What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2026-05-13 compared with 2025-11-14 · 30 added, 145 removed, 5 unchanged (97% of the section changed)

1 unchanged sentence

Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 26, 2026.

changes to such risk factors have occurred during the nine months ended September 30, 2025, except as described below.

Related to Our Transition from the Prescription (“Rx”) Regulatory Framework to OTC Pathways

shift from an Rx regulatory framework to OTC monograph pathways could introduce significant regulatory risks that could delay or prevent

product launches, require reformulation or relabeling, restrict indications or target populations, and materially increase costs.

prescription drugs, OTC products must be shown to be safe and effective for consumer self-selection and self-use without a healthcare

professional’s supervision.

For products marketed under the OTC monograph system (implemented through FDA administrative orders),

our products must meet all applicable conditions for “generally recognized as safe and effective” (“GRASE”),

including specific active ingredients, indications, strengths, dosage forms, dosing intervals, age ranges, warnings, and Drug Facts Labeling.

If any aspect of our product(s)—such as an active ingredient, indication, combination of actives, strength, dosage form, route

of administration, dosing directions, or age range—falls outside the applicable monograph conditions, we may be required to reformulate,

relabel, narrow the intended population or indications, or submit a request for an amended administrative order supported by additional

FDA may decline to modify the relevant administrative order, require more data than we anticipate, or take longer than expected

to act on a request, any of which could delay launches or prevent us from marketing the product as designed.

Evolving FDA orders or compliance

sweeps, including changes to impurity limits (such as nitrosamines), new contraindications or age restrictions, or additional warnings,

can also emerge late in development and force unplanned reformulation, relabeling, or withdrawal—resulting in write-offs of packaging

or finished goods, extensions of stability programs, and missed commercialization timelines.

we were pursuing XYNGARI as a prospective candidate for approval under the FDA New Drug Application process, we have since withdrawn

the investigational new drug application for XYNGARI and no longer consider it an investigational product.

While we believe that our

prospective OTC acne kit is distinct from XYNGARI and will comply with the applicable OTC monograph, a form of our Spongilla technology

and H 2 O 2 will be included as inactive ingredients in our OTC acne kit with no therapeutic claims.

If the FDA determines

that either or both substances are active ingredients in our OTC acne kit, our OTC acne kit will not fit within the OTC monograph

and we could have to reformulate the kit or could be subject to enforcement action for marketing an unapproved new drug, which could

result in consequences, including, but not limited to, a warning letter, product seizure, and/or civil or criminal penalties.

products that do not fit within an OTC monograph or for which we seek novel claims, actives, or conditions of use, we may pursue an OTC

OTC NDAs generally require consumer behavior evidence that differs from Rx approvals, including label comprehension, self selection,

and, in many cases, actual use studies, as well as human factors and packaging usability validation.

If study participants misinterpret

labeling, fail to self select appropriately, make dosing errors, or misuse the product, we may need multiple iterative cycles of label

revisions, packaging or device redesign, and retesting.

FDA may also require additional clinical or post marketing safety data to support

broader, unsupervised consumer use;

impose narrower indications, higher minimum ages, or dosing restrictions;

or convene advisory committee

review—all of which can delay approval or materially diminish the commercial viability of the product.

of these regulatory dynamics—alone or in combination—could delay or prevent product launches, require us to reformulate,

relabel, restrict indications or target populations, write off inventory and packaging, expand study programs, or incur greater user

fees and manufacturing costs.

If we are unable to timely secure applicable administrative orders or if chosen, OTC NDA approvals, on

commercially acceptable terms, or if we must significantly alter our products, labeling, or packaging to meet OTC requirements, our development

timelines, revenue prospects, operating margins, inventory levels, and relationships with customers and channel partners could be materially

adversely affected.

intellectual-property-infringing, or other unauthorized versions (“Counterfeit Copies”) of our products, particularly in

our OTC business, could harm consumers and adversely affect us.

industry has been and continues to be challenged by illegal counterfeiting.

Third parties have illegally distributed and sold, and may

in the future illegally distribute and sell, counterfeit versions of OTC medicines or other products, which do not meet the rigorous

manufacturing and testing standards applicable to the authentic producer of those OTC medicines or products.

