TherapeuticsMD, Inc. 10-K/A

Item 7. Management’s discussion and analysis of financial condition and results of operations You should read the following discussion and analysis in conjunction with the information set forth under our consolidated financial statements and the notes to those financial statements included elsewhere in this 2025 10-K Report. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. See “Statement Regarding Forward-Looking Information.” Our actual results may differ materially from those contained in or implied by any forward-looking statements as a result of various factors, including, but not limited to, the risks and uncertainties described under “Risk Factors” elsewhere in this 2025 10-K Report. Certain amounts in the Management’s discussion and analysis of financial condition and results of operations may not add due to rounding, and all percentages have been calculated using unrounded amounts. Business overview TherapeuticsMD was previously a women’s healthcare company with a mission of creating and commercializing innovative products to support the lifespan of women from pregnancy prevention through menopause. In December 2022, we changed our business to become a pharmaceutical royalty company, currently receiving royalties on products licensed to pharmaceutical organizations that possess commercial capabilities in relevant territories. On December 30, 2022 (the “Closing Date”), we completed a transaction (the “Mayne Transaction”) with Mayne Pharma LLC, a Delaware limited liability company (“Mayne Pharma”) and subsidiary of Mayne Pharma Group Limited, an Australian public company (“Mayne Pharma Group”), in which we and our subsidiaries (i) granted Mayne Pharma an exclusive license to commercialize our IMVEXXY, BIJUVA and prescription prenatal vitamin products sold under the BocaGreenMD and vitaMedMD brands (collectively, the “Licensed Products”) in the United States and its possessions and territories, (ii) assigned to Mayne Pharma our exclusive license to commercialize ANNOVERA® (together with the Licensed Products, collectively, the “Products”) in the United States and its possessions and territories, and (iii) sold certain other assets to Mayne Pharma in connection therewith. 40 In 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. Under the Mayne License Agreement, Mayne Pharma agreed to 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 agreed to pay us royalties on net sales of all Products in the United States at a royalty rate of 8.0% on the first $80.0 million in annual net sales and 7.5% on annual net sales above $80.0 million, subject to certain adjustments, for a period of 20 years following the Closing Date. The royalty rate will decrease to 2.0% on a Product-by-Product basis upon the earlier to occur of (i) the expiration or revocation of the last patent covering a Product and (ii) a generic version of a Product launching in the United States. Mayne Pharma agreed to 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. Under the Transaction Agreement, dated December 4, 2022, between TherapeuticsMD and Mayne Pharma (the “Transaction Agreement”), we sold to Mayne Pharma, at closing, certain assets for Mayne Pharma to commercialize the Products in the United States, including, with the Population Council’s consent, our exclusive license from the Population Council to commercialize ANNOVERA (the “Transferred Assets”). The total consideration from Mayne Pharma to TherapeuticsMD for the purchase of the Transferred Assets under the Transaction Agreement 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 Pharma 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. As part of the transformation that included the Mayne License Agreement, all results associated with former commercial operations have been reflected as discontinued operations in our consolidated financial statements. Assets and liabilities associated with the commercial business are classified as assets and liabilities of discontinued operations in our consolidated balance sheets. Additional disclosures regarding discontinued operations are provided in Note 2 of our consolidated financial statements. 41 The Company also has license agreements with strategic partners to commercialize IMVEXXY and BIJUVA outside of the U.S. ● In July 2018, we entered into the “Knight License Agreement” with 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 June 2019, we entered into the “Theramex License Agreement” with 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 December 2024, we transferred the right to commercialize IMVEXXY and BIJUVA in Israel from Knight to Theramex. Employees As of December 31, 2025, we employed one full-time employee primarily engaged in an executive position. We have engaged external consultants who support our relationship with current partners and assist with certain financial, IT, legal, and regulatory matters and the continued wind-down of our historical business operations. On August 15, 2023, we entered into a master services agreement with JZ Advisory Group, pursuant to which Joseph Ziegler serves as our Principal Financial and Accounting Officer. Portfolio of our licensed 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. 