Stablecoin Development Corp
For the period ended Mar 31, 2025. Filed May 15, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 15, 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-Q
Period ended 2024-09-30; filed 2024-11-07.
0001437749-24-033919
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsLegal ProceedingsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-15.
0001437749-25-017064
Item 2. 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 123 previous paragraphs and 62 current paragraphs.
19 unchanged; 20 reworded; 22 added; 82 removed; 2 previous and 1 current paragraphs rearranged.
Tables are not compared: 6 previous and 5 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 (22)
Current report
We were historically focused on the development and sale of scientifically-created and clinically-proven eyecare, wound care, and skin care products. We have undergone significant changes to our business and operations as a result of the following transactions in the first quarter of 2025 and 2024:
Current report
Following the closings of all of these transactions, we completed the sale of substantially all of our assets and significantly reduced the Company’s operations and significantly reduced our current and expected revenue. The expected revenue from our continuing operations is expected to be derived primarily from the manufacture of our wound care products at least until June 30, 2025 under our remaining contractual obligations to our distribution partner in China.
Current report
Discontinued Operations
Current report
Historical financial results related to each of the businesses that we divested above in the Avenova Asset Divestiture, the Wound Care Divestiture and the DERMAdoctor Divestiture is presented as discontinued operations in the unaudited condensed consolidated financial statements included in this report. See Notes 14, “Avenova Asset Divestiture and Bridge Loan,” 15 “Wound Care Divestiture” and 16, “DERMAdoctor Divestiture” to the Condensed Consolidated Financial Statements (unaudited) in Part I, Item 1 of this report for additional details.
Current report
Strategic Options and Plan of Dissolution
Current report
The Company’s Board unanimously approved each of the transactions above and is now evaluating the strategic options available to the Company. After consideration of various factors, and the absence of other more favorable strategic options available to us at the time, the Board unanimously determined that the best opportunity available to maximize the remaining value for our Company and to our stockholders was to pursue the Dissolution pursuant to the Plan of Dissolution and obtain stockholder approval of the Dissolution at the 2025 Special Meeting (see Note 1, “Organization” in the Notes to Condensed Consolidated Financial Statements (unaudited) in Part I, Item 1 of this report). During the period that the Company was seeking stockholder approval of the Dissolution proposal at the 2025 Special Meeting, the Company was also exploring and evaluating other alternative strategic transactions available to the Company, including mergers, reverse mergers, strategic partnerships, investments, licensing and sub-licensing transactions. The Company considered pursuing potential alternative strategic transactions, which included engaging its former financial advisor, Lucid (i) to address the uncertainty surrounding the Company’s ability to ultimately obtain the requisite stockholder approval for the Dissolution, particularly considering the Company did not receive approval for the Dissolution at its previously held special meeting of stockholders, and (ii) to further confirm the strategic direction of the Company as it considered the Dissolution. Stockholders approved the Dissolution at the 2025 Special Meeting held on April 16, 2025. Although stockholder approval of the Dissolution was received, the Board as part of this approval was also authorized to subsequently determine, in its discretion, whether or not to proceed with the Dissolution. Accordingly, the Board now retains complete discretion to evaluate and determine if and when the Plan of Dissolution should be effected or if another strategic option would instead be available to us that would be a better opportunity to maximize our remaining value for our Company and stockholders and be in the best interests of our Company and stockholders.
Current report
As a result of having completed the Avenova Asset Divestiture and the Wound Care Divestiture in January 2025, our business was significantly reduced. We expected to derive revenue in the near term from manufacturing our wound care products under our remaining contractual obligations to our distribution partner in China until at least June 30, 2025 and through our continued performance of transition services for PRN under the PRN Transition Services Agreement through May 19, 2025. Based on our funds available on March 31, 2025, 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 May 15, 2026; however, there is uncertainty with respect to our strategic direction. Although the Dissolution was approved by stockholders at the 2025 Special Meeting, it has not been authorized by the Board as the Company is continuing to explore other potential strategic alternatives that may be available to us that could represent a better opportunity for us to maximize our remaining value for our Company and stockholders. As a result, when we do make a determination and pursue our strategic direction in the near term, 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 Assets
Current report
Impact of Divestitures
Current report
General and administrative expenses increased $0.4 million, or 18%, to $2.7 million for the three months ended March 31, 2025, from $2.3 million for the three months ended March 31, 2024, due primarily to an increase in outside services costs related to non-recurring strategic initiatives, including the Avenova Asset Divestiture and pursuing the potential Dissolution as a strategic option for our Company. The Company also incurred one time severance costs relating to the departure of employees in connection with completing the Avenova Asset Divestiture during the three months ended March 31, 2025. As a result of having completed the Avenova Asset Divestiture, the Company expects that its general and administrative expenses for the second quarter of 2025 will primarily be incurred as we continue to operate the Company’s remaining continuing operations, as well as determine and pursue a strategic direction for our Company that is determined to be in the best interests of our Company and stockholders.
