What changed in this filing

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Item 1. Financial Statements

2025-05-13 compared with 2024-11-13 · 1150 added, 1077 removed, 84 unchanged (96% of the section changed)

FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

OF SEPTEMBER 30, 2024 AND DECEMBER 31, 2023

thousands, except share and per share data)

and cash equivalents

receivable, net

expenses and other current assets

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2025 AND DECEMBER 31, 2024

(in thousands, except share and per share data)

Current Assets:

and equipment, net

lease - right of use asset

AND STOCKHOLDERS’ EQUITY

expenses and other current liabilities

portion of note payable

consideration liability

lease liability, current portion

lease liabilities, current portion

current liabilities

lease liabilities, net of current portion

lease liability, net of current portion

payable, net of current portion

and Contingencies (Note 16)

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;

6,790,777 and 5,741,838 shares issued and outstanding as of September 30, 2024

and December 31, 2023, respectively

paid-in capital

NexGel stockholders’ equity

Non-controlling

interest in joint venture

stockholders’ equity

Accounts receivable, net

Prepaid expenses and other current assets

Total current assets

Intangibles, net

Property and equipment, net

Operating lease - right of use asset

LIABILITIES AND STOCKHOLDERS’ EQUITY

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

CONSOLIDATED STATEMENTS OF OPERATIONS

THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

thousands, except share and per share data)

and development

general and administrative

Current Liabilities:

Accounts payable

Accounts payable - related party

Accounts payable

Accrued expenses and other current liabilities

Deferred revenue

Current portion of note payable

Warrant liability

Contingent consideration liability

Financing lease liability, current portion

Operating lease liabilities, current portion

Total current liabilities

Operating lease liabilities, net of current portion

Financing lease liability, net of current portion

Notes payable, net of current portion

Total liabilities

Commitments and Contingencies (Note 17)

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;

7,654,037 and 7,638,497 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively

Additional paid-in capital

Accumulated deficit

Total NexGel stockholders’ equity

Non-controlling interest in joint venture

Total stockholders’ equity

Total liabilities and stockholders’ equity

The accompanying notes are an integral part of these

condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024

(in thousands, except share and per share data)

Three Months Ended

Revenues, net

Cost of revenues

Gross margin (loss)

Operating expenses:

from operations

income (expense)

on investments

in fair value of warrant liability

other income, net

before income taxes

Loss (income) attributable to non-controlling interest in joint venture

loss attributable to NexGel stockholders

loss per common share - basic

loss per common share - diluted

average shares used in computing net loss per common share - basic

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

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

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

thousands, except share data)

Research and development

Selling, general and administrative

Total operating expenses

Loss from operations

Other income (expense):

Interest income (expense), net

Changes in fair value of warrant liability and warrant modification expense

Gain on investment in marketable securities

Other expense

Total other income (expense), net

Loss before income taxes

Income tax expense

Income (loss) attributable to non-controlling interest in joint venture

Net loss attributable to NexGel stockholders

Net loss per common share - basic

Net loss per common share - diluted

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

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

The accompanying notes are an integral part of these

condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024

(in thousands, except share data)

Stockholders’

January 1, 2024

compensation and restricted stock vesting

offering proceeds, net of expenses

of placement agent warrants in conjunction with the equity offering

Balance, January 1, 2025

Share-based compensation and restricted stock vesting

Balance, March 31, 2025

compensation and restricted stock vesting

issued in acquisition

Issuance of shares

Non-controlling

interest contribution

Balance, June 30,

compensation and restricted stock vesting

offering proceeds, net of expenses

of placement agent warrants in conjunction with the equity offering

September 30, 2024

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

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023

thousands, except share data)

Stockholders’

January 1, 2023

stock vesting

Exercise of warrants

Non-controlling

interest in JV

Non-controlling

interest contribution

income (loss)

Balance, January 1, 2024

Share-based compensation and restricted stock vesting

Rights offering proceeds, net of expenses

Issuance of placement agent warrants in conjunction with the rights offering

Balance, March 31, 2024

Exercise of warrants

income (loss)

Balance, June 30,

income (loss)

September 30, 2023

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

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

(loss) attributable to non-controlling interest in joint venture

and amortization

in ROU asset and operating lease liability

compensation and restricted stock vesting

on investment in marketable securities

in fair value of warrant liability

in operating assets and liabilities:

expenses and other assets

expenses and other current liabilities

Cash Used in Operating Activities

from sales of marketable securities

cash paid for Asset acquisition

Cash (Used in) Provided by Investing Activities

from margin line of credit

from Rights offering

by joint venture partner

payment on financing lease liability

in contingent consideration liability

payments of notes payable

Cash Provided by Financing Activities

Decrease in Cash

Cash – Beginning

Disclosure of Cash Flows Information

paid during the year for:

Non-cash Investing and Financing activities

issued in conjunction with asset acquisition

and equipment financed under notes payable

and equipment financed under financing leases

and equipment contributed as capital investment to JV

asset and operating lease liabilities recognized upon consolidation of JV

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

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 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.

