Journey Medical Corp 10-K

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 recognized 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 were 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 Interim 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 Interim 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. 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, 2022. 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 Interim Chief Financial Officer) has concluded that, as of December 31, 2022, 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. 71 Table of Contents Remediation of previously reported material weakness As previously disclosed, in September 2021, an employee email account was compromised by a third-party impersonator and payments intended for a vendor, approximating $9.5 million, were fraudulently re-directed into an individual bank account controlled by this third-party impersonator. The impersonator had taken a number of steps to deceive our employees and reduce the likelihood of detection. As a result of the foregoing, we identified a material weakness as of September 30, 2021 due to our internal controls having not been adequately designed to prevent or timely detect unauthorized cash disbursements. To remediate the material weakness identified, we enhanced and formalized cash disbursement controls to prevent and timely detect unauthorized cash disbursements and significantly enhanced our information technology infrastructure and security measures. As the implementation of the enhanced procedures and controls have functioned effectively for multiple quarters, we concluded that we have remediated the material weakness previously disclosed in 2021. Changes in Internal Control over Financial Reporting Other than as discussed above, 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, 2022 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 None. ​ Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. ​ None. ​ 72 Table of Contents 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 2023 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 2023 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 2023 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 2023 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 2023 Annual Meeting of Stockholders. ​ ​ 73 Table of Contents 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, 2022 and 2021 F-3 Consolidated Statements of Operations for the years ended December 31, 2022 and 2021 F-4 Consolidated Statement of Changes in Stockholders’ Equity for the years ended December 31, 2022 and 2021 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021 F-6 Notes to Consolidated Financial Statements F-7 ​ ​ 74 Table of Contents (b) Exhibits. ​ Exhibit Number Description 3.1 ​ Third Amended and Restated Certificate of Incorporation of Journey Medical Corporation, filed on March 28, 2022 and incorporated herein by reference. 3.2 ​ Amended and Restated 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 ​ 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.# 10.4 ​ Executive Employment Agreement with Ernie De Paolantonio, filed as Exhibit 10.3 to Form S-1, filed on October 22, 2021 and incorporated herein by reference.# 10.5 ​ Non-Employee Director Compensation Plan, filed as Exhibit 10.2 to Form S-1, filed on October 22, 2021 and incorporated herein by reference.# 10.6 ​ Loan and Security Agreement, entered into by and between Journey Medical Corporation and East West Bank, dated March 31, 2021, filed as Exhibit 10.5 to Form S-1, filed on October 22, 2021 and incorporated herein by reference. 10.7 ​ First Amendment to Loan and Security Agreement, entered into by and between Journey Medical Corporation and East West Bank, dated March 31, 2021, filed as Exhibit 10.2 to Form 10-Q for the quarter ended March 31, 2022, filed May 10, 2022 and incorporated herein by reference.** 10.8 ​ Second Amendment to Loan and Security Agreement, entered into by and between Journey Medical Corporation and East West Bank, dated November 4, 2021, filed as Exhibit 10.3 to Form 10-Q for the quarter ended March 31, 2022, filed May 10, 2022 and incorporated herein by reference.** 10.8 ​ Third Amendment to Loan and Security Agreement, entered into by and between Journey Medical Corporation and East West Bank, dated January 12, 2022, filed as Exhibit 10.4 to Form 10-Q for the quarter ended March 31, 2022, filed May 10, 2022 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. ** 75 Table of Contents 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.** 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 ​ Asset Purchase Agreement between Journey Medical Corporation and VYNE Therapeutics Inc., dated as of January 12, 2022, filed as Exhibit 10.1 to the Form 8-K filed on January 13, 2022 and incorporated herein by reference. ** 10.20 ​ Fortress Promissory Note, dated as of June 6, 2015, filed as Exhibit 10.16 to Form S-1, filed on October 22, 2021 and incorporated herein by reference. 10.21 ​ 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. 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. ** * 101 ​ The following financial information from the Company’s Quarterly Report on Form 10-K for the period ended December 31, 2022, 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, 2021, 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. ​ ​ ​ 76 Table of Contents 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, 2022 and 2021 F-3 Consolidated Statements of Operations for the years ended December 31, 2022 and 2021 F-4 Consolidated Statement of Changes in Stockholders’ Equity for the years ended December 31, 2022 and 2021 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021 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, 2022 and 2021, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the years then ended December 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the years then ended December 31, 2022, in conformity with U.S. generally accepted accounting principles. 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 30, 2023 ​ F-2 Table of Contents JOURNEY MEDICAL CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 ASSETS ​ ​ Current assets ​ ​ Cash and cash equivalents $ 32,003 $ 49,081 Accounts receivable, net of reserves ​ 28,208 ​ 23,112 Inventory ​ 14,159 ​ 9,862 Prepaid expenses and other current assets ​ 3,309 ​ 2,438 Total current assets ​ 77,679 ​ 84,493 ​ ​ ​ ​ ​ ​ ​ Intangible assets, net ​ 27,197 ​ 12,552 Operating lease right-of-use asset, net ​ 189 ​ 89 Other assets ​ 95 ​ 150 Total assets ​ $ 105,160 ​ $ 97,284 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ Current liabilities ​ ​ Accounts payable ​ $ 36,570 ​ $ 22,812 Due to related party ​ 413 ​ 641 Accrued expenses ​ 19,388 ​ 22,733 Accrued interest ​ 160 ​ — Income taxes payable ​ ​ 35 ​ ​ 8 Line of credit ​ ​ 2,948 ​ ​ 812 Deferred cash payment (net of discount of $ 9 ) ​ ​ 4,991 ​ ​ — Installment payments – licenses, short-term ​ 2,244 ​ 4,510 Operating lease liability, short-term ​ 83 ​ 98 Total current liabilities ​ 66,832 ​ 51,614 ​ ​ ​ ​ ​ ​ ​ Term loan (net of debt discount of $ 180 ) ​ 19,826 ​ — Installment payments – licenses, long-term ​ 1,412 ​ 3,627 Operating lease liability, long-term ​ 108 ​ — Total liabilities ​ 88,178 ​ 55,241 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies (Note 14) ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders’ equity ​ ​ Common stock, $ .0001 par value, 50,000,000 shares authorized, 11,765,700 and 11,316,344 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively ​ 1 ​ 1 Common stock - Class A, $ .0001 par value, 50,000,000 shares authorized, 6,000,000 shares issued and outstanding as of December 31, 2022 and December 31, 2021 ​ 1 ​ 1 Additional paid-in capital ​ 85,482 ​ 80,915 Accumulated deficit ​ ( 68,502 ) ​ ( 38,874 ) Total stockholders’ equity ​ 16,982 ​ 42,043 Total liabilities and stockholders’ equity ​ $ 105,160 ​ $ 97,284 ​ 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, ​ 2022 2021 Revenue: ​ ​ ​ ​ ​ ​ Product revenue, net ​ $ 70,995 ​ $ 63,134 Other revenue ​ ​ 2,674 ​ ​ — Total revenue ​ ​ 73,669 ​ ​ 63,134 ​ ​ ​ ​ ​ ​ ​ Operating expenses ​ ​ ​ Cost of goods sold – product revenue ​ 30,775 ​ 32,084 Research and development ​ 10,943 ​ 2,739 Research and development - licenses acquired ​ — ​ 13,819 Selling, general and