Current report
Impairments of Long-Lived Assets
Current report
During the quarter ended March 31, 2025, the Company recorded one-time impairments for right-of-use assets associated with leases of $559 thousand and $30 thousand for fixed assets including leasehold improvements due to the uncertainty associated with our future operations and our strategic direction as we are exploring the Dissolution of the Company and other potential strategic alternatives that may be available to us.
Current report
Non-cash gain on changes in fair value of warrant liability
Current report
Accretion of interest and amortization of discounts on convertible notes was $0.4 million for the three months ended March 31, 2024 with no comparable result for the three months ended March 31, 2025. The 2024 result was primarily from the amortization of discount and issuance cost related to the Secured Convertible Notes issued in May 2023 which were fully repaid in the third quarter of 2024. See Note 3, “Fair Value Measurements” and Note 9, “Convertible Notes” in the Notes to the Condensed Consolidated Financial Statements (unaudited), in Part I, Item 1 of this report.
Current report
Other expense, net was $40 thousand for the three months ended March 31, 2025 and $0.5 million for the three months ended March 31, 2024. The higher result in the 2024 period was due to issuance costs incurred for the March 2024 Warrant and the Unsecured Convertible Notes issued in March 2024. See Note 9, “Convertible Notes” and Note 10, “Common Stock Warrants” in the Notes to the Condensed Consolidated Financial Statements (unaudited), in Part I, Item 1 of this report.
Current report
We have largely incurred net losses and generated negative cash flows from operations since inception and expect to incur losses as we pursue our strategic initiatives, which could include the Dissolution. Our net losses from continuing operations were $3.3 million and $2.9 million for the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, our cash and cash equivalents were $8.5 million, compared to $430 thousand as of December 31, 2024. This increase was due to our Company having received net proceeds from the completed Avenova Asset Divestiture and the Wound Care Divestiture in January 2025 of approximately $10.5 million and $0.5 million, respectively. 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 Divestiture on January 17, 2025, at which time the collateral securing the Bridge Loan was also released. See additional discussion in Note 14 “Avenova Asset Divestiture and Bridge Loan” in the Notes to the Condensed Consolidated Financial Statements (unaudited) in Part I, Item 1 of this report.
Current report
Based on our funds available on March 31, 2025, 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 May 15, 2026; however, there is uncertainty with respect to our strategic direction in the near term. Although the Dissolution was approved by stockholders at the 2025 Special Meeting, it has not been authorized by the Board as the Company is continuing to explore other potential strategic alternatives that may be available to us that could represent a better opportunity for us to maximize our remaining value for our company and stockholders. As a result, when we do make a determination and pursue our strategic direction in the near term, 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
Net Cash Used in Operating Activities, Continuing Operations
Current report
Cash Used in Financing Activities, Continuing Operations
Current report
Net cash used in financing activities from continuing operations was $1.7 million for the three months ended March 31, 2025, which consisted primarily of $1.8 million in cash payments to repurchase outstanding warrants and a $0.5 million repayment of the Bridge Note. Offsetting these payments were $0.6 million in proceeds from warrant exercises.
Current report
Net cash used in financing activities from continuing operations was $0.6 million for the three months ended March 31, 2024, which consisted primarily of $0.6 million in repayments on the Secured Convertible Notes.
Current report
In connection with the Avenova Asset Divestiture, the Wound Care Divestiture and the DERMAdoctor Divestiture, the Company disposed of its primary commercial operations and therefore is not exposed to any significant impact from seasonality.
Removed paragraphs (82)
Previous report
We are a company focused on the development and sale of 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 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
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 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.
Previous report
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. On March 25, 2024, we announced the closing of the sale of DERMAdoctor (the “DERMAdoctor Divestiture”). We acquired DERMAdoctor in November 2021 in order to achieve overall revenue growth, cost reductions and profitability. We were unable to achieve those objectives with DERMAdoctor. Therefore, we determined to divest DERMAdoctor and consummate the DERMAdoctor Divestiture, having incurred historical losses including the loss of $124 thousand for the nine months ended September 30, 2024. The DERMAdoctor Divestiture streamlined our business by reducing our cash burn and allowing us to focus on our core business.
