The following discussion and analysis of our financial condition and results of
operations should be read together with our financial statements and the related
notes and the other financial information included elsewhere in this Quarterly
Report. This discussion contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including those discussed below and elsewhere in this Quarterly Report,
particularly those under "Risk Factors." Additionally, many of these risks and
uncertainties are currently elevated by and may or will continue to be elevated
by the COVID-19 pandemic. We undertake no obligation to update these
forward-looking statements to reflect events or circumstances after the date of
this report or to reflect actual outcomes.



              CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS




This report on Form 10-Q contains forward-looking statements made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995 under Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Forward-looking
statements include statements with respect to our beliefs, plans, objectives,
goals, expectations, anticipations, assumptions, estimates, intentions and
future performance, and involve known and unknown risks, uncertainties and other
factors, which may be beyond our control, and which may cause our actual
results, performance or achievements to be materially different from future
results, performance or achievements expressed or implied by such
forward-looking statements. All statements other than statements of historical
fact are statements that could be forward-looking statements. You can identify
these forward-looking statements through our use of words such as "may," "can,"
"anticipate," "assume," "should," "indicate," "would," "believe," "contemplate,"
"expect," "seek," "estimate," "continue," "plan," "point to," "project,"
"predict," "could," "intend," "target," "potential" and other similar words

and
expressions of the future.




There are a number of important factors that could cause the actual results to
differ materially from those expressed in any forward-looking statement made by
us. These factors include, but are not limited to:



  · our lack of operating history and history of operating losses;

· our current and future capital requirements and our ability to satisfy our

capital needs, including our ability to access financing that may be

unavailable due to contractual limitations under the Securities Purchase


        Agreement (as defined below);




  · the dilutive effect of our outstanding convertible securities;




    ·   our ability to successfully complete required clinical trials of our

products and obtain approval from the U.S. Food and Drug Administration


        ("FDA") or other regulatory agents in different jurisdictions;

· the impact of the recent COVID-19 pandemic on our operations, including on


        our clinical development plans and timelines;

· the outcome, costs and timing of clinical trial results for the Company's


        current or future product candidates;




    ·   our ability to maintain or protect the validity of our patents and other
        intellectual property;




  · the volatility of the price of our common stock;

  · our ability to retain key executives;

· our ability to internally develop new inventions and intellectual property;






  · interpretations of current laws and future laws;




  · acceptance of our products in our industry;

· the accuracy of our estimates regarding expenses and capital requirements;


        and




  · our ability to adequately support growth.




                                      17





Overview



Timber Pharmaceuticals, Inc. ("Timber", the "Company", "we", "us") is a
clinical-stage biopharmaceutical company focused on the development and
commercialization of treatments for orphan dermatologic diseases. Our
investigational therapies have proven mechanisms-of-action backed by decades of
clinical experience and well-established CMC (chemistry, manufacturing and
control) and safety profiles. We are initially focused on developing
non-systemic treatments for rare dermatologic diseases including congenital
ichthyosis ("CI"), facial angiofibromas ("FAs") in tuberous sclerosis complex
("TSC"), and scleroderma. Our lead programs are TMB-001, TMB-002 and TMB-003.



TMB-001, a proprietary topical formulation of isotretinoin, is currently being
evaluated in a Phase 2b clinical trial for the treatment of moderate to severe
subtypes of CI, a group of rare genetic keratinization disorders that lead to
dry, thickened, and scaling skin. A prior Phase 1/2 study involving 19 patients
with CI demonstrated safety and a signal of preliminary efficacy of TMB-001, as
well as minimal systemic absorption. In 2018, the FDA awarded us the first
tranche of a $1.5 million grant in the amount of $500,000 to support clinical
trials evaluating TMB-001 through its Orphan Products Grant program. In March
2020 and March 2021, the FDA awarded us the second and third tranches of the
grant, respectively, each in the amount of $500,000.



TMB-002, a proprietary topical formulation of rapamycin, is currently being
evaluated in a Phase 2b clinical trial for the treatment of FAs in TSC, a
multisystem genetic disorder resulting in the growth of hamartomas in multiple
organs. TSC results from dysregulation in the mTOR pathway, and as a topical
mTOR inhibitor, TMB-002 may address FAs in TSC without the systemic absorption
of an oral agent.

The product in its earliest stage in our pipeline is TMB-003, a proprietary formulation of Sitaxsentan, a new chemical entity in the U.S., which is a selective endothelin-A receptor antagonist. It is currently in preclinical development as a locally applied formulation for the treatment of scleroderma, a rare connective tissue disorder characterized by abnormal thickening of the skin.





In connection with the Merger (as defined below), we acquired the BPX-01 and
BPX-04 assets. BPX-01 is a Phase 3 ready topical minocycline for the treatment
of inflammatory lesions of acne vulgaris, and BPX-04 is a Phase 3 ready topical
minocycline for the treatment of papulopustular rosacea. We are seeking to
monetize these assets through a license, co-development, or sale.



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 (the "Common Stock"), at a ratio of 1-for-12 (the
"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 11,849,031 shares of Common Stock outstanding
(after the 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 VARs, as defined below) 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 629.57 shares of Common Stock for each Timber
Sub unit. In addition, the 584 Value Appreciation Rights of Timber Sub ("VARs")
that were outstanding immediately prior to Merger became denoted and payable in
367,670 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.



                                      18






In connection with the Merger Agreement, on March 27, 2020, Timber Sub and
BioPharmX entered into a securities purchase agreement (the "Securities Purchase
Agreement"), with certain accredited investors (the "Investors") pursuant to
which, among other things, Timber Sub issued to the Investors shares of Timber
units immediately prior to the Merger and BioPharmX issued to the Investors
warrants to purchase shares of BioPharmX 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 (which amount is comprised of (x) a $5 million credit with respect to
the Bridge Notes and (y) $20 million in cash from the Investors) (the "Purchase
Price"). We issued to the Investors 8,384,764 Series A Warrants to purchase
shares of Common Stock ("Series A Warrants") and 7,042,175 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 8,384,764 shares of Common
Stock issued to the Investors, subject to certain adjustments. The Series B
Warrants have an exercise price per share of $0.001, were exercisable upon
issuance and were initially convertible into 7,042,175 shares of Common Stock in
the aggregate, subject to the number of shares and exercise price being reset
based on our stock price after the Merger.



In addition, pursuant to the terms of the Securities Purchase Agreement, on May
22, 2020 we issued to the Investors warrants to purchase 413,751 shares of
Common Stock (the "Bridge Warrants") which have an exercise price of $2.2362 per
share.




On November 19, 2020 the Company entered into a waiver agreement with each of
the Warrant holders (each a "Waiver Agreement" and collectively, the "Waiver
Agreements") which modified the terms of the original agreement and eliminated
further resets. The aggregate number of Series A Warrants issued was fixed at
20,178,214 and the warrant exercise price was fixed at $1.16. The aggregate
number of Series B Warrants was fixed at 22,766,777. The exercise price of the
Series B Warrants remained unchanged.



In addition, certain restrictions contained in the Series A Warrants, Series B
Warrants and Securities Purchase Agreement were modified including restrictions
on the Company's ability to issue additional equity securities in connection
with a financing and the Company's ability to complete a fundamental
transaction. Subject to certain restrictions detailed in the Waiver Agreements,
the Company is now able to complete an equity financing or a fundamental
transaction at any time after April 30, 2021.



Further, in connection with the Waiver Agreements the Company agreed to
immediately register 11,383,389 shares of common stock issuable upon exercise of
the Series B Warrants. The Series A Warrant and Series B Warrant holders have
additional demand registration rights as described in the Waiver Agreements. As
of March 4, 2021, all Series B Warrants had been exercised in full. As of March
31, 2021, 16,701,824 shares of common stock remain issuable upon exercise of the
Series A Warrants.



We have a limited operating history as the Company was formed on February 26,
2019. Since inception, Timber's operations have focused on establishing its
intellectual property portfolio, including acquiring rights to the proprietary
formulations of isotretinoin, rapamycin and Sitaxsentan, as described above,
organizing and staffing the Company, business planning, raising capital, and
conducting clinical trials. Since inception, we have financed our operations
with net proceeds totaling a net of $18.9 million through capital contributions.



Since inception, we have incurred significant operating losses. For the three
months ended March 31, 2021, our net loss was $1.9 million. As of March 31,
2021, we had an accumulated deficit of $20.1 million. We expect to continue to
incur significant expenses and operating losses for the foreseeable future. We
anticipate that our expenses will increase significantly in connection with our
ongoing activities, as we continue to develop the pipeline of programs.



Asset Purchase Agreements with Patagonia Pharmaceuticals LLC ("Patagonia")



On February 28, 2019, we acquired the intellectual property rights for a topical
formulation of isotretinoin for the treatment of CI and identified as TMB-001,
formerly PAT-001 including the IPEGTM brand, from Patagonia (the "TMB-001
Acquisition").



Under the terms of the TMB-001 Acquisition, we paid a one-time upfront payment
of $50,000 to Patagonia. Patagonia is entitled to up to $27.0 million of cash
milestone payments relating to certain regulatory and commercial achievements of
the TMB-001 Acquisition, with the first being $4.0 million from the initiation
of a Phase 3 pivotal trial, as agreed with the FDA. In addition, Patagonia is
entitled to net sales earn-out payments ranging from low single digits to
mid-double digits for the program licensed. We are responsible for all
development activities under the license. The potential regulatory and
commercial milestones are not yet considered probable, and no milestone payments
have been accrued at March 31, 2021 and December 31, 2020.



On June 26, 2019, we acquired the intellectual property rights for a locally
administered formulation of Sitaxsentan for the treatment of cutaneous fibrosis
and/or pigmentation disorders, and identified as TMB-003, formerly PAT-S03, from
Patagonia (the "TMB-003 Acquisition").



Upon closing of the TMB-003 Acquisition, we paid a one-time upfront payment of
$20,000 to Patagonia. Patagonia is entitled to up to $10.25 million of cash
milestone payments subject to adjustments relating to certain regulatory and
commercial achievements of the TMB-003 License, with the first being a one-time
payment of $250,000 upon the opening of an IND with the FDA. In addition,
Patagonia is entitled to net sales earn-out payments ranging from low to
mid-single digits for the program licensed. We are responsible for all
development activities under the license. The potential regulatory and
commercial milestones are not yet considered probable, and no milestone payments
have been accrued at March 31, 2021 and December 31, 2020.



                                      19

Acquisition of License from AFT Pharmaceuticals Limited ("AFT")





On July 5, 2019, we entered into a license agreement with AFT which provides us
with (i) an exclusive license to certain licensed patents, licensed know-how and
AFT trademarks to commercialize the Pascomer® product in the United States,
Canada and Mexico and (2) a co-exclusive license to develop the Pascomer product
in this territory. Concurrently, we granted to AFT an exclusive license to
commercialize the Pascomer product outside of its territory and co-exclusive
sublicense to develop and manufacture the licensed product for commercialization
outside of its territory (the "AFT License Agreement").



The AFT License Agreement also provides for the formation of a joint steering
committee to oversee, coordinate and review recommendations and approve
decisions in respect of the matters related to the development and
commercialization of the Pascomer product, in which both the Company and AFT
have the right to appoint two members. The committee is currently comprised of
three members. We have final decision-making authority on all matters relating
to the commercialization of the Pascomer product in the specified territory and
on all matters related to the development (and regulatory approval) of the
Pascomer product, with certain exceptions.



The development of the Pascomer product is being conducted pursuant to a written
development plan, written by AFT and approved by the joint steering committee,
which is reviewed on at least an annual basis. AFT shall perform clinical trials
of the Pascomer product in the specified territory and shall perform all CMC
(chemistry, manufacturing and controls) and related activities to support
regulatory approval. We are responsible for all expenses incurred by AFT during
the term of the AFT License Agreement and shall equally share all costs and
expenses with AFT, incurred by AFT for development and marketing work performed
in furtherance of regulatory approval and commercialization worldwide, outside
of the specified territory. We are also entitled to receive a significant
percentage of the economics (royalties and milestones) in any licensing
transaction that AFT executes outside of North America, Australia, New Zealand,
and Southeast Asia.



Upon closing of the AFT License Agreement, we were obligated to reimburse AFT
for previously spent development costs, subject to certain limitations and were
obligated to pay a one-time, irrevocable and non-creditable upfront payment to
AFT, payable in scheduled installments. AFT is entitled to up to $25.5 million
of cash milestone payments relating to certain regulatory and commercial
achievements of the AFT License. In addition, AFT is entitled to net sales
royalties ranging from high single digits to low double digits for the program
licensed. The potential regulatory and commercial milestones are not yet
considered probable, and no milestone payments have been accrued at March 31,
2021 and December 31, 2020.



Recent Developments



Other Announcements



On July 1, 2020, we announced that all 11 sites across the United States and
Australia in the Phase 2b CONTROL study evaluating TMB-001 in patients with
moderate to severe CI are currently enrolling patients. As of December 31, 2020,
all sites participating in a Phase 2b clinical trial evaluating TMB-001 were
opened and are currently enrolling patients. On March 15, 2021, we announced
that 50% of patients in the Phase 2b clinical trial have been enrolled. We
continue to anticipate topline data readout in the third quarter of 2021 for the
Phase IIb TMB-001 trial. We are currently evaluating the sample size, including
a potential reduction, which would allow to stop enrollment earlier to maintain
forward progress towards phase III.



As of April 30, 2021, all sites participating in a Phase 2b clinical trial
evaluating TMB-002 were opened and are currently enrolling patients. Site
activation and patient enrollment and data collection have been impacted by the
COVID-19 pandemic in the larger and longer TMB-002 study, especially at our
contracted test sites in Eastern Europe. We have experienced delays to the
completion of recruitment and in the topline data readout for the TMB-002
program and we are currently working with our partners and the sites to better
quantify this. The Company is also continuing to assess the effect on its
operations by monitoring the spread of COVID-19 and the actions implemented to
combat the virus throughout the world and its assessment of the impact of
COVID-19 may change.



Pursuant to the Amended Merger Agreement, BPX-01 (Topical Minocycline, 2%) and
BPX-04 (Topical Minocycline, 1%) were added to our portfolio. BPX-01 and BPX-04
are assets currently in development for acne vulgaris and papulopustular
rosacea, respectively. On July 22, 2020, we announced that we had received
notice from the European Patent Office that it intends to grant a patent for the
Company's topical composition of pharmaceutical tetracycline (including
minocycline) for dermatological use (European Patent Application No. 16714168.8)
and the application subsequently issued on December 16, 2020 as EP 3273940.
Patents covering the BPX-01 and BPX-04 assets have previously been granted in
the United States, South Africa and Australia, among other countries. We are
currently evaluating our strategic options regarding these assets.

On September 15, 2020, we announced that we had received a notice of allowance from the U.S. Patent and Trademark Office (USPTO) for a Company patent application covering BPX-01 and BPX-04, our pharmaceutical tetracycline (including minocycline) compositions for dermatological use (U.S. Patent Application No.: 16/514,459) and the application subsequently issued on January 5, 2021 as US 10,881,672.





                                      20





On December 15, 2020, we announced that we had received a notice of allowance
from the USPTO for a Company patent application covering TMB-001, our
pharmaceutical isotretinoin composition (U.S. Patent Application No.:
15/772,456) and the application subsequently issued on February 10, 2021 as

US
10,933,018.

On January 12, 2021, we announced that the FDA has granted orphan drug designation for TMB-003, our locally delivered formulation of Sitaxsentan, for the treatment of systemic sclerosis.


On January 25, 2021, we announced the appointment of Alan Mendelsohn, M.D., as
Chief Medical Officer. Dr. Mendelsohn assumed the roles and responsibilities of
Amir Tavakkol, Ph.D., who stepped down as our Chief Scientific Officer.



On March 17, 2021, we announced that AFT Pharmaceuticals Limited ("AFT"), one of
our development partners, entered into a license and supply agreement with
Desitin Arzneimittel GmbH ("Desitin") for Pascomer® (TMB-002 topical rapamycin)
for the treatment of FAs associated with TSC in Europe. Pursuant to the AFT
Licensing and Development Agreement (as defined below), we are entitled to
receive a significant percentage of the economics (royalties and milestones) in
any licensing transaction that AFT executes outside of North America, Australia,
New Zealand, and Southeast Asia. The current transaction with Desitin is
included in the scope of this provision.

On April 16, 2021, Michael Derby resigned as our Executive Chairman of the Board and as a director. On April 20, 2021, Mr. Koconis, our CEO was appointed as Chairman of the Board and Edward J. Sitar was appointed as Lead Independent Director. Also on April 20, 2021, the Board established the Science and Technology Committee of the Board.


On April 28, 2021, we announced that the Japanese Patent Office has decided to
grant a patent (No. 2018-542677) for our lead asset, TMB-001, our topical
pharmaceutical composition of isotretinoin that is currently being evaluated for
the treatment of moderate to severe subtypes of CI.



Results of Operations

Comparison of the Three Months Ended March 31, 2021 and 2020







                                          Three months ended March 31,          Change $        Change %
                                             2021                2020

Grant revenues                          $        40,734      $     26,907     $     13,827              51 %
Research and development                        849,518         1,018,231         (168,713 )           -17 %
Transaction costs                                     -         1,189,842       (1,189,842 )           N/A

Selling, general and administrative           1,065,389           456,794  

       608,595             133 %
Loss from operations                         (1,874,173 )      (2,637,960 )        763,787             -29 %
Interest expense                                      -        (1,102,606 )      1,102,606             N/A
Interest income                                       -           456,775         (456,775 )           N/A
Change in fair value of investment in
BioPharmX                                             -            83,560          (83,560 )           N/A
Change in fair value of warrant
liability                                             -          (321,051 )        321,051             N/A
Gain (loss) on foreign currency
exchange                                            (87 )           2,682           (2,769 )          -103 %
Net loss                                     (1,874,260 )      (3,518,600 )      1,644,340             -47 %
Cumulative dividends on Series A
preferred stock                                 (35,887 )         (34,481 )         (1,406 )           N/A
Net loss attributable to common
stockholders                            $    (1,910,147 )    $ (3,553,081 )   $  1,642,934             -46 %




Grant revenue




During the three months ended March 31, 2021 and 2020, we recognized grant
revenue of $41,000 and $27,000, respectively. The revenue consisted of
reimbursements received from the FDA as a result of achieving certain clinical
milestones in the development of TMB-001. In September 2018, Patagonia was
awarded a $1.5 million grant (the "Grant") from the FDA as part of the Orphan
Products Clinical Trials Grants Program of the Office of Orphan Products
Development. The Grant funds are available in three annual installments of
$500,000 per year, which commenced in September 2018. The Grant was transferred
to Timber pursuant to its TMB-001 Acquisition Agreement with Patagonia in
February 2019. A six-month no cost extension was granted to Timber in September
2019 and ended in February 2020. During the course of each year for which the
Grant was active, the Company submitted its allowable expenses and is reimbursed
up to the maximum amount of each installment.



                                      21





Operating costs and expenses

Research and development expense

During the three months ended March 31, 2021 and 2020, research and development expenses were $0.8 and $1.0 million respectively. Research and development expenses are primarily related to costs incurred related to our Phase 2a clinical trials of TMB-001 and TMB-002, such as CRO direct and pass-through expenses.





Research and development costs were primarily attributable to costs incurred in
connection with Timber's research activities and include costs associated with
clinical trials, consultants, clinical trial materials, regulatory filings,
facilities, laboratory expenses and other supplies.

Research and development costs are expensed as incurred. Costs for certain activities, such as preclinical studies and clinical trials, are generally recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to it by Timber's vendors and collaborators.





Transaction Costs

There were no transaction costs for the three months ended March 31, 2021. For the three months ended March 31, 2020, transaction costs were $1.2 million, consisting of legal and professional fees related to our acquisition of BioPharmX.

General and administrative expense





During the three months ended March 31, 2021, general and administrative expense
was $1.1 million compared to $0.5 million for the three months ended March 31,
2020. The increase in general and administrative expenses of approximately $0.6
million was due to increased personnel and related costs of $0.5 million due to
increased compensation and benefits expense, and other overhead expenses of
$0.1
million.



Other income (expense)




During the three months ended March 31, 2021 and 2020, respectively, other
expense was zero and $0.9 million. For the three months ended March 31, 2020,
other expense primarily consisted of interest expense of $1.1 million related to
amortization of the debt discount for our bridge loan and $0.3 million for the
change in fair value of our warrant liability, offset by $0.5 million of
interest income related to our BioPharmX loan.



Income Taxes




The Company did not record tax expense for the three-month ended March 31, 2021
due to the Company's loss position and full valuation allowance. The Company did
not record tax expense for the three-month ended March 31, 2020 as the Company
was a non-taxable flow-through entity for US federal income tax purposes.

Liquidity and Capital Resources





Since inception, Timber has not generated revenue from product sales and has
incurred net losses and negative cash flows from its operations. At March 31,
2021, we had working capital of approximately $7.5 million, which included cash
and cash equivalents of $8.5 million. We reported a net loss of $1.9 million
during the three months ended March 31, 2021.

Cash Flows for the Three Months Ended March 31, 2021 and 2020





                                                            Three months ended
                                                                 March 31,
                                                           2021             2020

Cash provided by (used in) continuing operations:


   Operating activities                                $ (1,848,640 )   $

(1,609,152 )


   Investing activities                                           -

(1,250,000 )


   Financing activities                                           -

3,700,000


   Net increase in cash and cash equivalents           $ (1,848,640 )   $    840,848




Operating Activities



For the three months ended March 31, 2021, net cash used in operating activities
was $1.8 million, which primarily consisted of our net loss of $1.9 million,
adjusted for non-cash expenses of $0.1 million of stock-based compensation
expense. The change in assets and liabilities of $0.2 million is primarily due
to decreases in prepaid insurance of $0.1 million and a net decrease in accounts
payable, accrued expenses and other liabilities of $0.1 million.



                                      22





For the three months ended March 31, 2020, net cash used in operating activities
was $1.6 million, which primarily consisted of our net loss of $3.5 million,
adjusted for non-cash expenses of $1.0 million primarily consisting of, $1.0
million of amortization expense related to the Bridge Notes, $0.3 million for
the change in fair value of our warrant liability, $0.1 million of accrued
interest on the Bridge Notes, $0.1 million of non-cash contributions, offset by
$0.4 million for the amortization of our loan discount, and $0.1 million for the
change in fair value of our investment in BioPharmX. The change in assets and
liabilities of $0.9 million is primarily due to increases in accounts payable of
$1.0 million related to transaction costs and a decrease in accrued expenses of
$0.2 million.



Investing Activities




For the three months ended March 31, 2021 and 2020, respectively, net cash used
in investing activities was zero and approximately $1.3 million for our loan to
BioPharmX.



Financing Activities

For the three months ended March 31, 2021 and 2020, respectively, net cash provided by financing activities was zero and approximately $3.7 million, which consisted of net proceeds received from the issuance of our Bridge Notes.





Funding requirements



We expect our expenses to increase in connection with our ongoing activities,
particularly as we continue the research and development of our pipeline of
programs. Furthermore, following the completion of the Merger, we have been
incurring additional costs as a public company. Accordingly, we will need to
obtain additional funding. If we are unable to raise capital or otherwise obtain
funding when needed or on attractive terms, we could be forced to delay, reduce
or eliminate our research and development programs or future commercialization
efforts.



As discussed above, Timber Sub and BioPharmX entered into the Securities
Purchase Agreement pursuant to which, among other things, we issued the Investor
Warrants to the Investors in a private placement transaction for an aggregate
purchase price of approximately $25 million (which amount is comprised of (x) a
$5 million credit with respect to the Bridge Notes and (y) $20 million in cash
from the Investors).



In addition, on July 17, 2020, we entered into an Amended and Restated
Registration Rights Agreement (as amended, the "Registration Rights Agreement")
with the Investors. Pursuant to the Registration Rights Agreement, we agreed to
provide certain demand registration rights to the Investors relating to the
registration of the shares underlying the Investor Warrants and the Bridge
Warrants. In connection with the entry into the Registration Rights Agreement
and pursuant to the Securities Purchase Agreement, we were restricted from
various financing activities until August 16, 2022. On November 19, 2020 we
entered into Waiver Agreements with the investors revising the restriction

date
to April 30, 2021.



Further, the Company has a class of Series A Preferred Stock which is currently
subject to redemption at any time in whole or in part at the request of the
holder, TardiMed. The redemption price is equal to approximately $1.9 million in
the aggregate, including accumulated and unpaid dividends which accrue at the
rate of 8% per annum. Redemption is subject to certain limitations under
Delaware law, so that our ability to pay the redemption price to TardiMed is and
may be limited.



We have evaluated whether there are any conditions and events, considered in the
aggregate, that raise substantial doubt about our ability to continue as a going
concern within one year beyond the filing of this Annual Report on Form 10-K.
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 March 31, 2021 are sufficient only to satisfy our operating
cash needs through the third quarter of 2021.

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

· our ability to raise additional funds to finance its operations, including our ability to access financing that may be unavailable due to contractual limitations under the Securities Purchase Agreement;

· the dilutive effect of our outstanding securities;

· the impact of the recent COVID-19 pandemic on our operations, including on our clinical development plans and timelines;


· the outcome, costs and timing of clinical trial results for our current or
future product candidates, including the timing, progress, costs and results of
our Phase 2b clinical trial of TMB-001 for the treatment of congenital
ichthyosis as well as our ongoing Phase 2b clinical trial of TMB-002 for the
treatment of facial angiofibromas in tuberous sclerosis complex;



                                      23

· the outcome, timing and cost of meeting regulatory requirements established by the FDA and other comparable foreign regulatory authorities;

· the emergence and effect of competing or complementary products;

· our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;

· the cost and timing of completion of commercial-scale manufacturing activities;


· the cost of establishing sales, marketing and distribution capabilities for
our products in regions where we choose to commercialize our products on our
own;

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

· the volatility of the price of our common stock;

· acceptance of our products in our industry;

· the accuracy of our estimates regarding expenses and capital requirements;

· our ability to retain our current employees and the need and ability to hire additional management and scientific and medical personnel; and

· the terms and timing of any collaborative, licensing or other arrangements that we have or may establish.





We 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 our product
candidates. If we are unable to maintain sufficient financial resources, our
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 we 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 our existing stockholders.



The impact of the worldwide spread of COVID-19 has been unprecedented and
unpredictable. Site activation and patient enrollment have recently been
impacted by the COVID-19 pandemic in the larger and longer TMB-002 study,
especially at our contracted test sites in Eastern Europe. We are continuing to
assess the effect on our operations by monitoring the spread of COVID-19 and the
actions implemented to combat the virus throughout the world and our assessment
of the impact of COVID-19 may change.

Off-balance sheet arrangements





Timber does not have any relationships with unconsolidated entities or financial
partnerships, including entities sometimes referred to as structured finance or
special purpose entities that were established for the purpose of facilitating
off-balance sheet arrangements or other contractually narrow or limited
purposes. Timber does not engage in off-balance sheet financing arrangements. In
addition, Timber does not engage in trading activities involving non-exchange
traded contracts. Timber therefore believe that Timber is not materially exposed
to any financing, liquidity, market or credit risk that could arise if it had
engaged in these relationships.



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Critical Accounting Policies and Significant Judgments and Estimates


Our management's discussion and analysis of financial condition and results of
operations is based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States,
or GAAP. The preparation of these financials statements requires us to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements, as well as the revenue and expenses incurred during
the reporting periods. On an ongoing basis, we evaluate our estimates and
adjustments, including those related to accrued expenses and share-based
compensation. We base our estimates on historical experience and on various
other factors that we believe are reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying value of
assets and liabilities that are not apparent from other sources. Changes in
estimates are reflected in reported results for the period in which they become
known. Actual results may differ from these estimates under different
assumptions or conditions.

There have been no material changes to our critical accounting policies and estimates as compare to the critical accounting policies and estimates described in our latest Annual report Form 10-K.

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