administrative ​ 59,468 ​ 39,833 Wire transfer fraud loss ​ — ​ 9,540 Total operating expenses ​ 101,186 ​ 98,015 Loss from operations ​ ( 27,517 ) ​ ( 34,881 ) ​ ​ ​ ​ ​ ​ ​ Other expense (income) ​ ​ Interest income ​ ( 60 ) ​ ( 2 ) Interest expense ​ ​ 2,019 ​ ​ 7,034 Foreign exchange transaction losses ​ ​ 89 ​ ​ — Change in fair value of derivative liability ​ — ​ 447 Total other expense (income) ​ 2,048 ​ 7,479 Loss before income taxes ​ ( 29,565 ) ​ ( 42,360 ) ​ ​ ​ ​ ​ ​ ​ Income tax expense ​ 63 ​ 1,634 Net Loss ​ $ ( 29,628 ) ​ $ ( 43,994 ) ​ ​ ​ ​ ​ ​ ​ Net loss per common share: ​ ​ ​ ​ ​ ​ Basic and diluted ​ $ ( 1.69 ) ​ $ ( 4.32 ) ​ ​ ​ ​ ​ ​ ​ Weighted average number of common shares: ​ ​ ​ ​ Basic and diluted ​ 17,531,274 ​ 10,189,844 ​ 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 ​ Retained ​ Total ​ Common Stock Common Stock A ​ Paid-in ​ Earnings ​ Shareholders’ ​ Shares Amount Shares Amount Capital (Accumulated Deficit) Equity Balance as of December 31, 2020 ​ 3,151,333 ​ $ — ​ 6,000,000 ​ $ 1 ​ $ 5,171 ​ $ 5,120 ​ $ 10,292 Share-based compensation ​ — ​ ​ — ​ — ​ ​ — ​ ​ 2,466 ​ ​ — ​ ​ 2,466 Exercise of options for cash ​ 10,000 ​ ​ — ​ — ​ ​ — ​ ​ 7 ​ ​ — ​ ​ 7 Issuance of common stock related to equity plans ​ 136,500 ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Issuance of common shares upon initial public offering, net of issuance costs of $ 1,921 million ​ 3,520,000 ​ ​ 1 ​ — ​ ​ — ​ ​ 30,614 ​ ​ — ​ ​ 30,615 Conversion of class A preferred stock settled note to common stock ​ 2,231,346 ​ ​ — ​ — ​ ​ — ​ ​ 21,812 ​ ​ — ​ ​ 21,812 Conversion of related party payables to common stock ​ 1,610,467 ​ ​ — ​ — ​ ​ — ​ ​ 16,105 ​ ​ — ​ ​ 16,105 Conversion of placement agent warrants to common stock ​ 111,567 ​ ​ — ​ — ​ ​ — ​ ​ 948 ​ ​ — ​ ​ 948 Conversion of contingent payment warrants to common stock ​ 545,131 ​ ​ — ​ — ​ ​ — ​ ​ 3,680 ​ ​ — ​ ​ 3,680 Contribution of capital – extinguishment of related party payable ​ — ​ ​ — ​ — ​ ​ — ​ ​ 112 ​ ​ — ​ ​ 112 Net loss ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 43,994 ) ​ ​ ( 43,994 ) Balance as of December 31, 2021 ​ 11,316,344 ​ $ 1 ​ 6,000,000 ​ $ 1 ​ $ 80,915 ​ $ ( 38,874 ) ​ $ 42,043 Share-based compensation ​ — ​ ​ — ​ — ​ ​ — ​ ​ 4,425 ​ ​ — ​ ​ 4,425 Exercise of stock options for cash ​ 155,649 ​ ​ — ​ — ​ ​ — ​ ​ 142 ​ ​ — ​ ​ 142 Issuance of common stock for vested restricted stock units ​ 293,707 ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Net loss ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 29,628 ) ​ ​ ( 29,628 ) Balance as of December 31, 2022 ​ 11,765,700 ​ $ 1 ​ 6,000,000 ​ $ 1 ​ $ 85,482 ​ $ ( 68,502 ) ​ $ 16,982 ​ 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, ​ 2022 2021 Cash flows from operating activities ​ ​ ​ ​ ​ ​ Net loss ​ $ ( 29,628 ) ​ $ ( 43,994 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ ​ Bad debt expense ​ 284 ​ 48 Non-cash interest expense ​ 770 ​ 781 Amortization of debt discount ​ 63 ​ 2,572 Accretion of convertible preferred shares ​ — ​ 2,845 Amortization of acquired intangible assets ​ 4,277 ​ 2,474 Amortization of operating lease right-of-use assets ​ 88 ​ 86 Share-based compensation ​ 4,425 ​ 2,466 Deferred taxes ​ — ​ 1,566 Change in fair value of derivative liability ​ — ​ 447 Research and development-licenses acquired, expense ​ — ​ 13,819 Changes in operating assets and liabilities: ​ ​ ​ ​ Accounts receivable ​ ​ ( 5,380 ) ​ ​ 768 Inventory ​ 1,744 ​ ( 8,458 ) Prepaid expenses and other current assets ​ ( 871 ) ​ ( 774 ) Other assets ​ 55 ​ ( 144 ) Accounts payable ​ 14,343 ​ 20,388 Related party expenses ​ ( 228 ) ​ 1,869 Accrued expenses ​ ( 3,568 ) ​ 1,235 Accrued interest ​ 160 ​ — Income tax payable ​ 27 ​ ( 91 ) Lease liabilities ​ ​ ( 95 ) ​ ​ ( 84 ) Net cash used in operating activities ​ ( 13,534 ) ​ ( 2,181 ) ​ ​ ​ ​ ​ Cash flows from investing activities ​ ​ ​ ​ Purchase of research and development licenses ​ — ​ ( 10,000 ) Acquired assets ​ ​ ( 20,000 ) ​ ​ — Net cash used in investing activities ​ ​ ( 20,000 ) ​ ​ ( 10,000 ) ​ ​ ​ ​ Cash flows from financing activities ​ ​ ​ ​ Proceeds from the exercise of stock options ​ 142 ​ 7 Proceeds from Fortress note ​ ​ — ​ ​ 9,540 Payment of license installment note payable ​ ( 5,000 ) ​ ( 5,300 ) Proceeds from convertible preferred shares ​ — ​ 18,967 Payment of debt issuance costs associated with convertible preferred shares ​ ( 214 ) ​ ( 1,996 ) Proceeds from line of credit ​ 5,000 ​ 7,000 Repayment of line of credit ​ ​ ( 2,864 ) ​ ​ ( 6,188 ) Proceeds from issuance of common stock - initial public offering ​ — ​ 32,536 Proceeds from EWB term-loan, net of discount ​ ​ 19,763 ​ ​ — Offering costs for the issuance of common stock - initial public offering ​ ( 371 ) ​ ( 1,550 ) Net cash provided by financing activities ​ 16,456 ​ 53,016 ​ ​ ​ ​ ​ ​ ​ Net change in cash ​ ( 17,078 ) ​ 40,835 Cash at the beginning of the period ​ 49,081 ​ 8,246 Cash at the end of the period ​ $ 32,003 ​ $ 49,081 ​ ​ ​ ​ ​ Supplemental disclosure of cash flow information: ​ ​ ​ ​ ​ ​ Cash paid for interest ​ $ 993 ​ $ — Cash paid for income taxes ​ $ 168 ​ $ 158 ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of non-cash financing and investing activities: ​ ​ ​ ​ ​ ​ Deferred payment for asset acquisition ​ $ 4,740 ​ $ — ROU assets obtained in exchange for lease liabilities ​ $ 188 ​ $ — Unpaid debt offering cost ​ $ — ​ $ 214 Unpaid initial public offering cost ​ $ — ​ $ 371 Derivative warrant liability associated with convertible preferred shares ​ $ — ​ $ 362 Conversion of class A preferred stock settled note to common stock ​ $ — ​ $ 21,812 Conversion of related party payables to common stock ​ $ — ​ $ 16,105 Conversion of placement agent warrants to common stock ​ $ — ​ $ 948 Conversion of contingent payment warrants to common stock ​ $ — ​ $ 3,680 Extinguishment of related party payable relates to deferred tax assets ​ $ — ​ $ 43 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ ​ F-6 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 development and commercialization of pharmaceutical products for the treatment of dermatological conditions. The Company’s current product portfolio includes eight branded and three authorized generic 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 exclusive field sales organization. At of December 31, 2022 and 2021, the Company is a majority-owned subsidiary of Fortress Biotech, Inc. (“Fortress” or “Parent”). Liquidity and Capital Resources At December 31, 2022, the Company had $ 32.0 million in cash and cash equivalents as compared to $ 49.1 million at December 31, 2021. On December 30, 2022, the Company filed a shelf registration statement on Form S-3 (File No. 333-269079), which was declared effective by the Securities and Exchange Commission (“SEC”) on January 26, 2023. This shelf registration statement covers the offering, issuance and sale by the Company of up to an aggregate of $ 150.0 million of the Company’s common stock, preferred stock, debt securities, warrants, and units (the “2022 Shelf”). At December 31, 2022, $ 150.0 million remains available under the 2022 Shelf. In connection with the 2022 shelf, the Company has entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) with B. Riley Securities, Inc. (“B. Riley”), relating to shares of the Company’s common stock. In accordance with the terms of the Sales Agreement, the Company may offer and sell up to 4,900,000 shares of its common stock, par value $ 0.0001 per share, from time to time through or to B. Riley acting as the Company’s agent or principal. On January 12, 2022, the Company entered into a third amendment of the loan and security agreement with EWB (the “Amendment”), which increased the borrowing capacity of the Company’s revolving line of credit to $ 10.0 million, of which $ 2.9 million was outstanding at December 31, 2022, and added a term loan not to exceed $ 20.0 million. Both the revolving line of credit and the term loan mature on January 12, 2026. In January 2022 and August 2022, the Company borrowed $ 15.0 million and $ 5.0 million, respectively, against the term loan. The term loans bear interest at a floating rate equal to 1.73 % above the prime rate and are payable monthly. The term loans contain an interest-only payment period through January 12, 2024, with an extension through July 12, 2024, if certain covenants are met, after