Previous report
Recent Developments
Previous report
Potential Asset Sale Transaction and Dissolution
Previous report
On September 19, 2024, the Company entered into an Asset Purchase Agreement (the “Original Purchase Agreement”) with PRN Physician Recommended Nutriceuticals, LLC, a Delaware limited liability company (“PRN”), pursuant to which PRN will acquire the Company’s eyecare products sold under the Avenova brand and the related assets (the “Avenova Assets”) (collectively, the “Asset Sale Transaction”). On November 5, 2024, the Company entered into an amendment to the Original Purchase Agreement (the “APA Amendment,” and together with the Original Purchase Agreement, the “Purchase Agreement”) that provides for, among other terms, an increase in the base purchase price to $11.5 million from $9.5 million and for PRN to provide the Company with a $1.0 million secured promissory note (the “Bridge Loan”). Pursuant to the Purchase Agreement, the Asset Sale Transaction is subject to certain closing conditions, including stockholder approval. Assuming stockholder approval is received and other closing conditions are met, the Company expects to close the Asset Sale Transaction in the fourth quarter of 2024.
Previous report
The Asset Sale Transaction would constitute substantially all of the Company’s revenue generating and operating assets; however, PRN would not purchase any of the Company’s other products and assets, including those that relate to the Company’s wound care, urology or dermatology businesses. The Board unanimously approved the Asset Sale Transaction and further determined that, if the Asset Sale Transaction is completed, the best opportunity available to optimize value to our stockholders is to wind-up the Company’s affairs and pursue a liquidation and dissolution pursuant to the Plan of Dissolution under Delaware law that may result in distributions to our stockholders of our remaining asset value (the “Dissolution”). If the Asset Sale Transaction and/or the Dissolution are not completed, we will continue our corporate existence and the Board will continue to explore its options to secure immediate funding for ongoing operations due to significantly reduced available capital and liquidity, the strategic alternatives available to the Company including to return capital to stockholders or, to the extent funding or any other viable alternatives are not available, then the Company may need to file for bankruptcy protection or commence a similar state law proceeding.
Previous report
The Company has called a special meeting of stockholders (the “Special Meeting”) on November 22, 2024 to approve (1) the Asset Sale Transaction and (2) the Dissolution subject to the Board’s discretion to proceed with the Dissolution.
Previous report
On October 29, 2024, the Company announced that the Board determined that an unsolicited and non-binding acquisition proposal from Refresh Acquisitions BidCo LLC (“Refresh”) to purchase the Avenova Assets (the “Refresh Unsolicited Offer”) was a “Superior Proposal” (as defined in the Purchase Agreement). As a result, the Company notified PRN of the Board’s determination and the Company’s intention to terminate the Purchase Agreement pursuant to its terms, unless the Company received a revised proposal from PRN such that the Board determined the Refresh Unsolicited Offer was no longer a Superior Proposal, all in accordance with the process provided in the Purchase Agreement.
Previous report
Subsequent to this Board determination, in accordance with the process in the Purchase Agreement, the Company negotiated in good faith with PRN, and, as a result of these negotiations, PRN proposed amending the terms of the Original Purchase Agreement by entering into the APA Amendment, which provides for the following primary revisions to the Original Purchase Agreement: (i) an increase in the base purchase price to $11.5 million from $9.5 million; (ii) the removal of debt financing contingencies and related PRN representations, while adding a new PRN representation that it has sufficient funding for the $11.5 million purchase price; (iii) PRN providing the Company with the Bridge Loan; and (iv) PRN providing the Company with an equity funding commitment letter (the “Equity Commitment Letter”) from Roundtable Healthcare Partners V, L.P. that provides for up to $13.0 million in financing to be used by PRN’s parent company, Acumen Intermediate Holdings, LLC, and contributed to PRN for payment of the purchase price at the closing of the Asset Sale Transaction (with such updated terms, the “Revised PRN Transaction Terms”). On November 4, 2024, after considering the Revised PRN Transaction Terms, the Board determined that the Refresh Unsolicited Offer was no longer a “Superior Proposal” and that it was advisable and in the best interests of stockholders to enter into the APA Amendment and the Bridge Loan.
Previous report
On November 5, 2024, the Company entered into the APA Amendment and the Bridge Loan. The Bridge Loan provides for the Company to receive a secured loan of up to $1.0 million from PRN as lender that will be funded in two tranches of $0.5 million each upon the Company providing written notice to PRN on or after November 22, 2024 and on or after December 6, 2024. The amounts borrowed under the Bridge Loan are required to be used for working capital purposes, will bear interest at a rate of 10% per annum and be secured by all of the Company’s assets as collateral. The Bridge Loan is to be repaid upon the earlier of the closing of the Asset Sale Transaction (to be repaid from the purchase price), immediately upon termination of the Purchase Agreement or February 28, 2025. If the Asset Sale Transaction is not consummated, the Purchase Agreement is terminated and the Company is required to repay the full amount borrowed pursuant to the Bridge Loan, the Company may not have the necessary capital resources available at the time to repay the Bridge Loan absent the Company raising additional capital.
Previous report
For more information regarding the Asset Sale Transaction (including the Revised PRN Transaction Terms, the APA Amendment and the Bridge Loan) and the Dissolution, please see the Company’s Current Reports on Form 8-K filed with the SEC on September 20, 2024, October 29, 2024 and November 6, 2024 and the Company’s Definitive Proxy Statement on Schedule 14A filed with the SEC on October 16, 2024 (as may be supplemented, the “Special Meeting Proxy Statement”).
Previous report
2024 Public Offering
Previous report
On July 26, 2024, the Company entered into the Underwriting Agreement with Ladenburg, as the sole underwriter, relating to the issuance and sale in a public offering (the “2024 Public Offering”) of: (i) 1,158,566 shares of common stock and 2,041,814 July 2024 Pre-Funded Warrants, in lieu of shares of common stock, (ii) 3,200,380 Series F-1 Warrants, (iii) 3,200,380 Series F-2 Warrants, and (iv) 3,200,380 Series F-3 Warrants. The 2024 Public Offering closed on July 29, 2024, and the Company received gross proceeds of $3.9 million, without taking into account any underwriting discounts and commissions. A portion of the proceeds were used towards repaying the Secured Convertible Notes, which were repaid in full during the third quarter of 2024.
Previous report
DERMAdoctor Divestiture
Previous report
On March 12, 2024, we entered into a Membership Unit Purchase Agreement (the “DERMAdoctor Purchase Agreement”) by and among: (i) New Age Investments, LLC; (ii) DERMAdoctor; and (iii) the Company that provided for the sale of 100% of the membership units (the “Membership Units”) of DERMAdoctor.
Previous report
Upon the closing of the DERMAdoctor Divestiture on March 25, 2024 as contemplated by the DERMAdoctor Purchase Agreement, the Company sold the Membership Units to New Age Investments, LLC for a purchase price of $1.1 million. For additional information regarding the DERMAdoctor Divestiture, see also Note 18, “Divestiture and Discontinued Operations” in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.
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 (see Note 10, “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 and (ii) terminate the Subsidiary Guarantee, dated April 27, 2023, which DERMAdoctor entered into in connection with the issuance of the Secured Convertible Notes.
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, and a Consent and Release to effect the 2024 Subsidiary Guarantee Termination. 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 common stock purchase warrant (the “March 2024 Warrant”), 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 March 2024 Warrant to a Secured Party that is exercisable for an aggregate of 1,000,000 shares of common stock (28,572 shares post-Reverse Stock Split) and (B) 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 3,750,000 shares of common stock (107,146 shares post-Reverse Stock Split).
Previous report
The Company incurred total issuance costs of $130 thousand in conjunction with the 2024 Subsidiary Guarantee Termination. The Company allocated $19 thousand of the issuance costs to the Unsecured Convertible Notes which was recorded as a discount in the Company’s unaudited condensed consolidated balance sheet as of September 30, 2024. The remaining $111 thousand was allocated to the embedded derivative liability and warrant liability and expensed as “Other expense, net” in the Company’s unaudited condensed consolidated statements of operations, during the nine months ended September 30, 2024. For additional information regarding the March 2024 Warrant and the Unsecured Convertible Notes that we issued, see also Notes 9, “Financing Activities”; 10, “Convertible Notes”; 11, “Common Stock Warrants”; and 12, “Stockholders’ Equity” in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.
Previous report
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 $2.2 million and $1.8 million for the three months ended September 30, 2024 and 2023, respectively. In addition, our net losses were $7.4 million and $7.5 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, we had an accumulated deficit of $182.2 million, total current assets of $2.3 million and total assets of $3.9 million.
