What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-17 compared with 2021-03-04 · 311 added, 429 removed, 759 unchanged (49% of the section changed)

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial Statements

VYNE THERAPEUTICS INC.

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020

VYNE THERAPEUTICS INC.

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020

Report of Independent Registered Public Accounting Firm

Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm ( PricewaterhouseCoopers LLP , Florham Park, NJ , PCAOB ID 238 )

Consolidated Balance Sheets

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Opinion on the Financial Statements

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

and its subsidiaries (the “Company”) as of December 31, 2020, and the related consolidated statements of operations, of comprehensive loss, of changes in shareholders' equity and of cash flows for the year then ended, including 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, 2020, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

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

and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, of comprehensive loss, of changes in shareholders' equity and of cash flows for the years then ended, including 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, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company has incurred losses and experienced negative operating cash flows since its inception that raise substantial doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also discussed in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of these consolidated financial statements in accordance with the standards of the PCAOB.

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.

We conducted our audits of these consolidated financial statements 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.

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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Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

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We have served as the Company’s auditor since 2020.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

Opinion on the Financial Statements

We have audited the consolidated balance sheet of VYNE Therapeutics Inc.

(formerly known as Foamix Pharmaceuticals Ltd.) and its subsidiary (the “Company”) as of December 31, 2019, and the related consolidated statements of operations, comprehensive loss, changes in shareholders' equity and cash flows for each of the two years in the period ended December 31, 2019, including 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, 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 2p to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ Kesselman & Kesselman

Certified Public Accountants (Isr.)

A member firm of PricewaterhouseCoopers International Limited

Tel-Aviv, Israel

March 12, 2020, except for the effects of the reverse stock split discussed in Note 1, and except for the effects of the merger exchange ratio discussed in Note 3, and except for the effects of disclosing the reconciliation of income taxes at the U.S.

federal statutory rate discussed in Note 14, as to which the date is March 4, 2021

We served as the Company's auditor from 2006 to 2020.

VYNE THERAPEUTICS INC.

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Restricted cash 605 855

Short term bank deposits — 12,102

Investment in marketable securities (Note 6) — 1,027

Restricted investment in marketable securities (Note 6) — 434

Trade receivable, net of allowances 7,583 15,819

Prepaid and other assets 4,591 1,557

Inventory (Note 7) 7,291 7,404

Prepaid and other expenses 5,119 4,591

Operating lease right of use assets (Note 10) 338 —

Total Current Assets 63,186 87,259

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Operating lease right of use assets (Note 10) — 1,583

Other 4,345 166

Prepaid and other expenses 3,506 4,345

Total Non-current Assets 3,860 6,483

Total Assets $ 67,046 $ 93,742

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

VYNE THERAPEUTICS INC.

CONSOLIDATED BALANCE SHEETS

dollars in thousands)

Liabilities and Shareholders’ Equity

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Employee-related obligations 2,752 4,360

Liability for employee severance benefits 206 312

Operating lease liabilities (Note10) 349 757

Other 104 270

Total Current Liabilities 18,410 21,765

Long-term Liabilities :

Liability for employee severance benefits 312 424

Operating lease liabilities (Note 10) — 853

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$ 0.0001 par value;

75,000,000 shares authorized at December 31, 2020 and December 31, 2019, respectively;

150,000,000 shares and 75,000,000 shares authorized at December 31, 2021 and December 31, 2020, respectively;

53,577,744 and 43,205,221 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively

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Year ended December 31

2020 2019 2018

Revenues (Note 4)

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Royalty revenues 931 791

Other revenues — — 62

Total Revenues 14,755 20,993

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Interest expense 5,610 4,390

Other Income, net ( 1,110 ) ( 1,440 ) ( 941 )

Other expense (income), net 135 ( 1,110 )

Loss Before Income Tax 73,777 255,826

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Year ended December 31

2020 2019 2018

Net Loss $ 73,329 $ 255,568

Other Comprehensive Loss (Income):

Other Comprehensive Loss:

Net unrealized gains from marketable securities — ( 1 )

Gains (losses) on marketable securities reclassified into net loss 6 2 ( 5 )

Net unrealized losses (gains) on derivative financial instruments — ( 3 ) 74

Losses on derivative financial instruments reclassified into net loss — — ( 60 )

Total Other Comprehensive Loss (Income) 5 ( 48 ) ( 50 )

Losses on marketable securities reclassified into net loss — 6

Total Other Comprehensive Loss — 5

Total Comprehensive Loss $ 73,329 $ 255,573

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Number of shares Amounts Amounts

BALANCE AT DECEMBER 31, 2017, as previously reported 5,553,473 $ 1 $ 209,939 $ ( 141,281 ) $ ( 58 ) $ 68,601

Impact of initial adoption of new accounting standards — — — 35 ( 35 ) —

CHANGES DURING 2018:

Comprehensive income (loss) — — — ( 74,163 ) 50 ( 74,113 )

Issuance of common stock through a public offering, net of

$ 5 issuance costs (note 13)

1,987,575 — 75,356 — — 75,356

Issuance of common stock through a securities purchase

agreement, net of $ 39 issuance costs (note 13)

435,414 — 16,131 — — 16,131

Exercise of warrants (Note 13) 26,431 — 840 — — 840

Exercise of options and restricted share units (Note 13) 46,510 — 47 — — 47

Share-based compensation (Note 13) — — 5,320 — — 5,320

BALANCE AT DECEMBER 31, 2019 9,120,078 $ 1 $ 328,156 $ ( 310,587 ) $ 5 $ 17,575

CHANGES DURING 2020:

Comprehensive income (loss) — — — ( 95,178 ) 48 ( 95,130 )

Issuance of common stock and warrants, net of $ 359 issuance

costs (Notes 12 and 13)

968,878 — 15,011 — — 15,011

Exercise of options, restricted share units and shares issued

under employee share purchase plan (Note 13) 101,797 — 617 — — 617

Share-based compensation (Note 13) — — 4,895 — — 4,895

BALANCE AT DECEMBER 31, 2019 9,120,078 $ 1 $ 328,156 $ ( 310,587 ) $ 5 $ 17,575

CHANGES DURING 2020:

Comprehensive loss — — — ( 255,568 ) ( 5 ) ( 255,573 )

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Classification of stock awards to derivative liability — — ( 975 ) — — ( 975 )

Issuance of common stock through a public offering, net of $ 3,903 issuance costs

7,776,875 $ 1 $ 53,648 $ — $ — $ 53,649

Issuance of common stock under at-the-market offering, net of $ 248 issuance costs

Issuance of common stock, net of $ 4,151 issuance costs

8,951,875 1 61,641 — — 61,642

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BALANCE AT DECEMBER 31, 2020 43,205,221 $ 4 $ 603,685 $ ( 566,196 ) $ — $ 37,493

CHANGES DURING 2021:

Comprehensive loss — — — ( 73,329 ) — ( 73,329 )

Exercise of options, vesting of restricted stock units and shares issued under employee share purchase plan 364,937 — 410 — — 410

Stock-based compensation — — 8,080 — — 8,080

Issuance of common stock, net of $ 4,215 issuance costs

10,007,586 1 75,981 — — 75,982

BALANCE AT DECEMBER 31, 2021 53,577,744.00 5 688,156 ( 639,525 ) — 48,636

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

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Year ended December 31

2020 2019 2018

Cash Flows From Operating Activities:

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Changes in marketable securities and bank deposits, net — ( 142 )

Changes in accrued liability for employee severance benefits, net of retirement fund profit ( 112 ) 57 ( 70 )

Debt prepayment premium 1,432 —

Share-based compensation 8,080 18,100

Non-cash other income, net ( 542 ) 140 43

Non-cash other expense (income), net 2,472 ( 654 )

Changes in operating asset and liabilities, net of effects of businesses acquired:

(Increase) decrease in trade receivables, prepaid and other assets ( 17,138 ) 373 ( 308 )

Increase in other non-current assets ( 4,171 ) ( 131 ) ( 14 )

(Decrease) increase in accounts payable and accruals ( 12,975 ) 18,053 238

Increase in inventory ( 6,048 ) ( 1,356 ) —

Increase (decrease) in other liabilities 1 ( 258 ) ( 274 )

Decrease (increase) in trade receivables, prepaid and other assets 7,709 ( 17,138 )

Decrease (increase) in other non-current assets 841 ( 4,171 )

(Decrease) in accounts payable and accruals ( 2,675 ) ( 12,975 )

(Decrease) increase in inventory 113 ( 6,048 )

Decrease (increase) in other liabilities ( 1,212 ) 1

Net cash used in operating activities ( 56,367 ) ( 137,082 )

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Purchase of fixed assets — ( 113 )

Proceeds from sale of fixed assets — 40 10

Investment in marketable securities — ( 44,964 ) ( 77,652 )

Cash acquired through merger — 38,641

Proceeds from sale and maturity of marketable securities and bank deposits 1,027 50,579

Net cash provided by (used in) investing activities 89,107 41,869 ( 11,755 )

Net cash provided by investing activities 1,027 89,107

Cash Flows From Financing Activities:

Proceeds from exercise of warrants — — 840

Debt repayment (Note 13) ( 36,432 ) —

Proceeds from exercise of options and issuance of shares under the employee shares purchase plan 522 310

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Proceeds from issuance of common stock, net of issuance costs 75,981 61,639

Proceeds from debt financing and issuance of warrants, net of issuance costs — 33,903 —

Net cash provided by financing activities 39,777 61,808

Increase in cash, cash equivalents and restricted cash 13,833 16,425 11,955

(Decrease) Increase in cash, cash equivalents and restricted cash ( 15,563 ) 13,833

Effect of exchange rate on cash, cash equivalents and restricted cash — 1

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Year ended December 31

2020 2019 2018

Supplementary information on investing and financing activities not involving cash flows:

Cashless exercise of warrants and restricted share units * 11 11

Issuance of shares under employee share purchase plan $ 169 $ 387

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Supplemental disclosure of cash flow information:

Cash paid for taxes — — 587

Interest received $ 17 $ 102

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Merger net of cash acquired $ — $ 72,802

* Represents an amount less than $1.

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

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NOTE 1 - NATURE OF OPERATIONS

On September 4, 2020, the Company changed its corporate name from "Menlo Therapeutics Inc." ("Menlo") to “VYNE Therapeutics Inc.” (the “Company,” “VYNE” or the “combined company”) and changed its ticker symbol on the Nasdaq Global Select Market from "MNLO" to "VYNE." VYNE is a specialty pharmaceutical company focused on developing and commercializing proprietary, innovative and differentiated therapies in dermatology and beyond.

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

The Company's most advanced product candidate, FMX114, which is in Phase 2a, is being evaluated for the potential treatment of mild-to-moderate AD.

The Company is also in the pre-clinical stages of developing products containing BET inhibitor compounds.

Its initial BET inhibitor candidate in development is VYN201, a locally administered pan-BET inhibitor, which the Company is exploring in various immuno-inflammatory diseases, including skin diseases .

In addition, the Company continues to explore opportunistic transactions that may enhance its pipeline portfolio, as well as support its current operations and fund its future growth.

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

Reverse Merger

On November 10, 2019, Menlo, Foamix Pharmaceuticals Ltd.

(“Foamix”) and Giants Merger Subsidiary Ltd.

(“Merger Sub”), a wholly-owned subsidiary of Menlo, entered into an Agreement and Plan of Merger (as amended by Amendment No.

1 to the Agreement and Plan of Merger, dated as of December 4, 2019, the “Merger Agreement”).

Pursuant to the terms of the Merger Agreement, Merger Sub merged with and into Foamix, with Foamix surviving as a wholly-owned subsidiary of Menlo (the “Merger”) on March 9, 2020 (the “Effective Date”).

For accounting purposes, the Merger is treated as a “reverse acquisition” under generally accepted accounting principles in the United States (“U.S.

GAAP”) and Foamix is considered the accounting acquirer.

Accordingly, upon consummation of the Merger, the historical financial statements of Foamix became the Company’s historical financial statements, and the historical financial statements of Foamix are included in the comparative prior periods.

See “Note 3 – Business Combination” for more information on the Merger.

Strategic Business Review and Sale of the MST Franchise

Beginning in the second quarter of 2021, the Company conducted a review of its commercial and research and development portfolio to determine how to optimally deploy capital and drive shareholder value.

During the course of this review, the Company carefully considered the revenues received from the commercialization of AMZEEQ and ZILXI and the associated costs to drive those revenues, the protracted negative impact of the COVID-19 pandemic during the commercial launches of both AMZEEQ and ZILXI, the payor landscape, as well as the costs to develop each of its pipeline products.

During this process, the Company evaluated several strategic options including the acquisition of marketed assets, out-licensing its approved products outside of the United States, and possible partnering or co-development relationships with interested parties.

Following its review, the Company determined to initiate a process to explore a possible sale or license of its topical minocycline franchise, including AMZEEQ, ZILXI, FCD105 (the Company’s former Phase 3 proprietary novel topical combination foam formulation of minocycline and adapalene for the treatment of moderate-to-severe acne vulgaris) and the underlying Molecule Stabilizing Technology platform.

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 (the “MST Franchise”), to Journey.

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

Pursuant to the Agreement, the Buyer assumed certain liabilities of the MST Franchise including, among others, those arising from VYNE’s patent infringement suit initiated against Padagis Israel Pharmaceuticals Ltd.

There were no current or long-term liabilities recorded by the Company which were transferred to the Buyer.

Pursuant to the Purchase Agreement, VYNE received an upfront payment of $ 20.0 million and will receive an additional $ 5.0 million on the one-year anniversary of the closing of the transaction.

VYNE is also eligible to receive sales milestone payments of up to $ 450.0 million in the aggregate upon the achievement of specified levels of net sales on a product-by-product basis, beginning with annual net sales exceeding $ 100.0 million (with products covered in three categories (1) AMZEEQ (and certain modifications), (2) ZILXI (and certain modifications), and (3) FCD105 and other products covered by the patents being transferred, including certain modifications).

In addition, VYNE is entitled to receive certain payments from any licensing or sublicensing of the assets by Journey outside of the United States.

See Note 17 - Subsequent Events for additional discussion of the disposition.

By leveraging its drug development and clinical development capabilities and strong network of discovery and preclinical science partners, the Company has transitioned its strategic focus to develop therapies for the treatment of immuno-inflammatory conditions.

The Company expects to continue to invest in FMX114 for the treatment of mild to moderate atopic dermatitis and enrolled the first patient in its Phase 1b/2a proof-of-concept study in October 2021.

On January 19, 2022, the Company announced findings from the Phase 1b safety portion of the Phase 1b/2a trial evaluating FMX 114.

The findings support trial continuation.

In addition, on August 12, 2021, the Company announced a transaction with In4Derm Limited, a company incorporated and registered in Scotland (“In4Derm”).

In4Derm is a spin-out of the University of Dundee’s School of Life Sciences which has discovered and is developing proprietary Bromodomain and Extra-Terminal Domain ("BET") inhibitors for the treatment of immunology and oncology conditions.

On April 30, 2021, the parties entered into an Evaluation and Option Agreement (the “Option Agreement”) pursuant to which In4Derm granted the Company an exclusive option to obtain exclusive worldwide

rights to research, develop and commercialize products containing In4Derm’s BET inhibitor compounds, which are new chemical entities for treatments in all fields for any disease, disorder or condition in humans.

On August 6, 2021, the parties entered into a License Agreement granting the Company a worldwide, exclusive license that is sublicensable through multiple tiers to exploit certain of In4Derm’s pan-BD BET inhibitor compounds in all fields.

The Company paid a $ 1.0 million cash payment to In4Derm upon the execution of the Option Agreement and $ 0.5 million in connection with entering into the License Agreement.

Pursuant to the License Agreement, the Company has agreed to make cash payments to In4Derm upon the achievement of specified clinical development and regulatory approval milestones with respect to each licensed topical product in the U.S.

of up to $ 15.75 million for all indications.

In addition, the Company currently expects to exercise the Oral BETi Option following the selection of a lead candidate for the program.

Upon exercise of the exclusive Oral BETi Option, the parties will sign a license agreement (the “Oral License Agreement”), and the Company will be required to pay In4Derm a $ 4.0 million cash payment.

The Oral License Agreement will include cash payments of up to $ 43.75 million payable to In4Derm upon the achievement of specified clinical development and regulatory approval milestones with respect to each licensed oral product in the U.S.

for all indications.

The license agreements also provide for tiered royalty payments of up to 10 % of net annual sales across licensed BET inhibitor products by the Company.

In4Derm is entitled to additional milestones upon the achievement of regulatory approvals in certain jurisdictions outside the U.S.

The initial BET inhibitor candidates in development are VYN201 and VYN202.

VYN201 is a pan-bromodomain or pan-BD BET inhibitor.

It is a first-in-class “soft” pan-BD BET inhibitor that is being developed to address diseases involving multiple, diverse inflammatory cell signaling pathways.

With the VYN201 program, the Company is attempting to develop a therapy that is locally acting and is rapidly cleared through the body's metabolic process so as to avoid systemic absorption.

The Company is continuing to evaluate VYN201 in a variety of preclinical models and will announce an initial indication for VYN201 following such evaluation.

With respect to the VYN202 program, the Company is exploring multiple BET inhibitor compounds that are highly selective for bromodomain 2 ("BD2").

By selectively inhibiting BD2, the Company believes VYN202 could have a more targeted anti-inflammatory effect with an improved benefit/risk profile.

The Company is diligently working with In4Derm to develop a lead molecule for the VYN202 program.

Once a lead candidate has been selected, the Company intends to exercise its option with respect to these BET inhibitor compounds and commence an IND-enabling preclinical safety program.

As the Company transitioned from a commercial organization to one focused on research and development, the Company streamlined operations by eliminating the vast majority of planned expenditures supporting its commercial operations.

Furthermore, following its decision to divest the MST franchise, the Company reduced its workforce by terminating approximately 70 employees.

The Company incurred a one-time charge of $ 1.6 million in the year ended December 31, 2021 in connection with this restructuring plan, consisting of $ 1.4 million of employee termination costs, including severance and other benefits, and retention payments of $ 0.2 million.

Additional charges of $ 0.2 million related to retention payments are anticipated through June 30, 2022.

Reverse stock split and recasting of per-share amounts

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Unless noted, all common shares and per share amounts contained in the consolidated financial statements have been retroactively adjusted to reflect a 1-for-4 reverse stock split.

Products, Product Candidates and Licenses

Prior to the Merger, in January 2020, Foamix launched AMZEEQ ® (minocycline) topical foam, 4% (“AMZEEQ”), a once-daily topical antibiotic for the treatment of inflammatory lesions of non-nodular moderate-to-severe acne vulgaris in patients 9 years of age and older.

On May 28, 2020, the U.S.

Food and Drug Administration (the "FDA") approved ZILXI ™ (minocycline) topical foam, 1.5% (formerly FMX103, "ZILXI"), for the treatment of inflammatory lesions of rosacea in adults.

ZILXI became available in pharmacies nationwide in October 2020.

AMZEEQ and ZILXI are the first topical minocycline products approved by the FDA for any condition.

AMZEEQ and ZILXI utilize the Company’s proprietary Molecule Stabilizing Technology (MST) ™ platform that is also being used in the development of the Company’s product candidate FCD105, a topical foam comprising minocycline and adapalene for the treatment of acne vulgaris.

On June 2, 2020, the Company announced positive results from a Phase II clinical trial evaluating the preliminary safety and efficacy of FCD105 (3% minocycline / 0.3% adapalene foam), the first ever topical minocycline-based combination product, for the treatment of moderate-to-severe acne vulgaris.

The Company held an end-of-Phase II meeting with the FDA in the fourth quarter of 2020 and anticipates commencing a Phase III program in 2021.

Additionally, the Company was developing serlopitant, a small molecule inhibitor of the neurokinin 1 receptor, or NK1-R, given as a once-daily, oral tablet, for the treatment of pruritus, or itch, associated with various conditions including prurigo nodularis, or PN.

Reverse Merger

On November 10, 2019, Menlo Therapeutics Inc.

("Menlo"), Foamix Pharmaceuticals Ltd.

(“Foamix”) and Giants Merger Subsidiary Ltd.

(“Merger Sub”), a wholly-owned subsidiary of Menlo, entered into an Agreement and Plan of Merger (as amended by Amendment No.

1 to the Agreement and Plan of Merger, dated as of December 4, 2019, the “Merger Agreement”).

The combined Company changed its name to VYNE in September 2020.

For accounting purposes, the Merger is treated as a “reverse acquisition” under generally accepted accounting principles in the United States (“U.S.

GAAP”) and Foamix is considered the accounting acquirer.

See “Note 3 – Business Combination” for more information on the Merger.

The Company was developing serlopitant, a small molecule inhibitor of the neurokinin 1 receptor, or NK1-R, given as a once-daily, oral tablet, for the treatment of pruritus, or itch, associated with various conditions including prurigo nodularis, or PN.

On April 6, 2020, the Company announced top line results from two Phase III clinical trials evaluating the safety and efficacy of once-daily oral serlopitant for the treatment of pruritus (itch) associated with PN, studies MTI-105 and MTI-106.

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The Company does not currently intend to further pursue the development of serlopitant.

As a result, the Company recorded a full impairment charge related to the IPR&D and Goodwill assets in its consolidated statement of operations and comprehensive loss.

As a result, in the second quarter of 2020, the Company recorded a full impairment charge related to the IPR&D and Goodwill assets in its unaudited condensed consolidated statement of operations and comprehensive loss.

See "Note 3 - Business Combination" for more information.

The Company is actively pursuing opportunities to out-license its products and product candidates to third parties for development and commercialization outside the United States, and entered into a license agreement with Cutia Therapeutics (HK) Limited (“Cutia”) in April 2020.

See "Note 4 - Revenue Recognition." The Company has also licensed certain technology under development and licensing agreements to various pharmaceutical companies for development of certain products combining the Company’s foam technology with the licensee’s proprietary drugs.

Liquidity and Capital Resources

The Company launched AMZEEQ in the United States in January 2020 and commenced generating product revenues in the first quarter of 2020.

The Company’s activities prior to the commercial launch of AMZEEQ had primarily consisted of developing product candidates, raising capital and performing research and development activities.

Since inception, the Company has incurred losses and negative cash flows from operations.

Since inception, the Company has funded 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 commenced generating product revenues related to sales of AMZEEQ and ZILXI in January 2020 and October 2020, respectively.

AMZEEQ and ZILXI were sold as part of the sale of the MST Franchise on January 12, 2022 and, as such, the Company will no longer be generating revenue from the sale of these products.

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.

For the year ended December 31, 2021 the Company incurred a net loss of $ 73.3 million and used $ 56.4 million of cash in operations.

As of December 31, 2020, the Company had cash, cash equivalents, restricted cash and investments of $ 59.4 million and an accumulated deficit of $ 566.2 million.

If the Company does not successfully commercialize AMZEEQ, ZILXI or any of its future product candidates, it may be unable to achieve profitability.

Accordingly, the Company may be required to obtain further funding through public or private debt or equity offerings, or other arrangements.

Adequate additional funding may not be available to the Company on acceptable terms, or at all.

If the Company is unable to raise capital when needed or on acceptable terms, it may be forced to delay, reduce or eliminate its research and development programs or commercialization and manufacturing efforts.

Prior to the Merger, the Company was focused on the development and commercialization of serlopitant.

Following the receipt of the results of the Phase 3 clinical trials evaluating serlopitant for the treatment of PN and the impact of the COVID-19 pandemic, the Company revised its operating plan to focus on the commercialization of AMZEEQ, ZILXI and its current product candidates.

The Company does not currently intend to further pursue the development of serlopitant.

In addition, the revised operating plan reflects prudent resource prioritization and allocation management, including the rationalization of research and development spend to focus on existing product candidates.

From January 1, 2021 through January 25, 2021, the Company sold 2,778,012 shares of common stock in "at-the-market" offerings pursuant to the Sales Agreement.

The Company received approximately $ 26.3 million in net proceeds from the sales.

Effective as of January 25, 2021, the Company terminated the Sales Agreement and will not make any further sales thereunder.

In addition, on January 26, 2021, the Company entered into a Securities Purchase Agreement with certain institutional and accredited investors for the sale of an aggregate of 5,274,261 shares of common stock of the Company, at a purchase price of $ 9.48 per share in a registered direct offering.

The offering was completed on January 28, 2021 and the Company received approximately $ 46.7 million in net proceeds, after deducting placement agent fees and other offering expenses.

The Company believes that its existing cash and investments as of December 31, 2020, the net proceeds received from the registered direct offering and the "at-the-market" offerings and projected cash flows from revenues will provide sufficient resources for its operating expense and capital requirements through the end of 2022.

However, the amounts and timing of the Company's actual expenditures may vary significantly depending on numerous factors, including the impact of the COVID-19 pandemic, the Company's ability to successfully commercialize AMZEEQ and ZILXI, and any unforeseen cash needs.

In addition, the Company may seek additional financing in order to achieve its longer-term strategic plans.

The COVID-19 pandemic has had a significant impact, both direct and indirect, on global businesses and commerce, including our own operations.

For example, our product sales for AMZEEQ and ZILXI have been negatively impacted by office closures as a result of the pandemic.

Even as our customers’ offices began to reopen, our access to healthcare providers remained limited

which dampened sales and negatively impacted our ability to execute our commercial strategy with respect to AMZEEQ and similarly impacted sales of ZILXI, which we launched on October 1, 2020.

The future progression of the outbreak and its effects on our business and operations are uncertain.

Many patients have chosen not to visit or contact their healthcare providers regarding their skin conditions, which has limited new patient access and conversion.

In response to the outbreak, we have taken certain steps to safeguard our employees, healthcare professionals and our other partners.

For example, beginning in the first quarter of 2020, our sales force and marketing team were removed from the field and adopted remote and virtual sales activities, including tele-detailing, web-based speaker programs and virtual product education sessions, as needed, in order to meet patients’ needs.

In addition, there was a surge in COVID-19 cases in the fourth quarter of 2020 that prompted several regions to re-institute restrictions, which continued to negatively impact our sales force’s ability to access healthcare providers.

No assurance can be made that remote sales tactics will be as effective as those used prior to the outbreak of COVID-19.

If the activities of our sales force continue to be disrupted or patients elect not to visit their healthcare providers during the pandemic, we may continue to generate less revenue than expected which would have a material adverse effect on our financial results and liquidity as well as hinder our ability to satisfy the minimum revenue covenant contained in our Amended and Restated Credit Agreement, which was amended in August 2020 following an assessment of the impact of the COVID-19 pandemic on our business operations (see "Note 12 - Long-Term Debt" for more information).

The future progression of the outbreak and its effects on our business and operations are uncertain.

As of December 31, 2021, the Company had cash and cash equivalents of $ 42.9 million.

The Company's cash and cash equivalents are held in money market accounts.

The Company also received proceeds of $ 20.0 million from the sale of the MST Franchise in January 2022 and will receive an additional payment of $ 5.0 million on the one-year anniversary of the sale.

Following the sale of the MST Franchise, the Company is refocusing its limited resources on its immuno-inflammatory pipeline and intends to support the FMX114 and the BET inhibitor development programs.

Research and development activities for these programs, including preclinical and clinical testing of the Company's drug candidates, will require significant additional financing.

The future viability of the Company and its ability to continue as a going concern is dependent on its ability to raise sufficient working capital through either debt or equity financings to fund our operations and successfully develop commercially viable drug candidates.

There is no assurance the Company will be able to achieve these objectives under acceptable terms or at all.

In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that its audited consolidated financial statements are issued.

The accompanying audited consolidated financial statements have been prepared assuming that the Company will continue as a going concern and contemplate the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company's ability to continue as a going concern is expected

to be impacted by the outcome of the plans outlined above, including the Company's ability to raise additional capital to fund its operations, positive results from clinical trials for FMX114, and the successful development and positive results from clinical trials for the BET inhibitor programs.

Based on its current plans and assumptions, the Company believes that absent sufficient proceeds received from equity transactions, financing transactions or business development transactions, the Company will not have sufficient cash and cash equivalents to fund its operations beyond one year from the issuance of these financial statements.

Accordingly, the Company will, over the course of the next twelve months, require significant additional financing to continue its operations.

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

As of the filing of this Annual Report on Form 10-K, the Company will be subject to the general instructions of Form S-3 known as the "baby shelf rules." Under these instructions, 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 its common stock held by non-affiliates of the Company.

Therefore, the Company will be limited in the amount of proceeds it is able to raise by selling shares of its common stock using its Form S-3 until such time as its public float exceeds $75 million.

These factors raise substantial doubt about the Company's ability to continue as a going concern.

Failure to successfully receive additional financing will require the Company to delay, scale back or otherwise modify its business and its research and development activities and other operations.

The accompanying financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES:

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Actual results could differ from the Company’s estimates.

The extent to which the COVID-19 pandemic continues to impact the Company’s business and financial results will depend on numerous evolving factors including, but not limited to:

the magnitude and duration of the pandemic;

the extent to which patients and our sales representatives are able to access healthcare provider offices;

the impact on worldwide macroeconomic conditions, including interest rates, employment rates and health insurance coverage;

the speed of the anticipated recovery;

and governmental and business reactions to the pandemic.

The Company's product sales for 2020, particularly during the second and fourth quarters, were negatively impacted by office closures.

No assurance can be given that such office closures will not occur again in future periods, and if such closures do occur, or any other circumstance arises such that patients or our sales representatives are restricted in their ability to connect with healthcare providers, our product sales would be negatively impacted.

The COVID-19 pandemic and government measures taken in response to the pandemic have had a negative impact on the Company's operations.

Access to healthcare providers has been limited, which has negatively impacted sales and the Company's ability to execute its commercial strategy with respect to AMZEEQ and ZILXI.

The length of time and extent to which the COVID-19 pandemic will directly or indirectly impact the Company's business, results of operations and financial condition and liquidity will depend on future developments that are highly uncertain, subject to change and will continue to evolve with geographical re-openings, surges in cases, the emergence of new strains and the vaccination effort.

In addition, the Company further assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of December 31, 2021 and through the date of this report.

The accounting matters assessed included, but were not limited to, the Company’s allowance for doubtful accounts and credit losses, inventory and related reserves, impairments of long-lived assets and revenue recognition.

The Company recorded impairments of goodwill and certain indefinite-lived intangible assets;

In 2020, the Company recorded impairments of goodwill and certain indefinite-lived intangible assets;

however, these were unrelated to the impact of COVID-19 (See "Note 3 - Business Combination" for more information).

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The Company considers as cash equivalents all short-term, highly liquid investments, which include short-term bank deposits 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.

Bank deposits

Bank deposits with original maturity dates of more than three months but at balance sheet date are less than one year are included in short-term deposits.

The fair value of bank deposits approximates the carrying value since they bear interest at rates close to the prevailing market rates.

Marketable securities

Marketable debt securities:

Marketable debt securities are classified as available for sale and are recorded at fair value.

Management determines the appropriate classification of its investments in securities at the time of purchase.

Classifications of debt securities in the balance sheet are determined based on the maturity date of the securities.

Dividend and interest income, including amortization of the premium and discount arising at acquisition, as well as realized gains and losses, are included in other income, net.

Unrealized gains, net of taxes, are reflected in other comprehensive income (loss).

Unrealized losses considered to be temporary are reflected in other comprehensive income (loss);

unrealized losses that are considered to be other-than-temporary are charged to income as an impairment charge.

Realized gains and losses are included in other income, net.

Other-than-temporary impairment has occurred if the Company does not expect to recover the entire amortized cost basis of the debt security.

If the Company does not intend to sell the impaired debt security, and it is not more likely than not it will be required to sell the debt security before the recovery of its amortized cost basis, the amount of the other-than-temporary impairment is recognized in earnings, recorded in other income, net, is limited to the portion attributed to credit loss.

The remaining portion of the other-than-temporary impairment related to other factors is recognized in other comprehensive income or loss.

Marketable equity securities:

The Company’s marketable equity securities are recorded at fair market value and, beginning January 1, 2018, following the adoption of ASU No.

2016-1, Financial Instruments—Overall (Subtopic 825-10), unrealized gains and losses are included in other income, net in the consolidated statements of operations.

Derivatives and Hedging

The Company recognizes all derivative instruments as either assets or liabilities in the consolidated balance sheet at their respective fair values.

All gains and losses associated with derivatives are reported as a other income net in the accompanying consolidated statements of operations.

As of December 31, 2020, the Company had no derivative instruments.

The Company's marketable equity securities are recorded at fair value, with unrealized gains and losses included in other income, net in the consolidated statement of operations.

Prior to the date the Company obtains regulatory approval for its product candidates, inventory costs related to commercial production are expensed as research and development expense.

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Office furniture and equipment 7 - 14 years

Vehicles 7 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.

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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.

For the years ended December 31, 2020, 2019 and 2018, the Company did not recognize an impairment loss for its long-lived assets.

For the years ended December 31, 2021 and 2020, the Company did no t recognize an impairment loss for its long-lived assets.

Goodwill and other indefinite lived intangible assets

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Impairment testing is based upon the best information available including estimates of fair value which incorporate assumptions market participants would use in making their estimates of fair value.

In 2020, the Company recorded full impairment charges related to its $ 4.5 million of goodwill and $ 49.8 million of IPR&D (See "Note 3 - Business Combination" for more information).

In 2020, the Company recorded full

impairment charges related to its $ 4.5 million of goodwill and $ 49.8 million of IPR&D (See "Note 3 - Business Combination" for more information).

No impairment was recorded in the years ended December 31, 2021.

Allowance for doubtful accounts

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Debt issuance costs related to a recognized debt liability are presented on the consolidated balance sheet as a direct deduction from the carrying amount of the debt liability and are amortized to interest expense over the term of the related debt, using the effective interest method.

The Company adopted ASU 2016-02, Leases (Topic 842) on January 1, 2019.

The new standard requires lessees to record assets and liabilities on the balance sheet for all leases.

Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.

The Company recognizes the lease payments in the consolidated statements of operations on a straight-line basis over the lease period.

The Company elected the short-term lease recognition exemption for all leases with a term shorter than 12 months.

Lease expense for operating leases is recognized on a straight-line basis over the expected lease term.

Leases with an initial term of 12 months or less are not recorded on the balance sheet.

Contingencies

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

The Company’s net product revenues through December 31, 2020 were primarily 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’s net product revenues through December 31, 2021 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.

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

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The Company will supply the finished licensed products to Cutia for clinical and commercial use.

The Company received an upfront cash payment of $ 10.0 million and will be eligible to receive an additional $ 1.0 million payment upon the receipt of marketing approval in China of the first licensed product.

The Company will also receive royalties on net sales of any licensed products.

The license is determined to be a distinct performance obligation of the arrangement, therefore the Company recognizes the revenues from the upfront license fee when the license is transferred to the licensee and the licensee is able to use and benefit from the license.

The Company received an upfront cash payment of $ 10.0 million.

The license was determined to be a distinct performance obligation of the arrangement, therefore the Company recognized the revenues from the upfront license fee when the license is transferred to the licensee and the licensee is able to use and benefit from the license.

The disposition of the MST Franchise included the license agreement with Cutia including the rights to future revenues under that agreement.

See "Note 4 - Revenue Recognition" for more information.

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

Clinical trial accruals

Clinical trial expenses are charged to research and development expense as incurred.

The Company accrues for expenses resulting from obligations under contracts with clinical research organizations ("CROs").

The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided.

The Company’s objective is to reflect the appropriate trial expense in the consolidated financial statements by matching the appropriate expenses with the period in which services and efforts are expended.

In the event advance payments are made to a CRO, the payments are recorded as other assets, which will be recognized as expenses as services are rendered.

Income taxes:

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The calculation of the weighted-average number of common stock outstanding during the period in which the reverse merger occurs was based on:

The number of common stock outstanding from the beginning of that period to the merge date was computed on the basis of the weighted-average number of common stock of the legal acquiree (accounting acquirer) outstanding during the period multiplied by the exchange ratio established in the merger agreement

The number of common stock outstanding from the beginning of that period to the merger date was computed on the basis of the weighted-average number of common stock of the legal acquiree (accounting acquirer) outstanding during the period multiplied by the exchange ratio established in the merger agreement

The number of common stock outstanding from the merger date to the end of that period was the actual number of common stock of the legal acquirer (the accounting acquiree) outstanding during that period.

The basic and diluted loss per share for each comparative period before the acquisition date presented in the consolidated financial statements following the reverse merger was calculated by dividing (a) by (b):

The loss of the legal acquiree attributable to common stockholders in each of those periods.

The legal acquiree's historical weighted-average number of common stock outstanding multiplied by the exchange ratio established in the merge agreement

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

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Common stock equivalents include outstanding stock options and warrants which are included under the treasury share method when dilutive.

The following average stock options, restricted stock units (“RSUs”), warrants and incremental shares to be issued under the employee stock purchase plan (“ESPP”) were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented (share data):

The following stock options, restricted stock units (“RSUs”), warrants and incremental shares to be issued under the employee stock purchase plan (“ESPP”) were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented (share data):

Year ended December 31

2020 2019 2018

Outstanding share options, RSUs and shares under ESPP 5,306,352 4,994,333

Warrants 495,165 495,165

In addition to the above, the CSR was excluded from the calculation of the diluted net loss per share because its effect would have been anti-dilutive for the periods presented.

On April 6, 2020, the Company announced that each of Menlo’s Phase III PN Trials (study MTI-105 and study MTI-106) did not meet their respective primary endpoint of demonstrating statistically significant reduction in pruritus in patients treated with serlopitant compared to placebo based upon a 4-point improvement responder analysis.

Each CSR was converted into 1.2082 shares of Menlo common stock, resulting in an effective exchange ratio (the "Exchange Ratio") in the Merger of 1.8006 shares of Menlo common stock for each Foamix ordinary share.

The conversion of the CSR also affected the Exchange Ratio of the pre-Merger Foamix equity awards and warrants outstanding as of March 9, 2020.

See "Note 3 - Business Combination" for more information.

Fair value measurement

Fair value is based on the price that would be received from the sale of an asset or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date.

In order to increase consistency and comparability in fair value measurements, the guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described as follows:

In order to increase consistency and comparability in

fair value measurements, the guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described as follows:

Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.

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Concentration of credit risks

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents, restricted cash, bank deposits, marketable securities and accounts receivables.

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents, restricted cash, marketable securities and accounts receivables.

The Company deposits cash and cash equivalents with highly rated financial institutions and, as a matter of policy, limits the amounts of credit exposure to any single financial institution.

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For the year ended December 31, 2021, the Company's three largest customers collectively represented 41 % of product revenue and 58 % of accounts receivable.

For the year ended December 31, 2020, the Company's largest three customers collectively represented 96 % of product revenue and 90 % of accounts receivable.

Comprehensive loss

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The Company is currently evaluating the impact of ASU 2020-4 on its consolidated financial statements.

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

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

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

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.

Measurement of Credit Losses on Financial Instruments” (ASU 2016-13), which requires companies to measure credit losses of financial instruments, including customer accounts receivable, 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.

As a smaller reporting company, the Company will adopt ASU 2016-13 effective January 1, 2023 or at such time where it is no longer a smaller reporting company.

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

In December 2019, the FASB issued Accounting Standards Update No.

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The standard is effective for years beginning after December 15, 2020, and interim periods beginning after December 15, 2020.

Currently, we do not expect the adoption of the new standard to have a material impact to the Company's consolidated financial statements.

This guidance became effective during the first quarter of 2021.

The adoption of the new standard did not have a material impact to the Company's consolidated financial statements.

NOTE 3 - BUSINESS COMBINATION:

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On March 9, 2020, the Merger was completed and Foamix is now a wholly-owned subsidiary of the Company.

The combined Company changed its name to VYNE in September 2020.

On the Effective Date, each ordinary share of Foamix was exchanged for 0.5924 shares of common stock of Menlo.

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As such, the Company recorded a full impairment charge of $ 4.5 million related to goodwill in its consolidated statements of operations and comprehensive loss for the year ended December 31, 2020.

There were no impairment charges in the years ended December 31, 2019 and 2018.

There were no impairment charges in the year ended December 31, 2021.

In-Process Research and Development (“IPR&D")

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As such, the Company recorded a full impairment charge of $ 49.8 million related to the IPR&D asset in its consolidated statements of operations and comprehensive loss for the year ended December 31, 2020.

There were no impairment charges in the years ended December 31, 2019 and 2018.

There were no impairment charges in the year ended December 31, 2021.

The CSR was issued pursuant to the CSR Agreement, dated as of March 9, 2020, by and between Menlo and American Stock Transfer & Trust Company, LLC, and represented the non-transferable contractual right to receive shares of common stock of Menlo depending on the results of Menlo’s Phase III PN Trials.

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On April 6, 2020, the Company recorded $ 84.7 million of expense in its consolidated statements of operations and comprehensive loss to remeasure the CSR liability in its consolidated balance sheet to its fair value of $ 104.4 million (calculated based on 74,544,413 shares issued, adjusted retrospectively to 18,636,103 shares of common stock upon the reverse stock split effective February 12, 2021, and a share price of $ 1.40 on April 6, 2020) and then settled in connection with the issuance of shares.

The actual Menlo net loss included in the Company’s consolidated statements of operations and comprehensive income for the year ended December 31, 2020 (for the period from March 9, 2020, the Effective Date, through December 31, 2020, which are not indicative of the results to be expected for a full year) and the supplemental unaudited pro forma revenue and net loss of the combined entity had the acquisition been completed on January 1, 2019 are as follows:

Actual Menlo results of operations included in the consolidated statement of operation for the year ended December 31, 2020:

Actual Menlo results of operations for the period from March 9, 2020, the Effective Date, through December 31, 2020 included in the consolidated statement of operation for the year ended December 31, 2020:

(in thousands) Year ended December 31, 2020

Loss attributable to Menlo $ 24,517

Pro forma Menlo results of operations for the year ended December 31, 2020.

(in thousands, except per share data) (Unaudited)

SUPPLEMENTAL PRO FORMA COMBINED RESULTS OF OPERATIONS:

$ 20,993 $ 443

$ 252,951 $ 161,967

Loss per share - basic and diluted

$ 7.53 $ 11.19

Adjustments to the supplemental pro forma combined results of operations, included in the above, are as follows:

Transaction costs

$ ( 14,931 ) $ —

Acceleration of stock based compensation

Total Adjustments

$ ( 22,130 ) $ —

These unaudited pro forma consolidated financial results have been prepared for illustrative purposes only and do not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred on the first day of the earliest period presented, or of future results of the consolidated entities.

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

For the year ended December 31, 2020, three distributors accounted for 42 %, 39 % and 15 % of product revenue, respectively.

For the year ended December 31, 2021, three customers accounted for 17 %, 15 % and 9 % of product revenue, respectively.

For the year ended December 31, 2020, three customers accounted for 42 %, 39 %, and 15 % of product revenue, respectively.

Product Sales Provisions

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

Provisions for revenue reserves described below reduced product revenues by $ 39.5 million for the year ended December 31, 2020.

The revenue reserve accrual at December 31, 2020 was $ 5.8 million reflected in accrued expenses in the consolidated balance sheet.

Provisions for revenue reserves described below reduced product revenues by $ 62.9 million and $ 39.5 million for the years ended December 31, 2021 and December 31, 2020, respectively.

The revenue reserve accrual was $ 5.5 million and $ 5.8 million at December 31, 2021 and December 31, 2020, respectively and was reflected in accrued expenses in the consolidated balance sheet.

Distribution Fees and Trade Discounts and Allowances :

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

The Company estimates that approximately 2 % to 3 % of product will be returned.

The Company estimates that between 1 % and 2 % of product sold to wholesalers will be returned.

The Company does not estimate returns for

sales made to the pharmacies as they are not contractually permitted to return product and the Company did not accept any returns from pharmacies in the year ended December 31, 2021 .

License Revenues

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Outside of the license transferred, the Company does not have any additional performance obligations under the arrangement.

In exchange for the license, the Company received an upfront cash payment of $ 10.0 million and will be eligible to receive an additional $ 1.0 million payment upon the receipt of marketing approval in China of the first licensed product.

The license is considered functional IP as the licensee is able to use and benefit from the license without the continued involvement of the Company.

In exchange for the license, the Company received an upfront cash payment of $ 10.0 million.

The license was considered functional IP as the licensee was able to use and benefit from the license without the continued involvement of the Company.

The disposition of the MST Franchise included the license agreement with Cutia including the rights to future revenues and obligations under that agreement.

The Company recorded $ 10.0 million of license revenue in the year ended December 31, 2020.

There was no license revenue in the year ended December 31, 2019.

The Company will also receive royalties on net sales of any licensed products, such royalties will be recognized in the period the sales or usage occurs under the royalties sales-and usage based exception.

The Company has not recorded revenue related to the $ 1.0 million payment due upon receipt of marketing approval for the licensed product as such amount is constrained under the variable consideration guidance under ASC 606, Revenue from Contracts with Customers.

No license revenue was earned in the year ended December 31, 2021.

Contract Assets and Contract Liabilities

The Company did not have any contract assets (unbilled receivables) related to product sales or as of December 31, 2021, as customer invoicing generally occurs 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, 2020.

The Company did not have any contract liabilities as of December 31, 2020, as the Company did not receive payments in advance of fulfilling its performance obligations to its customers.

The Company did not have any contract assets (unbilled receivables) related to its license revenues as of December 31, 2021 or 2020.

The Company did not have any contract liabilities as of December 31, 2021 or 2020, as the Company did not receive payments in advance of fulfilling its performance obligations to its customers.

Sales Commissions

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Marketable securities $ 1,027 $ — $ 1,027

$ 1,020 $ 15,660 $ 16,680

(1) The Company’s debt securities are traded in markets that are not considered to be active, but are valued based on quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

Accordingly, these assets are categorized as Level 2.

Foreign exchange risk management

Occasionally, the Company purchases and writes non-functional currency options in order to hedge the currency exposure on the Company’s cash flow.

The currency hedged items are denominated in New Israeli Shekels (“NIS”).

The purchasing and writing of options is part of a comprehensive currency hedging strategy with respect to salary and rent expenses denominated in NIS.

These transactions are at zero cost for periods of up to one year .

The counterparties to the derivatives are major banks in Israel.

As of December 31, 2020 and 2019, there were no hedged amounts.

As of December 31, 2020 and 2019, the Company has a lien in the amount of $ 0.3 million on the Company's checking account and as of December 31, 2019, the Company had a lien in the amount of $ 0.3 million on the Company's marketable securities, in respect of bank guarantees granted in order to secure hedging transactions.

The Company sold its marketable securities during the year ended December 31, 2021.

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, 2020 and December 31, 2019 consist mainly of debt and mutual funds securities.

The debt securities are classified as available-for-sale and are recorded at fair value.

Changes in fair value, net of taxes (if applicable), are reflected in other comprehensive loss (income).

Realized gains and losses on sales of the securities, as well as premium or discount amortization, are included in the consolidated statement of operations as other income, net.

Marketable securities as of December 31, 2020 consisted of mutual funds securities.

Realized gains and losses on sales of the securities, are included in the consolidated statement of operations as other income, net.

The Company did not hold any marketable securities as of December 31, 2021.

Equity securities with readily determinable fair value are measured at fair value.

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Israeli mutual funds $ — $ 1,027

Certificates of deposit — 151

U.S Government and agency bonds — 6,031

U.S Treasury bills — 9,478

Total $ — $ 1,027

At December 31, 2020 there were no available-for-sale debt securities.

As of December 31, 2019, the fair value, cost and gross unrealized holding gains and losses of the available-for-sale debt securities owned by the Company were as follows:

December 31, 2019

value Cost or

Amortized cost Gross unrealized

holding loss Gross unrealized

holding gains

Certificates of deposit $ 151 $ 151 $ — $ —

Government and agency bonds 6,031 6,030 — 1

Treasury bills 9,478 9,475 — 3

Total $ 15,660 $ 15,656 $ — $ 4

As of December 31, 2019, the unrealized losses attributed to the Company’s available-for-sale debt securities were primarily due to credit spreads and interest rate movements.

The Company has considered factors regarding other than temporary impaired securities and determined that there are no securities with impairment that is other than temporary as of December 31, 2020.

As of December 31, 2019, all of the Company's debt securities were due within one year.

As of December 31, 2021 and 2020 there were no available-for-sale debt securities.

The Company has considered factors regarding other than temporary impaired securities and determined that there were no securities with impairment that is other than temporary as of December 31, 2020.

During the years ended December 31, 2021 and 2020, the Company received aggregate proceeds of $ 1.0 million and $ 38.5 million, respectively, upon the sale and maturity of marketable securities.

As of December 31, 2020, there were no restricted marketable securities.

As of December 31, 2019, the Company's restricted marketable securities were $ 0.4 million due to a lien in respect of bank guarantees granted to secure hedging transactions and the Company’s rent agreement.

See "Note 5 - Fair Value Measurement" and "Note 9 - Operating Lease" for more information.

NOTE 7 – INVENTORY

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The Company periodically reviews its inventory levels and, if necessary, writes down inventory that is expected to expire prior to being sold, inventory in excess of expected sales requirements and inventory that fails to meet commercial sale specifications, with a corresponding charge to cost of goods sold.

There were no inventory write-downs during the years ended December 31, 2020 and 2019.

There were no material inventory write-downs during the years ended December 31, 2021 and 2020.

All inventory was sold or written-off in connection with the sale of the MST Franchise.

The following table sets forth the Company’s inventory:

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NOTE 8 - PROPERTY AND EQUIPMENT

FOAMIX PHARMACEUTICALS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

dollars in thousands, except share and per share amounts)

NOTE 8 - PROPERTY AND EQUIPMENT (continued)

Leasehold improvements $ 59 $ 59

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Property and Equipment, net $ 354 $ 555

Depreciation and amortization expense totaled $ 0.3 million, $ 0.4 million and $ 0.3 million for the years ended December 31, 2020, 2019 and 2018, respectively.

During the years ended December 31, 2020, 2019 and 2018, the Company disposed of fixed assets in the net amount of $ 2.1 million, $ 16 thousand and $ 42 thousand, respectively.

Depreciation and amortization expense totaled $ 0.1 million and $ 0.3 million for the years ended December 31, 2021 and 2020, respectively.

During the years ended December 31, 2021 and December 31, 2020, the Company disposed of fixed assets in the net amount of $ 0.1 million and $ 2.1 million.

Loss on disposal of fixed assets during the year ended December 31, 2020 relates to the write-off of laboratory and leasehold improvements in Israel due to a reduction in office space.

There were no losses from sales of fixed assets for the year ended December 31, 2020.

Losses from sales of fixed assets for the years ended December 31, 2019 and 2018 were $ 2 thousand and $ 2 thousand, respectively.

NOTE 9 - ACCRUED EXPENSES

Accrued expenses consisted of the following:

Product sales provisions (see Note 4) $ 5,489 $ 5,772

Professional services 1,213 696

Research and development 969 862

Marketing — 1,322

Commercialized product accruals 596 1,324

Other 326 1,476

Total Accrued Expenses $ 8,593 $ 11,452

NOTE 10 – OPERATING LEASE

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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 agreement for the office space in Israel is a one year lease that expires in December 2021.

Given the short-term nature of the lease term, the Company did not recognize a right-of-use asset and liability.

The lease agreement for the office space in Israel expires in December 2022.

Additionally, the Company entered into operating lease agreements in connection with the leasing of vehicles.

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These amounts have been recorded as part of the operating lease right to use assets.

In connection with the strategic business review and sale of the MST Franchise certain vehicle leases were transferred to members of the commercial workforce resulting in the elimination of $ 0.5 million of right of use assets and $ 0.5 million of right of use liabilities.

Operating lease costs for the year ended December 31, 2021 are as follows:

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Vehicles lease expenses $ 434 $ 390

The operating lease costs include variable lease payments of $ 35 thousand and $ 45 thousand for the year ended December 31, 2020 and 2019, respectively.

The operating lease costs include an immaterial amount of variable lease payments for the years ended December 31, 2021 and 2020, respectively.

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

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As of December 31, 2021, the Company had a lien in the amount of $ 0.6 million on the Company’s cash in respect of bank guarantees granted in order to secure the lease agreements.

Leases prior to the adoption of the new standard:

Operating lease expense for the year ended December 31, 2018 was $ 0.9 million.

VYNE THERAPEUTICS INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

dollars in thousands, except share and per share amounts)

NOTE 11 - EMPLOYEE SAVINGS PLAN

Beginning September 2017, the Company has retirement savings plans available to all employees of the Subsidiary, which are intended to qualify as deferred compensation plans under Section 401(k) of the Internal Revenue Code (the “401(k) Plans”).

The Company made contributions to these 401(k) Plans during the years ended December 31, 2020, 2019 and 2018 of approximately $ 0.8 million, $ 0.2 million and $ 0.1 million, respectively.

The Company made contributions to these 401(k) Plans during the years ended December 31, 2021, and 2020 of approximately $ 0.4 million and $ 0.8 million, respectively.

NOTE 12 – COMMITMENTS AND CONTINGENCIES

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The Company may periodically become subject to legal proceedings and claims arising in connection with its business.

As of December 31, 2020, no claims or actions pending against the Company that, in the opinion of management, are likely to have a material adverse effect on the Company.

On November 8, 2018 and January 28, 2019, two purported class actions were filed in the Superior Court of California, San Mateo County, against the Company and certain of our officers and directors.

The actions were entitled Silvestrov v.

Menlo Therapeutics Inc., et al., and McKay v.

Menlo Therapeutics Inc., et al.

The underwriters for our initial public offering were also named as defendants in these lawsuits.

The complaints contained identical allegations against the same defendants.

Both complaints alleged that the Registration Statement and prospectus for Menlo's initial public offering contained false and misleading statements in violation of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 due to allegedly false and misleading statements in connection with Menlo's initial public offering.

The complaints sought, among other things, an award of damages in an amount to be proven at trial, along with reimbursement of reasonable costs and expenses, including attorneys’ fees and expert fees.

The McKay action was consolidated with the Silvestrov action and the claim for violations of Section 12(a)(2) was dismissed.

The parties mediated the consolidated lawsuit and reached a settlement, providing for payment to the class of plaintiffs in the amount of $ 9.5 million, the vast majority of which was paid by the Company's insurance carriers, in return for a release of all claims against the defendants, including the Company and its current and former officers and directors.

The Court granted final approval of the settlement at a hearing on August 14, 2020.

Accordingly, the Company considers the matter concluded.

Menlo accrued for the remaining settlement amount that is not covered by insurance carriers as of December 31, 2019, which did not have a material impact on its financial statements.

Merger Lawsuits

Seven lawsuits (collectively, the “Merger Lawsuits”) were filed in various U.S.

federal district courts against Foamix and certain other defendants in connection with the Merger.

The lawsuits generally alleged that the registration statement on Form S-4 and the prospectus/joint proxy statement included therein included false or misleading information regarding the Merger in violations of Section 14(a) and Section 20(a) of the Exchange Act and/or Rule 14a-9 promulgated under the Exchange Act.

In addition, one of the lawsuits alleged that the members of Foamix’s board of directors breached their fiduciary duties in connection with the Merger.

The plaintiffs sought, among other things, to enjoin consummation of the Merger, or alternatively rescission or rescissory damages;

to compel the individual defendants to disseminate a joint proxy statement/prospectus that does not contain any untrue statements of material fact and that states all material facts required in it or necessary to make the statements contained therein not misleading;

a declaration that defendants violated Sections 14(a) and/or 20(a) of the Exchange Act;

a declaration that the Merger Agreement was entered into in breach of fiduciary duty and is therefore invalid and unenforceable;

an order directing the individual defendants to commence a sale process for Foamix and obtain a transaction;

and an award of costs, including attorneys’ and experts’ fees and expenses, as well as an accounting of damages allegedly suffered by the plaintiffs.

The plaintiffs have agreed the Lawsuits were rendered moot by subsequent disclosure, and on April 22, 2020, each of the plaintiffs and defendants named in the Merger Lawsuits entered into a mootness resolution agreement pursuant to which the plaintiffs agreed to dismiss their lawsuits with prejudice as to the named plaintiff and Foamix agreed to pay a de minimis mootness fee to plaintiffs’ counsel.

As of May 4, 2020, each of the Merger Lawsuits has been dismissed.

Accordingly, the Company considers the matter concluded.

As of December 31, 2021, there are no claims or actions pending against the Company that, in the opinion of management, are likely to have a material adverse effect on the Company.

On June 30, 2021, the Company received a paragraph IV certification notice (the “Notice”) from Padagis Israel Pharmaceuticals Ltd.

(f/k/a Perrigo Israel Pharmaceuticals Ltd.

(“Padagis”)) advising that Padagis has submitted to the U.S.

Food and Drug Administration (the “FDA”) an Abbreviated New Drug Application (“ANDA”) seeking approval to manufacture and sell a generic version of the Company’s product AMZEEQ® (minocycline) topical foam, 4% in the United States prior to the expiration of the Company’s U.S.

8,865,139, 8,945,516, 8,992,896, 9,675,700, 10,086,080, 10,137,200, 10,213,512, 10,265,404, 10,398,641, 10,517,882, 10,821,187, and 10,849,847 (the “Listed Patents”), which are listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, otherwise known as the “Orange Book.” The Notice alleges that the Listed Patents are invalid, unenforceable, and/or will not be infringed by the commercial manufacture, use or sale of the generic product described in Padagis’s ANDA.

On August 9, 2021, the Company initiated a patent infringement suit against Padagis in the United States District Court for the District of Delaware arising from Padagis’s ANDA filing with the FDA.

The patent infringement suit asserts each of the Listed Patents.

As a result, under applicable law, the FDA cannot grant final approval to Padagis’s ANDA before December 30, 2023, or a court decision in Padagis’s favor.

VYNE is seeking, among other relief, an order that the effective date of any FDA approval of Padagis’s ANDA be no earlier than the expiration of the Listed Patents, the latest of which expires on September 8, 2037, and such further and other relief as the court may deem appropriate.

Padagis filed its response and counterclaim on October 1, 2021.

The Company filed its response to such counterclaim on October 22, 2021.

The liabilities associated with this matter have been transferred to Journey in connection with the Sale.

NOTE 13 - LONG-TERM DEBT

On July 29, 2019, Foamix entered into a Credit Agreement (the "Credit Agreement") to secure up to $ 50 million from two lenders, one of which is a significant stockholder of the Company and is considered a related party, and a Securities Purchase Agreement with one of the lenders for gross proceeds of approximately $ 14 million, before deducting offering expenses (see "Note 14 - Share Capital" for more information).

On March 9, 2020, the Company entered into an Amended and Restated Credit Agreement and Guaranty (the "Amended and Restated Credit Agreement"), whereby the Company has guaranteed the indebtedness obligations of the borrower and granted a first priority security interest in substantially all of our assets for the benefit of the lenders.

As of December 31, 2020 and December 31, 2019, $ 35.0 million was drawn under the Amended and Restated Credit Agreement.

On March 9, 2020, the Company entered into an Amended and Restated Credit Agreement and Guaranty (as further amended on August 5, 2020, the "Amended and Restated Credit Agreement"), whereby the Company has guaranteed the indebtedness obligations of the borrower and granted a first priority security interest in substantially all of our assets for the benefit of the lenders.

As of December 31, 2020, $ 35.0 million was drawn under the Amended and Restated Credit Agreement.

The Company did not incur the remaining $ 15.0 million under the Amended and Restated Credit Agreement.

The term loans available under the Amended and Restated Credit Agreement are comprised as follows:

The term loans available under the Amended and Restated Credit Agreement were comprised as follows:

(a) $ 15 million that was funded on July 29, 2019 (the “Tranche 1 Loan”), (b) $ 20 million that was funded on December 17, 2019 (the “Tranche 2 Loan”) and (c) up to $ 15 million that was available prior to September 30, 2020 (the “Tranche 3 Loan”).

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The Company did not incur the Tranche 3 Loan.

Subject to any acceleration as provided in the Amended and Restated Credit Agreement, including upon an event of default (as defined in the Amended and Restated Credit Agreement), the loans will mature on July 29, 2024 and bear interest equal to the sum of (A) 8.25 % (subject to increase in accordance with the terms of the Amended and Restated Credit Agreement) plus (B) the greater of (x) the one-month LIBOR as of the second business day immediately preceding the first day of the calendar month or the date of borrowing (if such loan is not outstanding as of the first day of the calendar month), as applicable, and (y) 2.75 %.

terms of the Amended and Restated Credit Agreement) plus (B) the greater of (x) the one-month LIBOR as of the second business day immediately preceding the first day of the calendar month or the date of borrowing (if such loan is not outstanding as of the first day of the calendar month), as applicable, and (y) 2.75 %.

A fee in an amount equal to 1.0 % of the aggregate principal amount of all loans made on any given borrowing date shall be payable to the lenders.

The Amended and Restated Credit Agreement contains certain financial covenants, including that the Company maintain a minimum aggregate compensating cash balance of $ 2.5 million.

In addition, the parties entered into Amendment No.

1 to Amended and Restated Credit Agreement (the "Amendment") on August 5, 2020.

The Amendment provided for a covenant "holiday" with respect to the minimum net revenue covenant such that the compliance with such covenant commenced with the fiscal quarter ending on December 31, 2020, rather than September 30, 2020.

Accordingly, as of the last day of each fiscal quarter commencing with the fiscal quarter ending December 31, 2020, the Company must generate consolidated net product revenue for the trailing 12-month period in amounts set forth in the Amendment, which range from $ 6.0 million for the fiscal quarter ending December 31, 2020 to $ 97.0 million for the fiscal quarter ending June 30, 2024.

As of December 31, 2020, the Company is in compliance with all covenants, including maintaining a minimum aggregate compensating cash balance as mentioned above.

In the event where the Company fails to observe or perform any of the financial covenants the lenders may, by notice to the Company, declare the loans then outstanding to be due and payable in whole, together with accrued interest and a Prepayment Premium (as defined in the Amended and Restated Credit Agreement).

Additionally, the Company will continue to monitor ongoing developments in connection with the COVID-19 pandemic, which may have an adverse impact on the Company's commercial prospects, projected cash position and ability to remain in compliance with these covenants.

Under the Amended and Restated Credit Agreement, there are no required payments of principal amounts until July 2023.

Afterwards, the Company will pay 1.5 % of the aggregate principal amount each month.

The outstanding amount will be paid in full on July 2024.

The loans were scheduled to mature on July 29, 2024.

However, following discussions with the Company's lenders regarding the revenue targets included in the Amended and Restated Credit Agreement, the revenue expected to be generated for the trailing twelve month period ended June 30, 2021 and the Company's strategic business review discussed in Note 1, the Company determined to prepay its outstanding indebtedness in addition to a 4 % prepayment fee and accrued but unpaid interest in the total amount of approximately $ 36.5 million on August 11, 2021.

Following the prepayment, the Amended and Restated Credit Agreement and the security interests thereunder were terminated.

As of December 31, 2021 there was no debt outstanding.

Perceptive Credit Holdings II, LP ("Perceptive") was one of the lenders and the administrative agent under the Amended and Restated Credit Agreement.

As of August 11, 2021, the date of the prepayment, affiliates of Perceptive were holders of more than 5% of the Company's outstanding common stock.

In connection with the prepayment of the Company's indebtedness, Perceptive received $ 18.3 million, representing their portion of the principal amount, interest and prepayment premium.

As of December 31, 2021, Perceptive was no longer a related party.

In addition, on July 29, 2019, the lenders under the Credit Agreement were issued warrants to purchase up to an aggregate of 1,100,000 of Foamix ordinary shares, at an exercise price of $ 2.09 per share (the “Warrants”), which represented the five-day volume weighted average price of the Foamix ordinary shares as of the trading day immediately prior to the issuance of the Warrants.

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Proceeds received under the Tranche 1 Loan were allocated to the Warrants and the Tranche 1 Loan on a relative fair value basis.

The Company incurred offering expenses of $ 1.1 million in connection with transactions contemplated by the Credit Agreement and the Securities Purchase Agreement, which were allocated to the Warrants, shares and debt consistently with the allocation of proceeds.

During the year ended December 31, 2020 the Company incurred offering expenses of $ 1.1 million in connection with transactions contemplated by the Credit Agreement and the Securities Purchase Agreement, which were allocated to the Warrants, shares and debt consistently with the allocation of proceeds.

The Company incurred additional expenses in the amount of $ 0.3 million from the borrowing of Tranche 2 Loan, allocated only to the debt.

Debt issuance costs are recorded on the consolidated balance sheet as a reduction of liabilities.

Amounts allocated to the debt, net of issuance cost, are subsequently recognized at amortized cost using the effective interest method.

The fair value of the debt as of December 31, 2020 was $ 37.4 million and is categorized as Level 3.

The valuation was performed by applying the income approach, under which the contractual present value method was used.

The estimation of risk adjusted discount curve was based on public information reported in the financial statements of publicly traded venture lending companies.

During the year ended December 31, 2020 the company recorded interest expense of $ 3.9 million and $ 0.5 million relating to the interest and discount cost, respectively.

During the year ended December 31, 2019 the company recorded interest expense of $ 0.8 million and $ 0.1 million relating to the interest and discount cost, respectively.

NOTE 13 - SHARE CAPITAL:

During the year ended December 31, 2021 the company recorded interest expense of $ 5.6 million comprised of interest on debt of $ 3.8 million and discount costs of $ 1.8 million.

The interest expense includes a debt prepayment fee of $ 1.4 million and the write-off of discount costs of $ 1.6 million associated with the Company's prepayment of outstanding indebtedness resulting in a total extinguishment loss of $ 3.0 million During the year ended December 31, 2020 the company recorded interest expense of $ 3.9 million and $ 0.5 million relating to the interest and discount cost, respectively.

NOTE 14 - STOCKHOLDERS' EQUITY

Preferred stock

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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.

The number of shares of common stock authorized under the Company's Amended and Restated Certificate of Incorporation was proportionately reduced in connection with the Company's 1-for-4 reverse stock split.

Accordingly, the Company is authorized to issue 75,000,000 shares of common stock, par value $ 0.0001 per share.

In connection with the corporate name change, we changed our ticker symbol from "MNLO" to "VYNE" on September 8, 2020.

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 July 19, 2021, the Company held its meeting of Stockholders (the "Annual Meeting").

Following the approval by the holders of a majority of the outstanding shares of common stock at the Annual Meeting, the Company filed a Certificate of Amended and Restated Certificate of Incorporation to increase the number of authorized share of common stock from 75,000,000 to 150,000,000 shares of common stock, par value $ 0.0001 per share.

Each share of common stock is entitled to one vote.

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Therefore, the incremental fair value, in the amount of $ 41 thousand, of the modified Warrants over the original ones (as of modification date) was recognized in retained earnings as a deemed dividend to the Warrant holders in the year ended December 31, 2020.

During the year ended December 31, 2020 and December 31, 2019 no Warrants were exercised.

During the year ended December 31, 2018, 1,394,558 warrants were exercised into 178,468 ordinary shares, later exchanged to 105,724 shares of Menlo common stock and one CSR at the closing of the Merger, adjusted retrospectively to 26,431 shares of common stock and one CSR upon the reverse stock split effective February 12, 2021.

No amounts were recognized in the year ended December 31, 2021.

Issuance of stock

On February 1, 2019, the Company entered into a Sales Agreement with Cantor Fitzgerald & Co., or 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 will act as our sales agent.

The issuance and sale of shares of common stock by us pursuant to the Sales Agreement are deemed an "at-the-market" offering under the Securities Act.

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

On February 1, 2019, the Company entered into a Sales Agreement (the "2019 Sales Agreement") with Cantor Fitzgerald & Co., or 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 acted as our sales agent.

The issuance and sale of shares of common stock by us pursuant to the 2019 Sales Agreement were deemed an "at-the-market" offering under the Securities Act.

Cantor Fitzgerald was entitled to compensation for its services equal to up to 3.0 % of the gross proceeds of any shares of common stock sold under the 2019 Sales Agreement.

During the year ended December 31, 2020, the Company issued and sold 1,175,000 shares of common stock at a weighted average price per share of $ 7.00 pursuant to the 2019 Sales Agreement for $ 8.0 million in net proceeds, all of which was sold during the three months ended December 31, 2020.

In addition, from January 1, 2021 through January 25, 2021, the Company issued and sold an additional 2,778,012 shares of common stock at a weighted average price per share of $ 9.76 for $ 26.3 million in net proceeds.

Effective as of January 25, 2021, the Company terminated the Sales Agreement and will not make any additional sales thereunder.

Effective as of January 25, 2021, the Company terminated the 2019 Sales Agreement.

On August 12, 2021, the Company entered into a new sales agreement (the "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 will act as the Company's sales agent.

The issuance and sale of shares of common stock by us pursuant to the Sales Agreement are deemed an "at-the-market" offering under the Securities Act.

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

During the year ended December 31, 2021, the Company issued and sold 1,955,313 shares of common stock at a weighted average per share price of $ 1.57 pursuant to the Sales Agreement for $ 2.9 million in net proceeds.

This agreement was in effect as of December 31, 2021.

On January 28, 2021, the Company entered into a Securities Purchase Agreement with certain institutional and accredited investors for the sale of an aggregate of 5,274,261 shares of common stock of the Company, at a purchase price of $ 9.48 per share in a registered direct offering.

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The net proceeds of the offering were approximately $ 53.6 million, after deducting underwriting discounts and commissions and other offering expenses.

Pursuant to the completion of the merger, on March 9, 2020, the Company issued 36,500,335 shares to Foamix shareholders.

On April 6, 2020, pursuant to the terms of the CSR Agreement, the Company issued 74,544,413 shares to Foamix shareholders, adjusted retrospectively to 18,636,103 shares of common stock upon the reverse stock split effective February 12, 2021.

On July 29, 2019, pursuant to the Credit Agreement and Securities Purchase Agreement, Foamix issued and sold, in a registered offering, an aggregate of 6,542,057 shares at a purchase price of $ 2.14 per share, later exchanged to 3,875,514 Menlo common stock and one CSR at the closing of the Merger, adjusted retrospectively to 968,878 shares of common stock and one CSR upon the reverse stock split effective February 12, 2021.

The aggregate gross proceeds of approximately $ 14.0 million, before deducting issuance costs allocated as described in Note 12 - Long-Term Debt, in the amount of $ 0.3 million.

On September 18, 2018, Foamix completed a public offering in which 11,670,000 ordinary shares were sold at a price of $ 6.00 per share.

Upon closing of the offering, the underwriters exercised their ‘green shoe’ option at full and purchased 1,750,500 additional shares.

The shares from this offering were later exchanged to 7,950,303 Menlo common stock and one CSR at the closing of the Merger, adjusted retrospectively to 1,987,575 shares of common stock and one CSR upon the reverse stock split effective February 12, 2021.

The net proceeds, including the underwriters' option, were approximately $ 75.4 million, after deducting underwriter’s discounts, commissions and other offering expenses.

On April 13, 2018, Foamix entered into a Securities Purchase Agreement with an existing investor pursuant to which the Company agreed to issue and sell, in a registered offering, an aggregate of 2,940,000 shares at a purchase price of $ 5.50 per share, later exchanged to 1,741,656 Menlo common stock and one CSR at the closing of the Merger, adjusted retrospectively to 435,414 shares of common stock and one CSR upon the reverse stock split effective February 12, 2021.

The net proceeds from the offering were $ 16.1 million after deducting transaction expenses.

The closing of the issuance and sale of these shares took place on April 16, 2018.

Share-based compensation

In connection with the Merger, the Company issued 36,500,335 shares to legacy Foamix shareholders.

On April 6, 2020, pursuant to the terms of the CSR Agreement, the Company issued 74,544,413 shares to legacy Foamix shareholders, adjusted retrospectively to 18,636,103 shares of common stock upon the reverse stock split effective February 12, 2021

NOTE 15 - SHARE BASED COMPENSATION

Equity incentive plans:

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In addition, the Company adopted the 2018 Omnibus Incentive Plan (the "2018 Plan") in January 2018.

In January 2020, the number of shares reserved under the 2018 Plan automatically increased by 244,026 shares of common stock pursuant to the terms thereof.

As of December 31, 2021, 147,550 shares remain issuable under the 2018 Plan.

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As of December 31, 2021, 2,232,207 shares remain available for grant under the ESPP.

During the year ended December 31, 2020, 61,031 Foamix ordinary shares were purchased by Foamix employees pursuant to the ESPP prior to the Merger, which were later exchanged for 36,155 shares of the Company's common stock and one CSR in the Merger, adjusted retrospectively to 9,038 shares of common stock and one CSR upon the reverse stock split effective February 12, 2021, and 38,716 shares were issued to employees after the Merger.

During the year ended December 31, 2019, 134,449 shares were issued to the employees, later exchanged to 79,648 shares of Menlo common stock and one CSR in the Merger, adjusted retrospectively to 19,912 shares of common stock and one CSR upon the reverse stock split effective February 12, 2021.

During the year ended December 31, 2021, 71,890 shares were issued to employees pursuant to the ESPP.

During the year ended December 31, 2020, 61,031 Foamix ordinary shares were purchased by Foamix employee pursuant to the ESPP prior to the Merger, which were later exchanged for 36,155 shares of the Company's common stock and one CSR in the Merger, adjusted retrospectively to 9,038 shares of common stock and one CSR upon the reverse stock split effective February 12, 2021, and 38,716 shares were issued to employees after the Merger.

Options and RSUs granted to employees and directors:

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1 year - 4 years

RSU 654,427 — 1 year - 4 years

RSU 970,813 — 2 years - 4 years

Year ended December 31, 2020

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RSU 654,427 — 1 year - 4 years

Year ended December 31, 2018

Award amount* Exercise price range* Vesting period Expiration

Employees and Directors:

Options 132,683 $ 27.40 - $ 43.20

1 year - 4 years

RSU 32,089 — 3 years - 4 years

* All amounts and exercise prices for pre-Merger grants are presented following the exchange to Menlo options and RSUs at the Exchange Ratio described in Note 3-Business Combination

The fair value of options and RSUs granted to employees and directors during 2020, 2019 and 2018 was $ 11.9 million, $ 4.4 million and $ 4.0 million, respectively.

The fair value of options and RSUs granted to employees and directors during 2021 and 2020 was $ 9.4 million and $ 11.9 million, respectively.

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

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Year ended December 31

2020 2019 2018

Fair value of stock option $ 1.02 -$ 6.75

$ 3.47 -$ 7.68

$ 27.60 -$ 40.44

Dividend yield 0 % 0 %

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60.44 %- 69.83 %

61.00 %- 62.60 %

Risk-free interest rate 0.50 %- 1.29 %

0.31 %- 1.26 %

2.75 %- 2.87 %

Expected term 6 years 6 years 6 years

Expected term 6 years 6 years

Modification of share-based compensation:

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The conversion was considered by the company to be a modification under ASC 718.

As a result of the modification, for outstanding options and RSUs granted to Foamix employees and consultants, the Company recorded incremental compensation of $ 11.8 million for the year ended December 31, 2020.

As of December 31, 2020 there is $ 3.6 million of unrecognized incremental compensation expense related to the modification which will primarily be amortized using a graded vesting method over the next 2 years.

As a result of the modification, for outstanding options and RSUs granted to Foamix employees and consultants, the Company recorded incremental compensation of $ 1.8 million and $ 11.8 million for the years ended December 31, 2021 and December 31, 2020, respectively.

As of December 31, 2021 there is $ 0.9 million of unrecognized incremental compensation expense related to the modification which will primarily be amortized using a graded vesting method over the next 1 year.

Awards granted to holders who are no longer employed or providing services to the Company are accounted for in accordance with ASC 815-40, Derivatives and Hedging.

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Subsequent to the reclassification of these awards as a liability instrument, the Company recorded incremental compensation expense of $ 1.0 million for the year ended December 31, 2020.

As described in Note 3 - Business Combination, on April 6, 2020, the Company announced that study MTI-105 and study MTI-106 did not meet their respective primary endpoint of demonstrating statistically significant reduction in pruritus in patients treated with serlopitant compared to placebo based upon a 4-point improvement responder analysis.

There was no incremental compensation for the year ended December 31, 2021.

As described in Note 3 -

Business Combination, on April 6, 2020, the Company announced that study MTI-105 and study MTI-106 did not meet their respective primary endpoint of demonstrating statistically significant reduction in pruritus in patients treated with serlopitant compared to placebo based upon a 4-point improvement responder analysis.

Accordingly, on April 6, 2020, pursuant to the terms of the CSR Agreement, 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.

2 unchanged sentences

These awards were subject to acceleration upon the change of control per the previous Menlo stock option plan.

During the year ended December 31, 2018 the Company recorded additional share-based compensation expenses in the amount of approximately $ 0.7 million with respect to Type III modification.

Summary of outstanding and exercisable options and RSUs:

The following table summarizes the number of options outstanding for the years ended December 31, 2020, and related information:

The following table summarizes the number of options outstanding for the year ended December 31, 2021, and related information:

Number of options Weighted Average Exercise Price

Outstanding at December 31, 2020 4,274,649 $ 13.36

Granted pre-merger 132,352 26.92

Exercised, forfeited, and exercised pre-merger ( 8,371 ) 41.08

Menlo options outstanding as of the merger 899,293 23.24

Conversion of contingent stock rights 1,944,022 —

Granted post-merger 925,528 8.72

Exercised post-merger ( 44,188 ) 6.48

Forfeited post-merger ( 259,257 ) 9.40

Expired post-merger ( 143,903 ) 29.48

Granted 1,686,405 5.29

Exercised ( 70,827 ) 7.18

Forfeited ( 435,569 ) 8.25

Expired ( 1,410,706 ) 17.53

Outstanding at December 31, 2021 4,043,952 $ 9.20

Exercisable at December 31, 2021 1,971,922 $ 12.39

The weighted average remaining contractual term of outstanding and exercisable options as of December 31, 2020, is 5.97 and 4.34 years, respectively.

The weighted average remaining contractual term of outstanding and exercisable options as of December 31, 2021, is 7.0 years and 5.5 years, respectively.

Total unrecognized share based compensation for options at December 31, 2021 is $ 6.4 million, which is expected to be recognized over a weighted average period of 2.3 years.

The aggregate intrinsic value of the total of both the outstanding and exercisable options as of December 31, 2020, is $ 0.2 million and $ 0.1 million, respectively.

The following table summarizes the number of RSUs outstanding for the years ended December 31, 2020:

There was no intrinsic value of outstanding and exercisable options as of December 31, 2021

The following table summarizes the number of RSUs outstanding for the year ended December 31, 2021:

Number of RSUs

Outstanding at December 31, 2020 719,443

Awarded pre-merger 63,395

Vested pre-merger ( 6,956 )

Menlo awards outstanding as of the merger 122,363

Conversion of contingent stock rights 300,876

Awarded post-merger 461,738

Vested post-merger ( 284,102 )

Forfeited post-merger ( 28,929 )

Awarded 970,813

Vested ( 293,034 )

Forfeited ( 134,822 )

Outstanding at December 31, 2021 1,262,400

Total unrecognized compensation expense related to the unvested portion of the Company's RSUs was $ 5.1 million, which is expected to be recognized over a weighted average period of 3.16 years.

Total unrecognized compensation expense related to the unvested portion of the Company's RSUs at December 31, 2021 was $ 5.6 million, which is expected to be recognized over a weighted average period of 2.27 years.

Share-based compensation expenses:

1 unchanged sentence

Year ended December 31

2020 2019 2018

Research and development expenses 1,714 4,746

15 unchanged sentences

Year ended December 31

2020 2019 2018

Federal income tax provision at statutory rate 21.00 % 21.00 %

8 unchanged sentences

The income tax expense for the years ended December 31, 2021 and 2020 differed from the amounts computed by applying the U.S.

federal income tax rate of 21% to loss before tax expense as a result of nondeductible expenses, changes in state effective tax rates, foreign taxes, tax credits generated, true up of net operating loss carryforwards, and decrease in the Company’s valuation allowance.

The Company applies the elements of FASB ASC 740-10 regarding accounting for uncertainty in income taxes.

This clarifies the accounting for uncertainty in income taxes recognized in financial statements and required impact of a tax position to be recognized in the financial statements if that position is more likely than not of being sustained by the taxing authority.

Included in Other Liabilities on the Consolidated Balance Sheets, are the total amount of unrecognized tax benefits of approximately $ 2.8 million and $ 3.1 million as of December 31, 2021 and 2020, respectively, net of the federal benefit, if recognized, would favorably affect the Company’s future effective tax rate.

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

The Company believes it is reasonably possible the amount of unrecognized tax benefits may decrease by $ 0.5 million during 2021.

Tax years beginning in 2017 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.

17 unchanged sentences

At December 31, 2021 and 2020, the Company recorded valuation allowance against its net deferred tax assets of approximately $ 85.6 million and $ 69.7 million, respectively.

The change in the valuation allowance during the year ended December 31, 2020 and 2019 was a decrease of approximately $ 1.3 million and an increase of approximately $ 23.1 million, respectively.

The change in the valuation allowance during the years ended December 31, 2021 and 2020 was an increase of approximately $ 15.8 million and a decrease of approximately $ 1.3 million, respectively.

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

10 unchanged sentences

This study may result in an adjustment to the Company’s research and development credit carryforwards;

however, until a study is completed and any adjustment is known, a partial reserve has been presented as an uncertain tax position which is offset against the gross research and development deferred tax asset.

however, until a study is completed and any adjustment is known, a partial reserve has been presented as an uncertain tax position which

is offset against the gross research and development deferred tax asset.

A full valuation allowance has been provided against the Company’s research and development credits and, if an adjustment is required, this would be offset by an adjustment to the deferred tax asset established for the research and development credit carryforwards and the valuation allowance.

4 unchanged sentences

Balance at January 1, 2020

Decrease in uncertain tax positions for the year ( 176 )

Additions for prior year positions (1)

Additions for current year positions 273

Reductions related to expiration of statute of limitations ( 258 )

Balance at December 31, 2020 $ 3,083

6 unchanged sentences

As a result thereof, the Company's intellectual property was assigned to the U.S.

parent company and we recognized a $ 163.0 million taxable gain for Israeli income tax purposes.

parent company and we recognized a $ 163.0 million taxable gain in 2020 for Israeli income tax purposes.

However, the taxable gain was fully offset by net operating loss carryforwards, resulting in no income tax expense to the Company.

3 unchanged sentences

The relevant taxing authorities may disagree with the Company’s determinations as to the income and expenses attributable to specific jurisdictions.

If such a disagreement were to occur, and the Company’s position were not sustained, the

Company could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates and reduced cash flows than otherwise would be expected.

If such a disagreement were to occur, and the Company’s position were not sustained, the Company could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates and reduced cash flows than otherwise would be expected.

The Company has tax assessments that are considered to be final through tax year 2015.

Supplemental Financial Information

Unaudited selected quarterly financial results for the years ended December 31, 2020 and 2019 were as follows:

First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter

Revenues 1,750 11,688 3,269 4,286 308 — — 135

Expenses 41,639 178,865 26,760 24,883 16,192 19,359 23,199 —

Operating loss 39,889 167,177 23,491 21,989 15,884 19,359 23,199 37,431

Loss per share basic and diluted - pre-reverse stock split* $ 0.95 $ 1.21 $ 0.15 $ 0.14 $ 0.47 $ 0.59 $ 0.7 $ 1.04

Loss per share basic and diluted - post-reverse stock split $ 3.79 $ 4.83 $ 0.59 $ 0.55 $ 1.89 $ 2.36 $ 2.79 $ 4.17

* Loss per share basic and diluted in the second and third quarter of 2019 were revised from the reported amounts in the June 30, 2020 Form 10-Q filed on August 6, 2020 and the September 30, 2020 Form 10-Q filed on November 5, 2020 by using weighted average shares outstanding based on an exchange ratio of 0.5924 Menlo shares for each Foamix ordinary share.

The loss per share basic and diluted reported in the June 30, 2020 Form 10-Q and the September 30, 2020 Form 10-Q was based on an exchange ratio of 1.8006 Menlo shares for each Foamix ordinary share.

NOTE 17 - SUBSEQUENT EVENTS

Subsequent Events

Sale of Minocycline Franchise

As discussed in Note 1, On January 12, 2022, VYNE entered into a Purchase Agreement with Journey to sell its MST Franchise for $ 25.0 million of cash consideration which comprises an upfront payment of $ 20.0 million and an additional $ 5.0 million on the one-year anniversary of the closing of the transaction.

In addition, VYNE is entitled to receive certain payments from any licensing or sublicensing of the assets by Journey outside of the United States.

The Company anticipates recording an estimated gain from the sale of the MST Franchise in the first quarter of 2022 ranging from $ 13.5 million to $ 14.5 million.

The Company does not anticipate paying any federal or state income taxes based upon the utilization of net operating losses.

The estimated gain is based on net proceeds ranging from $ 21.3 million to $ 22.3 million including estimated transaction costs ranging from $ 2.7 million to $ 3.7 million.

Under the Purchase Agreement, the Company is obligated to indemnify Journey against certain potential liabilities and for breaches of representations, warranties and covenants under the agreement.

Pursuant to the Agreement, Journey assumed certain liabilities of the MST Franchise including, among others, those arising from VYNE’s patent infringement suit initiated against Padagis Israel Pharmaceuticals Ltd (see Note 12).

There were no current or long-term liabilities recorded by the Company which were transferred to the Buyer.

The Agreement includes customary representations and warranties, as well as indemnification rights for breaches of representations, warranties, and covenants, as well as certain other matters, subject to customary deductibles, caps, and other limitations.

The criteria for reporting the MST Franchise as held for sale was met after the balance sheet date, and therefore, the assets of the MST Franchise were classified as held and used as of December 31, 2021.

The total carrying amounts of the MST assets a were disposed were approximately $ 7.8 million, as of December 31, 2021.

These assets consist primarily of inventory of $ 7.3 million.

No liabilities were transferred.

Financing Activities

Since December 31, 2021, the Company has sold an aggregate of 2,465,500 shares pursuant to the Sales Agreement for gross proceeds of $ 1.5 million.

In addition, on March 15, 2022, the Company entered into a purchase agreement (the "Equity Purchase Agreement"), with Lincoln Park Capital Fund, LLC ("Lincoln Park") which provides that, upon the terms and subject to the conditions and limitations set forth therein, the Company may 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 1,667,593 shares of its common stock to Lincoln Park as commitment shares in accordance with the closing conditions contained within the Equity Purchase Agreement.

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