which the outstanding balance of each term loan is payable in equal monthly installments of principal, plus all accrued interest, through the term loan maturity date. The Company may elect to prepay all or any part of the term loan without penalty or premium, but the Company may not re-borrow any amount, once repaid. Any outstanding borrowing against the revolving line of credit bears interest at a floating rate equal to 0.70 % above the prime rate. The Amendment includes customary financial covenants such as collateral ratios and minimum liquidity provisions. At December 31, 2022, the Company was in compliance with all applicable financial covenants under the Amendment. The remaining $ 7.1 million revolving line of credit is fully available to the Company without any restrictions, other than certain customary and ordinary closing conditions. The Company expects that expenses will increase substantially for the foreseeable future as it pursues business development opportunities, commercializes and markets new products and incurs additional costs associated with operating as a public company. To date, the Company has not been materially impacted by COVID-19; however, depending on the extent of the ongoing pandemic, it is possible that the Company, financial condition and results of operations could be materially and adversely affected by COVID-19 in the future. Additionally, the Federal Reserve has raised and is expected to continue to raise the federal funds interest rate throughout 2023 in its effort to take action against domestic inflation. Because the Company’s borrowings under the facility with EWB bear interest at a floating rate, rising interest rates affect the amount of the regular payments the Company is required to make to EWB. Accordingly, the Company may experience materially higher borrowing costs in future fiscal quarters than it historically has to date. The Company may require additional financing to pursue both development stage and commercial opportunities. In addition, The Company anticipates increased commercialization expenses related to the launch of newly acquired products, as well as increased costs related to development and regulatory approval of potential development stage product acquisitions, including DFD-29. As the Company continues to expand its product portfolio, it may need to fund possible future operating losses, and, if deemed appropriate, establish or secure through F-7 Table of Contents JOURNEY MEDICAL CORPORATION Notes to Financial Statements additional third-party manufacturing for the Company’s products, and expanded sales and marketing capabilities related to recent product acquisitions. For the next twelve months from the issuance of these financial statements, the Company will be able to fund our operations through a combination of existing cash and cash equivalents generated from operations, and the EWB borrowing facility. In addition, the Company may seek to raise capital through additional debt or equity financing, which may include sales of securities under the 2022 Shelf or under a new registration statement. If such funding is not available or not available on terms acceptable to the Company, the current plans for expansion of the product portfolio may be scaled back, limited or curtailed. The Company regularly evaluates market conditions, its liquidity profile, and various financing alternatives for opportunities to enhance the Company’s capital structure. ​ 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 unaudited interim condensed 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, prompt-pay discounts, specialty pharmacy discounts, managed care rebates, product returns, government rebates 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 Information 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. 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 F-8 Table of Contents JOURNEY MEDICAL CORPORATION Notes to Financial Statements 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. 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 17 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, 2022 and 2021 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 standard payment terms. For certain customers, the accounts receivable for the customer is 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 $ 0.4 million and $ 0.1 million at December 31, 2022 and 2021, 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 alternate 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 $ 0.4 million and zero at December 31, 2022 and 2021, respectively. Property and Equipment Computer equipment, furniture and fixtures and machinery and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful life of each asset. Leasehold improvements are amortized over the shorter of the estimated useful lives or the term of the respective leases. 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. F-9 Table of Contents JOURNEY MEDICAL CORPORATION Notes to Financial Statements Research and Development Costs Research and development costs are expensed as incurred. Advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. Upfront and milestone payments due to third parties that perform research and development services on the Company’s behalf will be expensed as services are rendered or when the milestone is achieved. 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. In accordance with Accounting Standards Codification (“ASC”) 730-10-25-1, Research and Development , costs incurred in obtaining technology licenses are charged to research and development expense if the technology licensed has not reached commercial feasibility and has no alternative future use. Such licenses purchased by the Company require substantial completion of research and development, regulatory and marketing approval efforts in order to reach commercial feasibility and have no alternative future use. Accordingly, the total purchase price for the licenses acquired during the period was reflected as research and development - licenses acquired in the Consolidated Statements of Operations for the year ended December 31, 2022 and 2021. 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 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. F-10 Table of Contents JOURNEY MEDICAL CORPORATION Notes to Financial Statements 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. 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 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 for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset 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 are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset over its fair value, determined based on discounted cash flows. The Company has not recorded any impairment losses on long-lived assets for the years ended December 31, 2022 and 2021. 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 16 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 four years. Forfeitures are recorded as they occur. Share-based compensation costs are recorded in both research and development and selling, general and administrative expense 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— Historical information is the primary basis for the selection of the expected volatility of options granted. However, as the Company has limited trading history for its common shares, the expected volatility was estimated based on the average volatility for comparable guideline publicly traded biotechnology companies over a period equal to the expected term of the stock option grants. The comparable companies were chosen based on their similar size, stage in the life cycle or area of specialty. F-11 Table of Contents JOURNEY MEDICAL CORPORATION Notes to Financial Statements 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 our history and do 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 recorded as deferred compensation and 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. Prior to the Company’s IPO, which closed on November 16, 2021, the fair value of the Company’s common stock underlying stock options was an input to the Black-Scholes option pricing model. The Company engaged an independent third-party valuation firm to provide an estimate of the fair value of its common stock annually, utilizing input from management. The fair value of the Company’s common stock was determined considering a number of objective and subjective factors, including valuations of guideline public companies, transactions of guideline public companies, discounts for lack of control transactions, lack of liquidity of the Company’s common stock, and the general and industry-specific economic outlook. 