Processa Pharmaceuticals, Inc.

Previous wording

This Quarterly Report on Form 10-Q contains “forward-looking statements” that reflect, when made, the Company’s expectations or beliefs concerning future events that involve risks and uncertainties. Forward-looking statements frequently are identified by the words “believe,” “anticipate,” “expect,” “estimate,” “intend,” “project,” “will be,” “will continue,” “will likely result,” or other similar words and phrases. Similarly, statements herein that describe the Company’s objectives, plans or goals also are forward-looking statements. Actual results could differ materially from those projected, implied or anticipated by the Company’s forward-looking statements. Some of the factors that could cause actual results to differ include: our limited cash and history of losses; our ability to achieve profitability; our ability to obtain adequate financing to fund our business operations in the future; our ability to secure required FDA or other governmental approvals for our product candidates and the breadth of the indication sought; our ability to successfully execute our cryptocurrency treasury strategy, fluctuations in the market price of Digital Assets that we may acquire, the risks of holding Digital Assets on our balance sheet, our limited operating history in the cryptocurrency business, risks associated with the current or future regulation of Digital Assets; the impact of competitive or alternative products, technologies and pricing; whether we are successful in developing and commercializing our technology, including through licensing; the adequacy of protections afforded to us and/or our licensors by the anticipated patents that we own or license and the cost to us of maintaining, enforcing and defending those patents; our and our licensors’ ability to protect non-patented intellectual property rights; our exposure to and ability to defend third-party claims and challenges to our and our licensors’ anticipated patents and other intellectual property rights; our ability to remain listed on the Nasdaq Capital Market; and our ability to continue as a going concern. For a discussion of these and all other known risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” herein and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, which is available on the SEC’s website at www.sec.gov. All forward-looking statements are qualified in their entirety by this cautionary statement, and the Company undertakes no obligation to revise or update this Quarterly Report on Form 10-Q to reflect events or circumstances after the date hereof.

Current wording

This Quarterly Report on Form 10-Q contains “forward-looking statements” that reflect, when made, the Company’s expectations or beliefs concerning future events that involve risks and uncertainties. Forward-looking statements frequently are identified by the words “believe,” “anticipate,” “expect,” “estimate,” “intend,” “project,” “will be,” “will continue,” “will likely result,” or other similar words and phrases. Similarly, statements herein that describe the Company’s objectives, plans or goals also are forward-looking statements. Actual results could differ materially from those projected, implied or anticipated by the Company’s forward-looking statements. Some of the factors that could cause actual results to differ include: our limited cash and history of losses; our ability to achieve profitability; our ability to obtain adequate financing to fund our business operations in the future; our ability to secure required FDA or other governmental approvals for our product candidates and the breadth of the indication sought; the impact of competitive or alternative products, technologies and pricing; whether we are successful in developing and commercializing our technology, including through licensing; the adequacy of protections afforded to us and/or our licensors by the anticipated patents that we own or license and the cost to us of maintaining, enforcing and defending those patents; our and our licensors’ ability to protect non-patented intellectual property rights; our exposure to and ability to defend third-party claims and challenges to our and our licensors’ anticipated patents and other intellectual property rights; our ability to remain listed on the Nasdaq Capital Market; and our ability to continue as a going concern. For a discussion of these and all other known risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” herein and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, which is available on the SEC’s website at www.sec.gov. All forward-looking statements are qualified in their entirety by this cautionary statement, and the Company undertakes no obligation to revise or update this Quarterly Report on Form 10-Q to reflect events or circumstances after the date hereof.

Previous wording

Processa Pharmaceuticals, Inc. (“Processa,” “we” or the “Company”) is a publicly listed clinical-stage biopharmaceutical company. We are developing a pipeline of Next Generation Cancer therapy (“NGC”) small molecules, one of which is currently in a Phase 2 trial, while the other is in pre-clinical development. Our risk-mitigated strategy is to identify existing cancer therapies where the mechanism of action is well understood and that are cornerstones of current treatment regimens, but are highly toxic, with side effects that are often treatment limiting. We devise technologies to change the way the body metabolizes them, or the way they are distributed within the body, to improve the therapeutic effect and reduce toxicity. We then efficiently develop our pipeline of Next Generation Cancer therapies utilizing our proprietary Regulatory Science Approach, which we believe will further increase the likelihood of regulatory approval. Since the underlying active metabolites of these drugs are already commonly used in cancer therapy, we believe that if our clinical trials are successful and are showing better efficacy and tolerability than the currently used drugs, the commercial adoption for our NGC therapies will be rapid and broad.

