What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2025-03-27 compared with 2024-03-29 · 277 added, 225 removed, 680 unchanged (42% of the section changed)

3 unchanged sentences

In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and we are required to apply our judgment in evaluating the cost-benefit relationship of possible controls and procedures.

We have carried out an evaluation as of the end of the period covered by this Annual Report on Form 10-K under the supervision, and with the participation, of our management, including our Chief Executive Officer (who serves as our principal executive officer) and our 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.

We have carried out an evaluation as of the end of the period covered by this Annual Report on Form 10-K under the supervision, and with the participation, of our management, including our Chief Executive Officer (who serves as our principal executive officer) and our Chief Financial Officer (who serves as our principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K in providing reasonable assurance of achieving the desired control objectives.

Management’s Report on Internal Control over Financial Reporting

12 unchanged sentences

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, 2023, our internal control over financial reporting was effective.

Based on the results of this assessment, management (including our Chief Executive Officer and our Chief Financial Officer) has concluded that, as of December 31, 2024, 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.

29 unchanged sentences

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.#

Amendment to the Journey Medical Corporation 2015 Stock Incentive Plan, filed as Exhibit 10.1 to Form 8-K, filed on June 25, 2024 and incorporated herein by reference.#

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.#

14 unchanged sentences

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.**

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.

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.

At Market Issuance Sales Agreement, dated as of December 30, 2022, by and between Journey Medical Corporation and B.

4 unchanged sentences

filed as Exhibit 10.2 to Form 10 - Q filed on November 13, 2023.**

Credit Agreement, dated as of December 27, 2023, between Journey Medical Corporation with SWK Funding LLC.

Credit Agreement, dated as of December 27, 2023, between Journey Medical Corporation with SWK Funding LLC, filed as Exhibit 10.21 to Form 10-K filed on March 29, 2024.

First Amendment to the Credit Agreement, dated July 9, 2024, by and among Journey Medical Corporation, SWK Funding LLC, and the other financial institutions party thereto, filed as Exhibit 10.1 to Form 10-Q filed on November 12, 2024.**

Second Amendment to the Credit Agreement, dated October 21, 2024, by and among Journey Medical Corporation,

SWK Funding LLC, and the other financial institutions party thereto, filed as Exhibit 10.2 to Form 10-Q filed on November 12, 2024.**

Journey Medical Corporation Deferred Compensation Plan, adopted July 9, 2024.#*

Fortress Biotech, Inc.

and Subsidiaries Insider Trading Policy.*

List of Subsidiaries of Journey Medical Corporation.*

4 unchanged sentences

Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Clawback Policy of Journey Medical Corporation*

Clawback Policy of Journey Medical Corporation, filed as Exhibit 97.1 to Form 10-K filed on March 29, 2024 and incorporated herein by reference.

The following financial information from the Company’s Quarterly Report on Form 10-K for the period ended December 31, 2024, formatted in Extensible Business Reporting Language (XBRL):

18 unchanged sentences

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, 2023 and 2022, the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the years then ended December 31, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the years then ended December 31, 2023, in conformity with U.S.

We have audited the accompanying consolidated balance sheets of Journey Medical Corporation and subsidiary (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with U.S.

generally accepted accounting principles.

1 unchanged sentence

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations, and as a result has concluded that this raises substantial doubt about its ability to continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations, and as a result has concluded that raises substantial doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 1.

34 unchanged sentences

Income taxes payable

Line of credit

Deferred cash payment, net of discount

Installment payments – licenses, short-term

22 unchanged sentences

Operating expenses

Cost of goods sold – product revenue

Cost of goods sold – (excluding amortization of acquired intangible assets)

Amortization of acquired intangible assets

Research and development

1 unchanged sentence

Loss on impairment of intangible assets

Loss recovery

Total operating expenses

3 unchanged sentences

Interest expense

Gain on extinguishment of debt

Foreign exchange transaction losses

Total other expense (income)

Total other expense

Loss before income taxes

14 unchanged sentences

Issuance of common stock for vested restricted stock units

Issuance of common stock, ATM offering, net of issuance costs of $ 140

Balance as of December 31, 2023

2 unchanged sentences

Issuance of common stock for vested restricted stock units

Issuance of common stock under ESPP

Issuance of common stock, ATM offering, net of issuance costs of $ 245

7 unchanged sentences

Bad debt expense

Gain on extinguishment of debt

Non-cash interest expense

1 unchanged sentence

Amortization of acquired intangible assets

Amortization of operating lease right-of-use assets

Non-cash lease expense

Share-based compensation

9 unchanged sentences

Lease liabilities

Net cash provided by (used in) operating activities

Net cash (used in) provided by operating activities

Cash flows from investing activities

3 unchanged sentences

Proceeds from the exercise of stock options

Proceeds from issuance of common stock, ATM offering, net of issuance costs

Issuance of common stock under ESPP

Proceeds from term-loan

Payment of debt issuance costs

Payment of license installment note payable

Payment of debt issuance costs associated with convertible preferred shares

Proceeds from line of credit

Repayment of line of credit

Proceeds from term-loan

Repayment of EWB term-loan

Payment of issuance costs associated with EWB term-loan modification

Payment of issuance costs associated with issuance of SWK term-loan

Proceeds from issuance of common stock, ATM offering, net of issuance costs

Offering costs for the issuance of common stock - initial public offering

Net cash (used in) provided by financing activities

Net cash provided by (used in) financing activities

Net change in cash

5 unchanged sentences

Supplemental disclosure of non-cash financing and investing activities:

Deferred payment for asset acquisition

ROU assets obtained in exchange for lease liabilities

3 unchanged sentences

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 seven branded and two 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.

