NOTE 13. AVENOVA ASSET DIVESTITURE AND BRIDGE LOAN

On January 17, 2025, the Company completed the sale of its eyecare products sold under the Avenova brand and related assets (the “Avenova Assets”) to PRN Physician Recommended Nutriceuticals, LLC, a Delaware limited liability company (“PRN”), which constituted substantially all of the Company’s revenue generating and operating assets (the “Avenova Asset Divestiture”). The Avenova Asset Divestiture was consummated pursuant to the Asset Purchase Agreement, dated September 19, 2024, as amended by Amendment No. 1 to the Asset Purchase Agreement, dated November 5, 2024 (as so amended, the “Purchase Agreement”). The Purchase Agreement provided for, among other terms, a base purchase price of $11.5 million for the Avenova Assets and for PRN to provide the Company with up to a $1.0 million secured promissory note (the “Bridge Loan”). Amounts borrowed under the Bridge Loan were required to be used for working capital purposes, bore interest at a rate of 10% per annum and were secured by all of the Company’s assets as collateral. On November 22, 2024, the Company requested and received $0.5 million under the Bridge Loan.

In accordance with the Purchase Agreement, at the closing of the Avenova Asset Divestiture the Company received the cash purchase price equal to $11.5 million, less (i) the $507,954 balance of the Bridge Loan, including accrued interest, which was discharged with collateral released and (ii) $500,000, which amount was deposited into an escrow account (the “Escrow”) for up to six (6) months to be used for the Company’s indemnification obligations under the Purchase Agreement or the payment of the Net Working Capital Adjustment (as defined below) after the closing. The final amount of the purchase price that the Company received in the Avenova Asset Divestiture was subject to a post-closing working capital adjustment, upward or downward, that was limited to an amount of up to $500,000 (the “Net Working Capital Adjustment”). The Net Working Capital Adjustment was mutually determined by PRN and the Company based upon the difference between the amount of the Company’s Net Working Capital (as defined in the Purchase Agreement) immediately prior to the closing and the agreed upon target working capital value of $800,000. The Net Working Capital Adjustment was determined to be $365,566, which reduced the amount of total proceeds that we received from the Avenova Asset Divestiture. The Company recorded a gain of $10.7 million on the Avenova Asset Divestiture during the year ended December 31, 2025, net of the agreed upon Net Working Capital Adjustment.

In connection with the closing of the Avenova Asset Divestiture on January 17, 2025, the Company entered into a Transition Services Agreement, dated January 17, 2025 with PRN, pursuant to which the Company agreed to provide services to PRN with respect to specified accounting, marketing, sales, customer service, regulatory and operational support for a period of four (4) months after the closing of the Avenova Asset Divestiture (the “PRN Transition Services Agreement”). In exchange for providing such services, PRN and the Company agreed upon service fees to be paid to the Company. The Company recognized $16 thousand of income under the PRN Transition Services Agreement for the year ended December 31, 2025, which was included in other expense, net in the Company’s Consolidated Statements of Operations.

The accounting requirements for reporting results related to the Avenova Assets as discontinued operations were met during the first quarter of 2025. Accordingly, the Consolidated Financial Statements and Notes to the Consolidated Financial Statements reflect the results related to the Avenova Assets as a discontinued operation for the periods presented.

In accordance with the provisions of ASC 205-20, the Company has separately reported the assets and liabilities of the discontinued operations in the Consolidated Balance Sheets. The assets and liabilities related to the Avenova Assets have been reflected as discontinued operations in the Consolidated Balance Sheets as of December 31, 2024, and consist of the following (in thousands):

In accordance with the provisions of ASC 205-20, the Company has not included in the results of continuing operations the results of operations of the discontinued operations in the Consolidated Statements of Operations. Results related to the Avenova Asset for the years ended December 31, 2025 and 2024 have been reflected as discontinued operations in the Consolidated Statements of Operations and consist of the following (in thousands):

In accordance with the provisions of ASC 205-20, the Company has not included in the results of continuing operations the results of operations of the discontinued operations in the Consolidated Statements of Cash Flows. Results related to the Avenova Asset for the years ended December 31, 2025 and 2024 have been reflected as discontinued operations in the Consolidated Statements of Cash Flows and consist of the following (in thousands):