Item 9A. Controls and Procedures
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act, designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosures.
In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and we are required to apply our judgment in evaluating the cost-benefit relationship of possible controls and procedures. We have carried out an evaluation as of the end of the period covered by this Annual Report on Form 10-K under the supervision, and with the participation, of our management, including our Chief Executive Officer (who serves as our principal executive officer) and our Chief Financial Officer (who serves as our principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures.
Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K in providing reasonable assurance of achieving the desired control objectives.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting refers to the process designed by, or under the supervision of, our principal executive officer and principal financial officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:
(1)
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
(2)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and
(3)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of our assets that could have a material effect on the financial statements.
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Internal control over financial reporting has inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2025. In making the assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on the results of this assessment, management (including our Chief Executive Officer and our Chief Financial Officer) has concluded that, as of December 31, 2025, our internal control over financial reporting was effective.
This Annual Report does not include an attestation report on internal control over financial reporting from our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.
Changes in Internal Control over Financial Reporting
There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recent fiscal quarter ended December 31, 2025 to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
N o n e .
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2026 Annual Meeting of Stockholders.
Item 11. Executive Compensation
The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2026 Annual Meeting of Stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2026 Annual Meeting of Stockholders.
Item 13. Certain Relationships and Related Transactions, and Director Independence .
The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2026 Annual Meeting of Stockholders.
Item 14. Principal Accounting Fees and Services
The information required by this Item is incorporated by reference from our Proxy Statement for our 2026 Annual Meeting of Stockholders.
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PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) Financial Statements.
The following financial statements are filed as part of this report:
Report of Independent Registered Public Accounting Firm (KPMG LLP, Short Hills, New Jersey; PCAOB# 185)
F-2
Consolidated Balance Sheets as of December 31, 2025 and 2024
F-3
Consolidated Statements of Operations for the years ended December 31, 2025 and 2024
F-4
Consolidated Statement of Changes in Stockholders’ Equity for the years ended December 31, 2025 and 2024
F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024
F-6
Notes to Consolidated Financial Statements
F-7
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(b) Exhibits.
Exhibit
Number
Description
3.1
Fourth Amended and Restated Certificate of Incorporation of Journey Medical Corporation, filed as Exhibit 3.1 to Form 8-K, filed on June 26, 2025 and incorporated herein by reference.
3.2
Bylaws of Journey Medical Corporation, filed as Exhibit 3.2 to Form 10-K, filed on March 28, 2022 and incorporated herein by reference.
4.1
Form of Common Stock Certificate, filed as Exhibit 4.1 to Form S-1, filed on October 22, 2021 and incorporated herein by reference.
4.2
Description of Securities of Journey Medical Corporation, filed as Exhibit 4.2 to Form 10-K, filed on March 28, 2022 and incorporated herein by reference.
10.1
Journey Medical Corporation 2015 Stock Plan, filed as Exhibit 10.1 to Form S-1, filed on October 22, 2021 and incorporated herein by reference.#
10.2
Amendment to Journey Medical Corporation 2015 Stock Plan, filed as Exhibit 10.1 to Form 8-K filed on June 21, 2022 and incorporated herein by reference.#
10.3
Amendment to the Journey Medical Corporation 2015 Stock Incentive Plan, filed as Exhibit 10.1 to Form 8-K, filed on June 25, 2024 and incorporated herein by reference.#
10.4
Executive Employment Agreement with Claude Maraoui, dated September 22, 2014, filed as Exhibit 10.2 to Form S-1, filed on October 22, 2021 and incorporated herein by reference.#
10.5
Amended and Restated Employment Agreement with Ramsey Alloush, dated March 31, 2025, filed as Exhibit 10.1 to Form 10-Q, filed on May 15, 2025 and incorporated herein by reference.#
10.6
Second Amended and Restated Employment Agreement with Joseph Benesch, dated May 15, 2025, filed as Exhibit 10.2 to Form 10-Q, filed on May 15, 2025 and incorporated herein by reference.#
10.7
Non-Employee Director Compensation Plan, filed as Exhibit 10.4 to Form S-1, filed on October 22, 2021 and incorporated herein by reference.#
10.8
Journey Medical Corporation 2023 Employee Stock Purchase Plan, filed as Exhibit 10.1 to Form 8-K filed on June 23, 2023 and incorporated herein by reference.#
10.9
Asset Purchase Agreement for Qbrexza, entered into by and between Journey Medical Corporation and Dermira, Inc., a subsidiary of Eli Lilly and Company, dated as of March 31, 2021, filed as Exhibit 10.6 to Form S-1, filed on October 22, 2021 and incorporated herein by reference.**
10.10
Asset Purchase Agreement between VYNE Therapeutics Inc. and Journey Medical Corporation, dated as of January 12, 2022, filed as Exhibit 10.1 to Form 8-K filed on January 13, 2022 and incorporated herein by reference.**
10.11
License and Supply Agreement for Accutane, entered into by and between Journey Medical Corporation and Dr. Reddy’s Laboratories Ltd., dated as of July 29, 2020, filed as Exhibit 10.7 to Form S-1, filed on October 22, 2021 and incorporated herein by reference.**
10.12
License and Supply Agreement for Targadox, entered into by and between Journey Medical Corporation and Blu Caribe Inc., dated as of March 10, 2015, filed as Exhibit 10.8 to Form S-1, filed on October 22, 2021 and incorporated herein by reference.**
10.13
First Amendment to the License and Supply Agreement for Targadox, entered into by and between Journey Medical Corporation and Blu Caribe Inc., dated as of August 26, 2015, filed as Exhibit 10.9 to Form S-1, filed on October 22, 2021 and incorporated herein by reference.**
10.14
Asset Purchase Agreement for Exelderm, entered into by and between Journey Medical Corporation and Sun Pharmaceutical Industries, Inc., dated as of August 31, 2018, filed as Exhibit 10.10 to Form S-1, filed on October 22, 2021 and incorporated herein by reference.**
10.15
Amendment 1 to the Asset Purchase Agreement for Exelderm, entered into by and between Journey Medical Corporation and Sun Pharmaceutical Industries, Inc., dated as of September 5, 2018, filed as Exhibit 10.11 to Form S-1, filed on October 22, 2021 and incorporated herein by reference. **
10.16
Asset Purchase Agreement for Ximino, entered into by and between Journey Medical Corporation and Sun Pharmaceutical Industries, Inc., dated as of July 22, 2019, filed as Exhibit 10.12 to Form S-1, filed on October 22, 2021 and incorporated herein by reference.**
10.17
Asset Purchase Agreement for the Anti-itch Product, entered into by and between Journey Medical Corporation and Sun Pharmaceutical Industries, Inc., dated as of December 18, 2020, filed as Exhibit 10.13 to Form S-1, filed on October 22, 2021 and incorporated herein by reference.**
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10.18
License, Collaboration, and Assignment Agreement for DFD-29, entered into by and between Journey Medical Corporation and Dr. Reddy’s Laboratories Ltd., dated as of June 29, 2021, filed as Exhibit 10.14 to Form S-1, filed on October 22, 2021 and incorporated herein by reference.**
10.19
At Market Issuance Sales Agreement, dated as of December 30, 2022, by and between Journey Medical Corporation and B. Riley Securities, Inc., filed as Exhibit 1.2 to Form S-3, filed on December 30, 2022 and incorporated herein by reference.
10.20
At Market Issuance Sales Agreement, dated as of August 28, 2025, by and among Journey Medical Corporation, B. Riley Securities, Inc. and Lake Street Capital Markets, LLC, filed as Exhibit 10.1 to Form 8-K, filed on August 28, 2025 and incorporated herein by reference.
10.21
License Agreement, dated as of August 31, 2023, between Journey Medical Corporation and Maruho Co., Ltd. filed as Exhibit 10.1 to Form 10 - Q filed on November 13, 2023.**
10.22
Second Amended and Restated License Agreement, dated as of August 31, 2023, between Journey Medical Corporation and Maruho Co., Ltd. filed as Exhibit 10.2 to Form 10 - Q filed on November 13, 2023.**
10.23
Credit Agreement, dated as of December 27, 2023, between Journey Medical Corporation with SWK Funding LLC, filed as Exhibit 10.21 to Form 10-K filed on March 29, 2024. ***
10.24
First Amendment to the Credit Agreement, dated July 9, 2024, by and among Journey Medical Corporation, SWK Funding LLC, and the other financial institutions party thereto, filed as Exhibit 10.1 to Form 10-Q filed on November 12, 2024.**
10.25
Second Amendment to the Credit Agreement, dated October 21, 2024, by and among Journey Medical Corporation,
SWK Funding LLC, and the other financial institutions party thereto, filed as Exhibit 10.2 to Form 10-Q filed on November 12, 2024.**
10.26
Third Amendment to the Credit Agreement, dated September 25, 2025, by and among Journey Medical Corporation,
SWK Funding LLC, and the other financial institutions party thereto, filed as Exhibit 10.1 to Form 10-Q filed November 12, 2025.**
10.27
Journey Medical Corporation Deferred Compensation Plan, adopted July 9, 2024, filed as Exhibit 10.23 to Form 10-K filed on March 26, 2025.#*
19.1
Fortress Biotech, Inc. and Subsidiaries Insider Trading Policy, filed as Exhibit 19.1 to Form 10-K filed on March 26, 2025.*
21.1
List of Subsidiaries of Journey Medical Corporation.*
23.1
Consent of KPMG LLP.*
31.1
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
31.2
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
32.1
Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. * * *
32.2
Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ** *
97.1
Clawback Policy of Journey Medical Corporation, filed as Exhibit 97.1 to Form 10-K filed on March 29, 2024 and incorporated herein by reference.
