What changed in this filing

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Item 1. Financial Statements

2025-11-14 compared with 2025-08-13 · 339 added, 276 removed, 489 unchanged (56% of the section changed)

1 unchanged sentence

THERAPEUTICS, INC.

June 30, 2025

December 31, 2024

September 30,

Cash and cash equivalents

1 unchanged sentence

Liabilities and Stockholders’ Equity:

Accounts payable

Accrued and other current liabilities

Accounts payable (including related party amounts of $ 185,300 and $ 0 , respectively)

Accrued and other current liabilities (including related party amounts of $ 28,600 and $ 0 , respectively)

Total liabilities

1 unchanged sentence

Stockholders’ Equity:

Preferred Stock, par value $ 0.0001 per share, 10,000,000 shares authorized;

no shares issued or outstanding as of September 30, 2025 and December 31, 2024

Common Stock, par value $ 0.0001 per share, 250,000,000 shares authorized;

637,757 shares issued and outstanding as of June 30, 2025;

844,457 shares issued and outstanding as of September 30, 2025;

251,725 shares issued and outstanding as of December 31, 2024

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For the three months ended

For the six months ended

September 30,

the nine months ended

September 30,

Operating expenses:

Research and development

General and administrative

Selling, general and administrative (including related party amounts of $ 334,050 , $ 0 , $ 334,050 , and $ 0 , respectively)

Total operating expenses

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$ ( 69,680,019 )

Stock-based compensation

Issuance of abeyance shares

( 1,691,989 )

Balance at September 30, 2025

$ ( 71,372,008 )

accompanying notes are an integral part of these financial statements.

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$ ( 56,522,140 )

Stock-based compensation

6 unchanged sentences

$ ( 59,351,246 )

Stock-based compensation

Issuance of pre-funded warrants and warrants, net of issuance costs

Issuance of Common Stock upon exercise of pre-funded warrants

Issuance of Common Stock from ATM sales, net of issuance costs

Issuance of abeyance shares

( 3,173,156 )

Balance at September 30, 2024

$ ( 62,524,402 )

accompanying notes are an integral part of these financial statements.

1 unchanged sentence

of Cash Flows

the six months ended June 30,

the nine months ended

September 30,

Cash flows from operating activities:

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Payment of prior period issuance costs

Issuance costs paid setting up ATM agreement

Proceeds from exercise of pre-funded warrants

6 unchanged sentences

Non-cash financing activities:

March 2025 Warrant Inducement issuance costs in accounts payable

Issuance of abeyance shares

May 2024 Warrant Reload issuance costs in accounts payable

Deferred financing costs included in accounts payable or accrued expenses

Issuance costs in accounts payable or accrued expenses

Supplemental disclosure:

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its name to Dermata Therapeutics, Inc.

The Company is a clinical-stage biotechnology company focused on the treatment of medical and

The Company is a development stage biotechnology company focused on the treatment of medical and

aesthetic skin conditions and diseases.

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any revenue or commercialized any product candidates.

As of June 30, 2025, cash and cash equivalents totaled $ 6.5 million and the Company

had an accumulated deficit of $ 69.7 million.

For the six months ended June 30, 2025, and the year ended December 31, 2024, the Company

used cash of $ 4.6 million and approximately $ 11.1 million, respectively, in operations.

The Company’s cash and cash equivalents

are expected to fund operations into the second quarter of 2026.

The Company anticipates that it will continue to incur net losses for

the foreseeable future.

As of September 30, 2025, cash and cash equivalents totaled $ 4.7 million and the

Company had an accumulated deficit of $ 71.4 million.

For the nine months ended September 30, 2025, and the year ended December 31, 2024,

the Company used cash of $ 6.4 million and approximately $ 11.1 million, respectively, in operations.

The Company’s cash and cash

equivalents are expected to fund operations into the second quarter of 2026.

Company anticipates that it will continue to incur net losses for at least the next twelve months from the date of this filing.

the Company plans to launch its first product candidate in mid-2026, it is uncertain when the Company will generate operating income

to sustain operations.

These factors raise substantial doubt about the Company’s ability to continue as a going concern for the

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The Company’s

principal uses of cash have included cash used in operations and payments for license rights.

The Company expects that the principal

uses of cash in the future will be for continuing operations, funding of research and development, conducting preclinical studies and

clinical trials, and general working capital requirements.

The Company expects that as research and development expenses continue to

grow, it will need to raise additional capital to sustain operations and research and development.

principal use of cash has been for operations, and the Company expects that the principal uses of cash in the future will

be for continuing operations, marketing and commercialization activities for current and future product candidates, funding of research

and development, conducting preclinical studies and clinical trials, and general working capital requirements.

The Company expects that

as marketing expenses continue to grow, it will need to raise additional capital to sustain operations.

Plan to Continue as a Going Concern

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generate significant cash from operations, management’s plans to obtain such resources for the Company include proceeds from offerings

of the Company’s equity securities or debt, or transactions involving product development, technology licensing or collaboration.

Management can provide no assurance that any sources of a sufficient amount of financing or collaboration agreements will be available

to the Company on favorable terms, if at all.

The Company’s ability to raise additional capital may be adversely impacted by potential

worsening of global economic conditions, potential future global pandemics or health crises, and the disruptions to, and volatility in,

the credit and financial markets in the United States.

Because of historical and expected operating losses and net operating cash flow

deficits, there is substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance

of the financial statements, which is not alleviated by management’s plans.

The accompanying financial statements have been prepared

assuming that the Company will continue as a going concern.

The financial statements do not include any adjustments to reflect the possible

future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from

the possible inability of the Company to continue as a going concern.

of the Company’s equity securities or debt, generating product revenue from sales of over the counter (“OTC”) products, or transactions involving product

development, technology licensing or collaboration.

Management can provide no assurance that any sources of a sufficient amount of financing

or collaboration agreements will be available to the Company on favorable terms, if at all.

The Company’s ability to raise additional

capital may be adversely impacted by potential worsening of global economic conditions, tariffs, potential future global pandemics or

health crises, and the disruptions to, and volatility in, the credit and financial markets in the United States.

Because of historical

and expected operating losses and net operating cash flow deficits, there is substantial doubt about the Company’s ability to continue

as a going concern for one year from the issuance of the financial statements, which is not alleviated by management’s plans.

accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

The financial statements

do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts

and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

of Presentation

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estimates and judgments, including those related to accrued research and development expenses, stock-based compensation, and equity instruments.

The Company bases its estimates on various

assumptions that it believes are reasonable under the circumstances.

Actual results may differ from these estimates under different assumptions

or conditions.

The Company bases its estimates on various assumptions that it believes are reasonable under the circumstances.

Actual results may differ

from these estimates under different assumptions or conditions.

segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief

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the Company’s chief operating decision maker view the Company’s operations and manage its business in one operating segment.

which is the business of developing and commercializing pharmaceutical candidates.

and Cash Equivalents

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Company uses a three-tier fair value hierarchy to prioritize the inputs used in the Company’s fair value measurements.

tiers include:

Level 1, defined as observable inputs such as quoted prices in active markets for identical assets;

Level 2, defined

as inputs other than quoted prices in active markets that are either directly or indirectly observable;

and Level 3, defined as

unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Company does not have any Level 2 or Level 3 instruments.

The Company believes the carrying amount of cash and cash equivalents,

accounts payable and accrued expenses approximate their estimated fair values due to the short-term nature of these assets and

Level 2, defined as inputs

other than quoted prices in active markets that are either directly or indirectly observable;

and Level 3, defined as unobservable inputs

in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The Company believes the carrying

amount of cash and cash equivalents, accounts payable and accrued expenses approximate their estimated fair values due to the short-term

nature of these assets and liabilities.

Additionally, the Company’s warrants are equity classified and thereby Level 1 when determining

See further discussion in Note 4 – Equity Securities.

income consists of interest income earned on cash and cash equivalents from interest bearing demand accounts.

costs related to obtaining and maintaining patent protection in both the United States and other countries are expensed as incurred.

Patents costs are classified as general and administrative expenses.

and Development

and development costs consist of expenses incurred in connection with the development of the Company’s product candidates.

expenses include expenses incurred under agreements with contract research organizations, manufacturing and supply scale-up expenses

and the cost of acquiring and manufacturing preclinical and clinical trial supply, outsourced laboratory services, including materials

and supplies used to support the Company’s research and development activities, and payments made for license fees and milestones

that have not been demonstrated to have commercial value.

Such costs are expensed in the periods in which they are incurred.

payments and milestone payments for licensed technology are expensed as research and development as incurred or when the milestone is

achieved or is determined to be probable of being achieved.

Advanced payments for goods or services to be received in the future for

research and development activities are recorded as prepaid expenses and expensed as the related goods are received or services are performed.

Patents costs are classified as selling, general and administrative expenses.

and Development Costs

and development costs are expensed in the period incurred.

Research and development costs primarily consist of salaries and related expenses

for personnel, stock-based compensation expense, external research and development costs incurred under agreements with contract research

organizations, investigative sites and consultants to conduct clinical studies, costs related to compliance with regulatory requirements,

costs related to manufacturing the Company’s product candidates for clinical trials, and other allocated expenses.

for research and development activities are based on the terms of the individual agreements, which may differ from the pattern of costs

incurred, and payments made in advance of performance are reflected in the accompanying balance sheets as prepaid expenses.

records accruals for estimated costs incurred for ongoing research and development activities.

When evaluating the adequacy of the accrued

liabilities, the Company analyzes progress of the services, including the phase or completion of events, invoices received and contracted

The Company uses judgments and estimates to determine the prepaid or accrued balances at the end of any reporting period.

results could differ from the Company’s estimates.

General and Administrative Costs

general and administrative costs are expensed in the period incurred.

Selling, general and administrative costs primarily consist of

marketing-related expenses, salaries and related expenses for personnel, including stock-based compensation, as well as legal fees incurred

relating to corporate and patent matters, professional fees incurred for accounting, auditing, tax, and other consulting services, and

insurance costs.

Company is a C-corporation and accounts for income taxes under the asset and liability method, which requires the recognition of deferred

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of Potentially Diluted Basic Earnings Per Share

Common Stock options

Common Stock warrants

September 30,

Common Stock options outstanding

Common Stock warrants outstanding

Total potentially dilutive securities

Accounting Pronouncements

the six months ended June 30, 2025, the Company has reviewed recent accounting standards and identified the following as relevant to

the nine months ended September 30, 2025, the Company has reviewed recent accounting standards and identified the following as relevant

to the Company.

December 2023, the FASB issued ASU No.

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Improvements to Income Tax Disclosures (“ASU 2023-09”) .

ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate

reconciliation as well as information on income taxes paid.

ASU 2023-09 is effective for public entities with annual periods

beginning after December 15, 2024, with early adoption permitted.

ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information

on income taxes paid.

ASU 2023-09 is effective for public entities with annual periods beginning after December 15, 2024, with early

adoption permitted.

