Commitments and Contingencies

3 Months Ended

Mar. 31, 2024

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 6. Commitments and Contingencies

Lease Obligations

All the Company’s material leases are operating leases. Right-of-use (“ROU”) assets related to operating leases are included on the unaudited condensed consolidated balance sheets in other non-current assets. Operating lease cost is recognized over the lease term on a straight-line basis and is recorded within general and administrative expenses on the unaudited condensed consolidated statements of income. In March of 2023, the Company entered into a new lease for additional office space in Dallas, Texas. The Company’s corporate office spaces in Dallas, Texas total approximately 6,850 square feet consisting of the two office locations. Total rent expense recognized was $0.06 million and $0.03 million for three months ended March 31, 2024 and 2023, respectively. The respective office leases expire in August 2028 and August 2025.

The Enteris headquarters is located in Boonton, New Jersey, where Enteris leases approximately 32,000 square feet of space. Total rent expense recognized under the lease was $0.06 million for both the three months ended March 31, 2024 and 2023, respectively. The office lease expires in December 2024 with an option to renew for an additional five years.

The components of lease cost was as follows (in thousands):

	Three Months Ended March 31,
	2024		2023
Operating lease cost	$	125	$	98
Variable lease cost		15		1
Total lease cost	$	140	$	99

Future minimum rent on the Company’s operating leases was as follows as of March 31, 2024 (in thousands):

Remainder of 2024	$	384
2025		504
2026		461
2027		465
2028		405
Thereafter		272
Total future lease payments	$	2,491

Contingent Consideration

The Company recorded contingent consideration related to the 2019 acquisition of Enteris and sharing of certain milestone and royalties due to Enteris pursuant to the License Agreement. Contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved, with changes in the estimated fair value recognized in earnings. The estimated fair value of contingent consideration as of March 31, 2024 and December 31, 2023 was $4.9 million. The Company did not recognize a change in the estimated fair value of its contingent consideration during the three months ended March 31, 2024 and 2023.

Unfunded Commitments

As of March 31, 2024, the Company’s unfunded commitments were as follows (in thousands):

Journey Medical Corporation	$	5,000
Total unfunded commitments	$	5,000

Per the terms of the royalty purchase or credit agreements, unfunded commitments are contingent upon reaching an established revenue threshold or other performance metrics on or before a specified date or period of time, and in the case of loan transactions, are subject to being advanced as long as an event of default does not exist.

Litigation

The Company is involved in, or has been involved in, arbitrations or various other legal proceedings that arise from the normal course of its business. The ultimate outcome of any litigation is uncertain, and either unfavorable or favorable outcomes could have a material impact on the Company’s results of operations, balance sheets and cash flows due to defense costs, and divert management resources. The Company cannot predict the timing or outcome of these claims and other proceedings. As of March 31, 2024, the Company is not involved in any arbitration and/or other legal proceeding that it expects to have a material effect on its business, financial condition, results of operations and cash flows.

Indemnification

As permitted by Delaware law, the Company has agreements whereby it indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving in such capacity, or in other capacities at the Company’s request. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a director and officer insurance policy that limits its exposure and enables the Company to recover a portion of any such amounts. As a result of the Company’s insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is insignificant. Accordingly, the Company had no liabilities recorded for these agreements as of March 31, 2024 and December 31, 2023.