Stablecoin Development Corp
For the period ended Dec 31, 2024. Filed Apr 2, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Apr 2, 2025
SDEV$0.98+9.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-26.
0001437749-24-009417
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2024-12-31; filed 2025-04-02.
0001437749-25-010730
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 84 previous paragraphs and 72 current paragraphs.
11 unchanged; 24 reworded; 37 added; 49 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 2 previous and 2 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (37)
Current report
Overview of Significant Changes and Strategic Direction
Current report
We have undergone significant changes to our business and operations beginning in March 2024 as a result of a series of completed transactions, which changes are discussed below and summarized in further detail in this annual report under the section “Recent Developments and Stock Exchange Listing” in Part I, Item 1 above. As a result of completing these transactions, we are pursuing a new direction that may result in the Dissolution of our Company or another strategic alternative transaction, which are also discussed below and elsewhere in this annual report. Due to the significant changes that have already occurred to our business and operations and the future changes that will occur as we pursue the Dissolution or another strategic alternative, our historic financial condition, results of operations, and prospects discussed in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” will be materially different than our future financial condition, results of operations and prospects in the near term and in the future. Accordingly, it will be important to read about our recent developments and new strategic direction when reading our Management’s Discussion and Analysis of Financial Condition and Results of Operations. As a result of each of the completed transactions discussed below and elsewhere in this annual report, we have significantly reduced our business operations with limited sources of revenue generation. We were historically focused on the development and sale of scientifically-created and clinically-proven eyecare, wound care, and skin care products. Our Avenova Assets were our leading products formulated with our proprietary, stable and pure form of hypochlorous acid and were cleared by the Food and Drug Administration for sale in the United States. As described in additional detail below, subsequent to December 31, 2024, on January 17, 2025, we sold the Avenova Assets to PRN in the Avenova Asset Sale, which constituted the sale of substantially all of our revenue generating and operating assets. See additional discussion under the section “Recent Developments and Stock Exchange Listing” and subheading “Avenova Asset Sale” in Part I, Item 1 above. See also Note 12, “Avenova Asset Sale and Bridge Loan” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report.
Current report
With the Company having completed the sale of substantially all of its assets in the Avenova Asset Sale, as well as the other transactions discussed above, the Board, after evaluating the different strategic options available to the Company, determined that the best opportunity available to maximize the remaining value for our Company and to our stockholders is to wind-up the Company’s affairs and pursue the Dissolution pursuant to the Plan of Dissolution, which may result in distributions to our stockholders of our remaining asset value to the extent any remains. Concurrent with pursuing the Dissolution, the Company is also evaluating other strategic alternatives that may be available to us to the extent the Dissolution does not proceed. See the additional discussion under the section “Recent Developments and Stock Exchange Listing” and subheading “Company Dissolution and Other Strategic Alternatives” and “Engagement of Financial Advisor—Lucid” in Part I, Item 1 above.
Current report
Based on our funds available on December 31, 2024, as well as the net proceeds from the Avenova Asset Sale and the Wound Care Divestiture, management believes that the Company’s existing cash and cash equivalents will be sufficient to enable the Company to meet its planned operating expenses at least through April 2, 2026. However, there is uncertainty with respect to our strategic direction, as the Dissolution is subject to stockholder approval and we are also exploring other potential strategic alternatives that may be available to us, and, as a result, when we do pursue our strategic direction, there may be unknown or potential future claims and liabilities that may arise or changing circumstances that may cause the Company to expend cash significantly faster than currently anticipated because of factors beyond its control.
Current report
Impairment of Goodwill, Indefinite-Lived Intangible Assets and Long-Lived Assets
Current report
Estimates of Future Product Returns
Current report
Common Stock Warrant Liabilities
Current report
Impact of Held-for-Sale Assets and Discontinued Operations
Current report
Financial results related to the Company’s wound care products sold under the Wound Care Trademarks from January 1, 2023 through December 31, 2024 are set forth in the table above and as set forth in this annual report have been aggregated in the caption entitled “Net profit from held-for-sale assets” for the years ended December 31, 2024 and 2023. The Wound Care Divestiture, resulting in the sale of the Wound Care Trademarks, was unanimously approved by the Board on December 30, 2024 and closed subsequent to December 31, 2024, on January 8, 2025. See additional discussion in Note 22, “Wound Care Divestiture and Held-for-Sale Assets,” in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this annual report.
Current report
The financial results of DERMAdoctor beginning from January 1, 2023 through the closing of the DERMAdoctor Divestiture on March 25, 2024 in the table above and as set forth in this annual report have been aggregated in the caption entitled “Net loss from discontinued operations” for the years ended December 31, 2024 and 2023. See additional discussion in Note 21, “DERMAdoctor Divestiture and Discontinued Operations,” in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this annual report.
Current report
The discussions below and throughout this section apply only to results from continuing operations as of December 31, 2024, except as otherwise noted.
Current report
Product revenue, net, decreased by $0.7 million, or 7%, to $9.7 million for the year ended December 31, 2024, from $10.5 million for the year ended December 31, 2023.
Current report
Revenue from eyecare products increased $0.6 million to $9.7 million for the year ended December 31, 2024, from $9.1 million for the year ended December 31, 2023. The increase was primarily due to a continued overall increase in Avenova Spray sold through online channels.
Current report
The overall increase in eyecare product revenue was offset by a $1.4 million decrease in NeutroPhase sales to Pioneer. The Company recorded $1.4 million in product revenue, net, from NeutroPhase in the year ended December 31, 2023, with no comparable revenue in the year ended December 31, 2024.
