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Item 2. Management’s Discussion and Analysis

2024-05-10 compared with 2023-11-14 · 380 added, 250 removed, 48 unchanged (93% of the section changed)

Management’s discussion and analysis of financial condition and results of operations

The following discussion should be read in conjunction with our 2022 Annual Report on Form 10-K (“2022 10-K Report”), and the condensed consolidated financial statements and related notes in Item 1, Financial Statements, appearing elsewhere in this Quarterly Report on Form 10-Q (“10-Q Report”).

The following discussion may contain forward-looking statements, and our actual results may differ materially from the results suggested by these forward-looking statements.

Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of our 2022 10-K Report under the heading “Risk Factors.” We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.

Certain amounts in the following discussion may not add due to rounding, and all percentages have been calculated using unrounded amounts.

Management’s discussion and analysis of financial

condition and results of operations

The following discussion should be read in conjunction with our 2023

Annual Report on Form 10-K (“2023 10-K Report”), and the condensed consolidated financial statements and related notes in

Item 1, Financial Statements, appearing elsewhere in this Quarterly Report on Form 10-Q (“10-Q Report”).

The following discussion

may contain forward-looking statements, and our actual results may differ materially from the results suggested by these forward-looking

Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of our 2023

10-K Report under the heading “Risk Factors.” We assume no obligation to revise or update any forward-looking statements for

any reason, except as required by law.

Certain amounts in the following discussion may not add due to rounding,

and all percentages have been calculated using unrounded amounts.

Forward-looking statements

This 10-Q Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

This 10-Q Report contains forward-looking statements within the meaning

of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements involve substantial risks and uncertainties.

For example, statements regarding our operations, financial position, debt position, liquidity, business strategy, and other plans and objectives for future operations, and assumptions and predictions about future cost reduction strategies, expenses and royalties are all forward-looking statements.

These statements are generally accompanied by words such as “intend,” “anticipate,” “believe,” “estimate,” “potential(ly),” “continue,” “forecast,” “predict,” “plan,” “may,” “will,” “could,” “would,” “should,” “expect,” or the negative of such terms or other comparable terminology.

We have based these forward-looking statements on our current expectations and projections about future events.

We believe that the assumptions and expectations reflected in such forward-looking statements are reasonable, based on information available to us on the date of this 10-Q Report, and we cannot assure you that these assumptions and expectations will prove to have been correct or that we will take any action that we may presently be planning.

These forward-looking statements are inherently subject to known and unknown risks and uncertainties.

Actual results or experience may differ materially from those expected or anticipated in the forward-looking statements.

We do not undertake to update any forward-looking statements or to publicly announce the results of any revisions to any statements to reflect new information or future events or developments, except as required by law or by the rules and regulations of the SEC.

Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of our control.

Factors that could cause or contribute to such differences include, but are not limited to, our liquidity requirements, supply chain issues, management transitions, risks related to our licensing agreements, market and general economic factors, and the other risks discussed in Part I, Item 1A of our 2022 10-K Report, as updated and supplemented by Part II, Item 1A of this 10-Q Report.

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.

For example, statements regarding our operations, financial position, debt position, liquidity, business strategy, and other plans and

objectives for future operations, and assumptions and predictions about future cost reduction strategies, expenses and royalties are all

forward-looking statements.

These statements are generally accompanied by words such as “intend,” “anticipate,”

“believe,” “estimate,” “potential(ly),” “continue,” “forecast,” “predict,”

“plan,” “may,” “will,” “could,” “would,” “should,” “expect,”

or the negative of such terms or other comparable terminology.

We have based these forward-looking statements on our current expectations

and projections about future events.

We believe that the assumptions and expectations reflected in such forward-looking statements are

reasonable, based on information available to us on the date of this 10-Q Report, and we cannot assure you that these assumptions and

expectations will prove to have been correct or that we will take any action that we may presently be planning.

These forward-looking

statements are inherently subject to known and unknown risks and uncertainties.

Actual results or experience may differ materially from

those expected or anticipated in the forward-looking statements.

We do not undertake to update any forward-looking statements or to publicly

announce the results of any revisions to any statements to reflect new information or future events or developments, except as required

by law or by the rules and regulations of the SEC.

Forward-looking statements are not guarantees of future performance

and are subject to risks and uncertainties, many of which are outside of our control.

Factors that could cause or contribute to such differences

include, but are not limited to, our liquidity requirements, supply chain issues, management transitions, risks related to our licensing

agreements, market and general economic factors, and the other risks discussed in Part I, Item 1A of our 2023 10-K Report, as updated

and supplemented by Part II, Item 1A of this 10-Q Report.

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, primarily collecting royalties from our licensees.

We are no longer engaged in research and development or commercial operations.

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 (i) granted Mayne Pharma an exclusive license to commercialize 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 one-time, 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 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 minimum 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 (the “Minimum Annual Royalty”).

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 our exclusive license from the Population Council to commercialize ANNOVERA (the “Transferred Assets”).

The total consideration from Mayne Pharma to us for the purchase of the Transferred Assets and the grant of the licenses under the Mayne License 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.

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 received 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 TherapeuticsMD.

In addition, under the Mayne License Agreement Amendment, we owed Mayne Pharma $1.5 million payable from one royalty payment.

During the second quarter of 2023, Mayne Pharma held back our royalty payment and we funded an additional $0.9 million in August 2023 to settle the original $1.5 million payable.

This action represented a shift in our business and therefore, the related assets and liabilities associated with commercial operations are classified as discontinued operations on our condensed consolidated balance sheets and the results of operations have been presented as discontinued operations within our condensed consolidated statements of comprehensive income for all periods presented.

See Note 2 - Discontinued Operations to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further details.

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 September 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 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 the first quarter of 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 September 30, 2023, we employed 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.

vitaCare Divestiture

On April 14, 2022, we completed the divestiture of vitaCare Prescription Services, Inc.

(“vitaCare”) with the sale of all vitaCare’s issued and outstanding capital stock (the “vitaCare Divestiture”).

We received net proceeds of $142.6 million, net of 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 between us and GoodRx, Inc.

(the “Purchase Agreement”), which was recorded as restricted cash in the condensed consolidated balance sheets until the cash was released to us.

The restricted cash was held by an escrow agent and was released to us in March 2023.

Additionally, 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 when the consideration is realized or realizable.

The Purchase Agreement contains customary representations and warranties, covenants, and indemnities of the parties thereto.

Our 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, we owed Mayne Pharma $1.5 million payable from one royalty payment.

During the second quarter of 2023, Mayne Pharma held back our royalty payment and we funded an additional $0.9 million in August 2023 to settle the original $1.5 million payable.

The pre-divesture operations of vitaCare were reclassified to discontinued operations in December 2022 when we transitioned to becoming a royalty company and licensed our products to Mayne Pharma.

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 the filing of this 10-Q Report, 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.

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 (i) granted Mayne Pharma

an exclusive license to commercialize 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 one-time,

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.

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 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.

will pay us minimum 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 (the “Minimum Annual Royalty”).

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 our exclusive license from the Population Council to commercialize

ANNOVERA (the “Transferred Assets”).

total consideration from Mayne Pharma to us for the purchase of the Transferred Assets and the grant of the licenses under the Mayne

License 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.

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.

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 reduced 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 was paid to us.

We and Mayne Pharma settled

the $1.5 million of consideration due to Mayne for the assumed obligations under a long-term services agreement, including our minimum

payment obligations thereunder.

As the parties agreed, during the second quarter of 2023, Mayne Parma held back our royalty payment of

$0.6 million and we funded an additional $0.9 million in August 2023 to settle the original $1.5 million payable.

This action represented a shift in our business and therefore, the

related assets and liabilities associated with commercial operations are classified as discontinued operations on our condensed consolidated

balance sheets and the results of operations have been presented as discontinued operations within our condensed consolidated statements

of operations for all periods presented.

See Note 2 – Discontinued Operations to the condensed consolidated financial

statements included in this Quarterly Report on Form 10-Q for further details.

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.

Knight obtained regulatory approval for IMVEXXY and BIJUVA and began commercialization

efforts in 2024.

● In September 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 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 the first quarter of 2023 and severance obligations for terminated executive officers have been paid in

accordance with their employment agreements and separation agreements as previously disclosed.

As of December 31, 2023 and March

31, 2024 , we employed 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.

Going concern

On December 4, 2022, we entered into agreements with Mayne Pharma pursuant to which we (i) 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) assigned to Mayne Pharma our exclusive license to commercialize ANNOVERA in the United States and its possessions and territories, and (iii) sold certain other assets to Mayne Pharma.

The total consideration we received from Mayne Pharma 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, we changed our business to become a royalty company, currently receiving 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 are pursuing 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.

On May 1, 2023, we entered into a Subscription Agreement (the “Subscription Agreement”) with Rubric Capital Management LP (“Rubric”), pursuant to which we agreed to sell to Rubric, or one or more of its affiliates, up to an aggregate of 5,000,000 shares of our common stock, par value $0.001 per share (our “Common Stock”), from time to time during the term of the Subscription Agreement in separate draw-downs at the election of the Company.

On June 29, 2023, we issued and sold 312,525 shares of Common Stock at a price per share equal to $3.6797 pursuant to the Subscription Agreement.

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

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

On May 1, 2023, we entered into

a Subscription Agreement (the “Subscription Agreement”) with Rubric Capital Management LP (“Rubric”), pursuant

to which we agreed to sell to Rubric, or one or more of its affiliates, up to an aggregate of 5,000,000 shares of our common stock, par

value $0.001 per share (our “Common Stock”), from time to time during the term of the Subscription Agreement in separate draw-downs

at our election.

On June 29, 2023, we issued and sold 312,525 shares of Common Stock at a price per share equal to $3.6797 pursuant to

the Subscription Agreement.

We received gross proceeds of $1.15 million from the draw down, before expenses.

The Common Stock issued pursuant to the Subscription Agreement was sold and issued without registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act as transactions not involving a public offering and Rule 5-06 of Regulation D promulgated under the Securities Act as sales to accredited investors, and in reliance on similar exemptions under applicable state laws.

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 our current estimates if we are unsuccessful with future financings or if the continued impact of the COVID-19 pandemic on us or the third parties we rely on is 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.

On November 15, 2023 Rubric

drew down an additional 877,192 shares of Common Stock at a price per share equal to $2.2761.

We received gross proceeds of $2.0 million

from the drawdown, before expenses.

Mayne Pharma paid us approximately $12.1 million at closing on

December 30, 2022, for the acquisition of net working capital, subject to certain adjustments as determined in accordance with the Transaction

While the Transaction Agreement calls for much of the net working capital to be trued-up shortly after the Closing Date in

2023, for a period of one year following the Closing Date in the case of payer rebates and wholesale distributor fees and two years following

the Closing Date in the case for allowance for returns, net working capital amounts will be adjusted to arrive at final net working capital

under the Transaction Agreement.

In September 2023, we revised certain accrual estimates including increasing

our working capital adjustment accrual from $3.5 million to $5.5 million for amounts anticipated to be owed under the Transaction

In December 2023, we made a $5.5 million payment to Mayne Pharma to settle certain working capital amounts that were required

to be trued-up shortly after the Closing Date, excluding the allowance for returns, allowance for payer rebates, and allowance for wholesale

distributor fees.

The Company’s estimate of the allowance for payer rebates and

wholesale distributor fees was determined in accordance with the Transaction Agreement which establishes the process for the determination

of net working capital.

In February 2024, the Company received Mayne Pharma’s calculation of allowance for payer rebates and wholesale

distributor fees which differed significantly from the Company’s estimate of the allowances.

The Company and Mayne Pharma intend

to resolve this matter through the dispute resolution process outlined in the Transaction Agreement.

The Company believes its estimated allowances

for payer rebates and wholesale distributor fees are reasonable.

The timing and outcome of this matter is uncertain at this point.

a result, the Company cannot reasonably estimate a range of loss, and accordingly, the Company has not accrued any additional liability

associated with Mayne Pharma’s allowance calculation for payer rebates and wholesale distributor fees.

As of March 31, 2024, the Company believes

no additional accrual is required for amounts that may be owed for the allowance for returns under the Transaction Agreement.

has not recorded any contingent gains or receivables for any such allowances.

Management continues to monitor the unresolved and pending

net working capital items as changes to estimated amounts owed or amounts due from Mayne Pharma may be material.

If Mayne Pharma’s sales of Licensed

Products grow more slowly than expected or decline, if the net working capital settlement with Mayne Pharma under the Transaction Agreement

is greater than our current estimates, if we are unsuccessful with future financings 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.

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 consolidated financial statements

do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Portfolio of our royalty-bearing products

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, we granted an exclusive license to commercialize IMVEXXY, BIJUVA, and prescription prenatal vitamin products sold under the BocaGreenMD and vitaMedMD brands and assigning our exclusive license to commercialize ANNOVERA to Mayne Pharma.

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, we granted an exclusive license to commercialize IMVEXXY, BIJUVA, and prescription

prenatal vitamin products sold under the BocaGreenMD and vitaMedMD brands and assigning our exclusive license to commercialize ANNOVERA

to Mayne Pharma.

IMVEXXY (estradiol vaginal inserts), 4-µg and 10-µg

This pharmaceutical product is for the treatment of moderate-to-severe dyspareunia (vaginal pain associated with sexual activity), a symptom of vulvar and vaginal atrophy due to menopause.

As part of the FDA’s approval of IMVEXXY, we committed to conduct a post-approval observational study to evaluate the risk of endometrial cancer in post-menopausal women with a uterus who use a low-dose vaginal estrogen unopposed by a progestogen.

On December 30, 2022, we granted an exclusive license to commercialize IMVEXXY in the United States and its possessions and territories to Mayne Pharma.

We also have entered into licensing agreements with third parties to market and sell IMVEXXY outside of the U.S.

We entered into the Knight License Agreement, with Knight pursuant to which, we granted Knight an exclusive license to commercialize IMVEXXY in Canada and Israel.

We entered into the Theramex License Agreement with Theramex HQ UK Limited (“Theramex”) pursuant to which we granted Theramex an exclusive license to commercialize IMVEXXY for human use outside of the U.S., except for Canada and Israel.

As of September 30, 2023, no IMVEXXY sales had been made through the Theramex and Knight licensing agreements.

The FDA has also asked the sponsors of other vaginal estrogen products to participate in the observational study.

In connection with the observational study, we would have been required to provide progress reports to the FDA on an annual basis.

The obligation to conduct this study was transferred to Mayne Pharma as part of the Mayne License Agreement.

This pharmaceutical product is for the treatment of moderate-to-severe

dyspareunia (vaginal pain associated with sexual activity), a symptom of vulvar and vaginal atrophy due to menopause.

On December 30, 2022, we granted an exclusive license to commercialize

IMVEXXY in the United States and its possessions and territories to Mayne Pharma.

We also have entered into licensing agreements with

third parties to market and sell IMVEXXY outside of the U.S.

We entered into the Knight License Agreement, with Knight pursuant to which,

we granted Knight an exclusive license to commercialize IMVEXXY in Canada and Israel.

We entered into the Theramex License Agreement with

Theramex HQ UK Limited (“Theramex”) pursuant to which we granted Theramex an exclusive license to commercialize IMVEXXY for

human use outside of the U.S., except for Canada and Israel.

As of March 31, 2024 , no IMVEXXY

sales had been made through the Theramex licensing agreement.

BIJUVA (estradiol and progesterone) capsules, 1 mg/100 mg

This pharmaceutical product is the first and only FDA approved bioidentical hormone therapy combination of estradiol and progesterone in a single, oral capsule for the treatment of moderate-to-severe vasomotor symptoms (commonly known as hot flashes or flushes) due to menopause in women with a uterus.