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 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. In December 2024, we transferred the right to commercialize IMVEXXY in Israel from Knight to Theramex. 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. 42 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. In December 2024, we transferred the right to commercialize BIJUVA in Israel from Knight to Theramex. ANNOVERA (segesterone acetate (“SA”) and ethinyl estradiol (“EE”) vaginal system) 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). On December 30, 2022, we assigned our exclusive license to commercialize ANNOVERA in the United States and its possessions and territories to Mayne Pharma. 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, all results associated with former commercial operations have been reflected as discontinued operations in the Company’s 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 the Company’s consolidated balance sheets. Additional disclosures regarding discontinued operations are provided in Note 2 to the consolidated financial statements included in this 2025 10-K Report. 43 The following table sets forth the results of our operations (in thousands): Years ended December 31, 2025 2024 Revenue, net: License revenue $ 3,022 $ 1,761 Operating expenses: General and administrative 6,852 6,096 Write-off and impairment of patents 176 1,268 Depreciation & amortization 384 509 Total operating expenses 7,412 7,873 Loss from operations (4,390 ) (6,112 ) Other income (expense): Interest income, net 142 135 Sublease income 1,847 1,352 Miscellaneous income 1,748 2,282 Total other income 3,737 3,769 Loss from continuing operations before income taxes (653 ) (2,343 ) Income tax benefit - 31 Net loss from continuing operations (653 ) (2,312 ) Income from discontinued operations, net of income taxes 84 131 Net loss $ (569 ) $ (2,181 ) Revenue. As part of our transformation and the Mayne License Agreement, all results associated with former commercial operations have been reflected as discontinued operations in the Company’s consolidated financial statements for all periods presented. We recorded $3,022 thousand in license revenue during the year ended December 31, 2025 primarily from the Mayne License Agreement, an increase of $1,261 thousand, or 71.6%, compared to $1,761 thousand in license revenue during the year ended December 31, 2024. The increase is primarily attributable to changes in sales of licensed products. General and administrative. General and administrative expenses for 2025 were $6,852 thousand, an increase of $756 thousand, or 12.4%, compared to $6,096 thousand for 2024. This increase was primarily attributable to higher bonus expense and increased investor relations costs in 2025. Write-off and impairment of patents . We recognized a $176 thousand write-off for abandoned patents and application in 2025, compared to a $1,268 thousand impairment loss in 2024. Depreciation & amortization. Depreciation and amortization expense for 2025 was $384 thousand, a decrease of $125 thousand, or 24.6%, compared to $509 thousand for 2024. This balance is entirely comprised of amortization of license rights and intangible assets. Operating expenses. Total operating expenses for 2025 were $7,412 thousand, a decrease of $461 thousand, or 5.9%, compared to $7,873 thousand for 2024. The decrease was primarily attributable to lower impairment charges recognized in 2025 compared to 2024, which was partially offset by higher bonus expense and increased costs related to investor communications. Loss from operations. For 2025, we had a loss from operations of $4,390 thousand, a decrease in loss of $1,722 thousand, or 28.2%, compared to loss from operations of $6,112 thousand for 2024. This change reflects the increase in sales from licensed products and the increased efficiencies realized as a royalty-based business. Other income. In 2025, we had other income of $3,737 thousand, a decrease of $32 thousand, or 0.8%, compared to other income of $3,769 thousand in 2024. The decrease was primarily attributable to the absence of rental settlement gain and contract breakage settlements recognized in 2024, which was partially offset by the higher sublease income and increased royalty income from Mayne Pharma in 2025. 44 Benefit for income taxes . For 2025, no income tax benefits was recognized from continuing operations. In 2024, the Company recognized $31 thousand income tax benefits from continuing operations. Net loss from continuing operations . For 2025, we had net loss from continuing operations of $653 thousand, or $0.06 per basic and diluted common share, a decrease in loss of $1,659 thousand, compared to net loss from continuing operations of $2,312 thousand, or $0.20 per basic and diluted common share, for 2024. Discontinued Operations. For 2025, net income from discontinued operations was $84 thousand, a decrease of $47 thousand, compared to net income from discontinued operations of $131 thousand for 2024. For additional information, see “Note 2. Discontinued Operations”, in the notes to the consolidated financial statements appearing elsewhere in this 2025 10-K Report for further details. Liquidity and capital resources Our primary use of cash is to fund our continuing operations. We have funded our operations primarily through revenue from licensed royalties, public offerings of our common stock and private placements of equity and debt securities, and the transactions with Mayne Pharma. As of December 31, 2025, we had cash and cash equivalents totaling $7,483 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, 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 has agreed to 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 has agreed to 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 has agreed to 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. 