The Company adopted ASU 2023-09 as of January 1, 2025;

there was no impact on its financial statements and income tax footnote.

however, there was no impact on its financial statements and

income tax footnote.

November 2024, the FASB issued ASU No.

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Schedule of Balance Sheet Details

September 30,

Prepaid expenses and other current assets:

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Equity Securities

summary of the Company’s equity securities as of June 30, 2025, is as follows:

summary of the Company’s equity securities as of September 30, 2025, is as follows:

of Equity Securities

3 unchanged sentences

Total equity securities

March 27, 2025, the Company entered into an inducement offer letter agreement (the “March 2025 Inducement Letter”) with a

holder (the “Holder”) of certain of its existing warrants to purchase an aggregate of 483,447 shares of the Company’s

common stock.

Such existing warrants were made up of (i) certain of the May 17, 2024 (the “May 2024 Warrants”), which were

issued in two separate series, having an exercise price of $ 49.10 per share, and (ii) the September 16, 2024, which were issued in two

separate series, having an exercise price of $ 15.80 per share (the “September 2024 Warrants” and together with the May 2024

Warrants, the “Existing Warrants”).

Pursuant to the March 2025 Inducement Letter, the Holder agreed to exercise for cash

its Existing Warrants at a reduced exercise price of $ 12.84 per share in consideration for the Company’s agreement to issue in

a private placement (i) new Series A common stock purchase warrants (the “New Series A Warrants”) to purchase up to 498,080

shares of Common Stock (the “New Series A Warrant Shares”) and (ii) new Series B common stock purchase warrants (the “New

Series B Warrants” and together with the New Series A Warrants, the “New Warrants”) to purchase up to 468,813 shares

of Common Stock (the “New Series B Warrant Shares” and together with the New Series A Warrant Shares, the “New Warrant

The New Warrants were exercisable subject to stockholder approval, which the Company received at a stockholder meeting

on July 15, 2025.

The Company received net proceeds of approximately $ 5.7 million from the exercise of the Existing Warrants by the Holder,

after deducting financial advisor fees and other offering expenses payable by the Company.

As of June 30, 2025, the Holder has received

94,747 Common Shares, with the balance of 388,700 shares held in abeyance, to be released to the Holder at the Holder’s request.

March 27, 2025, the Company entered into an inducement offer letter agreement (the “March 2025 Inducement Letter”) with

a holder (the “Holder”) of certain of its existing warrants to purchase an aggregate of 483,447

shares of the Company’s Common Stock.

Such existing warrants were made up of (i) certain of the May 17, 2024 warrants (the

“May 2024 Warrants”), which were issued in two separate series, having an exercise price of $ 49.10

per share, and (ii) the September 16, 2024 warrants, which were issued in two separate series, having an exercise price of $ 15.80

per share (the “September 2024 Warrants” and together with the May 2024 Warrants, the “Existing Warrants”).

Pursuant to the March 2025 Inducement Letter, the Holder agreed to exercise for cash its Existing Warrants at a reduced exercise

price of $ 12.84

per share in consideration for the Company’s agreement to issue in a private placement (i) new Series A common stock purchase

warrants (the “New Series A Warrants”) to purchase up to 498,080

shares of Common Stock (the “New Series A Warrant Shares”) and (ii) new Series B common stock purchase warrants (the

“New Series B Warrants” and together with the New Series A Warrants, the “New Warrants”) to purchase up to 468,813

shares of Common Stock (the “New Series B Warrant Shares” and together with the New Series A Warrant Shares, the

“New Warrant Shares”).

The New Warrants were exercisable subject to stockholder approval, which the Company received at

a stockholder meeting on July 15, 2025.

The Company received net proceeds of approximately $ 5.7

million from the exercise of the Existing Warrants by the Holder, after deducting financial advisor fees and other offering expenses

payable by the Company.

As of September 30, 2025, the Holder has received 301,447

Common Shares, with the balance of 182,000

shares held in abeyance, to be released to the Holder at the Holder’s request.

January 21, 2025, the Company closed a private placement (the “January 2025 PIPE”) priced at the market under Nasdaq rules,

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In connection with the January 2025 PIPE,

the Company entered into a registration rights agreement with the investor, pursuant to which the Company agreed to prepare and file

the Company entered into a registration rights agreement with the investors, pursuant to which the Company agreed to prepare and file

a registration statement with the SEC registering the resale of the shares of Common Stock underlying the securities sold in the January

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During the first quarter of 2025, all of the January 2025 Pre-Funded Warrants were

As of June 30, 2025, no January 2025 Pre-Funded Warrants remained outstanding.

As of September 30, 2025, no January 2025 Pre-Funded Warrants remained outstanding.

September 17, 2024, the Company closed a private placement (the “September 2024 PIPE”) priced at the market under Nasdaq

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As of December 31, 2024, 90,500 September 2024 Pre-Funded Warrants remained outstanding, which were exercised during the first quarter

As of June 30, 2025, no September 2024 Pre-Funded Warrants remained outstanding.

As of September 30, 2025, no September 2024 Pre-Funded Warrants remained outstanding.

June 2024, the Company entered into an At The Market Offering Agreement (the “ATM Agreement”) with a sales agent (the “Sales

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issuer costs and other expenses related to setting up and issuing shares from the Company’s ATM.

As of June 30, 2025, the Company

does not have any remaining capacity under its ATM Agreement.

