Dermata Therapeutics, Inc.

Current report

We believe the skincare market, from a cosmetic, and over-the-counter (“OTC”), and Rx perspective, has seen a substantial shift towards consumers first relying upon multifaceted cosmetics and OTC products that simplify routines. Consumer preferences are changing to favor natural products that do more for their skin. There appears to be a resurgence of interest in traditional remedies to help with skin renewal and general cosmetic appearance. With consumers searching for multifunctional products to simplify their routines while valuing brand loyalty and sustainable practices. We believe there remains a gap in the skincare market for in-office level treatments that are available for home use and believe we have a product to fill this void. We believe that if we can provide consumers with a unique topical skincare product, we have an opportunity to capture a large segment of consumers seeking to simplify their skincare routine without needing to schedule an in-office visit. While this is a major shift in strategy for our company, we believe pursuing the commercial sale of unique cosmetic skincare products is the best path forward to meet our mission of providing consumers with efficacious and safe skincare treatment options.

Current report

We view this shift in consumer preferences as a significant benefit for our strategic repositioning. We have gained substantial clinical knowledge of various dermatology diseases and skin conditions. We plan to leverage this knowledge to create a whole product line of skincare treatments that consumers can access directly for each of their skincare needs. While our background is in clinical products, we plan to leverage the unique attributes of our hero ingredient,Spongilla lacustris, to develop skincare treatments. We plan to launch our first cosmetic product, the Foundational Treatment, in the middle of 2026. In the future, we plan to offer additional products that target specific needs of consumers. For example, for consumers who have more sensitive skin, we may plan to commercialize a milder version of our Foundational Treatment that could be used more often.

Current report

Our core products, like our Foundational Treatment, will utilize our Bioneedle, which is 100%Spongilla lacustris powder, to provide a once weekly skin renewal routine that is simple addition to skincare routines. This once weekly routine will contain our Bioneedle which will be combined with a fluidizing agent for easy application. Our Bioneedle is derived from a wildly grown freshwater sponge,Spongilla lacustrisorSpongilla, which is processed into a fine, purified powder and packaged with no additives.Spongillais a unique freshwater sponge that only grows in commercial quantities in select regions of the world, which gives our Bioneedle its distinctive properties. The combination of a proprietary harvesting protocol, developed by our exclusive supplier, and the post-harvest processing procedures, produces a cosmetic ingredient that we believe optimizes the Bioneedle for a unique and simple skin renewal routine, unlike most skincare on the market.

Current report

In addition to the DTC channel for our products, we believe there is a market for our technology to aid in the intradermal delivery of macromolecules for various aesthetic conditions. Typically, for facial aesthetics, botulinum toxins are injected into facial muscles to reduce forehead, lateral canthal, and glabella deep lines. However, this is limited to the use of intradermal delivery of botulinum toxin for a variety of skin diseases and conditions. Botox is currently the only approved botulinum toxin for the treatment of axillary hyperhidrosis via intradermal injections. While effective, intradermal injections, including 10-15 per axilla, of Botox can be painful for patients and very time consuming for dermatologists. Therefore, we believe developing a less painful, less time-consuming topical delivery of botulinum toxin into the dermis for various aesthetic and medical skin diseases and conditions, would provide physicians with an attractive alternative to intradermal injections of botulinum toxins.

Current report

We have taken steps to secure inventory ofSpongilla raw material in advance of the planned launch of our Tome skincare products. We believe we have sufficient quantities of processedSpongilla raw material inventory on hand to support the anticipated mid-2026 commercial launch and initial commercialization activities thereafter, based on our current operating plans, expected production volumes and internal assumptions. We continue to evaluate additional inventory procurement opportunities and manufacturing planning activities to support future commercial demand.

Current report

In January 2026, we raised approximately $2.0 million of net proceeds from the sale of 824,283 shares of our Common Stock under our At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright &Co., LLC (“HCW”), as sales agent. We paid HCW a fixed commission rate of 3% of approximately $67,000 and other transactional fees. We have no capacity to sell shares pursuant to the ATM Agreement remaining.

