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Item 8. Financial Statements and Supplementary Data

2025-03-06 compared with 2024-03-01 · 307 added, 330 removed, 589 unchanged (52% of the section changed)

Financial Statements and Supplementary Data

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

VYNE THERAPEUTICS INC.

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2024

Report of Independent Registered Public Accounting Firm (Baker Tilly US, LLP, Tewksbury, MA, PCAOB ID 23 )

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of VYNE Therapeutics Inc.

To the shareholders and the board of directors of VYNE Therapeutics Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of VYNE Therapeutics Inc.

and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, changes in mezzanine equity and shareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

(the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive loss, changes in mezzanine equity and shareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

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We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

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Investment in marketable securities (Note 6)

Amount due from sale of MST Franchise — 5,000

41,590 62,633

Prepaid and other current assets 2,921 2,656

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Non-current Assets:

Property and equipment, net (Note 7)

Operating lease right of use assets (Note 9)

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Total Assets $ 66,905 $ 97,685

Liabilities, Mezzanine Equity and Shareholders’ Equity

Liabilities and Shareholders’ Equity

Current Liabilities:

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Employee-related obligations 1,428 1,645

Liability for employee severance benefits — 206

Operating lease liabilities (Note 9)

Other current liabilities

Total Current Liabilities 14,819 7,538

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Commitments and Contingencies (Note 11)

Mezzanine Equity:

Convertible Preferred Stock:

$ 0.0001 par value;

20,000,000 shares authorized at December 31, 2023 and December 31, 2022;

Series A Preferred Stock:

0 and 3,000 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively (Note 12)

Shareholders' Equity:

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$ 0.0001 par value;

20,000,000 shares authorized at December 31, 2023 and December 31, 2022, respectively;

no shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively

20,000,000 shares authorized at December 31, 2024 and 2023;

no shares issued and outstanding at December 31, 2024 and 2023

Common stock:

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150,000,000 shares authorized at December 31, 2024 and December 31, 2023;

14,098,888 and 3,229,704 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively

14,830,013 and 14,098,888 shares issued and outstanding at December 31, 2024 and 2023, respectively

Additional paid-in capital 783,235 780,044

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Total Shareholders' Equity 52,086 88,735

Total Liabilities, Mezzanine Equity and Shareholders’ Equity $ 97,685 $ 40,758

Total Liabilities and Shareholders’ Equity

$ 66,905 $ 97,685

The accompanying notes are an integral part of these consolidated financial statements.

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Total operating expenses

44,138 29,682

Operating loss

( 43,637 ) ( 29,258 )

Other income, net 3,834 1,386

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Loss from continuing operations ( 39,807 ) ( 27,872 )

(Loss) income from discontinued operations, net of income taxes ( 580 ) 10,735

Net Loss $ ( 28,452 ) $ ( 23,210 )

Loss from discontinued operations, net of income taxes

( 27 ) ( 580 )

$ ( 39,834 ) $ ( 28,452 )

Loss per share from continuing operations, basic and diluted $ ( 0.93 ) $ ( 2.72 )

(Loss) income per share from discontinued operations, basic and diluted $ ( 0.06 ) $ 3.37

Loss per share from discontinued operations, basic and diluted

$ — $ ( 0.06 )

Loss per share, basic and diluted

$ ( 0.93 ) $ ( 2.78 )

Weighted average shares outstanding - basic and diluted 42,589 10,273

Other comprehensive income:

Unrealized gain on marketable securities, net of tax of $ 0

Total other comprehensive income 26 —

Other comprehensive (loss) income:

Unrealized (losses) gains on marketable securities, net of tax of $ 0

Total other comprehensive (loss) income

Comprehensive loss $ ( 39,840 ) $ ( 28,426 )

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CHANGES DURING 2023:

Reclassification due to reverse stock split — — — ( 5 ) 5 — —

Vesting of restricted stock units, net of withholding for tax, and shares issued under employee share purchase plan — — 50,214 — ( 18 ) — — ( 18 )

Stock-based compensation — — — — 4,297 — — 4,297

Issuance of equity line of credit commitment shares in March 2022 — — 92,644 — — — — —

Share-based compensation

— — — — 3,305 — — 3,305

Redemption of convertible preferred stock

( 3,000 ) ( 211 ) — — — — ( 149 ) ( 149 )

Issuance of common stock in at-the-market offering, net of $ 5 in issuance costs

— — 34,589 — 156 — — 156

Issuance of convertible preferred stock, net of $ 89 in issuance costs

Issuance of common stock and pre-funded warrants in Private Placement, net of $ 5,486 in issuance costs

— — 10,652,543 1 82,664 — — 82,665

Cashless exercise of pre-funded warrants

— — 131,838 — — — — —

Unrealized gains from marketable securities

— — — — — 26 — 26

Net loss — — — — — — ( 28,452 ) ( 28,452 )

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Vesting of restricted stock units, net of withholding for tax, and shares issued under employee share purchase plan — — 91,302 — ( 112 ) — — ( 112 )

Stock-based compensation — — — — 3,305 — — 3,305

Redemption of convertible preferred stock ( 3,000 ) ( 211 ) — — — ( 149 ) ( 149 )

Issuance of common stock in at-the-market offering, net of $ 5 in issuance costs

— — 34,589 — 156 — — 156

Issuance of common stock and pre-funded warrants in Private Placement, net of $ 5,486 in issuance costs

Share-based compensation

— — — — 3,303 — — 3,303

Cashless exercise of pre-funded warrants — — 639,823 — — — — —

Unrealized gains from marketable securities — — — — — 26 — 26

Unrealized losses from marketable securities

— — — — — ( 6 ) — ( 6 )

Net loss — — — — — ( 39,834 ) ( 39,834 )

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operating activities:

Depreciation — 72

Stock-based compensation 3,305 4,297

Loss from sale and disposal of fixed assets — 282

Gain on the sale of the MST Franchise — ( 12,918 )

Share-based compensation

Amortization of premium or discount on marketable securities ( 2,443 ) ( 255 )

Unrealized gains on cash equivalents 1 —

Unrealized (losses) gains on cash equivalents

Changes in operating assets and liabilities:

Decrease in inventory — 97

Decrease in trade receivables, prepaid and other current assets and operating lease right of use asset 405 11,210

Decrease in trade payables, accrued expenses, employee related obligations, liability for employee severance benefits and other long-term liabilities ( 559 ) ( 8,681 )

Increase (decrease) in operating lease liabilities 214 ( 349 )

Trade receivables, prepaid expenses and other current assets and operating lease right of use assets

Trade payables, accrued expenses, employee related obligations and other long-term liabilities

6,012 ( 559 )

Operating lease liabilities

Net cash used in operating activities ( 33,972 ) ( 25,341 )

Cash Flows From Investing Activities:

Purchase of property and equipment

Proceeds from the sale of the MST Franchise — 5,000

Proceeds from the sale and maturity of marketable securities

Purchases of marketable securities ( 60,518 ) ( 62,354 )

Net cash (used in) provided by investing activities ( 57,354 ) 15,667

Net cash provided by (used in) investing activities

23,365 ( 57,354 )

Cash Flows From Financing Activities:

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Proceeds related to the issuance of common shares through at-the-market offerings, net of issuance costs — 156

(Redemption) proceeds of convertible preferred stock ( 360 ) 211

Withholdings from exercise of options and issuance of shares for stock-based compensation arrangements, net ( 67 ) ( 28 )

Net cash provided by financing activities 82,394 1,653

Redemption of convertible preferred stock

Withholdings from exercise of options and issuance of shares for share-based compensation arrangements, net

( 141 ) ( 67 )

Net cash (used in) provided by financing activities

( 141 ) 82,394

Decrease in cash, cash equivalents and restricted cash ( 10,748 ) ( 301 )

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Accretion of preferred stock $ — $ 149

Issuance of shares under employee share purchase plan $ 48 $ 37

Cashless exercise of warrants $ 132 $ —

Amount due from sale of MST Franchise $ — $ 5,000

Issuance of vested shares under employee share purchase plan

Additions to operating lease right of use assets $ — $ 207

Additions to operating lease liabilities $ — $ 214

Supplemental disclosure of cash flow information:

Interest received $ 1,139 $ 446

The accompanying notes are an integral part of these consolidated financial statements.

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VYNE Therapeutics Inc.

(the "Company") is a clinical-stage biopharmaceutical company focused on developing proprietary, innovative and differentiated therapies for the treatment of immuno-inflammatory conditions.

In August 2021, the Company entered into a transaction with Tay Therapeutics Ltd., formerly known as In4Derm Limited "Tay"), providing the Company with exclusive worldwide rights to research, develop and commercialize products containing bromodomain and extra-terminal domain (“BET”) inhibitors for the treatment of any disease, disorder or condition in humans.

Through its access to this library of new chemical BET inhibitor compounds, the Company plans to develop product candidates for a diverse set of indications.

Based on data generated to date, the Company has chosen to focus its initial efforts for this platform on select therapeutic areas in immuno-inflammatory disease.

The Company's lead program is VYN201, a locally administered pan-bromodomain ("BD") BET inhibitor designed as a “soft” drug to address diseases involving multiple, diverse inflammatory cell signaling pathways while providing low systemic exposure.

In preclinical testing, VYN201 produced consistent reductions in pro-inflammatory and disease-related biomarkers and improvements in disease severity across a variety of inflammatory and fibrotic models.

(the "Company") is a clinical-stage biopharmaceutical company focused on developing differentiated therapies to treat chronic inflammatory and immune-mediated conditions with high unmet need.

The Company has exclusive worldwide rights to research, develop and commercialize products containing small molecule bromodomain and extra-terminal domain (“BET”) inhibitors for the treatment of any disease, disorder or condition in humans, which the Company licensed from Tay Therapeutics Ltd., formerly known as In4Derm Ltd ("Tay").

Through the Company’s access to this library of new small molecule BET inhibitors, which comprise the Company's InhiBET™ portfolio, the Company plans to develop product candidates for a diverse set of therapeutic indications.