May 21, 2024, the Company closed on inducement agreements (the “May 2024 Inducement”) with certain holders (the “Holders”)

of certain of the Company’s existing warrants to purchase up to an aggregate of 51,632 shares of the Company’s Common Stock,

issued to the Holders on (i) May 26, 2023 (the “May 2023 Warrants”), having an exercise price of $ 324.00 per share, and (ii)

November 2023 New Warrants (as defined below), which were issued in two separate series, each having an exercise price of $ 97.67 per

share (together with the May 2023 Warrants, the “May 2024 Existing Warrants”).

Pursuant to the May 2024 Inducement, the Holders

agreed to exercise for cash their May 2024 Existing Warrants at a reduced exercise price of $ 51.60 per share in consideration for the

Company’s agreement to issue in a private placement (i) new Series A Common Stock purchase warrants (the “New May 2024 Series

A Warrants”) to purchase up to 60,117 shares of Common Stock, and (ii) new Series B Common Stock purchase warrants (the “New

May 2024 Series B Warrants” and together with the New May 2024 Series A Warrants, the “New May 2024 Warrants”) to purchase

up to 43,149 shares of Common Stock.

The Company received net proceeds of approximately $ 2.3 million from the exercise of the May 2024

Existing Warrants by the Holders, after deducting placement agent fees and other offering expenses payable by the Company.

On November 7, 2025, the

Company filed a prospectus supplement, pursuant to which the Company may offer and sell, from time to time through Sales Agent,

shares of its Common Stock for aggregate proceeds of an additional $ 1,792,315

(upon the terms and subject to the conditions and limitations set forth in the ATM Agreement).

As of the date of this filing, the Company has not sold any additional shares under the ATM Agreement.

May 21, 2024, the Company closed on inducement agreements (the “May 2024 Inducement”) with certain holders (the

“May 2024 Holders”) of certain of the Company’s existing warrants to purchase up to an aggregate of 51,632

shares of the Company’s Common Stock, issued to the May 2024 Holders on (i) May 26, 2023 (the “May 2023

Warrants”), having an exercise price of $ 324.00

per share, and (ii) November 20, 2023, which were issued in two separate series, each having an exercise price of $ 97.67

per share (together with the May 2023 Warrants, the “May 2024 Existing Warrants”).

Pursuant to the May 2024 Inducement,

the May 2024 Holders agreed to exercise for cash their May 2024 Existing Warrants at a reduced exercise price of $ 51.60

per share in consideration for the Company’s agreement to issue in a private placement (i) new Series A Common Stock purchase

warrants (the “New May 2024 Series A Warrants”) to purchase up to 60,117

shares of Common Stock, and (ii) new Series B Common Stock purchase warrants (the “New May 2024 Series B Warrants” and

together with the New May 2024 Series A Warrants, the “New May 2024 Warrants”) to purchase up to 43,149

shares of Common Stock.

The Company received net proceeds of approximately $ 2.3

million from the exercise of the May 2024 Existing Warrants by the Holders, after deducting placement agent fees and other offering

expenses payable by the Company.

to the May 2024 Inducement, during July 2024, the balance of 26,700 abeyance shares related to the May 2024 Warrant Inducement were released

to the investor, leaving no further abeyance shares outstanding as of December 31, 2024.

the Company has 10,000,000

shares of preferred stock authorized with a par value of $ 0.0001 , no

shares of preferred stock are issued or outstanding as of June 30, 2025, or December 31, 2024, respectively.

the Company has 10,000,000 shares of preferred stock authorized with a par value of $ 0.0001 , no shares of preferred stock are issued

or outstanding as of September 30, 2025, or December 31, 2024.

of Warrants Outstanding

warrants outstanding as of June 30, 2025, are exercisable into 1,238,949 shares of Common Stock which had a fair value of $ 5.85 per share,

based on the closing trading price on June 30, 2025.

The aggregate intrinsic value of warrants outstanding as of June 30, 2025, is calculated

as the difference between the exercise price of the warrants and the closing market price of the Company’s Common Stock on that

The intrinsic value of warrants outstanding as of June 30, 2025, was zero .

warrants outstanding as of September 30, 2025, are exercisable into 1,238,949 shares of Common Stock which had a fair value of $ 5.02

per share, based on the closing trading price on September 30, 2025.

The aggregate intrinsic value of warrants outstanding as of September

30, 2025, is calculated as the difference between the exercise price of the warrants and the closing market price of the Company’s

Common Stock on that date.

The intrinsic value of warrants outstanding as of September 30, 2025, was zero .

of Information of Outstanding Warrants

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Outstanding as of

June 30, 2025

December 31, 2024

September 30,

Exercise Price

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Total warrants outstanding

March 2025, the Company entered into the March 2025 Inducement Letter with a Holder who agreed to exercise 483,447 warrants to purchase

Common Stock at a reduced exercise price of $ 12.84 per share in exchange for 498,080 New Series A Warrants and 468,813 New Series B Warrants

with an exercise price of $ 12.84 per share.

The March 2025 Inducement Letter, which resulted in the lowering of the exercise price of

the Existing Warrants and the issuance of the New Warrants, is considered a modification of the Existing Warrants under the guidance

The modification is consistent with the equity issuance classification under that guidance as the reason for the modification

was to induce the holders of the Existing Warrants to cash exercise their warrants, which raised equity capital and generated net proceeds

of approximately $ 5.7 million.

As the Existing Warrants and the New Warrants were classified as equity instruments before and after the

exchange, and as the exchange is directly attributable to an equity offering, the Company recognized the effect of the modification of

approximately $ 4.9 million as an equity issuance cost.