101
The following financial information from the Company’s Quarterly Report on Form 10-K for the period ended December 31, 2025, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statement of Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (v) Notes to the Consolidated Financial Statements.
104
Cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, formatted in Inline XBRL.
* Filed herewith.
** Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10) of Regulation S-K.
*** Furnished herewith.
# Management Compensation Arrangement.
Item 16.
Form 10-K Summary
The Company has elected not to provide summary information.
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INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm ( KPMG LLP , Short Hills, New Jersey ; PCAOB# 185 )
F-2
Consolidated Balance Sheets as of December 31, 2025 and 2024
F-3
Consolidated Statements of Operations for the years ended December 31, 2025 and 2024
F-4
Consolidated Statement of Changes in Stockholders’ Equity for the years ended December 31, 2025 and 2024
F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024
F-6
Notes to Consolidated Financial Statements
F-7
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Journey Medical Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Journey Medical Corporation and subsidiary (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ KPMG LLP
We have served as the Company’s auditor since 2021.
Short Hills, New Jersey
March 25, 2026
F-2
Table of Contents
JOURNEY MEDICAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
December 31,
2025
2024
ASSETS
Current assets
Cash and cash equivalents
$
24,090
$
20,305
Accounts receivable, net of reserves
29,783
10,231
Inventory
9,624
14,431
Prepaid expenses and other current assets
3,376
3,212
Total current assets
66,873
48,179
Intangible assets, net
27,605
31,863
Operating lease right-of-use asset, net
111
199
Total assets
$
94,589
$
80,241
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable
$
8,851
$
16,050
Due to related party
455
528
Accrued expenses
27,567
17,425
Accrued interest
398
404
Income taxes payable
70
60
Installment payments – licenses, short-term
—
625
Operating lease liability, short-term
101
83
Total current liabilities
37,442
35,175
Term loan, net of discount
25,277
24,879
Operating lease liability, long-term
18
118
Total liabilities
62,737
60,172
Commitments and contingencies (Note 13)
Stockholders’ equity
Common stock, $ .0001 par value, 50,000,000 shares authorized, 21,144,655 and 16,153,610 shares issued and outstanding as of December 31, 2025 and December 31, 2024, respectively
2
1
Common stock - Class A, $ .0001 par value, 50,000,000 shares authorized, 6,000,000 shares issued and outstanding as of December 31, 2025 and December 31, 2024
1
1
Additional paid-in capital
130,307
107,094
Accumulated deficit
( 98,458 )
( 87,027 )
Total stockholders’ equity
31,852
20,069
Total liabilities and stockholders’ equity
$
94,589
$
80,241
The accompanying notes are an integral part of these consolidated financial statements.
F-3
Table of Contents
JOURNEY MEDICAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
Year Ended December 31,
2025
2024
Revenue:
Product revenue, net
$
61,239
$
55,134
Other revenue
619
1,000
Total revenue
61,858
56,134
Operating expenses
Cost of goods sold – (excluding amortization of acquired intangible assets)
20,924
20,879
Amortization of acquired intangible assets
4,258
3,424
Research and development
480
9,857
Selling, general and administrative
44,368
40,204
Loss recovery
—
( 4,553 )
Total operating expenses
70,030
69,811
Loss from operations
( 8,172 )
( 13,677 )
Other expense (income)
Interest income
( 589 )
( 757 )
Interest expense
3,698
2,700
Gain on extinguishment of debt
—
( 1,125 )
Foreign exchange transaction losses
90
116
Total other expense
3,199
934
Loss before income taxes
( 11,371 )
( 14,611 )
Income tax expense
60
61
Net loss
$
( 11,431 )
$
( 14,672 )
Net loss per common share:
Basic and diluted
$
( 0.47 )
$
( 0.72 )
Weighted average number of common shares:
Basic and diluted
24,497,973
20,431,400
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Table of Contents
JOURNEY MEDICAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands, except share data)
Additional
Total
Common Stock
Common Stock A
Paid-in
(Accumulated
Shareholders’
Shares
Amount
Shares
Amount
Capital
Deficit)
Equity
Balance as of December 31, 2023
13,323,952
$
1
6,000,000
$
1
$
92,703
$
( 72,355 )
$
20,350
Share-based compensation
—
—
—
—
6,098
—
6,098
Exercise of stock options for cash
122,510
—
—
—
207
—
207
Issuance of common stock for vested restricted stock units
1,058,374
—
—
—
—
—
—
Issuance of common stock under ESPP
84,464
—
—
—
209
—
209
Issuance of common stock, ATM offering, net of issuance costs of $ 245
1,564,310
—
—
—
7,877
—
7,877
Net loss
—
—
—
—
—
( 14,672 )
( 14,672 )
Balance as of December 31, 2024
16,153,610
$
1
6,000,000
$
1
$
107,094
$
( 87,027 )
$
20,069
Share-based compensation
—
—
—
—
6,288
—
6,288
Exercise of stock options for cash, net of shares withheld
1,409,420
1
—
—
349
—
350
Issuance of common stock for vested restricted stock units
944,946
—
—
—
—
—
—
Issuance of common stock under ESPP
54,572
—
—
—
217
—
217
Issuance of common stock, ATM offering, net of issuance costs of $ 507
2,582,107
—
—
—
16,359
—
16,359
Net loss
—
—
—
—
—
( 11,431 )
( 11,431 )
Balance as of December 31, 2025
21,144,655
$
2
6,000,000
$
1
$
130,307
$
( 98,458 )
$
31,852
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Table of Contents
JOURNEY MEDICAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended
December 31,
2025
2024
Cash flows from operating activities
Net loss
$
( 11,431 )
$
( 14,672 )
Adjustments to reconcile net loss to net cash used in operating activities:
Bad debt (recovery) expense
( 211 )
516
Gain on extinguishment of debt
—
( 1,125 )
Amortization of debt discount
466
307
Amortization of acquired intangible assets
4,258
3,424
Amortization of operating lease right-of-use assets
88
91
Share-based compensation
6,288
6,098
Changes in operating assets and liabilities:
Accounts receivable
( 19,341 )
4,475
Inventory
4,807
( 4,225 )
Prepaid expenses and other current assets
( 164 )
376
Other assets
—
6
Accounts payable
( 7,199 )
( 2,099 )
Related party expenses
( 73 )
333
Accrued expenses
10,149
( 2,925 )
Accrued interest
( 6 )
382
Income tax payable
10
7
Lease liabilities
( 82 )
( 96 )
Net cash (used in) operating activities
( 12,441 )
( 9,127 )
Cash flows from investing activities
Acquired intangible assets
—
( 15,000 )
Net cash (used in) investing activities
—
( 15,000 )
Cash flows from financing activities
Proceeds from the exercise of stock options
350
207
Proceeds from issuance of common stock, ATM offering, net of issuance costs
16,359
7,877
Issuance of common stock under ESPP
217
209
Proceeds from term-loan
—
10,000
Payment of debt issuance costs
( 75 )
( 50 )
Payment of license installment note payable
( 625 )
( 1,250 )
Net cash provided by financing activities
16,226
16,993
Net change in cash
3,785
( 7,134 )
Cash at the beginning of the period
20,305
27,439
Cash at the end of the period
$
24,090
$
20,305
Supplemental disclosure of cash flow information:
Cash paid for interest
$
3,238
$
2,011
Cash paid for income taxes
$
50
$
125
Supplemental disclosure of non-cash financing and investing activities:
ROU assets obtained in exchange for lease liabilities
$
—
$
188
The accompanying notes are an integral part of these consolidated financial statements.
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Table of Contents
JOURNEY MEDICAL CORPORATION
Notes to Financial Statements
NOTE 1. ORGANIZATION AND PLAN OF BUSINESS OPERATIONS
Journey Medical Corporation (collectively “Journey” or the “Company”) is a commercial-stage pharmaceutical company that focuses on the selling and marketing of U.S. Food and Drug Administration (“FDA”) approved prescription pharmaceutical products for the treatment of dermatological conditions. The Company’s current product portfolio includes eight FDA-approved prescription drugs for dermatological conditions that are marketed in the U.S. The Company acquires rights to products and product candidates by licensing or otherwise acquiring an ownership interest in, funding the research and development of, and eventually commercializing the products through its field sales organization.
As of December 31, 2025 and 2024, the Company is a controlled subsidiary of Fortress Biotech, Inc. (“Fortress” or “Parent”).
Liquidity and Capital Resources
At December 31, 2025, the Company had $ 24.1 million in cash and cash equivalents as compared to $ 20.3 million at December 31, 2024, and working capital of $ 29.4 million at December 31, 2025, as compared to $ 13.0 million at December 31, 2024.
The Company relies primarily on cash on hand generated from sales of its pharmaceutical products to customers to fund its core operations. In addition, the Company has relied on the proceeds from its term loan (“Credit Facility”) with SWK Funding LLC (“SWK”), and its at-the-market sales program to meet additional capital and liquidity needs, specifically to fund the research and development and commercialization of Emrosi.