Current report
Cost of goods sold decreased $1.1 million, or 25%, to $3.3 million for the year ended December 31, 2024, from $4.4 million for the year ended December 31, 2023. The decrease was due primarily to the decrease in lower margin NeutroPhase sales, partially offset by the increase in higher-margin eyecare products sales during the comparable periods.
Current report
Sales and marketing
Current report
General and administrative
Current report
General and administrative expenses increased $1.9 million, or 35%, to $7.4 million for the year ended December 31, 2024, from $5.4 million for the year ended December 31, 2023. The increase was due primarily to an increase in legal costs primarily related to non-recurring strategic initiatives, including the DERMAdoctor Divestiture, the 2024 Public Offering, the Avenova Asset Sale, the Wound Care Divestiture and the Dissolution, ongoing during the year ended December 31, 2024.
Current report
Loss on divestiture of subsidiary
Current report
As a result of the closing of the DERMAdoctor Divestiture on March 25, 2024, we incurred a loss of $0.9 million for the year ended December 31, 2024 with no comparable activity for the year ended December 31, 2023. For additional information regarding the loss on divestiture of this subsidiary, please see Note 21, “DERMAdoctor Divestiture and Discontinued Operations,” in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this annual report.
Current report
Non-cash gain on changes in fair value of warrant liability
Current report
Non-cash gain (loss) on changes in fair value of embedded derivative liability
Current report
Adjustments to the fair value of embedded derivative liability resulted in a loss of $18 thousand for the year ended December 31, 2024 and gain of $40 thousand for the year ended December 31, 2023. For additional information regarding the embedded derivative liability and its valuation, please see Note 3, “Fair Value Measurements,” in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this annual report.
Current report
Accretion of interest and amortization of discounts on convertible notes
Current report
Other expense, net was $0.6 million for the year ended December 31, 2024 and $0.4 million for the year ended December 31, 2023. Expenses were related primarily to separate and unrelated financing events recorded during the respective periods.
Current report
We have incurred net losses and generated negative cash flows from operations since inception and expect to incur losses as we pursue our strategic initiatives, including the Dissolution. Our net losses from continuing operations were $7.2 million and $6.1 million for the years ending December 31, 2024 and 2023, respectively. As of December 31, 2024, our cash and cash equivalents were $430 thousand, compared to $2.9 million as of December 31, 2023. Our cash and cash equivalents as of December 31, 2024 included cash received from the Bridge Loan. As of December 31, 2024, our Bridge Loan had a balance of approximately $0.5 million, which was subsequently repaid upon the closing of the Avenova Asset Sale on January 17, 2025, at which time the collateral securing the Bridge Loan was also released. See additional discussion in Note 12, “Avenova Asset Sale and Bridge Loan” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report.
Current report
On March 25, 2024, the Company issued unsecured convertible notes (the “Unsecured Convertible Notes”) to four (4) secured parties that have an aggregate principal amount of $525,000 or will be convertible into an aggregate of 107,146 shares. The principal amount of the Unsecured Convertible Notes does not accrue interest and is payable to the secured parties upon maturity in March 2026, unless earlier converted into common stock. For additional information regarding the 2023 Private Placement and the Unsecured Convertible Notes, see Note 11 “Financing Activities,” Note 13 “Convertible Notes,” and Note 15 “Stockholders’ Equity” in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this annual report.
Current report
Subsequent to December 31, 2024, on January 17, 2025, we completed the Avenova Asset Sale for which we received net proceeds of approximately $10.5 million and we completed the Wound Care divestiture on January 8, 2025 where we received net proceeds of $0.5 million.
Current report
Based on our funds available on December 31, 2024, together with the net proceeds subsequently received from the Avenova Asset Sale, management believes that the Company’s existing cash and cash equivalents will be sufficient to enable the Company to meet its planned operating expenses at least through April 2, 2026. However, there is uncertainty with respect to our strategic direction, as the Dissolution is subject to stockholder approval and we are also exploring other potential strategic alternatives that may be available to us, and, as a result, when we do pursue our strategic direction, there may be unknown or potential future claims and liabilities that may arise or changing circumstances that may cause the Company to expend cash significantly faster than currently anticipated because of factors beyond its control.
Current report
Cash Used in Operating Activities
Current report
Net cash used in operating activities from continuing operations was $5.2 million for the year ended December 31, 2024, which consisted primarily of a net loss from continuing operations of $7.2 million, adjusted by depreciation and amortization expenses of $40 thousand, stock-based compensation expenses related to employee and director stock awards of $0.1 million, non-cash loss on divestiture of subsidiary of $0.9 million, non-cash expense incurred to obtain consent of Secured Convertible Note (as defined in Note 13, “Convertible Notes”) holders to release collateral for the DERMAdoctor Divestiture of $0.4 million, non-cash loss on modifications of warrants of $69 thousand, non-cash gain on changes in fair value of warrant liabilities of $0.1 million, non-cash loss on changes in fair value of embedded derivative liability of $18 thousand, non-cash right-of-use amortization of $0.3 million, accretion of interest and amortization of debt discounts on convertible notes of $0.9 million, and a net decrease of $0.6 million in our net operating assets and liabilities of continuing operations.
Current report
Net cash provided by investing activities from continuing operations was $1.1 million for the year ended December 31, 2024, which included the DERMAdoctor Divestiture proceeds of $1.1 million and purchase of property and equipment in a nominal amount. Net cash used in investing activities for the purchase of property and equipment from continuing operations was $19 thousand for the year ended December 31, 2023.
Current report
Cash Provided by Financing Activities
Current report
Net cash provided by financing activities from continuing operations was $1.5 million for the year ended December 31, 2024, which included repayment of $2.0 million for the Secured Convertible Notes, net proceeds of $2.9 million from the 2024 Public Offering (as defined in Note 11, “Financing Activities”), net proceeds of $0.2 million from the 2024 Warrant Reprice transaction, and the Bridge Loan of $0.5 million.
