Turn Therapeutics Inc.

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report and with our audited financial statements and related notes and other financial information appearing in our final prospectus for our direct listing filed with the U.S. Securities and Exchange Commission (the “SEC”) on October 8, 2025 (the “Prospectus”). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report and our Prospectus, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Current wording

Youshould read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report and with our audited financial statements and related notes and other financial information appearing in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 31, 2026 (the “Annual Report”). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report and our Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Previous wording

We have incurred operating losses since inception, and we expect to continue to incur losses for the foreseeable future. Our net losses were approximately $3.47 million and $1.45 million for the nine months ended September 30, 2025 and 2024, respectively. As of September 30, 2025, we had an accumulated deficit of approximately $22.67 million. We anticipate that our expenses and operating losses will increase substantially for the foreseeable future due to the increase in research and development costs for later-stage clinical trials.

Current wording

We have incurred operating losses since inception, and we expect to continue to incur losses for the foreseeable future. Our net losses were approximately $0.97 million and $0.33 million for the three months ended March 31, 2026 and 2025, respectively. As of March 31, 2026, we had an accumulated deficit of approximately $23.36 million. We anticipate that our expenses and operating losses will increase substantially for the foreseeable future due to the increase in research and development costs for later-stage clinical trials.

Previous wording

Other than any potential revenue from medical device or intellectual property out-licensing arrangements, we will not generate revenue in the future from product sales unless and until we successfully initiate and complete additional clinical development programs and obtain regulatory approval for one or more additional drug candidates. As a result, we will need substantial additional funding to support our continuing drug development and operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through equity and debt financing and from other sources of capital, which may include collaborations with other companies or other strategic transactions. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, reduce or eliminate the development and commercialization of our products. As of September 30, 2025 and December 31, 2024, we had cash and cash equivalents of approximately $3.11 million and $0.9 million, respectively. We believe that our existing cash, cash equivalents and other short term investments will be sufficient to fund our operating expenses and capital expenditure requirements into the first quarter of 2026. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See the section entitled “Risk Factors — Risks Related to Our Business and Industry — We design, develop, and conduct pre-clinical and clinical testing on drug candidates and medical devices. Given the inherent expense associated with these activities, it is common for companies at our stage to incur significant losses associated with such product development. We expect to incur additional losses for the foreseeable future, and it is possible we may never achieve or maintain profitability. Our consolidated financial statements therefore express substantial doubt about our ability to continue as a going concern.” in the Prospectus for more information.

Current wording

Other than any potential revenue from medical device or intellectual property out-licensing arrangements, we will not generate revenue in the future from product sales unless and until we successfully initiate and complete additional clinical development programs and obtain regulatory approval for one or more additional drug candidates. As a result, we will need substantial additional funding to support our continuing drug development and operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through equity and debt financing and from other sources of capital, which may include collaborations with other companies or other strategic transactions. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, reduce or eliminate the development and commercialization of our products. As of March 31, 2026 and December 31, 2025, we had cash and cash equivalents of approximately $11.22 million and $5.08 million, respectively. We believe that our existing cash, cash equivalents and other short term investments will be sufficient to fund our operating expenses and capital expenditure requirements into the first quarter of 2027. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See the section entitled “Risk Factors — Risks Related to Our Business and Industry — We design, develop, and conduct pre-clinical and clinical testing on drug candidates and medical devices. Given the inherent expense associated with these activities, it is common for companies at our stage to incur significant losses associated with such product development. We expect to incur additional losses for the foreseeable future, and it is possible we may never achieve or maintain profitability. Our consolidated financial statements therefore express substantial doubt about our ability to continue as a going concern.” in the Annual Report for more information.

Previous wording

General and administrative expenses consist primarily of employee-related costs related to the corporate functions such as equity-based compensation, executive and internal administrative operations, third-party professional fees, travel expenses, insurance expenses and rental costs.

Current wording

General and administrative expenses consist primarily of professional fees, employee-related costs related to the corporate functions such as equity-based compensation, executive and internal administrative operations, travel expenses, insurance expenses and rental costs.

Previous wording

Research and development expenses reflect our ongoing investments into expanding the applications of our flagship Hexagen formula and other drug candidates such as enhanced stability vaccine candidates, as well as in the development of medical devices utilizing our antimicrobial technologies. Our research and development costs also include expenses such as consulting costs, advisory costs, regulatory costs, information technology costs and overhead expenses.

Current wording

Research and development expenses reflect our ongoing investments into expanding the applications of our GX-03 formula and other drug candidates such as enhanced stability vaccine candidates, as well as in the development of medical devices utilizing our antimicrobial technologies. Our research and development costs also include expenses such as consulting costs, advisory costs, regulatory costs, information technology costs and overhead expenses.

Previous wording

Other income includes interest income earned from cash held in savings accounts and our highly liquid investments in money markets and vendor credits.

Current wording

Other income includes interest income earned from cash equivalents of our highly liquid investments in money markets, fair-value gain or loss from derivative liabilities, amortization of deferred offering cost and vendor credits.

Previous wording

The following table summarizes our results of operations for the three and nine months ended September 30, 2025 and 2024:

Current wording

The following table summarizes our results of operations for the three months ended March 31, 2026 and 2025:

Previous wording

We did not generate any revenue or incur any cost of goods sold during the three and nine months ended September 30, 2025 and 2024, as we continued to focus on the research and development of our drug candidates and medical devices.

Current wording

We did not generate any revenue or incur any cost of goods sold during the three months ended March 31, 2026 and 2025, as we continued to focus on the research and development of our drug candidates and medical devices.

Previous wording

General and administrative expenses increased by $1.2 million from $0.52 million for the three months ended September 30, 2024 to $1.75 million for the three months ended September 30, 2025. The increase in operating expenses during the three months ended September 30, 2025 primarily resulted from accruals for legal services, advisory services and other fees in contemplation of our direct listing which amounted to approximately $1.2 million when compared to three months ended September 30, 2024.

Current wording

General and administrative expenses increased by $0.76 million from $0.38 million for the three months ended March 31, 2025 to $1.14 million for the three months ended March 31, 2026. The increase in operating expenses primarily resulted from increase in stock-based compensation expense due to vesting timing difference of $0.20 million, increase in legal fees, advisory fees and audit fees of $0.36 million and increase in compensation related expenses of $0.19 million when compared to three months ended March 31, 2025.

Previous wording

Other income remained comparable with no material change for three months ended September 30, 2025 when compared to three months ended September 30, 2024.

Current wording

Interest income and other income remained comparable for three months ended March 31, 2026 when compared to three months ended March 31, 2025.

Previous wording

As of September 30, 2025, we had $4.3 million in total assets, which included $3.11 million in cash and cash equivalents, $188.58 thousand in prepaid expenses and other current assets, $89.42 thousand in right of use assets, $904.89 thousand in intangible assets and $8.6 thousand in security deposit. Our intangible assets primarily include capitalized legal costs related to the registration of patents and trademarks.

Current wording

As of March 31, 2026, we had $18.64 million in total assets, which included $11.22 million in cash and cash equivalents, $0.24 million in prepaid expenses and other current assets, $0.07 million in right of use assets, $0.92 million in intangible assets, $6.20 million as deferred offering cost and $8.6 thousand in security deposit. Our intangible assets primarily include capitalized legal costs related to the registration of patents and trademarks.

Previous wording

As of September 30, 2025, we had total liabilities of $3.79 million, including $2.3 million in current accounts payable and accrued expenses, $44.83 thousand in current portion of operating lease liability, $46.34 thousand in long term portion of lease liability and $1.44 million in deferred revenue. The deferred revenue as of September 30, 2025 is attributable to a license agreement for our FleX Product which has been deferred due to unpredictable outcomes and timelines of the FDA approval process which cannot be reasonably estimated. We will continue to defer the recognition of revenue until FDA approval is achieved or sufficient information is available to make a reasonable estimate on the outcome and timelines.

Current wording

As of March 31, 2026, we had total liabilities of $12.53 million, including $2.32 million in current accounts payable and accrued expenses, $2.77 million in derivative liability instruments pursuant to outstanding warrants, put option liability and conversion option, $47.80 thousand in current portion of operating lease liability, $21.54 thousand in long term portion of lease liability, $5.94 million in long-term debt, net of debt discounts and $1.44 million in deferred revenue. The deferred revenue as of March 31, 2026 is attributable to a license agreement for our FleX Product which has been deferred due to unpredictable outcomes and timelines of the FDA approval process which cannot be reasonably estimated. We will continue to defer the recognition of revenue until FDA approval is achieved or sufficient information is available to make a reasonable estimate on the outcome and timelines.

Previous wording

Based on our current operating plan, we estimate that our cash and cash equivalents as of September 30, 2025 will be sufficient to fund our operating expenses and capital expenditure requirements into the first quarter of 2026. We have based this estimate on assumptions that may prove to be wrong, and could deplete our capital resources sooner than we currently expect. Our capital resources may not be sufficient to fund operations through at least the next 12 months from the date that the accompanying unaudited condensed interim financial statements as of September 30, 2025 are issued based on our expected cash needs, which raises substantial doubt about our ability to continue as a going concern. For the remainder of 2025 and in 2026, we currently anticipate that we will require up to approximately $18.0 to $20.0 million to complete our planned Phase 3 trials for eczema and onychomycosis, and approximately $1.5 million to $2.5 million for our vaccine program, which we expect to fund through accessing the capital markets, including with additional issuances of equity and/or equity-linked securities. See the section entitled “Risk Factors — Risks Related to Our Business and Industry — We design, develop, and conduct pre-clinical and clinical testing on drug candidates and medical devices. Given the inherent expense associated with these activities, it is common for companies at our stage to incur significant losses associated with such product development. We expect to incur additional losses for the foreseeable future, and it is possible we may never achieve or maintain profitability. Our condensed consolidated financial statements therefore express substantial doubt about our ability to continue as a going concern.” in our Prospectus for more information.