The accompanying notes are an integral part of these

condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024

(in thousands)

Three Months Ended

Operating Activities

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

Income (loss) attributable to non-controlling interest in joint venture

Depreciation and amortization

Share-based compensation and restricted stock vesting

Gain on investment in marketable securities

Changes in fair value of warrant liability and warrant modification expense

Amortization of right of use asset

Changes in operating assets and liabilities:

Accounts receivable, net

Prepaid expenses and other assets

Accounts payable

Accounts payable – related party

Accrued expenses and other current liabilities

Deferred revenue

Net Cash Used in Operating Activities

Investing Activities

Proceeds from sales of marketable securities

Capital expenditures

Net Cash Used in Investing Activities

Financing Activities

Proceeds from rights offering, net of expenses

Payment of contingent consideration

Principal payment on financing lease liability

Principal payments of notes payable

Net Cash Provided by (Used in) Financing Activities

Net Decrease in Cash

Cash – Beginning of period

Cash – End of period

Supplemental Disclosure of Cash Flows Information

Cash paid during the year for:

Supplemental Non-cash Investing and Financing activities

Property and equipment financed under notes payable

Property and equipment financed under financing leases

The accompanying notes are an

integral part of these condensed consolidated financial statements.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in 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

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,

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

on November 14, 2019.

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”).

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”).

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.

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 (“CGN 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.

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.

The CGN JV was effective March 1, 2023.

As a result of this transaction,

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

of Presentation

accompanying unaudited condensed consolidated financial statements and footnotes of NexGel have been prepared in accordance with generally

accepted accounting principles in the United States of America (“GAAP”) for interim financial information and the instructions

to Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (“SEC”).

Accordingly, they do not include

all of the information and footnotes required by GAAP for complete financial statements.

In the opinion of management, these unaudited

condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, considered necessary

for a fair presentation of the results of the interim periods, but are not necessarily indicative of the results of operations

to be anticipated for the full year ending December 31, 2024 .

These condensed consolidated financial statements should be read

in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report

on Form 10-K for the year ended December 31, 2023.

of Consolidation

accompanying condensed consolidated financial statements include the accounts of the Company and its condensed consolidated wholly-owned

subsidiary, NexGelRx, Inc.

and the fifty percent ( 50 %) owned JV’s (see Note 5).

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

On January 6, 2023, the Company

acquired a 50 % interest in a newly formed joint venture (“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.

Basis of Presentation

The condensed 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.

The accompanying interim unaudited condensed consolidated

financial statements and footnotes of NexGel have been prepared in accordance with generally accepted accounting principles in the United

States of America (“GAAP”) for interim financial information and the instructions to Rule 10-01 of Regulation S-X of the Securities

and Exchange Commission (“SEC”).

Accordingly, they do not include all of the information and footnotes required by

GAAP for complete financial statements.

In the opinion of management, these unaudited condensed consolidated financial statements contain

all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the results of the interim

periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31,

These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements

and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Principles of Consolidation

The accompanying condensed consolidated financial

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

and the fifty percent

( 50 %) owned CGN JV (see Note 5).

Going Concern

of September 30, 2024, the Company had a cash balance of $ 1.1 million.

For the nine months ended September 30, 2024, the Company incurred

a net loss of $ 2.4 million and had a net usage of cash in operating activities of $ 3.0 million.

In addition, the Company had a

working capital of $ 1.6 million as of September 30, 2024.

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”).

The November Financing is expected to close on or about November 13, 2024 with

gross proceeds to the Company expected to be $ 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 RDO for working capital and for general corporate purposes (discussed further within Note

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.

expect to continue incurring losses for the near-term future.

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 condensed 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 condensed 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 accompanying condensed 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 March 31, 2025, the Company had a cash balance of $ 1.2 million.

For the three months ended March 31, 2025, the Company incurred

a net loss of $ 712 thousand and had a net usage of cash in operating activities of $ 400 thousand.

In addition, the Company had

working capital of $ 2.2 million as of March 31, 2025.

These conditions raise substantial doubt about the Company’s ability to continue

as a going concern.

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 our current

business activities, 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

The condensed 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 condensed 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

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

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

These estimates and assumptions

include allowances for credit losses, 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.

Use of Estimates

The preparation of the condensed consolidated financial

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

consolidated financial statements and accompanying notes.

These estimates and assumptions include allowances for credit losses, 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.

However, the Enigma JV was dissolved

on December 23, 2024.

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

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.

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.

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

“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 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.

Line of Credit

Company has a brokerage account through which it can buy and sell U.S.

We have reclassified, combined or separately disclosed

certain amounts in the prior years’ condensed 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

March 31, 2024 condensed consolidated statement of cashflows 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.

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).

borrowed are collateralized by the securities held in the account and bear interest at a negotiated rate payable monthly.

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 September 30, 2024 and December 31, 2023, there was $ 345 thousand and $ 245 thousand outstanding under this short-term

credit line which is included in accrued expenses and other current liabilities within the accompanying condensed consolidated balance

The short-term credit line will be repaid upon the maturity of U.S.

treasury bills of $0.8 million with an original maturity

of three months or less which are included in cash within the accompanying consolidated balance sheet (see Note 11).

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 doubtful accounts 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 $ 19 thousand as of September 30, 2024 and $ 11 thousand as of December 31, 2023.

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

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

“Cost of revenues” line item in the condensed 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.

and Development

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

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 March 31, 2025 and December 31, 2024

there were no balances outstanding under this short-term credit line.

