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Item 1A. Risk Factors

2026-03-30 compared with 2025-04-15 · 512 added, 817 removed, 61 unchanged (96% of the section changed)

4 unchanged sentences

In such an event, the market price of our common stock could decline and you might lose all or part of your investment.

RISKS RELATED TO OUR FINANCIAL POSITION AND NEED FOR ADDITIONAL CAPITAL

We will need to raise additional capital to remain a going concern, which may not be available on acceptable terms, or at all.

We require significant capital resources in order to continue to operate our business and conduct our exploration of strategic alternatives, and our limited liquidity could materially and adversely affect our business operations.

As of December 31, 2024, we had cash and cash equivalents of $2.1 million.

As of March 15, 2025, we owed $10.2 million in principal and accrued interest under the Loan and Security Agreement.

As of December 31, 2024, we had an accumulated deficit of approximately $195.3 million.

We expect to continue to incur cash outflows from operations for the near future.

These circumstances raise substantial doubt about our ability to continue as a going concern for at least one year from the date this Form 10-K was filed, and our independent registered public accounting firm included a “going concern” explanatory paragraph in its report on our financial statements for the year ended December 31, 2024, indicating that, without additional sources of funding, our cash at December 31, 2024 is not sufficient for us to operate as a going concern for a period of at least one year from the date that the financial statements included in this Annual Report on Form 10-K are issued.

Management’s plans concerning these matters, including our need to raise additional capital, are described in Note 2 - Summary of

Significant Accounting Policies - Liquidity and Going Concern of our financial statements included within this Annual Report on Form 10-K.

Implementation of our plans and our ability to continue as a going concern will depend on many factors, including our ability to successfully commercialize our products and services, competing technological and market developments, and the need to enter into collaborations with other companies.

Also, it is very difficult to project our current monthly cash burn rate given the transitional status of the Company and this estimate may prove inaccurate and we may expend our limited resources sooner.

The additional capital we require in order to remain a going concern may not be available on reasonable terms, if at all, due to a variety of factors, including uncertainty about the future direction of the Company, as well as broader conditions in the economy and capital markets, including recent volatility caused by inflation, questions about bank stability and other factors.

If we are unsuccessful in our operations to secure additional financing, or if any such incremental financing is not sufficient to fund our operations, we may be required to take additional measures to reduce costs in order to conserve our cash, pursue strategic transactions or file for bankruptcy.

If we cannot continue as a viable entity, our stockholders would likely lose most or all of their investment in us.

Our ongoing exploration of alternative strategic paths may not result in entering into or completing transactions when necessary, and the process of reviewing alternative strategic paths or their conclusion could adversely affect our stock price.

We continue to evaluate strategic paths to provide the resources necessary to commercialize Mydcombi and maximize stockholder value.

Potential strategic paths may include partnerships, joint ventures, mergers, acquisitions or licensing transactions, a combination of these, or other strategic transactions.

There can be no assurance, however, that our evaluation will result in transactions or other alternatives, even when deemed necessary.

There is no set timetable for our strategic process and we do not intend to provide updates unless or until the Board of Directors approves a specific action or otherwise determines that disclosure is appropriate or necessary.

Any potential transaction would be dependent on a number of factors that may be beyond our control, including, among other things, market conditions, industry trends, the interest of third parties in a potential transaction with us, obtaining stockholder approval, where necessary, and the availability of financing to third parties in a potential transaction with us on reasonable terms.

The process of reviewing alternative strategic paths may be time consuming and may involve the dedication of significant resources and may require us to incur significant costs and expenses.

It could negatively impact our ability to attract, retain and motivate employees, and expose us to potential litigation in connection with this process or any resulting transaction.

If we are unable to effectively manage the process, our financial condition and results of operations could be adversely affected.

In addition, speculation regarding any developments related to the review of strategic alternatives and perceived uncertainties related to the future of our Company could cause our stock price to fluctuate significantly.

Further, any alternative strategic paths that may be pursued and completed ultimately may not deliver the anticipated benefits or enhance stockholder value.

There can be no guarantee that the process of evaluating alternative strategic paths will result in our Company entering into or completing potential transactions within the anticipated timing or at all.

Delisting could prevent us from maintaining an active, liquid and orderly trading market for our common stock and may materially and adversely impact our ability to consummate certain strategic transactions.

Our ability to publicly or privately sell equity securities and the liquidity of our common stock could be adversely affected if we are delisted from The Nasdaq Capital Market or if we are unable to transfer our listing to another stock market.

On September 18, 2024, we were notified by The Nasdaq Stock Market LLC, or Nasdaq, that we were in breach of Listing Rule 5550(a)(2), or the (“Minimum Bid Price Rule”), for continued listing on the Nasdaq Capital Market because the minimum bid price of our listed securities for 30 consecutive business days had been less than $1 per share.

On December 12, 2024, we received a letter from Nasdaq notifying us that, because the closing bid price for our common stock was below $0.10 per share for 10 consecutive trading days, we were in breach of Listing Rule 5810(c)(3)(A)(iii).

On January 31, 2025, we executed an 80-for-1 reverse stock split, following which we were notified by Nasdaq that we had regained compliance with the Minimum Bid Price Rule.

Nasdaq Listing Rule 5810(c)(3)(A)(iv) states that any listed company that fails to meet the Minimum Bid Price Rule and has effected a reverse stock split over the prior one-year period, or has effected one or more reverse stock splits over the prior two-year period with a cumulative ratio of 250 shares or more to one, will not be eligible for an automatic 180-day grace compliance period and the Nasdaq Listing Qualifications Department is obligated to immediately issue a delisting determination.

Therefore, if we were to fall out of compliance with the Minimum Bid Price requirement prior to January 31, 2026, we would not be able to effect a reverse stock split and would immediately be issued a delisting determination.

common stock, increased volatility in our common stock, reduced liquidity in our common stock, the loss of federal preemption of state securities laws and greater difficulty in obtaining financing.

RISKS RELATED TO OUR HYPE TOKEN TREASURY STRATEGY

The Hyperliquid platform and technologies and HYPE have a limited operating history.

The Hyperliquid blockchain, exchange and related products launched in early 2023, and the HYPE token launched in November 2024.

When we refer to HYPE, we are referring to HYPE tokens and liquid staking tokens derived from HYPE tokens (“LSTs”).

We also hold other digital assets.

Hyperliquid is an early-stage project with a limited operating history.

Developers, validators, traders and market makers may not adopt Hyperliquid’s technology, and we believe that Hyperliquid’s adoption will likely depend on significant platform and product development and differentiation in a highly competitive market.

A failure to scale, unexpected technical flaws, privacy issues or the lack of engagement could materially reduce demand for HYPE and adversely affect its value.

Because our treasury strategy is currently primarily focused on holdings of HYPE, our treasury assets are highly dependent upon the value and performance of the Hyperliquid platform and HYPE.

If the Hyperliquid platform fails to achieve its objective, or has significant setbacks or delays, the value of HYPE may severely decline, which could materially and adversely impact the value of our treasury assets, liquidity, and financial condition, which could have a substantial impact on the value of our common stock.

HYPE is subject to extreme price volatility, and any sustained decline in the market price of HYPE could lead to substantial losses on our digital asset holdings and could adversely affect the market price of our common stock.

The price of HYPE has exhibited sudden and significant fluctuations due to shifts in market sentiment, speculative trading, macroeconomic trends, technology-related disruptions and regulatory announcements.

Because digital asset trading markets are relatively new, largely unregulated and, at times, subject to limited liquidity, HYPE has experienced and may continue to experience larger or more frequent price swings than traditional asset classes.

A rapid decrease in the price of HYPE - whether the result of negative perception, a lack of stability on the digital asset trading platforms on which HYPE trades, market manipulation of cryptocurrency trading platforms by customers, a cyber-security incident, regulatory action or other factors-could materially reduce the value of any HYPE we hold, force us to recognize impairment charges, and depress the market price of our securities.

Additionally, large portions of HYPE, potentially 238 million HYPE tokens or more, have been reported to be held by the Hyperliquid core contributors.

As a result, trading activity by these parties could have a material impact on the price and trading volume of HYPE.

Further, to our knowledge, the core contributors and other large holders of HYPE began to “unlock” their tokens on November 29, 2025, meaning that they became able to sell some of their HYPE starting on such date and at periodic unlock dates over a multi-year period.

The large influx of HYPE increases the circulating supply, which can lead to a price drop if demand does not increase proportionally to absorb the new tokens.

If all HYPE tokens that were unlocked on that day and are unlocked on subsequent unlock dates are immediately sold, this could have significant impacts on the price of HYPE on or around such unlock dates and depress the price of our common stock.

HYPE is a highly volatile asset, and fluctuations in the price and liquidity of HYPE may influence our financial results and the market price of our listed securities.

Our financial results and the market price of our listed securities would be adversely affected, and our business and financial condition would be negatively impacted, if the price of HYPE decreased substantially, including as a result of:

● decreased user and investor confidence in HYPE, including due to the various factors described in this filing;

● investment and trading activities such as (i) trading activities of highly active retail and institutional users, speculators and investors or (ii) actual or expected significant dispositions of HYPE by large holders, including the expected liquidation of digital assets seized by governments or associated with entities that have filed for bankruptcy protection, or associated with tokens vested by the Hyperliquid core team;

● negative publicity, media or social media coverage, or sentiment due to events in or relating to, or perception of, HYPE, Hyperliquid or the broader digital assets industry;

● changes in consumer preferences and the perceived value or prospects of HYPE or the utility of Hyperliquid;

● competition from other decentralized exchanges or digital assets that exhibit comparable or better speed, security, scalability or energy efficiency, that feature other more favored characteristics, that are backed by governments, including the U.S.

government, or reserves of fiat currencies, or that represent ownership or security interests in physical assets;

● a decrease in the price of other digital assets, to the extent the decrease in the price of such other digital assets may cause a decrease in the price of HYPE or adversely affect investor confidence in digital assets generally;

● developments relating to the Hyperliquid blockchain, including (i) changes to the Hyperliquid blockchain that impact its security, speed, scalability, usability or value, such as changes to the cryptographic security protocol underpinning the Hyperliquid blockchain, changes to the maximum number of HYPE outstanding, changes to the mutability of transactions, changes relating to the size of blockchain blocks, and similar changes;

(ii) failures to make upgrades to the Hyperliquid blockchain and the Hyperliquid interface to adapt to security, technological, legal or other challenges;

and (iii) changes to the Hyperliquid blockchain that introduce software bugs, security risks or other elements that adversely affect HYPE;

● disruptions, failures, unavailability, or interruptions in services of trading venues for HYPE;

● the filing for bankruptcy protection by, liquidation of, or market concerns about the financial viability of digital asset custody infrastructure providers, trading venues, lending platforms, investment funds, or other digital asset industry participants;

● regulatory, legislative, enforcement and judicial actions that adversely affect access to, functionality of or performance of Hyperliquid and its associated products such as cryptocurrency perpetual futures, the price, ownership, transferability, trading volumes, legality or public perception of, HYPE or other Layer 1 blockchains, or that adversely affect the operations of or otherwise prevent digital asset custodians, trading venues, lending platforms or other digital assets industry participants from accessing the Hyperliquid decentralized exchange and its associated products or operating in a manner that allows them to continue to deliver services to the digital assets industry;

● transaction congestion and fees associated with processing transactions on the Hyperliquid network;

● macroeconomic changes, such as changes in the level of interest rates and inflation, fiscal and monetary policies of governments, trade restrictions and fiat currency devaluations;

● developments in mathematics or technology, including in digital computing, algebraic geometry and quantum computing, that could result in the cryptography used by the Hyperliquid blockchain becoming insecure or ineffective;

● changes in national and international economic and political conditions, including, without limitation, federal government policies, trade tariffs and trade disputes, and the adverse impacts attributable to global conflicts, including those between Russia and Ukraine and in the Middle East.

The price of our listed securities has been and is likely to continue to be volatile, and with the adoption of our cryptocurrency treasury strategy in 2025, we expect to continue to see additional volatility in our stock price.

In addition, if investors view the value of our listed securities as dependent upon or linked to the value or change in the value of our HYPE holdings, the price of HYPE may significantly influence the market price of our listed securities.

The price of HYPE has historically been, and is likely to continue to be, volatile.

HYPE faces unique technical, governance and concentration risks that could materially affect its long-term viability.

HYPE is a high-throughput Layer 1 blockchain with an architectural feature that differs significantly from other blockchains, such as Ethereum.

While these features allow for rapid processing of transactions, they introduce risks that could adversely impact the value of HYPE and the stability of the HYPE network.

HYPE has previously experienced a network outage that resulted in slow operations and user inability to close positions.

If this kind of network outage were to recur, the confidence of the HYPE development community and its users could be adversely affected, which could cause a decline in the value of HYPE.

Structural flaws could emerge that require a fork, which may have an adverse impact on the HYPE network and our holdings.

In addition, the concentration of validators on the Hyperliquid network presents centralization risks that could affect the security and value of our HYPE token holdings.

The Hyperliquid blockchain currently operates with a limited number of validators (approximately 24 as of the date of this filing), which creates potential single points of failure.

If these validators were to be compromised or act maliciously, it could result in network disruption, loss of funds, or other adverse effects that could materially impact the value of our HYPE token holdings.

HYPE is subject to technological obsolescence, including competition from emerging blockchain and artificial intelligence protocols, which could have a negative impact on the price of HYPE and adversely affect the value of our HYPE holdings.

The digital asset ecosystem is characterized by rapid technological innovation and evolution, short development cycles, and intense competition among Layer 1 blockchains and related infrastructure providers.

Numerous alternative cryptocurrencies, blockchains, and DeFi platforms are vying for market share in areas such as perpetual futures trading, staking, and on-chain liquidity provision, which are core to the Hyperliquid ecosystem and its HYPE token.

As of February 28, 2026, HYPE was the eleventh largest digital asset by market capitalization (excluding stablecoins), as tracked by CoinMarketCap.com, based on circulating market capitalization.

As of February 28, 2026, the top eleven digital assets tracked by CoinMarketCap.com (excluding stablecoins) had a total market capitalization of approximately $1.82 trillion (including the approximately $7.5 billion market cap of HYPE, based on circulating market capitalization), as calculated using market prices and total available supply of each digital asset.

HYPE faces competition from a wide range of digital assets, including Bitcoin and Ether, and from existing protocols, such as Aptos and Sei, as well as new entrants that are currently being developed.

Many consortiums and financial institutions are also researching and investing resources into private or permissioned blockchain platforms rather than open platforms like the Hyperliquid network.

As 99% of Hyperliquid’s revenues are currently allocated to the Assistance Fund for the repurchase of HYPE tokens, a decline in revenue could have a material impact on the demand for HYPE tokens.

In addition, HYPE is supported by fewer trading platforms than more established digital assets, such as Bitcoin and Ether, which could impact its liquidity.

Further, the Hyperliquid network is in direct competition with other smart contract platforms, such as the Ethereum, Solana, Avalanche and Cardano networks.

Competition from the emergence or growth of alternative digital assets or other smart contract platforms could have a negative impact on the demand for, and price of, HYPE, and thereby adversely affect the value of our HYPE holdings.

Competitors may offer superior scalability, security, interoperability, decentralization, programmability and adoption, and may attract developers away from the HYPE ecosystem.

Advancements in AI and blockchain technology are likely to accelerate the development of such protocols, including the development of additional networks that natively integrate AI into consensus mechanisms and other core features.

If HYPE is unable to evolve to address such increased competition or if Layer 2 networks believe that HYPE’s core technology stack is outdated or less attractive compared with other Layer 1 networks, HYPE may be considered technologically obsolete by the next generation of protocols.

Any decline in the HYPE network would materially impact the market value of HYPE and adversely affect the value of our HYPE treasury holdings and our stock price.

Investors may also invest in HYPE through means other than our securities, including through direct investments in HYPE and other financial vehicles, such as securities backed by or linked to HYPE and digital asset treasury companies similar to us.

Market and financial conditions, and other conditions beyond our control, may make it more attractive to gain exposure to HYPE through other vehicles, rather than our securities.

Proof-of-stake blockchains are a relatively recent innovation, and have not been subject to as widespread use or adoption over as long of a period of time as traditional proof-of-work blockchains.

Certain digital assets, such as Bitcoin, use a “proof-of-work” consensus algorithm.

The genesis block on the Bitcoin blockchain was mined in 2009, and Bitcoin’s blockchain has been in operation since then.

Many newer blockchains enabling smart contract functionality use a newer consensus algorithm known as “proof-of-stake.” While their proponents believe that they may have certain advantages, the “proof-of-stake” consensus mechanisms and governance systems underlying many newer blockchain protocols, including the Hyperliquid network, and their associated digital assets – including our HYPE holdings – have not been tested at scale over as long of a period of time or subject to as widespread use or adoption as, for example, Bitcoin’s proof-of-work consensus mechanism has.

This could lead to these blockchains, and their associated digital assets, having undetected vulnerabilities, structural design flaws, suboptimal incentive structures for network participants (e.g., validators), technical disruptions or a wide variety of other problems, any of which could cause these blockchains not to function as intended, lead to outright failure to function entirely causing a total outage or disruption of network activity, or cause the blockchains to suffer other operational problems or reputational damage, leading to a loss of users or adoption or a loss in value of the associated digital assets, including our HYPE holdings.

Over the long term, there can be no assurance that the proof-of-stake blockchain on which our HYPE holdings rely will achieve widespread scale or adoption or perform successfully.

Any failure to do so could negatively impact the price of HYPE and the value of our HYPE holdings.

The concentration of our HYPE holdings could enhance the risks inherent in our HYPE treasury strategy.

The concentration of our HYPE holdings limits the risk mitigation that we could achieve if we were to purchase a more diversified portfolio of treasury assets, and the absence of diversification enhances the risks inherent in our HYPE treasury strategy.

Any future significant declines in the price of HYPE would have a more pronounced impact on our financial condition than if we used our cash to purchase a more diverse portfolio of assets.

The emergence or growth of other digital assets, including those with significant private or public sector backing, could have a negative impact on the price of HYPE and adversely affect our business.

As a result of our HYPE treasury strategy, our assets are concentrated in our HYPE holdings.

Accordingly, the emergence or growth of digital assets other than HYPE may have a material adverse effect on our financial condition.

There are numerous alternative digital assets and many entities, including consortiums and financial institutions, that are researching and investing resources into private or permissioned blockchain platforms or digital assets, that do not use proof-of-stake consensus mechanism like the Hyperliquid network, or use different technical innovations that build upon or improve the proof-of-stake consensus mechanism.

For example, in late 2022, the Ethereum network transitioned to a “proof-of-stake” mechanism for validating transactions that requires significantly less computing power than proof-of-work mining.

The Ethereum network has completed another major upgrade since then and may undertake additional upgrades in the future.

If the mechanisms for validating transactions in Ethereum and other alternative digital assets are perceived as superior to proof-of-stake, those digital assets could gain market share relative to HYPE.

We plan to use a portion of our capital raised that is not required to provide working capital for our ongoing operations to invest in HYPE, which may adversely affect our financial results and the market price of our securities.

We plan to use a portion of our capital raised that is not required to provide working capital for our ongoing operations to invest in HYPE.

The price of HYPE has been subject to significant price fluctuations and is highly volatile.

Moreover, digital assets are relatively novel, and the application of securities laws and other regulations to such assets is unclear in many respects.

It is possible that regulators may interpret laws in a manner that adversely affects the liquidity or value of our HYPE holdings.

Any increase or decrease in the fair value of HYPE will require us to recognize unrealized gains or losses, which could be material to our financial results for the applicable reporting period, which may create significant volatility in our reported earnings.

Any decrease in reported earnings or increased volatility of such earnings could have a material adverse effect on the market price of our securities.