Current report

Critical Accounting Estimates

Current report

Management considers an accounting estimate to be critical if it requires a significant level of estimation uncertainty, and changes in the estimate are reasonably likely to have a material effect on our financial condition or results of operations. There are items within our financial statements that require estimation but are not deemed critical, as defined above. For a detailed discussion of our significant accounting policies and related judgments, see Note 2 - Summary of Significant Accounting Policies to our unaudited financial statements contained within this Form 10-Q.

Current report

Selling, general and administrative expenses increased by approximately $0.5 million from $1.1 million for the three months ended March 31, 2025, to $1.5 million for the three months ended March 31, 2026. The increase in selling, general and administrative expenses was primarily attributable to $0.2 million of marketing expenses incurred, $0.2 million of increased audit fees and $0.1 million of increased legal fees. We anticipate that selling, general and administrative expenses will continue to increase related to marketing, branding, advertising, and personnel expenses as we continue to prepare for our first product launches and sales in mid-2026.

Current report

Other Income and Expenses

Current report

We earn interest income via overnight deposits on our cash and cash equivalents. Interest income was $78,676 for the first quarter of 2026 compared to $36,216 for the first quarter of 2025. The increase of $42,460 in interest income resulted from increased cash balances due to financing proceeds related to the December 2025 PIPE and recent ATM sales during the fourth quarter of 2025 and first quarter of 2026, respectively, as well as interest received related to the Employee Retention Tax Credit payments received during the first quarter of 2026.

Current report

Cash used in operations of approximately $2.5 million for the three months ended March 31, 2026, was the result of the net loss of $1.8 million as well as increases in prepaid and other current assets of $0.1 million and increased inventory of $0.1 million, as well as decreases in accounts payable and accrued and other current liabilities of approximately $0.5 million.

Current report

Cash provided by financing activities of $1.9 million for the three months ended March 31, 2026, was the result of approximately $2.0 million in net proceeds from ATM sales during the first quarter of 2026, partially offset by approximately $0.1 million of payments for issuance-related costs from the December 2025 PIPE financing.

Current report

Historically, our principal sources of cash have included proceeds from the issuance of equity securities. Our principal uses of cash have been for operations, and we expect that the principal uses of cash in the future will be for continuing operations, including various marketing expenditures, including, but not limited to, branding, paid media, marketing use studies, advertising, software subscriptions, and launch events and tradeshows, as well as non-marketing expenses including funding of research and development, and general working capital requirements. We expect that as marketing expenses continue to grow, we may need to raise additional capital to sustain operations.

Current report

Future Capital Requirements

Current report

We plan to focus our efforts in the near term on the development and commercialization of our Tome skincare product, our Foundational Treatment. We anticipate we will continue to incur net losses for the foreseeable future as we complete the launch of our Tome Foundational Treatment and ramp up marketing activities. We also plan to invest in developing additional skincare products to add to our portfolio that complement our Foundational Treatment. In addition, we plan to seek opportunities to identify, acquire or in license and develop additional skincare candidates, potentially expand commercial capabilities, and expand our corporate infrastructure. We may not be able to complete the development and initiate commercialization of these programs without raising additional capital.

Current report

Additional funds may not be available on a timely basis, on favorable terms, or at all, and such funds, if raised, may not be sufficient to enable us to continue to implement our long-term business strategy. If we are unable to raise sufficient additional capital, we may need to substantially curtail our planned operations and the pursuit of our growth strategy.

Current report

If we raise additional funds by issuing equity securities, our stockholders will experience dilution. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences that are not favorable to us or our stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies, future revenue streams or products or to grant licenses on terms that may not be favorable to us.

Current report

We cannot be certain that additional funding will be available on acceptable terms, or at all. In addition, future debt financing into which we enter may impose upon us covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, redeem our stock, make certain investments and engage in certain merger, consolidation or asset sale transactions.

Current report

If we are unable to raise additional capital when required or on acceptable terms, we may be required to significantly delay, scale back or discontinue the development and commercialization of one or more of our products, restrict our operations or obtain funds by entering into agreements on unattractive terms, which would likely have a material adverse effect on our business, stock price and our relationships with third parties with whom we have business relationships, at least until additional funding is obtained. If we do not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that would likely result in our stockholders losing some or all of their investment in us. In addition, our ability to achieve profitability or to respond to competitive pressures would be significantly limited.

Current report

Going Concern

Current report

Since inception, we have devoted substantially all of our resources to research and development activities. In September 2025, we made a strategic pivot from research and developing prescription products to becoming a science-driven leader in dermatologic solutions, anticipating our first DTC product launch from our Tome skincare brand in mid-2026. We have not generated revenues and have not yet achieved profitable operations, nor have we ever generated positive cash flow from operations. There is no assurance that profitable operations, if achieved, could be sustained on a continuing basis. In addition, we operate in an environment of rapid technological change, and we are largely dependent on the services of our employees and consultants. Further, our future operations are dependent on the success of our efforts to raise additional capital. These uncertainties raise substantial doubt about our ability to continue as a going concern for 12 months after the issuance date of our financial statements. The accompanying financial statements have been prepared on a going concern basis. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the company to continue as a going concern, which contemplates the continuation of operations, realization of assets and liquidation of liabilities in the ordinary course of business. We incurred a net loss of $1.8 million for the quarter ended March 31, 2026, and had an accumulated deficit of $75.1 million as of March 31, 2026. We anticipate incurring additional losses until such time, if ever, we can generate sufficient revenue from our products currently in development, or products we are in the process commercializing. Our primary source of capital has been the issuance of equity and equity-linked securities.

Current report

On April 5, 2012, the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for an “emerging growth company”. As an “emerging growth company,” we elected not to take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision not to take advantage of the extended transition period is irrevocable.

Current report

Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we are not required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation. These exemptions will apply until the fifth anniversary of the completion of our initial public offering, which would be August 2026, or until we no longer meet the requirements for being an “emerging growth company,” whichever occurs first.

Previous report

We believe the dermatology market, from both an OTC and Rx perspective, has seen a substantial shift over the last few years, with an increasing trend of consumers first relying on OTC treatments for common dermatological diseases and conditions such as acne vulgaris (or “acne”), psoriasis vulgaris (or “psoriasis”), and acne rosacea (or “rosacea”), among others. Common dermatology issues, like acne with over 50 million patients in the U.S., are well known by patients with extensive publicly available information and thus patients are more willing to treat these diseases with OTC offerings prior to seeing a dermatologist. Over 70% of patients with acne first choose to try OTC products and wait at least one year before scheduling a visit with a dermatologist. Additionally, due to the lower price point for OTC products, a desire for self-administration, difficulty getting appointments with dermatologists, and enhanced convenience, many consumers are first relying on OTC products to fill their treatment needs. We believe that we can apply the clinical knowledge we’ve gained over the last ten years to design products that incorporate OTC pharmaceutical ingredients with ourSpongilla technology to offer patients easy access to affordable and effective OTC treatments for acne, psoriasis, seborrheic dermatitis and other skin diseases and conditions. While this is a major shift in strategy for our company, we believe it is the best path forward to meet our mission of providing patients with efficacious and safe treatment options.

Previous report

We are currently working with a branding agency to build a new brand identity for our OTC treatments, that represents our core values of providing patients skin care products that are natural but scientifically proven to work. We believe this new brand identity will bridge the gap between Rx therapies and OTC pharmaceutical products, allowing patients to take control of their skin care needs and feel confident about the treatment outcomes of the products we plan to offer. As part of this new brand identity, we will be developing visual and verbal identities that bring to life the core essence of the new brand, which incorporates scientifically backed technology that targets the underlying causes of skin diseases with a consumer-friendly approach. We want customers to experience the efficacy and safety we saw in our previous clinical studies and to feel proud of their skin after using our products. We plan to develop and distribute a variety of OTC products that are backed by science but are easily accessible by patients who are more comfortable treating their skin problems independently with readily available OTC therapies. Our core values will remain unchanged during this strategic shift as we strive to provide patients with affordable, safe, and effective treatment options, but now they can directly order our products rather than having to see a physician to be prescribed treatment. We believe patients are seeking greater flexibility and freedom in treating their skin as a majority of patients first turn to OTC products before seeing a dermatologist. With the continued regulatory oversight of the OTC marketplace, patients should maintain confidence in the OTC therapies they can purchase without a prescription.

Previous report

We view this shift in consumer preferences as a significant benefit for the research we have completed to date. Over the past several years we have gained substantial knowledge of various dermatology diseases and what seems to work in treating these diseases. We plan to leverage this knowledge in creating a whole product line of skin care treatments that patients can access directly. We plan to launch our first product in the middle of 2026 which will consist of a once-weekly, topical acne kit that can be used by patients with mild, moderate, or severe acne. We have gained tremendous understanding of ourSpongillatechnology over the past 8 years and deeply understand the benefits of it being combined with OTC monograph active ingredients to topically treat a variety of dermatological conditions. OurSpongilla technology is derived from a naturally grown freshwater sponge,Spongilla lacustrisorSpongilla, which is processed into a fine, purified powder and mixed with a fluidizing agent immediately prior to application by the patient.Spongillais a unique freshwater sponge that only grows in commercial quantities in select regions of the world and under specific environmental conditions, all of which give ourSpongilla technology its distinctive anti-microbial, anti-inflammatory, and mechanical properties. The combination of these environmental conditions, the proprietary harvesting protocols developed with our exclusive supplier, and our post-harvest processing procedures produce an ingredient that optimizes the mechanical components as well as the organic components, while eliminating any harmful bacteria that could be found in a freshwater sponge. We believe these unique components used in tandem with an OTC monograph active ingredient could produce a superior OTC product candidate unlike anything currently on the market. We plan for our product candidates to have multiple mechanisms of action for the treatment of skin diseases and conditions.

Previous report

Prior to our strategic switch to develop and distribute OTC pharmaceutical products, our U.S. Food and Drug Administration (“FDA”) investigational new drug applicant, XYNGARI™, was intended to utilize ourSpongilla technology as a stand-alone product for the once weekly treatment of a variety of skin diseases, with our initial focus being the treatment of moderate to severe acne. In March 2025, we announced that our XYNGARI™ Phase 3SpongillaTreatment ofAcneResearch (“STAR-1”) trial topline data met all co-primary endpoints at week 12. XYNGARI™ demonstrated highly statistically significant difference compared with placebo for all primary endpoints after 12 weeks of once weekly treatments. XYNGARI™ patients saw a rapid and sustained therapeutics treatment effect in absolute reduction in inflammatory lesion counts with a -11.4 lesion reduction at week four, -14.7 lesion reduction at week 8, and -16.8 lesion reduction at week 12 compared to -8.6, -10.9, and -13.1 lesion reduction for placebo at weeks 4, 8, and 12, respectively. XYNGARI™ patients also saw a rapid and sustained therapeutics treatment effect in absolute reduction in noninflammatory lesion counts with a -12.4 lesion reduction at week four, -15 lesions reduction at week 8, and -17.3 lesion reduction at week 12 compared to -8.8, -10.4, and -12.4 lesion reduction for placebo at weeks 4, 8, and 12, respectively. Lastly, we observed a sustained therapeutics treatment effect as measured in the investigator’s global assessment (IGA) of acne scale. IGA is measured on a 5-point scale (0-4), with 4 being severe, 3 being moderate, 2 being mild, 1 being almost clear and 0 being clear. To be considered a responder, patients had to achieve a score of 0 (clear) or 1 (almost clear). There were 11.9% of XYNGARI™ patients that were considered a responder at week four, 21.6% of XYNGARI™ patients being considered a responder at week 8, and 29.4% of XYNGARI™ patients being considered a responder at week 12 compared to 6.2%, 8.0%, and 15.2% of placebo patients being considered a responder at weeks 4, 8, and 12, respectively. In fact, approximately 80% of the XYNGARI™ patients had at least a 1-grade change in their acne at the end of the study. The Phase 3 STAR-1 trial was double-blind, randomized, placebo controlled, and enrolled 520 patients with moderate-to-severe acne, age 9 years or older across sites in the United States and Latin America. The co-primary endpoints included absolute reduction in inflammatory and noninflammatory lesion counts and the improvement in investigators global assessment (“IGA”) of acne. Patients were treated once a week for 12 weeks with either XYNGARI™ or placebo and were evaluated monthly. While we saw positive results from the STAR-1 study, after evaluating the prescription dermatology market and regulatory hurdles for approval, we made the strategic decision to withdraw our investigational new drug application (“IND”) for XYNGARI™ for the treatment of acne. We believe this str…