On December 30, 2022, we granted an exclusive license to commercialize BIJUVA in the United States and its possessions and territories to Mayne Pharma.

We also have entered into the Knight License Agreement with Knight pursuant to which we granted Knight an exclusive license to commercialize BIJUVA in Canada and Israel.

We have entered into the Theramex License Agreement with Theramex pursuant to which we granted Theramex an exclusive license to commercialize BIJUVA for human use outside of the U.S., except for Canada and Israel.

ANNOVERA (segesterone acetate (“SA”) and ethinyl estradiol (“EE”) vaginal system)

On December 30, 2022, we assigned our exclusive license to commercialize ANNOVERA to Mayne Pharma.

This pharmaceutical product is a one-year ring-shaped contraceptive vaginal system (“CVS”) and the first and only patient-controlled, procedure-free, reversible prescription contraceptive that can prevent pregnancy for up to a total of 13 cycles (one year).

This pharmaceutical product is the first and only FDA approved bioidentical

hormone therapy combination of estradiol and progesterone in a single, oral capsule for the treatment of moderate-to-severe vasomotor

symptoms (commonly known as hot flashes or flushes) due to menopause in women with a uterus.

On December 30, 2022, we granted an exclusive license to commercialize

BIJUVA in the United States and its possessions and territories to Mayne Pharma.

We also have entered into the Knight License Agreement

with Knight pursuant to which we granted Knight an exclusive license to commercialize BIJUVA in Canada and Israel.

We have entered into

the Theramex License Agreement with Theramex pursuant to which we granted Theramex an exclusive license to commercialize BIJUVA for human

use outside of the U.S., except for Canada and Israel.

ANNOVERA (segesterone acetate (“SA”) and ethinyl estradiol

(“EE”) vaginal system)

On December 30, 2022, we assigned our exclusive license to commercialize

ANNOVERA to Mayne Pharma.

This pharmaceutical product is a one-year ring-shaped contraceptive vaginal system (“CVS”) and the

first and only patient-controlled, procedure-free, reversible prescription contraceptive that can prevent pregnancy for up to a total

of 13 cycles (one year).

ANNOVERA is commercially sold in the U.S.

pursuant to the terms of the Population Council License Agreement.

As part of the approval of ANNOVERA, the FDA has required a post-approval observational study be performed to measure the risk of venous thromboembolism.

We agreed to perform and pay the costs and expenses associated with this post-approval study, provided that if the costs and expenses associated with such post-approval study exceed $20.0 million, half of such excess will offset against royalties or other payments owed by us under the Population Council License Agreement.

In August 2021, we filed a supplemental New Drug Application (“NDA”) with the FDA to modify the testing specifications for ANNOVERA to allow increased consistency of supply of ANNOVERA.

In May 2022, the FDA approved the supplemental NDA for ANNOVERA.

Our obligations to perform the post-approval study have been transferred to Mayne Pharma as part of the Mayne License Agreement.

Prenatal vitamin products

On December 30, 2022, we granted an exclusive license to commercialize, in the United States and its possessions and territories, our prescription prenatal vitamin product lines under our vitaMedMD brand name and authorized generic formulations of some of our prescription prenatal vitamin products under our BocaGreenMD Prenatal name to Mayne Pharma.

Results of operations

Three months ended September 30, 2023 compared with three months ended September 30, 2022

In December 2022, we granted an exclusive license to commercialize our IMVEXXY, BIJUVA, and prescription prenatal vitamin products and assigned our exclusive license to commercialize ANNOVERA to Mayne Pharma, which resulted in a business shift that had a major effect on our operations and financial results.

As part of the transformation that included the Mayne License Agreement, historical results of commercial operations have been reflected as discontinued operations in our condensed consolidated financial statements for all periods prior to the Closing Date.

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 to the condensed consolidated financial statements included in this Quarterly Report.

The discussion below, and the revenues and expenses discussed below, are based on and relate to our continuing operations.

The following table sets forth the results of our operations (in thousands):

Three months ended September 30,

License and service revenue

Cost of revenue

Operating expenses:

Selling, general and administrative

Depreciation and amortization

Total operating expenses

Loss from operations

Other income (expense):

Interest expense and other financing costs

Miscellaneous income (expense)

Total other income (expense), net

Loss from continuing operations before income taxes

Provision for income taxes

Net loss from continuing operations

Loss from discontinued operations, net of income taxes

As part of our transformation and the Mayne License Agreement, historical results of commercial operations have been reflected as discontinued operations in the condensed consolidated financial statements for all periods presented.

License and service revenue.

We recorded $(0.1) million in license revenue for the third quarter of 2023, primarily from the Mayne License Agreement, offset by adjustments described below in the third quarter of 2023, compared to $0.4 million in sales to another licensee for the third quarter of 2022.

We report royalty revenue in excess of the contractual minimums each quarter totaling approximately $0.1 million in the third quarter of 2023.

Royalties reported as license revenue for intellectual property licensed by us totaled approximately $(0.1) million and royalties reported as other income for intellectual property we sold totaled approximately $0.1 million in the third quarter of 2023.

We are reporting license revenue of ($0.1) million in the third quarter of 2023 due to product sales adjustments reported by our licensed partners amounting to ($0.2) million.

