What changed in this filing

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Item 1A. Risk Factors

2025-03-12 compared with 2024-03-12 · 207 added, 102 removed, 944 unchanged (25% of the section changed)

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The beauty health industry is highly competitive, and if we are unable to compete effectively, our results will suffer.

The beauty industry is highly competitive and can rapidly change due to consumer preferences and industry trends, such as the expansion of digital channels, direct-to-consumer channels, new “disruptor” brands, and advances in technology such as artificial intelligence.

We face vigorous competition from companies throughout the world, including large multinational consumer products companies that have many beauty health brands under ownership and standalone beauty and skincare brands, including those that may target the latest trends or specific distribution channels.

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If we are unable to continue to compete effectively, it could have a material adverse effect on our business, financial condition and results of operations.

Our business is dependent on the commercial success of selling our Delivery Systems, particularly Syndeo 3.0 devices.

If we are unable to continue to successfully commercialize Syndeo 3.0, our results or operations and financial condition will be materially harmed.

Our business and our ability to generate revenue largely depends on our ability to successfully commercialize and sell our Delivery Systems, particularly Syndeo 3.0 devices.

Our ability to generate revenue depends on our ability to manufacture and sell high quality, reliable Delivery Systems and execute on our commercialization plans, and the size of the market for, and the level of market acceptance of, our Delivery Systems, particularly the Syndeo 3.0.

Our business is dependent on the commercial success and our ability to sell Delivery Systems.

If we are unable to continue to successfully commercialize and sell our Delivery Systems, our results or operations and financial condition will be materially harmed.

Our business and our ability to generate revenue largely depends on our ability to successfully commercialize and sell our Delivery Systems.

If our Delivery Systems are not accepted and adopted by our customers, if our customers experience significant performance interruptions or if our Syndeo devices do not meet our performance standards, or if we experience an RMA rate for Syndeo devices significantly above historical averages, our revenue and results of operations will be materially and adversely affected.

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Maintaining and enhancing the recognition and reputation of our brand is, therefore, critical to our business and future growth.

Many factors, some of which are beyond our control, will impact our ability to maintain and enhance our reputation and brand, including our ability to comply with ethical, social, product, labor and environmental standards.

Many factors, some of which are beyond our control, will impact our ability to maintain and enhance our reputation and brand, including our

ability to comply with ethical, social, product, labor and environmental standards.

Any actual or perceived failure in compliance with such standards could damage our reputation and brand.

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Such events may result in potential disputes with our customers, vendors, or other third parties, resulting in significant expenditure of related fees and costs, loss of key relationships, and/or damage to our brand value and reputation.

In addition, government authorities and self-regulatory bodies regulate advertising and product claims regarding the performance and benefits of our products.

These regulatory authorities typically require a reasonable basis to support any marketing claims.

What constitutes a reasonable basis for substantiation can vary widely based on geography, and the efforts that we undertake to support our claims may not be deemed adequate for any particular product or claim.

If we are unable to show adequate substantiation for our product claims, or our promotional materials make claims that exceed the scope of allowed claims for the classification of the specific product, regulatory authorities could take enforcement action or impose penalties, such as monetary consumer redress, requiring us to revise our marketing materials, amend our claims, or stop selling certain products.

We and/or our products may become subject to regulatory enforcement actions or civil litigation.

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Any of these outcomes could result in a material adverse effect on our business, financial condition and results of operations.

The illegal distribution and sale by third parties of counterfeit versions of our products or the unauthorized diversion by third parties of our products could have an adverse effect on our net sales and a negative impact on our reputation and business.

Third parties are illegally distributing and selling counterfeit versions of our products.

We believe these counterfeit products are inferior to our authentic products and could pose safety risks that our authentic products would not otherwise present to consumers or our customers.

Our customers and consumers could confuse counterfeit products with our authentic products, which could damage or diminish the image, reputation, and value of our brand and cause our customers and consumers to refrain from purchasing our products in the future.

Products sold to estheticians are meant to be sold to and used by such esthetician.

Our products have been and may continue to be sold to sales outlets other than the intended party, such as to general merchandise retailers or unapproved outlets.

Diverted products sold in such unapproved outlets may impact our customers’ and consumers’ perception of the nature of our products.

Further, in some instances, these diverted products may be old, damaged, or otherwise adulterated.

Diversion may result in lower net sales of our products if our customers purchase diverted products or choose to purchase products manufactured or sold by our competitors because of any perceived damage or diminishment to the image, reputation, or value of our brand resulting from such diversion.

Our reputation and brand may be negatively affected if our customers do not use our Delivery System as intended.

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A general slowdown in the U.S.

economy and certain international economies or an uncertain economic outlook could adversely affect consumer spending habits which may, among other things, result in reduced patient traffic in dermatology or internal medicine offices and in medical spa facilities and spa facilities, a reduction in consumer spending on elective, non-urgent or higher value treatments, such as those offered by our providers, or a reduction in the demand for aesthetic services generally, each of which could have a material adverse effect on our sales and operating results.

Weakness in the global economy results in a challenging environment for selling aesthetic technologies and doctors or estheticians may postpone investments in capital equipment, such as our delivery systems.

Increased market acceptance of all of our products and treatments will depend in part upon the recommendations of medical and aesthetics professionals, as well as other factors including effectiveness, safety, ease of use, reliability, aesthetics and price compared to competing products and treatment methods.

economy and certain international economies or an uncertain economic outlook could adversely affect consumer spending habits which may, among other things, result in reduced patient traffic in dermatology or internal medicine offices and in medical spa facilities and spa facilities, a reduction in consumer spending on elective, non-urgent or higher value treatments, such as those offered by our providers, or a reduction in the demand for esthetic services generally, each of which could have a material adverse effect on our sales and operating results.

Weakness in the global economy results in a challenging environment for selling esthetic technologies and doctors or estheticians may postpone investments in capital equipment, such as our delivery systems.

Increased market acceptance of all of our products and treatments will depend in part upon the recommendations of medical and esthetics professionals, as well as other factors including effectiveness, safety, ease of use, reliability, esthetics and price compared to competing products and treatment methods.

We may experience declines in average selling prices of our products which may decrease our net revenues.

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Growing our business may make it difficult for us to adequately predict the expenditures we will need to make in the future.

If we do not make the necessary overhead

expenditures to accommodate our future growth, we may be unsuccessful in executing our growth strategy and our results of operations could suffer.

If we do not make the necessary overhead expenditures to accommodate our future growth, we may be unsuccessful in executing our growth strategy and our results of operations could suffer.

Acquisitions or investments could disrupt our business and harm our financial condition.

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Our insurance coverage may not be sufficient to cover the full extent of any loss or damage to our manufacturing facilities or distribution centers, and any loss, damage of or disruption to those facilities, or loss or damage of the inventory stored there, could materially and adversely affect our business, financial condition and results of operations.

Our success depends, in part, on our retention of key members of our senior management team, whose continued service is not guaranteed, ability to manage the transition of our Chief Executive Officer, and ability to attract and retain qualified personnel.