In August 2025, the Company executed a new At Market Issuance Sales Agreement (the “2025 Sales Agreement”) with B. Riley Securities, Inc (“B. Riley”) and Lake Street Capital Markets, LLC (“Lake Street”) (each, an “Agent” and together, the “Agents”), replacing the previous December 30, 2022 At Market Issuance Sales Agreement with B. Riley (collectively with the 2025 Sales Agreement, the “ATM”). Pursuant to the terms of the 2025 Sales Agreement, the Company may offer and sell up to 3,750,000 shares of common stock, from time to time through or to the Agents, each acting as sales agent or principal.
On September 25, 2025, the Company entered into a Third Amendment to its Credit Agreement (the “Credit Agreement”) with SWK (the “Third Amendment”). The Third Amendment, among other things, extends the maturity date of the Company’s existing Credit Facility from December 27, 2027 to June 27, 2028. The Third Amendment also modifies the Revenue-Based Payment provision, as defined in the Credit Agreement, by lowering the applicable revenue threshold, measured on a trailing twelve-month basis, from $ 70.0 million to $ 60.0 million. Upon satisfaction of the revised revenue threshold, the interest-only period under the Credit Facility will be extended by one year, with scheduled principal repayments commencing in February 2027 rather than February 2026. The Company satisfied the $ 60.0 million revenue threshold as of December 31, 2025. Accordingly, principal payments under the Credit Facility will begin in February 2027.
On January 15, 2026, the Company filed a shelf registration statement on Form S-3 (File No. 333-292758) (the “2026 Shelf”), which was declared effective by the Securities and Exchange Commission on January 21, 2026. This shelf registration statement covers the offering, issuance and sale by us of up to an aggregate of $ 150.0 million of our common stock, preferred stock, debt securities, warrants, and units. The 2026 Shelf replaces the Company’s previous registration statement on Form S-3 filed in December 2022.
The Company regularly evaluates market conditions, its liquidity profile, and financing alternatives, including out-licensing arrangements for its products, to enhance its capital structure. The Company may seek to raise capital through debt or equity financings to expand its product portfolio and for other strategic initiatives, which may include sales of securities under either the Company’s 2026 Shelf, or a new registration statement, or in an unregistered, exempt transaction.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. However, as a result of recurring and historical losses, substantial doubt exists about the Company’s ability to continue as a going concern for a period of at least twelve months from the date of issuance of these financial statements. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that may be necessary if the Company is unable to continue as a going concern.
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Table of Contents
JOURNEY MEDICAL CORPORATION
Notes to Financial Statements
NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The Company’s consolidated financial statements include the accounts of the Company and the accounts of the Company’s wholly-owned subsidiary, JG Pharma, Inc. (“JG” or “JG Pharma”). All intercompany balances and transactions have been eliminated.
Emerging Growth Company
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard-setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s audited consolidated financial statements upon adoption. Under the Jumpstart Our Business Startups Act of 2012, as amended, the Company meets the definition of an emerging growth company and elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant estimates made by management include provisions for coupons, chargebacks, wholesaler fees, specialty pharmacy discounts, managed care rebates, product returns, and other allowances customary to the pharmaceutical industry. Significant estimates made by management also include inventory realization, valuation of intangible assets, useful lives of amortizable intangible assets and share-based compensation. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.
Segment Reporting
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one segment, which reflects products for the treatment of dermatological conditions. The dermatological segment derives revenues from the sale of branded and authorized general prescription products that treat certain dermatological conditions. The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer.
The CODM assesses performance for the dermatological segment and allocates resources based on consolidated net loss. The CODM uses net loss to monitor budget vs. actual results, which are presented quarterly, as well as to evaluate performance and income generated in deciding how to reinvest profits. The accounting policies of the segment are the same as those described in this Note 2. See Note 20 for segment information .
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash. Periodically, the Company may maintain deposits in financial institutions in excess of government insured limits. Management believes that the Company is not exposed to significant credit risk as the Company’s deposits are held at financial institutions that management believes to be of high credit quality. The Company has not experienced any losses on these deposits.
F-8
Table of Contents
JOURNEY MEDICAL CORPORATION
Notes to Financial Statements
The Company’s accounts receivable primarily represent amounts due from drug wholesalers and specialty pharmacies in the United States. The Company performs periodic credit evaluations of customers and does not require collateral. An allowance for doubtful accounts is maintained for potential credit losses based on the aging of accounts receivable, historical bad debts experience, and the customer’s current ability to pay its obligations to the Company. Accounts receivables balances are written off against the allowance when it is probable that the receivable will not be collected. See Note 16 for significant customers.
Cash and Cash Equivalents
The Company considers highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents at December 31, 2025 and 2024 consisted entirely of cash and cash equivalents in institutions within the United States. Balances at certain institutions have exceeded Federal Deposit Insurance Corporation insured limits.
Accounts Receivable, Net
The Company’s accounts receivable consists of amounts due from customers related to product sales and have payment terms, that range from 30 to 75 days . For certain customers, the accounts receivable for the customer are net of prompt payment or specialty pharmacy discounts. The Company monitors the financial performance and creditworthiness of its customers so that it can properly assess and respond to changes in their credit profile. The Company reserves against accounts receivable for estimated losses that may arise from a customer’s inability to pay, and any amounts determined to be uncollectible are written off against the reserve when it is probable that the receivable will not be collected. The Company has historically not experienced significant credit losses. The allowance for doubtful accounts was $ 0.2 million and $ 0.6 million at December 31, 2025 and 2024, respectively.
Inventories
Inventories are recorded at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. The Company periodically reviews the composition of inventory in order to identify excess, obsolete, slow-moving or otherwise non-saleable items taking into account anticipated future sales compared with quantities on hand, and the remaining shelf life of goods on hand. If non-saleable items are observed and there are no alternative uses for the inventory, the Company records a write-down to net realizable value in the period that the decline in value is first recognized. The Company’s inventory reserves were $ 1.0 million and $ 0.5 million at December 31, 2025 and 2024, respectively.
Leases
Arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the consolidated balance sheet as both a right-of-use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right-of-use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right-of-use asset result in straight-line rent expense over the lease term. Variable lease expenses are recorded when incurred.
In calculating the right-of-use asset and lease liability, the Company elects to combine lease and non-lease components.
Research and Development Costs
Research and development costs are expensed as incurred. Research and development costs primarily consist of personnel related expenses, payments made to third parties for license and milestone costs related to in-licensed products and technology, and payments made to third party contract research organizations.
F-9
Table of Contents
JOURNEY MEDICAL CORPORATION
Notes to Financial Statements
The Company’s research and development expense in 2024 includes costs associated with the research and development of the Company’s Emrosi TM product prior to regulatory approval. Prior to the regulatory approval of Emrosi, manufacturing costs associated with third-party contractors for validation and commercial batch production, process technology transfer, quality control and stability testing, raw material purchases, overhead expenses and facilities costs were recorded as research and development and expensed as incurred as future use could not be determined, and there is uncertainty surrounding regulatory approval. Following regulatory approval of Emrosi by the FDA, the Company capitalizes certain manufacturing costs as inventory.
Clinical trial costs for Emrosi have been a significant component of research and development expenses for the Company in 2024. The Company’s clinical studies were performed by third-party contract research organizations (“CROs”). These expenses are based on patient enrollment and include costs relating to the administration of the clinical trials including s CRO services, clinical sites, investigators, testing facilities and patients for participating in the Company’s clinical trials.
Contingencies
The Company records accruals for contingencies and legal proceedings expected to be incurred in connection with a loss contingency when it is probable that a liability has been incurred and the amount can be reasonably estimated.
If a loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.
Fair Value Measurement
The Company follows accounting guidance on fair value measurements for financial assets and liabilities measured at fair value on a recurring basis. Under the accounting guidance, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.
The accounting guidance requires fair value measurements to be classified and disclosed in one of the following three categories:
Level 1 :
Quoted prices in active markets for identical assets or liabilities.
Level 2 :
Observable inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace.
Level 3 :
Unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.
Certain of the Company’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate their fair value due to their liquid or short-term nature, such as accounts payable, accrued expenses and other current liabilities.
Intangible Assets
Intangible assets are reported at cost, less accumulated amortization and impairments. Intangible assets with finite lives are amortized over their estimated useful lives, which represents the estimated life of the product. Amortization is calculated using the straight-line method.
F-10
Table of Contents
JOURNEY MEDICAL CORPORATION
Notes to Financial Statements
During the ordinary course of business, the Company has entered into certain licenses and asset purchase agreements. Potential milestone payments for achieving sales targets or regulatory development milestones are recorded when it is probable of achievement. Upon a milestone payment being achieved, the milestone payment will be capitalized and amortized over the remaining useful life for approved products and expensed for milestones prior to FDA approval. Royalty payments for approved products are recorded as cost of goods sold as sales are recognized.
Impairment of Long-Lived Assets
The Company reviews long-lived assets, including intangible assets with finite useful lives, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable (a “triggering event”). Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the long-lived asset in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long-lived asset group for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset group to its carrying value. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset group are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset group over its fair value, determined based on discounted cash flows.
Share-based Compensation
The Company has a share-based compensation plan in place and records the associated share-based compensation expense over the requisite service period. The share-based compensation plan and related compensation expense are discussed more fully in Note 15 to the Company’s consolidated financial statements.
Compensation expense for service-based stock options is charged against operations on a straight-line basis over the vesting period, which is generally three or four years. Forfeitures are recorded as they occur. Share-based compensation costs are recorded in both research and development and selling, general and administrative expenses in the Company’s consolidated statements of operations. Options granted have a term of 10 years from the grant date.
The Company estimates the fair value of all service-based stock option awards as of the grant date by applying the Black-Scholes option pricing valuation model. The application of this valuation model involves assumptions, including the fair value of the common stock, expected volatility, risk-free interest rate, expected dividends and the expected term of the option. The assumptions used in calculating the fair value of share-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. The following inputs are used in the Black-Scholes calculation.
Expected term—The Company has elected to use the “simplified method” for estimating the expected term of options, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option (generally 10 years).
Expected volatility—The Company calculated the volatility of the closing market price of its common stock as the expected volatility over a term equal to the expected life of the option being valued in the current year. In the prior year, expected volatility was computed based on the implied volatility of comparable companies.
Risk-free interest rate— The risk-free interest rate is selected based upon yields of United States Treasury issues with a term equal to the expected life of the option being valued.
Expected dividend yield—The Company has not issued any dividends in its history and does not expect to issue dividends over the life of the options; therefore, the Company has estimated the dividend yield to be zero.
Restricted stock units (“RSU’s”) that are service based are amortized into compensation expense on a straight-line basis over the vesting period, which ranges from three to four years in duration. Compensation cost for service based RSU’s is based on the grant date fair value of the award, which is the closing market price of the Company’s common stock on the grant date multiplied by the number of shares awarded.
F-11
Table of Contents
JOURNEY MEDICAL CORPORATION
Notes to Financial Statements
Net (Loss) Income Per Share
Basic net (loss) income per share of common stock is calculated by dividing net (loss) income by the weighted-average number of shares of common stock outstanding during the reporting period. Diluted earnings per share is calculated by dividing net income by the weighted-average number of shares of common stock outstanding during the reporting period after giving effect to dilutive potential common shares for stock options and restricted stock units, determined using the treasury stock method. The Company has two classes of stock (Common Stock and Class A Common Stock); however, the terms of each class are substantially similar, and therefore the application of the two-class method does not impact the computation of the reported net (loss) income per share. See Note 19 below.
Revenue Recognition
The Company records and recognizes revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company’s revenues primarily result from contracts with customers, which are generally short-term and have a single performance obligation – the delivery of product. The Company’s performance obligation to deliver products is satisfied at the point in time that the goods are received by the customer, which is when the customer obtains title to and has the risks and rewards of ownership of the products. The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both.
Many of the Company’s products sold are subject to a variety of deductions. Revenues are recorded net of provisions for variable consideration, including coupons, chargebacks, wholesaler fees, specialty pharmacy discounts, managed care rebates, product returns, and other deductions customary to the pharmaceutical industry. Accruals for these provisions are presented in the consolidated financial statements as reductions to gross sales in determining net sales and as a contra asset within accounts receivable, net (if settled via credit) and other current liabilities (if paid in cash). Amounts recorded for revenue deductions can result from a series of judgements about future events and uncertainties and can rely on estimates and assumptions. The following section briefly describes the nature of the Company’s provisions for variable consideration and how such provisions are estimated:
Coupons — The Company offers coupons on products for qualified commercially-insured parties with prescription drug co-payments. Such product sales flow through both traditional wholesaler and specialty pharmacy channels. Coupons are processed and redeemed at the time of prescription fulfilment by the pharmacy. The majority of the coupon reserve accrual at the end of the period reflects expected redemptions for product in the distribution channel. The expected accrual reserve requires us to estimate the distribution channel inventory at period end, the expected redemption rates, and the cost per coupon claim that the Company expects to receive. The estimate of product remaining in the distribution channel is comprised of estimated inventory at the wholesaler as well as an estimate at the specialty pharmacies, which the Company estimates based upon historical ordering patterns. The estimated redemption rate is based on historical redemptions as a percentage of units sold. The cost per coupon is based on the coupon rate.
Chargebacks and Government Chargebacks — The Company sells a portion of its products indirectly through wholesaler distributors to contracted indirect customers and qualified government healthcare providers. The Company enters into specific agreements with or provides discounts to these indirect customers and entities to establish pricing for the Company’s products, and in-turn, the indirect customers and entities independently purchase these products. The Company’s provision for chargebacks is based on expected sell-through levels by the Company’s wholesale customers to the indirect customers and estimated wholesaler inventory levels as well as historical chargeback rates. The Company continually monitors its reserve for chargebacks and adjusts the reserve accordingly when expected chargebacks differ from actual experience.
Wholesaler fees — The Company provides allowances to its wholesale customers for sales order management, data, and distribution services. The Company also pays administrative and other fees to certain wholesale customers consistent with pharmaceutical industry practices. The Company records a provision for these fees based on contracted rates. Assumptions used to establish the provision include contract sales volumes and average contract pricing. The Company regularly reviews the information related to these estimates and adjusts the provision accordingly.
F-12
Table of Contents
JOURNEY MEDICAL CORPORATION
Notes to Financial Statements
Specialty Pharmacy Discounts — The Company has in place contractual arrangements with specialty pharmacies and provides for contractually agreed upon discounts. These discounts are recorded at the time of sale based on the customer’s contracted rate and recorded as a reduction of revenue.
Managed Care Rebates — The Company is subject to rebates in connection with its agreements with certain contracted commercial payers. The Company estimates its managed care rebates based on the Company’s estimated payer mix and the applicable contractual rebate rate. The Company’s accrual for managed care rebates is based on an estimate of future claims that the Company expects to receive, which considers an estimate for inventory in the distribution channel. The accrual is recognized at the time of sale, resulting in a reduction of gross product revenue.
Product Returns — Consistent with industry practice, the Company offers customers a right to return any unused product. The customer’s right of return commences six months prior to product expiration date and ends one year after product expiration date. Products returned for expiration are reimbursed at current wholesale acquisition cost or indirect contract price. The Company estimates the amount of its product sales that may be returned by the Company’s customers and accrues this estimate as a reduction of revenue in the period the related product revenue is recognized. The Company estimates product returns as a percentage of sales to its customers.
Income Taxes
The Company records income taxes using the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax effects attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases, and operating loss and tax credit carryforwards. The Company establishes a valuation allowance if it believes it is more likely than not that the deferred tax assets will not be recovered based on an evaluation of objective verifiable evidence. The Company has considered its history of cumulative tax and book income/loss incurred since inception, and the other positive and negative evidence, and has concluded that it is not more likely than not that it will realize the benefits of the net deferred tax assets as of December 31, 2025 and 2024 and therefore a full valuation allowance on all of the deferred tax assets is required.
For tax positions that are more likely than not of being sustained upon audit, the Company recognizes the largest amount of the benefit that is greater than 50 % likely of being realized. For tax positions that are not more likely than not of being sustained upon audit, the Company does not recognize any portion of the benefit. For the years ended December 31, 2025 and 2024, the Company had no unrecognized tax benefits and does not anticipate any significant change to the unrecognized tax benefit balance. The Company classifies interest and penalties related to uncertain tax positions as income tax expense, if applicable. There was no interest expense or penalties related to unrecognized tax benefits recorded through December 31, 2025 and 2024.
Comprehensive Income
The Company has no components of other comprehensive income, and therefore, comprehensive income equals net income.
Recently Issued Accounting Pronouncements
Adopted
In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which requires enhanced disclosures related to the rate reconciliation and income taxes paid, including greater disaggregation by jurisdiction and by significant categories of reconciling items. The objective of the amendments is to provide financial statement users with more decision-useful information about the nature and magnitude of factors that cause the effective tax rate to differ from the applicable statutory tax rate and about the amount and timing of income tax payments.
F-13
Table of Contents
JOURNEY MEDICAL CORPORATION
Notes to Financial Statements
The Company adopted ASU 2023-09 on January 1, 2025, the beginning of its fiscal year ending December 31, 2025, on a prospective basis for annual periods, as permitted by the standard. Adoption of ASU 2023-09 resulted in expanded income tax disclosures, including a more disaggregated reconciliation of the statutory U.S. federal income tax rate to the Company’s effective tax rate. The Company’s enhanced income tax disclosures required by ASU 2023-09 are presented in Note 18 to the consolidated financial statements.
Not yet adopted
In November 2024, the FASB issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which is intended to improve the disclosures about specified categories of expenses including purchases of inventory, employee compensation, depreciation and amortization, included in certain expense captions presented in the consolidated statement of operations. This update will be effective for annual periods beginning after December 15, 2026. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and disclosures.
In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets . The guidance provides a practical expedient that can be elected to be applied to accounts receivable and contract assets, which would allow entities to assume that current conditions as of the balance sheet date do not change for the remaining life of the assets when estimating expected credit losses for such assets. Entities are required to apply the guidance on a prospective basis. This update will be effective for the interim and annual periods beginning after December 15, 2025. Early adoption is permitted. The Company is currently evaluating the update to determine the impact the adoption will have on its consolidated financial statements.
NOTE 3. INVENTORY
The Company’s inventory consisted of the following at December 31, 2025 and 2024:
December 31,
($’s in thousands)
2025
2024
Finished goods
$
7,389
$
11,381
Work-in-process
174
367
Raw materials
3,057
3,196
Inventory at cost
10,620
14,944
Inventory reserves
( 996 )
( 513 )
Total inventories
$
9,624
$
14,431
NOTE 4. INTANGIBLES
The table below provides a summary of the Company’s intangible assets at December 31, 2025 and 2024, respectively:
Estimated
December 31,
($’s in thousands)
Useful Lives (Years)
2025
2024
Intangible assets - product licenses
3 - 15
$
52,925
$
52,925
Accumulated amortization
( 22,177 )
( 17,919 )
Accumulated impairment loss
( 3,143 )
( 3,143 )
Total intangible assets
$
27,605
$
31,863
The Company’s amortization expense for the years ended December 31, 2025 and 2024 was approximately $ 4.3 million and $ 3.4 million, respectively. Amortization expense is recorded as a component of cost of goods sold in the Company’s consolidated statements of operations.
