Turn Therapeutics Inc.

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

We were formed in Delaware in January 2015 as Global Health Solutions, LLC. In October 2018, we converted into a Delaware corporation under the name Global Health Solutions, Inc., and in September 2025, we changed our corporate name to Turn Therapeutics Inc. (hereinafter referred to as the “Company”, “we”, “us” or “our”). Our corporate headquarters are located in Westlake Village, California.

We are a clinical-stage biotechnology and medical device development company built around our proprietary platform technology called PermaFusion® designed to enhance drug performance. Our primary drug development programs focus on dermatological diseases, including eczema, hidradenitis suppurativa and onychomycosis. We also have a portfolio of Food and Drug Administration (the “FDA”) cleared medical devices. We are also developing an intranasal vaccine with sufficient thermostability for rapid deployment for pandemic response.

Direct Listing

On October 8, 2025, we completed the direct listing (the “Direct Listing”) of our common stock on The Nasdaq Global Market (“Nasdaq”) under the ticker symbol “TTRX.”

2. BASIS OF PRESENTATION, PRINCIPLES OF CONSOLIDATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) applicable to interim financial information and pursuant to the instructions of the Securities and Exchange Commission (the “SEC”) on Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Further, the results of our operations for any interim periods are not necessarily indicative of the results that may be expected for any other interim period or the full fiscal year. In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation have been included. The condensed consolidated balance sheet as of December 31, 2025, has been derived from our audited consolidated financial statements but does not include all disclosures required by U.S. GAAP. Because all of the disclosures required by U.S. GAAP for complete financial statements are not included herein, these unaudited condensed consolidated financial statements and the accompanying notes should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto in the Company’s Annual Report on Form 10-K (the “Annual Report”) for the fiscal year ended December 31, 2025, as filed with the SEC on March 31, 2026.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

2-for-1 Forward Stock Split

On September 11, 2025, our board of directors (the “Board”) approved a 2-for-1 forward stock split (the “Stock Split”) of our common stock upon the effectiveness of our registration statement on Form S-1 filed with the SEC and our Amended and Restated Certificate of Incorporation filed with the State of Delaware.

On September 30, 2025, our registration statement on Form S-1 was declared effective by the SEC and our Amended and Restated Certificate of Incorporation was filed with the State of Delaware, giving effect to a 2-for-1 forward split of our common stock.

Unless otherwise indicated, all authorized, issued, and outstanding stock and per share amounts contained herein have been adjusted to reflect the effect of the Stock Split for all prior periods presented. Proportionate adjustments were made to exercise prices and the number of shares issuable under our equity incentive plans and outstanding warrants.

The impacts of the Stock Split were applied retroactively for all periods presented in accordance with applicable guidance and therefore, amounts may differ from those previously reported.

Liquidity and Going Concern

As of September 30, 2026, we had approximately $10.4 million of cash and cash equivalents and working capital of approximately $7.6 million. We have a relatively limited operating history, and the revenue and income potential of our business and market are unproven. We have experienced net losses and negative cash flows from operations since inception and, as of September 30, 2026, we had an accumulated deficit of $35.4 million. During the nine months ended September 30, 2026, we incurred a net loss of $13.1 million and had cash outflows from operations of $4.1 million. We will continue to incur costs and expenses related to our ongoing operations until we successfully commercialize, develop, obtain regulatory approval for, and gain market acceptance of products and product candidates and achieve revenues adequate to support our operations.

From inception through September 30, 2026, we have funded our operations primarily with proceeds from the sale of common stock, including through exempt offerings under Regulation Crowdfunding, Regulation A+ and Regulation D, draw-down from our Share Purchase Agreement (Note 6), proceeds from debt financings as well as through proceeds from license and collaboration agreements. Based on our current operating plan, we estimate that our cash and cash equivalents as of September 30, 2026 will be sufficient to fund our operating expenses and research and development expenses for development of GX-03 in our currently ongoing atopic dermatitis (“AD”) program and hidradenitis suppurativa (“HS”) program into the third 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 these condensed consolidated financial statements as of September 30, 2026 are issued based on our expected cash needs, which raises substantial doubt about our ability to continue as a going concern.

As we continue to pursue our business plan, we expect to finance our operations through potential public or private equity offerings, including future draw-downs under our Share Purchase Agreement (Note 6), proceeds from debt financing (Note 8), and additional debt financings or other capital sources, including current or potential future collaborations, licenses and other similar arrangements. However, there can be no assurance that any additional financing or strategic arrangements will be available to us on acceptable terms, if at all. If events or circumstances occur such that we are not able to obtain additional funding, it may be necessary to significantly reduce our scope of operations to reduce the current rate of spending through actions such as reductions in staff and the need to delay, limit, reduce or terminate product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves, which could have a material adverse effect on our business, results of operations or financial condition.