Such counterfeit versions

may contain harmful substances, the wrong dose of an active pharmaceutical ingredient (“API”) or no API at all, depriving

consumers of the therapeutic benefit of these products.

However, to distributors and consumers, counterfeit copies may be visually indistinguishable

from the authentic versions and, as a result, the counterfeit copies may be sold by retailers or purchased by consumers in error.

particular, we may be unable to prevent sales of counterfeit copies online, particularly if our sales on various e-commerce platforms

Counterfeit copies pose a risk to consumer health and safety because of the conditions under which they are manufactured, which

are often in unregulated, unlicensed, uninspected, and unsanitary sites, as well as the lack of regulation of and information about their

Counterfeit copies could adversely affect our business, results of operations, or financial condition by being mistakenly attributed

to, or impacting consumer confidence in, our authentic products, potentially resulting in lost sales, damage to our reputation or our

brands, product recalls, and an increased threat of legal or regulatory proceedings.

to our distribution operations could adversely affect our ability to deliver our products to consumers and customers.

ability to receive inventory and deliver products to distributors, customers, and consumers on a timely basis depends on the proper functioning

of our manufacturing, supplier, and distribution operations, and interruptions or delays in these operations could adversely affect our

business, results of operations, or financial condition.

Distribution disruptions can occur for many reasons, including manufacturing

or supplier disruptions, labor disputes or shortages, concentration or insolvency of distributors or logistics providers, site-specific

incidents, natural disasters, political unrest, terrorist attacks, cybersecurity incidents, epidemics, pandemics, other unfavorable economic

or market conditions, trade embargoes, customs and tax requirements and similar factors, increases in transportation or shipping costs,

issues with overseas shipments, reductions in the transportation capacity of carriers, disruptions to transportation infrastructure,

and other unexpected delivery interruptions or delays.

We are also subject to risks of damage to, or loss of, our products while they

are stored in our warehousing facilities or being delivered by our shipping vendors.

Distributors, customers, and consumers rely on timely

receipt of our products and any repeated, intermittent or long-term disruption to, or failure of, the operations of our warehousing and

distribution facilities could lead to lower sales and profitability, excess inventory, reputational damage or loss of loyalty to our

In addition, as we continue to grow our business, we may need to continue to update or expand our warehousing and distribution

facilities, which may require significant amounts of capital, or engage additional third-party distributors and shipping vendors, which

may increase the risks to our business associated with reliance on third parties.

face intense competition from consumer products companies, both in the U.S.

and in international markets.

anticipate that our OTC products will compete with other widely advertised, promoted and merchandised brands within each product category

and from retailers, including supermarkets, mass merchandisers, wholesale clubs, drugstores, convenience stores, home stores, dollar

and other discount stores, other specialty stores and websites and other e-commerce channels, which are increasingly offering private

label and retailer-branded brands and generic non-branded products in certain categories, which typically are sold at lower prices, and

consumers are increasingly seeking lower cost “private label” products.

consumer behavior, including continuing shifts to online shopping, may also increase competition, as larger legacy competitors and newer

digitally native brands have increasingly moved into consumer products and staples.

We expect many of our competitors to be large companies,

including, among others, Procter & Gamble, L’Oréal, Unilever, The Estée Lauder Companies, and Colgate-Palmolive

Many of these companies have greater financial resources than we do, and these competitors, as well as new market entrants,

may therefore, have the capacity to outspend us on advertising and promotional activities and introduce competing products or adopt new

technologies, such as artificial intelligence and machine learning, more quickly, successfully and effectively, and respond more effectively

to changing business and economic conditions than we can.

We expect our products to generally compete on the basis of performance, brand

recognition, price, value or other benefits to consumers.

Significant price competition may require us to reduce the prices for our products

to price levels that do not offset manufacturing cost increases, to respond to competitive and customer pressures and to maintain market

Increases to our prices, as a result of inflationary pressures or otherwise, could cause declining sales of products whose prices

we have increased.

Ongoing periods of high inflation or increased costs resulting from higher tariffs imposed by the U.S.

or other countries

could lead to price increases on our products, potentially adversely impacting demand for our products.

Advertising, promotion, merchandising

and packaging also have a significant impact on retail customer decisions regarding the brands and product lines they sell and on consumer

purchasing decisions.

A newly introduced consumer product (whether improved or newly developed) usually encounters intense competition

requiring substantial expenditures for advertising, sales promotion and trade merchandising.