Journey Medical Corporation (collectively “Journey” or the “Company”) is a commercial-stage pharmaceutical company that focuses on the selling and marketing of U.S.

Food and Drug Administration (“FDA”) approved prescription pharmaceutical products for the treatment of dermatological conditions.

The Company’s current product portfolio includes eight FDA-approved prescription drugs for dermatological conditions that are marketed in the U.S.

The Company acquires rights to products and product candidates by licensing or otherwise acquiring an ownership interest in, funding the research and development of, and eventually commercializing the products through its field sales organization.

As of December 31, 2024 and 2023, the Company is a majority-owned subsidiary of Fortress Biotech, Inc.

1 unchanged sentence

Liquidity and Capital Resources

At December 31, 2023, the Company had $ 27.4 million in cash and cash equivalents as compared to $ 32.0 million at December 31, 2022.

On December 27, 2023, the Company entered into a Credit Agreement (the “Credit Agreement”) with SWK Funding LLC (“SWK”).

The Credit Agreement provides for a term loan facility (the “Credit Facility”) in the original principal amount of up to $ 20.0 million.

On the closing date, the Company drew $ 15.0 million.

The remaining $ 5.0 million may be drawn upon the Company’s request within 12 months after the closing date.

Loans under the Credit Facility (the “Term Loans”) mature on December 27, 2027, and bear interest at a rate per annum equal to the three-month term Secured Overnight Financing Rate (“SOFR”) (subject to a SOFR floor of 5 %) plus 7.75 %.

The interest rate resets quarterly.

Interest payments begin in February 2024 and are paid quarterly.

Beginning in February 2026, the Company is required to repay a portion of the outstanding principal of the Term Loans quarterly in an amount equal to 7.5 % of the principal amount of funded Term Loans.

On August 31, 2023, the Company entered into a license agreement (the “New License Agreement”) with Maruho Co., Ltd., a Japanese company specializing in dermatology (“Maruho”), whereby the Company granted an exclusive license to Maruho to develop and commercialize Qbrexza® for the treatment of primary axillary hyperhidrosis in South Korea, Taiwan, Hong Kong, Macau, Thailand, Indonesia, Malaysia, Philippines, Singapore, Vietnam, Brunei, Cambodia, Myanmar and Laos (the “Territory”).

Under the terms of the New License Agreement, in exchange for the exclusive rights to Qbrexza ® in the Territory, Maruho paid $ 19.0 million to the Company as a non-refundable upfront payment.

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”).

In connection with the 2022 Shelf, the Company entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) relating to shares of the Company’s common stock.

The Company may offer and sell up to 4,900,000 shares of its common stock, from time to time.

During 2023, the Company issued 748,703 shares of common stock under the 2022 Shelf, generating net proceeds of $ 4.5 million.

At December 31, 2023, 4,151,297 shares remain available for issuance under the 2022 Shelf.

At December 31, 2024, the Company had $ 20.3 million in cash and cash equivalents as compared to $ 27.4 million at December 31, 2023, and working capital of $ 13.0 million at December 31, 2024, as compared to $ 14.6 million at December 31, 2023.

The Company relies primarily on cash on hand generated from sales of its pharmaceutical products to customers to fund its core operations.

In addition, the Company has relied on the proceeds from its term loan Credit Facility (as defined below) with SWK Funding LLC (“SWK”), and it’s at-the-market sales program with B.

Riley to meet additional capital and liquidity needs, specifically to fund the research and development and commercialization of Emrosi, formerly referred to as DFD-29, which received marketing approval by the FDA on November 1, 2024.

The Company also actively pursues licensing opportunities to raise non-dilutive capital.

On August 31, 2023, the Company entered into the New License Agreement (as defined below) with Maruho (as defined below), whereby it granted an exclusive license to Maruho to develop and commercialize Qbrexza® for the treatment of primary axillary hyperhidrosis in South Korea, Taiwan, Hong Kong, Macau, Thailand, Indonesia, Malaysia, Philippines, Singapore, Vietnam, Brunei, Cambodia, Myanmar and Laos (the “Territory”).

Under the terms of the New License Agreement, in exchange for the exclusive rights to Qbrexza® in the Territory, Maruho paid the Company $ 19.0 million as a non-refundable upfront payment.

In December 2024, the Company received additional cash of $ 4.6 million as a result of the recovery of funds from the previously disclosed cybersecurity incident in September of 2021.

The Company regularly evaluates market conditions, its liquidity profile, and financing alternatives, including out-licensing arrangements for its products, to enhance its capital structure.

The Company may seek to raise capital through debt or equity financings to expand its product portfolio and for other strategic initiatives, which may include sales of securities under either the 2022 Shelf or a new registration statement or drawing on the SWK Credit Facility.

The Company cannot make any assurances that such additional financing will be available and, if available, the terms may negatively impact the Company’s business and operations.

The Company’s current assumptions, projected commercial sales of our products, clinical development plans and regulatory submission timelines are uncertain and may not emerge as expected.

Additionally, as a result of recurring losses, substantial doubt exists about the Company’s ability to continue as a going concern for a period of at least twelve months from the date of issuance of these financial statements.

333 - 269079), which was declared effective by the SEC on January 26, 2023 and 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”) or a new registration statement.

In addition, the Company expects to generate positive cash flows from the sale of Emrosi in 2025 and beyond.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business.

The financial statements do not include any adjustments relating to the

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that may be necessary if the Company is unable to continue as a going concern.

However, as a result of recurring losses, primarily a result of the research and development of Emrosi, substantial doubt exists about the Company’s ability to continue as a going concern for a period of at least twelve months from the date of issuance of these financial statements.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that may be necessary if the Company is unable to continue as a going concern.

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1 unchanged sentence

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.

