Timber Pharmaceuticals, Inc., formerly known as BioPharmX Corporation (together with its subsidiaries Timber Pharmaceuticals Australia Pty Ltd., BioPharmX Inc. and Timber Pharmaceuticals LLC, the “Company” or “Timber”) is incorporated under the laws of the state of Delaware. Timber was founded in 2019 to develop treatments for unmet needs in medical dermatology. Timber has a particular focus on rare diseases or conditions of the skin for which there are no current treatments. Timber is initially targeting multiple indications in rare/orphan dermatology with no approved treatments.

On November 7, 2022, the Company filed a Certificate of Amendment to its Certificate of Incorporation, as amended (the “Certificate of Amendment”), with the Secretary of State of Delaware that effected a 1-for-50 reverse stock split of its common stock, par value $0.001 per share, which became effective at 5:00 PM (EST) on November 8, 2022 (the “2022 Reverse Stock Split”). Pursuant to the Certificate of Amendment, the Company’s issued and outstanding common stock was decreased from 148,571,994 shares to 2,971,439 shares. The 2022 Reverse Stock Split did not affect the Company’s authorized common stock of 450,000,000 shares. The par value of its common stock was unchanged at $0.001 per share, post-split. All shares of common stock, including common stock underlying warrants, stock options, restricted stock units and VARs, as well as conversion ratios, exercise prices, conversion prices and per share information in these consolidated financial statements give retroactive effect to the 2022 Reverse Stock Split.

These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes in Item 8 of Part II, “Financial Statements and Supplementary Data,” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

On May 18, 2020, BioPharmX Corporation (“BioPharmX”) completed its business combination with Timber Pharmaceuticals LLC, a Delaware limited liability company (“Timber Sub”), in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of January 28, 2020 (the “Merger Agreement”), by and among BioPharmX, Timber Sub and BITI Merger, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Merger Sub”), as amended by Amendment No. 1 thereto made and entered into as of March 24, 2020 (the “First Amendment”) and Amendment No. 2 thereto made and entered into as of April 27, 2020 (the “Second Amendment”) (the Merger Agreement, as amended by the First Amendment and the Second Amendment, the “Amended Merger Agreement”), pursuant to which Merger Sub merged with and into Timber Sub, with Timber Sub surviving as a wholly-owned subsidiary of the Company (the “Merger”). In connection with, and immediately prior to the completion of, the Merger, BioPharmX effected a reverse stock split of the Company’s common stock, par value $0.001 per share, at a ratio of 1-for-12 (the “2020 Reverse Stock Split”). Immediately after completion of the Merger, BioPharmX changed its name to “Timber Pharmaceuticals, Inc.” and the officers and directors of Timber Sub became the officers and directors of the Company.

Under the terms of the Amended Merger Agreement, BioPharmX issued shares of common stock to the holders of common units of Timber Sub. Immediately after the Merger, there were approximately 236,980 shares of common stock outstanding (after the 2020 Reverse Stock Split). Pursuant to the terms of the Amended Merger Agreement, the former holders of common units of Timber Sub (including the Investors, as defined below, but excluding Value Appreciation Rights of Timber Sub (“VARs”), owned in the aggregate approximately 88.5% of the outstanding common stock, with the Company’s stockholders immediately prior to the Merger owning approximately 11.5% of the outstanding common stock. The number of shares of common stock issued to the holders of common units of Timber Sub for each common unit of Timber Sub outstanding immediately prior to the Merger was calculated using an exchange ratio of approximately 12.59 shares of common stock for each Timber Sub unit. In addition, the 11.68 VARs that were outstanding immediately prior to Merger became denoted and payable in 7,353 shares of common stock at the Effective Time of the Merger (the “Effective Time”). Further, the holder of the 1,819,289 preferred units of Timber Sub outstanding immediately prior to

the Merger received 1,819 shares of the newly created convertible Series A preferred stock (the “Series A Preferred Stock”) at the Effective Time.

On May 18, 2020, Timber and Timber Sub completed a private placement transaction (the “Pre-Merger Financing”) with the Investors pursuant to the Securities Purchase Agreement for an aggregate purchase price of approximately $25.0 million (comprised of (i) approximately $5 million credit with respect to the senior secured notes issued in connection with the bridge loan that certain of the Investors made to Timber Sub at the time of the execution of the Merger Agreement and (ii) approximately $20 million in cash from the Investors).

Pursuant to the Pre-Merger Financing, (i) Timber Sub issued and sold to the Investors common units of Timber Sub which converted pursuant to the exchange ratio in the Merger into an aggregate of approximately 82,750 shares (the “Converted Shares”) of common stock; and (ii) the Company agreed to issue to each Investor, on the tenth trading day following the consummation of the Merger, (A) Series A Warrants representing the right to acquire shares of common stock (“Series A Warrants”) equal to 75% of the sum of (a) the number of Converted Shares issued to the Investor, without giving effect to any limitation on delivery contained in the Securities Purchase Agreement, and (b) the number of shares of common stock underlying the Series B Warrants issued to the Investor (the “Series B Warrants”) and (B) the Series B Warrants. On June 2, 2020, pursuant to the terms of the Securities Purchase Agreement, the Company issued Series A Warrants to purchase 167,695 shares of common stock and Series B Warrants to purchase 140,844 shares of common stock.

In addition, pursuant to the terms of the Securities Purchase Agreement, dated as of January 28, 2020 between Timber Sub and several of the Investors, the Company issued to such purchasers, on May 22, 2020, warrants to purchase 8,275 shares of common stock (the “Bridge Warrants”) which had an initial exercise price of $111.81 per share. As a result of the August 2022 Offering (as defined below), the exercise price of the Bridge Warrants was adjusted to $1.00 per share.

The Series A Warrants have an exercise price of $58.00 per share, were exercisable upon issuance and will expire on the day following the later to occur of (i) June 2, 2025, and (ii) the date on which the Series A Warrants have been exercised in full (without giving effect to any limitation on exercise contained therein) and no shares remain issuable thereunder. As of September 30, 2022, the Series A Warrants are exercisable for 334,036 shares of common stock in the aggregate.

Pursuant to the Series A Warrants, the Company agreed not to enter into, allow or be party to certain fundamental transactions, generally including any merger with or into another entity, sale of all or substantially all of the Company’s assets, tender offer or exchange offer, or reclassification of the common stock (a “Fundamental Transaction”) until May 1, 2021. Thereafter, upon any exercise of a Series A Warrant, the holder shall have the right to receive, for each share of common stock that would have been issuable upon such exercise immediately prior to the occurrence of a Fundamental Transaction, at the option of the holder (without regard to any limitation on the exercise of the Series A Warrant), the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of common stock for which the Series A Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation on the exercise of the Series A Warrant). For purposes of any such exercise, the determination of the exercise price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of common stock in such Fundamental Transaction, and the Company shall apportion the exercise price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of common stock are given any choice as to the securities, cash or property to be received in a

Fundamental Transaction, then the holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of the Series A Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under the Series A Warrants, upon which the Series A Warrants shall become exercisable for shares of common stock, shares of the common stock of the Successor Entity or the consideration that would have been issuable to the holders had they exercised the Series A Warrants prior to such Fundamental Transaction, at the holders’ election. Additionally, at the request of a holder delivered before the 90th day after the consummation of a Fundamental Transaction, the Company must purchase such holder’s warrant for the value calculated using the Black-Scholes option pricing model as of the day immediately following the public announcement of the applicable Fundamental Transaction, or, if the Fundamental Transaction is not publicly announced, the date the Fundamental Transaction is consummated.

If the Company fails to issue to a holder of Series A Warrants the number of shares of common stock to which such holder is entitled upon such holder’s exercise of the Series A Warrants, then the Company shall be obligated to pay the holder on each day while such failure is continuing an amount equal to 1.5% of the market value of the undelivered shares determined using a trading price of common stock selected by the holder while the failure is continuing and if the holder purchases shares of common stock in connection with such failure (“Series A Buy-In Shares”), then the Company must, at the holder’s discretion, reimburse the holder for the cost of such Series A Buy-In Shares or deliver the owed shares and reimburse the holder for the difference between the price such holder paid for the Series A Buy-In Shares and the market price of such shares, measured at any time of the holder’s choosing while the delivery failure was continuing.

Further, the Series A Warrants provide that, in the event that the Company does not have sufficient authorized shares to deliver in satisfaction of an exercise of a Series A Warrant, then unless the holder elects to void such attempted exercise, the holder may require the Company to pay an amount equal to the product of (i) the number of shares that the Company is unable to deliver and (ii) the highest volume-weighted average price of a share of common stock as quoted on the NYSE American during the period beginning on the date of such attempted exercise and ending on the date that the Company makes the applicable payment.

On November 19, 2020, the Company entered into waiver agreements with each of the holders of the Company’s Series A Warrants. Pursuant to the waiver agreements the holders agreed to waive certain provisions in the Series A Warrants in order to allow for one immediate and final reset of the number of shares of common stock underlying the Series A Warrants and the exercise price of the Series A Warrants, and permanently waive the provisions providing for future resets of the number of shares of common stock underlying the Series A Warrants and the exercise price of the Series A Warrants (other than the anti-dilution protection provisions in the Series A Warrants providing for adjustments to the exercise price of the Series A Warrants upon a dilutive issuance). As a result, the exercise price of the Series A Warrants was set at $58.00 per share and the number of shares underlying all of the Series A Warrants was set at 403,564.

The Series B Warrants had an exercise price of $0.05 per share, were exercisable upon issuance and were exercised in full on March 4, 2021. The Series B Warrants were exercisable for 455,336 shares of common stock in the aggregate.

The Bridge Warrants were issued on May 22, 2020, to the Bridge Investors, had an exercise price of $111.81 per share, were immediately exercisable upon issuance and have a term of five years from the date of issuance. The Bridge Warrants are exercisable for 8,275 shares of common stock in the aggregate. As a result of the November 2021 Offering (as defined below), the exercise price of the Bridge Warrants was adjusted to $15.50 per share. Further, the exercise price of the Bridge Warrants was reduced to the offering price per share of the August 2022 Offering (as defined below) less the Black Scholes value of the common warrants issued in the August 2022 Offering, or $1.00 per share.

The Bridge Warrants provide that if Timber issues or sells or in accordance with the terms of the Bridge Warrants, is deemed to have issued or sold any shares of common stock for a price per share lower than the exercise price then in effect subject to certain limited exceptions, then the exercise price of the Bridge Warrants shall be reduced to such lower price per share.

Upon the consummation of a Fundamental Transaction by the Company, upon any exercise of a Bridge Warrant, the holder shall have the right to receive, for each share of common stock that would have been issuable upon such exercise immediately prior to the occurrence of a Fundamental Transaction, at the option of the holder (without regard to any limitation on the exercise of the Bridge Warrant), the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of common stock for which the Bridge Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation on the exercise of the Bridge Warrant). For purposes of any such exercise, the determination of the exercise price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of common stock in such Fundamental Transaction, and the Company shall apportion the exercise price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of common stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of the Bridge Warrant following such Fundamental Transaction. The Company shall cause any Successor Entity to assume in writing all of the obligations of the Company under the Bridge Warrants, upon which the Bridge Warrants shall become exercisable for shares of common stock, shares of the common stock of the Successor Entity or the consideration that would have been issuable to the holders had they exercised the Bridge Warrants prior to such Fundamental Transaction, at the holders’ election.

Additionally, at the request of a holder of a Bridge Warrant delivered before the 90th day after the consummation of a Fundamental Transaction, Timber or the successor entity must purchase such holder’s warrant for the value calculated using the Black-Scholes option pricing model as of the day immediately following the public announcement of the applicable Fundamental Transaction, or, if the Fundamental Transaction is not publicly announced, the date the Fundamental Transaction is consummated.

The Bridge Warrants also contain a “cashless exercise” feature that allows the holders to exercise the Bridge Warrants without making a cash payment in the event that there is no effective registration statement registering the shares issuable upon exercise of the Bridge Warrants. The Bridge Warrants are subject to a blocker provision which restricts the exercise of the Bridge Warrants if, as a result of such exercise, the holder, together with its affiliates and any other person whose beneficial ownership of common stock would be aggregated with the holder’s for purposes of Section 13(d) of the Exchange Act would beneficially own in excess of 4.99% or 9.99% of the outstanding shares of common stock (including the shares of common stock issuable upon such exercise), as such percentage ownership is determined in accordance with the terms of the Bridge Warrants.

On November 2, 2021, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with H.C. Wainwright & Co., LLC (“Wainwright”), as representative of the several underwriters named in Schedule I thereto, relating to the public offering, issuance and sale of 426,500 shares of common stock and, to certain investors, pre-funded warrants to purchase shares of common stock and accompanying warrants to purchase shares of common stock (the “November 2021 Offering”). After giving effect to the sale of additional shares pursuant to the exercise of the option by Wainwright that closed on November 9, 2021, the total number of shares of common stock (or common stock equivalents) sold by the Company in the November 2021 Offering was 539,063, together with warrants to purchase up to 539,063 shares of common stock (the “November Warrants”) issued at the closing on November 5, 2021, for total gross proceeds of $17.25 million before deducting underwriting discounts and commissions and other offering expenses, and net proceeds

of approximately $15.8 million. As a result of the November 2021 Offering, the exercise price of the Bridge Warrants was adjusted to $15.50 per share. Further, as a result of the August 2022 Offering, the exercise price of the Bridge Warrants was adjusted to $1.00 per share.

Each share of common stock and pre-funded warrant to purchase one share of common stock was sold together with a November Warrant to purchase one share of common stock. All of the securities sold in the offering were sold by the Company. The public offering price of each share of common stock and accompanying November Warrant was $32.00 and $31.95 for each pre-funded warrant and accompanying November Warrant. The pre-funded warrants were immediately exercisable at a price of $0.05 per share of common stock and were exercised in full on November 5, 2021. The November Warrants were immediately exercisable at a price of $35.00 per share of common stock and expire five years from the date of issuance. No November Warrants have been exercised as of September 30, 2022, or December 31, 2021, respectively.

On March 1, 2022, the Company entered into an engagement agreement, as subsequently amended on June 30, 2022 (the “Engagement Agreement”), with Wainwright, pursuant to which Wainwright agreed to act as the Company’s exclusive placement agent on a reasonable best efforts basis in connection with a public offering of the Company’s common stock, par value $0.001 per share.

In August 4, 2022, the Company announced the pricing of the public offering (the “August 2022 Offering”) of (i) 931,667 shares of common stock, (ii) pre-funded warrants to purchase up to an aggregate of 401,667 shares of common stock and (iii) common warrants to purchase up to an aggregate of 1,333,333 shares of common stock (the “August Warrants”). Each share of common stock and pre-funded warrant to purchase one share of common stock was sold together with an August Warrant to purchase one share of common stock. All of the securities sold in the August 2022 Offering were sold by the Company. The public offering price of each share of common stock and accompanying August Warrant was $6.00 and $5.995 for each pre-funded warrant and accompanying August Warrant. The pre-funded warrants were immediately exercisable at a price of $0.005 per share of common stock and may be exercised at any time until all of the pre-funded warrants are exercised in full. The August Warrants are immediately exercisable at a price of $6.00 per share of common stock and will expire five years from the date of issuance. The shares of common stock and pre-funded warrants, and the accompanying August Warrants, were issued separately and were immediately separable upon issuance. The August 2022 Offering closed on August 8, 2022. All of the pre-funded warrants were exercised, and none remain outstanding. On August 8, 2022, 24,000 August Warrants were exercised. As of September 30, 2022, 1,309,333 August Warrants have not been exercised.

In connection with the August 2022 Offering, on August 4, 2022, the Company entered into securities purchase agreements with certain institutional investors in the August 2022 Offering. The net proceeds to the Company from the August 2022 Offering were approximately $6.9 million, after deducting placement agent fees and expenses and estimated offering expenses payable by the Company, excluding the proceeds, if any, from the exercise of the August Warrants. The Company intends to use the net proceeds from the August 2022 Offering for research and development, including clinical trials, working capital and general corporate purposes. Further, the exercise price of the Bridge Warrants was reduced to the offering price per share of the August 2022 Offering less the Black Scholes value of the August warrants issued in the August 2022 Offering or $1.00 per share.

The Company has no product revenues, incurred operating losses since inception, and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. The Company had an accumulated deficit of approximately $44.6 million at September 30, 2022, a net loss of approximately $15.8 million, and approximately

$12.7 million of net cash used in operating activities for the nine months ended September 30, 2022. As of September 30, 2022, the Company had cash of approximately $11.2 million.

The Company has evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year beyond the filing of this Quarterly Report on Form 10-Q. Based on such evaluation and the Company's current plans, which are subject to change, management believes that the Company's existing cash and cash equivalents as of September 30, 2022, were sufficient only to satisfy our operating cash needs into the second quarter of 2023. Thus, the Company’s current cash on hand at September 30, 2022, was potentially not sufficient to satisfy our operating cash needs for the twelve months from the filing of this Quarterly Report on Form 10-Q. The Company closed on a stock and warrant offering in October 2022 (see Note 9). However, with the net proceeds of that offering, the Company’s cash and cash equivalents will be sufficient only to satisfy the Company’s operating cash needs into the second quarter of 2023.

The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue to operate as a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from uncertainty related to its ability to continue as a going concern.

The Company’s future liquidity and capital funding requirements will depend on numerous factors, including:

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the cost and timing of completion of commercial-scale manufacturing activities if any of its products are approved for commercial sale;

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the cost of establishing sales, marketing and distribution capabilities for its products in regions where it chooses to commercialize its products on its own;

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the initiation, progress, timing and results of the commercialization of its product candidates, if approved for commercial sale, if approved for commercial sale;

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its ability to retain its current employees and the need and ability to hire additional management and scientific and medical personnel; and,

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the terms and timing of any collaborative, licensing or other arrangements that it has or may establish.

The Company will need to raise substantial additional funds via the issuance of additional debt or equity and/or the completion of a licensing or other commercial transaction for one or more of the Company's product candidates. If the Company is unable to maintain sufficient financial resources, its business, financial condition and results of operations will be materially and adversely affected. This could affect future development and business activities and potential future clinical studies and/or other future ventures. There can be no assurance that the Company will be able to obtain the needed financing on acceptable terms or at all. Additionally, equity or convertible debt financings will likely have a dilutive effect on the holdings of the Company's existing stockholders.

The impact of the worldwide spread of the coronavirus (“COVID-19”) continues to be unpredictable. Clinical trial activities, including patient enrollment/retention can be impacted at any time. The Company continues to evaluate the effect on its operations by monitoring the spread of COVID-19 and associated impact on study procedures and requirements.