Current report
Off-Balance Sheet Arrangements
Current report
In connection with the Avenova Asset Sale, the Wound Care Divestiture and the DERMAdoctor Divestiture, the Company disposed of its primary commercial operations. Limited information for seasonality associated with the Avenova Assets and our wound care products, which were reported as continuing operations for the years ended December 31, 2024 and 2023 is provided below. Additional information about these and our former DERMAdoctor customers, manufacturing and suppliers can be found in our prior filings with the SEC.
Current report
Contractual Obligations
Removed paragraphs (49)
Previous report
Overview
Previous report
NovaBay Pharmaceuticals, Inc. (the “Company”) develops and sells scientifically-created and clinically-proven eyecare and wound care products. Our leading product, Avenova® Antimicrobial Lid and Lash Solution, or Avenova Spray, is proven in laboratory testing to have broad antimicrobial properties as it removes foreign material including microorganisms and debris from the skin around the eye, including the eyelid. Avenova Spray is formulated with our proprietary, stable and pure form of hypochlorous acid and is cleared by the Food and Drug Administration (the “FDA”) for sale in the United States. Avenova Spray is available direct to consumers primarily through online distribution channels and is also available by prescription and dispensed by eyecare professionals for blepharitis and dry eye disease. Because dry eye is a complex condition, we offer a complementary portfolio of scientifically-developed products for each step of the standard at-home treatment regimen, including the Avenova Eye Health Support antioxidant-rich oral supplement, Avenova Lubricating Eye Drops for instant relief, NovaWipes by Avenova, Avenova Warm Eye Compress to soothe the eyes, and the i-Chek by Avenova to monitor physical eyelid health.
Previous report
Recent****Developments
Previous report
DERMAdoctor**Divestiture
Previous report
On March 12, 2024, we entered into a Membership Unit Purchase Agreement (the “Purchase Agreement”) by and among: (i) New Age; (ii) DERMAdoctor; and (iii) the Company. Pursuant to the Purchase Agreement, the Company sold 100% of the membership units (the “Membership Units”) of DERMAdoctor (the “DERMAdoctor Divestiture”), which was the Company’s wholly-owned subsidiary that developed, manufactured, marketed, branded, distributed, and sold a variety of skincare products.
Previous report
Upon the closing of the DERMAdoctor Divestiture on March 25, 2024 as contemplated by the Purchase Agreement, the Company sold the Membership Units to New Age for a purchase price of $1,070,000, streamlining our business and allowing us to focus on pursuing better growth opportunities.
Previous report
Amendment to the Security Agreement and Consent to Terminate the Subsidiary Guarantee
Previous report
The closing of the DERMAdoctor Divestiture was subject to certain conditions, which included the Company obtaining the consent of the holders (the “Secured Parties”) of the Company’s Original Discount Senior Secured Convertible Debentures due November 1, 2024 (the “Secured Convertible Notes”), to (i) amend the Security Agreement, dated April 27, 2023 (the “Security Agreement”), to remove the Membership Units and any assets of DERMAdoctor as collateral for the Company’s obligations pursuant to the Secured Convertible Notes and for DERMAdoctor to be removed as a party to the Security Agreement (the “Security Agreement Amendment”) and (ii) terminate the Subsidiary Guarantee, dated April 27, 2023 (the “Subsidiary Guarantee”), which DERMAdoctor entered into in connection with the issuance of the Secured Convertible Notes (the “Subsidiary Guarantee Termination”).
Previous report
On March 24, 2024, the Company and the Secured Parties entered into a First Amendment to the Security Agreement to effect the Security Agreement Amendment (the “First Amendment”), and a Consent and Release to effect the Subsidiary Guarantee Termination (the “Subsidiary Guarantee Consent”). As consideration for the Secured Parties executing and delivering the First Amendment and the Subsidiary Guarantee Consent, which reduced the collateral available to secure the obligations under the Secured Convertible Notes, the Company provided each Secured Party the option, at the Secured Party’s election, to receive upon the closing of the DERMAdoctor Divestiture either: (i) a new Series D warrant (the “Series D Warrants”) to purchase shares of the Company’s common stock, or (ii) a new unsecured convertible note convertible into shares of common stock (the “Unsecured Convertible Notes”). Based on the Secured Parties’ elections and as a result of the closing of the DERMAdoctor Divestiture, the Company issued: (A) a Series D Warrant to a Secured Party that is exercisable for an aggregate of 1,000,000 shares of common stock and (B) New Notes to four (4) Secured Parties that have an aggregate principal amount of $525,000 or will be convertible into an aggregate of 3,750,000 shares of common stock.
Previous report
2023**Financing Transactions
Previous report
On April 27, 2023, the Company entered into the 2023 Private Placement that provided for the issuance and sale of $3.3 million aggregate principal amount of Secured Convertible Notes and the May 2023 Warrants exercisable for 5,076,928 shares of common stock. The 2023 Private Placement closed on May 1, 2023 and the Company received gross proceeds of $3.0 million, before deducting placement agent fees and other offering expenses. In connection with the 2023 Private Placement, certain previously issued common stock purchase warrants exercisable for 1,724,455 shares of common stock were amended to lower their exercise price from $6.30 to $1.50 per share.
Previous report
On December 21, 2023, the Company entered into the 2023 Warrant Reprice Transaction with certain existing holders of the May 2023 Warrants that were issued in the 2023 Private Placement. Participants agreed to exercise May 2023 Warrants exercisable for 2,528,848 shares of common stock at a reduced exercise price of $0.25 and were issued the December 2023 Warrants exercisable for 2,528,848 shares of common stock. The Company received gross proceeds of $0.6 million, before deducting placement agent fees and other offering expenses.