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. 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, prompt pay discounts, specialty pharmacy discounts, managed care rebates, product returns, government rebates 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 complex series of judgements about future events and uncertainties and can rely heavily 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 coupon reserve accrual at the end of the period reflects coupons that have been redeemed for which the Company has been billed in addition to an accrual for 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 F-12 Table of Contents JOURNEY MEDICAL CORPORATION Notes to Financial Statements 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 of inventory on the shelves 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, qualified government healthcare providers, qualified U.S. Department of Veterans Affairs hospitals, and 340B entities. 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. Because the price paid by the indirect customers and/or entities is lower than the price paid by the wholesaler, the Company provides a credit, called a chargeback, to the wholesaler for the difference between the contractual price with the indirect customers and their purchase price. 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. ​ Prompt-Pay Discounts – The Company provides for prompt pay discounts if payment is received within contractual payment term days, which generally ranges from 30 to 90 days. These discounts are recorded at the time of sale based on the customer’s contracted rate and recorded as a reduction of revenue and a reduction to accounts receivables. 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 products returns as a percentage of sales to its customers. The rate is estimated by using historical sales information, including its visibility and estimates into the inventory remaining in the distribution channel. Income Taxes As of December 31, 2022, the Company was 57.34 % owned by Fortress Biotech, Inc. (“Fortress”) and was filing consolidated federal tax returns and consolidated or combined state tax returns in multiple jurisdictions with Fortress for tax years prior to 2021. As the Company completed its initial public offering on November 12, 2021, it deconsolidated from the Fortress consolidated group for federal income tax purpose. The financial statements recognize the current and deferred income tax consequences that result from the activities during the current and preceding periods, as if the Company were a separate taxpayer rather than a member of the Fortress consolidated F-13 Table of Contents JOURNEY MEDICAL CORPORATION Notes to Financial Statements income tax return group. Fortress has agreed that the Company does not have to make payments to Fortress for the use of net operating losses (“NOLs”) of Fortress (including other Fortress group members). Since Fortress does not require the Company to pay in any form for the utilization of the consolidated group’s NOLs, the tax benefit realized have been recorded as a capital contribution. 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, 2022 and 2021 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, 2022 and 2021, 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, 2022 and 2021. Comprehensive Income The Company has no components of other comprehensive income, and therefore, comprehensive income equals net income. Recently Adopted Accounting Pronouncements There are no recent accounting pronouncements that are expected to have a material impact on the Company’s consolidated financial statements or related disclosures. NOTE 3. INVENTORY The Company’s inventory consisted of the following at December 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ($’s in thousands) 2022 2021 ​ ​ ​ ​ ​ ​ ​ Raw materials ​ $ 6,454 ​ $ 5,572 Work-in-process ​ 395 ​ — Finished goods ​ 7,739 ​ 4,290 Inventory at cost ​ ​ 14,588 ​ ​ 9,862 Inventory reserves ​ ​ ( 429 ) ​ ​ — Total Inventories ​ $ 14,159 ​ $ 9,862 ​ ​ NOTE 4. ASSET ACQUISITION On January 12, 2022, the Company entered into an agreement with Vyne Therapeutics Inc. (“Vyne”) to acquire two United States Food and Drug Administration (“FDA”) approved topical minocycline products, Amzeeq® (minocycline) topical foam, 4 %, and Zilxi® (minocycline) topical foam, 1.5 %, and a Molecule Stabilizing Technology™ proprietary platform from Vyne 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 Product Acquisition Agreement”). This expanded the Company’s product portfolio to eight marketed branded dermatology products. The Company also acquired the associated inventory related to the products. F-14 Table of Contents JOURNEY MEDICAL CORPORATION Notes to Financial Statements The Vyne Product Acquisition Agreement also provides for contingent net sales milestone payments, on a product-by-product basis. In the first calendar year in which annual net sales reach each of $ 100 million, $ 200 million, $ 300 million, $ 400 million and $ 500 million, the Company is required to make a one-time payment of $ 10 million, $ 20 million, $ 30 million, $ 40 million and $ 50 million, respectively, in that year only, per product, totaling up to $ 450 million. In addition, the Company will pay Vyne 10 % of any upfront payment received by the Company from a licensee or sublicensee of the products in any territory outside of the United States, subject to exceptions for certain jurisdictions as detailed in the Vyne Product Acquisition Agreement. The following table summarizes the aggregate consideration transferred for the assets acquired by the Company in connection with the Vyne Product Acquisition Agreement: ​ ​ ​ ​ ​ ​ Aggregate ​ ​ Consideration ($’s in thousands) ​ Transferred Consideration transferred to Vyne at closing ​ $ 20,000 Fair Value of deferred cash payment due January 2023 ​ 4,740 Transaction costs ​ 223 Total consideration transferred at closing ​ $ 24,963 ​ The fair value of the deferred cash payment is being accreted to the $ 5.0 million January 2023 cash payment over a one-year period through interest expense. The deferred cash payment had a carrying value of $ 5.0 million in the Company’s consolidated balance sheets at December 31, 2022. The following table summarizes the assets acquired in the Vyne Product Acquisition Agreement: ​ ​ ​ ​ ​ ​ Assets ($’s in thousands) ​ Recognized ​ ​ ​ ​ Inventory ​ $ 6,041 Identifiable Intangibles: ​ Amzeeq Intangible ​ 15,162 Zilxi Intangible ​ 3,760 Fair value of net identifiable assets acquired ​ $ 24,963 ​ The intangible assets were valued using an income approach, while the inventory was valued using a final sales value less cost to dispose approach. NOTE 5. INTANGIBLES The Company executed the Vyne Product Acquisition Agreement on January 12, 2022. The Company recognized intangible assets of $ 15.2 million for Amzeeq and $ 3.8 million for Zilxi, the two FDA approved products acquired in the agreement. On March 31, 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 agreement, the Company acquired the rights to Qbrexza® (glycoprronium), a prescription cloth towelette to treat primary axillary hyperhidrosis in patients nine years of age or older. The Company paid the upfront fee of $ 12.5 million to Dermira. In addition, the Company is obligated to pay Dermira up to $ 144 million in the aggregate upon the achievement of certain sales milestones. The royalty structure for the agreement is tiered with royalties for the first two years ranging from approximately 40 % to 30 %. Thereafter for a period of eight years royalties are approximately 12.0 % to 19.0 %. Royalty amounts are subject to 50 % diminution in the event of loss of exclusivity due to the introduction of an authorized generic. Upon closing of the Qbrexza® purchase, the Company became substituted for Dermira as the plaintiff in U.S. patent litigation commenced by Dermira on October 21, 2020 in the U.S. District Court of Delaware (the “Patent Litigation”) against Perrigo Pharma F-15 Table of Contents JOURNEY MEDICAL CORPORATION Notes to Financial