Previous report
To date, our plan 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 has been unsuccessful. However, in an effort to maximize stockholder value, our Board unanimously determined to pursue the Asset Sale Transaction and the Dissolution, both of which are subject to stockholder approval at the Special Meeting. See “Potential Asset Sale Transaction and Dissolution” above for additional information regarding the Asset Sale Transaction and the Dissolution.
Previous report
Impairment of Goodwill, Indefinite-Lived Intangible Assets and Long-Lived Assets
Previous report
Valuation of Contingent Consideration Resulting from a Business Combination
Previous report
We revalue any outstanding contingent obligations to pay future consideration related to business combinations at the end of each quarter and record increases or decreases in their fair value within our unaudited condensed consolidated statements of operations. Increases or decreases in fair value of the contingent consideration liabilities can result from updates to assumptions such as the expected timing or probability of achieving the specified milestones. Significant judgment is employed in determining these assumptions as of the acquisition date and for each subsequent period. Updates to assumptions could have a significant impact on our results of operations in any given period. See additional information in Note 2, “Summary of Significant Accounting Policies” in the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.
Previous report
Estimates of Future Product Returns
Previous report
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.
Previous report
Impact of DERMAdoctor Divestiture
Previous report
Total Net Sales and Cost of Goods Sold
Previous report
Product revenue, net, decreased $0.1 million, or 2%, to $2.4 million for the three months ended September 30, 2024, from $2.5 million for the three months ended September 30, 2023.
Previous report
Revenue from eyecare products, including Avenova Spray, was $2.4 million for both the three months ended September 30, 2024 and September 30, 2023.
Previous report
Revenue from the Company’s wound care products decreased to a nominal amount for the three months ended September 30, 2024, from $0.1 million for the three months ended September 30, 2023.
Previous report
Cost of goods sold remained consistent for the three months ended September 30, 2024 and September 30, 2023 at $0.8 million.
Previous report
Sales and marketing
Previous report
Sales and marketing expenses decreased $0.4 million, or 25%, to $0.9 million for the three months ended September 30, 2024, from $1.3 million for the three months ended September 30, 2023. The decrease was due primarily to continued digital marketing efficiencies and a decrease in related consulting costs incurred in the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
Previous report
General and administrative expenses increased $0.6 million, or 56%, to $1.7 million for the three months ended September 30, 2024, from $1.1 million for the three months ended September 30, 2023, due primarily to an increase in legal costs related to non-recurring strategic initiatives, including the 2024 Public Offering, the Asset Sale Transaction and the Dissolution, ongoing during the three months ended September 30, 2024.
Previous report
Accretion of interest and amortization of discounts on convertible notes was $0.1 million for the three months ended September 30, 2024 and $0.7 million for the three months ended September 30, 2023.
Previous report
Extinguishment of Secured Convertible Notes
Previous report
Extinguishment of Secured Convertible Notes was $13 thousand for the three months ended September 30, 2024, with no comparable activity for the three months ended September 30, 2023.
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Reworded paragraphs (20)
Previous wording
This discussion contains forward-looking statements that involve risks and uncertainties. The following discussion of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this report, and with our consolidated financial statements and related notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the Securities and Exchange Commission (the“SEC”) on March 26, 2024, as amended on March 29, 2024 (the“2023 Annual Report”). 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”* of this report, our 2023 Annual Report and our Special Meeting Proxy Statement (as defined below), as well as in other sections in our SEC filings, 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 revise or update publicly any forward-looking statements after the date of this report, even if new information becomes available in the future.
Current wording
This discussion contains forward-looking statements that involve risks and uncertainties. The following discussion of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this report, and with our consolidated financial statements and related notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our 2024 Annual Report. 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 significant changes that have occurred to us and our business as a result of completing the Avenova Asset Divestiture and the Wound Care Divestiture, the expected additional changes that will occur when we determine and proceed with the future strategic direction of our Company, as well as other factors, including those set forth under the section titled“Risk Factors”* in Part I, Item 1A. of our 2024 Annual Report, as well as in other sections in our SEC filings, 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 revise or update publicly any forward-looking statements after the date of this report, even if new information becomes available in the future.
Previous wording
To address the Company’s current liquidity and near term 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; and/or (3) the divestiture of certain business or product lines and related assets such as the Asset Sale Transaction and the DERMAdoctor Divestiture. If the Asset Sale Transaction and/or the Dissolution are not completed, we will continue our corporate existence and the Board will continue to explore its options to secure immediate funding for ongoing operations due to significantly reduced available capital, the strategic and alternatives available to the Company, including returning capital to stockholders or, to the extent any funding or other viable alternatives are not available or there is not sufficient capital remaining at the time to fund operations, then, the Company may need to file for bankruptcy protection or commence a similar state law proceeding. In connection with such strategic options, 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 SEC. While the Company believes that the proceeds from the 2024 Public Offering and the DERMAdoctor Divestiture improved the Company’s liquidity in the first nine months of 2024, there is no assurance that the Company will be successful in completing the Asset Sale Transaction and/or the Dissolution or otherwise executing on alternative capital-raising strategies at levels necessary to address the Company’s ongoing and future cash flow and liquidity needs. The accompanying unaudited condensed 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 unaudited condensed 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. If the Company’s stockholders approve the Dissolution, the Company would consider liquidation to be imminent and apply liquidation basis of accounting pursuant to U.S. GAAP.
Current wording
If the Board determines to proceed with the Dissolution, then the Company would consider liquidation to be imminent and apply the liquidation basis of accounting pursuant to U.S. GAAP.
Previous wording
On April 18, 2024, the Company received a notification (“Initial Deficiency Letter”) from the NYSE American LLC Exchange (“NYSE American”) stating that the Company is not in compliance with Section 1003(a)(ii) and 1003(a)(iii) of the NYSE American Company Guide (requiring stockholders’ equity of $4.0 million or more if the Company has reported losses from continuing operations and/or net losses in three of the four most recent fiscal years and $6.0 million or more if the Company has reported losses from continuing operations and/or net losses in its five most recent fiscal years, respectively).
Current wording
On April 18, 2024, the Company received a notification from the NYSE American LLC Exchange (“NYSE American”) stating that the Company is not in compliance with Section 1003(a)(ii) and 1003(a)(iii) of the NYSE American Company Guide (requiring stockholders’ equity of $4.0 million or more if the Company has reported losses from continuing operations and/or net losses in three of the four most recent fiscal years and $6.0 million or more if the Company has reported losses from continuing operations and/or net losses in its five most recent fiscal years, respectively).
Previous wording
On May 28, 2024, the Company received a letter (“Additional Deficiency Letter”) from NYSE American stating that the Company is not in compliance with the minimum stockholders’ equity requirements of Section 1003(a)(i) of the NYSE American Company Guide. Section 1003(a)(i) of the NYSE American Company Guide requires a listed company to maintain stockholders’ equity of $2.0 million or more if the listed company has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years. The Company reported stockholders’ equity of $160 thousand as of March 31, 2024 and has had losses from continuing operations and net losses in each of the last three fiscal years.
Current wording
On May 28, 2024, the Company received a letter from NYSE American stating that the Company is not in compliance with the minimum stockholders’ equity requirements of Section 1003(a)(i) of the NYSE American Company Guide. Section 1003(a)(i) of the NYSE American Company Guide requires a listed company to maintain stockholders’ equity of $2.0 million or more if the listed company has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years. The Company reported stockholders’ equity of $160 thousand as of March 31, 2024 and has had losses from continuing operations and net losses in each of the last three fiscal years.
Previous wording
Additionally, the Asset Sale Transaction (to the extent completed) may cause the NYSE American to delist our shares of common stock and the Company may not meet NYSE American’s continued listing requirements. To the extent the NYSE American does not delist our shares after completion of the Asset Sale Transaction and the Board determines to effect the Dissolution, the Company plans to request that our common stock stop trading on the NYSE American on the effective date of the Dissolution or as soon thereafter as is reasonably practicable.
Current wording
While our stockholders’ equity of $6.2 million as of March 31, 2025 exceeded the required amounts provided for under Sections 1003(a)(i), 1003(a)(ii) and 1003(a)(iii) of the NYSE American Company Guide, the Company has not yet regained compliance and remains subject to the procedures and requirements of Section 1009 of the NYSE American Company Guide. Although we may satisfy these requirements, the closing of the Avenova Asset Divestiture and the Wound Care Divestiture and the related changes to our Company could otherwise cause the NYSE American to delist our shares of common stock. This delisting may occur prior to the Dissolution, and/or the Company being able to pursue another strategic alternative transaction. To the extent the NYSE American does not delist our shares, and the Board determines to effect the Dissolution, the Company plans to request that our common stock stop trading on the NYSE American on the effective date of the Dissolution or as soon thereafter as is reasonably practicable. However, if we instead decide to pursue an alternative strategic transaction, then we expect that as part of such transaction that we will continue working to regain NYSE American compliance.
Previous wording
Our unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, as well as the reported revenues and expenses during the reporting periods. In preparing these unaudited condensed consolidated financial statements, management has made its best estimates and judgments of certain amounts, giving due consideration to materiality. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates.
Current wording
Our unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, as well as the reported revenues and expenses during the reporting periods. In preparing these unaudited condensed consolidated financial statements, management has made its best estimates and judgments of certain amounts, giving due consideration to materiality. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates.
Previous wording
While our significant accounting policies are more fully described in Note 2, “Summary of Significant Accounting Policies” in the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report, we believe that the following accounting estimates are most critical to fully understanding and evaluating our reported financial results as discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Current wording
While our significant accounting policies are more fully described in Note 2, “Summary of Significant Accounting Policies” in the Notes to Condensed Consolidated Financial Statements (unaudited) in Part I, Item 1 of this report, we believe that the following accounting estimates are most critical to fully understanding and evaluating our reported financial results as discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, particularly taking into account the significant changes that occurred to our business as a result of the closing of the Avenova Asset Divestiture and the Wound Care Divestiture in January 2025.
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 quarter of 2023 as further described in Note 2, “Summary of Significant Accounting Policies” included in our 2023 Annual Report.
Current wording
We review 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 economic conditions, probability of success, 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 first quarter of 2025 as further described in Notes 2, “Summary of Significant Accounting Policies;” 5, “Property and Equipment;” and 7, “Commitments and Contingencies” in the Notes to Condensed Consolidated Financial Statements (unaudited) in Part I, Item 1 of this report.
Previous wording
The financial results of DERMAdoctor beginning from January 1, 2024 through the closing of the DERMAdoctor Divestiture on March 25, 2024 in the table above and as set forth in this report have been aggregated in the captions entitled “Loss on divestiture of subsidiary” and “Net loss from discontinued operations” for the nine months ended September 30, 2024 (see Note 18, “Divestiture and Discontinued Operations” in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report). The discussions below and throughout this section apply only to results from continuing operations except as otherwise noted.
Current wording
Financial results related to divested assets from the Avenova Asset Divestiture and the Wound Care Divestiture for the three months ended March 31, 2025 and from the DERMAdoctor Divestiture for the three months ended March 31, 2024 have been aggregated and reported for each of these periods in the line item titled “Net income (loss) from discontinued operations, net of taxes” in the table above. See additional information in Notes 14, “Avenova Asset Divestiture and Bridge Loan;” 15, “Wound Care Divestiture;” and 16, “DERMAdoctor Divestiture” in Notes to the Condensed Consolidated Financial Statements (unaudited) in Part I, Item 1 of this report for additional details regarding these financial results for the periods presented. The discussions below and throughout this section apply only to results from our continuing operations except as otherwise noted.
Previous wording
Adjustments to the fair value of warrant liabilities resulted in a gain of $114 thousand for the nine months ended September 30, 2024 and $216 thousand for the nine months ended September 30, 2023. The warrant liabilities for the December 2023 Warrants and the March 2024 Warrant were reclassified to equity during the nine months ended September 30, 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 11, “Common Stock Warrants”, in the Notes to Unaudited Condensed Consolidated Financial Statements, in Part I, Item 1 of this report.
Current wording
Adjustments to the fair value of warrant liabilities resulted in a gain of $0.2 million for the three months ended March 31, 2024 with no comparable adjustment for the three months ended March 31, 2025. For additional information regarding warrant liabilities and their valuation, please see Note 3, “Fair Value Measurements” and Note 10, “Common Stock Warrants” in the Notes to Unaudited Condensed Consolidated Financial Statements, (unaudited) in Part I, Item 1 of this report.
Previous wording
Adjustments to the fair value of embedded derivative liability resulted in a loss of $18 thousand for the nine months ended September 30, 2024 and gain of $40 thousand for the nine months ended September 30, 2023. For additional information regarding the embedded derivative liability and its valuation, please see Note 3, “Fair Value Measurements”.
Current wording
Adjustments to the fair value of embedded derivative liability resulted in a gain of $65 thousand for the three months ended March 31, 2024 with no comparable adjustment for the three months ended March 31, 2025. For additional information regarding the embedded derivative liability and its valuation, please see Note 3, “Fair Value Measurements” and Note 9, “Convertible Notes” in the Notes to the Condensed Consolidated Financial Statements (unaudited), in Part I, Item 1 of this report.
