Note 8 - Commitments and Contingencies

9 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Text Block]

NOTE

– COMMITMENTS AND CONTINGENCIES

May 2017,

we entered into a commercial agreement with WWPIL, a wholly-owned subsidiary of Hikma Pharmaceuticals PLC (“Hikma”) (LSE: HIK) (NASDAQ Dubai: HIK) (OTC: HKMPY). Pursuant to the commercial agreement, WWPIL provided us with the rights to launch our branded, fluticasone propionate nasal spray USP,

mcg per spray (FlutiCare®), under WWPIL’s FDA approved ANDA

No.

207957

in the U.S. in mid-

November 2017.

The initial term of the commercial agreement is for

two

years, and upon expiration of the initial term, the agreement will automatically renew for subsequent

one

-year terms unless either party notifies the other party in writing of its desire

not

to renew at least

days prior to the end of the then current term. The agreement requires us to meet certain minimum product batch purchase requirements in order for the agreement to continue to be in effect. In

November 2019,

we terminated the Hikma agreement because in our view Hikma failed to provide us with releasable product in the required timeline. We have, however, agreed to purchase the remainder of the

one

batch that we ordered in

2019.

Leases

We lease approximately

172,000

square feet of office and warehouse facilities under a non-cancellable operating lease. Our lease has a remaining term of

years, which represents the non-cancellable periods of the lease. We exclude extension options that are

not

reasonably certain to be exercised from our lease terms. Our lease payment consists of fixed rental payments for the right to use the underlying assets over the lease term as well as payments for common-area-maintenance and administrative services. We have also received customary incentives from our landlord for tenant improvements and rent abatement periods, which effectively reduce the total lease payments owed for the lease.

Operating lease right-of-use assets and liabilities on our condensed consolidated balance sheets represent the present value of our remaining lease payments over the remaining lease terms. We do

not

allocate lease payments to non-lease components; therefore, fixed payments for common-area-maintenance and administrative services are included in our operating lease right-of-use assets and liabilities. We use our incremental borrowing rate to calculate the present value of our lease payments, as the implicit rates in our lease is

not

readily determinable.

As of

September

30,

2019,

the maturities of our operating lease were

as follows (in thousands):

	Remaining Lease Payments
2019	$	65
2020		267
2021		274
2022		282
2023		94
Total remaining lease payments		982
Less: imputed interest		(229	)
Total operating lease liabilities		753
Less: current portion		(162	)
Long-term operating lease liabilities		591
Weighted-average remaining lease term	4 years
Weighted-average discount rate		15	%

The components of our lease costs included in our condensed consolidated statement of operations consist of operating lease costs of

$57

,000

and

$172,000

for the

three

and

nine

months ended

September 30, 2019,

respectively

. Operating lease costs consist of the fixed lease payments included in our operating lease liability and are recorded on a straight-line basis over the lease term.

Litigation

James L. Yeager, Ph.D., and Midwest Research Laboratories, LLC v. lnnovus Pharmaceuticals, Inc.

November 2019,

we signed an amicable settlement term sheet with the Plaintiffs to settle the above matters with definitive settlement agreement expected to be executed on or before

December 6, 2019.

Marin County District Attorney

’

s Letter

August 24, 2018,

the Company received a letter from the Marin County District Attorney's Office requesting substantiation for certain advertising claims made for certain of the Company's products, DiabaSens®, and Apeaz® that were marketed and sold to customers in that County. The Marin County District Attorney's Office is part of a larger

ten

county Northern California Task Force of district attorneys to handle customer protection matters. In

November 2018,

the Company responded through its regulatory attorneys to the Marin County’s District Attorney’s letter. In

March 2019,

the Company heard back from the Marin County District Attorney. In

April 2019,

the Company responded to the letter and in

June 2019

the Company met with the Northern California Task Force. The Company is currently responding to additional due diligence requests from the Marin County District Attorney's office.

In the ordinary course of business, we

may

face various claims brought by

third

parties and we

may,

from time to time, make claims or take legal actions to assert our rights, including intellectual property disputes, contractual disputes and other commercial disputes. Any of these claims could subject us to litigation. Management believes the outcomes of currently pending claims are

not

likely to have a material effect on our consolidated financial position and results of operations.

INNOVUS PHARMACEUTICALS, INC. 10-Q