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Commitments and Contingencies

12 Months Ended

Jun. 30, 2021

Commitments and Contingencies

Commitments and Contingencies

16. Commitments and Contingencies

Commitments and contingencies are described below and summarized by the following table as of June 30, 2021:


		Total			2022			2023			2024			2025			2026			Thereafter

		(In thousands)
Prescription database		$	905		$	905		$	—		$	—		$	—		$	—		$	—
Pediatric portfolio fixed payments and product Milestone			11,575			4,100			3,100			2,100			2,100			175			—
Inventory purchase commitment			1,472			1,472			—			—			—			—			—
CVR liability			12,000			2,000			5,000			5,000			—			—			—
Product contingent liability			2,700			50			—			50			—			550			2,050
Product milestone payments			3,000			3,000			—			—			—			—			—
Rumpus earn out payments			852			580			32			35			35			35			135
Other commitments			685			189			212			178			106
Total		$	33,189		$	12,296		$	8,344		$	7,363		$	2,241		$	760		$	2,185

Prescription Database

In May 2016, the Company entered into an agreement with a vendor that provides us with prescription database information. The Company agreed to pay approximately $1.6 million over three years for access to the database of prescriptions certain products. In January 2020, the Company amended the agreement and agreed to pay an additional $0.6 million to add access to the database of prescriptions written for the Pediatric Portfolio. The agreement was further amended to include all prescriptions written for the Rx Portfolio.

Pediatric Portfolio Fixed Payments and Product Milestone

The Company assumed two fixed, periodic payment obligations to an investor (the “Fixed Obligation”). Beginning November 1, 2019 through January 2021, the Company will pay monthly payments of $86,840, with a balloon payment of $15.0 million that was to be due in January 2021. A second fixed obligation requires the Company pay a minimum of $100,000 monthly through February 2026, except for $210,767 paid in January 2020.

On May 29, 2020, the Company entered into an Early Payment Agreement and Escrow Instruction (the “Early Payment Agreement”) pursuant to which the Company agreed to pay $15.0 million to the investor in early satisfaction of

the Balloon Payment Obligation. The parties to the Early Payment Agreement acknowledged and agreed that the remaining fixed payments other than the Balloon Payment Obligation remain due and payable pursuant to the terms of the Agreement, and that nothing in the Early Payment Agreement alters, amends or waives any provisions or obligations in the Waiver or the Investor agreement other than as expressly set forth therein.

On June 21, 2021, the Company entered into a Waiver, Release and Consent pursuant to which the Company paid $2.8 million to the investor in early satisfaction of the second fixed obligation. The company agreed to pay the remaining fixed obligation of $3.0 million in six equal quarterly payments of $0.5 million over the next six quarters commencing September 30, 2021. As a result of this, the Company recognized a loss of approximately $1.3 million during the year ended June 30, 2021.

In addition, the Company acquired a Supply and Distribution Agreement with Tris (the “Karbinal Agreement”), under which the Company is granted the exclusive right to distribute and sell the product in the United States. The initial term of the Karbinal Agreement was 20 years. The Company will pay Tris a royalty equal to 23.5% of net sales.

The Karbinal Agreement make-whole payment is capped at $2.1 million each year. The Karbinal Agreement also contains minimum unit sales commitments, which is based on a commercial year that spans from August 1 through July 31, of 70,000 units annually through 2025. The Company is required to pay Tris a royalty make whole payment of $30 for each unit under the 70,000-unit annual minimum sales commitment through 2025. The annual payment is due in August of each year. The Karbinal Agreement also has multiple commercial milestone obligations that aggregate up to $3.0 million based on cumulative net sales, the first of which is triggered at $40.0 million of net revenues.

Inventory Purchase Commitment

On May 1, 2020, the Company's Innovus subsidiary entered into a Settlement Agreement and Release (the “Settlement Agreement”) with Hikma Pharmaceuticals USA Inc. (“Hikma”). Pursuant to the settlement agreement, Innovus has agreed to purchase and Hikma has agreed to manufacture a minimum amount of our branded fluticasone propionate nasal spray USP, 50 mcg per spray (FlutiCare®), under Hikma’s FDA approved ANDA No. 207957 in the U.S. The commitment requires Innovus to purchase three batches of product through fiscal year 2022 each of which amount to $1.0 million.

CVR Liability

Upon closing the Innovus Merger, the Company entered into a CVR Agreement (see Note 4). Each CVR entitles its holder to receive its pro rata share, payable in cash or stock, at the option of the Company, of certain payment amounts if the targets are met. If any of the payment amounts is earned, they are to be paid by the end of the first quarter of the calendar year following the year in which they are earned. Multiple revenue milestones can be earned in one year.

On March 31, 2020, the Company issued to CVR holders 123,820 shares of the Company’s common stock to satisfy the $2.0 million obligation as a result of Innovus achieving the $24.0 million revenue milestone for calendar year ended December 31, 2019. As a result of this, the Company recognized a gain of approximately $0.3 million during the year ended June 30, 2020.

On March 20, 2021, the Company issued to the CVR holders approximately 103,190 shares of the Company’s common stock to satisfy one of two $1.0 million 2020 milestones, which relates to the Innovus achievement of $30.0 million in revenues during the 2020 calendar year. The $1.0 million 2020 milestone for achieving profitability was not met.

Product Contingent Liability

In February 2015, Innovus acquired Novalere, which included the rights associated with distributing FlutiCare. As part of the Merger, Innovus is obligated to make five additional payments of $0.5 million when certain levels of FlutiCare sales are achieved. The discounted value as of June 30, 2021, is approximately $0.3 million.

In June 2017, Innovus entered into Exclusive License Agreement (“the Agreement”) with University of Iowa Research Foundation (“UIRD”) for the use of patent and technology know-how. Pursuant to the agreement, Innovus will pay to UIRD a total milestone payment of $50,000 every other year beginning on July 1, 2021 for a total payment of $0.2 million. The discounted value as of June 30, 2021, is approximately $0.1 million.

Product Milestone Payments

In connection with its intangible assets, the Company has certain milestone payments, totaling $3.0 million, payable at a future date, are not directly tied to future sales, but upon other events certain to happen. These obligations are included in the valuation of the Company’s contingent consideration (see Note 10).

Rumpus Earn Out Payments

On April 12, 2021, the Company acquired substantially all of the assets of Rumpus, pursuant to which the Company acquired certain rights and other assets, including key commercial global licenses with Denovo and Johns Hopkins, relating to AR101, which is a pivotal study-ready therapeutic being studied for the treatment of vEDS. This asset was acquired for an up-front fee of $1.5 million in cash and payment of aggregated fees of $0.6 million to Denovo and John Hopkins. Upon the achievement of certain regulatory and commercial milestones, up to $67.5 million in earn-out payments, which are payable in cash or shares of common stock, generally at the Company’s option, are payable to Rumpus. Under the license agreement with Denovo, the Company assumed the responsibility for paying annual maintenance fees of $25,000, a license option fee of $0.6 million payable in April 2022, and upon the achievement of certain regulatory and commercial milestones, up to $101.7 million, and escalating royalties based on net product sales ranging in percentage from the low teens to the high teens. Finally, under the license agreement with Johns Hopkins, the Company assumed the responsibility for paying minimum annual royalties escalating from $5,000 to $20,000 beginning in calendar year 2022, royalties of 3.0% of net product sales, and upon the achievement of certain regulatory and commercial milestones, up to $1.6 million.

Other commitments

In May 2021, the Company entered into commercial lease agreement for 6,352 square feet of office in Berwyn, Pennsylvania that commences on December 1, 2021 and ends on January 31, 2025. The initial monthly base rent was $14,300 with an approximate 2.5% increase in the base rent amount on an annual basis. On July 19, 2021, the Company and the lessor entered into an amendment, pursuant to which the parties agreed to amend the commencement date from December 1, 2021 to September 1, 2021. The Company will capitalize this lease as operating leases under ASC 842 in September 2021.