TherapeuticsMD, Inc. 10-Q

Item 2. 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 statements. 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. 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 2023 10-K Report, as updated and supplemented by Part II, Item 1A of this 10-Q Report. Our company 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. 17 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. 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 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. 18 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 September 30, 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 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. 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. 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 Agreement. 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. 19 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 Agreement. 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 intends 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. As 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. In addition, the Company has received information from Mayne Pharma pertaining to the allowance for returns that differs from the Company’s estimate of the allowance. As of September 30, 2024, the Company believes no additional accrual is required for amounts that may be owed for the allowance for returns under the Transaction Agreement, as the Company cannot reasonably estimate a range of loss. The Company 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. 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 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. 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. 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, 2024, no IMVEXXY sales had been made through the Theramex licensing agreement. 20 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). ANNOVERA is commercially sold in the U.S. pursuant to the terms of the Population Council 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 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. 21 Three months ended September 30, 2024 compared with three months ended September 30, 2023 The following table sets forth the results of our operations (in thousands): Three Months Ended September 30, 2024 2023 Revenue: License and service revenue $ 547 $ (53 ) Operating expenses: Selling, general and administrative 1,310 1,590 Impairment of long-lived assets (Note 4) — — Depreciation and amortization 96 130 Total operating expenses 1,406 1,720 Loss from operations (859 ) (1,773 ) Other income (expense): Interest expense and other financing costs (3 ) (20 ) Miscellaneous income 295 359 Total other income, net 292 339 Loss from continuing operations before income taxes (567 ) (1,434 ) Provision for income taxes — — Net loss from continuing operations (567 ) (1,434 ) Loss from discontinued operations, net of income taxes (42 ) (1,944 ) Net loss $ (609 ) $ (3,378 ) Revenue. 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 $547 thousand in license revenue for the third quarter of 2024, primarily from the Mayne License Agreement, an increase of $600 thousand, compared to $(53) thousand in license revenue for the third quarter of 2023. The increase is primarily attributable to changes in sales of licensed products. Reported negative license revenue of ($53) thousand in the third quarter of 2023 was due to product sales adjustments reported by our licensees. Operating expenses . Total operating expenses for the third quarter of 2024 were $1,406 thousand, a decrease of $314 thousand, or 18.3%, compared to the third quarter of 2023. This decrease was due to the further optimization of our business through the reduction of costs following our transition to a royalty-based business. Selling, general and administrative. Selling, general and administrative expenses were $1,310 thousand for the third quarter of 2024, a decrease of $280 thousand, or 17.6%, compared to the third 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 expense was $96 thousand for the third quarter of 2024, a decrease of $34 thousand, or 26.2%, compared to the third quarter of 2023. In the 2024 period, this balance is entirely comprised of amortization of license rights and intangible assets. Loss from operations. In the third quarter of 2024, we had a loss from operations of $859 thousand, as compared to a loss from operations of $1,773 thousand for the third quarter of 2023. This change reflects the streamlining of our business and increased efficiencies realized as a royalty-based business. 22 Other income (expense), net . During the third quarter of 2024, we had other income of $292 thousand compared to other income of $339 thousand in the third quarter of 2023. Other income in the 2024 period was mainly comprised of interest income, while other income in the prior year period was mainly comprised of royalties. Provision for income taxes . During the third quarter of 2024 and 2023, we recorded no provision for income taxes for continuing operations. Net loss from continuing operations . For the third quarter of 2024, we had a net loss of $567 thousand, or $0.05 per basic and diluted common share, compared to a net loss of $1,434 thousand, or $0.13 per basic and diluted common share, for the third quarter of 2023. Discontinued Operations – Net loss from discontinued operations was $42 thousand for the third quarter of 2024, compared to a net loss from discontinued operations of $1,944 thousand for the third quarter of 2023. Nine months ended September 30, 2024 compared with nine months ended September 30, 2023 The following table sets forth the results of our operations (in thousands): Nine Months Ended September 30, 2024 2023 Revenue: License and service revenue $ 1,094 $ 800 Operating expenses: Selling, general and administrative 3,865 7,427 Impairment of long-lived assets (Note 4) 1,261 — Depreciation and amortization 409 285 Total operating expenses 5,535 7,712 Loss from operations (4,441 ) (6,912 ) Other income (expense): Interest expense and other financing costs (8 ) (115 ) Miscellaneous income 2,023 869 Total other income, net 2,015 754 Loss from continuing operations before income taxes (2,426 ) (6,158 ) Provision for income taxes — — Net loss from continuing operations (2,426 ) (6,158 ) Loss from discontinued operations, net of income taxes (7 ) (3,237 ) Net loss $ (2,433 ) $ (9,395 ) Revenue . 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 $1,094 thousand in license revenue for the first nine months of 2024, primarily from the Mayne License Agreement, an increase of $294 thousand, or 36.8%, compared to $800 thousand in license revenue for the first nine months of 2023. The increase is primarily attributable to changes in sales of licensed products. 23 Operating expenses . Total operating expenses for the first nine months of 2024 were $5,535 thousand, a decrease of $2,177 thousand, or 28.2 %, compared to the first nine months of 2023. This decrease was due to the further optimization of our business through the reduction of costs following our transition to a royalty-based business and is partially off-set by the patent impairment recognized in the second quarter of 2024. Selling, general and administrative. Selling, general and administrative expenses were $3,865 thousand for the first nine months of 2024, a decrease of $3,562 thousand, or 48.0%, compared to the first nine months of 2023. This decrease was due to the increased efficiencies realized following our transition to a royalty-based business. Depreciation & amortization. Depreciation and amortization expense was $409 thousand for the first nine months of 2024, an increase of $124 thousand, or 43.5%, compared to the first nine months of 2023. In the 2024 period, this balance is entirely comprised of amortization of license rights and intangible assets. Loss from operations. In the first nine months of 2024, we had a loss from operations of $4,441 thousand, as compared to a loss from operations of $6,912 thousand for the first nine months of 2023. This change reflects the streamlining of our business and increased efficiencies realized as a royalty-based business. Other income, net . During the first nine months of 2024, we had other income of $2,015 thousand compared to other income of $754 thousand in the first nine months of 2023. The difference is mainly due to a $1,250 thousand one-time payment the Company received from its sublessee on its early termination on the sublease, which was recognized in the second quarter of 2024. Royalties reported as other income for intellectual property licensed by us totaled approximately $660 thousand in the first nine months of 2024. Provision for income taxes . During the first nine months 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 2024, we had a net loss of $2,426 thousand , or $0.21 per basic and diluted common share, compared to a net loss of $6,158 thousand, or $0.60 per basic and diluted common share, for the first nine months of 2023. Discontinued Operations - Net loss from discontinued operations was $7 thousand for the first nine months of 2024, compared to a net loss from discontinued operations of $3,237 thousand for the first nine months 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, 2024, we had cash and cash equivalents totaling $5,047 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. 24 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. 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 drawdowns 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. We received gross proceeds of $1.15 million from the drawdown, before expenses. 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. Managed Client Agreement with IWG On September 30, 2024 (the “Commencement Date”), we entered into a Managed Client Agreement (the “Managed Client Agreement”) with RGN-MCA Florida VI, LLC (“IWG”) pursuant to which IWG agreed to provide managed services for flexible workspaces under the “HQ” brand for 21,330 square feet of our office spaces located at 951 Yamato Road, Boca Raton, Florida 33431 (the “Premises”). The Managed Client Agreement is subject to termination by us or IWG if either party does not approve the specification, plans and drawings for the fit out of the Premises on or before the date that is 120 days after the Commencement Date. 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 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. Cash flows The following table reflects the major categories of cash flows for each of the periods (in thousands). Nine Months Ended September 30, 2024 2023 Net cash provided by (used in) continuing operating activities $ 1,153 $ (18,121 ) Net cash provided by financing activities — 1,149 Net cash used in discontinued operations (433 ) (22,179 ) Net increase (decrease) in cash $ 720 $ (39,151 ) Operating Activities from continuing operations . For the first nine months of 2024, net cash provided by operating activities was $1,153 thousand, compared to net cash used in operating activities of $18,121 thousand for the first nine months of 2023. This change of $19,274 thousand was primarily due to a $3,732 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. 25 Financing Activities from continuing operations. For the first nine months of 2024, there was no cash received from financing activities, compared to net cash received from financing activities of $1,149 thousand for the first nine months of 2023, reflecting the sale of common stock during the first nine months of 2023. Net cash used in discontinued operations. Net cash used in operating activities from discontinued operations for the first nine months of 2024 was $433 thousand as compared to net cash used in operating activities of $22,179 thousand for the first nine months of 2023. This change relates primarily to a decrease in 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, 2024, we had a royalty receivable of $3,160 thousand relating to the short-term portion of receivable from Mayne Pharma and $16,610 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. Inventory. 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 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, 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 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. GAAP and SEC rules and regulations related to interim financial reporting. 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. 26 Item 3. 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.