LEASES
As described in Note 1 — “Organization and Description of Business”, the Company's wholly owned subsidiary, LNHC, was formed in September 2023 to execute the Ligand acquisition of certain assets and liabilities from Novan in a 363
transaction. Per the 363 transaction, certain Novan agreements were assumed by LNHC and as of the Merger as of July 1, 2025, LNHC had certain rights and obligations related to its manufacturing facility and the related lease described below.
On January 18, 2021, the Company entered into a lease with an initial term expiring in 2032, as amended for 19,265 rentable square feet, located in Durham, North Carolina. This lease dated as of January 18, 2021, as amended (the “TBC Lease”), is by and between the Company and Copper II 2020, LLC (the “TBC Landlord”), pursuant to which the Company is leasing space serving as its corporate headquarters and primary API manufacturing site (the “Premises”) located within the Triangle Business Center. The lease executed on January 18, 2021, as amended, was further amended on November 23, 2021 to expand the Premises by approximately 3,642 additional rentable square feet from 15,623 rentable square feet.
The TBC Lease commenced on January 18, 2021 (the “Lease Commencement Date”). Rent under the TBC Lease commenced in October 2021 (the “Rent Commencement Date”). The term of the TBC Lease expires on the last day of the one hundred twenty-third calendar month after the Rent Commencement Date. The TBC Lease provides the Company with one option to extend the term of the TBC Lease for a period of 5 years, which would commence upon the expiration of the original term of the TBC Lease, with base rent of a market rate determined according to the TBC Lease; however, the renewal period was not included in the calculation of the lease obligation as the Company determined it was not reasonably certain to exercise the renewal option.
The monthly base rent for the Premises is approximately $39 for months 1-10 and approximately $49 for months 11-12, per the second amendment to the primary lease. Beginning with month 13 and annually thereafter, the monthly base rent will be increased by 3%. Subject to certain terms, the TBC Lease provided that base rent was abated for three months following the Rent Commencement Date. The Company is obligated to pay its pro-rata portion of taxes and operating expenses for the building as well as maintenance and insurance for the Premises, all as provided for in the TBC Lease.
Pursuant to the terms of the TBC Lease, the Company is currently obligated to deliver to the TBC Landlord a letter of credit in the amount of $583, as amended, as collateral for the full performance by the Company of all of its obligations under the TBC Lease and for all losses and damages the TBC Landlord may suffer as a result of any default by the Company under the TBC Lease. As of December 31, 2025, the Company is in the process of securing this letter of credit.
The Company’s facility lease cost was $399 for the year ended December 31, 2025, comprised of $324 and $75, respectively, of base rent and other variable expenses, including common area maintenance. Cash paid for amounts included in the measurement of operating lease liabilities was $324 for the year ended December 31, 2025. The Company also recorded $294 of storage rental costs associated with short-term leases for the year ended December 31, 2025.
The weighted average remaining lease term for the TBC Lease and weighted average discount rate for the TBC Lease are 6.1 years and 8.4%, respectively, as of December 31, 2025.
Future minimum lease payments as of December 31, 2025, were as follows:
| | | | | | | | |
| Maturity of Lease Liabilities | | Operating Leases |
| 2026 | | $ | 665 | |
| 2027 | | 685 | |
| 2028 | | 705 | |
| 2029 | | 726 | |
| 2030 | | 748 | |
| 2031 and thereafter | | 836 | |
| Total future undiscounted lease payments | | 4,365 | |
| Less: imputed interest | | (978) | |
| Total reported lease liability | | $ | 3,387 | |