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

Turn Therapeutics is a clinical-stage biotechnology company developing targeted inflammatory and immunologicalanti-inflammatory therapies for dermatologic conditions with high unmet needs. Turn’s lead investigational therapy, GX-03, is a potentially first-in-class, non-systemic topical inhibitortherapy for the potential treatment of moderate-to-severe atopic dermatitis (eczemaAD) designedthat toacts modulatevia modulating release of key inflammatory pathwayssignals involved in eczema and other inflammatory dermatological conditions.

GX-03 is currently being evaluated in an ongoing, randomized, double-blind, vehicle-controlled clinical study designed to assess its potential as a topical treatment for moderate-to-severe AD. An interim analysis was completed in June 2026 with 50 patients completed and based on the findings of the interim analysis, we expanded the trial to now enroll patients across the full Eczema Area Severity Index (EASI) from 1.1 and above. We intend to conductenroll anadditional interim120-135 assessmentpatients atin approximatelythe 50%trial. Enrollment in trial completion.is Toplineanticipated resultsto arecomplete expected mid-2026.in fourth quarter of 2026.

We have incurred operating losses since inception, and we expect to continue to incur losses for the foreseeable future. Our net losses were approximately $0.97 $6.8 million and $0.33$1.6 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. As of MarchJune 31,30, 2026, we had an accumulated deficit of approximately $23.36$29.2 million. We anticipate that our expenses and operating losses will increase substantially for the foreseeable future due to the increase in research and development costs for later-stage clinical trials.

Other than any potential revenue from medical device or intellectual property out-licensing arrangements, we will not generate revenue in the future from product sales unless and until we successfully initiate and complete additional clinical development programs and obtain regulatory approval for one or more additional drug candidates. As a result, we will need substantial additional funding to support our continuing drug development and operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through equity and debt financing and from other sources of capital, which may include collaborations with other companies or other strategic transactions. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, reduce or eliminate the development and commercialization of our products. As of MarchJune 31,30, 2026 and December 31, 2025, we had cash and cash equivalents of approximately $11.22$10.3 million and $5.08$5.1 million, respectively. We believe that our existing cash, cash equivalents and other short termshort-term investments will be sufficient to fund our operating expenses and capitalresearch expenditure requirementsand development expenses for development of GX-03 in AD into the firstthird quarter of 2027. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See the section entitledof our Annual Report titled “Risk Factors — Risks Related to Our Business and Industry — We design, develop, and conduct pre-clinical and clinical testing on drug candidates and medical devices. Given the inherent expense associated with these activities, it is common for companies at our stage to incur significant losses associated with such product development. We expect to incur additional losses for the foreseeable future, and it is possible we may never achieve or maintain profitability. Our consolidated financial statements therefore express substantial doubt about our ability to continue as a going concern.” in the Annual Report for more information.details.

GX-03 for Moderate-to-Severe Atopic Dermatitis (Lead Program)

GX-03 is a non-systemic topical immunomodulator therapy being developed for the potential treatment of moderate-to-severe AD. Preclinical studies demonstrated inhibition of cytokines associated with inflammatory skin disease, including IL-31, IL-36α/γ, and IL-4. GX-03 is currently being evaluated in a randomized, double-blind, vehicle-controlledvehicle-controlled, adaptive phase 2 clinical trial in adults with moderate-to-severe AD.

Following our direct listing (the “Direct Listing”) on The Nasdaq Global Market (“Nasdaq”), we expect our general and administrative expenses to increase as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations and increased expenses for insurance, investor relations and professional services. We also expect to incur higher equity-based compensation as we operate as a public company.

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

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

The following table summarizes our results of operations for the three and six months ended MarchJune 31,30, 2026 and 2025:

We did not generate any revenue or incur any cost of goods sold during the threesix months ended MarchJune 31,30, 2026 and 2025, as we continued to focus on the research and development of our drug candidates and medical devices.

General and administrative expenses increaseddecreased by $0.76$0.2 million from $0.38$1.3 million for the three months ended MarchJune 31,30, 2025 to $1.14$1.2 million for the three months ended MarchJune 31,30, 2026. The increasedecrease in operating expenses primarily resulted from decrease in professional fees of $0.7 million incurred in three months ended June 30, 2025 in relation to our Direct Listing which were offset by an increase in stock-based compensation expense due to vesting timing difference of $0.20 million, increase in legal fees, advisory fees and audit fees of $0.36$0.5 million and increase in compensation related expenses of $0.19 million when compared toduring three months ended MarchJune 31,30, 2025.2026.

Research and development expenses increased by $0.10$0.4 million from $9.26$62.7 thousand for the three months ended MarchJune 31,30, 2025 to $0.11$0.5 million for the three months ended MarchJune 31,30, 2026. The increase in research and development expenses primarily resulted from expenses incurred on our ongoing Phase-2 equivalent study of GX-03 in moderate-severe AD.

Change in fair value of derivative liability instrument was a net gain loss of $3.3 million and $2.6 million during the three and six months ended MarchJune 31,30, 2026 of $0.70 million.2026. The derivative liability instrument comprised of contingent warrant liability and the put option liability under the GEM Purchase Agreement among(defined us and GEMbelow) as well as contingent conversion option under the Avenue Capital Loan Agreement among us and Avenue Capital.Agreement. Cumulative fair value of derivative liabilities from different instruments as of December 31, 2025 was $3.03$3.0 million and a remeasurement net gainloss due to change in fair value as of MarchJune 31,30, 2026 is $0.70$2.6 million. These derivative liability instruments either did not exist or did not have any material value as of MarchJune 31,30, 2025.

Amortization of deferred offering cost was approximately $0.48$1.1 million and $0 for the six months ended June 30, 2026 and 2025, respectively. Amortization of deferred offering cost was approximately $0.6 million and $0 for the three months ended MarchJune 31,30, 2026 and 2025, respectively. Deferred offering cost of $0.85 million was recorded as an asset for commitment fee under the GEM Purchase Agreement which became payable to GEM upon completion of the Direct Listing in October 2025. A $5.60 million deferred offering cost was recorded as an asset for the initial recognition of warrant issued on the Direct Listing to GEM under the GEM Purchase Agreement. A $0.72 million deferred offering cost was recorded as an asset for the debt discounts related to Tranche 2 of the Avenue Loan Agreement. The deferred offering cost related to commitment fee under the GEM Purchase Agreement is being amortized proon ratastraight toline basis over the amountsterm drawn under theof GEM Purchase Agreement, the deferred offering cost related to warrant is being amortized on straight-line basis over the term of the GEM Purchase Agreement and the deferred offering cost related to Tranche 2 of Avenue Loan Agreement will be transferred to debt discount upon draw-down of Tranche 2 or expensed if Tranche 2 is not withdrawn.

As of MarchJune 31,30, 2026, we had $18.64$17.0 million in total assets, which included $11.22$10.3 million in cash and cash equivalents, $0.24$0.14 million in prepaid expenses and other current assets, $0.07$56.3 millionthousand in right of use assets, $0.92$0.9 million in intangible assets, $6.20$5.6 million as deferred offering cost and $8.6 thousand in security deposit. Our intangible assets primarily include capitalized legal costs related to the registration of patents and trademarks.

As of MarchJune 31,30, 2026, we had total liabilities of $12.53$16.3 million, including $2.32$2.6 million in current accounts payable and accrued expenses, $2.77$6.1 million in derivative liability instruments pursuant to outstanding warrants, put option liability and conversion option, $47.80$49.3 thousand in current portion of operating lease liability, $21.54 $8.7 thousand in long term portion of lease liability, $5.94$6.1 million in long-term debt, net of debt discounts and $1.44$1.4 million in deferred revenue. The deferred revenue as of MarchJune 31,30, 2026 is attributable to a license agreement for our FleX Product which has been deferred due to unpredictable outcomes and timelines of the FDA approval process which cannot be reasonably estimated. We will continue to defer the recognition of revenue until FDA approval is achieved or sufficient information is available to make a reasonable estimate on the outcome and timelines.

Based on our current operating plan, we estimate that our cash and cash equivalents as of MarchJune 31,30, 2026 will be sufficient to fund our operating expenses and capital expenditureresearch requirementsand development expenses for development of GX-03 in AD into the firstthird quarter of 2027. We have based this estimate on assumptions that may prove to be wrong, and could deplete our capital resources sooner than we currently expect. Our capital resources may not be sufficient to fund operations through at least the next 12 months from the date that the accompanying unaudited condensed consolidated interim financial statements as of MarchJune 31,30, 2026 are issued based on our expected cash needs, which raises substantial doubt about our ability to continue as a going concern. For the remainder of 2026 and in 2027, weWe currently anticipate that we will require up to approximately $60 to $65 million to complete our planned Phase 3 trials for AD and onychomycosis, and approximately $1.5 million to $2.5 million for our vaccine program,Phase 2a study in HS, which we expect to fund through accessing the capital markets, including with additional issuances of equity and/or equity-linked securities. See the section entitledtitled “Risk Factors — Risks Related to Our Business and Industry — We design, develop, and conduct pre-clinical and clinical testing on drug candidates and medical devices. Given the inherent expense associated with these activities, it is common for companies at our stage to incur significant losses associated with such product development. We expect to incur additional losses for the foreseeable future, and it is possible we may never achieve or maintain profitability. Our condensed consolidated financial statements therefore express substantial doubt about our ability to continue as a going concern.” in our Annual Report for more information.

We intend to fund the operations of the Company for the next 12 months from, as of MarchJune 31,30, 2026, the cash and cash equivalents available of approximately $11.22$10.3 million, from new licensing deals for our FDA-cleared medical devices or any payments from our existing license for the FleX Product, and other equity or debt financings, as available.

On March 23, 2026 (the “Closing Date”), we entered into a Loan and Security Agreement (the “Loan Agreement”), with Avenue Venture Opportunities Fund II, L.P., as administrative agent and collateral agent (the “Agent”) and Avenue Venture Opportunities Fund II, L.P., as lender (the “Lender”, together with Agent, “Avenue Capital”). The Loan Agreement makes available to us term loans in an aggregate principal amount of up to $25.0 million with (i) $7.0 million funded on March 24, 2026 (“Tranche 1”), (ii) up to $8.0 million to be made available to us between September 1, 2026 and March 31, 2027, subject to,to (ia) dosing of first patients in a phase Phase 3 trial of Onychomycosis,onychomycosis, (iib) raising $10.0 million via equity financing and (iiic) positive data in our ongoing phasePhase 2 clinical study of GX-03 for moderate-severe atopic dermatitis (“Tranche 2”). The Lender may make additional term loans of up to an additional $10.0 million (the “Discretionary Tranche 3” and collectively with Tranche 1, and Tranche 2, the “Loans”), to be funded between January 1, 2027 and June 30, 2028, subject to, among other things, (i) that we have drawn the full amount of Tranche 2, (ii) our achievement of a certain clinical milestone and (iii) the mutual written agreement between us and the Lender (upon the Lender’s investment committee approval).

Net cash used in operating activities during the threesix months ended MarchJune 31,30, 2026 was $1.63$2.6 million and consisted primarily of our net loss of $0.97$6.8 million, a $0.74 $0.3 million outflow from changes in operating assets and liabilities primarily attributable to the timing of expenses incurred and payments issued as well as non-cash adjustments of $0.28$0.7 million of stock-based compensation, $0.70$2.6 million non-cash fair value gain loss from derivative liability instruments and $14.45$29.0 thousandthousand, $1.1 million and $0.48$0.1 million in amortization of intangible assets andassets, deferred offering cost, cost and debt discount, respectively.

Net cash used in operating activities during the threesix months ended MarchJune 31,30, 2025 was $0.30$0.8 million and consisted primarily of our net loss of $0.33$1.6 million, a $0.31 $0.4 million outflowinflow from changes in operating assets and liabilities primarily attributable to the timing of expenses incurred and payments issued as well as non-cash adjustments of $76.60$0.1 thousandmillion of stock-based compensation, $0.25$0.3 million advisory services expense that was settled through issuance of common stock and $12.42$24.9 thousand in amortization of intangible assets.

Net cash used in investing activities during the threesix months ended MarchJune 31,30, 2026 was $12.23$18.0 thousand and consisted primarily of capitalization of patent related legal costs.

Net cash provided by financing activities during the threesix months ended MarchJune 31,30, 2026 was $7.79$7.8 million and consisted of $1.07$1.1 million in proceeds from subscription receivable and $6.72$6.7 million in net proceeds from Avenue Capital Loan Agreement.

Net cash provided by financing activities during the threesix months ended MarchJune 31,30, 2025 was $1.0$3.1 million and consisted of $1.0$3.1 million in proceeds from the issuance of common stock.stock under the Regulation Crowdfunding, Regulation A+ and Regulation D.

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

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. On the basis of this evaluation, the Company has determined that it is more likely than not that the Company will not recognize the benefits of the federal and state net deferred tax assets, and, as a result, a full valuation allowance has been set against its net deferred tax assets as of MarchJune 31,30, 2026 and December 31, 2025. The amount of the deferred tax asset to be realized could be adjusted if estimates of future taxable income during the carry-forward period are reduced or increased. For the fiscal year ended December 31, 2025, the Company had federal cumulative net operating loss (“NOL”) carryforwards of approximately $14.5 million, and the Company had state NOL carryforwards of approximately $7.3 million. Utilization of some of the federal and state NOL carryforwards to reduce future income taxes will depend on the Company’s ability to generate sufficient taxable income prior to the expiration of the carryforwards. The federal net operating loss carryforward is subject to an 80% limitation on taxable income, does not expire, and will carry on indefinitely.