DRMA 10-K & 10-Q changes, risk factors and insider trading

Investing in our securities involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this report, including the consolidated financial statements, the notes thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this report before deciding whether to invest in our securities. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of or that we deem immaterial may also become important factors that adversely affect our business. If any of the following risks actually occur, our business, financial condition, results of operations and future prospects could be materially and adversely affected. In that event, the market price of our common stock and/or Warrants could decline, and you could lose part or all of your investment. These disclosures reflect our beliefs and opinions as to factors that could materially and adversely affect us and our securities in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future.

We are a clinicalpre-commercial stage pharmaceutical company with a limited operating history.

We are a clinical-stagepre-commercial biopharmaceuticalstage company with a limited operating history upon which you can evaluate our business and prospects. We musthave completenever sold clinicala studiescommercial product before and receivethere regulatoryis approvalno beforeguarantee commercialthat saleswe ofwill abe product can commence.successful. The likelihood of success of our business plan must be considered in light of the problems, substantial expenses, difficulties, complications and delays frequently encountered in connection with developing and expandingselling early-stageskincare businesses and the regulatoryproducts and competitive environment in which we plan to operate. Pharmaceutical product development is a highly speculative undertaking, involves a substantial degree of risk and is a capital-intensive business.

Accordingly, you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies inlaunching thetheir earlyfirst stagescommercial of development, especially early stage clinical pharmaceutical companies such as ours.product. Potential investors should carefully consider the risks and uncertainties that a company with a limited operating history will face. In particular, potential investors should consider that we cannot assure you that we will be able to, among other things:

We have never generated revenue from operations,operations areand unlikelymay tonot generate revenues for several months or years, andif ever. We are currently operating at a loss and expect our operating costs will continue to increase significantly as we incur costs relatedattempt to preclinical development, the clinical trials forlaunch our drugfirst candidatescommercial product and continue to operatingoperate as a public company. We expect to incur substantial expenses without corresponding revenues unless and until we are able to obtain regulatory approval and successfully commercialize any of our drug candidates. We may never be able to obtain regulatory approval for the marketing of our drug candidates in any indication in the United States or internationally.products. Even if we are able to commercialize our drug candidates,products, there can be no assurance that we will generate significant revenues or ever achieve profitability. We have incurred losses in each year since we commenced operations in December 2014. We incurred net losses of approximately $12.3$7.8 million and approximately $7.8$12.3 million for the years ended December 31, 2024, 2025, and 2023,2024, respectively. As of December 31, 2024,2025, we had an accumulated deficit of approximately $65.7$73.2 million. The size of our future net losses will depend, in part, on our future expenses and our ability to generate revenue, if any. Revenue from our current and potential future collaborations is uncertain because milestones or other contingent payments under our agreements may not be achieved or received.

As of December 31, 2024,2025, we had capital resources consisting of cash and cash equivalents of $3.2$7.5 million. We will continue to expend substantial cash resources for the foreseeable future for the clinical development of our product candidatesproducts and developmentcommercial launches of anyour other indications and product candidates we may choose to pursue.products. These expenditures will include costs associated with research and development, conducting preclinical studies and clinical trials, manufacturing and supply, as well as marketing and selling any products approved for sale. In particular, our Phase 3 clinical studies for our product candidates will require substantial funds to complete. Because the conduct and results of any clinical trial are highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our current and any future product candidates.products.

We will require additional capital to fund our operations, and if we fail to obtain necessary financing, we may not be able to complete the development and commercialization of our product candidates.products.

We believe that our existing cash, together with interest thereon, will be sufficient to fund our operations into the thirdfirst quarter of 2025. 2027. We have based these estimates, however, on assumptions that may prove to be wrong, and we could spend our available capital resources much faster than we currently expect or require more capital to fund our operations than we currently expect. OurWe currentlyestimate that our existing cash will cover the anticipated expenditures for the development of our product candidates, XYNGARI™ and DMT410,commercial exceedlaunch of our existingTome cash.Foundational WeTreatment, but willwe may need to raise additional capital to fund our operations and continue to support our planned development and commercialization activities.