The Company has chosen to initially focus its development efforts with these molecules on immune-mediated inflammatory diseases, which are not being targeted by current BET inhibitors in development.

The Company’s lead program is repibresib gel (also known as VYN201), a topically administered, small molecule pan-BD BET inhibitor designed as a “soft” drug to address diseases involving multiple, diverse inflammatory cell signaling pathways while providing low systemic exposure.

In preclinical testing, repibresib produced consistent reductions in pro-inflammatory and disease-related biomarkers and improvements in disease severity across a variety of inflammatory and fibrotic preclinical models.

The Company is currently evaluating repibresib gel in a Phase 2b trial for the treatment of NSV.

The Company’s second program is VYN202, an oral, small molecule BD2-selective BET inhibitor.

VYN202 has been designed to achieve potential class-leading selectivity (BD2 vs.

BD1), maximum potency versus BD2 and optimal oral bioavailability.

By maximizing BD2 selectivity, the Company believes VYN202 has the potential to be a more conveniently-administered non-biologic treatment option for both acute control and chronic management of immuno-inflammatory indications, where the damaging effects of unrestricted inflammatory signaling activity are common.

The Company intends to advance its product candidates through clinical development toward regulatory approval.

As part of its strategy to maximize the value of its pipeline, the Company may partner with larger pharmaceutical companies to expand and accelerate the development of its programs and explore therapeutic areas outside of its core focus in immunology.

For additional information regarding the sale of the Company's legacy commercial business (the "MST Franchise") to Journey Medical Corporation in January 2022 and the Company's licensing arrangements with Tay, see "—Note 3 - Strategic Agreements."

VYN202 has been designed to achieve potential class-leading potency and selectivity for BD2 vs.

By maximizing BD2 selectivity, the Company believes VYN202 has the potential to be a potent oral immunomodulator option for both acute control and chronic management of immune-mediated inflammatory conditions, without the hematologic and gastrointestinal adverse effects associated with earlier generation systemic pan-BD BET inhibitors that were being developed in oncologic settings.

The Company has completed a Phase 1a single ascending dose/multiple ascending dose ("SAD/MAD") trial of VYN202 in healthy volunteers and announced positive data from this trial in December 2024.

The Company initiated a Phase 1b trial in February 2025 in adult subjects with moderate-to-severe plaque psoriasis.

The Company intends to advance its product candidates through further phases of clinical development toward regulatory approval.

As part of the strategy to maximize the value of the pipeline, the Company may partner with larger pharmaceutical companies to expand and accelerate the development of programs and explore other indications and therapeutic areas outside of the core focus in immune-mediated diseases.

For additional information regarding the sale of the Company's legacy commercial business (the "MST Franchise") to Journey Medical Corporation ("Journey") in January 2022 and the Company's licensing arrangements with Tay, see "Note 3—Strategic Agreements."

The Company is a Delaware corporation, has its principal executive offices in Bridgewater, New Jersey and operates as one business segment.

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At the effective time, every 18 issued and outstanding shares of the Company's common stock were converted into one share of common stock.

No fractional shares were issued in connection with the reverse stock split, and in lieu thereof, each stockholder holding fractional shares was entitled to receive a cash payment (without interest or deduction) in an amount equal to such stockholder’s respective pro rata share of the total net proceeds from the Company’s transfer agent's sale of all fractional shares at the then-prevailing prices on the open market.

No fractional shares were issued in connection with the reverse stock split, and in lieu thereof, each holder of fractional shares was entitled to receive a cash payment (without interest or deduction) from the Company's transfer agent in an amount equal to such holder’s respective pro rata share of the total net proceeds from the Company’s transfer agent's sale of all fractional shares at the then-prevailing prices on the open market.

A proportionate adjustment was also made to the maximum number of shares issuable under the Company’s 2019 Equity Incentive Plan, 2018 Omnibus Incentive Plan and 2019 Employee Share Purchase Plan.

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Securities Purchase Agreement

On October 27, 2023, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain institutional and other accredited investors (collectively, the “Purchasers”), pursu ant to which the Company agreed to sell and issue to the Purchasers in a private placement transaction (the “Private Placement”) (i) 10,652,543 shares of the Company’s common stock and (ii) with respect to certain Purchasers, pre-funded warrants to purchase 28,614,437 shares of

common stock in lieu of shares (the “Pre-Funded Warrants”).

The purchase price per share of common stock was $ 2.245 per share (the “Stock Purchase Price”) and the purchase price for the Pre-Funded Warrants was the Stock Purchase Price minus $ 0.0001 per Pre-Funded Warrant.

On November 1, 2023, the Company received gross proceeds of $ 88.2 million from the Private Placement.

On November 1, 2023, the Company received gross proceeds of $ 88.2 million from the Private Placement, before deducting fees to the placement agent and offering expenses payable by the Company.

This transaction resulted in $ 5.5 million of issuance costs and net proceeds of $ 82.7 million as of December 31, 2023.

Liquidity and Capital Resources

As of December 31, 2023, the Company had cash, cash equivalents, restricted cash and marketable securities of $ 93.3 million and an accumulated deficit of $ 691.3 million.

For the year ended December 31, 2023, the Company incurred a net loss of $ 28.5 million and used $ 25.3 million of cash in operations.

The net loss was comprised of a $ 27.9 million loss from continuing operations and a $ 0.6 million of loss from discontinued operations.

As of December 31, 2024, the Company had cash, cash equivalents and marketable securities of $ 61.5 million and an accumulated deficit of $ 731.2 million.

The Company had no outstanding debt as of December 31, 2024.

Other than in connection with its legacy commercial business, the Company has funded its operations primarily through private and public placements of its equity, debt and warrants and through fees, cost reimbursements and payments received from its licensees.

For the year ended December 31, 2024, the Company incurred a net loss of $ 39.8 million and used $ 34.0 million of cash in operations.

Other than in connection with its legacy commercial business that was sold in January 2022, the Company has funded its operations primarily through private and public placements of its equity, debt and warrants and through fees, cost reimbursements and payments received from its licensees.

The Company has incurred losses and experienced negative operating cash flows since its inception and anticipates that it will continue to incur losses until such a time when its product candidates, if approved, are commercially successful, if at all.

The Company will not generate any revenue from any current or future product candidates unless and until it obtains regulatory approval and commercializes such products.

If the Company's available cash, cash equivalents, restricted cash and marketable securities are insufficient to satisfy its liquidity requirements, the Company may need to raise additional capital to fund its operations.

If the Company's available cash, cash equivalents and marketable securities are insufficient to satisfy its liquidity requirements, the Company may need to raise additional capital to fund its operations.

No assurance can be given as to whether additional needed financing will be available on terms acceptable to the Company, if at all.

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Failure to manage discretionary spending or raise additional financing, as needed, would adversely impact the Company’s ability to achieve its intended business objectives and have an adverse effect on its results of operations and future prospects.

The amount of proceeds the Company may be able to raise pursuant to its shelf registration statement on Form S-3 is limited.

In addition, t he amount of proceeds the Company may be able to raise pursuant to its shelf registration statement on Form S-3 is limited.

As of the filing of this Annual Report on Form 10-K, the Company is subject to the general instructions of Form S-3 known as the "baby shelf rules." Under these rules, the amount of funds the Company can raise through primary public offerings of securities in any 12-month period using its registration statement on Form S-3 is limited to one-third of the aggregate market value of the shares of the Company's common stock held by its non-affiliates.

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In accordance with Accounting Standards Codification (“ASC”) Subtopic 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that its audited consolidated financial statements are issued.

As of the report date, the Company believes its existing cash, cash equivalents, restricted cash and marketable securities are sufficient to fund its operating and capital expenditure requirements for a period of at least 12 months from the date of issuance of these audited consolidated financial statements.

As of the report date, the Company believes its existing cash, cash equivalents and marketable securities are sufficient to fund its operating and capital expenditure requirements for a period of at least 12 months from the date of issuance of these audited consolidated financial statements.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

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The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the

date of the financial statements and the reported amounts of income and expenses during the reporting period.

Significant items subject to such estimates and assumptions include product returns and research and development accruals.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period.

Significant items subject to such estimates and assumptions include research and development accruals.

Actual results could differ from the Company’s estimates.

Foreign Currency Translation

Transactions and balances originally denominated in dollars are presented at their original amounts.

Balances in non-dollar currencies are translated into dollars using historical and current exchange rates for non-monetary and monetary balances, respectively.

For non-dollar transactions and other items in the statements of operations (indicated below), the following exchange rates are used:

(i) for transactions - exchange rates at transaction dates or average rates;

and (ii) for other items (derived from non-monetary balance sheet items such as depreciation and amortization, etc.) - historical exchange rates.

Currency transaction gains and losses are presented in financial income or expenses, as appropriate.

Cash and cash equivalents

The Company considers as cash equivalents all short-term, highly liquid investments, which include short-term bank deposits, treasury bills and money market funds with original maturities of three months or less from the date of purchase that are not restricted as to withdrawal or use and are readily convertible to known amounts of cash.

The Company considers cash equivalents to be all short-term, highly liquid investments, which include short-term bank deposits, treasury bills and money market funds with original maturities of three months or less from the date of purchase that are not restricted as to withdrawal or use and are readily convertible to known amounts of cash.

Restricted Cash

As of December 31, 2023 and 2022, the Company had restricted cash of $ 0.1 million representing bank guarantees.

As of December 31, 2024 and 2023, the Company had no and less than $ 0.1 million of restricted cash, respectively, representing bank guarantees.

Marketable securities

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Property and equipment

1) Property and equipment are stated at cost, net of accumulated depreciation and amortization.

Property and equipment are stated at cost, net of accumulated depreciation.

The Company’s property and equipment are depreciated by the straight-line method on the basis of their estimated useful life.

Annual rates of depreciation are as follows:

Estimated useful lives are as follows:

Estimated Useful Life

Computers 3 - 7 years

Laboratory equipment 5 - 14 years

Office furniture and equipment 7 - 14 years

Leasehold improvements are amortized by the straight-line method over the expected lease term, which is shorter than the estimated useful life of the improvements.

Office equipment

Impairment of long-lived assets

The Company tests long-lived assets for impair ment whenever events or circumstances present an indication of impairment.

If the sum of expected future cash flows (undiscounted and without interest charges) of the assets is less than the carrying amount

of such assets, an impairment loss would be recognized.

If the sum of expected future cash flows (undiscounted and without interest charges) of the assets is less than the carrying amount of such assets, an impairment loss would be recognized.

The assets would be written down to their estimated fair values, calculated based on the present value of expected future cash flows (discounted cash flows), or some other fair value measure.

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Where financial instruments do not share risk characteristics, they are evaluated on an individual basis.

The allowance is based on relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts..

The allowance is based on relevant available information, from internal and external sources,

relating to past events, current conditions, and reasonable and supportable forecasts.

T rade receivable balances are written off against the allowance when it is deemed probable that the receivable will not be collected.

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(iv) allocate the transaction price to the performance obligations in the contract;

and (v) recognize revenue when (or as) the Company satisfies the performance obligation.

and (v) recognize revenue when (or as) the Company satisfies

the performance obligation.

The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.

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The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when such performance obligation is satisfied.

As a result of the disposition of the MST Franchise in January 2022, the Company no longer has any revenue generating products;

however, it still may receive royalty revenues from the sale of specified products (see Note 4, Discontinued Operations).

Following the disposition of the MST Franchise in January 2022, the Company does not have any revenue generating products;

however, the Company may receive royalty revenues from the sale of specified products (see "Note 4—Discontinued Operations").

Royalty Revenues and Collaboration Agreements

The Company is entitled to royalty payments with respect to sales of a product developed by a customer in collaboration with the Company.

This product was not part of the MST Franchise that was sold in January 2022.

Royalties are recognized as revenue when the product is sold by the customer.

Revenues in the amount of $ 0.4 million and $ 0.5 million were recorded during the year ended December 31, 2023 and 2022, respectively.

The Company is entitled to royalty payments with respect to sales of Finacea foam.

The Company previously licensed the rights to Finacea foam to LEO Pharma A/S ("LEO Pharma").

Finacea foam was not part of the MST Franchise that was sold in January 2022.

Royalties are recognized as revenue when the product is sold by LEO Pharma.

For the year ended December 31, 2024 and 2023, royalty revenues were $ 0.5 million and $ 0.4 million, respectively.

For collaboration agreements under ASC 606, the Company identifies the contract, identifies the performance obligations, determines the transaction price, allocates the contract transaction price to the performance obligations, and recognizes the revenue when (or as) the performance obligation is satisfied.

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For performance obligations that are satisfied over time, the Company utilizes the input method and revenue is recognized by consistently applying a method of measuring progress toward complete satisfaction of that performance obligation.

The Company periodically reviews its estimated periods of performance based on the progress under each arrangement and accounts for the impact of any changes in estimated periods of performance on a prospective basis.

The Company periodically reviews estimated periods of performance based on the progress under each arrangement and accounts for the impact of any changes in estimated periods of performance on a prospective basis.

Milestone payments are a form of variable consideration as the payments are contingent upon achievement of a substantive

Milestone payments are estimated and included in the transaction price when the Company determines that it is probable that there will not be a significant reversal of cumulative revenue recognized in future periods.

Product Revenues, net

Milestone payments are estimated and are included in the transaction price when the Company determines that it is probable that there will not be a significant reversal of cumulative revenue recognized in future periods.

Product Sales Provisions

The Company's net product revenues were generated through sales of AMZEEQ, which was approved by the FDA in October 2019 and was commercially launched in the United States in January 2020, and ZILXI, which was approved by the FDA in May 2020 and was commercially launched in the United States in October 2020.

The Company sold the MST Franchise on January 12, 2022 and, as such, the Company no longer generates revenue from the sale of these products.

The following is a description of the Company's accounting policies related to the sales of AMZEEQ and ZILXI.

Product sales

The Company’s customers were a limited number of national and select regional wholesalers (the “distributors”) and certain independent and specialty pharmacies (together, the “customers”).

These distributors would subsequently resell the product, primarily to retail pharmacies that dispense the product to patients.

Net product revenue was typically recognized when customers obtained control of the Company’s products, which occurred at a point in time, typically upon delivery of product to the customers.

The Company evaluated the creditworthiness of its customers to determine whether it was probable that a significant reversal in the amount of the cumulative revenue recognized will not occur.

The Company did not assess whether a contract had a significant financing component if the expectation was such that the period between the transfer of the promised goods to the customer and the receipt of payment would be less than one year.

Standard credit terms did not exceed 75 days.

The Company expensed incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that would have been recognized is one year or less or the amount is immaterial.

Shipping and handling costs related to the Company’s product sales were included in selling, general and administrative expenses.

Product revenue was recorded net of distribution fees, trade discounts, allowances, rebates, copay program coupons, chargebacks, estimated returns and other incentives.

These reserves were classified as either reductions of accounts receivable or as current liabilities.

The estimates of reserves established for variable consideration reflect contractual and statutory requirements, known market events and trends, industry data and forecasted customer mix.

The transaction price, which includes variable consideration reflecting the impact of discounts and allowances, was subject to constraint and was included in the net product revenues only to the extent that it was probable that a significant reversal of the amount of the cumulative revenues recognized would not occur in a future period.

Product Sales Provisions

Provisions for distribution fees, trade discounts and chargebacks are reflected as a reduction to trade receivables, net on the consolidated balance sheet.

Provisions for distribution fees, trade discounts and chargebacks related to the sales of AMZEEQ and ZILXI are reflected as a reduction to trade receivables, net on the consolidated balance sheet.

All other provisions, including rebates, other discounts and return provisions are reflected as a liability within accrued expenses on the consolidated balance sheet.

The revenue reserve accrual was $ 2.3 million and $ 2.7 million as of December 31, 2023 and December 31, 2022, respectively.

The revenue reserve liability was $ 2.1 million and $ 2.3 million as of December 31, 2024 and 2023, respectively.

Under the terms of the Asset Purchase Agreement, the Company retained and is responsible for historical liabilities of the commercial business operations based on events occurring prior to the sale other than those liabilities expressly assumed by Journey.

Distribution Fees and Trade Discounts and Allowances

The Company paid fees for distribution services and for certain data that distributors provided to the Company and generally provided discounts on sales to its distributors for prompt payment.

These fees and discounts were contractual in nature and the Company expected its distributors to earn these fees and discounts, and accordingly deducted the full amount of these fees and discounts from its gross product revenues at the time such revenues were recognized.

Rebates, Chargebacks and Other Discounts

Product sales made under managed-care and governmental pricing programs in the United States were subject to rebates.

Managed Care rebates related to contractual agreements to sell products to managed care organizations and pharmacy benefit managers at contractual rebate percentages in exchange for volume and/or market share.

Chargebacks related to contractual agreements to sell products to government agencies and other indirect customers at contractual prices that are lower than the list prices the Company charges wholesalers.

When these government agencies or other indirect customers purchased products through wholesalers at these reduced prices, the wholesaler charged the Company for the difference between the prices they paid the Company and the prices at which they sold the products to the indirect customers.

The Company estimated the rebates and chargebacks it expected to be obligated to provide and deducted these estimated amounts from its gross product revenue at the time the revenue was recognized.

The Company's estimates were based upon (i) the Company's contracts, (ii) estimates regarding the payor mix based on third-party data and utilization, (iii) inventory held by distributors and (iv) estimates of inventory held at the retail channel.

Other discounts included the Company’s co-pay assistance coupon programs for commercially-insured patients meeting certain eligibility requirements.

The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that the Company expected to pay associated with product that had been recognized as revenue.

Product Returns

Consistent with industry practice, customers were generally allowed to return products within a specified period of time before and after its expiration date.

The Company estimated the amount of product that would be returned and deducted these estimated amounts from its gross revenue at the time the revenue was recognized.

T he information utilized to estimate the returns provision included:

(i) actual return history (ii) historical return industry information regarding rates for comparable pharmaceutical products and product portfolios , (iii) external data with respect to inventory levels in the wholesale distribution channel, (iv) external data with respect to prescription demand for products and (v) remaining shelf lives of products at the date of sale.

Contract Assets and Contract Liabilities

The Company did not have any contract assets (unbilled receivables) related to product sales as of December 31, 2023 or 2022, as customer invoicing generally occured before or at the time of revenue recognition.

The Company did not have any contract assets (unbilled receivables) related to its license revenues as of December 31, 2023 or 2022.

The Company did not have any contract assets (unbilled receivables) related to product sales as of December 31, 2024 or 2023, as customer invoicing generally occurred before or at the time of revenue recognition.

Similarly, the Company did not have any contract assets (unbilled receivables) related to its royalty revenues as of December 31, 2024 or 2023.

The Company did not have any contract liabilities as of December 31, 2024 or 2023, as the Company did not receive payments

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To the extent the arrangement is within the scope of ASC 808, the Company will assess whether aspects of the arrangement between it and their collaboration partner are within the scope of other accounting literature.

Research and development costs

Research and development expenses include costs directly attributable to the conduct of research and development programs, including the cost of clinical trials, clinical trial supplies, salaries, share-based compensation expenses, payroll taxes and other employee benefits, lab expenses, consumable equipment and consulting fees.

All costs associated with research and developments are expensed as incurred.

Research and development expenses

All expenses associated with research and development are expensed as incurred.

Research and development expenses include expenses directly attributable to conducting the Company's research and development programs, including expenses incurred under arrangements with third parties, such as contract research organizations, contract development and manufacturing organizations and consultants as well as the cost of clinical trials, clinical trial supplies, salaries, share-based compensation expenses, payroll taxes and other employee benefits.

Expenses are considered incurred based on the evaluation of the progress to completion of specific tasks under each contract using information and data provided by the service providers and vendors or the Company's estimate of the level of service that has been performed at each reporting date, whereas payments are dictated by the terms of each agreement, such as the successful enrollment of a certain number of patients, site initiation, and the completion of clinical trial milestones.

As such, depending on the timing of the payment relative to the receipt of goods or services, management may record prepaid expenses, accrued expenses, or other assets.

Fair value measurement

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In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and considers counterparty credit risk in its assessment of fair value.

Income taxes:

Deferred taxes

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Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws.

A valuation allowance is recognized to the extent that it is more likely than not that the deferred taxes will not be realized in the foreseeable future.

A valuation allowance is recognized to the extent

that it is more likely than not that the deferred taxes will not be realized in the foreseeable future.

Given the Company’s losses, the Company has provided a full valuation allowance with respect to its deferred tax assets.

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Net loss per share

Net loss per share, basic and diluted, is computed on the basis of the net loss from continuing operations for the period divided by the weighted average number of common shares outstanding during the period.

Diluted net loss per share is based upon the weighted average number of common stock and of common stock equivalents outstanding when dilutive.

The following stock options, restricted stock units (“RSUs”) and warrants were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented (data presented as numbers of shares):

Net loss per share, basic and diluted, is computed on the basis of the net loss from continuing operations for the period divided by the weighted average number of shares of common stock outstanding during the period.

Diluted net loss per share is based upon the weighted average number of shares of common stock and of common stock equivalents outstanding when dilutive.

The Company has issued the Pre-Funded Warrants, which do not expire until they are exercised in full (see "Note 12— Mezzanine Equity and Shareholder's Equity").

Pursuant to the guidance of ASC 260-10, the Company concluded that because the equity-classified Pre-Funded Warrants were immediately exercisable for little or no cash consideration, due to the non-substantive exercise price, all of the necessary conditions for issuance of the underlying shares of common stock had been met when the Pre-Funded Warrants were issued.

Therefore, the underlying shares of common stock should be included in the denominator for both the calculation of basic and diluted net loss per share of common stock for the year ended December 31, 2024.

Year ended December 31,

(in numbers of shares)

Outstanding stock options and RSUs 2,335,019 1,205,516

Warrants 27,509 27,509

Discontinued Operations

The Company accounted for the sale of the MST Franchise in accordance with ASC 205, Discontinued Operations, and ASU No.

2014-08, Reporting of Discontinued Operations and Disclosures of Disposals of Components of an Entity .

The Company followed the held-for-sale criteria as defined in ASC 360 Property, Plant and Equipment and ASC 205.

ASC 205 requires that a component of an entity that has been disposed of or is classified as held for sale and has operations and cash flows that can be clearly distinguished from the rest of the entity be reported as assets held for sale and discontinued operations.

In the period a component of an entity has been disposed of or classified as held for sale, the results of operations for the periods presented are reclassified into separate line items in the consolidated statements of operations.

Assets and liabilities are also reclassified into separate line items on the related consolidated balance sheets for the periods presented.

Non-cash items presented in the statement of cash flows and related to discontinued operations are presented in Note 4 - Discontinued Operations.

ASU 2014-08 requires that only a disposal of a component of an entity, or a group of components of an entity, that represents a strategic shift that has, or will have, a major effect on the reporting entity’s operations and financial results be reported in the consolidated financial statements as discontinued operations.

ASU 2014-08 also provides guidance on the financial statement presentations and disclosures of discontinued operations.

Due to the sale of the MST Franchise during the first quarter of 2022, in accordance with ASC 205, the Company has classified the results of the MST Franchise as discontinued operations in its consolidated statements of operations and cash flows for all periods presented (see Note 4, Discontinued Operations).

All disposed assets and liabilities associated with the MST Franchise were therefore classified as assets and liabilities of discontinued operations in the Company's consolidated balance sheets for the periods presented.

All amounts included in the notes to the consolidated financial statements relate to continuing operations unless otherwise noted.

Concentration of credit risks

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The Company has not experienced any material credit losses in these accounts and does not believe it is exposed to significant credit risk on these instruments.

Existing royalty receivables relate to one customer, but do not present a credit risk due to immaterial nature.

Restricted cash as of December 31, 2023 was $ 0.1 million which does not present a credit risk due to its immaterial nature.

Existing royalty receivables relate to one customer, but do not present a credit risk due to their immaterial nature.

There was no restricted cash as of December 31, 2024, thereby presenting no credit risk.

Employee Retention Tax Credit

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As there is no authoritative guidance under U.S.

GAAP on accounting for government assistance to for-profit business entities, the Company has accounted for the ERTC by analogy to International Accounting Standard, Accounting for Government Grants and Disclosure of Government Assistance (“IAS 20”).

The ERTC filings remain open to examination by the IRS until April 2025, and as such the Company has recorded the $ 1.3 million received within other liabilities on the consolidated balance sheet as of December 31, 2023 until such a time that the Company has reasonable assurance that the conditions associated with the grants have been met.

GAAP on accounting for government assistance to for-profit business entities, the

Company has accounted for the ERTC by analogy to International Accounting Standard, Accounting for Government Grants and Disclosure of Government Assistance (“IAS 20”).

The ERTC filings remain open to examination by the IRS until April 2025, and as such the Company has recorded the $ 1.3 million received within other current liabilities on the consolidated balance sheet as of December 31, 2024 until such a time that the Company has reasonable assurance that the conditions associated with the grants have been met.

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC Topic 815, Derivatives and Hedging (“ASC 815”).

The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification.

The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification.

This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent reporting period end date while the warrants are outstanding.

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Liability-classified warrants are required to be accounted for at fair value both on the date of issuance and on subsequent accounting period ending dates, with all changes in fair value after the issuance date recorded as a component of other income, net in the statements of operations.

As of December 31, 2023 all of the Company's outstanding warrants were equity-classified warrants.

As of December 31, 2024 and 2023, all of the Company's outstanding warrants were equity-classified warrants.

Newly issued and recently adopted accounting pronouncements :

Recent Accounting Guidance Issued

In June 2016, the FASB issued Accounting Standards Update No.

In June 2016, the FASB issued ASU No.

2016-13, “Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments ” (ASU 2016-13), which requires companies to measure credit losses of financial instruments, including customer accounts receivable and marketable securities, utilizing a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

Subsequent to the issuance of ASU 2016-13, the FASB issued several additional Accounting Standard Updates

to clarify implementation guidance, provide narrow-scope improvements and provide additional disclosure guidance.

Subsequent to the issuance of ASU 2016-13, the FASB issued several additional ASUs to clarify implementation guidance, provide narrow-scope improvements and provide additional disclosure guidance.

As a smaller reporting company, the Company adopted ASU 2016-13 effective January 1, 2023, and there was no material impact on the consolidated financial statements upon adoption.

In March 2020, the FASB issued Accounting Standards Update No.

2020-04, " Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting " (ASU 2020-04), which provides guidance to alleviate the burden in accounting for reference rate reform by allowing certain expedients and exceptions in applying generally accepted accounting principles to contracts, hedging relationships, and other transactions impacted by reference rate reform.

The provisions of ASU 2020-04 apply only to those transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform.

Adoption of the provisions of ASU 2020-04 was optional through December 31, 2022.

In December 2022, the FASB issued Accounting Standards Update No.

In December 2022, the FASB issued ASU No.

2022-06, " Reference Rate Reform (Topic 848):

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Currently, the Company does not expect the adoption of the new standard to have a material impact to the consolidated financial statements.

In August 2020, the FASB issued ASU No.

2020-06, “ Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity ” (“ASU 2020-06”), which simplifies the accounting for convertible instruments by eliminating the requirement to separately account for embedded conversion features as an equity component in certain circumstances.

A convertible debt instrument will be reported as a single liability instrument with no separate accounting for an embedded conversion feature unless separate accounting is required for an embedded conversion feature as a derivative or under the substantial premium model.

The ASU simplifies the diluted earnings per share calculation by requiring that an entity use the if-converted method and that the effect of potential share settlement be included in diluted earnings per share calculations.

Further, the ASU requires enhanced disclosures about convertible instruments.

The Company adopted ASU 2020-06 as of January 1, 2022 and there was no material impact on the consolidated financial statements upon adoption.

In November 2023, the FASB issued ASU No.

2023-07, "Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures" (ASU 2023-07), to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The amendments are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 31, 2024.

The Company adopted the standard as of December 31, 2024.

See Note 15 in the accompanying notes to the consolidated financial statement for further information.

In December 2023, the FASB issued ASU No.

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

In November 2024, the FASB issued ASU No.

2024-03, "Comprehensive Income (Topic 220)—Disaggregation of Income Statement Expenses" ("ASU 2024-03"), to improve financial reporting by requiring disclosures in the notes to financial

statements about specific types of expenses included in the expense captions presented on the face of the statement of operations.

The requirements of the ASU, as clarified by ASU 2025-01 issued in January 2025, are effective for annual reporting periods beginning after December 15, 2026 and for interim reporting periods beginning after December 15, 2027, with early adoption permitted.

The requirements will be applied prospectively with the option for retrospective application.

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

NOTE 3 - STRATEGIC AGREEMENTS

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Both payments were recorded as research and development expense.

On February 27, 2023, the parties entered into an additional Letter Agreement (the "Second Letter

Agreement") pursuant to which the Option Term was extended to April 30, 2023.

On February 27, 2023, the parties entered into an additional Letter Agreement (the "Second Letter Agreement") pursuant to which the Option Term was extended to April 30, 2023.

As consideration for the extension of the Option Term, the Company paid Tay $ 250,000 upon the execution of the Second Letter Agreement.

Per the terms of the Second Letter Agreement, this fee was deducted from the upfront fee paid by the Company to Tay following the Company's exercise of the Oral Option, as described below.

License for Locally Administered Pan-BD BET Inhibitor Program (VYN201)

On August 6, 2021, the Company exercised its option with respect to the VYN201 program and, on August 9, 2021, the parties entered into a License Agreement (the “VYN201 License Agreement”) granting the Company a worldwide, exclusive license that is sublicensable through multiple tiers to exploit certain of Tay’s pan-BD BET inhibitor compounds in all fields.

License for Locally Administered Pan-BD BET Inhibitor Program (Repibresib)

On August 6, 2021, the Company exercised its option with respect to the repibresib program and, on August 9, 2021, the parties entered into a License Agreement (the “Repibresib License Agreement”) granting the Company a worldwide, exclusive license that is sublicensable through multiple tiers to exploit certain of Tay’s pan-BD BET inhibitor compounds in all fields.

The Company has the sole responsibility for development, regulatory, marketing and commercialization activities to be conducted for the licensed products at its sole cost and discretion.

The Company is required to use commercially reasonable efforts to develop and, if approved, commercialize such products.

Pursuant to the VYN201 License Agreement, a joint development committee consisting of one representative from each party reviews the progress of the development plan for the licensed products.

Pursuant to the VYN201 License Agreement, the Company may develop a product that contains or incorporates a specific BET inhibitor, whether alone or in combination with other active ingredients, in any form, formulation, presentation, or dosage, and for any mode of administration.

The Company made a $ 0.5 million cash payment to Tay in connection with entering into the VYN201 License Agreement.

Pursuant to the VYN201 License Agreement, the Company has agreed to make cash payments to Tay upon the achievement of specified clinical development and regulatory approval milestones with respect to each licensed topical product in the United States of up to $ 15.75 million for all indications.

Pursuant to the Repibresib License Agreement, a joint development committee consisting of one representative from each party reviews the progress of the development plan for the licensed products.

Pursuant to the Repibresib License Agreement, the Company may develop a product that contains or incorporates a specific BET inhibitor, whether alone or in combination with other active ingredients, in any form, formulation, presentation, or dosage, and for any mode of administration.

The Company made a $ 0.5 million cash payment to Tay in connection with entering into the Repibresib License Agreement.

Pursuant to the Repibresib License Agreement, the Company has agreed to make cash payments to Tay of up to $ 15.75 million

upon the achievement of specified clinical development and regulatory approval milestones with respect to each licensed topical product in the United States for all indications, of whic h $ 1.8 million h as been paid or accrued through December 31, 2024.

Tay is entitled to additional milestone payments upon the achievement of regulatory approvals in certain non-U.S.

jurisdictions.

In addition, with respect to any products the Company commercializes under the VYN201 License Agreement, the Company will pay tiered royalties to Tay on net sales of such licensed products by the Company, its affiliates, or sublicensees, of 5 %, 7.5 % and 10 % based on tiered annual net sales bands subject to specified reductions.

The Company is obligated to pay royalties until the latest of (1) the tenth anniversary of the first commercial sale of the relevant licensed product, (2) the expiration of the last valid claim of the licensed patent rights covering such licensed product in such country and (3) the expiration of regulatory exclusivity for the relevant licensed product in the relevant country, on a licensed product-by-licensed product and country-by-country basis.

In addition, with respect to any products the Company commercializes under the Repibresib License Agreement, the Company will pay tiered royalties to Tay on net sales of such licensed products by the Company, its affiliates, or sublicensees, of 5 %, 7.5 % and 10 % based on tiered annual net sales bands subject to specified reductions.

The Company is

obligated to pay royalties until the latest of (1) the tenth anniversary of the first commercial sale of the relevant licensed product, (2) the expiration of the last valid claim of the licensed patent rights covering such licensed product in such country and (3) the expiration of regulatory exclusivity for the relevant licensed product in the relevant country, on a licensed product-by-licensed product and country-by-country basis.

Pursuant to the Repibresib License Agreement, VYNE was granted a sublicense under certain intellectual property which was licensed to Tay by the University of Dundee (“Dundee”) pursuant to a certain license agreement between Tay and Dundee effective as of July 24, 2020 and amended and restated on October 8, 2021 (the “Head License”).

On February 13, 2025, Tay and Dundee entered into an agreement for the termination of the Head License and assignment of such intellectual property from Dundee to Tay.

Upon termination of the Head License, the Repibresib License Agreement was accordingly amended to reflect the assignment of the intellectual property to Tay upon its payment in full to Dundee.

The amendment does not change any of Tay’s or VYNE’s rights or obligations under the Repibresib License Agreement, except that any references to the Head License were removed and any obligations owed by VYNE to Dundee with respect to repibresib are now owed to Tay.

License for Selective BET Inhibitor Program (VYN202)

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This payment was recorded as a research and development expense in the period paid.

Pursuant to the terms of the VYN202 License Agreement, the Company agreed to make cash payments to Tay of up to $ 43.75 million upon the achievement of specified clinical development and regulatory approval milestones with respect to each licensed oral product in the United States for all indications.

Tay is entitled to additional milestone payments upon the achievement of regulatory approvals in certain non-U.S.

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Sale of the MST Franchise

On January 12, 2022, VYNE entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Journey Medical Corporation (“Journey”) pursuant to which the Company sold its Molecule Stabilizing Technology franchise, including AMZEEQ, ZILXI, and FCD105 (referred to collectively as the “MST Franchise”), to Journey.

On January 12, 2022, VYNE entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Journey pursuant to which the Company sold its MST Franchise to Journey.

The assets included certain contracts, including the license agreement with Cutia Therapeutics (HK) Limited (“Cutia”), inventory and intellectual property related to the MST Franchise (together, the “Assets”).

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Accordingly the MST Franchise is reported as discontinued operations in accordance with ASC 205-20, Discontinued Operations .

The Company recognized a gain on the sale of the MST Franchise upon closing.

The negative product sales for the years ended December 31, 2023 and 2022 were primarily attributable to a change in the product returns provision following the sale of the MST Franchise.

In accordance with ASC 205-20, only expenses specifically identifiable and related to a business to be disposed may be presented in discontinued operations.

As such, the general and administrative expenses in discontinued operations include corporate costs incurred directly to solely support the MST Franchise.

The negative product sales for the year ended December 31, 2023 was primarily attributable to a change in the product returns provision following the sale of the MST Franchise.

The following table presents the combined results of discontinued operations of the MST Franchise:

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Product sales, net $ — $ ( 525 )

Cost of goods sold — 80

Operating expenses:

Selling, general and administrative 55 259

General and administrative

Total operating expenses 27 55

Loss from discontinued operations ( 580 ) ( 2,183 )

Gain on the sale of the MST Franchise — 12,918

Income (loss) from discontinued operations, before income taxes ( 580 ) 10,735

Income tax expense — —

Net income (loss) from discontinued operations $ ( 580 ) $ 10,735

The following table presents non-cash items related to discontinued operations, which are included in the Company's consolidated statement of cash flows for the year ended December 31, 2022:

Year ended December 31,

(in thousands) 2022

Cash Flows From Operating Activities:

Stock-based compensation (income) expense* $ ( 352 )

Gain on the sale of the MST Franchise ( 12,918 )

Total non-cash items of discontinued operations $ ( 13,270 )

Supplemental disclosure of cash flow information:

Amount due from sale of MST Franchise $ 5,000

*Income from stock-based compensation is related to forfeitures.

There were no non-cash items related to discontinued operations for the year ended December 31, 2023.

The following table presents the gain on the sale of the MST Franchise:

(in thousands) Year ended December 31, 2022

Cash proceeds 20,000

Proceeds received in January 2023 5,000

Less transaction costs ( 4,334 )

Less carrying value of assets sold ( 7,748 )

Gain on sale, before income taxes 12,918

Loss from discontinued operations, before taxes

( 27 ) ( 580 )

Income tax expense — —

Gain on sale net of tax $ 12,918

In accordance with ASC 205-20, only expenses specifically identifiable and related to a business to be disposed may be presented in discontinued operations.

As such, the research and development, marketing, selling and general and administrative expenses in discontinued operations include corporate costs incurred directly to solely support the MST Franchise.

The potential milestone payments for sales of ZILXI, AMZEEQ and FCD105 represent contingent consideration.

Net loss from discontinued operations

$ ( 27 ) $ ( 580 )

There were no non-cash items related to discontinued operations for the years ended December 31, 2024 and 2023.

The milestone payments for sales of ZILXI, AMZEEQ and FCD105 represent contingent consideration.

Contingent consideration has been accounted for as a gain contingency in accordance with ASC 450, Contingencies , and will be recognized in earnings in the period when realizable.

NOTE 5 - FAIR VALUE MEASUREMENTS

The Company’s financial assets that are measured at fair value as of December 31, 2023 are classified in the tables below in one of the three categories described in "Note 2(q) - Fair value measurement" above:

The Company’s financial assets that are measured at fair value as of December 31, 2024 and 2023 are classified in the tables below in one of the three categories described in "Note 2(p)—Fair value measurement" above:

December 31, 2024

(in thousands) Level 1 Level 2 Level 3 Total

Cash equivalents $ 20,353 $ 10,267 $ — $ 30,620

Cash and cash equivalents

$ 19,926 $ — $ — $ 19,926

Marketable securities — 41,590 — 41,590

Total assets $ 19,926 $ 41,590 $ — $ 61,516

As of December 31, 2022, the Company had $ 28.0 million of cash equivalents classified as Level 1 financial instruments and no marketable securities.

December 31, 2023

(in thousands) Level 1 Level 2 Level 3 Total

Cash and cash equivalents

$ 20,353 $ 10,267 $ — $ 30,620

Marketable securities — 62,633 — 62,633

Total assets $ 20,353 $ 72,900 $ — $ 93,253

Other financial instruments consist of trade receivables, trade payables and accrued expenses.

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These quoted prices were obtained by the Company with the assistance of a third-party pricing service based on available trade, bid and other observable market data for identical securities.

FOAMIX PHARMACEUTICALS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

dollars in thousands, except share and per share amounts)

NOTE 6 - MARKETABLE SECURITIES

Marketable securities as of December 31, 2023 consisted of U.S Government and agency bonds as well as U.S Treasury bills.

The Company did not hold any marketable securities as of December 31, 2022.

As of December 31, 2024 and 2023, marketable securities consisted of U.S.

Government and agency debt securities as well as U.S.

Treasury bills.

The following tables sets forth the Company’s marketable securities:

(in thousands) 2024 2023

Government and agency bonds $ 31,886

Government and agency debt securities

$ 10,572 $ 31,886

Treasury bills 31,018 30,747

Total $ 41,590 $ 62,633

As of December 31, 2023, the fair value, amortized cost, gross unrealized gains, and gross unrealized losses were as follows:

As of December 31, 2024 and 2023, the amortized cost, gross unrealized gains, gross unrealized losses and fair value were as follows:

December 31, 2024

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Cost Gross Unrealized Gain Gross Unrealized

U.S Government and agency bonds 31,866 30 ( 10 ) 31,886

U.S Treasury bills 30,742 5 — 30,747

Government and agency debt securities

$ 10,568 $ 4 $ — $ 10,572

Treasury bills

31,002 16 — 31,018

Total $ 41,570 $ 20 $ — $ 41,590

As of December 31, 2023, $ 62.6 million of the marketable securities were in an unrealized gain position.

December 31, 2023

(in thousands) Amortized

Cost Gross Unrealized Gain Gross Unrealized

Government and agency debt securities

$ 31,866 $ 30 $ ( 10 ) $ 31,886

Treasury bills

30,742 5 — 30,747

Total $ 62,608 $ 35 $ ( 10 ) $ 62,633

As of December 31, 2024 and 2023, $ 41.6 million and $ 62.6 million, respectively, of the marketable securities were in an unrealized gain position.

The Company determined that unrealized gains and losses on marketable securities were primarily due to interest rate changes.

No allowance for credit losses related to any of these securities was recorded for the year ended December 31, 2023.

No allowance for credit losses related to any of these securities was recorded for the years ended December 31, 2024 and 2023.

All maturities are less than 12 months.

NOTE 7 - PROPERTY AND EQUIPMENT

During the year ended December 31, 2022, the Company disposed of fixed assets in the net amount of $ 0.3 million.

Loss on disposal of fixed assets during the year ended December 31, 2022 related to the write-off of laboratory and leasehold improvements due to a reduction in office space in Israel and the United States and is reflected within operating expenses on the consolidated statements of operations.

Depreciation expense totaled zero and $ 0.1 million for the years ended December 31, 2023 and 2022, respectively.

The following table sets forth the Company's property and equipment, net as of December 31, 2024:

(in thousands) 2024

Office equipment

Property and equipment

Accumulated depreciation

Property and equipment, net

The Company had no property and equipment as of December 31, 2023.

Depreciation expense totaled $ 4 thousand and $ 0 for the years ended December 31, 2024 and 2023, respectively, which is included within general and administrative expenses on the consolidated statements of operations and comprehensive loss.

NOTE 8 - ACCRUED EXPENSES

Accrued expenses consisted of the following:

(in thousands) 2024 2023

Product sales provisions (1)

$ 2,107 $ 2,250

Research and development (2)

Professional services 491 648

Other 231 180

Total accrued expenses

$ 9,272 $ 4,119

(1) Comprised primarily of liabilities related to product returns associated with the MST Franchise.

(2) Comprised primarily of accruals related to fees for contract research organizations, investigative sites, and other service providers that assist in conducting preclinical research studies and clinical trials .

NOTE 9 – OPERATING LEASE

As of December 31, 2024, the Company had an operating lease for its principal executive office in Bridgewater, New Jersey.

On March 13, 2019, the Company signed an amendment to the original lease agreement for its principal executive office in Bridgewater, New Jersey (the “Lease Amendment”).

The Lease Amendment included an extension of the lease period of the 10,000 square feet previously leased under the original agreement (the “Original Space”) and an addition of 4,639 square feet (the “Additional Space”).

The Company entered the Additional Space following a period of preparation by the lessor completed during September 2019 (the “Commencement Date”).

The term included in the Lease Amendment expired on September 30, 2022.

Pursuant to the Lease Amendment, the Company recognized an additional right of use asset and liability in the amount of $ 0.7 million.

The Additional Space was considered a new lease agreement and was recognized as a right of use asset and liability, in the amount of $ 0.3 million, on the Commencement Date.

The lease liability matured on September 30, 2022.

In November 2022, the Company transitioned to a smaller corporate headquarters and signed a Sublease Agreement (the “Sublease”) to sublease approximately 5,755 square feet of office space (the “Leased Premises”) in Bridgewater, New Jersey through September 30, 2023.

In addition, the Company signed a Lease Agreement (the “Master Lease”) to lease the Leased Premises following the termination of the Sublease through September 30, 2025.

Following the termination of the Sublease, the Company signed a Lease Agreement (the “Master Lease”) to lease the Leased Premises through September 30, 2025.

The Company recorded a right of use asset of $ 0.2 million and liability of $ 0.3 million at the commencement date of the Master Lease on October 1, 2023.

The Company's lease agreement for its former office space in Israel was a one year lease that expired in December 2022.

Given the short-term nature of the lease term, the Company did no t recognize a right-of-use asset or liability.

The components of lease expense are as follows:

(in thousands) Year Ended December 31, 2023 Year Ended December 31, 2022

Year ended December 31,

(in thousands) 2024 Year Ended 2023

Operating lease expense $ 126 $ 32

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Variable lease expense primarily consists of utility and other common area maintenance ("CAM") charges.

For the year ended December 31, 2023 the variable lease expenses included a reversal of expense related to CAM charges.

Lease expense is included within general and administrative expenses on the consolidated statements of operations.

Operating cash flows for amounts included in the measurement of lease liabilities are as follows:

For the year ended December 31, 2023 the variable lease expenses included a reversal of immaterial expense related to CAM charges.

Lease expense is included within general and administrative expenses on the consolidated statements of operations and comprehensive loss.

Supplemental operating cash flows information is as follows:

Year ended December 31,

(in thousands) 2024 Year Ended 2023

Operating leases $ 126 $ 25

Supplemental information related to leases are as follows:

December 31, 2023

Supplemental consolidated balance sheet information related to leases is as follows:

(in thousands) December 31, 2024 December 31, 2023

Operating lease right-of-use assets $ 93 $ 207

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Weighted average discount rate 8.00 % 8.00 %

There were no right-of-use assets or lease liabilities as of December 31, 2022.

Maturities of lease liabilities are as follows:

Maturities of lease liabilities as of December 31, 2024 are as follows:

(in thousands) Year ended December 31, 2024

Total lease payments 101

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Total lease liability 99

Current operating lease liabilities 115

Non-current operating lease liabilities 99

Total lease liability $ 214

Total current operating lease liabilities

NOTE 10 - EMPLOYEE SAVINGS PLAN

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As of December 31, 2024, the Company's Amended and Restated Certificate of Incorporation (as amended, the "Certificate of Incorporation") authorized the Company to issue 20,000,000 shares of preferred stock, par value $ 0.0001 per share.

There wer e zero and 3,000 shares of Series A Convertible Preferred Stock issued and outstanding as of December 31, 2023 and December 31, 2022, respectively.

There wer e no shares of preferred stock issued and outstanding as of December 31, 2024 and 2023.

Shares of preferred stock may be issued from time to time in one or more series.

The voting powers (if any), preferences and relative, participating, optional or other special rights, and the qualifications, limitations and restrictions of any series of

preferred stock will be set forth in a Certificate of Designation filed pursuant to the Delaware General Corporation Law, as determined by the Company's Board of Directors.

On November 11, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Mutual Fund Series Trust, on behalf of AlphaCentric LifeSci Healthcare Fund (the “Purchaser”), pursuant to which the Company issued on November 14, 2022, in a private placement transaction, an aggregate of 3,000 shares of Series A Convertible Preferred Stock, par value $ 0.0001 per share (the “Series A Preferred”), for an aggregate subscription amount equal to $ 300,000 .

The voting powers (if any), preferences and relative, participating, optional or other special rights, and the qualifications, limitations and restrictions of any series of preferred stock will be set forth in a Certificate of Designation filed pursuant to the Delaware General Corporation Law, as determined by the Company's Board of Directors.

On November 11, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Mutual Fund Series Trust, on behalf of AlphaCentric LifeSci Healthcare Fund (“AlphaCentric”), pursuant to which the Company issued on November 14, 2022, in a private placement transaction, an aggregate of 3,000 shares of Series A Convertible Preferred Stock, par value $ 0.0001 per share (the “Series A Preferred”), for an aggregate subscription amount equal to $ 300,000 .

This transaction resulted in $ 89,000 of issuance costs and net proceeds of $ 211,000 .

The Company determined that the Series A Preferred should be classified as Mezzanine Equity (temporary equity outside of permanent equity), because the Series A Preferred more closely aligned with debt as the intent was for redemption by either the holder or the Company due to the favorable redemption terms.

The Purchase Agreement required that the Company convene a meeting of stockholders for the purpose of presenting to the Company’s stockholders a proposal (the “Proposal”) authorizing the Company's board of directors to approve a reverse stock split of its outstanding Common Stock, with the recommendation of the board of directors that the Proposal be approved, and that the Company use reasonable best efforts to obtain approval of the Proposal.

The Purchase Agreement required that the Company convene a meeting of stockholders for the purpose of presenting a proposal (the “Proposal”) authorizing the Company's board of directors to approve a reverse stock split of its outstanding common stock, with the recommendation of the board of directors that the Proposal be approved, and that the Company use reasonable best efforts to obtain approval of the Proposal.

The meeting was convened on January 12, 2023, and the Proposal was approved.

Additionally, the Purchase Agreement contained customary representations, warranties and agreements of the Company and the Purchaser, and customary indemnification rights and obligations of the parties.

Additionally, the Purchase Agreement contained customary representations, warranties and agreements of the Company and AlphaCentric, and customary indemnification rights and obligations of the parties.

Pursuant to the Purchase Agreement, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series A Co nvertible Preferred Stock (the “Certificate of Designation”) with the Secretary of State of Delaware on November 14, 2022 designating 3,000 shares out of the authorized but unissued shares of its preferred stock as Series A Preferred with a par value of $ 0.0001 per share and establishing the rights, preferences and limitations of the Series A Preferred.

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In addition, the Company would automatically redeem all of the Series A Preferred within five business days following a delisting event as specified in the Certificate of Designation at 130 % of the stated value.

On January 17, 2023, the Company redeemed all outstanding shares of its Series A Preferred, for an aggregate of $ 360,000 paid to the sole holder of the Series A Preferred.

On January 17, 2023, the Company redeemed all outstanding shares of its Series A Preferred, for an aggregate of $ 360,000 paid to AlphaCentric.

The redemption payment represented 120 % of the stated value of the Series A Preferred Stock pursuant to the Certificate of Designation.

On January 17, 2023, the Company filed a Certificate of Elimination (the “Certificate”) with the Secretary of State of the State of Delaware with respect to the Series A Preferred.

The Certificate (i) eliminated the previous designation of 3,000 shares of Series A Preferred from the Company’s Amended and Restated Certificate of Incorporation, none of which were outstanding at the time of filing, and (ii) caused such shares of Series A Preferred to resume their status as authorized but unissued and non-designated shares of preferred stock.

On January 17, 2023, the Company filed a Certificate of Elimination (the “Certificate”) with the Secretary of State of the State of Delaware with respect to the Series A Preferred Stock.

The Certificate (i) eliminated the previous designation of 3,000 shares of Series A Preferred Stock from the Company’s Amended and Restated Certificate of Incorporation, none of which were outstanding at the time of filing, and (ii) caused such shares of Series A Preferred Stock to resume their status as authorized but unissued and non-designated shares of preferred stock.

Pursuant to the Certificate of Incorporation, the Company is authorized to issue 150,000,000 shares of common stock, par value $ 0.0001 per share.

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On February 8, 2023, the Company's Board of Directors approved a 1-for-18 reverse stock split of the Company's outstanding shares of common stock.

The reverse stock split was effected on February 10, 2023 at 5:01 p.m.

Eastern time.

The reverse stock split was effected on February 10, 2023.

At the effective time, every 18 issued and outstanding shares of the Company's common stock were converted into one share of common stock.

No fractional shares were issued in connection with the reverse stock split, and in lieu thereof, each holder of fractional shares was entitled to receive a cash payment (without interest or deduction) in an amount equal to such holder’s respective pro rata share of the total net proceeds from the Company’s transfer agent's sale of all fractional shares at the then-prevailing prices on the open market.

The number of authorized shares of the Company's common stock and the par value of each share of common stock remained unchanged.

Unless noted, all common shares and per share amounts contained in the consolidated financial statements have been retroactively adjusted to reflect the 1-for-18 reverse stock split.

The Company had reserved shares of common stock for future issuance as follows:

Year ended December 31, 2023

Unless noted, all common stock and per share amounts contained in the consolidated financial statements have been retroactively adjusted to reflect the 1-for-18 reverse stock split.

As of December 31, 2024, t he Company had reserved shares of common stock for future issuance as follows:

(in numbers of shares)

December 31, 2024

Shares underlying outstanding Pre-Funded Warrants

Shares available for future grant under 2023 Plan (Note 13) 1,129,856

Common stock options outstanding (Note 13)

Shares available for future grant under 2023 Plan (Note 13)

Outstanding restricted stock units (Note 13)

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Shares underlying other outstanding warrants 27,509

Issuance of stock

At-the-Market Equity Offering Programs

Shares available for future grant under 2024 Inducement Plan (Note 13)

Issuances of common stock and warrants

At-the-Market Equity Offering Program

On August 12, 2021, the Company entered into a sales agreement (the "Cantor Sales Agreement") with Cantor Fitzgerald to sell shares of the Company's common stock, from time to time, with aggregate gross sales proceeds of up to $ 50.0 million through an at-the-market equity offering program under which Cantor Fitzgerald would act as the Company's sales agent.

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During the year ended December 31, 2023, the Company issued and sold 34,589 shares of common stock at a weighted average per share price of $ 4.66 pursuant to the Cantor Sales Agreement for $ 0.2 million in net proceeds.

On February 27, 2024, the Company delivered notice to Cantor Fitzgerald to terminate the Cantor Sales Agreement.

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Cowen is entitled to compensation for its services equal to 3.0 % of the gross proceeds of any shares of common stock sold under the Cowen Sales Agreement.

Sales pursuant to the Cowen Sales Agreement may only take place once the Registration Statement on Form S-3, of which the prospectus for such sales forms a part, is filed and declared effective by the Securities and Exchange Commission.

Equity Line of Credit

On March 15, 2022, the Company entered into a purchase agreement (the "Equity Purchase Agreement") with Lincoln Park Capital ("Lincoln Park") which provided that, upon the terms and subject to the conditions and limitations set forth therein, the Company could sell to Lincoln Park, at the Company's discretion, up to $ 30.0 million of shares of its common stock over the 36 -month term of the Equity Purchase Agreement.

Upon execution of the Equity Purchase Agreement, the Company issued 92,644 shares of its common stock to Lincoln Park as commitment shares in accordance with the closing conditions contained within the Equity Purchase Agreement.

The issuance of these shares were specific incremental costs directly attributable to the proposed offering.

The commitment shares were valued at $ 0.9 million and recorded as an addition to equity for the issuance of common stock and treated as a reduction to equity as a cost of capital to be raised under the Equity Purchase Agreement.

The Equity Purchase Agreement could be terminated by the Company at any time, at its sole discretion, without any additional cost or penalty.

On October 30, 2023, the Company delivered notice to Lincoln Park terminating the Equity Purchase Agreement.

The Company did not sell any shares of common stock under the Cowen Sales Agreement during the year ended December 31, 2024.

Private Placement

On October 27, 2023, the Company entered into the Securities Purchase Agreement, pursu ant to which the Company agreed to sell and issue to the Purchasers in the Private Placement (i) 10,652,543 shares of the Company’s common stock and (ii) with respect to certain Purchasers, Pre-Funded Warrants to purchase 28,614,437 shares of common stock in lieu of shares.

The Stock Purchase Price of common stock was $ 2.245 per share and the purchase price for the Pre-Funded Warrants was the Stock Purchase Price minus $ 0.0001 per Pre-Funded Warrant.

The Stock Purchase Price was $ 2.245 per share and the purchase price for the Pre-Funded Warrants was the Stock Purchase Price minus $ 0.0001 per Pre-Funded Warrant.

On November 1, 2023, the Company received gross proceeds of $ 88.2 million from the Private Placement.

This transaction resulted in $ 5.5 million of issuance costs and net proceeds of $ 82.7 million as of December 31, 2023 .

The Company expects to use the proceeds from the Private Placement to advance its clinical programs and for general corporate purposes.

This transaction resulted in $ 5.5 million of issuance costs and net proceeds of $ 82.7 million.

Pre-Funded Warrants

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provided, however, that a holder may increase or decrease the beneficial ownership limitation by giving 60 days’ notice to the Company, but not to exceed any percentage in excess of 19.99 %.

As of December 31, 2023, 131,843 of Pre-Funded Warrants were exercised pursuant to a net exercise mechanism.

During the year ended December 31, 2024, 639,854 of Pre-Funded Warrants were exercised pursuant to a net exercise mechanism.

As of December 31, 2024, 27,842,740 Pre-Funded Warrants remained outstanding.

Between the issuance and December 31, 2023, 131,838 Pre-Funded Warrants were exercised.

Other Warrants

As of December 31, 2023 and December 31, 2022, the Company had warrants to purchase an aggregate of 27,509 shares of the Company’s common stock outstanding, with exercise prices of $ 8.40 and $ 76.78 as of December 31, 2023 and 2022, respectively, and an expiration date of July 29, 2026.

As of December 31, 2024 and 2023, the Company had warrants to purchase an aggregate of 27,509 shares of the Company’s common stock outstanding, with exercise prices of $ 8.40 , and an expiration date of July 29, 2026.

These warrants were issued by Foamix (as defined below) in connection with a financing in July 2019 and were subsequently assumed by the Company in connection with the Merger (as defined below).

Pursuant to the warrant certificate, the exercise price of the warrant will be proportionally adjusted in the event that the Company distributes common stock at a price per share less than the exercise price (the "Down Round Feature").

During the years ended December 31, 2023 and 2022, the Down Round Feature was triggered due to the price per share received from the issuances of common stock.

Pursuant to the warrant certificate, the exercise price of the warrant will be proportionally adjusted in the event that the Company issues common stock at a price per share less than the exercise price (the "Down Round Feature").

During the year ended December 31, 2023, the Down Round Feature was triggered due to the price per share received from the issuances of common stock.

The Company calculated the value of the effect of Down Round Feature measured as the difference between the warrants’ fair value, using the Black-Scholes-Merton option-pricing model, before and after the Down Round Feature was triggered using the original exercise price and the new exercise price.

The difference in fair value of the effect of the Down Round Feature was immaterial and had an immaterial impact on net loss per share in the periods presented.

exercise price will continue to be adjusted in the event the Company issues additional shares of common stock below the current exercise price, in accordance with the terms of the warrants.

The difference in fair value of the effect of the Down Round Feature was immaterial and had an immaterial impact on net loss per share in the period presented.

The exercise price will continue to be adjusted in the event the Company issues additional shares of common stock below the then-current exercise price, in accordance with the terms of the warrants.

The Pre-Funded Warrants and warrants are classified as a component of permanent equity because they are freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock with which they were issued, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, and permit the holders to receive a fixed number of shares of common stock upon exercise.

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2023 Equity Incentive Plan

On December 13, 2023, the Company's stockholders approved the Company's 2023 Equity Incentive Plan (the "2023 Plan").

The Company previously maintained the 2019 Equity Incentive Plan (the “2019 Plan”) and 2018 Omnibus Incentive Plan (the "2018 Plan").

Following stockholder approval, any shares then available for future grant under the 2019 Plan and 2018 Plan were allocated to the 2023 Plan.

As of December 31, 2023, 1,129,856 shares remained issuable under the 2023 Plan, and no further grants will be made under the 2018 Plan or 2019 Plan.

The Company maintains the 2023 Equity Incentive Plan (the "2023 Plan") and previously maintained the 2019 Equity Incentive Plan (the “2019 Plan”) and 2018 Omnibus Incentive Plan (the "2018 Plan").

Following stockholder approval during the year ended December 31, 2023, any shares then available for future grant under the 2019 Plan and 2018 Plan were allocated to the 2023 Plan and no further grants could be made under the 2018 Plan and the 2019 Plan.

In December 2024, stockholders approved a proposal to amend the 2023 Plan to further increase shares available for grant under the 2023 Plan by 1,520,000 shares.

As of December 31, 2024 , 1,574,557 shares remained issuable under the 2023 Plan.

2024 Inducement Plan

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Pursuant to the Inducement Plan and Nasdaq Listing Rule 5635(c)(4), the Company is permitted to grant equity awards as an inducement material to an individual's entering into employment with the Company, subject to certain conditions ("Inducement Grants").

As of February 28, 2024, there were 500,000 shares available for future Inducement Grants.

In November 2024, the Board reduced the number of shares available to be issued under the Inducement Plan to one share.

As of December 31, 2024 , there was one share available for future Inducement Grants.

2019 Employee Share Purchase Plan

The Company has adopted an Employee Share Purchase Plan ("ESPP") pursuant to which qualified employees (as defined in the ESPP) may elect to purchase designated shares of the Company’s common stock at a price equal to 85 % of the lesser of the fair market value of the common stock at the beginning or end of each semi-annual share purchase period (“Purchase Period”).

fair market value of the common stock at the beginning or end of each semi-annual share purchase period (“Purchase Period”).

Employees are permitted to purchase the number of shares purchasable with up to 15 % of the earnings paid (as such term is defined in the ESPP) to each of the participating employees during the Purchase Period, subject to certain limitations under Section 423 of the U.S.

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As of December 31, 2024, 87,122 shares remained available for grant under the ESPP.

During the years ended December 31, 2023 and 2022, 15,261 a nd 7,549 shares were issued to employees pursuant to the ESPP, respectively.

During the years ended December 31, 2024 and 2023, 14,080 a nd 15,261 shares were purchased by employees pursuant to the ESPP, respectively.

Options and Restricted Stock Units ("RSUs") granted to employees and directors

In the years ended December 31, 2023 and 2022, the Company granted options and RSUs to employees and directors as follows:

For the years ended December 31, 2024 and 2023, the Company granted options and RSUs to employees and directors as follows:

Year ended December 31, 2024

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RSUs 435,000 — 4 years —

The fair value of options and RSUs granted to employees and directors during 2023 and 2022 was $ 2.4 million and $ 0.8 million, respectively.

During the years ended December 31, 2024 and 2023, the fair value of options and RSUs granted to employees and directors was $ 2.6 million and $ 2.4 million, respectively.

The fair value of RSUs granted is based on the share price on grant date.

One share of common stock will be issued upon settlement of each RSU that vests.

The fair value of RSUs granted to employees and directors is based on the share price on grant date.

The fair value of each option granted is estimated using the Black-Scholes option pricing method.

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Year ended December 31,

Fair value of stock option $ 2.18 - $ 2.23

Exercise price

$ 1.96 - $ 2.40

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Risk-free interest rate 3.95 % - 4.32 %

2.20 % - 2.92 %

Expected term 6 years 6 years

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On April 6, 2020, pursuant to the terms of the agreement governing the CSRs, each CSR was converted into 1.2082 shares of Menlo common stock, resulting in an effective exchange ratio in the Merger of 1.8006 shares of Menlo common stock for each Foamix ordinary share.

As a result of the modification, for outstanding options and RSUs granted to Foamix employees and consultants, the Company recorded incremental compensation expense of $ 46 thousand and $ 0.2 million for the years ended December 31, 2023 and December 31, 2022, respectively.

As of December 31, 2023 there is an immaterial amount of unrecognized incremental compensation expense related to the modification which will be amortized using a graded vesting method over the next year.

As a result of the modification, for outstanding options and RSUs granted to Foamix employees and consultants, the Company recorded incremental compensation expense of $ 7 thousand and $ 46 thousand for the years ended December 31, 2024 and 2023, respectively.

Summary of outstanding and exercisable options and RSUs

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Exercisable at December 31, 2024 397,143 $ 70.32

The weighted average grant date fair value of options granted during the years ended December 31, 2024 and 2023 was $ 1.6 million and $ 1.2 million, respectively.

The weighted average remaining contractual term of outstanding and exercisable options as of December 31, 2024 was 8.62 years and 7.06 years, respectively.

Total unrecognized share-based compensation for options at December 31, 2024 was $ 1.9 million, which is expected to be recognized over a weighted average period of 2.76 years.

There was no intrinsic value of outstanding and exercisable options as of December 31, 2023

The intrinsic value of outstanding and exercisable options was $ 1.3 million and $ 134 thousand, respectively, as of December 31, 2024.

The following table summarizes RSU activity for the year ended December 31, 2024:

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Share-based compensation expenses

The following table illustrates the allocation of share-based compensation within the line items on the statements of operations:

The following table illustrates the allocation of share-based compensation expense on the line items on the statements of operations and comprehensive loss:

Year ended December 31,

Research and development expenses 534 1,230

General and administrative expenses 2,771 3,419

Discontinued Operations* — ( 352 )

*Income from stock-based compensation is related to forfeitures.

(in thousands) 2024 2023

Research and development

General and administrative

$ 3,303 $ 3,305

NOTE 14 - INCOME TAX

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Domestic $ ( 39,830 ) $ ( 28,459 )

Foreign 7 279

Total loss before taxes $ ( 39,830 ) $ ( 28,452 )

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Change in valuation allowances ( 20.94 ) % ( 20.42 ) %

Other — % — %

Effective income tax rate ( 0.01 ) % — %

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The Company’s policy is to recognize interest and penalties related to tax matters within the income tax provision.

Tax years beginning in 2019 are generally subject to examination by taxing authorities, although net operating losses from all years are subject to examinations and adjustments for at least three years following the year in which the attributes are used.

Tax years beginning in 2020 are generally subject to examination by taxing authorities, although net

operating losses from all years are subject to examinations and adjustments for at least three years following the year in which the attributes are used.

The significant components of the Company's deferred tax assets and liabilities are as follows:

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Total gross deferred tax assets 100,679 89,773

Less - valuation allowance ( 89,773 ) ( 86,873 )

Total deferred tax assets, net of valuation allowance $ — $ —

Deferred tax liabilities:

Right of use assets — —

Total gross deferred tax liabilities — —

valuation allowance

( 100,679 ) ( 89,773 )

Net deferred tax assets $ — $ —

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A valuation allowance has been recorded since, in the judgment of management, these assets are not more likely than not to be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences and carryforwards become deductible or are utilized.

As of December 31, 2024, the Company had federal and state net operating loss carryforwards of $ 343.4 million and $ 53.6 million, respectively, of which $ 44.3 million will begin to expire in 2031 for federal and $ 53.6 million will begin to expire in 2040 for state purposes.

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Balance at December 31, 2023 $ 2,458

Additions for prior year positions 19

Reductions for prior year positions

Additions for current year positions 111

Reductions related to expiration of statute of limitations ( 520 )

Balance at December 31, 2024 $ 2,566

NOTE 15 - SEGMENT INFORMATION

The Company operates in one operating segment, and therefore one reportable segment, focused on the development of differentiated therapies to treat chronic inflammatory and immune-mediated conditions of high unmet need.

This determination, that the Company operates as a single operating segment, is consistent with the financial information regularly reviewed by the Chief Operating Decision Maker (“CODM”) for purposes of evaluating performance, allocating resources, and planning and forecasting for future periods.

The Company's Chief Executive Officer (“CEO”) is the CODM.

The accounting policies for the single operating segment are the same as those described in “Note 2—Significant Accounting Policies.” The CODM uses net loss based on net loss that is reported on the consolidated statement of operations and comprehensive loss to allocate resources (including employees, property, and financial resources), predominantly during the annual budget and forecasting process.

The Company’s CODM views specific program spend within research and development expenses as well as overall general and administrative expenses as significant segment expenses.

As a pre-product revenue company, the CODM also considers budget versus actual results for expenses that are deemed significant and cash forecast models for assessing performance and to decide the level of investment in the Company’s operating and capital allocation activities.

Further, the measure of segment assets is reported on the consolidated balance sheet as total consolidated assets.

All long-lived assets are held in the United States.

All revenues are generated in the US.

The following table presents segment revenue and significant expenses regularly reviewed by the CODM for the years ended December 31, 2024 and 2023 (in thousands):

Year ended December 31,

Royalty revenues $ 501 $ 424

Operating expenses

Research and development:

Repibresib (VYN201) 16,271 4,593

VYN202 11,262 8,770

Other segment items* 3,413 2,944

General and administrative 13,192 13,375

Total operating expenses 44,138 29,682

Operating loss ( 43,637 ) ( 29,258 )

Other income, net 3,834 1,386

Loss from continuing operations before income taxes ( 39,803 ) ( 27,872 )

Income tax expense 4 —

Loss from continuing operations ( 39,807 ) ( 27,872 )

Loss from discontinued operations, net of income taxes ( 27 ) ( 580 )

Net loss $ ( 39,834 ) $ ( 28,452 )

*Other segment items relate to research and development expenses that cannot be directly allocated to one specific product candidate, such as employee-related expenses, consulting, quality control, regulatory, and general IP legal expenses.

Accordingly, the Company manages its operations as a single operating and reportable segment, and the consolidated financial statements and notes thereto are presented as a single reportable segment.

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data