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Previous report

We are currently finalizing the components and container closure for our initial acne kit, as well as completing the brand identity, with an expected launch in the middle of 2026. The acne kit will be a topical product applied once weekly by patients at home or in a dermatology or esthetician’s office. The product will utilize one active ingredient from FDA’s OTC acne monograph, which consist of OTC drugs that are generally recognized by FDA as safe and effective, in predefined doses, for specific therapeutic categories. These OTC active ingredients can be used alone or in combination with other ingredients and marketed as a treatment for various skin diseases or conditions, like acne. For our initial acne kit we plan on incorporating salicylic acid as the active ingredient in combination with our uniqueSpongilla technology to distribute a novel acne treatment kit we believe is unlike anything currently on the market. Based on years of testing we have learned that our Spongilla technology has a unique combination of mechanical components and chemical components, that provide unique benefits against various skin conditions. The mechanical components of theSpongillapowder consist of many microscopic siliceous, needle-like spicules that, when massaged into the skin, penetrate the stratum corneum (the skin’s outermost protective layer) and create microchannels into the dermis where pro-inflammatory cytokines and bacteria reside. We believe that the penetration of the spicules also leads to the opening of microchannels, which allow oxygen to enter pilosebaceous glands, helping to kill C.acnes, which grow in an anaerobic (without oxygen) environment (C. acnesare the bacteria that cause inflammatory lesions in acne patients). The spicules also cause turnover of the top layer of dead skin, thereby increasing collagen production resulting in skin rejuvenation. Additionally, we believe the newly created microchannels provide a conduit forSpongilla powder’s naturally occurring chemical compounds to be delivered to the dermis and pilosebaceous glands, helping to kill theC. acnesand reduce inflammation. In addition to anti-microbial compounds, theSpongilla powder also appears to have anti-inflammatory chemical compounds, as demonstrated duringin vitro experiments, that inhibit inflammation through the reduction ofC.acnesstimulated IL-8 production and by inhibiting IL-17A and IL-17F expression in human cell lines. Also, duringin vitro studies ofSpongilla powder’s organic compounds, we observed the inhibition of the lipogenesis of sebocytes, which may translate to a reduction in sebum (an oily and waxy substance produced by the human body’s sebaceous glands) production and the oiliness of the skin in patients. We believe the combination of an FDA approved OTC active ingredient with the multiple biological and mechanical effects of ourSpongilla technology could be important factors in treating multiple inflammatory skin diseases.

Previous report

On January 17, 2025, we entered into a Clinical Trial Collaboration Agreement (the “Collaboration Agreement”) with Revance Therapeutics, Inc. (“Revance”) where we intended to conduct a Phase 2a clinical trial to evaluate the topical application of XYNGARI™ followed by the topical application of DAXXIFY® for the treatment of primary axillary hyperhidrosis. In light of our recent strategic shift to develop and distribute OTC pharmaceutical products, we plan to continue to discuss future opportunities for this collaboration with Revance. At this time, the initiation of the Phase 2a clinical trial has been placed on hold. We still believe there is a potential to utilize ourSpongilla technology for the topical delivery of botulinum toxin, but with our strategic decision to withdraw the XYNGARI™ IND, we are currently evaluating the regulatory and commercial opportunities for this program.

Previous report

While the initiation of the Phase 2a clinical study is on hold, we continue to evaluate alternative ways to leverage ourSpongilla technology as a novel platform to enhance the topical delivery of large-molecules, like botulinum toxin, as a needle-free alternative to conventional intradermal injection of large molecules for medical and aesthetic skin conditions. Typically, for facial aesthetics, botulinum toxins are injected into facial muscles to reduce forehead, lateral canthal, and glabella deep lines. While currently only approved for the treatment of axillary hyperhidrosis, intradermal injections of botulinum toxin primarily affect neuromodulatory at the level of cutaneous nerves, sweat glands, and superficial muscle fibers, not via deep muscular paralysis as with intramuscular injections. However, there have been many studies conducted with intradermal injections of botulinum toxin for various aesthetic and medical skin conditions, showing its broad potential application. This is because the mechanism of action of botulinum toxin in the dermis acts to block acetylcholine release from the presynaptic nerve terminals. The primary effects are 1) reduced cholinergic activity (eccrine glands reduce sweating, sebaceous glands reduce sebum production, arrector pili and superficial muscle fibers reduce fine wrinkling resulting in smoother skin), 2) modulation of sensory nerves leading to a reduction in neurogenic inflammation, itching, and erythema (redness), and 3) indirect skin-tightening due to mild reduction of superficial muscle tone and possible microvascular effects. Intradermal injections of botulinum toxin have also shown cosmetic effects, including skin smoothing through reducing pore size, reducing fine lines, and a mild lifting effect from dermal tightening and reducing oil and sweat reduction. However, due to the difficulty, pain, and time-consuming nature of intradermal injections, there still remains few approved or widely practiced treatment options.

Previous report

We believe ourSpongilla technology can increase the number of intradermal uses for botulinum toxin by leveraging the unique microstructure of ourSpongillatechnology, to create microchannels into the dermis, enabling improved dermal penetration of botulinum toxins (i.e. Botox®). Using our microstructures to create microchannels into the dermis avoids the need to give multiple intradermal injections, which can be painful for patients and very time consuming for the dermatologist or esthetician. Additionally, our technology can allow for broad coverage of larger surface areas of the skin, which we believe will provide a better field effect of the botulinum toxin

Previous report

We have a limited operating history. Since our inception, our operations have focused on developing XYNGARI™ and DMT410, our topical botulinum toxin program, organizing and staffing our company, raising capital, establishing our supply chain and manufacturing processes, further characterizing the multiple mechanisms of action of ourSpongilla technology, building an intellectual property portfolio, and conducting non-clinical and clinical trials. We do not have any product candidates approved for marketing and have not generated any revenue from product sales. We have funded our operations primarily through the sale of our equity securities and debt securities. Since inception, we have raised an aggregate of approximately $77.5 million of gross proceeds from the sale of our debt and equity securities.

Previous report

We have not generated any revenue to date and have incurred significant operating losses. Our net losses were $5.7 million and $9.1 million for the nine months ended September 30, 2025, and 2024, respectively. As of September 30, 2025, we had an accumulated deficit of $71.4 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase significantly in connection with our future activities, as we:

Previous report

We will need additional financing to support our operations. We may seek to fund our operations through public or private equity or debt financings or other sources. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital when needed or on favorable terms would have a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenues to achieve profitability, and we may never do so.

Previous report

OTC Pharmaceutical Requirements

Previous report

We plan to develop and distribute OTC pharmaceutical products, such as topical acne products, that are subject to FDA and foreign regulation. Under the U.S. OTC monograph system, OTC pharmaceutical products that meet established conditions are generally recognized as safe and effective and do not require the submission and approval of a new drug application. The FDA OTC monographs include well-known ingredients and specify requirements for permitted indications, required warnings and precautions, allowable combinations of ingredients and dosage levels. Pharmaceutical products marketed under the OTC monograph system must conform to specific quality, formula, and labeling requirements. Following the passage of the CARES Act, FDA is updating and working to finalize current monographs.

