Turn Therapeutics Inc.: Form 10-Q for the period ended Sep 30, 2025

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report and with our audited financial statements and related notes and other financial information appearing in our final prospectus for our direct listing filed with the U.S. Securities and Exchange Commission (the “SEC”) on October 8, 2025 (the “Prospectus”). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report and our Prospectus, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a pharmaceutical and medical device development company built around a proprietary platform technology designed to enhance drug performance. Our patented mixing process — commercially referred to as PermaFusion — enables stable suspension of polar, water-soluble active pharmaceutical ingredients (“APIs”) in oil-based carriers without the use of emulsifiers. This innovation reduces the quantity of required API inclusion by improving its bioavailability. Reduced API load reduces the likelihood of adverse events. Our proprietary platform has been validated across multiple FDA-cleared medical devices.

Our primary development programs focus on dermatological diseases, including moderate to severe eczema and onychomycosis. Our company’s origin is rooted in the personal journey of our founder, who developed a topical ointment to heal his own chronic, treatment-resistant wounds using the PermaFusion platform he developed. His initial formulation, now known as Hexagen, suspends certain antimicrobial/anti-inflammatory compounds in petrolatum without known cytotoxicity, irritation or sensitization. This formula has received three FDA clearances and has been utilized extensively in humans, which we believe demonstrates both technical proof of concept and meaningful therapeutic effects. The formula also has been demonstrated to provide anti-inflammatory immunological signaling (IL 36, IL 31, IL 4 inhibition), in-vivo nail penetration with fungal pathogen elimination, and other potential therapeutic benefits. These products are not presently on the market, and we are not currently generating revenue from these devices, as we focus on drug development of our core technology.

In addition to our dermatology and wound programs, we are exploring broader applications of our PermaFusion technology. In partnership with a leading global nonprofit organization, we are attempting to develop intranasal vaccines with sufficient thermostability to withstand distribution without deep-freeze. Our goal is to eliminate the need for frozen storage and, thus, enable deployment and delivery to low-resource settings that do not maintain suitable cold storage infrastructure required for administration of modern-day vaccines. Furthermore, if we are successful in this initial program, we believe there may be opportunities to develop additional vaccines in thermostable, intranasal form. By reducing cold-storage infrastructure requirements and therefore enabling standard shipping of such vaccines, we believe intranasal vaccines have the potential to enhance patient uptake by enabling immunization in a broader variety of settings including in clinic, hospital and home-health settings. We believe this initiative highlights our platform’s versatility and its potential to unlock new therapeutic categories beyond dermatology.

We have also completed preclinical, in-vivo xenograft studies for herpes zoster ophthalmicus (shingles of the eye) and basal cell carcinoma. A mildly reformulated version of the Hexagen formula was employed for the ocular study and compared this reformulation with placebo as a topical ocular agent intended to reduce viral load of herpes zoster in an animal model. Results obtained showed an 85% reduction in viral load compared to placebo without adverse events. For the basal cell carcinoma xenograft study, the Hexagen formula was compared to both placebo and 5-Fluorouracil (standard of care topical chemotherapy) as a topical treatment intended to reduce basal cell tumor size. The Hexagen formula showed an approximate 29% comparative reduction in tumor size to the placebo and an approximate 20% comparative reduction in tumor size compared to 5-Fluorouracil. We believe these preclinical in-vivo studies suggest meaningful potential in these indications, which we may continue to explore at the conclusion of our lead drug programs. We believe such exploratory results further underscore the potential breadth of opportunity enabled by our platform.

We have incurred operating losses since inception, and we expect to continue to incur losses for the foreseeable future. Our net losses were approximately $3.47 million and $1.45 million for the nine months ended September 30, 2025 and 2024, respectively. As of September 30, 2025, we had an accumulated deficit of approximately $22.67 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 September 30, 2025 and December 31, 2024, we had cash and cash equivalents of approximately $3.11 million and $0.9 million, respectively. We believe that our existing cash, cash equivalents and other short term investments will be sufficient to fund our operating expenses and capital expenditure requirements into the first quarter of 2026. 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 entitled “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 Prospectus for more information.

Products and Programs

The following pharmaceuticals and medical devices incorporating the core Hexagen formula are in development or complete:

• GX-03/Hexagen for Moderate-Severe Eczema: Drug candidate for eczema treatment. Development complete; human trials initiated in July 2025 which are Phase 2-equivalent.
• GX-03/Hexagen for Onychomycosis: Drug candidate for nail fungus. IND not yet submitted; leveraging human data from eczema studies.
• GX-03/Hexagen for Wounds (Hexagen (K160872)): Medical device for treating wounds and burns. Product development and clinical research are complete; FDA-cleared in 2016.
• GX-03/Hexagen for Derm (AtopX (K171191)): Medical device for managing dermatitis. Development and clinical stages are complete; FDA-cleared in 2017.
• Sterile Gauze Impregnated with GX-03/Hexagen (XEAL (K183681)): Medical device for wound care and post-surgical dressing. Development and clinical stages are complete; FDA-cleared in 2018. The product has been out-licensed to a global medical manufacturing and supply company.
• Sterile Collagen/Hexagen Powder (FleX Product): Medical device for wounds and burns. Development complete; partner currently finalizing in-vivo/in-vitro data for de-novo review per agency recommendations; out-licensed to MiMedx.
• Bio-defense Vaccine Project: Intranasal thermostable vaccine candidate in partnership with a global non-profit. Proved that delivery platform can maintain live virus with thermostability of 14 days at ambient temperatures and 28 days refrigerated (4°C) with 100% recovery. We expect to start in-vivo studies for this project in the near future.

Recent Developments

GX-03 – Phase 2-Equivalent Eczema Trial

Our randomized, double-blind, vehicle-controlled 114-120 patient clinical trial to evaluate the tolerability and effectiveness of topical investigational product, GX-03, in adult subjects with moderate- to-severe eczema initiated in July 2025 with first patient dosed on July 11, 2025. The study is eight weeks long and approximately 30% of enrollees have competed the trial. Enrollment is progressing as per expectations and we expect to finish in first half of 2026.

GX-03 – Phase 3-Equivalent Pivotal Onychomycosis Trial

We are actively in talks with multinational contract research organizations (“CRO”) to design and initiate our Phase 3-equivalent pivotal trials for utilizing GX-03 for treatment of Onychomycosis. We expect to engage a CRO partner in 2026 to initiate the study designs and method of treatment of trials.

Vaccine Project – In-vivo Studies

We have partnered with a global non-profit organization to conduct in-vivo studies for our vaccine project which are expected to initiate in the near future.

Components of Results of Operations

General and Administrative Expenses

General and administrative expenses consist primarily of employee-related costs related to the corporate functions such as equity-based compensation, executive and internal administrative operations, third-party professional fees, travel expenses, insurance expenses and rental costs.

Following our 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

Research and development expenses reflect our ongoing investments into expanding the applications of our flagship Hexagen formula and other drug candidates such as enhanced stability vaccine candidates, 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, information technology costs and overhead expenses.

We expect our research and development expenses to increase substantially for the foreseeable future as we continue to invest in research and development activities related to clinical programs associated with our product candidates, including but not limited to clinical trials. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our candidates is highly uncertain. As a result, we are unable to determine the duration and completion costs of our research and development projects, the costs of related clinical development costs or when and to what extent we will generate revenue from the commercialization of our products and drug candidates.

We expense research and development costs as incurred. Fluctuations in research and development expenses can be impacted by the timing and cadence of our clinical trials and preclinical studies.

Other Income

Other income includes interest income earned from cash held in savings accounts and our highly liquid investments in money markets and vendor credits.

Results of Operations

The following table summarizes our results of operations for the three and nine months ended September 30, 2025 and 2024:

22

We did not generate any revenue or incur any cost of goods sold during the three and nine months ended September 30, 2025 and 2024, as we continued to focus on the research and development of our drug candidates and medical devices.

General and administrative expenses increased by $1.2 million from $0.52 million for the three months ended September 30, 2024 to $1.75 million for the three months ended September 30, 2025. The increase in operating expenses during the three months ended September 30, 2025 primarily resulted from accruals for legal services, advisory services and other fees in contemplation of our direct listing which amounted to approximately $1.2 million when compared to three months ended September 30, 2024.

General and administrative expenses increased by $2.2 million from $1.2 million for the nine months ended September 30, 2024 to $3.4 million for the nine months ended September 30, 2025. The increase in operating expenses during nine months ended September 30, 2025 primarily resulted from accruals for legal services, advisory services and other fees in contemplation of our direct listing which amounted to approximately $2.05 million and an approximately $151.00 thousand increase in our audit fees when compared to the nine months ended September 30, 2024.

There was no material change in our research and development expenses for our eczema and vaccine programs for the three months and nine months ended September 30, 2025 when compared to the three months and nine months ended September 30, 2024.

Other income remained comparable with no material change for three months ended September 30, 2025 when compared to three months ended September 30, 2024.

Other income increased by $169.05 thousand, from $22.88 thousand for the nine months ended September 30, 2024 to $191.93 thousand for the nine months ended September 30, 2025. The increase was primarily due to a $120.96 thousand write-off of a historical balance owed to a vendor and $51.29 thousand discount received from another vendor against an historical outstanding invoice.

Liquidity and Capital Resources

Liquidity

As of September 30, 2025, we had $4.3 million in total assets, which included $3.11 million in cash and cash equivalents, $188.58 thousand in prepaid expenses and other current assets, $89.42 thousand in right of use assets, $904.89 thousand in intangible assets 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 September 30, 2025, we had total liabilities of $3.79 million, including $2.3 million in current accounts payable and accrued expenses, $44.83 thousand in current portion of operating lease liability, $46.34 thousand in long term portion of lease liability and $1.44 million in deferred revenue. The deferred revenue as of September 30, 2025 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 September 30, 2025 will be sufficient to fund our operating expenses and capital expenditure requirements into the first quarter of 2026. 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 interim financial statements as of September 30, 2025 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 2025 and in 2026, we currently anticipate that we will require up to approximately $18.0 to $20.0 million to complete our planned Phase 3 trials for eczema and onychomycosis, and approximately $1.5 million to $2.5 million for our vaccine program, which we expect to fund through accessing the capital markets, including with additional issuances of equity and/or equity-linked securities. See the section entitled “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 Prospectus for more information.

We intend to fund the operations of the Company for the next 12 months from, as of September 30, 2025, the cash and cash equivalents available of approximately $3.1 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. We did not receive any proceeds from our direct listing. On August 29, 2025, we entered into an amended and restated Share Purchase Agreement, which was further amended by a side letter dated as of September 24, 2025, and an amended and restated Registration Rights Agreement with GEM Global Yield LLC SCS and GEM Yield Bahamas Limited (collectively, “GEM”) (as amended, the “GEM Purchase Agreement” and the “GEM Rights Agreement,” respectively, and together, the “GEM Agreements”), pursuant to which we are eligible to put certain shares of common stock to the selling stockholders, subject to certain volume and price restrictions. Under the GEM Agreements, GEM agreed to purchase up to $85.0 million in shares of our common stock subject to certain conditions and limitations, including the registration of our common stock on a national securities exchange. Accordingly, we expect to put shares of our common stock to GEM under the GEM Agreements as needed. No shares of common stock were sold pursuant to the terms of the GEM Agreements during the nine months ended September 30, 2025.

We expect to incur significant additional costs in operating our business, including, but not limited to, research and development, general and administrative expenses and marketing and advertisement expenses, and intend to continue to fund our operations through additional equity and debt financing in the future and entry into additional strategic collaboration and licensing arrangements. We may also engage in additional debt and/or equity financing as determined to be necessary to fund our operations and planned research and development activities.

Cash flows

Operating Activities

Net cash used in operating activities during the nine months ended September 30, 2025 was $1.38 million and consisted primarily of our net loss of $3.4 million, which was partially offset by a $1.63 million decrease 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 $162.87 thousand of stock-based compensation, $250.00 thousand advisory services expense that was settled through issuance of common stock and $38.59 thousand in amortization of intangible assets.

Net cash used in operating activities during the nine months ended September 30, 2024 was $0.9 million and consisted primarily of our net loss of $1.4 million, which was partially offset by a $166.22 thousand decrease 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 $315.02 thousand of stock-based compensation and $35.12 thousand in amortization of intangible assets.

Investing Activities

Net cash used in investing activities during the nine months ended September 30, 2025 was $121.55 thousand and consisted primarily of capitalization of patent related legal costs.

Net cash used in investing activities during the nine months ended September 30, 2024 was $91.63 thousand and consisted primarily of capitalization of patent related legal costs.

Financing Activities

Net cash provided by financing activities during the nine months ended September 30, 2025 was $3.74 million and consisted of $3.74 million in proceeds from the issuance of common stock.

Net cash provided by financing activities during the nine months ended September 30, 2024 was $630.18 thousand and consisted primarily of $630.18 thousand in proceeds from the issuance of common stock.

Critical Accounting Policies and Estimates

Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include, but are not limited to, those relating to stock-based compensation, revenue recognition, research and development expenses 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.

Critical Accounting Policies

Revenue Recognition

Under ASC Topic 606, we recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of Topic 606, we perform the following five steps: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration to which we are entitled in exchange for the goods or services we transfer to a customer.

At contract inception, once the contract is determined to be within the scope of ASC 606, we assess whether the goods or services promised within each contract are distinct and, therefore, represent a separate performance obligation. Goods and services that are determined not to be distinct are combined with other promised goods and services until a distinct combined performance obligation is identified. We then allocate the transaction price (that is, the amount of consideration we expect to be entitled to from a customer in exchange for the promised goods or services) to each performance obligation and recognize the associated revenue when (or as) each performance obligation is satisfied. Our estimate of the transaction price for each contract includes all variable consideration to which we expect to be entitled, subject to the constraint on variable consideration. Variable consideration is not constrained if the potential reversal of cumulative revenue recognized at the contract level is not significant.

License Rights — If the license to our intellectual property is determined to be distinct from the other promises or performance obligations identified in the arrangement, which generally include research and development services, we recognize revenue from nonrefundable, upfront fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. In assessing whether a license is distinct from the other promises, we consider relevant facts and circumstances of each arrangement, including the research and development capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. In addition, we consider whether the collaboration partner can benefit from the license for its intended purpose without the receipt of the remaining promises, whether the value of the license is dependent on the unsatisfied promises, whether there are other vendors that could provide the remaining promises and whether it is separately identifiable from the remaining promises.

For licenses that are combined with other promises, we utilize judgment to assess the nature of the combined performance obligation and whether the license is the predominant promise within the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. If the license is the predominant promise, and it is determined that the license represents functional intellectual property, revenue is recognized at the point in time when control of the license is transferred. If it is determined that the license does not represent functional intellectual property, revenue is recognized over time using an appropriate method of measuring progress.

Milestone Payments — At the inception of an arrangement that includes development milestone payments, we evaluate whether the milestones are considered likely to be achieved and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant reversal of cumulative revenue recognized would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control, such as regulatory approvals, are not considered probable to be achieved until those approvals are received. We evaluate factors such as the scientific, clinical, regulatory, commercial and other risks that must be overcome to achieve the particular milestone in making this assessment. There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur. At the end of each subsequent reporting period, we re-evaluate the probability of achievement of all milestones subject to constraint and, if necessary, adjust its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

Royalties — For arrangements that include sales-based royalties, including milestone payments based on a level of sales, where the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, we have not recognized any royalty revenue resulting from licensing agreements.

Amounts due to us for satisfying the revenue recognition criteria or that are contractually due based upon the terms of the collaboration agreements are recorded as accounts receivable on the consolidated balance sheets. Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue. Amounts expected to be recognized as revenue within the one year following the balance sheet date are classified as current deferred revenue. Amounts not expected to be recognized as revenue within the one year following the balance sheet date are classified as deferred revenue, net of current portion.

Income Taxes

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 the nine months ended September 30, 2025 and year ended December 31, 2024. 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, 2024, the Company had federal cumulative NOL carryforwards of approximately $8.59 million, and the Company had state NOL carryforwards of approximately $7.35 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.

The Company is taxed as a “Corporation” for both federal and state income tax purposes. We account for income taxes using the asset and liability approach promulgated by ASC 740, Income Taxes, for financial reporting purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce the deferred tax assets to an amount expected to be realized.

Stock-Based Compensation

We account for stock-based compensation for both employees and non-employees in accordance with ASC 718, Compensation — Stock Compensation. Under the fair value recognition provisions of ASC 718, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period, which is generally the option vesting period.

Recently Adopted Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our unaudited condensed financial statements contained in Part I, Item 1 of this Quarterly Report.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and are not required to provide the information specified under this item.

We maintain disclosure controls and procedures (as defined in Exchange Act Rule 13a–15(e) and 15d-15(e)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, and the rules and regulations thereunder, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Evaluation of Disclosure Controls and Procedures

We have carried out an evaluation, under the supervision, and with the participation, of management, including our chief executive officer and chief financial officer, of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report. During the preparation of our financial statements for the year ended December 31, 2024, our management identified a material weakness in our internal control over financial reporting due to a lack of segregation of duties. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Specifically, in connection with the audit of our consolidated financial statements as of and for the year ended December 31, 2024, we determined that there were certain errors pertaining to our accounting for stock- based compensation, which resulted in our identification of a material weakness in our internal controls over financial reporting related to lack of properly designed, implemented and effective operating controls.

Remediation Plan for Material Weakness

With the addition of our chief accounting officer, engagement of expert advisors and the changes made to our accounting and financial reporting processes and internal controls during the three months ended September 30, 2025, we have strengthened our internal controls and will continue to add staff, evaluate and enhance qualification of staff, and implement initiatives to improve our internal controls over financial reporting as we grow. We have concluded that the material weakness has been effectively remediated as of September 30, 2025.

Changes in Internal Control over Financial Reporting

During the three months ended September 30, 2025, we implemented changes to our internal control over financial reporting to address the previously identified material weakness. These changes included:

• Engagement of Expert Advisors: We engaged external advisors with specialized knowledge in accounting and internal controls to assist, as needed, in designing and implementing effective control procedures.
• Enhancements to Accounting and Financial Reporting Processes: We revised our processes for accounting for stock-based compensation, including the implementation of new controls to ensure proper segregation of duties and accurate financial reporting.
• Staffing and Training Initiatives: We initiated plans to add staff and enhance the qualifications of existing personnel to strengthen our internal control environment.

These changes were designed to remediate the material weakness and improve the reliability of our financial reporting. We believe these measures have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We will continue to monitor the effectiveness of these controls and make further enhancements as necessary to ensure the ongoing reliability of our financial statements.

Limitations on the Effectiveness of Controls

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within an organization have been detected. Accordingly, our disclosure controls and procedures and our internal control over financial reporting are designed to provide reasonable, not absolute, assurance that the objectives of the control system are met. We continue to implement, improve, and refine our disclosure controls and procedures and our internal control over financial reporting.

As a smaller reporting company under Rule 12b-2 of the Exchange Act, we are not required to include risk factors in this Quarterly Report. However, as of the date of this Quarterly Report, except as disclosed below, there have been no material changes with respect to those risk factors previously disclosed in the “Risk Factors” section of the Prospectus. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business. Any of these factors could result in a significant adverse effect on our business, results of operations, financial condition, and prospects. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.

Risks Related to Our Business and Industry

Even if we can raise additional funding, we have in the past and may in the future enter into financing agreements that lead to increased dilution, and which will result in sales of our common stock in the open market, which could adversely impact the trading price of our common stock.

We entered into the GEM Share Purchase Agreements, pursuant to which GEM agreed to purchase up to $85.0 million in shares of our common stock subject to certain conditions and limitations. We may deliver drawdown notices to GEM of up to the aggregate limit and the applicable drawdown pricing period will be 15 consecutive trading days beginning on the notice date, provided that any requested drawdown may not exceed 300% of the average daily trading volume of our common stock during the 15 trading days immediately preceding the notice.

In connection with the GEM Agreements, we were also required to pay a commitment fee of 1% of the aggregate limit in cash or freely tradeable common stock, the latter of which is dilutive to our existing shareholders. We settled this fee through issuance of 161,905 shares of our common stock to GEM at an effective price of $5.25 per share. Additionally, on October 8, 2025, the date our common stock commenced trading on Nasdaq, we issued to GEM a warrant to purchase a number of shares of common stock equal to 4% of our fully diluted outstanding shares as of the same date at an exercise price equal to $5.03, subject to certain adjustments as set forth in the GEM Purchase Agreement. If the market price of our common stock exceeds the exercise price of the warrant, GEM is likely to exercise warrant shares, which would result in the issuance of a substantial number of additional shares of our common stock.

While we expect to receive proceeds from sales of our common stock under the GEM Agreements, these proceeds may not be sufficient to fund our ongoing operations or meet our future capital needs.

We also may issue our share capital or securities convertible into our share capital from time to time in connection with a financing, acquisition, investments, or otherwise. Any such issuance could result in substantial dilution to our existing shareholders and cause the public price of our common stock to decline.

The capital markets have been unpredictable in the recent past for companies such as ours. The amount of capital that companies such as ours can raise, as well as the terms upon which such capital may be available, often depends on variables that are beyond their control. As a result, we may not be able to secure financing on terms attractive to us, or at all. If we are able to consummate a financing arrangement, the amount raised may not be sufficient to meet our future needs. If adequate funds are not available on acceptable terms, or at all, our business, including our results of operations, financial condition and our continued viability will be materially adversely affected.

We identified a material weakness in our internal control over the accuracy of our financial reporting, and our management concluded that our internal controls over financial reporting were not effective as of December 31, 2024. While we have implemented remedial actions and concluded that the material weakness has been remediated as of September 30, 2025, if we fail to maintain effective internal controls over financial reporting, it could result in material misstatements of our consolidated financial statements.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected and corrected on a timely basis.

In connection with the audit of our consolidated financial statements as of and for the year ended December 31, 2024, we determined that there were certain errors pertaining to our accounting for stock- based compensation, which resulted in our identification of a material weakness in our internal controls over financial reporting related to lack of properly designed, implemented and effective operating controls.

Management, with oversight from board of directors and the audit committee of the board, implemented a remediation plan for this material weakness that included, among other things, hiring of personnel or engaging experts with adequate expertise in GAAP, designing and maintaining a formal control environment, accounting policies and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures. We have concluded that as a result of the remediation measures, the material weakness has been effectively remediated as of September 30, 2025.

Although we have implemented remedial actions to improve our internal controls, there can be no assurance that we will be successful in maintaining our internal controls over financial reporting, or that we will not identify additional control deficiencies or material weaknesses in the future. If we are not successful in maintaining our internal controls over financial reporting, or if we have additional control deficiencies, we may not be able to accurately report our financial results, prevent fraud or file our periodic reports with the SEC in a timely manner, which may expose us to legal and regulatory liabilities and our common stock to be delisted from Nasdaq, and may cause investors to lose confidence in our reported financial information and may lead to a decline in the market price of our common stock.

Our business is dependent on the successful development, regulatory approval, and commercialization of our products, product candidates, and/or future products and product candidates.

Our business is dependent on successful clinical trials of our products as well as FDA clearances/ approvals of our products. We have three FDA clearances for medical devices, two of which were obtained by the fourth quarter of 2017. In 2022, the Company entered into a licensing agreement for a biologic product it developed that is pending FDA clearance. On October 27, 2025, we entered into an out-licensing agreement with a global medical manufacturing and supply company for one of our currently FDA-cleared products — Xeal (K183681). The Company expects to continue increasing its drug development pipeline through expanded clinical trials for multiple disease indications and the buildout of staffing required to conduct such drug development. Failure to obtain meaningful clinical data, get further clearances/approvals from the FDA, or an inability to successfully develop license or market products could have a material adverse effect on the business, prospects, or operations of the Company.

In July 2025, we commenced a human trial on patients with moderate to severe eczema using our medical device formula cleared by FDA for the management of atopic dermatitis (eczema). This is the identical formula the company would propose for drug approval assuming positive trial outcomes. We expect to submit for IND approval to commence Phase 3 trials of this formula for moderate-severe eczema and onychomycosis following completion of this trial, and expect to include the relevant data in the IND approval submission package.

We currently have three total medical device clearances on completed products from the FDA. We have one fully-developed medical device, Flex, which is undergoing testing for De Novo clearance. After any De Novo request is accepted, the FDA will conduct a substantive review to determine if the device meets the criteria for De Novo classification, and there can be no assurance as to the FDA’s final determination. We have a completed drug candidate pending IND submission for moderate-severe eczema and onychomycosis. We have one pharmaceutical/drug candidate, specifically a thermostable, intranasal in pre-clinical development. The success of our business, including our ability to generate any substantial revenues in the future, will depend to a significant extent on both the successful regulatory approval and commercialization of our current and future products.

The clinical and commercial success of these current and future products will depend upon a number of factors, including the following:

• our ability to successfully establish manufacturing and distribution partnerships or license our products to third party companies which successfully implement and execute a marketing and sales strategy for our current and/or future products in the U.S. and internationally, whether alone or in collaboration with others;
• timely completion of our clinical trials, which may be significantly slower or cost more than we currently anticipate and will depend substantially upon the performance of third-party contractors;
• whether we are required by the FDA or foreign regulatory authorities to conduct additional clinical trials or other studies beyond those planned to support the approval and commercialization of our current or future products or product candidates;
• acceptance of our proposed indications and primary and secondary endpoint assessments relating to the proposed indications of our current product candidates by the FDA and foreign regulatory authorities;
• the prevalence, duration and severity of potential side effects or other safety issues experienced with our current or future products or product candidates;
• the timely receipt of necessary marketing approvals from the FDA and foreign regulatory authorities for our current or future products or product candidates;
• achieving, maintaining and, where applicable, ensuring that our third-party contractors achieve and maintain compliance with our contractual obligations and with all regulatory requirements applicable to Hexagen/GX-03 or any of our current or future products or product candidates;
• the ability of third parties upon which we rely to manufacture clinical trial and commercial supplies of Hexagen/GX-03 or any of our current or future products, product candidates and medical devices to remain in good standing with relevant regulatory authorities and to develop, validate and maintain commercially viable manufacturing processes that are compliant with Current Good Manufacturing Practice (“cGMP”);
• physician and patient demand for any of our current or future products or product candidates;
• our ability to establish, maintain, defend and enforce intellectual property rights in and to our current and future technologies, products and product candidates;
• our ability to avoid third party patent interference, intellectual property challenges or intellectual property infringement, misappropriation, dilution or other claims; and
• the ability to raise any additional required capital on acceptable terms, or at all.

31

Further, competitors who are developing competing products that have a similar mechanism of action may experience problems with their products that could indicate or result in class-wide problems or additional requirements that could potentially harm our business. Due to these risks and uncertainties, we cannot provide assurances that we will be able to generate sufficient revenue through the sale of our current or future products or product candidates to achieve or maintain profitability.

Changes in tax laws or in their implementation or interpretation could adversely affect our business and financial condition.

Income, sales, use or other tax laws, statutes, rules, or regulations could be enacted or amended at any time, which could affect our business or financial condition, including causing potentially adverse impacts to our effective tax rate, tax liabilities, and cash tax obligations. For example, the Inflation Reduction Act (IRA) was signed into law in August 2022, and the One Big Beautiful Bill Act (OBBBA) was signed into law in July 2025. The IRA introduced new tax provisions, including a one percent excise tax imposed on certain stock repurchases by publicly traded companies. The one percent excise tax generally applies to any acquisition of stock by the publicly traded company (or certain of its affiliates) from a stockholder of the company in exchange for money or other property (other than stock of the company itself), subject to a de minimis exception. Thus, the excise tax could apply to certain transactions that are not traditional stock repurchases. The OBBBA contains numerous tax provisions that we are currently in the process of evaluating, and which may significantly affect our business or financial condition. The recent changes under the OBBBA include tax rate extensions and changes to the business interest deduction limitation, the expensing of domestic research and development expenditures (in contrast to the continued capitalization and amortization of foreign research and development expenditures), the bonus depreciation deduction rules, and the international tax framework. Regulatory guidance under the IRA, the OBBBA, and other tax-related legislation is and continues to be forthcoming, and such guidance could ultimately increase or lessen the impact of these laws on our business and financial condition. In addition, it is uncertain if and to what extent various states will conform to changes to federal tax legislation.

Risks Related to Ownership of Our Common Stock

An active trading market may not develop or continue to be liquid and the market price of shares of our common stock may be volatile.

Prior to the direct listing, there was no public market for any of our securities. Our common stock has been listed on Nasdaq only for a limited period of time, and an active market for our common stock may not develop or be sustained after the listing, which could depress the market price of shares of our common stock and could affect the ability of our stockholders to sell our common stock. In the absence of an active public trading market, investors may not be able to liquidate their investments in our common stock. An inactive market may also impair our ability to raise capital by selling shares of our common stock, our ability to motivate our employees through equity incentive awards and our ability to acquire other companies, products or technologies by using shares of our common stock as consideration.

Since our listing on Nasdaq, the market price and trading volume of our common stock have been, and may continue to be, highly volatile, including within a single trading day. Such volatility could result in substantial losses for purchasers of our common stock. For example, on October 8, 2025, the first day of trading on Nasdaq, the price of our common stock fluctuated between an intraday high of $10.00 and an intraday low of $6.23, on trading volume of approximately 219,124 shares. We cannot predict if or when similar volatility will occur or how long such conditions may persist.

The public price of our common stock following the listing may continue to be subject to wide fluctuations in response to the risk factors described in this Quarterly Report and others beyond our control, including:

• changes in the industries in which we operate;
• variations in our operating performance and the performance of our competitors in general;
• actual or anticipated fluctuations in our quarterly or annual operating results;
• publication of research reports by securities analysts about us or our competitors or our industry;
• the public’s reaction to our press releases, our other public announcements and our filings with the SEC;
• our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market;
• additions and departures of key team members and personnel;
• changes in laws and regulations affecting our business;
• commencement of, or involvement in, litigation involving us;
• changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;
• the volume of shares of our common stock available for public sale; and
• general economic and political conditions such as recessions, interest rates, fuel prices, foreign currency fluctuations, international tariffs, social, political and economic risks and acts of war or terrorism.

In addition, securities exchanges have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies have fluctuated in a manner often unrelated to the operating performance of those companies. These fluctuations may be even more pronounced in the trading market for our common stock shortly following the listing of our common stock on Nasdaq as a result of the supply and demand forces described above. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and harm our business, results of operations and financial condition.

Risks Related to the Committed Equity Financing

We cannot predict the number of shares we may sell to GEM under the GEM Purchase Agreement, the prices at which such shares may be sold, or the actual proceeds we will receive, and any sales could cause substantial dilution to our stockholders.

On August 29, 2025, we entered into the GEM Purchase Agreement with GEM, which was further amended by a side letter dated as of September 24, 2025, pursuant to which GEM has committed to purchase up to $85.0 million of our common stock at our sole discretion, subject to certain limitations and conditions set forth in the GEM Purchase Agreement. We may sell shares to GEM from time to time by delivering drawdown notices, and GEM will purchase shares at a price equal to 90% of the average daily closing price of our stock over the 15 consecutive trading days beginning on the date of such drawdown, provided that such purchase price shall not be less than $1.00 per share and provided further that any requested drawdown may not exceed 300% of the average daily trading volume of our common stock during the 15 trading days immediately preceding the notice. In addition, we may issue an initial draw down notice to GEM for an amount not to exceed $10.0 million on October 29, 2025, provided that GEM reserves the right to subscribe for between 50% and 200% of such initial draw down amount. In connection with the GEM Purchase Agreement, on October 8, 2025, we also issued GEM a warrant to purchase a number of shares of our common stock equal to 4.0% of our fully diluted equity interests outstanding as of that date at an exercise price of $5.03 per share, subject to adjustments provided under the GEM Warrant.

Because the purchase price per share to be paid by GEM for the common stock will fluctuate based on the market prices of our common stock at the time we elect to sell shares pursuant to the GEM Purchase Agreement, it is not possible for us to predict, prior to any such sales, the number of shares, the purchase price per share, or the aggregate gross proceeds that we will receive under the GEM Purchase Agreement.

On October 29, 2025, a registration statement on Form S-1 became effective, registering for resale, up to 7,000,000 shares of Common Stock issuable pursuant to the GEM Purchase Agreement. Although the GEM Purchase Agreement provides that we shall, in our discretion, from time to time and during the term of the GEM Purchase Agreement, direct GEM to purchase shares from us in one or more purchases under the GEM Purchase Agreement, for a maximum aggregate purchase price of up to $85.0 million, only 7,000,000 shares of common stock are being registered for resale under the registration statement. However, the market prices of shares of our common stock may fluctuate from time to time and, as a result, the actual purchase prices to be paid by GEM for our shares of common stock that we direct GEM to purchase under the GEM Purchase Agreement also may fluctuate significantly based on the market price of our common stock.

Accordingly, if we decide to issue and sell to GEM under the GEM Purchase Agreement more than the 7,000,000 shares being registered for resale under the registration statement in order to receive additional proceeds (which we may elect to do, at our sole discretion, up to aggregate gross proceeds of $85.0 million), we must first file with the SEC one or more additional registration statements or post-effective amendments to registration statement already filed to register the resale under the Securities Act by GEM of any such additional common stock we wish to sell from time to time under the GEM Purchase Agreement, which the SEC must declare effective before we may elect to sell any such additional shares. Any issuance and sale by us under the GEM Purchase Agreement of a substantial amount of common stock in addition to the 7,000,000 shares registered for resale could cause additional substantial dilution to our shareholders. The number of shares of common stock ultimately offered for sale by GEM is dependent upon the number of shares, if any, we ultimately elect to sell to GEM under the GEM Purchase Agreement.