Current wording

Based on our current operating plan, we estimate that our cash and cash equivalents as of March 31, 2026 will be sufficient to fund our operating expenses and capital expenditure requirements into the first quarter of 2027. We have based this estimate on assumptions that may prove to be wrong, and could deplete our capital resources sooner than we currently expect. Our capital resources may not be sufficient to fund operations through at least the next 12 months from the date that the accompanying unaudited condensed consolidated interim financial statements as of March 31, 2026 are issued based on our expected cash needs, which raises substantial doubt about our ability to continue as a going concern. For the remainder of 2026 and in 2027, we currently anticipate that we will require up to approximately $60 to $65 million to complete our planned Phase 3 trials for AD and onychomycosis, and approximately $1.5 million to $2.5 million for our vaccine program, which we expect to fund through accessing the capital markets, including with additional issuances of equity and/or equity-linked securities. See the section entitled “Risk Factors — Risks Related to Our Business and Industry — We design, develop, and conduct pre-clinical and clinical testing on drug candidates and medical devices. Given the inherent expense associated with these activities, it is common for companies at our stage to incur significant losses associated with such product development. We expect to incur additional losses for the foreseeable future, and it is possible we may never achieve or maintain profitability. Our condensed consolidated financial statements therefore express substantial doubt about our ability to continue as a going concern.” in our Annual Report for more information.

Previous wording

We intend to fund the operations of the Company for the next 12 months from, as of September 30, 2025, the cash and cash equivalents available of approximately $3.1 million, from new licensing deals for our FDA-cleared medical devices or any payments from our existing license for the FleX Product, and other equity or debt financings, as available. We did not receive any proceeds from our direct listing. On August 29, 2025, we entered into an amended and restated Share Purchase Agreement, which was further amended by a side letter dated as of September 24, 2025, and an amended and restated Registration Rights Agreement with GEM Global Yield LLC SCS and GEM Yield Bahamas Limited (collectively, “GEM”) (as amended, the “GEM Purchase Agreement” and the “GEM Rights Agreement,” respectively, and together, the “GEM Agreements”), pursuant to which we are eligible to put certain shares of common stock to the selling stockholders, subject to certain volume and price restrictions. Under the GEM Agreements, GEM agreed to purchase up to $85.0 million in shares of our common stock subject to certain conditions and limitations, including the registration of our common stock on a national securities exchange. Accordingly, we expect to put shares of our common stock to GEM under the GEM Agreements as needed. No shares of common stock were sold pursuant to the terms of the GEM Agreements during the nine months ended September 30, 2025.

Current wording

On August 29, 2025, we entered into an amended and restated Share Purchase Agreement, which was further amended by a side letter dated as of September 24, 2025, and an amended and restated Registration Rights Agreement with GEM Global Yield LLC SCS and GEM Yield Bahamas Limited (collectively, “GEM”) (as amended, the “GEM Purchase Agreement” and the “GEM Rights Agreement,” respectively, and together, the “GEM Agreements”), pursuant to which we are eligible to put certain shares of common stock to the selling stockholders, subject to certain volume and price restrictions. Under the GEM Agreements, GEM agreed to purchase up to $85.0 million in shares of our common stock subject to certain conditions and limitations, including the registration of our common stock on a national securities exchange. Accordingly, we expect to put shares of our common stock to GEM under the GEM Agreements as needed. On October 31, 2025, we issued the initial draw-down notice to GEM for 1,235,200 shares and GEM purchased 1,235,200 shares of common stock at approximately $3.29 per share resulting in gross proceeds of $4.07 million to us.

Previous wording

Net cash used in operating activities during the nine months ended September 30, 2024 was $0.9 million and consisted primarily of our net loss of $1.4 million, which was partially offset by a $166.22 thousand decrease from changes in operating assets and liabilities primarily attributable to the timing of expenses incurred and payments issued as well as non-cash adjustments of $315.02 thousand of stock-based compensation and $35.12 thousand in amortization of intangible assets.