Current wording

We are a publicly listed clinical-stage biopharmaceutical company. We are developing a pipeline of Next Generation Cancer therapy (“NGC”) small molecules, one of which is currently in a Phase 2 trial, while the other is in pre-clinical development. Our risk-mitigated strategy is to identify existing cancer therapies where the mechanism of action is well understood and that are cornerstones of current treatment regimens, but are highly toxic, with side effects that are often treatment limiting. We devise technologies to change the way the body metabolizes them, or the way they are distributed within the body, to improve the therapeutic effect and reduce toxicity. We then efficiently develop our pipeline of Next Generation Cancer therapies utilizing our proprietary Regulatory Science Approach, which we believe will further increase the likelihood of regulatory approval. Since the underlying active metabolites of these drugs are already commonly used in cancer therapy, we believe that if our clinical trials are successful and are showing a better safety-efficacy profile than the currently used drugs, the commercial adoption for our NGC therapies will be rapid and broad.

Previous wording

Our oncology pipeline currently consists of NGC-Cap and NGC-Iri (also identified as PCS6422 and PCS11T, respectively) and two non-oncology drugs (PCS12852 and PCS499). We are exploring options for our non-oncology drugs, which may include out-licensing or partnership opportunities. The status of our drug pipeline is set forth below:

Current wording

Our oncology pipeline currently consists of NGC-Cap and NGC-Iri (also identified as PCS6422 and PCS11T, respectively) and two non-oncology drugs (PCS12852 and PCS499). We are exploring options for our non-oncology drugs, which may include out-licensing or partnership opportunities. The current status of our drug pipeline is set forth below:

Previous wording

We plan to use the net proceeds from both financings for continued research and development for NCG-Cap, and for working capital and general corporate purposes.

Current wording

On February 17, 2026 where we sold 86,956 shares of our common stock to an accredited investor in a private placement transaction for $200,000. On March 31, 2026, certain directors, officers, and employees purchased 17,796 shares of common stock for approximately $45,000. They also purchased 22,008 shares of common stock for approximately $62,000 during the month ended April 30, 2026. In April 2026, we also sold 50,330 shares of common stock under our ATM Offering for approximately $157,000 in net proceeds. We plan to use the net proceeds from these raises for continued research and development for NGC-Cap, and for working capital and general corporate purposes.

Previous wording

Comparison of the three and nine months ended September 30, 2025 and 2024

Current wording

Comparison of the three months ended March 31, 2026 and 2025

Previous wording

We estimate preclinical and clinical trial expenses based on the services performed, pursuant to contracts with research institutions and clinical research organizations that conduct and manage preclinical studies and clinical trials on our behalf. In accruing service fees, we estimate the period over which services will be performed and the level of patient enrollment and activity expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we will adjust the accrual accordingly. Payments made to third parties under these arrangements in advance of the receipt of the related services are recorded as prepaid expenses and expensed when the services are rendered.

Current wording

We estimate preclinical and clinical trial expenses based on the services performed, pursuant to contracts with research institutions and clinical research organizations that conduct and manage preclinical studies and clinical trials on our behalf. In accruing service fees, we estimate the time period over which services will be performed and the level of patient enrollment and activity expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we will adjust the accrual accordingly. Payments made to third parties under these arrangements in advance of the receipt of the related services are recorded as prepaid expenses and expensed when the services are rendered.

Previous wording

Our general and administrative expenses for the nine months ended September 30, 2025 increased by approximately $831,000 to $4.6 million from $3.8 million for the nine months ended September 30, 2024. This increase was due primarily to increases in salaries and other-payroll related costs of $396,000, primarily due to salary increases to our C-suite executives; an increase of $150,000 in investment management fees related to our recent cryptocurrency transaction; an increase in employee stock-based compensation of $305,000; and net increases in taxes and other miscellaneous office expenses of $31,000. The increases were offset by decreases in office expenses of $38,000; insurance expenses of $6,000; professional fees of $5,000; and travel expenses of $2,000. We received approximately $1,000 more in reimbursements from CorLyst during the nine months ended September 30, 2025 when compared to the same period in 2024.

Current wording

Our general and administrative expenses for the three months ended March 31, 2026 increased by approximately $264,000 to $1.5 million from $1.3 million for the three months ended March 31, 2025. This increase was due primarily to increases in professional fees of approximately $226,000; insurance expense of approximately $85,000; salaries and payroll-related expenses of $60,000; and travel-related expenses of approximately $33,000. The increases were offset by decreases in franchise tax expense of $35,000; office and other miscellaneous expenses of $26,000; rent expense of $22,000; and employee stock-based expenses of $70,000. We received approximately $13,000 less in reimbursements from CorLyst during the three months ended March 31, 2026 when compared to the same period in 2025.

Previous wording

We did not recognize any income tax benefit for the three or nine months ended September 30, 2025 or 2024.

Current wording

We did not recognize any income tax benefit for the three months ended March 31, 2026 or 2025.

Previous wording

The following table sets forth our sources and uses of cash and cash equivalents for the nine months ended September 30, 2025 and 2024:

Current wording

The following table sets forth our sources and uses of cash and cash equivalents for the three months ended March 31, 2026 and 2025:

Previous wording

As we continue our development of NGC-Cap and evaluate the other NGC drug in our portfolio, we anticipate our research and development efforts and ongoing general and administrative costs will continue to generate negative cash flows from operating activities for the foreseeable future. As we continue our clinical trials for NGC-Cap, we anticipate our clinical trial costs will increase when compared to prior periods since activities in 2024 were primarily related to the completion of our Phase 1B trial and setup of our Phase 2 trial for NGC-Cap.

Current wording

As we continue our development of NGC-Cap and evaluate the other NGC drugs in our portfolio, we anticipate our research and development efforts and ongoing general and administrative costs will continue to generate negative cash flows from operating activities for the foreseeable future. As we continue our Phase 2 clinical trial for NGC-Cap in 2026, we anticipate our clinical trial costs will increase when compared to prior periods since activities in 2025 were primarily related to the completion of our Phase 1B trial and setup of our Phase 2 trial for NGC-Cap.

Previous wording

We did not use cash in investing activities during the nine months ended September 30, 2025. During the nine months ended September 30, 2024, we used net cash in our investing activities of $3,244 to purchase property and equipment.

Current wording

We used $500,000 in investing activities to purchase additional digital assets during the three months ended March 31, 2026. We did not use any cash in investing activities during the same period in 2025.

Previous wording

During the nine months ended September 30, 2025, as described in Note 3, we received net proceeds of $12.9 million from sellinga cumulative 25,405,765 shares of common stock, pre-funded warrants to purchase up to 20,709,700 shares of common stock, accompanying Series A Warrants to purchase up to 8,050,672 shares of our common stock and Series B Warrants to purchase up to 4,025,336 shares of common stock in our January offering and common accompanying warrants to purchase up to 28,000,000 shares of common stock in our June offering. We also received $728,000 from the exercise of warrants to purchase 2,912,422 shares of common stock sold in our June offering. We used net cash in our financing activities of approximately $10,000 to pay income taxes owed on stock-based compensation, and $7,000 for payments owed under a financing lease obligation.

Current wording

During the three months ended March 31, 2025, we sold 41,239 shares of our common stock, pre-funded warrants to purchase up to 280,788 shares of our common stock, and accompanying Series A Warrants to purchase up to 322,027 shares of our common stock and Series B Warrants to purchase up to 161,014 shares of our common stock for net proceeds of $4.4 million. We also used cash classified as financing activities of $1,439 to pay income taxes owed on stock-based compensation, and $1,536 for payments owed under a financing lease obligation.

Previous wording

At September 30, 2025, we had cash and cash equivalents totaling $6.3 million. Based on our current business plans, we believe these funds, together with the $945,000 in gross proceeds we received subsequent to September 30, 2025 from the exercise of stock purchase warrants, will satisfy our capital needs into the first quarter of 2026. However, absent additional funding, our current cash and cash equivalents will not be sufficient to fund our planned operations for a period of one year or more after the date that these condensed consolidated financial statements were available to be issued based on the timing and amount of our projected net loss from continuing operations and the related amount of cash to be used in operating activities during that period of time. Our ability to execute our longer-term operating plans, including future preclinical studies and clinical trials for our portfolio of drugs depend on our ability to obtain additional funding from the sale of equity and/or debt securities, a strategic transaction or other funding transactions.

Current wording

At March 31, 2026, we had cash and cash equivalents totaling $1.7 million. Together with the $219,000 we raised in April 2026, we believe we will need to raise additional capital in the second quarter of 2026 based on our current business plans. However, absent additional funding, our current cash and cash equivalents will not be sufficient to fund our planned operations for a period of one year or more after the date that these condensed consolidated financial statements were available to be issued based on the timing and amount of our projected net loss from continuing operations and the related amount of cash to be used in operating activities during that period of time. Our ability to execute our longer-term operating plans, including future preclinical studies and clinical trials for our portfolio of drugs depend on our ability to obtain additional funding from the sale of equity and/or debt securities, a strategic transaction or other funding transactions.

Previous wording

We have incurred losses since inception, currently devoting substantially all our efforts toward research and development of our next generation cancer therapy drug product candidates, including conducting clinical trials and providing general and administrative support for these operations, and have an accumulated deficit of $97.4 million at September 30, 2025. During the nine months ended September 30, 2025, we generated a net loss of $10.2 million and used $8.5 million in net cash for operating activities from continuing operations. To date, none of our drug candidates have been approved for sale, and therefore we have not generated any product revenue and do not expect positive cash flow from operations in the foreseeable future. We will continue to be dependent upon equity and/or debt financing until we are able to generate positive cash flows fromour operations.

Current wording

We have incurred losses since inception, currently devoting substantially all our efforts toward research and development of our next generation chemotherapy drug product candidates, including conducting clinical trials and providing general and administrative support for these operations, and have an accumulated deficit of $104.2 million at March 31, 2026. During the three months ended March 31, 2026, we generated a net loss of $3.4 million and used $3.6 million in net cash for operating activities from continuing operations. To date, none of our drug candidates have been approved for sale, and therefore we have not generated any product revenue and do not expect positive cash flow from operations in the foreseeable future. We will continue to be dependent upon equity and/or debt financing until we are able to generate positive cash flows from its operations.

Previous wording

We plan to raise additional funds in the future through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements, but will only do so if the terms are acceptable to us. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of, or suspend our current or planned future clinical trial plans, or research and development programs. This may also cause us to not meet obligations contained in certain of our license agreements and put these assets at risk. To the extent that we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt or making capital expenditures. Subject to market conditions, we also expect to issue equity or debt securities or engage in other capital raising transactions with the objective of using the proceeds to purchase Digital Assets. We believe that strategic engagement with emerging financial technologies, including select Digital Assets with potential yield-generating capabilities, may offer returns than can contribute meaningfully to the funding of our clinical development programs. However, there can be no assurance that future funding will be available when needed.

Current wording

We plan to raise additional funds in the future through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements, but will only do so if the terms are acceptable to us. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of, or suspend our current or planned future clinical trial plans, or research and development programs. This may also cause us to not meet obligations contained in certain of our license agreements and put these assets at risk. To the extent that we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt or making capital expenditures. There can be no assurance that future funding will be available when needed.

Previous wording

Except as disclosed herein, there have been no changes in our critical accounting policies from those included in our most recent Annual Report on Form 10-K.

Current wording

There have been no changes in our critical accounting policies from those included in our most recent Annual Report on Form 10-K.