Previous wording
On March 25, 2024, the Company issued 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 3,750,000 shares of common stock (107,146 shares post-Reverse Stock Split). 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, the Secured Convertible Notes and the Unsecured Convertible Notes, see Note 9 “Financing Activities, Note 10 “Convertible Notes,” and Note 12 “Stockholders’ Equity” in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.
Current wording
On March 25, 2024, the Company issued 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. See Note 9 “Convertible Notes” in the Notes to the Condensed Consolidated Financial Statements (unaudited) in Part I, Item 1 of this report.
Previous wording
Net cash used in operating activities from continuing operations was $3.5 million for the nine months ended September 30, 2023, which consisted primarily of a net loss from continuing operations of $5.5 million, adjusted by depreciation and amortization expenses of $39 thousand, stock-based compensation expenses of $0.2 million, non-cash loss on modifications of warrants of $0.3 million, non-cash gain on changes in fair value of warrant liabilities of $0.2 million, non-cash gain on changes in fair value of embedded derivative liability of $40 thousand, non-cash right-of-use amortization of $0.2 million, accretion of interest and amortization of debt discounts on convertibles notes of $1.1 million, and a net decrease of $0.7 million in our net operating assets and liabilities of continuing operations.
Current wording
Net cash used in operating activities from continuing operations was $1.3 million for the three months ended March 31, 2025, which consisted primarily of a net loss from continuing operations of $3.3 million, adjusted by depreciation and amortization expenses of $2 thousand, stock-based compensation expenses related to employee and director stock awards of $2 thousand, non-cash right-of-use amortization of $53 thousand, non-cash impairment of long-lived assets of $0.6 million, accretion of interest and amortization of debt discounts on convertibles notes of $26 thousand, and a net decrease of $1.3 million in our net operating assets and liabilities of continuing operations.
Previous wording
Net cash used in operating activities from continuing operations was $4.2 million for the nine months ended September 30, 2024, which consisted primarily of a net loss from continuing operations of $6.0 million, adjusted by depreciation and amortization expenses of $32 thousand, stock-based compensation expenses related to employee and director stock awards of $0.1 million, non-cash loss on divestiture of $0.9 million, non-cash expense for consent of Secured Convertible Note holders 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 convertibles notes of $0.9 million, and a net decrease of $0.8 million in our net operating assets and liabilities of continuing operations.
Current wording
Net cash used in operating activities from continuing operations was $2.0 million for the three months ended March 31, 2024, which consisted primarily of a net loss from continuing operations of $2.9 million, adjusted by depreciation and amortization expenses of $12 thousand, stock-based compensation expenses related to employee and director stock awards of $60 thousand, non-cash expense incurred to obtain consent of Secured Convertible Note holders in connection with the DERMAdoctor Divestiture of $0.4 million, non-cash gain on changes in fair value of warrant liability of $0.2 million, non-cash gain on changes in fair value of embedded derivative liability of $65 thousand, non-cash right-of-use amortization of $84 thousand, accretion of interest and amortization of debt discounts on convertibles notes of $0.4 million, and a net decrease of $0.3 million in our net operating assets and liabilities of continuing operations.
Previous wording
Cash Provided by (Used in) Investing Activities
Current wording
Cash Used in Investing Activities, Continuing Operations
Previous wording
Net cash provided by investing activities from continuing operations was $1.1 million for the nine months ended September 30, 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 $16 thousand for the nine months ended September 30, 2023.
Current wording
Net cash used in investing activities from continuing operations was $2 thousand for the three months ended March 31, 2024, which consisted of purchases of property and equipment. There was no cash used in, or provided by, investing activities from continuing operations during the three months ended March 31, 2025.
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, 2024, 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-saving 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
We did not have any off-balance sheet arrangements at September 30, 2024 or December 31, 2023 as defined in Item 303(a)(4)(ii) of Regulation S-K.
Current wording
We did not have any “off-balance sheet arrangements” as defined in Item 303(b)(1)(ii)(B) of Regulation S-K at March 31, 2025 or December 31, 2024.
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 Note 8 “Commitments and Contingencies,” and Note 10 “Convertible Notes” in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.
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 7 and 9, respectively, in the Notes to the Condensed Consolidated Financial Statements (unaudited) in Part I, Item 1 of this report.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Non-cash gain on changes in fair value of embedded derivative liability
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Comparison of the Nine Months Ended September 30, 2024 and 2023 (dollars in thousands)
Previous report — wording carried elsewhere
Accretion of interest and amortization of discounts on convertible notes