45 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 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 draw-down, before expenses. There were no draw-downs in 2025 and 2024. 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 the financial statements included in this 2025 10-K Report. Cash flows The following table reflects the major categories of cash flows from continuing operations for each of the periods (in thousands). Years ended December 31, Cash flow from continuing operations 2025 2024 Net cash provided by operating activities $ 2,454 $ 1,170 Net cash used in discontinued operations (30 ) (438 ) Net increase in cash $ 2,424 $ 732 Operating Activities from continuing operations. Net cash provided by operating activities in 2025 was $2,454 thousand, an increase of $1,284 thousand, compared to net cash provided in operating activities of $1,170 thousand for 2024. This increase was primarily driven by the significant reduction in loss from continuing operations and favorable changes in accrued expenses and other current liabilities, partially offset by lower non-cash adjustments such decreased long-lived asset impairment charges in 2025. Financing Activities from continuing operations. There was no cash received from financing activities for both 2025 and 2024. Net cash used in discontinued operations. Net cash used in discontinued operations for 2025 was $30 thousand, a decrease of $408 thousand, as compared to net cash used in discontinued operations of $438 thousand for 2024. This change relates primarily to a decreased level of activities associated with our discontinued operations. For additional details, see the consolidated statements of cash flows included in our consolidated financial statements in this 2025 10-K Report. Other liquidity measure Receivable from Mayne Pharma. 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 December 31, 2025, and 2024, we had a royalty receivable of $3,159 thousand and $3,327 thousand, respectively, relating to the short-term portion of royalty receivable from Mayne Pharma and $13,713 thousand and $16,010 thousand, respectively 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 this 2025 10-K Report. 46 Contractual obligations, off-balance sheet arrangements, purchase commitments and employment agreements Our contractual obligations and off-balance sheet arrangements are discussed below. For additional information on any of the following and other obligations and arrangements, see “Note 7. Commitments and Contingencies” to the consolidated financial statements included in this 2025 10-K 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, for which there may or may not be limitations on potential damages. The maximum potential amount of future payments we could be required to make under these indemnification provisions is sometimes unlimited. 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 December 31, 2025. 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 accounting principles generally accepted in the United States of America (“U.S. GAAP”), an estimate is made of the loss and the appropriate accounting entries are reflected in our consolidated financial statements. Commitments Information regarding commitments is in “Note 7. Commitments and contingencies” to the consolidated financial statements included in this 2025 10-K Report. Employment agreements Information regarding employment agreements is in “Note 7. Commitments and contingencies” to the consolidated financial statements included in this 2025 10-K Report. Critical accounting policies and estimates Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements included elsewhere in this 2025 10-K Report, which has been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to identifiable intangible assets, certain accrued liabilities, and income taxes. We base our estimates on historical experience and on other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have identified the areas described below as critical to our business operations and the understanding of our results of operations given the uncertainties associated with the assumptions underlying each estimate. For a detailed discussion on the application of these and other significant accounting policies, see “Note 1. Basis of presentation, new accounting standards and summary of significant accounting policies” to the consolidated financial statements included in this 2025 10-K Report. Discontinued Operations Discontinued operations comprise activities that were disposed of at the end of the period, represent a separate major line of business that can be clearly distinguished for operational and financial reporting purposes and represent a business shift having a major effect on the Company’s operations and financial results according to Accounting Standard Codification (“ASC”) Topic 205, Presentation of Financial Statements. In 2022, we started classifying commercial activities as discontinued operations due to the cessation of these operations. For additional information, see “Note 2. Discontinued Operations”, in the notes to the consolidated financial statements appearing elsewhere in this 2025 10-K Report. 