The Company’s consolidated financial statements include the accounts of the Company and

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

the accounts of the Company’s wholly-owned subsidiary, JG Pharma, Inc.

(“JG” or “JG Pharma”).

All intercompany balances and transactions have been eliminated.

Reclassification

Certain prior period amounts have been reclassified to conform to the current period classification.

The Company has historically included amortization of acquired intangible assets within cost of goods sold on the consolidated statement of operations.

For the years ended December 31, 2024 and 2023, “Costs of goods sold – product revenue” as presented in the consolidated statement of operations was disaggregated into “Costs of goods sold – (excluding amortization of acquired intangible assets)” and “Amortization of acquired intangible assets”.

This presentation has been conformed for all previous periods presented and has no impact on previously reported financial results.

Emerging Growth Company

8 unchanged sentences

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

Segment Reporting

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance.

The Company views its operations and manages its business in one segment, which reflects products for the treatment of dermatological conditions.

The dermatological segment derives revenues from the sale of branded and authorized general prescription products that treat certain dermatological conditions.

The Company’s chief operating decision maker (“CODM”) is its chief executive officer.

The CODM assesses performance for the dermatological segment and allocates resources based on consolidated net loss.

The CODM uses net loss to monitor budget vs.

actual results, which are presented quarterly, as well as evaluate performance and income generated in deciding how to reinvest profits.

The accounting policies of the segment are the same as those described in this Note 2.

See Note 20 for segment information .

Concentrations of Credit Risk

3 unchanged sentences

The Company has not experienced any losses on these deposits.

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

The Company’s accounts receivable primarily represent amounts due from drug wholesalers and specialty pharmacies in the United States.

The Company performs periodic credit evaluations of customers and does not require collateral.

An allowance for doubtful accounts is maintained for potential credit losses based on the aging of accounts receivable, historical bad debts experience, and the customer’s current ability to pay its obligations to the Company.

An allowance for doubtful

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

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.

5 unchanged sentences

Accounts Receivable, Net

The Company’s accounts receivable consists of amounts due from customers related to product sales and have standard payment terms.

The Company’s accounts receivable consists of amounts due from customers related to product sales and have payment terms, that range from 30 to 75 days .

For certain customers, the accounts receivable for the customer are net of prompt payment or specialty pharmacy discounts.

15 unchanged sentences

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.

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.

The Company’s research and development expense includes costs associated with the research and development of the Company’s EMROSI TM product prior to regulatory approval.

Prior to the regulatory approval of EMROSI TM , manufacturing costs associated with third-party contractors for validation and commercial batch production, process technology transfer, quality control and stability testing, raw material purchases, overhead expenses and facilities costs were recorded as research and development and expensed as incurred as future use could not be determined, and there is uncertainty surrounding regulatory approval.

Following regulatory approval of EMROSI TM by the FDA, the Company capitalizes certain manufacturing costs as inventory.

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

Clinical trial costs for EMROSI TM have been a significant component of research and development expenses for the Company.

The Company’s clinical studies were performed by third-party contract research organizations (“CROs”).

These expenses are based on patient enrollment and include costs relating to the administration of the clinical trials including s CRO services, clinical sites, investigators, testing facilities and patients for participating in the Company’s clinical trials.

Contingencies

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.

18 unchanged sentences

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.

Royalty payments for approved products are recorded as cost of goods sold as sales are recognized.

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

Impairment of Long-Lived Assets

1 unchanged sentence

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.

During the year ended December 31, 2023, the Company recorded an impairment

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

loss associated with its intangible asset balance.

If an impairment review is performed to evaluate a long-lived asset group for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset group to its carrying value.

An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset group are less than its carrying amount.

The impairment loss would be based on the excess of the carrying value of the impaired asset group over its fair value, determined based on discounted cash flows.

During the year ended December 31, 2023, the Company recorded an impairment loss associated with its intangible asset balance.

See Note 4 for further details.

The Company did not record any impairment losses on long-lived assets for the year ended December 31, 2022.

Share-based Compensation

10 unchanged sentences

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.

Expected volatility—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.

2 unchanged sentences

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.

Restricted stock units (“RSU’s”) that are service based are amortized into compensation expense on a straight-line basis over the vesting period, which ranges from three to four years in duration.

Compensation cost for service based RSU’s is based on the grant date fair value of the award, which is the closing market price of the Company’s common stock on the grant date multiplied by the number of shares awarded.

1 unchanged sentence

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.

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

common shares for stock options and restricted stock units, determined using the treasury stock method.

The Company has two classes of stock (Common Stock and Class A Common Stock), however, the terms of each class are substantially similar, and therefore the application of the two-class method does not impact the computation of the reported net (loss) income per share.

See Note 19 below.

2 unchanged sentences

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

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

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.

24 unchanged sentences

These discounts are recorded at the time of sale based on the customer’s contracted rate and recorded as a reduction of revenue.

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

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 Company’s accrual for managed care rebates is based on an estimate of future claims that the Company expects to

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

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.

5 unchanged sentences

As of December 31, 2024, the Company was 44.51 % 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 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.

(“Fortress”).

Upon the completion of the Company’s initial public offering on November 12, 2021, it deconsolidated from the Fortress consolidated group for federal income and state income tax purposes and has since filed all tax returns as a standalone taxpayer.

The Company records income taxes using the asset and liability method.

15 unchanged sentences

The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company is currently evaluating the impact of the new standard on its consolidated financial statements.

The Company adopted this ASU in the year ended December 31, 2024.

The Company’s adoption of this guidance resulted in increased disclosures in the notes to the financial statements.

In December 2023, the FASB issued ASU No.

1 unchanged sentence

Improvements to Income Tax Disclosures , which expands disclosures in an entity’s income tax rate reconciliation table and disclosures regarding cash taxes paid both in the U.S.

and foreign jurisdictions.