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 or commercialization of one or more of our product candidates,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.

Furthermore, inflation can adversely affect us by increasing the costs of clinical trials, the researchdevelopment and developmentmarketing of our product candidates,products, as well as administration and other costs of doing business. We may experience increases in the prices of labor and other costs of doing business. In an inflationary environment, cost increases may outpace our expectations, causing us to use our cash and other liquid assets faster than forecasted. If this happens, we may need to raise additional capital to fund our operations, which may not be available in sufficient amounts or on reasonable terms, if at all, sooner than expected.

In addition, the global macroeconomic environment could be negatively affected by, among other things, public health emergencies, pandemics or epidemics, instability in global economic markets, increased U.S. trade tariffs and trade disputes with other countries and any resulting trade wars, instability in the global credit markets, supply chain weaknesses, instability in the geopolitical environment as a result of the withdrawal of the United Kingdom from the European Union, the Russianwar invasionbetween ofRussia and Ukraine, the ongoing conflicts in the Middle East, and other political tensions, and foreign governmental debt concerns. Such challenges have caused, and may continue to cause, uncertainty and instability in local economies and in global financial markets.

Our two product candidates, XYNGARI™ and DMT410, both incorporate our proprietary, multifaceted, Spongilla technology to topically treat a variety of dermatological conditions. Our Spongilla technologyBioneedle is derived from a naturallywildly grown freshwater sponge, Spongilla lacustris or Spongilla, which is processed into a fine, purified powder thatand is mixedpackaged with ano fluidizing agent immediately prior to application to form an easily applicable paste. additives. Spongilla is a unique freshwater sponge that only grows in commercial quantities in select regions of the world and under specific environmental conditions, all ofworld, which givegives itour Bioneedle its distinctive anti-microbial, anti-inflammatory,organic and mechanical properties. The combination of these environmental conditions, thea proprietary harvesting protocolsprotocol, developed withby our exclusive supplier, and ourthe post-harvest processing proceduresprocedures, produce aan pharmaceutical product candidateingredient that we believe optimizes the mechanical componentscomponents, which are silica microstructures also called spicules, as well as the chemicalorganic components of theSpongilla, spongewhile eliminating any harmful bacteria that could be found in many freshwater or marine sponges. Keeping our clinical roots in mind, we plan to createoffer aan productacne candidatesystem withthat multiplehas been mechanismsdermatologist of action for the treatment of inflammatory skin conditions and aesthetic applications.tested.

We have a limited operating history. Since our inception, our operations have focused on developing XYNGARI™ and DMT410, organizing and staffing our company, raising capital, establishing our supply chain and manufacturing processes, further characterizing the multiple mechanisms of action of our Spongilla technology,lacustris, building an intellectual property portfolio, and conducting non-clinical and clinical trials. We do not have any productcommercial candidates approved for marketingproducts 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 $68.8$82.0 million of gross proceeds from the sale of our debt and equity securities, including the securities sold in our initial public offering.

We have not generated any revenue to date and have incurred significant operating losses. Our net losses were $12.3$7.6 million and $7.8$12.3 million for forthe years ended December 31, 2024,2025, and 2023,2024, respectively, and as of December 31, 2024,2025, we had an accumulated deficit of $65.7$73.2 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 ongoing activities, as we:

The successful development and commercialization of our product candidatesproducts is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to completegenerate therevenue remainderfrom ofour the development of,products, or when, if ever, material net cash inflows may commence from our product candidates.products. This uncertainty is due to the numerous risks and uncertainties associated with thelaunching durationour first products including our ability to secure contracts with key vendors with favorable terms, if ever, and costour ofability clinicalto trials,build whichinventory varyto significantlysupport commercial oversales, theif life of a project as a result of many factors, including:any.

Our expenditures are subject to additional uncertainties, including the terms and timing of regulatoryexpenditures approvals,in designing, packaging and manufacturing our first products, and the expense of filing, prosecuting, defending, and enforcing any patent claims or other intellectual property rights. We may never succeed in achieving regulatory approval for our product candidates. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delay, or modify clinical trials of our product candidates. A change in the outcome of any of these variables with respect to the development of aour product candidateproducts could mean a significant change in the costs and timing associated with the development of thatour productproducts candidate. For example, ifor the FDAtiming or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in enrollment in anydiscontinuation of our clinicalproduct trials, we could be required to expend significant additional financial resources and time on the completion of clinical development. Product commercialization will take several years and millions of dollars in development costs.launch.

Selling, General and Administrative Expenses

GeneralSelling, general and administrative expenses consist principally of salaries and related costs for personnel in executiveexecutive, marketing, and administrative functions, travel expenses and recruiting expenses. Other general and administrative expenses include stock-based compensation expenses, marketing expenses, professional fees for legal, accounting and tax related services, insurance costs, as well as payments made to consultants. We expense all selling, general and administrative expenses as incurred.

We anticipate that our selling, general and administrative expenses will increase as a result of increased marketing and advertising expenses as we prepare to launch our first products, increased employee payroll, expanded infrastructure and highergreater consulting,consulting costs, legal and tax related services associated with maintaining compliance with stock exchange listing and SEC requirements, accounting and investor relations costs, and director and officer insurance premiums associated with being a public company.

Critical Accounting Policies and Significant Judgments and Estimates

We have based our management’s discussion and analysis of financial condition and results of operations on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimatesestimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments,judgments includingthat thoseare related to accrued research and development expenses and warrants. We base our estimatesbased on historical experience and on various other factorsassumptions that we believe to be appropriatereasonable under the circumstances. The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of expenses that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

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. While our significant accounting policies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following critical accounting policiesestimates are critical todescribe the process of makingmost significant judgments and estimates used in the preparation of our financial statements.

General Research and AdministrativeDevelopment Expenses

Since our inception, we have not generated any revenue or commercialized any products. As of December 31, 2024,2025, our cash and cash equivalents totaled $3.2$7.5 million, and we had an accumulated deficit of $65.7 $73.2 million. For the yearyears ended December 31, 2024,2025, and 2023,2024, we used cash in operations of approximately $11.1$7.8 million and $6.4$11.1 million, respectively.

Historically, our principal sources of cash have included proceeds from the issuance of equity and debt.securities. Our principal uses of cash have includedbeen cash used in operations (including clinical development of our product candidatesfor operations, and general and administrative expenses) and payments for license rights. Wewe expect that the principal uses of cash in the future will be for continuing operations, marketing and commercialization activities for skincare products, funding of research and development, and general working capital requirements. We expect that as research and development marketing expenses continue to grow for our Phase 3 development program,grow, we willmay need to raise additional capital to sustain operations and fund research and development activities, including our ongoing Phase 3 STAR-1 clinical study.operations.

In June 2024, we entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright &Co., LLC (“Wainwright”), as sales agent, pursuant to which we may offer and sell, from time to time through Wainwright, 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 the twelve months ended December 31, 2024, we sold 550,02455,001 shares of common stock under the ATM Agreement, for net proceeds of $1.4 million, after deducting $0.3 million of compensationexpenses, including approximately $126,000 paid to Wainwright,Wainwright auditors,as lawyers,sales and other administration fees.agent.

Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 26, 2026. No material changes to such risk factors have occurred during the threesix months ended MarchJune 31,30, 2026, except as described below:

On April 23, 2026, Villani, Inc. (“Villani”) filed a complaint against us in the U.S. District Court for the Central District of California asserting claims for false advertising under the Lanham Act, breach of contract, and conversion, and seeking injunctive relief.relief (the “Lawsuit”). On June 5, 2026, Villani hasfiled alsoa statedStatement thatof itClaims intendswith tothe initiateAmerican anArbitration arbitrationAssociation, proceeding against us seeking monetary damages. Although nocommencing arbitration demandbased hason beenthe servedsame toconduct date, we may become subject to additional claims, damages, costs, or other remediesalleged in connectionthe Lawsuit (“Arbitration”). Villani alleges breach of contract, breach withof anythe suchduty proceeding.of good faith and fair dealing, false advertising under the Lanham Act 15 USC § 1125, violation of California Business and Professions Code §§ 17200, et seq., and conversion. Villani seeks money damages in the Arbitration.

In connection with the litigation, Villani sought a temporary restraining order (“TRO”) and preliminary injunction against us.in the Lawsuit. On May 6, 2026, the Court denied the TRO in part related to athe breach of contract and conversion claims and granted the TRO in part on the false or misleading advertising statements, which imposesimposed certain temporary restrictions on specific statements the the Company cancould make pending further proceedings. VillaniOn hasAugust also5, requested a preliminary injunction, which, if granted, could extend or grant new restrictions imposed by2026, the Court duringdenied Villani’s motion for a preliminary injunction and vacated the pendencyinjunctive relief granted in the TRO, and the company is not currently subject to any injunctive restrictions. In denying the motion, the Court found that questions exist going to the merits of anyVillani’s arbitrationbreach proceedingof orcontract claim, relatedbut litigation.that Villani had not established a likelihood of immediate irreparable harm and that the balance of equities favored the Company. Villani continues to seek permanent injunctive relief in the Lawsuit and money damages in the Arbitration. We intend to are vigorously defenddefending ourselves against these claims; however, litigation and arbitration proceedings are inherently uncertain, costly, costly, and time-consuming.

While we are not currently restrained from manufacturing, promoting, advertising, using, selling, offering for sale, distributing, or delivering delivering in commerce any product or regimen containing Spongilla, if Villani were to obtain injunctive relief at a preliminarylater injunction,stage of the Lawsuit, an arbitration award, or otherwise, we could be restricted or delayed in our ability to market, manufacture, distribute, advertise, sell, or or commercialize certain of our current or planned products, including products containing our Spongilla. Such restrictions could could disrupt our planned product launches, impair relationships with suppliers, manufacturers, distributors, marketing partners, or customers, customers, require us to modify our products, branding, formulations, or marketing claims, or otherwise adversely affect our commercialization strategy. In addition, defending this matter may require significant management attention and financial resources, result in substantial legal expenses, expenses, divert resources from our business operations and strategic initiatives, and expose us to reputational harm.

We are a scientific leader in skincare, dedicated to the development and commercialization of products that address common and underserved skin conditions. Dermata initially was founded with a focus on researching and developing prescription products subject to the FDA approval process. In September 2025, after an extensive review of current trends in dermatology, changing consumer preferences, additional non-clinical and clinical development costs, and go-to market costs for ana Rxprescription, or Rx, acne product, management, with approval from our board of directors, determined that a strategic shift to developing and distributing DTC and B2B skincare products, that are backed by science, would be a better path to commercialization for the Company with potentially greater financial upside and faster time to market. We believe we we can leverage our history and knowledge of Rx dermatology to create skincare products that are effective and safe, and available to consumers consumers without the nuisance of obtaining a prescription. We believe this strategic repositioning will accelerate our path to commercialization, reduce our regulatory burden, and decrease development expenses, all while enabling us to address broad consumer segments in the skincare market.

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.visit with an aesthetician or a dermatologist. 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.

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.conditions or our years of developing prescription products. We plan to leverage this knowledge to create a wholediversified product line of skincare treatments that consumers can access directly for each of their skincare needs. While our background is in clinicalprescription products, we plan to leverage the unique attributes of our hero ingredient, Spongilla lacustris, to develop multiple skincare treatments.treatments for a variety of consumer and professional needs. We planexpect to launch our first cosmetic product, our theTome Foundational Treatment, inon theAugust middle25, of2026, 2026.with those on our waitlist being able to preorder early. 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.