The Company’s finite-lived intangible assets consist of acquired intangible assets. On November 1, 2024, the FDA approved the Company’s drug candidate for the treatment of inflammatory lesions of rosacea in adults, Emrosi. The approval triggered a $ 15.0 million milestone payment, which the Company capitalized as an acquired intangible asset.
F-14
Table of Contents
JOURNEY MEDICAL CORPORATION
Notes to Financial Statements
Future amortization of the Company’s intangible assets is as follows:
Total
For the years ended
Amortization
December 31, 2026
$
3,470
December 31, 2027
2,775
December 31, 2028
2,596
December 31, 2029
2,596
December 31, 2030
2,596
Thereafter
9,631
Subtotal
23,664
Asset not yet placed in service
3,941
Total
$
27,605
NOTE 5. LICENSES
Assets and Licenses Acquired:
Emrosi
On June 29, 2021, the Company entered a license, collaboration, and assignment agreement with Dr. Reddy’s Laboratories, Ltd. (“DRL”) to obtain the global rights for the development and commercialization of Emrosi (“Emrosi”), formerly known as DFD-29, a late-stage development modified release oral minocycline that is being evaluated for the treatment of inflammatory lesions of rosacea (the “Emrosi Agreement”). The Company acquired global rights to Emrosi, including in the U.S. and Europe, except that DRL has retained certain rights to the program in select markets, namely in Armenia, Azerbaijan, Belarus, Brazil, Georgia, India, Kazakhstan, Kyrgyzstan, Moldova, the People’s Republic of China, Russia, Taiwan, Tajikistan, Turkmenistan, Ukraine and Uzbekistan. Pursuant to the Emrosi Agreement, the Company made an upfront payment of $ 10.0 million. In April 2024, the Company made a $ 3.0 million milestone payment to DRL, based on FDA acceptance of the Company’s new drug application (“NDA”) for Emrosi, and in December of 2024, the Company made a $ 15.0 million milestone payment to DRL, which was triggered by the November 1, 2024 FDA marketing approval of Emrosi. Upon the $ 15.0 million milestone payment, all assets related to Emrosi, including the NDA, regulatory documentation and intellectual property, transferred to the Company. Pursuant to the Emrosi Agreement, the Company may be required to make additional contingent regulatory and commercial milestone payments to DRL, totaling up to $ 150.0 million. Royalties ranging from ten percent to fourteen percent are payable on net sales of the product. Royalties are subject to a 50 % reduction in the event that a generic competitor launches in an applicable country where the Company markets and sells the product.
Amzeeq and Zilxi
In January 2022, the Company entered into an asset purchase agreement with VYNE Therapeutics, Inc. (“VYNE”) to acquire two FDA approved products, Amzeeq® (minocycline) topical foam, 4%, and Zilxi® (minocycline) topical foam, 1.5%, for an upfront payment of $ 20.0 million and an additional $ 5.0 million payment on the one year anniversary of the closing (the “VYNE APA”). The VYNE APA also provides for contingent net sales milestone payments. In the first calendar year in which annual sales reach each of $ 100 million , $ 200 million , $ 300 million , $ 400 million and $ 500 million , a one-time payment of $ 10 million , $ 20 million , $ 30 million , $ 40 million and $ 50 million , respectively, will be paid in that year only, per product, totaling up to $ 450 million.
F-15
Table of Contents
JOURNEY MEDICAL CORPORATION
Notes to Financial Statements
Qbrexza
In March 2021, the Company executed an Asset Purchase Agreement (the “Qbrexza APA”) with Dermira, Inc., a subsidiary of Eli Lilly and Company (“Dermira”). Pursuant to the terms of the Qbrexza APA, the Company acquired the rights to Qbrexza® (glycopyrronium), a prescription cloth towelette to treat primary axillary hyperhidrosis in patients nine years of age or older. The Company paid an upfront fee of $ 12.5 million to Dermira. In addition, the Company is obligated to pay Dermira up to $ 144.0 million in the aggregate and are contingent upon the achievement of certain net sales milestones. The royalty structure for the Qbrexza APA is tiered with royalties for the first two years ranging from approximately 40 % to 30 %. Thereafter, royalties are approximately 12.0 % to 19.0 %. Royalty amounts are subject to certain reductions in the event there is a loss of exclusivity.
Accutane
In July 2020, the Company entered into an exclusive license and supply agreement for Accutane (the “Accutane Agreement”) with DRL. Pursuant to the Accutane Agreement, the Company paid $ 5.0 million. Three additional milestone payments totaling $ 17.0 million are contingent upon the achievement of certain net sales milestones. The Company is required to pay royalties in an amount equal to a low-double digit percentage of net sales. The term of the Accutane Agreement is ten years and renewable upon mutual agreement. Each party may terminate the Accutane Agreement for an uncured material breach by the other party or for certain bankruptcy or insolvency related events. The Company may also terminate the Accutane Agreement without cause upon 180 days written notice to DRL.
Other License Agreements:
Maruho License Agreement
On August 31, 2023, the Company entered into a license agreement (the “New License Agreement”) with Maruho Co., Ltd., the Company’s exclusive licensing partner in Japan (“Maruho”). Under the terms of the New License Agreement, the Company granted an exclusive license to develop and commercialize Qbrexza for the treatment of primary axillary hyperhidrosis in Korea and certain other Asian countries in exchange for an upfront payment of $ 19 million. Prior to the date of the New License Agreement, the Company and Maruho were party to an existing exclusive amended and restated license agreement (the “First A&R License Agreement”), under which Maruho acquired exclusive license rights to Qbrexza in Japan.
Simultaneously, Journey and Maruho also entered into the Second Amended and Restated Exclusive License Agreement (the “Second A&R License Agreement”), which supersedes the First A&R License Agreement. The Second A&R License Agreement contains modifications that remove Maruho’s obligation to pay Journey royalties on its net sales of Rapifort (the Japanese equivalent of Qbrexza) in Japan for sales occurring after October 1, 2023 and removes Maruho’s obligation to pay $ 10.0 million to Journey in the event that Maruho achieves net sales of at least ¥ 4 billion (yen) of Rapifort during a single fiscal year. All other remaining potential milestone payment obligations, which aggregate to $ 45.0 million, remain in full force and effect.
Cutia License Agreement
In January 2022, as a part of the Vyne APA, the Company assumed a license agreement with Cutia Therapeutics (HK) Limited (“Cutia”), a Hong Kong biopharmaceutical company with experience in developing pharmaceutical products in the greater China region (the “Cutia Agreement”). Pursuant to the agreement, Cutia was granted an exclusive license to obtain regulatory approval of and commercialize Amzeeq (topical 4 % minocycline foam) and Zilxi (topical 1.5 % minocycline foam) in mainland China, Taiwan, Hong Kong and Macau. The Company has agreed to supply the finished licensed products to Cutia for clinical and commercial use at an agreed price. Additionally, the Company will earn a royalty in the low single digit percentages on net sales of the licensed products by Cutia.
On November 11, 2024, Cutia received marketing approval for Amzeeq from the National Medical Products Administration (the “NMPA”) of the People’s Republic of China (the “PRC”). The approval triggered a $ 1.0 million milestone payment to the Company. The $ 1.0 million milestone payment was recorded as a component of other revenue on the approval date of November 11, 2024. In August 2025, the Company began supplying Cutia with finished licensed products for Cutia’s commercial use. The Company recognized $ 0.6 million in Other revenue associated with royalties and the supply of Amzeeq to Cutia.
F-16
Table of Contents
JOURNEY MEDICAL CORPORATION
Notes to Financial Statements
NOTE 6: FAIR VALUE MEASUREMENTS
Financial assets and liabilities measured at fair value on a recurring basis are summarized below:
December 31, 2025
($’s in thousands)
Level 1
Level 2
Level 3
Total
Assets
Cash and cash equivalents
$
24,090
$
—
$
—
$
24,090
Total
$
24,090
$
—
$
—
$
24,090
December 31, 2024
($’s in thousands)
Level 1
Level 2
Level 3
Total
Assets
Cash and cash equivalents
$
20,305
$
—
$
—
$
20,305
Total
$
20,305
$
—
$
—
$
20,305
The Company did not carry any level 2 or level 3 assets or liabilities at December 31, 2025 or December 31, 2024. No transfers occurred between level 1, level 2, and level 3 instruments during December 31, 2025 and 2024.
NOTE 7. RELATED PARTY AGREEMENTS
Shared Services Agreement with Fortress
On November 12, 2021, the Company and Fortress entered into an arrangement to share the cost of certain legal, finance, regulatory, and research and development employees (the “Shared Services Agreement”). Fortress’ Executive Chairman and Chief Executive Officer is the Executive Chairman of the Company. Under the terms of the Shared Services Agreement, the Company will reimburse Fortress for the salary and benefit costs associated with these employees based upon actual hours worked on Journey-related projects following the completion of the Company’s initial public offering, which occurred in November 2021. In addition, the Company reimburses Fortress for various payroll-related costs and selling, general and administrative costs incurred by Fortress for the benefit of the Company.
For the year ended December 31, 2025 and 2024, the Company recorded related party expenses to Fortress of less than $ 0.1 million and $ 0.1 million, respectively. The due to related party liability at December 31, 2025 and 2024, was $ 0.5 million and $ 0.5 million, respectively, and primarily relate to reimbursable expenses incurred by Fortress on behalf of the Company. The Company would have incurred these costs irrespective of the relationship with Fortress.
NOTE 8. ACCRUED EXPENSES
Accrued expenses for the years ended December 31, 2025 and 2024 consisted of the following:
December 31,
($’s in thousands)
2025
2024
Accrued coupons and rebates
$
16,547
$
6,200
Accrued compensation
5,589
3,378
Return reserve
2,177
3,124
Accrued royalties payable
1,805
1,374
Accrued inventory
—
1,303
Accrued marketing and market access
850
1,185
Accrued legal, accounting and tax
274
413
Other
325
448
Total accrued expenses
$
27,567
$
17,425
F-17
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JOURNEY MEDICAL CORPORATION
Notes to Financial Statements
NOTE 9. INSTALLMENT PAYMENTS
Ximino Settlement
In August 2024, the Company executed a settlement agreement (the “Settlement Agreement”) to settle amounts owed by the Company to Sun Pharmaceutical Industries, Inc. (“Sun”) pursuant to the Ximino Asset Purchase Agreement. The Company owed $ 3.0 million of license installment payments to Sun associated with the license of Ximino. Pursuant to the Settlement Agreement, the Company agreed to settle the total outstanding obligation owed to Sun for a total of $ 1.9 million, payable in three installments: 1) $ 625.0 thousand upon execution of the Settlement Agreement, 2) $ 625.0 thousand on December 1, 2024, and 3) $ 625.0 thousand on January 15, 2025. The Company accounted for the settlement of the license installment payment as a gain of $ 1.1 million for the difference between the carrying value of the license installment payments of $ 3.0 million and the settlement amount of $ 1.9 million. The Company recorded the difference of $ 1.1 million as a Gain on extinguishment of debt in the Condensed Consolidated Statements of Operations.
NOTE 10. OPERATING LEASE OBLIGATIONS
The Company leases 3,801 square feet of office space in Scottsdale, Arizona. In July 2024, the Company amended the lease to extend the lease term for an additional 25 months at an annual rate of approximately $ 0.1 million. The amended lease commenced on February 1, 2025 and expires on February 28, 2027.
The Company recorded rent expense as follows (dollars in thousands):
For the Years Ended December 31,
2025
2024
Operating lease cost
$
99
$
98
Variable lease cost
7
5
Total lease cost
$
106
$
103
The following table summarizes quantitative information about the Company’s operating leases (dollars in thousands):
For the Years Ended December 31,
2025
2024
Cash paid for amounts included in the measurement of lease liabilities
$
94
$
102
Weighted-average remaining lease term - operating leases
1.2
2.2
Weighted-average discount rate - operating leases
7.35
%
7.35
%
As of December 31, 2025, future payments of operating lease liabilities are as follows:
For the year ended December 31,
($’s in thousands)
2026
$
105
2027
18
Total lease payments
123
Less: present value discount
( 4 )
Total operating lease liabilities
$
119
F-18
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JOURNEY MEDICAL CORPORATION
Notes to Financial Statements
NOTE 11. DEBT
The Company’s Debt obligations at December 31, 2025 and 2024 were as follows:
December 31,
($’s in thousands)
2025
2024
Short-term portion of principal balance
$
—
$
—
Long-term portion of principal balance
25,000
25,000
Principal balance
$
25,000
$
25,000
Plus: Exit fee
1,250
1,250
Less: Debt discount and fees
( 973 )
( 1,371 )
Net carry amount
$
25,277
$
24,879
SWK Long-Term Debt
On December 27, 2023, the Company entered into a Credit Agreement (the “Credit Agreement”) with SWK. The Credit Agreement provides for a term loan facility (the “Credit Facility”) in the original principal amount of up to $ 20.0 million. On the closing date of the facility, the Company drew $ 15.0 million. On June 26, 2024, the Company drew the remaining $ 5.0 million under the Credit Facility. On July 9, 2024, the Company entered into an amendment (the “First Amendment”) to the Credit Agreement with SWK. The First Amendment increased the original principal amount of the Credit Facility from $ 20.0 million to $ 25.0 million. The $ 5.0 million of additional principal added in the First Amendment was contractually required to be drawn upon FDA approval of Emrosi, subject to the Company receiving approval on or before June 30, 2025. The Company received FDA approval for Emrosi on November 1, 2024 and the Company drew on the remaining $ 5.0 million on November 25, 2024.
Pursuant to the terms under the Credit Facility, repayments of principal commence in February 2026 in an amount equal to $ 1.9 million per quarter, or 7.5 %, of the principal amount of funded Term Loans, with any remaining principal balance due on the maturity date. Term loans under the Credit Facility (“Term Loans”) accrue interest, which is payable quarterly in arrears, and bear interest at a rate per annum equal to the three-month term SOFR (subject to a SOFR floor of 5 %) plus 7.75 %. The interest rate resets quarterly.
On September 25, 2025, the Company entered into the third amendment (“Third Amendment”). The Third Amendment, among other things, extends the maturity date of the Company’s existing Credit Facility from December 27, 2027 to June 27, 2028. The Third Amendment also modifies the Revenue-Based Payment provision, as defined in the Credit Agreement, by lowering the applicable revenue threshold, measured based on the twelve months ended December 31, 2025, from $ 70.0 million to $ 60.0 million. The Company satisfied the $ 60.0 million Revenue-Based Payment provision as of December 31, 2025. Accordingly, the interest-only period under the Credit Facility was extended by one year, with scheduled principal repayments commencing in February 2027 rather than February 2026. Thereafter, the Company will make quarterly principal payments equal to $ 2.5 million per quarter, or 10.0 %, of the outstanding principal amount of the funded Term Loan, with any remaining principal balance due on the maturity date.
The Company may at any time prepay the outstanding principal balance of the Term Loans in whole or in part. Upon repayment in full of the Term Loans, the Company will pay an exit fee equal to 5 % of the original principal amount of the Term Loans. Additionally, the Company paid an origination fee of $ 0.2 million on the closing date of the Credit Facility and incurred issuance costs of $ 0.2 million, both of which have been recorded as a debt discount. The Company is accreting the carrying value of the Term Loans to the original principal balance plus the exit fee over the term of the loan using the effective interest method. The amortization of the discount is accounted for as interest expense. The effective interest rate on the Term Loans as of December 31, 2025 was 14.1 %. The fair value of the debt approximates its carrying value.
The Credit Facility also includes both revenue and liquidity covenants, restrictions as to payment of dividends, and is secured by substantially all assets of the Company. As of December 31, 2025, the Company was in compliance with the financial covenants under the Credit Facility.
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JOURNEY MEDICAL CORPORATION
Notes to Financial Statements
As of December 31, 2025, the contractual maturities of the long-term debt, including the payment of the exit fee, are as follows (dollars in thousands):
Years ending December 31,
Term Loan
2026
$
—
2027
10,000
2028
16,250
Total
26,250
Debt discount
( 973 )
Total, net
25,277
Current portion
—
Term-loan (long-term)
$
25,277
NOTE 12. INTEREST EXPENSE AND FINANCING FEES
Interest expense and financing fees for the years ended December 31, 2025 and 2024 consisted of the following:
Year Ended December 31,
2025
2024
Cash interest expense
$
3,232
$
2,393
Amortization of debt discount
466
307
Total interest expense and financing fees
$
3,698
$
2,700
NOTE 13. COMMITMENTS AND CONTINGENCIES
License Agreements
The Company has undertaken to make contingent milestone payments to the licensors of its portfolio of drug products and candidates. In addition, the Company is required to pay royalties to such licensors based on a percentage of net sales of each drug candidate following regulatory marketing approval. For additional information on future milestone payments and royalties, see Note 5.
NOTE 14. STOCKHOLDERS’ EQUITY
Common Stock
The Company’s Certificate of Incorporation, as amended, authorizes the Company to issue 50,000,000 shares of $ 0.0001 par value Common Stock of which 6,000,000 shares are designated and authorized as Class A Common Stock.
Voting Rights
Each holder of Common Stock is entitled to one vote per share of Common Stock held on all matters submitted to a vote of the stockholders, including the election of directors. The Company’s Certificate of Incorporation and bylaws do not provide for cumulative voting rights.
Each holder of Class A Common Stock is entitled to a number of votes that is equal to 1.1 times a fraction, the numerator of which is the sum of the shares of outstanding Common Stock, including the Class A Common Stock, and the denominator of which is the number of outstanding shares of Class A Common Stock. Thus, the holders of the Class A Common Stock will at all times constitute a voting majority.
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JOURNEY MEDICAL CORPORATION
Notes to Financial Statements
Dividends
The holders of the Company’s outstanding shares of Common Stock and Class A Common Stock are entitled to receive dividends, if any, as may be declared from time to time by the Company’s Board of Directors out of legally available funds.
Liquidation
In the event of the Company’s liquidation, dissolution or winding up, holders of Common Stock and Class A Common Stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of the Company’s debts and other liabilities, subject to the satisfaction of any liquidation preference granted to the holders of any outstanding shares of Preferred Stock.
Rights and Preference
Holders of the Company’s Common Stock and Class A Common Stock have no preemptive, conversion or subscription rights, and there is no redemption or sinking fund provisions applicable to either the Common Stock or the Class A Common Stock. The rights, preferences and privileges of the holders of Common Stock and Class A Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of the Company’s Preferred Stock that are or may be issued.
NOTE 15. SHARE-BASED COMPENSATION
In 2015, the Company’s Board of Directors adopted, and stockholders approved, the Journey Medical 2015 Stock Plan (the “Plan”) authorizing the Company to grant shares of common stock to eligible employees, directors, and consultants in the form of restricted stock, restricted stock units (“RSUs”), stock options and other types of grants. The amount, terms, and exercisability provisions of grants are determined by the Board of Directors. At the Company’s 2024 Annual Meeting of Stockholders, held on June 24, 2024, the Company’s stockholders approved, among other matters, an amendment to the Plan (the “Amended Plan”) to increase the number of shares of Common Stock issuable under the Plan by 3,000,000 to 10,642,857 . At December 31, 2025 there were 1,895,803 shares available for issuance under the Amended Plan.
The Company grants stock options to employees, non-employees and Directors with exercise prices equal to the closing price of the underlying shares of the Company’s common stock on the Nasdaq Capital Market on the date that the options are granted. Options granted have a term of ten years from the grant date. Options granted generally vest over a three or four -year period. Compensation cost for stock options is charged against operations on a straight-line basis over the vesting period. The Company estimates the fair value of stock options on the grant date by applying the Black-Scholes option pricing valuation model.
In 2023, the Company’s Board of Directors adopted, and stockholders approved, the Journey Medical Corporation 2023 Employee Stock Purchase Plan (the “2023 ESPP”). The Company initially reserved 300,000 shares of common stock for future issuance under the 2023 ESPP. As of December 31, 2025, 160,964 shares were available for issuance under the 2023 ESPP.
The following table summarizes the components of share-based compensation expense in the consolidated statements of operations for the years ended December 31, 2025 and 2024:
Year Ended December 31,
($’s in thousands)
2025
2024
Research and development
$
—
$
508
Selling, general and administrative
6,288
5,590
Total non-cash share-based compensation expense
$
6,288
$
6,098
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JOURNEY MEDICAL CORPORATION
Notes to Financial Statements
Stock Options
The weighted-average key assumptions used in determining the fair value of options granted for the year ended December 31, 2025 are as follows:
2025
Risk-free interest rate
4.06 %
Expected volatility
94.69 %
Expected term (years)
5.77
Expected dividend yield
0 %
The weighted average grant-date fair value of stock options issued during the year ended December 31, 2025 was $ 4.88 per share. The weighted average grant-date fair value of stock options issued during the year ended December 31, 2024 was $ 3.82 per share.
The following table summarizes the Company’s stock option activity for the year ended December 31, 2025:
Weighted
Weighted
average
Number
average
Aggregate
remaining
of
exercise
intrinsic
contractual
Shares
price
value
life (years)
Outstanding options at December 31, 2024
2,471,945
$
1.41
$
6,191,995
3.20
Granted
491,585
6.31
—
—
Exercised
( 1,420,297 )
0.30
—
—
Forfeited
( 31,189 )
4.47
—
—
Expired
( 2,500 )
4.57
—
—
Outstanding options at December 31, 2025
1,509,544
$
3.50
$
6,359,288
6.21
Options vested and exercisable at December 31, 2025
819,580
$
1.98
$
4,693,725
4.13
For the years ended December 31, 2025 and 2024, the Company issued 1,420,297 and 122,510 shares, respectively, of Common Stock upon the exercise of outstanding stock options and received proceeds of $ 0.4 million and $ 0.2 million, respectively. For the years ended December 31, 2025 and 2024, approximately $ 1.4 million and $ 0.3 million, respectively, of stock option compensation cost was charged against operations. At December 31, 2025, the Company had unrecognized share-based compensation expense related to all unvested options of $ 1.2 million, which the Company expects to recognize over a weighted-average period of approximately 1.5 years.
The aggregate intrinsic value in the previous table reflects the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the period and the exercise price of the options, multiplied by the number of in-the-money stock options) that would have been received by the option holders had all option holders exercised their options on December 31, 2025. The intrinsic value of the Company’s stock options changes based on the closing price of the Company’s common stock.
Restricted Stock Units
The following table summarizes the Company’s RSU activity for the year ended December 31, 2025:
Weighted
average
Number of
grant date
units
Fair value
Unvested balance at December 31, 2024
2,339,961
$
4.33
Granted
561,589
6.66
Vested
( 944,946 )
4.32
Forfeited
( 108,464 )
4.72
Unvested balance at December 31, 2025
1,848,140
$
5.03
F-22
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JOURNEY MEDICAL CORPORATION
Notes to Financial Statements
For the years ended December 31, 2025 and 2024 the Company issued 944,946 and 1,058,374 shares of Common Stock, respectively, upon the vesting of RSU’s amounting to $ 4.1 million and $ 4.5 million, respectively, in total aggregate fair market value, and $ 6.7 million and $ 5.4 million, respectively, in total intrinsic value. For the years ended December 31, 2025 and 2024, approximately $ 4.8 million and $ 5.6 million, respectively, of RSU compensation cost was charged against operations. At December 31, 2025, 1,848,140 RSU’s remained unvested and there was approximately $ 4.0 million of unrecognized compensation cost related to RSUs, which the Company expects to recognize over a weighted-average period of approximately 1.8 years.
On July 9, 2024, the Board approved and adopted the Journey Medical Corporation Deferred Compensation Plan (the “Deferred Compensation Plan”), which is considered a non-qualified deferred compensation plan. As part of the Deferred Compensation Plan, the Company offers certain non-employee members of the Board (“Director Participants”) and select executive-level employees (the “Executive Participants”) the ability to defer up to 100 % of the payment for services and annual bonuses, respectively, in the form of RSU’s. As of December 31, 2025, the executive participants deferred 485,629 shares of Journey Medical Inc. common stock upon the vesting of RSU’s.
Employee Stock Purchase Plan
The 2023 ESPP provides that eligible employees may contribute up to 10 % of their eligible earnings toward a semi-annual purchase of the Company’s common stock. The 2023 ESPP is qualified under Section 423 of the Internal Revenue Code. The employee’s purchase price is derived from a formula based on the closing price of the common stock on the first day of the offering period versus the closing price on the last date of purchase (or, if not a trading day, on the immediately preceding trading day). The offering period under the 2023 ESPP has a duration of six months , and the purchase price with respect to each offering period beginning on or after such date is, until otherwise amended, equal to 85 % of the lesser of (i) the fair market value of the Company’s common stock at the commencement of the applicable six-month offering period or (ii) the fair market value of the Company’s common stock on the purchase date. The Company estimates the fair value of the common stock under the 2023 ESPP using a Black-Scholes valuation model. The fair value was estimated on the date of grant for the offering period beginning August 1, 2025 using the Black-Scholes option valuation model and the straight-line attribution approach with the following assumptions: risk-free interest rate ( 4.2 %); expected term ( 0.5 years); expected volatility ( 73.8 %); and an expected dividend yield ( 0 %). The Company recorded $ 0.1 million of stock-based compensation under the 2023 ESPP for the year ended December 31, 2025. As of December 31, 2025, there was unrecognized stock-based compensation expense of $ 11,000 related to the current ESPP offering period, which ends January 31, 2026.
NOTE 16. REVENUES FROM CONTRACTS WITH CUSTOMERS
Disaggregation of Net Revenues
The Company has the following actively marketed products, Emrosi TM , Qbrexza®, Amzeeq®, Zilxi®, Accutane®, Exelderm®, Targadox®, and Luxamend®. All of the Company’s product revenues are recorded in the U.S.
Revenues by product are summarized as follows:
Year Ended December 31,
($ in thousands)
2025
2024
Emrosi TM
$
14,745
$
—
Qbrexza®
25,014
25,114
Accutane®
12,882
19,407
Foam franchise products (Amzeeq® & Zilxi®)
5,859
6,652
Other / legacy
2,739
3,961
Total product revenues
$
61,239
$
55,134
F-23
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JOURNEY MEDICAL CORPORATION
Notes to Financial Statements
The Company recognized other revenue as follows:
Year Ended December 31,
($ in thousands)
2025
2024
Milestone payment from Cutia
$
—
$
1,000
Cutia supply agreement
606
—
Royalties on sales of Amzeeq by Cutia
13
—
Total other revenue
$
619
$
1,000
Other revenue for the year ended December 31, 2025 reflects the supply of Amzeeq to Cutia and sales-based royalties earned on the net sales of Amzeeq by Cutia. In August 2025, the Company began supplying Cutia with Amzeeq for Cutia’s commercial use. See Note 5 to the Consolidated financial statements for further details on the Cutia Agreement. Other revenue for the year ended December 31, 2024 reflects a $ 1.0 million milestone payment from Cutia triggered by the November 11, 2024 marketing approval Cutia received for topical 4% minocycline foam from the NMPA of the PRC.
Significant Customers
As of December 31, 2025, none of the Company’s customers accounted for more than 10.0% of its total accounts receivable balance. As of December 31, 2024, one of the Company’s customers accounted for more than 10.0% of its total accounts receivable balance at 10.3 %.
For the year ended December 31, 2025 and 2024, none of the Company’s customers accounted for more than 10.0% of its total gross product revenue.
NOTE 17. LOSS RECOVERY
In September 2021, the Company was the victim of a business email compromise cybersecurity incident that affected its accounts payable function and led to approximately $ 9.5 million in wire transfers being misdirected to fraudulent accounts. Upon discovery of the fraud, the Company retained third-party cybersecurity experts and reported the matter to the Federal Bureau of Investigation (the “FBI”). The Company recorded the loss as a separate component of operating expenses in its 2021 consolidated financial statements. After a series of investigations, the FBI was able to trace and seize a portion of the misappropriated funds. The Company received recovered funds of $ 4.6 million on December 4, 2024. The proceeds from the recovery were recorded and classified within the Company’s Consolidated Statements of Operations as a separate component of operating expenses, consistent with the initial recognition of the loss in 2021.
NOTE 18. INCOME TAXES
The components of the income tax provision are as follows:
Years Ended December 31,
($’s in thousands)
2025
2024
Current:
Federal
$
—
$
2
State
60
58
Total current
60
60
Deferred:
Federal
( 2,223 )
( 2,704 )
State
( 44 )
( 1,184 )
Total deferred
( 2,267 )
( 3,888 )
Valuation allowance
2,267
3,889
Total income tax expense
$
60
$
61
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JOURNEY MEDICAL CORPORATION
Notes to Financial Statements
Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards.
The significant components of the Company’s deferred tax assets consisted of the following:
December 31,
($’s in thousands)
2025
2024
Deferred tax assets:
Net operating loss carryforwards
$
8,036
$
6,814
Amortization of license fees
5,480
5,670
R&D capitalization
2,711
4,714
Stock compensation
2,077
1,647
Lease liability
29
51
Reserve on sales return, discount and bad debt
4,636
2,471
Accruals and reserves
1,445
850
Tax credits
1,493
1,493
Business interest expense deduction limit
321
373
State taxes
18
10
Other
91
—
Total deferred tax assets
26,337
24,093
Less: valuation allowance
( 26,310 )
( 24,043 )
Deferred tax assets, net
$
27
$
50
Deferred tax liability:
Right-of-use asset
( 27 )
( 50 )
Deferred tax assets, net
$
—
$
—
The Company adopted ASU 2023-09 on a prospective basis. As a result, the 2025 rate reconciliation is presented in accordance with the new disclosure requirements, while the 2024 reconciliation continues to be presented under the disclosure requirements in effect for that period.
A reconciliation of income tax computed at the federal statutory rate to the provision for income taxes pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025, was as follows:
Years Ended December 31,
2025
($’s in thousands)
Amount
Percent
U.S. federal statutory tax rate
$
( 2,388 )
21.0
%
State and local income taxes, net of federal income tax effect (1)
42
- 0.4
%
Change in valuation allowance
2,223
- 19.5
%
Non-deductible items:
Share-based compensation
( 277 )
2.4
%
Non-deductible compensation
406
- 3.6
%
Other
85
- 0.7
%
Other adjustments
( 31 )
- 0.3
%
Provision for income taxes and effective income tax rate
$
60
- 0.5
%
(1)
During the year ended December 31, 2025, state taxes in Arizona, California, New York, New Jersey, Florida, and Texas comprised greater than 50% of the tax effect in this category.
F-25
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JOURNEY MEDICAL CORPORATION
Notes to Financial Statements
A reconciliation of the statutory tax rates and the effective tax rates for the year ended December 31, 2024, was as follows:
Years Ended December 31,
2024
Percentage of pre-tax income:
U.S. federal statutory income tax rate
21
%
State taxes, net of federal benefit
3
%
Non-deductible items
- 2
%
State tax adjustments
3
%
Change in valuation allowance
- 28
%
Share-based compensation
2
%
Effective income tax rate
- 1
%
As required by ASC 740, the Company has evaluated the evidence bearing upon the realizability of its deferred tax assets. Based on the weight of available evidence, both positive and negative, the Company has determined that it is more likely than not that it will not realize the benefits of these assets. Accordingly, the Company recorded a valuation allowance of $ 26.0 million at December 31, 2025, representing an increase of $ 2.2 million.
As of December 31, 2025, the Company had federal and state NOL carryforwards of approximately $ 30.9 million and $ 32.3 million, respectively. The Federal NOL carryforwards do not expire, but $ 27.1 million of the state NOL carryforwards expire if not utilized prior to 2045.
Utilization of the U.S. federal and state NOL carryforwards may be subject to a substantial annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of NOL carryforwards that can be utilized annually to offset future taxable income and tax liabilities, respectively. The Company has performed calculations through December 31, 2023, to support that its NOL carryovers are subject to limitations under section 382 (“382 Limitations”). Based on the analysis of the NOL carryovers subject to the 382 Limitations, the Company concluded that the 382 Limitations would not prevent the Company from utilizing all of its NOL carryovers in 2023.
The Company’s ability to use its remaining net operating loss and tax credit carryforwards may be further limited if the Company experiences another Section 382 ownership change due to future changes in its stock ownership. Because of the valuation allowance, future changes in the Company’s unrecognized tax benefits will not have an impact on the Company’s effective tax rate.
At December 31, 2025 and December 31, 2024, the Company did no t have any significant uncertain tax positions. The Company will recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2025 and 2024, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s statement of operations.
The Company is subject to U.S. federal and state taxes. Because of net operating losses, all federal tax years since inception remain open for the assessment of income taxes. The expiration of the statute of limitations related to the various state income and franchise tax returns varies by state.
Income taxes paid (net of refunds received) by jurisdiction, pursuant to the disclosure requirements of ASU 2023-09, were as follows:
Years Ended December 31,
($’s in thousands)
2025
Federal
$
1
State
Texas
$
45
Other
4
Total net payments (refunds)
$
50
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JOURNEY MEDICAL CORPORATION
Notes to Financial Statements
NOTE 19. NET (LOSS) INCOME PER COMMON SHARE
The Company accounts for and discloses net earnings (loss) per share using the treasury stock method. Net earnings (loss) per common share, or basic earnings (loss) per share, is computed by dividing net earnings (loss) by the weighted-average number of common shares outstanding. Net earnings (loss) per common share assuming dilutions, or diluted earnings (loss) per share, is computed by reflecting the potential dilution from the exercise of in-the-money stock options, and non-vested restricted stock units.
The Company’s basic and diluted weighted-average number of common shares outstanding for years ended December 31, 2025 and 2024 were as follows:
Year ended December 31,
2025
2024
Basic and diluted
24,497,973
20,431,400
Potentially dilutive securities:
Unvested restricted stock units
1,848,140
2,339,961
Stock options
1,507,607
1,686,089
Total potentially dilutive securities
27,853,720
24,457,450
The Company’s Common Stock equivalents, including unvested restricted stock and options have been excluded from the computation of diluted loss per share for the years ended December 31, 2025 and 2024, as the effect would be to reduce the loss per share. Therefore, the weighted average common stock outstanding used to calculate both basic and diluted income loss per share is the same for the years ended December 31, 2025 and 2024.
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JOURNEY MEDICAL CORPORATION
Notes to Financial Statements
NOTE 20. SEGMENT INFORMATION
The Company’s reportable segment net loss for the years ending December 31, 2025 and 2024 consisted of the following:
Year Ended December 31,
($ in thousands)
2025
2024
Revenue
$
61,858
$
56,134
Less: Segment expenses (1)
Cost of goods sold – (excluding amortization of acquired intangible assets)
20,924
20,879
Research and development
480
9,857
Selling, general and administrative
Employee related
16,969
14,765
Sales, operations, outside services and consulting
9,522
9,417
Marketing related
6,279
5,258
Stock compensation
6,288
5,590
Legal and administrative
2,428
2,230
Product compliance expense
1,187
1,632
Office and administrative
946
739
Other
749
573
Other segment items (2)
7,517
( 134 )
Segment expenses
73,289
70,806
Segment loss from operations
$
( 11,431 )
$
( 14,672 )
Reconciliation to net loss:
Adjustments and reconciling items
—
—
Net loss
$
( 11,431 )
$
( 14,672 )
(1) The significant expense amounts align with the expenses that the CODM is regularly provided with to assess performance and allocate resources.
(2) Other segment items for the reportable segment include amortization of intangible assets, loss on impairment of intangible assets, loss recovery, interest income (expense), gain on extinguishment of debt, foreign exchange transaction losses and income tax expense .
NOTE 21. SUBSEQUENT EVENTS
The Company evaluates events that occur after the period’s end date through the date the financial statements are available to be issued. Accordingly, management has evaluated subsequent events through the date these financial statements are issued and has determined that no subsequent events require disclosure in these financial statements.
F-28
Table of Contents
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Journey Medical Corporation
(Registrant)
Date: March 25, 2026
By:
/s/ Claude Maraoui
Claude Maraoui
President and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Claude Maraoui
President, Chief Executive Officer and Director
March 25, 2026
Claude Maraoui
(Principal Executive Officer)
/s/ Lindsay A. Rosenwald, M.D.
Executive Chairman
March 25, 2026
Lindsay A. Rosenwald, M.D.
/s/ Joseph Benesch
Chief Financial Officer
March 25, 2026
Joseph Benesch
(Principal Financial Officer and Principal Accounting Officer)
/s/ Neil Herskowitz
Director
March 25, 2026
Neil Herskowitz
/s/ Justin Smith
Director
March 25, 2026
Justin Smith
/s/ Miranda Toledano
Director
March 25, 2026
Miranda Toledano
/s/ Michael Pearce
Director
March 25, 2026
Michael Pearce
76
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.