What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-03-31 compared with 2025-03-27 · 1026 added, 1159 removed, 291 unchanged (88% of the section changed)

Financial Statements and Supplementary

FINANCIAL STATEMENTS - TABLE OF CONTENTS

For the Years Ended December 31, 2024 and 2023

Report of Independent Registered Public Accounting Firm (PCAOB

Consolidated Financial Statements:

Financial Statements and Supplementary Data

STATEMENTS - TABLE OF CONTENTS

the Years Ended December 31, 2025 and 2024

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Financial Statements:

Consolidated Balance Sheets at December 31, 2025 and 2024

7 unchanged sentences

have audited the accompanying consolidated balance sheets of NexGel, Inc.

(the “Company”) as of December 31, 2024 and 2023,

and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the years in the two year

period ended December 31, 2024, and the related notes (collectively referred to as the financial statements).

In our opinion, the financial

statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the

results of its operations and its cash flows for each of the years in the two year period ended December 31, 2024, in conformity with

accounting principles generally accepted in the United States of America.

and its subsidiaries (the “Company”) as of December

31, 2025 and 2024, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then

ended, and the related notes to consolidated financial statements (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December

31, 2025 and 2024, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting

principles generally accepted in the United States of America.

Paragraph – Going Concern

accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note

2 to the financial statements, the Company has recurring losses from operations and negative cash flows from operating activities, which

raises substantial doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also

described in Note 2.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

2 of the financial statements, the Company expects to continue incurring operating losses and generating negative cash flows from operations

for the foreseeable future.

Additionally, the Company has a significant working capital deficiency, accumulated deficit and net loss

for the year.

These conditions raise substantial doubt about its ability to continue as a going concern.

Management’s plans in

regard to these matters are also described in Note 2 to the financial statements.

The financial statements do not include any adjustments

that might be necessary should the Company be unable to continue as a going concern.

financial statements are the responsibility of the Company’s management.

21 unchanged sentences

provide a reasonable basis for our opinion.

Stone & Company, L.L.P .

We have served as the Company’s auditor since 2019.

Dallas, Texas

March 27, 2025

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

Turner, Stone & Company, L.L.P.

have served as the Company’s auditor since 2019.

BALANCE SHEETS

thousands, except share and per share data)

December 31, 2025

1 unchanged sentence

Current Assets:

Restricted cash

Accounts receivable, net

4 unchanged sentences

Operating lease - right of use asset

Investment in NexGelRx

LIABILITIES AND STOCKHOLDERS’ EQUITY

5 unchanged sentences

Current portion of note payable

Warrant liability

Contingent consideration liability

Finance lease liability, short term

Operating lease liability, current portion

Partnership accrued advance

Warrant liability and contingent consideration liability

Current portion of finance lease liability

Current portion of operating lease liability

Total current liabilities

Operating lease liability, net of current portion

Finance lease liability, long term

Finance lease liability, net of current portion

Notes payable, net of current portion

1 unchanged sentence

Commitments and Contingencies (Note 18)

STOCKHOLDERS’

STOCKHOLDERS’ EQUITY

Preferred stock, par value $ 0.001 per share, 5,000,000 shares authorized, no shares issued and outstanding

Common stock, par value $ 0.001 per share, 25,000,000 shares authorized;

7,638,497 and 5,741,838 shares issued and outstanding

as of December 31, 2024 and 2023, respectively

8,143,133 and 7,638,497 shares issued and outstanding as of December 31, 2025 and 2024, respectively

Additional paid-in capital

4 unchanged sentences

Total liabilities and stockholders’ equity

The accompanying notes are an integral part of these

consolidated financial statements.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

accompanying notes are an integral part of these consolidated financial statements.

STATEMENTS OF OPERATIONS

thousands, except share and per share data)

Year Ended December 31,

11 unchanged sentences

Change in fair value of contingent consideration

Gain in spin-off of NexGelRx

Other expense

5 unchanged sentences

Net loss per common share – basic and diluted

Weighted average shares used in computing net loss per common share – basic

The accompanying notes are an integral part of these

consolidated financial statements.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

Years Ended December 31, 2024 and 2023

(in thousands, except share data)

Weighted average shares used in computing net loss per common share – basic and diluted

accompanying notes are an integral part of these consolidated financial statements.

STATEMENTS OF STOCKHOLDERS’ EQUITY

Ended December 31, 2025 and 2024

thousands, except share data)

Non-controlling

Stockholders’

2 unchanged sentences

Restricted stock issuances

Shares issued in acquisition

Exercise of warrants

Issuance of securities

Non-controlling interest contribution

Balance, December 31, 2024

Non-controlling

Stockholders’

2 unchanged sentences

Restricted stock issuances

Shares issued in acquisition

Exercise of warrants

Issuance of securities

Non-controlling interest contribution

Warrants issued in conjunction with NexgelRx

Balance, December 31, 2025

The accompanying notes are an integral part of these

consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

accompanying notes are an integral part of these consolidated financial statements.

STATEMENTS OF CASH FLOWS

Year Ended December 31,

1 unchanged sentence

Adjustments to reconcile net loss to net cash used in operating activities:

Loss attributable to non-controlling interest in joint venture

Depreciation and amortization

4 unchanged sentences

Amortization of right of use asset

Warrant modification expense

Gain in spin-off of NexGelRx

Changes in operating assets and liabilities:

4 unchanged sentences

Accrued expenses and other current liabilities

Partnership advance

Deferred revenue

Operating lease liability

Net Cash Used in Operating Activities

5 unchanged sentences

Financing Activities

Principal payments on operating lease liability

Proceeds from notes payable

Payment of contingent consideration

6 unchanged sentences

Net Increase (Decrease) in Cash (*)

Cash – Beginning of year

Cash – End of year

Cash and restricted cash – Beginning of year

Cash and restricted cash – End of year

(*) $ 1,490 relates to decrease in cash

and $ 741 relates to increase in restricted cash

Supplemental Non-cash Investing and Financing Activities

Warrants issued in conjunction with investment in NexgelRx

Additional ROU assets and operating lease liabilities from lease modification

Shares issued in conjunction with asset acquisition

1 unchanged sentence

Property and equipment financed under financing leases

Property and equipment contributed as capital investment to JV

ROU asset and operating lease liabilities recognized upon consolidation

The accompanying notes are an integral part of these

consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Description of Business, Stock Split and

Basis of Presentation

(“NexGel” or the “Company”)

manufactures high water content, electron beam cross-linked, aqueous polymer hydrogels, or gels, used for wound care, medical diagnostics,

transdermal drug delivery and cosmetics.

The Company specializes in custom gels by capitalizing on proprietary manufacturing technologies.

The Company has historically served as a contract manufacturer, supplying our gels to third parties who incorporate them into their own

Beginning in 2020, we created two new lines of business for the Company.

First, we launched our own line of branded consumer

products sold direct to consumers.

Second, we expanded into custom and white label opportunities, which focuses on combining our gels

with proprietary branded products and white label opportunities.

All of our gel products are manufactured using proprietary and non-proprietary

mixing, coating and cross-linking technologies.

Together, these technologies enable us to produce gels that can satisfy rigid tolerance

specifications with respect to a wide range of physical characteristics (e.g., thickness, water content, adherence, absorption, moisture

vapor transmission rate [a measure of the passage of water vapor through a substance] and release rate) while maintaining product integrity.

Additionally, we have the manufacturing ability to offer broad choices in the selection of liners onto which the gels are coated.

Consequently,

the Company and its customers are able to determine tolerances in moisture vapor transmission rate and active ingredient release rates

while personalizing color and texture.

NexGel was previously known as AquaMed Technologies,

accompanying notes are an integral part of these consolidated financial statements.

TO CONSOLIDATED FINANCIAL STATEMENTS

thousands, except share and per share data)

Description of Business and Basis of Presentation

(“NexGel” or the “Company”) manufactures high water content, electron beam cross-linked, aqueous polymer

hydrogels, or gels, used for wound care, medical diagnostics, transdermal drug delivery and cosmetics.

The Company specializes in custom

gels by capitalizing on proprietary manufacturing technologies.

The Company has historically served as a contract manufacturer, supplying

our gels to third parties who incorporate them into their own products.

Beginning in 2020, we created two new lines of business for the

First, we launched our own line of branded consumer products sold direct to consumers.

Second, we expanded into custom and white

label opportunities, which focuses on combining our gels with proprietary branded products and white label opportunities.

gel products are manufactured using proprietary and non-proprietary mixing, coating and cross-linking technologies.

Together, these technologies

enable us to produce gels that can satisfy rigid tolerance specifications with respect to a wide range of physical characteristics (e.g.,

thickness, water content, adherence, absorption, moisture vapor transmission rate [a measure of the passage of water vapor through a

substance] and release rate) while maintaining product integrity.

Additionally, we have the manufacturing ability to offer broad choices

in the selection of liners onto which the gels are coated.

Consequently, the Company and its customers are able to determine tolerances

in moisture vapor transmission rate and active ingredient release rates while personalizing color and texture.

was previously known as AquaMed Technologies, Inc.

(“AquaMed”) before changing its name to NexGel, Inc.

on November 14, 2019.

On May 15, 2024, the Company purchased substantially

all of the assets from Semmens Online Pty Ltd as Trustee for Semmens Business Trust (the “SG Seller”) related to the SG Seller’s

eyeliner, fake eyelashes, lash serum and mascara business operating under the tradename “Silly George” (collectively, the

“Silly George Business”).

On December 1, 2023, the

Company purchased substantially all of the assets Olympus Trading Company, LLC (the “Kenkoderm Seller”) related to the Kenkoderm

Seller’s skincare line focused on reducing symptoms associated with psoriasis operating under the tradename “Kenkoderm”

(“Kenkoderm acquisition”).

On March 1, 2023, the Company acquired a 50 % interest

in a newly formed joint venture (“JV”), CG Converting and Packaging, LLC (“CGN”), with C.G.

Laboratories Inc.

(“CG Labs”) for its converting and packaging business.

The JV is effective March 1, 2023.

As a result of this transaction,

the Company owns 50 % of the JV, with the remaining 50 % held by CG Labs.

On January 6, 2023, the

Company acquired a 50 % interest in a newly formed JV (“Enigma”) to pursue branded consumer product retail opportunities and

the development of new patch products.

The JV agreement is effective January 6, 2023.

As a result of this transaction, the Company owns

50 % of the JV, with the remaining 50 % held by Moiety.

Basis of Presentation

The consolidated financial statements of the Company

have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and

are presented in US dollars.

Principles of Consolidation

The accompanying consolidated financial statements

include the accounts of the Company and its consolidated wholly-owned subsidiary, NexGelRx, Inc.

and the fifty percent ( 50 %) owned JV’s

(see Note 5).

May 15, 2024, the Company purchased substantially all of the assets from Semmens Online Pty Ltd as Trustee for Semmens Business Trust

(the “SG Seller”) related to the SG Seller’s eyeliner, fake eyelashes, lash serum and mascara business operating under

the tradename “Silly George” (collectively, the “Silly George Business”).

of Presentation

consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the

United States of America (“GAAP”) and are presented in US dollars.

of Consolidation

accompanying consolidated financial statements include the accounts of the Company and the fifty percent ( 50 %) owned JV’s (see Note 7).

Going Concern

The accompanying audited consolidated financial

statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the

Company as a going concern.

As of December 31, 2024, the Company had a cash balance of $ 1.8

For the year ended December 31, 2024, the Company incurred a net loss of $ 3.5

million and had a net usage of cash in operating activities of $ 3.9

In addition, the Company had a working capital of $ 2.6

million as of December 31, 2024.

accompanying consolidated financial statements have been prepared in conformity with GAAP, which

contemplate continuation of the Company as a going concern.

As of December 31, 2025, the Company had a cash balance of $ 317 thousand.

For the year ended December 31, 2025, the Company incurred a net loss attributable to NexGel stockholders of $ 3.0 million and

had net usage of cash in operating activities of $ 1.3 million.

In addition, the Company had a working capital of $ 1.4 million as of December

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

On November 11, 2024, the Company entered into subscription

agreements with investors and certain members of its board of directors and management for the sale by the Company of an aggregate of

363,636 units at a price to the public of $ 5.50 per unit, with each unit consisting of two shares of the Company’s common stock,

and a warrant to purchase one share of common stock at an exercise price of $ 4.25 per share (the “November Financing”).

November Financing closed on November 20, 2024 with gross proceeds to the Company of approximately $ 2.0 million, before deducting the

placement agent’s fees and other estimated offering expenses payable by the Company, and excluding the proceeds, if any, from the

exercise of the warrants.

The Company intends to use the net proceeds from the November Financing for working capital and for general

corporate purposes (discussed further within Note 13).

Management is exploring new product channel sales

in adjacent industries, such as cosmetics, athletic products, and proprietary medical devices.

The Company has increased focus on sales

and developing a sales pipeline for potential customers.

This customer base expansion will enable us to provide financial stability for

the foreseeable future, expand our current processes, and position us for long-term shareholder value creation.

We intend to maintain and attempt to grow our existing

contract manufacturing business.

We also plan to continue building and developing our catalogue of consumer products for sale to branding

partners and to use our in-house capabilities to create and test market additional branded products.

These products will be target marketed

and sold online through social media and online advertising and marketplaces.

Furthermore, the Company plans to develop its own proprietary

medical devices and explore drug delivery programs for its technology.

Additionally, the Company continues to evaluate strategic initiatives

(e.g., acquisitions) and additional capital raises through debt or equity may be necessary to achieve these objectives.

We expect to continue incurring losses for the near-term

Our ability to continue to operate as a going concern in the long-term is dependent upon our ability to manage and grow our current

products and to ultimately achieve profitable operations.

Management may consider various options to raise capital to fund potential

acquisitions through equity or debt offerings.

There can be no assurances, however, that management will be able to obtain sufficient

additional funds, if needed, or that such funds, if available, will be obtained on terms satisfactory to us.

The consolidated

financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and liabilities

that might be necessary should we be unable to continue as a going concern.

Additionally, it is reasonably possible that estimates made

in the consolidated financial statements have been, or will be, materially and adversely impacted in the near term as a result

of these conditions, including the recoverability of long-lived assets.

The Company’s

cash balance of $ 317 thousand as of December 31, 2025 does not include $ 741 thousand in partnership restricted cash.

See Note 18 for

additional information regarding partnership restricted cash.

is exploring new product channel sales in adjacent industries, such as cosmetics, athletic products, and proprietary medical devices.

The Company has increased focus on sales and developing a sales pipeline for potential customers.

This customer base expansion will enable

us to provide financial stability for the foreseeable future, expand our current processes, and position us for long-term shareholder

value creation.

intend to maintain and attempt to grow our existing contract manufacturing business.

We also plan to continue building and developing

our catalogue of consumer products for sale to branding partners and to use our in-house capabilities to create and test market additional

branded products.

These products will be target marketed and sold online through social media and online advertising and marketplaces.

Furthermore, the Company plans to develop its own proprietary medical devices and explore drug delivery programs for its technology.

Additionally, the Company continues to evaluate strategic initiatives (e.g., acquisitions), and additional capital raises through debt

or equity may be necessary to achieve these objectives.

expect to continue incurring losses for the near-term.

Our ability to continue to operate as a going concern in the long-term is dependent

upon our ability to manage and grow our current products and to ultimately achieve profitable operations.

Management may consider various

options to raise capital to fund our current business activities and potential acquisitions through equity or debt offerings.

be no assurances, however, that management will be able to obtain sufficient additional funds, if needed, or that such funds, if available,

will be obtained on terms satisfactory to us.

The consolidated financial statements do not include any adjustments relating to the recoverability

and classification of recorded assets and liabilities that might be necessary should we be unable to continue as a going concern.