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Summary of Significant Accounting Policies

Use of Estimates

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, fair value estimates of warrants and other derivative liabilities, 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.

Concentration of Credit Risk

Financial instruments which potentially subject us to significant concentration of credit risk consist of cash and cash equivalents. We maintain deposits in federally insured financial institutions in excess of federally insured limits. We have not experienced any losses in such accounts, and management believes that we are not exposed to significant credit risk due to the nature of the instruments held in the depository institutions. As of September 30, 2026 and December 31, 2025, cash and cash equivalents exceeded Federal Deposit Insurance Corporation insured limits by $9.9 million and $4.5 million, respectively.

A significant portion of our accounts payable and accrued expenses are concentrated with one vendor namely Davis Polk & Wardwell LLP, a related party (Note 13), having a balance of approximately $1.1 million which represents approximately 47% of our accounts payable and accrued expenses as of September 30, 2026. The amount owed to the same vendor as of December 31, 2025 was approximately $1.5 million, which represents approximately 51% of our accounts payable and accrued expenses.

Cash and Cash Equivalents

Cash and cash equivalents are considered to be highly liquid investments with maturities of three months or less at the date of purchase. Cash equivalents primarily represent funds invested in readily available money market securities. As of September 30, 2026 and December 31, 2025, we had cash and cash equivalent balances deposited at multiple major financial institutions.

Intangible Assets

We capitalize costs associated with obtaining patents and trademarks. Patents are amortized over the estimated useful life of 20 years and trademark costs are indefinitely lived.

Deferred Financing Cost

Deferred financing cost consists of costs we incur directly in connection with obtaining debt financing that has not yet been drawn, such as costs allocated to undrawn tranches under a loan facility. These costs may be paid in cash or settled by issuing equity instruments. Costs settled in equity instruments are measured at their fair value on the date they are issued.

Deferred financing cost is recorded as an asset on the condensed consolidated balance sheets and amortized over the draw window to which it relates. When we draw on the related debt, any unamortized balance of deferred financing cost related to that debt is reclassified as a debt discount, presented as a direct deduction from the carrying amount of the debt. If we determine that the related debt will not be drawn, or the availability period expires, the remaining unamortized balance of deferred financing cost is expensed in the condensed consolidated statements of operations in that period.

Deferred Offering Cost

Deferred offering cost consists of costs we incur directly in connection with securing access to future equity financing, such as equity line facilities. These costs may be paid in cash or settled by issuing equity instruments, such as common stock or warrants. Costs settled in equity instruments are measured at their fair value on the date they are issued.

Deferred offering cost is recorded as an asset on the condensed consolidated balance sheets. It is amortized on a straight-line basis over the term of the related agreement. The amortization is recognized as expense in the condensed consolidated statements of operations.

Derivatives

Derivative financial instruments, including the liability instrument, are recorded at fair value on the condensed consolidated balance sheets. Liabilities classified as derivatives are remeasured at their fair value at each reporting date, with decreases or increases in the fair value recognized as other gain or loss, respectively, within the condensed consolidated statements of operations. Equity classified derivatives are not remeasured at each reporting date. If a liability classified derivative becomes eligible for reclassification to an equity classified derivative, any gains or losses recognized up to the point of reclassification are not reversed.

Debt

We initially record debt at the principal amount borrowed, net of any debt discount. Debt discount includes the following; (i) fees paid to the lender, (ii) third-party costs directly attributable to obtaining the debt including legal fees, (iii) the fair value of equity instruments issued to the lender, (iv) the fair value of any embedded features that are separated from the debt and accounted for as derivative liabilities, and (v) the present value of any final payment fee due at maturity or prepayment.

When a loan facility is funded in more than one tranche, costs that relate to the whole facility are allocated between the funded and unfunded tranches. The portion allocated to an unfunded tranche is accounted for under our deferred financing cost policy.

Debt discount is presented as a direct deduction from the carrying amount of the related debt on the condensed consolidated balance sheets. It is amortized to interest expense using the effective interest rate method over the term of the debt. Any final payment fee is accreted to interest expense over the same period.

Research and development expenses are composed of both internal and external costs. Internal costs include salaries and employment-related expenses of scientific personnel and direct project costs. External research and development expenses consist primarily of costs associated with clinical and non-clinical development programs and are charged to expenses as incurred.

We also record accruals for estimated ongoing clinical trial costs. Clinical trial costs primarily represent costs incurred by contract research organizations and clinical trial sites. We analyze the progress of the clinical trial, including levels of subject enrollment, invoices received and contracted costs when evaluating the adequacy of accrued liabilities. In accruing for these services, we estimate the time period over which services will be performed and the level of effort to be expended in each period. These estimates are based on communications with the third-party service providers and our estimates of accrued expenses based on information available at each balance sheet date. If the actual timing of the performance of services or the level of effort varies from the estimate, we will adjust the accrual accordingly.

Stock-Based Compensation

We account for stock-based compensation for both employees and non-employees in accordance with Accounting Standards Codification (“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.

Segment Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker (“CODM”) in making decisions regarding resource allocation and assessing performance. We manage our operations as asingle reportable segment for the purposes of assessing performance and making operating decisions.

Fair Value of Financial Instruments

Financial assets and liabilities recorded at fair value on a recurring basis in the balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A framework is used for measuring fair value utilizing a three-tier hierarchy or levels that prioritizes the inputs to valuation techniques used to measure fair value.

These levels, in order of the highest to lowest priority, are described below:

Level 1— Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.

Level 2— Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3— Prices or valuation techniques that require inputs that are both significant to the fair value measurement and are unobservable (i.e., supported by little or no market activity).

Comprehensive Loss

We have no components of other comprehensive loss other than net loss, and accordingly, our comprehensive loss is equivalent to our net loss for the periods presented.

Related Parties

Transactions between related parties are considered to be related party transactions even though they may not be given accounting recognition. ASC 850,* Related Party Disclosures*, requires that transactions with related parties that would make a difference in decision-making shall be disclosed so that users of the financial statements can evaluate their significance.

Net Loss Per Share

We calculate basic and diluted net loss per share attributable to common stockholders based on the weighted average number of shares of common stock outstanding during the period. Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock and common stock equivalents outstanding for the period. Common stock equivalents are only included when their effect is dilutive.

Our potentially dilutive securities, including outstanding stock options under our equity incentive plans and warrants with exercise prices that are not nominal, have been excluded from the computation of diluted net loss per share as their inclusion would be anti-dilutive. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to our net loss position.

Emerging Growth Company Status

We qualify as an emerging growth company (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not an EGC. We may take advantage of these exemptions until we are no longer an EGC under Section 107 of the JOBS Act, and we have elected to use the extended transition period for complying with new or revised accounting standards. As a result of this election, our condensed consolidated financial statements may not be comparable to companies that comply with public company FASB standards’ effective dates.

Recently Issued But Not Yet Adopted Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”). The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We elected to avail ourselves of this extended transition period and, as a result, we will not be required to adopt certain new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

In November 2024, the FASB issued Accounting Standards Update (“ASU”) No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”). The guidance in ASU 2024-03 aims to improve disclosures around an entity’s expenses. Upon adoption, companies will be required to disclose in the notes to the financial statements a disaggregation of certain expense categories included within the expense captions on the face of the income statement. In January 2025, the FASB issued ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures, which amends the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating this standard’s potential impact on our disclosures.

Although there were several other new accounting pronouncements issued or proposed by the FASB, we do not believe any of those accounting pronouncements have had or will have a material impact on our financial position or operating results.

3. FAIR VALUE MEASUREMENTS

The carrying amounts reflected in the condensed consolidated balance sheets for prepaid expenses, accounts payable and accrued expenses and other liabilities are shown at their historical values which approximate their fair values. The debt is being reflected in the condensed consolidated balance sheets at amortized cost.

The following tables present the financial instruments carried at fair value on a recurring basis:

Cash equivalents primarily represent funds invested in readily available money market securities.

As at September 30, 2026, derivative liability instrument includes the contingent put option liability under the Share Purchase Agreement (Note 6) as well as contingent conversion option under the Avenue Capital Loan Agreement (Note 8). The fair value of the contingent put option liability was $0.14 million and fair value of contingent conversion option was $0.43 million as at September 30, 2026. The warrant liability was derecognized upon the cashless exercise of the warrant on August 13, 2026 (Note 6).

As at December 31, 2025, derivative liability instrument includes contingent warrant liability and the contingent put option liability under the Share Purchase Agreement (Note 6). The fair value of the warrant liability was $2.8 million and the fair value of the contingent put option liability was $0.2 million at December 31, 2025.

The following table summarizes the activity related to Level 3 financial liabilities for the nine months ended September 30, 2026:

The following table summarizes the gains recognized in the condensed consolidated statements of operations related to derivative instruments that were outstanding as of September 30, 2026 and were not designated as hedging instruments for the three and nine months ended September 30, 2026 and 2025:

The following table summarizes the losses recognized in the condensed consolidated statements of operations related to the warrant derivative instrument that was exercised on August 13, 2026 and was not designated as a hedging instrument for the three and nine months ended September 30, 2026 and 2025:

As at August 12, 2026 (one day prior to warrant exercise date, i.e. August 13, 2026) and December 31, 2025, the warrant liability value for the warrant issued to investor under the Share Purchase Agreement (Note 6) was determined using a Monte Carlo simulation. Inputs used in the Monte Carlo simulation are as below:

As at September 30, 2026 and December 31, 2025, the put contract derivative liability was remeasured using a Black-Scholes option valuation model, followed by a series of contractual adjustments. Inputs used in Black-Scholes model were as follows:

As at September 30, 2026, the conversion derivative liability value for the conversion option under the Avenue Capital Loan Agreement (Note 8) was determined using a Monte Carlo simulation. Inputs used in the Monte Carlo simulation are as below:

4. DEFERRED OFFERING AND FINANCING COSTS

Under the Share Purchase Agreement (Note 6), we issued a warrant on Direct Listing date to the investor granting the right to purchase 1,192,207 shares of our common stock representing 4% of the total equity interest, as of that date, at an exercise price of $5.03. The warrant was recognized at fair value on the issuance date as a derivative liability with offsetting debit to deferred offering cost asset recorded on the condensed consolidated balance sheets. The deferred offering cost relating to this warrant is being amortized on straight-line basis over the term of the agreement with related expense being recorded in condensed consolidated statement of operations.

Under the Share Purchase Agreement (Note 6), the investor was also entitled to a 1% commitment fee of the Aggregate Limit (defined in Note 6), either in cash or common stock, which was settled through issuance of 161,905 shares of our common stock. The commitment fee was initially recorded, on Direct Listing date, on the condensed consolidated balance sheets as a deferred offering cost which is being amortized on straight-line basis over the term of the agreement with related expense being recorded in condensed consolidated statement of operations.

Upon entering the Loan and Security Agreement (Note 8), we recorded the portion of debt issuance costs allocated to Tranche 2 as deferred financing cost asset on the condensed consolidated balance sheets. The deferred financing cost relating to Tranche 2 will be amortized on a straight-line basis in the condensed consolidated statement of operations over the Tranche 2 draw-down period (i.e. from September 2026 through March 2027) as long as the Tranche 2 draw remains probable. If Tranche 2 is drawn, any unamortized balance of deferred financing cost outstanding as of the draw date will be reclassified as debt discount. If it is no longer probable that Tranche 2 will be drawn, any unamortized balance will be expensed immediately.

The following table summarizes the activity related to deferred offering cost for the nine months ended September 30, 2026:

The following table summarizes the activity related to deferred financing cost for the nine months ended September 30, 2026:

As of September 30, 2026, the expected future amortization of deferred offering and financing costs assuming that we do not draw the Tranche 2 under the Loan and Security Agreement is as follows:

5. CAPITALIZATION AND EQUITY TRANSACTIONS

Common Stock

Our amended and restated certificate of incorporation authorizes the issuance of up to 500,000,000 shares of common stock with a par value of $0.0001 per share. As at September 30, 2026 and December 31, 2025,30,532,704 and 29,445,183 shares of our common stock were issued and outstanding, respectively.

Preferred Stock

Our amended and restated certificate of incorporation authorizes the issuance of up to 100,000,000 shares of preferred stock with par value of $0.0001 per share. As at September 30, 2026 and December 31, 2025, no shares of our preferred stock were issued and outstanding.

2024 Crowdfunding Offering

In May 2024, we launched a crowdfunding campaign pursuant to Regulation Crowdfunding with StartEngine as our registered platform. We were offering common stock to accredited and non-accredited investors with an offering price of $4.59. The offering closed on March 15, 2025 and from January 1, 2025 through the closing date on March 15, 2025, we sold 215,972 shares of common stock for net proceeds of approximately $0.8 million.

2025 Regulation A+ Offering

On March 31, 2025, the SEC qualified our Regulation A+ offering with StartEngine as our registered platform. We were offering common stock to accredited and non-accredited investors with an offering price of $5.63. The offering closed on June 27, 2025, and we sold 83,610 shares of our common stock and received net proceeds of $0.3 million, net of offering costs and platform fees.

2025 Regulation D Offering

In March 2025, our Board authorized a private offering pursuant to Regulation D. We were offering common stock to accredited investors with a minimum investment of $100,000, an offering price of $4.59 per share and certain warrants with an exercise price of $0.005. The offering closed on June 27, 2025, and we issued 596,478 shares of our common stock and received gross proceeds of approximately $2.7 million. All the investors in this offering simultaneously exercised the warrants, and we issued 178,990 shares of our common stock upon exercise of warrants for cash proceeds of approximately $900.

On October 23, 2025, we issued 25,252 shares of common stock, in aggregate, to a director and an officer at the closing market price of $4.95 per share on October 23, 2025. The gross proceeds from the issuance of shares were approximately $0.1 million.

2026 Regulation D Offering

In August 2026, we issued an aggregate of 165,000 shares of our common stock to accredited investors in a private placement pursuant to Regulation D at a price of $10.00 per share, for gross proceeds of approximately $1.65 million. We also granted certain registration rights to investors with respect to shares acquired under this offering.

Shares Issued in Exchange for Advisory Services

In March 2025, we engaged Clear Street LLC (“Clear Street”) as an exclusive financial advisor for certain services, including advisory services in connection with the Direct Listing. As part of the engagement, we issued 54,466 shares of our common stock to Clear Street for advisory services amounting to approximately $0.25 million. The related expense was recorded as period cost in general and administrative expenses.