Current wording

Net cash used in operating activities during the three months ended March 31, 2026 was $1.63 million and consisted primarily of our net loss of $0.97 million, a $0.74 million outflow from changes in operating assets and liabilities primarily attributable to the timing of expenses incurred and payments issued as well as non-cash adjustments of $0.28 million of stock-based compensation, $0.70 million non-cash fair value gain from derivative liability instruments and $14.45 thousand and $0.48 million in amortization of intangible assets and deferred offering cost, respectively.

Previous wording

Net cash used in operating activities during the nine months ended September 30, 2025 was $1.38 million and consisted primarily of our net loss of $3.4 million, which was partially offset by a $1.63 million decrease from changes in operating assets and liabilities primarily attributable to the timing of expenses incurred and payments issued as well as non-cash adjustments of $162.87 thousand of stock-based compensation, $250.00 thousand advisory services expense that was settled through issuance of common stock and $38.59 thousand in amortization of intangible assets.

Current wording

Net cash used in operating activities during the three months ended March 31, 2025 was $0.30 million and consisted primarily of our net loss of $0.33 million, a $0.31 million outflow from changes in operating assets and liabilities primarily attributable to the timing of expenses incurred and payments issued as well as non-cash adjustments of $76.60 thousand of stock-based compensation, $0.25 million advisory services expense that was settled through issuance of common stock and $12.42 thousand in amortization of intangible assets.

Previous wording

Net cash used in investing activities during the nine months ended September 30, 2025 was $121.55 thousand and consisted primarily of capitalization of patent related legal costs.

Current wording

Net cash used in investing activities during the three months ended March 31, 2026 was $12.23 thousand and consisted primarily of capitalization of patent related legal costs.

Previous wording

Net cash provided by financing activities during the nine months ended September 30, 2025 was $3.74 million and consisted of $3.74 million in proceeds from the issuance of common stock.

Current wording

Net cash provided by financing activities during the three months ended March 31, 2025 was $1.0 million and consisted of $1.0 million in proceeds from the issuance of common stock.

Previous wording

The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include, but are not limited to, those relating to stock-based compensation, revenue recognition, research and development expenses and determination of right-of-use assets under lease transactions and related lease obligations. Although these estimates are based on our knowledge of current events and actions we may undertake in the future, actual results may materially differ from these estimates and assumptions.

Current wording

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include, but are not limited to, those relating to stock-based compensation, revenue recognition, research and development expenses and determination of right-of-use assets under lease transactions and related lease obligations. Although these estimates are based on our knowledge of current events and actions we may undertake in the future, actual results may materially differ from these estimates and assumptions.

Previous wording

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. On the basis of this evaluation, the Company has determined that it is more likely than not that the Company will not recognize the benefits of the federal and state net deferred tax assets, and, as a result, a full valuation allowance has been set against its net deferred tax assets as of the nine months ended September 30, 2025 and year ended December 31, 2024. The amount of the deferred tax asset to be realized could be adjusted if estimates of future taxable income during the carry-forward period are reduced or increased. For the fiscal year ended December 31, 2024, the Company had federal cumulative NOL carryforwards of approximately $8.59 million, and the Company had state NOL carryforwards of approximately $7.35 million. Utilization of some of the federal and state NOL carryforwards to reduce future income taxes will depend on the Company’s ability to generate sufficient taxable income prior to the expiration of the carryforwards. The federal net operating loss carryforward is subject to an 80% limitation on taxable income, does not expire, and will carry on indefinitely.

Current wording

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. On the basis of this evaluation, the Company has determined that it is more likely than not that the Company will not recognize the benefits of the federal and state net deferred tax assets, and, as a result, a full valuation allowance has been set against its net deferred tax assets as of March 31, 2026 and December 31, 2025. The amount of the deferred tax asset to be realized could be adjusted if estimates of future taxable income during the carry-forward period are reduced or increased. For the fiscal year ended December 31, 2025, the Company had federal cumulative net operating loss (“NOL”) carryforwards of approximately $14.5 million, and the Company had state NOL carryforwards of approximately $7.3 million. Utilization of some of the federal and state NOL carryforwards to reduce future income taxes will depend on the Company’s ability to generate sufficient taxable income prior to the expiration of the carryforwards. The federal net operating loss carryforward is subject to an 80% limitation on taxable income, does not expire, and will carry on indefinitely.

Previous wording

We account for stock-based compensation for both employees and non-employees in accordance with ASC 718, Compensation — Stock Compensation. Under the fair value recognition provisions of ASC 718, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period, which is generally the option vesting period.

Current wording

We account for stock-based compensation for both employees and non-employees in accordance with ASC 718,Compensation — Stock Compensation. Under the fair value recognition provisions of ASC 718, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period, which is generally the vesting period.

Previous wording

A description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our unaudited condensed financial statements contained in Part I, Item 1 of this Quarterly Report.

Current wording

A description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report.