Additionally, a portion of this adjustment is due to reallocations of license revenue to other income (expense).

On a quarterly basis, we reallocate royalty revenue proportionately between operating revenue for the amounts related to our licensed intellectual property and other income for royalties related to intellectual property we sold.

Operating expenses.

Total operating expenses for the third quarter of 2023 were $1.7 million, a decrease of $12.8 million, or 88.2%, compared to the third quarter of 2022.

This decrease was due to the transition of our business from a manufacturing and commercialization business to a royalty-based business with limited infrastructure.

Selling, general and administrative.

Selling, general and administrative expenses were $1.6 million for the third quarter of 2023, a decrease of $12.7 million, or 88.8%, compared to the third quarter of 2022.

This decrease was due to the transition of our business from a manufacturing and commercialization business to a royalty-based business.

Depreciation & amortization.

Depreciation and amortization expense was $0.1 million for the third quarter of 2023, a decrease of $0.1 million, or 52.4%, compared to the third quarter of 2022.

This decrease was due to the transition of our business from a manufacturing and commercialization business to a royalty-based business.

Loss from operations.

In the third quarter of 2023, we had a loss from operations of $1.8 million, as compared to a loss from operations of $14.5 million for the third quarter of 2022.

This change was primarily due to the transition of our business from a manufacturing and commercialization business to a royalty-based business and the associated decrease in expenses.

Other income (expense), net.

During the third quarter of 2023, we had other income of $0.3 million compared to other expense of $0.1 million in the third quarter of 2022.

This change was due to the transition of our business from a manufacturing and commercialization business to a royalty-based business.

Royalties reported as other income for intellectual property we sold totaled approximately $0.1 million in the third quarter of 2023.

Provision for income taxes .

During the third quarter of 2023 and 2022, we recorded no provision for income taxes for continuing operations.

Net loss from continuing operations .

For the third quarter of 2023, we had a net loss of $1.4 million, or $0.13 per basic and diluted common share, compared to a loss of $14.6 million, or $1.58 per basic and diluted common share, for the third quarter of 2022.

Discontinued Operations - Revenues from discontinued operations were $(0.8) million for the third quarter of 2023, a decrease of $21.4 million as compared to the third quarter of 2022.

Operating expenses from discontinued operations were $0.0 million in the third quarter of 2023, a decrease of $23.4 million, as compared to the third quarter of 2022.

Net income (loss) from discontinued operations for the third quarter of 2023 was $1.9 million, a decrease of $12.4 million as compared to the third quarter of 2022.

For additional information, see Note 2 - Discontinued Operations, in the notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report.

On December 30, 2022, we granted an exclusive license to commercialize,

in the United States and its possessions and territories, our prescription prenatal vitamin product lines under our vitaMedMD brand name

and authorized generic formulations of some of our prescription prenatal vitamin products under our BocaGreenMD Prenatal name to Mayne

Results of operations

Nine months ended September 30, 2023 compared with nine months ended September 30, 2022

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 to the condensed consolidated financial statements included in this Quarterly Report.

The discussion below, and the revenues and expenses discussed below, are based on and relate to our continuing operations.

Three months ended March 31, 2024 compared with three months ended

March 31, 2023

As part of the transformation that included the Mayne License Agreement,

historical results of commercial operations have been reflected as discontinued operations in our condensed consolidated financial statements

for all periods prior to the Closing Date.

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 to the condensed consolidated financial statements included in this Quarterly Report.

The discussion below, and the revenues and expenses discussed below,

are based on and relate to our continuing operations.

The following table sets forth the results of our operations (in thousands):

Nine months ended September 30,

Three Months Ended

License and service revenue

Cost of revenue

Operating expenses:

6 unchanged sentences

Miscellaneous income (expense)

Total other income (expense), net

Total other income, net

Loss from continuing operations before income taxes

2 unchanged sentences

Income (loss) from discontinued operations, net of income taxes

Net income (loss)

License and service revenue.

We recorded $0.8 million in license revenue for the first nine months of 2023, primarily from the Mayne License Agreement partially offset by adjustments described below, compared to $1.4 million in sales to another licensee during the first nine months of 2022.

We report royalty revenue in excess of the contractual minimums each quarter totaling approximately $1.0 million year-to-date.

Royalties reported as license revenue for intellectual property licensed by us totaled approximately $0.5 million and royalties reported as other income for intellectual property we sold totaled approximately $0.5 million year-to-date.

Operating expenses.

Total operating expenses for the first nine months of 2023 were $7.7 million, a decrease of $39.5 million, or 83.7%, compared to the first nine months of 2022.

This decrease was due to the transition of our business from a manufacturing and commercialization business to a royalty-based business with limited infrastructure.

As part of our transformation and the Mayne License

Agreement, historical results of commercial operations have been reflected as discontinued operations in the condensed consolidated financial

statements for all periods presented.

We recorded $313 thousand in license revenue for the first quarter

of 2024, primarily from the Mayne License Agreement, compared to $416 thousand in license revenue

from the Mayne License Agreement for the first quarter of 2023.

The decrease is primarily attributable to changes in sales of licensed

Total operating expenses for the first quarter of 2024 were $1,455 thousand, a decrease of $1,628 thousand, or 52.8%, compared

to the first quarter of 2023.