Additionally,

it is reasonably possible that estimates made in the consolidated financial statements have been, or will be, materially and adversely

impacted in the near term as a result of these conditions, including the recoverability of long-lived assets.

Significant Accounting Policies and Estimates

Use of Estimates

The preparation of the consolidated financial statements

in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial

statements and accompanying notes.

These estimates and assumptions include allowances for doubtful accounts, inventory reserves, deferred

taxes, share-based compensation and related valuation allowances and fair value of long-lived assets.

Actual results could differ from

the estimates.

Segment Reporting

The Financial Accounting Standards Board (“FASB”)

Accounting Standard Codification (“ASC”) Topic 280, Segment Reporting , requires that an enterprise report selected

information about reportable segments in its financial reports issued to its stockholders.

The Company has two reportable segments -

the NexGel segment and the “CGN” segment.

The NexGel segment is comprised of the manufacturing

of ultra-gentle, high-water-content hydrogel products for healthcare and consumer applications, which is based in Langhorne, Pennsylvania.

The NexGel segment includes the Kenkoderm and Silly George recent acquisitions and the Enigma JV.

The “CGN” segment is comprised of the

CGN JV used for the Company’s converting and packaging business, which is based in Granbury, Texas.

Reclassifications

We have reclassified, combined or separately disclosed

certain amounts in the prior years’ consolidated financial statements and accompanying footnotes to conform with the current year’s

presentation.

These changes consisted of separating Accounts payable – related party from Accounts payable within the December 31, 2023 consolidated

balance sheet and we have reclassified expenses on our statement of operations realigning

certain expenses previously classified as selling, general and administrative to cost of revenue related to our online sales commissions

and contract fees.

The reclassifications had no effect on total assets or liabilities as of December 31, 2023.

Cash and cash equivalents

Cash and cash equivalents is comprised of cash in

banks and highly liquid investments, including U.S.

treasury bills purchased with an original maturity of three months or less as well

as investments in money market funds for which the carrying amount approximates fair value, due to the short maturities of these investments.

Margin Line of Credit

The Company has a brokerage account through which

it can buy and sell U.S.

treasury bills.

The provisions of the account allow us to borrow on certain securities held in the account and

to purchase additional securities based on the account equity (including cash).

Amounts borrowed are collateralized by the securities

held in the account and bear interest at a negotiated rate payable monthly.

Securities pledged to secure margin balances cannot be specifically

identified as a portion of all securities held in a brokerage account are used as collateral.

As of December 31, 2024 and December 31,

2023, there was $ 0 and $ 245 thousand outstanding under this short-term credit line which is included in accrued expenses and other current

liabilities within the accompanying consolidated balance sheet.

Accounts Receivable, net

Trade accounts receivable are stated at the amount

the Company expects to collect and do not bear interest.

For its financial instruments subject to credit risk, consisting of its receivables,

the Company recognizes as an allowance its estimate of lifetime

expected credit losses under the current expected credit loss (CECL) model of ASC 326.

The approach is based on the Company’s internal

knowledge and historical default rates over the expected life of the receivables and is adjusted to reflect current economic conditions.

This evaluation takes into account the customer’s ability and intention to pay the consideration when it is due along with incorporating

changes in the forward-looking estimates.

If the expected financial condition of the Company’s customers were to improve, the allowances

may be reduced accordingly .

Provisions to the allowances for doubtful accounts are recorded in selling, general and administrative

The allowance for credit losses

was $ 5 thousand as of December

31, 2024 and $ 11 thousand

as of December 31, 2023.

Inventory and Cost of Revenues

The inventory balance is stated at the lower of cost,

the value determined by the first-in, first-out method, or net realizable value.

The Company evaluates inventories for excess quantities,

obsolescence, and shelf-life expiration.

This evaluation includes an analysis of historical sales levels by product, projections of future

demand, the risk of technological or competitive obsolescence for products, general market conditions, and a review of the shelf-life

expiration dates for products.

These factors determine when, and if, the Company adjusts the carrying value of inventory to estimated

net realizable value.

The Company produces proprietary branded products

and white label opportunities in our manufacturing of consumer products.

In our contract manufacturing, the Company builds its products

based on customer orders and immediately ships the products upon completion of the production process.

The inventory balance is made up of raw materials,

work-in-progress, and finished goods.

Inventory is maintained at the Company’s warehouses, third party warehouses and at fulfilment centers owned by Amazon,

Walmart and CVS.

The “Cost of revenues” line item in the

consolidated statements of operations is comprised of the book value of inventory sold to customers during the reporting period.

circumstances dictate that we use net realizable value as the basis for recording inventory, we base our estimates on expected future

selling prices less expected disposal costs.

preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions

that affect the amounts reported in the consolidated financial statements and accompanying notes.

These estimates and assumptions

include allowances for doubtful accounts, inventory reserves, deferred taxes and related valuation allowances, share-based compensation and fair value of long-lived assets.

Actual results could differ from the estimates.

Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 280, Segment

Reporting , requires that an enterprise report selected information about reportable segments in its financial reports issued to its

stockholders.

The Company has two reportable segments - the NexGel segment and the CGN segment.

NexGel segment is comprised of the manufacturing of ultra-gentle, high-water-content hydrogel products for healthcare and consumer applications,

which is based in Langhorne, Pennsylvania as well as the Kenkoderm acquisition, the Silly George acquisition and the Enigma JV.

the Enigma JV was dissolved on December 23, 2024.

CGN segment is comprised of the CGN JV used for the Company’s converting and packaging business, which is based in

Granbury, Texas.

and cash equivalents and restricted cash

and cash equivalents is comprised of cash in banks and highly liquid investments, including U.S.

treasury bills purchased with an original

maturity of three months or less as well as investments in money market funds for which the carrying amount approximates fair value,

due to the short maturities of these investments.

Company also maintains restricted cash under a Partnership Agreement (see Note 18).

As of December 31, 2025, restricted cash totaled

$ 741 thousand, representing

funds that are contractually restricted from use for general operating purposes and may be utilized only in accordance with the terms

of the Partnership Agreement.

Restricted cash is included in total cash, cash equivalents, and restricted cash as presented in the statement

of cash flows.

Receivable, net

accounts receivable are stated at the amount the Company expects to collect and do not bear interest.

The Company evaluates the collectability

of accounts receivable and records a provision to the allowance for credit losses based on factors including the length of time the receivables

are past due, the customer’s payment history, the credit quality of the customer and other factors that may affect the customers’

ability to pay.

Provisions to the allowances for credit losses are recorded in selling, general and administrative expenses.

balances are charged off against the allowance when it is probable that the receivable will not be recovered.

The allowance for credit

losses was $ 9 thousand and $ 5 thousand as of December 31, 2025 and 2024, respectively.

and Cost of Revenues

inventory balance is stated at the lower of cost, the value determined by the first-in, first-out method, or net realizable value.

Company evaluates inventories for excess quantities, obsolescence, and shelf-life expiration.

This evaluation includes an analysis of

historical sales levels by product, projections of future demand, the risk of technological or competitive obsolescence for products,

general market conditions, and a review of the shelf-life expiration dates for products.

These factors determine when, and if, the Company

adjusts the carrying value of inventory to estimated net realizable value.

Company produces proprietary branded products and white label opportunities in our manufacturing of consumer products.

In our contract

manufacturing, the Company builds its products based on customer orders and immediately ships the products upon completion of the production

inventory balance is made up of raw materials, work-in-progress, and finished goods.

Inventory is maintained at the Company’s warehouses,

third party warehouses and at fulfilment centers owned by Amazon, Walmart and CVS.

“Cost of revenues” line item in the consolidated statements of operations is comprised of the book value of inventory

sold to customers during the reporting period.

When circumstances dictate that we use net realizable value as the basis for

recording inventory, we base our estimates on expected future selling prices less expected disposal costs.

The reserve recorded

against inventories was $ 271 thousand and $ 46 thousand as of December 31, 2025 and 2024, respectively.

and Development

research and development activities focus on new and innovative products designed to support revenue growth.

Research and development

Our research and development activities focus on

new and innovative products designed to support revenue growth.

Research and development expenses consist primarily of contracted development

and testing efforts associated with development of products.

Property and Equipment, net

Property and equipment is recorded at historical

cost, net of accumulated depreciation and amortization.

Depreciation is provided over the assets’ useful lives on a straight-line

Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or lease terms.

Repairs and maintenance costs are expensed as incurred.

Management periodically assesses the estimated useful

life over which assets are depreciated or amortized.

If the analysis warrants a change in the estimated useful life of property and equipment,

management will reduce the estimated useful life and depreciate or amortize the carrying value prospectively over the shorter remaining

The carrying amounts of assets sold or retired and

the related accumulated depreciation are eliminated in the year of disposal and any resulting gains and losses are included in the results

of operations during the same year.

Impairment of Long-Lived Assets

The Company reviews its property and equipment

and any identifiable intangibles with definite lives for impairment whenever events or changes in circumstances indicate that the

carrying amount of an asset may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the

carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset.

If such assets are

considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset

exceeds the fair value of the asset.

Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value

less costs to sell.

Goodwill and Intangible Assets

In applying the acquisition method of accounting,

amounts assigned to identifiable assets and liabilities acquired were based on estimated fair values as of the date of acquisition, with

the remainder recorded as goodwill.

Identifiable intangible assets are initially recorded at fair value using generally accepted valuation

methods appropriate for the type of intangible asset.

Identifiable intangible assets with definite lives are amortized over their estimated

useful lives and are reviewed for impairment if indicators of impairment arise.

Intangible assets with indefinite lives are tested for

impairment within one year of the acquisition date or annually as of December 31, and whenever indicators of impairment exist.

value of intangible assets is compared with their carrying values, and an impairment loss would be recognized for the amount by which

a carrying amount exceeds its fair value.

The Company performed the annual assessment and concluded

it is more likely than not that the fair value exceeds the carrying value and no impairments were recognized in the year ended December

31, 2024 and 2023.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets are

recorded at historical cost and are primarily made up of $ 46

thousand and $ 64

thousand of prepaid insurance, and $ 577

thousand and $ 336

thousand general prepaid expenses and other current assets as of December 31, 2024 and 2023, respectively.

Other assets are recorded at historical costs,

and as of December 31, 2024 and 2023, the balance is primarily comprised of spare parts for manufacturing equipment.

maintains spare parts for either repair and maintenance, which is expensed as incurred, or replacement of capitalized equipment.

Capitalized equipment spare parts are not subject to depreciation until such time that they are placed into service and the part

that is being replaced is disposed.

Fair Value Measurements

The Company utilizes the fair value hierarchy to

apply fair value measurements.

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair values

that are either observable or unobservable.

Observable inputs reflect assumptions market participants would use in pricing an asset or

liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing

based upon its own market assumptions.

The basis for fair value measurements for each level within the hierarchy is described below:

Level 1 —Quoted prices for identical

assets or liabilities in active markets.

Level 2 —Quoted prices for similar assets

or liabilities in active markets;

quoted prices for identical or similar assets or liabilities in markets that are not active;

or model-derived

valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 —Valuations derived from valuation

techniques in which one or more significant inputs to the valuation model are unobservable.

The Company considers the carrying amounts of its

financial instruments (cash, accounts receivable and accounts payable, notes payable and convertible notes payable) in the consolidated

balance sheet to approximate fair value because of the short-term or highly liquid nature of these financial instruments.

expenses consist primarily of contracted development and testing efforts associated with development of products.

Research and development

costs are expensed as incurred.

and Equipment, net

and equipment is recorded at historical cost, net of accumulated depreciation and amortization.

Depreciation is provided over the assets’

useful lives on a straight-line basis.

Leasehold improvements and right-of-use assets under financing lease arrangements are amortized

on a straight-line basis over the shorter of their estimated useful lives or lease terms.

Repairs and maintenance costs are expensed

periodically assesses the estimated useful life over which assets are depreciated or amortized.

If the analysis warrants a change in

the estimated useful life of property and equipment, management will reduce the estimated useful life and depreciate or amortize the

carrying value prospectively over the shorter remaining useful life.

carrying amounts of assets sold or retired and the related accumulated depreciation are eliminated in the year of disposal and any resulting

gains and losses are included in the results of operations during the same year.

of Long-Lived Assets

Company reviews its property and equipment and any identifiable intangibles with definite lives for impairment whenever events or changes

in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets to be held and used is

measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by

If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying

amount of the asset exceeds the fair value of the asset.

Long-lived assets to be disposed of are reported at the lower of carrying amount

or fair value less costs to sell.

and Intangible Assets

applying the acquisition method of accounting, amounts assigned to identifiable assets and liabilities acquired were based on estimated

fair values as of the date of acquisition, with the remainder recorded as goodwill.

Identifiable intangible assets are initially recorded

at fair value using generally accepted valuation methods appropriate for the type of intangible asset.

Identifiable intangible assets

with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise.

Intangible assets with indefinite lives are tested for impairment within one year of the acquisition date or annually as of December

31, and whenever indicators of impairment exist.

The fair value of intangible assets is compared with their carrying values, and an impairment

loss would be recognized for the amount by which carrying amount exceeds its fair value.

Company performed the annual assessment and concluded it is more likely than not that the fair value exceeds the carrying value and no

impairments were recognized in the year ended December 31, 2025 and 2024.

Expenses and Other Current Assets

expenses and other current assets are recorded at historical cost and are primarily made up of $ 45 thousand and $ 46 thousand of prepaid

insurance, and $ 451 thousand and $ 577 thousand general prepaid expenses and other current assets as of December 31, 2025 and 2024, respectively.

assets are recorded at historical costs, and as of December 31, 2025 and 2024, the balance is primarily comprised of spare parts for

manufacturing equipment.

The Company maintains spare parts for either repair and maintenance, which is expensed as incurred, or replacement

of capitalized equipment.

Capitalized equipment spare parts are not subject to depreciation until such time that they are placed into

service and the part that is being replaced is disposed.

Value Measurements

Company utilizes the fair value hierarchy to apply fair value measurements.

The fair value hierarchy is based on inputs to valuation

techniques that are used to measure fair values that are either observable or unobservable.

Observable inputs reflect assumptions market

participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs

reflect a reporting entity’s pricing based upon its own market assumptions.

The basis for fair value measurements for each level

within the hierarchy is described below:

1 —Quoted prices for identical assets or liabilities in active markets.

2 —Quoted prices for similar assets or liabilities in active markets;

quoted prices for identical or similar assets or liabilities

in markets that are not active;

or model-derived valuations whose inputs are observable or whose significant value drivers are observable.

3 —Valuations derived from valuation techniques in which one or more significant inputs to the valuation model are unobservable.

Company considers the carrying amounts of its financial instruments (cash, accounts receivable and accounts payable, notes payable and

convertible notes payable) in the consolidated balance sheet to approximate fair value because of the short-term or highly liquid nature

of these financial instruments.

following table classifies the Company’s assets and liabilities measured at fair value on a recurring basis into the fair value

hierarchy as of December 31, 2025 and 2024 (in $ thousands):

of Assets and Liabilities Measured at Fair Value On a Recurring Basis Into the Fair Value

Fair value measured at December 31, 2025

Fair value at December 31, 2025

Quoted prices in

active markets

Significant other

observable inputs

unobservable inputs

Investment in NexGelRx

Total fair value

Fair value measured at December 31, 2024

Fair value at

December 31, 2024

Quoted prices in

active markets

Significant other

observable inputs

unobservable inputs

Warrant liability

Warrants to purchase common stock were issued in

connection with equity financing raises, which occurred during 2019 through 2023.

The fair values of the warrants are estimated as of

the date of issuance and again at each reporting period using a Black-Scholes option valuation model.

At issuance, the fair values of

the warrant are recognized as an equity issuance cost within additional paid-in-capital.

