Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following Management's Discussion and Analysis of Financial Condition and Results of Operations provides information about our results of operations, financial condition, liquidity and asset quality. This information is intended to facilitate your understanding and assessment of significant changes and trends related to our financial condition and results of operations. This discussion should be read in conjunction with our financial information in our Annual Report on Form 10-K for the year ended December 31, 2024 ("2024Form 10-K"), and the unaudited condensed consolidated financial statements and notes to condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q (this "Report"). This discussion contains forward-looking statements that involve risks and uncertainties. These statements include, but are not limited to, statements about the plans, objectives, expectations and intentions of STRATA Skin Sciences, Inc., a Delaware corporation (referred to in this Report as "we," "us," "our," "STRATA" or "STRATA Skin Sciences") and can be identified by terminology such as the words "may," "should," "expect," "intend," "plan," "anticipate," "believe," "estimate," "predict," "will," "could," "project," "target," "potential," "continue" and similar expressions, and are intended to identify forward-looking statements, as such term is defined in the Private Securities Litigation Reform Act of 1995, and other statements contained in this Report that are not historical facts. Factors that could cause results to differ from those expressed in these forward-looking statements include, but are not limited to, the risks and uncertainties described or referenced in Part I, Item 1A. "Risk Factors," in the 2024Form 10-K and in other of our public filings with the SEC, as well as the following:

Although we believe that the expectations reflected in forward-looking statements are reasonable, such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by forward-looking statements. These statements, like all statements in this Report, speak only as of their date (unless another date is indicated), and we undertake no obligation to update or revise these statements in light of future developments.

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Introduction, Outlook and Overview of Business Operations

STRATA Skin Sciences is a medical technology company dedicated to developing, commercializing, and marketing innovative products for the treatment of dermatologic conditions. Its products include the XTRAC® and Pharos® excimer lasers and VTRAC® lamp systems utilized in the treatment of psoriasis, vitiligo, and various other skin conditions, as well as the TheraClear® X Acne Therapy System ("TheraClear") utilized in the treatment of acne-related skin conditions.

The XTRAC ultraviolet light excimer laser system is utilized to treat psoriasis, vitiligo, and other skin diseases. The XTRAC excimer laser system received clearance from the FDA in 2000 and has since become a widely recognized treatment among dermatologists. The system delivers targeted 308nm ultraviolet light to affected areas of skin, leading to psoriasis clearing and vitiligo repigmentation, following a series of treatments. As of September 30, 2025, there were 838XTRAC systems placed in dermatologists' offices in the United States under our dermatology recurring procedures model, a decreasefrom 864as of December 31, 2024. Under the dermatology recurring procedures model, the XTRAC system is placed in a physician's office and fees are charged on a per procedure basis or a fee is charged on a periodic basis not to exceed an agreed upon number of procedures. The XTRAC system's use for psoriasis is covered by nearly all major insurance companies, including Medicare. The VTRAC Excimer Lamp system, offered internationally in addition to the XTRAC, provides targeted therapeutic efficacy demonstrated by excimer technology with the simplicity of design and reliability of a lamp system. The Pharos excimer laser system holds FDA clearance to treat chronic skin diseases, including psoriasis, vitiligo, atopic dermatitis, and leukoderma. We believe there are approximately 8 million people in the United States and up to 125 million people worldwide suffering from psoriasis, and 1% to 2% of the world's population suffers from vitiligo.

The TheraClear® X Acne Therapy System combines intense pulsed light with vacuum (suction) for the treatment of mild to moderate inflammatory acne (including acne vulgaris), comedonal acne and pustular acne. The TheraClear device was cleared by the FDA through the 510(k) process. Currently, there is little insurance reimbursement coverage for acne treatments, such as those provided by TheraClear.

Our non-U.S. business focuses on a direct distribution model for equipment sales and recurring revenue, and we have distribution agreements in place in the Mid-East, Asia, and Mexico.

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Post-COVID-19 Pandemic

In late 2019, there was an outbreak of a new strain of coronavirus ("COVID-19") which became a global pandemic. Since March 2020, the COVID-19 pandemic has negatively impacted business conditions in the industry in which we operate, disrupted global supply chains, constrained workforce participation, and created significant volatility and disruption of financial markets. The pandemic led to the suspension of elective procedures in the U.S. and to the temporary closure of many physician practices, which are our primary customers. While most physician offices have reopened, some of our partner physician practices closed permanently, and the impact of the COVID-19 pandemic and its variants on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frames is ongoing. We will continue to identify and plan around potential future pandemics and disruptions to our business.

Impact of Russia-Ukraine War

Prior to the outbreak of the Russia-Ukraine War, Ukraine was the largest exporter of noble gases including neon, krypton, and xenon and has historically been the source of a significant amount of gas supplied to us by our contract suppliers. Neon gas is essential to the proper functioning of our lasers. Our suppliers have been resourceful in continuing to supply gases to us but cannot assure us that the supply will not remain uninterrupted. The reduced supply and ongoing conflict have also impacted the price of gas worldwide. Additionally, the Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022 has led to a further tightening of rare gas supplies as semiconductor chip manufacturers reconfigure their supply chains to address the need to secure their own supplies of rare gases for use in the manufacture of computer chips.

Impact of Middle East Conflict

We have not seen an impact on our distributors' businesses in the Middle East due to the Middle East conflict, but cannot predict the impact should the conflict continue or develop into a larger war.

Impact of Tariffs

In 2025, the U.S. introduced trade policy actions that have increased import tariffs across a wide range of countries at various rates, with certain exemptions. To the extent that trade tariffs and other restrictions imposed by the U.S. or other countries increase the price of, or limit the amount of, our products or components or materials used in our products imported into the U.S., or create adverse tax consequences, the revenues, costs, or gross profit of our products and services, primarily in the Dermatology Procedures Equipment segment, may be adversely affected and the demand from our customers may be diminished. Uncertainty surrounding international trade policy and regulations as well as disputes and protectionist measures could also have an adverse effect on consumer confidence and spending and may impact our results of operations.

Key Technologies

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Critical Accounting Estimates

The preparation of our financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and the rules and regulations of the SEC requires us to make estimates and assumptions, based on judgments considered reasonable, which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates and assumptions on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Although we believe our estimates and assumptions are reasonable when made, they are based upon information available to us at the time they are made. We evaluate our estimates and assumptions on an ongoing basis and, if necessary, make adjustments. Due to the risks and uncertainties involved in our business and evolving market conditions and given the subjective element of the estimates and assumptions made, actual results may differ from estimated results.

We define our critical accounting estimates as those accounting policies that are most important to the portrayal of our financial condition and results of operations and require our most difficult and subjective judgments. Critical accounting estimates made in accordance with such policies are regularly discussed with our Audit Committee. Those policies are discussed under "Critical Accounting Policies and Estimates," as well as in our consolidated financial statements and the footnotes thereto, included in the 2024Form 10-K, and include revenue recognition, goodwill and intangible impairments, and sales and use taxes. There have been no changes to our critical accounting policies in the three and ninemonths ended September 30, 2025.

Results of Operations

As discussed in Note 3, Revision of Previously Issued Consolidated Financial Statementsto the Notes to unaudited condensed consolidated financial statements, during the third quarter of 2025, we identified an error in our methodology for accruing sales tax liabilities that had resulted in a cumulative overstatement of accrued expenses and sales tax expense. The overstatement of accrued expenses resulted in an understatement of the carrying value of the dermatology recurring procedures reporting unit, which resulted in a corresponding understatement of goodwill impairment. This error impacted quarterly reporting periods during 2024 and 2025 through June 30, 2025. We assessed the materiality of the error on prior period consolidated financial statements in accordance with SEC Staff Accounting Bulletins No. 99 and No. 108, as codified in ASC 250, Accounting Changes and Error Corrections. Based on this assessment, in consideration of both quantitative and qualitative factors, we concluded that the error is not material to any previously presented interim financial statements. We revised our financial statements for the periods impacted. The revised balances are reflected in the following discussion of results of operations.

Revenues

The following table presents revenues from our two business segments for the periods presented below (in thousands):

Dermatology Recurring Procedures

Recognized recurring treatment revenue for the three months ended September 30, 2025was $5.5 million, which we estimate is approximately 67,000XTRAC treatments with prices between $65 to $95 per treatment, compared to recognized recurring treatment revenue for the three months ended September 30, 2024of $5.4 million, which we estimate is approximately 64,000XTRAC treatments with prices between $65 to $95 per treatment. Recognized recurring treatment revenue for the nine months ended September 30, 2025 was $15.4 million, which we estimate is approximately 186,000 XTRAC treatments with prices between $65 to $95 per treatment, compared to recognized recurring treatment revenue for the nine months ended September 30, 2024 of $15.4 million, which we estimate is approximately 188,000 XTRAC treatments with prices between $65 and $95 per treatment.Subsequent to the launch of the TheraClear Acne Therapy System, there were 161and 135TheraClear devices placed in dermatologists' offices in the United States under our recurring procedures model as of September 30, 2025and 2024, respectively.

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Increases in procedures are dependent upon building market acceptance through marketing programs with our physician partners and their patients to show that the XTRAC procedures will be of clinical benefit and will be generally reimbursed by insurers. We believe that several factors have an impact on the prescribed use of XTRAC treatments for psoriasis and vitiligo patients. Specifically, we believe that there is a lack of awareness of the positive effects of XTRAC treatments among both sufferers and providers; and the treatment regimen, which can sometimes require up to 12 or more treatments, has limited XTRAC use to certain patient populations. We reduced our direct-to-patient advertising over the course of 2023, which we believe contributed to a reduction in the number of XTRAC treatments compared to prior periods that continued into 2024. Therefore, our strategy going forward is to continue to increase our direct-to-patient program for XTRAC advertising in the United States, targeting psoriasis and vitiligo patients through a variety of media and through our use of social media such as Facebook and X (formerly Twitter), and aimed at motivating them to seek out XTRAC treatments from our physician partners. We monitor the results of our advertising expenditures in this area in order to effectively reach the more than 10 million patients in the United States we believe are afflicted with these diseases.

Revenues from dermatology recurring procedures are recognized ratably over a 30 or 60 day period, as the treatments are being used. As of September 30, 2025and 2024, we deferred domestic net revenues of $1.8 millionand $1.9 million, respectively, which will be recognized as revenue over the remaining usage period for the related placements. Lower deferred revenue from the fourth quarter of 2024negatively impacted the first quarter of 2025as compared to the first quarter of 2024, when higher deferred revenue from the fourth quarter of 2023positively impacted that period.

Dermatology Procedures Equipment

For the three and ninemonths ended September 30, 2025, dermatology procedures equipment revenues were $1.4 millionand $6.0 million, respectively. Internationally, we sold 8systems (6XTRAC and 2VTRAC) and 39systems (34XTRAC and 5VTRAC), respectively, during the three and ninemonths ended September 30, 2025. Domestically, there were no XTRAC systems sold during the three months ended September 30, 2025 and 3 XTRAC systems sold during the nine months ended September 30, 2025.

For the three and ninemonths ended September 30, 2024, dermatology procedures equipment revenues were $3.4 millionand $8.6 million, respectively. Internationally, we sold 20systems (20XTRAC and nilVTRAC) and 60systems (56XTRAC and 4VTRAC), respectively, during the three and ninemonths ended September 30, 2024. Domestically, there were 7and 12XTRAC systems sold, respectively, during the three and ninemonths ended September 30, 2024. In addition to equipment sales, we recognized approximately $0.1 million of previously deferred service revenue associated with assumed service contracts from Ra Medical during the nine months ended September 30, 2024.

Cost of Revenues

The following table presents cost of revenues from our two business segments for the periods listed below (in thousands):

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Gross Profit Analysis

The following table presents changes in our gross profit for the periods presented below:

Company Profit Analysis

During the third quarter of 2025, we reclassified $21.0 thousand of outsourced international service fees from selling and marketing expense to cost of revenues for the three months ended September 30, 2024 and $0.1 million of outsourced international service fees from cost of revenues to selling and marketing expense for the nine months ended September 30, 2024 to conform with the current period presentation, which more accurately reflects the nature of these costs.

Gross profit decreased to $4.2 million for the three months ended September 30, 2025 from $5.3 million during the same period in 2024. As a percentage of revenues, gross profit was 60.4% for the three months ended September 30, 2025, as compared to 60.1% for the same period in 2024. The increase in gross profit percentage compared to the same period in the prior year was primarily the result of a an increase in the contribution of higher-margin recurring revenue to total revenue and reduced obsolescence costs, partially offset by increases in manufacturing overhead.

Gross profit decreasedto $12.3 millionfor the nine months ended September 30, 2025from $13.5 millionduring the same period in 2024. As a percentage of revenues, gross profit was 57.3%for the nine months ended September 30, 2025, as compared to 56.1%for the same period in 2024. The increase in gross profit percentage compared to the same period in the prior year was primarily the result of an increase in the contribution of higher-margin recurring revenue and the write-off of inventories in 2024 related to the Pharos laser system products that were no longer needed for warranty purposes due to the expiration of the related warranty service contracts during the three months ended March 31, 2024, partially offset by an increase in manufacturing overhead and the impact of tariffs.

Dermatology Recurring Procedures

Gross profit for dermatology recurring procedures decreasedto $3.4 millionfor the three months ended September 30, 2025from $3.5 millionduring the same period in 2024. As a percentage of revenues, gross profit was 61.6%for the three months ended September 30, 2025, as compared to 65.4%for the same period in 2024. The decrease in gross profit percentage compared to the same period in the prior year was primarily the result ofincreases in manufacturing overhead, driven by cost increases in materials and parts used in operations, and outsourced service fees related to our owned international lasers, as well as less deferred revenue recognized in the three months ended September 30, 2025 from the second quarter of 2025, compared to higher deferred revenue from the second quarter of 2024 recognized in the three months ended September 30, 2024.

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Gross profit for dermatology recurring procedures decreasedto $9.4 millionfor the nine months ended September 30, 2025from $9.6 millionduring the same period in 2024. As a percentage of revenues, the gross profit decreased to 61.0%for the nine months ended September 30, 2025from 62.3%during the same period in 2024.

Dermatology Procedures Equipment

Gross profit for dermatology procedures equipment decreasedto $0.8 millionfor the three months ended September 30, 2025from $1.8 millionduring the same period in 2024. As a percentage of revenues, gross profit was 55.5%for the three months ended September 30, 2025, as compared to 51.7%for the same period in 2024. The increase in gross profit percentage compared to the same period in the prior year was primarily the result of reduced obsolescence costs during the three months ended September 30, 2025.

Gross profit for dermatology procedures equipment decreased to $2.9 millionfor the nine months ended September 30, 2025from $3.8 millionduring the same period in 2024. As a percentage of revenues, gross profit was 47.9%for the nine months ended September 30, 2025, as compared to 44.9%for the same period in 2024. The increase in gross profit percentage compared to the same period in the prior year was primarily the result of the write-off of inventories related to the Pharos laser system products that will no longer be needed for warranty purposes due to the expiration of the related warranty service contracts during the nine months ended September 30, 2024, a discount on the sale of certain lasers to an international distributor during the nine months ended September 30, 2024and reduced obsolescence costs during the nine months ended September 30, 2025, partially offset by an increase in manufacturing overhead and service fees and the impact of tariffs as discussed above.

Engineering and Product Development

For each of the three months ended September 30, 2025and 2024, engineering and product development expenses were $0.2 million. For the nine months ended September 30, 2025, engineering and product development expenses were $0.4 millionas compared to $0.7 millionfor the nine months ended September 30, 2024. Engineering and product development costs were lower during the nine-month period in 2025primarily as a result of decreases in salaries and outside services.

Selling and Marketing Expenses

For the three months ended September 30, 2025, selling and marketing expenses were $3.2 millionas compared to $3.0 millionfor the three months ended September 30, 2024. For the nine months ended September 30, 2025, selling and marketing expenses were $9.9 millionas compared to $9.2 millionfor the nine months ended September 30, 2024. Selling and marketing expenses were higher during the three and nine-month periods in 2025primarily as a result of increases in (i) certain employee related expenses, (ii) expenses related to our direct-to-patient advertising campaign aimed at motivating psoriasis and vitiligo patients to seek out XTRAC treatments from our physician partners, and (iii) trade shows and advertising expenses.

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General and Administrative Expenses

For the three months ended September 30, 2025, general and administrative expenses were $2.7 millionas compared to $3.6 millionfor the three months ended September 30, 2024. For the nine months ended September 30, 2025, general and administrative expenses were $7.9 millionas compared to $8.5 millionfor the nine months ended September 30, 2024.General and administrative expenseswere lower during the three and nine-month periods in 2025primarily as a result of (i) an increase in our sales tax accrual during the 2024period (see Note 14, Commitments and Contingencies), partially offset by increases in (ii) accounting and legal expenses and (iii) certain employee related expenses.

Settlement Gains

For each of the three and nine months ended September 30, 2025, settlement gains were $0.7 million. There were no settlement gains for each of the three and nine months ended September 30, 2024. Settlement gains increased in the current year due to the settlement of outstanding obligations with a supplier, resulting in the recognition of a gain on the difference between the settlement payment and the value of the related property and equipment. For additional information see Note 6, Property and Equipment, net.

Interest Expense

For each of the three months ended September 30, 2025and 2024interest expense was $0.5 million. For the nine months ended September 30, 2025, interest expense was $1.5 millionas compared to $1.6 millionfor the nine months ended September 30, 2024, as there was no significant change in the principal balance or interest rate associated with our Senior Term Facility.

Other Income

During the nine months ended September 30, 2024we received $0.9 millionfrom the Employee Retention Credit, a refundable tax credit available under the Coronavirus Aid, Relief, and Economic Securities Act ("CARES Act") that was designed to keep employees on the payroll during the COVID-19 pandemic. There was no such credit received during the threeand nine months ended September 30, 2025or the three months ended September 30, 2024.

Non-GAAP Financial Measures

We have determined to supplement our condensed consolidated financial statements, prepared in accordance with U.S. GAAP, presented elsewhere within this Report, with certain non-GAAP measures of financial performance. These non-GAAP measures include non-GAAP adjusted EBITDA, "Earnings Before Interest, Taxes, Depreciation, and Amortization."

This non-GAAP disclosure has limitations as an analytical tool, should not be viewed as a substitute for Net Earnings (Loss) determined in accordance with U.S. GAAP, and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under U.S. GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies. We consider these non-GAAP measures in addition to our results prepared under current accounting standards, but they are not a substitute for, nor superior to, U.S. GAAP measures. These non-GAAP measures are provided to enhance readers' overall understanding of our current financial performance and to provide further information for comparative purposes. This supplemental presentation should not be construed as an inference that our future results will be unaffected by similar adjustments to Net Earnings (Loss) determined in accordance with U.S. GAAP. Specifically, we believe the non-GAAP measures provide useful information to management and investors by isolating certain expenses, gains and losses that may not be indicative of our core operating results and business outlook. In addition, we believe non-GAAP measures enhance the comparability of results against prior periods.

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Reconciliation to the most directly comparable U.S. GAAP measure of all non-GAAP measures included in this Report is as follows (in thousands):

Liquidity and Capital Resources

As of September 30, 2025, we had negative working capital of $0.8 millioncompared to working capital of $3.2 millionas of December 31, 2024. The change in working capital was primarily the result of increases in net loss and decreases in cash and cash equivalents in connection with lower revenues, and an increase in current liabilities due to the start of principal repayments on long-term debt within the next year. Cash and cash equivalents and restricted cash were $7.1 millionas of September 30, 2025, as compared to $8.6 millionas of December 31, 2024.

In September 2021, we entered into the Senior Term Facility with MidCap, also acting as the administrative agent, and the lenders identified therein and borrowed $8.0 million in the form of a senior term loan. The term loan bore interest at LIBOR (with a LIBOR floor rate of 0.50%) plus 7.50% per year. In September 2022, we amended the credit facility to transition, upon the cessation of LIBOR, to bear interest at one-month Secured Overnight Financing Rate ("SOFR"), or such other applicable period, plus 0.10%, with a floor of 0.50%. In June 2023, we amended the credit facility to: (i) refinance our existing $8.0 million term loan, (ii) borrow an additional $7.0 million, and (iii) provide for an additional $5.0 million tranche that could have been drawn under certain conditions in 2024. The facility matures on June 1, 2028. Borrowings under the credit facility bear interest at a rate per annum equal to the sum of (a) the greater of (i) the sum of (A) 30-day forward-looking term rate of one month SOFR, as published by CME Group Benchmark Administration Limited, from time to time, plus (B) 0.10%, and (ii) the applicable floor rate of 3.50%, with such sum reset monthly, and (b) 7.50%. We are obligated to make interest-only payments through June 2026. From July 2026 to maturity, we will make principal payments in 24 equal installments. We also amended and restated the existing warrant to allow MidCap to purchase 80,000 shares of our common stock at an exercise price of $8.80 per share for a 10-year period ending June 30, 2033. The loan is senior to all other indebtedness and is secured by substantially all of our assets. We are subject to customary affirmative and negative covenants, including a financial covenant based on minimum net revenue thresholds. Upon an event of default, including a covenant violation, all principal and interest are due on demand.

In February 2024, the parties amended the credit facility to, among other things, revise the applicable minimum net revenue threshold financial covenant. In March 2024, the credit facility was further amended to clarify certain provisions related to the maintenance of cash collateral accounts.

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In November 2025, we further amended the credit facility, pursuant to which there shall be no measurement of net revenue for purposes of calculating financial covenant compliance for the quarterly period ended September 30, 2025 and continuing thereafter through the quarterly periods ending September 30, 2026 (the "Pause Period"). The amendment further provides that commencing with the first quarterly period ending after September 30, 2026, and for each quarterly period thereafter, we shall not permit net revenue for any applicable quarterly period, as tested quarterly on the last day of the applicable quarter to be less than the minimum revenue required by the credit and security agreement for such quarter.

In January 2022, we acquired certain assets related to the TheraClear devices from Theravant Corporation ("Theravant"). Theravant was eligible to receive up to $3.0 million in future earnout payments upon the achievement of certain annual net revenue milestones ($1.0 million of which was due upon the earlier of achieving a revenue target or July 2025), up to $20.0 million in future royalty payments based upon a percentage of gross profit from future domestic sales ranging from 10-20%, 25% of gross profit from international sales over the subsequent four-year period, and up to $0.5 million in future milestone payments upon the achievement of certain development and commercialization related targets. We entered into a mutual release and settlement agreement ("Theravant Settlement") with Theravant in October 2025, pursuant to which we were released from all obligations related to contingent consideration. We expect to write off the related product technology intangible asset with a net carrying value of $0.7 million and derecognize our liability for contingent consideration of $1.2 millionin the fourth quarter of 2025.

As additional consideration to the mutual releases contained within the Theravant Settlement, we will owe Theravant a royalty equal to 5% of sales of TheraClear® X devices, payable quarterly in arrears, starting on the later of January 1, 2027 or when we first achieve annual domestic revenue of more than $2.5 million from the sale or placement of TheraClear® X devices and ending on the first to occur of (i) we have paid aggregate royalties of $3.0 million to Theravant or (ii) we commercially launch a new TheraClear® X device and replace the current TheraClear® X device (as defined in the Theravant Settlement). No royalties were incurred through September 30, 2025.

In October 2021, we entered into an equity distribution agreement with an investment bank under which we may sell up to $11.0 million of our shares of common stock in registered "at-the-market" offerings. The shares will be offered at prevailing market prices, and we will pay commissions of up to 3.00% of the gross proceeds from the sale of shares sold through our agent, which may act as an agent and/or principal. We have no obligation to sell any shares under this agreement and may, at any time, suspend solicitations under this agreement. In July 2024, we sold 665,136 shares of our common stock for gross proceeds of approximately $2.1 million. In September 2025, the Company sold 1,097,547shares of its common stock under the equity distribution agreement at an average price of $2.204per share for total gross and net proceeds of approximately $2.4 millionand $2.2 million, respectively. As of September 30, 2025, we may sell up to an additional $6.5 millionshares of our common stock under this distribution agreement, subject to certain limitations. In October 2025, we sold an additional 619,491 shares of our common stock under the equity distribution agreement at an average price of $2.304 per share for total gross and net proceeds of approximately $1.4 million, after which $5.1 million shares of common stock were available to be sold under the distribution agreement.

We cannot predict our revenues and expenses in the short term as a result of potential future pandemics, the ongoing Russia-Ukraine war, the Middle East conflict, changes in U.S. trade policies, supply chain disruptions, rising interest rates and related responses by our customers and our ultimate consumers as a result thereof. Based on our current business plan, we believe that our cash and cash equivalents, combined with the anticipated revenues from the sale or use of our products and operating expense management, will be sufficient to satisfy our working capital needs, capital asset purchases, outstanding commitments and other liquidity requirements associated with our existing operations for at least the next 12 months following the date of the issuance of these interim condensed consolidated financial statements. However, if these sources are insufficient to satisfy our liquidity requirements, we may seek to sell additional debt or equity securities or enter into a new credit facility or another form of third-party funding or seek other debt financing. If we raise additional funds by issuing equity or equity-linked securities, our stockholders would experience dilution and any new equity securities could have rights, preferences, and privileges superior to those of holders of our common stock. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. We cannot be assured that additional equity, equity-linked or debt financing will be available on terms favorable to us or our stockholders, or at all. It is also possible that we may allocate significant amounts of capital towards products or technologies for which market demand is lower than expected and, as a result, abandon such efforts. If we are unable to maintain our current financing or obtain adequate additional financing when we require it, or if we obtain financing on terms which are not favorable to us, or if we expend capital on products or technologies that are unsuccessful, our ability to continue to support our business growth and to respond to business challenges could be significantly limited, or we may be required to delay the development, commercialization and marketing of our products.

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Net cash used in operating activities was $2.6 millionfor the nine months ended September 30, 2025, compared to net cash used in operating activities of $0.5 millionfor the nine months ended September 30, 2024. The increase in cash used in operating activities is primarily the result of (i) an increase in net loss of approximately $0.8 million, (ii) decreases in net non-cash transactions of $0.9 million, primarily as a result of (a) the settlementgains and (b) a reduction in amortization expense as certain intangible assets became fully amortized in the current period, and (iii) increases in cash used by changes in current balance sheet accounts in the ordinary course of business of approximately $0.4 million, primarily due to (a) $3.3 millionfrom accrued expenses and other current liabilities due to (1) the payment of sales and use taxes related to the adverse Appellate Division ruling with respect to the applicability of sales and use taxes to our sales of XTRAC treatment codes and (2) a change in accrued compensation and benefits and (b) $0.6 millionfrom purchases of inventory, partially offset by decreases in cash used of (c) $2.1 millionin accounts payable due to the timing of payments and (d) $1.6 millionin collections of accounts receivable.

Net cash used in investing activities was $1.2 millionfor each of the nine months ended September 30, 2025and nine months ended September 30, 2024. The cash used in both periods is primarily the result of purchases of property and equipment.

Net cash provided by financing activities was $2.2 millionfor the nine months ended September 30, 2025, compared to net cash provided by financing activities of $1.9 millionfor the nine months ended September 30, 2024. The financing activity for the nine months ended September 30, 2025consisted of $2.2 millionin net proceeds from the issuance of common stock. The financing activity for the nine months ended September 30, 2024consisted of $1.9 millionin net proceeds from the issuance of common stock, partially offset by an $18.0 thousandpayment of contingent consideration to Theravant.

Commitments and Contingencies

A description of our commitments and contingencies is discussed in Note 15, Commitments and Contingenciesto the Notes to unaudited condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 1, Basis of presentationto the Notes to unaudited condensed consolidated financial statements.

Off-Balance Sheet Arrangements

The Company did not have any off-balance sheet arrangements as of September 30, 2025.