NOTE 7. COMMITMENTS AND CONTINGENCIES

Indemnification Agreements

In the normal course of business, the Company provides indemnification of varying scope under its agreements with other entities, including its service providers, vendors, and counterparties. Additionally, the Company provided for certain indemnification obligations in connection with the Avenova Asset Divestiture and PhaseOne Divestiture (see Note 13, “Divestitures”). The potential future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company maintains liability insurance policies that limit its exposure. As a result, the Company believes the fair value of these indemnification agreements is minimal. Accordingly, the Company has not recorded any liabilities for these agreements as of June 30, 2026 or December 31, 2025. 

Legal Matters

From time to time, the Company is subject to various legal proceedings, as well as demands, claims and threatened litigation, which arise in the normal course of our business. The ultimate outcome of any litigation or other legal dispute is uncertain. When a loss related to a legal proceeding or claim is probable and reasonably estimable, the Company accrues its best estimate for the ultimate resolution of the matter. If one or more legal matters are resolved against the Company in a reporting period for an amount above expectations, the Company’s financial condition and operating results for that period may be adversely affected.

During the three months ended March 31, 2026, the Company became aware of a claim for a mootness fee in connection with previously disclosed litigation in Delaware. The Company recorded a $225 thousand accrual related to this matter as of March 31, 2026. During the three months ended June 30, 2026, the Company paid and fully settled this matter.

The Company cannot provide assurance that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against it in the future, and these matters could relate to prior, current, or future transactions or events.

Leases

The Company leased office space for its corporate headquarters located in Emeryville, California. On June 30, 2026, the Company terminated the lease early, pursuant to a lease termination agreement, prior to the original lease expiration date. In connection with the early termination, the Company made a lease termination fee payment of approximately $569 thousand pursuant to the lease termination agreement and derecognized the remaining lease liability of approximately $522 thousand, resulting in the recording of a net loss on lease termination of approximately $47 thousand, included in general and administrative expenses in the Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2026. No impairment of right-of-use assets was recorded during the three or six months ended June 30, 2026, as the Company's right-of-use assets were fully impaired during 2025. During the six months ended June 30, 2025, the Company recorded an impairment of right-of-use assets of $559 thousand associated with the lease.

Lease costs for the three and six months ended June 30, 2026 and 2025 were as follows (in thousands):

The Company has measured its operating lease liabilities as the present value of minimum lease payments using its incremental borrowing rate over the remaining term for each operating lease. The weighted average remaining lease term and the weighted average discount rate for operating leases from continuing operations are summarized as follows:

The Company had no future minimum lease payments under non-cancelable leases as of June 30, 2026, as its lease agreement was terminated effective that date.