The update will be effective for annual periods beginning after December 15, 2024.

The Company is currently evaluating the impact that this guidance will have on its consolidated financial statement disclosures.

In November 2024, the FASB issued ASU No.

2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses , which is intended to improve the disclosures about specified categories of expenses including purchases of inventory, employee compensation, depreciation and amortization, included in certain expense captions presented in the consolidated statement of operations.

This update will be effective for annual periods beginning

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

foreign jurisdictions.

The update will be effective for annual periods beginning after December 15, 2024.

The Company is currently evaluating the impact that this guidance will have on its consolidated financial statements and disclosures.

after December 15, 2026.

Early adoption is permitted.

The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and disclosures.

The Company’s inventory consisted of the following at December 31, 2024 and 2023:

($’s in thousands)

Raw materials

Work-in-process

Finished goods

Work-in-process

Raw materials

Inventory at cost

1 unchanged sentence

Total Inventories

ASSET ACQUISITION

In January 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 APA”).

The Company also acquired the associated inventory related to the products.

The Vyne APA 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 and $ 200 million, the Company is required to make a one-time payment of $ 10.0 million and $ 20.0 million, respectively, in that year only, per product.

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 APA.

The following table summarizes the aggregate consideration transferred for the assets acquired by the Company in connection with the Vyne APA:

Consideration

($’s in thousands)

Consideration transferred to Vyne at closing

Fair Value of deferred cash payment due January 2023

Transaction costs

Total consideration transferred at closing

The fair value of the deferred cash payment was accreted to the $ 5.0 million January 2023 cash payment over a one-year period through interest expense.

The Company made the $ 5.0 million deferred cash payment in January 2023.

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

The following table summarizes the assets acquired in the Vyne APA:

($’s in thousands)

Identifiable intangibles:

Amzeeq intangible

Zilxi intangible

Fair value of net identifiable assets acquired

The intangible assets were valued using an income approach, while the inventory was valued using a final sales value less cost to dispose approach.

The Company’s finite-lived intangible assets consist of acquired intangible assets.

During the year ended December 31, 2023, the Company experienced lower net product revenues and gross profit levels for its Ximino products.

Based on these results, the Company revised the financial outlook and plans for its Ximino products.

The Company assessed the revised forecast for Ximino and determined that this constituted a triggering event, and the results of the analysis indicated the carrying amount was not expected to be recovered.

The Company recorded an intangible asset impairment charge of $ 3.1 million during the year ended December 31, 2023.

This non-cash charge was recorded to loss on impairment of intangible assets in the consolidated statements of operations.

The table below provides a summary of the Company’s intangible assets at December 31, 2024 and 2023, respectively:

7 unchanged sentences

Amortization expense is recorded as a component of cost of goods sold in the Company’s consolidated statements of operations.

The Company’s finite-lived intangible assets consist of acquired intangible assets.

On November 1, 2024, the FDA approved the Company’s drug candidate for the treatment of inflammatory lesions of rosacea in adults, Emrosi TM .

The approval triggered a $ 15.0 million milestone payment, which the Company capitalized as an acquired intangible asset.

During the year ended December 31, 2023, the Company experienced lower net product revenues and gross profit levels for its Ximino products.

Based on these results, the Company revised the financial outlook and plans for its Ximino products.

The Company recorded an intangible asset impairment charge of $ 3.1 million during the year ended December 31, 2023.

This non-cash charge was recorded to loss on impairment of intangible assets in the consolidated statements of operations.

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

Future amortization of the Company’s intangible assets is as follows:

4 unchanged sentences

December 31, 2028

December 31, 2029

Asset not yet placed in service

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

LICENSES ACQUIRED

In June 2021, the Company entered a license, collaboration, and assignment agreement (the “DFD-29 Agreement”) to obtain 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”);

provided, that DRL retained certain rights to the program in select markets including Brazil, Russia, India and China.

Pursuant to the terms and conditions of the DFD-29 Agreement, the Company paid $ 10.0 million.

Based on the development and commercialization of DFD-29, additional contingent regulatory and commercial milestone payments totaling up to $ 158.0 million may also become payable by the Company.

The Company is required to pay royalties ranging from approximately ten percent to fifteen percent on net sales of the DFD-29 product, subject to certain reductions.

Additionally, the Company was required to fund and oversee the Phase 3 clinical trials beginning upon the license of DFD-29 in 2021.

The Phase 3 clinical trials substantially concluded in July 2023 upon the Company’s receipt of positive topline results from the trials.

From inception to date the Company has incurred approximately $ 23.8 million in costs associated with the development of DFD-29.

Assets and Licenses Acquired:

On June 29, 2021, the Company entered into a license, collaboration, and assignment agreement with Dr.

Reddy’s Laboratories, Ltd.

(“DRL”) to obtain the global rights for the development and commercialization of Emrosi TM (“Emrosi”), a late-stage development modified release oral minocycline that is being evaluated for the treatment of inflammatory lesions of rosacea (the “Emrosi Agreement”).

The Company acquired global rights to Emrosi, including in the U.S.

and Europe, except that DRL has retained certain rights to the program in select markets including Brazil, Russia, India, China and the Commonwealth of Independent States (“CIS”) countries.

Pursuant to the Emrosi Agreement, the Company agreed to make an upfront payment of $ 10.0 million, comprised of a $ 2.0 million payment upon execution and $ 8.0 million which was paid on September 29, 2021, 90 days following execution.

In addition, the Company paid two developmental milestones in 2024.

In April 2024 the Company paid a $ 3.0 milestone to DRL, based on FDA acceptance of the Company’s NDA application for Emrosi, and in December of 2024 the Company paid a $ 15.0 million milestone payment to DRL, which was triggered by the November 1, 2024 FDA marketing approval of Emrosi.