May 2024, the Company completed the May 2024 Inducement with the Holders who agreed to exercise 51,632 warrants to purchase Common Stock

at a reduced exercise price of $ 51.60 per share in exchange for 60,117 New May 2024 Series A Warrants and 43,149 New May 2024 Series

B Warrants with an exercise price of $ 49.10 per share.

The May 2024 Inducement, which resulted in the lowering of the exercise price

of the May 2024 Existing Warrants and the issuance of the May 2024 New Warrants, is considered a modification of the May 2024 Existing

Warrants under the guidance ASC 815-40.

The modification is consistent with the equity issuance classification under that guidance as

the reason for the modification was to induce the holders of the May 2024 Existing Warrants to cash exercise their warrants, which raised

equity capital and generated net proceeds of approximately $ 2.3 million.

As the May 2024 Existing Warrants and the May 2024 New Warrants

were classified as equity instruments before and after the exchange, and as the exchange is directly attributable to an equity offering,

the Company recognized the effect of the modification of approximately $ 1.5 million as an equity issuance cost.

March 2025, the Company entered into the March 2025 Inducement Letter with a Holder who agreed to exercise 483,447

warrants to purchase Common Stock at a reduced exercise price

per share in exchange for 498,080

New Series A Warrants and 468,813

New Series B Warrants with an exercise price of $ 12.84

The March 2025 Inducement Letter, which resulted

in the lowering of the exercise price of the Existing Warrants and the issuance of the New Warrants, is considered a modification of

the Existing Warrants under the guidance ASC 815-40.

The modification is consistent with the equity issuance classification under that

guidance as the reason for the modification was to induce the holders of the Existing Warrants to cash exercise their warrants, which

raised equity capital and generated net proceeds of approximately $ 5.7

As the Existing Warrants and the New Warrants were

classified as equity instruments before and after the exchange, and as the exchange is directly attributable to an equity offering, the

Company recognized the effect of the modification of approximately $ 4.9

million as an equity issuance cost.

May 2024, the Company completed the May 2024 Inducement with the May 2024 Holders who agreed to exercise 51,632 warrants

to purchase Common Stock at a reduced exercise price of $ 51.60 per

share in exchange for 60,117 New

May 2024 Series A Warrants and 43,149 New

May 2024 Series B Warrants with an exercise price of $ 49.10 per

The May 2024 Inducement, which resulted in the lowering of the exercise price of the May 2024 Existing Warrants and the

issuance of the May 2024 New Warrants, is considered a modification of the May 2024 Existing Warrants under the guidance ASC 815-40.

The modification is consistent with the equity issuance classification under that guidance as the reason for the modification was to

induce the holders of the May 2024 Existing Warrants to cash exercise their warrants, which raised equity capital and generated net

proceeds of approximately $ 2.3 million.

As the May 2024 Existing Warrants and the May 2024 New Warrants were classified as equity instruments before and after the exchange,

and as the exchange is directly attributable to an equity offering, the Company recognized the effect of the modification of

approximately $ 1.5 million

as an equity issuance cost.

Placement Agent Warrants

The Company works with H.C.

& Co., LLC (the “Placement Agent”) to act as its investment bank for certain financing transactions.

Per the terms of

the Company’s engagement letter with the Placement Agent, the Placement Agent receives compensation in the form of fees and reimbursed

expenses, as well as the issuance to the Placement Agent, or its designees, warrants to purchase Common Stock of the Company equal to

7.0% of aggregate number of Common Stock issued in a related to the financing at an exercise price equal to 125% of the financing price.

Equity Incentive Plan

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and one year for directors of the Company’s Board and consultants.

of June 30, 2025, there remain 13 shares reserved for issuance under the 2021 Plan, as amended.

of September 30, 2025, there remain 13 shares reserved for issuance under the 2021 Plan, as amended.

Option Award Activity

summary of the Company’s 2021 Plan stock option activity is as follows:

of Stock Option Activity

Balance at December 31, 2024

Options granted

Options exercised

Options cancelled

Balance at September 30, 2025

Options exercisable at September 30, 2025

January 2024, the Board unanimously approved to provide employees and directors of the Company the opportunity to cancel outstanding,

out-of-the-money, stock options without consideration, in accordance with an option cancellation agreement.

Accordingly, 674 of the 675

stock options outstanding as of December 31, 2023, were cancelled in February 2024.

accordance with accounting guidance provided in ASC 718, since the stock option cancellations were not accompanied by a concurrent grant,

or offer to grant, a replacement award, any unrecognized compensation cost was recognized at the cancellation date.

Accordingly, the

Company recognized stock-based compensation expense of $ 568,372 resulting from the stock option cancellation during the first quarter

aggregate intrinsic value of options outstanding and exercisable as of September 30, 2025, is calculated as the difference between the

exercise price of the underlying options and the closing market price of the Company’s Common Stock on September 30, 2025, which

was $ 5.02 per share.

The intrinsic value of options outstanding and exercisable as of September 30, 2025, was zero.

of September 30, 2025, the total unrecognized compensation cost related to stock options was approximately $ 0.2 million and the weighted

average period over which this cost is expected to be recognized is 2.7 years.

Compensation Expense

general, stock-based compensation is allocated to research and development expense or selling, general and administrative expense according

to the classification of cash compensation paid to the employee, director, or consultant to whom the stock award was granted.

following table summarizes the total stock-based compensation expense related to stock options included in the Company’s statements

of operations:

of Stock Based Compensation Expense

Three Months Ended

September 30,

Nine Months Ended

September 30,

Research and development

Selling, general and administrative

Stock-based compensation expense

Value Measurement

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yield of zero.

