TherapeuticsMD, Inc. 10-Q

Item 1. Financial statements TherapeuticsMD, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited – in thousands, except per share data) March 31, 2023 December 31, 2022 Assets: Current assets: Cash $ 17,248 $ 38,067 Restricted cash — 11,250 Royalty receivable, current portion 2,041 — Prepaid and other current assets 5,446 6,034 Total current assets 24,735 55,351 Fixed assets, net 58 78 License rights and other intangible assets, net 6,877 6,943 Right of use assets 7,406 7,580 Royalty receivable, long term 20,272 20,253 Other non-current assets 253 253 Total assets $ 59,601 $ 90,458 Liabilities and stockholders’ equity: Current liabilities: Accounts payable $ 2,326 $ 2,162 Accrued expenses and other current liabilities 14,360 18,846 Current liabilities of discontinued operations 2,650 25,831 Total current liabilities 19,336 46,839 Operating lease liabilities 7,135 7,369 Other non-current liabilities 1,106 1,107 Total liabilities 27,577 55,315 Commitments and contingencies (Note 9) Stockholders’ equity: Preferred stock, par value $ 0.001 ; 10,000 shares authorized, no ne issued — — Common stock, par value $ 0.001 ; 12,000 shares authorized, 9,548 and 9,498 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively 10 9 Additional paid-in capital 974,980 974,497 Accumulated deficit ( 942,966 ) ( 939,363 ) Total stockholders’ equity 32,024 35,143 Total liabilities and stockholders’ equity $ 59,601 $ 90,458 The accompanying notes are an integral part of these condensed consolidated financial statements. 1 Table of Contents TherapeuticsMD, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited – in thousands, except per share data) Three Months Ended March 31, 2023 2022 Revenue, net: License and service $ 416 $ 695 Total revenue, net 416 695 Cost of revenue — 695 Gross profit 416 — Operating expenses: Selling, general and administrative 3,056 17,546 Depreciation & amortization 27 329 Total operating expenses 3,083 17,875 Income (loss) from operations ( 2,667 ) ( 17,875 ) Other (expense) income: Interest expense and other financing costs ( 50 ) — Miscellaneous income 407 — Total other income, net 357 — Income (loss) from continuing operations before income taxes ( 2,310 ) ( 17,875 ) Income (loss) from discontinued operations, net of income taxes ( 1,293 ) ( 31,146 ) Net income (loss) $ ( 3,603 ) $ ( 49,021 ) Income (loss) per common share, basic and diluted: Continuing operations ( 0.24 ) ( 2.08 ) Discontinued operations, net ( 0.13 ) ( 3.62 ) Net income (loss) per common share, basic and diluted $ ( 0.37 ) $ ( 5.70 ) Weighted average common shares, basic 9,754 8,614 Weighted average common shares, diluted 9,754 8,614 Net income (loss) $ ( 3,603 ) $ ( 49,021 ) Other comprehensive income — — Comprehensive income (loss): $ ( 3,603 ) $ ( 49,021 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 2 Table of Contents TherapeuticsMD, Inc. and Subsidiaries Condensed Consolidated Statements of Stockholders’ Equity (Deficit) (Unaudited – in thousands) Common Stock Additional Paid in Capital Accumulated Deficit Total Shares Amount Balance, January 1, 2023 9,498 $ 9 $ 974,497 $ ( 939,363 ) $ 35,143 Shares issued for vested stock compensation and warrants 455 1 — — 1 Share-based compensation — — 483 — 483 Net loss — — — ( 3,603 ) ( 3,603 ) Balance, March 31, 2023 9,953 $ 10 $ 974,980 $ ( 942,966 ) $ 32,024 Balance, January 1, 2022 8,598 $ 9 $ 957,730 $ ( 1,051,360 ) $ ( 93,621 ) Shares issued for vested restricted stock units 71 — — — — Share-based compensation — — 2,062 — 2,062 Net loss — — — ( 49,021 ) ( 49,021 ) Balance, March 31, 2022 8,669 $ 9 $ 959,792 $ ( 1,100,381 ) $ ( 140,580 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Table of Contents TherapeuticsMD, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flow s (Unaudited – in thousands) Three Months Ended March 31, 2023 2022 Cash flows from operating activities: Net loss $ ( 3,603 ) $ ( 49,021 ) Less: Loss from discontinued operations, net of tax 1,293 31,146 Net income (loss) from continuing operations ( 2,310 ) ( 17,875 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 27 329 Write-off of patents and trademarks 59 — Share-based compensation 483 2,061 Other ( 60 ) ( 7 ) Changes in operating assets and liabilities: Other assets ( 19 ) — Prepaid and other current assets ( 1,453 ) 1,052 Accounts payable 164 ( 502 ) Accrued expenses and other current liabilities ( 4,486 ) ( 2,930 ) Other non-current liabilities ( 1,106 ) — Total adjustments ( 6,391 ) 3 Net cash used in continuing operating activities ( 8,701 ) ( 17,872 ) Cash flows from investing activities: Payment of patent related costs — ( 170 ) Purchase of fixed assets — ( 42 ) Net cash used in continuing investing activities — ( 212 ) Cash flows from financing activities: Repayments of debt — ( 5,000 ) Net cash used in continuing financing activities — ( 5,000 ) Discontinued operations: Net cash used in operating activities ( 24,474 ) ( 11,654 ) Net cash provided by financing activities 1,106 — Net cash used in discontinued operations ( 23,368 ) ( 11,654 ) Net (decrease) increase in cash ( 32,069 ) ( 34,738 ) Cash and restricted cash – continuing operations, beginning of period 49,317 65,122 Cash and restricted cash – discontinued operations, beginning of period — — Total cash and restricted cash, end of period $ 17,248 $ 30,384 Supplemental disclosure of cash flow information: Interest paid $ — $ 5,364 Supplemental disclosure of noncash financing activities: Paid in kind (“PIK”) debt financing fees with corresponding increase in debt $ — $ 30,000 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Table of Contents TherapeuticsMD, Inc. and Subsidiaries Notes to the Condensed Consolidated Financial Statements (Unaudited) 1. Business, basis of presentation, new accounting standards and summary of significant accounting policies General TherapeuticsMD, Inc. (the “Company”), a Nevada corporation, and its condensed consolidated subsidiaries are referred to collectively in this Quarterly Report on Form 10-Q (“10-Q Report”) as “TherapeuticsMD,” “we,” “our” and “us.” This 10-Q Report includes trademarks, trade names and service marks, such as TherapeuticsMD ® , vitaMedMD ® , BocaGreenMD ® , vitaCare TM , IMVEXXY ® , BIJUVA ® and ANNOVERA ® , which are protected under applicable intellectual property laws and are the property of, or licensed by or to, us. Solely for convenience, trademarks, trade names and service marks referred to in this 10-Q Report may appear without the ® , TM or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, trade names and service marks. We do not intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display should not be construed to imply a relationship with, or endorsement or sponsorship of us by, these other parties. TherapeuticsMD was previously a women’s healthcare company with a mission of creating and commercializing innovative products to support the lifespan of women from pregnancy prevention through menopause. In December 2022, we changed our business to become a pharmaceutical royalty company, currently receiving royalties on products licensed to pharmaceutical organizations that possess commercial capabilities in the relevant territories. On December 30, 2022 (the “Closing Date”), we completed a transaction (the “Mayne Transaction”) with Mayne Pharma LLC, a Delaware limited liability company (“Mayne Pharma”) and subsidiary of Mayne Pharma Group Limited, an Australian public company, pursuant to which we and our subsidiaries (i) granted Mayne Pharma an exclusive license to commercialize our IMVEXXY, BIJUVA and prescription prenatal vitamin products sold under the BocaGreenMD ® and vitaMedMD ® brands (collectively, the “Licensed Products”) in the United States and its possessions and territories, (ii) assigned to Mayne Pharma our exclusive license to commercialize ANNOVERA (together with the Licensed Products, collectively, the “Products”) in the United States and its possessions and territories, and (iii) sold certain other assets to Mayne Pharma in connection therewith. Pursuant to a License Agreement, dated December 4, 2022, between TherapeuticsMD and Mayne Pharma (the “Mayne License Agreement”), we granted Mayne Pharma, on the Closing Date, (i) an exclusive, sublicensable, perpetual, irrevocable license to research, develop, register, manufacture, have manufactured, market, sell, use, and commercialize the Licensed Products in the United States and its possessions and territories and (ii) an exclusive, sublicensable, perpetual, irrevocable license to manufacture, have manufactured, import and have imported the Licensed Products outside the United States for commercialization in the United States and its possessions and territories. Pursuant to the Mayne License Agreement, Mayne Pharma will pay us milestone payments of each of (i) $ 5.0 million if aggregate net sales of all Products in the United States during a calendar year reach $ 100.0 million, (ii) $ 10.0 million if aggregate net sales of all Products in the United States during a calendar year reach $ 200.0 million and (iii) $ 15.0 million if aggregate net sales of all Products in the United States during a calendar year reach $ 300.0 million. Further, Mayne Pharma will pay us royalties on net sales of all Products in the United States at a royalty rate of 8.0 % on the first $ 80.0 million in annual net sales and 7.5 % on annual net sales above $ 80.0 million, subject to certain adjustments, for a period of 20 years following the Closing Date. The royalty rate will decrease to 2.0 % on a Product-by-Product basis upon the earlier to occur of (i) the expiration or revocation of the last patent covering a Product and (ii) a generic version of a Product launching in the United States. Mayne Pharma will pay us minimal annual royalties of $ 3.0 million per year for 12 years, 5 Table of Contents adjusted for inflation at an annual rate of 3 %, subject to certain further adjustments, including as described below. Upon the expiry of the 20 -year royalty term, the licenses granted to Mayne Pharma under the Mayne License Agreement will become a fully paid-up and royalty free license for the Licensed Products. Pursuant to a Transaction Agreement, dated December 4, 2022, between TherapeuticsMD and Mayne Pharma (the “Transaction Agreement”), we sold to Mayne Pharma, at closing, certain assets for Mayne Pharma to commercialize the Products in the United States, including, with the Population Council’s consent, our exclusive license from the Population Council to commercialize ANNOVERA (the “Transferred Assets”). The total consideration from Mayne Pharma to TherapeuticsMD for the purchase of the Transferred Assets and the grant of the licenses under the Mayne Transaction Agreement was (i) a cash payment of $ 140.0 million at closing, (ii) a cash payment of approximately $ 12.1 million at closing for the acquisition of net working capital as determined in accordance with the Transaction Agreement and subject to certain adjustments, (iii) a cash payment of approximately $ 1.0 million at closing for prepaid royalties in connection with the Mayne License Agreement Amendment (as defined below) and (iv) the right to receive the contingent consideration set forth in the Mayne License Agreement, as amended. The acquisition of net working capital was determined in accordance with the Transaction Agreement and included significant estimates which could change materially for a period of up to two years following the Closing Date. On the Closing Date, TherapeuticsMD and Mayne Pharma entered into Amendment No. 1 to the Mayne License Agreement (the “Mayne License Agreement Amendment”). Pursuant to the Mayne License Agreement Amendment, Mayne Pharma agreed to pay us approximately $ 1.0 million in prepaid royalties on the Closing Date. The prepaid royalties will reduce the first four quarterly payments that would have otherwise been payable pursuant to the Mayne License Agreement by an amount equal to $ 257 thousand per quarterly royalty payment plus interest calculated at 19 % per annum accruing from the Closing Date until the date such quarterly royalty payment is paid to us. In addition, the parties agreed that Mayne Pharma will reduce one quarterly royalty payment (other than the first quarterly royalty payment) otherwise payable to TherapeuticsMD by $ 1.5 million in consideration of Mayne Pharma assuming our obligations under a long-term services agreement (see the section entitled “vitaCare divestiture” below for a discussion of the long-term services agreement), including our minimum payment obligations thereunder. As part of the transformation that included the Mayne License Agreement, historical results of commercial operations for all periods prior to the Closing Date have been reflected as discontinued operations in our condensed consolidated financial statements. Assets and liabilities associated with the commercial business are classified as assets and liabilities of discontinued operations in our condensed consolidated balance sheets. Additional disclosures regarding discontinued operations are provided in Note 2 of our condensed consolidated financial statements. We also have license agreements with strategic partners to commercialize IMVEXXY and BIJUVA outside of the U.S. • In July 2018, we entered into a license and supply agreement (the “Knight License Agreement”) with Knight Therapeutics Inc. (“Knight”) pursuant to which we granted Knight an exclusive license to