Warrant Grants, Exercises, Expirations and Modifications

In 2017, we issued warrants to a certain investor to purchase 47,620 shares of our common stock at an exercise price of $0.005. Upon conversion to a Corporation in 2018, the warrants were amended to purchase 47,620 shares of common stock with all other terms and conditions being unchanged. In 2025, the warrants were exercised and converted into 47,620 shares of our common stock.

In 2022, we issued warrants to a certain party, as success fee for issuance and conversion of convertible notes, to purchase 40,124 shares of our common stock at an exercise price of $3.25.

The fair value of the warrants issued in 2017 and 2022 was estimated on the grant date using the Black-Scholes option pricing model, and the related expense was recognized on the grant date as the warrants did not have a vesting period.

We evaluated the terms of the warrants issued in 2017 and 2022 and determined that they should be classified as equity instruments within additional paid-in capital.

Upon the Direct Listing, we issued warrants to certain investor under the Share Purchase Agreement (Note 6) to purchase 1,192,207 shares of our common stock at an exercise price of $5.03. On August 13, 2026, the investor exercised the warrant in full, on a cashless basis, and we issued 579,664 shares of our common stock (Note 6).

As of September 30, 2026, the following common stock warrants were outstanding:

The weighted-average exercise price of all outstanding warrants as of September 30, 2026 is $3.25. All outstanding warrants are exercisable by the holder by payment in cash of the stated exercise price per share or through cashless exercise.

6. SHARE PURCHASE AGREEMENT

In December 2024, we entered into a share purchase agreement with a certain investor for the sale of our common stock of up to $75.0 million (the “Aggregate Limit”) contingent upon us achieving a public listing of our common stock. The agreement allows us to issue common stock to the investor, within three(3) years from public listing, at 90% of the average daily closing price during the draw-down pricing period and the draw-down amount not exceeding 300% of the average trading volume of 15 days immediately preceding the draw-down exercise date. The agreement allows us to put restrictions on stock sales volume by investor, prohibitions on short selling by investor and us being able to set a threshold ‘floor’ price (“Threshold Price”) during draw-down periods.

In April 2025, the Share Purchase Agreement was amended to increase the Aggregate Limit from $75.0 million to $85.0 million with the additional $10.0 million available only via a day-one draw-down (the “Initial Draw-Down”). Moreover, the draw-down pricing period for Initial Draw-Down was reduced to 10 trading days with the investor having an option to shorten with six(6) hours’ notice to us. The Initial Draw-Down amount with reduced draw-down pricing period was capped at $10.0 million.

In August 2025, the Share Purchase Agreement was further amended to make changes to the registration rights of the investor and the timing of such registrations. This amendment did not materially change any key terms including the Aggregate Limit, the commitment fee, underlying warrants issuable under the agreement and the draw-down pricing and timing including the initial draw-down. In September 2025, we also entered into a side letter with the investor that limits the Threshold Price to be $1.00 per share that we can set during any draw-down period.

On the date of Direct Listing, we issued a warrant to the investor granting the right to purchase 1,192,207 shares of our common stock representing 4% of our fully diluted outstanding shares at an exercise price of $5.03. The warrant was recognized at fair value on the issuance date as a derivative liability using a Monte Carlo valuation method with offsetting debit to deferred offering cost asset recorded on the condensed consolidated balance sheets. The fair value of the warrant was remeasured at August 12, 2026 (prior to the warrant exercise date) and December 31, 2025 using the same valuation methodology, and the resulting gain or loss is recognized in condensed consolidated statement of operations.

The investor was also entitled to a 1% commitment fee of the Aggregate Limit, either in cash or common stock, which was settled through issuance of 161,905 shares of our common stock. The commitment fee was initially recorded on the condensed consolidated balance sheets as a deferred offering cost with subsequent amortization, on a straight-line basis over the term of the agreement with amortization expense recognized in condensed consolidated statement of operations.

On October 31, 2025, we issued the Initial Draw-Down Notice for 1,235,200 shares of common stock to investor and the draw-down period for the initial draw-down was extended from 10 trading days to 30 trading days by mutual agreement between us and the investor. The investor advanced us $3.0 million. On the closing date of the initial draw-down notice, i.e., December 15, 2025, the investor accepted 1,235,200 shares at a price of approximately $3.29 per share resulting in gross proceeds of $4.1 million, of which $3.0 million was received as an advance on October 31, 2025 and $1.1 million was recorded as subscription receivable as of December 31, 2025 which was received in March 2026.

On August 13, 2026, the investor exercised the warrant to purchase 1,192,207 shares of our common stock in full on a cashless basis and we issued 579,664 shares of our common stock. The warrant derivative liability was remeasured to its fair value of $8.9 million prior to exercise date and the related loss was recognized in statement of operations. The warrant derivative liability was derecognized, with a corresponding increase to common stock and additional paid-in capital.