The Company granted stock options in January 2025 and 2024.

no stock option grants during the second quarter of 2025 or 2024.

The following table presents the weighted-average assumptions used for

stock options granted during the following periods:

Company granted stock options in January 2025 and 2024.

There were no stock option grants during the second or third quarters of 2025

The following table presents the weighted-average assumptions used for stock options granted during the following periods:

of Weighted Average Assumptions used for Stock Options

Six Months Ended June 30,

Nine Months Ended

September 30,

Grant date fair value

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Expected volatility

Compensation Expense

general, stock-based compensation is allocated to research and development expense or general and administrative expense according to

the classification of cash compensation paid to the employee, director, or consultant to whom the stock award was granted.

following table summarizes the total stock-based compensation expense related to stock options included in the Company’s statements

of operations:

of Stock Based Compensation Expense

Three Months Ended June 30,

Six Months Ended June 30,

Research and development

General and administrative

Stock-based compensation expense

Option Award Activity

summary of the Company’s 2021 Plan stock option activity is as follows:

of Stock Option Activity

Balance at December 31, 2024

Options granted

Options exercised

Options cancelled

Balance at June 30, 2025

Options exercisable at June 30, 2025

January 2024, the Board unanimously approved to provide employees and directors of the Company the opportunity to cancel outstanding,

out-of-the-money, stock options without consideration, in accordance with an option cancellation agreement.

Accordingly, 674 of the 675

stock options outstanding as of December 31, 2023, were cancelled in February 2024.

accordance with accounting guidance provided in ASC 718, since the stock option cancellations were not accompanied by a concurrent grant,

or offer to grant, a replacement award, any unrecognized compensation cost was recognized at the cancellation date.

Accordingly, the

Company recognized stock-based compensation expense of $ 568,372 resulting from the stock option cancellation during the first quarter

aggregate intrinsic value of options outstanding and exercisable as of June 30, 2025, is calculated as the difference between the exercise

price of the underlying options and the closing market price of the Company’s Common Stock on June 30, 2025, which was $ 5.85 per

The intrinsic value of options outstanding and exercisable as of June 30, 2025, was zero .

of June 30, 2025, total unrecognized compensation cost related to stock options was approximately $ 0.3 million and the weighted average

period over which this cost is expected to be recognized is 2.7 years.

Commitments and Contingencies

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quarter of 2025.

During the six months ended June 30, 2025, the Company recognized $ 0.7 million in research and development expense for

the STAR-1 clinical trial.

During the three and six months ended June 30, 2024, the Company recognized $ 1.6 million and $ 2.4 million,

respectively, in research and development expense for the STAR-1 clinical trial.

The STAR-1 clinical trial is completed, and no further

expenses are expected to be incurred.

a result of Russia’s invasion of Ukraine, the United States, the United Kingdom, and the European Union governments, among others,

have developed coordinated sanctions and export-control measure packages against Russian individuals and entities.

The Company is currently

a party to an exclusive supply agreement for the supply of the Spongilla raw material used in XYNGARI™ and DMT410 product

During the nine months ended September 30, 2025, the Company recognized $ 0.7 million in research and development expense

for the STAR-1 clinical trial.

During the three and nine months ended September 30, 2024, the Company recognized $ 1.8 million and $ 4.2

million, respectively, in research and development expense for the STAR-1 clinical trial.

The STAR-1 clinical trial was completed in the

second quarter of 2025, and no further expenses are expected to be incurred.

a result of Russia’s invasion of Ukraine, the United States has developed coordinated sanctions and export-control measure

packages against Russian individuals and entities.

The Company is currently a party to an exclusive supply agreement for the supply

of the Spongilla raw material used in product candidates.

The counterparty to this supply agreement is a Russian entity.

The imposition of enhanced export controls and economic sanctions

on transactions with Russia and Russian entities by the United States, the United Kingdom, and/or the European Union could prevent the

Company from performing under this existing contract or any future contract it may enter or may prevent the Company from remitting payment

for raw material purchased from the Company’s supplier.

The Company has received multiple shipments of raw material from its supplier

subsequent to the implementation of export controls and sanctions, containing additional quantities of Spongilla raw material,

which will provide the Company with sufficient quantities of Spongilla to initiate and complete two Phase 3 studies in moderate-to-severe

acne and support filing a new drug application for XYNGARI™ in acne upon the successful completion of two Phase 3 studies.

on the extent and breadth of new sanctions or export controls that may be imposed against Russia, otherwise or as a result of the impact

of the war in Ukraine, it is possible that the Company’s ability to obtain additional supply of the Spongilla raw material

used in XYNGARI™ and DMT410 product candidates could be negatively impacted, which could adversely affect its business, results

of operations, and financial condition.

imposition of enhanced export controls and economic sanctions on transactions with Russia and Russian entities by the United States could prevent the Company from performing under this existing contract or any future

contract it may enter or may prevent the Company from remitting payment for raw material purchased from the Company’s

The Company has received multiple shipments of raw material from its supplier subsequent to the implementation of export

controls and sanctions.

Depending on the extent and breadth of new sanctions, export controls, or tariffs that may be imposed

against Russia, otherwise or as a result of the impact of the war in Ukraine, it is possible that the Company’s ability to

obtain additional supply of the Spongilla raw material could be negatively impacted, which could adversely affect its

business, results of operations, and financial condition.

March 31, 2017, the Company entered into a license agreement, as amended (the “License Agreement”) with Villani, Inc.

Villani has granted the Company an exclusive, sub-licensable, royalty-bearing license (the “License”) under the Licensed

Patents (as defined in the License Agreement), to formulate, develop, seek regulatory approval for, make or sell products that contain

Spongilla lacustris (alone or in combination with other active or inactive ingredients) for the treatment of diseases, disorders

and conditions of the skin, including but not limited to acne, rosacea, psoriasis, atopic dermatitis, seborrheic dermatitis, actinic

keratosis and eczema that were developed using certain licensed know-how (“Licensed Products”).

The Company is responsible

for the development (including manufacturing, packaging, non-clinical studies, clinical trials and obtaining regulatory approval and

commercialization (including marketing, promotion, distribution, etc.)) for all Licensed Products.

The original License Agreement was

amended in 2019, and pursuant to the amended License Agreement, the Company was required to make future milestone payments to Villani

in an aggregate amount of up to $ 20.25 million upon the achievement of specified development and sales milestones, payable in cash or

in equity, at the option of Villani, as well as single-digit royalty payments on net sales.

On July 30, 2021, the Company further amended

the License Agreement in the Second Amendment to the License and Settlement Agreement (the “Second Amendment”).

to the Second Amendment, the Company is required to make future milestone payments to Villani in an aggregate amount of up to $ 40.5 million

upon the achievement of specified development and sales milestones, payable in cash or in equity, at the option of Villani, as well as

single-digit royalty payments on net sales.

The Second Amendment includes customary terms relating to, among others, indemnification,

intellectual property protection, confidentiality, remedies, and warranties.

As of June 30, 2025, the Company evaluated the likelihood

of the Company achieving the specified milestones and determined that the likelihood is not yet probable and as such no accrual of these

payments is required as of June 30, 2025.

(“Villani”) whereby Villani has granted the Company an exclusive, sub-licensable, royalty-bearing license (the

“License”) under the Licensed Patents (as defined in the License Agreement), to formulate, develop, seek regulatory

approval for, make or sell pharmaceutical products that contain Spongilla lacustris (alone or in combination with other

active or inactive ingredients) for the treatment of diseases, disorders and conditions of the skin, including but not limited to

acne, rosacea, psoriasis, atopic dermatitis, seborrheic dermatitis, actinic keratosis and eczema that were developed using certain

licensed know-how (“Licensed Products”).

The Company is responsible for the development (including manufacturing,

packaging, non-clinical studies, clinical trials and obtaining regulatory approval and commercialization (including marketing,

promotion, distribution, etc.)) for all Licensed Products.

The original License Agreement was amended in 2019, and pursuant to the

amended License Agreement, the Company has agreed to make future milestone payments to Villani in an aggregate amount of up to

$ 20.25 million

upon the achievement of specified development and sales milestones, payable in cash or in equity, at the option of Villani, as well

as single-digit royalty payments on net sales.

On July 30, 2021, the Company further amended the License Agreement in the Second

Amendment to the License and Settlement Agreement (the “Second Amendment”).

Pursuant to the Second Amendment, the

Company agreed to make future milestone payments to Villani in an aggregate amount of up to $ 40.5 million

upon the achievement of specified development and sales milestones, payable in cash or in equity, at the option of Villani, as well

as single-digit royalty payments on net sales.

The Second Amendment includes customary terms relating to, among others,

indemnification, intellectual property protection, confidentiality, remedies, and warranties.

As of September 30, 2025, the Company

evaluated the likelihood of the Company achieving the specified milestones and determined that the likelihood is not yet probable

and as such no accrual of these payments is required as of September 30, 2025.

On November 10, 2025, the Company received a notice

of material breach and demand for cure (the “Notice”) from Villani alleging that the Company breached the License

Agreement as a result of the Company’s recent strategic shift to focus on over-the-counter pharmaceutical products.

alleges that the Company (i) failed to use Commercially Reasonable Efforts (as defined in the License Agreement) to pursue a

prescription product business, (ii) failed to provide Villani with advance notice of certain submissions to regulatory authorities,

(iii) used Licensed Know-How (as defined in the License Agreement) outside of the Field (as defined in the License Agreement) and

(iv) the Company’s anticipated OTC kits do not qualify as Licensed Products (as defined in the License Agreement).

November 11, 2025, Villani delivered an additional notice to the Company (the “Additional Notice”) whereby Villani

requested (i) the reversion and assignment of all assets regarding Spongilla -based products back to Villani, (ii) that the

Company preserve all Spongilla inventory, and (iii) the Company preserve all documents, data, and tangible materials related

to Spongilla .

The Company disputes the allegations contained in the Notice and the Additional Notice and is engaged in

discussions with Villani to resolve such disputes.

If the parties are unable to reach a resolution, then either party, pursuant to

the License Agreement, may file for arbitration or termination of the License Agreement.

To date, the License Agreement has not been

terminated and continues in full force.

At this point in time, the Company is unable to predict the final outcome of this

Collaboration

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The Company has agreed to sponsor, conduct, and fund the Phase 2a clinical trial;

As of June 30, 2025, the Company has not

incurred any expenses related to the Revance Clinical Trial Agreement.

however, no activities have been initiated

by either party.

As of September 30, 2025, the Company has not incurred any expenses related to the Revance Clinical Trial Agreement.

Rights Agreement

2 unchanged sentences

The Registration Rights Agreement provides that the Company

shall file a registration statement covering the resale of all of the registrable securities (as defined in the Registration Rights Agreement)

shall file a registration statement covering the resale of all the registrable securities (as defined in the Registration Rights Agreement)

with the SEC.

7 unchanged sentences

aggregate subscription amount.

As of June 30, 2025, the Company determined that the likelihood of the Company incurring liquidated damages

pursuant to the Registration Rights Agreement is remote, and as such, no accrual of these payments is required as of June 30, 2025.

As of September 30, 2025, the Company determined that the likelihood of the Company incurring liquidated

damages pursuant to the Registration Rights Agreement is remote, and as such, no accrual of these payments is required as of September

the normal course of business, the Company may be involved in legal proceedings or threatened legal proceedings.

21 unchanged sentences

is not presented.

following table summarizes the segment’s financial information including the Company’s significant segment expenses:

the Company’s September 2025 strategic pivot to prioritize the development and distribution of OTC products, the segment information

disclosure has been recast for all periods presented to reflect this change.

The following table summarizes the segment’s financial

information including the Company’s significant segment expenses:

of Segment Financial Information

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Research and development

Chemistry, manufacturing and controls

Personnel related

Total research and development

General and administrative

Selling, general and administrative

Public company compliance

Personnel related

Total selling, general and administrative

Interest income

3 unchanged sentences

$ ( 9,136,523 )

Related Party Transaction

connection with the January 2025 PIPE financing, certain Company insiders, including the Company’s CEO, Chief Financial Officer

and certain members of the Company’s board of directors, participated in the offering.

These Company insiders purchased an aggregate

of 122,047 Common Stock and Warrants to purchase up to an aggregate of 122,047 shares of Common Stock, for an aggregate purchase price

of $ 1.55 million.

The purchase price per share and accompanying Warrant for these Company insiders was the same as paid by other investors

in the January 2025 PIPE.

Subsequent Events

to June 30, 2025, at the Holder’s request, the Company delivered 43,800 shares of Common Stock which were held in abeyance, related

to the March 2025 Warrant Inducement.

Accordingly, 344,900 shares are held in abeyance, which are not issued and not outstanding.

previously reported, on May 14, 2025, the Company received a letter from the Listing Qualifications Department (the “Staff”)

of The Nasdaq Stock Market (“Nasdaq”) indicating that, based upon the closing bid price of the Company’s Common Stock

for the prior 30 consecutive business days, the Company was not in compliance with the requirement to maintain a minimum bid price of

$ 1.00 per share for continued listing on Nasdaq, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”).

Staff further indicated that, based upon the Company’s implementation of a reverse stock split within the prior one-year period,

the Company’s securities were subject to delisting from the Nasdaq Capital Market and would be suspended at the opening of business

on May 23, 2025.

The Company timely requested a hearing before the Panel, which request stayed any further suspension or delisting action

by Nasdaq, pending the ultimate conclusion of the hearing process.

July 2, 2025, the Panel notified the Company that it has granted Company’s request for an exception until August 14, 2025, to demonstrate

compliance with the Minimum Bid Price Requirement.

There can be no assurance that the Company will be able to regain compliance and maintain

its listing on the Nasdaq Capital Market.

If the Company does not regain compliance with the Minimum Bid Price Requirement, or if the

Company fails to satisfy another Nasdaq requirement for continued listing, Nasdaq could provide notice that the Company’s securities

will become subject to delisting.

the Company’s 2025 annual meeting of stockholders on July 15, 2025, the Company’s stockholders approved an amendment to its

Amended and Restated Certificate of Incorporation to effect a reverse stock split of the issued and outstanding shares of the Company’s

common stock at a specific ratio, ranging from one-for-two to one-for-thirty, with the exact ratio to be determined by the Company’s

board of directors without further approval or authorization of the Company’s stockholders.

On July 15, 2025, the Company’s

board of directors set and approved a reverse split ratio of one-for-ten and authorized the Company’s management to effect the

reverse stock split on August 1, 2025.

The number of shares of the Company’s authorized common stock was not affected by the 2025

Reverse Stock Split and the par value of the Company’s common stock remained unchanged at $ 0.0001 per share.

where disclosed, all amounts related to number of shares and per share amounts have been retrospectively adjusted in these financial

statements to reflect the 2025 Reverse Stock Split.

Related Party Transactions

September 2025, the Company entered into a Master Services Agreement (the “MSA”) with Wilder & Partners, LLC (“Wilder”),

an agency that assists the Company in branding, marketing, and product design for the Company’s first product launch, expected

The founding partner of Wilder is the CEO’s son-in-law and as such, falls in accordance with the Company’s Policy

and Procedures for Related Party Transactions.

Accordingly, the Board of Directors, inclusive of the Audit Committee, considered, reviewed,

and unanimously approved the retention of Wilder as the branding agency, authorizing management to negotiate and execute an agreement

on terms substantially consistent with the proposal reviewed.

For the three and nine months ended September 30, 2025, the Company incurred

approximately $ 0.5 million of marketing expenses related to Wilder, of which approximately $ 0.2 million was outstanding and included

in accounts payable and other accrued expenses as of September 30, 2025.

connection with the January 2025 PIPE financing, certain Company insiders, including the Company’s CEO, Chief Financial

Officer and certain members of the Company’s board of directors, participated in the offering.

These Company insiders

purchased an aggregate of 122,047

shares of Common Stock and Warrants to purchase up to an aggregate of 122,047

shares of Common Stock, for an aggregate purchase price of $ 1.55

The purchase price per share and accompanying Warrant for these Company insiders was the same as paid by other investors in

the January 2025 PIPE.

Subsequent Event

to September 30, 2025, at the Holder’s request, the Company delivered the remaining balance of 182,000 shares of Common Stock which

were held in abeyance related to the March 2025 Warrant Inducement.

Accordingly, no further shares are held in abeyance.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements