What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-13 compared with 2025-11-14 · 303 added, 525 removed, 74 unchanged (92% of the section changed)

26 unchanged sentences

expectation that we will incur significant operating losses for the foreseeable future and will need significant additional capital;

expectation that any planned OTC formulation, dosage, combination, or indications fall inside the scope of an applicable OTC monograph,

will not require a new drug application, and are otherwise not challenged by FDA, state boards, or other regulators, any of which

could delay or prevent launch or require reformulation, relabeling, additional testing, or other corrective actions;

possibility that positive clinical data generated in the Rx setting are not predictive of consumer experience or commercial performance

in the OTC context, and the limits such data may impose on the scope of permissible OTC claims;

ability to timely secure and scale manufacturing, packaging, and quality systems suitable for OTC commercialization, including meeting

current and future capital requirements to support our development and commercialization efforts for our products and our ability

to satisfy our capital needs;

dependence on our products, which are still in various stages of development;

ability to acquire sufficient quantities of raw material needed to manufacture our products;

or that of our third-party manufacturers, ability to manufacture current Good Manufacturing Practices (“cGMPs”) quantities

of our products as required to support commercial quantities of our products;

possibility that an over the counter (“OTC”) formulation, dosage, combinations, or indication will fall outside the scope

of applicable OTC monographs, will require new drug applications (“NDA”), or are otherwise challenged by the U.S.

and Drug Administration (“FDA”), state boards, or other regulators, any of which could delay or prevent launch and commercialization

or require reformulation, relabeling, additional testing, or other corrective actions;

possibility that positive clinical data are not predictive of consumer experience or commercial performance of a product;

ability to timely secure and scale manufacturing, packaging, and quality systems suitable for commercialization, including meeting

lot release, stability, shelf life, and container-closure requirements, and to manage product returns, recalls, or withdrawals if

quality issues arise;

ability to successfully execute our strategic pivot from Rx to OTC, including our capacity to design, formulate, manufacture, package

and distribute products that comply with applicable federal, state and international OTC requirements and standards, including FDA

OTC monographs, current good manufacturing practices applicable to OTC products, labeling and Drug Facts requirements, and other

enforcement policies;

ability to establish and maintain distribution and sales channels, including direct-to-consumer e-commerce, professional/clinic channels,

and any retail partners, and to manage channel economics, chargebacks, returns, and working capital needs;

current and future capital requirements to support our development and commercialization efforts for our product candidates and our

ability to satisfy our capital needs;

dependence on our product candidates, which are not yet available for commercial sale;

ability to acquire sufficient quantities of raw material needed to manufacture our product candidates;

or that of our third-party manufacturers, ability to manufacture cGMP quantities of our product candidates as required for clinical

trials and, subsequently, our ability to manufacture commercial quantities of our product candidates for commercial sale;

lack of a sales and marketing organization and our ability to effectively commercialize our product candidates, including in connection

with our recent pivot to the OTC market;

dependence on third parties to manufacture our product candidates;

ability to maintain or protect the validity of our intellectual property;

ability to successfully execute our strategic pivot from Rx to direct-to-consumer (“DTC”), including our capacity to

design, formulate, manufacture, package and distribute products that comply with applicable federal, state and international requirements

and standards, including FDA OTC monographs, current good manufacturing practices applicable to our products, labeling and Drug Facts

requirements, and other enforcement policies;

ability to establish and maintain distribution and sales channels, including DTC e-commerce,

business-to-business (“B2B”) professional/clinic channels, and any retail partners,

and to manage channel economics, chargebacks, returns, and working capital needs;

ability to internally develop new inventions and intellectual property;

interpretations

of current laws and the passages of future laws;

of current laws and the passage of future laws;

of increased trade tariffs, import quotas or other trade restrictions or measures taken by the United States and other countries,

including the recent and potential changes in U.S.

trade policies that have been and may be made by the Trump presidential administration;

trade policies that may be made by the Trump presidential administration;

of our business model by investors;

accuracy of our estimates regarding expenses and capital requirements;

accuracy of our estimate forecast for future commercial sales of our product candidates;

ability to adequately support organizational and business growth.

factors discussed in our most recent Annual Report on Form 10-K.

foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or

risk factors that we are faced with that may cause our actual results to differ from those anticipated in our forward-looking statements.

Please see “Risk Factors” for additional risks which could adversely impact our business and financial performance.

risk factors that we are faced with that may cause our actual results to differ from those anticipated in such forward-looking statements.

Please see “Part I—Item 1A—Risk Factors” for additional risks which could adversely impact our business and financial

forward-looking statements are expressly qualified in their entirety by this cautionary notice.

You are cautioned not to place undue

reliance on any forward-looking statements, which speak only as of the date of this report, or the date of the document incorporated

by reference into this report.

We have no obligation, and expressly disclaim any obligation, to update, revise or correct any of the

forward-looking statements, whether as a result of new information, future events or otherwise.

We have expressed our expectations, beliefs

and projections in good faith, and we believe they have a reasonable basis.

However, we cannot assure you that our expectations, beliefs,

or projections will result or be achieved or accomplished.

are a scientific leader in dermatology dedicated to the development and commercialization of products that address common and

underserved skin conditions.

In March 2025, we announced that we achieved statistically significant results from our Phase 3 STAR-1

clinical trial of XYNGARI™, formerly our lead prescription (“Rx”) candidate incorporating our Spongilla technology for

moderate-to-severe acne.

XYNGARI™ demonstrated statistically significant results across all three co-primary endpoints at

weeks 4, 8, and 12 when compared with placebo.

Following the successful completion of the STAR-1 trial, we conducted a full

assessment of the Rx landscape and the continued Rx development pathway for XYNGARI™.

In September 2025, after an extensive

review of current trends in dermatology, changing patient preferences, and go-to market costs, management, with support from the our

board of directors, determined that a strategic shift to developing and distributing OTC pharmaceutical dermatology products that

are backed by science would be a better path to commercialization with potentially greater financial upside.

We believe we can

leverage the data generated with our Spongilla technology to create OTC pharmaceutical products that are effective and that

patients want to use.

This repositioning should accelerate our path to commercialization, reduce our regulatory burden, and decrease

company expenses, all while being able to address broader consumer segments in the dermatology space.

believe the dermatology market, from both an OTC and Rx perspective, has seen a substantial shift over the last few years, with an

increasing trend of consumers first relying on OTC treatments for common dermatological diseases and conditions such as acne

vulgaris (or “acne”), psoriasis vulgaris (or “psoriasis”), and acne rosacea (or “rosacea”), among others.

Common dermatology issues, like

acne with over 50 million patients in the U.S., are well known by patients with extensive publicly available information and thus

patients are more willing to treat these diseases with OTC offerings prior to seeing a dermatologist.

Over 70% of patients with acne

first choose to try OTC products and wait at least one year before scheduling a visit with a dermatologist.

