SPRUCE BIOSCIENCES, INC. Commitments Disclosure
7. Commitments and Contingencies
From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of business. The Company evaluates the likelihood of an unfavorable outcome in legal or regulatory proceedings to which it is a party and records a loss contingency on an undiscounted basis when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These judgments are subjective and based on the status of such legal proceedings, the merits of the Company’s defenses, and consultation with legal counsel. Actual outcomes of these legal proceedings may differ materially from the Company’s estimates. The Company estimates accruals for legal expenses when incurred as of each balance sheet date based on the facts and circumstances known to the Company at that time.
See Note 8 for discussion over commitments associated with the Company's license and purchase agreements.
Legal Matters
The Company’s industry is characterized by frequent claims and litigation, including claims regarding intellectual property. As a result, the Company may be subject to various legal proceedings from time to time. The results of any future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors. Other than as disclosed below, the Company was not subject to any material legal proceedings during the years ended December 31, 2025 and 2024 and management is not aware of any pending or threatened litigation that, individually or in the aggregate, could have a material adverse effect on the Company's business, financial condition or results of operations.
In January 2025, Neurocrine Biosciences, Inc. (“Neurocrine”) initiated proceedings seeking to invalidate European Patent 3,784,233 (the “Patent”) in the United Kingdom Patents Court (“UKPC”), and in August 2025, initiated similar proceeds before the Unified Patent Court (collectively, the “Patent Proceedings”). In February 2026, the UKPC issued a judgment ordering the Company to pay Neurocrine an interim payment of approximately $1.2
million for its legal costs. As of the year ended December 31, 2025, the Company accrued $1.9 million for loss contingencies associated with the Patent Proceedings which is included in accrued expenses and other current liabilities on the balance sheet and in general and administrative expenses on the statement of operations and comprehensive loss
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 9, 2026 | Showing above |
| 2024 | Apr 15, 2025 | |
| 2023 | Mar 18, 2024 | |
| 2022 | Mar 16, 2023 | |
| 2021 | Mar 14, 2022 | |
| 2020 | Mar 22, 2021 | |
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.