Our success depends, in part, on our retention of key members of our senior management team, whose continued service is not guaranteed, and ability to attract and retain qualified personnel.

Our success depends, in part, on our ability to retain our key employees, including our executive officers, our senior management team and our development, operations, finance, sales and marketing personnel, whose continued service is not guaranteed.

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The loss of any of these key personnel could result in the loss of these and other benefits and could also materially and adversely affect our results of operations.

Andrew Stanleick, our former Chief Executive Officer, was terminated from his position as Chief Executive Officer of the Company without cause, and as a member of our Board of Directors, effective as of November 19, 2023.

Stanleick agreed to remain available to assist our Company as an advisor through December 31, 2023.

Marla Beck was appointed as our Interim Chief Executive Officer, effective as of November 20, 2023, for a 6-month term.

Beck has held a number of senior management positions and directorships and has extensive multi-channel marketing, branding, and deep digital experience, she had not served as the chief executive officer of a U.S.

publicly traded company before joining our Company in that role.

Our future performance will depend, in part, on the successful performance of Ms.

Beck as our Interim Chief Executive Officer and our ability to identify, attract, and hire a suitable replacement for our Chief Executive Officer in a timely fashion.

Furthermore, if we do not successfully manage our chief executive officer transition, it could be viewed negatively by our customers, employees or investors and could have an adverse impact on our business.

Our success also depends, in part, on our continuing ability to identify, hire, train and retain other highly qualified personnel.

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however, there is no assurance our campaigns will achieve the returns on advertising spend desired or successfully increase brand or product awareness sufficiently to sustain or increase our growth goals, which could have an adverse effect on our gross margin and business overall.

We manufacture and assemble our delivery systems in both California and China, and if these sites were to become compromised or damaged, our ability to continue to manufacture and assemble our products would be negatively affected.

One of our sites in California manufactures and assembles our delivery systems.

Another site in California fills the majority of our consumable products and these items are kitted at the first site.

Our contract manufacturing partner in China manufactures and assembles our delivery systems as well.

If any of these sites were shut down or damaged by natural disaster, fire, social unrest, government regulation or other causes, our operations would be negatively impacted.

We manufacture and assemble our Delivery Systems in California, and if this site were to become compromised or damaged, our ability to continue to manufacture and assemble our products would be negatively affected.

Our manufacturing facility in Long Beach, California manufactures and assembles our Delivery Systems and fills the majority of our Consumable products onsite.

If this site were shut down or damaged by natural disaster, fire, social unrest, government regulation or other causes, our operations would be negatively impacted.

In that situation, our ability to manufacture our products would be impaired and our ability to distribute to and service our customers would be impaired, which could materially and adversely affect our business, financial condition and results of operations and possibly our reputation.

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• changes in federal, state, local, or foreign regulations that affect the scope of practice of our providers.

We may enter into collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships with third parties that may not result in the development of commercially viable products or product improvements or the generation of significant future revenues.

In the ordinary course of our business, we may enter into collaborations, in-licensing arrangements, joint ventures, strategic alliances, partnerships or other arrangements to develop new products or product improvements and to pursue new markets.

Proposing, negotiating and implementing collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships may be a lengthy and complex process.

Other companies, including those with substantially greater financial, marketing, sales, technology or other business resources, may compete with us for these opportunities or arrangements.

We may not identify, secure, or complete any such transactions or arrangements in a timely manner, on a cost-effective basis, on acceptable terms or at all.

We have limited institutional knowledge and experience with respect to these business development activities, and we may also not realize the anticipated benefits of any such transaction or arrangement.

In particular, these collaborations may not result in the development of products that achieve commercial success or viable product improvements or result in significant revenues and could be terminated prior to developing any products.

Additionally, we may not be in a position to exercise sole decision-making authority regarding the transaction or arrangement, which could create the potential risk of creating impasses on decisions, and our future collaborators may have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals.

It is possible that conflicts may arise with our collaborators, such as conflicts concerning the achievement of performance milestones, or the interpretation of significant terms under any agreement, such as those related to financial obligations or the ownership or control of intellectual property developed during the collaboration.

If any conflicts arise with any future collaborators, they may act in their self-interest, which may be adverse to our best interest, and they may breach their obligations to us.

In addition, we may have limited control over the amount and timing of resources that any future collaborators devote to our or their future products.

Disputes between us and our collaborators may result in litigation or arbitration which would increase our expenses and divert the attention of our management.

Further, these transactions and arrangements will be contractual in nature and will generally be terminable under the terms of the applicable agreements and, in such event, we may not continue to have rights to the products relating to such transaction or arrangement or may need to purchase such rights at a premium.

If we enter into in-bound intellectual property license agreements, we may not be able to fully protect the licensed intellectual property rights or maintain those licenses.

Future licensors could retain the right to prosecute and defend the intellectual property rights licensed to us, in which case we would depend on the ability of our licensors to obtain, maintain and enforce intellectual property protection for the licensed intellectual property.

These licensors may determine not to pursue litigation against other companies or may pursue such litigation less aggressively than we would.

Further, entering into such license agreements could impose various diligence, commercialization, royalty or other obligations on us.

Future licensors may allege that we have breached our license agreement with them, and accordingly seek to terminate our license, which could adversely affect our competitive business position and harm our business prospects.

Risks related to our financial condition

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However, we may be unable to satisfy financial covenants in the future, which could materially and adversely affect our ability to finance future operations, such as acquisitions or capital needs.

If our earnings substantially decrease or we are unable to obtain future financings on terms acceptable to us, it is possible that we would be unable to make payments of principal and interest due under our credit agreement with JPMorgan Chase Bank, N.A.

and/or our 1.25% Convertible Senior Notes due 2026 (the “Notes”), resulting in a default under such agreements.

A default under our credit facility or the Notes, among other things, would trigger the counterparty’s ability to immediately demand payment without any further action or notice by such party.

A default under the Notes, among other things, would trigger the counterparty’s ability to immediately demand payment without any further action or notice by such party.

If we are unable to repay in full or refinance our debt obligations on commercially reasonable terms, or at all, we could face substantial liquidity problems and might be required to sell material assets or operations in an attempt to meet our debt obligations.

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Furthermore, if we cannot make scheduled payments on our debt, the lenders under our credit agreement may terminate their commitments to loan money to us under our revolving credit facility, and our lenders under our credit agreement can declare all outstanding principal and interest to be due and payable and foreclose against the assets securing their borrowings, and we could be forced into bankruptcy or liquidation.

The terms of our credit agreement and senior notes require us to meet certain operating and financial covenants and place restrictions on our operating and financial flexibility.

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

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

Our credit agreement with JPMorgan Chase Bank, N.A.

contains various restrictive covenants subject to certain exceptions, including limitations on our ability to incur indebtedness and certain liens, make certain investments, become liable under contingent obligations in certain circumstances, make certain restricted payments, make certain dispositions within guidelines and limits, engage in certain affiliate transactions, alter our fundamental business or make certain fundamental changes, and requirements to maintain financial covenants, including maintaining a leverage ratio of no greater than 3.00 to 1.00 and maintaining a fixed charge coverage ratio of not less than 1.15 to 1.00.

Similarly, the Indenture governing the Notes contains certain restrictive covenants including covenants restricting our ability to consolidate with or merge with or into, or sell, lease or otherwise transfer, in one transaction or a series of transactions, all or substantially all of the assets of the Company and our subsidiaries.

The Indenture governing the Notes contains certain restrictive covenants including covenants restricting our ability to consolidate with or merge with or into, or sell, lease or otherwise transfer, in one transaction or a series of transactions, all or substantially all of the assets of the Company and our subsidiaries.

These covenants may restrict our current and future operations, particularly our ability to respond to certain changes in our business or industry, or take future actions.

Furthermore, a failure to satisfy these covenants would constitute an event of default under the respective agreement.

Furthermore, a failure to satisfy these covenants would constitute an event of default under the Notes.

If in the future we raise additional capital through debt financing, the terms of any new debt arrangements could further restrict our ability to operate our business by imposing significant restrictions on our operations, including restrictive covenants such as limitations on our ability to incur additional debt or issue additional equity, limitations on our ability to pay dividends, limitations on our ability to acquire or license intellectual property rights, and other operating restrictions.

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If such banking institutions fail, we could lose all or a portion of those amounts held in excess of such insurance limitations.

While the FDIC took control of two such banking institutions, Silicon Valley Bank (“SVB”) on March 10, 2023 and Signature Bank (“Signature Bank”) on March 12, 2023, we did not have any accounts with SVB or Signature Bank, and therefore, did not experience any direct risk of loss.

Any material loss, individually or in the aggregate, from a similarly failed banking relationship above FDIC insurance limits that we may experience in the future could have an adverse effect on our ability to pay our operational expenses or make other payments and may require us to move our accounts to other banks, which could cause a temporary delay in making payments to our vendors and employees and cause other operational inconveniences.

Any material loss, individually or in the aggregate, from a failed banking relationship above FDIC insurance limits that we may experience in the future could have an adverse effect on our ability to pay our operational expenses or make other payments and may require us to move our accounts to other banks, which could cause a temporary delay in making payments to our vendors and employees and cause other operational inconveniences.

Our ability to use any net operating loss carryforwards and certain other tax attributes may be limited.

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We are subject to changing tax laws and policies, and changes in interpretations of existing tax laws, both within and outside of the United States, and tax authorities are increasingly scrutinizing the tax positions of companies.

For example, the Tax Cuts and Jobs Act (“2017 Tax Act”) and the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) remain unclear in many respects.

As such, the 2017 Tax Act and the CARES ACT could be subject to potential amendments and technical corrections or be subject to interpretation and implementing regulations by the U.S.

Treasury and Internal Revenue Service, any of which could mitigate or increase certain adverse tax effects of the 2017 Tax Act or the CARES Act.

In addition, on August 16, 2022, the U.S.

Congress passed the Inflation Reduction Act of 2022, which contained provisions effective January 1, 2023, including a 1% excise tax on stock repurchases that could increase our future tax liability.

For example, on August 16, 2022, the U.S.

Congress passed the Inflation Reduction Act of 2022, which contained provisions effective January 1, 2023, including a 1% excise tax on certain stock repurchases that could increase our future tax liability.

federal, state, and local governments, countries in the European Union, as well as a number of other countries and organizations such as the Organization for Economic Cooperation and Development, are considering or proposing changes to existing tax laws that, if enacted, could increase our tax obligations in jurisdictions where we do business.

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Exchange rate fluctuations may affect the costs we incur in our operations.

The main currencies to which we are exposed are the British pound, the EU euro, and the Chinese Renminbi.

The main currencies to which we are exposed are the Euro, Chinese renminbi, British pound sterling, Mexican peso, and Australian dollar.

The exchange rates between these currencies and the U.S.

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dollar will decrease the U.S.

dollar equivalent of the amounts derived from foreign operations reported in our consolidated financial statements, and an appreciation of these currencies will result in a corresponding increase in such amounts.

dollar equivalent of the amounts derived from foreign operations reported in our consolidated financial statements, and an appreciation of these currencies will result in a

corresponding increase in such amounts.

The cost of certain items, such as raw materials, manufacturing, employee salaries and transportation and freight, required by our operations may be affected by changes in the value of the relevant currencies.

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The qualitative and quantitative analysis used to test goodwill are dependent upon various assumptions and reflect management’s best estimates.

Changes in certain assumptions including revenue growth rates, discount rates, earnings multiples and future cash flows may cause a change in circumstances indicating that the carrying value of goodwill or the asset group may be impaired.

We may be required to record a significant charge to earnings in the financial statements during the period in which any impairment of goodwill or asset group is determined.

Changes in assumptions may cause a change in circumstances indicating that the carrying value of goodwill or the asset group may be impaired.

For more information, see Part II, Item 7 “Critical Accounting Policies and Estimates — Goodwill and Intangible Assets” and Part II, Item 8 “Financial Statements and Supplementary Data — Note 2 - Summary of Significant Accounting Policies — Goodwill” in this Annual Report on Form 10-K.

Volatility in the financial markets could have a material adverse effect on our business.

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This scenario could leave us with reduced borrowing capacity, which could have a material adverse effect on our business, financial condition and results of operations.

Our sales and profitability may decline as a result of increasing costs and decreasing selling prices.

Our business is subject to significant pressure on costs and pricing caused by many factors, including intense competition, constrained sourcing capacity and related inflationary pressure, the availability of qualified labor and wage inflation, pressure from our customers to reduce the prices we charge for our products, and changes in consumer demand.

These and other factors have, and may in the future, cause us to experience increased costs, reduce our prices to customers or experience reduced sales in response to increased prices, any of which could cause our operating margin to decline if we are unable to offset these factors by taking certain actions like reduce our operating costs and could have a material adverse effect on our business, financial condition and results of operations.

Risks related to information technology and cybersecurity

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In addition, difficulties with implementing new technology systems, delays in our timeline for planned improvements, significant system failures, or our inability to successfully modify our information systems to respond to changes in our business needs may cause disruptions in our business operations and have a material adverse effect on our business, financial condition and results of operations.

Privacy and data protection laws increase our compliance burden.

We are subject to a variety of privacy and data protection laws and regulations that change frequently and have requirements that vary from jurisdiction to jurisdiction.

For example, we are subject to significant compliance obligations under privacy laws such as the GDPR in the European Union, the Personal Information Protection and Electronic Documents Act (“PIPEDA”) in Canada, the California Consumer Privacy Act ("CCPA") modified by the California Privacy Rights Act (“CPRA”), and the Personal Information Protection Law (“PIPL”) in the People's Republic of China ("PRC").

Some privacy laws prohibit the transfer of personal information to certain other jurisdictions.

We are subject to privacy and data protection audits or investigations by various government agencies.

Our failure to comply with these laws subjects us to potential regulatory enforcement activity, fines, private litigation including class actions, and other costs.

Our efforts to comply with privacy laws may complicate our operations and add to our compliance costs.

A significant privacy breach or failure or perceived failure by us or our third-party service providers to comply with privacy or data protection laws, regulations, policies or regulatory guidance might have a material adverse impact on our reputation, business operations and our financial condition or results of operations.

We are subject to risks associated with product failure and/or technology flaws.

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We have in place certain technical and organizational measures designed to maintain the security of critical proprietary, personal, employee, provider and financial data.

, ransomware), unauthorized access or other cybersecurity attacks, natural disasters (including hurricanes and earthquakes), terrorism, war, fire, and telecommunication or electrical failures.

Despite implementation of such measures, our information technology systems, as well as those of our service providers and of third parties with which we have relationships, could still be vulnerable to failure or damage from computer viruses and other malware (e.g., ransomware), unauthorized access or other cybersecurity attacks, natural disasters (including hurricanes and earthquakes), terrorism, war, fire, and telecommunication or electrical failures.

We and our service providers may not be able to prevent third parties, including criminals, competitors or others, from breaking into or altering our systems, disrupting our business operations or communications infrastructure through denial-of-service attacks, attempting to gain access to our systems, information or monetary funds through phishing or social engineering campaigns, installing viruses or malicious software on our e-commerce websites or devices used by our employees or contractors, or carrying out other activity intended to disrupt our systems or gain access to confidential or sensitive information in our or our service providers’ systems.

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Third parties may attempt to fraudulently induce our or our service providers’ employees or consultants to misdirect funds or to disclose information in order to gain access to personal data about our consumers or website users that we maintain.

In addition, we have limited control or influence over the security policies or measures adopted by third-party providers of online payment services through which some of our

consumers may elect to make payment for purchases at our e-commerce websites.

In addition, we have limited control or influence

over the security policies or measures adopted by third-party providers of online payment services through which some of our consumers may elect to make payment for purchases at our e-commerce websites.

We must have a designated employee to oversee cybersecurity operations and maintain a data security/information security program with specific measures, employee training, comprehensive risk assessments, vendor contract requirements, and timely data disposal.

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If we fail to comply with the rules or requirements of any third-party provider of a payment method we accept, or if the volume of fraud in our transactions limits or terminates our rights to use payment methods we currently accept, or if a data breach occurs relating to our payment systems, or if security requirements for multi-factor authentication, passwords and encryption standards to prevent theft and malware are inadequate, among other things, we may be subject to fines and higher transaction fees or lose our ability to accept credit and debit card payments from our consumers, process electronic funds transfers or facilitate other types of online payments, and our reputation and our business, financial condition and results of operations could be materially and adversely affected.

We use AI in our business, and challenges with properly managing its use could result in harm to our brand, reputation, business or customers, and adversely affect our results of operations.

We are implementing the use of AI solutions, including machine learning and generative AI tools that collect, aggregate, and analyze data to assist in the development of our products and in the use of internal tools that support our business.

These applications may become increasingly important in our operations over time.

This emerging technology presents a number of risks inherent in its use.

AI algorithms are based on machine learning and predictive analytics, which can create accuracy issues, unintended biases, and discriminatory outcomes that could harm our brand, reputation, business, or customers.

Additionally, no assurance can be made that the usage of AI will assist us in being more efficient.

Further, dependence on AI without adequate safeguards to make certain business decisions may introduce additional operational vulnerabilities by producing inaccurate outcomes, recommendations, or other suggestions based on flaws in the underlying data or other unintended results.

Our competitors or other third parties may incorporate AI into their business, services, and products more rapidly or more successfully than us, which could hinder our ability to compete effectively and adversely affect our results of operations.

Implementing the use of AI successfully, ethically and as intended, will require significant resources.

In addition, the use of AI may increase cybersecurity and data privacy risks, such as intended, unintended, or inadvertent transmission of proprietary or sensitive information.

The technologies underlying AI and their use cases are rapidly developing, and it is not possible to predict all of the legal, operational or technological risks related to the use of AI.

While new AI initiatives, laws, and regulations are emerging and evolving, what they ultimately will look like remains uncertain, and our obligation to comply with them could entail significant costs, negatively affect our business, or limit our ability to incorporate certain AI capabilities into our business.

Risks related to conducting business internationally

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If any of the risks outlined above materialize in the future, we could experience production delays and lost or delayed revenues, among other potential negative consequences, which could materially impact our international operations and adversely affect our business as a whole.

Adverse economic conditions in the United States, Europe or any of the other countries in which we may conduct business could negatively affect our business, financial condition and results of operations.

Adverse economic conditions in the United States, Europe, China or any of the other countries in which we may conduct business could negatively affect our business, financial condition and results of operations.

Consumer spending on beauty health products and services is influenced by general economic conditions and the availability of discretionary income.

Adverse economic conditions in the United States, Europe or any of the other jurisdictions in which we do significant business, or periods of inflation or high energy prices may contribute to higher unemployment levels, decreased consumer spending, reduced credit availability and declining consumer confidence and demand, each of which poses a risk to our business.

Adverse economic conditions in the United States, Europe, China or any of the other jurisdictions in which we do significant business, or periods of inflation or high energy prices may contribute to higher unemployment levels, decreased consumer spending, reduced credit availability and declining consumer confidence and demand, each of which poses a risk to our business.

A decrease in consumer spending or in consumer confidence and demand for our products could have a significant negative impact on our net sales and profitability, including our operating margins and return on invested capital.

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Depending on tariffs and trade regulation negotiations, we may be forced to acquire duplicate arrangements in the EU either temporarily or permanently, which may increase our costs in the EU and the United Kingdom.

Further, since the United Kingdom is no longer part of the EU, its data protection regulatory regime will be independent of the EU.

From January 1, 2021, companies have had to comply with the GDPR and also the UK GDPR, which, together with the amended United Kingdom Data Protection Act 2018, retains the GDPR in UK national law.

The UK GDPR mirrors the fines under the GDPR, i.e.

, fines up to the greater of €20 million (£17.5 million) or 4% of global turnover.

Further, since the United Kingdom is no longer part of the EU, its data protection regulatory regime is also independent of the EU.

Since January 1, 2021, companies have had to comply with the GDPR and also the UK GDPR, which, together with the amended United Kingdom Data Protection Act 2018, retains the GDPR in UK national law.

The UK GDPR mirrors the fines under the GDPR, i.e., fines up to the greater of €20 million (£17.5 million) or 4% of global turnover.

The relationship between the United Kingdom and the EU in relation to certain aspects of data protection law remains unclear, and it is unclear how United Kingdom data protection laws and regulations will develop in the medium to longer term.

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Any of these factors could depress economic activity and restrict our access to capital, which could materially and adversely affect our business, financial condition and results of operations.

We have growing operations in China, which exposes us to risks inherent in doing business in that country.

We conduct business in China, which exposes us to risks inherent in doing business in that country.

We currently source components in China and do not have substantial alternatives to those suppliers.

We also use manufacturers located in China to help manufacture, package, and label our Delivery Systems and Consumables and utilize warehouse services provided by our third-party distributors in China.

With the rapid development of the Chinese economy, the cost of labor has increased and may continue to increase in the future.

Our results of operations will be materially and adversely affected if our labor costs, or the labor costs of our suppliers, continue to increase significantly.

In addition, our suppliers may be unable to find a sufficient number of qualified workers due to the intensely competitive and fluid market for skilled labor in China.

Furthermore, pursuant to Chinese labor laws, employers in China are subject to various requirements when signing labor contracts, including paying remuneration, determining the term of employees’ probation and unilaterally terminating labor contracts.

These labor laws and related regulations impose liabilities on employers and may significantly increase the costs of workforce reductions.

If we decide to change or reduce our workforce, these labor laws could limit or restrict our ability to make such changes in a timely, favorable and effective manner.

Moreover, the Chinese government may impose additional regulations regarding ingredients and composition and these regulations may affect our products.

The government may regulate or apply a substantially different set of requirements to our products than anticipated, in which case we may need to invest a significant amount of resources and time before we can commercialize our products in the country.

We also utilize warehouse services provided by third parties in China.

As the Chinese economy continues to develop, the cost of labor has increased and may continue to increase in the future.

Our results of operations may be materially and adversely affected if the labor costs of our suppliers or the third parties we utilize continue to increase significantly or if our suppliers and such third parties experience significant liabilities due to violations of Chinese labor laws and related regulations.

In addition, our suppliers and the third parties we utilize in China may be unable to find a sufficient number of qualified workers due to the intensely competitive and fluid market for skilled labor in China.

As we plan to transition our sales in China from a direct sales model to a distributor model and reduce our direct workforce in China, we will be subject to these labor laws and will make payments in accordance with such laws.

If we decide to change or reduce our direct workforce further in the future, these labor laws could limit or restrict our ability to make such changes in a timely, favorable, and effective manner.

Furthermore, the Chinese government may impose additional regulations regarding ingredients and composition and these regulations may affect our products.

The Chinese government may regulate or apply a substantially different set of requirements to our products than anticipated, in which case we may need to invest a significant amount of resources and time before we can commercialize our products in the country.

Any of these events may materially and adversely affect our business, financial condition and results of operations.

Operating in China also exposes us to political, legal and economic risks.

Moreover, conducting business in China also exposes us to political, legal and economic risks.

In particular, the political, legal and economic climate in China, both nationally and regionally, is fluid and unpredictable.

Our ability to operate in China may be adversely affected by changes in U.S.

and Chinese laws and regulations such as those related to, among other things, taxation, import and export tariffs, environmental regulations, land use rights, intellectual property, currency controls, network security, employee benefits, hygiene supervision and other matters.

In addition, we or our suppliers may not obtain or retain the requisite legal permits to continue to operate in China, and costs or operational limitations may be imposed in connection with obtaining and complying with such permits.

Our ability to conduct business in China may be adversely affected by changes in U.S.

In addition, we or our suppliers or our distributors may not obtain or retain the requisite legal permits to continue to do business in China, and costs or operational limitations may be imposed in connection with obtaining and complying with such permits.

In other cases, we may be forced to expend a significant amount of resources to obtain the requisite legal permits, such as clinical trials, or otherwise be required to forfeit such permits.

In addition, Chinese trade regulations are in a state of flux, and we may become subject to other forms of taxation, tariffs and duties in China.

In addition, Chinese trade regulations are in a state of flux, and we may become subject to other forms of taxation, tariffs and duties in China that could adversely affect our ability to sell our products in China.

Furthermore, the third parties that we rely on in China may disclose our confidential information or intellectual property to competitors or third parties, which could result in the illegal distribution and sale of counterfeit versions of our products.

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Recent and potential additional tariffs imposed by the United States government on certain imports or a global trade war could increase the cost of our products, which could materially and adversely affect our business, financial condition and results of operations.

government has imposed increased tariffs on certain imports from China, some of which cover products that we import from that country.

government has imposed increased tariffs on certain imports from China and other countries, some of which cover products that we import from that country.

We currently source important components for our products from third-party suppliers in China, and, as such, current tariffs may increase our cost of goods, which may result in lower gross margin on certain of our products.

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Trade restrictions implemented by the United States or other countries in connection with a global trade war could materially and adversely affect our business, financial condition and results of operations.

Our business could be negatively impacted by changes in the United States political environment.

Any policy changes as a result of the change in presidential administration and Congress in 2025 could significantly affect our business as well as the markets in which we operate.

Specific legislative and regulatory proposals discussed during election campaigns and more recently that might materially impact our business include, but are not limited to, promoting access to healthcare via market competition and pricing transparency, enhancing flexibility and choice in healthcare at the state and individual level, prioritizing domestic production and increasing tariffs on imports (which may complicate and increase costs associated with our supply chain), and rolling back regulatory initiatives adopted under the previous administration.

We cannot predict whether industry initiatives to seek tariff carve-outs for devices or other life sciences goods and products will be successful.

Personnel and policy changes at the regulatory agencies, including the FDA, may hinder our ability to operate our business as intended.

With the change in the presidential administration in 2025, substantial uncertainty remains as to how, if at all, the new administration will seek to modify or revise the requirements and policies of the FDA and other regulatory agencies with jurisdiction over our products.

Since the start of the new congressional session and presidential administration, substantial volatility and uncertainty have surrounded both the present activities of federal regulatory agencies and their future, including termination of a substantial number of employees at many agencies, and re-hiring of a substantial number of such employees at certain regulatory agencies, such as the FDA.

The new administration also has issued, and is expected to continue relying upon, executive orders to address a wide range of policy areas, some of which may impact our business.

Examples of executive orders that have already been issued on public health and healthcare topics include orders seeking to withdraw the United States from the World Health Organization, rescind a 2022 order issued under the prior administration to lower the cost of prescription drugs, and address COVID-19 vaccination requirements.

The new administration has also delayed or put on pause a number of initiatives at the FDA.

Such political developments may require us to allocate significant time, resources, and expense to modifying our policies and procedures, processes, systems, and practices to ensure compliance or adapt to the new regulatory climate, particularly to the extent such actions are subject to protracted and uncertain legal challenges.

To the extent changes in the political environment have a negative impact on us or on our markets, our business, results of operation, and financial condition could be materially and adversely affected in the future.

Risks related to environmental, social, and governance issues

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If we do not take action, climate change could result in increased costs, reduced profit and reduced growth.

For example, in California, high temperatures during the summer months, earthquakes, or wildfire danger could increase the probability of planned (or unplanned) power outages which may impact our operations and have the potential to disrupt our business.

Increased scrutiny from investors and others regarding our environmental, social, governance, or sustainability, responsibilities could result in additional costs or risks and adversely impact our reputation, employee retention, and willingness of customers and suppliers to do business with us.

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There has been an increase in regulatory activity and activism in the United States and abroad, and the regulatory landscape is becoming more complex with increasingly strict requirements.

In addition, significant uncertainty exists during periods of political and governmental transition that may impact existing laws and regulations, as well as our ability to remain compliant.

If this trend continues, we may find it necessary to alter some of the ways we have traditionally manufactured and marketed our products in order to stay in compliance with a changing regulatory landscape, and this could add to the costs of our operations and have an adverse impact on our business.

To the extent federal, state, local or foreign regulatory changes regarding the scope of practice of estheticians, licensing, distribution, consumer protection, or the ingredients, claims or safety of our products occurs in the future, they could require us to obtain additional licenses and registrations, reformulate or discontinue certain of our products, revise the product packaging or labeling, adjust operations and systems, or affect our ability to sell our products to certain customer groups in particular states and/or territories, any of which could result in, among other things, increased costs, delays in product launches, product returns or recalls and lower net sales, and therefore could have a material adverse effect on our business, financial condition and results of operations.

To the extent federal, state, local or foreign regulatory changes regarding the scope of practice of estheticians or other professionals utilizing our products, licensing, distribution, consumer protection, or the ingredients, marketing, claims, or safety of our products occurs in the future, they could require us to obtain additional licenses and registrations, reformulate or discontinue certain of our products, revise the product packaging or labeling, adjust operations and systems, or affect our ability to sell our products to certain customer groups in particular states, countries, and/or territories, any of which could result in, among other things, increased costs, delays in product launches, product returns or recalls and lower net sales, and therefore could have a material adverse effect on our business, financial condition and results of operations.

Noncompliance with applicable regulations, including those for medical devices, could result in enforcement action by the FDA or other regulatory authorities within or outside the United States, including state and local regulatory authorities, with actions including but not limited to warning letters or untitled letters, fines;

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For example, Congress enacted MoCRA on December 29, 2022, which directed FDA to implement a set of new regulatory requirements that previously were not applicable to cosmetic products.

Pursuant to MoCRA, FDA will subject the manufacturers and cosmetic products to requirements such as facility registration and product listing requirements, compliance with certain GMP requirements, adverse event reporting requirements, and other labeling requirements.

Some of the requirements became applicable on December 29, 2023, although many of the requirements, such as those relating to labeling, will become applicable in 2024 and 2025.

Pursuant to MoCRA, FDA now subjects manufacturers and cosmetic products to requirements such as facility registration and product listing requirements, adverse event reporting requirements, and other labeling requirements.

The FDA is required to promulgate final regulations implementing GMPs for cosmetics by December 29, 2025.

Moreover, depending on how we market the products, they could also be regulated as both drugs and cosmetics simultaneously, as the categories are not mutually exclusive.

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New laws, regulations, enforcement trends, or changes in existing regulations could affect the ability of our esthetician providers in certain states to provide our treatments to consumers, any of which could have a material adverse effect on our business, financial condition, and results of operation.

Currently, licensed estheticians are allowed to provide Hydrafacial treatments to customers whether or not they are supervised by a physician.

Changes in regulations or enforcement trends regarding the scope of practice of estheticians could limit the ability of estheticians to provide Hydrafacial treatments or require estheticians to obtain additional training and certifications to provide Hydrafacial treatments.

Currently, many states allow licensed estheticians to provide Hydrafacial treatments to customers without supervision by a physician.

Changes in regulations or enforcement trends regarding the scope of practice of estheticians and other professionals could limit the ability of estheticians to provide Hydrafacial treatments or require estheticians to obtain additional training and certifications to provide Hydrafacial treatments.

Any such regulatory changes could affect our ability to sell our products to certain customer groups in particular states and/or territories, which could result in decreased sales, and therefore could have a material adverse effect on our business, financial condition, and results of operation.

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In the United States, medical device products are subject to extensive regulation by the FDA and include requirements related to developing, testing, establishment registration and device listing, manufacturing, labeling, sale, marketing, advertising, promotion, distribution, import, export, shipping, inspections and audits, record keeping, recalls and field safety corrective actions and post-market surveillance, including reporting of certain events.

Delivery Systems are subject to regulation by the FDA and comparable foreign regulatory authorities as a medical device, while our boosters and serums are marketed as cosmetics.

Currently, Delivery Systems are subject to regulation by the FDA and comparable foreign regulatory authorities as a medical device, while our Boosters and serums are marketed as cosmetics.

Before a new medical device, or a new use of, or claim for, an existing medical device product can be marketed in the United States, it must first receive marketing authorization from the FDA unless it is exempt from such requirements.

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refusal to permit the import or export of products;

and criminal prosecution.

and/or criminal prosecution.

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

We are exposed to the risk that our employees, consultants, and other commercial partners and business associates may engage in fraudulent or other misconduct.

Misconduct by these parties could include intentional, reckless or negligent conduct or other unauthorized activities that violate the regulations of the FDA and non-U.S.

regulators, including those laws requiring the reporting of true, complete and accurate information to such regulators, manufacturing standards, healthcare fraud and abuse laws and regulations in the United States and internationally or laws that require the true, complete and accurate reporting of financial, billing and claims information or data.

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

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

The precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations.

If any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could result in the imposition of significant fines or other sanctions, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of operations, any of which could adversely affect our ability to operate our business and our results of operations.

Whether or not we are successful in defending against such actions or investigations, we could incur substantial costs, including legal fees and reputational harm, and divert the attention of management in defending ourselves against any of these claims or investigations.

Our facilities are subject to regulation under the FDCA and FDA implementing regulations governing the manufacture of our products.

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Any failure by us to take satisfactory corrective action in response to an adverse inspection could result in enforcement actions against us, including warning letters or untitled letters;

fines, injunctions

or civil penalties;

fines, injunctions or civil penalties;

suspension or withdrawal of approvals or clearances;

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refusal to permit the import or export of products;

and criminal prosecution.

and/or criminal prosecution.

In addition, there may be increased risk of regulatory enforcement if we or our sales force markets our products for off-label use, or physicians, estheticians, or others attempt to use our products off-label.

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The use of our products for indications other than those for which our products have been cleared by the FDA or certified by a notified body, or that are permitted under the scope of any regulation establishing an exemption from 510(k) clearance, may not have the intended effect, which could harm our reputation in the marketplace.

Physicians, a/estheticians, and others may also misuse our products or use improper techniques if they are not adequately trained in the particular use, potentially leading to injury and an increased risk of product liability claims.

Physicians, estheticians, and others may also misuse our products or use improper techniques if they are not adequately trained in the particular use, potentially leading to injury and an increased risk of product liability claims.

Product liability claims are expensive to defend and could divert management’s attention from the primary business and result in substantial damage awards against us.

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Depending on the corrective action we take to redress a product’s deficiencies or defects, the FDA or foreign regulatory authorities may require, or we may decide, that we will need to obtain new approvals, clearances or certifications for the product before we may market or distribute the corrected product.

Seeking such approvals, clearances or certifications may delay our ability to replace the recalled products in a timely manner.