47 Loss contingencies – Mayne Pharma In determining whether an accrual for a loss contingency is required, we first assess the likelihood of occurrence of the future event or events that will confirm the loss. When a loss is probable (the future event or events are likely to occur) and the amount of the loss can be reasonably estimated, the estimated loss is accrued. If the reasonable estimate of the loss is a range and an amount within the range appears to be a better estimate than any other amount within the range, that amount should be accrued. However, if no amount within the range is a better estimate, the minimum amount in the range should be accrued. In February 2024, we received Mayne Pharma’s calculation of the net working capital allowances for payer rebates and wholesale distributor fees pursuant to the Transaction Agreement, which differed significantly from our estimate of the allowances. We continue to believe our estimated allowances for payer rebates and wholesale distributor fees are reasonable. In August 2024 and in February 2025, we also received information from Mayne Pharma pertaining to the net working capital allowance for returns that differs significantly from our estimate of the allowance. On April 8, 2025, we filed the Mayne Lawsuit seeking damages for breach of contract, breach of the implied covenant of good faith and fair dealing, fraudulent inducement, and unjust enrichment related to Mayne Pharma’s actions in relation to the License Agreement and the Transaction Agreement, primarily relating to the net working capital allowances and certain actions or inactions by Mayne Pharma relating thereto. On June 20, 2025, we filed an amended complaint against Mayne Pharma and on July 22, 2025, Mayne Pharma filed a motion to dismiss the Mayne Lawsuit. On March 23, 2026, a magistrate judge recommended that the court grant-in-part and deny-in-part Mayne Pharma’s motion to dismiss. The magistrate judge recommended granting Mayne’s motion to dismiss our claims for breach of the covenant of good faith and fair dealing, certain of our breach of contract claims and our claim for fraudulent inducement, but recommended the court grant us leave to amend the fraudulent inducement claim. The magistrate judge recommended denying Mayne’s motion to dismiss our other claims. The magistrate judge further recommended the court stay the Mayne Lawsuit while the parties submit the net working capital claims to a dispute resolution process. The parties have 14 days to object to these recommendations. On May 30, 2025, Mayne Pharma filed the Mayne Countersuit seeking damages for breach of contract and fraudulent inducement related to the Transaction Agreement. As part of the Mayne Countersuit, Mayne Pharma also made certain indemnification demands under the Transaction Agreement, which we dispute. On July 28, 2025, we filed a motion to dismiss the fraudulent inducement claim in the Mayne Countersuit. On March 23, 2026, a magistrate judge recommended that the court grant our motion to dismiss Mayne Pharma’s claim for fraudulent inducement, but recommended the court deny our motion to dismiss Mayne Pharma’s other claims. The parties have 14 days to object to this recommendation. As of December 31, 2025, we believed no additional accrual was required for such claims, as we could not reasonably estimate a range of loss. The outcome of this matter is uncertain at this point. As a result, we cannot reasonably estimate a range of loss, and accordingly, we have not accrued any additional liability associated with Mayne Pharma’s allowance calculation for payer rebates and wholesale distributor fees, particularly as we believe the outcome of this matter to be intertwined with the resolution of the net working capital allowance for returns. As of December 31, 2025, we also believed no additional accrual was required for amounts that may be owed for the allowance for returns under the Transaction Agreement. We have 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. License revenue License arrangements may consist of non-refundable upfront license fees, exclusive licensed rights to patented or patent pending technology, and various performance or sales milestones and future product royalty payments. Some of these arrangements may include multiple performance obligations. Non-refundable up-front fees that are not contingent on any future performance by us, and do not require continuing involvement on our part, are recognized as revenue when the right to use functional intellectual property is transferred to the customer. On December 30, 2022, we closed a License Agreement with Mayne Pharma pursuant to which we sold to Mayne Pharma the exclusive license rights in our product ANNOVERA and granted an exclusive license in other products, including IMVEXXY and BIJUVA. Under the terms of the License Agreement, we received $140 million at closing and we are eligible to receive additional payments in the aggregate of up to an additional $30 million based on the achievement of sales milestones (collectively, the “Milestone Amounts”). The proceeds at closing were allocated between consideration for the sale of ANNOVERA and the initial license fee for the Licensed Products, as the sale of ANNOVERA was accounted for under ASC 610-20, Gains and Losses from Derecognition of Nonfinancial Assets in arriving at the gain on disposal (see Note 2 to the consolidated financial statements included in this 2025 10-K Report), while the license grant of the other products were recognized under the provisions of ASC 606, Revenue from Contracts with Customers, as a license of functional intellectual asset. The proceeds were allocated among the Licensed Products on the relative net present value of forecasted future product sales from those products. The Milestone Amounts will be recognized, as applicable, in subsequent periods based on actual product sales that exceed the respective net sales milestones as such variable consideration is constrained by the occurrence of the subsequent sales. 48 Our royalty revenue recognized in 2025 and 2024 primarily related to royalties provided for under the Mayne License Agreement based on Mayne Pharma’s sales of the Licensed Products subject to that agreement. Under the Mayne License Agreement, the Company is entitled to earn royalties on net sales of all of the Licensed Products at a royalty rate of (i) 8% on the first $80 million of net sales of the Licensed Products and (ii) 7.5% on net sales of all of the Licensed Products after the first $80 million of net sales. The royalty rate is subject to a 2% reduction upon the earlier to occur of (i) the expiration or revocation of the last valid claim covering a Licensed Product, and (ii) a generic product launch (a “LOE”). We are entitled to minimum annual royalties beginning with the year ending December 31, 2023 ($3 million annual minimum) and continuing with 3% annual increases through the year ending December 31, 2034 (the “Minimum Annual Royalty”). The Minimum Annual Royalty originally totaled $42.6 million, and this total amount was allocated among the Licensed Products on the relative net present value of forecasted future product sales from those products. The portion allocated to consideration for the sale of ANNOVERA was attributed towards the gain on disposal of that asset. For the remaining portion allocated to the license grants for the other products, we determined that the minimum guarantee underlying the Minimum Annual Royalty should be treated as fixed consideration and recognized under ASC 606 at the point in time when the license was transferred. Since the Minimum Annual Royalty will be received in annual installments through 2034, we determined the transaction price allocated under ASC 606 contained a significant financing component, and we therefore determined the initial royalty revenue and corresponding receivable based on the present value of the allocated Minimum Annual Royalty. The present value was calculated using a discount rate of 10.45%, based on the credit characteristics of Mayne Pharma and the timing of future payments, and the value will be accreted to full value through the earlier of January 1, 2034 or a LOE. This royalty receivable is a contract asset as of December 31, 2025, and is further subject to offset by Mayne Pharma. Royalty revenue earned in excess of the Minimum Annual Royalty will be recognized under ASC 606, which provides revenue recognition constraints by requiring the recognition of revenue at the later of the following: 1) when the subsequent sale occurs or 2) when the performance obligation to which some or all of the sales-based royalty has been allocated has been satisfied (or partially satisfied). We applied the royalty recognition constraint required under the guidance for sales-based royalties, which requires a sales-based royalty to be recorded no sooner than the underlying sale. Therefore, royalties on sales of products commercialized by Mayne Pharma will be recognized in the subsequent periods that the Licensed Products are sold. For additional discussion on revenue, see “I. Revenue recognition” in “Note 1. Basis of presentation, new accounting standards and summary of significant accounting policies” to the consolidated financial statements included in this 2025 10-K Report. Recent accounting pronouncements Information regarding accounting standards issued or effective in 2025 is included in “Note 1. Basis of Presentation, New Accounting Standards and Significant Accounting Policies” to the consolidated financial statements. Item 7A. Quantitative and qualitative disclosures about market risk As a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act, and pursuant to Instruction 6 to Item 201(e) of Regulation S-K, we are not required to provide this information.