Accounts Receivable, net

Trade 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.

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

Account balances are charged off against

the allowance when it is probable that the receivable will not be recovered.

The allowance for credit losses was $ 6 thousand as of March

31, 2025 and $ 5 thousand as of December 31, 2024.

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

condensed 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.

Research and Development

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

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 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.

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 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

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 a 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, 2023.

Expenses and Other Current Assets

expenses and other current assets are recorded at historical cost and are primarily made up of $ 65 thousand and $ 64 thousand of prepaid

insurance, and $ 814 thousand and $ 336 thousand general prepaid expenses and other current assets as of September 30, 2024 and December

31, 2023, respectively.

assets are recorded at historical costs, and as of September 30, 2024 and December 31, 2023, the balance is primarily comprised of spare

parts for manufacturing equipment.

The Company maintains spare 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 condensed consolidated balance sheet to approximate fair value because of the short-term or highly

liquid nature of these financial instruments.

to purchase common stock were issued in connection with equity financing raises, which occurred during 2019 through 2024.

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 condensed 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 Company’s

condensed consolidated statements of changes in stockholders’ equity and condensed consolidated balance sheets.

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.

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.

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 basis.

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

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

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.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets are recorded

at historical cost and are primarily made up of $ 28 thousand and $ 46 thousand of prepaid insurance, and $ 748 thousand and $ 577 thousand

general prepaid expenses and other current assets as of March 31, 2025 and December 31, 2024, respectively.

Other assets are recorded at historical costs, and

as of March 31, 2025 and December 31, 2024, 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.

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

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 condensed consolidated

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

Warrant Liability

Warrants to purchase common stock were issued in connection

with equity financing raises, which occurred during 2019 through 2024.

The fair values of the warrants are estimated as of the date of

issuance and again at each year end 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 condensed 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 condensed consolidated statements of changes in stockholders’ equity and condensed

consolidated balance sheets.

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.

Revenue is recognized upon shipment to the end customer.

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.

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.

Historically, sales return provisions have not been material.

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):

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

manufacturing

and white label

consumer products

devices/other

manufacturing

and white label

consumer products

devices/other

of September 30, 2024 and December 31, 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

and $ 20 at September 30, 2024 and December 31, 2023, respectively, that the Company had not satisfied as of the end of the respective

Company has four distinct lines of business;

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

Manufacturing

order rolls of gel (“rollstock”).

Three Months Ended

Contract manufacturing

Custom and white label finished goods manufacturing

Consumer branded products

Contract Liabilities

As of March 31, 2025 and December 31, 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 $ 286 thousand and $ 179 thousand at March 31, 2025 and December 31, 2024,

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

Deferred revenue

Total Deferred revenue

Significant changes in the contract liabilities balance during the period

are as follows:

of Contract Liabilities Balance

Contract liabilities

Balance, December 31, 2024

Non-cancelable contracts with customers entered during the period

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

Balance, March 31, 2025

The Company has four distinct lines of business;

Manufacturing, Custom & White Label, Consumer Branded 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.

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 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.

Consumer Products

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

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 customer.

These products carry the Company’s brand names, which include

Medagel, Lumagel Beauty, Kenkoderm and Silly George.

Devices/Other

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.

Historically, this was 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 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.

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 consumers 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 customer.

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

Medical Devices

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

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

2 unchanged sentences

freight revenue from contract manufacturing customers.

and Handling Revenue and Expense

and handling revenue and expense are included in our condensed 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

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

See Note 13 below 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, 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.

Compensation expense is recognized in the condensed 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 condensed 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 condensed 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.

842, Leases, requires recognition of leases on the condensed 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 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.

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 condensed consolidated

financial statements.

As of December 31, 2023, 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 is made.

and liabilities recorded as a result of consolidating the financial results of the VIE into the Company’s condensed 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 condensed consolidated financial position or results of operations upon adoption.

June 2016, the FASB issued Accounting Standards Update (“ASU’) 2016-13, Financial Instruments – Credit Losses (Topic

Measurement of Credit Losses on Financial Instruments .

ASU 2016-13 significantly changes the impairment model for most financial

assets and certain other instruments.

ASU 2016-13 will require immediate recognition of estimated credit losses expected to occur over

the remaining life of many financial assets, which will generally result in earlier recognition of allowances for credit losses on loans

and other financial instruments.

ASU 2016-13 is effective for the Company’s fiscal year beginning January 1, 2023 and subsequent

interim periods.

The Company adopted this new standard during the year ended December 31, 2023 and it did not have a material impact

to its condensed consolidated financial statements.

Pronouncements Issued But Not Yet Adopted

June 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-05, Business Combinations (ASC

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

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

ASU 2023-05 will be effective for non-public entities for annual periods beginning after December 15, 2025, with early adoption

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

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

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.

Early adoption is permitted.

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

income tax related disclosures.

The Company is currently evaluating the impact this standard will have on its condensed consolidated

financial statements.

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

Shipping and Handling Revenue and Expense

Shipping and handling revenue and expense are included

in our condensed 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 13 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.

Compensation expense

is recognized in the condensed 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 realized.

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 condensed 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 condensed 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.

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

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 is made.

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 condensed consolidated financial

position or results of operations upon adoption.

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

Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

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.

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.

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.

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):

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.

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.

The Company is currently evaluating the impact this

standard will have on its condensed consolidated financial statements.

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

The Company is

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

Business Segments

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

or (loss) as the profitability measure.

Items 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.

financial information concerning the Company’s reportable segments for each of the quarters ended September 30, 2024 and 2023 is

presented below.

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.

Items 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.

financial information concerning the Company’s reportable segments for each of the quarters ended March 31, 2025 and 2024

statement of operations and balance sheet at March 31, 2025 and December 31, 2024 is presented below.

of Reportable Segments

Quarter Ended September 30, 2024 ($ in thousands)

Manufacturing

and White Label Finished Goods

Consumer Products

Cost of sales

from operations

Quarter Ended September 30, 2023 ($ in thousands)

Manufacturing

and White Label Finished Goods

Consumer Products

Cost of sales

from operations

the Nine Months Ended September 30, 2024 ($ in thousands)

Manufacturing

and White Label Finished Goods

Consumer Products

For Quarter Ended March 31, 2025 ($ in thousands)

Contract Manufacturing

Custom and White Label Finished Goods

Branded Consumer Products

Total revenue

Cost of sales

from operations

the Nine Months Ended September 30, 2023 ($ in thousands)

Manufacturing

and White Label Finished Goods

Consumer Products

Operating expenses

Income (loss) from operations

For Quarter Ended March 31, 2024 ($ in thousands)

Contract Manufacturing

Custom and White Label Finished Goods

Branded Consumer Products

Total revenue

Cost of sales

from operations

of September 30, 2024 ($ in thousands)

receivable, net

expenses and other current assets

Operating expenses

Loss from operations

As of March 31, 2025 ($ in thousands)

Current assets:

and equipment, net

lease – right of use asset

expenses and other current liabilities

portion of note payable

consideration liability

lease liability, current portion

lease liabilities, current portion

Accounts receivable, net

Prepaid expenses and other current assets

Total current assets

Intangibles, net

Property and equipment, net

Operating lease – right of use asset

Current liabilities:

lease liability, net of current portion

lease liabilities, net of current portion

payable, net of current portion

of December 31, 2023 ($ in thousands)

receivable, net

expenses and other current assets

Accounts payable

Accounts payable – related party

Accounts payable

Accrued expenses and other current liabilities

Deferred revenue

Current portion of note payable

Warrant liability

Contingent consideration liability

Financing lease liability, current portion

Operating lease liabilities, current portion

Total current liabilities

Operating lease liabilities, net of current portion

Financing lease liability, net of current portion

Notes payable, net of current portion

Total liabilities

As of December 31, 2024 ($ in thousands)

Current assets:

and equipment, net

lease – right of use asset

expenses and other current liabilities

portion of note payable

consideration liability

lease liability, current portion

Accounts receivable, net

Prepaid expenses and other current assets

Total current assets

Property and equipment, net

Operating lease – right of use asset

Liabilities and Stockholders’ Equity

Current liabilities:

lease liability, net of current portion

payable, net of current portion

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 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 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.

Accounts payable

Accounts payable – related party

Accrued expenses and other current liabilities

Deferred revenue

Current portion of note payable

Warrant liability

Contingent consideration liability

Finance lease liability, short term

Operating lease liability, current portion

Total current liabilities

Operating lease liability, net of current portion

Finance lease liability, long term

Notes payable, net of current portion

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 “Silly George acquisition”).

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 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.

The table below shows an analysis for the Silly George

acquisition ($ in thousands):

Schedule of Business Acquisitions

purchase consideration at preliminary fair value:

consideration liability

Consideration

related intangibles

assets acquired

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”

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.

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.

provisional 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 condensed 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.

table below shows a preliminary analysis for the Kenkoderm acquisition ($ in thousands):

Schedule of Business Acquisitions

purchase consideration at preliminary fair value:

consideration liability

of consideration

acquired and liabilities assumed at preliminary fair value

Product/technology

related intangibles

tangible assets acquired

net assets acquired

Consideration

Defense Acquisition

May 29, 2020, the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) whereby the

Company purchased all of the outstanding equity securities of Sport Defense LLC, a Delaware limited liability company (“Sports

Defense”), from the members of Sport Defense (the “Sellers”).

Subsequent to the Closing Date, Sport Defense is a wholly-owned

subsidiary of the Company.

Defense is a marketing and distribution company that leverages the unique benefits of ultra-gentle, high-water content hydrogels, manufactured

by the Company, to build brands that treat various ailments of the skin caused by athletic training, such as blisters, turf burns, scrapes

and skin irritations.

the terms of the Purchase Agreement, the purchase price paid to the Sellers was an aggregate of $ 375 thousand (the “Sports Defense

Purchase Price”) which was paid by the Company through the issuance of an aggregate of 9,375,000 shares of the Company’s

common stock, par value $ 0.001 (the “Shares”), which equates to a per share purchase price of $ 0.04 .

The Shares are “restricted

securities” as such term is defined by Rule 144 promulgated under the Securities Act of 1933, as amended.

Levy, the Company’s Chief Executive Officer and Chief Financial Officer, and Nachum Stein, a member of the Company’s Board

of Directors (the “Board”), were each members of Sport Defense and part of the Sellers.

Levy received 1,546,875

of the Shares and Mr.

Stein received 3,187,500 of the Shares.

Due to the potential conflict of interest that existed because of

Levy and Stein’s partial ownership of Sport Defense, the Board obtained an independent investment bank to prepare

a valuation report with respect to Sport Defense.

This valuation report supported the Sports Defense Purchase Price.

recused himself from the vote of the Board regarding the approval to purchase Sport Defense.

Purchase Agreement and the Sport Defense acquisition were not subject to approval by the shareholders of the Company.

The Purchase Agreement

contained minimal representations and warranties regarding Sport Defense and certain limited representations and warranties regarding

the Company and the Sellers.

fair value of the purchase consideration issued to the Seller was allocated to the net tangible assets acquired.

The Company accounted

for the Sports Defense 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

The fair value of the net assets acquired was approximately $ 375 thousand.

The excess of the aggregate fair value of the net

tangible assets has been allocated to goodwill.

table below shows an analysis for the Sports Defense acquisition:

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

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

Consideration at preliminary fair value:

of consideration

acquired and liabilities assumed at preliminary fair value

Product/Technology

related intangibles

payable and accrued expenses

tangible assets acquired

net assets acquired

Consideration

in Joint Venture – CGN

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.

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 JV.

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.

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):

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 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.

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

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

The Company recorded assets acquired and liabilities

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

The table below set forth the CGN JV purchase price

allocation ($ in thousands):

Schedule of Business Acquisitions

consideration at fair value:

contributed by the Company

Noncontrolling

interest portion of CG Labs contributed business

Consideration

acquired and liabilities assumed at fair value

contributed by the Company

Product/technology

related intangibles

tangible assets acquired

in Joint Venture – Enigma

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.

As of September 30, 2024, the Company has contributed $ 20 thousand

and $ 37 thousand has been contributed by the non-controlling interest portion of Enigma contributed business.

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.

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.

The 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.

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

The unaudited pro-forma

condensed consolidated results of operations are not intended to present actual results that would have been attained had the Kenkoderm

and Silly George acquisitions and the CGN JV and Enigma 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):

Purchase consideration at fair value:

Cash contributed by the Company

Noncontrolling interest portion of CG Labs contributed business

Amount of consideration

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 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 has contributed $ 20 thousand and $ 37 thousand has been contributed by the non-controlling interest

portion of Enigma JV contributed business.

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

consolidated the Enigma 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 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

loss allocable to common shareholders

loss per share

average number of shares outstanding

For the Three Months Ended

Revenues, net

Net loss allocable to common shareholders

Net loss per share

Weighted average number of shares outstanding

Variable interest entities

The following table presents the

assets and liabilities of the CGN JV and Enigma JV, included in the condensed consolidated balance sheet as of March 31, 2025 and

December 31, 2024.

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.

The Enigma JV was dissolved on

December 23, 2024.

of Consolidated Variable Interest Entities

Current Assets:

Accounts receivable, net

Prepaid expenses and other current assets

Total current assets

Intangibles, net

Property and equipment, net

Operating lease - right of use asset

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

Accounts payable

Accounts payable – related party

Accounts payable

Accrued expenses and other current liabilities

Deferred revenue

Current portion of note payable

Finance lease liability, short term

Operating lease liability, current portion

Total current liabilities

Operating lease liability, net of current portion

Finance lease liability, long term

Notes payable, net of current portion

Total liabilities and stockholders’ equity

The amounts above represent the combined assets and

liabilities of the VIE described above, for which we are the primary beneficiary.

The assets of each of these consolidated VIEs can only

be used to settle the obligations of the VIE.

All of the liabilities are non-recourse to us as of March 31, 2025 and December 31, 2024.

Operating Leases

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.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.

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

of September 30, 2024 ($ in thousands):

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 March 31, 2025 ($ in thousands):

Schedule of Future Minimum Operating Lease Payments

of Lease Liability

(Remainder of year)

undiscounted operating lease payments

Maturity of Lease Liability

Lease Liability

Total undiscounted operating lease payments

Imputed interest

value of operating lease liabilities

Weighted average

remaining lease term

Weighted average

discount rate

operating lease expense for the nine months ended September 30, 2024 and 2023, was $ 183 thousand and $ 197 thousand, respectively, and

is recorded in cost of goods sold and selling, general and administrative expenses in the accompanying condensed consolidated statements

of operations.

cash flows information related to leases was as follows:

Present value of operating lease liability

Weighted average remaining lease term

Weighted average discount rate

Total operating lease expense for both the three months

ended March 31, 2025 and 2024, was $ 71 thousand, and is recorded in cost of goods sold and selling, general and administrative expenses

in the accompanying condensed consolidated statements of operations.

Supplemental cash flows information related to leases

was as follows:

Schedule of Supplemental Cash Flows Information Related to Leases

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

cash flows from operating lease

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

Operating cash flows from operating lease

Financing Lease

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

In 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

The agreements require monthly payments of principal and interest through maturity

and are secured by the assets under the lease.

As of September 30, 2024, $ 417 thousand is included in the property and equipment on the

balance sheet.

The weighted average interest rate was 9.1 % at September 30, 2024.

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

of September 30, 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, 2024, $ 417 thousand is included in the property and equipment on the balance sheet.

The weighted average interest rate

was 9.1 % at March 31, 2025.

The following table presents information about the

amount and timing of the liability arising from the Company’s financing lease as of March 31, 2025 ($ in thousands):

Schedule of Future Minimum Financing Lease Payments

of Lease Liability

(Remainder of year)

undiscounted financing lease payments `

Maturity of Lease Liability

Total undiscounted financing lease payments’

Imputed interest

value of financing lease liability

Weighted average

remaining lease term

Weighted average

discount rate

consists of the following ($ in thousands):

Present value of financing lease liability

Weighted average remaining lease term

Weighted average discount rate

Inventory consists of the following ($ in thousands):

Schedule of Inventory

Raw materials

Work-in-progress

Finished goods

Inventory, gross

Inventory reserve for excess and slow moving 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.

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.

Property and Equipment, Net

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

Property and equipment consist of the following ($

in thousands):

Schedule of Property and Equipment

and equipment

furniture and equipment

Machinery and equipment

Office furniture and equipment

Leasehold improvements

Construction in progress

Property and equipment, gross

accumulated depreciation and amortization

and equipment, net

expense for the nine months ended September 30, 2024 and 2023 was $ 240 and $ 95 , respectively.

Property and equipment, net

Depreciation expense for the three months ended March

31, 2025 and 2024 was $ 82 thousand and $ 38 thousand, respectively.

Intangible Assets

following provides a breakdown of identifiable intangible assets as of September 30, 2024 and December 31, 2023 ($ in thousands):

The following provides a breakdown of identifiable

intangible assets as of March 31, 2025 and December 31, 2024 ($ in thousands):

Schedule of Breakdown of Identifiable Intangible Assets

Product/Technology

intangible assets, gross

Product/technology

related identifiable intangible assets, net

related intangible asset, gross

related intangibles

related identifiable intangible assets, net

identifiable intangible assets, net

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.

connection with the March 1, 2023 CGN JV, the Company identified intangible assets of $ 287 thousand representing technology related and

customer related intangibles.

connection with the December 1, 2023 acquisition of Kenkoderm, the Company identified intangible assets of $ 113 thousand representing

technology related and customer related intangibles.

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.

assets are being amortized on a straight-line basis over their weighted average estimated useful life of 2.2 years and amortization expense

amounted to $ 88 thousand and $ 4 thousand for the nine months ended September 30, 2024 and 2023, respectively.

of September 30, 2024, the estimated annual amortization expense for each of the next five fiscal years is as follows ($ in thousands):

Product/Technology Related

Identifiable intangible assets, gross

Accumulated amortization

Product/technology related identifiable intangible assets, net

Marketing Related

Customer related intangible asset, gross

Tradename related intangible asset, gross

Trademark related intangibles

Accumulated amortization

Marketing related identifiable intangible assets, net

Total identifiable intangible assets, net

In connection with the May 15, 2024

Silly George acquisition, the Company identified intangible assets of $ 600

thousand representing trademark related intangibles with indefinite lives.

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 1.7 years and amortization expense amounted to $ 32 and $ 24 thousand for the

three months ended March 31, 2025 and 2024, respectively.

As of March 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

(remainder of the year)

lived intangible assets (subject to impairment analysis)

2025 (remainder of year)

Indefinite lived intangible assets (subject to impairment analysis)

Accrued Expenses and Other Current Liabilities

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

Accrued expenses and other current liabilities consist

of the following ($ in thousands):

Schedule of Accrued Expenses and Other Current Liabilities

benefits, and incentive compensation

line of credit

accrued expenses and other current liabilities

September 30, 2024, the Company has reserved common stock for issuance in relation to the following:

Salaries, benefits, and incentive compensation

Total accrued expenses and other current liabilities

At March 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

compensation plan

to purchase common stock

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.

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.

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 %.

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 Company.

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

August Offering for working capital and for general corporate purposes.

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 agreed to pay 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, and upon the closing of the August Offering, the Company agreed to issue

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 .

June 6, 2024, Company issued 5,000 common shares to a consultant valued at $ 9 thousand.

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.

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.

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 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 %.

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.

has and intends to continue to use the net proceeds from the February Offering RDO for working capital and for general corporate purposes.

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 Offering.

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 .

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 condensed consolidated balance sheet date to determine if there were any such events or transactions

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

except as set forth below:

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

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

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 holder.

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

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 .

Share-based Compensation

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.

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

March 23, 2023, the Board approved an additional 300,000 shares of common stock to be reserved under the 2019 Plan, such that total of

number of shares underlying the Plan is 871,429 of which 827,379 shares have already been awarded or exercised.

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.

following table contains information about the 2019 Plan as of September 30, 2024:

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.

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, 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 975,907

shares have already been awarded or exercised.

The Company intends to submit this 780,000

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

of common stock.

The following table contains information about the

2019 Plan as of March 31, 2025:

Schedule of Information about Incentive Plan

issued in excess of 2019 Plan (2)

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 and related information for the period ended September

Available for

2019 Plan (1)

Awards issued in excess of 2019 Plan (2)

Includes incentive stock options and restricted stock units discussed below.

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

Incentive stock options

On January 2, 2025, the Company granted options to

purchase up to 150,000 shares of the Company’s common stock at a per share exercise price of $ 3.83 to Adam Levy for his service

as our Chief Executive Officer pursuant to the terms of his Executive Employment Agreement dated December 31, 2024, all of which vests

over a period of four years beginning December 31, 2025.

On January 2, 2025, the Company granted options to

purchase up to 100,000 shares of the Company’s common stock at a per share exercise price of $ 3.83 to Joe McGuire for his service

as our Chief Financial Officer pursuant to the terms of his Executive Employment Agreement dated December 31, 2024, which 25 % vest beginning

September 1, 2025 and the remainder over a period of three years.

The following table summarizes the Company’s

incentive stock option activity and related information for the period ended March 31, 2025:

Schedule of Incentive Stock Option Activity

at January 1, 2024

at September 30, 2024

of September 30, 2024 and 2023, vested outstanding stock options had $ 428 thousand and $ 282 thousand of intrinsic value as the exercise

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

As of September 30, 2024, there were $ 255

thousand 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.

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

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).

Outstanding at January 1, 2025

Outstanding at March 31, 2025

Exercisable at March 31, 2025

As of March 31, 2025, vested outstanding stock options

had $ 419 thousand intrinsic value as the exercise price is greater than the estimated fair value of the underlying common stock, respectively.

As of March 31, 2025, there was approximately $ 715 thousand of total unrecognized share-based compensation related to unvested stock options,

which the Company expects to recognize over the next 3 months 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.

The service period is generally the vesting period.

The following assumptions were used to calculate share-based

compensation expense for the three months ended March 31, 2025 and 2024:

Schedule of Assumptions used in Share-based Compensation

Risk-free interest rate

Dividend yield

Expected term

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.

The 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.

Restrictive stock awards

Effective as of January 2, 2025, the Company granted

an aggregated restricted stock award of 26,116 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, 2024.

The shares vest monthly from January 2, 2025

through December 31, 2025.

Under ASC 718, Compensation—Stock Compensation, the Company has measured the value of the 26,116 shares

granted based on the closing price of the Company’s stock at the grant date of the RSU Grant ($ 3.83 per share).

Effective as of January 1, 2025, the Company granted

fully vested restricted stock awards of 2,500 shares of the Company’s common stock to two board members.

Under ASC 718, Compensation—Stock

Compensation, the Company has measured the value of the aggregated 5,000 shares granted based on the closing price of the Company’s

stock at the grant date of the RSU Grant ($ 3.83 per share).

Effective as of January 2, 2025, the Company granted

an aggregated restricted stock award of 4,082 fully vested shares of the Company’s common stock to Joseph McGuire for reimbursed

expenses in the prior year.

Under ASC 718, Compensation—Stock Compensation, the Company has measured the value of the 4,082 shares

granted based on the closing price of the Company’s stock at the grant date of the RSU Grant ($ 4.62 per share).

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).

Schedule of Restricted Stock Units Granted

at January 1, 2024

and converted to common shares

at September 30, 2024

expense will be recognized ratable over the total vesting schedule.

The Company will periodically adjust the cumulative compensation

expense for forfeited awards.

Stock based compensation of $ 271 thousand and $ 120 thousand has been recorded for the nine months ended

September 30, 2024 and 2023, respectively.

As of September 30, 2024, there was $ 53 thousand unrecognized share-based compensation related

to unvested RSUs, which the Company expects to recognize through December 2025.

following table shows a summary of common stock warrants through September 30, 2024:

Outstanding at January 1, 2025

Exercised and converted to common shares

Outstanding at March 31, 2025

Exercisable at March 31, 2025

Compensation expense will be recognized ratably over

the total vesting schedule.

The Company will periodically adjust the cumulative compensation expense for forfeited awards.

recognizes the reversal of any previously recognized compensation expense on forfeited awards in the period the awards are forfeited.

Share-based compensation of $ 166 thousand and $ 54 thousand has been recorded for the three months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, there was $ 75 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 through March 31, 2025:

Schedule of Common Stock Warrants

at January 1, 2024 (originally reported)

Warrants – 2021 IPO (1)

Outstanding at January 1, 2024 (corrected)

at September 30, 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.

of September 30, 2024 and 2023, vested outstanding warrants had no intrinsic value as the exercise price is greater than the estimated

fair value of the underlying common stock.

Term in Years

Outstanding at January 1, 2025

Outstanding at March 31, 2025

Exercisable at March 31, 2025

31, 2025 and 2024, vested outstanding warrants had $ 2 thousand and $ 0 thousand, respectively, intrinsic value as the exercise price is

greater than the estimated fair value of the underlying common stock.

Notes Payable

JV Notes Payable

CGN JV has entered into a $ 231 thousand promissory note agreement for certain equipment.

The 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 $ 208 thousand

and $ 231 thousand as of September 30, 2024 and December 31, 2023, 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 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 $ 218 thousand and $ 84 thousand as of September 30, 2024 and December 31,

The principal balance amounted to $ 188 thousand and $ 198 thousand as of March 31, 2025 and December 31, 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 .

The principal balance amounted to $ 9 thousand as of September 30, 2024.

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 $ 273 and $ 279 thousand as of September 30, 2024 and December 31, 2023, respectively.

future annual principal amounts and accrued interest to be paid as of September 30, 2024 are as follows:

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 $ 197 thousand and

$ 207 thousand as of March 31, 2025 and December 31, 2024, respectively.

NexGel Segment

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 $ 6 thousand and $ 8 thousand as of March 31, 2025 and December 31, 2024, respectively.

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 $ 271 and $ 272 thousand as of March

31, 2025 and December 31, 2024, respectively.

The future annual principal amounts and accrued interest

to be paid as of March 31, 2025 are as follows:

Schedule of Debt Instruments

the year ending December 31 ($ in thousands):

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 ,

respectively, as equity issuance consideration, in connection with equity offering of the Company’s common stock.

entitle the holder to purchase one share of our common stock at an exercise price equal to $ 0.49

share at any time on or after their issuance date and on or prior to the close of business three years after the issuance date (the “Termination

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 condensed consolidated statements

of operations.

warrants outstanding and fair values at each of the respective valuation dates are summarized below:

For the year ending December 31 ($ in thousands):

2025 (remaining of the year)

current portion of notes payable

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 condensed consolidated statements of operations.

The warrants outstanding and fair values at each of

the respective valuation dates are summarized below:

Schedule of Warrant Liability

Value per Share

value as of year ended 12/31/2023

in fair value of warrant liability

value as of year ended 9/30/2024

following assumptions were used to calculate the warrant liability for nine months ended September 30, 2024 and 2023:

Warrant Liability

Warrants Outstanding

Fair Value per Share

Fair value as of year ended 12/31/2024

Change in fair value of warrant liability

Fair value as of year ended 3/31/2025

The following assumptions were used to

calculate the warrant liability as of March 31, 2025 and 2024, respectively:

Schedule of Assumptions Used in Warrant Liability

interest rate

warrant liabilities are considered Level 3 liabilities on the fair value hierarchy as the determination of fair value includes various

assumptions about of future activities and the Company’s stock prices and historical volatility of Guideline Public Companies as

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.

Commitments and Contingencies

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 condensed consolidated financial position, results of operations, or cash flows

of the Company.

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.

The Company may be subject to legal proceedings and

claims that arise in the ordinary course of business.

Except as described in Part II, Item 1 “Legal Proceedings” of this Form

10-Q, 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.

Concentrations of Risk

Company’s revenues are concentrated in a small group of customers with some individually having more than 10% of total revenues.

from one customer that exceeded 10% of total revenues for the nine months ended September 30, 2024, was 10 %.

The accounts receivable

from the top customer was 25 % as well as 10 %, 13 % and 23 % from three other customers of the total accounts receivable as of September

from three customers that exceeded 10% of total revenues for the nine months ended September 30, 2023, were 20 %, 11 % and 10 %.

receivable from those top three customers were 0 % and 23 % and 0 % as well as 15 %, 18 %, and 13 % from three other customers of the total

accounts receivable as of September 30, 2023.

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 September 30, 2024, the Company did not have any balances that exceeded the FDIC insurance limit.

has not experienced any credit losses associated with its cash balances in the past.

The Company’s revenues are concentrated in a

small group of customers with some individually having more than 10% of total revenues.

For the three months ended March 31, 2025, the Company

had revenue from one customer that approximated 10 % of total revenue.

For the three months ended March 31, 2024, the Company had revenue

from one customer that approximated 10 % of total revenue.

The Company had two customers with accounts receivable

balances that were 26 % and 49 % of total accounts receivable as of March 31, 2025.

The Company had two customers with accounts receivable

balances that were 24 % and 44 % of total accounts receivable as of March 31, 2024.

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 March 31, 2025, the

total amount exceeding such limit was $ 97 thousand.

The Company has not experienced any credit losses associated with its cash balances

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.

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.

Related Party Transactions

Jerome Zeldis, a member of the Company board of directors, has an outstanding balance due of $ 25,000 for services as of December 31,

2023, which is included in accounts payable in the accompanying condensed consolidated balance sheets.

The balance was repaid in August

Accounts payable – related party

As of March 31, 2025 and December 31, 2024, the Company

had outstanding balances of $ 482 thousand and $ 494 thousand, respectively, due to C.G.

Laboratories, Inc., a related party.

Additionally,

as of March 31, 2025 and December 31, 2024, the Company had an outstanding balance of $ 17 thousand and $ 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.

Subsequent Events

of the Company has performed a review of events and transactions occurring after the condensed consolidated balance sheet date to determine

if there were any such events or transactions requiring adjustment to or disclosure in the accompanying condensed consolidated financial

statements, noting no such events or transactions except as set forth below:

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”).

of the November Financing is expected to occur on or about November 13, 2024 (the “November Closing Date”).

On or about the

November Closing Date, the Company expects to issue 727,272 shares of common stock and issue November Warrants to purchase up to 363,636 shares

of common stock

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 Date.

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%.

members of the Company’s board of directors and management have agreed to purchase an aggregate of 19,659 units in the November

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.

gross proceeds to the Company from the November Financing are expected to be 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.

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 Financing.

The Company agreed to pay 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, and upon the closing of the November

Financing, the Company agreed to issue 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

In accordance with ASC 855 “Subsequent Events”,

the Company evaluated subsequent events after March 31, 2025, through the date these Condensed Consolidated Financial Statements were

issued and has no transactions or events requiring 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-Q

Item 1. Financial Statements