Our core products, like our Foundational Treatment, will utilize our Bioneedle, which is 100% Spongilla lacustris powder, to provide a once weeklyonce-weekly, skin renewal routine that is a 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 wildlywild grownharvested freshwater sponge, Spongilla lacustris or Spongilla, which is processed into a fine, purified powder and packaged with no additives. Spongilla is 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,supplier over 20 plus years of harvesting, and the post-harvest processing procedures,procedures we developed, produces a cosmetic ingredient that we believe optimizes the Bioneedle for a unique and simple skin renewal routine, unlike most skincare on the market.

In addition to thein-office DTC channelapplication for ourskin products,renewal, based on the mechanism of Bioneedle, we also believe there is a market for our technology to aid in the intradermal delivery of macromoleculesmacromolecules, like botulinum toxin, that must be applied by certified professionals. Currently for various aesthetic conditions. Typically, for facial aesthetics, botulinum toxins are injectedonly intoapproved facialfor musclesintramuscular injections of the face to reduce forehead, lateral canthal, and glabella deep lines. However, thiswe believe there is limitedan tountapped theaesthetic usemarket ofseeking intradermalneedle deliveryfree, topical applications of botulinum toxin for asuperficial aesthetic variety ofconditions, skinlike diseasesreducing fine lines, pore size, and conditions.sebum Botoxproduct isor currentlyimproving theluminosity, 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 patientsbrightness and overall aesthetic very time consuming for dermatologists.appearance. 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. While we have no current timeline for the launch of this program we plan to continue to explore additional uses for this platform and look forward to getting our technology in the hands of aestheticians and dermatologists so they may better serve the medical and aesthetic needs of their patients.

We have taken steps to secure inventory of Spongilla raw material in advance of the planned launch of our Tome skincare products. We believe we have sufficient quantities of processed Spongilla raw material inventory on hand to support the anticipatedexpected mid-2026August 25, 2026, commercial launch and initial commercialization activities thereafter, based on our current operating plans, expected production volumes volumes and internal assumptions. We continue to evaluate additional inventory procurement opportunities and manufacturing planning activities to support future commercial demand.

Our results of operations have fluctuated significantly from period to period in the past and are likely to continue to do so in the future. We anticipate that our quarterly and annual results of operations will be impacted for the foreseeable future by several factors, including the marketing expenses associated with the launch of our first Tome skincare products and resulting revenues, if any, in mid-2026.the second half of 2026. Due to these fluctuations, we believe that the period-to-period comparisons of our operating results are not a good indication of our future performance.

Three Months Ended MarchJune 31,30, 2026, and 2025

Research and development expenses decreased by $0.9$0.4 million from $1.3$0.6 million for the three months ended MarchJune 31,30, 2025, to $0.4$0.2 million for the three months ended MarchJune 31,30, 2026. The decrease in research and development expenses resulted from $0.7 million of decreased clinical expensesprimarily from the XYNGARI™Company’s STAR-1decision to acne study, which was completed duringprioritize the secondcommercial quarterlaunch of 2025,its $0.1first millionproduct, ofresulting decreased chemistry,in manufacturinga anddecrease controls, or CMC, and non-clinical expenses period over period as result of the Company’s pivot to focus on DTC product sales, and $0.1 million of decreased personnel expenses, which resulted from the receipt of proceeds of the Employee Retention Tax Credit refund which partially offset payroll taxes forin research and development employeesefforts during the firstthree months quarterended ofJune 30, 2026. While we continue to focus on designing, packaging, and manufacturing of our first commercial products, as well as product development, we anticipate that research and development expenses will continue to decrease as we prepare for launching our first productcommercial salesproduct, in mid-2026.expected on August 25, 2026.

Selling, general and administrative expenses increased by approximately $0.5$1.6 million from $1.1$1.2 million for the three months ended MarchJune 31,30, 2025, to $1.5$2.8 million for the three months ended MarchJune 31,30, 2026. The increase in selling, general and administrative expenses was primarily attributable to $0.2the Company’s decision to prioritize the commercial launch of its first product, resulting in significant pre-launch commercialization activities during the three months ended June 30, 2026. This resulted in an increase of $0.6 million of marketing and other commercialization expenses incurred,and $0.2an increase of $0.3 million of increasedcompensation auditexpense primarily due to a reallocation of employee duties from research and development to selling, general and administrative expense, as a result of the shift in business focus towards commercialization. In addition, legal fees andincreased $0.1by $0.7 million ofduring increasedthe three months ended June 30, 2026, due to ongoing litigation and other legal fees. matters. 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 saleslaunch in mid-2026.the third quarter of 2026.

We earn interest income via overnight deposits on our cash and cash equivalents. Interest income was $78,676$47,000 for the firstsecond quarter of 2026 compared to $36,216$72,000 for the firstsecond quarter of 2025. The increase of $42,460decrease in interest income resulted from increaseddecreased 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.balances.

Cash used in operations of approximately $2.5$4.9 million for the threesix months ended MarchJune 31,30, 2026, was the result of the net loss of $1.8$4.8 million as well as increases in prepaid and other current assets of $0.1$0.3 million and increased inventoryinventories of $0.1 million, as well as decreasesa decrease in accounts payable and accrued and other current liabilities of approximately $0.5 million, partially offset by an increase in accounts payable of $0.7 million and non-cash stock-based compensation of $0.1 million.

Cash used in operations of $1.9$4.6 million for the threesix months ended MarchJune 31,30, 2025, was the result of the net loss of $2.3$4.0 million,million offsetand decreases by increases in accounts payable and accrued and other current liabilities of approximately $0.3$0.9 million, aspartially welloffset asby the decrease of prepaid prepaid expenses and other current assets of approximately $0.2 million and non-cash stock-based compensation of $0.1 million.

Cash provided by financing activities of $1.9 million for the threesix months ended MarchJune 31,30, 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.

Cash provided by financing activities of $8.5$7.9 million for the threesix months ended MarchJune 31,30, 2025, was the result of the January 2025 PIPE financing which raised net proceeds of $2.3$2.2 million, and the March 2025 Inducement financing which raised net proceeds of $6.2$5.7 million.

Since our inception, we have not generated any revenue or commercialized any products. As of MarchJune 31,30, 2026, our cash and cash equivalents totaled totaled $6.9$4.4 million, and we had an accumulated deficit of $75.1$78.0 million. For the threesix months ended MarchJune 31,30, 2026, and the year ended December December 31, 2025, we used cash of $2.5$4.9 million and approximately $7.8 million, respectively, in operations. We expect our current cash resources resources to fund operations into the firstfourth quarter of 2027.2026.

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 productproduct, inexpected mid-2026,on August 25, 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.

We believe that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements into the firstfourth quarter of 2027.2026. We have based this estimate of cash runway on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. We may require additional capital to continue to commercialize our Tome skincare products, and to pursue in-licenses or acquisitions of other drug candidates. Accordingly, beyond our current cash and any proceeds from the sales of our common stock pursuant to the ATM Agreement, if any, we will require substantial additional financing to support our operations. We expect our expenses and capital requirements to increase in connection with our ongoing activities, including the commercial launch of our first Tome skincare products.

Since inception, we have devoted substantially all of our resources to research and development activities.activities, and during 2026, on marketing and other pre-launch commercial activities in preparation of its first product launch. 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 brandbrand, inexpected mid-2026.on August 25, 2026. We have not generated revenues and have not yet achieved profitable operations, 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 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 after the issuance date of our financial statements. The accompanying financial statements have been prepared on a going concern basis. The The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of 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 course of business. We incurred a net loss of $1.8$4.8 million for the quartersix months ended MarchJune 31,30, 2026, and had an accumulated deficit of $75.1$78.0 million million as of MarchJune 31,30, 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.