Previous report

All facilities where OTC pharmaceutical products are manufactured, tested, packaged, stored or distributed must comply with current Good Manufacturing Practices (“cGMP”) regulations and/or regulations promulgated by competent authorities in the countries where the facilities are located. All of our pharmaceutical products are manufactured, tested, packaged, stored and distributed according to cGMP regulations. The FDA performs periodic audits to ensure that our facilities remain in compliance with all appropriate regulations. The failure of a facility to be in compliance may lead to a breach of representations made to customers or to regulatory action against us related to the products made in that facility, such as seizure, injunction or recall. Serious product quality concerns could also result in governmental actions against us that, among other things, could result in the suspension of production or distribution of our products, product seizures, loss of certain licenses or other governmental penalties, and could have a material adverse effect on our financial condition or operating results. We are required to report serious adverse events associated with the use of our OTC pharmaceutical products marketed in the U.S. and other countries where such products are sold.

Previous report

We cannot predict whether new legislation regulating our activities will be enacted or what effect any legislation would have on our business.

Previous report

OTC Pharmaceutical Pre- and Post-market Regulation

Previous report

Before and after an OTC pharmaceutical product is commercialized, numerous regulatory requirements apply, including:

Previous report

On July 15, 2025, we held our annual meeting of stockholders at which time our stockholders approved the adoption of an amendment to our Amended and Restated Certificate of Incorporation, as amended, to effect a reverse stock split of its issued and outstanding shares of Common Stock, at a specific ratio, ranging from one-for-two to one-for-thirty, with the exact ratio determined by our board of directors without further approval or authorization of its stockholders. On August 1, 2025, we effected the reverse split of our shares of Common Stock at a ratio of 1-for-10, as approved by our board of directors, with no adjustment to par value. All issued and outstanding shares of Common Stock and per share amounts contained in our financial statements have been retroactively adjusted to reflect this reverse stock split for all periods presented.

Previous report

On September 10, 2025, we announced a strategic pivot to shift our focus to developing and distributing OTC pharmaceutical products for the dermatology market. We plan to focus on developing and launching multiple products that can be sold directly to consumers to treat their various skin diseases and conditions. We believe this strategic shift, through leveraging the FDA’s OTC monograph pathway, could accelerate our ability to launch a commercial dermatology product, reduce our regulatory burden, and give us access to a broader consumer market. We are currently working with a branding agency to develop the commercial launch strategy while also beginning the manufacturing process for our initial product launch, which we expect to occur in the middle of 2026.

Previous report

ATM Agreement

Previous report

In June 2024, we entered into the ATM Agreement with H.C. Wainwright & Co., LLC , as Sales Agent, pursuant to which we may offer and sell, from time to time through Sales Agent, shares of our Common Stock for aggregate proceeds of up to $1,662,761 (upon the terms and subject to the conditions and limitations set forth in the ATM Agreement). In 2024, we sold 55,001 shares of Common Stock under the ATM Agreement, for net proceeds of $1.4 million after deducting $0.2 million of compensation to Sales Agent and other administration fees. During the nine months ended September 30, 2025, we sold no shares of Common Stock under the ATM Agreement.

Previous report

On November 7, 2025, we filed a prospectus supplement, pursuant to which we may offer and sell, from time to time through Sales Agent, shares of our Common Stock for aggregate proceeds of an additional $1,792,315 (upon the terms and subject to the conditions and limitations set forth in the ATM Agreement). As of the date of this filing, we have not sold any additional shares under the ATM Agreement.

Previous report

Critical Accounting Policies and Use of Estimates

Previous report

While our significant accounting policies are more fully discussed in Note 2 - Summary of Significant Accounting Policies to our unaudited financial statements contained within this Form 10-Q, we believe that the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of our financial statements.

Previous report

To date, our research and development expenses have been related to the clinical development and manufacturing costs of our product candidates. Research and development expenses include salaries and related expenses for personnel, including stock-based compensation, as well as external party costs for clinical, nonclinical, and manufacturing of our product candidates. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received. Research and development estimates will be subject to change as additional information becomes available.

