Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

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

The terms "we," "us," "our," "Evofem" or the "Company" refer collectively to Evofem Biosciences, Inc. and its wholly-owned subsidiaries, unless otherwise stated. All information presented in this quarterly report on Form 10-Q (Quarterly Report) is based on our fiscal year. Unless otherwise stated, references to particular years, quarters, months, or periods refer to our fiscal years ending December 31 and the associated quarters, months, and periods of those fiscal years.

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report. Some of the information contained in this discussion and analysis is set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the "Risk Factors" section of this Quarterly Report, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.

Overview

We are a San Diego-based commercial-stage biopharmaceutical company with a strong focus on innovation in women's health. We currently commercialize two FDA-approved products: PHEXX^® (lactic acid, citric acid and potassium bitartrate) vaginal gel and SOLOSEC^® (secnidazole) 2 g oral granules.

Approved by the FDA on May 22, 2020, PHEXX is the first and only non-hormonal prescription contraceptive gel. It is locally acting, with no systemic activity, and used on-demand by women only when they have sex. Because PHEXX is a non-hormonal contraceptive, it is not associated with side effects of exogenous hormone use. In some women, these side effects may include depression, weight gain, headaches, loss of libido, mood swings and irritability. Taking hormones may not be right for some women, especially those with certain medical conditions, including clotting disorders hormone-sensitive cancer, diabetes, or a BMI over 30, or those who are breast feeding or who smoke. Per the National Center for Health Statistics (NCHS), more than 15.9 million women in the U.S. who will not use a hormonal contraceptive.²

Evofem has delivered PHEXX net sales growth in each consecutive year since it was launched in September 2020. Key growth drivers for 2026 include social media campaigns, participation in strategic medical conferences, and initiatives to expand use of PHEXX in women who take oral birth control pills in conjunction with GLP-1 prescription medications like Mounjaro and Zepbound for weight loss. These drugs may make oral birth control pills less effective at certain points in the dosing schedule. Per the products' USPIs, prescribers are instructed to "advise patients using oral contraceptives to switch to a non-oral contraceptive method or add a barrier method" to prevent unintended pregnancy during these times.

In July 2024 we acquired global rights to SOLOSEC. This FDA-approved single-dose oral antimicrobial agent provides a complete course of therapy for the treatment of two common sexual health infections - bacterial vaginosis (BV) and trichomoniasis. The SOLOSEC acquisition aligns with and advances our mission to improve access to innovative and differentiated options that impact women's daily lives. We expect commercialization of SOLOSEC will benefit from our commercial infrastructure and strong physician relationships.

We intend to expand the global reach of our products and further increase our global potential through ex-U.S. partnerships or licensing agreements for PHEXX and SOLOSEC.

We licensed exclusive commercial rights for PHEXX in MENA to Pharma 1 Drug Store, an emerging Emirati health care company. Under the License and Supply Agreement dated on July 17, 2024, as amended on May 3, 2025, the licensed territory includes the UAE, Kuwait, Saudi Arabia, Qatar, Oman, and Jordan, with potential to expand into 15 other countries in the region. Pharma 1 is responsible for obtaining and maintaining any regulatory approvals required to market and sell PHEXX, and will handle all aspects of distribution, sales and marketing, pharmacovigilance and all other commercial functions in these countries. Evofem will supply product to Pharma 1 at cost-plus. Pharma 1 filed for regulatory approval of PHEXX in the UAE in June 2025. The Emirates Drug Establishment issued favorable pricing certificates for PHEXX in late 2025.

²Daniels K and Abma J. Current Contraceptive Status Among Females Ages 15-49: United States, 2022-2023. NCHS Data Brief No. 539. August 2025. Data table for Figure 1, sourced from National Survey of Family Growth (NSFG) 2022-2023. https://www.cdc.gov/nchs/data/databriefs/db539.pdf

The Company licensed commercial rights for SOLOSEC in MENA to Pharma 1 on May 19, 2025. Under this agreement, the licensed territory includes the UAE, Kuwait, Saudi Arabia, Qatar, Oman, and Jordan, with potential to expand into 15 other countries in the region. Pharma 1 is responsible for obtaining and maintaining any regulatory approvals required to market and sell SOLOSEC, and will handle all aspects of distribution, sales and marketing, pharmacovigilance and all other commercial functions in these countries. Evofem will supply product to Pharma 1 at a specified cost per unit. Pharma 1 filed for regulatory approval of SOLOSEC in the UAE in September 2025.

In April 2026, we entered into a Distributorship Agreement with Clovis Davis Pharmaceuticals, Inc. for distribution of SOLOSEC in sub-Saharan Africa.

Under the 2020 Global Health Agreement with Adjuvant Capital, the Company submitted marketing applications for PHEXX under the trademark Femidence™ in Nigeria, Ethiopia, and Ghana. Femidence was approved in Nigeria on October 6, 2022, by the National Agency for Food and Drug Administration and Control. In October 2021, the Company submitted Femidence for approval in Mexico. The Company has not allocated resources to follow up with these regulatory bodies or advance commercialization in Nigeria due to fiscal constraints since October 2022.

We halted clinical development of our investigational product candidates in October 2022 to focus resources on growing domestic sales of PHEXX for the prevention of pregnancy.

In the second quarter of 2025, enrollment commenced in an investigator-led randomized, open-label, parallel Phase 4 clinical trial to evaluate the efficacy and cost-effectiveness of secnidazole (SOLOSEC® 2 g, one dose administered one time) versus metronidazole (Flagyl® 500 mg, administered twice daily for seven days) for the treatment of trichomoniasis in men and women. Study investigators hypothesize that, in the current clinical trial, the rate of repeat infections with T. vaginalis will be 1.75 lower in the SOLOSEC arm versus the multi-dose oral metronidazole arm and that single-dose SOLOSEC will have higher initial cost but will be more cost effective compared to multi-dose metronidazole, largely due to lower breakthrough rates of infection. This trial is funded directly by the National Institutes of Health (NIH).

In an investigator-led clinical study of SOLOSEC in 24 women with recurrent bacterial vaginosis (BV), once-weekly dosing with demonstrated efficacy matching or potentially surpassing outcomes of current CDC-recommended suppressive treatments. These promising results underscore SOLOSEC's potential to redefine the standard of care for recurrent BV - offering a simpler treatment option for long-term symptom control. The study was presented at the 2025 American College of Obstetricians and Gynecologists (ACOG) Annual Clinical and Scientific Meeting.

Recent Developments

Amendment to Securities Purchase Agreement

On April 10, 2026 we entered into a fourth amendment (the Fourth Amendment) to the Securities Purchase Agreement dated as of October 14, 2020, as amended, pursuant to which Adjuvant purchased from the Company certain convertible promissory notes (the Adjuvant Notes) with the Adjuvant Purchasers. The Fourth Amendment amends certain provisions within the Securities Purchase Agreement including updating the date that the Adjuvant Notes will be payable in full to the earlier of (a) six months after April 10, 2026 (b) at the election of Adjuvant, the date of a consummation of a Change of Control (as defined in the Securities Purchase Agreement), and (c) the date of any acceleration of the Notes in accordance with Section 8 (the Maturity Date, as per the Securities Purchase Agreement). The Adjuvant Notes may not be prepaid prior to the date that is six months after April 10, 2026 without prior written consent of Adjuvant.

Distributorship Agreement in Sub-Saharan Africa

On April 24, 2026, we entered into an exclusive distributorship agreement with Clovis Davis Pharmaceuticals, LLC., a Delaware Limited Liability Company (Clovis Davis) to commercialize SOLOSEC in Sub-Saharan Africa (the Territory) for a period of five years commencing on April 24, 2026. Under the distributorship agreement, Clovis Davis will lead the distribution, promotion, marketing, and sales of SOLOSEC within the Territory. Local regulatory filings for approval of SOLOSEC will be based on Evofem's registration dossier submitted and approved by the FDA.

PHEXX as a Contraceptive; Commercial Strategies

In September 2020, we commercially launched PHEXX in the United States. Our sales force promotes PHEXX directly to obstetrician/gynecologists (OB/GYNs) and their affiliated health professionals, who collectively write the majority of prescriptions for contraceptive products. Our sales force comprises regional sales representatives, sales managers, business directors, and a Senior Vice President of Commercial Operations. Additionally, we offer women direct access to PHEXX via a telehealth platform. Using this platform, women can directly meet with an HCP to determine their eligibility for a PHEXX prescription and, if eligible, have the prescription written by the HCP, then filled and mailed directly to them by a third-party pharmacy.

Our comprehensive commercial strategy for PHEXX includes marketing and product awareness campaigns targeting HCPs and women of reproductive potential in the U.S., including the approximately 15.9 million women who are not using hormonal contraception and the approximately 10.3 million women who are using a short-acting hormonal contraceptive, some of whom, particularly oral birth control pill users, may be ready to move to an FDA-approved, non-invasive, non-systemic hormone-free contraceptive, as well as certain identified target HCP segments.³ In addition to marketing and product awareness campaigns, our commercial strategy includes payer outreach and execution of our consumer digital and media strategy.

³ Daniels K and Abma J. Current Contraceptive Status Among Females Ages 15-49: United States, 2022-2023. NCHS Data Brief No. 539. August 2025. Data table for Figure 1, sourced from National Survey of Family Growth (NSFG) 2022-2023. https://www.cdc.gov/nchs/data/databriefs/db539.pdf

Key growth drivers for 2026 include social media campaigns, participation in strategic medical conferences, and initiatives to expand use of PHEXX in women who take oral birth control pills in conjunction with GLP-1 prescription medications like Mounjaro and Zepbound for weight loss. These drugs may make oral birth control pills less effective at certain points in the dosing schedule. Per the USPI, prescribers are instructed to "advise patients using oral contraceptives to switch to a non-oral contraceptive method or add a barrier method" to prevent unintended pregnancy during these times.

We continue working to increase the number of lives covered and to gain a preferred formulary position for PHEXX.

Previous contracting efforts have validated our access strategy. With PHEXX approval rates consistently above 80%, the Company has shifted from broad payer contracting to strengthening pharmacy partnerships. In 2025, we expanded our network in two of our highest-volume markets - California and the Northeast - by adding new partners in California and a regional distributor with more than 90 pharmacies in the Northeast. These targeted partnerships represent low-hanging fruit in high-demand areas, improving patient access while supporting more cost-effective and scalable pull-through.

Approximately 13.7 million lives are covered under our December 2020 contract award from the U.S. Department of Veterans Affairs.

We also participate in government programs, including the 340B and the Medicaid Drug Rebate Program. As a result of our participation in the Medicaid National Drug Rebate Program, the U.S. Medicaid population gained access to PHEXX on January 1, 2021. As of January 2026, Medicaid provides health coverage to approximately 68.0 million members; nearly two-thirds of adult women enrolled in Medicaid are in their reproductive years (19-44). Additionally, we began participating in a 340B Group Purchasing Organization (GPO) that serves safety-net clinics throughout the U.S. in June 2024. This GPO has over 6,500 members, which expands our reach among safety-net providers.

PHEXX is classified in the databases and pricing compendia of Medi-Span and First Databank, two major drug information databases that payers can consult for pricing and product information, as the first and only "Vaginal pH Modulator."

Effective as of January 1, 2023, most insurers and PBMs must provide coverage, with no out-of-pocket costs (e.g., $0 copay) to the subscriber or dependent, for FDA-approved contraceptive products, like PHEXX, prescribed by healthcare providers.

To comply with these federal guidelines, payers are increasingly covering PHEXX by:

	-	Adding PHEXX to formulary (commercial insurers) or preferred drug list (Medicaid)
	-	Removing the requirement for a Prior Authorization letter from the HCP (commercial insurers)
	-	Moving PHEXX to $0 copay (commercial insurers)

In 2022, Evofem developed and introduced a new contraceptive educational chart for patients and HCPs that details high-level information about birth control methods currently available to women in the U.S., including the vaginal pH modulator. This new contraceptive educational tool has been extremely well received and has had a positive impact with HCPs and patients alike.

SOLOSEC

In July 2024, we expanded our commercial portfolio by acquiring global rights to SOLOSEC^® (secnidazole) 2 g oral granules, a single-dose oral antimicrobial agent that provides a complete course of therapy with just one dose for the treatment of two common sexual health infections. SOLOSEC is FDA-approved for the treatment of:

	1)	Bacterial vaginosis (BV), a common vaginal infection, in females 12 years of age and older, and
	2)	Trichomonas vaginalis, a common sexually transmitted infection (STI), in people 12 years of age and older.

SOLOSEC has the same call point as PHEXX, enabling us to leverage our commercial infrastructure and strong physician relationships. We re-launched the brand in November 2024.

Bacterial Vaginosis

Bacterial vaginosis (BV) affects an estimated 21 million women in the U.S., approximately 29% of the U.S. population, making it the most common vaginal condition in women ages 15-44. It results from an overgrowth of bacteria, which upsets the balance of the natural vaginal microbiome and can lead to symptoms including odor and discharge. Of interest, BV raises the pH of the vagina, making it a more friendly environment for trichomoniasis and other STIs; approximately 20% of BV patients also have Trich.

If left untreated, BV can have serious health consequences. Untreated or improperly treated BV is associated with increased risk of infection with STIs like HPV, herpes, Trich, chlamydia, gonorrhea, and HIV, as well as transmission of STIs to a partner. Additional risks include developing pelvic inflammatory disease (PID), which can threaten a woman's fertility, and complications with gynecological surgery.

In May 2025, an investigator-led clinical trial entitled 'Once Weekly Secnidazole Granules for the Treatment of Recurrent Bacterial Vaginosis' was presented at the 2025 ACOG Annual Clinical and Scientific Meeting; the abstract was subsequently published in Obstetrics & Gynecology. In this focused clinical study of 24 women with recurrent BV, once-weekly dosing with SOLOSEC demonstrated efficacy matching or potentially surpassing outcomes of current CDC-recommended suppressive treatments. These promising results underscore SOLOSEC's potential to redefine the standard of care for recurrent BV by offering a simpler treatment option for long-term symptom control.

Trichomoniasis

Trichomoniasis (Trich) is the most common non-viral STI in the world. It is caused by a parasite called Trichomonas vaginalis and affects both women and men. All sexual partners of an infected person must be treated to prevent reinfection with the parasite. In 2018, there were an estimated 6.9 million new T. vaginalis infections in the U.S. According to the CDC, the U.S. prevalence of T. vaginalis is 2.1% among females and 0.5% among males, with the highest rates among Black females (9.6%) and Black males (3.6%). A study of STD clinic attendees in Birmingham, Alabama, identified a prevalence of 27% among women and 9.8% among men. Approximately 70% of women with trichomoniasis are also infected with the bacteria that cause BV.

In clinical trials, a single dose of SOLOSEC demonstrated a cure rate of 92.2% for Trich in women, while reported cure rates in males range from 91.7%-100%.

SOLOSEC's one-and-done dosing and the resulting high level of compliance is believed to be a significant differentiator. Non-compliance to a multi-day metronidazole regimen is a contributing factor to persistent Trich or BV; both ACOG and the CDC no longer recommend single dose metronidazole to treat Trich in women.

A Phase 4 investigator-led randomized, open-label, parallel arm clinical trial is underway to evaluate the efficacy and cost-effectiveness of secnidazole (SOLOSEC 2 g, one dose administered one time) versus metronidazole (Flagyl® 500 mg, administered twice daily for seven days) for the treatment of Trich in men and women. Study investigators hypothesize that, in the current clinical trial, the rate of repeat infections with T. vaginalis will be 1.75 lower in the SOLOSEC arm versus the multi- dose oral metronidazole arm and that single-dose SOLOSEC will have higher initial cost but will be more cost effective compared to multi-dose metronidazole, largely due to lower breakthrough rates of infection. This trial is directly funded by the National Institutes of Health (NIH).

Financial Operations Overview

Net Product Sales

Our revenue recognition is based on unit shipments to our customers, which consist of wholesale distributors, retail pharmacies, telehealth companies, and mail-order specialty pharmacies. We have recognized net product sales in the U.S. since the commercial launch of PHEXX in September 2020; SOLOSEC net product sales were added to our revenue beginning in July 2024. Gross revenues, as discussed in Note 3 - Revenue, are adjusted for variable consideration, including our patient support programs.

Cost of Goods Sold

Inventory costs include all purchased materials, direct labor, and manufacturing overhead. We are obligated to pay quarterly royalties under the SOLOSEC Asset Purchase Agreement dated July 14, 2024; this royalty is based on a percentage of SOLOSEC net sales in the U.S., adjusted for co-pay program costs. There are no minimum quarterly or annual royalty amounts. Such royalty costs were less than $0.1 million for each of the three months ended March 31, 2026 and 2025.

Operating Expenses

Research and Development Expenses

Our research and development expenses primarily consist of costs associated with ongoing improvements related to our products. These expenses include:

	●	ongoing improvements of manufacturing and analytical efficiency;
	●	ongoing product characterization and process optimization;
	●	alternative raw material evaluation to secure an uninterrupted supply chain and reduce cost of goods sold;
	●	employee-related expenses, including salaries, benefits, travel and noncash stock-based compensation expense; and
	●	facilities, depreciation, and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation of leasehold improvements and equipment, and research and other supplies.

We expense internal and third-party research and development expenses as incurred. We do not anticipate significant investment in clinical development for the foreseeable future.

During the three months ended March 31, 2025, the Company negotiated a portion of its trade payables with numerous vendors, which resulted in a $5.6 million reduction in research and development expenses.

Selling and Marketing Expenses

Our selling and marketing expenses consist primarily of PHEXX and SOLOSEC commercialization costs, the PHEXX telehealth platform, training, salaries, benefits, travel, noncash stock-based compensation expense, other related costs for our employees and consultants, and the Prescription Drug User Fee Act (PDUFA) fees we are required to pay to the FDA for our products.

General and Administrative Expenses

Our general and administrative expenses consist primarily of salaries, benefits, travel, business development expenses, investor and public relations expenses, noncash stock-based compensation, and other related costs for our employees and consultants performing executive, administrative, finance, legal and human resource functions. Other general and administrative expenses include facility-related costs not otherwise included in research and development or selling and marketing, and professional fees for accounting, auditing, tax and legal fees, and other costs associated with obtaining and maintaining our patent portfolio.

Other Income (Expense)

Other income (expense) consists primarily of interest expense and the fair value adjustments of financial instruments issued in various capital raise transactions, including loss on issuance of financial instruments, change in fair value adjustments, and gains or losses on debt extinguishment. The change in fair value of financial instruments was recognized as a result of mark-to-market adjustments for those financial instruments.

Results of Operations

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025 (in thousands):

Net Product Sales

		Three Months Ended March 31,								2026 vs. 2025
		2026				2025				$ Change				% Change
Product sales, net		$	899			$	845			$	54				6	%

The increase in product sales, net, primarily reflects the increase in WAC for PHEXX as well as increased product sales, net, related to SOLOSEC due to an increase in both unit sales and WAC. The increases were partially offset by a decrease in the PHEXX sales volume in the current period due to the significant amount of PHEXX purchases by wholesalers in December 2025 ahead of the January 2026 price increase.

Cost of Goods Sold

		Three Months Ended March 31,								2026 vs. 2025
		2026				2025				$ Change				% Change
Cost of goods sold		$	410			$	365			$	45				12	%

The increase in cost of goods sold was primarily due to the write-off in the current quarter of $0.2 million of expired raw materials held by the Company's PHEXX manufacturer, partially offset by the reduced units sold in the current quarter.

Amortization of Intangible Asset

		Three Months Ended March 31,								2026 vs. 2024
		2026				2025				$ Change				% Change
Amortization of intangible asset		$	75			$	223			$	(148	)			(66	)%

The decrease in amortization of intangible asset primarily reflects the decrease in value of the SOLOSEC intangible asset in 2025 based on the quarterly valuations of the related contingent liabilities. As the asset value decreases, the quarterly amortization also decreases.

Research and Development Expenses

		Three Months Ended March 31,								2026 vs. 2025
		2026				2025				$ Change				% Change
Research and development, net		$	518			$	(5,035	)		$	5,553				110	%

During the three months ended March 31, 2025, the Company settled a portion of its trade payables with numerous vendors, which resulted in a one-time $5.6 million reduction in research and development expenses; such settlement did not recur in the current quarter.

Selling and Marketing Expenses

		Three Months Ended March 31,								2026 vs. 2025
		2026				2025				$ Change				% Change
Selling and marketing		$	2,093			$	2,600			$	(507	)			(20	)%

The decrease in selling and marketing expenses was primarily due to a $0.2 million decrease in personnel costs and a $0.2 million decrease in distribution costs related to the termination of a commercial services agreement to better align resources with core business priorities, and a $0.1 million decrease related to travel and other expense.

General and Administrative Expenses

		Three Months Ended March 31,								2026 vs. 2025
		2026				2025				$ Change				% Change
General and administrative		$	2,372			$	2,365			$	7				0	%

General and administrative expenses were materially unchanged from the prior year.

Total other income (expense), net

		Three Months Ended March 31,								2026 vs. 2025
		2026				2025				$ Change				% Change
Total other income (expense), net		$	(897	)		$	629			$	(1,526	)			(243	)%

Total other income (expense), net, for the three months ended March 31, 2026 primarily included a loss of $0.2 million related to the change in fair value of financial instruments and $0.7 million of interest expense primarily related to the Adjuvant Note.

Total other income, net, for the three months ended March 31, 2025 primarily included a gain of $1.2 million related to the change in fair value of financial instruments partially offset by $0.6 million of interest expense related primarily to the Adjuvant Note.

Liquidity and Capital Resources

Overview

As of March 31, 2026, we had a working capital deficit of $72.7 million and an accumulated deficit of $902.9 million. We have financed our operations to date primarily through the issuance of preferred stock, common stock, warrants and convertible and term notes; cash received from private placement transactions; and, to a lesser extent, product sales. As of March 31, 2026, we had approximately $2.4 million in cash and cash equivalents, including $0.9 million of restricted cash equivalents available for use as prescribed in the Adjuvant Notes (as defined in Note 4 - Debt). Our cash and cash equivalents include amounts held in checking accounts. Management believes that the Company's cash and cash equivalents as of March 31, 2026 are insufficient to fund operations for at least the next 12 months from the date on which this Quarterly Report on Form 10-Q is filed with the SEC.

Since inception, we have regularly incurred losses and negative cash flows from operating activities. In 2025, we focused on further improving and increasing PHEXX and SOLOSEC access and delivered our fifth consecutive year of net sales growth. We have restructured some of our trade payables with extended terms and implemented measures to better align our cost structure with projected revenues.

In 2026, we will continue to focus on top-line growth and while maintaining a lean operating structure. We will continue to explore opportunities for Nasdaq listing of our Common Stock and other strategic options, organic growth, entry into new markets, and potential expansion of our product offerings beyond PHEXX and SOLOSEC.

As of March 31, 2026 the Company's significant commitments include the Baker Notes, Adjuvant Notes, SSNs, and Aditxt Notes as described in Note 4 - Debt and the potential settlement amount with TherapeuticsMD as described in Note 7 - Commitments and Contingencies. The purpose of these commitments is to further the commercialization of PHEXX and SOLOSEC. Management's plans to meet the Company's cash flow needs in the next 12 months include generating revenue from the sale of PHEXX and SOLOSEC, further restructuring of the Company's current payables, and obtaining additional funding through means such as the issuance of its capital stock, non-dilutive or dilutive financings, or through collaborations or partnerships with other companies, including license agreements for PHEXX and/or SOLOSEC in the U.S. or foreign markets, or other potential business combinations.

If the Company is not able to obtain the required funding through a significant increase in revenue, equity or debt financings, license agreements for our products in the U.S. or foreign markets, or other means, or is unable to obtain funding on terms favorable to the Company, there will be a material adverse effect on commercialization and development operations and the Company's ability to execute its strategic development plan for future growth. If the Company cannot successfully raise additional funding and implement its strategic development plan, the Company may be forced to make further reductions in spending, including spending in connection with its commercialization activities, extend payment terms with suppliers, liquidate assets where possible at a potentially lower amount than as recorded in the interim condensed consolidated financial statements, suspend, or curtail planned operations, or cease operations entirely. Any of these could materially and adversely affect the Company's liquidity, financial condition and business prospects, and the Company would not be able to continue as a going concern. The Company has concluded that these circumstances and the uncertainties associated with the Company's ability to obtain additional equity or debt financing on terms that are favorable to the Company, or at all, and otherwise succeed in its future operations raise substantial doubt about the Company's ability to continue as a going concern.

If we are unable to continue as a going concern, we may have to liquidate our assets and, in doing so, we may receive less than the value at which those assets are carried on our consolidated financial statements. Any of these developments would materially and adversely affect the price of our stock and the value of an investment in our stock. As a result, our interim condensed consolidated financial statements include explanatory disclosures expressing substantial doubt about our ability to continue as a going concern.

The opinion of our independent registered public accounting firm on our audited consolidated financial statements as of and for the years ended December 31, 2025 and 2024 contained an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Future reports on our consolidated financial statements may include an explanatory paragraph with respect to our ability to continue as a going concern. Our unaudited condensed consolidated financial statements as of March 31, 2026 and December 31, 2025 and for the three months ended March 31, 2026 and 2025 included in this Quarterly Report do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts of liabilities that might be necessary should we be unable to continue our operations.

Summary Statement of Cash Flows

The following table sets forth a summary of the net cash flow activity for each of the periods set forth below (in thousands):

		Three Months Ended March 31,								2026 vs. 2025
		2026				2025				$ Change				% Change
Net cash and cash equivalents and net restricted cash and cash equivalents provided by operating activities		$	2,301			$	560			$	1,741				311	%
Net cash and cash equivalents and net restricted cash and cash equivalents used in investing activities			(2	)			(57	)			55				96	%
Net cash and cash equivalents and net restricted cash and cash equivalents used in financing activities			(498	)			(135	)			(363	)			(269	)%
Net change in cash, cash equivalents and restricted cash		$	1,801			$	368			$	1,433				389	%

Cash Flows from Operating Activities. During the three months ended March 31, 2026, the primary source of net cash and cash equivalents and net restricted cash and cash equivalents in operating activities was the decrease in trade accounts receivable of $11.9 million, partially offset by decreases in accrued expenses and other liabilities of $1.6 million, accounts payable of $1.6 million, and accrued compensation of $1.1 million as well as an increase in prepaid and other current assets of $0.1 million and the purchase of inventory of $0.8 million. The net loss of $5.5 million plus $1.2 million net adjustments to reconcile net loss to net cash and cash equivalents and net restricted cash and cash equivalents provided by operating activities also offset the cash provided.

During the three months ended March 31, 2025, the primary source of net cash and cash equivalents and net restricted cash and cash equivalents in operating activities was driven by net income of $1.0 million offset by net adjustments to reconcile net income to net cash and cash equivalents and net restricted cash and cash equivalents used in operating activities of $5.7 million. The cash provided was also impacted by increased customer collections of $8.7 million and a decrease in prepaid and other assets of $0.1 million. The cash provided by operating activities was partially offset by payments of trade payables of $1.8 million, inventory purchases of $0.9 million, and payment of accrued compensation of $0.8 million.

Cash Flows from Investing Activities. During the three months ended March 31, 2026, the primary use of net cash and cash equivalents and net restricted cash and cash equivalents was the purchase of computer equipment. During the three months ended March 31, 2025, the primary use of net cash and cash equivalents and net restricted cash and cash equivalents was the payment of amounts related to the acquisition of SOLOSEC which had previously been recorded as accounts payable.

Cash Flows from Financing Activities. During the three months ended both March 31, 2026 and 2025, the primary use of net cash and cash equivalents and net restricted cash and cash equivalents was the payment of short-term debt and notes carried at fair value.

Operating and Capital Expenditure Requirements

Our specific future operating and capital expense requirements are difficult to forecast. However, we can anticipate the general types of expenses and areas in which they might occur. In 2026, while we expect to maintain a lean operating structure at approximately the same level as 2025, should resources become available we may increase marketing spend to catalyze sales growth.

Contractual Obligations and Commitments

Operating Leases

Operating lease right-of-use assets and lease liabilities were $0.2 million each on both March 31, 2026 and December 31, 2025. See Note 7- Commitments and Contingencies for more detailed discussions on leases and financial statements information under ASC 842, Leases.

Other Contractual Commitments

As described in Note 7 - Commitments and Contingencies, in November 2019, the Company entered into a supply and manufacturing agreement with a third-party to manufacture PHEXX, with potential to manufacture other product candidates, in accordance with all applicable current good manufacturing practice regulations. There were approximately $0.9 million and $0.8 million in purchases under the supply and manufacturing agreement for the three months ended March 31, 2026 and 2025, respectively.

As described in Note 7 - Commitments and Contingencies, in prior periods, the Company had commitments related to the SOLOSEC asset acquisition including a commitment to purchase inventory from the seller through November 2026 at a pre-defined unit price; this commitment was terminated on March 13, 2026. The Company remains obligated to pay contingent liabilities and quarterly royalties based on SOLOSEC net revenue over the Earnout Term as described below and in Note 7 - Commitments and Contingencies.

Intellectual Property Rights

As described in Note 7 - Commitments and Contingencies, the Company no longer owes any royalties to Rush University pursuant due to the expiration of the Rush patent.

As described in Note 7 - Commitments and Contingencies, as of July 14, 2024, the Company is obligated to pay a quarterly royalty in amounts equal to a certain percentage of the SOLOSEC U.S. net revenue. There are no minimum quarterly or annual royalty payment amounts. Such royalty costs were less than $0.1 million for each of the three months ended March 31, 2026 and 2025, and no milestones triggering payment of any contingent liabilities were attained. As of March 31, 2026, $0.1 million and $1.1 million related to the future payments related to the SOLOSEC acquisition, including sales-based payments, one-time payment, and quarterly royalty payments, was included in contingent liabilities - current and contingent liabilities - noncurrent, respectively, in the condensed consolidated balance sheet. Such amounts were $0.1 million and $4.6 million, respectively, as of December 31, 2025.

Other Matters

Recently Issued Accounting Pronouncements

For information with respect to recent accounting pronouncements, see Note 2 - Summary of Significant Accounting Policies to our interim condensed consolidated financial statements appearing in Part I, Item 1 of this Quarterly Report.

Critical Accounting Policies

No material changes to the critical accounting policies were disclosed in our Form 10-K for the year ended December 31, 2025.