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Commitments and Contingencies | 9 Months Ended
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Sep. 30, 2018
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | NOTE 16. COMMITMENTS AND CONTINGENCIES Legal Dr. Sobol In December 2016, Louis L. Sobol, M.D. (“Sobol”) filed a lawsuit in the U.S. District Court for the Eastern District of Michigan, Southern Division against the Company, asserting claims on behalf of himself and an as-yet-uncertified class of consumers. The claims allege violations under the Telephone Consumer Protection Act, 47 U.S.C. § 227 via our alleged transmittal of advertisements to our clients via facsimile. In June 2018, Sobol filed a motion for class certification and in July 2018 the Company filed a response in opposition to the motion for class certification. A hearing on class certification was heard on October 24, 2018, however, as of the date of this Report no decision has been made. The Company believes the claims are frivolous and has previously and will continue to dispute all claims asserted against it and intends to vigorously defend these allegations. Nonetheless, the Company cannot predict the eventual outcome of this this litigation, it could result in substantial costs and a diversion of management’s resources and attention, which could harm the Company’s business and the value of its common stock. Allergan USA In September 2017, Allergan USA, Inc. (“Allergan”) filed a lawsuit in the U.S. District Court for the Central District of California against the Company, primarily claiming violations under the federal Lanham Act and other state laws. The case is currently in discovery, with a trial date set for April 2019. The Company believes the claims are frivolous and has previously and will continue to dispute all asserted claims against it and intends to vigorously defend these allegations. Nonetheless, the Company cannot predict the eventual outcome of this this litigation, it could result in substantial costs and a diversion of management’s resources and attention, which could harm the Company’s business and the value of its common stock. Spectrum In February 2018, the Company filed a complaint against Spectrum Laboratory Products, Inc., Spectrum Chemical Manufacturing Corp. and Spectrum Pharmacy Products, Inc. (collectively “Spectrum”) in the Los Angeles County Superior Court asserting claims for breach of contract, breach of implied covenant of good faith and fair dealing, violation of California Commercial Code Section 2101 and fraud. The claims stem from prior business dealings between the Company and Spectrum and allege false representation by Spectrum regarding their products, fraudulent labeling and misrepresentations of approved product usages. The complaint has been filed with the Court and in May 2018, Spectrum filed an answer with the Court. The matter is currently in the beginning stages of discovery. Novel Drug Solutions et al. In April 2018, Novel Drug Solutions, LLC and Eyecare Northwest, PA, (collectively “NDS”) filed a lawsuit against the Company in the U.S. District Court of Delaware asserting claims for breach of contract. The claims stem from an asset purchase agreement between the Company and NDS entered into in 2013. In July 2018, NDS filed a first amended complaint which added a claim for fraudulent inducement. In July 2018, the Company filed a motion to dismiss certain causes of action found in the complaint, and its motion to dismiss was denied. In October 2018, the Company filed counterclaims alleging breach of contract and breach of covenant of good faith and fair dealing and named certain individual defendants. The Company believes the claims against it are frivolous and has previously and will continue to dispute all claims asserted against it and intend to vigorously defend these allegations. Nonetheless, the Company cannot predict the eventual outcome of this this litigation, it could result in substantial costs and a diversion of management’s resources and attention, which could harm the Company’s business and the value of its common stock. California Board of Pharmacy In March 2018, the California Board of Pharmacy filed an accusation against our wholly owned subsidiary, Park Compounding, Inc. (“Park”) related to a compounded formulation the Company believes was legally dispensed and was, without the Company’s knowledge, inappropriately administered to a patient unknown to the Company, by the prescribing healthcare professional. The Company has filed its response to the accusation and has requested a formal hearing. The Company disputes all claims against it and intends to vigorously defend against the allegations. Nonetheless, the Company cannot predict the outcome of this matter, it could result in substantial costs, suspension or revocation of Park’s pharmacy license and a diversion of management’s resources and attention, which could harm the Company’s business and the value of its common stock. Product and Professional Liability Product and professional liability litigation represents an inherent risk to all firms in the pharmaceutical and pharmacy industry. The Company utilizes traditional third-party insurance policies with regard to its product and professional liability claims. Such insurance