INNOVUS PHARMACEUTICALS, INC.

On September 12, 2019, the Company signed a definitive merger agreement with Aytu Bioscience, Inc. ("Aytu"), a specialty pharmaceutical company focused on identifying, acquiring and commercializing novel products that address significant patient needs.  Pursuant to the terms and conditions of the merger agreement, the Companys shareholders will receive an aggregate of up to $8 million in shares of Aytu common stock, less certain deductions, at the time of closing as consideration for the merger.  Additional consideration for up to $16 million in milestone payments in the form of contingent value rights ("CVRs") may be paid to the Company's shareholders in cash or stock over the next five years if certain revenue and profitability milestones are achieved. Additionally, on August 8, 2019 the Company entered into a promissory note agreement with Aytu for $1 million which is due February 29, 2020 (see note 6). On October 10, 2019 the Company entered into an Addendum No. 1 to Promissory Note upon which Aytu loaned the Company an additional $350,000 with the same maturity as the promissory note agreement. The merger with Aytu is currently estimated to close in the first quarter to first half of 2020.

In April 2019, the Company entered into an Amendment to the Promissory Note upon which the maturity date was extended from May 1, 2019 to August 1, 2019. In July 2019, the Company entered into an Amendment #2 to the Promissory Note upon which the maturity date was extended from August 1, 2019 to October 1, 2019 in exchange for 60,000 shares of common stock.  The fair value of the common stock issued was $91,000 and was recorded as an additional debt discount and amortized over the remaining term of the agreement.  On October 1, 2019 this Promissory Note was paid in full to the investor.

On November 12, 2019, the Company entered into promissory note agreement with an unrelated third-party investor in which the investor loaned the Company gross proceeds of $480,000 in consideration for the issuance of a promissory note.  The note has an OID of $120,000 and requires payment of $600,000 in principal.  The note does not bear an interest rate and the principal amount will be paid of approximately $45,000 per month with a remaining lump sum payment at May 30, 2020.  As additional consideration for the purchase of the note, the Company issued 40,000 shares of restricted common stock to the investor.

On September 12, 2019, the Company signed a definitive merger agreement with Aytu Bioscience, Inc. ("Aytu"), a specialty pharmaceutical company focused on identifying, acquiring and commercializing novel products that address significant patient needs.  Pursuant to the terms and conditions of the merger agreement, the Companys shareholders will receive an aggregate of up to $8 million in shares of Aytu common stock, less certain deductions, at the time of closing as consideration for the merger.  Additional consideration for up to $16 million in milestone payments in the form of contingent value rights ("CVRs") may be paid to the Company's shareholders in cash or stock over the next five years if certain revenue and profitability milestones are achieved. 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed by, or under the supervision of, our CEO and CFO and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with accepted accounting principles generally accepted in the United States of America. Our management, under the supervision and with the participation of our CEO and CFO, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations (“COSO”). Based on such evaluation, management concluded that our internal control over financial reporting was effective as of September 30, 2019.