7. STOCK-BASED COMPENSATION

Stock Option Plans

2018 Stock Option Plan

In 2018, the Board authorized the Stock Option Plan (which may be referred to as the “2018 Plan”).2,000,000 shares of our common stock were originally reserved to be issued under the Plan and in July 2024, the Board amended the 2018 Plan to decrease the shares reserved to 1,508,934. As at September 30, 2026, no options were available for grant under the 2018 Plan and 1,508,934 shares of our common stock were outstanding under the 2018 Plan subject to option exercise by the holders.

2024 Stock Option Plan

In 2024, the Board authorized a new Stock Option Plan (which may be referred to as the “2024 Plan”).891,066 shares of our common stock were reserved to be issued under the 2024 Plan, which provides for the grant of shares of stock options to employees, non-employee directors, and non-employee consultants. As of September 30, 2026,697,816 options to purchase shares of our common stock were available for grant and 193,250 shares of our common stock were outstanding under the 2024 Plan subject to option exercise by the holders and vesting restrictions.

2025 Omnibus Incentive Plan

In September 2025, the Board authorized the 2025 Omnibus Plan (which may be referred to as the “2025 Plan”).3,000,000 shares of our common stock were reserved to be issued under the 2025 Plan, which provides for the grant of shares of stock options, restricted stock units and other equity-based instruments to employees, directors, non-employee directors and consultants among others. As of September 30, 2026,1,781,134 shares of our common stock were available for grant and 1,156,984 shares of our common stock were outstanding under the 2025 Plan subject to option exercise by the holders and vesting restrictions.

The following table summarizes option activity for the nine months ended September 30, 2026:

We use the Black-Scholes option pricing model with the following assumptions to estimate the stock-based compensation expense:

The risk-free interest rate assumption for options granted is based upon observed interest rates on the United States government securities appropriate for the expected term of our employee stock options.

The dividend yield assumption for options granted is based on our history and expectation of dividend payouts. We have never declared or paid any cash dividends on our common stock, and we do not anticipate paying any cash dividends in the foreseeable future.

Due to lack of historical exercise data, the expected holding period for employee stock options is calculated using the simplified method which takes into consideration the contractual life and vesting terms of the options.

We determined the expected volatility assumption for options granted using the historical volatility of comparable public companies’ stock. We will continue to monitor peer companies and other relevant factors used to measure expected volatility for future stock option grants, until such time that our common stock has enough market history to use historical volatility. Forfeitures are recognized as incurred.

Cumulative grant date fair value of all options granted during the nine months ended September 30, 2026 and 2025 is approximately $3.5 million and $0.4 million, respectively.

As of September 30, 2026, the unrecognized stock-based compensation expense was $3.8 million, which is expected to be recognized over a period of approximately 3.92 years.

Restricted Stock Units

RSUs granted to directors under the plans generally vest over one year and as of September 30, 2026 and December 31, 2025, all RSU grants were to directors. We recognize the stock-based compensation expense relating to RSUs over the requisite service period of the individual grantees, which generally equals the vesting period.

The following table summarizes RSU activity during the nine months ended September 30, 2026:

Cumulative grant date fair value of RSUs granted during the nine months ended September 30, 2026 and 2025 is approximately $0.1 million and $0, respectively.

As of September 30, 2026, unrecognized stock-based compensation expense related to RSUs was approximately $0.03 million. The unrecognized stock-based compensation expense is estimated to be recognized over a period of 0.3 years from September 30, 2026. No RSUs vested during the nine months ended September 30, 2026 and 2025.

Stock-Based Compensation Expense

Stock-based compensation expense was classified in the condensed consolidated statements of operations as follows:

8. DEBT

Avenue Capital Loan Agreement

On March 23, 2026 (the “Closing Date”), we entered into a Loan and Security Agreement (the “Loan and Security Agreement”) and a Supplement to the Loan and Security Agreement (together with the Loan and Security Agreement, the “Loan Agreement”), with Avenue Venture Opportunities Fund II, L.P., as administrative agent and collateral agent (the “Agent”) and Avenue Venture Opportunities Fund II, L.P., as lender (the “Lender”, together with Agent, “Avenue Capital”).

The Loan Agreement makes available to us term loans in an aggregate principal amount of up to $25.0 million with (i) $7.0 million funded on March 24, 2026 (“Tranche 1”), (ii) up to $8.0 million to be made available to us between September 1, 2026 and March 31, 2027, subject to (a) dosing of first patients in a Phase 3 trial of Onychomycosis, (b) raising $10.0 million via equity financing and (c) positive data in our ongoing Phase 2 clinical study of GX-03 for moderate-severe atopic dermatitis (“Tranche 2”). As of September 30, 2026, the conditions to draw Tranche 2 had not been met. We concluded that it is probable that the conditions will be met and Tranche 2 will be drawn before the availability period ends on March 31, 2027. The Lender may make additional term loans of up to an additional $10.0 million (the “Discretionary Tranche 3” and collectively with Tranche 1, and Tranche 2, the “Loans”), to be funded between January 1, 2027 and June 30, 2028, subject to, among other things, (i) that we have drawn the full amount of Tranche 2, (ii) our achievement of a certain clinical milestone and (iii) the mutual written agreement between us and the Lender (upon the Lender’s investment committee approval).

The Loans bear interest at an annual rate equal to the greater of (x) the sum of 5.50% plus the prime rate as reported in The Wall Street Journal and (y)12.25%. The Loans are secured by a lien upon and security interest in all of our assets, including intellectual property, subject to agreed exceptions. The loan matures on 42 nd month anniversary (September 2029) of the Closing Date (the “Maturity Date”). The Loan Agreement does not contain any minimum cash requirement or other financial covenants.

We will make interest-only payments on the Loans until the 15-month anniversary (June 2027) of the Closing Date, subject to (i) a 9-month (to March 2028) extension, so long as Tranche 2 has been funded and (ii) an additional 6-month (to September 2028) extension if we achieve the Discretionary Tranche 3 milestone. The Loan principal is repayable in equal monthly installments from the end of the interest-only period to the Maturity Date.

We may, at our option at any time, prepay the Loans in their entirety by paying the then-outstanding principal balance and all accrued and unpaid interest on the Loans, subject to a prepayment fee equal to (i)3.0% of the principal amount outstanding if the prepayment occurs on or prior to the first anniversary following the Closing Date, (ii)2.0% of the principal amount outstanding if the prepayment occurs after the first anniversary following the Closing Date, but on or prior to the second anniversary following the Closing Date, and (iii)1.0% of the principal amount outstanding if the prepayment occurs after the second anniversary following the Closing Date. We will pay a final payment of 3.75% (“Final Payment Fee”) of the amount funded and outstanding on the earlier of (x) the Maturity Date and (y) the date that we prepay all of the outstanding principal amount of the Loans in full.

On the Closing Date, we paid the Lender a commitment fee of $0.15 million. On the Closing Date, we also issued 342,857 shares of our common stock at no cost to the Lender, which represent 8.00% of the Tranche 1 and Tranche 2 amounts. The price per share was determined using the 5-day volume-weighted average price calculated on the day prior to the Closing Date. If we draw the Discretionary Tranche 3, we will issue further shares to the Lender at no cost equal to 8.00% of the $10.0 million (amount of the Discretionary Tranche 3) at the 5-day volume-weighted average price calculated on the day prior to funding of Discretionary Tranche 3.

The Loan Agreement contains customary representations, warranties and covenants, including covenants by us limiting, among other things, additional indebtedness, liens, guaranties, mergers and consolidations, substantial asset sales, investments and loans, certain corporate changes, transactions with affiliates and fundamental changes. The Loan Agreement provides for events of default customary for term loans of this type, including but not limited to non-payment, breaches or defaults in the performance of covenants, insolvency, bankruptcy and the occurrence of a material adverse effect on the Company. After the occurrence of an event of default, the Agent may (i) accelerate payment of all obligations, impose an increased rate of interest, and terminate the Lender’s commitments under the Loan Agreement and (ii) exercise any other right or remedy provided by contract or applicable law including a foreclosure on our assets.

Pursuant to the Loan Agreement, the Lender will have the right to convert initially up to $2.0 million of the outstanding principal of the Loans (the “Conversion Option”) at a price per share equal to 80% of the trading price on the date of conversion, subject to certain terms and conditions, including beneficial ownership limitations. Upon draw-down of Tranche 2, the Conversion Option will be increased by $1.0 million. The Conversion Option shall terminate on the loan payoff. On the Closing Date, the conversion option was initially accounted for as an embedded derivative liability with subsequent changes in fair value recognized in statement of operations. Refer to Note 3 for more details on fair-value methodology adopted and the inputs used.

In addition, subject to applicable law, the Lender may participate in certain equity financing transactions in an aggregate amount of up to $1.0 million on the same terms, conditions and pricing offered by us to other investors participating in such financing transaction (such right, the “Participation Right”). The Participation Right terminates upon the earlier of the Maturity Date and the repayment in full of all of the obligations under the Loan Agreement.

As of the Closing Date, we recorded the following discounts:

We amortize debt discount as interest expense using the effective interest rate method through the maturity date. We accrete the Final Payment Fee as interest expense using the interest method through the maturity date. The effective interest rate on Tranche 1, including amortization of the debt discount and accretion of the Final Payment Fee, was approximately 22.56%. Interest expense using the effective interest rate method for the three and nine months ended September 30, 2026 was $0.3 million and $0.7 million, respectively. Contractual interest expense for the three and nine months ended September 30, 2026 was $0.2 million and $0.5 million, respectively.

As of September 30, 2026, the debt, without giving consideration to the extendable interest-only period, consists of the following:

As of September 30, 2026, without giving consideration to the extendable interest-only period, principal payments of debt including the final payment fee are as follows:

9. INCOME TAXES

We had no current or deferred federal and state income tax expense or benefit for the periods presented because we generated net operating losses, and currently we do not believe it is more likely than not that the net operating losses will be realized and as a result, we have recorded full valuation allowance for the periods presented.

10. NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS

Basic and diluted net loss per share was calculated as follows:

Our potentially dilutive securities, which include or have included outstanding stock options, certain warrants and conversion option under the Avenue Capital Loan Agreement have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of shares of common stock outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.

We excluded the following from the computation of diluted net loss per share attributable to common stockholders because including them would have had an anti-dilutive effect:

11. COMMITMENTS, CONTINGENCIES, GUARANTEES AND INDEMNIFICATIONS

Contractual Commitments

We enter into contracts in the normal course of business with contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”), academic institutions and other third parties for preclinical and clinical research studies, testing and manufacturing services. These contracts generally do not contain minimum purchase commitments and are cancellable by us upon prior written notice, although purchase orders for preclinical materials are generally non-cancellable or have cancellation penalties. Payments due upon cancellation consist primarily of payments for services provided or expenses incurred, including non-cancellable obligations from our service providers, up to the date of cancellation or upon the completion of a manufacturing run.

Litigation and Claims

From time to time, we may be party to litigation, arbitration, claims or other legal proceedings in the course of our business. The outcome of any such legal proceedings, regardless of the merits, is inherently uncertain. In addition, litigation and related matters are costly and may divert the attention of our management and other resources that would otherwise be engaged in other activities. If we were unable to prevail in any such legal proceedings, our business, results of operations, liquidity, and financial condition could be adversely affected.

Indemnification Obligations

We entered into indemnification agreements with our officers and directors that require us to indemnify such individuals for certain events or occurrences while each such officer or director is, or was, serving at our request in such capacity. The maximum potential future payments we could be required to make is, in many cases, unlimited. We have directors’ and officers’ liability insurance coverage that limits our exposure and enables us to recover a portion of any future amounts to be paid.

12. SEGMENT REPORTING

Our CODM is our Chief Executive Officer. The CODM uses net loss, as reported on our condensed consolidated statements of operations, in evaluating performance and determining how to allocate resources. The CODM does not review assets in evaluating the results and therefore, such information is not presented.

The following table provides the segment expenses and income (loss):

Other segment income (expense) includes total other income (expense), net on the condensed consolidated statements of operations.

13. RELATED PARTY TRANSACTIONS

In March 2025, we engaged Davis Polk & Wardwell LLP (“Davis Polk”) to provide legal advisory services in connection with the Direct Listing. On September 30, 2025, Mr. Arthur Golden, a senior counsel at Davis Polk, joined our Board of Directors, establishing a related-party relationship between the Company and Davis Polk.

During the nine months ended September 30, 2026 and 2025, the Company incurred legal expenses of approximately $0.1 million and $1.2 million, respectively, which were recognized in general and administrative expense in the statements of operations. During the nine months ended September 30, 2026 and 2025, we made payments to Davis Polk of $0.5 million and $0, respectively. As of September 30, 2026 and December 31, 2025, amounts payable to Davis Polk for legal services were approximately $1.1 million and $1.5 million, respectively.

In August 2026, we were offering our common stock under Regulation D at $10 per share. Mr. Joshua Burnam, brother of our CEO and therefore a related party, purchased 8,500 shares at $10 per share resulting in gross proceeds of $85,000.

In September 2026, we engaged PJT Partners (“PJT”), a related party due to Martin Dewhurst, our director, being a senior advisor at PJT. The engagement with PJT provides them with a right to advise us on any strategic transactions, including a change-of-control transaction with fees to be negotiated in good faith. PJT is also entitled to a 5.00% fee on gross proceeds in an equity transaction if PJT is engaged by us as sole-placement agent and $50,000 maximum reimbursable expenses. During the nine months ended September 30, 2026 and as of that date, PJT was not engaged as sole-placement agent andno expenses or fees were incurred under this arrangement.

14. SUBSEQUENT EVENTS

We have evaluated subsequent events through issuance and have identified the following material events and transactions that occurred:

On October 29, 2026, the Company issued a Draw-down Notice to the investor under the Share Purchase Agreement. The draw-down period for the draw-down is 15 trading days and we have put 272,642 shares to the investor under the draw-down with a threshold price of $10.00 per share. The investor advanced us $2.7 million for the shares and the final amount and number of shares will be determined at the end of draw-down period.