This decrease was due to the down-sizing of our business following our transition to a royalty-based business.

Selling, general and administrative.

Selling, general and administrative expenses were $7.4 million for the first nine months of 2023, a decrease of $38.9 million, or 84.0%, compared to the first nine months of 2022.

This decrease was due to the transition of our business from a manufacturing and commercialization business to a royalty-based business.

Selling, general and administrative expenses were $1,322 thousand for

the first quarter of 2024, a decrease of $1,734 thousand, or 56.7%, compared to the first quarter of 2023.

This decrease was due to the

increased efficiencies realized following our transition to a royalty-based business.

Depreciation & amortization.

Depreciation and amortization expenses were $0.3 million for the first nine months of 2023, a decrease of $0.6 million, or 67.8%, compared to the first nine months of 2022.

This decrease was due to the transition of our business from a manufacturing and commercialization business to a royalty-based business.

Depreciation and amortization expense was $133 thousand for the first

quarter of 2024, an increase of $106 thousand, or 392.6%, compared to the first quarter of 2023.

In 2024, this balance is entirely comprised

of amortization of license rights and intangible assets.

Loss from operations.

For the first nine months of 2023, we had a loss from operations of $6.9 million, as compared to a loss from operations of $47.3 million, for the first nine months of 2022.

This change was primarily due to the transition of our business from a manufacturing and commercialization business to a royalty-based business and the associated decrease in expenses.

In the first quarter of 2024, we had a loss from operations of $1,142

thousand, as compared to a loss from operations of $2,667 thousand for the first quarter of 2023.

This change reflects the streamlining

of our business and increased efficiencies realized as a royalty-based business.

Other income (expense), net .

During the first nine months of 2023 we had other income of $0.8 million as compared to a other expense of $0.1 million during the first nine months of 2022.

This increase was due to the transition of our business from a manufacturing and commercialization business to a royalty-based business.

Other income represents interest income from banks accounts as well the present value of the minimum royalty receivables recorded compared to actual minimum royalties received and other miscellaneous items.

During the first quarter of 2024,

we had other income of $333 thousand compared to other income of $357 thousand in the first quarter of 2023.

This change reflects our

transition to a royalty-based business.

Royalties reported as other income for intellectual property licensed by us totaled approximately

$295 thousand in the first quarter of 2024.

Provision for income taxes .

During the first nine months of 2023 and 2022, we recorded no provision for income taxes for continuing operations.

During the first quarter of 2024

and 2023, we recorded no provision for income taxes for continuing operations.

Net loss from continuing operations .

For the first nine months of 2023, we had a net loss of $6.2 million, or $0.60 per basic and diluted common share, compared to a loss of $47.4 million, or $5.34 per basic and diluted common share, for the first nine months of 2022.

Discontinued Operations - Revenues from discontinued operations were $(0.8) million for the first nine months of 2023, a decrease of $68.2 million as compared to the first nine months of 2022.

Operating expenses from discontinued operations were $0.3 million for the first nine months of 2023, a decrease of $73.7 million, as compared to the first nine months of 2022.

Net loss from discontinued operations for the first nine months of 2023 was $3.2 million, a decrease of $84.9 million as compared to the first nine months of 2022.

For additional information, see Note 2 - Discontinued Operations, in the notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report.

For the first quarter of

2024, we had a net loss of $809 thousand, or $0.07 per basic and diluted common share, compared to a net loss of $2,310 thousand, or $0.24

per basic and diluted common share, for the first quarter of 2023.

Discontinued Operations - Net income from discontinued operations

was $75 thousand for the first quarter of 2024, compared to a net loss from discontinued operations of $1,293 thousand for the first

quarter of 2023.

This change reflects the continued wind-down of our legacy business.

For additional information, see Note 2 - Discontinued Operations, in

the notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report.

Liquidity and capital resources

Our primary use of cash is to fund our continued operations.

We have funded our operations primarily through public offerings of our common stock and private placements of equity and debt securities, the divestiture of our former subsidiary vitaCare, and the transactions with Mayne Pharma.

As of September 30, 2023, we had cash and cash equivalents totaling $10.2 million.

We maintain cash at financial institutions that at times may exceed the Federal Deposit Insurance Corporation insured limits of $0.25 million per bank.

We have never experienced any losses related to these funds.

vitaCare Divestiture

On April 14, 2022, we completed the vitaCare Divestiture.

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 utilized $120.0 million of net proceeds from the vitaCare Divestiture to make a prepayment of the loans under the Financing Agreement.

funded our operations primarily through public offerings of our common stock and private placements of equity and debt securities, the

divestiture of our former subsidiary vitaCare, and the transactions with Mayne Pharma.

31, 2024 , we had cash and cash equivalents totaling $4,338 thousand.

We maintain cash at financial institutions that at times may

exceed the Federal Deposit Insurance Corporation insured limits of $250 thousand per bank.

We have never experienced any losses related

to these funds.

Mayne Pharma License Agreement

On December 30, 2022, we granted Mayne Pharma (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.

The total consideration from Mayne Pharma to us 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 as determined in accordance with the transaction agreement dated December 4, 2022, 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 and (iv) the right to receive the contingent consideration set forth in the Mayne License Agreement, as amended.

Mayne Pharma will pay us 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.

During the three months ended September 30, 2023, we revised certain estimates pertaining to contracts we were a party to when we were an operating company.

These included an incremental accrual of approximately $2 million for net working capital adjustments related to the Transaction Agreement.

On December 30, 2022, we granted Mayne Pharma (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.

The total consideration from Mayne Pharma to us 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 as determined in accordance with the transaction agreement dated December 4, 2022, 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

and (iv) the right to receive the contingent consideration set forth in the Mayne License Agreement, as amended.

Pursuant to the Mayne License Agreement, Mayne Pharma will pay us one-time,

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.

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 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.

will pay us 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.

Subscription Agreement with Rubric Capital Management LP

On May 1, 2023, we entered into the Subscription Agreement with Rubric, pursuant to which we agreed to sell to Rubric, or one or more of its affiliates, up to an aggregate of 5,000,000 shares of Common Stock, from time to time during the term of the Subscription Agreement in separate draw downs at our election, at a purchase price of the five-day volume-weighted average price of our common stock at the time of the sale of such shares, at an aggregate purchase price of up to $5,000,000 (collectively, the “Private Placement”).

The initial draw down occurred on June 29, 2023 consisting of a sale of 312,525 shares of Common Stock at a price per share equal to $3.6797.

On May 1, 2023, we entered into the Subscription Agreement with Rubric,

pursuant to which we agreed to sell to Rubric, or one or more of its affiliates, up to an aggregate of 5,000,000 shares of Common Stock,

from time to time during the term of the Subscription Agreement in separate draw downs at our election, at a purchase price of the five-day

volume-weighted average price of our common stock at the time of the sale of such shares, at an aggregate purchase price of up to $5,000,000

(collectively, the “Private Placement”).

initial draw down occurred on June 29, 2023 consisting of a sale of 312,525 shares of Common Stock at a price per share equal to $3.6797.

We received gross proceeds of $1.15 million from the drawdown, before expenses.

See “Going Concern” above for further discussion related to our ability to generate and obtain adequate amounts of cash to meet our liquidity needs and our plans for to satisfy our such needs in the short-term and in the long-term.

The following table reflects the major categories of cash flows for each of the periods (in thousands).

Nine Months Ended September 30,

On November 15, 2023 Rubric drew down an additional 877,192

shares of Common Stock at a price per share equal to $2.2761.

We received gross proceeds of $2.0 million from the drawdown, before expenses.

See “Going Concern” above for further discussion

related to our ability to generate and obtain adequate amounts of cash to meet our liquidity needs and our plans for to satisfy our

such needs in the short-term and in the long-term.

As a result, there is substantial doubt about our ability to continue as a going

concern for the next twelve months from the issuance of these financial statements.

The following table reflects the major categories of cash flows for

each of the periods (in thousands).

Three Months Ended

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by (used in) financing activities

Net cash provided by (used in) discontinued operations

Net (decrease) in cash

Net increase (decrease) in cash

Operating Activities from continuing operations .

For the first nine months of 2023, net cash used in operating activities was $18.1 million, compared to net cash used in operating activities of $20.9 million for the first nine months of 2022.

This decrease of $2.8 million or 13.2%, was primarily due to a $41.2 million decrease in our net loss from continuing operations following our transition from a manufacturing and commercialization business to a royalty-based business, offset by a $38.5 million decrease in non-cash expenses as compared to the first nine months of 2022.

Investing Activities from continuing operations.

Net cash used in investing activities for the first nine months of 2023 was $0.0 million, compared to net cash used in investing activities of $0.3 million for the first nine months of 2022.

This change was due our transition from a manufacturing and commercialization business to a royalty-based business.

Financing Activities from continuing operations.

For the first nine months of 2023, net cash received from financing activities was $1.2 million, compared to net cash used by financing activities of $123.3 million for the first nine months of 2022, reflecting the sale of common stock during the first nine months of 2023 and the payments of outstanding long-term debt during the first nine months of 2022.

Net cash used in discontinued operations.

Net cash used in operating activities from discontinued operations for the first nine months of 2023 was $22.2 million as compared to net cash provided by operating activities of $117.6 million for first nine months of 2022.

This change relates primarily to expenses incurred and the payment of current liabilities associated with our transition from a manufacturing and commercialization business to a royalty-based business.

Net cash provided by investing activities from discontinued operations was $0.0 million for the first nine months of 2023 and $0.1 million for the first nine months of 2022.

Net cash provided by financing activities from discontinued operations was $0.0 million for the first nine months of 2023 and 2022.

For additional details, see the condensed consolidated statements of cash flows in Item 1, Financial Statements, appearing elsewhere in this 10-Q Report.

For the first

three months of 2024, net cash used in operating activities was $229 thousand, compared to net cash used in operating activities of $8,701

thousand for the first three months of 2023.

This decrease of $8,472 thousand or 97.4%, was primarily due to a $1,501 thousand decrease

in our net loss from continuing operations following our transition from a manufacturing and commercialization business to a royalty-based

business combined with the pay-down of current liabilities in the prior-year period.

Net cash provided by (used in) discontinued operations.

cash provided by operating activities from discontinued operations for the first three months of 2024 was $240 thousand as compared to

net cash used in operating activities of $23,368 thousand for the first three months of 2023.

This change relates primarily to expenses

incurred and the payment of current liabilities associated with our transition from a manufacturing and commercialization business to

a royalty-based business.

For additional details, see the condensed consolidated statements of

cash flows in Item 1, Financial Statements, appearing elsewhere in this 10-Q Report.

Other liquidity measures

Receivable from Mayne .

On December 30, 2022, Mayne Pharma acquired our accounts receivable balance of approximately $29.3 million which is subject to certain working capital adjustments.

As of September 30, 2023, we had a royalty receivable of $2.7 million relating to the short-term portion of receivable from Mayne Pharma and $19.1 million relating to the long-term portion of royalty receivable which includes royalties recognized from the Minimum Annual Royalty.

See Note 1 Business, basis of presentation, new accounting standards and summary of significant accounting policies (Revenue Recognition) to the condensed consolidated financial statements included in this Quarterly Report.

On December 30, 2022, Mayne Pharma acquired our inventory balance of approximately $6.6 million, which is subject to certain net working capital adjustments.

Contractual obligations, off-balance sheet arrangements and purchase commitments and employment agreements

Our contractual obligations and off-balance sheet arrangements are set forth below.

On December 30, 2022, Mayne Pharma acquired

our accounts receivable balance of approximately $29.3 million which is subject to certain working capital adjustments.

31, 2024 , we had a royalty receivable of $3,113 thousand relating to the short-term portion of receivable from Mayne Pharma and

$17,855 thousand relating to the long-term portion of royalty receivable which includes royalties recognized from the Minimum Annual Royalty.

See Note 1 Business, basis of presentation, new accounting standards and summary of significant accounting policies (Revenue Recognition)

to the consolidated financial statements included in our 2023 10-K Report .

On December 30, 2022, Mayne Pharma acquired our inventory

balance of approximately $6.6 million, which is subject to certain net working capital adjustments.

Contractual obligations, off-balance sheet arrangements and purchase

commitments and employment agreements

Our contractual obligations and off-balance sheet arrangements are

set forth below.

For additional information on any of the following and other obligations and arrangements, see “Note 6.

Commitments and Contingencies” to the condensed consolidated financial statements included in this 10-Q Report.

In the ordinary course of business, we enter into agreements with third parties that include indemnification provisions, which, in our judgment, are normal and customary for companies in our industry sector.

Pursuant to these agreements, we generally agree to indemnify, hold harmless, and reimburse indemnified parties for losses suffered or omitted by us.

The maximum potential amount of future payments we could be required to make under these indemnification provisions is sometimes unlimited.

and Contingencies” to the condensed consolidated financial statements included in this 10-Q Report.

In the ordinary course of business, we enter into agreements with third

parties that include indemnification provisions, which, in our judgment, are normal and customary for companies in our industry sector.

Pursuant to these agreements, we generally agree to indemnify, hold harmless, and reimburse indemnified parties for losses suffered or

omitted by us.

The maximum potential amount of future payments we could be required to make under these indemnification provisions is

sometimes unlimited.

We have not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions.

As a result, the estimated fair value of liabilities relating to these provisions is minimal.

Accordingly, we had no liabilities recorded for these provisions as of September 30, 2023 and December 31, 2022.

In the normal course of business, we may be confronted with issues or events that may result in contingent liability.

These generally relate to lawsuits, claims, environmental actions, or the actions of various regulatory agencies.

Accordingly, we had no liabilities recorded

for these provisions as of March 31, 2024 and December 31, 2023 .

In the normal course of business, we may be confronted with issues

or events that may result in contingent liability.

These generally relate to lawsuits, claims, environmental actions, or the actions of

various regulatory agencies.

We consult with counsel and other appropriate experts to assess the claim.

If, in our opinion, we have incurred a probable loss as set forth by U.S.

GAAP, an estimate is made of the loss and the appropriate accounting entries are reflected in our financial statements.

If, in our opinion, we have incurred

a probable loss as set forth by U.S.

GAAP, an estimate is made of the loss and the appropriate accounting entries are reflected in our

condensed consolidated financial statements.

Critical accounting policies and estimates

Management’s discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements included elsewhere in this 10-Q Report, which has been prepared in accordance with U.S.

We make estimates and assumptions that affect the reported amounts on our condensed consolidated financial statements and accompanying notes as of the date of the condensed consolidated financial statements.

The critical accounting policies and estimates used are disclosed in Item 7 - Critical accounting policies and estimates in our 2022 10-K Report.

Quantitative and qualitative disclosures about market risk

As a “smaller reporting company,” as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and pursuant to Instruction 6 to Item 201(e) of Regulation S-K, we are not required to provide this information.

Management’s discussion and analysis of our financial condition

and results of operations are based upon our condensed consolidated financial statements included elsewhere in this 10-Q Report, which

has been prepared in accordance with U.S.

We make estimates and assumptions that affect the reported amounts on our condensed consolidated

financial statements and accompanying notes as of the date of the condensed consolidated financial statements.

The critical accounting

policies and estimates used are disclosed in Item 7 – Management’s discussion and analysis of financial condition and results

of operations – Critical accounting policies and estimates in our 2023 10-K Report.

Quantitative and qualitative disclosures about market

As a “smaller reporting company,” as defined by Rule 12b-2

of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and pursuant to Instruction 6 to Item 201(e) of Regulation

S-K, we are not required to provide this information.

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-Q

Item 2. Management’s Discussion and Analysis