In addition, the application of generally accepted accounting principles in the United States with respect to digital assets remains uncertain in some respects, and any future changes in the manner in which we account for our HYPE holdings could have a material adverse effect on our financial results and the market price of our securities.

In addition, if investors view the value of our securities as dependent upon or linked to the value or change in the value of our HYPE holdings, the price of such digital assets may significantly influence the market price of our securities.

Our digital asset holdings are less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.

Historically, cryptocurrency markets have been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges, and various other risks inherent in their entirely electronic, virtual form and decentralized network.

During times of market instability, we may not be able to sell our digital asset holdings at favorable prices or at all.

Further, we use custody infrastructure providers and transact with trade execution partners.

Currently, we do not deposit our digital assets directly with a custodian but instead use a self-custody approach using infrastructure provided by a custodian.

These entities do not have the same protections as are available to cash or securities deposited with or transacted by institutions subject to regulation.

For example, U.S.

banks are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 per depositor in the case of the bank’s insolvency.

In addition, U.S.

broker-dealers are covered by the Securities Investor Protection Corporation (“SIPC”), which ensures recovery of the securities by the depositor.

In contrast, cryptocurrency custody infrastructure providers do not offer such protections.

If such a provider were to become insolvent, it is possible that, while the assets are not in custody of a third party, we could face delays or difficulties with respect to the management of our digital assets.

Apart from the risk of insolvency of the custody infrastructure provider, there is also a risk of custodians causing operational difficulty, typically in connection with a security incident, regulatory compliance or technical issues, and may be unresponsive to customers attempting to retrieve their funds.

In such events, it may be difficult to reach a representative to assist with unfreezing assets and we may not be able to sell or use our digital assets.

Additionally, the secondary market for borrowing against digital assets is not well developed.

We may be unable to enter into term loans or other capital raising transactions collateralized by our unencumbered digital assets or otherwise generate funds using our digital assets, especially during times of market instability or when the price of digital assets has declined significantly.

If we are unable to sell our digital assets, enter into additional capital raising transactions using digital assets as collateral or otherwise generate funds using our digital assets, or if we are forced to sell our digital assets at a significant loss in order to meet our working capital requirements, our business and financial condition could be negatively impacted.

Competition from central bank digital currencies (“CBDCs”) and emerging payments initiatives involving financial institutions could adversely affect the price of HYPE and other digital assets.

Central banks in various countries have introduced digital forms of legal tender.

China’s CBDC project, known as Digital Currency Electronic Payment, has reportedly been tested in a live pilot program conducted in multiple cities in China.

Central banks representing at least 130 countries have published retail or wholesale CBDC work ranging from research to pilot projects.

Whether or not they incorporate blockchain or similar technology, CBDCs, as legal tender in the issuing jurisdiction, could have an advantage in competing with, or replace, HYPE and other cryptocurrencies as a medium of exchange or store of value.

Central banks and other governmental entities have also announced cooperative initiatives and consortia with private sector entities, with the goal of leveraging blockchain and other technology to reduce friction in cross-border and interbank payments and settlement, and commercial banks and other financial institutions have also recently announced a number of initiatives of their own to incorporate new technologies, including blockchain and similar technologies, into their payments and settlement activities, which could compete with, or reduce the demand for, HYPE.

As a result of any of the foregoing factors, the price of HYPE could decrease, which could adversely affect the value of our HYPE holdings.

The Company’s options activity on the price of HYPE exposes the Company to financial, liquidity, and counterparty risk.

The Company operates an options strategy on the price of HYPE to mitigate risk and enhance yield on its digital asset treasury.

The Company executes its options strategies through agreements with institutional counterparties.

Confirmations of transaction activity are executed among the Company and its counterparties.

In 2025, the Company only executed out of the money covered call option agreements, on the price of HYPE sold against and collateralized by HYPE owned by the Company (including liquid staking tokens such as HiHYPE and kHYPE).

Executing covered calls limits upside appreciation potential on the Company’s corresponding digital assets.

In addition, these covered call agreements are typically collateralized 100% by the Company’s underlying digital assets.

This means the Company is restricted from selling, transferring, or otherwise deploying corresponding HYPE tokens while posted as collateral under open positions.

In the first quarter of 2026, the Company also sold out of the money puts on the price of HYPE.

puts may obligate the Company to purchase HYPE at a level above the current market price if the options expire in-the-money, which could result in a subsequent unrealized loss on the value of HYPE purchased.

In addition, these put agreements are typically 100% collateralized by cash, USDC, or USDH, and the Company is restricted from utilizing that collateral for other purposes.

The Company may choose to execute other options strategies in the future, including but not limited to, purchasing puts.

There can be no assurance that such options activity will result in net positive economic impacts to the Company.

Further, while the Company conducts due diligence on its counterparties, including their safeguarding practices with respect to the Company’s posted collateral, there can be no assurance that the posted collateral will be returned to the Company when the positions are closed.

In addition, while counterparty diversification is a factor in the Company’s decision for which counterparties to use, all collateral under the Company’s options strategy may be posted to one counterparty or concentrated in a small number of counterparties, which may create concentrated risk of loss.

The Company’s Temporary Use Agreement with Native Markets, Inc.

exposes the Company to financial risk, earnings volatility, liquidity constraints, and risk of loss.

On November 19, 2025, the Company entered into a Temporary Use Agreement with Native Markets, Inc., for 300,000 HYPE tokens.

This is the Company’s only Temporary Use Agreement, as of December 31, 2025.

Under this Agreement, the Company’s 300,000 HYPE tokens are staked at a deployer address to meet certain requirements of the Hyperliquid blockchain which unlocks more favorable economics for USDH.

In return the Company receives a fee for the use of its tokens by NativeMarkets, Inc., and the Company is entitled to receive all staking rewards on the tokens.

The Company’s interest in the tokens is secured by a Security Agreement and UCC Filing.

However, there can be no assurance that the Company’s tokens will be returned to the Company at the end of the Temporary Use Agreement.

In addition, the Company has limited ability to sell, transfer, or obtain liquidity against its tokens while they are deployed into this strategy.

Furthermore, given that this strategy has contractual limitations limiting the Company’s ability to withdraw its tokens without financial consequence, the Company may not be able to immediately deploy these tokens into more compelling economic opportunities without significant delay.

The Company may enter into similar Temporary Use Agreements, or other arrangements whereby the Company’s tokens are deployed in bespoke arrangements with uncertain economic, liquidity, and risk outcomes.

There may be no realized economic value of the Company’s KNTQ tokens.

The Kinetiq protocol is a liquid staking platform built on the Hyperliquid Layer 1 blockchain.

On November 27, 2025, Kinetiq executed a token generation event of its governance token called “KNTQ”.

KNTQ gives holders voting rights to influence Kinetiq’s governance decisions, such as protocol upgrades, parameter changes, and reward structures.

The maximum total supply of KNTQ is 1 billion, of which 25% was air dropped on November 27, 2025.

It is reported that approximately 30% of the KNTQ maximum supply are retained for growth and rewards, 23.5% for contributors, 10% for the Kinetiq Foundation, and the rest for other purposes.

The Company received 1,918,478.78 KNTQ in the airdrop on November 27, 2025.

KNTQ has limited trading history, with a limited number of trading venues providing liquidity as of December 31, 2025.

There can be no assurance that the Company will be able to monetize these tokens for any material economic value.

The Company’s liquid staking activities, including its holdings of HiHYPE, kHYPE, and kmHYPE (each an intangible digital asset), expose the Company to additional risks and earnings volatility.

Hyperion Institutional HYPE (“HiHYPE”), Kinetiq Staked HYPE (“kHYPE”) and Kinetiq Market HYPE (“kmHYPE”) are liquid staking tokens (each, an “LST”) designed by Kinetiq that enable the Company to access HyperEVM DeFi.

Each LST evidences ownership of the Company’s deposited HYPE, the underlying digital asset of such LST, and automatically accrues staking rewards denominated in HYPE.

Liquid staking allows the Company to earn native staking rewards while maintaining access to liquidity on its digital assets that can be used for additional strategies on- and off-chain.

The risks involved with liquid staking differ from direct staking, including the following:

● Liquid staking requires a certain level of technical expertise to manage the staking and un-staking process effectively.

There is associated counterparty risk tied to the reliance on using the liquid staking provider’s smart contract platform.

● Disputes or compromise among the liquid staking provider’s core team may lead to the value of staking assets diverging from HYPE or failure to exit the liquid staking position.

● The price of the staked derivative may decrease from its original price.

This may happen because the new token has a lower market price.

● If we lose any of our LSTs, we will also lose access to our staked token.

This can result from liquidations at lending protocols or other execution partners, the loss of private keys or other forms of access to the addresses that hold our LSTs, and mistaken or stolen asset transfers.

The Hyperliquid network is based, in part, upon the development and deployment of smart contracts, which are self-executing contracts with the terms of the agreement written into software code.

Like any software code, smart contracts are exposed to risk that the code contains a bug or other security vulnerability, which can lead to loss of assets that are held on or transacted through the contract.

The smart contract is deployed on Hyperliquid and, as such, may contain a bug or other vulnerability that may lead to the loss of, or inability to access, digital assets held in the smart contract.

The Company currently relies on Kinetiq for its liquid staking solution.

The smart contract code written by Kinetiq was audited by Code4rena, Spearbit, Pashov Audit Group and Zenith.

Nevertheless, there is no guaranty against a bug or other vulnerability leading to a loss of digital assets.

In addition, the Company is also exposed to risk of losing HYPE in the pool due to system failure or hacking.

As a result, LSTs do not confer an enforceable right to the underlying HYPE tokens, but only a claim.

Further, the redemption of LSTs back into the underlying HYPE tokens may be subject to any protocol-defined lockup or unbonding periods.

LSTs are initially recognized at the fair value of the HYPE tokens exchanged and, due to their indefinite useful life, are not amortized but instead are subject to impairment testing.

In contrast, HYPE is measured at fair value.

The variances in valuation methods between HYPE and LSTs may create material volatility in the financial statements depending on conversion and redemption activity between HYPE and LSTs each period.

In addition, any staking rewards earned on LSTs are not recognized until LSTs are redeemed.

REGULATORY RISKS ASSOCIATED WITH OUR STRATEGY

HYPE, the Hyperliquid network and other digital assets are novel and are subject to significant legal and regulatory uncertainty.

HYPE and other digital assets are relatively novel, have not been in existence for an extended period of time, and are subject to significant uncertainty, which could adversely impact their price.

The application of state and federal securities laws and other laws and regulations to digital assets is unclear in certain respects, and it is possible that regulators in the United States or foreign countries may interpret or apply existing laws and regulations in a manner that adversely affects the price of HYPE or the ability of individuals or institutions such as us to own or transfer HYPE.

federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of HYPE or the ability of individuals or institutions such as us to own or transfer HYPE.

For example, within the past several years:

● in March 2026, the SEC and the Commodity Futures Trading Commission (the “CFTC”) jointly released interpretive guidance regarding the application of federal securities laws to certain crypto assets and transactions (the “SEC Interpretive Release”).

Among other things, the interpretive guidance aims to:

provide a token taxonomy for digital commodities, digital collectibles, digital tools, stablecoins, and digital securities;

address how a non-security crypto asset may become subject to, and how it may cease to be subject to, an investment contract;

and clarify the application of federal securities laws to airdrops, protocol mining, protocol staking, and the wrapping of a non-security crypto asset;

● in January 2025, President Trump signed an Executive Order instructing a working group comprised of representatives from key federal agencies to evaluate measures that can be taken to provide regulatory clarity and certainty built on technology-neutral regulations for individuals and firms involved in digital assets, including through well-defined jurisdictional regulatory boundaries.

This area continues to evolve and additional regulations are likely to be issued in the future, the effect of which cannot be predicted at this time;

● in January 2025, the SEC announced the formation of a “Crypto Task Force,” which was created to provide clarity on the application of the federal securities laws to the crypto asset market and to recommend policy measures with respect to digital asset security status, registration and listing of digital asset-based investment vehicles, and digital asset custody, lending and staking;

● in November 2023, Binance Holdings Ltd.

(“Binance”) and its then chief executive officer reached a settlement with the U.S.

Department of Justice, the CFTC, the U.S.

Department of Treasury’s Office of Foreign Asset Control, and the Financial Crimes Enforcement Network to resolve a multi-year investigation by the agencies and a civil suit brought by

the Commodity Futures Trading Commission, pursuant to which Binance agreed to, among other things, pay $4.3 billion in penalties across the four agencies and to discontinue its operations in the United States;

● in November 2023, the SEC filed a complaint against Payward Inc.

and Payward Ventures Inc., together known as Kraken, alleging, among other claims, that Kraken’s crypto trading platform was operating as an unregistered securities exchange, broker, dealer and clearing agency;

● in June 2023, the SEC filed complaints against Binance and Coinbase, Inc.

(“Coinbase”), and their respective affiliated entities, relating to, among other claims, assertions that each party was operating as an unregistered securities exchange, broker, dealer and clearing agency;

● in June 2023, the United Kingdom adopted and implemented the Financial Services and Markets Act 2023, which regulates market activities in “cryptoassets”;

● in April 2023, the European Union adopted Markets in Crypto Assets Regulation, a comprehensive digital asset regulatory framework for the issuance and use of digital assets, like bitcoin;

● in China, the People’s Bank of China and the National Development and Reform Commission have outlawed cryptocurrency mining and declared all cryptocurrency transactions illegal within the country, and

● Uncertainty over the passage of legislation in the United States that would help clarify the regulatory landscape, such as the CLARITY Act.

While the complaint against Coinbase was dismissed in February 2025, the complaint against Payward Inc.

and Payward Ventures Inc.

was dismissed with prejudice in March 2025, and the complaint against Binance was dismissed on May 29, 2025, the SEC or other regulatory agencies may initiate similar actions in the future, which could materially impact the price of HYPE and our ability to own or transfer HYPE.

It is not possible to predict whether or when new laws will be enacted that change the legal framework governing digital assets or provide additional authorities to the SEC or other regulators, or whether or when any other federal, state or foreign legislative bodies will take any similar actions.

It is also not possible to predict the nature of any such additional laws or authorities, how additional legislation or regulatory oversight might impact the ability of digital asset markets to function, the willingness of financial and other institutions to continue to provide services to the digital assets industry, or how any new laws or regulations, or changes to existing laws or regulations, might impact the value of digital assets generally and HYPE specifically.

The consequences of any new law or regulation relating to digital assets and digital asset activities could adversely affect the market price of HYPE, as well as our ability to hold or transact in HYPE, and in turn adversely affect the market price of our listed securities.

Our HYPE and other digital assets treasury strategy subjects us to enhanced regulatory oversight.

There has been increasing focus on the extent to which digital assets can be used to launder the proceeds of illegal activities, fund criminal or terrorist activities, or circumvent sanctions regimes, including those sanctions imposed in response to the ongoing conflict between Russia and Ukraine.

While we have implemented and maintain policies and procedures reasonably designed to promote compliance with applicable anti-money laundering and sanctions laws and regulations and take care to only acquire our HYPE and other digital assets through entities subject to anti-money laundering regulation and related compliance rules in the United States, if we are found to have purchased any of our HYPE or other digital assets from bad actors that have used HYPE or other digital assets to launder money or persons subject to sanctions, we may be subject to regulatory proceedings, and any further transactions or dealings in HYPE or other digital assets by us may be restricted or prohibited.

A portion of our HYPE or other digital assets may serve as collateral securing our outstanding indebtedness, and we may incur additional indebtedness or enter into other financial instruments in the future that may be collateralized by our HYPE or other digital assets.

We may also consider pursuing strategies to create income streams or otherwise generate funds using our HYPE or other digital assets.

These types of digital assets-related transactions are the subject of enhanced regulatory oversight.

These and any other digital assets-related transactions we may enter into, beyond simply acquiring and holding digital assets, may subject us to additional regulatory compliance requirements and scrutiny, including under federal and state money services regulations, money transmitter licensing requirements and various commodity and securities laws and regulations.

Additional laws, guidance and policies may be issued by domestic and foreign regulators following the filing for Chapter 11 bankruptcy protection by FTX, one of the world’s largest cryptocurrency exchanges, in November 2022.

The FTX collapse may have increased regulatory focus on the digital assets industry.

Increased enforcement activity and changes in the regulatory environment, including changing interpretations and the implementation of new or varying regulatory requirements by the government or any new legislation affecting HYPE, as well as enforcement actions involving or impacting our trading venues, counterparties and custody infrastructure providers, may impose significant costs or significantly limit our ability to hold and transact in HYPE.

However, it is important to note that Hyperliquid—the exchange to which HYPE is native—is intended to be more decentralized than FTX, such that a single entity is unlikely to exert complete control over the entire system.

For example, unlike FTX when it filed for bankruptcy protection, Hyperliquid’s assets are custodied on-chain (not centrally by a single entity), order matching on Hyperliquid occurs transparently via on-chain mechanisms (not fully off-chain), Hyperliquid is governed by a set of approximately 24 validators (not a single individual), and Hyperliquid’s on-chain states (e.g., positions, collateral, and funding rates) are publicly available such that users can audit the system.

In addition, private actors that are wary of HYPE or the regulatory concerns associated with HYPE have in the past taken and may in the future take actions that may have an adverse effect on our business or the market price of our listed securities.

For example, it is possible that a financial institution could restrict customers from buying our securities if it were to determine that the value of our securities is closely tied to the performance of HYPE, signaling a reluctance to facilitate exposure to virtual currencies.

Absent federal regulations, there is a possibility that HYPE may be classified as a “security.” Any classification of HYPE as a “security” would subject us to additional regulation and could materially and adversely impact the operation of our business.

If HYPE were classified as a “security” for purposes of the U.S.

federal securities laws, our business would become subject to additional regulation, including a requirement to register as an investment company under the Investment Company Act of 1940 (the “Investment Company Act”).

To date, neither the SEC nor any other U.S.

federal or state regulator has publicly stated whether they believe that HYPE should be classified as a “security.” There can be no certainty that the March 2026 SEC Interpretive Release, including in combination with other rulemakings or executive orders, will become recognized as authoritative framework for determining with certainty whether HYPE is or is not a “security” for purposes of the U.S.

federal securities laws.

For the reasons discussed below, we believe that HYPE should not be classified as a “security,” and, as a result, we do not believe the Company is required to register as an investment company under the Investment Company Act.

However, because of the lack of any current authoritative framework for analyzing the issue, it is possible that the SEC or another regulatory body or federal court could determine that HYPE is a security.

Our belief, even if reasonable under the circumstances, would not preclude legal or regulatory action based on such a finding that HYPE is a “security,” including a requirement to register as an investment company under the Investment Company Act.

If we were required to register as an investment company, we expect we would need to make fundamental changes to our business model, strategy, operations and assets.

We have implemented a process for analyzing the U.S.

federal securities law status of HYPE and other cryptocurrencies as guidance and case law continue to evolve.

As part of this process, we take into account a number of factors, including the various definitions of what constitutes a “security” under U.S.

federal securities laws and federal court decisions interpreting the elements of these definitions, such as the U.S.

Supreme Court’s decisions in the Howey and Reves cases, as well as court rulings, regulatory reports, orders, press releases, public statements, and speeches by the SEC Commissioners and SEC Staff providing guidance on when a digital asset or a transaction to which a digital asset may relate may be a security for purposes of U.S.

federal securities laws.

In July 2025, the SEC announced “Project Crypto” which is expected to result in rulemakings and/or other authoritative guidance on how to determine whether digital assets are or are not “securities” for purposes of U.S.

federal securities laws and in March 2026, the SEC issued the SEC Interpretive Release.

Public statements by Chairman Atkins suggest that the SEC is considering further regulatory safe harbors.

Further, it appears that the current United States Congress is inclined toward increased flexibility regarding the regulatory treatment of digital assets.