commercialize IMVEXXY and BIJUVA in Canada and Israel. • In June 2019, we entered into an exclusive license and supply agreement (the “Theramex License Agreement”) with Theramex HQ UK Limited (“Theramex”) to commercialize IMVEXXY and BIJUVA outside of the U.S., excluding Canada and Israel. In 2021, Theramex secured regulatory approval for BIJUVA in certain European countries and began commercialization efforts in those countries. In connection with our transformation into a pharmaceutical royalty company, the termination of our executive management team (except for Mr. Marlan Walker, our former General Counsel and current Chief Executive 6 Table of Contents Officer) and all other employees was completed by December 31, 2022. Severance obligations for all employees other than executive officers were paid in full in January 2023 and severance obligations for terminated executive officers will be paid in accordance with their employment agreements and separation agreements as previously disclosed. As of December 31, 2022 and March 31, 2023, we employed one full-time employee primarily engaged in an executive position. We have also entered into consulting agreements with certain former members of our management team who support our relationship with current partners and assist with certain financial, legal and regulatory matters and the continued wind-down of our historical business operations. vitaCare Divestiture On April 14, 2022, we completed the divestiture of our former subsidiary vitaCare Prescription Services, Inc. (“vitaCare”) with the sale of all of vitaCare’s issued and outstanding capital stock (the “vitaCare Divestiture”). We received net proceeds of $ 142.6 million, after deducting transaction costs of $ 7.2 million, and we recognized a gain on sale of business of $ 143.4 million. Included in the net proceeds amount was $ 11.3 million of customary holdbacks as provided in the stock purchase agreement (the “Purchase Agreement”) which we received in 2023. Additionally, the vitaCare Divestiture provides that we may receive up to an additional $ 7.0 million in earn-out consideration, contingent upon vitaCare’s financial performance through 2023 as determined in accordance with the terms of the Purchase Agreement, however we do not believe this earnout will be realized. We will record the contingent consideration at the settlement amount if and when the consideration is realized or realizable. The Purchase Agreement contains customary representations and warranties, covenants, and indemnities of the parties thereto. The commitments under a long-term services agreement related to vitaCare were transferred to Mayne Pharma as part of the Mayne Transaction. In addition, under the Mayne License Agreement Amendment, Mayne Pharma will reduce one quarterly royalty payment (other than the first quarterly royalty payment) otherwise payable to us by $ 1.5 million in consideration of Mayne Pharma assuming our obligations under the long-term services agreement related to vitaCare. The divestiture of vitaCare was determined to be a component of discontinued operations in December 2022, when we changed our business by becoming a royalty company and as a result vitaCare activities were reclassified to discontinued operations for the three months ended March 31, 2023 and 2022. COVID-19 With multiple variant strains of the SARS-Cov-2 virus and the COVID-19 disease that it causes (collectively, “COVID-19”) still circulating, we continue to be subject to risks and uncertainties in connection with the COVID-19 pandemic. The extent of the future impact of the COVID-19 pandemic on our business continues to be highly uncertain and difficult to predict. As of the date of issuance of these condensed consolidated financial statements, the future extent to which the COVID-19 pandemic may continue to materially impact our financial condition, liquidity, or results of operations remains uncertain and difficult to predict. Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business as a result of any economic recession or depression that has occurred or may occur in the future. Going concern On December 4, 2022, we entered into agreements with Mayne Pharma pursuant to which we granted Mayne Pharma an exclusive license to commercialize IMVEXXY, BIJUVA, and prescription prenatal vitamin products (in the United States and its possessions and territories), (ii) assign to Mayne Pharma our exclusive license to commercialize ANNOVERA in the United States and its possessions and territories, and (iii) sell certain other assets to Mayne Pharma. 7 Table of Contents The total consideration from Mayne Pharma to TherapeuticsMD for the purchase of the Transferred Assets and the grant of the licenses under the Mayne License Agreement consisted of (i) a cash payment of $ 140.0 million at closing, (ii) a cash payment of approximately $ 12.1 million at closing for the acquisition of net working capital subject to certain adjustments, (iii) a cash payment of approximately $ 1.0 million at closing for prepaid royalties in connection with the Mayne License Agreement Amendment and (iv) the right to receive the contingent consideration set forth in the Mayne License Agreement, as amended. On the Closing Date, we repaid all obligations under the Financing Agreement, dated as of April 24, 2019, as amended, with Sixth Street Specialty Lending, Inc., as administrative agent, the various lenders from time-to-time party thereto, and certain of our subsidiaries party thereto from time to time as guarantors (the “Financing Agreement”) and the Financing Agreement was terminated. Following the transaction with Mayne Pharma, our primary source of revenue is from royalties on products licensed to pharmaceutical organizations that possess commercial capabilities in the relevant territories. We may need to raise additional capital to provide additional liquidity to fund our operations until we become cash flow positive. To address our capital needs, we may pursue various equity and debt financing and other alternatives. The equity financing alternatives may include the private placement of equity, equity-linked, or other similar instruments or obligations with one or more investors, lenders, or other institutional counterparties or an underwritten public equity or equity-linked securities offering. Our ability to sell equity securities may be limited by market conditions, including the market price of our common stock, and our available authorized shares. To the extent that we raise additional capital through the sale of such securities, the ownership interests of our existing stockholders will be diluted, and the terms of these new securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders. If we are