If a product gains consumer acceptance,

it normally requires continued advertising, promotional support and product improvements to maintain its relative market position.

our advertising, marketing and promotional programs, including the use of digital and social media to reach consumers, are not effective,

our sales growth may decline.

Risks Related to Our License Agreement

If we are found to have breached our

obligations under our license agreement, we could lose rights that may be important to our business.

We are a party to certain

license agreements that impose various diligence, milestone, royalty, insurance and other obligations on us.

If we fail to comply

with these obligations, the respective licensors may have the right to terminate the license, in which event we may not be able to

develop or market the affected product candidate.

The loss of such rights could materially adversely affect our business, financial

condition, operating results and prospects.

For example, on November 10, 2025, we received a notice of material breach and demand

for cure (the “Notice”) from the licensor pursuant to our License Agreement, dated March 31, 2017 (the “License

Agreement”), with Villani, Inc.

(“Villani”), alleging that we breached the License Agreement as a result of our

recent strategic shift to focus on over-the-counter pharmaceutical products.

The Notice alleges that we (i) failed to use

Commercially Reasonable Efforts (as defined in the License Agreement) to pursue a prescription product business, (ii) failed to

provide Villani with advance notice of certain submissions to regulatory authorities, (iii) used Licensed Know-How (as defined in

the License Agreement) outside of the Field (as defined in the License Agreement) and

(iv) our anticipated OTC kits do not qualify as Licensed Products (as defined in the License Agreement).

On November 11, 2025,

Villani delivered an additional notice (the “Additional Notice”) whereby Villani requested (i) the reversion and

assignment of all assets regarding Spongilla -based products back to Villani, (ii) that we preserve all Spongilla inventory,

and (iii) we preserve all documents, data, and tangible materials related to Spongilla .

We dispute the allegations

contained in the Notice and Additional Notice and are engaged in discussions with Villani to resolve such disputes.

If the parties

are unable to reach a resolution, then the either party, pursuant to the License Agreement, may file for arbitration or termination

of the License Agreement.

To date, the License Agreement has not been terminated and continues in full force.

At this point in time,

we are unable to predict the final outcome of this dispute.

changes to such risk factors have occurred during the three months ended March 31, 2026, except as described below:

are involved in litigation with Villani, Inc.

relating to our Spongilla-based products and commercialization activities, which could

adversely affect our business, operations, financial condition and ability to commercialize our products.

April 23, 2026, Villani, Inc.

(“Villani”) filed a complaint against us in the U.S.

District Court for the Central District

of California asserting claims for false advertising under the Lanham Act, breach of contract, and conversion, and seeking injunctive

Villani has also stated that it intends to initiate an arbitration proceeding against us seeking monetary damages.

arbitration demand has been served to date, we may become subject to additional claims, damages, costs, or other remedies in connection

with any such proceeding.

connection with the litigation, Villani sought a temporary restraining order (“TRO”) and preliminary injunction against

On May 6, 2026, the Court denied the TRO in part related to a breach of contract and conversion claims and granted the TRO in

part on the false or misleading advertising statements, which imposes certain temporary restrictions on specific statements the

Company can make pending further proceedings.

Villani has also requested a preliminary injunction, which, if granted, could extend

or grant new restrictions imposed by the Court during the pendency of any arbitration proceeding or related litigation.

vigorously defend ourselves against these claims;

however, litigation and arbitration proceedings are inherently uncertain, costly,

and time-consuming.

we are not currently restrained from manufacturing, promoting, advertising, using, selling, offering for sale, distributing, or

delivering in commerce any product or regimen containing Spongilla, if Villani were to obtain a preliminary injunction, arbitration

award, or otherwise, we could be restricted or delayed in our ability to market, manufacture, distribute, advertise, sell, or

commercialize certain of our current or planned products, including products containing our Spongilla .

Such restrictions

could disrupt our planned product launches, impair relationships with suppliers, manufacturers, distributors, marketing partners, or

customers, require us to modify our products, branding, formulations, or marketing claims, or otherwise adversely affect our

commercialization strategy.

In addition, defending this matter may require significant management attention and financial resources, result in substantial legal expenses,

divert resources from our business operations and strategic initiatives, and expose us to reputational harm.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors