Timber Pharmaceuticals, Inc., formerly known as BioPharmX Corporation (together with its subsidiary Timber Pharmaceuticals Australia Pty Ltd. 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.

On May 18, 2020, we completed our business combination with BioPharmX Corporation (“BioPharmX”) in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of January 28, 2020 by and among BioPharmX, Timber Pharmaceuticals, LLC, a Delaware limited liability company (“Timber Sub”) and BITI Merger, Inc., a Delaware corporation and wholly-owned subsidiary of BioPharmX (“Merger Sub”), on March 24, 2020 and subsequently amended on April 27, 2020 as amended (the “Merger Agreement”), pursuant to which Merger Sub merged with and into Timber Sub, with Timber Sub surviving as our wholly-owned subsidiary (the “Merger”). In connection with the Merger, BioPharmX effected a reverse stock split of the shares of common stock, at a ratio of 1-for-12 (the “2020 Reverse Stock Split”). Following the completion of the Merger, we changed our name to “Timber Pharmaceuticals, Inc.” and the officers and directors of Timber Sub became the officers and directors of our Company.

In connection with the Merger, the 11.68 VARs of Timber Sub 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 Series A preferred stock (the “Series A Preferred Stock”) at the Effective Time. As part of the Merger, the Company assumed 4,401 legacy BioPharmX warrants with a weighted average exercise price of $8,208.50 per share, and 1,957 legacy BioPharmX stock options with a weighted average exercise price of $2,290.50 per share. In connection with the Merger Agreement, BioPharmX entered into a Credit Agreement with Timber Sub, pursuant to which Timber Sub made a bridge loan to the Company (the “Bridge Loan”), in an aggregate amount of $2.25 million with $250,000 original issue discount.

In connection with the Merger Agreement, on March 27,2022, Timber Sub and BioPharmX entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain accredited investors (the “Investors”) pursuant to which Timber Sub issued to the Investors shares of Timber units immediately prior to the Merger and we issued to the Investors warrants to purchase shares of common stock on the tenth trading day following the consummation of the Merger (the “Investor Warrants”) in a private placement transaction for an aggregate purchase price of approximately $25 million. We issued to the Investors 167,695 Series A Warrants to purchase shares of common stock (“Series A Warrants”) and 140,844 Series B Warrants to purchase shares of common stock (“Series B Warrants”). The Series A Warrants have a 5-year term and an exercise price of $2.7953, subject to the number of shares and exercise price being reset based on our stock price after the Merger. The Series A Warrants were initially exercisable into 167,695 shares of common stock, subject to certain adjustments. The Series B Warrants had an exercise price per share of $0.05, were exercisable upon issuance and were initially convertible into 140,844 shares of common stock in the aggregate.

In addition, pursuant to the terms of the Securities Purchase Agreement, the Company issued to the Investors, on May 22, 2020, warrants to purchase 8,275 shares of common stock (the “Bridge Warrants”) which originally had an exercise price of $111.81 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 December 31, 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 has 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 Warrants in order to allow for one immediate and final reset of the number of shares of common stock underlying the 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 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.

On November 19, 2020 the Company entered into waiver agreements with each of the holders of the Company’s Series B Warrants. Pursuant to the waiver agreements the holders agreed to waive certain provisions in the Warrants in order to allow for one immediate and final reset of the number of shares of common stock underlying the Series B Warrants. As a result, the number of shares underlying all of the Series B Warrants was set at 455,336 and the exercise price remains at $0.05 per share. During the year ended December 31, 2020, 305,855 Series B warrants were exercised for 305,700 shares of the Company’s common stock.

The number of shares underlying a holder’s Series B Warrants was calculated using the existing formula set forth in the Series B Warrants and was reached by dividing the initial purchase price paid by the holder under the Purchase Agreement by a “Reset Price”, equal to the arithmetic average of the five (5) lowest Weighted Average Prices (as defined in the Warrants) of the common stock during the applicable “Reset Period,” in this case being the nine Trading Day (as defined in the Warrants) period ending on the Effective Date (but not less than the Reset Floor Price), and subtracting from such quotient the number of shares of common stock issued (or that were issuable) under the Purchase Agreement to the holder.

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, 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. As of December 31, 2022 the Bridge Warrants are excisable for 8,275 shares of common stock in the aggregate.

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 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 the Company’s 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 December 31, 2022.

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.

On 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 December 31, 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.

On October 3, 2022, the Company entered into a Securities Purchase Agreement (the “October Purchase Agreement”) with several institutional accredited investors (the “October Investors”) to sell, in a registered direct offering (the “Registered Offering”) (i) 260,000 shares of common stock, and (ii) Series 1 common warrants (the “Series 1 Warrants”) to purchase up to an aggregate of 260,000 shares of common stock. The Series 1 Warrants are immediately exercisable at an exercise price of $5.00 per share and will expire two and one-half years following the initial exercise date. The October Purchase Agreement contains customary representations and warranties and agreements of the Company and the October Investors, and customary indemnification rights and obligations of the parties. Total gross proceeds from the Registered Offering, before deducting the placement agent's fees and other estimated offering expenses, was $1.3 million. The Registered Offering closed on October 3, 2022.

The Company filed a prospectus supplement (the “Prospectus Supplement”) on October 3, 2022, with the Securities and Exchange Commission (the “SEC”) in connection with the Registered Offering. The shares of common stock and Series 1 Warrant Shares were offered pursuant to a “shelf” registration statement on Form S-3 (Registration No.333-255743) (the “Registration Statement”), which was declared effective by the SEC on May 11, 2021, the accompanying base prospectus dated May 11, 2021 contained within the Registration Statement, and the Prospectus Supplement.

In a concurrent private placement (the “Concurrent Private Placement Offering” and, together with the Registered Offering, the “October 2022 Offerings”) the Company has also agreed to issue (i) Series 2 common warrants (the “Series 2 Warrants, “and together with the Series 1 Warrants, the “Warrants”) to purchase up to an aggregate of 260,000 shares of underlying common stock (the “Series 2 Warrant Shares”), and (ii) 13,000 shares of Series B Mirroring Preferred Stock (the “Series B Preferred Stock”).

Each share of Series B Preferred Stock has a stated value of $0.001 per share. The Series B Preferred Stock had super voting rights on the approval of the 2022 Reverse Stock Split (as defined below) equal to 10,000,000 votes per share of Series B Preferred Stock. The voting rights of the Series B Preferred Stock were established in order to maintain the Company’s NYSE American listing by raising the average minimum bid price of the common stock to over $0.20 for 30 consecutive trading days. Upon the effectiveness of the Certificate of Amendment, the outstanding shares of Series B Preferred Stock were automatically transferred to the Company and cancelled for no consideration with no action on behalf of the holders thereof and such shares resumed the status of authorized but unissued shares of preferred stock and were no longer designated as shares of Series B Stock.

The Series 2 Warrants are exercisable on the date six (6) months following the date of issuance at an exercise price of $6.00 per share and will expire two and one-half years following the initial exercise date. The Series B Preferred Stock, was not, and the Series 2 Warrants and Series 2 Warrant Shares issuable upon exercise of the Series 2 Warrants have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and were offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act and Rule 506(b) promulgated thereunder.

As compensation to Wainwright, as the exclusive placement agent in connection with the Registered Offering, the Company paid Wainwright a cash fee of 6% of the aggregate gross proceeds raised in the Registered Offering and reimbursed Wainwright for legal fees and expenses up to $40,000, non-accountable expenses of $25,000 and $15,950 for clearing expenses. In connection with the October 2022 Offerings, the Company received net proceeds of $1.0 million.

On November 7, 2022, the Special Meeting, the stockholders approved a proposal to amend the Company’s certificate of incorporation to effect a reverse split of the common stock at a specific ratio, ranging from one-for-twenty-five to one-for-fifty, at any time prior to the first anniversary date of the Special Meeting (the “2022 Reverse Stock Split”), with the exact ratio to be determined by the Board. The Board had previously approved the reverse split at a ratio of one-for-fifty on October 27, 2022, subject to obtaining stockholder approval.

On November 7, 2022, the Company filed the Certificate of Amendment with the Secretary of State of the State of Delaware, which effected, at 5:00 p.m. Eastern Time on November 8, 2022, the 2022 Reverse Stock Split of the Company’s issued and outstanding shares common stock at a ratio of one-for-fifty. In connection with the 2022 Reverse Stock Split, the CUSIP number for the common stock changed to 887080208.

As a result of the 2022 Reverse Stock Split, every 50 shares of common stock issued and outstanding was converted into one share of common stock. As a result of the 2022 Reverse Stock Split, the 13,000 shares of Series B Preferred Stock were automatically cancelled for no consideration and resumed the status of authorized but unissued shares of preferred stock of the Company. The 2022 Reverse Stock Split affected all common stockholders uniformly and did not alter any stockholder’s percentage interest in the Company’s equity, except to the extent that the 2022 Reverse Stock Split would have resulted in some stockholders owning a fractional share. No fractional shares were issued in connection with the 2022 Reverse Stock Split. Stockholders who would otherwise be entitled to a fractional share of common stock were instead entitled to receive a proportional cash payment. The common stock began trading on a post-split as-adjusted basis on November 9, 2022. There can be no assurance that the Company will be able to maintain compliance with the NYSE American continued listing standards, even after the implementation of the 2022 Reverse Stock Split.

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 $48.3 million at December 31, 2022, a net loss of approximately $19.4 million, and approximately $15.9 million of net cash used in operating activities for the year ended December 31, 2022.

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 Annual Report. Based on such evaluation and the Company’s current plans, which are subject to change, management believes there is substantial doubt about its ability to continue as a going concern as the Company’s existing cash and cash equivalents as of December 31, 2022 are not sufficient to satisfy its operating cash needs for the year after the filing of this Annual Report.

The accompanying 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:

The Company will need to raise substantial additional funds through one or more of the following: 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 Company is unable to accurately predict the full impact that COVID-19 will have on its business, results of operations, and financial conditions due to numerous uncertainties, including the full scope of the disease, the duration of the outbreak, the number and intensity of subsequent waves of infections, actions that may be taken by governmental authorities, the impact to the businesses of third parties the Company relies on, the development of treatments and vaccines, and other factors identified under “Risk Factors” in this Annual Report. The Company will continue to evaluate the nature and extent of the impact to the Company’s business, results of operations, and financial condition.