Statements International DAC (“Perrigo”) alleging infringement of certain patents covering Qbrexza® (the “Qbrexza® Patents”), which are included among the proprietary rights to Qbrexza®. The Patent Litigation was initiated following the submission by Perrigo, in accordance with the procedures set out in the Drug Price Competition and Patent Term Restoration Act of 1984 (the “Hatch-Waxman Act”), of an Abbreviated New Drug Application (“ANDA”). The ANDA seeks approval to market a generic version of Qbrexza® prior to the expiration of the Qbrexza® Patents and alleges that the Qbrexza® Patents are invalid. Perrigo is subject to a 30-month stay preventing it from selling a generic version, but that stay is set to expire on March 9, 2023. As of December 31, 2022, the Patent Litigation was settled by and between the parties and case subsequently has been dismissed. The purchase price of $ 12.5 million included the asset, Qbrexza, as well as finished goods and raw material inventory. The Company also has the obligation to accept any product returns related to sales made by Dermira. The Company allocated the upfront payment to inventory since the fair value of the inventory and Qbrexza rights exceeded the purchase price. The future contingent milestone payments, if achieved, will be recorded to intangible asset and amortized over the seven-year life of the asset commencing on the closing date. The table below provides a summary of the Company’s intangible assets at December 31, 2022 and 2021, respectively: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ Estimated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Useful ​ Gross ​ ​ ​ ​ ​ ​ ​ ​ Lives ​ Carrying ​ Accumulated ​ Intangible ($’s in thousands) (Years) Value ​ Amortization Assets, Net Amortizable intangible assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ceracade® ​ 3 ​ $ 300 ​ $ ( 300 ) ​ $ — Luxamend® ​ 3 ​ 50 ​ ​ ( 50 ) ​ — Targadox® ​ 3 ​ 1,250 ​ ​ ( 1,250 ) ​ — Ximino® ​ 7 ​ 7,134 ​ ​ ( 3,482 ) ​ 3,652 Exelderm® ​ 3 ​ 1,600 ​ ​ ( 1,600 ) ​ — Accutane ® ​ 5 ​ 4,727 ​ ​ ( 1,733 ) ​ 2,994 Amzeeq® ​ 9 ​ ​ 15,162 ​ ​ ( 1,597 ) ​ ​ 13,565 Zilxi® ​ 6 ​ ​ 3,760 ​ ​ ( 716 ) ​ ​ 3,044 ​ ​ ​ ​ ​ 33,983 ​ ​ ( 10,728 ) ​ ​ 23,255 Non-amortizable intangible assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ Anti-itch product (1) ​ 3 ​ 3,942 ​ ​ — ​ 3,942 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total intangible assets ​ ​ ​ $ 37,925 ​ $ ( 10,728 ) ​ $ 27,197 (1) As of December 31, 2022, this asset has not yet been placed in service, therefore no amortization expense was recognized on this asset for the year ended December 31, 2022. Commercial launch of this product is expected in 2023. F-16 Table of Contents JOURNEY MEDICAL CORPORATION Notes to Financial Statements ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ Estimated ​ ​ ​ ​ ​ ​ ​ ​ Useful ​ Gross ​ ​ ​ ​ ​ ​ ​ ​ Lives ​ Carrying ​ Accumulated ​ Intangible ($’s in thousands) ​ (Years) ​ Value ​ Amortization ​ Assets, Net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amortizable intangible assets: ​ ​ ​ ​ Ceracade® ​ 3 ​ $ 300 ​ $ ( 300 ) ​ $ — Luxamend® ​ 3 ​ 50 ​ ( 50 ) ​ — Targadox® ​ 3 ​ 1,250 ​ ( 1,250 ) ​ — Ximino® ​ 7 ​ 7,134 ​ ( 2,463 ) ​ 4,671 Exelderm® ​ 3 ​ 1,600 ​ ( 1,600 ) ​ — Accutane® ​ 5 ​ 4,727 ​ ( 788 ) ​ 3,939 ​ ​ ​ ​ ​ 15,061 ​ ( 6,451 ) ​ 8,610 Non-amortizable intangible assets: ​ ​ ​ ​ Anti-itch product (1) ​ 3 ​ 3,942 ​ — ​ 3,942 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total intangible assets ​ ​ ​ ​ $ 19,003 ​ $ ( 6,451 ) ​ $ 12,552 (1) As of December 31, 2021, this asset has not yet been placed in service, therefore no amortization expense was recognized on this asset for the year ended December 31, 2021. The commercial launch of this product is expected in 2023. ​ The table below provides a summary for the year ended December 31, 2022 and 2021, of the Company’s recognized intangible amortization expense related to its product licenses, which was recorded in costs of goods sold on the consolidated statement of operations: ​ ​ ​ ​ ​ ​ Intangible ($’s in thousands) Assets, Net Balance at December 31, 2020 ​ $ 15,029 License acquisition adjustment ​ ( 3 ) Amortization expense ​ ​ ( 2,474 ) Balance at December 31, 2021 ​ $ 12,552 VYNE License agreement ​ ​ 18,922 Amortization expense ​ ​ ( 4,277 ) Balance at December 31, 2022 ​ $ 27,197 ​ The Company’s amortization expense for the years ended December 31, 2022 and 2021 was approximately $ 4.3 million and $ 2.5 million, respectively. Amortization expense is recorded as a component of cost of goods sold in the Company’s consolidated statements of operations. F-17 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, 2023 ​ $ 4,277 December 31, 2024 ​ 4,277 December 31, 2025 ​ 4,277 December 31, 2026 ​ 3,064 Thereafter ​ 7,360 Subtotal ​ ​ 23,255 Asset not yet placed in service ​ 3,942 Total ​ $ 27,197 ​ ​ NOTE 6. LICENSES ACQUIRED On June 29, 2021, the Company entered a license, collaboration, and assignment agreement (the “DFD-29 Agreement”) to obtain the global rights for the development and commercialization of a late-stage development modified release oral minocycline for the treatment of rosacea (“DFD-29”) with Dr. Reddy’s Laboratories, Ltd (“DRL”). Pursuant to the terms and conditions of the DFD-29 Agreement, the Company paid $ 10.0 million. Additional contingent regulatory and commercial milestone payments totaling up to $ 158.0 million may also payable. Royalties ranging from approximately 10 % to approximately 15 % are payable on net sales of the DFD-29 product. The product candidates acquired by the Company require substantial completion of research and development, and regulatory and marketing approval efforts in order to reach technological feasibility. As such, the $ 10.0 million for the year ended December 31, 2021 for the purchase price of licenses acquired were classified as research and development-licenses acquired in the consolidated statement of operations. Additionally, the DFD-29 Agreement contained contingent consideration payable by the Company upon either an IPO of the Company’s common stock or an acquisition of the Company. The Company recognized $ 3.8 million of expense classified as research and development-licenses acquired upon execution of the DFD-29 Agreement associated with the contingent consideration. In connection with the closing of the Company’s IPO on November 16, 2021, the Company issued 545,131 shares of its common stock to DRL in a transaction exempt from registration under the Securities Act calculated using a 15-day volume weighted average price (“VWAP”) of $ 9.1721 per share in full settlement of the contingent payment to DRL. The restrictions on the unregistered shares of common stock are governed by the terms set forth in the DFD-29 Agreement and applicable securities laws. See “Contingent Payment Derivative” in Note 7 for further details. The Company is required to fund and oversee the Phase 3 clinical trials. Either party may terminate the agreement prior to NDA approval in the event of bankruptcy or a material breach that remains uncured beyond the applicable cure period. Additionally, DRL may terminate the agreement if the Company: i.) ceases development of the product for 6 consecutive months (except if such cessation is caused by DRL, applicable laws, or action/inaction of any third party beyond Company’s control); ii.) files a patent challenge on any claim for a product patent or DRL background patent; or iii.) fails to initiate development of the product in the European Union (“EU”) (such termination solely relates to the rights granted in EU) within 24 months after product regulatory approval or cause first commercial sale in at least one country in the EU within 72 months after product regulatory approval. From inception to date the Company has incurred approximately $ 13.0 million associated with the development of DFD-29. ​ F-18 Table of Contents JOURNEY MEDICAL CORPORATION Notes to Financial Statements NOTE 7: FAIR VALUE MEASUREMENTS Financial assets and liabilities measured at fair value on a recurring basis are summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ($’s in thousands) Level 1 Level 2 Level 3 Total Assets ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 32,003 ​ $ — ​ $ — ​ $ 32,003 Total ​ $ 32,003 ​ $ — ​ $ — ​ $ 32,003 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ($’s