Basis of Presentation

The accompanying consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Segment Reporting

The chief operating decision maker, the CEO, manages the Company’s operations as a single operating segment for the purposes of assessing performance and making operating decisions.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Accounting estimates and

management judgments reflected in the consolidated financial statements include: the accrual of research and development expenses, stock-based compensation, operating lease liabilities, product revenue reserves, interest expense on the royalty obligation, and assumptions used to value the embedded derivative in the royalty obligation. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may materially differ from these estimates and assumptions.

Foreign Currency

The functional currency of each of the Company’s foreign subsidiaries is primarily the local currency of the country in which the subsidiary operates. The Company’s asset and liability accounts are translated at the current exchange rate as of the balance sheet date. Revenue and expense accounts are translated at the average exchange rate over the period. Adjustments resulting from the translation of the financial statements of the Company’s foreign subsidiaries into U.S. dollars are accumulated as a separate component of stockholders’ equity within accumulated other comprehensive income. Gains or losses resulting from transactions denominated in foreign currencies are included in foreign currency losses, net, within the consolidated statements of operations and comprehensive loss.

Recent Accounting Pronouncements

Recently issued but not yet adopted

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures, which requires public business entities to disclose, on an annual and interim basis, disaggregated information about certain income statement expense line items. The required information includes purchases of inventory, employee compensation, depreciation, intangible asset amortization and depletion. The standard will be effective for the Company beginning with annual financial statements for the fiscal year ending December 31, 2027. The Company has not yet determined the impact of adopting this guidance on its financial statements.

Recently adopted

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. The Company adopted ASU 2023-09 for the current year on a prospective basis. The adoption of ASU 2023-09 resulted in additional disclosures (see Note 16, Income Taxes) but did not have a material impact on the consolidated financial statements.

The Company does not expect any other recently issued accounting standards to have a material impact to its financial statements or disclosures.

Cash and Cash Equivalents

Cash and cash equivalents consist of readily available checking and bank deposit accounts and marketable securities. Cash equivalents are carried at cost which approximates fair value due to their short-term nature. The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents.

The Company maintains its cash and cash equivalent balances with financial institutions that management believes are of high credit quality. The Company’s cash and cash equivalent accounts at times may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk of cash and cash equivalents.

Investments

The Company classifies all of its debt securities as available-for-sale (“AFS”). AFS debt securities are recorded at fair value and unrealized gains and losses are included in accumulated other comprehensive loss in the consolidated balance sheets. Realized gains and losses are reported in other income, net in the consolidated statements of operations and comprehensive loss, on a specific identification basis with transactions recorded on a trade date basis.

Accounts Receivable, net

The Company’s trade accounts receivable arise from product sales and represent amounts due from specialty distributors and specialty pharmacy providers in the U.S. and retail pharmacies in international markets. The Company monitors the financial performance and creditworthiness of its customers so that it can properly assess and respond to changes in its customers’ credit profile. The Company reserves against these receivables for estimated losses that may arise from a customer’s inability to pay. Amounts determined to be uncollectible are charged or written-off against the reserve.

Inventory

The Company values inventory at the lower of cost or estimated net realizable value with cost determined on a first-in, first-out basis. Raw materials and work-in-process include all inventory costs prior to packaging and labeling, including raw material, active product ingredient, and the drug product. Finished goods include packaged and labeled products. At each reporting date, the Company evaluates the carrying value of inventory and provides valuation reserves for any estimated excess, obsolete, short-dated or unmarketable inventory. In the event that certain batches or units of product do not meet quality specifications, the Company will record a write-down of any potential unmarketable inventory to its estimated net realizable value and record the expense as cost of revenue in the consolidated statements of operations and comprehensive loss. Prior to obtaining initial regulatory approval for an investigational product candidate, costs relating to production of pre-launch inventory are expensed as research and development expense in the period incurred. After initial regulatory approval has been received, inventory costs are capitalized.

Research and Development Tax Credit Receivable

The research and development tax credit receivable consists of research and development expenses that have been claimed as research and development tax credits in accordance with the relevant U.K. tax legislation. These refundable tax credits are payable to the Company in cash and are carried on the consolidated balance sheet at the amount claimed and expected to be received from the U.K. government within the next 12 months.

Restricted Cash

Restricted cash consists of deposits held at financial institutions that are used to collateralize irrevocable letters of credit required under the Company’s lease agreements. Restricted cash is reported in other assets on the consolidated balance sheets.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Expenditures for repairs and maintenance are charged to expense as incurred. Upon retirement or sale, the costs of the assets disposed of and the related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is reflected in the consolidated statements of operations and comprehensive loss. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets, which are as follows:

Impairment of Long-Lived Assets

Long-lived assets are assessed for impairment whenever events or changes in circumstances indicate that the carrying value of such assets, or asset groups, may not be recoverable. Whenever events or changes in circumstances suggest that the carrying amount of long-lived assets may not be recoverable, the future undiscounted cash flows expected to be generated by the asset, or asset groups, from its use or eventual disposition is estimated. If the sum of the expected future undiscounted cash flows is less than the carrying amount of those assets, or asset groups, an impairment loss is recognized based on the excess of the carrying amount over the fair value of the assets, or asset groups.

Leases

The Company determines if an arrangement contains an operating or finance lease at inception and will utilize the short-term lease exception for certain temporary lab and office space arrangements with terms of 12 months or less. As of December 31, 2025, the

Company maintained only operating leases. The Company recognizes a right-of-use operating lease asset and associated short and long-term operating lease liability in the consolidated balance sheets for operating leases greater than one year. The right-of-use assets represent the right to use an underlying asset for the lease term and the lease liabilities represent the obligation to make lease payments arising from the lease arrangement. The Company recognizes the right-of-use operating lease assets and lease liabilities based on the present value of the future minimum lease payments that will be paid over the lease term, adjusted for items such as prepayments or incentives received. The Company determines the lease term at the inception of each lease, and in certain cases the lease term could include renewal options if it is concluded it is reasonably certain the renewal option will be exercised. When a lease option is exercised that was not previously included in the initial lease term, the right-of-use asset and lease liabilities are reassessed for the new lease term.

As the leases do not provide an interest rate implicit in the lease, the Company uses the incremental borrowing rate as the discount rate, based on the information available as of the lease inception date or at the lease option extension date in determining the present value of future payments. The Company recognizes rent expense for the minimum lease payments on a straight-line basis over the expected term of the lease. The Company has elected the practical expedient which allows non-lease components to be combined with the lease components for all existing asset classes and will therefore include any fixed additional rent amounts in its lease payments. Any variable lease payments are excluded from the lease liability and are recognized in the period incurred.

Deferred Royalty Obligation

The Company treats the debt obligation to DRI UK LP, an affiliate of DRI Healthcare Trust (“DRI”) discussed further in Note 14, Purchase and Sale Agreement, as a deferred royalty obligation, amortized using the effective interest rate method over the estimated life of the revenue stream. The Company periodically assesses its expected revenues using internal projections, imputes interest on the carrying value of the deferred royalty obligation, and records interest expense using the imputed effective interest rate. To the extent its estimates of future revenues are greater or less than previous estimates or the estimated timing of such payments is materially different than previous estimates, the Company will account for any such changes by adjusting the effective interest rate on a prospective basis. The assumptions used in determining the expected repayment term of the deferred royalty obligation and amortization period of the issuance costs require that the Company makes estimates that could impact the classification of such costs, as well as the period over which such costs will be amortized.

Embedded Derivative Liability

The Company evaluates all its financial instruments to determine if such instruments contain features that qualify as embedded derivatives per ASC 815, Derivatives and Hedging, (“ASC 815”). The Purchase and Sale Agreement (“PSA”) with DRI contains certain features that meet the definition of an embedded derivative requiring bifurcation as a separate compound financial instrument (the “Derivative Liability”). The Derivative Liability was recorded at fair value upon entering into the PSA and is subsequently remeasured to fair value at each reporting period with the corresponding change in fair value recognized in other income, net, in the consolidated statements of operations and comprehensive loss. The PSA was initially valued and is remeasured using Monte Carlo simulation models to perform the “with-and-without” method, which involves valuing the PSA with the embedded derivative and then valuing it without the embedded derivative. The Monte Carlo simulation model requires the use of Level 3 unobservable inputs, primarily the amount and timing of expected future revenue, the estimated volatility of these revenues, the discount rate corresponding to the risk of revenue, and the probability of a change in control. The difference between values is determined to be the estimated fair value of the Derivative Liability. Bifurcated embedded derivatives are classified with the related host contract in the Company’s consolidated balance sheets. Refer to Note 3, Fair Value Measurements, for details regarding the fair value.

Convertible Notes

Convertible instruments are accounted for as a single unit of account in the Company's consolidated balance sheets as the conversion feature is not bifurcated from the host debt instrument, which would require the feature to be separately accounted for as a derivative under ASC 815. Debt issuance costs are recorded as contra-liabilities in the Company's consolidated balance sheets that are amortized to interest expense over the term of the note using the effective interest rate. Interest expense is recognized based on the contractual interest rate and includes the amortization of debt discounts and issuance costs.

Revenue recognition

The Company recognizes revenue from product sales and partnership arrangements. In accordance with ASC 606, Revenue from Contracts with Customers, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods and services.

To determine revenue recognition for arrangements within the scope of ASC Topic 606, Revenue from Contracts with Customers, the Company performs the following five steps: (1) identify the contracts with a customer; (2) identify the performance

obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when or as we satisfy a performance obligation.

Performance obligations promised in a contract are identified based on the goods and services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other available resources, and are distinct in the context of the contract, whereby the transfer of the good or service is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised goods and services, the Company must apply judgment to determine whether promised goods and services are capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised goods and services are accounted for as a combined performance obligation.

The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods and services to the customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Any estimates, including the effect of the constraint on variable consideration, are evaluated at each reporting period for any changes.

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct service that forms part of a single performance obligation. The consideration to be received is allocated among the separate performance obligations based on relative standalone selling prices.

The Company satisfies performance obligations either over time or at a point in time. Revenue is recognized over time if either: (1) the customer simultaneously receives and consumes the benefits provided by the entity’s performance, (2) the entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced or (3) the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date. If the entity does not satisfy a performance obligation over time, the related performance obligation is satisfied at a point in time by transferring the control of a promised good or service to a customer. ASC 606 requires the Company to select a single revenue recognition method for the performance obligation that faithfully depicts the Company’s performance in transferring control of the goods and services. The guidance allows for two methods to measure progress toward complete satisfaction of a performance obligation, depending on the facts and circumstances:

Output methods - recognize revenue on the basis of direct measurements of the value to the customer of the goods or services transferred to date relative to the remaining goods or services promised under the contract (e.g., surveys of performance completed to date, appraisals of results achieved, milestones reached, time elapsed, and units of produced or units delivered); and

Input methods - recognize revenue on the basis of the entity’s efforts or inputs to the satisfaction of a performance obligation (e.g., resources consumed, labor hours expended, costs incurred, or time elapsed) relative to the total expected inputs to the satisfaction of that performance obligation.

Licenses of intellectual property: If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company must consider the nature of the intellectual property to which the customer will have rights (i.e., access at a point in time or benefit of intellectual property enhancements over time). The Company recognizes revenue from non-refundable, up-front fees allocated to the license at a point in time/over the period the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress at each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Milestone payments: At the inception of each arrangement that includes development and regulatory milestone payments for promised goods and services, the Company evaluates the circumstances of whether the milestones will be reached and estimates the amount to be included in the transaction price that will not cause a significant revenue reversal.

Up-front payments: Up-front payments and fees are recorded as deferred revenue upon receipt or when due and may require deferral of revenue recognition to a future period until the Company performs its obligations under these arrangements. Amounts payable to the Company are recorded as a receivable within prepaid expenses and other current assets in the consolidated balance sheets when the

Company’s right to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.

Variable Consideration

Net revenue from sales of EKTERLY is recorded at net selling price (transaction price), which includes reserves for variable consideration such as estimated government rebates, patient assistance programs, prompt payment discounts, distribution fees, and product returns. These estimated reserves, representing the Company's best estimates of the amount of consideration to which we expect to be entitled based on the terms of the applicable contracts and statutory requirements. The related reserves are recorded as reductions of accounts receivable when no payments are required or a current liability when payment is expected. Actual amounts of consideration may differ from our estimates. If actual results vary from estimates, these estimates are adjusted, which would affect net product revenue and earnings in the period such variances become known.

Rebates: The Company estimates rebates it will provide to commercial payors and governmental programs, including Medicaid and Medicare, and deduct these estimated amounts from total gross product revenues at the time the revenues are recognized, resulting in a reduction of product revenue and the establishment of a current liability. Governmental rebate reserves are calculated based on the terms of applicable government statutory requirements and estimated product utilization by eligible patients.

Patient assistance: The Company provides financial assistance programs such as co-pay assistance to eligible commercially insured patients to help reduce out-of-pocket costs. The calculation is based on claims processed during a given period. Reserves for these programs are recorded in the same period in which the related revenue is recognized, resulting in a reduction of product revenue and establishment of a current liability.

Prompt payment discounts: The Company estimates credits to be granted to specialty pharmacies that remit payment within established incentive periods. These amounts are recorded as reductions of product revenue and accounts receivable at the time the related revenue is recognized.

Distribution fees: Distribution fees relate to payments made to customers in the distribution channel that provide inventory management, data reporting and product distribution services. These fees are generally recorded as a reduction of product revenue and a current liability at the time related revenues are recognized. If the services provided by the customer are distinct from the sale of product, the payments are instead classified as selling, general and administrative expenses.

Product returns: Reserves for estimated product returns are established in the period that the related revenue is recognized and recorded as reductions of both product revenue and accounts receivable.

Cost of Revenue

The Company's cost of revenue is comprised of direct costs related to its commercial revenue, including manufacturing costs and indirect costs associated with the manufacturing and distribution of its products. The Company also may include certain period costs related to manufacturing services and inventory adjustments in cost of revenue. Cost of revenue for EKTERLY does not currently include the full cost of manufacturing until the Company manufactures and sells additional inventory after exhausting its pre-launch supply. Such pre-launch supply has previously been recorded as research and development expense.

Contract Balances

The Company recognizes a contract asset when the Company transfers goods or services to a customer before the customer pays consideration or before payment is due, excluding any amounts presented as a receivable (i.e., accounts receivable). A contract asset is an entity’s right to consideration in exchange for goods or services that the entity has transferred to a customer. The contract liabilities (i.e., deferred revenue) primarily relate to contracts where the Company has received payment but has not yet satisfied the related performance obligations. The advance consideration received from customers for research and development services and/or licenses is a contract liability, recorded as deferred revenue, until the underlying performance obligations are transferred to the customer.

Research and Development

Research and development costs are expensed as incurred and include, but are not limited to:

Costs for certain research and development activities, such as manufacturing development activities and clinical studies are recognized based on the contracted amounts adjusted for the percentage of work completed to date. Payments for these activities are based on the terms of the contractual arrangements, which may differ from the pattern of costs incurred, and are reflected on the consolidated balance sheets as prepaid or accrued expenses. The Company defers and capitalizes non-refundable advance payments made by the Company for research and development activities until the related goods are delivered or the related services are performed.

Income Taxes

The Company accounts for income taxes using an asset and liability approach. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company evaluates the realizability of its deferred tax assets and establishes a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not be realized. The Company has provided a full valuation allowance on its deferred tax assets.

Relative to accounting for uncertainties in tax positions, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. For those tax positions where it is more likely than not that a tax benefit will be sustained, the Company records the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, the Company does not recognize a tax benefit in the financial statements.

The Company recognizes interest and penalties related to uncertain tax positions, if any, as a component of income tax expense. As the Company has no uncertain tax positions, there were no interest or penalties charges recognized in the statement of operations for any years.

Stock-Based Compensation

The Company accounts for stock-based compensation arrangements at fair value. The fair value is recognized over the period during which the recipient is required to provide services (usually the vesting period), on a straight-line basis. Forfeitures are recognized as they are incurred.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the sum of the weighted average number of common shares and the number of potential dilutive common share equivalents outstanding during the period. In computing diluted earnings per share, common share equivalents are not considered in periods in which a net loss is reported, as the inclusion of the common share equivalents would be anti-dilutive.

All shares underlying pre-funded warrants are included in the weighted- average number of shares of common stock used to calculate basic and diluted net loss per share because the shares may be issued for little consideration, are fully vested and exercisable after the original purchase date.

Fair Value Measurement

The Company classifies fair value measurements using a three-level hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

See Note 3, Fair Value Measurements, for additional information related to fair value measurements.