We expect this area of regulation will develop rapidly during this Administration, and we plan to continually monitor developments in this area as they evolve.

Our position that HYPE is not a “security” is premised, in part, on our conclusion that HYPE does not meet the elements of the Howey test.

Among the reasons for our conclusion that HYPE is not a security is that holders of HYPE do not have a reasonable expectation of profits from the efforts of Hyperliquid, the Hyperliquid Foundation or any other person, entity or group of persons in respect of their holding of HYPE.

HYPE’s value does not primarily derive from the efforts of a centralized “manager” because Hyperliquid is structured around validator governance rather than a single operating entity.

Relatedly, token holders are not passive investors;

rather, they have the ability to directly influence governance decisions, staking incentives, and validator participation.

Consistent with this analysis, we note that Hyperliquid’s founding team has stated a clear goal of “full decentralization” in both validator

distribution and protocol governance, signaling an intent to eliminate all vestiges of centralized managerial reliance.

Also, HYPE ownership does not guarantee the right to receive any interest, rewards or other returns.

While we recognize that any new regulatory framework for digital assets promulgated by the SEC, such as the SEC Interpretive Release, may not be based on all of the elements of the Howey test, we believe more generally that HYPE does not otherwise have the characteristics of a “security” for purposes of the U.S.

federal securities laws.

The views of the SEC and other regulators, and Congress, regarding the proper classification of HYPE and other digital assets may evolve over time, based in part on assessments of a multitude of factors over which we have no control.

Application of securities laws to the specific facts and circumstances of digital assets is complex and subject to change.

Our conclusion that HYPE should not be classified as a security, even if reasonable under the circumstances, would not preclude legal or regulatory action based on a finding that HYPE or any other digital asset we might hold is a “security.” If HYPE is alleged or ultimately determined to be a security, the viability of Hyperliquid, HYPE and our own business model would be materially and adversely affected.

In such event, we would likely be required to register as an investment company under the Investment Company Act, and would also be at risk of enforcement proceedings and lawsuits against us, which could result in potential injunctions, cease-and-desist orders, fines and penalties.

Such developments would adversely affect our business, results of operations, financial condition and prospects.

If we were deemed to be an investment company under the Investment Company Act, applicable restrictions likely would make it impractical for us to continue segments of our business as currently contemplated.

Under Sections 3(a)(1)(A) and (C) of the Investment Company Act, a company generally will be deemed to be an “investment company” if (i) it is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or (ii) it engages or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities, and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S.

government securities and cash items) on an unconsolidated basis.

Rule 3a-1 under the Investment Company Act generally provides that notwithstanding the test described in clause (ii) in the previous sentence, an entity will not be deemed to be an “investment company” for purposes of the Investment Company Act if no more than 45% of the value of its assets (exclusive of U.S.

government securities and cash items) consists of, and no more than 45% of its net income after taxes (for the last four fiscal quarters combined) is derived from, securities other than U.S.

government securities, securities issued by employees’ securities companies, securities issued by qualifying majority owned subsidiaries of such entity, and securities issued by qualifying companies that are controlled primarily by such entity.

We do not believe that we are an “investment company” as such term is defined in either Section 3(a)(1)(A) or Section 3(a)(1)(C) of the Investment Company Act since we believe HYPE is not an investment security.

With respect to Section 3(a)(1)(A), we do not hold ourselves out as being engaged primarily or propose to engage primarily in the business of investing, reinvesting or trading in securities within the meaning of such section.

With respect to Section 3(a)(1)(C), we believe we satisfy the elements of Rule 3a-1 and therefore are deemed not to be an investment company under, and we intend to conduct our operations such that we will not be deemed an investment company under, Section 3(a)(1)(C).

HYPE and other digital assets, as well as new business models and transactions enabled by blockchain technologies, present novel interpretive questions under the Investment Company Act.

There is a risk that assets or arrangements that we have concluded are not securities could be deemed to be securities by the SEC or another authority for purposes of the Investment Company Act, which would increase the percentage of securities held by us for Investment Company Act purposes.

The SEC has requested information from a number of participants in the digital assets’ ecosystem regarding the potential application of the Investment Company Act to their businesses.

For example, in an action unrelated to the Company, in February 2022, the SEC issued a cease-and-desist order under the Investment Company Act to BlockFi Lending LLC (“BlockFi”), in which the SEC alleged that BlockFi was operating as an unregistered investment company because it issued securities and also held more than 40% of its total assets, excluding cash, in investment securities, including the loans of digital assets made by BlockFi to institutional borrowers.

If we were deemed to be an investment company, Rule 3a-2 under the Investment Company Act is a safe harbor that provides a one-year grace period for transient investment companies that have a bona fide intent to be engaged primarily, as soon as is reasonably possible (in any event by the termination of such one-year period), in a business other than that of investing, reinvesting, owning, holding or trading in securities, with such intent evidenced by the company’s business activities and an appropriate resolution of its board of directors.

The grace period is available not more than once every three years and runs from the earlier of (i) the date on which the issuer owns securities and/or cash having a value exceeding 50% of the issuer’s total assets on either a consolidated or unconsolidated basis or (ii) the date on which the issuer owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuer’s total assets (exclusive of U.S.

government securities and cash items) on an unconsolidated basis.

Accordingly, the grace period

may not be available at the time that we seek to rely on Rule 3a-2;

however, Rule 3a-2 is a safe harbor and we may rely on any exemption or exclusion from investment company status available to us under the Investment Company Act at any given time.

Furthermore, reliance on Rule 3a-2, Section 3(a)(1)(C) or Rule 3a-1 could require us to take actions to dispose of securities, limit our ability to make certain investments or enter into joint ventures, or otherwise limit or change our service offerings and operations.

If we were to be deemed an investment company in the future, restrictions imposed by the Investment Company Act—including limitations on our ability to issue different classes of stock and equity compensation to directors, officers, and employees and restrictions on management, operations, and transactions with affiliated persons—likely would make it impractical for us to continue our business as contemplated, and could have a material adverse effect on our business, results of operations, financial condition and prospects.

Investment companies in the United States that are not registered under Section 8 of the Investment Company Act (as we are not), and which are not exempt from such registration, are generally prohibited from engaging in interstate commerce, and the contracts entered into by such companies are generally unenforceable.

We are not subject to the legal and regulatory obligations that apply to investment companies such as mutual funds and funds, or to obligations applicable to investment advisers.

Mutual funds, exchange-traded funds and their directors and management are subject to extensive regulation as investment companies and investment advisers under U.S.

federal and state law;

this regulation is intended for the benefit and protection of investors.

We are not subject to, and do not otherwise voluntarily comply with, these laws and regulations.

This means, among other things, that the execution of or changes to our treasury reserve policy or our HYPE strategy, our use of leverage, the manner in which our HYPE is custodied, our ability to engage in transactions with affiliated parties and our operating and investment activities generally are not subject to the extensive legal and regulatory requirements and prohibitions that apply to investment companies and investment advisers.

For example, although a significant change to our treasury reserve policy would require the approval of our board of directors, no stockholder or regulatory approval would be necessary.

Consequently, our board of directors has broad discretion over the investment, leverage and cash management policies it authorizes, whether in respect of our HYPE or other activities we may pursue, and has the power to change our current policies, including our strategy of acquiring and holding HYPE.

As a result, investors in our company may be exposed to greater volatility, concentration risk and governance discretion than they would be if we were subject to the protections afforded to regulated investment vehicles.

TECHNOLOGICAL AND OPERATIONAL RISKS ASSOCIATED WITH OUR STRATEGY

HYPE is created and transmitted through the operations of the peer-to-peer Hyperliquid network, a decentralized network of computers running software following the HYPE protocol.

If the Hyperliquid network is disrupted or encounters any unanticipated difficulties, the value of HYPE could be negatively impacted.

If the Hyperliquid network is disrupted or encounters any unanticipated difficulties, the processing of transactions on the Hyperliquid network may be disrupted, which in turn may prevent us from depositing or withdrawing HYPE from our wallet addresses or otherwise effecting HYPE transactions.

Such disruptions could include, for example:

the price volatility of HYPE;

the insolvency, business failure, interruption, default, failure to perform, security breach, or other problems of participants, custodians or others;

the closing of HYPE trading platforms due to fraud, failures, security breaches or otherwise;

or network outages or congestion, power outages, or other problems or disruptions affecting the Hyperliquid network.

For example, in June 2025, after a trader allegedly manipulated the price of JELLY in a Hyperliquid vault market, Hyperliquid forcibly closed the market at a very low price to minimize losses.

Hyperliquid’s intervention raised questions as to whether the platform is truly decentralized.

In addition, digital asset validating operations can consume significant amounts of electricity, which may have a negative environmental impact and give rise to public opinion against allowing, or government regulations restricting, the use of electricity for validating operations.

Additionally, validators may be forced to cease operations during an electricity shortage or power outage.

We face risks relating to the custody of our HYPE and other digital assets, such as the loss or destruction of private keys required to access our HYPE and cyberattacks or other data loss relating to our HYPE, including smart contract-related losses and vulnerabilities.

We hold our HYPE and other digital assets in self-custodied wallet addresses using infrastructure provided by Anchorage Digital Bank (a regulated custodian), as well as hardware wallet providers.

Our wallet infrastructure does not restrict our ability to reallocate our HYPE and other digital assets among our wallet addresses, and our HYPE and other digital assets may be concentrated with a single custodian or custodial infrastructure provider from time to time.

In light of the significant amount of HYPE that we hold, we expect to continually seek to engage additional custody infrastructure providers to achieve a greater degree of diversification in the custody of our HYPE as the extent of potential risk of loss is dependent, in part, on the degree of diversification.

However, multiple custody infrastructure providers may utilize similar wallet infrastructure, cloud service providers or software systems, which could

increase systemic technology risk.

While we will conduct due diligence on our custody infrastructure providers and any smart contract platforms we may use, there can be no assurance that such diligence will uncover all risks, including operational deficiencies, hidden vulnerabilities or legal noncompliance.

HYPE is controllable only by the possessor of both the unique public key and private key(s) relating to the local or online digital wallet in which the HYPE is held.

While the Layer 1 blockchain ledger requires a public key relating to a digital wallet to be published when used in a transaction, private keys must be safeguarded and kept private in order to prevent a third party from accessing the HYPE held in such wallet.

To the extent the private key(s) for a digital wallet are lost, destroyed, or otherwise compromised and no backup of the private key(s) is accessible, neither we nor our custody infrastructure providers will be able to access the HYPE held in the related digital wallet.

Furthermore, we cannot provide assurance that our digital wallets, nor the digital wallets of our custody infrastructure providers, will not be compromised as a result of a cyberattack.

The HYPE and blockchain ledger, as well as other digital assets and blockchain technologies, have been, and may in the future be, subject to security breaches, cyberattacks or other malicious activities.

Our digital assets are not insured by the FDIC or SIPC.

The digital assets held by us are not insured.

The market for such insurance is in the early stages.

Further, banking institutions will not accept our digital assets and they are therefore not insured by the Federal Deposit Insurance Corporation (“FDIC”) or the Securities Investor Protection Corporation (“SIPC”).

Therefore, a loss may be suffered with respect to our digital assets that is not covered by insurance and we may not be able to recover any of our carried value in these digital assets if they are lost or stolen or suffer significant and sustained reduction in conversion spot price.

If we are not otherwise able to recover damages from a malicious actor in connection with these losses, our business and results of operations may suffer, which may have a material negative impact on the price of our securities.

The limited rights of legal recourse available to us and our lack of insurance protection for risk of loss of our digital assets exposes us and our shareholders to the risk of loss of our digital assets for which no person may ultimately be held liable and we may not be able to recover our losses.

Any uninsured losses may have an adverse effect on our results of operations, financial condition and prospects.

To the extent that we obtain insurance to cover losses of our HYPE holdings in the future, such insurance may cover none or only a small fraction of the value of the entirety of our HYPE holdings.

Any loss associated with any insolvency proceedings is unlikely to be covered by any insurance coverage we may obtain in the future related to our HYPE.

The legal framework governing digital asset ownership and rights in custodial or insolvency contexts remains uncertain and continues to evolve, which could result in unexpected losses, protracted recovery processes or adverse treatment in insolvency proceedings.

We use smart contracts that are subject to coding errors and other potential flaws.

As part of our treasury management strategy, we may engage in staking, restaking, or other permitted activities that involve the use of “smart contracts” or decentralized applications.

The use of smart contracts or decentralized applications entails certain risks including risks stemming from the existence of an “admin key” or coding flaws that could be exploited, potentially allowing a bad actor to issue or otherwise compromise the smart contract or decentralized application, which could lead to a loss of our HYPE.

Like all software code, smart contracts are exposed to risk that the code contains a bug or other security vulnerability, which can lead to loss of assets that are held on or transacted through the contract or decentralized application.

Smart contracts and decentralized applications may contain bugs, security vulnerabilities or poorly designed permission structures that could result in the irreversible loss of HYPE or other digital assets.

Exploits, including those stemming from admin key misuse, admin key compromise or protocol flaws, have occurred in the past and may occur in the future.

We are exposed to slashing risks.

Our participation in on-chain activities related to validating and DeFi partnerships, such as our HYPE Asset Use Service agreements, exposes the company to slashing risk, which may result in partial loss of staked digital assets.

Slashing is an enforcement mechanism that financially penalizes blockchain network validators for behavior that endangers network security or reliability.

Slashing may occur due to validator misbehavior, software flaws, operational mistakes or changes to network governance, with tokens permanently forfeited and not recoverable.

Such losses could have a material adverse effect on our financial condition and reputation.

While we seek to mitigate these risks through legal contracts, internal controls and counterparty diligence, residual risk remains due to factors beyond our control.

We face other risks related to our digital asset treasury reserve business model.

Our digital asset treasury reserve business model exposes us to various risks, including the following:

● HYPE and other digital assets are subject to significant legal, commercial, regulatory and technical uncertainty, and our HYPE strategy subjects us to enhanced regulatory oversight;

● regulatory changes could impact our ability to operate validators or receive rewards;

● regulatory scrutiny of the Company’s activities may increase, potentially limiting our operations;

● potential litigation risks exist related to smart contract vulnerabilities, validator operations, or our business activities;

● uncertainty around the regulatory status of digital assets, including HYPE, may impact our ability to list on certain exchanges;

● changes in political administration may not guarantee a favorable regulatory environment for digital assets;

● future SEC actions or court decisions could retroactively classify digital assets as a security, potentially leading to penalties or forced unwinding of transactions;

● increased regulatory focus on Layer 1 blockchains beyond Bitcoin and Ethereum could result in new compliance requirements.

We may engage in distinct digital asset financing strategies in which we will leverage our digital asset holdings to acquire additional amounts of the same leveraged digital assets, and may do so on a compounded basis, which will increase our exposure to smart-contract, operational and counterparty risks.

We may engage in digital asset leverage strategies to acquire additional amounts of HYPE.

As part of this strategy, we may borrow digital assets by pledging our own HYPE holdings as collateral, deploy these borrowed assets to acquire additional amounts of HYPE, and subsequently re-pledge the newly acquired HYPE to further engage in these leveraged transactions.

As each of these transactions will be effectuated on chain, the strategy may expose us to significant smart-contract vulnerabilities and operational risks.

The smart contracts that are used for purposes of these transactions may contain undiscovered bugs, logical errors or economic vulnerabilities that could be exploited by malicious actors or that could cause the contracts to perform in unintended ways, resulting in partial or total loss of our collateral and borrowed assets.

In addition, the strategy may subject us to counterparty risk through the platforms we utilize to facilitate leveraging strategies including, among others, insolvency of the platform, coding errors and cyberattacks.

Finally, lenders customarily require that collateral ratios be maintained within narrowly defined thresholds and may exercise broad contractual discretion to impose additional margin requirements or to liquidate collateral without notice when those thresholds are breached.

We may also incur losses if the interest that accrues on our borrowings significantly exceeds the revenue generated by the borrowed HYPE.

FINANCIAL REPORTING, TAX, ACCOUNTING AND TRADING RISKS ASSOCIATED WITH OUR STRATEGY

We may be subject to additional tax liability if regulation or policy changes adversely affect the tax treatment of rewards from staking HYPE.

federal income tax treatment of rewards from staking digital assets such as HYPE remains uncertain and is currently under the subject of debate and regulatory attention.

Under current guidance by the Internal Revenue Service (“IRS”), staking rewards are generally treated as ordinary income upon receipt.

If regulation or policy changes, or the interpretation or enforcement thereof, results in adverse tax treatment of rewards from staking HYPE, we could be subject to increased audits by the IRS and additional tax liabilities.

Our historical financial statements do not reflect the potential variability in earnings that we may experience in the future relating to our HYPE holdings.

Our historical financial statements do not reflect the potential variability in earnings that we may experience in the future from holding or selling significant amounts of HYPE.

The prices of digital assets have historically been subject to significant price fluctuations and are highly volatile.

In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60):

Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”), which we have adopted.

ASU 2023-08 requires us to measure our HYPE holdings at fair value in our statement of financial position, and to recognize gains and losses from changes in the fair value of our HYPE in net income each reporting period.

ASU 2023-08 also requires us to provide certain interim and annual disclosures with respect to our HYPE holdings.

As a result, volatility in our earnings may be significantly more than what we experienced in prior periods.

Unrealized fair value gains on our HYPE holdings could cause us to become subject to the corporate alternative minimum tax under the Inflation Reduction Act.

The United States enacted the Inflation Reduction Act of 2022 (“IRA”) in August 2022.

Unless an exemption applies, the IRA imposes a 15% corporate alternative minimum tax (“CAMT”) on a corporation with respect to an initial tax year and subsequent tax years, if the average annual adjusted financial statement income for any consecutive three-tax-year period preceding the initial tax year exceeds $1 billion.

On September 12, 2024, the Department of Treasury and the IRS issued proposed regulations with respect to the application of the CAMT.

In connection with the implementation of our HYPE treasury strategy, we have adopted ASU 2023-08.

ASU 2023-08 requires us to measure our HYPE holdings at fair value in our statement of financial position, with gains and losses from changes in the fair value of our HYPE recognized in net income each reporting period.

When determining whether we are subject to CAMT and when calculating any related tax liability for an applicable tax year, the proposed regulations provide that, among other adjustments, our adjusted financial statement income must include this ratable amount in addition to any unrealized gains or losses reported in the applicable tax year.

Accordingly, as a result of the enactment of the IRA and our adoption of ASU 2023-08, we could become subject to the CAMT in future tax years, unless the IRA is amended or the proposed regulations with respect to CAMT, when finalized, are revised to provide relief (or other interim relief is granted).

If we become subject to the CAMT, it could result in a material tax obligation that we would need to satisfy in cash, which could materially affect our financial results, including our earnings and cash flow, and our financial condition.

Due to the unregulated nature and lack of transparency surrounding the operations of many HYPE trading venues, these trading venues may experience greater fraud, security failures or regulatory or operational problems than trading venues for more established asset classes, which may result in a loss of confidence in HYPE trading venues and adversely affect the value of our HYPE.

HYPE trading venues are relatively new and, in many cases, unregulated.

Furthermore, there are many HYPE trading venues that do not provide the public with significant information regarding their ownership structure, management teams, corporate practices and regulatory compliance.

As a result, the marketplace may lose confidence in HYPE trading venues, including prominent exchanges that handle a significant volume of HYPE trading and/or are subject to regulatory oversight, in the event one or more HYPE trading venues cease or pause for a prolonged period the trading of HYPE or other digital assets, or experience fraud, significant volumes of withdrawal, security failures or operational problems.

The SEC alleged as part of its June 5, 2023, complaint against Binance that Binance committed strategic and targeted “wash trading” through its affiliates to artificially inflate the volume of certain digital assets traded on its exchange.

The SEC has also brought actions against individuals and digital asset market participants alleging that such persons artificially increased trading volumes in certain digital assets through wash trades, or repeated buying and selling of the same assets in fictitious transactions to manipulate their underlying trading price.

Such reports and allegations may indicate that the HYPE market is significantly smaller than expected and that the United States makes up a significantly larger percentage of the HYPE market than is commonly understood.

Any actual or perceived wash trading in the HYPE market, and any other fraudulent or manipulative acts and practices, could adversely affect the value of our HYPE.

Negative perception, a lack of stability in the broader digital currency markets and the closure, temporary shutdown or operational disruption of HYPE trading venues, lending institutions, institutional investors, institutional miners, custodians, or other major participants in the HYPE ecosystem, due to fraud, business failure, cybersecurity events, government-mandated regulation, bankruptcy or any other reason, may result in a decline in confidence in HYPE and the broader digital currency ecosystem and greater volatility in the price of HYPE.

For example, in 2022, each of Celsius Network, Voyager Digital, Three Arrows Capital, FTX and BlockFi filed for bankruptcy, following which digital assets significantly declined.

In addition, in June 2023, the SEC announced enforcement actions against Coinbase and Binance, two providers of large trading venues for digital assets, which similarly was followed by a decrease in the market price of digital assets.

These were followed in November 2023 by an SEC enforcement action against Payward Inc.

and Payward Ventures Inc., together known as Kraken, another large trading venue for digital assets.

While the complaint against Coinbase was dismissed in February 2025, the complaint against Payward Inc.

and Payward Ventures Inc.

was dismissed with prejudice in March 2025, and the complaint against Binance was dismissed in May 2025, the SEC or other regulatory agencies may initiate similar actions in the future.

As the price of our listed securities may be affected by the value of our HYPE holdings, the failure of a major participant in the digital currency ecosystem could have a material adverse effect on the market price of our listed securities.

Delisting of our common stock from Nasdaq could prevent us from maintaining an active, liquid and orderly trading market for our common stock.

Our ability to publicly or privately sell equity securities and the liquidity of our common stock would be adversely affected if we are delisted from The Nasdaq Capital Market or if we are unable to transfer our listing to another stock market.

In the past, we have encountered issues with compliance with aspects of the Listing Rules of The Nasdaq Stock Market LLC (“Nasdaq”), including the rules relating to minimum bid price and stockholders’ equity.

If our common stock is delisted by Nasdaq, it could lead to a number of negative implications, including an adverse effect on the price of our common stock, deterring broker-dealers from making a market in or otherwise seeking or generating interest in our common stock, increased volatility in our common stock, reduced liquidity in our common stock, the loss of federal preemption of state securities laws and greater difficulty in obtaining financing.

Delisting could also cause a loss of confidence of our customers, collaborators, vendors, suppliers and employees, which could harm our business and future prospects.

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The additional burdens imposed upon broker-dealers by these requirements may discourage broker-dealers from recommending transactions in our securities, which could severely limit the liquidity of our securities and consequently adversely affect the market price for our securities.

Furthermore, if our common stock is delisted, we would expect it to have an adverse impact on our ability to consummate certain strategic alternatives.

Further, if our common stock is delisted, we would incur additional costs under state blue sky laws in connection with any sales of our securities.

These requirements could severely limit the market liquidity of our common stock and the ability of our stockholders to sell our common stock in the secondary market.

Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, our investors’ ownership interest will be diluted.

Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we are unable to obtain funding on a timely basis, we may be required to significantly curtail or delay manufacturing and commercialization plans, which would adversely impact potential revenues, results of operations and our financial condition.

If we raise additional capital through future collaborations, strategic alliances or third-party licensing arrangements, we may have to relinquish valuable rights to our intellectual property, future revenue streams, Mydcombi, Optejet or clobetasol propionate, or grant licenses on terms that might not be favorable to us.

The terms of the Loan and Security Agreement require us to meet certain operating covenants and place restrictions on our operating and financial flexibility.

The terms of our Loan and Security Agreement require us to meet certain operating covenants and place restrictions on our operating and financial flexibility.

If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business.

On November 22, 2022, we entered into the Loan and Security Agreement with Avenue, which is secured by a lien on all of our assets.

The Loan and Security Agreement, as supplemented by the Supplement, provides for term loans in an aggregate principal amount of up to $15.0 million to be delivered in multiple tranches.

On November 22, 2022, we entered into a Loan and Security Agreement with Avenue Capital (as amended, the “Loan and Security Agreement”), which is secured by a lien on all of our assets.

The amount we owed under the Loan and Security Agreement as of December 31, 2025 was $8,339,366.

The Loan and Security Agreement contains customary affirmative and negative covenants and events of default.

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These restrictions may include, among other things, limitations on the incurrence of additional debt and specific restrictions on the use of our assets, as well as prohibitions on our ability to create liens, pay dividends, redeem capital stock or make investments.

If we default under the terms of the Loan and Security Agreement or any future debt facility, Avenue may accelerate all of our repayment obligations and take control of our pledged assets, potentially requiring us to renegotiate our agreement on terms less favorable to us or to immediately cease operations.

If we default

under the terms of the Loan and Security Agreement or any future debt facility, Avenue may accelerate all of our repayment obligations and take control of our pledged assets, potentially requiring us to renegotiate our agreement on terms less favorable to us or to immediately cease operations.

Further, if we were to be liquidated, Avenue’s right to repayment would be senior to the rights of the holders of our common stock.

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Any declaration by Avenue of an event of default could significantly harm our business and prospects and could cause the price of our common stock to decline.

We have entered into a loan modification agreement with Avenue and, based on our lack of financial liquidity, we cannot guarantee that we will be able to comply with the terms of this agreement, or continue obtaining forbearance if needed.

As of March 15, 2025, the Company owed $10.2 million in principal and accrued interest under the facility.

Amounts outstanding under the facility bear interest at an annual rate equal to the greater of (a) 7.0% and (b) the prime rate as reported in The

Wall Street Journal plus 4.45% (the “Interest Rate”).

The maturity date is November 1, 2025.

On November 22, 2024, the Company entered into the First Amendment, pursuant to which Avenue agreed to defer principal and interest payments on amounts outstanding until February 28, 2025.

On February 21, 2025, the Company entered into the Second Amendment, pursuant to which Avenue agreed to defer principal and interest payments on amounts outstanding until the end of September 2025.

Deferred interest will accrue on the outstanding principal amount at the interest rate as defined in the Second Amendment.

Under the Second Amendment, the Company has agreed to use a portion of the proceeds (net of fees and commissions payable to Chardan) received from sales under its Amended and Restated Sales Agreement (the “ATM Agreement”) with Chardan Capital Markets, LLC for its at-the-market offering program (the “ATM Proceeds”) to pay down the outstanding principal amount under the Loan and Security Agreement as follows:

a) until the Company raises $3 million of aggregate ATM Proceeds, 65% of the ATM Proceeds shall be remitted to Avenue as a payment in respect of the outstanding principal amount, and b) after the Company raises $3 million of aggregate ATM Proceeds, 75% of the ATM Proceeds shall be remitted to Avenue as a payment in respect of the outstanding principal amount.

Under the Second Amendment, at any time on or after April 1, 2025, Avenue will also have the right, in their discretion, but not the obligation, to convert an aggregate amount of up to $10 million of the aggregate principal amount under the Loan and Security Agreement into shares of the Company’s common stock, at a price equal to $1.68 per share.

It is possible that the Company may be unable to make payments against the loan when the forbearance period ends on September 30, 2025.

If the Company fails to obtain the requisite waivers or further extends the forbearance period, Avenue could declare the Company in default and require repayment of the outstanding balances on the relevant loans.

If that were to occur, the Company may not have sufficient funds to pay the applicable debt.

We currently do not have sufficient liquidity to repay all the outstanding debt to Avenue.

We have incurred operating losses since our inception.

We expect to continue to incur losses for the foreseeable future and might never achieve or maintain profitability.

We have incurred net losses of approximately $195.3 million since inception, have not generated any significant product sales revenue and have not achieved profitable operations.

Our net losses were approximately $49.8 million and $27.3 million for the years ended December 31, 2024 and 2023, respectively.

We expect to continue to incur substantial losses in future periods while we continue to test and prepare our product candidates for the market.

We may never achieve profitability.

The net losses we incur may fluctuate significantly from quarter to quarter and year to year.

We anticipate that our expenses will increase substantially if, and as, we:

● continue to develop the Optejet® User Filled Device;

● develop, maintain, expand and protect our intellectual property portfolio;

● implement additional operational, financial and management systems

Even if we are able to generate substantial revenues from the sale of our product, we might not become profitable and may need to obtain additional funding to continue operations.

If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce our operations.

Even if we do achieve profitability, we might not be able to sustain or increase profitability on a quarterly or annual basis.

Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital or continue our operations.

If we are unable to use carryforward tax losses or benefit from favorable tax legislation to reduce our taxes, our business, results of operations and financial condition may be adversely affected.

We have incurred significant net operating losses since our inception in July 2014.

As of December 31, 2024, we had federal net operating loss carry-forwards of approximately $133.7 million, of which approximately $10.8 million will expire at various dates from 2034 to 2037 for federal purposes.

If we are unable to use carryforward tax losses to reduce our future taxable basis for corporate tax purposes, our business, results of operations and financial condition may be adversely affected.

Net operating loss and tax credit carry-forwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal

Revenue Code of 1986, as amended, as well as similar state provisions.

This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities.

The federal and state income tax returns are generally subject to tax examinations.

To the extent we have tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service or state tax authorities to the extent utilized in a future period.

Any unfavorable tax adjustment could have a significant impact on our results of operations and future cash flows.

Furthermore, if the United States government decides to eliminate, or reduce the scope or the rate of any tax benefit, either of which it could decide to do at any time, our results of operations could be adversely affected.

RISKS RELATED TO THE PROPOSED BUSINESS COMBINATION BETWEEN EYENOVIA AND BETALIQ

The proposed business combination may not be consummated on the terms described in the non-binding Letter of Intent or at all.

On March 18, 2025, Eyenovia entered into the non-binding Letter of Intent with Betaliq, a privately-held company, relating to a proposed business combination between Eyenovia and Betaliq.

Although Eyenovia anticipates entering into and closing a definitive business combination agreement in the second quarter of 2025, no assurance can be given that Eyenovia will be able to do so within that timeframe or at all.

Execution of a definitive business combination agreement with Betaliq is subject to a number of conditions in the Letter of Intent, including satisfactory completion of due diligence by each party, which due diligence has not been completed as of the date of this report, as well as successful negotiation of the terms and conditions of the business combination agreement.

In addition, even if Eyenovia were to negotiate and enter into the definitive business combination agreement, there is no assurance that the proposed business combination would be consummated on the terms described in the Letter of Intent, or at all.

Failure to enter into a definitive business combination agreement or consummate the proposed business combination could negatively affect Eyenovia’s business, future business and financial results.

The terms of a definitive business combination agreement are subject to negotiation, and Eyenovia cannot guarantee that the parties will be able to reach acceptable terms.

Execution of the definitive business combination agreement is subject to various conditions in the Letter of Intent, including satisfactory completion of due diligence by each party.

In the event the parties are unable to negotiate a definitive business combination agreement or consummate the proposed business combination, it will have a material adverse effect on Eyenovia’s business, financial condition, and results of operations, including the following:

● Incurring costs related to the negotiation of the business combination agreement, such as legal, accounting, and financial advisory fees;

● Declines in the market price of Eyenovia Common Stock to the extent that such market price reflects an assumption that the business combination would be consummated;

● The diversion of management’s attention from day-to-day business operations and the potential disruption to each company’s employees and other personnel and business relationships during the period the definitive business combination agreement is being negotiated and stockholder approval is being solicited;

● The potential for litigation related to the proposed business combination.

Even if the parties are able to enter into a definitive business combination agreement, Eyenovia cannot guarantee that the terms will be as described in the Letter of Intent or that the closing conditions set forth in such business combination agreement, including obtaining the requisite stockholder approval and listing the combined company’s shares on Nasdaq, will be satisfied.

If Eyenovia is unable to satisfy its closing conditions, or if other mutual closing conditions are not satisfied, Betaliq will not be obligated to complete the business combination.

If the business combination is not completed, Eyenovia’s board of directors would need to evaluate other available strategic alternatives, which alternatives may not be as favorable to Eyenovia stockholders as the business combination or available at all and could include winding down its operations, which may result in a total loss of stockholders’ investment.

Eyenovia and Betaliq will be subject to various uncertainties while the proposed business combination is pending that could adversely affect the anticipated benefits of the business combination.

Uncertainty about the effect of the proposed business combination on counterparties to contracts, employees, consultants, and other parties may have an adverse effect on Eyenovia and Betaliq.

These uncertainties could cause contract counterparties and others who deal with Eyenovia or Betaliq to seek to change existing business relationships and may impair the ability of Eyenovia and Betaliq to attract, retain, and motivate key personnel until the business combination is completed and for a period of time thereafter.

Retention and recruitment of employees and consultants may be particularly challenging prior to the completion of the business combination.

Eyenovia employees and consultants, and the employees and consultants and prospective employees and consultants of Betaliq, may experience uncertainty about their future roles following the business combination.

The negotiations to enter into a definitive business combination agreement, pursuit of the business combination, and the preparation for the combination of the two companies may place a significant burden on management and internal resources.

Any significant diversion of management attention away from ongoing business and any difficulties encountered in the negotiations, transition, and integration process could affect each party’s business and limit them from pursuing attractive business opportunities and making other changes to their business prior to the entry into a definitive business combination agreement and/or completion of the business combination.

Eyenovia expects to incur substantial transaction costs in connection with the proposed business combination.

Eyenovia expects to incur a significant amount of non-recurring expenses in connection with the proposed business combination, including legal, accounting, financial advisory, consulting, printing, mailing, and other expenses.

In general, these expenses are payable by Eyenovia whether or not the business combination is completed.

Additional unanticipated costs may be incurred following consummation of the business combination.

RISKS RELATED TO COMMERCIALIZATION OF OUR PRODUCTS

Our ability to achieve profitability is highly dependent on the commercial success of Mydcombi and clobetasol propionate, and to the extent Mydcombi and clobetasol propionate are not successful, our business, financial condition and results of operations may be materially adversely affected and the price of our common stock may decline.

Mydcombi and clobetasol propionate are currently our only products that have been approved by FDA for commercial sale in the United States, and our prospects are substantially dependent on our and our licensees’ abilities to successfully commercialize Mydcombi.

For the year ended December 31, 2024, we recorded net sales of $57,336.

Revenues from sales of Mydcombi, clobetasol propionate and other products through our distribution and co-promotion agreements, have not been sufficient to fund our operations fully in prior periods and we cannot provide assurance that revenues from product sales will be sufficient to fund our operations fully in the future.

We will need to generate substantially more product revenue to achieve and sustain profitability.

We may be unable to sustain or increase revenues generated from product sales for a number of reasons, including:

● pricing, coverage and reimbursement policies of government and private payers such as Medicare, Medicaid, the U.S.

Department of Veterans Affairs, group purchasing organizations, insurance companies, health maintenance organizations and other plan administrators;

● a lack of acceptance by physicians, patients and other members of the healthcare community;

● interruptions in supply of Mydcombi from our contract manufacturing partners;

● the availability, relative price and efficacy of Mydcombi as compared to alternative treatment options or branded, compounded or generic competing products;

● an unknown safety risk;

● the failure to enter into and maintain acceptable partnering arrangements for marketing and distribution of Mydcombi outside of the United States;

● changed or increased regulatory restrictions in the United States, European Union and/or other foreign territories.

In addition, we require substantial additional funding to advance manufacturing and commercialization of Mydcombi and development of the Gen-2 Optejet.

If additional capital is not available when needed, including because of general market conditions, we may need to significantly scale back or reprioritize our manufacturing and commercialization plans, and potentially even cease our operations.

If we are unable to develop, obtain marketing approval for or successfully commercialize our MicroPine and MicroLine product candidates, either alone or through a collaboration, or experience significant delays in doing so, our business could be materially harmed.

Our products may cause undesirable side effects, which could result in significant negative consequences.

If undesirable side effects of our products are identified, a number of potentially significant negative consequences could result, including:

● marketing of such product may be suspended;

● a product recall or product withdrawal;

● regulatory authorities may withdraw or limit their approvals of such product or may require additional warnings on the label;

● the requirement to develop a REMS for each product or, if a strategy is already in place, to incorporate additional requirements under the REMS, or to develop a similar strategy as required by a comparable foreign regulatory authority;

● the requirement to conduct additional post-market studies;

● being sued and held liable for harm caused to patients.

Consequently, our reputation and business operations may suffer.

In addition, adverse side effects caused by any therapeutics that may be similar in nature to our products could result in significant negative consequences for our products.

Any of these events could prevent the achievement or maintaining of market acceptance of the particular product and could significantly harm our business, results of operations and prospects.

If the market opportunities for Mydcombi and clobetasol propionate are smaller than we believe they are, our product revenues may be adversely affected and our business may suffer.

We are currently focusing efforts on commercializing our Mydcombi and clobetasol propionate products, and we have licensed commercialization rights to Mydcombi in Greater China (mainland China, Hong Kong, Macau and Taiwan) and South Korea to Arctic Vision (with Senju retaining such licensed rights in the rest of Asia).

Our understanding of both the number of people who have needs for our products, as well as the subset of people who have the potential to benefit from our product in varying countries, are based on estimates in published literature.

While we believe these estimates are reasonable, they may prove to be incorrect and new studies may reduce the estimated incidence or prevalence of mydriasis.

The number of patients in the United States and elsewhere may turn out to be lower than expected or these patients might not be otherwise amenable to our products or may become increasingly difficult to identify and access, all of which would adversely affect our business, financial condition, results of operations and prospects.

The commercial success of Mydcombi and clobetasol propionate will depend in large part on the degree of market acceptance among ophthalmologists and optometrists, patients, patient advocacy groups, third-party payors and the medical community.

There can be no assurance that Mydcombi and clobetasol propionate will achieve commercial success or market acceptance, which could prevent us from becoming profitable.

We may have difficulties convincing the medical community, third-party payors and consumers to accept and use Mydcombi or clobetasol propionate.

Other factors that we believe will affect market acceptance of Mydcombi or clobetasol propionate include:

● the timing of our receipt of any marketing approvals, the terms of any approvals and the countries in which approvals are obtained;

● safety, efficacy and ease of administration of Mydcombi or clobetasol propionate;

● the success of physician education programs;

● the availability of any government and third-party payor reimbursement;

● the pricing of Mydcombi or clobetasol propionate, particularly as compared to alternative treatment methods and medications;

● the extent to which alternative treatment methods and medications are more readily available as compared to the availability of Mydcombi or clobetasol propionate future;

● the prevalence and severity of any adverse effects.

We face competition in an environment of rapid technological change and the possibility that our competitors may develop therapies that are more advanced or effective than ours, may adversely affect our financial condition and our, or our licensees’, ability to successfully market or commercialize our products.

The specialty pharma market is highly competitive.

If we or our licensees are unable to compete effectively with any existing products, new treatment methods and new technologies, we may be unable to commercialize our products.

The specialty pharma market is subject to rapid technological change and is significantly affected by existing rival products and medical procedures, new product introductions and the market activities of other participants.

Pharmaceutical and biotechnology companies, academic institutions, governmental agencies and other public and private research organizations may pursue the research and development of technologies, drugs or other therapeutic products for the treatment of some or all of the diseases or conditions we are targeting.

We may also face competition from products which have already been approved and accepted by the medical community for the treatment of these same indications.

As a result of any of the foregoing factors, our competitors may develop or commercialize products with significant advantages over our products.

If our competitors are more successful in commercializing their products than we are, their success could adversely affect our competitive position and harm our business prospects.

If we fail to establish and maintain effective manufacturing and distribution processes our business may be adversely affected.

We have limited resources for the manufacturing, sales, marketing and distribution of drug products.

To achieve commercial success for Mydcombi and clobetasol propionate, we will need to establish and maintain an adequate sales force additional manufacturing, marketing and distribution capabilities, either ourselves or through collaborations or other arrangements with third parties.

We may encounter delays in the manufacturing process for Mydcombi that could delay the process of commercialization of the product, which could have a material negative effect on our revenues.

In addition, failure to secure contracts with manufacturers, wholesalers, retailers, or specialty pharmacies could negatively impact the production and distribution of our products, and failure to coordinate financial systems could negatively impact our ability to accurately report product revenue.

If we are unable to effectively establish and manage the manufacturing and distribution process, the commercial sales of our products may be severely compromised and our results of operations may be harmed.

We are exposed to the risk of claims seeking monetary damages by individuals and the risk of investigations by regulatory authorities, which could cause us to incur substantial liabilities and to limit commercialization of any products that we develop.

We are exposed to the risk of claims seeking monetary damages being filed against us for loss or harm suffered by participants of our prior clinical trials or for loss or harm suffered by users of Mydcombi or clobetasol propionate.

In either event, the FDA or the regulatory authorities of other countries or regions may commence investigations of the safety and effectiveness of any such commercialized drug, the manufacturing processes and facilities or marketing programs utilized in respect of any such drug.

Such investigations may result in mandatory or voluntary recalls of any such commercialized drug or other significant enforcement action such as limiting the indications for which any such drug may be used, or suspension or withdrawal of approval for any such drug.

Product liability lawsuits against us could divert our resources and could cause us to incur substantial liabilities and to limit commercialization of any products that we develop.

We face an inherent risk of product liability exposure related to the use of Mydcombi or clobetasol propionate.

If we cannot successfully defend ourselves against claims that our products caused injuries, we will incur substantial liabilities.

Regardless of merit or eventual outcome, liability claims may result in:

● decreased demand for Mydcombi or clobetasol propionate;

● injury to our reputation and significant negative media attention;

● significant costs to defend the related litigation;

● substantial monetary awards to patients;

● loss of revenue;

● reduced time and attention of our management to pursue our business strategy.

Our insurance policies might not fully cover the risk of loss associated with our operations.

We may need to increase our insurance coverage as we commercialize Mydcombi and clobetasol propionate.

Insurance coverage is increasingly expensive.

We might not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.

In the event that we are required to pay damages for any such claim, we may be forced to seek bankruptcy or to liquidate because our asset and revenue base may be insufficient to satisfy the payment of damages and any insurance that we have obtained or may obtain for product or clinical trial liability might not provide sufficient coverage against potential liabilities.

We may not be able to successfully commercialize Mydcombi or clobetasol propionate due to unfavorable pricing regulations or third-party coverage and reimbursement policies, which could make it difficult for us to sell Mydcombi or clobetasol propionate profitably.

Obtaining coverage and reimbursement approval for a product from a government or other third-party payor is a time-consuming and costly process, with uncertain results, that could require us to provide supporting scientific, clinical and cost effectiveness data for the use of our products to the payor.

There may be significant delays in obtaining such coverage and reimbursement for products, and coverage may not be available, or may be more limited than the purposes for which the product is approved by the FDA or other comparable foreign regulatory authorities.

Moreover, eligibility for coverage and reimbursement does not imply that a product will be paid for in all cases or at a rate that covers our costs, including research, development, intellectual property, manufacture, sale and distribution expenses.

Reimbursement rates may vary according to the use of the product and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost products and may be incorporated into existing payments for other services.

Net prices for products may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors, by any future laws limiting drug prices and by any future relaxation of laws that presently restrict imports of product from countries where they may be sold at lower prices than in the United States.

In the United States, there is no uniform policy among third-party payors for coverage and reimbursement.

Third-party payors often rely upon Medicare coverage policy and payment limitations in setting reimbursement policies, but also have their own methods and approval process apart from Medicare coverage and reimbursement determinations.

Therefore, one third-party payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage for the product.

Coverage and reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that use of a product is:

● a covered benefit under its health plan;

● safe, effective and medically necessary;

● appropriate for the specific patient;

● cost-effective;

● neither experimental nor investigational.

We cannot be sure that reimbursement will be available for Mydcombi or clobetasol propionate and, if coverage and reimbursement are available, what the level of reimbursement will be.

Our inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors for our products could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.

Reimbursement may impact the demand for, and the price of, our products.

Even if we obtain coverage for a given product by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high.

Patients who are prescribed medications for the treatment of their conditions, and their prescribing physicians, generally rely on third-party payors to reimburse all or part of the costs associated with those medications.

Patients are unlikely to use our products unless coverage is provided and reimbursement is adequate to cover all or a significant portion of the cost of our products.

Therefore, coverage and adequate reimbursement are critical to a product’s acceptance.

Coverage decisions may depend upon clinical and economic standards that disfavor products when more established or lower cost therapeutic alternatives are already available or subsequently become available.

For products administered by or under the supervision of a physician, obtaining coverage and adequate reimbursement may be particularly difficult because of the higher prices often associated with such drugs.

Additionally, separate reimbursement for the product itself may or may not be available.

Instead, the hospital or administering physician may be reimbursed only for providing the treatment or procedure in which our product is used.

Further, from time to time, the Centers for Medicare & Medicaid Services, or CMS, the federal agency responsible for administering the Medicare program, revises the reimbursement amounts paid to health care providers, including the Medicare Physician Fee Schedule and Hospital Outpatient Prospective Payment System, which may result in reduced Medicare payments.

We expect to experience pricing pressures in connection with the sale of our products due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, and additional legislative changes.

The downward pressure on healthcare costs in general, particularly prescription medicines, medical devices and surgical procedures and other treatments, has become very intense.

As a result, increasingly high barriers are being erected to the successful commercialization of new products.

Further, the adoption and implementation of any future governmental cost containment or other health reform initiative may result in additional downward pressure on the price that we may receive for our products.

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action in the United States or any other jurisdiction.

If we, or any third parties we may engage are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or such third parties are not able to maintain regulatory compliance, our products may lose any regulatory approval that has been obtained and we may not achieve or sustain profitability.

If the regulatory authorities in such jurisdictions set prices or make reimbursement criteria that are not commercially attractive for us or our collaborators, our revenues and the potential profitability of our products in those countries would be negatively affected.

RISKS RELATED TO REGULATORY APPROVAL OF OUR PRODUCTS AND OTHER LEGAL COMPLIANCE MATTERS

We are subject to ongoing regulatory obligations and continued regulatory review of our products, which may result in significant additional expense.

Additionally, our products could be subject to post-market study requirements, marketing and labeling restrictions, and even recall or market withdrawal if unanticipated safety issues are discovered.

In addition, we may be subject to penalties or other enforcement action if we fail to comply with regulatory requirements.

The manufacturing processes, labeling, packaging, distribution, storage, advertising, promotion, import, export, recordkeeping, monitoring, and reporting of our products is subject to extensive and ongoing regulatory requirements.

These requirements include submissions of safety and other post-marketing information and reports, establishment registration and listing, as well as continued compliance with cGMPs and GCP requirements for any clinical trials that we conduct post-approval.

Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:

● restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or mandatory product recalls;

● revision to the labeling, including limitations on approved uses or the addition of additional warnings, contraindications or other safety information, including boxed warnings;

● mandated modification of promotional materials and labeling and the issuance of corrective information;

● imposition of a REMS, which may include distribution or use restrictions;

● requirements to conduct additional post-market clinical trials to assess the safety of the product;

● fines, warning letters or other regulatory enforcement action;

● refusal by the FDA to approve pending applications or supplements to approved applications filed by us;

● suspension, limitation, or withdrawal of marketing approvals;

● product seizure or detention, or refusal to permit the import or export of products;

● consent decrees, corporate integrity agreements, debarment, or exclusion from federal health care programs;

● injunctions or the imposition of civil or criminal penalties.

Any government investigation of alleged violations of law would be expected to require us to expend significant time and resources in response and could generate adverse publicity.

Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize our products and our value and operating results would be adversely affected.

In addition, the FDA’s and other comparable foreign regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit or delay commercialization of our products.

If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, which would adversely affect our business, prospects and ability to achieve or sustain profitability.

Although we have obtained FDA approval for Mydcombi in the United States, we may never obtain approval for or commercialize Mydcombi or any of our current or future product candidates in any other jurisdiction, which would limit our ability to realize their full market potential.

In order to market any products in any particular jurisdiction, we must establish and comply with numerous and varying regulatory requirements on a country-by-country basis regarding safety and efficacy.

Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, while a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in other jurisdictions.

For example, approval by the FDA in the United States does not ensure approval by regulatory authorities in other countries or jurisdictions.

However, the failure to obtain approval in one jurisdiction may negatively impact our ability to obtain approval elsewhere.

Drug product approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the United States, including additional preclinical studies or clinical trials as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions.

Seeking foreign regulatory approval could result in difficulties and increased costs for us and require additional preclinical studies or clinical trials which could be costly and time consuming.

In many jurisdictions, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction.

In some cases, the price that we intend to charge for our products is also subject to approval.

Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of our products in those countries.

Other than Mydcombi and clobetasol propionate in the United States, we do not have any product candidates approved for sale in any jurisdiction, including in international markets, and we do not have experience in obtaining regulatory approval in international markets.

If we fail to comply with regulatory requirements in international markets or to obtain and maintain required

approvals, or if regulatory approvals in international markets are delayed, our target market will be reduced and our ability to realize the full market potential of any product we develop will be unrealized.

Regulatory approval by the FDA or comparable foreign regulatory authorities is limited to those specific indications and conditions for which approval has been granted, and we may be subject to substantial fines, criminal penalties, injunctions, or other enforcement actions if we are determined to be promoting the use of our products for unapproved or “off-label” uses, or in a manner inconsistent with the approved labeling, resulting in damage to our reputation and business.

We must comply with requirements concerning advertising and promotion for Mydcombi and clobetasol propionate.

Promotional communications with respect to therapeutics are subject to a variety of legal and regulatory restrictions and continuing review by the FDA or comparable foreign regulatory and governmental authorities, Department of Justice, Office of Inspector General for the U.S.

Department of Health and Human Services, state attorneys general, members of Congress, and the public.

When the FDA or comparable foreign regulatory authorities grant regulatory approval for a product, the regulatory approval is limited to those specific uses and indications for which the product is approved.

If we are not able to obtain FDA or comparable foreign regulatory authority approval for desired uses or indications for our products, we may not market or promote them for those indications and uses, referred to as off-label uses, and our business, financial condition, results of operations, stock price and prospects will be materially harmed.

We also must sufficiently substantiate any claims that we make for our products, including claims comparing our products to other companies’ products, which may require additional nonclinical studies or clinical trials, and must abide by the FDA or a comparable foreign regulatory or governmental authority’s strict requirements regarding the content of promotion and advertising.

While physicians may choose to prescribe products for uses that are not described in the product’s labeling and for uses that differ from those tested in clinical trials and approved by the regulatory authorities, we and any third parties engaged on our behalf are prohibited from marketing and promoting the products for indications and uses that are not specifically approved by the FDA or comparable foreign regulatory authorities.

Regulatory authorities in the United States generally do not restrict or regulate the behavior of physicians in their choice of treatment within the practice of medicine.

Regulatory authorities do, however, restrict communications by pharmaceutical companies concerning off-label use.

If we are found to have impermissibly promoted Mydcombi or clobetasol propionate, we may become subject to significant liability and government sanctions or enforcement actions.

The FDA and other agencies actively enforce the laws and regulations regarding product promotion, particularly those prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted a product may be subject to significant sanctions.

The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion.

The FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed.

In the United States, engaging in the impermissible promotion of Mydcombi or clobetasol propionate for off-label uses can also subject us to false claims and other litigation under federal and state statutes.

These include fraud and abuse and consumer protection laws, which can lead to civil and criminal penalties and fines, agreements with governmental authorities that materially restrict the manner in which we promote or distribute therapeutic products and conduct our business.

These restrictions could include corporate integrity agreements, suspension or exclusion from participation in federal and state healthcare programs, and suspension and debarment from government contracts and refusal of orders under existing government contracts.

These False Claims Act lawsuits against manufacturers of drugs and biologics have increased significantly in volume and breadth, leading to several substantial civil and criminal settlements pertaining to certain sales practices and promoting products for off-label uses.

In addition, False Claims Act lawsuits may expose manufacturers to follow-on claims by private payors based on fraudulent marketing practices.

This growth in litigation has increased the risk that a pharmaceutical company will have to defend a false claim action, pay settlement fines or restitution, as well as criminal and civil penalties, agree to comply with burdensome reporting and compliance obligations, and be excluded from Medicare, Medicaid, or other federal and state healthcare programs.

If we do not lawfully promote our approved products we may become subject to such litigation and, if we do not successfully defend against such actions, those actions may have a material adverse effect on our business, financial condition, results of operations, stock price and prospects.

In the United States, the promotion of pharmaceutical products are subject to additional FDA requirements and restrictions on promotional statements.

If the FDA determines that our promotional activities violate its regulations and policies pertaining to product promotion, it could request that we modify our promotional materials or subject us to regulatory or other enforcement actions, including issuance of warning letters or untitled letters, suspension or withdrawal of an approved product from the market, requests for recalls, payment of civil fines, disgorgement of money, imposition of operating restrictions, injunctions or criminal prosecution, and other enforcement actions.

Similarly, industry codes in foreign jurisdictions may prohibit companies from engaging in certain promotional activities and regulatory agencies in various countries may enforce violations of such codes with civil penalties.

If we become subject

to regulatory and enforcement actions our business, financial condition, results of operations, stock price and prospects will be materially harmed.

Furthermore, the use of our products for indications other than those approved by the FDA or comparable foreign regulatory authorities may not effectively treat such conditions.

Any such off-label use of our product candidates could harm our reputation in the marketplace among physicians and patients.

There may also be increased risk of injury to patients if physicians attempt to use our products for these uses for which they are not approved, which could lead to product liability suits that that might require significant financial and management resources and that could harm our reputation.

Our relationships with customers, health care providers, physicians, prescribers, purchasers, third-party payors, charitable organizations and patients are subject to applicable anti-kickback, fraud and abuse and other health care laws and regulations, which expose us to potential criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

We are subject to certain health care statutory and regulatory requirements and oversight by federal and state governments in the United States as well as foreign governments in the jurisdictions in which we conduct our business.

Health care providers, physicians and third-party payors in the United States and elsewhere play a primary role in the recommendation and prescription of biopharmaceutical products.

Arrangements with third-party payors and customers can expose biopharmaceutical manufacturers to broadly applicable fraud and abuse and other health care laws and regulations, including, without limitation, the federal Anti-Kickback Statute and the False Claims Act, which may constrain the business or financial arrangements and relationships through which such companies sell, market and distribute biopharmaceutical products.

In particular, the research of our product candidates, as well as the promotion, sales and marketing of health care items and services, as well as certain business arrangements in the health care industry, are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing and other abusive practices.

These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commission(s), certain customer incentive programs and other business arrangements generally.

Activities subject to these laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials.

The health care laws that may affect us include:

the federal fraud and abuse laws, including the federal Anti-Kickback Statute;

false claims and civil monetary penalties laws, including the False Claims Act and Civil Monetary Penalties Law;

federal data privacy and security laws, including HIPAA, as amended by HITECH;

and the federal Physician Payments Sunshine Act which requires us to report to CMS annually any transfers of value made to physicians (defined broadly to include doctors, dentists, optometrists, podiatrists, chiropractors, and other advanced practice health care professionals), certain non-physician health care practitioners and teaching hospitals as well as ownership and investment interests held by physicians and their immediate family members.

In addition, many states have similar laws and regulations that may differ from each other and federal law in significant ways, thus complicating compliance efforts.

Moreover, several states require biopharmaceutical companies to comply with the biopharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require manufacturers to report information related to payments and other transfers of value to physicians and other health care providers or marketing expenditures.

Additionally, some state and local laws require the registration of biopharmaceutical sales representatives in the jurisdiction.

The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of health care reform, especially in light of the lack of applicable precedent and regulations.

Ensuring business arrangements comply with applicable health care laws, as well as responding to possible investigations by government authorities, can be time- and resource-consuming and can divert a company’s attention from other aspects of its business.

It is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other health care laws and regulations.

If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, reputational harm, possible exclusion from participation in federal and state funded health care programs, contractual damages and the curtailment or restricting of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws.

Further, if any of the physicians or other health care providers or entities with whom we expect to do business is found not to be in compliance with applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including exclusions from government funded health care programs.

Any action for violation of these laws, even if successfully defended, could cause a biopharmaceutical manufacturer to incur significant legal expenses and divert management’s attention from the operation of the business.

Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may

Prohibitions or restrictions on sales or withdrawal of future marketed products could materially affect business in an adverse way.

Healthcare legislative reform measures may have a material adverse effect on our financial condition or results of operations.

In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs.

For example, in March 2010, the Patient Protection and Affordable Care Act (the “ACA”), was passed.

The ACA was a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of health care spending, enhance remedies against fraud and abuse, add new transparency requirements for health care and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms.

As another example, the 2021 Consolidated Appropriations Act, which was signed into law on December 27, 2020, incorporated extensive health care provisions and amendments to existing laws, including a requirement that all manufacturers of drugs and biological products covered under Medicare Part B report the product’s average sales price to the Department of Health and Human Services, or HHS, as of January 1, 2022, as well as several changes to the statutes governing FDA’s drug and biologic programs.

Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA, and as a result, certain sections of the ACA have not been fully implemented or have been effectively repealed through Executive Orders and/or executive agency actions.

However, following several years of litigation in the federal courts, in June 2021, the U.S.

Supreme Court upheld the ACA when it dismissed a legal challenge to the ACA’s constitutionality.

Further legislative and regulatory changes under the ACA remain possible, but it is unknown what form any such changes or any law would take, and how or whether it may affect the biopharmaceutical industry as a whole or our business in the future.

We expect that changes or additions to the ACA, the Medicare and Medicaid programs, such as changes stemming from other healthcare reform measures, especially with regard to healthcare access, financing or other legislation in individual states, could have a material adverse effect on the health care industry in the United States.

Further, over the past several years there has been heightened governmental scrutiny over the manner in which biopharmaceutical manufacturers set prices for their marketed products, which has resulted in several U.S.

Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products.

The probability of success of these newly announced policies, many of which have been subjected to legal challenge in the federal court system, and their potential impact on the U.S.

prescription drug marketplace is unknown.

There are likely to be continued political and legal challenges associated with implementing these reforms as they are currently envisioned.

For example, in July 2021, President Biden issued a sweeping executive order on promoting competition in the American economy that includes several mandates pertaining to the pharmaceutical and health care insurance industries, and called on HHS to release a comprehensive plan to combat high prescription drug prices.

The drug pricing plan released by HHS in September 2021 in response to the executive order makes clear that the Biden Administration supports aggressive action to address rising drug prices, including allowing HHS to negotiate the cost of Medicare Part B and D drugs, but such significant changes will require either new legislation to be passed by Congress or time-consuming administrative actions.

Accordingly, there remains a large amount of uncertainty regarding the federal government’s approach to making pharmaceutical treatment costs more affordable for patients.

In August 2022, President Biden signed into the law the Inflation Reduction Act of 2022 (the “IRA”).

Among other things, the IRA has multiple provisions that may impact the prices of drug products that are both sold into the Medicare program and throughout the United States.

Starting in 2023, a manufacturer of a drug or biological product covered by Medicare Parts B or D must pay a rebate to the federal government if the product’s price increases faster than the rate of inflation.

This calculation is made on a drug product by drug product basis and the amount of the rebate owed to the federal government is directly dependent on the volume of a drug product that is paid for by Medicare Parts B or D.

Additionally, starting in payment year 2026, CMS will negotiate drug prices annually for a select number of single source Part D drugs without generic or biosimilar competition.

CMS will also negotiate drug prices for a select number of Part B drugs starting for payment year 2028.

If a drug product is selected by CMS for negotiation, it is expected that the revenue generated from such drug will decrease.

The effect of the Inflation Reduction Act of 2022 on our business and the healthcare industry in general is not yet known.

There remains a large amount of uncertainty regarding the federal government’s approach to making pharmaceutical treatment costs more affordable for patients.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

For example, California requires pharmaceutical manufacturers to notify certain purchasers, including health insurers and government health plans at least 60 days before any scheduled increase in the wholesale acquisition cost (“WAC”), of their product if the increase exceeds 16%, and further requires pharmaceutical manufacturers to explain whether a change or improvement in the product necessitates such an increase.

Similarly, Vermont requires pharmaceutical manufacturers to disclose

price information on certain prescription drugs, and to provide notification to the state if introducing a new drug with a WAC in excess of the Medicare Part D specialty drug threshold.

In December 2020, the U.S.

Supreme Court also held unanimously that federal law does not preempt the states’ ability to regulate pharmaceutical benefit managers (“PBMs”), and other members of the healthcare and pharmaceutical supply chain, an important decision that may lead to further and more aggressive efforts by states in this area.

The Federal Trade Commission in mid-2022 also launched sweeping investigations into the practices of the PBM industry that could lead to additional federal and state legislative or regulatory proposals targeting such entities’ operations, pharmacy networks, or financial arrangements.

Significant efforts to change the PBM industry as it currently exists in the United States may affect the entire pharmaceutical supply chain and the business of other stakeholders, including biopharmaceutical developers like us.

Legally mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations, financial condition and prospects.

In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs.

This could reduce the ultimate demand for our product candidates, if approved, or put pressure on our product pricing, which could negatively affect our business, results of operations, financial condition and prospects.

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action.

We expect that additional federal and state health care reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for health care products and services, which could result in limited coverage and reimbursement and reduced demand for our products, once approved, or additional pricing pressures.

We are subject to anti-corruption laws, as well as export control laws, customs laws, sanctions laws and other laws governing our operations.

If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures and legal expenses, be precluded from developing manufacturing and selling products outside the United States or be required to develop and implement costly compliance programs, which could adversely affect our business, results of operations and financial condition.

We are subject to anti-corruption laws, as well as export control laws, customs laws, sanctions laws and other laws governing our operations.

Our operations are subject to anti-corruption laws, including the United States Foreign Corrupt Practices Act (“FCPA”), and the United Kingdom Bribery Act 2010 (“Bribery Act”), which apply wherever we do business around the world.

We may also become subject to local anti-corruption laws in countries where we may do business in the future, such as Canada’s Corruption of Foreign Public Officials Act, the Criminal Law and Anti-unfair Competition Law of the People’s Republic of China, the Hong Kong Prevention of Bribery Ordinance, and the Act on Preventing Bribery of Foreign Public Officials in International Business Transactions, or OECD Anti-Bribery Convention, enacted by the Organisation for Economic Co-operation and Development, and adopted by South Korea along with more than 40 other countries, and which is designed to criminalize bribery of public officials in connection with international business transactions.

The Bribery Act, FCPA, the OECD Anti-Bribery Convention, and similar international treaties and various countries’ local anti-corruption laws, referred to as Anti-Corruption Laws, generally prohibit us, our officers, and our employees and intermediaries from bribing, being bribed or making other prohibited payments to government officials or other persons to obtain or retain business or gain some other business advantage.

Compliance with the FCPA, for example, is expensive and difficult, particularly in countries in which corruption is a recognized problem.

In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials.

Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.

We may in the future operate in jurisdictions that pose a high risk of potential violations of Anti-Corruption Laws, and we may participate in collaborations and relationships with third parties whose actions could potentially subject us to liability under Anti-Corruption Laws.

In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted.

As we expand our operations outside of the United States, we will need to dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in which we plan to operate.

We are also subject to other laws and regulations governing our potential international operations, including regulations administered by the governments of the United Kingdom and the United States, and authorities in the European Union, including applicable export control regulations, economic sanctions on countries and persons, customs requirements and currency exchange regulations, collectively referred to as the Trade Control laws.

In addition, various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the sharing with certain non-United States nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products.

If we expand our presence outside

of the United States, it will require us to dedicate additional resources to comply with these laws, and these laws may preclude us from developing, manufacturing, or selling certain products and product candidates outside of the United States, which could limit our growth potential and increase our development costs.

We might not be completely effective in ensuring our compliance with all applicable Anti-Corruption Laws or other legal requirements, including Trade Control laws.

If we are not in compliance with Anti-Corruption Laws or Trade Control laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on our business, financial condition, results of operations and liquidity.

The SEC also may suspend or bar issuers from trading securities on United States exchanges for violations of the FCPA’s accounting provisions.

Any investigation of any potential violations of Anti-Corruption Laws or Trade Control laws by U.K., United States or other authorities could also have an adverse impact on our reputation, our business, results of operations and financial condition.

Inadequate funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes.

Average review times at the agency have fluctuated in recent years as a result.

In addition, government funding of the SEC and other government agencies on which our operations may rely, including those that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business.

For example, over the last several years, the U.S.

government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities.

The coronavirus pandemic has also adversely affected the operations of necessary government agencies.

If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

In addition, competing demands from other companies or issues can affect the timeliness for which the FDA can review and process our regulatory submissions.

RISKS RELATED TO OUR BUSINESS OPERATIONS AND MANAGING GROWTH

We are highly dependent on the services of our senior management team, including our Chief Executive Officer, and if we are not able to retain these members of our management team or recruit and retain additional management, clinical, scientific and sales personnel, our business will be harmed.

We are highly dependent on our senior management team, including our Chief Executive Officer.

The employment agreements we have with our executive officers do not prevent such persons from terminating their employment with us at any time.

The loss of the services of any of these persons could impede the achievement of our research, development and commercialization objectives.

In addition, we are dependent on our continued ability to retain and motivate highly qualified additional personnel.

If we are not able to retain our management and to retain personnel necessary for the commercialization of our products, we might not be able to sustain our operations or grow.

We might not be able to retain qualified personnel in the future due to the intense competition for qualified personnel among biotechnology, pharmaceutical and other businesses.

Many of the other medical technology companies that we compete against for qualified personnel and consultants have greater financial and other resources, different risk profiles and a longer history in the industry than we do.

They also may provide more diverse opportunities and better chances for career advancement.

Some of these characteristics may be more appealing to high-quality candidates and consultants than what we have to offer.

If we are unable to continue to retain and motivate high-quality personnel and consultants to accomplish our business objectives, our business will be limited.

We have limited corporate infrastructure.

As of March 15, 2025, we had 14 total employees.

Thirteen are full-time employees and one is part-time and we rely on third-party contractors for the provision of professional and other services.

Our management may need to divert a disproportionate amount of its attention away from our day-to-day operations and devote a substantial amount of time to managing the exploration of our strategic alternatives.

We might not be able to effectively manage our day-to-day operations, which may result in weaknesses in our infrastructure, operational inefficiencies, loss of business opportunities, loss of employees and reduced productivity among remaining employees.

Our financial performance, our ability to successfully commercialize Mydcombi and clobetasol propionate, and our ability to find a suitable strategic transaction will depend, in part, on our ability to effectively utilize our corporate infrastructure.

We rely upon information technology and any failure, inadequacy, interruption or security lapse of that technology, including any cyber security incidents, could harm our ability to operate our business effectively.

In the ordinary course of our business, we collect and store sensitive data and intellectual property and proprietary business information owned or controlled by ourselves or our customers.

This data encompasses a wide variety of business-critical information including research and development information, operational information, commercial information, and business and financial information.

We face four primary risks relative to protecting this critical information:

loss of access;

inappropriate disclosure;

inappropriate modification;

and inadequate monitoring of our controls over the first three risks.

The secure processing, storage, maintenance, and transmission of this critical information is vital to our operations and business strategy, and we devote significant resources to protecting such information.

Although we take measures to protect sensitive information from unauthorized access or disclosure, our information technology and infrastructure may be vulnerable to attacks by hackers or viruses, breaches, interruptions due to employee error, malfeasance, faulty password management, lapses in compliance with privacy and security mandates, or other disruptions.

The risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.

Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations.

To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur substantial liability.

Although we make efforts to maintain the security and integrity of these types of IT networks and related systems, and we have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging.

Our information technology systems may have vulnerabilities, and we may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyberattacks, such as ransomware attacks.

A significant cyber incident, including system failure, security breach, disruption by malware or other damage, could interrupt or delay our operations, result in a violation of applicable cybersecurity and privacy and other laws, damage our reputation, cause a loss of customers or expose sensitive customer data, or give rise to monetary fines and other penalties, which could be significant.

Any such breach or interruption could compromise our networks and the information stored there could be accessed by unauthorized parties, publicly disclosed, lost, or stolen.

Third parties may attempt to fraudulently induce employees or other persons into disclosing usernames, passwords or other sensitive information, which may in turn be used to access our information systems, commit identity theft or carry out other unauthorized or illegal activities.

Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen.

We engage third-party vendors and service providers to store and otherwise process some of our data, including sensitive and personal information.

Our vendors and service providers may also be the targets of the risks described above, including cyberattacks, malicious software, phishing schemes, and fraud.

Our ability to monitor our vendors and service providers’ data security is limited, and, in any event, third parties may be able to circumvent those security measures, resulting in the unauthorized access to, misuse, disclosure, loss or destruction of our data, including sensitive and personal information, and disruption of our or third-party service providers’ systems.

We and our third-party service providers may face difficulties in identifying, or promptly responding to, potential security breaches and other instances of unauthorized access to, or disclosure or other loss of, information.

Any hacking or other attack on our or our third-party service providers’ or vendors’ systems, and any unauthorized access to, or disclosure or other loss of, information suffered by us or our third-party service providers or vendors, or the perception that any of these have occurred, could result in legal claims or proceedings, loss of intellectual property, liability under laws that protect the privacy of personal information, negative publicity, disruption of our operations and damage to our reputation, which could divert our management’s attention from the operation of our business and materially and adversely affect our business, revenues and competitive position.

Moreover, we may need to increase our efforts to train our personnel to detect and defend against cyber- or phishing-attacks, which are becoming more sophisticated and frequent, and we may need to implement additional protective measures to reduce the risk of potential security breaches, which could cause us to incur significant additional expenses.

Any such security breach or interruption, as well as any action by us or our employees or contractors that might be inconsistent with the rapidly evolving data privacy and security laws and regulations applicable within the United States and elsewhere where we conduct business, could result in enforcement actions by U.S.

states, the U.S.

federal government or foreign governments, liability or sanctions under data privacy laws that protect personally identifiable information, regulatory penalties, other legal proceedings such as but not limited to private litigation, the incurrence of significant remediation costs, disruptions to our development programs, business operations and collaborations, diversion of management efforts and damage to our reputation, which could harm our business and operations.

Because of the rapidly moving nature of technology and the increasing sophistication of cybersecurity threats, our measures to prevent, respond to and minimize such risks may be unsuccessful.

In addition, our insurance may be insufficient to cover our losses resulting from cyber-attacks, breaches, or other interruptions, and any incidents may result in loss of, or increased costs of, such insurance.

The successful assertion of one or more large claims against us that exceed available insurance coverage, the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, or denials of coverage, could have a material adverse effect on our business, including our financial condition, results of operations and reputation.

Our employees, consultants and commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.

We are exposed to the risk of fraud or other misconduct by our employees, consultants and commercial partners.

Misconduct by these parties could include intentional failures to comply with the regulations of the FDA and other comparable foreign regulatory authorities, provide accurate information to the FDA and other comparable foreign regulatory authorities, comply with healthcare fraud and abuse laws and regulations in the United States and in other jurisdictions, report financial information or data accurately or disclose unauthorized activities to us.

In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices.

These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.

Such misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and cause serious harm to our reputation.

It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations.

If any such actions are instituted against us those actions could have a significant impact on our business, including the imposition of significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, contractual damages, reputational harm, diminished profits and future earnings, additional reporting obligations and oversight if subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations.

RISKS RELATED TO OUR DEPENDENCE ON THIRD PARTIES

We may encounter delays in the manufacturing of the second generation Optejet device, including as a result of our reliance on third parties for manufacturing activities, and this may cause delays in the commercialization of our products.

Any such delays would increase the risk that we will not have sufficient quantities of our products or such quantities at an acceptable cost, which could delay, prevent or impair our commercialization efforts.

We do not currently operate and might not be able to timely implement adequate internal manufacturing facilities for all of the components necessary for commercial production of Mydcombi.

If we are unable to establish adequate manufacturing processes internally or to reach and maintain agreements with third parties to help us with manufacturing, our commercialization activities would be delayed.

Reliance on third-party providers may expose us to more risk than if we were to manufacture our products ourselves.

We do not control the manufacturing processes of the third-party suppliers we contract with and are dependent on those third parties for the production of components of our products in accordance with relevant applicable regulations, such as cGMP, which includes, among other things, quality control, quality assurance and the maintenance of records and documentation.

In complying with the manufacturing regulations of the FDA and other comparable foreign regulatory authorities, we and our third-party suppliers must spend significant time, money and effort in the areas of design and development, testing, production, record-keeping and quality control to assure that the products meet applicable specifications and other regulatory requirements.

If either we or our third-party suppliers fail to comply with these requirements, we may be subject to regulatory enforcement action, including the seizure of products and shutting down of production.

We do not currently have any agreements with third-party suppliers for the long-term commercial supply of components for Mydcombi.

We may be unable to conclude agreements for commercial supply with a sufficient number of suppliers or may be unable

to do so on acceptable terms.

If we are unable to reach acceptable agreements with a sufficient number of suppliers of materials, our commercialization activities will be delayed and our ability to implement our business plan will be compromised.

Our manufacturing process is complicated and expensive and it requires months of advance planning.

We rely on a limited number of manufacturers for our current supply of Mydcombi for commercialization.

If we were unable to acquire the necessary amount of deliverables to meet market demand, our ability to commercialize could be delayed substantially.

Even if we are able to establish and maintain agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:

● reliance on the third party for regulatory, compliance and quality assurance;

● the possible breach of the manufacturing agreement by the third party;

● the possible misappropriation of our proprietary information, including our trade secrets and know-how;

● the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.

We or our third-party suppliers may encounter shortages in the raw materials or active pharmaceutical ingredients necessary to produce Mydcombi in sufficient quantities for commercialization as a result of capacity constraints or delays or disruptions in the market for the raw materials or active pharmaceutical ingredients, including shortages caused by the purchase of such raw materials or active pharmaceutical ingredients by our competitors or others.

The failure by us or our third-party suppliers to obtain the raw materials or active pharmaceutical ingredients necessary to manufacture sufficient quantities of Mydcombi may have a material adverse effect on our business.

Our third-party suppliers may be subject to inspection and approval by regulatory authorities.

Our third-party suppliers may not be able to comply with cGMP regulations or similar regulatory requirements outside of the United States.

Our failure, or the failure of our third-party suppliers, to comply with applicable regulations could result in regulatory actions, such as the issuance of FDA Form 483 notices of observations, warning letters or sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of Mydcombi, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our products.

If any of our third-party suppliers fails to comply with cGMP or other applicable manufacturing regulations, our ability to develop and commercialize Mydcombi could suffer significant interruptions.

Any disruption, such as a fire, natural hazards or vandalism at our third-party suppliers could significantly interrupt our manufacturing capability.

We currently do not have alternative production plans in place or disaster-recovery facilities available.

In case of a disruption, we will have to establish alternative component supply sources.

This would require substantial capital on our part, which we may not be able to obtain on commercially acceptable terms or at all.

Additionally, we would likely experience months of manufacturing delays as we build facilities or locate alternative suppliers and seek and obtain necessary regulatory approvals.

If this occurs, we will be unable to satisfy manufacturing needs on a timely basis, if at all.

If changes to third-party suppliers occur, then there also may be changes to manufacturing processes inherent in the setup of new operations for our products.

Any such changes could require the conduct of bridging studies before we can use any materials produced at new facilities in our commercial supply.

Further, business interruption insurance may not adequately compensate us for any losses that may occur and we would have to bear the additional cost of any disruption, such as loss of potential sales of Mydcombi.

For these reasons, a significant disruptive event of any third-party suppliers could have drastic consequences, including placing our financial stability at risk.

Mydcombi and clobetasol propionate may compete with other product candidates and drugs for access to manufacturing facilities.

There are no assurances we would be able to enter into similar commercial arrangements with other manufacturers that operate under cGMP regulations and other applicable regulatory requirements and that might be capable of manufacturing for us.

Any performance failure on the part of our existing or future suppliers could delay clinical development or marketing approval.

If we were to experience an unexpected loss of supply of or if any supplier were unable to meet our clinical or commercial demand for Mydcombi or clobetasol propionate, we could experience delays in commercialization.

We could be unable to find alternative suppliers of acceptable quality and experience that can produce and supply appropriate volumes at an acceptable cost or on favorable terms.

Moreover, our suppliers are often subject to strict manufacturing requirements and rigorous testing requirements, which could limit or delay production.

The long transition periods necessary to switch manufacturers and suppliers, if necessary, would significantly delay commercialization of Mydcombi and clobetasol propionate, which would materially adversely affect our business, financial condition and results of operation.

If we, our service providers or our third-party manufacturers fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.

If we, our service providers, or any third-party manufacturers fail to comply with laws regulating the protection of the environment and health and human safety, we could be subject to enforcement actions and our business prospects could be adversely affected.

Our commercialization activities may involve the use of hazardous materials and chemicals or the maintenance of various flammable and toxic chemicals.

Failure to adequately handle and dispose of these materials could lead to liabilities for resulting damages, which could be substantial.

We also may be subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-home pathogens and the handling of bio-hazardous materials.

If we, our service providers, or any third-party manufacturers fail to comply with applicable federal, state or foreign laws or regulations, we could be subject to enforcement actions, which could adversely affect our ability to develop, market and sell our products successfully and could harm our reputation and lead to reduced acceptance of our products.

These enforcement actions may include:

● restrictions on, or prohibitions against, marketing our products;

● restrictions on importation of our products;

● suspension or withdrawal of product approvals;

● product seizures;

● injunctions;

● civil and criminal penalties and fines.

RISKS RELATED TO OUR INTELLECTUAL PROPERTY AND POTENTIAL LITIGATION

Our success depends on our ability to protect our intellectual property and proprietary technology.

Our success depends in large part on our ability to obtain and maintain patent, trade secret and other intellectual property protection in the United States and other countries with respect to our proprietary products.

If we do not adequately protect our intellectual property rights, competitors may be able to erode, negate or preempt any competitive advantage we may have, which could harm our business and ability to achieve profitability.

The patent application and approval process is expensive and time-consuming and we might not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.

If the scope of the patent protection we obtain is not sufficiently broad, we might not be able to prevent others from developing and commercializing technology and products similar or identical to ours.

The degree of patent protection we require to successfully compete in the marketplace may be unavailable or severely limited in some cases and might not adequately protect our rights or permit us to gain or keep any competitive advantage.

Although we enter into non-disclosure and confidentiality agreements with parties who have or have had access to confidential or patentable aspects of our research and development output, such as our employees, contractors and other third parties, any of these parties may breach the agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection.

In addition, publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all.

Therefore, we cannot be certain that we were the first to make the inventions claimed in our patents or pending patent applications, or that we were the first to file for patent protection of such inventions.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions, and has been the subject of much litigation in recent years.

As a result, the issuance, scope, validity, enforceability, and commercial value of our patent rights may be uncertain.

Our pending and future patent applications might not result in patents being issued which protect our technology or product candidates or which effectively prevent others from commercializing competitive technologies and product candidates.

In addition, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance.

Even if our patent applications issue as patents, they might not issue in a form that will provide us with any meaningful protection, prevent competitors or other third parties from competing with us, or otherwise provide us with any competitive advantage.

In addition, changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection.

the laws of foreign countries might not protect our rights to the same extent or in the same manner as the laws of the United States.

For example, patent laws in various jurisdictions, including significant commercial markets such as Europe, restrict the patentability of methods of treatment of the human body more than United States law does.

Some of our future patents and patent applications may be co-owned with third parties.

If we are unable to obtain an exclusive license to any such third-party co-owners’ interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products and technology.

In addition, we would need the cooperation of any such co-owners of our patents in order to enforce such patents against third parties, and such cooperation might not be provided to us.

Furthermore, we, or any future partners, collaborators, or licensees, may fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them.

Therefore, we may miss potential opportunities to strengthen our patent position.

Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and prospects.

Our patents covering our proprietary technology may be subject to challenge, narrowing, circumvention and invalidation by third parties.

Any of our patents may be challenged, narrowed, circumvented, or invalidated by third parties.

The issuance of a patent is not conclusive as to its inventorship, scope, validity, or enforceability, and our patents may be challenged in the courts or patent offices in the United States and abroad.

We may be subject to a third-party preissuance submission of prior art to the USPTO or become involved in opposition, derivation, revocation, reexamination, post-grant and inter partes review, or interference proceedings challenging our patent rights or the patent rights of others.

An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights.

Moreover, we may have to participate in interference proceedings declared by the USPTO to determine priority of invention or in post-grant challenge proceedings, such as oppositions in a foreign patent office, that challenge priority of invention or other features of patentability.

Such challenges may result in loss of patent rights, loss of exclusivity, or in patent claims being narrowed, invalidated, or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and product candidates.

Such proceedings also may result in substantial cost and require significant time from our management, even if the eventual outcome is favorable to us.

In addition, our competitors and other third parties may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner.

For example, a third party may develop a competitive therapy that provides benefits similar to our products but that uses a technology that falls outside the scope of our patent protection.

Our competitors may also seek approval to market generic versions of any approved products and in connection with seeking such approval may claim that our patents are invalid, unenforceable or not infringed.

In these circumstances, we may need to defend or assert our patents, or both, including by filing lawsuits alleging patent infringement.

In any of these types of proceedings, a court or other agency with jurisdiction may find our patents invalid or unenforceable, or that our competitors are competing in a non-infringing manner.

Thus, even if we have valid and enforceable patents, these patents still might not provide protection against competing products or processes sufficient to achieve our business objectives.

If the patent protection provided by the patents and patent applications we hold or pursue with respect to our product candidates is not sufficiently broad to impede such competition, our ability to successfully commercialize our products could be negatively affected, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.

We cannot be sure that we were the first to make the technologies claimed in our patents or patent applications or that we were the first to file for patent protection.

Assuming the other requirements for patentability are met, currently, the first to file a patent application is generally entitled to the patent.

However, prior to March 16, 2013, in the United States, the first to invent was entitled to the patent.

Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are not published until 18 months after filing, or in some cases not at all.

Similarly, we cannot be certain that parties from whom we may license or purchase patent rights were the first to make relevant claimed inventions or were the first to file for patent protection for them.

If third parties have filed patent applications on inventions claimed in our patents or applications on or before March 15, 2013, an interference proceeding in the United States can be initiated by such third parties to determine the first to invent any of the subject matter covered by the patent claims of our applications.

If third parties have filed such applications after March 15, 2013, a derivation proceeding in the United States can be initiated by such third parties to determine whether our invention was derived from theirs.

The patent application process is subject to numerous risks and there can be no assurance that we will be successful in obtaining patents for which we have applied.

Pending patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such applications.

The patent application process is subject to numerous risks and uncertainties, and there can be no assurance that we or any of our future development partners will be successful in protecting our product candidates by obtaining and defending patents.

These risks and uncertainties include the following:

● the USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process.

There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.

In such an event, competitors might be able to enter the market earlier than would otherwise have been the case;

● the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance;

● patent applications might not result in any patents being issued;

● patents that may be issued or in-licensed may be challenged, invalidated, modified, revoked, circumvented, narrowed, found to be unenforceable or otherwise might not provide any competitive advantage;

● our competitors, many of whom have substantially greater resources and many of whom have made significant investments in competing technologies, may seek or may have already obtained patents that will limit, interfere with or eliminate our ability to make, use, and sell our products;

● there may be significant pressure on the U.S.

government and international governmental bodies to limit the scope of patent protection both inside and outside the United States for disease treatments that prove successful, as a matter of public policy regarding worldwide health concerns;

● countries other than the United States may have patent laws less favorable to patentees than those upheld by United States courts, allowing foreign competitors a better opportunity to create, develop and market competing products.

Any of the foregoing events could have a material adverse effect on our business, financial condition, results of operations, and prospects.

It is difficult and costly to protect our intellectual property and our proprietary technologies, and we might not be able to ensure their protection.

Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection for the composition, use and structure of our products, the methods used to manufacture them, the related therapeutic targets and associated methods of treatment as well as on successfully defending these patents against potential third-party challenges.

Our ability to protect our products from unauthorized making, using, selling, offering to sell or importing by third parties is dependent on the extent to which we have rights under valid and enforceable patents that cover these activities.

The ultimate determination by the USPTO or by a court or other trier of fact in the United States, or corresponding foreign national patent offices or courts, on whether a claim meets all requirements of patentability cannot be assured.

Although we have conducted searches for third-party publications, patents and other information that may affect the patentability of claims in our various patent applications and patents, we cannot be certain that all relevant information has been identified.

Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our patents or patent applications, in our licensed patents or patent applications or in third-party patents.

We cannot provide assurances that any of our patent applications will be found to be patentable, including over our own prior art patents, or will issue as patents.

Neither can we make assurances as to the scope of any claims that may issue from our pending and future patent applications nor to the outcome of any proceedings by any potential third parties that could challenge the patentability, validity or enforceability of our patents and patent applications in the United States or foreign jurisdictions.

Any such challenge, if successful, could limit patent protection for our products and/or materially harm our business.

The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and might not adequately protect our rights or permit us to gain or keep our competitive advantage.

● we might not be able to generate sufficient data to support full patent applications that protect the entire breadth of developments in one or more of our programs;

● it is possible that one or more of our pending patent applications will not become an issued patent or, if issued, that the patent(s) will be insufficient to protect our technology, provide us with a basis for commercially viable products or provide us with any competitive advantages;

● if our pending applications issue as patents, they may be challenged by third parties as not infringed, invalid or unenforceable under United States or foreign laws;

● if issued, the patents under which we hold rights might not be valid or enforceable.

Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and prospects.

Obtaining and maintaining patent protection of our technologies depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and applications are required to be paid to the USPTO and various governmental patent agencies outside of the United States in several stages over the lifetime of the patents and applications.

The USPTO and various non- U.S.

governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process and after a patent has issued.

There are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.

Under the terms of some of our licenses or future licenses, we may not have the ability to maintain or prosecute patents in the portfolio, and must therefore rely on third parties to comply with these requirements.

Failure by us or our licensors to maintain protection of our patent portfolio could have a material adverse effect on our business, financial condition, results of operations, and prospects.

In addition, it is possible that defects of form in the preparation or filing of our patents or patent applications may exist, or may arise in the future, for example with respect to proper priority claims, inventorship, claim scope, or requests for patent term adjustments.

If we fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be reduced or eliminated.

If any of our present or future partners, collaborators, licensees, or licensors, are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised.

If there are material defects in the form, preparation, prosecution, or enforcement of our patents or patent applications, such patents may be invalid and/or unenforceable, and such applications may never result in valid, enforceable patents.

Any of these outcomes could impair our ability to prevent competition from third parties, which may have a material adverse effect on our business, financial condition, results of operations, and prospects.

Patent terms may be inadequate to protect our competitive position on our products for an adequate amount of time and if we do not obtain protection under the Hatch-Waxman Amendments and similar non-U.S.

legislation for extending the term of patents covering our products, our business may be materially harmed.

Patents have a limited lifespan.

In the United States, the natural expiration of a patent is generally 20 years after it is filed.

Various extensions may be available, however, the life of a patent, and the protection it affords, is limited.

As a result, our patent portfolio might not provide us with adequate and continuing patent protection sufficient to exclude others from commercializing products similar to our products.

Changes to the patent law in the United States or other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products.

Our success is heavily dependent on intellectual property, particularly patents.

Obtaining and enforcing patents in the biopharmaceutical industry involves both technological and legal complexity and is therefore costly, time consuming and inherently uncertain.

The Leahy-Smith America Invents Act, or the America Invents Act, reformed U.S.

patent law in part by changing the U.S.

patent system from a “first to invent” system to a “first inventor to file” system, expanding the definition of prior art, and developing a post-grant review system.

This legislation changed U.S.

patent law in a way that may weaken our ability to obtain patent protection in the United States for those applications filed after March 16, 2013.

Further, the America Invents Act created new procedures to challenge the validity of issued patents in the United States, including post-grant review and inter partes review proceedings, which some third parties have been using to cause the cancellation of selected or all claims of issued patents of competitors.

For a patent with an effective filing date of March 16, 2013 or later, a petition for post-grant review can be filed by a third party in a nine-month window from issuance of the patent.

A petition for inter partes review can be filed immediately following the issuance of a patent if the patent has an effective filing date prior to March 16, 2013.

A petition for inter partes review can be filed after the nine-month period for filing a post-grant review petition has expired for a patent with an effective filing date of March 16, 2013 or later.

Post-grant review proceedings can be brought on any ground of invalidity, whereas inter partes review proceedings can only raise an invalidity challenge based on published prior art and patents.

These adversarial actions at the USPTO review patent claims without the presumption of validity afforded to U.S.

patents in lawsuits in U.S.

federal courts, and use a lower burden of proof than used in litigation in U.S.

federal courts.

Therefore, it is generally considered easier for a competitor or third party to have a U.S.

patent invalidated in a USPTO post-grant review or inter partes review proceeding than invalidated in a litigation in a U.S.

federal court.

If any of our patents are challenged by a third party in such a USPTO proceeding, there is no guarantee that we, our licensors or collaborators will be successful in defending the patent, which would result in a loss of the challenged patent right to us.

In addition, court rulings in cases such as Association for Molecular Pathology v.

Myriad Genetics, Inc., BRCA1- & BRCA2-Based Hereditary Cancer Test Patent Litigation, Promega Corp.

Life Technologies Corp.

and Abbvie Deutschland GmbH v.

Janssen Biotech, Inc.

have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations.

In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents once obtained.

Depending on future actions by the U.S.

Congress, the U.S.

courts, the USPTO and the relevant law-making bodies in other countries, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.

Any changes to patent law in the United States or other jurisdictions that impairs our ability to protect our products could have a material adverse effect on our business, financial condition, results of operations, and prospects.

We might not be able to enforce our intellectual property rights throughout the world.

Filing, prosecuting, enforcing and defending patents on our product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some foreign countries can be less extensive than those in the United States.

The requirements for patentability may differ in certain countries, particularly in developing countries;

thus, even in countries where we do pursue patent protection, there can be no assurance that any patents will issue with claims that cover our products.

Moreover, our ability to protect and enforce our intellectual property rights may be adversely affected by unforeseen changes in foreign intellectual property laws.

Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions.

The legal systems of some countries, including India, China and other developing countries, do not favor the enforcement of patents and other intellectual property rights.

This could make it difficult for us to stop the infringement of our patents or the misappropriation of our other intellectual property rights.

For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties.

Consequently, we might not be able to prevent third parties from practicing our inventions in certain foreign countries.

Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop and market their own products and, further, may export otherwise infringing products to territories where we have patent protection, if our ability to enforce our patents to stop infringing activities is inadequate.

These products may compete with our products, and our patents or other intellectual property rights might not be effective or sufficient to prevent them from competing.

Agreements through which we license patent rights might not give us sufficient rights to permit us to pursue enforcement of our licensed patents or defense of any claims asserting the invalidity of these patents (or control of enforcement or defense) of such patent rights in all relevant jurisdictions as requirements may vary.

Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and resources from other aspects of our business.

Moreover, such proceedings could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us.

We might not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, might not be commercially meaningful.

Furthermore, while we intend to protect our intellectual property rights in major markets for our products, we cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market our

Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate.

Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and prospects.

If we are sued for infringing, misappropriating, or otherwise violating intellectual property rights of third parties, such litigation could be costly and time consuming and could prevent or delay us from commercializing our products.

Our commercial success depends, in part, on our ability to develop, manufacture, market and sell our products without infringing, misappropriating, or otherwise violating the intellectual property and other proprietary rights of third parties.

Third parties may have U.S.

issued patents and pending patent applications relating to compounds, methods of manufacturing compounds and/or methods of use for the treatment of the disease indications that may cover our products.

If any third-party patents or patent applications are found to cover our products or their methods of use or manufacture, or our approach to complement inhibition, we might not be free to manufacture or market our products as planned without obtaining a license, which might not be available on commercially reasonable terms, or at all.

There is a substantial amount of intellectual property litigation in the biotechnology and pharmaceutical industries, and we may become party to, or threatened with, litigation or other adversarial proceedings regarding intellectual property rights with respect to our products, including interference and post-grant proceedings before the USPTO.

There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the composition, use or manufacture of our products.

We cannot guarantee that any of our patent searches or analyses including, but not limited to, the identification of relevant patents, the scope of patent claims or the expiration of relevant patents are complete or thorough, nor can we be certain that we have identified each and every patent and pending application in the United States and abroad that is relevant to or necessary for the commercialization of our products in any jurisdiction.

Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our products may be accused of infringing.

In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents.

Accordingly, third parties may assert infringement claims against us based on intellectual property rights that exist now or arise in the future.

The outcome of intellectual property litigation is subject to uncertainties that cannot be adequately quantified in advance.

The pharmaceutical and biotechnology industries have produced a significant number of patents, and it might not always be clear to industry participants, including us, which patents cover various types of products or methods of use or manufacture.

The scope of protection afforded by a patent is subject to interpretation by the courts, and the interpretation is not always uniform.

If we are sued for patent infringement, we would need to demonstrate that our products or methods either do not infringe the patent claims of the relevant patent or that the patent claims are invalid or unenforceable, and we might not be able to do this.

Proving invalidity is difficult.

For example, in the United States, proving invalidity requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents.

Even if we are successful in these proceedings, we may incur substantial costs and the time and attention of our management could be diverted in pursuing these proceedings, which could significantly harm our business and operating results.

In addition, we might not have sufficient resources to bring these actions to a successful conclusion.

Further, the outcome of intellectual property litigation is subject to uncertainties that cannot be adequately quantified in advance, including the demeanor and credibility of witnesses and the identity of any adverse party.

This is especially true in intellectual property cases that may turn on the testimony of experts as to technical facts upon which experts may reasonably disagree.

If we are found to infringe, misappropriate, or otherwise violate a third party’s intellectual property rights, we could be forced, including by court order, to cease manufacturing or commercializing the infringing product.

Alternatively, we may be required to obtain a license from such third party in order to use the infringing technology and continue manufacturing or marketing the infringing product.

However, we might not be able to obtain any required license on commercially reasonable terms or at all.

Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us;

alternatively or additionally it could include terms that impede or destroy our ability to compete successfully in the commercial marketplace.

In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent.

A finding of infringement could prevent us from commercializing our products or force us to cease some of our business operations, which could harm our business.

Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.

Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and prospects.

We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property and proprietary technology.

Many of our current and former employees and our licensors’ current and former employees, including our senior management, were previously employed at universities or at other biotechnology or pharmaceutical companies, including some which may be competitors or potential competitors.

Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property,

including trade secrets or other proprietary information, of any such third party.

Litigation may be necessary to defend against such claims.

If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel or sustain damages.

Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or products.

Such a license might not be available on commercially reasonable terms or at all.

Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

In addition, while we typically require our employees, consultants and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own, which may result in claims by or against us related to the ownership of such intellectual property.

If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights.

Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our management.

Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and prospects.

We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful.

Competitors may infringe, misappropriate, or otherwise violate our patents, trademarks, copyrights or other intellectual property.

To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time consuming and divert the time and attention of our management and scientific personnel.

Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their patents, in addition to counterclaims asserting that our patents are invalid or unenforceable, or both.

In any patent infringement proceeding, there is a risk that a court will decide that a patent of ours is invalid or unenforceable, in whole or in part, and that we do not have the right to stop the other party from using the invention at issue.

There is also a risk that, even if the validity of such patents is upheld, the court will construe the patent’s claims narrowly or decide that we do not have the right to stop the other party from using the invention at issue on the grounds that our patent claims do not cover the invention.

An adverse outcome in a litigation or proceeding involving one or more of our patents could limit our ability to assert those patents against those parties or other competitors, and may curtail or preclude our ability to exclude third parties from making and selling similar or competitive products.

Similarly, if we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question.

In this case, we could ultimately be forced to cease use of such trademarks.

This is especially true in intellectual property cases that may turn on the testimony of experts as to technical facts upon which experts may reasonably disagree.

Even if we establish infringement, the court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which might not be an adequate remedy.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation.

There could also be public announcements of the results of hearings, motions or other interim proceedings or developments.

If securities analysts or investors perceive these results to be negative, it could adversely affect the price of our common stock.

Moreover, there can be no assurance that we will have sufficient financial or other resources to file and pursue such infringement claims, which typically last for years before they are concluded.

Even if we ultimately prevail in such claims, the monetary cost of such litigation and the diversion of the attention of our management and scientific personnel could outweigh any benefit we receive as a result of the proceedings.

Any such litigation could have a material adverse effect on our business, financial condition, results of operations, and prospects.

If we fail to comply with our obligations under our existing and any future intellectual property licenses with third parties, we could lose license rights that are important to our business.

We may be reliant upon licenses to certain patent rights and proprietary technology form third parties that are important or necessary to the commercialization of our product candidates.

These and other licenses might not provide exclusive rights to use such intellectual property and technology in all relevant fields of use and in all territories in which we may wish to commercialize our technology and products in the future.

As a result, we might not be able to prevent competitors from developing and commercializing competitive products in territories included in all of our licenses.

Our licensors may have relied on third party consultants or collaborators or funds from third parties such that our licensors are not the sole and exclusive owners of the patents we in-license.

This could have a material adverse effect on our competitive position, business, financial conditions, results of operations and prospects.

In addition, the agreements under which we license patent rights might not give us control over patent prosecution or maintenance, so that we might not be able to control which claims or arguments are presented and might not be able to secure, maintain, or successfully enforce necessary or desirable patent protection from those patent rights.

We cannot be certain that patent prosecution and maintenance activities by our licensors will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents.

Even if we are permitted to pursue such enforcement or defense, we will require the cooperation of our licensors, and cannot guarantee that we would receive it and on what terms.

We cannot be certain that our licensors will allocate sufficient resources or prioritize their or our enforcement of such patents or defense of such claims to protect our interests in any licensed patents.

If we cannot obtain patent protection, or enforce existing or future patents against third parties, it could have a material adverse effect on our business, financial condition, results of operations, and prospects.

Further, the agreements under which we currently license intellectual property or technology to or from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations.

The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could have a material adverse effect on our business, financial conditions, results of operations, and prospects.

Moreover, if disputes over intellectual property that we license prevent or impair our ability to maintain our licensing arrangements on commercially acceptable terms, we may be unable to successfully commercialize the affected products, which could have a material adverse effect on our business, financial conditions, results of operations, and prospects.

Disputes may arise regarding intellectual property subject to a licensing agreement, including:

● the scope of rights granted under the license agreement and other interpretation-related issues;

● the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;

● the sublicensing of patent and other rights under current and any future collaborative relationships;

● our diligence obligations under any license agreement and what activities satisfy such obligations;

● the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our license counterparties and us and our partners;

● the priority of invention of patented technology.

In spite of our efforts, our license counterparties might conclude that we have materially breached our license agreements and might therefore terminate the license agreements, which may remove our ability to and commercialize the products and technology covered by these license agreements.

If any in-licenses are terminated, competitors would have the freedom to seek regulatory approval of, and to market, products identical to ours.

It is possible that we may be unable to obtain any additional licenses that we require at a reasonable cost or on reasonable terms, if at all.

In that event, we may be required to expend significant time and resources to redesign our product candidates, technology, or the methods for manufacturing them or to develop or license replacement technology, all of which might not be feasible on a technical or commercial basis.

If we are unable to do so, we may be unable to commercialize the affected products, which could harm our business, financial condition, results of operations, and prospects significantly.

Any of these events could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.

If we are unable to protect the confidentiality of our trade secrets, the value of our technology could be negatively impacted and our business would be harmed.

In addition to the protection afforded by patents, we also rely on trade secret protection for certain aspects of our intellectual property.

However, trade secrets are difficult to protect.

We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, consultants, independent contractors, advisors, contract manufacturers, suppliers and other third parties.

We also enter into confidentiality and invention or patent assignment agreements with employees and certain consultants.

Any party with whom we have executed such an agreement may breach that agreement and disclose our proprietary information, including our trade secrets, and we might not be able to obtain adequate remedies for such breaches.

Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable.

Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the trade secret.

Further, if any of our trade secrets were to be

lawfully obtained or independently developed by a competitor, we would have no right to prevent such third party, or those to whom they communicate such technology or information, from using that technology or information to compete with us.

If any of our trade secrets were to be disclosed to or independently developed by a competitor, it could have a material adverse effect on our business, financial condition, results of operations, and prospects.

If our trademarks and trade names are not adequately protected, then we might not be able to build name recognition in our marks of interest and our business may be adversely affected.

Our trademarks or trade names, including Optejet®, may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks.

We rely on both registration and common law protection for our trademarks.

We might not be able to protect our rights to these trademarks and trade names or may be forced to stop using these names, which we need for name recognition by potential partners or customers in our markets of interest.

During trademark registration proceedings, we may receive rejections.

Although we would be given an opportunity to respond to those rejections, we may be unable to overcome such rejections.

In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks.

Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks might not survive such proceedings.

If we are unable to establish name recognition based on our trademarks and trade names, we might not be able to compete effectively and our business may be adversely affected.

RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK

If we are unable to raise sufficient additional capital on acceptable terms, we may be unable to expand or maintain our HYPE reserve, which could adversely affect our liquidity, financial condition and growth prospects.

We completed a private placement of our securities on June 20, 2025, the net proceeds of which have been used for our HYPE treasury strategy.

To the extent holders exercise the warrants we have issued for cash, we may acquire additional HYPE at market prices, which could magnify our exposure to HYPE price volatility.

If we are unable to raise sufficient additional capital through warrant exercises, our at-the-market offering facility or other equity financings on acceptable terms, we may be unable to expand or maintain our HYPE reserve, which could adversely affect our liquidity, financial condition and growth prospects.

We may need to raise additional capital in the future, which may not be available on reasonable terms, or at all.

We require significant capital resources in order to continue to operate our business.

As of December 31, 2025, we had cash and cash equivalents of $6.4 million and an accumulated deficit of approximately $240.6 million.

Also as of December 31, 2025, we owed approximately $8.3 million in principal and accrued interest under the Loan and Security Agreement.

We expect to continue to incur cash outflows from operations for the near future.

Implementation of our plans will depend on many factors, including our ability to successfully commercialize our products and services, competing technological and market developments, and the need to enter into collaborations with other companies.

Also, it is very difficult to project our current monthly cash burn rate, and we may expend our resources sooner than we anticipate.

Although we have the ability to liquidate HYPE tokens to fund our operations, any required additional capital may not be available on reasonable terms, if at all, due to a variety of factors, including volatile conditions in the economy and capital markets, due to inflation, questions about bank stability and other factors.

We may not be able to obtain financing on favorable terms, if at all.

If we raise additional funds by issuing equity securities, the percentage ownership of our then current stockholders will be reduced, and the holders of the new equity securities may have rights superior to those of our then existing securityholders, which could adversely affect the market price of our common stock and the voting power of shares of our common stock.

If we raise additional funds by issuing debt securities or preferred stock, the holders of such securities may have rights that are senior to those of our then existing securityholders, and the terms of those securities could impose restrictions on operations and create a significant interest expense for us, which could have a materially adverse effect on our business.

A significant portion of our total outstanding shares may be sold into the market in the near future, which could cause the market price of our common stock to drop significantly, even if our business is performing well.

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These sales, or the perception in the market that holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.

As of March 31, 2025, we had 300,000,000 shares of common stock authorized and 2,830,546 shares of common stock outstanding, 1,363,135 shares of common stock issuable upon exercise of warrants, 56,318 shares of our common stock issuable upon exercise of options, 5,952,380 of shares issuable upon the conversion of convertible debt and 247,623 shares of common stock issuable upon the vesting and/or delivery of restricted stock units.

The price of our common stock has been, and may continue to be, volatile and may fluctuate substantially, which could result in substantial losses for purchasers of our common stock.

The stock market historically has experienced extreme price and volume fluctuations, such as those seen in 2024.

As a result of this volatility, you might not be able to sell your common stock at or above the price at which you purchase it.

From January 1, 2020 through March 15, 2025 the per share trading price of our common stock has been as high as $617.60 and as low as $1.43.

The per share trading price of our common stock might continue to fluctuate significantly in response to various factors, some of which are beyond our control.

These factors include:

● general economic, industry and market conditions, including as a result of the coronavirus pandemic and geopolitical events such as the ongoing war between Russia and Ukraine or between Israel and Hamas;

● our ability to successfully manufacture and commercialize Mydcombi and clobetasol propionate;

● the success of competitive products or technologies;

● commencing, maintaining, or terminating of licensing agreements and other collaborations;

● regulatory or legal developments in the United States and other countries;

● developments or disputes concerning patent applications, issued patents or other proprietary rights;

● the recruitment or departure of key personnel;

● actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;

● our inability to obtain or delays in obtaining adequate product supply for any approved product or inability to do so at acceptable prices;

● significant lawsuits, including patent or stockholder litigation;

● variations in our financial results or those of companies that are perceived to be similar to us;

● changes in the structure of healthcare payment systems;

● market conditions in the pharmaceutical and biotechnology sectors;

● amount of our debt servicing;

● the progress and outcome of our search for strategic alternatives;

● the other factors described in this “Risk Factors” section.

As of December 31, 2025, we had 600,000,000 shares of common stock authorized and 8,680,005 shares of common stock outstanding, 33,820,785 shares of common stock issuable upon exercise of warrants, 92,075 shares of common stock issuable upon exercise of options, 1,545,000 shares of common stock issuable upon the vesting of restricted stock units (“RSUs”) and 16,307,691 shares of common stock issuable upon conversion of our Series A Non-Voting Convertible Preferred Stock (the “Series A Preferred Stock”).

We have broad discretion in the use of our cash, including the net proceeds from our financings, and might not use them effectively.

Our management will have broad discretion in the application of our cash, including the net proceeds from our financing transactions, and could spend our cash in ways that do not improve our results of operations or enhance the value of our common stock.

The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our common stock to decline and delay the development of our product candidates.

Our management has broad discretion in the application and deployment of our cash resources, including the net proceeds from our financing transactions, and could spend our cash in ways that do not improve our results of operations or enhance the value of our common stock.

The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business and cause the price of our common stock to decline.

Pending their use, we may invest our cash, including the net proceeds from our financings, in a manner that does not produce income or that loses value.

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If this happens, we may need to raise additional capital to fund our operations, which may not be available in sufficient amounts or on reasonable terms, if at all, sooner than expected.

As a public company, we need to have effective internal controls and disclosure controls, which is costly and time consuming.

Failure to develop and maintain adequate financial controls could cause us to have material weaknesses, which could adversely affect our operations and financial position.

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, the Dodd-Frank Act, and the rules and regulations of our stock exchange.

The requirements of these rules and regulations will increase our legal, accounting, and financial compliance costs, will make some activities more difficult, time-consuming, and costly, and may also place undue strain on our personnel, systems, and resources.

We are required to disclose changes made to our internal control and procedures on a quarterly basis.

As a public company, we are required to have effective internal controls and disclosure controls, which are costly and time consuming to implement.

Failure to maintain adequate financial controls could cause us to have material weaknesses, which could adversely affect our operations and financial position.

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002, the Dodd-Frank Act, and the rules and regulations of Nasdaq.

The requirements of these rules and regulations result in legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly, and may also place undue strain on our personnel, systems and resources.

We are required to disclose changes made to our internal controls and procedures on a quarterly basis.

However, our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until we are no longer a “smaller reporting company” as defined in the rules of the SEC.

If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, the market price of our stock could decline and we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC, or other regulatory authorities, which would require additional financial and management resources.

If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, the market price of our stock could decline and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities, which would require additional financial and management resources.

An internal control system, no matter how well-designed, cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to maintain proper and effective internal controls, we might not be able to produce timely and accurate financial statements.

If that were to happen, the market price of our stock could decline

and we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC, or other regulatory authorities.

Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results or cause us to fail to meet our reporting obligations.

If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act, or if we are unable to maintain proper and effective internal controls, we might not be able to produce timely and accurate financial statements.

If that were to happen, the market price of our stock could decline and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities.

Any failure to maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results or cause us to fail to meet our reporting obligations.

Any failure to implement and maintain effective internal controls also could adversely affect the results of periodic management evaluations regarding the effectiveness of our internal control over financial reporting that we are required to include in our periodic reports filed with the SEC under Section 404 of the Sarbanes-Oxley Act.

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Such changes may not be effective, however, in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and could materially impair our ability to operate our business.

In the event that we are not able to demonstrate compliance with Section 404 of the Sarbanes-Oxley Act in a timely manner, that our internal controls are perceived as inadequate, or that we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating results and our stock price could decline.

We are an “smaller reporting company” and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors.

We are considered a “smaller reporting company” under Rule 12b-2 of the Exchange Act.

We are therefore entitled to rely on certain reduced disclosure requirements, such as an exemption from providing selected financial data and executive compensation information.

These exemptions and reduced disclosures in our SEC filings due to our status as a smaller reporting company also mean our auditors are not required to review our internal control over financial reporting and may make it harder for investors to analyze our results of operations and financial prospects.

We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions.

If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our common stock prices may be more volatile.

We will remain a smaller reporting company until our public float exceeds $250 million as of the last business day of our most recently completed second quarter if our annual revenues are $100 million or more as of our most recently completed fiscal year, or until our public float exceeds $700 million as of the last business day of our most recently completed second quarter if our annual revenues are less than $100 million as of our most recently completed fiscal year.

In the event that we are not able to demonstrate compliance with Section 404 of the Sarbanes-Oxley Act, that our internal controls are perceived as inadequate, or that we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating results and our stock price could decline.

The accuracy of our financial reporting depends on the effectiveness of our internal control over financial reporting.

We have identified material weaknesses in our internal control over financial reporting, which may raise questions regarding the accuracy and reliability of our financial statements and our ability to report accurately in the future.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

We have identified material weaknesses, both in the past and currently, and have taken steps to remediate those material weaknesses, as follows:

● As previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, we identified a material weakness in our internal control over financial reporting because the controls associated with evaluating our right-of-use (ROU) assets for potential impairment were not adequately designed or operating effectively.

This deficiency resulted from a lack of sufficient precision in our control activities to properly account for the impairment of ROU assets and to appropriately measure the impairment loss.

To remediate this material weakness, management redesigned the control requiring that ROU assets be evaluated for impairment upon the occurrence of triggering events.

The control now includes the identification of appropriate asset groups, a structured assessment of triggering events, the application of the required order of impairment testing, including performance of the undiscounted cash flow recoverability test with measurement of the impairment utilizing the fair value of the asset group as required, with contemporaneous written documentation subject to review by the Chief Financial Officer.

● As previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, we identified a material weakness in our internal control over financial reporting because the controls over the accounting for certain significant and complex, non-routine transactions and events were not adequately designed or operating effectively.

Specifically, we failed to properly account for the fair value of common equity shares issued in relation to the consideration for licensing agreements and debt modification.

To remediate this material weakness, management redesigned the control associated with contractual equity issuances.

The control now requires that all such obligations to issue equity are subject to a mandatory accounting assessment, followed by a review by a professional with the requisite technical competence.

Management has evaluated the design, implementation and operating effectiveness of these enhanced controls and has concluded that the two material weaknesses described above have been remediated and are operating effectively as of December 31, 2025.

This remediation represents a material change to our internal control over financial reporting during the quarter ended December 31, 2025.

In addition, during the process of preparing the financial statements as of, and for the year ended, December 31, 2025, we determined that we had a new material weakness.

We failed to properly design and implement controls over digital asset pricing, specifically relating to validation of digital asset pricing and principal market determination provided by third party service providers.

Due to the existence of this material weakness, our management has concluded that, as of December 31, 2025, our internal control over financial reporting was not effective.

We have since taken steps to redesign the internal controls over digital asset pricing and principal market determination, including implementation of an internal process to test, and independently verify, the digital asset pricing data received from the third party source.

Our management is committed to taking further action and implementing necessary enhancements or improvements, including those necessary to address the material weakness cited above.

However, the material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

We cannot provide any assurance that the measures we have taken will be sufficient to remediate the material weakness that existed as of December 31, 2025 or will avoid additional material weaknesses from occurring in the future.

These material weaknesses, or those that may occur in the future, could have an adverse effect on our ability to meet our reporting obligations, which could cause our investors to lose confidence in our publicly reported information, cause the market price of our stock to decline, harm our reputation, business and financial results, and expose us to litigation or investigations by the SEC or other regulatory authorities.

OTHER RISKS RELATING TO THE OWNERSHIP OF OUR COMMON STOCK

Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

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These provisions also could limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock.

In addition, because our Board of Directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our Board.

In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors (the “Board of Directors” or the “Board”).

Among other things, these provisions:

● allow the authorized number of our directors to be changed only by resolution adopted by a majority of our Board;

● limit the manner in which stockholders can remove directors from the Board, as may be permitted by law;

● establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our Board;

● allow the authorized number of our directors to be changed only by resolution adopted by a majority of our Board of Directors;

● limit the manner in which stockholders can remove directors from the board of directors, as may be permitted by law;

● establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our Board of Directors;

● limit who may call stockholder meetings;

● authorize our Board to issue preferred stock without stockholder approval, which could be used to institute a stockholder rights plan, or so-called “poison pill,” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our Board;

● require all stockholder action to take place at duly called stockholder meetings and disallow the ability of our stockholders to act by majority written consent.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

● authorize our Board of Directors to issue preferred stock without stockholder approval, which could be used to institute a stockholder rights plan, or so-called “poison pill,” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our Board of Directors.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law (the “DGCL”), which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is, to the fullest extent permitted by law, the sole and exclusive forum for substantially all disputes between us and our stockholders.

These choice of forum provisions could limit the ability of stockholders to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Unless we consent to the selection of an alternative forum, our certificate of incorporation provides that the Court of Chancery of the State of Delaware, or the Court of Chancery, will be, to the fullest extent permitted by law, the sole and exclusive forum for any derivative action or proceeding brought on our behalf;

any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees or agent to the Company or our stockholders;

any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, or DGCL, or our certificate of incorporation or bylaws;

Unless we consent to the selection of an alternative forum, our certificate of incorporation provides that the Court of Chancery of the State of Delaware (the “Court of Chancery”) will be, to the fullest extent permitted by law, the sole and exclusive forum for any derivative action or proceeding brought on our behalf;

any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees or agents to the Company or our stockholders;

any action asserting a claim against us arising pursuant to the DGCL, or our certificate of incorporation or bylaws;

any action to enforce or determine the validity of our certificate of incorporation or bylaws;

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If securities analysts do not continue to publish research or reports about our business or if they publish negative evaluations of our stock, the price of our stock could decline.

The trading market for our common stock will rely, in part, on the research and reports that industry or financial analysts publish about us or our business.

The trading market for our common stock relies, in part, on the research and reports that industry or financial analysts publish about us or our business.

If securities analysts do not continue coverage of us, the trading price of our stock could decrease.

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If one or more of these analysts cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline.

The accuracy of our financial reporting depends on the effectiveness of our internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

During the process of preparing the financial statements as of and for the year ended December 31, 2024, we determined that we had material weaknesses related to the incorrect valuation of the Company’s accounting for shares of common stock that were issued for licensing agreements and debt modification and the impairment of a right-of-use asset.

Due to the existence of these material weaknesses, our management has concluded that as of December 31, 2024, our internal control over financial reporting was not effective.

We are taking steps to remediate these material weaknesses.

However, we cannot provide any assurance that the measures we have taken to date and that we intend to implement will be sufficient to remediate the material weaknesses that we have identified, or to avoid additional material weaknesses from occurring in the future.

We are an “smaller reporting company” and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors.

We are considered a “smaller reporting company” under Rule 12b-2 of the Exchange Act.

We are therefore entitled to rely on certain reduced disclosure requirements, such as an exemption from providing selected financial data and certain executive compensation information.

We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions.

If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our common stock prices may be more volatile.

We are highly dependent on the services of our senior management team, and if we are not able to retain these members of our management team or recruit and retain additional management personnel, our business will be harmed.

We are highly dependent on our senior management team.

The employment agreements we have with our executive officers do not prevent such persons from terminating their employment with us at any time.

The loss of the services of any of these persons could impede the achievement of our business objectives.

In addition, we are dependent on our continued ability to retain and motivate highly qualified additional personnel.

If we are not able to retain our management and to retain personnel necessary for the operation of our business, we might not be able to sustain our operations or grow.

In the ordinary course of our business, we collect and store sensitive data and intellectual property and proprietary business information owned or controlled by ourselves or our business partners.

This data encompasses a wide variety of business-critical information including operational information, commercial information, and business and financial information.

We face four primary risks relative to protecting this critical information:

loss of access;

inappropriate disclosure;

inappropriate modification;

and inadequate monitoring of our controls over the first three risks.

The secure processing, storage, maintenance and transmission of this critical information is vital to our operations and business strategy, and we devote significant resources to protecting such information.

security mandates or other disruptions.

Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations.

A significant cyber incident, including system failure, security breach, disruption by malware or other damage, could interrupt or delay our operations, result in a violation of applicable cybersecurity and privacy and other laws, damage our reputation, cause a loss of customers or expose sensitive data, or give rise to monetary fines and other penalties, which could be significant.

Any such breach or interruption could compromise our networks and the information stored there could be accessed by unauthorized parties, publicly disclosed, lost or stolen.

Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen.

We engage third-party vendors and service providers to store and otherwise process some of our data, including sensitive and personal information.

Our vendors and service providers may also be the targets of the risks described above, including cyberattacks, malicious software, phishing schemes and fraud.

states and the U.S.

federal government, regulatory penalties, other legal proceedings, including but not limited to private litigation, the incurrence of significant remediation costs, disruptions to our business operations, diversion of management efforts and damage to our reputation, which could harm our business and operations.

Because of the rapidly moving nature of technology and the increasing sophistication of cybersecurity threats, our measures to prevent, respond to and minimize such risks may be unsuccessful.

In addition, our insurance may be insufficient to cover our losses resulting from cyber-attacks, breaches or other interruptions, and any incidents may result in loss of, or increased costs of, such insurance.

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-K

Item 1A. Risk Factors