Previous report
See also Notes 11, “Financing Activities”; 12, “Secured Convertible Notes”; 13, “Common Stock Warrants”; and 14, “Stockholders’ Equity” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report.
Previous report
Included in our net losses for the years ended December 31, 2023 and 2022, was an impairment of our DERMAdoctor business of approximately $2.6 million and $6.8 million, respectively. Approximately $2.6 million and $6.7 million of the total impairment was reflected in the goodwill, intangible and other asset impairment caption in our consolidated statements of operations for each of those years, respectively, and approximately $0.1 million was reflected in the general and administrative caption in our consolidated statements of operations for the year ended December 31, 2022. The impact of the DERMAdoctor impairment on our consolidated balance sheet as of December 31, 2023 was reflected by a right-of-use asset reduction to $1.3 million by $0.1 million, a goodwill reduction to zero by $0.3 million and other intangible assets, net was fully reduced to zero by $2.1 million. Refer to Note 2, “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report for further information on the impairment of our DERMAdoctor business. Subsequent to December 31, 2023, on March 25, 2024, we closed the DERMAdoctor Divestiture. See additional information above under the subheading “Overview”.
Previous report
We expect to grow commercial sales of Avenova branded products primarily through an expansion of domestic market penetration of our online channels as well expanded product offerings through partnerships with other eyecare product providers.
Previous report
Impairmentof Goodwill, Indefinite-Lived Intangible Assets and Long-Lived Assets
Previous report
Estimatesof Future Product Returns
Previous report
CommonStock Warrant Liabilities
Previous report
DERMAdoctor Divestiture
Previous report
The results above include the financial results of DERMAdoctor for all periods presented. Subsequent to December 31, 2023, on March 25, 2024, we announced the closing of the DERMAdoctor Divestiture. Accordingly, DERMAdoctor results will be excluded from future periods presented after closing. See additional information about the DERMAdoctor Divestiture above under the subheading “Recent Developments”.
Previous report
Product revenue, net, increased by $0.3 million, or 2%, to $14.7 million for the year ended December 31, 2023, from $14.4 million for the year ended December 31, 2022.
Previous report
Revenue from Avenova Spray increased by $0.2 million to $7.8 million for the year ended December 31, 2023 from $7.6 million for the year ended December 31, 2022. The 2022 result reflects an unanticipated increase in expired Avenova Spray units returned from retail pharmacies for product purchased prior to the launch of our over-the-counter Avenova Spray product in 2019 and the beginning of the COVID-19 pandemic in 2020. Additionally, the Company recorded a year-over-year increase of $0.2 million in 2023 in revenue from other Avenova branded optical products, including the Company’s NovaWipes by Avenova and Avenova Moist Heating Eye Compress Mask.
Previous report
Additionally, product revenue, net, from the Company’s NeutroPhase and PhaseOne branded wound care products was $0.5 million higher during the year ended December 31, 2023, compared to the year ended December 31, 2022.
Previous report
These increases were partially offset by a $0.6 million decrease in product revenue from DERMAdoctor branded skincare products due to our focus on commercializing only the most profitable skincare products and sales channels. Subsequent to December 31, 2023, on March 25, 2024, we closed the DERMAdoctor Divestiture. See additional information above about the DERMAdoctor Divestiture under the subheading “Recent Developments”.
Previous report
Cost of goods sold* *increased by $0.2 million, or 3%, to $6.8 million for the year ended December 31, 2023, from $6.6 million for the year ended December 31, 2022. The increase was slightly higher than the percentage increase in overall product revenue due to the relative increase in sales of lower-margin wound care products.
Previous report
Researchand development
Previous report
Research and development expenses decreased by $106 thousand to $68 thousand for the year ended December 31, 2023, from $174 thousand for the year ended December 31, 2022, as the Company continues to focus on the commercialization of established products rather than the development and launch of new products.
Previous report
Salesand marketing
Previous report
Generaland administrative
Previous report
General and administrative expenses decreased $1.2 million to $6.3 million for the year ended December 31, 2023, from $7.5 million for the comparable period in 2022. The 2023 results reflect lower overall average general and administrative headcount as compared to the 2022 period. The Company also experienced a reduction in corporate registration fees and insurance premiums in the 2023 period due to a reduction of related market rates. The Company also recorded lower depreciation and amortization costs in the 2023 period after intangible and other asset impairments were reflected in those asset balances in 2022 as discussed below.
Previous report
***Goodwill,***intangible and other asset impairment
Previous report
In connection with the impairment of our DERMAdoctor business, we recorded a goodwill, intangible and other asset impairment charge of $2.6 million and $6.7 million in the years ended December 31, 2023 and 2022, respectively. Goodwill, indefinite-lived intangible assets and long-lived assets related to our DERMAdoctor business were fully impaired as of December 31, 2023. For further details refer to Note 2, “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this annual report. Subsequent to December 31, 2023, on March 25, 2024, we closed the DERMAdoctor Divestiture. See additional information about the DERMAdoctor Divestiture above under the subheading “Recent Developments”.
Previous report
Non-cashgain on changes in fair value of warrant liability
Previous report
Non-cashgain on changes in fair value of embedded derivative liability
Previous report
The adjustments to the fair value of the embedded derivative liability resulted in a gain of $40 thousand for the year ended December 31, 2023. The gain results from the decrease in the Company’s common stock price during the period that the embedded derivative liability was classified as a liability. The Company did not record a comparable result for the year ended December 31, 2022.
Previous report
Non-cashgain on changes in fair value of contingent liability
Previous report
Adjustments to the fair value of contingent liability resulted in a gain of $0.6 million for the year ended December 31, 2022 with no comparable adjustment for the 2023 period. The contingent liability related to potential earn out payments that could have become payable if specified DERMAdoctor business milestones were achieved during the first two calendar years after the DERMAdoctor Acquisition. We have determined that the above-mentioned milestones were not met and therefore no earn out payments are due.
Previous report
As of December 31, 2023, our cash and cash equivalents were $3.1 million, compared to $5.4 million as of December 31, 2022. Our cash and cash equivalents as of December 31, 2023 includes $0.6 million of net proceeds from the 2023 Warrant Reprice Transaction and $2.8 million of net proceeds from the 2023 Private Placement. Under the terms of the Secured Convertible Notes issued in the 2023 Private Placement, we are required to make a monthly redemption of the principal amount of the Secured Convertible Notes (“Monthly Redemption”) over an 18-month period, which began on June 1, 2023 in an amount equal to $193 thousand per month, unless such Monthly Redemption is eligible under the terms of the Secured Convertible Notes to instead be settled through the issuance of our common stock. We have paid the Monthly Redemption in cash to date. For additional information regarding the 2023 Warrant Reprice Transaction and 2023 Private Placement and the Secured Convertible Notes, see Notes 11, “Financing Activities” and 12, “Secured Convertible Notes” in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this report.
Previous report
Based primarily on the funds available on December 31, 2023, the Company believes that the Company’s existing cash and cash equivalents and cash flows generated from product sales will be sufficient to fund its existing operations, meet its planned operating expenses and to meet the Monthly Redemption of the Secured Convertible Notes into at least the third quarter of 2024. The Company has sustained operating losses for the majority of its corporate history and expects that its 2024 expenses will exceed its 2024 revenues, as the Company continues to invest in its commercialization efforts. Additionally, the Company expects to continue incurring operating losses and negative cash flows until revenues reach a level sufficient to support ongoing growth and operations. Accordingly, the Company has determined that its planned operations raise substantial doubt about its ability to continue as a going concern. Additionally, changing circumstances may cause the Company to expend cash significantly faster than currently anticipated, and the Company may need to spend more cash than currently expected because of circumstances beyond its control that impact the broader economy such as periods of inflation, supply chain issues, global pandemics and international conflicts (e.g., the conflicts between Israel and Hamas, Russia and Ukraine, and China and Taiwan).
Previous report
The Company’s long-term liquidity needs will be largely determined by the success of our commercialization efforts. To address the Company’s current liquidity and capital needs, the Company has and continues to evaluate different plans and strategic transactions to fund operations, including: (1) raising additional capital through debt and equity financings or from other sources; (2) reducing spending on operations, including reducing spending on one or more of its sales and marketing programs or restructuring operations to change its overhead structure; (3) out-licensing rights to certain of its products or product candidates, pursuant to which the Company would receive cash milestones or an upfront fee; (4) entering into license agreements to sell new products; and/or (5) the divestiture of certain business or product lines and related assets, which resulted in the DERMAdoctor Divestiture on March 25, 2024. The Company may issue securities, including common stock, preferred stock, convertible debt securities and warrants through additional private placement transactions or registered public offerings, which may require the filing of a Form S-1 or Form S-3 registration statement with the Securities and Exchange Commission (“SEC”). There is no assurance that the Company will be successful in executing additional capital raising strategies at levels necessary to address the Company’s ongoing and future cash flow and liquidity needs. Accordingly, the Company continues to evaluate different plans and strategies to address the Company’s capital and liquidity needs, as well as evaluating potential other strategic alternatives and transactions. The accompanying consolidated financial statements have been prepared assuming the Company will continue to operate as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts of liabilities that may result from uncertainty related to its ability to continue as a going concern.
Showing the first 40 of 49 passages. Open the source sections for the rest.
Reworded paragraphs (24)
Previous wording
The**following discussion of our financial condition and results of operations should be read together with our consolidated financial statements and related notes included in Part II, Item 8 of this annual report. This discussion contains forward-looking statements that involve risks and uncertainties. Words such as“expects,”* “anticipated,” “will,” “may,” “goals,” “plans,” “believes,” “estimates,” “concludes,” determines,” variations of these* words, and similar expressions are intended to identify these forward-looking statements. As a result of many factors, including those set forth under the section entitled“Risk Factors”* in Item* 1A. and elsewhere in this annual report, our actual results may differ materially from those anticipated in these forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions based upon assumptions made that we believed to be reasonable at the time and are subject to risks and uncertainties. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Except as required by law, we undertake no obligation to publicly revise or update any forward-looking statements after the date of this annual report, even if new information becomes available in the future.
Current wording
The following discussion of our financial condition and results of operations should be read together with our consolidated financial statements and related notes included in Part II, Item 8 of this annual report. This discussion contains forward-looking statements that involve risks and uncertainties. Words such as“expects,”* “anticipated,” “will,” “may,” “goals,” “plans,” “believes,” “estimates,” “concludes,” determines,” variations of these* words, and similar expressions are intended to identify these forward-looking statements. As a result of the Avenova Asset Sale, the Wound Care Divestiture and future strategic direction of our Company, as well as many other factors, including those set forth under the section entitled“Risk Factors”* in Part I, Item* 1A. and elsewhere in this annual report, our actual results may differ materially from those anticipated in these forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions based upon assumptions made that we believed to be reasonable at the time and are subject to risks and uncertainties. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Except as required by law, we undertake no obligation to publicly revise or update any forward-looking statements after the date of this annual report, even if new information becomes available in the future.
Previous wording
We also manufacture and sell our proprietary form of hypochlorous acid for the wound care market through our NeutroPhase and PhaseOne branded products. NeutroPhase and PhaseOne are used for the cleansing and irrigation as part of surgical procedures, as well as treating wounds, burns, ulcers and other injuries. The Company currently sells these products through distributors.
Current wording
We have also historically manufactured and sold a proprietary form of hypochlorous acid for the wound care market primarily under the NeutroPhase and PhaseOne brands. Our wound care products are used for cleansing and irrigation as part of surgical procedures, as well as treating wounds, burns, ulcers and other injuries. Subsequent to December 31, 2024, on January 8, 2025, we sold our Wound Care Trademarks and our wound care inventory to Phase One in the Wound Care Divestiture. Following the Wound Care Divestiture, our wound care business has been significantly reduced although we continue to manufacture our wound care products under remaining contractual obligations to our distribution partner in China. We anticipate fulfilling these obligations by the end of the second quarter of 2025. See the additional discussion under the section “Recent Developments and Stock Exchange Listing” and subheading “Wound Care Divestiture” in Part I, Item 1 above. See also Note 22, “Wound Care Divestiture and Held-for-Sale Assets” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report.
Previous wording
Through our former subsidiary DERMAdoctor, LLC (“DERMAdoctor”), the Company offered over 30 dermatologist-developed products targeting common skin concerns, ranging from aging and blemishes to dry skin, perspiration and keratosis pilaris. DERMAdoctor branded products were marketed and sold through the DERMAdoctor website, well-known traditional and digital beauty retailers, and a network of international distributors. We acquired DERMAdoctor in November 2021 (the “DERMAdoctor Acquisition”), and since completing this transaction we worked to integrate and expand the DERMAdoctor business in order to achieve strategic objectives contemplated by the DERMAdoctor acquisition, including revenue growth, cost reductions and overall profitability. We were not able to achieve these objectives in fiscal 2023, although our overall operating loss attributable to the skin care segment declined significantly in 2023 compared to fiscal 2022. We continue to evaluate strategies for our entire Company, to maximize revenue growth and profitability and minimize operating losses while addressing our capital and liquidity needs. To that end, we determined to divest DERMAdoctor and entered into a Membership Unit Purchase Agreement with New Age Investments, LLC (“New Age”) dated March 12, 2024 to buy DERMAdoctor from us which closed on March 25, 2024.
Current wording
Through our former subsidiary, DERMAdoctor, we previously offered over 30 dermatologist-developed products targeting common skin concerns, ranging from aging and blemishes to dry skin, perspiration and keratosis pilaris. On March 25, 2024, we announced the closing of the sale of DERMAdoctor pursuant to the DERMAdoctor Divestiture. See also Note 21, “DERMAdoctor Divestiture and Discontinued Operations” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report.
Previous wording
We have incurred net losses and generated negative cash flows from operations since inception and expect to incur losses in the future as we continue to commercialize our products. Our net losses were $9.6 million and $10.6 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $174.8 million, total current assets of $7.2 million and total assets of $9.0 million.
Current wording
We have incurred net losses and generated negative cash flows from operations since inception and expect to incur losses as we pursue our strategic initiatives, including the Dissolution. Our net losses from continuing operations were $7.2 million and $6.1 million for the years ending December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $183.5 million, total current assets of $1.9 million and total assets of $3.4 million. Subsequent to December 31, 2024, on January 17, 2025, we completed the Avenova Asset Sale for which we received net proceeds of approximately $10.5 million and on January 8, 2025, and we completed the Wound Care Divestiture for which we received net proceeds of $0.5 million.
Previous wording
While our significant accounting policies are more fully described in Note 2, “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this report, we believe that the following accounting estimates are most critical to fully understanding and evaluating our reported financial results.
Current wording
While our significant accounting policies are more fully described in Note 2, “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report, we believe that the following accounting estimates are most critical to fully understanding and evaluating our reported financial results for the periods set forth in this annual report.
Previous wording
We review goodwill, indefinite-lived intangible assets and long-lived assets for impairment at least annually or whenever events or changes in business circumstances indicate that any such asset may be impaired, that the carrying amount of any such asset may not be fully recoverable or that the useful life of the asset, if applicable, is no longer appropriate. Management uses judgement in making critical assumptions and estimates in determining when an impairment assessment should be recorded, if more frequent than annually, or in the completion of any such assessment. This includes cash flow projections that look several years into the future and assumptions on variables such as future sales and operating margin growth rates, economic conditions, probability of success, market competition, inflation and discount rates. Changes in judgments with respect to these assumptions and estimates could impact any such impairments recorded such as those recorded in the fourth quarters of 2023 and 2022 to fully impair these assets related to our DERMAdoctor business as further described in Note 2, “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this report.
Current wording
We review goodwill, indefinite-lived intangible assets and long-lived assets for impairment at least annually or whenever events or changes in business circumstances indicate that any such asset may be impaired, that the carrying amount of any such asset may not be fully recoverable or that the useful life of the asset, if applicable, is no longer appropriate. Management uses judgment in making critical assumptions and estimates in determining when an impairment assessment should be recorded, if more frequent than annually, or in the completion of any such assessment. This includes cash flow projections that look several years into the future and assumptions on variables such as future sales and operating margin growth rates, economic conditions, probability of success, market competition, inflation and discount rates. Changes in judgments with respect to these assumptions and estimates could impact any such impairments recorded such as those recorded in the fourth quarter of 2023 to fully impair these assets related to our DERMAdoctor business as further described in Note 2, “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this annual report.
Previous wording
The Company records revenue in an amount that reflects the consideration which the Company expects to receive. Accordingly, revenue is reduced for estimated future product returns. The Company’s estimates for returns are updated quarterly based on historical data of actual returns. Actual future returns experience may differ significantly from historical data and could result in significant future adjustments, including a reduction of revenue recognized.
Current wording
The Company records revenue in an amount that reflects the consideration which the Company expects to receive. Accordingly, revenue is reduced for estimated future product returns. The Company’s estimates for product returns have been historically updated quarterly based on historical data of actual returns. Actual future product returns experienced by us could differ significantly from historical data. As a result of having completed the Avenova Asset Sale, the impact of product returns has been significantly reduced, in particular due to PRN assuming the liability for returns of Avenova products that occur after the closing date of January 17, 2025.
Previous wording
Comparisonof Years Ended December 31, 2023 and 2022 (in thousands)
Current wording
Comparison of Years Ended December 31, 2024 and 2023 (in thousands)
Previous wording
TotalNet Sales and Cost of Goods Sold
Current wording
Total Net Sales and Cost of Goods Sold
Previous wording
Sales and marketing expenses decreased by $1.3 million, or 17%, to $6.5 million for the year ended December 31, 2023, from $7.8 million for the year ended December 31, 2022. The decrease was due primarily to continued lower digital and other advertising costs and related consulting costs incurred in 2023 compared to 2022.
Current wording
Sales and marketing expenses decreased $0.7 million, or 14%, to $4.0 million for the year ended December 31, 2024, from $4.7 million for the year ended December 31, 2023. The decrease was due primarily to continued digital advertising efficiencies, a decrease in the cost of marketing samples and lower marketing consulting costs incurred in the year ended December 31, 2024 as compared to the year ended December 31, 2023.
Previous wording
Adjustments to the fair value of warrant liabilities resulted in a gain of $0.3 million for the year ended December 31, 2023 as compared to a gain of $5.4 million for the year ended December 31, 2022. For additional information regarding the warrant liabilities and related valuations, see Note 13, “Common Stock Warrants and Warrant Liabilities”, in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this report.
Current wording
Adjustments to the fair value of warrant liabilities resulted in a gain of $114 thousand for the year ended December 31, 2024 and $272 thousand for the year ended December 31, 2023. The warrant liabilities for the December 2023 Warrants (as defined in Note 14, “Common Stock Warrants and Warrant Liabilities”) and the March 2024 Warrant (as defined in Note 14, “Common Stock Warrants and Warrant Liabilities”) were reclassified to equity during the year ended December 31, 2024, and will no longer require fair value adjustments which will impact our results of operations. For additional information regarding warrant liabilities and their valuation, please see Note 14, “Common Stock Warrants and Warrant Liabilities,” in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this annual report.
Previous wording
Other expense, net increased $1.8 million to $2.1 million for the year ended December 31, 2023, from $0.3 million for the year ended December 31, 2022. The increase was primarily due to the amortization of discounts and issuance costs related to the Secured Convertible Notes issued in May 2023 with no comparable expense for the year ended December 31, 2022. For additional information, see Note 12, “Secured Convertible Notes” in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this report.
Current wording
Accretion of interest and amortization of discounts on convertible notes was $0.9 million for the year ended December 31, 2024 and $1.7 million for the year ended December 31, 2023. See additional discussion in Note 13, “Convertible Notes,” in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this annual report.
Previous wording
Non-cashloss on modification of common stock warrants
Current wording
Non-cash loss on modification of common stock warrants
Previous wording
During the year ended December 31, 2023, the Company recorded a $0.3 million non-cash loss on the modification of common stock warrants, which resulted from the 2023 Private Placement and 2023 Warrant Reprice Transaction. During the year ended December 31, 2022, the Company recorded a $1.9 million non-cash loss on the modification of common stock warrants, which resulted from the 2022 Warrant Reprice Transaction. For additional information, see Notes 11, “Financing Activities” and 13, “Common Stock Warrants and Warrant Liabilities”, in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this report.
Current wording
During the year ended December 31, 2023, the Company recorded a $0.3 million non-cash loss on the modification of common stock warrants, which resulted from the 2023 Private Placement and 2023 Warrant Reprice Transaction. For additional information, see Notes 11, “Financing Activities” and 14, “Common Stock Warrants and Warrant Liabilities,” in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this annual report.
Previous wording
Net cash used in operating activities was $4.1 million for the year ended December 31, 2023, which consisted primarily of a net loss of $9.6 million, a non-cash loss of $0.3 million on the modification of common stock warrants, a non-cash gain of $0.3 million on the change in fair value of our warrant liability, impairment of our DERMAdoctor business including goodwill, intangible assets and property and equipment totaling $2.6 million, the amortization of intangible assets and depreciation of property and equipment of $0.2 million, stock-based compensation expenses of $0.3 million, and a net decrease of $0.7 million in our net operating assets and liabilities.
Current wording
Net cash used in operating activities from continuing operations was $4.3 million for the year ended December 31, 2023, which consisted primarily of a net loss from continuing operations of $9.6 million, adjusted by depreciation and amortization expenses of $51 thousand, stock-based compensation expenses of $0.3 million, non-cash loss on modifications of warrants of $0.3 million, non-cash gain on changes in fair value of warrant liabilities of $0.3 million, non-cash gain on changes in fair value of embedded derivative liability of $40 thousand, non-cash right-of-use amortization of $0.3 million, accretion of interest and amortization of debt discounts on convertible notes of $1.7 million, and a net decrease of $0.4 million in our net operating assets and liabilities of continuing operations.
Previous wording
Net cash used in investing activities for the purchase of property and equipment was $19 thousand and $112 thousand for the years ended December 31, 2023 and 2022, respectively.
Current wording
Cash Provided by (Used in) Investing Activities
Previous wording
Net cash provided by financing activities was $1.9 million for the year ended December 31, 2023, including $0.6 million of net proceeds from the 2023 Warrant Reprice Transaction and $2.8 million of net proceeds from the 2023 Private Placement. The proceeds were partially offset by repayments of $1.5 million on the Secured Convertible Notes issued in the 2023 Private Placement.
Current wording
Net cash provided by financing activities was $1.9 million for the year ended December 31, 2023, including $0.6 million of net proceeds from the 2023 Warrant Reprice Transaction and $3.0 million of net proceeds from the 2023 Private Placement. The proceeds were partially offset by repayments of $1.5 million on the Secured Convertible Notes issued in the 2023 Private Placement.
Previous wording
Net cash provided by financing activities for the year ended December 31, 2022 of $4.6 million was primarily related to the net proceeds received in the 2022 Warrant Reprice Transaction of $1.7 million, and the net proceeds received in the 2022 Private Placement of $3.0 million (including the issuance of Series C Preferred Stock and the issuance of the 2022 Warrants), partially offset by $0.1 million for the repayment of our DERMAdoctor line of credit, which was terminated in the first quarter of 2022. Additional information on Financing Activities can be found in Notes 11 to 14 in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this report.
Current wording
Additional information on Financing Activities can be found in Notes 11 to 15 in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this annual report.
Previous wording
NetOperating Losses and Tax Credit Carryforwards
Current wording
Net Operating Losses and Tax Credit Carryforwards
Previous wording
As of December 31, 2023, we had net operating loss carryforwards for federal and state income tax purposes of $139.3 million and $117.4 million, respectively. The federal net operating loss carryforwards consist of $94.9 million generated before January 1, 2018, which will begin to expire in 2024 and $44.4 million that will carry forward indefinitely but are subject to an 80% limitation for years following December 31, 2021. The state net operating loss carryforwards will begin to expire in 2028. As of December 31, 2023, we also had tax credit carryforwards of $0.5 million for federal income tax purposes and $0.1 million for state tax purposes. If not utilized, the federal tax credits will begin expiring in 2031. The state tax credits have an indefinite carryover period.
Current wording
As of December 31, 2024, we had net operating loss carryforwards for federal and state income tax purposes of $153.7 million and $128.6 million, respectively. The federal net operating loss carryforwards consist of $94.9 million generated before January 1, 2018, which will begin to expire in 2025 and $59.6 million generated after December 31, 2017, that will carry forward indefinitely but are subject to an 80% limitation for years following December 31, 2021. The state net operating loss carryforwards will begin to expire in 2028. As of December 31, 2023, we also had tax credit carryforwards of $0.5 million for federal income tax purposes and $0.1 million for state tax purposes. If not utilized, the federal tax credits will begin expiring in 2031. The state tax credits have an indefinite carryover period.
Previous wording
Our costs are subject to fluctuations, particularly due to changes in the price of raw and packing materials and the cost of labor, transportation and operating supplies. Therefore, our business results depend, in part, on our continued ability to manage these fluctuations through pricing actions, cost savings projects and sourcing decisions, while maintaining and improving margins and market share. Failure to manage these fluctuations could adversely impact our results of operations or cash flows.
Current wording
Our costs and operating expenses are subject to fluctuations, particularly historically due to changes in the cost of labor and service providers. As a result of our recent changes to our business and reduced operations, our future business results will depend, in part, on our continued ability to manage these fluctuations through cost savings projects and sourcing decisions. Failure to manage these fluctuations could adversely impact our results of operations or cash flows.
Previous wording
Consistent with our peers in the United States pharmaceutical industry, prescriptions for Avenova Spray experience seasonality with the first quarter of each year typically being the lowest revenue quarter. This annual phenomenon is due to consumers facing the need to satisfy health insurance deductibles and changes to copays as each new insurance year begins. Sales of Avenova Spray through non-prescription channels, along with the other Avenova branded products, experience less seasonality with demands, with more consistent sales throughout the year.
Current wording
Consistent with our peers in the United States pharmaceutical industry, prescriptions for Avenova Spray experienced seasonality with the first quarter of each year typically being the lowest revenue quarter. This annual phenomenon is due to consumers facing the need to satisfy health insurance deductibles and changes to copays as each new insurance year begins. Sales of Avenova Spray through non-prescription channels, along with the other Avenova branded products, experienced less seasonality and more consistent sales throughout the year.
Previous wording
Our NeutroPhase and PhaseOne branded products were sold through wholesale distribution relationships with third parties such as Chongqing Pioneer Pharma Holdings Limited and Phase One Health; therefore, we received periodic large orders that resulted in large chunks of revenue that were received in irregular intervals during the year.
Current wording
Our former NeutroPhase and PhaseOne branded products were sold through wholesale distribution relationships with third parties such as Pioneer and Phase One; therefore, we received periodic large orders that resulted in large chunks of revenue that were received in irregular intervals during the year. We do not expect this seasonality to impact the manufacture of our wound care products under remaining contractual obligations to our distribution partner in China.
Previous wording
In the normal course of business, we enter into contracts and commitments that obligate us to make payments in the future. Information regarding our obligations under lease and convertible note arrangements are provided in Notes 10 and 12, respectively.
Current wording
In the normal course of business, we have historically entered into contracts and commitments that obligate us to make payments in the future and we expect to enter into contracts and commitments on behalf of the Company in connection with pursuing the Dissolution or other strategic alternatives. Information regarding our obligations under lease and convertible note arrangements are provided in Notes 10 and 13, respectively, in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report.