectively. The weighted-average remaining lease term for the operating lease as of June 30, 2024 is 0.3 years. The discount rate for the operating lease is 7%. Patent Agreement In July 2021, the Company entered into a patent assignment agreement (the Agreement) with the University Medical Center of Johannes Gutenberg University Mainz, Germany. Under the terms of the Agreement, the Company received exclusive world-wide patent rights relating to the use of rNAPc2 as a potential treatment for COVID-19, and other indications, based on the research and discoveries from Univ.-Prof. Dr. Wolfram Ruf, the Scientific Director and Alexander von Humboldt Professor at the Center for Thrombosis and Hemostasis (CTH) of the University Medical Center Mainz, and his collaborators. The Company has upfront and potential milestone obligations to the University Medical Center Mainz that could total approximately €1.6 million and royalty obligations in the low single digit range, if rNAPc2 receives regulatory approval and is commercialized. The term of the Agreement extends to the date of expiration of the last to expire of any of the assigned patents.

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