Additionally, due to the

lower price point for OTC products, a desire for self-administration, difficulty getting appointments with dermatologists, and

enhanced convenience, many consumers are first relying on OTC products to fill their treatment needs.

believe that we can apply the clinical knowledge we’ve gained over the last ten years to design products that incorporate OTC

pharmaceutical ingredients with our Spongilla technology to offer patients easy access to affordable and effective OTC

treatments for acne, psoriasis, seborrheic dermatitis and other skin diseases and conditions.

While this is a major shift in

strategy for our company, we believe it is the best path forward to meet our mission of providing patients with efficacious and safe

reliance on any forward-looking statements, which speak only as of the date of this report or the date of the document incorporated by

reference into this report.

We have no obligation, and expressly disclaim any obligation, to update, revise or correct any of the forward-looking

statements, whether as a result of new information, future events or otherwise.

We have expressed our expectations, beliefs and projections

in good faith and believe they have a reasonable basis.

However, we cannot assure you that our expectations, beliefs or projections will

result or be achieved or accomplished.

are a scientific leader in skincare, dedicated to the development and commercialization of products that address common and underserved

skin conditions.

Dermata initially was founded with a focus on researching and developing prescription products subject to the FDA approval

In September 2025, after an extensive review of current trends in dermatology, changing consumer preferences, additional non-clinical

and clinical development costs, and go-to market costs for an Rx acne product, management, with approval from our board of directors,

determined that a strategic shift to developing and distributing DTC and B2B skincare products, that are backed by science, would be

a better path to commercialization for the Company with potentially greater financial upside and faster time to market.

We believe we

can leverage our history and knowledge of Rx dermatology to create skincare products that are effective and safe, and available to consumers

without the nuisance of obtaining a prescription.

We believe this strategic repositioning will accelerate our path to commercialization,

reduce our regulatory burden, and decrease development expenses, all while enabling us to address broad consumer segments in the skincare

believe the skincare market, from a cosmetic, and over-the-counter (“OTC”), and Rx perspective, has seen a substantial shift

towards consumers first relying upon multifaceted cosmetics and OTC products that simplify routines.

Consumer preferences are changing

to favor natural products that do more for their skin.

There appears to be a resurgence of interest in traditional remedies to help with

skin renewal and general cosmetic appearance.

With consumers searching for multifunctional products to simplify their routines while

valuing brand loyalty and sustainable practices.

We believe there remains a gap in the skincare market for in-office level treatments

that are available for home use and believe we have a product to fill this void.

We believe that if we can provide consumers with a unique

topical skincare product, we have an opportunity to capture a large segment of consumers seeking to simplify their skincare routine without

needing to schedule an in-office visit.

While this is a major shift in strategy for our company, we believe pursuing the commercial sale

of unique cosmetic skincare products is the best path forward to meet our mission of providing consumers with efficacious and safe skincare

treatment options.

are currently working with a branding agency to build a new brand identity for our OTC treatments, that represents our core values of

providing patients skin care products that are natural but scientifically proven to work.

We believe this new brand identity will bridge

the gap between Rx therapies and OTC pharmaceutical products, allowing patients to take control of their skin care needs and feel confident

about the treatment outcomes of the products we plan to offer.

As part of this new brand identity, we will be developing visual and verbal

identities that bring to life the core essence of the new brand, which incorporates scientifically backed technology that targets the

underlying causes of skin diseases with a consumer-friendly approach.

We want customers to experience the efficacy and safety we saw

in our previous clinical studies and to feel proud of their skin after using our products.

We plan to develop and distribute a variety

of OTC products that are backed by science but are easily accessible by patients who are more comfortable treating their skin problems

independently with readily available OTC therapies.

Our core values will remain unchanged during this strategic shift as we strive to

provide patients with affordable, safe, and effective treatment options, but now they can directly order our products rather than having

to see a physician to be prescribed treatment.

We believe patients are seeking greater flexibility and freedom in treating their

skin as a majority of patients first turn to OTC products before seeing a dermatologist.

With the continued regulatory oversight of the

OTC marketplace, patients should maintain confidence in the OTC therapies they can purchase without a prescription.

view this shift in consumer preferences as a significant benefit for the research we have completed to date.

Over the past several years

we have gained substantial knowledge of various dermatology diseases and what seems to work in treating these diseases.

We plan to leverage

this knowledge in creating a whole product line of skin care treatments that patients can access directly.

We plan to launch our first

product in the middle of 2026 which will consist of a once-weekly, topical acne kit that can be used by patients with mild, moderate,

or severe acne.

We have gained tremendous understanding of our Spongilla technology over the past 8 years and deeply understand

the benefits of it being combined with OTC monograph active ingredients to topically treat a variety of dermatological conditions.

Spongilla technology is derived from a naturally grown freshwater sponge, Spongilla lacustris or Spongilla , which

is processed into a fine, purified powder and mixed with a fluidizing agent immediately prior to application by the patient.

is a unique freshwater sponge that only grows in commercial quantities in select regions of the world and under specific environmental

conditions, all of which give our Spongilla technology its distinctive anti-microbial, anti-inflammatory, and mechanical properties.

The combination of these environmental conditions, the proprietary harvesting protocols developed with our exclusive supplier, and our

post-harvest processing procedures produce an ingredient that optimizes the mechanical components as well as the organic components,

while eliminating any harmful bacteria that could be found in a freshwater sponge.

We believe these unique components used in tandem

with an OTC monograph active ingredient could produce a superior OTC product candidate unlike anything currently on the market.

for our product candidates to have multiple mechanisms of action for the treatment of skin diseases and conditions.

to our strategic switch to develop and distribute OTC pharmaceutical products, our U.S.

Food and Drug Administration (“FDA”)

investigational new drug applicant, XYNGARI™, was intended to utilize our Spongilla technology as a stand-alone product

for the once weekly treatment of a variety of skin diseases, with our initial focus being the treatment of moderate to severe acne.

In March 2025, we announced that our XYNGARI™ Phase 3 S pongilla T reatment of A cne R esearch

(“STAR-1”) trial topline data met all co-primary endpoints at week 12.

XYNGARI™ demonstrated highly statistically significant

difference compared with placebo for all primary endpoints after 12 weeks of once weekly treatments.

XYNGARI™ patients saw a

rapid and sustained therapeutics treatment effect in absolute reduction in inflammatory lesion counts with a -11.4 lesion reduction

at week four, -14.7 lesion reduction at week 8, and -16.8 lesion reduction at week 12 compared to -8.6, -10.9, and -13.1 lesion

reduction for placebo at weeks 4, 8, and 12, respectively.

XYNGARI™ patients also saw a rapid and sustained therapeutics

treatment effect in absolute reduction in noninflammatory lesion counts with a -12.4 lesion reduction at week four, -15 lesions

reduction at week 8, and -17.3 lesion reduction at week 12 compared to -8.8, -10.4, and -12.4 lesion reduction for placebo at weeks

4, 8, and 12, respectively.

Lastly, we observed a sustained therapeutics treatment effect as measured in the investigator’s

global assessment (IGA) of acne scale.

IGA is measured on a 5-point scale (0-4), with 4 being severe, 3 being moderate, 2 being

mild, 1 being almost clear and 0 being clear.

To be considered a responder, patients had to achieve a score of 0 (clear) or 1

(almost clear).

There were 11.9% of XYNGARI™ patients that were considered a responder at week four, 21.6% of XYNGARI™

patients being considered a responder at week 8, and 29.4% of XYNGARI™ patients being considered a responder at week 12

compared to 6.2%, 8.0%, and 15.2% of placebo patients being considered a responder at weeks 4, 8, and 12, respectively.

approximately 80% of the XYNGARI™ patients had at least a 1-grade change in their acne at the end of the study.

STAR-1 trial was double-blind, randomized, placebo controlled, and enrolled 520 patients with moderate-to-severe acne, age 9 years

or older across sites in the United States and Latin America.

The co-primary endpoints included absolute reduction in inflammatory

and noninflammatory lesion counts and the improvement in investigators global assessment (“IGA”) of acne.

Patients were treated once a

week for 12 weeks with either XYNGARI™ or placebo and were evaluated monthly.

While we saw positive results from the STAR-1

study, after evaluating the prescription dermatology market and regulatory hurdles for approval, we made the strategic decision to

withdraw our investigational new drug application (“IND”) for XYNGARI™ for the treatment of acne.

We believe this strategic

decision will provide us greater flexibility to leverage the many novel features and benefits of our Spongilla technology in

a variety of skin care products for the OTC marketplace.

are currently finalizing the components and container closure for our initial acne kit, as well as completing the brand identity, with

an expected launch in the middle of 2026.

The acne kit will be a topical product applied once weekly by patients at home or in a dermatology

or esthetician’s office.

The product will utilize one active ingredient from FDA’s OTC acne monograph, which consist of OTC

drugs that are generally recognized by FDA as safe and effective, in predefined doses, for specific therapeutic categories.

active ingredients can be used alone or in combination with other ingredients and marketed as a treatment for various skin diseases or

conditions, like acne.

For our initial acne kit we plan on incorporating salicylic acid as the active ingredient in combination with

our unique Spongilla technology to distribute a novel acne treatment kit we believe is unlike anything currently on the market.

Based on years of testing we have learned that our Spongilla technology has a unique combination of mechanical components and chemical

components, that provide unique benefits against various skin conditions.

The mechanical components of the Spongilla powder consist

of many microscopic siliceous, needle-like spicules that, when massaged into the skin, penetrate the stratum corneum (the skin’s

outermost protective layer) and create microchannels into the dermis where pro-inflammatory cytokines and bacteria reside.

that the penetration of the spicules also leads to the opening of microchannels, which allow oxygen to enter pilosebaceous glands, helping

acnes , which grow in an anaerobic (without oxygen) environment ( C.

acnes are the bacteria that cause inflammatory

lesions in acne patients).

The spicules also cause turnover of the top layer of dead skin, thereby increasing collagen production resulting

in skin rejuvenation.

Additionally, we believe the newly created microchannels provide a conduit for Spongilla powder’s

naturally occurring chemical compounds to be delivered to the dermis and pilosebaceous glands, helping to kill the C.

reduce inflammation.

In addition to anti-microbial compounds, the Spongilla powder also appears to have anti-inflammatory chemical

compounds, as demonstrated during in vitro experiments, that inhibit inflammation through the reduction of C.acnes stimulated

IL-8 production and by inhibiting IL-17A and IL-17F expression in human cell lines.

Also, during in vitro studies of Spongilla

powder’s organic compounds, we observed the inhibition of the lipogenesis of sebocytes, which may translate to a reduction in sebum

(an oily and waxy substance produced by the human body’s sebaceous glands) production and the oiliness of the skin in patients.

We believe the combination of an FDA approved OTC active ingredient with the multiple biological and mechanical effects of our Spongilla

technology could be important factors in treating multiple inflammatory skin diseases.

January 17, 2025, we entered into a Clinical Trial Collaboration Agreement (the “Collaboration Agreement”) with Revance Therapeutics,

(“Revance”) where we intended to conduct a Phase 2a clinical trial to evaluate the topical application of XYNGARI™

followed by the topical application of DAXXIFY® for the treatment of primary axillary hyperhidrosis.

In light of our recent strategic

shift to develop and distribute OTC pharmaceutical products, we plan to continue to discuss future opportunities for this collaboration

with Revance.

At this time, the initiation of the Phase 2a clinical trial has been placed on hold.

We still believe there is a potential

to utilize our Spongilla technology for the topical delivery of botulinum toxin, but with our strategic decision to withdraw the

XYNGARI™ IND, we are currently evaluating the regulatory and commercial opportunities for this program.

the initiation of the Phase 2a clinical study is on hold, we continue to evaluate alternative ways to leverage our Spongilla

technology as a novel platform to enhance the topical delivery of large-molecules, like botulinum toxin, as a needle-free

alternative to conventional intradermal injection of large molecules for medical and aesthetic skin conditions.

Typically, for

facial aesthetics, botulinum toxins are injected into facial muscles to reduce forehead, lateral canthal, and glabella deep lines.

While currently only approved for the treatment of axillary hyperhidrosis, intradermal injections of botulinum toxin primarily

affect neuromodulatory at the level of cutaneous nerves, sweat glands, and superficial muscle fibers, not via deep muscular

paralysis as with intramuscular injections.

However, there have been many studies conducted with intradermal injections of botulinum

toxin for various aesthetic and medical skin conditions, showing its broad potential application.

This is because the mechanism of

action of botulinum toxin in the dermis acts to block acetylcholine release from the presynaptic nerve terminals.

effects are 1) reduced cholinergic activity (eccrine glands reduce sweating, sebaceous glands reduce sebum production, arrector pili

and superficial muscle fibers reduce fine wrinkling resulting in smoother skin), 2) modulation of sensory nerves leading to a

reduction in neurogenic inflammation, itching, and erythema (redness), and 3) indirect skin-tightening due to mild reduction of

superficial muscle tone and possible microvascular effects.

Intradermal injections of botulinum toxin have also shown cosmetic

effects, including skin smoothing through reducing pore size, reducing fine lines, and a mild lifting effect from dermal tightening

and reducing oil and sweat reduction.

However, due to the difficulty, pain, and time-consuming nature of intradermal injections,

there still remains few approved or widely practiced treatment options.

believe our Spongilla technology can increase the number of intradermal uses for botulinum toxin by leveraging the unique microstructure

of our Spongilla technology, to create microchannels into the dermis, enabling improved dermal penetration of botulinum toxins

Using our microstructures to create microchannels into the dermis avoids the need to give multiple intradermal

injections, which can be painful for patients and very time consuming for the dermatologist or esthetician.

Additionally, our technology

can allow for broad coverage of larger surface areas of the skin, which we believe will provide a better field effect of the botulinum

plan to leverage this platform for broad applicability across dermatologic and aesthetic skin conditions, potentially allowing dermatologists

and estheticians to increase uses for the intradermal delivery of botulinum toxin.

We believe this non-invasive approach could meaningfully

expand the therapeutic and aesthetic utility of botulinum toxin for conditions such as axillary, palmar and plantar hyperhidrosis, acne,

acne scars, rosacea, and improved skin aesthetics (including improvements in skin luminosity and brightness, reducing pore size and number

view this shift in consumer preferences as a significant benefit for our strategic repositioning.