Previous report

In March 2025, we announced topline results from our Phase 3 STAR-1 clinical trial and we completed the trial in the second quarter of 2025. We expect that research and development costs will decrease in fiscal year 2026 as we will no longer conduct FDA-regulated clinical trials under IND for NDA, and the cost of manufacturing OTC products is significantly less than manufacturing FDA-regulated products.

Previous report

Selling, General and Administrative Costs

Previous report

Selling, general and administrative expenses consist primarily of salaries, benefits, stock-based compensation for personnel in executive, finance, business development, marketing and other corporate administrative functions. Selling, general and administrative expenses also include pre-commercial launch activities prior to product launch, including marketing expenses, legal fees incurred relating to corporate and patent matters, professional fees incurred for accounting, auditing, tax and administrative consulting services, and insurance costs.

Previous report

We expect our selling, general and administrative expenses to increase in 2026. The increase in expenses is due to our planned launch of our first product candidate in mid-2026, including the development and commencement of our marketing campaigns and initiatives, the hiring of marketing personnel and engagement of consultants to support full commercialization activities, and the addition of programs to support commercialization activities.

Previous report

We expect to continue to incur audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums, board of director fees, investor relations costs associated with operating as a public company, patent costs and defense, and general and administrative personnel.

Previous report

We perform an assessment of warrants upon issuance to determine their proper classification in the financial statements based upon the warrant’s specific terms, in accordance with the authoritative guidance provided in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480,Distinguishing Liabilities from Equity (“ASC 480”), and ASC 815-40,Derivatives and Hedging – Contracts in Entity’s Own Equity (“ASC 815-40”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480 and whether the warrants meet all of the requirements for equity classification under ASC 815-40, including whether the warrants are indexed in our own Common Stock and whether the warrant holders could potentially require cash settlement of the warrants.

Previous report

For issued or modified warrants that meet all the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be liability-classified and recorded at their initial fair value on the date of issuance and remeasured at fair value at each balance sheet date thereafter. We have performed an assessment of all warrants issued and modified and determined that our warrants are equity classified.

Previous report

Research and Development Expenses

Previous report

Selling, general and administrative expenses increased by $0.4 million from $0.8 million for the three months ended September 30, 2024, to $1.3 million for the three months ended September 30, 2025. The increase in selling, general and administrative expense was the result of $0.5 million of increased marketing expenses, as we are preparing for our first product launch in mid-2026, partially offset by $0.1 million of decreased audit fees.

Previous report

Nine Months Ended September 30, 2025, and 2024

Previous report

Research and Development Expenses

Previous report

Research and development expenses decreased by $3.6 million from $6.0 million for the nine months ended September 30, 2024, to $2.4 million for the nine months ended September 30, 2025. The decrease in research and development expenses resulted from approximately $3.6 million of decreased clinical expenses from the XYNGARI™ STAR-1 acne study, which completed enrollment during the fourth quarter of 2024.

Previous report

Selling, General and Administrative Expenses

Previous report

Selling, general and administrative expenses increased by approximately $0.2 million from $3.3 million for the nine months ended September 30, 2024, to approximately $3.5 million for the nine months ended September 30, 2025. The increase in selling, general and administrative expense was the result of $0.5 million of increased marketing expenses partially offset by $0.3 million of decreased audit fees. We expect marketing expenses to increase as we are preparing for our first product launch in mid-2026.

Previous report

Cash used in operations of $8.2 million for the nine months ended September 30, 2024, was the result of the net loss of $9.1 million, offset by increases in non-cash stock-based compensation of $0.6 million and increases in accrued expenses of $0.3 million.

Current report — wording carried from elsewhere

We anticipate that we will continue to incur net losses for at least the next twelve months from the date of this filing. While we plan to launch our first DTC product in mid-2026, it is uncertain when we will generate operating income to sustain operations, if ever. These factors raise substantial doubt about our ability to continue as a going concern for the one-year period following the date that these financial statements were issued.

Previous report — wording carried elsewhere

The following table summarizes our results of operations for the periods presented: