NovaBay Pharmaceuticals, Inc.
For the period ended Dec 31, 2025. Filed Mar 19, 2026.
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.
FY2025 · Filed Mar 19, 2026
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 2024-12-31; filed 2025-04-02.
0001437749-25-010730
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2025-12-31; filed 2026-03-19.
0001437749-26-009090
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 72 previous paragraphs and 76 current paragraphs.
14 unchanged; 19 reworded; 43 added; 39 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 (43)
Current report
Overview
Current report
During 2025, we completed a comprehensive realignment of our business. As part of this realignment, we adopted a capital allocation approach focused on acquiring and holding economically productive digital assets that enable participation in open, decentralized financial networks, subject to applicable risk, liquidity, governance, and regulatory considerations. Our primary objective is to preserve stockholder value and, over time, seek opportunities to enhance value through disciplined participation in such networks. We also continue to maintain a limited legacy wound care business.
Current report
Pursuant to oversight by our Board of Directors and our Digital Asset Strategy Advisory Committee established by our Board of Directors, our core business consists of the accumulation, holding, and deployment of operating digital assets for use within blockchain-based networks to support protocol-level services, including staking, governance participation, validation, and related activities. These activities may generate protocol-defined incentives, rewards, or service-based fees in accordance with network rules and governance-approved parameters. Our initial focus is on SKY, the protocol token of the decentralized Sky Protocol.
Current report
The Company holds digital assets as part of a long-term capital allocation strategy and does not engage in short-term speculative trading, proprietary trading strategies, margin arrangements, or derivatives transactions referencing digital assets unless expressly authorized by the Digital Asset Strategy Advisory Committee and supported by appropriate risk management, compliance, and liquidity controls.
Current report
Separately, we maintain cash, cash equivalents, and short-duration investments outside of our digital asset strategy to meet near-term operating requirements and liquidity needs.
Current report
January 2026 Private Placement
Current report
Subsequent to December 31, 2025, we completed the January 2026 Placement, consisting of the issuance of pre-funded warrants to purchase an aggregate of 167,539,227 shares of common stock in exchange for approximately $25.0 million in cash, 35,000,000 USDT and 16,000,000 USDS stablecoins (with an aggregate value of approximately $51.0 million at the time of the placement), and 943,599,690 SKY tokens (with an aggregate value of approximately $61.4 million at the time of the placement). The value of the stablecoins and SKY tokens was determined based on their respective fair values as of the closing date of the private placement. The proceeds of the private placement were received to further support the Company’s capital allocation strategy.
Current report
The Company has not established a specific target allocation for SKY or other digital assets. Decisions regarding the pace, size, and timing of any acquisitions or dispositions are driven by prevailing market conditions, liquidity considerations, risk controls established by management, and oversight by the Digital Asset Strategy Advisory Committee and the Board of Directors.
Current report
Digital Asset Holdings–** SKY**
Current report
As of March 16, 2026, the Company held approximately 2.1 billion SKY tokens. SKY tokens are a network-native digital asset that may be held and transferred through blockchain-based wallets and may be exchanged on trading venues that support SKY trading pairs.
Current report
The Sky Protocol is a decentralized, non-custodial software protocol built around the USDS stablecoin and governed by Sky ecosystem participants through on-chain governance processes. The protocol is implemented through open-source smart contracts deployed on the Ethereum blockchain. The Sky Protocol includes two primary native tokens: USDS, a collateral-backed stablecoin designed to maintain a soft peg to the U.S. dollar, and SKY, the protocol token used in governance and certain protocol-level economic mechanisms.
Current report
The market price of SKY is determined by supply and demand across network-based markets and may be volatile. Prices may fluctuate due to factors including protocol changes, governance decisions, market sentiment, macroeconomic conditions, and broader digital asset market dynamics.
Current report
Custody and Safeguarding of Digital Assets
Current report
We safeguard our digital assets through a combination of third-party custodial services and internally controlled wallet infrastructure. A portion of our SKY is held in custody accounts with a regulated digital asset custodian that serves as custodian of record under applicable law.
Current report
We also utilize internally controlled wallet infrastructure to manage private keys and execute on-chain transactions, including staking and other protocol interactions. Digital assets held through this infrastructure are controlled by the Company rather than held in trust by a third-party custodian.
Current report
Digital assets maintained outside of custodial accounts are generally limited to amounts necessary to facilitate protocol participation and transactional activity and are subject to internal controls designed to mitigate loss.
Current report
Governmental, Regulatory, and Accounting Considerations
Current report
The regulatory framework applicable to blockchain-based networks and digital assets continues to evolve in the United States and internationally. Regulatory developments affecting trading venues, custodians, or service providers may impact access, liquidity, or pricing of digital assets held by the Company. We monitor regulatory developments and adjust our policies, counterparties, and controls as appropriate.
Current report
Digital assets held by the Company will be subject to evolving accounting standards, and changes in market value and protocol participation may result in volatility in the Company’s financial results.
Current report
Discontinued Operations
Current report
As part of the comprehensive realignment of our business during 2024 and 2025, we completed the Avenova Asset Divestiture, the PhaseOne Divestiture, and the DERMAdoctor Divestiture, and decided to exit our involvement in the China NeutroPhase product line. The historical financial results of these businesses are reflected as discontinued operations in the Consolidated Financial Statements included in this annual report. See Notes 13, “Avenova Asset Divestiture and Bridge Loan,” 14 “PhaseOne Divestiture”, 15, “DERMAdoctor Divestiture” and 16, “Summary of Discontinued Operations” to the Consolidated Financial Statements in Part II, Item 8 of this annual report for additional details.
Current report
Based on funds available as of December 31, 2025, aggregate gross cash proceeds of approximately $25.0 million from the January 2026 Private Placement, net cash generated from the conversion of the stablecoins received in the January 2026 Private Placement into U.S. dollars, and $13.5 million in gross cash proceeds from issuances under the 2026 ATM Program between January 20, 2026 and March 16, 2026, management believes that the Company’s existing cash and cash equivalents will be sufficient to fund its planned operating expenses at least through March 19, 2027.
Current report
All of the stablecoins received in the January 2026 Private Placement were converted into U.S. dollars to support operating liquidity, and a significant portion was deployed to acquire additional SKY tokens. Subsequent to the January 2026 Private Placement and through March 16, 2026, the Company deployed approximately $70.7 million in cash to acquire approximately 1.1 billion SKY tokens.
Current report
The fair value of warrant liabilities is determined in accordance with ASC 820 using valuation techniques that are appropriate based on the specific terms and economic characteristics of each warrant instrument. Depending on the nature of the warrants, valuation techniques may include option pricing models, such as the Black-Scholes option pricing model, or intrinsic value calculations.
Current report
Warrants that contain nominal exercise prices are economically similar to common stock, and do not require assumptions related to volatility, expected term, or other option-pricing inputs are generally measured based on intrinsic value, calculated as the excess of the Company’s common stock price over the exercise price, multiplied by the number of warrant shares outstanding. Other warrant instruments may require the use of option pricing models that incorporate assumptions such as expected volatility, risk-free interest rates, expected term, and dividend yield.
Current report
The determination of the appropriate valuation technique and the related assumptions requires significant judgment. Changes in the Company’s stock price, volatility, or other valuation inputs could materially affect the recorded fair value of warrant liabilities and the related non-cash gains or losses recognized in the Consolidated Statements of Operations. See additional information in Note 9, “Common Stock Warrants and Warrant Liabilities” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report.
Current report
Impairment of Assets
Current report
Digital Assets
Current report
The Company did not hold any digital assets as of and during the years ended December 31, 2025 and 2024. Subsequent to December 31, 2025, in January 2026, the Company entered into the January 2026 Private Placement pursuant to which it received digital assets, including stablecoins and SKY tokens, and subsequently engaged in purchases and sales of such digital assets.
Current report
Digital assets acquired in connection with the January 2026 Private Placement and subsequent transactions will be accounted for in accordance with applicable U.S. GAAP and other authoritative accounting guidance in effect at the time, including Accounting Standards Update No. 2023-08, Accounting for and Disclosure of Crypto Assets, which established Subtopic 350-60 within ASC 350, Intangibles—Goodwill and Other, where applicable. Depending on the nature of the digital assets held and the Company’s specific facts and circumstances—including the Company’s activities (such as staking or other yield-generating activities), the contractual terms of related arrangements, and the Company’s relationships with counterparties—the Company may apply different accounting models. Such models could include digital assets held at fair value with changes in fair value recognized in earnings under applicable crypto-asset guidance or, if such guidance is not applicable, accounting under other relevant U.S. GAAP models, including accounting for certain digital assets as indefinite-lived intangible assets measured at historical cost and evaluated for impairment. The applicable accounting framework may differ depending on the specific facts and circumstances, and the resulting classification, measurement, and presentation could materially affect the Company’s financial position and results of operations, including potential variability in reported results.
Current report
Impact of Divestitures
Current report
Impairment of Long-Lived Assets
Current report
During the year ended December 31, 2025, the Company recorded an impairment of $854 thousand related primarily to right-of-use assets and fixed assets associated with excess leased office capacity resulting from our strategic realignment. This impairment reflects actions taken to reduce our office space and streamline our cost structure following the realignment. No comparable impairment was recorded during the year ended December 31, 2024.
Current report
Based on funds available as of December 31, 2025, aggregate gross cash proceeds of approximately $25.0 million from the January 2026 Private Placement, net cash generated from the conversion of all stablecoins received in the January 2026 Private Placement into U.S. dollars, and $13.5 million in gross cash proceeds from issuances under the 2026 ATM Program between January 20, 2026 and March 16, 2026, management believes that the Company’s existing cash and cash equivalents will be sufficient to fund its planned operating expenses at least through March 19, 2027.
Current report
All of the stablecoins received in the January 2026 Private Placement were converted into U.S. dollars to support operating liquidity, and a significant portion was deployed to acquire additional SKY tokens. Subsequent to the January 2026 Private Placement and through March 16, 2026, the Company deployed approximately $70.7 million in cash to acquire approximately 1.1 billion SKY tokens.
Current report
Cash Used in Operating Activities, Continuing Operations
Current report
The Company reported no cash used in or provided by investing activities for the years ended December 31, 2025 and 2024.
Current report
Cash Provided by Financing Activities, Continuing Operations
Current report
Net cash provided by financing activities from continuing operations was $4.6 million for the year ended December 31, 2025, which included net proceeds of $5.8 million from the 2025 Preferred Stock Purchase Agreement (as defined in Note 7, “Financing Activities”), net proceeds of $5.9 million from the October 2025 Pre-Funded Warrants, repurchase of warrants of $2.0 million, repayment of $0.5 million for the Bridge Loan, net proceeds of $0.9 million from exercise of warrants, payment on redemption of Series F Preferred Stock of $0.2 million and payment of a Special Dividend of $4.8 million.
Current report
We believe that we experienced an ownership change during 2025 and, as a result, our pre-change net operating loss (“NOL”) carryforwards became subject to significant limitations under Section 382 of the Internal Revenue Code. As of December 31, 2025, we had federal and state NOL carryforwards of approximately $2.9 million and $348 thousand, respectively, primarily generated subsequent to the 2025 ownership change. Our federal NOLs may be carried forward indefinitely but are generally limited to offsetting 80% of taxable income in any given year. The state NOL carryforwards begin to expire in 2045. As of December 31, 2025, we had no federal or state tax credit carryforwards.
Showing the first 40 of 43 passages. Open the source sections for the rest.
Removed paragraphs (39)
Previous report
Overview of Significant Changes and Strategic Direction
Previous 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.
Previous report
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 report
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 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.
Previous 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.
Previous report
Impairment of Goodwill, Indefinite-Lived Intangible Assets and Long-Lived Assets
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 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 report
Impact of Held-for-Sale Assets and Discontinued Operations
Previous 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.
Previous 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.
Previous report
Total Net Sales and Cost of Goods Sold
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous report
Sales and marketing
Previous report
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 report
Loss on divestiture of subsidiary
Previous 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.
Previous report
Non-cash gain (loss) on changes in fair value of embedded derivative liability
Previous 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.
Previous report
Non-cash loss on modification of common stock warrants
Previous report
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 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.
Previous 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.
Previous 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.
Previous 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.
Previous report
Cash Used in Operating Activities
Previous 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.
Previous report
Cash Provided by Financing Activities
Previous report
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 report
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 report
Current federal and California tax laws include substantial restrictions on the utilization of net operating loss carryforwards in the event of an ownership change of a corporation. Accordingly, our ability to utilize net operating loss carryforwards may be limited as a result of such ownership changes. Such a limitation could result in the expiration of carryforwards before they are utilized.
Previous report
Seasonality
Previous 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.
Previous report
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 report
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.
Reworded paragraphs (19)
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 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.
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 Divestiture, the PhaseOne 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
Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these 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 consolidated financial statements, as well as the reported revenues and expenses during the reporting periods. In preparing these 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 Consolidated Financial Statements have been prepared in accordance with U.S. GAAP. The preparation of these 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 Consolidated Financial Statements, as well as the reported revenues and expenses during the reporting periods. In preparing these 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 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.
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 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 PhaseOne Divestiture in January 2025.
Previous wording
For warrants that are classified as liabilities, the Company records the fair value of the warrants upon issuance and at each balance sheet date with changes in the estimated fair value recorded as a non-cash gain or loss in the consolidated statements of operations. The fair values of these warrants are determined using the Black-Scholes option pricing model. These values are subject to a significant degree of management’s judgment.
Current wording
For warrants that are classified as liabilities, the Company records the fair value of the warrants upon issuance and remeasures the warrants at each balance sheet date, with changes in estimated fair value recorded as a non-cash gain or loss in the Consolidated Statements of Operations.
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 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.
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 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 economic conditions, probability of success, and discount rates. Changes in judgments with respect to these assumptions and estimates could impact any such impairments recorded during 2025 as further described in Notes 2, “Summary of Significant Accounting Policies;” and 6, “Commitments and Contingencies” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report.
Previous wording
The discussions below and throughout this section apply only to results from continuing operations as of December 31, 2024, except as otherwise noted.
Current wording
Financial results related to divested assets from the Avenova Asset Divestiture and the PhaseOne Divestiture and the China NeutroPhase product line for the years ended December 31, 2025 and 2024 and from the DERMAdoctor Divestiture for the year ended December 31, 2024 have been aggregated and reported for each of these periods in the line item titled “Net income from discontinued operations, net of taxes” in the table above. Prior-period amounts have been revised to correct the presentation of the loss on the DERMAdoctor Divestiture and related divestiture proceeds, which were previously presented within continuing operations and are now reflected within discontinued operations. This revision did not affect total net loss, total net loss per share, total cash flows, or the Company’s financial position. See additional information in Notes 13, “Avenova Asset Divestiture and Bridge Loan;” 14, “PhaseOne Divestiture”, 15, “DERMAdoctor Divestiture” and 16, “Summary of Discontinued Operations” in Notes to the Consolidated Financial Statements in Part II, Item 8 of this annual 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
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 wording
General and administrative expenses increased $0.2 million, or 3%, to $7.6 million for the year ended December 31, 2025, from $7.4 million for the year ended December 31, 2024. The increase was due primarily to higher legal costs associated with non-recurring strategic initiatives during the year ended December 31, 2025.
Previous wording
Non-cash gain on changes in fair value of warrant liability
Current wording
Non-cash (loss) gain on changes in fair value of warrant liability
Previous 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.
Current wording
Adjustments to the fair value of warrant liabilities resulted in a non-cash loss of $24.5 million for the year ended December 31, 2025 and a non-cash gain of $0.1 million for the year ended December 31, 2024. The warrant liability recorded during the year ended December 31, 2025 related to the October Pre-Funded Warrants. The warrant liability recorded during the year ended December 31, 2024 related to the December 2023 Warrants and the March 2024 Warrants. For additional information regarding warrant liabilities and their valuation, please see Note 9, “Common Stock Warrants and Warrant Liabilities,” in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this annual report.
Previous 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.
Current wording
Accretion of interest and amortization of discounts on convertible notes was $0.3 million for the year ended December 31, 2025, compared to $0.9 million for the year ended December 31, 2024. The decrease reflects the elimination of the Secured Convertible Notes, which were outstanding during 2024 and carried higher interest and discount amortization, with only the Unsecured Convertible Notes outstanding during 2025. See additional discussion in Note 8, “Convertible Notes,” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report.
Previous wording
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 wording
Other expense, net was $20 thousand for the year ended December 31, 2025, compared to $0.6 million for the year ended December 31, 2024. The amounts recorded in each period primarily relate to separate and unrelated financing activities. The higher expense in 2024 reflects non-recurring financing-related costs incurred during that period.
Previous 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.
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. Our net losses from continuing operations were $33.2 million and $8.8 million for the years ending December 31, 2025 and 2024, respectively. The net loss from continuing operations for the year ended December 31, 2025 included a non-cash loss of $24.5 million for an increase in warrant liability recorded in conjunction with the October Pre-Funded Warrants. As of December 31, 2025, our cash and cash equivalents were $8.0 million, compared to $0.4 million as of December 31, 2024.
Previous 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.
Current wording
Net cash used in operating activities from continuing operations was $8.4 million for the year ended December 31, 2025, which consisted primarily of a net loss from continuing operations of $33.2 million, adjusted by stock-based compensation expenses related to employee and director stock awards of $29 thousand, non-cash loss on changes in fair value of warrant liabilities of $24.5 million, non-cash right-of-use amortization of $0.1 million, right-of-use impairment of $0.9 million, accretion of interest and amortization of debt discounts on convertible notes of $0.2 million, and a net increase of $1.0 million in our net operating assets and liabilities of continuing operations.
Previous wording
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 wording
Net cash used in operating activities from continuing operations was $7.5 million for the year ended December 31, 2024, which consisted primarily of a net loss from continuing operations of $8.8 million, adjusted by stock-based compensation expenses related to employee and director stock awards of $0.1 million, non-cash loss on extinguishment of Secured Convertible Note of $13 thousand, non-cash expense incurred to obtain consent of Secured Convertible Note (as defined in Note 8, “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 increase of $0.5 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
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.
Current wording
Additional information on Financing Activities can be found in Notes 7 to 10 in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this annual report.
Previous 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.
Current wording
Our costs and operating expenses are subject to fluctuations, particularly due to changes in the cost of labor and service providers. Under our digital asset strategy, our exposure to inflationary pressures is reduced relative to our prior pharmaceutical operations; however, inflation may affect general and administrative costs, third-party service fees, and the broader economic environment in which digital asset markets operate. 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 December 31, 2024 or December 31, 2023 as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.
Current wording
We did not have any off-balance sheet arrangements at December 31, 2025 or December 31, 2024 as defined in Item 303(b) of SEC Regulation S-K.
Previous 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.
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 other strategic alternatives.