We have gained substantial clinical

knowledge of various dermatology diseases and skin conditions.

We plan to leverage this knowledge to create a whole product line of skincare

treatments that consumers can access directly for each of their skincare needs.

While our background is in clinical products, we plan

to leverage the unique attributes of our hero ingredient, Spongilla lacustris , to develop skincare treatments.

We plan to launch

our first cosmetic product, the Foundational Treatment, in the middle of 2026.

In the future, we plan to offer additional products that

target specific needs of consumers.

For example, for consumers who have more sensitive skin, we may plan to commercialize a milder version

of our Foundational Treatment that could be used more often.

core products, like our Foundational Treatment, will utilize our Bioneedle, which is 100% Spongilla lacustris powder, to provide

a once weekly skin renewal routine that is simple addition to skincare routines.

This once weekly routine will contain our Bioneedle

which will be combined with a fluidizing agent for easy application.

Our Bioneedle is derived from a wildly grown freshwater sponge,

Spongilla lacustris or Spongilla , which is processed into a fine, purified powder and packaged with no additives.

is a unique freshwater sponge that only grows in commercial quantities in select regions of the world, which gives our Bioneedle

its distinctive properties.

The combination of a proprietary harvesting protocol, developed by our exclusive supplier, and the post-harvest

processing procedures, produces a cosmetic ingredient that we believe optimizes the Bioneedle for a unique and simple skin renewal routine,

unlike most skincare on the market.

addition to the DTC channel for our products, we believe there is a market for our technology to aid in the intradermal delivery of macromolecules

for various aesthetic conditions.

Typically, for facial aesthetics, botulinum toxins are injected into facial muscles to reduce forehead,

lateral canthal, and glabella deep lines.

However, this is limited to the use of intradermal delivery of botulinum toxin for a variety

of skin diseases and conditions.

Botox is currently the only approved botulinum toxin for the treatment of axillary hyperhidrosis via

intradermal injections.

While effective, intradermal injections, including 10-15 per axilla, of Botox can be painful for patients and

very time consuming for dermatologists.

Therefore, we believe developing a less painful, less time-consuming topical delivery of botulinum

toxin into the dermis for various aesthetic and medical skin diseases and conditions, would provide physicians with an attractive alternative

to intradermal injections of botulinum toxins.

plan to leverage our Bioneedle platform for broad applicability across dermatologic and aesthetic skin conditions, potentially allowing

dermatologists and aestheticians to increase the use of botulinum toxin.

We believe this non-invasive approach could meaningfully expand

the therapeutic and aesthetic utility of botulinum toxin for conditions such as axillary, palmar, and plantar hyperhidrosis, acne, acne

scars, rosacea, and improved facial aesthetics (including improvements in skin luminosity and brightness, reducing pore size and number

of pores, reducing fine lines, and reducing skin oiliness by decreasing sebum production).

Our initial clinical proof-of-concept studies

using our Spongilla technology have demonstrated the ability to deliver botulinum toxin into the dermis for improvement in facial

aesthetics and reduction in sweat production in patients with primary axillary hyperhidrosis.

We plan to continue to explore additional

uses for this platform and look forward to getting our technology in the hands of estheticians and dermatologists so they may better

serve their patients.

have a limited operating history.

Since our inception, our operations have focused on developing XYNGARI™ and DMT410, our topical botulinum toxin program, organizing

and staffing our company, raising capital, establishing our supply chain and manufacturing processes, further characterizing the multiple

mechanisms of action of our Spongilla technology, building an intellectual property portfolio, and conducting non-clinical and

clinical trials.

We do not have any product candidates approved for marketing and have not generated any revenue from product sales.

We have funded our operations primarily through the sale of our equity securities and debt securities.

Since inception, we have raised

an aggregate of approximately $77.5 million of gross proceeds from the sale of our debt and equity securities.

have not generated any revenue to date and have incurred significant operating losses.

Our net losses were $5.7 million and $9.1 million

for the nine months ended September 30, 2025, and 2024, respectively.

As of September 30, 2025, we had an accumulated deficit of $71.4

We expect to continue to incur significant expenses and operating losses for the foreseeable future.

We anticipate that our

expenses will increase significantly in connection with our future activities, as we:

develop OTC pharmaceutical kits for the treatment of acne;

for commercial launch of OTC pharmaceutical kits for the treatment of acne, including hiring additional marketing personnel;

development of DMT410 for the treatment of aesthetic and medical skin conditions, including proof of concept clinical

our product candidates for commercial sale;

additional research and development and selling, general and administrative personnel;

expand, and protect our intellectual property portfolio; and

additional costs associated with operating as a public company.

will need additional financing to support our operations.

We may seek to fund our operations through public or private equity or debt

financings or other sources.

Adequate additional financing may not be available to us on acceptable terms, or at all.

Our failure to

raise capital when needed or on favorable terms would have a negative impact on our financial condition and our ability to pursue our

business strategy.

We will need to generate significant revenues to achieve profitability, and we may never do so.

Pharmaceutical Requirements

We plan to develop and distribute

OTC pharmaceutical products, such as topical acne products, that are subject to FDA and foreign regulation.

Under the U.S.

OTC monograph

system, OTC pharmaceutical products that meet established conditions are generally recognized as safe and effective and do not require

the submission and approval of a new drug application.

The FDA OTC monographs include well-known ingredients and specify requirements

for permitted indications, required warnings and precautions, allowable combinations of ingredients and dosage levels.

Pharmaceutical

products marketed under the OTC monograph system must conform to specific quality, formula, and labeling requirements.

Following the passage

of the CARES Act, FDA is updating and working to finalize current monographs.

All facilities where OTC pharmaceutical

products are manufactured, tested, packaged, stored or distributed must comply with current Good Manufacturing Practices (“cGMP”)

regulations and/or regulations promulgated by competent authorities in the countries where the facilities are located.

All of our pharmaceutical

products are manufactured, tested, packaged, stored and distributed according to cGMP regulations.

The FDA performs periodic audits to

ensure that our facilities remain in compliance with all appropriate regulations.

The failure of a facility to be in compliance may lead

to a breach of representations made to customers or to regulatory action against us related to the products made in that facility, such

as seizure, injunction or recall.

Serious product quality concerns could also result in governmental actions against us that, among other

things, could result in the suspension of production or distribution of our products, product seizures, loss of certain licenses or other

governmental penalties, and could have a material adverse effect on our financial condition or operating results.

We are required to report

serious adverse events associated with the use of our OTC pharmaceutical products marketed in the U.S.

and other countries where such

products are sold.

We cannot predict whether new

legislation regulating our activities will be enacted or what effect any legislation would have on our business.

OTC Pharmaceutical Pre- and Post-market Regulation

Before and after an OTC pharmaceutical

product is commercialized, numerous regulatory requirements apply, including:

international quality system regulations, including those of the FDA and other regulatory authorities, impose cGMP requirements governing the methods used in, and the facilities and controls used for, the design, manufacture, packaging, servicing, labeling, storage, installation, and distribution of all finished OTC pharmaceuticals intended for human use;

global standards and regulations affecting product design and development, including requirements to keep existing products current to the “state of the art,” and doing an ongoing assessment of the risk acceptability, adopting risk control measures where appropriate, and re-assessing the clinical benefit;

labeling regulations, including a prohibition on product promotion for unapproved or “off label” uses;

the drug reporting regulation requiring a manufacturer to report to the regulatory authorities if its drug may have caused or contributed to a death or serious injury in a way that would likely cause or contribute to a death or serious injury if it were to recur and ongoing post-market surveillance of the product and like-products to continuously evaluate the benefit/risk over the life of the product;

regulations on corrections and removals which require a manufacturer to report recalls and field actions to the regulatory authorities if initiated to reduce a risk to health posed by the device or to remedy a violation of the applicable laws.

July 15, 2025, we held our annual meeting of stockholders at which time our stockholders approved the adoption of an amendment to our

Amended and Restated Certificate of Incorporation, as amended, to effect a reverse stock split of its issued and outstanding shares of

Common Stock, at a specific ratio, ranging from one-for-two to one-for-thirty, with the exact ratio determined by our board of directors

without further approval or authorization of its stockholders.

On August 1, 2025, we effected the reverse split of our shares of Common

Stock at a ratio of 1-for-10, as approved by our board of directors, with no adjustment to par value.

All issued and outstanding shares

of Common Stock and per share amounts contained in our financial statements have been retroactively adjusted to reflect this reverse

stock split for all periods presented.

September 10, 2025, we announced a strategic pivot to shift our focus to developing and distributing OTC pharmaceutical products for

the dermatology market.

We plan to focus on developing and launching multiple products that can be sold directly to consumers to treat

their various skin diseases and conditions.

We believe this strategic shift, through leveraging the FDA’s OTC monograph pathway,

could accelerate our ability to launch a commercial dermatology product, reduce our regulatory burden, and give us access to a broader

consumer market.

We are currently working with a branding agency to develop the commercial launch strategy while also beginning the manufacturing

process for our initial product launch, which we expect to occur in the middle of 2026.

In June 2024, we entered into the ATM Agreement with H.C.

Co., LLC , as Sales Agent, pursuant to which we may offer and sell, from time to time through Sales Agent, shares of our Common Stock

for aggregate proceeds of up to $1,662,761 (upon the terms and subject to the conditions and limitations set forth in the ATM Agreement).

In 2024, we sold 55,001 shares of Common Stock under the ATM Agreement, for net proceeds of $1.4 million after deducting $0.2 million

of compensation to Sales Agent and other administration fees.

During the nine months ended September 30, 2025, we sold no shares of Common

Stock under the ATM Agreement.

On November 7, 2025, we filed a prospectus supplement, pursuant to which

we may offer and sell, from time to time through Sales Agent, shares of our Common Stock for aggregate proceeds of an additional $1,792,315

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

As of the date of this filing, we have

not sold any additional shares under the ATM Agreement.

Accounting Policies and Use of Estimates

While we have no current timeline for the

launch of this program we plan to continue to explore additional uses for this platform and look forward to getting our technology in

the hands of aestheticians and dermatologists so they may better serve the medical and aesthetic needs of their patients.

have taken steps to secure inventory of Spongilla raw material in advance of the planned launch of our Tome skincare products.

We believe we have sufficient quantities of processed Spongilla raw material inventory on hand to support the anticipated mid-2026

commercial launch and initial commercialization activities thereafter, based on our current operating plans, expected production volumes

and internal assumptions.

We continue to evaluate additional inventory procurement opportunities and manufacturing planning activities

to support future commercial demand.

January 2026, we raised approximately $2.0 million of net proceeds from the sale of 824,283 shares of our Common Stock under our At

The Market Offering Agreement (the “ATM Agreement”) with H.C.

Wainwright &Co., LLC (“HCW”), as sales

We paid HCW a fixed commission rate of 3% of approximately $67,000 and other transactional fees.

have no capacity to sell shares pursuant to the ATM Agreement remaining.

Accounting Estimates

have based our management’s discussion and analysis of financial condition and results of operations on our financial statements,

which have been prepared in accordance with GAAP.

The preparation of these financial statements requires us to make estimates that affect

the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements

as well as expenses during the reporting periods.

On an ongoing basis, we evaluate our estimates and judgments, including those related

to clinical development expenses.

We base our estimates on historical experience and on various other factors that we believe to be appropriate

under the circumstances.

Actual results may differ from these estimates under different assumptions or conditions.

our significant accounting policies are more fully discussed in Note 2 - Summary of Significant Accounting Policies to our unaudited

financial statements contained within this Form 10-Q, we believe that the following accounting policies are critical to the process of

making significant judgments and estimates in the preparation of our financial statements.

and Development Expenses

date, our research and development expenses have been related to the clinical development and manufacturing costs of our product candidates.

Research and development expenses include salaries and related expenses for personnel, including stock-based compensation, as well as

external party costs for clinical, nonclinical, and manufacturing of our product candidates.

Research and development expenses are recognized

as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until

the goods or services are received.

Research and development estimates will be subject to change as additional information becomes available.

March 2025, we announced topline results from our Phase 3 STAR-1 clinical trial and we completed the trial in the second quarter of

We expect that research and development costs will decrease in fiscal year 2026 as we will no longer conduct FDA-regulated clinical trials under IND for NDA,

and the cost of manufacturing OTC products is significantly less than manufacturing FDA-regulated

General and Administrative Costs

general and administrative expenses consist primarily of salaries, benefits, stock-based compensation for personnel in executive, finance,

business development, marketing and other corporate administrative functions.

Selling, general and administrative expenses also include

pre-commercial launch activities prior to product launch, including marketing expenses, legal fees incurred relating to corporate and

patent matters, professional fees incurred for accounting, auditing, tax and administrative consulting services, and insurance costs.

expect our selling, general and administrative expenses to increase in 2026.

The increase in expenses is due to our planned launch of

our first product candidate in mid-2026, including the development and commencement of our marketing campaigns and initiatives, the hiring

of marketing personnel and engagement of consultants to support full commercialization activities, and the addition of programs to support

commercialization activities.

expect to continue to incur audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing

and SEC requirements, director and officer insurance premiums, board of director fees, investor relations costs associated with operating

as a public company, patent costs and defense, and general and administrative personnel.

perform an assessment of warrants upon issuance to determine their proper classification in the financial statements based upon the warrant’s

specific terms, in accordance with the authoritative guidance provided in Financial Accounting Standards Board (“FASB”) Accounting

Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) , and ASC 815-40,

Derivatives and Hedging – Contracts in Entity’s Own Equity (“ASC 815-40”) .

The assessment considers whether

the warrants are freestanding financial instruments pursuant to ASC 480 and whether the warrants meet all of the requirements for equity

classification under ASC 815-40, including whether the warrants are indexed in our own Common Stock and whether the warrant holders could

potentially require cash settlement of the warrants.

issued or modified warrants that meet all the criteria for equity classification, the warrants are required to be recorded as a component

of additional paid-in capital.

For issued or modified warrants that do not meet all the criteria for equity classification, the warrants

are required to be liability-classified and recorded at their initial fair value on the date of issuance and remeasured at fair value

at each balance sheet date thereafter.

We have performed an assessment of all warrants issued and modified and determined that our warrants

are equity classified.

which have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of these financial

statements requires us to make estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the

date of the financial statements as well as the reported expenses during the reporting periods.

On an ongoing basis, we evaluate our

estimates and judgments that are based on historical experience and on various other assumptions that we believe to be reasonable under

the circumstances.

The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities

and the reported amount of expenses that are not readily apparent from other sources.

Actual results may differ from these estimates

under different assumptions or conditions.

considers an accounting estimate to be critical if it requires a significant level of estimation uncertainty, and changes in the estimate

are reasonably likely to have a material effect on our financial condition or results of operations.

There are items within our financial

statements that require estimation but are not deemed critical, as defined above.

For a detailed discussion of our significant accounting

policies and related judgments, see Note 2 - Summary of Significant Accounting Policies to our unaudited financial statements contained

within this Form 10-Q.

in Operating Results

results of operations have fluctuated significantly from period to period in the past and are likely to continue to do so in the

We anticipate that our quarterly and annual results of operations will be impacted for the foreseeable future by several

factors, including the progress and timing of expenditures related to the development and commercialization of our product

Due to these fluctuations, we believe that the period-to-period comparisons of our operating results are not a good

indication of our future performance.

results of operations have fluctuated significantly from period to period in the past and are likely to continue to do so in the future.

We anticipate that our quarterly and annual results of operations will be impacted for the foreseeable future by several factors, including

the marketing expenses associated with the launch of our first Tome skincare products and resulting revenues, if any, in mid-2026.

to these fluctuations, we believe that the period-to-period comparisons of our operating results are not a good indication of our future

of Operations

Months Ended September 30, 2025, and 2024

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

Three Months Ended September 30,

Operating expenses:

Research and development

$ (1,896,972 )

Selling, general and administrative

Total operating expenses

Losses from operations

Other income and expenses:

Interest income, net

$ (1,691,989 )

$ (3,173,156 )

and Development Expenses

and development expenses decreased by $1.9 million from $2.4 million for the three months ended September 30, 2024, to $0.5 million for

the three months ended September 30, 2025.

The decrease in research and development expenses resulted from $1.9 million of decreased

clinical expenses from the XYNGARI™ STAR-1 acne study, which completed enrollment during the fourth quarter of 2024 and completed

expenses during the second quarter of 2025.

General and Administrative Expenses

general and administrative expenses increased by $0.4 million from $0.8 million for the three months ended September 30, 2024, to

$1.3 million for the three months ended September 30, 2025.

The increase in selling, general and administrative expense was the

result of $0.5 million of increased marketing expenses, as we are preparing for our first product launch in mid-2026, partially

offset by $0.1 million of decreased audit fees.

Months Ended September 30, 2025, and 2024

Months Ended March 31, 2026, and 2025

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

Nine Months Ended September 30,

Three Months Ended

Operating expenses:

Research and development

$ (3,607,838 )

Selling, general and administrative

2 unchanged sentences

Other income and expenses:

Interest expense, net

Interest income

$ (1,847,706 )

1 unchanged sentence

and Development Expenses

and development expenses decreased by $3.6 million from $6.0 million for the nine months ended September 30, 2024, to $2.4 million for

the nine months ended September 30, 2025.

The decrease in research and development expenses resulted from approximately $3.6 million

of decreased clinical expenses from the XYNGARI™ STAR-1 acne study, which completed enrollment during the fourth quarter of 2024.

and development expenses decreased by $0.9 million from $1.3 million for the three months ended March 31, 2025, to $0.4 million for the

three months ended March 31, 2026.

The decrease in research and development expenses resulted from $0.7 million of decreased clinical

expenses from the XYNGARI™ STAR-1 acne study, which was completed during the second quarter of 2025, $0.1 million of decreased

chemistry, manufacturing and controls, or CMC, and non-clinical expenses period over period as result of the Company’s pivot to

focus on DTC product sales, and $0.1 million of decreased personnel expenses, which resulted from the receipt of proceeds of the Employee

Retention Tax Credit refund which partially offset payroll taxes for research and development employees during the first quarter of 2026.

While we continue to focus on designing, packaging, and manufacturing of our first commercial products, as well as product development,

we anticipate that research and development expenses will continue to decrease as we prepare for launching our first product sales in

General and Administrative Expenses

general and administrative expenses increased by approximately $0.2 million from $3.3 million for the nine months ended September

30, 2024, to approximately $3.5 million for the nine months ended September 30, 2025.

The increase in selling, general and

administrative expense was the result of $0.5 million of increased marketing expenses partially offset by $0.3 million of decreased

We expect marketing expenses to increase as we are preparing for our first product launch in mid-2026.

general and administrative expenses increased by approximately $0.5 million from $1.1 million for the three months ended March 31, 2025,

to $1.5 million for the three months ended March 31, 2026.

The increase in selling, general and administrative expenses was primarily

attributable to $0.2 million of marketing expenses incurred, $0.2 million of increased audit fees and $0.1 million of increased legal

We anticipate that selling, general and administrative expenses will continue to increase related to marketing, branding, advertising,

and personnel expenses as we continue to prepare for our first product launches and sales in mid-2026.

Income and Expenses

earn interest income via overnight deposits on our cash and cash equivalents.

Interest income was $78,676 for the first quarter of 2026

compared to $36,216 for the first quarter of 2025.

The increase of $42,460 in interest income resulted from increased cash balances due

to financing proceeds related to the December 2025 PIPE and recent ATM sales during the fourth quarter of 2025 and first quarter of 2026,

respectively, as well as interest received related to the Employee Retention Tax Credit payments received during the first quarter of

following table summarizes our cash flows from operating and financing activities:

Nine Months Ended September 30,

Three Months Ended

Statements of cash flows data:

5 unchanged sentences

Increase (decrease) in cash and cash equivalents

$ (1,294,383 )

used in operations of $6.4 million for the nine months ended September 30, 2025, was the result of the net loss of $5.7 million and decreases

in accounts payable and accrued expenses and other current liabilities of $0.8 million, partially offset by non-cash stock-based compensation

of $0.1 million.

used in operations of $8.2 million for the nine months ended September 30, 2024, was the result of the net loss of $9.1 million, offset

by increases in non-cash stock-based compensation of $0.6 million and increases in accrued expenses of $0.3 million.

provided by financing activities of $7.9 million for the nine months ended September 30, 2025, was primarily the result of the January

2025 PIPE financing which raised net proceeds of approximately $2.2 million, and the March 2025 Inducement financing which raised net

proceeds of $5.7 million.

provided by financing activities of approximately $7.0 million for the nine months ended September 30, 2024, was the result of the September

2024 PIPE financing which raised net proceeds of $3.1 million, sales of the Company’s shares through the ATM Agreement which raised

net proceeds of $1.4 million during the third quarter of 2024, and the May 2024 warrant inducement financing which raised net proceeds

of $2.3 million.

used in operations of approximately $2.5 million for the three months ended March 31, 2026, was the result of the net loss of $1.8 million

as well as increases in prepaid and other current assets of $0.1 million and increased inventory of $0.1 million, as well as decreases

in accounts payable and accrued and other current liabilities of approximately $0.5 million.

used in operations of $1.9 million for the three months ended March 31, 2025, was the result of the net loss of $2.3 million, offset

by increases in accounts payable and accrued and other current liabilities of approximately $0.3 million, as well as the decrease of

prepaid expenses and other current assets of approximately $0.1 million.

provided by financing activities of $1.9 million for the three months ended March 31, 2026, was the result of approximately $2.0 million

in net proceeds from ATM sales during the first quarter of 2026, partially offset by approximately $0.1 million of payments for issuance-related

costs from the December 2025 PIPE financing.

provided by financing activities of $8.5 million for the three months ended March 31, 2025, was the result of the January 2025 PIPE financing

which raised net proceeds of $2.3 million, and the March 2025 Inducement financing which raised net proceeds of $6.2 million.

and Capital Resources

our inception, we have incurred net losses and have not generated any revenue.

As of September 30, 2025, our cash and cash

equivalents totaled $4.7 million, and we had an accumulated deficit of $71.4 million.

For the nine months ended September 30, 2025,

and the year ended December 31, 2024, we used cash of $6.4 million and approximately $11.1 million, respectively, in operations.

expect our cash resources to fund operations into the second quarter of 2026.

We anticipate that we will continue to incur net

losses for the foreseeable future, or until product candidate revenues exceed operating expenses, which timing is uncertain at this

our inception, we have not generated any revenue or commercialized any products.

As of March 31, 2026, our cash and cash equivalents

totaled $6.9 million, and we had an accumulated deficit of $75.1 million.

For the three months ended March 31, 2026, and the year ended

December 31, 2025, we used cash of $2.5 million and approximately $7.8 million, respectively, in operations.

We expect our current cash

resources to fund operations into the first quarter of 2027.

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

While we plan

to launch our first DTC product in mid-2026, it is uncertain when we will generate operating income to sustain operations, if ever.

factors raise substantial doubt about our ability to continue as a going concern for the one-year period following the date that these

financial statements were issued.

Historically,

our principal sources of cash have included proceeds from the issuance of equity and proceeds from the issuance of debt.

Our principal

use of cash has been cash used in operations.

Our projected principal uses of cash for the next 12 months are the following expected

activities related to our OTC product launch, which is expected in mid-2026:

formulation optimization, bench testing, and small-scale manufacturing runs;

development, consumer product testing, brand development, and marketing activities in preparation for commercial launch;

research and development related to additional OTC product launches;

working capital requirements.

expect that selling, general and administrative expenses, including marketing, will continue to grow, and therefore, we will need to

raise additional capital to sustain operations until we can generate operating income.

are focused on preparing for the launch of our first commercial OTC product, a monthly kit containing four weekly acne treatments, which

is planned for mid-2026, based on our current operating plan and anticipated expenditures associated with formulation and pre-commercial

We anticipate we will incur net losses for the next several years until we can generate sufficient

operating income from our OTC products.

Our primary uses of capital are, and we expect will continue to be, compensation and related

expenses, marketing, external manufacturing, legal and other regulatory expenses, and administrative and overhead costs.

Our future funding

requirements will be heavily determined by the potential income generated from revenues related to our OTC product candidates.

we may seek opportunities to identify, acquire or in license and develop additional drug candidates, potentially build commercial capabilities,

and expand our corporate infrastructure.

believe that our existing cash and cash equivalents will be sufficient to fund our operating expenses into the second quarter of 2026.

We have based this estimate of cash runway on assumptions that may prove to be wrong, and we could deplete our available capital resources

sooner than we expect.

We anticipate that we will continue to incur net losses for the foreseeable future.

These factors raise substantial

doubt about our ability to continue as a going concern for the one-year period following the date that these financial statements were

on our recurring losses from operations incurred since inception, expectation of continuing operating losses for the foreseeable future,

and the need to raise additional capital to finance future operations, we are developing plans to mitigate this risk, which may consist

of raising additional capital through some combination of equity or debt financings, and/or potentially new collaborations, business

transactions, and reducing cash expenditures.

If we are not able to secure adequate additional funding, we may be forced to make significant

reductions in our operations and the pursuit of our growth strategy.

In that event, we may have to delay, scale back, or eliminate some

or all of our research and development programs and activities which could adversely affect our business prospects, or we may be unable

to continue operations.

our principal sources of cash have included proceeds from the issuance of equity securities.

Our principal uses of cash have been for

operations, and we expect that the principal uses of cash in the future will be for continuing operations, including various marketing

expenditures, including, but not limited to, branding, paid media, marketing use studies, advertising, software subscriptions, and launch

events and tradeshows, as well as non-marketing expenses including funding of research and development, and general working capital requirements.

We expect that as marketing expenses continue to grow, we may need to raise additional capital to sustain operations.

Capital Requirements

plan to focus our efforts in the near term on the development and commercialization of our Tome skincare product, our Foundational Treatment.

We anticipate we will continue to incur net losses for the foreseeable future as we complete the launch of our Tome Foundational Treatment

and ramp up marketing activities.

We also plan to invest in developing additional skincare products to add to our portfolio that complement

our Foundational Treatment.

In addition, we plan to seek opportunities to identify, acquire or in license and develop additional skincare

candidates, potentially expand commercial capabilities, and expand our corporate infrastructure.

We may not be able to complete the development

and initiate commercialization of these programs without raising additional capital.

primary uses of capital are, and we expect will continue to be, compensation and related expenses, marketing and advertising expenses,

external research, development and manufacturing costs, legal and other regulatory expenses, and administrative and overhead costs.

future funding requirements will be heavily dependent upon any product revenues generated from our first product launch, of which we

cannot estimate at this time, as well as the resources needed to support additional development of future products.

believe that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements

into the first quarter of 2027.

We have based this estimate of cash runway on assumptions that may prove to be wrong, and we could utilize

our available capital resources sooner than we expect.

We may require additional capital to continue to commercialize our Tome skincare

products, and to pursue in-licenses or acquisitions of other drug candidates.

funds may not be available on a timely basis, on favorable terms, or at all, and such funds, if raised, may not be sufficient to enable

us to continue to implement our long-term business strategy.

If we are unable to raise sufficient additional capital, we may need to

substantially curtail our planned operations and the pursuit of our growth strategy.

may raise additional capital through the sale of equity or convertible debt securities.

In such an event, the terms of these securities

may include liquidation or other preferences that adversely affect the rights of the holders of our Common Stock.

future funding requirements will depend on many factors, including:

number and characteristics of the product candidates we pursue;

scope, progress, results, and costs of researching and developing our product candidates, and conducting any clinical trials;

timing of, and the costs involved in, obtaining regulatory approvals for our product candidates;

cost of manufacturing our product candidates and any candidates we successfully commercialize;

may include liquidation or other preferences that adversely affect the rights of a holder of our common stock.

of the numerous risks and uncertainties associated with launching our first products, as well as any revenues generated from those products,

we are unable to estimate the exact amount of our working capital requirements.

Our future funding requirements will depend on many factors,

number and characteristics of the skincare products we pursue;

scope, progress, results, and costs of developing our products, and marketing such products if commercialized;

timing of, and the costs involved in, launching our products;

cost of manufacturing our products and any products we successfully commercialize;

ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of such agreements;

costs involved in preparing, filing, prosecuting, maintaining, defending, and enforcing patent claims, including litigation costs

and the outcome of such litigation;

timing, receipt and amount of sales of, or milestone payments related to or royalties on, our current or future drug candidates, if any;

derived from the sale of our OTC products, if any;

and cost of product formulation and validation of our OTC acne product;

and scale of commercial launch activities, including digital and retail distribution partnerships;

of manufacturing scale-up and establishing compliant supply chains;

of marketing and consumer acquisition spending required to gain initial market traction.

continue to grow our business over the longer term, we plan to commit substantial resources to marketing our first OTC product.

Additionally,

we have evaluated and expect to continue to evaluate a wide array of strategic transactions as part of our plan to acquire or in license

and develop additional products and product candidates to augment our internal development pipeline.

Strategic transaction opportunities

that we may pursue could materially affect our liquidity and capital resources and may require us to incur additional indebtedness, seek

equity capital or both.

In addition, we may pursue development, acquisition or in licensing of approved or development products in new

or existing therapeutic areas or continue the expansion of our existing operations.

Accordingly, we expect to continue to opportunistically

seek access to additional capital to license or acquire additional products, product candidates or companies to expand our operations,

or for general corporate purposes.

Strategic transactions may require us to raise additional capital through one or more public or private

debt or equity financings or could be structured as a collaboration or partnering arrangement.

We have no arrangements, agreements, or

understandings in place at the present time to enter into any acquisition, in licensing or similar strategic business transaction.

Obligations and Commitments

do not currently own or lease any office space.

enter into contracts in the normal course of business with contract research organizations for research studies and stability testing,

contract manufacturing organizations for manufacturing and other services, agencies for branding, marketing, and product design for our

first product launch, expected in mid-2026, and others for operating purposes.

These contracts generally provide for termination upon

notice, and therefore we believe that our non-cancelable obligations under these agreements are not material.

and the outcome of such litigation; and

timing, receipt and amount of revenues, if any, or milestone payments related to or royalties on, our current or future products,

continue to refocus our business on skincare products and other operations and potential product acquisitions and in-licensing.

evaluated and expect to continue to evaluate a wide array of strategic transactions as part of our plan to acquire or in-license and

develop additional products to add to our Tome skincare brand.

Strategic transaction opportunities that we may pursue could materially

affect our liquidity and capital resources and may require us to incur additional indebtedness, seek equity capital or both.

we expect to continue to opportunistically seek access to additional capital to license or acquire additional products or companies to

expand our Tome skincare brand and operations, or for general corporate purposes.

Strategic transactions may require us to raise additional

capital through one or more public or private debt or equity financings or could be structured as a collaboration or partnering arrangement.

We have no arrangements, agreements, or understandings in place at the present time to enter into any acquisition, in licensing or similar

strategic business transaction.

we raise additional funds by issuing equity securities, our stockholders will experience dilution.

Debt financing, if available, would

result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to

take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

Any debt financing or additional

equity that we raise may contain terms, such as liquidation and other preferences that are not favorable to us or our stockholders.

we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable

rights to our technologies, future revenue streams or products or to grant licenses on terms that may not be favorable to us.

cannot be certain that additional funding will be available on acceptable terms, or at all.

In addition, future debt financing into which

we enter may impose upon us covenants that restrict our operations, including limitations on our ability to incur liens or additional

debt, pay dividends, redeem our stock, make certain investments and engage in certain merger, consolidation or asset sale transactions.

we are unable to raise additional capital when required or on acceptable terms, we may be required to significantly delay, scale back

or discontinue the development and commercialization of one or more of our products, restrict our operations or obtain funds by entering

into agreements on unattractive terms, which would likely have a material adverse effect on our business, stock price and our relationships

with third parties with whom we have business relationships, at least until additional funding is obtained.

If we do not have sufficient

funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that would likely result in our

stockholders losing some or all of their investment in us.

In addition, our ability to achieve profitability or to respond to competitive

pressures would be significantly limited.

inception, we have devoted substantially all of our resources to research and development activities.

In September 2025, we made a strategic

pivot from research and developing prescription products to becoming a science-driven leader in dermatologic solutions, anticipating

our first DTC product launch from our Tome skincare brand in mid-2026.

We have not generated revenues and have not yet achieved profitable

operations, nor have we ever generated positive cash flow from operations.

There is no assurance that profitable operations, if achieved,

could be sustained on a continuing basis.

In addition, we operate in an environment of rapid technological change, and we are largely

dependent on the services of our employees and consultants.

Further, our future operations are dependent on the success of our efforts

to raise additional capital.

These uncertainties raise substantial doubt about our ability to continue as a going concern for 12 months

after the issuance date of our financial statements.

The accompanying financial statements have been prepared on a going concern basis.

The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification

of assets or the amounts and classification of liabilities that may result from the possible inability of the company to continue as

a going concern, which contemplates the continuation of operations, realization of assets and liquidation of liabilities in the ordinary

course of business.

We incurred a net loss of $1.8 million for the quarter ended March 31, 2026, and had an accumulated deficit of $75.1

million as of March 31, 2026.

We anticipate incurring additional losses until such time, if ever, we can generate sufficient revenue

from our products currently in development, or products we are in the process commercializing.

Our primary source of capital has been

the issuance of equity and equity-linked securities.

Act Accounting Election

are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the

JOBS Act until such time as those standards apply to private companies.

We have irrevocably elected not to avail ourselves of this exemption

from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public

companies that are not emerging growth companies.

April 5, 2012, the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, was signed into law.

The JOBS Act contains provisions

that, among other things, reduce certain reporting requirements for an “emerging growth company”.

As an “emerging growth

company,” we elected not to take advantage of the extended transition period afforded by the JOBS Act for the implementation of

new or revised accounting standards, and as a result, we will comply with new or revised accounting standards on the relevant dates on

which adoption of such standards is required for non-emerging growth companies.

Section 107 of the JOBS Act provides that our decision

not to take advantage of the extended transition period is irrevocable.

to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we are not required to, among other things,

(i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404,

(ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall

Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight

Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the

audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation-related items

such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation

to median employee compensation.

These exemptions will apply until the fifth anniversary of the completion of our initial public offering,

which would be August 2026, or until we no longer meet the requirements for being an “emerging growth company,” whichever

occurs first.

Accounting Pronouncements

3 unchanged sentences

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 2. Management’s Discussion and Analysis