coverage at any given time reflects current market conditions, including cost and availability, when the policy is written. John Erick et al. In January 2018, John Erick and Deborah Ferrell, successors-in-interest and heirs of Jade Erick, (collectively “Erick”) filed a lawsuit in the San Diego County Superior against Kim Kelly, ND, MPH asserting claims related to death of Jade Erick. In April 2018, Erick filed an amendment to the lawsuit, naming the Company as a co-defendant. In September 2018, co-defendant Dr. Kelly filed a cross-complaint against the Company and various Spectrum entities. The cross-complaint seeks indemnity and contribution from the Company and Spectrum. The Company answered the claims filed by Dr. Kelly in October 2018. The Company believes the claims are frivolous and has previously and will continue to dispute all asserted claims against it and intends to vigorously defend these allegations. Nonetheless, the Company cannot predict the eventual outcome of this this litigation, it could result in substantial costs and a diversion of management’s resources and attention, which could harm the Company’s business and the value of its common stock. General and Other In the ordinary course of business, the Company may face various claims brought by third parties and the Company may, from time to time, make claims or take legal actions to assert the Company’s rights, including intellectual property disputes, contractual disputes and other commercial disputes. Any of these claims could subject the Company to litigation. Management believes the outcomes of currently pending claims are not likely to have a material effect on the Company’s consolidated financial position and results of operations. Indemnities In addition to the indemnification provisions contained in the Company’s charter documents, the Company generally enters into separate indemnification agreements with each of the Company’s directors and officers. These agreements require the Company, among other things, to indemnify the director or officer against specified expenses and liabilities, such as attorneys’ fees, judgments, fines and settlements, paid by the individual in connection with any action, suit or proceeding arising out of the individual’s status or service as the Company’s director or officer, other than liabilities arising from willful misconduct or conduct that is knowingly fraudulent or deliberately dishonest, and to advance expenses incurred by the individual in connection with any proceeding against the individual with respect to which the individual may be entitled to indemnification by the Company. The Company also indemnifies its lessors in connection with its facility leases for certain claims arising from the use of the facilities. These indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities in the accompanying condensed consolidated balance sheets. Klarity License Agreement – Related Party In April 2017 and as amended in April 2018, the Company entered into a license agreement (the “Klarity License Agreement”) with Richard L. Lindstrom, M.D., a member of its Board of Directors. Pursuant to the terms of the Klarity License Agreement, the Company licensed certain intellectual property and related rights from Dr. Lindstrom to develop, formulate, make, sell, and sub-license the topical ophthalmic solution Klarity used to protect and rehabilitate the ocular surface (the “Klarity Product”). Under the terms of the Klarity License Agreement, the Company is required to make royalty payments to Dr. Lindstrom ranging from 3% - 6% of net sales, dependent upon the final formulation of the Klarity Product sold. In addition, the Company is required to make certain milestone payments to Dr. Lindstrom including: (i) an initial payment of $50 upon execution of the Klarity License Agreement, (ii) a second payment of $50 following the first $50 in net sales of the Klarity Product; and (iii) a final payment of $50 following the first $100 in net sales of the Klarity Product. All of the above referenced milestone payments are payable at the Company’s election in cash or shares of the Company’s restricted common stock. Payments totaling $110 were made during the three and nine months ended September 30, 2018, and $12 was due to Dr. Lindstrom at September 30, 2018. Sales and Marketing Agreements During 2017, the Company entered various sales and marketing agreements with certain organizations, to provide exclusive sales and marketing representation services to Imprimis in select geographies in the U.S., in connection with our ophthalmic compounded formulations. Under the terms of the sales and marketing agreements, the Company is required to make commission payments to equal to 10% - 14% of net sales for products above and beyond the initial existing sales amounts. In addition, the Company is required to make periodic milestone payments to certain organizations in shares of the Company’s restricted common stock if net sales in the assigned territory reach certain future levels by the end of their terms, as applicable. No stock-based payments were made and $507 and $1,065 were incurred under these agreements for commission expenses during the three and nine months ended September 30, 2018, respectively.

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