Fair value adjustments to the warrant liability

are recognized in other income (expense) in the consolidated statements of operations.

Equity Classified Warrants

Warrants that meet all necessary criteria to be accounted

for as equity in accordance with ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity are presented within

additional paid-in capital within Company’s consolidated statements of changes in stockholders’ equity and consolidated balance

Warrants classified as equity are initially measured at fair value.

Subsequent changes in fair value are not recognized as long

as the warrants continue to be classified as equity.

Revenue Recognition

The Company records revenue in accordance with ASC

Topic 606, Revenue from Contracts with Customers (“ASC 606”).

The core principle of ASC 606 requires that an entity

recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which

the Company expects to be entitled in exchange for those goods or services.

ASC 606 defines a five-step process to achieve this core

principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required

under existing GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to

include in the transaction price and allocating the transaction price to each separate performance obligation.

The Company currently recognizes revenue predominately

from three sources, contract manufacturing, custom and white label finished goods manufacturing (“Custom and white label”),

and our branded consumer products.

Contract manufacturing and Custom and white label revenues are recognized at the point where the customer

obtains control of the goods and the Company satisfies its performance obligation, which generally is at the time the customer receives

Branded consumer product revenue is derived from direct-to-consumer purchases through websites like Amazon and through our

Shopify stores.

Total fair value

to purchase common stock were issued in connection with equity financing raises, which occurred during 2019 through 2025.

The fair values

of the warrants are estimated as of the date of issuance and again at each reporting period using a Black-Scholes option valuation model.

At issuance, the fair values of the warrant are recognized as an equity issuance cost within additional paid-in-capital.

Fair value adjustments

to the warrant liability are recognized in other income (expense) in the consolidated statements of operations.

Classified Warrants

that meet all necessary criteria to be accounted for as equity in accordance with ASC 815-40, Derivatives and Hedging—Contracts

in Entity’s Own Equity , are presented within additional paid-in capital within the Company’s consolidated statements

of changes in stockholders’ equity and consolidated balance sheets.

Warrants classified as equity are initially measured at fair

value using a Black-Scholes option valuation model.

Subsequent changes in fair value are not recognized as long as the warrants continue

to be classified as equity.

Company complies with the requirements of ASC 340-40 , Other Assets and Deferred Cost, with regards to offering costs.

Prior to the completion of an offering, offering costs

will be capitalized as deferred offering costs on the balance sheet.

The deferred offering costs will be charged to stockholders’

equity upon the completion of an offering or to expense if the offering is not completed.

Company records revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”).

principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an

amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

ASC 606 defines

a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within

the revenue recognition process than required under existing GAAP including identifying performance obligations in the contract, estimating

the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance

Company currently recognizes revenue predominately from three sources:

contract manufacturing, custom and white label finished goods

manufacturing (“Custom and white label”), and our branded consumer products.

Contract manufacturing and Custom and white

label revenues are recognized at the point where the customer obtains control of the goods and the Company satisfies its performance

obligation, which generally is at the time the customer receives the product.

Branded consumer product revenue is derived from direct-to-consumer

purchases through websites like Amazon and through our Shopify stores.

Revenue is recognized upon shipment to the end customer.

The Company’s customers consist of other life

sciences companies and Amazon retail customers.

Revenues are predominately concentrated in the United States, but with the Silly George

acquisition, have expanded into Europe and Asia.

Payment terms, excluding branded consumer products, vary by the type and location of

customer and may differ by jurisdiction and customer but payment is generally required in a term ranging from 30 to 60 days from date

Branded consumer products are purchased and paid for by the consumer at the time the transaction is completed.

Estimates for product returns, allowances and discounts

are recorded as a reduction of revenue and are established at the time of sale.

Returns are estimated through a comparison of historical

return data and are determined for each product and adjusted for known or expected changes in the marketplace specific to each product,

when appropriate.

Company’s customers consist of other life sciences companies and Amazon retail customers.

Revenues are predominately concentrated

in the United States, but with the Silly George acquisition, have expanded into Europe and Asia.

Payment terms, excluding branded consumer

products, vary by the type and location of customer and may differ by jurisdiction and customer but payment is generally required in

a term ranging from 30 to 60 days from date of shipment.

Branded consumer products are purchased and paid for by the consumer at the

time the transaction is completed.

for product returns, allowances and discounts are recorded as a reduction of revenue and are established at the time of sale.

are estimated through a comparison of historical return data and are determined for each product and adjusted for known or expected changes

in the marketplace specific to each product, when appropriate.

Historically, sales return provisions have not been material.

Amounts accrued for sales allowances and discounts are

based on estimates of amounts that are expected to be claimed on the related sales and are based on historical data.

Payments for allowances

and discounts have historically been immaterial.

Disaggregated revenue by sales type ($ in thousands):

of Disaggregated Revenue by Sales Type

accrued for sales allowances and discounts are based on estimates of amounts that are expected to be claimed on the related sales and

are based on historical data.

Payments for allowances and discounts have historically been immaterial.

Disaggregated

revenue by sales type ($ in thousands):

Schedule of Disaggregated Revenue by Sales Type

Contract manufacturing

1 unchanged sentence

Consumer branded products

Contract Liabilities

As of December 31, 2024 and 2023, the Company did

not have any contract assets or contract liabilities from contracts with customers and there were no remaining performance obligations

that the Company had not satisfied except for deferred revenue of $ 179 thousand and $ 20 thousand at December 31, 2024 and 2023, respectively,

that the Company had not satisfied as of the end of the respective period.

The following table provides information about contract liabilities from contracts with our customers ($ in thousands).

of Contract Liabilities From Contract With Customers

of December 31, 2025 and 2024, the Company did not have any contract assets or contract liabilities from contracts with customers and

there were no remaining performance obligations that the Company had not satisfied except for deferred revenue of $ 2 and $ 179 thousand

at December 31, 2025 and 2024, respectively, that the Company had not satisfied as of the end of the respective period.

following table provides information about contract liabilities from contracts with our customers ($ in thousands).

Schedule of Contract Liabilities From Contract With Customers

Deferred revenue

1 unchanged sentence

changes in the contract liabilities balance during the period are as follows:

of Contract Liabilities Balance

Contract liabilities

Balance, December 31, 2023

Non-cancelable contracts with customers entered during the period

Revenue recognized related to non-cancelable contracts with customers during the period

Balance, December 31, 2024

The Company has four distinct lines of business;

Schedule of Contract Liabilities Balance

December 31, 2024

Non-cancelable

contracts with customers entered during the period

recognized related to non-cancelable contracts with customers during the period

December 31, 2025

Company has four distinct lines of business;

Contract Manufacturing, Custom and White Label, Branded Consumer Products, and Medical Devices/Other.

Contract Manufacturing

Customers order rolls of gel (“rollstock”).

The rollstock is shipped to our customers, which they package into finished goods.

Historically, this has been the Company’s primary

source of revenue.

Custom and White Label

These products often infuse various ingredients into

our base gel to develop unique product offerings to satisfy market demand (e.g.

aloe infused into the gel for a beauty mask).

The rollstock

is converted and packaged into saleable units.

The finished goods are shipped to the customer, who is ultimately responsible for product

distribution.

Frequently these products started as development deals, in which the customer paid the Company a small fee to develop a

specific product.

Once completed, the customer places a large order for newly developed product.

Custom and white label revenue is recognized

upon delivery of the finished product.

Branded Consumer Products

These products are finished goods marketed and sold

directly to the customer by the Company through online and retail channels.

The Company is responsible for sales, marketing, and distribution.

When merchandise is shipped to a customer, our performance obligation is met, and revenue is recognized when control passes to the

These products carry the Company’s brand names, which include Medagel, Lumagel Beauty, Kenkoderm and Silly George.

Medical Devices/Other

Medical Devices are a hybrid business, combining

elements of Custom and White Label and Branded Consumer Products.

Medical Devices, which are not yet marketed, are expected to be distributed

through strategic partnerships.

The Company will manufacture and possibly convert/package the device while the strategic partner brings

the product to market.

Small market Medical Devices could be launched by the Company, but also be offered to a distributor to reach the

full scale of the market.

Other includes shipping and handling revenue from

customers who purchase the Company’s branded consumer products through their Shopify stores.

It also includes a small amount of

freight revenue from contract manufacturing customers.

Shipping and Handling Revenue and Expense

Shipping and handling revenue and expense are included

in our consolidated statements of operations in revenues and cost of revenues, respectively.

The Company accounts for shipping activities,

consisting of direct costs to ship products performed after the control passes to the customer.

Shipping revenue and expense are primarily

generated through the Amazon marketplace and Silly George direct customer sales.

Share-based Compensation

On August 28, 2019, the Company adopted the 2019

Long-Term Incentive Plan, as amended (the “2019 Plan”).

See Note 14 below for further details regarding the 2019 Plan.

The 2019 Plan provides certain employees, contractors,

and outside directors with share-based compensation in the form of incentive stock options, nonqualified stock options, stock appreciation

rights, restricted stock, restricted stock units, performance awards, dividend equivalent rights and other awards.

The fair values of

incentive stock option award grants are estimated as of the date of grant using a Black-Scholes option valuation model.

expense is recognized in the consolidated statements of operations on a straight-line basis over the requisite service period, which

is generally the vesting period.

Income taxes are accounted for using an asset and

liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary

differences between the financial statement and tax bases of assets and liabilities at the applicable tax rates.

Deferred tax assets

are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be

Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates.

Tax benefits are recognized from an uncertain tax

position only if it is more likely than not that the tax position will be sustained upon examination by a tax authority and based upon

the technical merits of the tax position.

The tax benefit recognized in the consolidated financial statements for a particular tax position

is based on the largest benefit that is more likely than not to be realized upon settlement.

An unrecognized tax benefit, or a portion

thereof, is presented in the consolidated financial statements as a reduction to a deferred tax asset for a net operating loss carryforward,

a similar tax loss, or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is

ASC 842, Leases, requires recognition of leases on

the consolidated balance sheets as right-of-use (“ROU”) assets and lease liabilities.

ROU assets represent the Company’s

right to use underlying assets for the lease terms and lease liabilities represent the Company’s obligation to make lease payments

arising from the leases.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value and future

minimum lease payments over the lease term at commencement date.

As the Company’s leases do not provide an implicit rate, the Company

used its estimated incremental borrowing rate based on the information available at commencement date in determining the present value

of lease payments.

A number of the lease agreements contain options to renew and options to terminate the leases early.

The lease term

used to calculate ROU assets and lease liabilities only includes renewal and termination options that are deemed reasonably certain to

be exercised.

The Company recognized lease liabilities, with corresponding

ROU assets, based on the present value of unpaid lease payments for existing operating leases longer than twelve months.

The ROU assets

were adjusted per ASC 842 transition guidance for existing lease-related balances of accrued and prepaid rent, and unamortized lease

incentives provided by lessors.

Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term

and is recorded in selling, general and administrative expenses.

Variable lease payments for common area maintenance, property taxes

and other operating expenses are recognized as expense in the year when the changes in facts and circumstances on which the variable

lease payments are based occur.

The Company has elected not to separate lease and non-lease components for all property leases for the

purposes of calculating ROU assets and lease liabilities.

Variable Interest Entity

The Company reviews each legal entity formed by parties

related to the Company to determine whether or not the Company has a variable interest in the entity and whether or not the entity would

meet the definition of a variable interest entity (“VIE”) in accordance with ASC Topic 810, Consolidation .

whether the Company has a variable interest in the entity as a whole, the Company considers and makes judgements regarding the purpose

and design of the entity, the value of the licensed assets to the entity, the value of the entity’s total assets and the significant

activities of the entity.

If the Company has a variable interest in the entity as a whole, the Company assesses whether or not the Company

is a primary beneficiary of that VIE, based on a number of factors, including:

(i) which party has the power to direct the activities

that most significantly affect the VIE’s economic performance, (ii) the parties’ contractual rights and responsibilities

pursuant to the collaboration agreement, and (iii) which party has the obligation to absorb losses of or the right to receive benefits

from the VIE that could be significant to the VIE.

If the Company determines that it is the primary

beneficiary of a VIE at the onset of the collaboration, the collaboration is treated as a business combination and the Company consolidates

the financial statements of the VIE into the Company’s consolidated financial statements.

As of December 31, 2024, and on a quarterly

basis thereafter, the Company will evaluate whether it continues to be the primary beneficiary of the consolidated VIE.

If the Company

determines that it is no longer the primary beneficiary of a consolidated VIE, it deconsolidates the VIE in the period in which the determination

Assets and liabilities recorded as a result of consolidating

the financial results of the VIE into the Company’s consolidated balance sheet do not represent additional assets that could be

used to satisfy claims against the Company’s general assets or liabilities for which creditors have recourse to the Company’s

general assets.

Recently Issued Accounting Standards

From time to time, new accounting pronouncements

are issued by the FASB, or other standard setting bodies and adopted by us as of the specified effective date.

Unless otherwise discussed,

the impact of recently issued standards that are not yet effective will not have a material impact on our consolidated financial position

or results of operations upon adoption.

In November 2023, the FASB issued ASU 2023-07 ,

Segment Reporting (Topic 280):

Manufacturing

order rolls of gel (“rollstock”).

The rollstock is shipped to our customers, which they package into

Historically, this has been the Company’s primary source of revenue.

and White Label

products often infuse various ingredients into our base gel to develop unique product offerings to satisfy market demand (e.g.

into the gel for a beauty mask).

The rollstock is converted and packaged into salable units.

The finished goods are shipped to the customer,

who is ultimately responsible for product distribution.

Frequently these products started as development deals, in which the customer

paid the Company a small fee to develop a specific product.

Once completed, the customer places an order for newly developed product.

Branded Products

products are finished goods marketed and sold directly to consumers by the Company through online and retail channels.

We are responsible

for sales, marketing, and distribution.

The products we sell under our MedaGel brand primarily relate to healthcare over-the-counter

(“OTC”) remedy solutions, such as blister and applications.

In December 2023 we added a second consumer product brand when

we completed the purchase of the Kenkoderm brand.

The Kenkoderm skincare line was originally developed by a dermatologist to provide

gentle to the skin products for consumer with psoriasis.

In May 2024, we added our third consumer product brand with the purchase of

the Silly George brand.

Silly George is a beauty brand primarily focused on false eyelashes and other eye related products.

to look for additional potential acquisitions as part of our consumer product “roll-up” strategy.

Devices/Other

Devices are a hybrid business, combining elements of Custom & White Label and Consumer Branded Products.

Medical Devices, which are

not yet marketed, are expected to be distributed through strategic partnerships.

We will manufacture and possibly convert/package the

device while the strategic partner brings the product to market.

Small market Medical Devices could be launched by us, but also be offered

to a distributor to reach the full scale of the market.

includes freight charged to customers who purchase the Company’s branded consumer products through their Shopify stores.

and Handling Revenue and Expense

and handling revenue and expense are included in our consolidated statements of operations in revenues and cost of revenues, respectively.

The Company accounts for shipping activities, consisting of direct costs to ship products performed after the risk of loss passes to

the customer.

Shipping revenue and expense are primarily generated through the Amazon marketplace and Silly George direct customer sales.

August 28, 2019, the Company adopted the 2019 Long-Term Incentive Plan, as amended (the “2019 Plan”).

See Note 15 for further

details regarding the 2019 Plan.

2019 Plan provides certain employees, contractors, and outside directors with share-based compensation in the form of incentive stock

options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend

equivalent rights and other awards.

The fair values of incentive stock option award grants are estimated as of the date of grant using

a Black-Scholes option valuation model.