not successful in obtaining additional financing, we could be forced to discontinue or curtail our business operations, sell assets at unfavorable prices, or merge, consolidate, or combine with a company with greater financial resources in a transaction that might be unfavorable to us. If Mayne Pharma’s sales of IMVEXXY, BIJUVA, or ANNOVERA are delayed, if the net working capital settlement with Mayne Pharma under the Transaction Agreement is greater than estimated, if we are unsuccessful with future financings or if the continued impact of the COVID-19 pandemic on us or the third-parties we or our licensees rely on or the supply chains related to the third-party contract manufacturers are worse than we anticipate, our existing cash reserves may be insufficient to satisfy our liquidity requirements. The potential impact of these factors in conjunction with the uncertainty of the capital markets raises substantial doubt about our ability to continue as a going concern for the next twelve months from the issuance of these financial statements. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. Basis of presentation We prepared the condensed consolidated financial statements included in this 10-Q Report following the requirements of the United States (“U.S.”) Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain notes or other financial information that are normally required by accounting principles generally accepted in the U.S. (“U.S. GAAP”) for complete financial statements can be condensed or omitted. However, except as disclosed herein, there has been no material change in the information disclosed in the notes included in our 2022 Annual Report on Form 10-K (the “2022 10-K Report”). As part of the transformation as a result of the Mayne Transaction, historical results of commercial operations for all periods prior to the Closing Date have been reflected as discontinued operations in the condensed consolidated financial statements. Assets and liabilities associated with the commercial business are classified as 8 Table of Contents assets and liabilities of discontinued operations in the condensed consolidated balance sheet. Additional disclosures regarding discontinued operations are provided in Note 2 of the condensed consolidated financial statements. Revenues, expenses, assets, liabilities, and equities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be representative of those for the full year. In our opinion, all adjustments necessary for a fair statement of the financial statements, which are of a normal and recurring nature, have been made for the interim periods reported. The information included in this 10-Q Report should be read in conjunction with the condensed consolidated financial statements and accompanying notes included in our 2022 10-K Report. Certain amounts in the condensed consolidated financial statements and accompanying notes may not add due to rounding, and all percentages have been calculated using unrounded amounts. New accounting standards Adoption of new accounting standards New accounting standards or “ASUs” were assessed and determined to be either not applicable or did not have a material impact on our condensed consolidated financial statements or processes. Common stock reverse stock split On May 6, 2022, we completed a reverse stock split of our common stock, par value $ 0.001 per share (our “Common Stock”). As a result, shares of our outstanding Common Stock were split at a ratio of 50-for-1 (the “Reverse Stock Split”) with any fractional shares resulting from the Reserve Stock Split rounded up to the next whole share of common stock. The number of authorized shares of Common Stock was also correspondingly reduced from 600.0 million shares to 12.0 million shares to give effect to the Reverse Stock Split. Additionally, all rights to receive shares of Common Stock under outstanding warrants, options, restricted stock units (“RSUs”) and performance stock units (“PSUs”) were adjusted to give effect to the Reverse Stock Split. Furthermore, remaining shares of Common Stock available for future issuance under share-based payment award plans and our employee stock purchase plan were adjusted to give effect to the Reverse Stock Split. Pursuant to Section 78.209 of the Nevada Revised Statutes, the approval of our stockholders was not required for our Board of Directors to effectuate the Reverse Stock Split. All historical numbers of shares of Common Stock and per share data have been adjusted to give effect to the Reverse Stock Split. Additionally, since the Common Stock par value was unchanged, historical amounts for Common Stock and additional paid-in capital have been adjusted to give effect to the Reverse Stock Split. Estimates and assumptions The preparation of our condensed consolidated financial statements in conformity to U.S. GAAP requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. We evaluate our estimated assumptions based on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ, at times in material amounts, from these estimates under different assumptions or conditions. Significant accounting policies The significant accounting policies we use for quarterly financial reporting are disclosed in Note 1 of the accompanying notes to the condensed consolidated financial statements included in our 2022 10-K report and in the section below. 9 Table of Contents 2. Discontinued Operations As discussed in Note 1, we changed our business in 2022 by licensing our products to receive royalties and future sales related milestone payments, after granting an exclusive license to commercialize our IMVEXXY, BIJUVA, and prescription prenatal vitamin products sold under the BocaGreenMD and vitaMedMD brands in the United States and assigning our exclusive license to commercialize ANNOVERA to Mayne Pharma. This plan represented a strategic shift having a major effect on our operations and financial results. Upon the completion of our restructuring and ultimate conversion from a commercial pharmaceutical company to a licensing only company with the consummation of the Mayne Transaction, we classified all direct revenues, costs and expenses related to commercial operations, within income (loss) from discontinued operations, net of tax, in the condensed consolidated statements of operations for all periods presented. We have no t allocated any amounts for shared general and administrative operating support expense to discontinued operations. As required by the terms of the Financing Agreement, the proceeds from both transactions were used to fully repay our outstanding debt borrowings, and as a result interest expense and amortization of deferred financing costs as well as expense for accretion of Series A Preferred Stock and loss on extinguishment of debt are included within income (loss) from discontinued operations, net of tax (as disclosed below). Additionally, the related assets and liabilities have been reported as assets and liabilities of discontinued operations in our condensed consolidated balance sheets as of March 31, 3023 and December 31, 2022. The total consideration from Mayne Pharma consisted of (i) a cash payment of $ 140.0 million at closing, (ii) a cash payment of $ 12.1 million for the acquisition of net working capital subject to certain adjustments, (iii) a cash payment of approximately $ 1.0 million for prepaid royalties in connection with the Mayne License Agreement Amendment and (iv) the right to receive the contingent consideration set forth in the Mayne License Agreement, as amended. Our estimate of net working capital at closing was determined in accordance with the Transaction Agreement which establishes the process for the determination of final net working capital. The determination of net working capital includes significant estimates which could change materially for a period of up to two years following the Closing Date. On March 29, 2023, we received Mayne Pharma’s closing net working capital calculation which differed significantly from our estimate of closing net working capital. We believe that our estimate of net working capital is reasonable and intend to resolve this matter through the process outlined in the Transaction Agreement. Given the recent receipt of Mayne Pharma’s calculation and the nature of the estimates involved, the outcome of this matter is uncertain at this point. As a result, we cannot reasonably estimate a range of loss, and accordingly, continue to contemplate any additional liability associated with Mayne Pharma’s calculation. 10 Table of Contents The following table presents results of discontinued operations (in thousands): Three months ended March, 31 2023 2022 Product revenue, net $ — $ 18,638 Cost of goods sold — 4,165 Gross profit (loss) — 14,473 Operating expenses: Selling and marketing — 18,895 General and administrative 335 2,515 Research and development — 1,400 Depreciation and amortization — 17 Total operating expenses 335 22,827 Operating profit (loss) from discontinued operations ( 335 ) ( 8,354 ) Other income (expense), net ( 958 ) ( 22,792 ) Total other income (expense), net ( 958 ) ( 22,792 ) Net income (loss) from discontinued operations $ ( 1,293 ) $ ( 31,146 ) The following table presents the carrying amounts of the classes of assets and liabilities of discontinued operations as of March 31, 2023 and December 31, 2022 (in thousands): March 31, 2023 December 31, 2022 Liabilities: Current liabilities: Accounts payable $ 828 $ 12,243 Accrued expenses and other current liabilities 1,822 13,588 Total current liabilities $ 2,650 $ 25,831 3. Prepaid and other current assets Our prepaid and other current assets consisted of the following as of March 31, 2023 and December 31, 2022 (in thousands): March 31, 2023 December 31, 2022 Insurance $ 1,608 $ 1,167 Capitalized legal 2,334 2,334 Other 1,504 2,533 Prepaid and other current assets $ 5,446 $ 6,034 11 Table of Contents 4. Fixed assets Our fixed assets, net consisted of the following as of March 31, 2023 and December 31, 2022 (in thousands): March 31, 2023 December 31, 2022 Furniture and fixtures $ 931 $ 931 Computer and office equipment 1,167 1,168 Computer software 375 375 Leasehold improvements 49 49 Fixed assets 2,522 2,523 Less: accumulated depreciation and amortization 2,464 2,445 Fixed assets, net $ 58 $ 78 We recorded, in continuing operations, depreciation expense of $ 0.0 million and $ 0.1 million for the three months ended March 31, 2023 and 2022, respectively. 5. Licensed rights and other intangible assets The following provides information about our license rights and other intangible assets, net as of March 31, 2023 and December 31, 2022 (in thousands): March 31, 2023 December 31, 2022 Gross Carrrying Amount Accumulated Amortization Net Gross Carrrying Amount Accumulated Amortization Net Intangible assets subject to amortization: Hormone therapy drug patents $ 6,224 $ 1,604 $ 4,620 $ 6,225 $ 1,598 $ 4,627 Hormone therapy drug patents applied and pending approval 1,936 — 1,936 1,995 — 1,995 Intangible assets subject to amortization 8,160 1,604 6,556 8,220 1,598 6,622 Intangible assets not subject to amortization: Trademarks/trade name rights 321 — 321 321 — 321 License rights and other intangible assets, net $ 8,481 $ 1,604 $ 6,877 $ 8,541 $ 1,598 $ 6,943 We recorded, in continuing operations, amortization expense related to patents of $ 0.0 million and $ 0.2 million respectively, for the three months ended March 31, 2023 and 2022. Our intangible assets subject to amortization are expected to be amortized as follows (in thousands): Year ending December 31, 2023 $ 337 2024 439 2025 438 2026 438 2027 438 Thereafter 2,530 Total $ 4,620 12 Table of Contents 6. Accrued expenses and other current liabilities Other accrued expenses and other current liabilities consisted of the following (in thousands): March 31, 2023 December 31, 2022 Payroll and related costs $ 3,822 $ 8,748 Accrued contract termination costs 5,078 4,700 Research and development expenses — 978 Professional fees 623 415 Operating lease liabilities 1,441 1,390 Prepaid royalty 1,061 1,011 Other accrued expenses and current liabilities 2,335 1,604 Accrued expenses and other current liabilities $ 14,360 $ 18,846 7. Commitments and contingencies Mayne Pharma Agreement Mayne Pharma paid us approximately $ 12.1 million at closing on December 30, 2022, for the acquisition of net working capital, as determined in accordance with the Transaction Agreement, and is subject to certain adjustments for a period of up to two years following the Closing Date. Pursuant to the Mayne License Agreement Amendment, Mayne Pharma also paid us approximately $ 1.0 million in prepaid royalties on the Closing Date. The prepaid royalties will reduce the first four quarterly payments that would have otherwise been payable pursuant to the Mayne License Agreement by an amount equal to $ 257,250 per quarterly royalty payment plus interest calculated at 19 % per annum accruing from the Closing Date until the date such quarterly royalty payment is paid to us. In addition, Mayne Pharma will reduce one quarterly royalty payment (other than the first quarterly royalty payment) otherwise payable to us by $ 1.5 million in consideration of Mayne Pharma assuming our obligations under a long-term services agreement, including our minimum payment obligations thereunder. We received 0.1 million in royalty payments from Mayne Pharma during the three months ended March 31, 2023. Population Council License Agreement Under the terms of our license agreement with the Population Council, Inc. (the “Population Council License Agreement”), we paid the Population Council a milestone payment of $ 20.0 million in 2018, which was within 30 days following the approval by the FDA of the N ew D rug A ppli c ation (“NDA”) for ANNOVERA, and $ 20.0 million in 2019 following the first commercial batch release of ANNOVERA. The aggregate $ 40.0 million of milestone payments were recorded as license rights. The Population Council was also eligible to receive future payments upon the achievement of certain commercial sales milestones of ANNOVERA. On December 30, 2 022, we assigned the ANNOVERA license to Mayne Pharma. Our rights and obligations under the Population Council License Agreement have been transferred to Mayne Pharma and may revert back to us upon the occurrence of certain events. Legal proceedings In February 2020, we received a Paragraph IV certification notice letter (the “IMVEXXY Notice Letter”) regarding an Abbreviated New Drug Application (“ANDA”) submitted to the FDA by Teva Pharmaceuticals USA, Inc. (“Teva”). The ANDA seeks approval from the FDA to commercially manufacture, use, or sell a generic version of the 4 mcg and 10 mcg doses of IMVEXXY. In the IMVEXXY Notice Letter, Teva alleges that TherapeuticsMD patents listed in the FDA’s Orange Book that claim compositions and methods of IMVEXXY 13 Table of Contents (the “IMVEXXY Patents”) are invalid, unenforceable, and/or will not be infringed by Teva’s commercial manufacture, use, or sale of its proposed generic drug product. The IMVEXXY Patents identified in the IMVEXXY Notice Letter expire in 2032 or 2033. In April 2020, we filed a complaint for patent infringement against Teva in the United States District Court for the District of New Jersey arising from Teva’s ANDA filing with the FDA. We are seeking, among other relief, an order that the effective date of any FDA approval of Teva’s ANDA would be a date no earlier than the expiration of the IMVEXXY Patents and equitable relief enjoining Teva from infringing the IMVEXXY Patents. Teva has filed its answer and counterclaim to the complaint, alleging that the IMVEXXY Patents are invalid and not infringed. In July 2021, following a proposal by Teva, the District Court entered an order temporarily staying all proceedings in the IMVEXXY litigation, which order was filed under seal. In September 2021, the District Court made available a public version of the order following the parties’ agreement to a consent motion to redact information Teva contended was confidential. The order provides that the statutory stay that prevents the FDA from granting final approval of the ANDA for 30 months from the date of the IMVEXXY Notice Letter will be extended for the number of days that the stay of the IMVEXXY litigation is in place. The length of the stay of the IMVEXXY litigation is dependent on further action by Teva. We have incurred and recorded legal costs amounting to $ 0.1 million in prepaid expenses and other current assets as of March 31, 2023, for the IMVEXXY Paragraph IV legal proceeding since we believe that we will successfully prevail in this legal proceeding. Upon the successful conclusion of the legal proceeding, the related capitalized legal costs will be reclassified to patents, in license rights and other intangible assets, net, in the accompanying condensed consolidated balance sheets, and such costs will be amortized over the remaining useful life of the patents. If we are unsuccessful in this legal proceeding, then the related capitalized legal costs for this legal preceding and any unamortized IMVEXXY patent costs that were previously capitalized will be immediately expensed in the period in which we become aware of an unsuccessful legal proceeding. In March 2020, we received a Paragraph IV certification notice letter (the “BIJUVA Notice Letter”) regarding an ANDA submitted to the FDA by Amneal Pharmaceuticals (“Amneal”). In April 2020, we filed a complaint for patent infringement against Amneal in the United States District Court for the District of New Jersey arising from Amneal’s ANDA filing with the FDA. In December 2021, we entered into a settlement agreement (the “Settlement Agreement”) with Amneal Pharmaceuticals, Inc., Amneal Pharmaceuticals, LLC and Amneal Pharmaceuticals of New York LLC (collectively “Amneal”) to resolve the litigation over our patents listed in the FDA’s Orange Book that claim compositions and methods of BIJUVA (the “BIJUVA Patents”). Under the terms of the Settlement Agreement, the parties filed a consent judgment with the U.S. District Court for the District of New Jersey that enjoins Amneal from marketing a generic version of BIJUVA (1 mg estradiol and 100 mg progesterone) before the expiration of the patents-in-suit, except as provided in the Settlement Agreement, and we granted Amneal a non-exclusive, non-transferable, royalty-free license to commercialize Amneal’s generic formulation of BIJUVA in the U.S. commencing in May 2032 (180 days before the current expiration date in November 2032 for the last to expire of our BIJUVA Patents), or earlier under certain circumstances customary for settlement agreements of this nature. Beginning on December 30, 2022 and per the Mayne License Agreement, Mayne Pharma is responsible for all enforcement of our patents, including the litigation discussed above with respect to Teva. From time to time, we are involved in other litigations and proceedings in the ordinary course of business. We are currently not involved in any other litigations and proceedings that we believe would have a material effect on our condensed consolidated financial condition, results of operations, or cash flows. Compliance with Nasdaq’s continued listing requirements In January 2023, we received a deficiency letter (the “Notice”) from the Listing Qualifications Department of the Nasdaq Stock Market, LLC (“Nasdaq”) notifying us that we were not in compliance with the rules for continued listing as set forth in Nasdaq Listing Rule 5620(a) (the “Annual Meeting Rule”) due to our failure to hold an annual meeting of stockholders within 12 months after our fiscal year ended December 31, 2021. The Notice had 14 Table of Contents no immediate effect on the listing of our Common Stock. We did not hold an annual meeting of stockholders during 2022 due to our then ongoing strategic processes. The Notice stated that, under Nasdaq Listing Rule 5810(c)(2)(G), we had 45 calendar days, or until February 20, 2023, to submit a plan to regain compliance with the Annual Meeting Rule. We timely submitted such plan, and Nasdaq granted us an extension until June 29, 2023, to regain compliance. We have announced an annual meeting of stockholders to be held on June 26, 2023 which we expect will cause us to fully regain compliance with all applicable Nasdaq listing standards. Off-balance sheet arrangements As of March 31, 2023 and December 31, 2022 we had no off-balance sheet arrangements that have had or are reasonably likely to have current or future effects on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. Employment agreements In connection with our transformation into a pharmaceutical royalty company, the termination of our executive management team (except for Mr. Marlan Walker, our former General Counsel and current Chief Executive Officer) and all other employees was completed by December 30, 2022. Severance obligations for all employees other than executive officers were paid in full in the first quarter of 2023. As of March 31, 2023, we employ one full-time employee primarily engaged in an executive position. We have engaged external consultants, including certain former members of our management team, who support our relationship with current partners and assist with certain financial, legal and regulatory matters and the continued wind-down of our historical business operations. The separation of our former Interim Co-Chief Executive Officers, former Interim Chief Financial Officer and other executives from TherapeuticsMD was each a termination without “Good Cause,” as defined in their respective employment agreements. In the aggregate, as of March 31, 2023, we have accrued severance liabilities for executive termination obligations of $ 3.5 million. 8. Stockholders’ equity (deficit) Warrants As of March 31, 2023, the following table summarizes the status of our outstanding and exercisable warrants and related transactions since December 31, 2022 (in thousands, except weighted average exercise price and weighted average remaining contractual life data): Warrants Weighted Average Exercise Price Aggregate Intrinsic Value Weighted Average Remaining Contractual Life (in Years) As of January 1, 202 3 536 $ 13.10 $ 2,427 9.3 Exercised ( 310 ) Expired ( 2 ) As of March 31, 2023 225 $ 31.26 $ 467 8.5 Share-based compensation payment plans As of March 31, 2023, 559,661 shares of common stock were subject to outstanding awards under our share-based payment award plans and inducement grants (calculated using the base number of PSUs that may vest). If we assume the maximum achievement of performance goals for PSUs, then 591,661 shares of common stock will be subject to outstanding awards under our share-based payment award plans and inducement grants. As of March 31, 2023, 300,232 shares of common stock were available for future grants of share-based payment awards under the TherapeuticsMD, Inc. 2019 Stock Incentive Plan. 15 Table of Contents The following table summarizes the status of our outstanding and exercisable options and related transactions (each adjusted to account for the Reverse Stock Split) since December 31, 2022 (in thousands, except weighed average exercise price and weighted average remaining contractual life data): Outstanding Exercisable Options Awards Weighted Average Exercise Price Aggregate Intrinsic Value Weighted Average Remaining Contractual Life (in Years) Options Awards Weighted Average Exercise Price Aggregate Intrinsic Value Weighted Average Remaining Contractual Life (in Years) As of January 1, 2023 172 $ 228.28 — 3.6 170 $ 229.43 — 3.6 Granted — — — — — — Exercised — — — — — — Cancelled/Forfeited — — — — Expired ( 69 ) 219.07 ( 69 ) 219.07 As of March 31, 2023 103 $ 234.32 — 2.7 101 $ 236.66 — 2.7 The following table summarizes the status of our RSUs and related transactions (each adjusted to account for the Reverse Stock Split) since December 31, 2022 (in thousands, except weighed average grant date fair value): RSUs awards outstanding RSUs awards vested and not settled RSUs Weighted Average Grant Date Fair Value Aggregate Intrinsic Value RSUs Weighted Average Grant Date Fair Value Aggregate Intrinsic Value As of January 1, 2023 246 $ 29.64 $ 1,376 189 $ 26.28 $ 1,059 Granted 120 5.12 50 5.12 Vested and settled ( 189 ) 26.28 ( 1,559 ) ( 189 ) 26.28 ( 1,559 ) Cancelled/Forfeited — — — — As of March 31, 2023 177 $ 8.15 $ 663 53 $ 6.85 $ 199 The following table summarizes the status of our PSU and related transactions for each for the following years (each adjusted to account for the Reverse Stock Split) since December 31, 2022 (in thousands, except weighed average grant date fair value): Outstanding Vested and not settled PSUs Weighted Average Grant Date Fair Value Aggregate Intrinsic Value PSUs Weighted Average Grant Date Fair Value Aggregate Intrinsic Value As of January 1, 2023 100 $ 42.30 $ 558 81 $ 39.95 $ 450 Granted — — — — ` Vested and settled ( 81 ) 39.95 450 ( 81 ) 39.95 450 Cancelled/Forfeited — — — — As of March 31, 2023 19 (1) $ 52.15 $ 72 5 $ 56.05 $ 19 (1) The number of PSUs represents the base number of PSUs that will vest. Share-based payment compensation cost Share-based payment compensation expense for PSUs is based on 100 % vesting which was a part of termination of benefits for all employees who were terminated in 2022. We recorded share-based payment award 16 Table of Contents compensation costs related to previously issued options, RSU and PSUs, as well as shares of common stock issued under our ESPP totaling $ 0.5 million and $ 2.1 million for the three months ended March 31, 2023 and 2022 respectively. As of March 31, 2023, we had $ 0.8 million of unrecognized share-based payment award compensation cost related to unvested options, RSUs and PSUs as well as shares issuable under our ESPP, which may be adjusted for future changes in forfeitures and is included as additional paid-in capital in the accompanying condensed consolidated balance sheets. No tax benefit was realized due to a continued pattern of net losses. The unrecognized compensation cost as of March 31, 2023, of $ 0.8 million is expected to be recognized as share-based payment award compensation over a weighted average period of 1.1 years. 9. Revenue Pursuant to the Mayne License Agreement, the Company granted Mayne Pharma, on the Closing Date, (i) an exclusive, sublicensable, perpetual, irrevocable license to research, develop, register, manufacture, have manufactured, market, sell, use, and commercialize the Licensed Products in the United States and its possessions and territories and (ii) an exclusive, sublicensable, perpetual, irrevocable license to manufacture, have manufactured, import and have imported the Licensed Products outside the United States for commercialization in the United States and its possessions and territories. Pursuant to the Mayne License Agreement, Mayne Pharma will make one-time, milestone payments to the Company of each of (i) $ 5.0 million if aggregate net sales of all Products in the United States during a calendar year reach $ 100.0 million, (ii) $ 10.0 million if aggregate net sales of all Products in the United States during a calendar year reach $ 200.0 million and (iii) $ 15.0 million if aggregate net sales of all Products in the United States during a calendar year reach $ 300.0 million. Further, Mayne Pharma will pay to the Company royalties on net sales of all Products in the United States at a royalty rate of 8.0 % on the first $ 80 million in annual net sales and 7.5 % on annual net sales above $ 80.0 million, subject to certain adjustments, for a period of 20 years following the Closing Date. The royalty rate will decrease to 2.0 % on a Product-by-Product basis upon the earlier to occur of (i) the expiration or revocation of the last patent covering a Product and (ii) a generic version of a Product launching in the United States. Mayne Pharma will pay to the Company minimal annual royalties of $ 3.0 million per year for 12 years, adjusted for inflation at an annual rate of 3 %, subject to certain further adjustments, including as described below. Upon the expiry of the 20 -year royalty term, the licenses granted to Mayne Pharma under the Mayne License Agreement will become a fully paid-up and royalty free license for the Licensed Products. 10. Income taxes We do not expect to pay any significant federal or state income taxes as a result of (i) the losses recorded during the three months ended March 31, 2023 and 2022, (ii) additional losses expected for the remainder of 2023 or losses recorded in 2022, or (iii) net operating losses carry forwards from prior years. We recorded a full valuation allowance of the net operating losses for the three months ended March 31, 2023 and 2022. Accordingly, there were no provisions for income taxes for the three months ended March 31, 2023 and 2022. Additionally, as of March 31, 2023 and December 31, 2022, we maintain a full valuation allowance for all deferred tax assets. 17 Table of Contents 11. Loss per common share The following table sets forth the computation of basic and diluted loss per common share (each adjusted to account for the Reverse Stock Split) for the periods presented (in thousands, except per share amounts): Three Months Ended March 31, 2023 2022 Numerator: Net income (loss) from continuing operations $ ( 2,310 ) $ ( 17,875 ) Net income (loss) from discontinued operations ( 1,293 ) ( 31,146 ) Net loss $ ( 3,603 ) $ ( 49,021 ) Denominator: Weighted average common shares for basic loss per common share 9,754 8,614 Effect of dilutive securities — — Weighted average common shares for diluted loss per common share $ 9,754 $ 8,614 Income (loss) per common share, continuing operations Basic $ ( 0.24 ) $ ( 2.08 ) Diluted ( 0.24 ) ( 2.08 ) Income (loss) per common share, discontinued operations Basic $ ( 0.13 ) $ ( 3.62 ) Diluted ( 0.13 ) ( 3.62 ) Since we reported a net loss for the three months ended March 31, 2023 and 2022, our potentially dilutive securities are deemed to be anti-dilutive, accordingly, there was no effect of dilutive securities. Therefore, our basic and diluted loss per common share and our basic and diluted weighted average common share are the same for the three months ended March 31, 2023 and 2022. The following table sets forth the outstanding securities as of the periods presented which were not included in the calculation of diluted earnings per common share during the respective three months ended March 31, 2023 and 2022 (in thousands): As of March 31, 2023 2022 Stock options 103 316 RSUs 177 339 PSUs 19 176 Warrants 225 103 524 934 12. Related parties On August 23, 2022, we appointed Mr. Justin Roberts as a director to fill a newly created vacancy on our Board of Directors. Mr. Roberts will serve until our 2023 Annual Meeting of Stockholders or until his successor is duly elected or appointed or his earlier death or resignation and has been nominated for reelection at the 2023 Annual Meeting of Stockholders. As a director of our Company, Mr. Roberts is entitled to receive compensation in the same manner as our other non-employee directors, described in the section entitled “Director Compensation” in our Amendment No. 1 to Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission on May 1, 2023, but he has elected not to receive any compensation for his service as a non-employee director at this time. Mr. Roberts currently serves as a Partner of Rubric Capital Management LP (“Rubric”). On July 29, 2022, September 30, 2022, October 28, 2022 and 18 Table of Contents May 1, 2023, we entered into subscription agreements with Rubric. On December 30, 2022, in accordance with the terms of the Certificate of Designation, we redeemed all 29,000 outstanding shares of Series A Preferred Stock previously issued to affiliates of Rubric at a purchase price of $ 1,333 per share. We also paid certain affiliates of Rubric approximately $ 3.0 million as a make-whole payment pursuant to the subscription agreements previously entered into between us and Rubric. 13. Business concentrations TherapeuticsMD was previously a women’s healthcare company with a mission of creating and commercializing innovative products to support the lifespan of women from pregnancy prevention through menopause. In December 2022, we changed our business to become a pharmaceutical royalty company, currently receiving royalties on products licensed to pharmaceutical organizations that possess commercial capabilities in the relevant territories. As part of the transformation that included the Mayne License Agreement, historical results of commercial operations for all periods prior to the Closing Date have been reflected as discontinued operations in our condensed consolidated financial statements. Assets and liabilities associated with the commercial business are classified as assets and liabilities of discontinued operations in our condensed consolidated balance sheets. Additional disclosures regarding discontinued operations are provided in Note 2. For the three months ended March 31, 2023, 100 % of license revenue related to Mayne Pharma and Theramex. As of March 31, 2023, we had a royalty receivable of $ 2.0 million relating to the short-term portion of receivable from Mayne Pharma and Theramex and $ 20.3 million relating to the long-term portion of royalty receivable which includes royalties recognized from the minimum annual royalty that Mayne Pharma is obligated to pay to us under the Mayne License Agreement. As of March 31, 2023, we also recorded $ 1.1 million in prepaid royalties that we received from Mayne Pharma which were recorded in accrued expenses and other current liabilities. 19 Table of Contents