Seeking such approvals, clearances or

certifications may delay our ability to replace the recalled products in a timely manner.

Moreover, if we do not adequately address problems associated with our products, we may face additional regulatory enforcement action, including warning letters or untitled letters;

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For example, over the past decade, the United States government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical and non-critical activities.

Separately, in response to the COVID-19 pandemic, the FDA had significantly curtailed and limited its inspection of both foreign and domestic facilities.

Furthermore, regulatory authorities outside the United States adopted similar restrictions or other policy measures in response to the COVID-19 pandemic.

If a prolonged government shutdown occurs, or if new or

existing global health concerns hinder or prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

In the event that a prolonged government shutdown occurs, or if new or existing global health concerns hinder or prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

Furthermore, changes in the regulatory landscape in response to the new presidential administration and congress in 2025 may result in significant changes to laws, regulations, and enforcement practices of various agencies that we may not be able to follow or may significantly change the way that our business operates.

Changes to existing laws, regulations, and enforcement practices may cause us to experience losses, force us to discontinue the sale of certain products or alter the way our business sells products, force us to close certain facilities or restructure, and potentially cease operations in extreme circumstances.

It is impossible to predict changes that may result from the new administration, and the risks associated with this change are not completely known.

In addition, in the EU, notified bodies must be officially designated to certify products and services in accordance with the EU Medical Devices Regulation.

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Effective internal control over financial reporting is necessary for us to provide reliable financial reports.

As a “large accelerated filer”, we are responsible for establishing and maintaining internal controls and procedures that will allow our management to report on, and our independent registered public accounting firm to attest to, our internal controls over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404.

Although our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 and our management is required to report on our internal controls over financial reporting under Section 404, any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations.

As an “accelerated filer”, we are responsible for establishing and maintaining internal controls and procedures that will allow our management to report on, and our independent registered public accounting firm to attest to, our internal controls over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404.

Although our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-

Oxley Act of 2002 and our management is required to report on our internal controls over financial reporting under Section 404, any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations.

In addition, any testing by us, as and when required, conducted in connection with Section 404 or any subsequent testing by our independent registered public accounting firm, as and when required, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement.

Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our shares of Class A Common Stock.

We have identified a material weakness in our internal control over financial reporting that could negatively impact our financial condition.

Based on the Company’s assessment in the prior year, management identified a material weakness in our internal control over financial reporting, due to the Company’s lack of sufficient resources within inventory operations with an appropriate level of accounting knowledge, training, and experience which resulted in the ineffective design and operating effectiveness of controls over the accounting for inventory.

As a result, the Company’s accounting department was not provided with complete and adequate support, documentation, and information to effectively analyze and record accounting matters timely and account for the financial statement effects of the areas impacted.

This resulted in inadequate controls over 1) excess and obsolete inventory, and 2) inventory pricing and purchase arrangements.

The material weakness did not result in any material misstatements to our consolidated financial statements as of December 31, 2024 or in previous periods.

As defined in standards established by the Public Company Accounting Oversight Board (United States) (“PCAOB”), a “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

With oversight from our Audit Committee, we have made progress on our remediation plan specific to the material weakness, with the completion of the following remediation activities as of December 31, 2024:

• We appointed new individuals in key roles including the Chief Supply Chain and Operations Officer and other operational leadership roles;

• We enhanced training and operational guidelines resulting in the successful completion of our annual physical inventory counts;

• We designed and implemented controls with regards to excess and obsolete inventory and inventory pricing and purchase arrangements.

We have implemented the remediation steps detailed above;

however, we are unable to conclude that these controls are operating effectively until the applicable controls operate for a sufficient period of time and are subject to testing to conclude that remediation has been achieved.

We anticipate that remediation activities will be completed during fiscal year 2025, however, we cannot give assurance that other material weaknesses will not arise in the future.

Any failure to remediate the material weakness or the development of a new material weakness in our internal control over financial reporting could result in material misstatements in our financial statements and cause us to fail to meet our reporting obligations, which could have a negative impact on our financial condition, results of operations or cash flows or otherwise cause a decline in investor confidence and the market price of our Class A Common Stock.

For more information about the material weakness, see Part II, Item 9A “Controls and Procedures” in this Annual Report on Form 10-K.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

We are continuing to refine our disclosure controls and procedures to provide reasonable assurance that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

We believe that any disclosure controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.

Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls.

Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.

Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could adversely affect our business, results of operations, and financial condition.

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In the United States, numerous federal and state laws and regulations, including data breach notification laws, information privacy and security laws and consumer protection laws and regulations may apply to our operations.

For example, the California Consumer Privacy Act (“CCPA”) creates individual privacy rights for California consumers, increases the privacy and security obligations of entities handling certain personal information, and also establishes significant penalties for noncompliance.

For example, the CCPA creates individual privacy rights for California consumers, increases the privacy and security obligations of entities handling certain personal information, and also establishes significant penalties for noncompliance.

The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.

Further, the California Privacy Rights Act (“CPRA”) passed in California in 2020.

Further, the CPRA passed in California in 2020.

The CPRA significantly amends the CCPA and imposes additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data.

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Such regulations, including uncertainties about how well the advertising technology ecosystem can adapt to legal changes around the use of tracking technologies, may have a negative effect on businesses, including ours, that collect and use online usage information for consumer acquisition and marketing.

The decline of cookies or other online tracking technologies as a means to identify and target potential purchasers may increase the cost of operating our business and lead to a decline in revenues.

The decline of cookies or other online tracking technologies as a means to identify and target potential purchasers may increase the cost of operating our business and lead to a decline in

In addition, legal uncertainties about the legality of cookies and other tracking technologies may increase regulatory scrutiny and increase potential civil liability under data protection or consumer protection laws.

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For example, regulations implemented pursuant to the Health Insurance Portability and Accountability Act (“HIPAA”), including regulations governing the privacy and security of individually identifiable health information held by healthcare providers and their business associates may require us to make significant and unplanned enhancements of software applications or services, result in delays or cancellations of orders, cause us to be subject to significant penalties or fines for violations, or result in the revocation of endorsement of our products and services by healthcare participants, among others.

In addition, significant changes to the regulatory requirements for cosmetic products are scheduled in the next several years.

In addition, significant changes to the regulatory requirements for cosmetic products have come into effect and more are scheduled throughout 2025.

On December 29, 2022, Congress enacted MoCRA that adds significant new regulatory requirements to cosmetic products.

Some of the requirements became applicable on December 29, 2023, although many of the requirements, such as those relating to labeling, will become applicable in 2024 and 2025.

For example, cosmetic manufacturing and processing facilities will need to be registered with FDA, and products will need to be listed with FDA.

Adulterated or misbranded cosmetic products will be subject to recalls that are mandated by FDA, similar to medical devices.

In addition, a responsible person will be required to report any serious adverse events that result from the use of a cosmetic product manufactured, packaged, or distributed by the associated entity, and the records relating to each adverse event report will be required to be kept for six years.

Notably, MoCRA requires FDA to promulgate proposed rules for Good Manufacturing Practices for cosmetic products by December 29, 2024, and final rules by December 29, 2025.

Many of the requirements became applicable on December 29, 2023, and throughout 2024, though new rules regarding manufacturing practices are expected in 2025.

Notably, MoCRA requires FDA to promulgate final rules for Good Manufacturing Practices for cosmetic products by December 29, 2025.

Subsequently, compliance with such GMP requirements will become mandatory for manufacturers of cosmetic products.

Additionally, cosmetic labels will need to identify the responsible person for the purpose of serious adverse event reporting, and cosmetic labels will also need to identify fragrance allergens.

We, as the manufacturer, and our products, will become subject to these requirements, and will need to expend capital to ensure that our manufacturing practices and labeling processes are compliant.

Additionally, we may need to hire additional personnel to implement the adverse event reporting procedures and to ensure compliance with these new requirements.

There may be certain challenges to compliance with these requirements and failure to comply may result in enforcement actions from FDA and other regulatory agencies that could disrupt our business operations.

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If we are unable to obtain, maintain and enforce intellectual property protection directed for our technology and future technologies that we develop, others may be able to make, use, import or sell products that are the same or substantially the same as ours, which could adversely affect our business, financial condition and results of operations.

If we are unable to protect the confidentiality of our trade secrets, our business or competitive position could be harmed.

In addition to patent protection, we also rely upon other non-patent protection, such as:

trademark, or, trade secret protection, as well as confidentiality agreements with our employees, consultants, vendors, and third parties, to protect our confidential and proprietary information.

Despite the existence of such confidentiality agreements, or other contractual restrictions, we may not be able to prevent the unauthorized disclosure or use of our confidential proprietary information or trade secrets by employees, consultants, vendors, and third parties.

In addition to contractual measures, we try to protect the confidential nature of our proprietary information using commonly accepted physical and technological security measures.

Such measures may not, for example, in the case of misappropriation of a trade secret by an employee or third party with authorized access, provide adequate protection for our proprietary information.

Our security measures may not prevent an employee or consultant from misappropriating our trade secrets and providing them to a competitor, and, recourse we take against such misconduct may not provide an adequate remedy to fully protect our interests.

Unauthorized parties may also attempt to copy or reverse engineer certain aspects of our products that we consider proprietary.

Enforcing a claim that a party illegally disclosed, or misappropriated a trade secret, can be difficult, expensive and time-consuming, and, the outcome is unpredictable.

Even though we use commonly accepted security measures, trade secret violations are often a matter of state law, and the criteria for protection of trade secrets can vary among different jurisdictions.

Furthermore, the laws of foreign countries may not protect our trade secrets effectively or to the same extent as the laws of the United States.

In addition, trade secrets may be independently developed by others in a manner that could prevent legal recourse by us.

If any of our confidential or proprietary information, such as our trade secrets, were to be disclosed or misappropriated, or if any such information was independently developed by a competitor, our business and competitive position could be harmed.

Our success depends on our ability to operate our business without infringing, misappropriating or otherwise violating the trademarks, patents, copyrights and other proprietary rights of third parties.

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Many of the risks associated with the use of third‑party products cannot be eliminated, and these risks could negatively affect our business.

Third parties may assert ownership or commercial rights to inventions we develop or acquire.

Third parties may make claims challenging the inventorship or ownership of our intellectual property.

In addition, we may face claims by third parties that our agreements with employees, contractors or consultants obligating them to assign intellectual property to us are ineffective or in conflict with prior or competing contractual obligations of assignment, which could result in ownership disputes regarding intellectual property we have developed, will develop, acquired, or will acquire and interfere with our ability to capture the commercial value of such intellectual property.

Litigation may be necessary to resolve an ownership dispute, and if we are not successful, we may be precluded from using certain intellectual property or we may lose our rights in that intellectual property.

Either outcome could harm our business and competitive position.

We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties.

We employ individuals who previously worked with other companies, including our competitors or potential competitors.

We may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information, including trade secrets or other proprietary information, of former employers or other third parties.

We may also be subject to claims that former employers or other third parties have an ownership interest in our patents, design of our products, formulations, and other intellectual property.

Litigation may be necessary to defend against these claims.

We may not be successful in defending these claims, and even if we are successful, litigation could result in substantial cost and be a distraction to our management and other employees.

Any litigation or the threat thereof may adversely affect our ability to hire employees and we may lose valuable intellectual property rights if we fail in defending any such claims.

A loss of key personnel or their work product could diminish or prevent our ability to commercialize our products, which could have an adverse effect on our business, results of operations and financial condition.

Risks related to marketing activities

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If we fail to satisfy the continued listing requirements of Nasdaq, such as the corporate governance requirements or the minimum closing bid price requirement, Nasdaq may take steps to delist our Class A Common Stock.

Such a delisting would likely have a negative effect on the price of our common stock and would impair our stockholders’ ability to sell or purchase our common stock when they wish to do so.

In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with the listing requirements would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, or prevent future non-compliance with the continued listing requirements of Nasdaq.

Such a delisting would likely have a negative effect on the price of our Class A Common Stock and would impair our stockholders’ ability to sell or purchase our Class A Common Stock when they wish to do so.

In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with the listing requirements would allow our Class A Common Stock to become listed again, stabilize the market price or improve the liquidity of our Class A Common Stock, or prevent future non-compliance with the continued listing requirements of Nasdaq.

In addition to potential dilution associated with future offerings of debt or equity securities, we currently have significant numbers of securities outstanding that may be exercisable for shares of our Class A Common Stock, which may result in significant dilution to current stockholders and downward pressure on our stock price.

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As a result of the SEC Staff Statement, we reevaluated the accounting treatment of our warrants, and determined to classify the warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings.

As a result, included on the Company’s Consolidated Balance Sheets in this Annual Report on Form 10-K are derivative liabilities related to embedded features contained within our warrants.

Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”), provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations.

Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging, provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations.

As a result of the recurring fair value measurement, our consolidated financial statements and results of operations may fluctuate quarterly, based on factors that are outside of our control.

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Any adverse determination in litigation could also subject us to significant liabilities.

Actions of activist stockholders could be costly and time-consuming, divert management’s attention and resources, and have an adverse effect on our business.

While we value open dialogue and input from our stockholders, activist stockholders could take actions that could be costly and time-consuming to us, disrupt our operations, and divert the attention of our board of directors, management, and employees, such as public proposals and requests for potential nominations of candidates for election to our board of directors, requests to pursue a strategic combination or other transaction, or other special requests.

As a result, we have retained, and may in the future retain additional services of various professionals to advise us in these matters, including legal, financial and communications advisers, the costs of which may negatively impact our future financial results.

In addition, perceived uncertainties as to our future direction, strategy, or leadership created as a consequence of activist stockholder initiatives may result in the loss of potential business opportunities, harm our ability to attract new or retain existing investors, customers, directors, employees or other partners, and cause our stock price to experience periods of volatility or stagnation.

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

What changed 10-K

Item 1A. Risk Factors