Compensation expense is recognized in the consolidated statements of operations on a straight-line

basis over the requisite service period, which is generally the vesting period.

taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for

the expected future tax consequences of temporary differences between the financial statement and tax bases of assets and liabilities

at the applicable tax rates.

Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion

or all of the deferred tax assets will not be realized.

Deferred tax assets and liabilities are adjusted for the effects of changes in

tax laws and rates.

benefits are recognized from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon

examination by a tax authority and based upon the technical merits of the tax position.

The tax benefit recognized in the consolidated

financial statements for a particular tax position is based on the largest benefit that is more likely than not to be realized upon settlement.

An unrecognized tax benefit, or a portion thereof, is presented in the consolidated financial statements as a reduction to a deferred

tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward if such settlement is required or expected

in the event the uncertain tax position is disallowed.

account for our leases in accordance with ASC 842, Leases.

We determine whether an arrangement is an operating or financing lease

at contract inception.

Operating leases, requires recognition of leases on the consolidated balance sheets as right-of-use (“ROU”)

assets and lease liabilities.

ROU assets represent the Company’s right to use underlying assets for the lease terms and lease liabilities

represent the Company’s obligation to make lease payments arising from the leases.

Operating lease ROU assets and operating lease

liabilities are recognized based on the present value and future minimum lease payments over the lease term at commencement date.

the Company’s leases do not provide an implicit rate, the Company used its estimated incremental borrowing rate based on the information

available at commencement date in determining the present value of lease payments.

A number of the lease agreements contain options to

renew and options to terminate the leases early.

The lease term used to calculate ROU assets and lease liabilities only includes renewal

and termination options that are deemed reasonably certain to be exercised.

Company recognized lease liabilities, with corresponding ROU assets, based on the present value of unpaid lease payments for existing

operating leases longer than twelve months.

The ROU assets were adjusted per ASC 842 transition guidance for existing lease-related balances

of accrued and prepaid rent, and unamortized lease incentives provided by lessors.

Operating lease cost is recognized as a single lease

cost on a straight-line basis over the lease term and is recorded in cost of revenues and selling, general and administrative expenses.

Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the year

when the changes in facts and circumstances on which the variable lease payments are based occur.

The Company has elected not to separate

lease and non-lease components for all property leases for the purposes of calculating ROU assets and lease liabilities.

leases are those that transfer substantially all of the risks and rewards of ownership to the Company.

At the lease commencement date,

the Company recognizes a financing lease ROU asset and a corresponding lease liability measured at the present value of future lease

The ROU asset is subsequently amortized on a straight-line basis over the shorter of the lease term or the useful life of the

underlying asset, while the lease liability is increased by interest expense and reduced by lease payments made.

Interest expense on

the lease liability and amortization of the ROU asset are presented separately in the consolidated statements of operations, resulting

in a front-loaded expense pattern over the lease term.

Financing lease ROU assets are included in property and equipment, net, and the

related lease liabilities are included within current and long-term debt, as applicable.

Interest Entity

Company reviews each legal entity formed by parties related to the Company to determine whether or not the Company has a variable interest

in the entity and whether or not the entity would meet the definition of a variable interest entity (“VIE”) in accordance

with ASC Topic 810, Consolidation .

In assessing whether the Company has a variable interest in the entity as a whole, the Company

considers and makes judgements regarding the purpose and design of the entity, the value of the licensed assets to the entity, the value

of the entity’s total assets and the significant activities of the entity.

If the Company has a variable interest in the entity

as a whole, the Company assesses whether or not the Company is a primary beneficiary of that VIE, based on a number of factors, including:

(i) which party has the power to direct the activities that most significantly affect the VIE’s economic performance, (ii) the

parties’ contractual rights and responsibilities pursuant to the collaboration agreement, and (iii) which party has the obligation

to absorb losses of or the right to receive benefits from the VIE that could be significant to the VIE.

the Company determines that it is the primary beneficiary of a VIE at the onset of the collaboration, the collaboration is treated as

a business combination and the Company consolidates the financial statements of the VIE into the Company’s consolidated financial

On a quarterly basis, the Company will evaluate whether it continues to be the primary beneficiary of the consolidated VIE.

If the Company determines that it is no longer the primary beneficiary of a consolidated VIE, it deconsolidates the VIE in the period

in which the determination is made.

and liabilities recorded as a result of consolidating the financial results of the VIE into the Company’s consolidated balance

sheet do not represent additional assets that could be used to satisfy claims against the Company’s general assets or liabilities

for which creditors have recourse to the Company’s general assets.

Issued Accounting Standards

time to time, new accounting pronouncements are issued by the FASB, or other standard setting bodies and adopted by us as of the specified

effective date.

Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material

impact on our consolidated financial position or results of operations upon adoption.

July 2025, the FASB issued Accounting Standards Update (“ASU”) 2025-05, Financial Instruments—Credit Losses

Measurement of Credit Losses for Accounts Receivable and Contract Assets , which amends the guidance related to the measurement

of credit losses for accounts receivable and contract assets.

The amendments are effective for annual reporting periods beginning after

December 15, 2025, and interim reporting periods within those annual reporting periods.

Early adoption is permitted.

The Company adopted

this new standard during the year ended December 31, 2025 with no material impact to the financial statements.

November 2023, the FASB issued ASU 2023-07 , Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

This ASU includes amendments that expand the existing

reportable segment disclosure requirements and requires disclosure of (i) significant expense categories and amounts by reportable segment

as well as the segment’s profit or loss measure(s) that are regularly provided to the chief operating decision maker (the “CODM”)

to allocate resources and assess performance;

(ii) how the CODM uses each reported segment profit or loss measure to allocate resources

and assess performance;

(iii) the nature of other segment balances contributing to reported segment profit or loss that are not captured

within segment revenues or expenses;

and (iv) the title and position of the individual or name of the group or committee identified as

This guidance requires retrospective application to all prior periods presented in the financial statements and is effective

for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

Early adoption

is permitted.

The adoption of this guidance will result in the Company being required to include enhanced disclosures relating to its

reportable segments.

ASU includes amendments that expand the existing reportable segment disclosure requirements and requires disclosure of (i) significant

expense categories and amounts by reportable segment as well as the segment’s profit or loss measure(s) that are regularly provided

to the chief operating decision maker (the “CODM”) to allocate resources and assess performance;

(ii) how the CODM uses each

reported segment profit or loss measure to allocate resources and assess performance;

(iii) the nature of other segment balances contributing

to reported segment profit or loss that are not captured within segment revenues or expenses;

and (iv) the title and position of the

individual or name of the group or committee identified as the CODM.

This guidance requires retrospective application to all prior periods

presented in the financial statements and is effective for fiscal years beginning after December 15, 2023 and interim periods within

fiscal years beginning after December 15, 2024.

The guidance resulted in the Company being required to include enhanced disclosures relating

to its reportable segments.

The Company adopted this new standard during the year ended December 31, 2024.

Accounting Pronouncements Issued But Not Yet Adopted

In June 2023, the Financial Accounting Standards

Board (FASB) issued Accounting Standards Update (ASU) 2023-05, Business Combinations (ASC Topic 805):

Joint Venture Formations, which

provides guidance on accounting for joint ventures established through new entities.

The update mandates the application of the acquisition

method of accounting for such transactions, requiring parties to recognize and measure identifiable assets and liabilities based on fair

values at the acquisition date and establishes a measurement period for adjustments.

The amendments in this Update are effective prospectively

for all joint venture formations with a formation date on or after January 1, 2025.

ASU 2023-05 will be effective for non-public entities

for annual periods beginning after December 15, 2025, with early adoption permitted.

The Company is currently evaluating the implications

of this update on its accounting practices for joint ventures and expects it will enhance consistency and transparency in financial reporting,

without a material impact on its financial position or results of operations.

In December 2023, the FASB issued ASU 2023-09 ,

Income Taxes (Topic 740):

June 2023, the FASB issued ASU 2023-05, Business Combinations

(ASC Topic 805):

Joint Venture Formations , which provides guidance on accounting for joint ventures established through new entities.

The update mandates the application of the acquisition method of accounting for such transactions, requiring parties to recognize and

measure identifiable assets and liabilities based on fair values at the acquisition date and establishes a measurement period for adjustments.

The amendments in this Update are effective prospectively for all joint venture formations with a formation date on or after January

The adoption of ASU 2023-05 had no material impact to the financial statements.

In December 2023, the FASB issued ASU 2023-09, Income

Taxes (Topic 740):

Improvements to Income Tax Disclosures .

The ASU requires that an entity disclose specific categories in

the effective tax rate reconciliation as well as reconciling items that meet a quantitative threshold.

Further, the ASU requires additional

disclosures on income tax expense and taxes paid, net of refunds received, by jurisdiction.

The new standard is effective for annual

periods beginning after December 15, 2024 on a prospective basis with the option to apply it retrospectively.

This update requires disaggregated information about a reporting entity’s

effective tax rate reconciliation as well as additional information on income taxes paid.

The Company adopted this standard effective

January 1, 2025.

As the Company maintains a full valuation allowance against its deferred tax assets, the adoption did not have a material

impact on the Company’s consolidated financial statements or disclosures.

Pronouncements Issued But Not Yet Adopted

In December 2025 , the FASB issued

ASU 2025 - 12, Codification Improvements to make improvements to the Codification arising from technical

corrections, unintended application of the Codification, and clarifications.

For all entities, the amendments in this Update are effective

for annual reporting periods beginning after December 15, 2026, including interim periods within those annual reporting

Early adoption is permitted.

The adoption of this guidance will result in the Company being required to include enhanced income tax related disclosures.

is currently evaluating the impact this standard will have on its consolidated financial statements.

The Company is currently evaluating the impact this new guidance will have on its financial statements

and disclosures.

November 2024, the FASB issued the ASC 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures

(Subtopic 220-04) Disaggregation of Income Statement Expenses, which requires additional disclosure of the nature of expenses included

in the income statement in response to requests from investors for more information about an entity’s expenses.

The new standard

requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement

as disclosures about selling expenses.

The guidance is effective for annual reporting periods beginning after December 15, 2026 and interim

reporting periods within annual reporting periods beginning after December 15, 2027.

The requirements will be applied prospectively with

the option for retrospective application.

Early adoption is permitted.

The Company is currently evaluating the impact this new guidance

will have on its financial statements and disclosures.

Business Segments

The Company’s CODM evaluates the financial

performance of the Company’s segments based upon segment adjusted operating income or (loss) as the profitability measure.

outside of adjusted operating income or (loss) are not reported by segment, since they are excluded from the single measure of segment

profitability reviewed by the CODM.

Summarized financial information concerning the Company’s

reportable segments for the years ended December 31, 2024 and 2023 is presented below.

of Reportable Segments

For Year Ended December 31, 2024 ($ in thousands)

Contract Manufacturing

Custom and White Label Finished Goods

Branded Consumer Products

Total revenue

Company’s CODM evaluates the financial performance of the Company’s segments based upon segment operating income or

(loss) as the profitability measure.

The Company has identified its Chief Executive Officer as the CODM.

Items outside of operating

income or (loss) are not reported by segment, since they are excluded from the single measure of segment profitability reviewed by

financial information concerning the Company’s reportable segments for the years ended December 31, 2025 and 2024 is presented

Schedule of Reportable Segments

Year Ended December 31, 2025 ($ in thousands)

Cost of sales

Research and development

Advertising, marketing and amazon fees

1 unchanged sentence

Total Selling, general and administrative

Research and development

Operating expenses

Loss from operations

For Year Ended December 31, 2023 ($ in thousands)

Contract Manufacturing

Custom and White Label Finished Goods

Branded Consumer Products

Total revenue

Year Ended December 31, 2024 ($ in thousands)

Cost of sales

Research and development

Advertising, marketing and amazon fees

1 unchanged sentence

Total Selling, general and administrative

Research and development

Operating expenses

Loss from operations

As of December 31, 2024 ($ in thousands)

of December 31, 2025 ($ in thousands)

of December 31, 2024 ($ in thousands)

George Acquisition

May 15, 2024, the Company entered into and closed a transaction related to an Asset Purchase Agreement dated May 15, 2024 (the “SG

Purchase Agreement”) with Semmens Online Pty Ltd as Trustee for Semmens Business Trust, an Australian proprietary limited company

(the “SG Seller”), whereby the Company purchased the Silly George assets (the “Silly George acquisition”).

Company believes the Silly George assets will be accretive and synergistic to its existing health and beauty customer product brands.

the terms of the SG Purchase Agreement on May 15, 2024, the Company paid the SG Seller a cash payment of $ 400 thousand and issued $ 200

thousand in shares of the Company’s common stock based on the 10-Day VWAP (as defined in the SG Purchase Agreement), or 89,892

of shares of the Company’s common stock.

Additionally, the Company will pay the Seller a cash earn-out based on 20 % of the Net

Profit (as defined in the SG Purchase Agreement) related to the Silly George assets for the fiscal quarterly period beginning June 30,

2024 and ending on June 30, 2028.

Per the scope exception under ASC 815, the Company has not accrued the contingent consideration.

table below shows an analysis for the Silly George acquisition ($ in thousands):

Schedule of Business Acquisitions

Purchase consideration at preliminary fair value:

Purchase price

Consideration paid

Trademark related intangibles

Intangible assets acquired

unaudited pro-forma results of operations are presented for information purposes only.

The unaudited pro-forma results of operations

are not intended to present actual results that would have been attained had the Silly George acquisitions been completed as of January

1, 2024 or to project potential operating results as of any future date or for any future periods ($ in thousands except share and per

share amounts):

Schedule of Unaudited Pro-Forma Results of Operations

For the Years Ended

Revenues, net

Net loss allocable to common shareholders

Net loss per share

Weighted average number of shares outstanding

Investment in NexGelRx

December 11, 2025, the Company completed the disposition of a controlling interest in its dormant subsidiary, NexgelRX, Inc.

(“NexgelRX”), and retained a 19.99 % non-controlling interest through a convertible preferred stock holding, which is non-dilutive up to $ 8.0 million

of third-party capital raised.

NexgelRX focuses exclusively on developing and commercializing prescription drug delivery solutions utilizing

the Company’s proprietary hydrogel technology.

At the time of the disposition, NexgelRX raised approximately $ 1.25 million from

third-party investors.

In connection with the transaction, the Company granted NexgelRX a license to its technology and is entitled to

receive a 5% royalty on future product sales.

Company evaluated NexgelRX under ASC 810 and concluded that it is not a variable interest entity because it has sufficient substantive

equity investment at risk, including third-party equity, to finance its activities without additional subordinated financial support.

The Company uses the measurement alternative for equity investments with no readily determinable fair value and the investment is reported

at cost, adjusted for impairments or any observable price changes in ordinary transactions with identical or similar investments.

Company valued its convertible preferred stock interest at $ 249 thousand, which is reported on the Consolidated Balance

Sheets and a gain on spin-off of NexGelRx for the year ended December 31, 2025.

part of the transaction, the Company issued 125,000

warrants to purchase its common stock at an exercise price

per share, with a five-year term.

The warrants represent approximately

10% warrant coverage relative to the Investee’s capital raise and were classified as equity under ASC 815-40.

The warrants were

valued at $ 87 thousand using the Black-Scholes option model , and such amount was recorded as additional paid-in capital with

a corresponding decrease in the gain in spin-off of NexGelRx.

Variable interest entities

in Joint Venture – CGN

March 1, 2023, the Company acquired a 50 % interest in the CGN JV (see Note 1).

The CGN JV is owned 50 % by the Company and 50 % by CG Labs.

CG Labs contributed its existing converting and packaging division to the CGN JV, including, but not limited to, its facilities, equipment,

employees, and customers.

The Company will contribute $ 500 thousand to the CGN JV, on a schedule to be determined, to be used for equipment

and facility upgrades as well as general corporate purposes for the CGN JV.

CGN JV is considered to be a VIE and we have consolidated the CGN JV, because we believe we are the primary beneficiary and we

meet the power and the economics criteria.

in Joint Venture – Enigma

January 6, 2023, the Company acquired a

50 % interest in a newly formed joint venture (the “Enigma JV”) to pursue branded consumer product retail

opportunities and the development of new patch products.

The Enigma JV agreement was effective January 6, 2023.

As a result of this

transaction, the Company owned 50 %

of the Enigma JV, with the remaining 50 %

held by Moiety.

However, the Enigma JV was dissolved on December 23, 2024.

As of December 31, 2024, the Company had contributed

thousand and the non-controlling interest portion of Enigma JV had contributed $ 37

Enigma JV was considered to be a VIE and was consolidated because we believed we were the primary beneficiary and we met the

power and the economics criteria.

following table presents the assets and liabilities of the CGN JV included in the consolidated balance sheet as of December 31, 2025

The assets and liabilities presented below include only the third-party assets and liabilities of the consolidated VIE and

excludes any intercompany balances, which were eliminated upon consolidation.

Schedule of Consolidated Variable Interest Entities

Current Assets:

2 unchanged sentences

Total current assets

Intangibles, net

Property and equipment, net

Operating lease - right of use asset

Liabilities and Stockholders’ Equity

Current Liabilities:

5 unchanged sentences

Current portion of note payable

Warrant liability

Contingent consideration liability

Finance lease liability, short term

5 unchanged sentences

Total liabilities

Silly George Acquisition

On May 15, 2024, the Company entered into and closed

a transaction related to an Asset Purchase Agreement dated May 15, 2024 (the “SG Purchase Agreement”) with Semmens Online

Pty Ltd as Trustee for Semmens Business Trust, an Australian proprietary limited company (the “SG Seller”), whereby the Company

purchased the Silly George assets.

The Company believes the Silly George assets will be accretive and synergistic to its existing health

and beauty customer product brands.

Under the terms of the SG Purchase Agreement and

on the Closing Date, the Company paid the SG Seller a cash payment of $ 400,000 and issued $ 200,000 in shares of the Company’s common

stock based on the 10-Day VWAP (as defined in the SG Purchase Agreement), or 89,892 of shares of the Company’s common Stock.

Additionally,

the Company will pay the Seller a cash earn-out based on 20 % of the Net Profit (as defined in the SG Purchase Agreement) related to the

Silly George assets for the fiscal quarterly period beginning June 30, 2024 and ending on June 30, 2028.

Per the scope exception under

ASC 815, the Company has not accrued the contingent consideration.

Schedule of Business Acquisitions

Provisional purchase consideration at preliminary fair value:

Purchase price

Consideration paid

Trademark related intangibles

Intangible assets acquired

Kenkoderm Acquisition

On December 1, 2023, the Company closed a transaction

related to an Asset Purchase Agreement dated November 30, 2023 (the Kenkoderm Purchase Agreement”) with Olympus Trading Company,

LLC, a Virginia limited liability company, whereby the Company purchased all assets related to the Kenkoderm Seller’s skincare

line focused on reducing symptoms associated with psoriasis operating under the tradename “Kenkoderm” (“Kenkoderm acquisition”).

The Company believes the Kenkoderm brand fits its health and wellness lines of product.

Under the terms of the Kenkoderm Purchase Agreement,

the Company paid the Kenkoderm Seller a cash payment of $ 547 thousand on December 1, 2023.

Additionally, the Company will pay the Kenkoderm

Seller a cash earn-out of the same amount each quarter, payable in the subsequent month following quarter end, of $ 137 thousand, subject

to adjustment.

The cash earn-out can fluctuate higher or lower based on the quarterly results of the Kenkoderm business during 2024 according

to the formula contained in the Kenkoderm Purchase Agreement.

The fair value of the purchase consideration issued to the Kenkoderm

Seller was allocated to the net tangible assets acquired.

The Company accounted for the Kenkoderm acquisition as the purchase of a business

under GAAP under the acquisition method of accounting, and the assets and liabilities acquired were recorded as of the acquisition date,

at their respective fair values and consolidated with those of the Company.

The fair value of the net assets acquired was approximately

$ 169 thousand.

The excess of the aggregate fair value of the net tangible assets has been allocated to goodwill.

The table below shows an analysis for the Kenkoderm

acquisition ($ in thousands):

Schedule of Business Acquisitions

Purchase consideration at fair value:

Purchase price

Contingent consideration liability

Amount of consideration

Assets acquired and liabilities assumed at fair value

Product/technology related intangibles

Marketing related intangibles

Net tangible assets acquired

Total net assets acquired

Consideration paid

Interest in Joint Venture – CGN

On March 1, 2023, the Company acquired a 50 % interest

in the JV (see Note 1).

The JV is owned 50 % by the Company and 50 % by CG Labs.

CG Labs contributed its existing converting and packaging

division to the JV, including, but not limited to, its facilities, equipment, employees, and customers.

The Company will contribute $ 500,000

to the JV, on a schedule to be determined, to be used for equipment and facility upgrades as well as general corporate purposes for the

The JV is considered to be a VIE and we have consolidated

the JV because we believe we are the primary beneficiary because we meet the power and the economics criteria, as laid out in ASC 323.

The Company recorded assets acquired and liabilities

assumed in connection with the formation of the JV based on their estimated fair values as of the March 1, 2023.

The purchase price allocation

is as follow ($ in thousands):

Schedule of Business Acquisitions

Purchase consideration at fair value:

Cash contributed by the Company

Noncontrolling interest portion of CG Labs contributed business

Consideration Paid

Assets acquired and liabilities assumed at fair value

Cash contributed by the Company

Product/technology related intangibles

Marketing related intangibles

Net tangible assets acquired

Interest in Joint Venture – Enigma

On January 6, 2023, the Company acquired a 50 % interest

in a newly formed JV (“Enigma”) to pursue branded consumer product retail opportunities and the development of new patch

The JV agreement is effective January 6, 2023.

As a result of this transaction, the Company owns 50 % of the JV, with the remaining

50 % held by Moiety.

As of December 31, 2024, the Company has contributed $ 20 thousand and $ 37 thousand has been contributed by the non-controlling

interest portion of Enigma contributed business.

The JV is considered to be a VIE and we have consolidated

the JV because we believe we are the primary beneficiary because we meet the power and the economics criteria, as laid out in ASC 323.

The allocation of the purchase price to identifiable

assets is based on the preliminary valuations performed to determine the fair value of the net assets as of the acquisition date.

measurement period for the valuation of net assets acquired ends as soon as information on the facts and circumstances that existed as

of the acquisition dates becomes available, but not to exceed 12 months following the acquisition date.

Adjustments in purchase price

allocations may require a change in the amounts allocated to net assets acquired during the periods in which the adjustments are determined.

The unaudited pro-forma results of operations are

presented for information purposes only.

The unaudited pro-forma results of operations are not intended to present actual results that

would have been attained had the Kenkoderm and Silly George acquisitions and CG Labs JV been completed as of January 1, 2023 or to project

potential operating results as of any future date or for any future periods ($ in thousands except share and per share amounts):

Schedule of Unaudited Pro-Forma Results of Operations

the Year Ended

Revenues, net

Net loss allocable to common shareholders

Net loss per share

Weighted average number of shares outstanding

Variable interest entities

following table presents the assets and liabilities of the CGN JV and Enigma, included in the Consolidated Balance Sheet as of December

31, 2024 and 2023.

The assets and liabilities presented below include only the third-party assets and liabilities of the consolidated

VIE and excludes any intercompany balances, which were eliminated upon consolidation.

of Consolidated Variable Interest Entities

Current Assets:

receivable, net

expenses and other current assets

current assets

and equipment, net

lease - right of use asset

AND STOCKHOLDERS’ EQUITY

Current Liabilities:

payable – related party

expenses and other current liabilities

portion of note payable

lease liability, short term

lease liability, current portion

current liabilities

lease liability, net of current portion

lease liability, long term

payable, net of current portion

liabilities and stockholders’ equity

amounts above represent the combined assets and liabilities of the VIE described above, for which we are the primary beneficiary.

assets of each of these consolidated VIEs can only be used to settle the obligations of the VIE.

amounts above represent the assets and liabilities of the VIE described above, for which we are the primary beneficiary.

assets of the CGN JV consolidated VIE can only be used to settle the obligations of the VIE.

All of the liabilities are non-recourse

to us as of December 31, 2024 and 2023.

to us as of December 31, 2025 and December 31, 2024.

Operating Leases

The Company has an operating lease for a commercial

manufacturing facility and administrative offices located in Langhorne, Pennsylvania that runs through January 2031.

There are two options

that can extend the lease term for five years each.

The exercise of the lease options to renew is solely at the Company’s discretion.

The Company also has a sublease for office and manufacturing

space in Granbury, Texas that runs through February 2028.There is an option that can extend the lease term for an additional five years

through February 2033.

The exercise of the lease options to renew is solely at the Company’s discretion.

The following table presents information about the

amount and timing of the liability arising from the Company’s operating lease as of December 31, 2024 ($ in thousands):

Company has an operating lease for a commercial manufacturing facility and administrative offices located in Langhorne, Pennsylvania

that runs through January 2031.

There are two options that can extend the lease term for five years each.

The exercise of the lease options

to renew is solely at the Company’s discretion.

Company also has a sublease for office and manufacturing space in Granbury, Texas that runs through February 2028.

The Company modified

the lease agreement through July 2035.

following table presents information about the amount and timing of the liability arising from the Company’s operating lease as

of December 31, 2025 ($ in thousands):

Schedule of Future Minimum Operating Lease Payments

6 unchanged sentences

Weighted average discount rate

Total operating lease expense for the years ended

December 31, 2024, and 2023, was $ 287 thousand and $ 303 thousand, respectively, and is recorded in cost of goods sold and selling, general,

and administrative expenses in the accompanying consolidated statements of operations.

Supplemental cash flows information related to leases

was as follows:

Schedule of Supplemental Cash Flows Information Related to Leases

operating lease expense for the years ended December 31, 2025, and 2024, was $ 314

thousand and $ 287

thousand, respectively, and is recorded in cost of goods sold

and selling, general, and administrative expenses in the accompanying consolidated statements of operations.

The weighted average

discount rate was 2.6 % and 3.0 % and the weighted average remaining lease term was 6.9 years and 6.4 years at December 31, 2025 and 2024,

respectively.

cash flows information related to operating leases was as follows:

of Supplemental Cash Flows Information Related to Operating Leases

Cash paid for amounts included in the measurement of lease liability ($ in thousands):

Operating cash flows from operating lease

Operating cash flows from operating leases

ROU assets obtained in exchange for lease liabilities

Financing Lease

In February 2024, the CGN JV entered into a lease

agreement for certain equipment under separate non-cancelable equipment loan and security agreements.

February 2024, the CGN JV entered into a lease agreement for certain equipment under separate non-cancelable equipment loan and

security agreements.

The agreement matures in January 2030.

The agreements require monthly payments of principal and interest through maturity and are secured by the assets under the lease.

As of December 31, 2024, $ 417 thousand is included in the property and equipment on the balance sheet.

The weighted average interest

rate was 9.1 % at December 31, 2024.

The following table presents information about the

amount and timing of the liability arising from the Company’s financing lease as of December 31, 2024 ($ in thousands):

The agreements require monthly payments of principal and interest

through maturity and are secured by the assets under the lease.

As of December 31,

thousand is included in the property and equipment on the balance sheet.

The weighted average interest rate was 9.1 %

and 9.1 % and the weighted average remaining lease term was 4.1 years and 5.1 years at

December 31, 2025 and 2024, respectively.

following table presents information about the amount and timing of the liability arising from the Company’s financing lease as

of December 31, 2025 ($ in thousands):

Schedule of Future Minimum Financing Lease Payments

5 unchanged sentences

Weighted average discount rate

Inventory consists of the following ($ in thousands):

Supplemental cash flows information related to financing

lease was as follows:

Schedule of Supplemental Cash Flows Information Related to Financing

Cash paid for amounts included in the measurement of lease liability ($ in thousands):

Operating cash flows from financing lease

consists of the following ($ in thousands):

Schedule of Inventory

4 unchanged sentences

Inventory reserve for excess and slow moving inventory

Inventory is maintained at the Company’s warehouses

and at fulfillment centers owned by Amazon, Walmart and CVS.

The Company builds its contract manufacturing products based on customer

orders and immediately ships the products upon completion of the production process.

is maintained at the Company’s warehouses and at fulfillment centers owned by Amazon, Walmart and Borderless.

The Company builds

its contract manufacturing products based on customer orders and immediately ships the products upon completion of the production process.

Property and Equipment, Net

Property and equipment consist of the following ($

in thousands):

and equipment consist of the following ($ in thousands):

Schedule of Property and Equipment

Machinery and equipment

Office furniture and equipment

Leasehold improvements

Construction in progress

and equipment

furniture and equipment

Property and equipment, gross

accumulated depreciation and amortization

Property and equipment, net

Depreciation expense for the year ended December

31, 2024 and 2023 was $ 319 thousand and $ 132 thousand, respectively.

and equipment, net

expense for the years ended December 31, 2025 and 2024 was $ 324 thousand and $ 319 thousand, respectively.

Intangible Assets

The following provides a breakdown of identifiable

intangible assets as of December 31, 2024 and 2023 ($ in thousands):

following provides a breakdown of identifiable intangible assets as of December 31, 2025 and 2024 ($ in thousands):

Schedule of Breakdown of Identifiable Intangible Assets

2 unchanged sentences

Accumulated amortization

Product/technology related identifiable intangible assets,

Product/technology related identifiable intangible assets, net

Marketing Related

1 unchanged sentence

Tradename related intangible asset, gross

Trademark related intangibles

Accumulated amortization

1 unchanged sentence

Total identifiable intangible assets, net

In connection with the May 29, 2020 acquisition of

Sports Defense, the Company identified intangible assets of $ 55 thousand representing technology related and customer related intangibles.

In connection with the March 1, 2023 CG Labs JV,

the Company identified intangible assets of $ 287 thousand representing technology related and customer related intangibles.

In connection with the December 1, 2023 acquisition

of Kenkoderm, the Company identified intangible assets of $ 113 thousand representing technology related and customer related intangibles.

In connection with the May 15, 2024 acquisition of

Silly George, the Company identified intangible assets of $ 600 thousand representing trademark related intangibles with indefinite

Intangible assets with indefinite lives are tested

for impairment within one year of the acquisition date or annually as of December 31, and whenever indicators of impairment exist.

These assets are being amortized on a straight-line

basis over their weighted average estimated useful life of 1.9 years and amortization expense amounted to $ 119 and $ 94 thousand for the

years ended December 31, 2024 and 2023, respectively.

