Quarterly report pursuant to Section 13 or 15(d)

Note 4 - Investment in Limited Liability Company

v3.8.0.1
Note 4 - Investment in Limited Liability Company
9 Months Ended
Sep. 30, 2017
Notes to Financial Statements  
Equity Method Investments and Joint Ventures Disclosure [Text Block]
4.
        Investment in Limited Liability Company
 
On
August 8
,
2017,
the Company entered into an exclusive Distributorship Agreement (the “Distributorship Agreement”) with InControl Medical, LLC (“ICM”), a Wisconsin limited liability company focused on women's health, pursuant to which the Company will directly market, promote, distribute and sell ICM’s products to licensed medical professional offices and hospitals.
 
Under the terms of the Distributorship Agreement, ICM agreed to
not
directly or indirectly appoint or authorize any
third
party to market, promote, distribute or sell any of the licensed products to any licensed medical professional offices and hospitals in the United States. In exchange, the Company agreed to
not
market, promote, distribute or sell (or contract to do so) any product which substantially replicates all or almost all of the key features of the licensed products.
The Company has a minimum purchase requirement to purchase a certain quantity of ICM products per month during the term of this Distributorship Agreement. In addition, the parties agreed to certain mutual marketing obligations to promote sales of the licensed products.
 
In connection with the Distributorship Agreement, the Company also entered into a Membership Unit Subscription Agreement with ICM and the associated limited liability company
operating agreement of ICM, pursuant to which the Company invested
$2,500,000
in, and acquired membership units of, ICM. This investment has been recorded in investment in a limited liability company in the condensed consolidated balance sheets. The Company used the equity method to account for the investment in ICM because the Company does
not
control it, but has the ability to exercise significant influence over it. The Company’s allocated portion of ICM’s results of operations for the
three
and
nine
months ended
September 30, 2017
was immaterial.