The Company generates most of its revenue from license and royalty arrangements. At inception of each contract, the Company identifies the goods and services that have been promised to the customer and each of those that represent a distinct performance obligation, determines the transaction price including any variable consideration, allocates the transaction price to the distinct performance obligations and determines whether control transfers to the customer at a point in time or over time. Variable consideration is included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The Company reassesses its reserves for variable consideration at each reporting date and makes adjustments, if necessary, which may affect revenue and earnings in periods in which any such changes become known.

See Note 7 for a description of the Verity License Agreement, the SPC License Agreement, the Pharmalink Distribution Agreement, and the Aché License Agreement. See Note 11 for a description of the agreement with Spriaso, a related party.

License Fees

For distinct license performance obligations, upfront license and collaboration fees are recognized when the Company satisfies the underlying performance obligation. Performance obligations under these licenses, which consist of the right to use the Company’s proprietary technology, are satisfied at a point in time corresponding with delivery of the underlying technology rights to the licensee, which is generally upon transfer of the licensed technology/product to the customer. In addition, license arrangements may include contingent milestone payments, which are due following achievement by our licensee of specified sales or regulatory milestones and the licensee and/or Company will fulfill its performance obligation prior to achievement of these milestones. Because of the uncertainty of the milestone achievement, and/or the dependence on sales of our licensee, variable consideration for contingent milestones is fully constrained and is not recognized as revenue until the milestone is achieved by our licensee, to the extent collectability is reasonably certain.

Royalties

Royalty revenue consists of sales-based and minimum royalties earned under license agreements for our products. Sales-based royalty revenue represents variable consideration under license agreements and is recognized in the period a customer sells products incorporating the Company’s licensed technologies/products. The Company estimates sales-based royalty revenue earned but unpaid at each reporting period using information provided by the licensee. The Company’s license arrangements may also provide for minimum royalties, which the Company recognizes upon the satisfaction of the underlying performance obligation, which generally occurs with delivery of the underlying technology rights to the licensee. Sales-based and minimum royalties are generally due within 45 days after the end of each quarter in which they are earned.

Deferred Revenue – Customer Prepayment for Inventory

As of September 30, 2026 and December 31, 2025, the Company has recorded deferred revenue of $320,000 related to a one-time non-refundable, non-creditable upfront prepayment received from SPC Korea (“SPC”) in consideration for TLANDO product inventory that has not yet been delivered or transferred. This prepayment is recognized as a contract liability in accordance with ASC 606, Revenue from Contracts with Customers, because the Company has an obligation to transfer inventory in the future. Revenue associated with this advance payment will be recognized when the inventory is transferred to the customer, which will occur upon shipment of the inventory. The deferred revenue is expected to be recognized as revenue within 60 days of SPC’s receipt of marketing authorization for TLANDO in South Korea (the “SPC Territory”), which is expected to occur in 2027. The Company periodically evaluates deferred revenue balances to ensure they appropriately reflect remaining performance obligations and expected fulfillment timelines.

Revenue Concentration

For the three months ended September 30, 2026, revenue from a collaborative partner totaled $1,500,000, representing 65.5% of the Company’s total revenue. License and royalty revenue under the Verity License Agreement totaled approximately $690,000, representing 30.1% of the Company’s total revenue. For the three months ended September 30, 2025, royalty revenue under the Verity License Agreement totaled approximately $115,000 and represented 100% of the Company’s total revenue.

For the nine months ended September 30, 2026, revenue from a collaborative partner totaled $1,500,000, representing 57.7% of the Company’s total revenue, and license and royalty revenue under the Verity License Agreement totaled $1,000,000, representing 38.5% of the Company’s total revenue. For the nine months ended September 30, 2025, the Company recognized license revenue from one customer of $500,000, representing 60.1% of the Company’s total revenue, and royalty revenue under the Verity License Agreement totaled approximately $331,000, representing 39.9% of the Company’s total revenue.