Upon the $ 15.0 million milestone payment, the assets related to Emrosi, including the NDA, regulatory documentation and intellectual property, transferred to the Company.

Pursuant to the Emrosi Agreement, the Company may be required to pay additional contingent regulatory, commercial, and corporate-based milestone payments, totaling up to $ 150.0 million.

Royalties ranging from ten percent to fourteen percent are payable on net sales of the product.

Royalties are payable in each country until the last-to-expire patent in such country expires.

Royalties are subject to a 50 % reduction in the event that a generic competitor launches in an applicable country where the Company markets and sells the product.

In March 2021, the Company executed an Asset Purchase Agreement (the “Qbrexza APA”) with Dermira, Inc., a subsidiary of Eli Lilly and Company (“Dermira”).

10 unchanged sentences

The term of the Accutane Agreement is ten years and renewable upon mutual agreement.

Each party may terminate the Accutane Agreement for an uncured material breach by the other party or for certain bankruptcy or insolvency related events.

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

party may terminate the Accutane Agreement for an uncured material breach by the other party or for certain bankruptcy or insolvency related events.

The Company may also terminate the Accutane Agreement without cause upon 180 days written notice to DRL.

Other License Agreements:

Maruho License Agreement

On August 31, 2023, the Company entered into a license agreement (the “New License Agreement”) with Maruho Ltd., the Company’s exclusive licensing partner in Japan (“Maruho”).

Under the terms of the New License Agreement, the Company granted an exclusive license to develop and commercialize Qbrexza for the treatment of primary axillary hyperhidrosis in the Territory.

Prior to the date of the New License Agreement, the Company and Maruho were party to an existing exclusive amended and restated license agreement (the “First A&R License Agreement”), under which Maruho acquired exclusive license rights to Qbrexza in Japan.

In connection with Journey’s entry into the New License Agreement, Journey and Maruho also entered into the Second Amended and Restated Exclusive License Agreement (the “Second A&R License Agreement”), which supersedes the First A&R License Agreement.

The Second A&R License Agreement contains modifications that remove Maruho’s obligation to pay Journey royalties on its net sales of Rapifort (the Japanese equivalent of Qbrexza) in Japan for sales occurring after October 1, 2023 and removes Maruho’s obligation to pay $ 10.0 million to Journey in the event that Maruho achieves net sales of at least ¥ 4 billion (yen) of Rapifort during a single fiscal year.

All other remaining potential milestone payment obligations, which aggregate to $ 45.0 million, remain in full force and effect.

Under the terms of the New License Agreement, in exchange for the exclusive rights to Qbrexza in the Territory, Maruho paid the Company a $ 19.0 million non-refundable upfront payment.

(“the payment”).

The Company accounted for the payment as “point-in-time” revenue as all performance obligations were satisfied at the time of the payment.

The payment is reflected as other revenue within the Company’s Consolidated Statements of Operations.

Maruho is also obligated to pay royalties to the Company related to sales of the product in the Territory equal to the corresponding rate payable by the Company to Dermira under the asset purchase agreement between Journey and Dermira.

The New License Agreement may be terminated by Maruho in its entirety or on a region-by-region basis for convenience upon 30 days ’ notice to the Company.

The Company does not have any obligation to assist in the regulatory approval efforts of Maruho under the New License Agreement in the Territory.

The arrangement with Maruho provides for the transfer of the following:

(i) an exclusive license of Qbrexza from Journey to Maruho, including all related patents and know-how, and (ii) a non-exclusive license from Journey to Maruho to manufacture or have manufactured drug substance and products outside of the Territory, but exclusively for the sale of products in the Territory.

Cutia License Agreement

In January 2022, as a part of the Vyne APA, the Company assumed a license agreement with Cutia Therapeutics (HK) Limited, a Hong Kong biopharmaceutical company with experience in developing pharmaceutical products in the greater China region (the “Cutia Agreement”).

Pursuant to the agreement, Cutia was granted an exclusive license to obtain regulatory approval of and commercialize Amzeeq (topical 4% minocycline foam) and Zilxi (topical 1.5% minocycline foam) in mainland China, Taiwan, Hong Kong and Macau.

The Company has agreed to supply the finished Licensed Products to Cutia for clinical and commercial use at an agreed price.

On November 11, 2024, Cutia received marketing approval for topical 4% minocycline foam from the National Medical Products Administration (the “NMPA”) of the People’s Republic of China (the “PRC”).

The approval triggered a $ 1.0 million dollar milestone payment to the Company.

The $ 1.0 million dollar milestone payment was recorded as a component of other revenue in the Company’s December 31, 2024 Consolidated Statements of Operations on the approval date of November 11, 2024.

See Note 16 below.

The Company received the cash payment from Cutia of $ 1.0 million on January 2, 2025.

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

FAIR VALUE MEASUREMENTS

6 unchanged sentences

Cash and cash equivalents

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

The Company did not carry any level 2 or level 3 assets or liabilities at December 31, 2024 or December 31, 2023.

No transfers occurred between level 1, level 2, and level 3 instruments during December 31, 2024 and 2023.

RELATED PARTY AGREEMENTS

4 unchanged sentences

In addition, the Company reimburses Fortress for various payroll-related costs and selling, general and administrative costs incurred by Fortress for the benefit of the Company.

For the year ended December 31, 2023 and 2022, the Company recorded related party expenses to Fortress of approximately $ 0.1 million and $ 0.1 million, respectively.

The due to related party liability at December 31, 2023 and 2022, were $ 0.2 million and $ 0.4 million, respectively, and primarily relate to reimbursable expenses incurred by Fortress on behalf of the Company.

For the year ended December 31, 2024 and 2023, the Company recorded related party expenses to Fortress of less than $ 0.1 million and $ 0.1 million, respectively.

The due to related party liability at December 31, 2024 and 2023, was $ 0.5 million and $ 0.2 million, respectively, and primarily relate to reimbursable expenses incurred by Fortress on behalf of the Company.

The Company would have incurred these costs irrespective of the relationship with Fortress.

5 unchanged sentences

Accrued compensation

Accrued royalties payable

Return reserve

Accrued inventory

Accrued research and development

Accrued royalties payable

Accrued inventory in-transit and other costs

Accrued marketing and market access

Accrued legal, accounting and tax

Accrued iPledge program

Total accrued expenses

INSTALLMENT PAYMENTS — LICENSES

The following tables show the details of the Company’s installment payments – licenses for the years ended December 31, 2023 and 2022:

December 31, 2023

($’s in thousands)

Installment payments - licenses

imputed interest

Sub-total installment payments - licenses

December 31, 2022

($’s in thousands)

Installment payments - licenses

imputed interest

Sub-total installment payments - licenses

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

INSTALLMENT PAYMENTS

Ximino Settlement

In August 2024, the Company executed a settlement agreement (the “Settlement Agreement”) to settle amounts owed by the Company to Sun Pharmaceutical Industries, Inc.

(“Sun”) pursuant to the Ximino Asset Purchase Agreement.

The Company owed $ 3.0 million of license installment payments to Sun associated with the license of Ximino.

Pursuant to the Settlement Agreement, the Company agreed to settle the total outstanding obligation owed to Sun for a total of $ 1.9 million, payable in three installments:

1) $ 625.0 thousand upon execution of the Settlement Agreement, 2) $ 625.0 thousand on December 1, 2024, and 3) $ 625.0 thousand on January 15, 2025.

The Company accounted for the settlement of the license installment payment as a gain of $ 1.1 million for the difference between the carrying value of the license installment payments of $ 3.0 million and the settlement amount of $ 1.9 million.

The Company recorded the difference of $ 1.1 million as a Gain on extinguishment of debt in the Condensed Consolidated Statements of Operations.

OPERATING LEASE OBLIGATIONS

The Company leases 3,801 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.

In July 2024, the Company amended the lease to extend the lease term for an additional 25 months at an annual rate of approximately $ 0.1 million.

The amended lease commenced on February 1, 2025 and expires on February 28, 2027.

The Company recorded rent expense as follows (dollars in thousands):

6 unchanged sentences

Cash paid for amounts included in the measurement of lease liabilities

Right-of-use assets exchanged for new operating lease liabilities

Weighted-average remaining lease term - operating leases

13 unchanged sentences

Net carry amount (Long-term)

December 31, 2022

($’s in thousands)

Discount & Fees

Deferred cash payment

EWB Revolving LOC

Total Short-Term Debt

EWB Term Loan (Long-term)

Total Debt & Obligations

SWK Long-Term Debt

On December 27, 2023, the Company entered into a Credit Agreement with SWK.

The Credit Agreement provides for a term loan Credit Facility in the original principal amount of up to $ 20.0 million.

On the Closing Date, the Company drew $ 15.0 million.

The remaining $ 5.0 million may be drawn upon request by the Company within 12 months after the Closing Date.

Term Loans under the Credit Facility mature on December 27, 2027.

The Term Loans accrue interest which is payable quarterly in arrears.

The Term Loans bear interest at a rate per annum equal to the three-month term SOFR (subject to a SOFR floor of 5 %) plus 7.75 %.

On December 27, 2023, the Company entered into a Credit Agreement (the “Credit Agreement”) with SWK.

The Credit Agreement provides for a term loan facility (the “Credit Facility”) in the original principal amount of up to $ 20.0 million.

On the closing date of the facility, the Company drew $ 15.0 million.

On June 26, 2024, the Company drew the remaining $ 5.0 million under the Credit Facility.

On July 9, 2024, the Company entered into an amendment (the “Amendment”) to the Credit Agreement with SWK.

The Amendment increased the original principal amount of the Credit Facility from $ 20.0 million to $ 25.0 million.

The $ 5.0 million of additional principal added in the Amendment was contractually required to be drawn upon FDA approval of Emrosi, subject to the Company receiving approval on or before June 30, 2025.

The Company received FDA approval for Emrosi on November 1, 2024 and the Company drew on the remaining $ 5.0 million on November 25, 2024.

Term loans under the Credit Facility mature on December 27, 2027, accrue interest which is payable quarterly in arrears and bear interest at a rate per annum equal to the three-month term SOFR (subject to a SOFR floor of 5 %) plus 7.75 %.

The interest rate resets quarterly.

9 unchanged sentences

The fair value of the debt approximates its carrying value.

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

The SWK Credit Facility also includes both revenue and liquidity covenants, restrictions as to payment of dividends, and is secured by substantially all assets of the Company.

As of December 31, 2024, the Company was in compliance with the financial covenants under the SWK Credit Facility.

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

As of December 31, 2024, the contractual maturities of the long-term debt, including the payment of the exit fee, are as follows (dollars in thousands):

3 unchanged sentences

Term-loan (long-term)

East West Bank Line of Credit and Long-Term Debt

The Company was previously party to a Loan and Security Agreement, dated March 31, 2021 (as amended, the “EWB Facility”), with East West Bank (“EWB”), under which EWB made a $ 20.0 million term loan and a $ 10.0 million revolving line of credit available to the Company.

During 2023, the Company voluntarily repaid the entire $ 20.0 million outstanding term loan principal balance under the EWB Facility.

The repayment satisfied all of the Company’s outstanding debt obligations under the EWB Facility.

The Company has no further obligations to EWB.

INTEREST EXPENSE AND FINANCING FEES

9 unchanged sentences

In addition, the Company is required to pay royalties to such licensors based on a percentage of net sales of each drug candidate following regulatory marketing approval.

For additional information on future milestone payments and royalties, see Note 4 and Note 6.

For additional information on future milestone payments and royalties, see Note 5.

STOCKHOLDERS’ EQUITY

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.

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

Voting Rights

3 unchanged sentences

Thus, the holders of the Class A Common Stock will at all times constitute a voting majority.

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

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.

4 unchanged sentences

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.

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 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 the Company’s 2024 Annual Meeting of Stockholders, held on June 25, 2024, the Company’s stockholders approved, among other matters, a second amendment to the Plan to increase the number of shares of Common Stock issuable under the Plan by 3,000,000 to 10,642,857 .

At December 31, 2024 there were 2,806,824 shares available for issuance under the Plan.

4 unchanged sentences

The Company estimates the fair value of stock options on the grant date by applying the Black-Scholes option pricing valuation model.

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

In 2023, the Company’s Board of Directors adopted, and stockholders approved, the Journey Medical Corporation 2023 Employee Stock Purchase Plan (the “2023 ESPP”).

7 unchanged sentences

Total non-cash compensation expense related to share-based compensation included in operating expense

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

Stock Options

1 unchanged sentence

Risk-free interest rate

3.45 % - 4.44 %

Expected volatility

89.09 % - 101.75 %

Weighted average expected volatility

7 unchanged sentences

Options vested and exercisable at December 31, 2024

For the years ended December 31, 2023 and 2022, the Company issued 82,300 and 155,649 shares, respectively, of Common Stock upon the exercise of outstanding stock options and received proceeds of $ 120,555 and $ 142,330 , respectively.

For the years ended December 31, 2024 and 2023, the Company issued 122,510 and 82,300 shares, respectively, of Common Stock upon the exercise of outstanding stock options and received proceeds of $ 0.2 million and $ 0.1 million, respectively.

For the years ended December 31, 2024 and 2023, approximately $ 0.3 million and $ 0.5 million, respectively, of stock option compensation cost was charged against operations.

At December 31, 2024, the Company had unrecognized share-based compensation expense related to all unvested options of $ 0.4 million, which the Company expects to recognize over a weighted-average period of approximately 1.5 years.

The aggregate intrinsic value in the previous table reflects the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the period and the exercise price of the options, multiplied by the number of in-the-money stock options) that would have been received by the option holders had all option holders exercised their options on December 31, 2024.

The intrinsic value of the Company’s stock options changes based on the closing price of the Company’s common stock.

JOURNEY MEDICAL CORPORATION

3 unchanged sentences

Unvested balance at December 31, 2023

( 1,058,374 )

Unvested balance at December 31, 2024

2 unchanged sentences

At December 31, 2024 approximately 2,339,961 of RSU’s remained unvested and there was approximately $ 5.6 million of unrecognized compensation cost related to RSUs, which the Company expects to recognize over a weighted-average period of approximately 1.7 years.

On July 9, 2024, the Board approved and adopted the Journey Medical Corporation Deferred Compensation Plan (the “Deferred Compensation Plan”), which is considered a non-qualified deferred compensation plan.

As part of the Deferred Compensation Plan, the Company offers certain non-employee members of the Board (“Director Participants”) and select executive-level employees (the “Executive Participants”) the ability to defer up to 100 % of the payment for services and annual bonuses, respectively, in the form of RSU’s.

As of December 31, 2024, the Company had no outstanding deferred RSU’s.

Employee Stock Purchase Plan

9 unchanged sentences

and an expected dividend yield ( 0 %).

The Company recorded $ 46,700 of stock-based compensation under the 2023 ESPP for the year ended December 31, 2023.

As of December 31, 2023, there was unrecognized stock-based compensation expense of $ 9,524 related to the current ESPP offering period, which ends January 31, 2024.

The Company recorded $ 0.2 million of stock-based compensation under the 2023 ESPP for the year ended December 31, 2024.

As of December 31, 2024, there was unrecognized stock-based compensation expense of approximately $ 9,026 related to the current ESPP offering period, which ends January 31, 2025.

REVENUES FROM CONTRACTS WITH CUSTOMERS

7 unchanged sentences

($ in thousands)

Other / legacy

Total product revenues

2 unchanged sentences

($in thousands)

Milestone payment from Cutia

Non-refundable upfront payment from Maruho

Net milestone payment from Maruho

Royalties on sales of Rapifort® Wipes 2.5 %

Total other revenue

Other revenue reflects royalties on sales of Rapifort® Wipes 2.5 % in Japan, from Maruho, the Company’s exclusive out-licensing partner in Japan.

Other revenue for the year ended December 31, 2023 also reflects a net $ 19.0 million payment from Maruho under the New License Agreement.

Other revenue for the year ended December 31, 2022 also reflects a net $ 2.5 million milestone payment from Maruho.

In January 2022, Maruho received manufacturing and marketing approval in Japan for Rapifort Wipes 2.5 % (Japanese equivalent to U.S.

FDA approved Qbrexza ® ), for the treatment of primary axillary hyperhidrosis, triggering the net payment.

Maruho License Agreement

On August 31, 2023, the Company entered into the New License Agreement with Maruho.

Under the terms of the New License Agreement, the Company granted an exclusive license to develop and commercialize Qbrexza for the treatment of primary axillary hyperhidrosis in the Territory.

All other remaining potential milestone payment obligations, which aggregate to $ 45.0 million, remain in full force and effect.

Under the terms of the New License Agreement, in exchange for the exclusive rights to Qbrexza in the Territory, Maruho paid the Company a $ 19.0 million non-refundable upfront payment.

The New License Agreement may be terminated by Maruho in its entirety or on a region-by-region basis for convenience upon 30 days ’ notice to the Company.

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

The Company does not have any obligation to assist in the regulatory approval efforts of Maruho under the New License Agreement in the Territory.

The arrangement with Maruho provides for the transfer of the following:

Other revenue for the year ended December 31, 2024 reflects a $ 1.0 million milestone payment from Cutia triggered by the November 11, 2024 marketing approval Cutia received for topical 4% minocycline foam from the NMPA of the PRC.

Other revenue for the year ended December 31, 2023 reflects a net $ 19.0 million payment from Maruho under the New License Agreement and $ 0.5 million in sales-based royalty payments based on the sales of Rapifort® Wipes 2.5 % in Japan, from Maruho.

Significant Customers

As of December 31, 2024, one of the Company’s customers accounted for more than 10.0% of its total accounts receivable balance at 10.3 %.

As of December 31, 2022, two of the Company’s customers accounted for more than 10.0% of its total accounts receivable balance at 16.7 % and 10.4 %.

As of December 31, 2023, one of the Company’s customers accounted for more than 10.0% of its total accounts receivable balance at 13.0 %.

For the year ended December 31, 2024 and 2023, none of the Company’s customers accounted for more than 10.0% of its total gross product revenue.

LOSS RECOVERY

In September 2021, the Company was the victim of a business email compromise cybersecurity incident that affected its accounts payable function and led to approximately $ 9.5 million in wire transfers being misdirected to fraudulent accounts.

Upon discovery of the fraud, the Company retained third-party cybersecurity experts and reported the matter to the Federal Bureau of Investigation (the “FBI”).

The Company recorded the loss as a separate component of operating expenses in its 2021 consolidated financial statements.

After a series of investigations, the FBI was able to trace and seize a portion of the misappropriated funds.

The Company received recovered funds of $ 4.6 million on December 4, 2024.

The proceeds from the recovery were recorded and classified within the Company’s Consolidated Statements of Operations as a separate component of operating expenses, consistent with the initial recognition of the loss in 2021.

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

The components of the income tax provision are as follows:

5 unchanged sentences

Total income tax expense

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards.

14 unchanged sentences

Deferred tax liability:

Section 481(a) adjustment on reserve on sales return, discount and bad debt

Right-of-use asset

Deferred tax assets, net

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

A reconciliation of the statutory tax rates and the effective tax rates is as follows:

15 unchanged sentences

The Federal NOL carryforwards do not expire, but $ 25.8 million of the state NOL carryforwards expire if not utilized prior to 2043.

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

Utilization of the U.S.

1 unchanged sentence

These ownership changes may limit the amount of NOL carryforwards that can be utilized annually to offset future taxable income and tax liabilities, respectively.

The Company has performed calculations to support that its NOL carryovers are subject to limitations under section 382 (“382 Limitations”).

Based on the analysis of the NOL carryovers subject to the 382 Limitations, the Company has concluded that the 382 Limitations would not prevent the Company from utilizing all of its NOL carryovers prior to expiration.

The Company has performed calculations through December 31, 2023 to support that its NOL carryovers are subject to limitations under section 382 (“382 Limitations”).

The Company is in the process of updating the study through December 31, 2024.

As such, going-forward utilization of the net operating loss and credit carryforwards may be subject to an additional annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986.

At December 31, 2024 and 2023, the Company did not have any significant uncertain tax positions.

The Company will recognize interest and penalties related to uncertain tax positions in income tax expense.

As of December 31, 2024 and 2023, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s consolidated statements of operations.

The Company does not anticipate a material change to unrecognized tax benefits in the next twelve months.

The Company is subject to U.S.

2 unchanged sentences

The expiration of the statute of limitations related to the various state income and franchise tax returns varies by state.

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

NET (LOSS) INCOME PER COMMON SHARE

11 unchanged sentences

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, 2024 and 2023.

JOURNEY MEDICAL CORPORATION

Notes to Financial Statements

SEGMENT INFORMATION

The Company’s reportable segment net loss for the years ending December 31, 2024 and 2023 consisted of the following:

Year Ended December 31,

($in thousands)

Segment Expenses (1)

Cost of goods sold – (excluding amortization of acquired intangible assets)

Research and development

Selling, general and administrative

Employee related

Sales, operations, outside services and consulting

Marketing related

Stock compensation

Legal and administrative

Product compliance expense

Office and administrative

Other segment items (2)

Segment expenses

Reconciliation of net loss:

Adjustments and reconciling items

(1) The significant expense amounts align with the expenses that the CODM is regularly provided with to assess performance and allocate resources.

(2) Other segment items for the reportable segment include amortization of intangible assets, loss on impairment of intangible assets, loss recovery, interest income (expense), gain on extinguishment of debt, foreign exchange transaction losses and income tax expense.

SUBSEQUENT EVENTS

1 unchanged sentence

Accordingly, management has evaluated subsequent events through the date these financial statements are issued and has determined that no subsequent events require disclosure in these financial statements.

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.

Pursuant to the requirements of the Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Journey Medical Corporation

March 26, 2025

/s/ Claude Maraoui

Claude Maraoui

President, Chief Executive Officer, and Director

President and Chief Executive Officer

(Principal Executive Officer)

March 26, 2025

/s/ Joseph Benesch

Joseph Benesch

Chief Financial Officer

(Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

10 unchanged sentences

/s/ Joseph Benesch

Interim Chief Financial Officer

Chief Financial Officer

March 26, 2025

6 unchanged sentences

March 26, 2025

/s/ Miranda Toledano

March 26, 2025

Miranda Toledano

/s/ Michael Pearce

March 26, 2025

Michael Pearce

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures