Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our audited consolidated financial statements and related notes to those statements included in this Annual Report. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs and expectations that involve risks and uncertainties. Our actual results and the timing of events could differ materially from those discussed in these forward-looking statements. Important factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report, particularly in Part I, Item 1A. “Risk Factors” and the section entitled “Cautionary Note Regarding Forward-Looking Statements and Summary of Risk Factors.”
Overview
We are a late-stage clinical specialty pharmaceutical company focused on the development and commercialization of therapeutic products that treat rare and orphan diseases for which there are currently either no approved or very limited treatments or cures. Our lead product, QRX003, is under clinical development as a potential treatment for Netherton Syndrome, a rare hereditary genetic disease. QRX003 is entering pivotal registrational clinical testing under an open IND application with the FDA. We have opened six clinical sites in the U.S. along with international sites that are being opened in the UK, Spain, France and the Netherlands. QRX003 is currently being tested in seven pediatric NS patients in investigator-initiated studies in Ireland, Austria, the Netherlands and New Zealand. QRX003 is also being developed as a potential treatment for Peeling Skin Syndrome with the first subject being treated in New Zealand. We are in the process of expanding this study to include up to an additional five pediatric subjects. We entered into a Research Agreement with QUT, under which we have obtained an option for a global license to QRX008 for the potential treatment of scleroderma, as well as a Research Agreement with UCC for the development of novel topical formulations of rapamycin (sirolimus) as potential treatments for a number of rare and orphan diseases for which there are either limited or no approved therapies or cures, including microcystic lymphatic malformations, venous malformations and angiofibromas among others. We have also entered into 9 commercial partnerships for QRX003 spanning 61 countries outside of our core commercial territories of the U.S., Western Europe and Japan. These partnership countries include Canada, Australia, New Zealand, the Middle East, China, Taiwan, Hong Kong Singapore, Israel, Central and Eastern Europe, Turkey as well as several countries in Latin America.
Our mission is to develop and commercialize proprietary therapeutic drug products that treat rare and orphan diseases, particularly for those diseases where no approved treatment currently exists. To achieve this, we plan to:
● complete the late-stage clinical testing of QRX003 in NS and, if successful, file for marketing approval in the United States, Europe, Japan and the other territories for which we have commercial agreements in place;
● prepare to commercialize QRX003 by (i) establishing our own sales infrastructure in the U.S., Europe, and Japan and e(ii) work with our distribution partners to commercialize the product in Canada, Australia/New Zealand, the Middle East, China, Hong Kong, Taiwan, Latin America, Central and Eastern Europe, Turkey and Singapore;
● continue the development of QRX003 for Peeling Skin Syndrome and related rare, genetic skin diseases;
● commence clinical testing of one or more selected formulations of topical rapamycin; and
● pursue business development activities by seeking partnering, licensing, merger and acquisition opportunities or other transactions to further expand our pipeline and drug-development capabilities.
To date, no products have been commercialized and no revenue has been generated. We do not expect to generate revenue from product sales unless and until we successfully complete development and obtain marketing approval for one or more of our product candidates, which we expect will take a number of years and is subject to significant uncertainty. We will need to obtain further funding through public or private offerings of our capital stock, debt financing, pursuant to the exercise of warrants issued to investors in our prior public and private offerings, collaboration, strategic and/or licensing arrangements or other sources in order to complete the research and development of our product candidates and to fund our other operating requirements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. In addition, any exercise of our outstanding warrants is at the discretion of the warrant holders and is dependent, in part, upon the market price of our ADSs. There can be no assurance that any of our outstanding warrants will ever be in-the-money prior to their expiration and, as such, our outstanding warrants may expire without being exercised. Our failure to obtain additional funding or enter into such other arrangements as and when
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needed would have a negative impact on our financial condition and our ability to continue our operations. See “Liquidity and Capital Resources”.
Recent Developments
ADS Ratio Change
Effective April 9, 2025, the ratio of ADSs evidencing our Ordinary Shares, changed from 1 ADS representing one (1) Ordinary Share to 1 ADS representing thirty-five (35) Ordinary Shares (the “Ratio Change”), which resulted in a 1-for-35 reverse split of the issued and outstanding ADSs (the “Reverse Split”). Our Ordinary Shares were not affected by this adjustment.
Except as specifically provided, ADSs and related option, warrant, purchase price and exercise price information presented in this Annual Report, including our consolidated financial statements and the related notes, has been retroactively adjusted to reflect the Ratio Change and the Reverse Split.
Increase in Authorized Capital
On August 21, 2025, at our 2025 Annual General Meeting of Shareholders (the “2025 Annual Meeting”), our shareholders approved an amendment to our articles of association to increase our authorized Ordinary Share capital from 100,000,000 Ordinary Shares to 5,000,000,000 Ordinary Shares.
Public and Private Offerings
March 2024 Offering . On March 7, 2024, we completed an offering (the “March 2024 Offering”) of the following securities (i) 811,250 ordinary shares represented by 23,179 ADSs, (ii) Series D warrants (the “Series D Warrants”) to purchase 4,062,500 ordinary shares represented by 116,071 ADSs, (iii) Series E warrants (the “Series E Warrants”) to purchase 4,062,500 ordinary shares represented by 116,071 ADSs, and (iv) Pre-funded warrants (the “March 2024 Pre-Funded Warrants”) to purchase 3,251,255 ordinary shares represented by 92,893 ADSs for aggregate gross proceeds of approximately $6.5 million, resulting in net proceeds of approximately $5.5 million, after deducting the placement agent’s fees and offering expenses paid by us. Each ADS (or March 2024 Pre-Funded Warrant to purchase one ADS in lieu thereof) was sold together with a Series D Warrant to purchase one ADS and a Series E Warrant to purchase one ADS. The ADSs and accompanying Series D Warrants and the Series E Warrants were sold at a combined public offering price of $56 and the March 2024 Pre-Funded Warrants and accompanying Series D Warrants and the Series E Warrants were sold at a combined public offering price of $55.9965, which is equal to the combined purchase price per ADS and accompanying Series D Warrants and the Series E Warrants, minus the exercise price of each March 2024 Pre-Funded Warrant of $0.0035. As of December 31, 2024, all March 2024 Pre-Funded Warrants had been exercised and were included in issued and outstanding ADSs. The Series D Warrants and the Series E Warrants have an exercise price of $56 per share, were exercisable immediately following the closing of the March 2024 Offering and expire in two years and five years, respectively, from the closing of the March 2024 Offering.
On March 7, 2024, we also entered into privately negotiated agreements with the holders of certain existing outstanding warrants to purchase up to 18,252 ADSs to, among other things, reduce the exercise price of such warrants to $56 and to extend the expiration date of such warrants until March 7, 2029. The incremental fair value of the modified warrants was approximately $209,000, which was accounted for as an offering expense in connection with the March 2024 Offering.
December 2024 Offering. On December 23, 2024, we completed an offering (the “December 2024 Offering” and, together with the March 2024 Offering, the “2024 Offerings”) of the following securities (i) 3,137,778 ordinary shares represented by 89,651 ADSs, (ii) Series F warrants (the “Series F Warrants”) to purchase 15,111,110 ordinary shares represented by 431,746 ADSs, (iii) Series G warrants (the “Series G Warrants” and together with the Series F Warrants, the “December 2024 Warrants”) to purchase 15,111,110 ordinary shares represented by 431,746 ADSs, and (iv) Pre-funded warrants (the “December 2024 Pre-Funded Warrants”) to purchase 11,973,332 ordinary shares represented by 342,095 ADSs for aggregate gross proceeds of approximately $6.8 million, resulting in net proceeds of approximately $5.8 million, after deducting the placement agent’s fees and offering expenses paid by us. Each ADS (or December 2024 Pre-Funded Warrant to purchase one ADS in lieu thereof) was sold together with a Series F Warrant to purchase one ADS and a Series G Warrant to purchase one ADS. The ADSs and accompanying Series F Warrants and Series G Warrants were sold at a combined public offering price of $15.75 and the December 2024 Pre-Funded Warrants and accompanying Series F Warrants and Series G Warrants were sold at a combined public offering price of $15.7465, which is equal to the combined purchase price per ADS and accompanying Series F Warrants and Series G Warrants, minus the exercise price of each December 2024 Pre-Funded Warrant of $0.0035. The Series F Warrants and the Series G Warrants have an exercise price of $15.75 per share, were exercisable immediately
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upon issuance and expire in two years and five years, respectively, from the closing of the December 2024 Offering. Durin 2025, certain investors in our December 2024 Offering exercised (i) the remaining outstanding 320,362 December 2024 Pre-Funded Warrants, (ii) 199,619 Series F Warrants and 23,182 Series G Warrants, resulting in net proceeds of approximately $3.5 million. As of December 31, 2025, all of the December 2024 Pre-Funded Warrants have been exercised and are included in issued and outstanding ADSs.
Certain of our officers and directors purchased an aggregate of 38,095 ADSs and accompanying December 2024 Warrants to purchase 76,190 ADSs, for a total purchase price of approximately $600,000, at the public offering price and on the same terms as the other purchasers in the December 2024 Offering.
On December 20, 2024, we also entered into privately negotiated agreements with the holders of certain existing outstanding warrants to purchase up to 200,071 ADSs to, among other things, reduce the exercise price of such warrants to $15.75 and to extend the expiration date of such warrants until December 23, 2029. The incremental fair value of the modified warrants was approximately $1.5 million, which was accounted for as an offering expense in connection with the December 2024 Offering.
October 2025 Private Placement . On October 10, 2025, we entered into the October 2025 Purchase Agreement with several institutional and accredited investors relating to the issuance and sale in a private placement transaction (the “October 2025 Private Placement”) of (i) 530,320 ordinary shares represented by 15,152 ADSs and (ii) Pre-funded warrants to purchase 69,787,865 ordinary shares represented by 1,993,939 ADSs (the “ October 2025 Pre-Funded Warrants”), together with (A) Series H Warrants to purchase 70,318,185 ordinary shares represented by up to 2,009,091 ADSs (“Series H Warrants”), (B) Series I Warrants to purchase 70,318,185 ordinary shares represented by up to 2,009,091 ADSs (“Series I Warrants”), (C) Series J Warrants to purchase 70,318,185 ordinary shares represented by up to 2,009,091 ADSs (“Series J Warrants”), and (D) Series K Warrants to purchase 70,318,185 ordinary shares represented by up to 2,009,091 ADSs (“Series K Warrants” and, together with the Series H Warrants, Series I Warrants, and Series J Warrants, the “October 2025 Ordinary Warrants”). The combined purchase price was $8.25 per each ADS and accompanying October 2025 Ordinary Warrants and $8.2499 per each October 2025 Pre-Funded Warrant and accompanying October 2025 Ordinary Warrants, which pricing was designed to be in accordance with the “Minimum Price” requirement as defined in the Nasdaq rules. The October 2025 Private Placement closed on October 14, 2025 (the “October 2025 Closing Date”). We received upfront net proceeds of approximately $15 million from the October 2025 Private Placement, after deducting estimated offering expenses payable by us, including placement agent fees and expenses. We intend to use the upfront net proceeds from the October 2025 Private Placement for general corporate purposes, which may include operating expenses, research and development, including completion of clinical development of QRX003 for Netherton Syndrome, working capital, future acquisitions and general capital expenditures. We may also receive up to an aggregate of $88 million of additional gross proceeds if the October 2025 Ordinary Warrants are exercised in full for cash. As of December 31, 2025, 684,348 of the October 2025 Pre-funded Warrants have been exercised and are included in issued and outstanding ADSs and all of the October 2025 Ordinary Warrants were outstanding.
Dennis Langer, one of our directors, participated in the October 2025 Private Placement. Mr. Langer purchased 530,320 ordinary shares represented by 15,152 ADSs and accompanying October 2025 Ordinary Warrants for a total purchase price of approximately $128,641, at a combined purchase price of $8.49 per ADS and accompanying October 2025 Ordinary Warrants. In accordance with Nasdaq Rules, Mr. Langer’s purchase price was based upon the consolidated closing bid price from the trading day immediately preceding the date we entered into the October 2025 Purchase Agreement, plus $0.50.
Description of October 2025 Pre-Funded Warrants and October 2025 Ordinary Warrants
Beneficial ownership limitation . A holder of the October 2025 Pre-Funded Warrants or October 2025 Ordinary Warrants may not exercise any portion of such holder’s October 2025 Pre-Funded Warrants or October 2025 Ordinary Warrants for ADSs to the extent that the holder, together with its affiliates, would beneficially own more than 4.99% of the number of ordinary shares outstanding immediately after giving effect to the issuance of the ordinary shares represented by the ADSs issuable upon exercise of the applicable warrant.
October 2025 Pre-Funded Warrants . The October 2025 Pre-Funded Warrants have an exercise price of $0.0001 per ADS. The October 2025 Pre-Funded Warrants are exercisable at any time after their original issuance, subject to the beneficial ownership limitation (as described above) and will not expire until exercised in full. In addition, the October 2025 Pre-Funded Warrants may be exercised, in whole or in part, any time after issuance by means of a cashless exercise.
October 2025 Ordinary Warrants . The October 2025 Ordinary Warrants are exercisable at any time after their original issuance, subject to the beneficial ownership limitation (as described above). The Series H Warrants have an exercise price of $9.075 per ADS and, pursuant to the terms of the Series H Warrants, such warrants may be exercised until the earlier of (i) five (5) years from the October
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2025 Closing Date or (ii) 30 days after the public announcement that we have received Type C meeting minutes from the FDA indicating openness to baseline-controlled pivotal studies for QRX003 for the treatment of Netherton Syndrome. As a result of the March Type C Meeting Minutes, the Company has determined that the Series H Warrants will remain exercisable until five (5) years from the October 2025 Closing Date. The Series I Warrants have an exercise price of $10.3125 per ADS and, pursuant to the terms of the Series I Warrants, such warrants may be exercised as follows: (i) 50% of the Series I Warrants may be exercised until the earlier of (A) five (5) years from the October 2025 Closing Date or (B) 30 days after the public announcement that the primary endpoint has been met in the monotherapy pivotal trial of QRX003 for the treatment of Netherton Syndrome, and (ii) 50% of the Series I Warrants may be exercised until the earlier of (A) five (5) years from the October 2025 Closing Date or (B) 30 days after the public announcement that the primary endpoint has been met in the adjuvant pivotal trial of QRX003 for the treatment of Netherton Syndrome. The Series J Warrants have an exercise price of $12.375 per ADS and, pursuant to the terms of the Series J Warrants, such warrants may be exercised until the earlier of (i) five (5) years from the October 2025 Closing Date or (ii) 30 days after the public announcement of the receipt of either accelerated or traditional approval by the FDA of QRX003 for the treatment of Netherton Syndrome. The Series K Warrants have an exercise price of $12.375 per ADS and, pursuant to the terms of the Series K Warrants, such warrants may be exercised until the earlier of (i) five (5) years from the October 2025 Closing Date or (ii) 30 days after the public announcement of the sale of a Priority Review Voucher (PRV).
Series H Warrants Exercise
On January 8, 2026, the Company received $0.2 million from the exercise of 25,000 Series H warrants issued in the October 2025 Private Placement.
Components of Our Results of Operations
Operating Expenses
Our current operating expenses consist of two components - research and development expenses, and general and administrative expenses.
Research and Development Expenses
Research and development costs are expensed as incurred. Research and development expenses include personnel costs associated with research and development activities, including third-party contractors to perform research, conduct clinical trials and manufacture drug supplies and materials. We utilize outside consultants and third parties to conduct the majority of our research and development, under the supervision of our management team.
Future research and development expenses may include:
● employee-related expenses, such as salaries, bonuses and benefits, consultant-related expenses, share-based compensation, overhead - related expenses and travel - related expenses for our research and development personnel;
● expenses incurred under agreements with CROs, as well as consultants that support the implementation of the clinical studies described above;
● manufacturing and packaging costs in connection with conducting clinical trials and for stability and other studies required to support the NDA filing as well as manufacturing drug product for commercial launch;
● formulation, research and development expenses related to QRX003; and other product candidates we may choose to develop
● costs for sponsored research; and
● costs for commercial launch preparation should one of our products receive regulatory approval.
Research and development activities will continue to be central to our business plan. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect our research and development expenses to be significant over the next several
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years as personnel and compensation costs increase and we conduct late-stage clinical studies and prepare to seek regulatory approval for QRX003 and any other future product candidate.
The duration, costs and timing of clinical trials of QRX003 and any other future product candidate will depend on a variety of factors that include, but are not limited to:
● the number of trials required for approval;
● the per patient trial costs;
● the number of patients that participate in the trials;
● the number of sites included in the trials;
● the countries in which the trials are conducted;
● the length of time required to enroll eligible patients;
● the number of doses that patients receive;
● the drop-out or discontinuation rates of patients;
● the potential additional safety monitoring or other studies requested by regulatory agencies;
● the duration of patient follow-up;
● the timing and receipt of regulatory approvals; and
● the efficacy and safety profile of our product candidates.
General and Administrative Expenses
General and administrative expenses consist primarily of compensation and employee - related expenses including non-cash stock-based compensation, professional fees and other corporate expenses. We anticipate that our general and administrative expenses will increase in the future to support our continued research and development activities. These increases will likely include compensation and employee-related expenses including stock-based compensation, increased costs related to the potential hiring of personnel, travel costs and fees to outside consultants, lawyers and accountants.
Other Expenses (income)
Other expenses (income) consist primarily of interest income and unrealized loss (gain) on investments.
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Results of Operations - Year ended December 31, 2025 compared to Year ended December 31, 2024
The following table sets forth our results of operations for the year ended December 31, 2025 compared to the year ended December 31, 2024:
Year ended December 31,
2025
2024
Change
Operating Expenses
General and administrative
$
6,487,909
$
5,925,833
$
562,076
Research and development
9,802,807
3,602,632
6,200,175
Total operating expenses
16,290,716
9,528,465
6,762,251
Other (income) and expenses
Unrealized gain
(3,980)
(7,502)
3,522
Realized and accrued interest income
(482,081)
(558,491)
76,410
Total other income
(486,061)
(565,993)
79,932
Net loss
$
(15,804,655)
$
(8,962,472)
$
(6,842,183)
General and Administrative Expenses
General and administrative expenses were approximately $6,488,000 and $5,926,000, in the year ended December 31, 2025 and 2024, respectively, representing an increase of $562,000, or 9.5%. The increase was primarily due to an increase in public company expenses of $215,000; legal fees of $117,000; marketing expenses of $114,000; consulting expenses of $105,000 and other (primarily corporate taxes) of $163,000; and increase in payroll and benefits of $63,000 offset by decreases in board cash fees expense of $142,000 and lower insurance costs by $77,000.
Research and Development Expenses
Our research and development (R&D) expenses during the years ended December 31, 2025 and 2024 were approximately $9,803,000 and $3,603,000, respectively, representing an increase of $6,200,000, or approximately 172%. The increase was primarily due to an increase of $6,094,000 worth of expenditures on our development programs, including work related to the clinical studies for the development of QRX003, manufacturing costs for material used in our clinical studies an increased allocation of internal compensation and travel costs to our research and development programs. The increase also included approximately $106,000 in non-cash stock-based compensation expense. We expect to continue our research and development efforts by conducting the remaining studies necessary for the development and approval of QRX003, see “Components of Our Results of Operations - Research and Development Expenses” above.
We amortize licensed or acquired intellectual property over its expected useful life, included in research and development expenses set out above. The license from Skinvisible was obtained in October 2019, see “Research and Development Commitments” below. Amortization of intangible assets was approximately $100,000 and $100,000 in each of the years ended December 31, 2025 and 2024.
Other Expenses:
Interest and financing expense
We earned approximately $482,000 in interest income and approximately $4,000 in unrealized gain and earned approximately $558,000 in interest income and approximately $7,500 in unrealized gain, in the year ended December 31, 2025 and December 31, 2024, respectively, from our cash and cash equivalents and investments in marketable debt securities. The decrease in interest income in the year ending December 31, 2025 is the result of lower average aggregate cash and investment balances and a decrease in interest rates.
Liquidity and Capital Resources
We have incurred net losses every year since inception. We have a limited operating history and have historically funded our operations through our founders’ funding expenditures and debt and equity financings. At December 31, 2025, the Company had cash balances totaling $3.8 million and investments of $14.9 million. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of planned clinical trials and our expenditures on other research and development activities. Based upon our current business plans and cash, cash equivalents and investments on hand, we have concluded that there is substantial doubt
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about our ability to continue as a going concern for a period of at least one year from the issuance of the audited consolidated financial statements included in this report. In order to address our capital needs, we intend to consider multiple alternatives, including, but not limited to, the sale of additional equity or debt securities or other debt instruments, collaborative, strategic and/or licensing relationships or grants to support our future operations. We do not expect to generate revenue from product sales unless and until we successfully complete development and obtain marketing approval for one or more of our product candidates, which we expect will take a number of years and is subject to significant uncertainty. We will need to obtain further funding through public or private offerings of our capital stock, debt financing, pursuant to the exercise of warrants issued to investors in our prior public and private offerings, collaboration, strategic and/or licensing arrangements or other sources in order to complete the research and development of our product candidates and to fund our other operating requirements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. In addition, any exercise of our outstanding warrants is at the discretion of the warrant holders and is dependent, in part, upon the market price of our ADSs. There can be no assurance that any of our outstanding warrants will ever be in-the-money prior to their expiration and, as such, our outstanding warrants may expire without being exercised. If we are unable to improve our liquidity position, we may not be able to continue as a going concern.
We continue to seek sources of financing to fund our continued operations and research and development programs. To raise additional capital, we may sell additional equity or debt securities, or enter into collaborative, strategic, and/or licensing transactions. There can be no assurance that we will be able to complete any financing transaction in a timely manner or on acceptable terms or otherwise enter into a collaborative or strategic transaction. If we are unable to obtain additional funding when it becomes necessary, the development of our product candidates will be impacted and we would likely be forced to delay, reduce, or terminate some or all of our development programs or cease operations altogether, all of which could have a material adverse effect on our business, results of operations and financial condition.
Future Funding Requirements
We will need to obtain further funding through public or private offerings of our capital stock, debt financing, pursuant to the exercise of warrants issued to investors in our prior public and private offerings, collaboration, strategic and/or licensing arrangements or other sources, the requirements for which will depend on many factors, including:
● the scope, timing, rate of progress and costs of our drug development efforts, pre-clinical development activities, the timing of laboratory testing and clinical trials for our product candidates;
● the number and scope of clinical programs we decide to pursue;
● the cost, timing and outcome of preparing for and undergoing regulatory review of our product candidates;
● the scope and costs of development and commercial manufacturing activities;
● the cost and timing associated with commercializing our product candidates, if they receive marketing approval;
● the extent to which we acquire or in-license other product candidates and technologies;
● the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
● our ability to establish and maintain collaborations on favorable terms, if at all;
● our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the development of our product candidates and, ultimately, the sale of our products, following FDA approval;
● our implementation of operational, financial and management systems;
● the market price of our ADSs; and
● the costs associated with being a public company.
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Adequate additional funding may not be available to us on acceptable terms, or at all. In addition, restrictions under the October 2025 Purchase Agreement may limit our ability to raise capital. See “Risk Factors ─The terms of our October 2025 private placement may make it difficult for us to procure additional financing” for more information. If we are unable to raise capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of QRX003, any future product candidate, or potentially discontinue operations.
To the extent that we raise additional capital through the sale of our equity or convertible debt securities, and pursuant to the exercise of the warrants issued to the investors in our prior public and private offerings, the ownership interest of our equity holders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our equity holders. Debt financing and preferred equity financing, if available, 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.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or proposed products, or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts or grant rights to develop and market any future product that we would otherwise prefer to develop and market ourselves.
Summary Statement of Cash Flows – Year ended December 31, 2025 compared to Year ended December 31, 2024
As of December 31, 2025, we had approximately $18,745,000 in cash and investments in marketable securities. The table below presents our cash flows for the years ended December 31, 2025 and 2024:
Year ended December 31,
2025
2024
Net cash used in operating activities
$
(13,540,994)
$
(7,857,309)
Net cash used in investing activities
(4,277,775)
(1,888,282)
Net cash provided by financing activities
18,014,135
10,967,736
Effect of foreign exchange rate on changes on cash
(613)
—
Net change in cash and cash equivalents
$
194,753
$
1,222,145
Operating Activities
Net cash used in operating activities was approximately $13,541,000 and $7,857,000 for the year ended December 31, 2025 and 2024, respectively. The increase for the year ended December 31, 2025 was primarily due to a higher net operating loss driven by higher R&D expenditures offset by an increase in accounts payable and accrued expenses.
Investing Activities
Net cash used in investing activities was approximately $4,278,000 and $1,888,000 in the year ended December 31, 2025 and 2024, respectively, with the change in each period consisting of net proceeds from maturity and purchases of short maturity US Treasury Bills and Notes.
Financing Activities
Net cash provided by financing activities was approximately $18,014,000 for the year ended December 31, 2025, consisting of approximately $18,614,000 in net proceeds from the October 2025 Private Placement and warrant exercises, partially offset by repayments of amounts due to officers of $600,000. Net cash provided by financing activities was approximately $10,968,000 for the year ended December 31, 2024, consisting of approximately $11,568,000 in net proceeds from the 2024 Offerings, partially offset by repayments of amounts due to officers of $600,000.
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Research and Development Commitments
In October 2019, Quoin Inc. entered into the Licensing Agreement with Skinvisible, under which Skinvisible granted us an exclusive royalty-bearing license relating to the production and manufacture of prescription drug products related to certain patents held by Skinvisible, including those related to QRX003 and QRX004. We made Skinvisible a one-time non-refundable, non-creditable license fee of $1 million (the “License Fee”). In addition, we agreed to pay Skinvisible a single digit royalty percentage of our net sales revenues for any licensed product covered by the patent rights licensed under the License Agreement. We also agreed to pay Skinvisible 25% of any revenues we receive as royalties in the event that we sublicense any licensed products to a third party. The License Agreement also requires that we make a $5 million payment to Skinvisible upon receiving approval in the U.S. or European Union, whichever occurs first, for the first drug product developed using intellectual property licensed thereunder.
In November 2020, Quoin Inc. entered into a Master Service Agreement with Therapeutics Inc. for the management of the pre-clinical and clinical development of QRX003 for Netherton Syndrome. The initial term of the agreement was three years with automatic one-year extensions, and the agreement required the execution of individual work orders. Quoin Inc. may terminate any work order for any reason with 90 days written notice subject to costs incurred through termination and a defined termination fee, unless there is a material breach by Therapeutics Inc. A work order was entered into in June 2022 for the first QRX003 clinical study at an expected estimated cost of approximately $4.4 million through 2024. An additional change order was entered into in December 2022 for a second QRX003 clinical study at an expected estimated cost of approximately $830,000. An amended and restated change order for the two studies was entered into in December 2024 at an estimated total remaining cost from August 2024 of approximately $3.6 million for the two studies combined. In the years ended December 31, 2025 and 2024, we incurred research and development costs under these agreements of approximately $2.1 million and $1.1 million, respectively. During the year ended December 31, 2024, we received a credit of approximately $83,000 applied to prior expenses incurred during the period of January 2024 to March 2024.
In November 2021, we entered into a research agreement with QUT for a pre-clinical research program for the development of a product to treat Netherton Syndrome of approximately $250,000. In May 2022, we entered into a second research agreement with QUT for the development of a product to treat Scleroderma of approximately $610,000. Each agreement remains in place until the completion of the research program, which in each case was initially anticipated to be 18 months from execution. For the years ended December 30, 2025 and 2024, we did not incur any costs related to these agreements. In July 2025 we announced that, in light of the expected near-term completion of the QRX003 clinical program for Netherton Syndrome, we have discontinued Netherton Syndrome research program with QUT. We are planning to schedule a meeting with QUT to discuss the future direction of the Scleroderma research program.
In June 2024, we entered into a research agreement with The School of Pharmacy at UCC. The scope of the agreement encompasses the development of novel topical formulations of Rapamycin (sirolimus) as potential treatments for a number of rare and orphan diseases for which there are currently very limited or no approved therapies or cures. Under the terms of the agreement, based on the achievement of certain milestones, we will fund up to approximately €567,000 ($664,000) plus VAT over an anticipated 2-1/2 year period to support the UCC research program to investigate the development of a number of topical rapamycin formulations for future development as potential treatments for several rare and orphan diseases. Following completion of the research program, we will have the option to advance the clinical development of rapamycin formulations developed by UCC. Work on this research project commenced in December 2024. For the years ended December 31, 2025 and December 31, 2024, we incurred a research and development expense under these agreements of approximately $0.3 million and de-minimis respectively. On November 11, 2025 we announced that the target loading concentrations for two topical rapamycin delivery technologies have been successfully achieved. Specifically, a rapamycin loading concentration of 4% w/w has been achieved for our proprietary topical formulation while an even higher rapamycin concentration of 5% w/w has been formulated in a proprietary dermal patch system.
Critical Accounting Estimates
Critical accounting estimates are those that, in management’s view, are most important to the portrayal of a company’s financial condition and results of operations and most demanding on their calls on judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. We believe our most critical accounting estimates relate to:
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Research and Development
Research and development costs are expensed as incurred. Research and development expenses include personnel costs associated with research and development activities, including third-party contractors to perform research, conduct clinical trials and manufacture drug supplies and materials. We accrue for costs incurred by external service providers, including contract research organizations and clinical investigators, based on its estimates of service performed and costs incurred. These estimates include the level of services performed by third parties, patient enrollment in clinical trials when applicable, administrative costs incurred by third parties, and other indicators of the services completed. Based on the timing of amounts invoiced by service providers, we may also record payments made to those providers as prepaid expenses that will be recognized as expenses in future periods as the related services are rendered.
Stock based compensation
We recognize compensation costs resulting from the issuance of stock-based awards to employees, non-employees and directors as an expense in the consolidated statements of operations over the requisite service period based on a measurement of fair value for each stock-based award. The fair value of each option grant is estimated as of the date of grant using the Black-Scholes option-pricing model. We account for forfeitures as they occur. The fair value is amortized as compensation cost on a straight-line basis over the requisite service period of the awards, which is generally the vesting period.
Since we have a limited history of trading as a public company, our expected stock volatility is based on a weighting of its historical volatility along with a group of a publicly traded set of peer companies. We utilize the simplified method to estimate the expected term. The risk-free interest rate was determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The expected dividend yield was assumed to be zero as we have not paid dividends since our inception and do not anticipate paying dividends in the foreseeable future.
Long-lived assets
Long-lived assets are comprised of acquired technology and licensed rights to use technology, which are considered platform technology with alternative future uses beyond the current products in development. Such intangible assets are being amortized on a straight-line basis over their expected useful life of 10 years.
We assess the impairment for long-lived assets whenever events or circumstances indicate the carrying value may not be recoverable. Factors we consider that could trigger an impairment review include the following:
● Significant changes in the manner of our use of the acquired assets or the strategy for our overall business,
● Significant underperformance relative to expected historical or projected development milestones,
● Significant negative regulatory or economic trends, and
● Significant technological changes which could render the platform technology obsolete.
We recognize impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value. During the year ended December 31, 2025 there was no impairment indicator which required an impairment loss measurement. During the year ended December 31, 2024, there was no impairment indicator which required an impairment loss measurement.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this Item 7A.
Item 8. Financial Statements and Supplementary Data
The information required by this Item is set forth in the consolidated financial statements and notes thereto in Item 15 of Part IV of this Annual Report.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.