As of December 31, 2024, the estimated annual amortization

expense for each of the next five fiscal years is as follows ($ in thousands):

connection with the May 15, 2024 acquisition of Silly George, the Company identified intangible assets of $ 600 thousand representing

trademark related intangibles with indefinite lives.

assets with indefinite lives are tested for impairment within one year of the acquisition date or annually as of December 31, and whenever

indicators of impairment exist.

intangible assets with definite lives are being amortized on a straight-line basis over their weighted average estimated useful life

of 1.5 years and amortization expense amounted to $ 126 and $ 119 thousand for the nine months ended December 31, 2025 and 2024, respectively.

of December 31, 2025, the estimated annual amortization expense for each of the next five fiscal years is as follows ($ in thousands):

Schedule of Estimated Annual Amortization Expense

Indefinite lived intangible assets (subject to impairment analysis)

lived intangible assets (subject to impairment analysis)

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist

of the following ($ in thousands):

expenses and other current liabilities consist of the following ($ in thousands):

Schedule of Accrued Expenses and Other Current Liabilities

Salaries, benefits, and incentive compensation

Margin line of credit

Total accrued expenses and other current liabilities

At December 31, 2024, the Company has reserved common

stock for issuance in relation to the following:

December 31, 2025, the Company has reserved common stock for issuance in relation to the following:

Schedule of Reserved Common Stock For Issued Securities in Relation

Share-based compensation plan

Warrants to purchase common stock

Restricted stock units

Management of the Company has performed a review

of events and transactions occurring after the consolidated balance sheet date to determine if there were any such events or transactions

requiring adjustment to or disclosure in the accompanying consolidated financial statements, noting no such events or transactions except

as set forth below:

On November 11, 2024, the Company entered into subscription

agreements with investors and certain members of its board of directors and management for the sale by the Company of an aggregate of 363,636 units

at a price to the public of $ 5.50 per unit (the “November Financing”), with each unit consisting of two shares

of the Company’s common stock and a warrant to purchase one share of common stock at an exercise price of $ 4.25 per share (the

“November Warrants”).

The closing of the November Financing occurred on November 20, 2024 (the “November Closing Date”).

On or about the November Closing Date, the Company issued 727,272 shares of common stock and issued November Warrants to purchase

up to 363,636 shares of common stock

Subject to certain ownership limitations, each of

the November Warrants will become exercisable on the November Closing Date and will expire five years after the November Closing

The November Warrants may only be exercised on a cashless basis if there is no registration statement registering, or the prospectus

contained in the registration statement is not available for, the issuance or resale of shares of common stock underlying the November

Warrants to or by the holder.

The holder of an November Warrant is prohibited from exercising of any such warrants to the extent

that such exercise would result in the number of shares of common stock beneficially owned by such holder and its affiliates exceeding

4.99 % of the total number of shares of common stock outstanding immediately after giving effect to the exercise, which percentage may

be increased or decreased at the holder’s election not to exceed 9.99 %.

Certain members of the Company’s board of directors

and management have agreed to purchase an aggregate of 19,659 units in the November Financing.

In connection with the November Financing,

the members of board of directors and management purchasing units in the November Financing have agreed not to offer, issue, sell, contract

to sell, encumber, grant any option for the sale of or otherwise dispose of any of securities relating to the units for a period of 180

days following the date of the prospectus used in the November Financing.

The gross proceeds to the Company from the November

Financing were approximately $ 2.0 million, before deducting the placement agent’s fees and other estimated offering expenses

payable by the Company, and excluding the proceeds, if any, from the exercise of the November Warrants.

The Company intends to use the

net proceeds from the November Financing for working capital and for general corporate purposes.

The Company retained Alere Financial Partners, LLC

(a division of Cova Capital Partners, LLC) to act as the placement agent (the “November Placement Agent”) for the November

The Company paid the November Placement Agent a cash fee of 8 % of the aggregate gross proceeds in the November Financing

received from non-affiliates of the Company and 4 % of the aggregate gross proceeds in the November Financing received from

affiliates of the Company.

Additionally, the Company issued to the November Placement Agent warrants exercisable for a period of five

years to purchase up to 8 % of the number of shares sold in November Financing, or up to 58,182 shares, at a per share

exercise price of $ 4.25 .

On August 8, 2024, the Company entered into subscription

agreements with investors and certain members of its board of directors and management for the sale by the Company of an aggregate of

222,000 units at a price to the public of $ 5.00 per unit (the “August Financing”), with each unit consisting of two shares

of the Company’s common stock and a warrant to purchase one share of common stock at an exercise price of $ 4.25 per share (the

“August Warrants”).

The closing of the August Offering occurred August 23, 2024 (the “August Closing Date”).

On the August Closing Date, the Company issued 444,000 shares of common stock and issued August Warrants to purchase up to 222,000 shares

of common stock.

Subject to certain ownership limitations, each of

the August Warrants will became exercisable on the August Closing Date and will expire five years after the August Closing Date.

August Warrants may only be exercised on a cashless basis if there is no registration statement registering, or the prospectus contained

in the registration statement is not available for, the issuance or resale of shares of common stock underlying the August Warrants to

or by the holder.

The holder of an August Warrant is prohibited from exercising of any such warrants to the extent that such exercise

would result in the number of shares of common stock beneficially owned by such holder and its affiliates exceeding 4.99 % of the total

number of shares of common stock outstanding immediately after giving effect to the exercise, which percentage may be increased or decreased

at the holder’s election not to exceed 9.99 %.

The net proceeds to the Company from the August Offering

were approximately $ 1.1 million, after deducting the placement agent’s fees and other estimated offering expenses payable by the

The Company has and intends to continue to use the net proceeds from the August Offering for working capital and for general

corporate purposes.

The Company retained Alere Financial Partners, LLC

(a division of Cova Capital Partners, LLC) to act as the placement agent (the “August Placement Agent”) for the August Offering.

The Company paid the August Placement Agent a cash fee of 8 % of the aggregate gross proceeds in the August Offering received from non-affiliates

of the Company and 4 % of the aggregate gross proceeds in the August Offering received from affiliates of the Company.

Additionally, the

Company issued to the August Placement Agent warrants exercisable for a period of five years to purchase up to 8 % of the number of shares

sold in August Offering, or up to 33,360 shares, at a per share exercise price of $ 4.25 .

On June 6, 2024, Company issued 5,000 common shares

to a consultant valued at $ 9 thousand.

On February 15, 2024, the Company entered into subscription

agreements with investors and certain members of its board of directors and management for the sale by the Company of an aggregate of

242,891 units at a price to the public of $ 4.22 per unit (the “February Offering”), with each unit consisting of two shares

of the Company’s common stock and a warrant to purchase one share of common stock at an exercise price of $ 4.00 per share (the

“February Warrants”).

The closing of the February Offering occurred on March 1, 2024 (the “February Closing Date”).

On the February Closing Date, the Company issued 485,782 shares of common stock and issued February Warrants to purchase up to 242,891

shares of common stock.

Subject to certain ownership limitations, each of

the February Warrants became exercisable on the February Closing Date and will expire five years after the February Closing Date.

warrants may only be exercised on a cashless basis if there is no registration statement registering, or the prospectus contained in

the registration statement is not available for, the issuance or resale of shares of common stock underlying the warrants to or by the

The holder of a warrant is prohibited from exercising of any such warrants to the extent that such exercise would result in the

number of shares of common stock beneficially owned by such holder and its affiliates exceeding 4.99 % of the total number of shares of

common stock outstanding immediately after giving effect to the exercise, which percentage may be increased or decreased at the holder’s

compensation plan

to purchase common stock

Company’s issuance of common stock and warrant for the two years ended December 31, 2025 are as follows:

of issuance of common stock and warrant

Placement Agent

Financing Closing Date

Shares Issued

Warrants Issued

Warrants Exericise Price

Total Proceeds

Exercise Price

August 5, 2025

July 31, 2025

November 20, 2024

August 23, 2024

March 1, 2024

the Company enters into subscription agreements with investors for the sale of its common stock, accompanied with the issuance warrants

to acquire common stock.

to certain ownership limitations, each of the warrants will become exercisable on the respective closing date and will expire after five

The warrants may only be exercised on a cashless basis if there is no registration statement registering, or the prospectus contained

in the registration statement is not available for the issuance or resale of shares of common stock underlying the warrants to or by

The holder of a warrant is prohibited from exercising any such warrants to the extent that such exercise would result in

the number of shares of common stock beneficially owned by such holder and its affiliates exceeding 4.99 % of the total number of shares

of common stock outstanding immediately after giving effect to the exercise, which percentage may be increased or decreased at the holder’s

election not to exceed 9.99 %.

The net proceeds to the Company from the February

Offering were $ 0.9 million, after deducting the placement agent’s fees and other estimated offering expenses payable by the Company,

and excluding the proceeds, if any, from the exercise of the warrants.

The Company has and intends to continue to use the net proceeds

from the February Offering RDO for working capital and for general corporate purposes.

The Company retained Alere Financial Partners, LLC

(A division of Cova Capital Partners, LLC) (the “February Placement Agent”) to act as the placement agent for the February

The Company paid the February Placement Agent a cash fee of 6 % of the aggregate gross proceeds in the February Offering received

from non-affiliates of the Company and 3 % of the aggregate gross proceeds in the February Offering received from affiliates of the Company.

Additionally, on the February Closing Date, the Company issued to the February Placement Agent warrants exercisable for a period of five

years to purchase up to 6 % of the number of shares sold in this offering, or up to 27,725 shares, at a per share exercise price of $ 4.00 .

gross proceeds to the Company from the common stock issuances were intended to be used for working capital and for general corporate purposes.

Company retained Alere Financial Partners, LLC (a division of Cova Capital Partners, LLC) (“Alere”) to act as the placement

agent for August 5, 2025, November 20, 2024, August 23, 2024, and March 1, 2024 common stock issuances.

The Company pays Alere a cash

fee ranging from 3 % to 6 % of the gross proceeds received, based on the individual deal and whether the issuances are made to insiders

or outsiders of the Company.

Additionally, the Company granted Alere warrants exercisable for a period of five years from the closing

date for each of the issuances.

Share-based Compensation

The 2019 Plan provides for the granting of incentive

stock options, nonqualified stock options, restricted stock, stock appreciation rights (“SARs”), restricted stock units,

performance awards, dividend equivalent rights and other awards, which may be granted singly, in combination, or in tandem, and which

may be paid in cash, shares of common stock of the Company or a combination of cash and shares of common stock of the Company.

initially reserved a total of 57,143 shares of the Company’s common stock for awards under the 2019 Plan.

Effective as of May 26,

2020 and May 3, 2021, respectively, the Board approved an increase of the number of authorized shares of common stock reserved under

the 2019 Plan from 57,143 shares of common stock to 485,715 and from 485,715 shares of common stock to 571,429 shares of common stock,

2019 Plan provides for the granting of incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights

(“SARs”), restricted stock units, performance awards, dividend equivalent rights and other awards, which may be granted singly,

in combination, or in tandem, and which may be paid in cash, shares of common stock of the Company or a combination of cash and shares

of common stock of the Company.

Effective as of May 26, 2020, May 3, 2021, and March 23, 2023 respectively, the Board approved an increase

of the number of authorized shares of common stock reserved under the 2019 Plan from 57,143

shares of common stock to 485,715 ,

shares of common stock to 571,429

shares of common stock, and from 571,429

shares of common stock to 785,715 ,

all of which may be delivered pursuant to incentive stock options.

On December 31, 2024, the Board approved an additional

780,000 shares of common stock to be reserved under the 2019 Plan, such that total of number of shares underlying the Plan is 1,651,429

of which 793,735 shares have already been awarded or exercised.

The Company intends to submit this 780,000 increase under the 2019

for stockholder approval as part of the 2025 Proxy Statement.

Subject to adjustments pursuant to the 2019 Plan, the maximum number of

shares of common stock with respect to which stock options or SARs may be granted to an executive officer during any calendar year is

14,286 shares of common stock.

The following table contains information about the

2019 Plan as of December 31, 2024:

December 31, 2024, the Board approved an additional 780,000 shares of common stock to be reserved under the 2019 Plan, bringing the total number of shares underlying the Plan to 1,651,429 of which 793,735 shares have already been awarded or exercised.

The Company’s

stockholders approved the 780,000 share increase at the Company’s 2025 Annual Meeting of Stockholders held on June 17, 2025.

to adjustments pursuant to the 2019 Plan, the maximum number of shares of common stock with respect to which stock options or SARs may

be granted to an executive officer during any calendar year is 14,286 shares of common stock.

following table contains information about the 2019 Plan as of December 31, 2025:

Schedule of Information about Incentive Plan

2 unchanged sentences

Awards issued in excess of 2019 Plan (2)

Includes incentive stock options and restricted stock units discussed

Includes shares of restricted common stock granted outside of the 2019

Plan to our Chief Executive Officer, Adam Levy.

Incentive stock options

On September 17, 2024, the Company granted a contractor

an option to purchase up to 70,000 shares of the Company’s common stock at a per share price of $ 2.65 under the Company’s

2019 Long-Term Incentive Plan.

A portion of the award, 10,000 options are fully vested as of the date of the grant and the remaining

60,000 options are contingent upon certain sales based milestones being achieved.

On September 16, 2024, the Company granted a contractor

an option to purchase up to 2,000 shares of the Company’s common stock at a per share exercise price of $ 2.00 under the Company’s

This option award vests immediately.

On September 13, 2024, the Company granted options

to purchase up to 100,000 shares of the Company’s common stock at a per share exercise price of $ 2.72 to members of the Board of

Directors, all of which vests over a period of one year with 25 % vested upon issuance.

On August 17, 2023, the Company granted options to

purchase up to 90,000 shares of the Company’s common stock at a per share exercise price of $ 2.05 to members of the Board of Directors,

all of which vests over a period of one year with 25 % vested upon issuance.

On March 8, 2023, the Company granted a contractor

an option to purchase up to 17,532 shares of the Company’s common stock at a per share exercise price of $ 2.00 under the Company’s

This option award vests over a period of 12 months.

The options expired unexercised.

The following table summarizes the Company’s

incentive stock option activity and related information for the year ended December 31, 2024:

incentive stock options and restricted stock units discussed below.

shares of restricted common stock granted outside of the 2019 Plan to our Chief Executive Officer, Adam Levy.

Stock-Options

following table summarizes the Company’s incentive stock option activity for the two years ended December 31, 2025:

Schedule of Incentive Stock Option Activity

3 unchanged sentences

Exercisable at December 31, 2025

As of December 31, 2024 and 2023, vested outstanding

stock options had $ 1,151 thousand and $ 295 thousand of intrinsic value as the exercise price is greater than the estimated fair value

of the underlying common stock, respectively.

As of December 31, 2024 and 2023, there were $ 179 thousand and $ 0 of unrecognized share-based

compensation related to unvested stock options, excluding options fully contingent upon certain sales-based milestones being achieved

within 18 to 36 months of commercial release.

The Company recognizes compensation expense for stock

option awards on a straight-line basis over the applicable service period of the award.

of December 31, 2025 and 2024, vested outstanding stock options had $ 88 thousand and $ 1,151 thousand of intrinsic value as the exercise

price is greater than the estimated fair value of the underlying common stock, respectively.

As of December 31, 2025 and 2024, there

were $ 609 thousand and $ 179 of unrecognized share-based compensation related to unvested stock options, which the Company expects to

recognize over the next 36 months excluding options fully contingent upon certain sales-based milestones being achieved within 18 to

36 months of commercial release.

Company recognizes compensation expense for stock option awards on a straight-line basis over the applicable service period of the award.

The service period is generally the vesting period.

The following assumptions were used to calculate share-based compensation expense for year ended December 31, 2024 and 2023:

The following assumptions were used to calculate share-based compensation expense

for year ended December 31, 2025 and 2024:

Schedule of Assumptions used in Share-based Compensation

1 unchanged sentence

277.56 - 279.29

Risk-free interest rate

Dividend yield

Expected term

5 - 5.50 years

The Company does not have sufficient historical information

to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior.

Accordingly, the

Company has elected to use the “simplified method” to estimate the expected term of its share-based awards.

The simplified

method computes the expected term as the sum of the award’s vesting term plus the original contractual term divided by two.

Based on the lack of historical data of volatility

for the Company’s common stock, the Company based its estimate of expected volatility on a weighted-average of the historical volatility

of comparable public companies that manufacture similar products and are similar in size, stage of life cycle, and financial leverage.

Restrictive stock awards

Effective as of January 1, 2024, the Company granted

an aggregated restricted stock award of 22,222 shares of the Company’s common stock to Adam Levy for his service as our Chief Executive

Officer pursuant to the terms of his Executive Employment Agreement dated December 31, 2023.

The shares vest monthly from April 1, 2024

through December 31, 2024.

Under ASC 718, Compensation—Stock Compensation, the Company has measured the value of the 22,222 shares

granted based on the closing price of the Company’s stock at the grant date of the RSU Grant ($ 2.25 per share).

Effective as of January 3, 2023, the Company granted

a restricted stock award of 37,037 shares of the Company’s common stock to Adam Levy for his service as our Chief Executive Officer

pursuant to the terms of his Executive Employment Agreement dated December 30, 2022, all of which shares vested monthly from January

3, 2023 through December 31, 2023.

Under ASC 718, the Company has measured the value of the 37,037 shares granted based on the closing

price of the Company’s stock at the grant date of the RSU Grant ($ 1.35 per share).

interest rate

Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting

employment termination behavior.

Accordingly, the Company has elected to use the “simplified method” to estimate the expected

term of its share-based awards.

The simplified method computes the expected term as the sum of the award’s vesting term plus the

original contractual term divided by two.

Company estimated the expected volatility input for the Black-Scholes model using the historical volatility of its own publicly traded

common stock over a period commensurate with the expected term of the option.

Company recognizes compensation expense for stock option awards on a straight-line basis over the applicable service period of the award.

The service period is generally the vesting period.

following table summarizes the Company’s restricted stock awards activity for the year ended December 31, 2025:

Schedule of Restricted Stock Units Granted

5 unchanged sentences

Exercisable at December 31, 2025

Compensation expense will be recognized ratable over

the total vesting schedule.

The Company will periodically adjust the cumulative compensation expense for forfeited awards.

expense will be recognized ratably over the total vesting schedule.

The Company will periodically adjust the cumulative compensation

expense for forfeited awards.

The Company recognizes the reversal of any previously recognized compensation expense on forfeited awards

in the period the awards are forfeited.

compensation of $ 367 thousand and $ 217 thousand has been recorded for the years ended December 31, 2024 and 2023, respectively.

December 31, 2024, there was $ 29 thousand unrecognized share-based compensation related to unvested RSUs, which the Company expects to

recognize through December 2025.

The following table shows a summary of common stock

warrants for the years ended December 31, 2024 and 2023.

As of December 31, 2025, there was $ 38 thousand unrecognized share-based compensation related

to unvested RSUs, which the Company expects to recognize through December 2027.

compensation of $ 654 thousand and $ 367 thousand has been recorded for the year ended December 31, 2025 and 2024, respectively.

following table shows a summary of common stock warrants for the years ended December 31, 2025 and 2024.

Schedule of Common Stock Warrants

Term in Years

Outstanding at December 31, 2022

Outstanding at December 31, 2023

Warrants – 2021 IPO (1)

Outstanding at January 1, 2024 (corrected)

Outstanding at December 31, 2024

Exercisable at December 31, 2024

The warrants outstanding have been corrected to reflect 387,750 additional

warrants related to the December 27, 2021 unit offering not previously included in the prior year warrant schedule.

As of December 31, 2024, vested outstanding stock

options had $ 300 thousand intrinsic value as the exercise price is greater than the estimated fair value of the underlying common

As of December 31, 2023, vested outstanding warrants had no intrinsic value as the exercise price is greater than the estimated

fair value of the underlying common stock.

at December 31, 2023

– 2021 IPO (1)

at January 1, 2024 (corrected)

at December 31, 2024

at December 31, 2025

warrants outstanding have been corrected to reflect 387,750 additional warrants related to the December 27, 2021 unit offering not

previously included in the prior year warrant schedule.

of December 31, 2025, vested outstanding warrants had no intrinsic value as the exercise price is greater than the estimated fair value

of the underlying common stock.

of December 31, 2024, vested outstanding stock options had $ 300 thousand intrinsic value as the exercise price is greater than the

estimated fair value of the underlying common stock.

Notes Payable

CGN JV Notes Payable

The CGN JV has entered into a $ 231 thousand promissory

note agreement for certain equipment.

CGN JV has entered into a $ 231 thousand promissory note agreement for certain equipment.

The equipment was installed in December 2023.

The promissory note has a term of five years beginning

on March 13, 2024.

The promissory note accrues interest at 8 % and requires interest only payments through March 13, 2024 and monthly

payments of $ 4 thousand thereafter.

The principal balance amounted to $ 198 thousand and $ 231 thousand as of December 31, 2024 and 2023,

respectively.

The CGN JV has entered into a $ 237 thousand promissory

note agreement for certain equipment.

The funding advances of $ 153 thousand and $ 84 thousand have been issued in February 2024 and December

2023, respectively.

The promissory note has a term of five years beginning on March 13, 2024.

The promissory note accrues interest at

8 % and requires interest only payments through March 13, 2024 and monthly payments of $ 5 thousand thereafter.

The principal balance amounted

to $ 207 thousand and $ 84 thousand as of December 31, 2024 and 2023, respectively.

The Company has entered into a $ 13 thousand promissory

note agreement for certain leasehold improvements.

The leasehold improvements were installed in February 2024.

The promissory note has

a term of two years beginning on February 11, 2024.

The promissory note accrues interest at 0 % and requires monthly payments of less

than $ 1 thousand.

The principal balance amounted to $ 8 thousand as of December 31, 2024.

Economic Injury Disaster Loan

On May 28, 2020, the Company entered into the standard

loan documents required for securing a loan (the “EIDL Loan”) from the SBA under its Economic Injury Disaster Loan (“EIDL”)

assistance program in light of the impact of the COVID-19 pandemic on the Company’s business.

Pursuant to that certain Loan Authorization

and Agreement (the “SBA Loan Agreement”), the principal amount of the EIDL Loan is up to $ 260,500 , with proceeds to be used

for working capital purposes.

Interest accrues at the rate of 3.75 % per annum.

Installment payments, including principal and interest,

are due monthly beginning May 28, 2021 (twelve months from the date of the SBA Note) in the amount of $ 1,270 .

The balance of principal

and interest is payable thirty years from the date of the SBA Note.

In connection therewith, the Company received an $ 8 thousand advance,

which does not have to be repaid.

On March 26, 2021, the SBA announced that all EIDL loans issued in 2020 will start repayment 24 months

from the date of the SBA Note.

The SBA has since extended the repayment start to 30 months from the date of the SBA Note.

made its first payment in December 2022.

The balances of the principal and accrued interest amounted to $ 272 thousand and $ 277 thousand

as of December 31, 2024 and 2023, respectively.

The future annual principal amounts and accrued interest

to be paid as of December 31, 2024 are as follows:

The promissory note accrues interest at 8 % and requires interest

only payments through March 13, 2024 and monthly payments of $ 4 thousand thereafter.

The principal balance amounted to $ 156 thousand

and $ 198 thousand as of December 31, 2025 and 2024, respectively.

CGN JV has entered into a $ 237 thousand promissory note agreement for certain equipment.

The funding advances of $ 153 thousand and $ 84

thousand have been issued in February 2024 and December 2023, respectively.

The promissory note has a term of five years beginning on

March 13, 2024.

The promissory note accrues interest at 8 % and requires interest only payments through March 13, 2024 and monthly payments

of $ 5 thousand thereafter.

The principal balance amounted to $ 163 thousand and $ 207 thousand as of December 31, 2025 and 2024, respectively.

Company has entered into a $ 13 thousand promissory note agreement for certain leasehold improvements.

The leasehold improvements were

installed in February 2024.

The promissory note has a term of two years beginning on February 11, 2024.

The promissory note accrues interest

at 0 % and requires monthly payments of less than $ 1 thousand.

The outstanding principal balance was $ 1 thousand and $ 8 thousand as of

December 31, 2025 and 2024, respectively.

Injury Disaster Loan

May 28, 2020, the Company entered into the standard loan documents required for securing a loan (the “EIDL Loan”) from the

SBA under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on

the Company’s business.

Pursuant to that certain Loan Authorization and Agreement (the “SBA Loan Agreement”), the principal

amount of the EIDL Loan is up to $ 260,500 , with proceeds to be used for working capital purposes.

Interest accrues at the rate of 3.75 %

Installment payments, including principal and interest, are due monthly beginning May 28, 2021 (twelve months from the date

of the SBA Note) in the amount of $ 1,270 .

The balance of principal and interest is payable thirty years from the date of the SBA Note.

In connection therewith, the Company received an $ 8 thousand advance, which does not have to be repaid.

On March 26, 2021, the SBA announced

that all EIDL loans issued in 2020 will start repayment 24 months from the date of the SBA Note.

The SBA has since extended the repayment

start to 30 months from the date of the SBA Note.

The Company made its first payment in December 2022.

The balances of the principal

and accrued interest amounted to $ 267 thousand and $ 272 thousand as of December 31, 2025 and 2024, respectively.

future annual principal amounts and accrued interest to be paid as of December 31, 2025 are as follows:

Schedule of Debt Instruments

2 unchanged sentences

Long-term portion of notes payable

Warrant Liability

On September 2, 2021, March 11, 2021, February 3,

2021, December 24, 2020, March 18, 2020, September 10, 2019, and November 6, 2019, the Company issued 22,019 , 34,285 , 7,429 , 7,286 , 44,286 ,

35,714 and 114,286 warrants, respectively, as equity issuance consideration, in connection with equity offering of the Company’s

common stock.

The warrants entitle the holder to purchase one share of our common stock at an exercise price equal to $ 0.49 to $ 5.25

per share at any time on or after their issuance date and on or prior to the close of business three to five years after the issuance

date (the “Termination Date”).

The Company determined that these warrants are free standing financial instruments that are

legally detachable and separately exercisable from the common stock included in the public share offering.

Management also determined

that the warrants required classification as a liability pursuant to ASC 815, Derivatives and Hedging .

In accordance with the

accounting guidance, the outstanding warrants are recognized as a warrant liability on the balance sheet and are measured at their inception

date fair value and subsequently re-measured at each reporting period with changes being recorded as a component of other income (expense)

in the consolidated statements of operations.

The warrants outstanding and fair values at each

of the respective valuation dates are summarized below:

Company issued approximately 265,000 warrants in 2019, 2020 and 2021 as equity issuance consideration, in connection with equity offerings

of the Company’s common stock.

The warrants entitle the holder to purchase one share of our common stock at an exercise price equal

to $ 0.49 to $ 5.25 per share at any time on or after their issuance date and on or prior to the close of business three to five years

after the issuance date (the “Termination Date”).

The Company determined that these warrants are free standing financial

instruments that are legally detachable and separately exercisable from the common stock included in the public share offering.

also determined that the warrants required classification as a liability pursuant to ASC 815, Derivatives and Hedging .

In accordance

with the accounting guidance, the outstanding warrants are recognized as a warrant liability on the balance sheet and are measured at

their inception date fair value and subsequently re-measured at each reporting period with changes being recorded as a component of other

income (expense) in the consolidated statements of operations.

warrants outstanding and fair values at each of the respective valuation dates are summarized below:

Schedule of Warrant Liability

Warrant Liability

Fair value as of year ended 12/31/2022

Exercise of warrants

Modification of warrants

Change in fair value of warrant liability

Fair value as of year ended 12/31/2023

Exercise of warrants

Change in fair value of warrant liability

Fair value as of year ended 12/31/2024

The following assumptions were used to calculate

the warrant liability for years ended December 31, 2024 and 2023:

value as of 12/31/2023

in fair value of warrant liability

value as of 12/31/2024

in fair value of warrant liability

value as of 12/31/2025

following assumptions were used to calculate the warrant liability as of December 31, 2025 and 2024, respectively:

Schedule of Assumptions Used in Warrant Liability

Exercise price

2.80 to $ 5.25

0.49 - $ 5.25

2.16 - $ 4.46

92.34 % - 283.32

137.02 % - 287.87

Risk-free interest rate

3.66 % - 5.09

3.81 % - 4.74

Dividend yield

Expected term

interest rate

to 1.43 years

to 2.43 years

The warrant liabilities are considered Level 3 liabilities

on the fair value hierarchy as the determination of fair value includes various assumptions about future activities and the Company’s

stock prices and historical volatility of Guideline Public Companies as inputs.

warrant liabilities are considered Level 3 liabilities on the fair value hierarchy as the determination of fair value includes various

assumptions about future activities and the Company’s stock prices and historical volatility of guideline public companies as inputs.

Commitments and Contingencies

The Company may be subject to legal proceedings and

claims that arise in the ordinary course of business.

Management is not currently aware of any matters that will have a material effect

on the financial position, results of operations, or cash flows of the Company.

Service Agreement

On March 21, 2023, the Company entered into a Services

Agreement with GlaxoSmithKline Consumer Healthcare Holdings (US) LLC (“Haleon”) to supply material for a consumer product

to be developed and released in the future.

There can be no guaranty that a consumer product will be released or, if released, that it

will be successful.

July 14, 2025, the Company expanded its partnership with STADA Arzneimittel AG (“STADA”), a European leader in

consumer health.

The expansion included a $ 1 million advance from STADA to the Company in non-dilutive capital to support product launches

and marketing efforts under the Master Distribution Agreement between the parties and relates to the planned launch of digestive enzyme

formulas and solutions targeting scars and stretch marks.

As of December 31, 2025, the Company maintained $ 741 thousand of the advance

in partnership restricted cash related to the advance with $ 731 thousand also classified as a current liability under partnership accrued

advance The advance is subject to contractual restrictions on use and will be applied against eligible project costs as incurred in accordance

with the terms of the Master Distribution Agreement, as amended.

Company may be subject to legal proceedings and claims that arise in the ordinary course of business.

Management is not currently aware of any matters that will or may have a material

effect on the financial position, results of operations, or cash flows of the Company.

Concentrations of Risk

The Company’s revenues are concentrated in

a small group of customers with some individually having more than 10% of total revenues.

There were no revenues from customers that exceeded

10% of total revenues for the year ended December 31, 2024.

The accounts receivable from three customers was 50 %, 10 % and 22 % of the

total accounts receivable as of December 31, 2024.

Revenues from one customer that exceeded 10% of total

revenues for the year ended December 31, 2023, was 20 %.

The accounts receivable from one customer was 69 % of total accounts receivable

as of December 31, 2023.

The Company’s financial instruments that are

exposed to concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities.

Cash balances are maintained

principally at major U.S.

financial institutions and are insured by the Federal Deposit Insurance Corporation (“FDIC”) up

to regulatory limits.

Such cash balances are currently in excess of the FDIC insurance limit of $ 250 thousand.

As of December 31, 2024,

the Company did not have any balances that exceeded the FDIC insurance limit.

The Company has not experienced any credit losses associated

with its cash balances in the past.

The Company invests its cash equivalents in U.S.

treasury bills with original maturities of three

months or less.

Marketable securities are comprised of U.S.

bills with original maturities greater than three months.

The Company has not experienced any losses in such accounts.

The Company believes

it is not exposed to any significant credit risk on cash, cash equivalents, and marketable securities and performs periodic evaluations

of the credit standing of such institutions.

the years ended December 31, 2025 and 2024, the Company had no revenue from customers that approximated 10% of total revenue.

Company had one customer with accounts receivable balances that was 50 % of total accounts receivable as of December 31, 2025.

had three customers with accounts receivable balances that were 50 %, 10 % and 22 % of the total accounts receivable as of December 31,

Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash, cash equivalents,

restricted cash, and marketable securities.

Cash balances are maintained principally at major U.S.

financial institutions and are insured

by the Federal Deposit Insurance Corporation (“FDIC”) up to regulatory limits.

As of December 31, 2025, there is no balance

exceeding such limit.

The Company has not experienced any credit losses associated with its cash balances in the past.

The Company invests

its cash equivalents in U.S.

treasury bills with original maturities of three months or less.

securities are comprised of U.S.

treasury bills with original maturities greater than three months.

The Company has not experienced any

losses in such accounts.

The Company believes it is not exposed to any significant credit risk on cash, cash equivalents, and marketable

securities and performs periodic evaluations of the credit standing of such institutions.

Related Party Transactions

Accounts payable – related party

As of December 31, 2024, and 2023, the Company had

outstanding balances of $ 494 thousand and $ 654 thousand, respectively, due to C.G.

Laboratories, Inc., a related party.

Additionally,

as of December 31, 2024, the Company had an outstanding balance of $ 37 thousand due to Russell Crum, the CEO of CG Labs.

These balances

primarily relate to transactions for contract manufacturing, packaging, and other services provided by CG Laboratories, Inc.

Jerome Zeldis, a member of the Company board

of directors, had an outstanding balance due of $ 25

thousand for services as of December 31, 2023, which is included in accounts payable in the accompanying consolidated balance

The balance was repaid in August 2024.

The Company has established a full valuation allowance

for its deferred tax assets based on management’s belief that it is not more likely than not that the related deferred tax assets

will be realized.

For the years ended December 31, 2024 and 2023, there was no income tax expense or benefit.

At December 31, 2024 and 2023, the Company had no

recorded tax liabilities for uncertain tax positions.

The Company does not expect any significant changes to the estimate amount of liabilities

associated with uncertain tax positions in the next 12 months.

The income tax (benefit) provision consists of the

following ($ in thousands):

payable – related party

of December 31, 2025, and 2024, the Company had outstanding balances of $ 456 thousand and $ 494 thousand, respectively, due to C.G.

Laboratories,

Inc., a related party.

Additionally, as of December 31, 2025 and 2024, the Company had an outstanding balance of $ 17 thousand and $ 37

thousand due to the CEO of CG Labs.

These balances primarily relate to transactions for contract manufacturing, packaging, and other

services provided by CG Laboratories, Inc.

As of December 31, 2025, the Company had outstanding

balances due to Achieving Consulting Excellence, LLC, a company owned by the Company’s Chief Financial Officer, of $ 93 thousand

related to consulting services.

Company has established a full valuation allowance for its deferred tax assets based on management’s belief that it is more likely

than not that the related deferred tax assets will be realized.

For the years ended December 31, 2025 and 2024, there was no income tax

expense or benefit.

December 31, 2025 and 2024, the Company had no recorded tax liabilities for uncertain tax positions.

The Company does not expect any

significant changes to the estimate amount of liabilities associated with uncertain tax positions in the next 12 months.

income tax (benefit) provision consists of the following ($ in thousands):

Schedule of Income Tax (Benefit) Provision

2 unchanged sentences

Income tax provision

For the years ended December 31, 2024 and 2023, the

expected tax benefit based on the statutory rate reconciled with the actual benefit is as follows:

the years ended December 31, 2025 and 2024, the expected tax benefit based on the statutory rate reconciled with the actual benefit is

Schedule of Effective Income Tax Rate Reconciliation

For The Years Ended December 31,

For The Years Ended

federal statutory rate

5 unchanged sentences

Income tax provision

For the years ended December 31, 2024 and 2023, differences

between the expected tax expense based on the federal statutory rate and the actual tax expense is primarily attributable to the net

losses incurred and the corresponding increase to the valuation allowance.

As of December 31, 2024 and 2023, the Company’s

deferred tax assets consisted of the effects of temporary differences attributable to the following ($ in thousands):

the years ended December 31, 2025 and 2024, differences between the expected tax expense based on the federal statutory rate and the

actual tax expense is primarily attributable to the net losses incurred and the corresponding increase to the valuation allowance.

of December 31, 2025 and 2024, the Company’s deferred tax assets consisted of the effects of temporary differences attributable

to the following ($ in thousands):

Schedule of Deferred Tax Assets and Liabilities

5 unchanged sentences

Deferred tax assets, net of valuation allowance

As of December 31, 2024 and 2023, the Company has

approximately $ 21.5 million and $ 18.6 million of federal NOL carryovers, respectively, which begin to expire in 2029 through 2037.

the subsidiary’s Pennsylvania state returns reported state NOL carryovers of approximately $ 21.5 million and $ 18.6 million, as

of December 31, 2024 and 2023, respectively.

However, these loss carryforwards on a separate company basis may be subject to limitations

on the amounts that may be utilized pursuant to Internal Revenue Code section 382 and applicable state law.

Section 382 imposes significant

limitations on the utilization of net operating losses after certain changes of corporate ownership.

The Company will need to determine

the amount of loss carryforwards that may be utilized in the future as necessary.

In assessing the realization of deferred tax assets,

management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized.

realization of the deferred tax assets is dependent upon the future generation of taxable income during the years in which those temporary

differences become deductible.

Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income

and tax planning strategies in making this assessment.

After consideration of all the evidence, both positive and negative, management

has recorded a full valuation allowance against net deferred tax assets at December 31, 2024 and 2023 because management has determined

that it is more likely than not that these deferred tax assets will not be realized.

The Company is subject to taxation in the U.S.

various states.

Based on the history of net operating losses all jurisdictions and tax years are open for examination until the operating

losses are utilized or the statute of limitations expires.

As of December 31, 2024 and 2023, the Company does not have any significant

uncertain tax positions.

of December 31, 2025 and 2024, the Company has approximately $ 23.6 million and $ 21.5 million of federal NOL carryovers, respectively,

which begin to expire in 2029 through 2037.

Similarly, the subsidiary’s Pennsylvania state returns reported state NOL carryovers

of approximately $ 23.6 million and $ 21.5 million, as of December 31, 2025 and 2024, respectively.

However, these loss carryforwards on

a separate company basis may be subject to limitations on the amounts that may be utilized pursuant to Internal Revenue Code section

382 and applicable state law.

Section 382 imposes significant limitations on the utilization of net operating losses after certain changes

of corporate ownership.

The Company will need to determine the amount of loss carryforwards that may be utilized in the future as necessary.

assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of

the deferred tax assets will be realized.

The ultimate realization of the deferred tax assets is dependent upon the future generation

of taxable income during the years in which those temporary differences become deductible.

Management considers the scheduled reversal

of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

After consideration

of all the evidence, both positive and negative, management has recorded a full valuation allowance against net deferred tax assets at

December 31, 2025 and 2024 because management has determined that it is more likely than not that these deferred tax assets will not

Company is subject to taxation in the U.S.

and various states.

Based on the history of net operating losses all jurisdictions and tax

years are open for examination until the operating losses are utilized or the statute of limitations expires.

As of December 31, 2025

and 2024, the Company does not have any significant uncertain tax positions.

Subsequent Events

In accordance with ASC 855 “Subsequent Events”,

the Company evaluated subsequent events after December 31, 2024, through the date these Consolidated Financial Statements were issued

and has no transactions or events requiring disclosure

Changes in and Disagreements with Accountants

on Accounting and Financial Disclosure

accordance with ASC 855, Subsequent Events , the Company evaluated subsequent events after December 31, 2025, through the date

these Consolidated Financial Statements were issued and has no transactions or events requiring disclosure except as disclosed below.

Purchase Agreement

February 9, 2026, the Company entered into a Securities Purchase Agreement with a certain institutional investor (the “Investor”)

named therein (the “Purchase Agreement”) providing for the purchase by the Investor of a 10 %

original issue discount (OID) convertible note facility in up to the aggregate original principal amount of $ 56,667,667

(the “Convertible Note Facility”), providing for

the purchase by the Investor, in one or more closings, of (i) series A senior secured convertible notes up to an aggregate original principal

amount of up to $ 1,797,381

(the “Series A Convertible Notes,” and the shares

of common stock, par value $ 0.001

per share (“Common Stock”) issuable pursuant to

the terms of the Series A Convertible Notes (the “Series A Conversion Shares”) in a registered direct pursuant to a currently

effective shelf registration statement on Form S-3 (File No.

333-264282), which has been declared effective by the SEC on June 7, 2023 and (ii) series B senior secured convertible notes up to an aggregate

original principal amount of up to $ 54,869,286

(or such other amount as the Company and the Investor shall

mutually agree in writing) (the “Series B Convertible Notes,” together with the Series A Convertible Notes, the “Convertible

Notes”) and the shares of common stock issuable pursuant to the terms of the Series B Convertible Notes (the “Series B Conversion

Shares”, and collectively with the Series A Conversion Shares, the “Conversion Shares”)), in reliance upon the exemption

from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”),

and Rule 506(b) of Regulation D as promulgated by the SEC under the Securities Act.

Series A Convertible Notes were issued on February 10, 2026, and the Company received gross proceeds of $ 1,797,381

before deducting expenses, which proceeds shall be subject

to the terms of a deposit account control agreement.

The Company is required to use the net proceeds from the offering of the Series

A Convertible Notes primarily for an approved future acquisition as further described in the Purchase Agreement (the “Approved

Acquisition”).

The Company agreed not to use the net proceeds for certain purposes, including satisfaction of other indebtedness

(except as specifically permitted), redemption or repurchase of securities (except as permitted), or settlement of outstanding litigation.

If the Company consummates the Approved Acquisition no later than April 15, 2026, subject to certain other conditions, the Investor will

be required to purchase Series B Convertible Notes in up to an aggregate original principal amount of $ 14,869,286

at an additional closing pursuant to the Purchase Agreement,

all of which proceeds will be used for the Approved Acquisition, except for certain expenses payable on behalf of the Investor.

Purchase Agreement contains representations and warranties of the Company typical for transactions of this type, including representations

and warranties relating to organization and authorization, issuance and validity of the securities, compliance with securities laws and

effectiveness of the registration statement, absence of conflicts, SEC filings and financial statements, capitalization, absence of litigation,

and other customary matters.

The Purchase Agreement also contains representations and warranties of the Investor, including that each

Investor is a qualified institutional investor or institutional accredited investor acquiring the securities for investment purposes.

Purchase Agreement also contains customary affirmative and negative covenants, including covenants relating to filing and maintenance

of registration statements, listing of securities, reservation of shares, restrictions on issuance of competing securities during specified

periods, and participation rights in certain subsequent financings.

The Purchase Agreement also obligates the Company to indemnify the

Investor and its affiliates for certain losses resulting from any breach of representations, warranties or covenants in the transaction

documents, or any third-party claims arising out of the execution or performance of the transaction documents or the Investor’s

status as investors in the Company.

Capital Group the “Placement Agent”) acted as the Company’s placement agent with respect to the Convertible Notes.

The Company agreed to pay to the a cash fee equal to 7 %

of the aggregate gross proceeds raised from the Convertible Notes at the time and if the Company consummates the Approved Acquisition;

provided , however ,

the Placement Agent has agreed to convert 25% of this cash fee into a form of convertible promissory note to be agreed to between the

Company and the Placement Agent.

Additionally and at the time and if we consummate the Approved Acquisition, the Company agreed to issue

to Placement Agent warrants to purchase that number of shares of Common Stock of the equal to 7 %

of the aggregate number of shares of Common Stock (or Common Stock equivalent, if applicable) sold in the offering (the “Placement

Agent Warrants”).

The Placement Agent Warrants will (x) provide for cashless exercise, (y) have an exercise price equal to the

offering price per share in at closing and (z) expire on the five (5) year anniversary from issuance.

to the Purchase Agreement, the Company will issue the two series of convertible notes in this offering:

(i) Series A Convertible Notes

issued in a registered direct offering pursuant to the Company’s effective shelf registration statement on Form S-3 and a related

prospectus supplement and (ii) Series B Convertible Notes to be issued, in one or more closings, in a private placement pursuant to Section

4(a)(2) of the Securities Act, and Regulation D promulgated thereunder

Convertible Notes are issued pursuant to substantially identical forms, with certain provisions applicable only to one series or the

Specifically, the Series A Convertible Notes, and the Series A Conversion Shares were registered at issuance under the prospectus

supplement and the Series B Conversion Shares will be freely transferable by the holders, while the Series B Convertible Notes will be

issued in a private placement and accordingly the Series B Conversion Shares are subject to transfer restrictions under applicable securities

The Company entered into a Registration Rights Agreement (as defined below) with the Investor, pursuant to which the Company is

obligated to file a registration statement registering the Series B Conversion Shares and maintain its effectiveness in accordance with

the terms of such agreement.

Certain provisions in the forms of Convertible Notes, such as events of default relating to registration

statement effectiveness and obligations to deliver unlegended shares, apply only to the Series B Convertible Notes.

as otherwise specified, references to the “Convertible Notes” in this Annual Report on Form 10-K apply to both the Series

A Convertible Notes and the Series B Convertible Notes, and the description of the terms of the Convertible Notes set forth below applies

equally to both series unless otherwise indicated.

Convertible Notes bear interest at a rate of 10 % per annum (increasing to 18 % per annum upon the occurrence and during the continuance

of an Event of Default), with interest payable monthly on the first Trading Day of each calendar month commencing May 1, 2026.

Each Convertible

Note will mature on the two (2) year anniversary of the applicable issuance date, subject to adjustment if certain conditions with respect

to the Approved Acquisition are not met.

Series A Convertible Notes are convertible into shares of Common Stock at a fixed Conversion Price of $ 1.244 per share, subject to adjustment

as provided in the Series A Convertible Notes.

The holder may elect to convert the Convertible Notes at an Alternate Conversion Price,

subject to certain conditions, which provides for conversion at a discounted price based on recent trading VWAP.

The Alternate Optional

Conversion Price is equal to the lower of (i) the Conversion Price or (ii) the greater of (x) the Floor Price (as defined below) or (y)

95% of the average VWAP during the ten (10) consecutive Trading Day period ending on the trading day immediately preceding delivery of

the conversion notice.

The Alternate Event of Default Conversion Price is equal to the lower of (i) the Conversion Price or (ii) the

greater of (x) the Floor Price or (y) 80% of the average VWAP during the ten (10) consecutive trading day period ending on the trading

day immediately preceding delivery of the conversion notice.

The Floor Price is $ 0.2488 per share, subject to adjustment.

to the Purchase Agreement, the issuance of the Series B Convertible Notes at the Company’s option shall be subject to and conditioned

on the Company receiving the required stockholder approval for the following matters:

(i) the redomestication of the Company to the State

of Nevada, (ii) the approval of one or more reserve stock splits over the next twelve (12) months up to an aggregate ratio of 250 shares-to-1

share, (iii) approval of the increase of the authorized shares of Common Stock of the Company from 25,000,000 to 250,000,000 , and (iv)

the approval of the issuance of all of the Securities in compliance with the rules and regulations of Nasdaq Capital Markets.

Purchase and Exclusive License Agreement

March 6, 2026, the Company entered into an Asset Purchase and Exclusive License Agreement (the “License Agreement”) with

Celularity Inc., a Delaware corporation (the “Licensor”), whereby the Licensor agreed to grant to the Company an exclusive

license to its commercial-stage biomaterials portfolio and certain development-stage programs as more fully described in the Agreement

and the Licensor agreed to sell to the Company assets related to the portfolio (collectively, the “Business”).

Pursuant to the License Agreement, consideration

for the Business will consist of up to $ 35.0 million in cash, subject to certain adjustments, which will include (i) a $ 15.0 million

upfront payment and (ii) an additional $ 20.0 million in potential milestone payments based on net sales targets related to the Business.

Each party’s obligation to consummate the transaction

is subject to customary conditions as set out in the Agreement, including the Company’s receipt of financing in an amount sufficient

to pay the initial $15.0 million upfront payment.

In addition, the Agreement contains customary termination rights of the parties.

Agreement contains customary representations, warranties, covenants, indemnifications, and agreements.

Among other ancillary agreements,

the Agreement contemplates that the parties will enter into a contract manufacturing agreement and sublease agreement related to the

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data