in thousands) Level 1 Level 2 Level 3 Total Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 49,081 ​ $ — ​ $ — ​ $ 49,081 Total ​ $ 49,081 ​ $ — ​ $ — ​ $ 49,081 ​ Placement Agent Warrants Pursuant to the terms of the Company’s Class A Preferred Stock offering (see Note 15), the Company was required to issue upon a Qualified Financing (an external financing of $ 25.0 million or greater) warrants to the placement agent (“the Placement Agent Warrants”) to purchase 5 % of the shares of common stock into which the Class A Preferred Stock converts. This condition was met by the Company’s IPO. The Placement Agent Warrants have a term of five years and are exercisable at a 15 % discount to the Qualified Financing price. The Company valued the Placement Agent Warrants using a Monte Carlo simulation valuation methodology. A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring Journey’s warrant liability that are categorized within Level 3 of the fair value hierarchy before the conversion was as follows: ​ ​ ​ ​ ​ Risk-free interest rate 0.98 % Expected dividend yield — ​ Expected term in years 1.0 ​ Expected volatility 50 % ​ In connection with the Company’s IPO, the Company issued 111,567 shares of common stock related to the conversion of all of the Placement Agent Warrants. ​ Contingent Payment Derivative In connection with the DFD-29 Agreement, the Company agreed to pay DRL additional consideration upon either an IPO of the Company’s common stock or an acquisition of the Company, the agreement further specifies that only one payment can be made. The contingent payment associated with an IPO of the Company’s common stock, is deemed to be achieved if upon the completion of an IPO the Company’s market capitalization on a fully diluted basis is $ 150 million or greater at the close of business on the date of such IPO. The payment due for the achievement of the IPO criteria is a follows: (a) issue to DRL a number of shares of the Company’s common stock equal to $ 5.0 million as calculated using a fifteen ( 15 ) day volume weighted average price (“VWAP”) of the Company’s closing price, measured fifteen ( 15 ) days following the IPO; or (b) make a cash payment to DRL equal to $ 5.0 million. As a result of the IPO on November 16, 2021, calculated using a 15-day VWAP of $ 9.1721 per share, the Company issued 545,131 shares of Journey common stock to DRL in a transaction exempt from registration under the Securities Act. The restrictions on the shares of common stock issued in such transaction are governed by the terms set forth in the DFD-29 Agreement and applicable securities laws. ​ F-19 Table of Contents JOURNEY MEDICAL CORPORATION Notes to Financial Statements The Company valued the contingent payment discussed above utilizing a Probability Weighted Expected Return Method (PWERM) model using a discount rate of 30 % and expected term of 3 - 5 months. The table below provides a roll-forward of the changes in fair value of Level 3 financial instruments as of December 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ Warrant ($in thousands) liabilities Fair value at December 31, 2020 ​ $ — Additions: ​ Contingent payment warrant ​ 3,819 Placement agent warrant (see note 15) ​ 362 Change in fair value of warrant liabilities: ​ ​ ​ Contingent payment warrant ​ ​ ( 139 ) Placement agent warrant ​ ​ 586 Settlement of warrant liabilities in connection with IPO: ​ ​ Conversion of contingent payment warrants to common shares ​ ​ ( 3,680 ) Conversion of placement agent warrants to common shares ​ ​ ( 948 ) Fair value at December 31, 2021 ​ $ — Fair value at December 31, 2022 ​ $ — ​ During the years ended December 31, 2022 and 2021 , no transfers occurred between Level 1, Level 2, and Level 3 instruments. ​ NOTE 8. 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. Fortress’s Executive Chairman and Chief Executive Officer is the Executive Chairman of the Company. Under the terms of the 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 their IPO. For the years ended December 31, 2022 and 2021, the Company incurred expenses to Fortress employees totaling $ 0.1 million and $ 0.6 million, respectively. Upon completion of the Company’s IPO, the Company’s outstanding balance owed to Fortress of $ 0.5 million converted into 52,438 shares of Journey common stock at the IPO price of $ 10.00 per share. In the normal course of business, the Company reimburses Fortress for various payroll related costs and selling, general and administrative costs. As of December 31, 2022 and 2021, the Company had a balance of approximately $ 0.4 million and $ 0.6 million, respectively, recorded as due to related party on the consolidated balance sheets. Fortress Note From the Company’s inception in October 2014 until the IPO, Fortress funded the Company’s operations through the Fortress Note for a total of $ 5.2 million. On September 30, 2021, Fortress increased the Journey promissory note by $ 9.5 million in response to a cyber incident that occurred at Journey and resulted in $ 9.5 million of fraudulent payments being made by the Company. In lieu of repayment a $ 9.5 million contribution was approved by the boards of directors of both the Fortress and Journey and was made with the purpose of ensuring that Journey’s accounts payable function would continue to operate smoothly. This contribution, along with $ 5.2 million already outstanding under the Fortress Note, was converted into 1,476,044 shares of the Company’s common stock upon the closing of the Company’s IPO at the IPO price of $ 10.00 per share in full settlement of the amounts owed to Fortress. ​ F-20 Table of Contents JOURNEY MEDICAL CORPORATION Notes to Financial Statements NOTE 9. ACCRUED EXPENSES Accrued expenses for the years ended December 31, 2022 and 2021 consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ($’s in thousands) 2022 2021 Accrued expenses and other short-term liabilities: ​ ​ Accrued coupons and rebates $ 7,604 $ 10,603 Accrued compensation ​ ​ 2,586 ​ ​ 2,702 Accrued royalties payable ​ ​ 2,627 ​ ​ 3,833 Return reserve ​ 3,689 ​ 3,240 Accrued Inventory ​ 112 ​ 253 Accrued research and development ​ 1,404 ​ 870 Accrued legal, accounting and tax ​ ​ 334 ​ ​ 512 Accrued iPledge program ​ ​ 447 ​ ​ 41 Accrued marketing and advertising ​ — ​ 229 Other ​ 585 ​ 450 Total accrued expenses ​ $ 19,388 ​ $ 22,733 ​ ​ NOTE 10. INSTALLMENT PAYMENTS — LICENSES The following tables show the details of the Company’s installment payments – licenses for the years ended December 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ($’s in thousands) Short-Term Long-Term Total Installment payments - licenses ​ $ 2,500 ​ $ 1,500 ​ $ 4,000 Less: imputed interest ​ ( 256 ) ​ ( 88 ) ​ ( 344 ) Sub-total installment payments - licenses ​ $ 2,244 ​ $ 1,412 ​ $ 3,656 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ($’s in thousands) ​ Short-Term ​ Long-Term ​ Total Installment payments - licenses ​ $ 5,000 ​ $ 4,000 ​ $ 9,000 Less: imputed interest ​ ( 490 ) ​ ( 373 ) ​ ( 863 ) Sub-total installment payments - licenses ​ $ 4,510 ​ $ 3,627 ​ $ 8,137 ​ ​ ​ F-21 Table of Contents JOURNEY MEDICAL CORPORATION Notes to Financial Statements NOTE 11. OPERATING LEASE OBLIGATIONS The Company leases 3,681 square feet of office space in Scottsdale, Arizona. The lease was set to expire on December 31, 2022. In September 2022, 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 will expire on January 31, 2025. The Company recorded rent expense as follows (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ 2022 ​ 2021 Operating lease cost ​ $ 93 ​ $ 89 Variable lease cost ​ ​ 4 ​ ​ 4 Total lease cost ​ $ 97 ​ $ 93 ​ The following table summarizes quantitative information about the Company’s operating leases (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ 2022 2021 Cash paid for amounts included in the measurement of lease liabilities ​ $ 100 ​ $ 91 ​ Right-of-use assets exchanged for new operating lease liabilities ​ $ 188 ​ $ — ​ Weighted-average remaining lease term - operating leases ​ 2.1 ​ 1.0 ​ Weighted-average discount rate - operating leases ​ 6.25 % 4.0 % ​ As of December 31, 2022, future payments of operating lease liabilities are as follows: ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ($’s in thousands) 2023 ​ $ 92 2024 ​ 102 2025 ​ 9 Total lease payments ​ ​ 203 Less: present value discount ​ ​ ( 12 ) Total operating lease liabilities ​ $ 191 ​ ​ F-22 Table of Contents JOURNEY MEDICAL CORPORATION Notes to Financial Statements NOTE 12. DEBT The Company’s Debt obligations at December 31, 2022 and 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ ​ ​ Net ​ ​ Principal ​ Unamortized ​ Carry ($’s in thousands) ​ Balance ​ Discount & Fees ​ Amount ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deferred cash payment ​ $ 5,000 ​ $ 9 $ 4,991 EWB Revolving LOC ​ 2,948 ​ — 2,948 Total Short-Term Debt ​ $ 7,948 ​ $ 9 $ 7,939 EWB Term Loan (Long-term) ​ $ 20,000 ​ $ 174 $ 19,826 Total Debt & Obligations ​ $ 27,948 ​ $ 183 $ 27,765 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EWB Revolving LOC (Short-term) ​ $ 812 ​ $ — $ 812 ​ East West Bank Line of Credit and Long-Term Debt On January 12, 2022, the Company entered into a third amendment of the loan and security agreement with EWB (the “Amendment”), which increased the borrowing capacity of the Company’s revolving line of credit to $ 10.0 million, $ 2.9 million of which was outstanding at December 31, 2022, and added a term loan not to exceed $ 20.0 million. Both the revolving line of credit and the term loan mature on January 12, 2026. In January 2022 and August 2022, the Company borrowed $ 15.0 million and $ 5.0 million, respectively, against the term loan. The term loan bears interest at a floating rate equal to 1.73 % above the prime rate and are payable monthly. The term loan effective interest rate at December 31, 2022 is 9.64 %. The term loan contains an interest-only payment period through January 12, 2024, with an extension through July 12, 2024, if certain covenants are met, after which the outstanding balance of each term loan is payable in equal monthly installments of principal, plus all accrued interest, through the term loan maturity date. The Company may prepay all or any part of the term loan without penalty or premium, but may not re-borrow any amount, once repaid. Any outstanding borrowing against the revolving line of credit bears interest at a floating rate equal to 0.70 % above the prime rate. The Amendment includes customary financial covenants such as collateral ratios and minimum liquidity provisions. The Company was in compliance with all applicable financial covenants under the Amendment as of December 31, 2022. The remaining $ 7.1 million revolving line of credit is fully available to the Company without any restrictions, other than certain customary and ordinary closing conditions. The Company accounted for the Amendment as a debt modification. The remaining unamortized debt issuance costs related to the original revolving facility together with any lender fees and direct third-party costs incurred in connection with the entry into the Amendment are considered associated with the new arrangement. The fees allocated to the revolving line are amortized over the new four-year term of the amended revolving facility. The fees allocated to the term loan are recorded as a debt discount and amortized to interest expense over the four-year term of the term loan under the effective interest method. ​ F-23 Table of Contents JOURNEY MEDICAL CORPORATION Notes to Financial Statements NOTE 13. INTEREST EXPENSE AND FINANCING FEES Interest expense and financing fees for the years ended December 31, 2022 and 2021 consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 ​ 2021 Interest payments on EWB term loan and LOC ​ $ 1,153 ​ $ — Imputed Interest on acquired intangible assets ​ 519 ​ 781 Amortization/Accretion ​ 347 ​ 2,572 Interest and Fees on convertible preferred shares ​ — ​ 2,845 Dividends payable on convertible preferred shares ​ ​ — ​ ​ 820 EWB LOC Fees ​ ​ — ​ ​ 16 Total Interest Expense and Financing Fees ​ $ 2,019 ​ $ 7,034 ​ ​ NOTE 14. 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 shall 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 4 and Note 5. ​ NOTE 15. STOCKHOLDERS’ EQUITY AND CLASS A PREFERRED STOCK 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. 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. F-24 Table of Contents JOURNEY MEDICAL CORPORATION Notes to Financial Statements 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. On November 16, 2021, the Company completed an IPO of its common stock and issued 3,520,000 shares of its common stock at $ 10.00 per share, which resulted in net proceeds of approximately $ 30.6 million, after deducting underwriting discounts and other offering costs. In addition, as a result of the IPO, the Company issued shares of its Common stock based on the following. 8 % Cumulative Convertible Class A Preferred Offering In March 2021, the Company commenced an offering of 8 % Cumulative Convertible Class A Preferred Stock (“Class A Preferred Offering”). The Class A Preferred Offering terminated on July 18, 2021 and raised gross proceeds of $ 19 million. The Class A Preferred Stock automatically converts into the Company’s Common Stock upon a sale of the Company or a financing in an amount of at least $ 25.0 million within a year of the closing date of the Class A Preferred Offering (extendable by another six months at the Company’s option) at a discount of 15 % to the per share qualified stock price. In the event that neither a sale of the Company nor a $ 25.0 million financing was completed, the Class A Preferred Stock was to be exchanged for shares of Fortress common stock, at a 7.5 % discount to the average Fortress common stock trading price over the 10-day period preceding such exchange. The Company issued an aggregate of 758,680 Class A Preferred shares at a price of $ 25.00 per share, for gross proceeds of $ 19.0 million. Following the payment of placement agent fees of $ 1.9 million, and other expenses of $ 0.1 million, the Company received $ 17.0 million of net proceeds. In connection with the Company’s IPO, the company issued 2,231,346 shares of common stock resulting from the conversion of all of the Class A Preferred Stock. NOTE 16. SHARE-BASED COMPENSATION In 2015, the Company’s Board of Directors adopted, and stockholders approved, the Journey Medical Corporation 2015 Stock Plan (the “Plan”) authorizing the Company to grant up to 4,642,857 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 2022 Annual Meeting, held on June 21, 2022, the Company’s stockholders approved, among other matters, an amendment to the Plan to increase the number of shares of Common Stock issuable under the Plan by 3,000,000 to 7,642,857 . At December 31, 2022 there were 1,146,620 shares available for issuance under the 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 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. F-25 Table of Contents JOURNEY MEDICAL CORPORATION Notes to Financial Statements Total compensation cost charged against operations related to the above plan for the years ended December 31, 2022 and 2021 was $ 4.4 million and $ 2.5 million, respectively. The following table summarizes the components of share-based compensation expense in the consolidated statements of operations for the years ended December 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ($’s in thousands) ​ 2022 2021 Research and development ​ $ 73 ​ $ — Selling, general and administrative ​ 4,352 ​ 2,466 Total non-cash compensation expense related to share-based compensation included in operating expense ​ $ 4,425 ​ $ 2,466 ​ Stock Options The weighted-average key assumptions used in determining the fair value of options granted for the year ended December 31, 2022 are as follows: ​ ​ ​ ​ ​ 2022 Risk-free interest rate 2.89 % - 4.20 % Expected volatility 80.25 % - 86.18 % Weighted average expected volatility 85.45 % Expected term (years) 5.60 - 6.35 Expected dividend yield 0 % ​ The weighted average grant-date fair value of stock options issued during the year ended December 31, 2022 was $ 2.67 per share. The Company did not grant any stock options during the year ended December 31, 2021. The following table summarizes the Company’s stock option activity for the year ended December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ Weighted ​ average ​ ​ Number ​ average ​ Aggregate ​ remaining ​ ​ of ​ exercise ​ intrinsic ​ contractual ​ Shares price value life (years) Outstanding options at December 31, 2021 ​ 2,104,334 ​ $ 0.79 ​ $ 9,661,393 ​ 4.68 Granted ​ 1,149,000 ​ ​ 3.59 ​ ​ — ​ 9.53 Exercised ​ ( 155,649 ) ​ ​ 1.01 ​ ​ 141,019 ​ — Forfeited ​ ( 105,500 ) ​ ​ 3.20 ​ ​ 9,805 ​ — Expired ( 32,185 ) ​ 1.39 ​ 17,058 — Outstanding options at December 31, 2022 2,960,000 ​ $ 1.76 ​ $ 2,217,815 5.65 Options vested and exercisable at December 31, 2022 1,897,500 ​ $ 0.76 ​ $ 2,209,600 3.50 ​ For the years ended December 31, 2022 and 2021, the Company issued 155,649 and 10,000 shares, respectively, of Common Stock upon the exercise of outstanding stock options and received proceeds of $ 142,330 and $ 6,800 , respectively. For the years ended December 31, 2022 and 2021, approximately $ 0.8 million and $ 51,669 , respectively, of stock option compensation cost was charged against operations. At December 31, 2022, the Company had unrecognized share-based compensation expense related to all unvested options of $ 2.0 million, which the Company expects to recognize over a weighted-average period of approximately 2.4 years. F-26 Table of Contents JOURNEY MEDICAL CORPORATION Notes to Financial Statements Restricted Stock Units The following table summarizes the Company’s RSU activity for the year ended December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ average ​ ​ Number of ​ grant date ​ units Fair value Unvested balance at December 31, 2021 ​ 715,030 ​ $ 4.12 Granted ​ 1,907,225 ​ ​ 4.10 Vested ​ ( 293,707 ) ​ ​ 4.33 Forfeited ​ ( 67,500 ) ​ ​ 4.80 Unvested balance at December 31, 2022 ​ 2,261,048 ​ $ 4.05 ​ For the years ended December 31, 2022 and 2021 the Company issued 293,707 and 136,500 shares of Common Stock, respectively, upon the vesting of RSU’s amounting to $ 0.9 million and $ 1.4 million, respectively, in total aggregate fair market value. For the years ended December 31, 2022 and 2021, approximately $ 3.6 million and $ 2.5 million, respectively, of RSU compensation cost was charged against operations. The $ 2.5 million of RSU compensation cost that was charged against operations for the year ended December 31, 2021 includes $ 2.4 million of RSU compensation cost related to RSU’s that fully vested upon the Company’s IPO on November 12, 2021. At December 31, 2022 approximately 2,261,048 of RSU’s remained unvested and there was approximately $ 4.8 million of unrecognized compensation cost related to RSUs, which the Company expects to recognize over a weighted-average period of approximately 1.9 years. ​ NOTE 17. REVENUES FROM CONTRACTS WITH CUSTOMERS Disaggregation of Net Revenues The Company has the following actively marketed products, Qbrexza®, Amzeeq®, Zilxi®, Accutane®, Ximino®, Exelderm®, and Targadox®. 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) 2022 2021 Qbrexza® ​ $ 26,715 ​ $ 17,056 Accutane® ​ ​ 18,373 ​ ​ 10,053 Targadox® ​ ​ 7,972 ​ ​ 22,378 Amzeeq® ​ ​ 7,242 ​ ​ — Ximino® ​ 4,957 ​ 8,247 Zilxi® ​ 2,273 ​ — Exelderm® ​ 3,463 ​ 5,363 Other branded revenue ​ — ​ 37 Total product revenues ​ $ 70,995 ​ $ 63,134 ​ The Company recognized other revenue as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ($in thousands) ​ 2022 2021 Other revenue $ 2,674 ​ $ — Total other revenue ​ $ 2,674 ​ $ — ​ F-27 Table of Contents JOURNEY MEDICAL CORPORATION Notes to Financial Statements Other revenue for the year ended December 31, 2022 included a net $ 2.5 million milestone payment from Maruho Co., Ltd, upon receipt of marketing and manufacturing approval for Rapifort® Wipes 2.5 % (Qbrexza®), as well as $ 0.2 million in royalties from Maruho on sales of Rapifort® Wipes 2.5 % in Japan. Significant Customers As of December 31, 2022, two of the Company’s customers accounted for more than 10% of its total accounts receivable balance at 16.7 % and 10.4 %. As of December 31, 2021, two of the Company’s customers accounted for more than 10% of its total accounts receivable balance at 16.3 % and 12.9 %. ​ For the year ended December 31, 2022 and 2021, none of the Company’s customers accounted for more than 10% of its total gross product revenue. ​ NOTE 18. INCOME TAXES The components of the income tax provision are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ($’s in thousands) 2022 2021 Current: ​ ​ ​ ​ Federal ​ $ — ​ $ — State ​ 63 ​ 67 Total current ​ 63 ​ 67 ​ ​ ​ ​ ​ ​ ​ Deferred: ​ ​ Federal ​ ( 6,701 ) ​ ( 7,829 ) State ​ ( 1,737 ) ​ ( 1,474 ) Total deferred ​ ( 8,438 ) ​ ( 9,303 ) Valuation allowance ​ ​ 8,438 ​ ​ 10,870 Total income tax expense ​ $ 63 ​ $ 1,634 ​ 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. F-28 Table of Contents JOURNEY MEDICAL CORPORATION Notes to Financial Statements The significant components of the Company’s deferred tax assets consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ($’s in thousands) 2022 2021 Deferred tax assets: ​ ​ ​ ​ Net operating loss carryforwards ​ $ 6,553 ​ $ 3,113 Amortization of license fees ​ 4,951 ​ 4,760 R&D capitalization ​ 2,462 ​ — Stock compensation ​ 1,293 ​ 667 Lease liability ​ ​ 48 ​ ​ 25 Reserve on sales return, discount and bad debt ​ 2,988 ​ 3,573 Accruals and reserves ​ 574 ​ 505 Tax credits ​ 1,152 ​ 193 Business interest expense deduction limit ​ 322 ​ 41 State taxes ​ 13 ​ 12 Total deferred tax assets ​ 20,356 ​ 12,889 Less: valuation allowance ​ ​ ( 19,307 ) ​ ​ ( 10,870 ) Deferred tax assets, net ​ $ 1,049 ​ $ 2,019 ​ ​ ​ ​ ​ ​ ​ Deferred tax liability: ​ ​ ​ ​ ​ ​ Section 481(a) adjustment on reserve on sales return, discount and bad debt ​ ​ ( 1,001 ) ​ ​ ( 1,996 ) Right-of-use asset ​ ​ ( 48 ) ​ ​ ( 23 ) Deferred tax assets, net ​ $ — ​ $ — ​ A reconciliation of the statutory tax rates and the effective tax rates is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2022 2021 Percentage of pre-tax income: ​ ​ ​ U.S. federal statutory income tax rate 21 % 21 % State taxes, net of federal benefit 4 % 4 % Non-deductible items ( 0 ) % ( 5 ) % Provision to return 0 % 0 % Change in state rate 0 % 0 % Change in valuation allowance ​ ( 28 ) % ( 26 ) % Other 3 % 2 % Effective income tax rate ( 0 ) % ( 4 ) % ​ The Company has incurred NOLs in previous years. As of December 31, 2022, the Company had total federal NOLs of approximately $ 27.0 million, of which $ 7.6 million is subject to expiration and will begin to expire in the year 2033, total state NOLs of $ 17 million, of which $ 4.7 million is subject to expiration and will begin to expire in the year 2026, and federal income tax credits of $ 1.2 million, which will begin to expire in 2031. Approximately $ 19.4 million of the federal NOLs and $ 12.3 million of the state NOLs can be carried forward indefinitely. The utilization of the Company’s NOLs are subject to annual Internal Revenue Code Section 382 limitations (382 Limitations). Based on the analysis of the NOLs carryovers subject to the 382 Limitations, the Company has concluded that the 382 Limitations would not prevent the Company from utilizing all of its NOLs carryovers before expiration. The Company is subject to U.S. federal and various state taxes. As of December 31, 2022, the earliest federal tax year open for the assessment of income taxes under the applicable statutes of limitations is its 2019 tax year. The expiration of the statute of limitations related to the various state income and franchise tax returns varies by state. ​ F-29 Table of Contents 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, 2022 and 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2022 2021 Basic ​ 17,531,274 ​ 10,189,844 Common stock equivalents: ​ ​ ​ ​ Unvested restricted stock units ​ 2,261,048 ​ 715,030 Stock Options ​ 1,566,131 ​ 1,879,378 Diluted ​ 21,358,453 ​ 12,784,252 ​ 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, 2022 and 2021, 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, 2022 and 2021. ​ ​ ​ ​ F-30 Table of Contents SIGNATURES Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ​ Journey Medical Corporation By: /s/ Claude Maraoui Name: Claude Maraoui Title: President, Chief Executive Officer, and Director March 30, 2023 ​ 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 30, 2023 Claude Maraoui (Principal Executive Officer) ​ ​ ​ /s/ Lindsay A. Rosenwald, M.D. ​ ​ ​ ​ Lindsay A. Rosenwald, M.D. ​ Executive Chairman ​ March 30, 2023 ​ ​ ​ ​ ​ /s/ Joseph Benesch Interim Chief Financial Officer March 30, 2023 Joseph Benesch (Principal Financial Officer) /s/ Neil Herskowitz Director March 30, 2023 Neil Herskowitz /s/ Jeff Paley, M.D. Director March 30, 2023 Jeff Paley, M.D. /s/ Justin Smith Director March 30, 2023 Justin Smith /s/ Miranda Toledano Director March 30, 2023 Miranda Toledano ​ ​ ​ ​ ​ ​ ​ 77