UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 001-00100
THERAPEUTICSMD, INC.
(Exact name of Registrant as specified in its Charter)
Nevada
(State or other jurisdiction
of incorporation or organization)
951 Yamato Road, Suite 220
Boca Raton, Florida
(Address of principal executive offices)
87-0233535
(I.R.S. Employer Identification No.)
33431
(Zip Code)
Title of Each Class
Common Stock, par value $0.001 per share
Name of each exchange on which registered
The Nasdaq Stock Market LLC
561-961-1900
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Trading
symbol
TXMD
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer
Non-accelerated filer
Emerging growth company
☐
☒
☐
Accelerated filer
Smaller reporting company
☐
☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an
error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s
executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of June 30, 2022, the registrant’s most recently completed second fiscal quarter, the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by
reference to the market price at which the common equity was last sold was $87,323,238.
As of April 5, 2023, there were outstanding 9,953,290 shares of the registrant’s common stock, par value $0.001 per share.
Documents Incorporated by Reference
Portions of the registrant’s definitive Proxy Statement for its 2023 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K where
indicated. Such Proxy Statement will be filed with the Securities and Exchange Commission no later than 120 days after the end of the registrant’s fiscal year ended December 31, 2022.
Part I
Part II
Part III
Part IV
TABLE OF CONTENTS
Item 1.
Business
Item 1A. Risk factors
Item 1B. Unresolved staff comments
Item 2.
Properties
Item 3.
Legal proceedings
Item 4.
Mine safety disclosures
Item 5.
Market for registrant’s common equity, related stockholder matters, and issuer purchases of equity securities
Item 6.
Reserved
Item 7.
Management’s discussion and analysis of financial condition and results of operations
Item 7A. Quantitative and qualitative disclosures about market risk
Item 8.
Financial statements and supplementary Data
Item 9.
Changes in and disagreements with accountants on accounting and financial disclosure
Item 9A. Controls and procedures
Item 9B. Other information
Item 9C. Disclosure regarding foreign jurisdictions that prevent inspections
Item 10.
Directors, executive officers and corporate governance
Item 11.
Executive compensation
Item 12.
Security ownership of certain beneficial owners and management and related stockholder matters
Item 13.
Certain relationships and related transactions, and director independence
Item 14.
Principal accountant fees and services
Item 15.
Exhibits and financial statement schedules
Item 16.
Form 10-K summary
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Part I
Item 1.
Business
Overview
Throughout this Annual Report on Form 10-K (“2022 10-K Report”), the terms “we,” “us,” “our,” “TherapeuticsMD,” “the Company,” or “our company”
refer to TherapeuticsMD, Inc., a Nevada corporation, and unless specified otherwise, include our wholly owned subsidiaries vitaMedMD, LLC, a Delaware
limited liability company (“vitaMed”), and BocaGreenMD, Inc., a Nevada corporation (“BocaGreen”).
TherapeuticsMD owns or has rights to trademarks, service marks, or trade names that were previously used in connection with the operation of its business,
or are now licensed by another party, including TherapeuticsMD®, vitaMedMD®, BocaGreenMD®, vitaCareTM, BIJUVA®, and IMVEXXY®, which are
protected under applicable intellectual property laws and are the property of the Company. This 2022 10-K Report also contains trademarks, trade names
and service marks of other companies, which are the property of their respective owners. Solely for convenience, trademarks, trade names and service
marks referred to in this 2022 10-K Report may appear without the ®, ™ or SM symbols, but such references are not intended to indicate, in any way, that
we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, trade names, and service
marks. We do not intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display should not be
construed to imply a relationship with, or endorsement or sponsorship of us by, these other parties.
In addition, this 2022 10-K Report includes market and industry data that we obtained from periodic industry publications, third-party studies and surveys,
government-agency sources, filings of public companies in our industry, and internal-company surveys. Industry publications and surveys generally state
that their information has been obtained from sources believed to be reliable. Although we believe that the industry and market data below is reliable as of
the date of this 2022 10-K Report, this information could prove to be inaccurate as a result of a variety of matters.
Forward-looking statements
This 2022 10-K Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-
looking statements involve substantial risks and uncertainties. For example, statements regarding our operations, financial position, business strategy, and
other plans and objectives for future operations, and assumptions and predictions about future demand, marketing, expenses and sales are all forward-
looking statements. These statements may be found in the items of this 2022 10-K Report entitled “Business” and “Management’s Discussion and Analysis
of Financial Condition and Results of Operations,” as well as in this 2022 10-K Report generally. These statements are generally accompanied by words
such as “intend,” “anticipate,” “believe,” “estimate,” “potential(ly),” “continue,” “forecast,” “predict,” “plan,” “may,” “will,” “could,” “would,” “should,”
“expect,” or the negative of such terms or other comparable terminology.
We have based these forward-looking statements on our current expectations and projections about future events. We believe that the assumptions and
expectations reflected in such forward-looking statements are reasonable, based on information available to us on the date of this 2022 10-K Report, but we
cannot assure you that these assumptions and expectations will prove to have been correct or that we will take any action that we may presently be
planning. These forward-looking statements are inherently subject to known and unknown risks and uncertainties. Actual results or experience may differ
materially from those expected or anticipated in the forward-looking statements. Factors that could cause or contribute to such differences include, but are
not limited to, competition from other businesses, market and general economic factors, and the other risks discussed in Item 1A of this 2022 10-K Report.
This discussion should be read in conjunction with the consolidated financial statements and notes thereto included in this 2022 10-K Report.
We have identified some of the important factors that could cause future events to differ from our current expectations and they are described in this 2022
10-K Report in the section entitled “Risk Factors” that you should review carefully. Please consider our forward-looking statements in light of those risks
as you read this 2022 10-K Report. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be
incorrect, actual results may vary materially from what we project. We do not undertake to update any forward-looking statements or to publicly announce
the results of any revisions to any statements to reflect new information or future events or developments.
1
Our company
TherapeuticsMD was previously a women’s healthcare company with a mission of creating and commercializing innovative products to support the
lifespan of women from pregnancy prevention through menopause.
In December 2022, we changed our business to become a pharmaceutical royalty company, primarily collecting royalties from our licensees. Our Company
is no longer engaging in research and development or commercial operations and is transforming to a virtual company with limited infrastructure. On
December 30, 2022 (the “Closing Date”), the Company completed a transaction (the “Mayne Transaction”) with Mayne Pharma LLC, a Delaware limited
liability company (“Mayne Pharma”) and subsidiary of Mayne Pharma Group Limited, an Australian public company, pursuant to which the Company and
its subsidiaries (i) granted Mayne Pharma an exclusive license to commercialize the Company’s IMVEXXY, BIJUVA and prescription prenatal vitamin
products sold under the BocaGreenMD® and vitaMedMD® brands (collectively, the “Licensed Products”) in the United States and its possessions and
territories, (ii) assigned to Mayne Pharma the Company’s exclusive license to commercialize ANNOVERA® (together with the Licensed Products,
collectively, the “Products”) in the United States and its possessions and territories, and (iii) sold certain other assets to Mayne Pharma in connection
therewith.
Pursuant to a License Agreement, dated December 4, 2022, between the Company and Mayne Pharma (the “Mayne License Agreement”), the Company
granted Mayne Pharma, on the Closing Date, (i) an exclusive, sublicensable, perpetual, irrevocable license to research, develop, register, manufacture, have
manufactured, market, sell, use, and commercialize the Licensed Products in the United States and its possessions and territories and (ii) an exclusive,
sublicensable, perpetual, irrevocable license to manufacture, have manufactured, import and have imported the Licensed Products outside the United States
for commercialization in the United States and its possessions and territories.
Pursuant to the Mayne License Agreement, Mayne Pharma will make one-time, milestone payments to the Company of each of (i) $5.0 million if aggregate
net sales of all Products in the United States during a calendar year reach $100.0 million, (ii) $10.0 million if aggregate net sales of all Products in the
United States during a calendar year reach $200.0 million and (iii) $15.0 million if aggregate net sales of all Products in the United States during a calendar
year reach $300.0 million. Further, Mayne Pharma will pay to the Company royalties on net sales of all Products in the United States at a royalty rate of
8.0% on the first $80 million in annual net sales and 7.5% on annual net sales above $80.0 million, subject to certain adjustments, for a period of 20 years
following the Closing Date. The royalty rate will decrease to 2.0% on a Product-by-Product basis upon the earlier to occur of (i) the expiration or
revocation of the last patent covering a Product and (ii) a generic version of a Product launching in the United States. Mayne Pharma will pay to the
Company minimum annual royalties of $3.0 million per year for 12 years, adjusted for inflation at an annual rate of 3%, subject to certain further
adjustments, including as described below (the “Minimum Annual Royalty”). Upon the expiry of the 20-year royalty term, the licenses granted to Mayne
Pharma under the Mayne License Agreement will become a fully paid-up and royalty free license for the Licensed Products.
Pursuant to a Transaction Agreement, dated December 4, 2022, between the Company and Mayne Pharma (the “Transaction Agreement”), the Company
sold to Mayne Pharma, at closing, certain assets for Mayne Pharma to commercialize the Products in the United States, including the Company’s exclusive
license from the Population Council to commercialize ANNOVERA (the “Transferred Assets”).
The total consideration from Mayne Pharma to the Company for the purchase of the Transferred Assets and the grant of the licenses under the Mayne
License Agreement was (i) a cash payment of $140.0 million at closing, (ii) a cash payment of approximately $12.1 million at closing for the acquisition of
net working capital as determined in accordance with the Transaction Agreement and subject to certain adjustments, (iii) a cash payment of approximately
$1.0 million at closing for prepaid royalties in connection with the Mayne License Agreement Amendment (as defined below) and (iv) the right to receive
the contingent consideration set forth in the Mayne License Agreement, as amended.
On the Closing Date, the Company and Mayne Pharma entered into Amendment No. 1 to the Mayne License Agreement (the “Mayne License Agreement
Amendment”). Pursuant to the Mayne License Agreement Amendment, Mayne Pharma agreed to pay the Company approximately $1.0 million in prepaid
royalties on the Closing Date. The prepaid royalties will reduce the first four quarterly payments that would have otherwise be received pursuant to the
Mayne License Agreement by an amount equal to $257,250 per quarterly royalty payment plus interest calculated at 19% per annum accruing from the
Closing Date until the date such quarterly royalty payment is paid to the Company. In addition, the parties agreed that Mayne Pharma will reduce one
quarterly royalty payment (other than the first quarterly royalty payment) otherwise payable to the Company by $1.5 million in consideration of Mayne
Pharma assuming the Company’s obligations under a long-term services agreement, including the Company’s minimum payment obligations thereunder.
This action represented a shift in our business and therefore, the related assets and liabilities associated with commercial operations are classified as
discontinued operations on our consolidated balance sheets and the results of operations have been presented as discontinued operations within our
consolidated statements of operations and comprehensive income (loss) for all periods presented.
2
See Note 2 - Discontinued Operations to the consolidated financial statements included in this Annual Report on Form 10-K for further details.
The Company also has license agreements with strategic partners to commercialize IMVEXXY and BIJUVA outside of the U.S.
•
•
In July 2018, we entered into a license and supply agreement (the “Knight License Agreement”) with Knight Therapeutics Inc. (“Knight”)
pursuant to which we granted Knight an exclusive license to commercialize IMVEXXY and BIJUVA in Canada and Israel.
In June 2019, we entered into an exclusive license and supply agreement (the “Theramex License Agreement”) with Theramex HQ UK Limited
(“Theramex”) to commercialize IMVEXXY and BIJUVA outside of the U.S., excluding Canada and Israel. In 2021, Theramex secured
regulatory approval for BIJUVA in certain European countries and began commercialization efforts in those countries.
In connection with the Company’s transformation into a pharmaceutical royalty company, the termination of our executive management team (except for
Mr. Marlan Walker, our former General Counsel and current Chief Executive Officer) and all other employees was completed by December 31, 2022.
Severance obligations for all employees other than executive officers were paid in full in the first quarter of 2023 and severance obligations for terminated
executive officers will be paid in accordance with their employment agreements and separation agreements as previously disclosed. As of December 31,
2022, we employed one full-time employee primarily engaged in an executive position. We have engaged external consultants, including certain former
members of our management team, who support our relationship with current partners and assist with certain financial, legal and regulatory matters and the
continued wind-down of our historical business operations.
vitaCare divestiture
On April 14, 2022, we completed the divestiture of vitaCare Prescription Services, Inc. (“vitaCare”) with the sale of all vitaCare’s issued and outstanding
capital stock (the “vitaCare Divestiture”). We received net proceeds of $142.6 million, net of transaction costs of $7.2 million, and we recognized a gain on
sale of business of $143.4 million. Included in the net proceeds amount was $11.3 million of customary holdbacks as provided in the stock purchase
agreement (the “Purchase Agreement”), which is recorded as restricted cash in the consolidated balance sheets. The restricted cash was held by an escrow
agent and was released to us in March 2023. Additionally, we may receive up to an additional $7.0 million in earn-out consideration, contingent upon
vitaCare’s financial performance through 2023 as determined in accordance with the terms of the Purchase Agreement. We will record the contingent
consideration at the settlement amount when the consideration is realized or realizable.
The Purchase Agreement contains customary representations and warranties, covenants, and indemnities of the parties thereto. The commitments under a
long-term services agreement related to vitaCare was transferred to Mayne Pharma as part of the Mayne Transaction. In addition, under the Mayne License
Agreement Amendment, Mayne Pharma will reduce one quarterly royalty payment (other than the first quarterly royalty payment) otherwise payable to us
by $1.5 million in consideration of Mayne Pharma assuming our obligations under the long-term services agreement related to vitaCare.
The pre-divesture operations of vitaCare were reclassified to discontinued operations in December 2022 when the Company transitioned to becoming a
royalty company and licensing its products to Mayne Pharma.
The impact of COVID-19 on our business
With multiple variant strains of the SARS-Cov-2 virus and the COVID-19 disease that it causes (collectively, “COVID-19”) still circulating, we continue to
be subject to risks and uncertainties in connection with the COVID-19 pandemic. The extent of the future impact of the COVID-19 pandemic on our
business continues to be highly uncertain and difficult to predict.
As of the date of the filing of this Annual Report, the future extent to which the COVID-19 pandemic may continue to materially impact our financial
condition, liquidity, or results of operations remains uncertain and difficult to predict. Even after the COVID-19 pandemic has subsided, we may continue
to experience adverse impacts to our business as a result of any economic recession or depression that has occurred or may occur in the future.
Our business model
We changed our business in 2022, by out-licensing our products and collecting royalties, after granting an exclusive license to commercialize the
Company’s IMVEXXY, BIJUVA, and prescription prenatal vitamin products sold under the BocaGreenMD® and vitaMedMD® brands in the United
States and its possessions and territories and assigning the Company’s exclusive license to commercialize ANNOVERA in the United States and its
possessions and territories to Mayne Pharma.
3
The Company also has license agreements with strategic partners to commercialize IMVEXXY and BIJUVA outside of the U.S. In July 2018 we entered
into the Knight License Agreement pursuant to which we granted Knight an exclusive license to commercialize IMVEXXY and BIJUVA in Canada and
Israel. In June 2019, we entered into the Theramex License Agreement to commercialize IMVEXXY and BIJUVA outside of the U.S., excluding Canada
and Israel. In 2021, Theramex secured regulatory approval for BIJUVA in certain European countries and began commercialization efforts in those
countries.
Currently, we collect royalties on sales of ANNOVERA, IMVEXXY, and BIJUVA under the TherapeuticsMD brand, prescription prenatal vitamins under
our vitaMedMD brand name, and authorized generic formulations of our prescription prenatal vitamin products under BocaGreenMD brand name.
We expect that the primarily source of our future revenue will be based on payments we may receive for milestones and royalties related to these products.
The Company no longer has research and development, commercial, manufacturing and finance infrastructure and operates as a virtual corporation with no
material capital investment in fixed assets.
Industry and market
Women’s healthcare market
According to BBC Research’s September 2020 report, “Pharmaceuticals for Women’s Health: Global Markets,” post-menopausal osteoporosis, pregnancy
disorders and management, menopause, endometriosis, and polycystic ovary syndrome (PCOS) are the largest segments within the global market for
women’s health therapeutics. Women’s health therapeutics established a very strong presence in the global pharmaceutical market over the last few
decades. The market is expected to grow moderately, mainly due to patent expirations of blockbuster drugs such as Evista, the Premarin family, Forteo,
Mirena, Boniva, Actonel, Gonal-F and several other. However, the launch of new drugs in the market, and novel drugs under R&D in the late-stage
pipeline, has the strong potential to drive the market during the forecast period. The global market for women’s health therapeutics is projected to grow
from $31.5 billion in 2019 to $41.2 billion by 2025, at a compound annual growth rate (CAGR) of 4.7% for the period of 2019-2025. The menopause
market is projected to grow from $5.7 billion in 2019 to $7.7 billion by 2025 at a CAGR of 5.4% through 2025.
Reproductive market
Contraception can be defined as the deliberate prevention of pregnancy by interfering with normal process of ovulation, fertilization, and implantation
through the use of barriers, drugs, medical devices, or surgical techniques. The contraceptive market includes non-hormonal methods, such as the non-
hormonal intrauterine device, or IUD, contraceptive sponge, diaphragm, cervical cap or shield and condoms, and hormonal methods such as oral
contraceptives, injections, implants, hormonal IUDs and vaginal ring and transdermal contraceptive products. Hormonal contraceptives can be composed of
synthetic estrogens and progestins. Contraceptives containing both estrogen and a progestin are referred to as combination hormonal contraceptives, CHCs,
and contraceptives containing only progestin are referred to as progestin-only, or P-only.
The most common synthetic estrogen approved in the U.S. for use in contraceptive products is ethinyl estradiol (EE). There are 10 different progestins that
have been used in contraceptives sold in the U.S. The progestin component provides most of the contraceptive effect, while the estrogen component
primarily provides cycle control, for example, minimizing bleeding or spotting between cycles. The progestin exerts its contraceptive effect by inhibiting
ovulation, or release of an egg from the ovary, and by thickening cervical mucus. Thickening cervical mucus helps to prevent sperm entry into the upper
genital tract. The estrogen component, in addition to providing cycle control, makes a small contribution to contraception by decreasing the maturation of
the egg in the ovary. As per the National Center for Health Statistics (“NCHS’) Data Brief No. 388 from the Centers for Disease Control and Prevention
(“CDC”), the latest data, for 2017 to 2019, indicate that 65.3% of women aged 15 to 49 were using some type of contraceptive method with approximately
half of these women in this age group using reversable prescription contraception. Most women who were not using contraception had reasons for not
doing so, such as seeking pregnancy, being pregnant or postpartum, or not being sexually active.
The U.S. contraceptive market size is expected to reach $9.9 billion by 2027, expanding at a CAGR of 4.3% from 2020 to 2027 according to Grand View
Research, Inc. Increasing awareness about long-acting reversible contraceptives (“LARCs”) is expected to augment the product demand, thereby driving
the market over the next few years. According to the NCHS, the use of LARCs in the U.S. was 10.4% in 2017-2019 among women aged 15 to 49. We
believe that the increasing awareness about LARCs will grow incremental product demand, thereby driving market growth over the coming years. This is
currently led by IUDs. The remainder of the market is dominated by oral contraceptives, which is represented by one major brand, Lo Loestrin® Fe by
AbbVie and a variety of generics.
4
Menopause market
Menopause is the spontaneous and permanent cessation of menstruation, which naturally occurs in most women. The average age of menopause in the U.S.
is 52. The range for women is usually between 45 and 58. Per the National Institutes of Health, in the U.S., approximately 1.3 million women become
menopausal each year, typically beginning between the ages of 51 and 52. However, about 5.0% of women experience early menopause between the ages
of 40 and 45. Additionally, 1.0% of women experience premature menopause before the age of 40, due to permanent ovarian failure that may be associated
with sex chromosome abnormalities.
Classic symptoms of menopause are vasomotor symptoms (“VMS”) (including hot flashes and night sweats), vulvovaginal symptoms (including
dyspareunia and vaginal dryness) and sleep disturbances. These symptoms are caused by the reduced levels of circulating estrogen as ovarian production
shuts down. Common treatments for menopausal VMS and vulvovaginal symptoms of menopause range from prescription medications, including hormone
therapy and non-hormonal options, to over-the-counter supplements and lubrication options.
Hormone therapy is the most effective treatment in the U.S. and Canada for relief of menopausal symptoms according to the North American Menopause
Society (“NAMS”). Approved FDA prescriptions for menopausal hormone therapy in the U.S. dropped significantly following the Women’s Health
Initiative (“WHI”) study results published in 2002, which found that subjects using conjugated equine estrogens plus the synthetic progestin
medroxyprogesterone acetate had, among other things, a greater incidence of coronary heart disease, breast cancer, stroke, and pulmonary embolism. This
study caused a significant change in hormone therapy prescribing habits. Since 2002, many women and HCPs have chosen compounded hormone therapy,
a bio-identical solution for treating VMS, and the use of local vaginal therapy increased during this time. The FDA recommends that women with
moderate-to-severe menopausal symptoms who want to try menopausal hormone therapy for relief use it for the shortest time needed and at the lowest
effective dose.
Prenatal vitamin market
According to the CDC, there are approximately four million births per year in the U.S. Most HCPs encourage taking a prenatal vitamin as the
recommended standard of care. Prenatal vitamins are dietary supplements intended to be taken before and during pregnancy and during postnatal lactation
that provide nutrients recognized by various health organizations as helpful for a healthy pregnancy outcome.
The prenatal vitamin market is highly fragmented, with dozens of companies selling hundreds of competitive products. Prenatal vitamin products are
marketed as either nonprescription products or prescription products, with many companies marketing their products through both channels.
Our Licensed Menopause portfolio
IMVEXXY
On December 30, 2022, we granted an exclusive license to commercialize the Company’s IMVEXXY in the United States and its possessions and
territories to Mayne Pharma. IMVEXXY is a small, digitally inserted, softgel vaginal insert that dissolves when inserted into the vagina. It is administered
mess-free, without the need for an applicator, and can be used any time of day. IMVEXXY provides a mechanism of action and dosing that is comfortable
for patients, with no patient education required for dose application or applicators. Additionally, the dose packaging for IMVEXXY is designed to optimize
compliance and convenience for users. IMVEXXY demonstrated efficacy as early as two weeks (secondary endpoint) and maintained efficacy through
week 12 in clinical studies, with no increase in systemic hormone levels beyond the normal postmenopausal range (the clinical relevance of systemic
absorption rates for vaginal estrogen therapies is not known). We previously granted licenses to commercialize the Company’s IMVEXXY product outside
of the United States to Theramex and Knight.
As part of the FDA’s approval of IMVEXXY, we committed to conduct a post-approval observational study to evaluate the risk of endometrial cancer in
post-menopausal women with a uterus who use a low-dose vaginal estrogen unopposed by a progestogen. The FDA has also asked the sponsors of other
vaginal estrogen products to participate in the observational study. In connection with the observational study, we would have been required to provide
progress reports to the FDA on an annual basis. The obligation to conduct this study was transferred to Mayne Pharma as part of the License Agreement.
BIJUVA
On December 30, 2022, we granted an exclusive license commercialize the Company’s BIJUVA in the United States and its possessions and territories to
Mayne Pharma. BIJUVA offers the convenience of a single-capsule combination of two hormones (estradiol and progesterone), which may improve a
user’s compliance. The estradiol and progesterone in BIJUVA are plant-based, not animal-sourced, and do not contain peanut oil unlike other FDA-
approved progesterone products. BIJUVA provides a sustained steady state of estradiol
5
which reduced the frequency and severity of hot flashes in clinical studies with no demonstrated impact on a patient’s weight or blood pressure.
Additionally, through clinical trials, BIJUVA has demonstrated endometrial safety and greater than 90% amenorrhea rates, while providing no clinically
meaningful changes in mammograms, or in coagulation or lipid parameters, and while providing clinically meaningful improvements in quality of life and
sleep disturbance. In December 2021, the FDA approved the supplemental NDA for the 0.5 mg/100 mg dose of BIJUVA. We previously granted licenses to
commercialize the Company’s BIJUVA product outside of the United States to Theramex and Knight.
Estrogen (with or without a progestin) is most commonly used to treat VMS due to menopause that is a direct result of the decline in estrogen levels
associated with ovarian shutdown at menopause. Estrogen is a generic term for any substance, natural or synthetic, that exerts biological effects
characteristic of estrogenic hormones, such as estradiol, a natural ovarian produced estrogen. According to NAMS, the most effective treatment for VMS
due to menopause is estrogen therapy.
Progestins are used in combination with estrogen in menopausal women with a uterus to avoid an increase in the incidence of endometrial hyperplasia,
which is a condition caused by chronic use of estrogen alone by a woman with a uterus and is associated with an increased incidence of uterine, or
endometrial, cancer. Progestins include the naturally occurring hormone progesterone and several synthetic progestin compounds that have pregestational
activity. These agents are used for a variety of indications and conditions. Progestins alone are also used to treat women with secondary amenorrhea to
create withdrawal bleeding in these women who have not had regular menses. Progestins are also used to treat dysfunctional uterine bleeding and
endometriosis.
With the approval of BIJUVA, the FDA required a post-approval commitment to further develop and validate our in-vitro dissolution method to show how
BIJUVA is released from the capsule in an in-vitro setting for quality control assessments. The development of this method and validation were completed
and submitted to the FDA as required in our approval.
Our hormone therapy pharmaceutical products are characterized by safety and efficacy profiles that can be consistently manufactured to target
specifications. This provides an alternative to the non-FDA approved compounded bio-identical market. We believe that our FDA-approved pharmaceutical
products offer advantages in terms of demonstrated safety and efficacy, consistency in the hormone dose, lower patient cost due to the increased likelihood
of insurance coverage, and improved access as a result of availability from major retail pharmacy chains rather than custom order or formulation by
individual compounders.
Our licensed prenatal vitamin products
On December 30, 2022, we granted an exclusive license to commercialize, in the United States and its possessions and territories, our prescription prenatal
vitamin product lines under our vitaMedMD brand name and authorized generic formulations of some of our prescription prenatal vitamin products under
our BocaGreenMD Prena1 name to Mayne Pharma.
License agreements
Mayne license agreement
Pursuant to the Mayne License Agreement, on the Closing Date the Company granted Mayne Pharma (i) an exclusive, sublicensable, perpetual, irrevocable
license to research, develop, register, manufacture, have manufactured, market, sell, use, and commercialize the Licensed Products in the United States and
its possessions and territories and (ii) an exclusive, sublicensable, perpetual, irrevocable license to manufacture, have manufactured, import and have
imported the Licensed Products outside the United States for commercialization in the United States and its possessions and territories.
Pursuant to the Mayne License Agreement, Mayne Pharma will make one-time, milestone payments to the Company of each of (i) $5.0 million if aggregate
net sales of all Products in the United States during a calendar year reach $100.0 million, (ii) $10.0 million if aggregate net sales of all Products in the
United States during a calendar year reach $200.0 million and (iii) $15.0 million if aggregate net sales of all Products in the United States during a calendar
year reach $300.0 million. Further, Mayne Pharma will pay to the Company royalties on net sales of all Products in the United States at a royalty rate of
8.0% on the first $80 million in annual net sales and 7.5% on annual net sales above $80.0 million, subject to certain adjustments, for a period of 20 years
following the Closing Date. The royalty rate will decrease to 2.0% on a Product-by-Product basis upon the earlier to occur of (i) the expiration or
revocation of the last patent covering a Product and (ii) a generic version of a Product launching in the United States. Mayne Pharma will pay to the
Company minimum annual royalties of $3.0 million per year for 12 years, adjusted for inflation at an annual rate of 3%, subject to certain further
adjustments, including as described below. Upon the expiry of the 20-year royalty term, the licenses granted to Mayne Pharma under the Mayne License
Agreement will become a fully paid-up and royalty free license for the Licensed Products.
Pursuant to the Transaction Agreement, the Company sold to Mayne Pharma, at closing, certain assets for Mayne Pharma to commercialize the Products in
the United States, including the Company’s exclusive license from the Population Council to commercialize ANNOVERA.
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The total consideration from Mayne Pharma to the Company for the purchase of the Transferred Assets and the grant of the licenses under the License
Agreement was (i) a cash payment of $140.0 million at closing, (ii) a cash payment of approximately $12.1 million at closing for the acquisition of net
working capital as determined in accordance with the Transaction Agreement and subject to certain adjustments, (iii) a cash payment of approximately $1.0
million at closing for prepaid royalties in connection with the Mayne License Agreement Amendment and (iv) the right to receive the contingent
consideration set forth in the Mayne License Agreement, as amended.
On the Closing Date, the Company and Mayne Pharma entered into the Mayne License Agreement Amendment. Pursuant to the Mayne License
Agreement Amendment, Mayne Pharma agreed to pay the Company approximately $1.0 million in prepaid royalties on the Closing Date. The prepaid
royalties will reduce the first four quarterly payments that would have otherwise been payable pursuant to the Mayne License Agreement by an amount
equal to $257,250 per quarterly royalty payment plus interest calculated at 19% per annum accruing from the Closing Date until the date such quarterly
royalty payment is paid to the Company. In addition, the parties agreed that Mayne Pharma will reduce one quarterly royalty payment (other than the first
quarterly royalty payment) otherwise payable to the Company by $1.5 million in consideration of Mayne Pharma assuming the Company’s obligations
under a long-term services agreement, including the Company’s minimum payment obligations thereunder.
Knight license agreement
Pursuant to the terms of the Knight License Agreement, Knight paid us $2.0 million in milestone fees upon the first regulatory approval in Canada for
IMVEXXY and BIJUVA in 2020 and is required to pay us sales milestone fees based upon certain aggregate annual sales in Canada and Israel of each of
IMVEXXY and BIJUVA and royalties based on aggregate annual sales of each of IMVEXXY and BIJUVA in Canada and Israel.
We may terminate the Knight License Agreement if Knight does not submit all regulatory applications, submissions and/or registrations required for
regulatory approval to use and commercialize IMVEXXY and BIJUVA in Canada within certain specified time periods. We also may terminate the Knight
License Agreement if Knight challenges our patents. Either party may terminate the Knight License Agreement for any material breach by the other party
that is not cured within certain specified time periods or if the other party files for bankruptcy or other related matters. As part of the Knight License
Agreement, Knight is prohibited from exporting IMVEXXY and BIJUVA to the U.S.
Theramex license agreement
Under the terms of the Theramex License Agreement, Theramex paid us EUR 14 million, or $15.5 million, in cash as an upfront fee in August 2019.
Within thirty days of signing the Theramex License Agreement, we provided Theramex the regulatory materials and clinical data that were necessary for
Theramex to obtain marketing authorizations and other applicable regulatory approvals for commercializing BIJUVA and IMVEXXY. In 2019, at a point in
time when Theramex was able to use and benefit from the license which was when the knowledge transfer of regulatory documents occurred, we
recognized the revenue related to the upfront fee, which was a non-refundable payment.
In 2021, we received additional milestone payments comprised of an aggregate of EUR 1.0 million, or $1.2 million, in regulatory milestone payments
based on regulatory approvals for BIJUVA in certain specified markets. Additionally, in December 2021, we received EUR 0.5 million, or $0.6 million, in
additional upfront payments for the license grants of IMVEXXY in Brazil and Mexico. The additional upfront payment for the license grants of
IMVEXXY in Brazil and Mexico may be returned to Theramex under certain conditions if IMVEXXY fails to obtain marketing authorization in one of
Brazil or Mexico within a prespecified period.
We are eligible to receive additional sales milestone payments up to an aggregate of EUR 27.5 million in sales milestone payments to be paid in escalating
tranches based on Theramex first attaining certain aggregate annual net sales milestones of BIJUVA and IMVEXXY outside of the U.S., excluding Canada
and Israel (collectively the “Theramex Territory”), ranging from EUR 25 million to EUR 100 million. We are also entitled to receive quarterly royalty
payments at a rate of 5% on net sales of BIJUVA and IMVEXXY in the Theramex Territory. Theramex is responsible for all regulatory and commercial
activities for BIJUVA and IMVEXXY in the Theramex Territory.
Theramex may sublicense its rights to commercialize BIJUVA and IMVEXXY in the Theramex Territory, except for certain specified markets. We may
terminate the Theramex License Agreement if Theramex does not submit all regulatory applications, submissions and/or registrations required for
regulatory approval to use and commercialize BIJUVA and IMVEXXY within certain specified time periods. We also may terminate the Theramex License
Agreement if Theramex challenges our patents. Either party may terminate the Theramex License Agreement for any material breach by the other party
that is not cured within certain specified time periods or if the other party files for bankruptcy or other related matters.
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ANNOVERA
On December 30, 2022, we assigned the Company’s exclusive license to commercialize ANNOVERA to Mayne Pharma. The segesterone acetate
component of ANNOVERA was classified by the FDA as a “new chemical entity,” or NCE, and thus ANNOVERA has five years of regulatory exclusivity
under the Drug Price Competition and Patent Term Restoration Act of 1984, otherwise known as the Hatch-Waxman Act. ANNOVERA is a one-year (13
cycles) ring-shaped contraceptive vaginal system, or CVS. ANNOVERA, which is made with a silicone elastomer, contains segesterone acetate, a 19-nor
progesterone derivative also known as Nestorone®, or SA, and ethinyl estradiol, or EE. EE is an approved active ingredient in many marketed hormonal
contraceptive products. Segesterone acetate, an NCE, is a potent progestin that, based on pharmacological studies in animals and in vitro, does not bind to
the androgen or estrogen receptors and has no glucocorticoid activity at contraceptive doses. SA has been evaluated in 51 clinical studies across these
delivery systems with more than 26,794 cycles of exposure.
ANNOVERA can be inserted and removed by the woman herself without the aid of a healthcare provider and, unlike oral contraceptives, ANNOVERA
does not require daily administration to obtain the contraceptive effect. After 21 days of use, the woman removes ANNOVERA for seven days, thereby
providing a regular bleeding pattern (i.e., withdrawal/scheduled bleeding). The same CVS is then re-inserted for additional 21/7-days in/out, for up to a
total of 13 cycles (one year). ANNOVERA releases daily vaginal doses of both active ingredients (SA and EE). The claimed release rate of 150 μg/day SA
and 13 μg/day EE is supported by the calculated average release rate from an ex vivo analysis of ANNOVERA used for 13 cycles and is also supported by
data from 13 cycles of in vitro release.
As part of the approval of ANNOVERA, the FDA has required a post-approval observational study be performed to measure the risk of venous
thromboembolism. We agreed to perform and pay the costs and expenses associated with this post-approval study, provided that if the costs and expenses
associated with such post-approval study exceed $20.0 million, half of such excess will offset against royalties or other payments owed by us under the
Population Council License Agreement. In August 2021, we filed a supplemental New Drug Application (“NDA”) with the FDA to modify the testing
specifications for ANNOVERA to allow increased consistency of supply of ANNOVERA. In May 2022, the FDA approved the supplemental NDA for
ANNOVERA. With the FDA approval of the supplemental NDA, we expect the third-party contract manufacturer will be able to supply sufficient
ANNOVERA to better meet customer demand. Our obligations to perform the post-approval study have been transferred to Mayne Pharma as part of the
Mayne License Agreement.
We believe that ANNOVERA competes across all the contraception options for women, especially for those women seeking a long-lasting option without a
procedure.
For patients, ANNOVERA provides a single, long-lasting, reversible birth control product that does not require a procedure at the doctor’s office for
insertion or removal, empowering women to be in complete control of their fertility and menstruation with a 21/7 regimen. We believe that ANNOVERA is
a unique alternative for women who have previously chosen other forms of birth control. These include nulliparous women (or women who have never
given birth), women who are considering an IUD but would rather not have a procedure, women who are between pregnancies but desire protection
without a long-term commitment, and women who are not satisfied with oral options due to the daily usage or potential side effects.
Based on prescription data from Symphony Health Solutions, the FDA-approved prescription market in the U.S. for contraceptive products during 2021
amounted to more than 69 million prescriptions, generating $5.4 billion in gross sales.
Population Council license agreement
Under the terms of the Population Council License Agreement, we paid the Population Council a milestone payment of $20.0 million in 2018, which was
within 30 days following the approval by the FDA of the NDA for ANNOVERA, and $20.0 million in 2019 following the first commercial batch release of
ANNOVERA. The aggregate $40.0 million of milestone payments were recorded as license rights and amortized over the remaining useful life over which
the license rights contributed directly or indirectly to our cash flows. On December 30, 2022, we assigned the ANNOVERA license to Mayne Pharma. The
rights and obligations under the Population Council License Agreement have been transferred to Mayne Pharma and will revert back to us upon certain
events. For additional information, see “Note 5. License rights and other intangible assets” to the consolidated financial statements included in this 2022
10-K Report.
The Population Council has agreed to perform and pay the costs and expenses associated with four post-approval studies required by the FDA for
ANNOVERA, and we had agreed to perform and pay the costs and expenses associated with a post approval study required by the FDA to measure risk for
venous thromboembolism, provided that if the costs and expenses associated with such post-approval study exceed $20.0 million, half of such excess was
to be offset against royalties or other payments owed by us to the Population Council under the Population Council License Agreement. In July 2021, we
received a letter from FDA indicating that the post-marketing commitment study being conducted by the Population Council for ANNOVERA to
characterize the in vivo release rate of
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ANNOVERA was not fulfilled to FDA’s satisfaction. In addition, the final reports for the two post-marketing requirement studies being performed by the
Population Council for ANNOVERA were not submitted by the initial listed submission deadline, which deadlines have since been extended by FDA. Our
obligations to perform the post-approval study have been transferred to Mayne Pharma as part of the Mayne License Agreement. We believe, Mayne
Pharma is working with Population Council to complete the post-marketing commitment study to FDA’s satisfaction and reduce the delay in submitting the
post-marketing requirement final reports. To the extent that the Population Council does not fulfil these studies to FDA’s satisfaction, FDA may impose
additional requirements and penalties against the NDA holder for ANNOVERA.
Unless earlier terminated, the Population Council License Agreement will remain in effect until the later of the expiration of the last-to-expire of the
Population Council’s U.S. patents that are licensed to Mayne Pharma, or the date following such expiration that follows a continuous period of six months
during which Mayne Pharma has not made a commercial sale of ANNOVERA in the U.S. The Population Council License Agreement may also be
terminated for certain breach and bankruptcy-related events and by Mayne Pharma on 180 days’ prior notice to the Population Council.
Sales concentration
Our business model is dependent on third parties achieving specified milestones and product sales. For information on the concentration of licenses of our
products, see “Note 10. Revenue” to the consolidated financial statements included in this 2022 10-K Report. Currently, the Company collects license
revenue from 3 licensees.
Seasonality
The pharmaceutical markets in which we license our products are not subject to seasonal sales fluctuations. However, our license revenues for the first
quarter of each year can be negatively affected by the annual reset of high-deductible commercial insurance plans.
Manufacturing of our licensed products
As of December 30, 2022, we were no longer responsible for any manufacturing and have no manufacturing contracts. All manufacturing responsibility has
been transferred to Mayne Pharma.
Mayne Pharma sources third-party contract manufacturing organizations (“CMOs”), for the commercial supply of the Products. The regulations for
manufacturing of approved drug products are significantly more extensive than the standards for manufacturing supplements or drug product for early-
stage clinical trials. The CMOs are responsible for the manufacture of licensed products in accordance with the product specifications and applicable
regulatory requirements. There are long-term supply agreements with Catalent Pharma Solutions, LLC (“Catalent”) for the commercial supply of our
IMVEXXY and BIJUVA, and Sever Pharma Solution (formerly QPharma AB), both of which have their establishments registered with FDA, for the
supply of ANNOVERA. If Mayne Pharma is unable to obtain sufficient quantities of drugs or receive raw materials in a timely manner, it could be
required to delay its manufacturing and seek alternative manufacturers, which would be costly and time-consuming. See also Item 1A. Risk Factors – “Our
dependence upon third parties for the manufacture and supply of our existing women’s healthcare products may cause delays in, or prevent our licensees
from, successfully commercializing, and marketing our products” below for further discussion related to our dependence on third-party CMOs.
Mayne Pharma uses third-party manufacturers to manufacture and package the vitamin and supplement products that we licensed to them, as well as meet
applicable contract and regulatory requirements. They currently obtain all our vitaMedMD and BocaGreen products from Lang Pharma Nutrition (“Lang”),
a full-service, private label and corporate brand manufacturer specializing in premium health benefit driven products, including medical foods, nutritional
supplements, beverages, bars, and functional foods in the dietary supplement category. As a result, Mayne Pharma is dependent on Lang and its
subcontractors for the manufacture of our vitamin and supplement products. We believe that Lang maintains multiple supply and purchasing relationships
throughout the raw materials marketplace to provide an uninterrupted supply of products to meet Mayne Pharma’s manufacturing requirements.
While we used Lang for the manufacturing of our vitamins and supplements prior to licensing them to Mayne Pharma, we experienced no material
difficulties in obtaining the vitamin and supplement products we needed in the amounts we required and do not anticipate those issues in the future. At
present, we believe the relationship with Lang is established and reliable, and to the best of our knowledge, Mayne Pharma continues to use Lang as its
third-party manufacturer for most of the licensed vitamins and supplements.
Quality control for our products
Our licensed products for the U.S. market are required to be manufactured in accordance with the FDA’s current Good Manufacturing Practice, or cGMPs.
The third-party suppliers and manufacturers of our licensed products are also responsible for continued compliance with cGMP requirements. As of
December 30, 2022, we are no longer involved in quality control activities, which have been transferred
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to Mayne Pharma. To comply with these drug commercialization standards, we believe that Mayne Pharma has personnel with pharmaceutical
development, manufacturing, and quality assurance experience who are responsible for the relationships with the suppliers of our licensed products. We
assigned our commercial supply agreements with Catalent to Mayne Pharma, and to the best of our knowledge, Catalent continues to manufacture the
commercial supply for both IMVEXXY and BIJUVA. We also assigned our commercial supply agreement with Sever Pharma Solutions to Mayne Pharma.
To the best of our knowledge, Sever Pharma Solutions continues to manufacture the commercial supply for ANNOVERA. For the prenatal vitamins, we
believe that Mayne Pharma continues to collaborate with Lang to monitor the cGMP compliance of Lang’s contracted manufacturers and packagers.
Although each of Catalent, Sever, and Lang have received Form FDA 483 observations from FDA inspections in the past, we are not aware of any open
FDA investigations into the manufacturing and/or packaging processes at the facilities that are used for our licensed products.
Research and development
As of December 30, 2022, we no longer conduct any research and development activities. Historically, our product development programs have been
concentrated in advanced hormone therapy pharmaceutical products.
Intellectual property
Patents and trademarks
Our success depends, in part, on our ability to obtain patents, maintain trade-secret protection, and operate without infringing the proprietary rights of
others. Our intellectual property portfolio is one way we attempt to protect our competitive position. We rely primarily on a combination of know-how,
trade secrets, patents, trademarks, and contractual restrictions to protect our products and to maintain our competitive position. We are diligently seeking
ways to protect our intellectual property through various legal mechanisms in relevant jurisdictions. Where permitted, patents for our hormone therapy drug
products have been submitted to the Orange Book.
As of December 31, 2022, we have 54 issued domestic patents and 47 issued foreign patents as well as 60 pending patent applications (47 foreign and 13
domestic), including:
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22 issued domestic patents and 19 issued foreign patents that relate to BIJUVA. These patents establish an important intellectual property
foundation for BIJUVA and are owned by us. The domestic patents will expire in 2032. The foreign patents will expire no earlier than 2032. In
addition, we have pending patent applications relating to BIJUVA in the U.S., Argentina, Australia, Brazil, China, Europe, Israel, Japan, Mexico,
New Zealand, Russia, South Africa, and South Korea;
22 issued domestic patents (20 utility and two design) and 25 foreign patents (16 utility and nine design) that relate to IMVEXXY. These patents
establish an important intellectual property foundation for IMVEXXY and are owned by us. The domestic patents will expire between 2032 and
2034. The foreign utility patents will expire no earlier than 2033. The foreign design patents provide protection expiring no earlier than 2025. In
certain countries, the foreign design patents provide protection through at least 2037. In addition, we have pending patent applications related to
IMVEXXY in the U.S., Argentina, Australia, Brazil, Canada, Europe, Israel, Japan, Mexico, New Zealand, Russia, South Africa, and South
Korea;
One issued domestic utility patent that relates to our topical-cream candidates, which is owned by us and will expire in 2035;
One issued domestic utility patent and one issued foreign patent that relate to our transdermal-patch candidates, which are owned by us. The
domestic utility patent will expire in 2032. The foreign patent will expire in 2033. We have a pending patent application with respect to our
transdermal-patch candidates in Brazil;
Two issued domestic utility patents that relate to estradiol and progesterone product candidates, which are owned by us and will expire in 2032;
Three issued domestic utility patents that relate to TX-009HR, a progesterone and estradiol product candidate, which are owned by us and will
expire in 2037; and
Three issued domestic and two issued foreign patents that relate to formulations containing progesterone, which are owned by us. The domestic
patents will expire between 2032 and 2036. The foreign patents will expire no earlier than 2033.
We hold multiple U.S. trademark registrations and have numerous pending trademark applications. Issuance of a federally registered trademark creates a
rebuttable presumption of ownership of the mark; however, it is subject to challenge by others claiming first use in the mark in some or all the areas in
which it is used. Federally registered trademarks have a perpetual life so long as they are maintained and renewed on a timely basis and used properly as
trademarks, subject to the rights of third parties to seek cancellation of the trademarks if they claim priority or confusion of usage. We believe our patents
and trademarks are valuable and provide us certain benefits in marketing our products.
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We intend to actively protect our intellectual property with patents, trademarks, trade secrets, or other legal avenues for the protection of intellectual
property and to aggressively prosecute, enforce, and defend our patents, trademarks, and proprietary technology, including those licensed by Mayne
Pharma, Knight and Theramex with our licensees to the extent permitted under their respective license agreements. The loss, by expiration or otherwise, of
any one patent may have a material effect on our business. Defense and enforcement of our intellectual property rights can be expensive and time
consuming, even if the outcome is favorable to us. It is possible that the patents issued or licensed to us will be successfully challenged, that a court may
find that we are infringing on validly issued patents of third parties, or that we may have to alter or discontinue the development of our products or pay
licensing fees to account for patent rights of third parties. See “– Pharmaceutical Regulation – Regulatory Exclusivity” below for information regarding our
intellectual property and challenges to that intellectual property.
While we seek broad coverage under our patent applications, there is always a risk that an alteration to the process may provide sufficient basis for a
competitor to avoid infringement claims. In addition, patents expire, and we cannot provide any assurance that any patents will be issued from our pending
application or that any potentially issued patents will adequately protect our intellectual property.
Mayne Pharma licensed US patents and trademarks for our commercial products. Under the terms of the Mayne License Agreement, Mayne Pharma
exclusively took over prosecution of our US patent and trademark portfolio and enforcement of our licensed patents and trademarks.
Government regulation
In the U.S., the FDA regulates pharmaceuticals, biologics, medical devices, dietary supplements, and cosmetics under the Federal Food, Drug, and
Cosmetic Act (“FDCA”) and its implementing regulations. These products are also subject to other federal, state, and local statutes and regulations,
including federal and state consumer protection laws, laws regarding pricing transparency, laws requiring the implementation of compliance programs,
laws requiring the reporting of payments or other transfers of value to HCPs or other healthcare professionals, laws governing the financial relationships
between manufacturers and HCPs or other referral sources and industry stakeholders, laws protecting the privacy of health-related information, laws
restricting items and services of value provided to patients, and laws prohibiting unfair and deceptive acts and trade practices. See also Item 1A. Risk
Factors – “Risks related to our business” for a discussion, among other things, of the extensive and costly governmental regulation we are subject to.
Pharmaceutical regulation
The process required by the FDA before a new drug product may be marketed in the U.S. generally involves the following:
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completion of or reference to extensive preclinical laboratory tests and preclinical animal studies, all performed in accordance with the FDA’s
Good Laboratory Practice, or GLP, regulations;
submission to the FDA of an investigational new drug (“IND”) application under which the holder may begin conducting human clinical trials,
provided that the FDA does not object; the IND must be updated annually;
performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug candidate for each proposed
indication; and
submission to the FDA of an NDA after completion of all pivotal clinical trials.
An IND application is a request for authorization from the FDA to administer an investigational drug product to humans.
Post-Approval Regulation
Mayne Pharma is required to comply with several post-approval requirements for our currently approved drug products. We no longer have responsibility
for any post-approval requirements. As the holder of an approved NDA, Mayne Pharma is required to report, among other things, certain adverse reactions
and production problems to the FDA, to provide updated safety and efficacy information, to adhere to product sampling and distribution requirements,
fulfill post-marketing study commitments, and to comply with requirements concerning advertising and promotional labeling for any of our drug products,
which include, among other things, standards for direct-to-consumer advertising, restrictions that prohibit promoting products for certain uses or in patient
populations that are not described in the product’s approved indications or that are not otherwise consistent with the approved, FDA-required label (known
as “off-label use”), limitations on industry-sponsored scientific and educational activities, and requirements for promotional activities involving the
internet. Although physicians may prescribe legally available products for off-label use if they deem such use to be appropriate in their professional
medical judgment, manufacturers may not market or promote such off-label uses.
Also, quality control and manufacturing procedures must continue to conform to cGMPs to ensure and preserve the long-term stability of the drug product.
cGMP regulations require among other things, quality control and quality assurance as well as the corresponding maintenance of records and
documentation and the obligation to investigate and correct any deviations from cGMP. Manufacturers and
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other entities involved in the manufacture and distribution of approved products are, depending on the nature and scope of their activities, subject to FDA
and certain state agency requirements relating to establishing and maintaining product quality. Changes to the manufacturing process are strictly regulated,
and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation
and correction of any deviations from cGMP and impose reporting and documentation requirements upon us and any third-party manufacturers that we
may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in production and quality control to maintain compliance
with cGMP and other aspects of regulatory compliance.
The FDA periodically inspects manufacturing facilities to assess compliance with cGMP, which imposes extensive procedural, substantive, and record
keeping requirements. For example, Catalent, the CMO that contracted for the commercial supply of the BIJUVA and IMVEXXY hormone therapy drug
products, was issued a Form FDA 483 in 2019 with respect to its softgel manufacturing plant. The observations and associated corrective actions related to
the BIJUVA product was identified in Catalent’s response to the Form FDA 483. The current inspection classification status of that Form FDA 483 is that
the response was adequate and Voluntary Action Indicated. Voluntary Action Indicated status indicates that objectionable conditions or practices were
found but the FDA is not prepared to take or recommend any administrative or regulatory action.
Our licensees rely, and expect to continue to rely, on third parties to produce commercial quantities of our licensed drugs. Future FDA and state inspections
may identify compliance issues at the facilities of the manufacturers of our licensed products that may disrupt production or distribution or require
substantial resources to correct. In addition, discovery of previously unknown problems (for example, through adverse events observed in the post-
marketing context, or in Phase 4 / post-marketing studies) with a product or the failure to comply with applicable requirements may result in restrictions on
a product, manufacturer, or holder of an approved NDA, including withdrawal or recall of the product from the market or other voluntary, FDA-initiated or
judicial action that could delay or prohibit further marketing. Newly discovered or developed safety or effectiveness data may require changes to a
product’s approved labeling, including the addition of new warnings and contraindications, and may require the implementation of other risk management
measures. Also, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change,
which could delay or prevent regulatory approval of our products.
Regulatory exclusivity
There are two types of NDAs available under Section 505(b) of the FDCA. Section 505(b)(1) of the FDCA provides a marketing approval pathway that is
known as the “traditional” or “full” NDA process. Sponsors use 505(b)(1) applications to obtain marketing approval of a new drug with active ingredients
that have not previously been approved by FDA. The data package necessary for approval of this new drug requires demonstration of safety and efficacy
based on adequate and well controlled human clinical trials conducted by or for the sponsor, without allowance for reference to third party data. In contrast,
Section 505(b)(2) of the FDCA provides an alternative NDA process for approving a new drug that contains the same active ingredient as a previously
approved product but allows sponsors to rely on clinical trials not conducted by or for the sponsor, as well as other clinical data or literature produced by
other parties. In addition, Section 505(j) of the FDCA provides for a significantly shortened regulatory pathway for approval of a “generic” version of a
new drug, by way of an Abbreviated New Drug Application or ANDA. Rather than demonstrating safety and effectiveness as required for an NDA, the
ANDA requires proof that the generic drug is the “same” as or “bioequivalent” to the new drug under the standard of “bioequivalence,” often using
pharmacokinetic, pharmacodynamic, and/or in vitro studies.
A Section 505(b) NDA applicant may be eligible for its own regulatory exclusivity period, such as a five-year or three-year exclusivity. The first approved
Section 505(b) NDA applicant for a drug containing an active ingredient that has not previously been approved in any other 505(b) NDA (a “new chemical
entity,” or NCE), is eligible for a five-year NCE exclusivity period starting on the date of the NDA approval. During this period, an Abbreviated New Drug
Application (“ANDA”) or 505(b)(2) application for a drug containing the protected active ingredient of the NCE product generally cannot be submitted to
FDA until the end of the five-year exclusivity period, except that such applications can be submitted at year four if the product is covered by an Orange
Book listed patent and the ANDA or 505(b)(2) NDA includes a Paragraph IV Certification challenging such patent. Additional exclusivities may also
apply.
The first approved Section 505(b) NDA applicant for a particular condition, or a supplemental NDA approval for a change to a marketed product, such as a
new extended-release formulation for a previously approved product, may be eligible for a three-year Hatch-Waxman exclusivity if one or more new
clinical studies, other than bioavailability or bioequivalence studies, was essential to the approval of the application and was conducted or sponsored by the
applicant. Should this occur, the FDA would be precluded from granting final approval to any ANDA or 505(b)(2) application for the same condition of
use or change to the marketed product that was granted exclusivity until after that three-year exclusivity period has run.
Additionally, any ANDA or 505(b)(2) NDA that references the 505(b) product must include one of several types of patent certifications. If the Section
505(b) NDA drug has one or more unexpired patents listed in the Orange Book, an ANDA or 505(b)(2) NDA must include either a “Paragraph III
Certification” or a “Paragraph IV Certification.” A Paragraph III Certification identifies the expiration date of
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the listed patent and requires FDA to withhold final approval until that patent has expired. A “Paragraph IV Certification” states that, in the applicant’s
opinion, the relevant patent is invalid, unenforceable, or would not be infringed by the commercial marketing of the proposed ANDA or 505(b)(2) NDA
product. The sponsor of a Paragraph IV ANDA or 505(b)(2) NDA must also provide the holder of the marketed product NDA, and the owner of the
challenged patent, with notification of the Paragraph IV filing along with a detailed statement of the reasons the applicant believes the patent is invalid,
unenforceable, or would not be infringed. If the patent owner brings an infringement action against the Paragraph IV applicant within 45 days of the
notification, a statutory stay is imposed which prevents FDA from granting final approval of the Paragraph IV application for 30 months from the date of
the Paragraph IV Notification. Generally, no more than one 30-month stay may be applied against any specific Paragraph IV ANDA or 505(b)(2) NDA. A
30-month stay can be terminated early, and the Paragraph IV application can be immediately approved, if the district court rules in favor of the Paragraph
IV applicant that the patent is invalid, unenforceable, or would not be infringed.
In February 2020, we received a Paragraph IV certification notice letter (the “IMVEXXY Notice Letter”) regarding an ANDA submitted to FDA by Teva
Pharmaceuticals USA, Inc. (“Teva”). See Legal Proceedings in Item 3 of this 2022 10-K Report for additional information.
In March 2020, we received a Paragraph IV certification notice letter (the “BIJUVA Notice Letter”) regarding an ANDA submitted to FDA by Amneal
Pharmaceuticals (“Amneal”). In April 2020, we filed a complaint for patent infringement against Amneal in the U.S. District Court for the District of New
Jersey arising from Amneal’s ANDA filing with FDA. In December 2021, we entered into a settlement agreement (the “Settlement Agreement”) with
Amneal Pharmaceuticals, Inc., Amneal Pharmaceuticals, LLC and Amneal Pharmaceuticals of New York LLC (collectively “Amneal”) to resolve the
litigation over our patents listed in FDA’s Orange Book that claim compositions and methods of BIJUVA (the “BIJUVA Patents”). Under the terms of
the Settlement Agreement, the Company granted Amneal a non-exclusive, non-transferable, royalty-free license to commercialize Amneal’s generic
formulation of BIJUVA in the U.S. commencing in May 2032 (180 days before the current expiration date in November 2032 for the last to expire of our
BIJUVA Patents), or earlier under certain circumstances customary for settlement agreements of this nature.
Other U.S. healthcare laws and compliance requirements
Certain federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights, among other topics, are and will be applicable to
our business. Our licensees and the licensed products are subject to regulation by both the federal government and the states in which we or our partners
conduct our business. The healthcare laws and regulations that may affect our licensees’ ability to operate and our ability to receive licensing revenues
include:
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the federal Anti-Kickback Statute, which prohibits, among other things, any person or entity from knowingly and willfully offering, soliciting,
receiving or providing any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to
induce either the referral of an individual or in return for the purchase, lease, or order of, or the arranging for, any good, facility item or service,
for which payment may be made, in whole or in part, under federal healthcare programs such as the Medicare and Medicaid programs;
federal civil and criminal false claims laws and civil monetary penalty laws, including, for example, the federal civil False Claims Act, which
impose criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals or entities for, among other things,
knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment
that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;
the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which created additional federal criminal statutes that
prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of
false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any
healthcare benefit program, regardless of the payer (e.g., public or private), knowingly and willfully embezzling or stealing from a healthcare
benefit program, willfully obstructing a criminal investigation of a healthcare offense and knowingly and willfully falsifying, concealing or
covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for,
healthcare benefits, items or services relating to healthcare matters;
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their implementing regulations, which
impose obligations on covered entities, including certain healthcare providers, health plans, and healthcare clearinghouses, as well as their
respective business associates that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered
entity, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;
the federal physician sunshine requirements under the ACA, which require certain manufacturers of drugs, devices, biologics and medical
supplies for which payment is available under Medicare or Medicaid to report annually to the Centers for Medicare & Medicaid Services
information related to payments and other transfers of value provided to physicians and teaching hospitals,
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and ownership and investment interests held by physicians and their immediate family members. In 2022, the Sunshine Act has been extended to
payments and transfers of value to physician assistants, nurse practitioners, and other mid-level practitioners (with reporting requirements going
into effect in 2022 for payments made in 2021). In addition, Section 6004 of the ACA requires annual reporting of information about drug
samples that manufacturers and authorized distributors provide to healthcare providers;
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federal and state laws requiring pricing transparency or limiting price increases, which are in existence today or are anticipated to be in existence
in the near future, may limit the ability to raise prices, require disclosure of price increases or require disclosure of the wholesale acquisition cost
of pharmaceutical products to governmental agencies and consumers; and
state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, which may apply to items or services
reimbursed by any third-party payer, including commercial insurers or even self-pay; state laws that require pharmaceutical companies to comply
with the pharmaceutical industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal
government, or otherwise restrict payments that may be provided to healthcare providers and other potential referral sources; state laws that
require drug manufacturers to report information related to payments and other transfers of value to healthcare providers or marketing
expenditures; state laws requiring a license, registration or permit to engage in manufacturing and distribution of prescription products or to
engage in the practice of pharmacy; and state laws governing the privacy and security of health information in certain circumstances, many of
which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
Pharmaceutical company interactions with HCPs, patient advocacy groups, and patients, including with respect to product and patient assistance programs
and other education and support initiatives, have been and continue to be, the subject of regulatory scrutiny for compliance with fraud and abuse laws.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of the business
activities of the entities with whom we do business could be subject to challenge under one or more of such laws. Efforts to ensure that our business
arrangements with third parties comply with applicable healthcare laws and regulations could be costly. If our past operations, including activities
conducted by our sales team or agents, are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may
be subject to significant civil, criminal, and administrative penalties, damages, fines, exclusion from third-party payer programs, such as Medicare and
Medicaid, and the curtailment or restructuring of our operations. If any of the HCPs, providers, or entities with whom we do business are found to not be in
compliance with applicable laws, they may be subject to criminal, civil, or administrative sanctions, including exclusion from government funded
healthcare programs.
Many aspects of these laws have not been definitively interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of
subjective interpretations that increases the risk of potential violations. In addition, these laws and their interpretations are subject to change. Any action
against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses, divert our management’s
attention from the operation of our business, and damage our reputation.
In addition to the fraud and abuse laws, we continue to monitor the potential impact of proposals to lower prescription drug costs at the federal and state
level. For example, in November 2021, the Biden Administration announced several prescription drug pricing proposals as part of the Build Back
Better legislation. In particular, the plan would allow for Medicare to negotiate prices for high-cost prescription drugs, including for both Part D and Part B
drugs, after the drugs have been on the market for a fixed number of years: 9 years for small molecule drugs and 12 years for biologics. Medicare will
negotiate up to 10 drugs per year during 2023, with the negotiated prices taking effect in 2025, increasing up to 20 drugs per year. Further, the plan imposes
a tax penalty if drug manufacturers increase their prices faster than inflation. Finally, the plan places a $2,000 per year cap on out-of-pocket drug costs
under Medicare Part D. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical
pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and
transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. We are unable to predict the
future course of federal or state healthcare legislation in the U.S. directed at broadening the availability of healthcare and containing or lowering the cost of
healthcare.
In addition, from time to time in the future, our licensees and the licensed products may become subject to additional laws or regulations administered by
the FDA, the FTC, U.S. Department of Health and Human Services (“HHS”), or by other federal, state, local, or foreign regulatory authorities, or the repeal
of laws or regulations that we generally consider favorable, such as DSHEA, or to more stringent interpretations of current laws or regulations. We are not
able to predict the nature of such future laws, regulations, repeals, or interpretations, and we cannot predict what effect additional governmental regulation,
if and when it occurs, would have on our business in the future. Such developments could, however, require reformulation of certain products to meet new
standards, recalls or discontinuance of certain products not able to be reformulated, additional record-keeping requirements, increased documentation of the
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properties of certain products, additional or different labeling, additional scientific substantiation, additional personnel, or other new requirements. Any
such developments could have a material adverse effect on our business.
Employees
In connection with the Company’s transformation into a pharmaceutical royalty company, the termination of our executive management team (except for
Mr. Marlan Walker, our former General Counsel and current Chief Executive Officer) and all other employees was completed by December 31, 2022.
Severance obligations for all employees other than executive officers were paid in full in the first quarter of 2023 and severance obligations for terminated
executive officers will be paid in accordance with their employment agreements and separation agreements as previously disclosed. As of December 31,
2022, we employed one full-time employee primarily engaged in an executive position. We have engaged external consultants, including certain former
members of our management team, who support our relationship with current partners and assist with certain financial, legal and regulatory matters and the
continued wind-down of our historical business operations.
None of our employees are covered by a collective bargaining agreement, and we are unaware of any union organizing efforts. We have never experienced
a major work stoppage, strike, or dispute. We consider our relationship with our employees to be good.
Available information
We are a Nevada corporation, and we maintain our principal executive offices at 951 Yamato Road, Suite 220, Boca Raton, Florida 33431. Our telephone
number is (561) 961-1900. We maintain a corporate website at www.therapeuticsmd.com as well as various product websites. The information contained
on our websites or that can be accessed through our websites is not incorporated by reference into this 2022 10-K Report or in any other report or document
we file with the SEC.
Item 1A. Risk factors
Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors, together with all of the information
included in this 2022 10-K Report and our other filings with the SEC, before you decide to purchase shares of our common stock. We believe the risks and
uncertainties described below are the most significant we face. Additional risks and uncertainties of which we are unaware, or that we currently deem
immaterial, also may become important factors that affect us. If any of the following risks occur, our business, financial condition, or results of operations
could be materially and adversely affected. In that case, the trading price of our common stock could decline, and you may lose all or part of your
investment.
Our business is subject to a number of risks and uncertainties. The following is a summary of the principal risk factors described in this section:
• We currently derive all of our revenues from royalties related to sales of our products, and the failure of our licensees to maintain or increase
sales of these products could have an adverse effect on our business, financial condition, results of operations, and growth prospects.
• We have incurred net losses in the past and there are no assurances we will be able to maintain or increase profitability in the future.
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There is substantial doubt about our ability to continue as a going concern.
• We could be affected by transitions in our senior management team.
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The dependence upon third parties for the manufacture and supply of our women’s healthcare products may cause delays in, or prevent our
licensees from, successfully commercializing and marketing our products.
The commercial success of our products will depend upon gaining and retaining significant market acceptance of these products among
physicians and payers.
Coverage and reimbursement may not be available for our products, which could make it difficult for our licensees to sell our products profitably.
Time and costs associated with winding down our general and administrative, commercial, and research and development activities may be
significant.
Our future success depends on our ability to attract and retain qualified personnel.
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Our financial condition and results of operations for 2021 and 2022 were, and our financial condition and results of operations for 2023 and
beyond may be, adversely affected by the ongoing COVID-19 (coronavirus) pandemic and any future pandemics or epidemics.
Licensing of intellectual property involves complex legal, business and scientific issues, and disputes could jeopardize our rights under such
agreements.
Our products and our licensees are subject to extensive government regulation.
• We must rely on Mayne Pharma to prosecute, file lawsuits or take other actions to protect or enforce our intellectual property and there can be no
assurance they will be take such actions or be successful.
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If our efforts to protect the proprietary nature of the intellectual property covering our hormone therapy pharmaceutical products and other
products are not adequate, we may not be able to compete effectively in our market.
Our products face significant competition from branded and generic products, and our operating results will suffer if we fail to compete
effectively.
Our success is tied to the distribution channels of our licensees.
Any failure of our licensees to adequately maintain a sales force will impede our growth.
Our failure to maintain compliance with Nasdaq’s continued listing requirements could result in the delisting of our common stock.
Risks related to our business
We currently derive all revenue from royalties related to sales of our women’s healthcare products, and the failure of our licensees to maintain or
increase sales of these products could have an adverse effect on our business, financial condition, results of operations, and growth prospects.
Following the Mayne Transaction, we derive all revenue from royalties related to sales of our women’s healthcare products, including patient-controlled,
long-acting contraceptive, hormone therapy pharmaceutical products, prenatal and women’s multi-vitamins, and iron supplements. We cannot assure you
that our licensees will be able to sustain such sales or that such sales will grow. In addition to other risks described herein, the ability of our licensees to
maintain or increase existing product sales is subject to several risks and uncertainties, including the following:
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the presence of new or existing competing products, including non-authorized generic copies of our products;
supply or distribution problems arising with any of their manufacturing and distribution partners;
changed or increased regulatory restrictions or regulatory actions by the FDA;
changes in healthcare laws and policy, including changes in requirements for drug pricing, rebates, reimbursement, and coverage by federal
healthcare programs and commercial payers;
the impact or efficacy of any price increases our licensees may implement in the future;
changes to the licensed products’ labels and labeling, including new safety warnings or changes to boxed warnings, that further restrict how our
licensees market and sell our products; and
acceptance of our products as safe and effective by physicians and patients.
If revenue from royalties related to sales of our products does not increase, we may be required to seek to raise additional funds, which could have an
adverse effect on our business, financial condition, results of operations, and growth prospects.
We have incurred net losses in the past and there are no assurances we will be able to maintain or increase profitability in the future.
In 2022, we recognized a net income of $112.0 million due to the net proceeds from the Mayne Pharma Transaction and vitaCare divestiture exceeding our
costs and expenses. We utilized a significant portion of net proceeds to repay borrowings and redeem our preferred stock. In the past, we have incurred
recurring net losses, including net losses of $172.4 million and $183.5 million for 2021 and 2020, respectively. As of December 31, 2022, our stockholders’
equity was $35.1 million. We have funded our operations to date primarily from public and private sales of equity and private sales of debt securities. We
may incur substantial additional losses over the next few years because of costs associated with the wind down of our historical business as well as the
ongoing costs of being a public company. As a result, we may not maintain or increase profitability. If we continue to incur substantial losses and are
unable to secure additional financing, we could be forced to discontinue or curtail our business operations, merge, consolidate, or combine with a company
with greater financial resources in a transaction that might be unfavorable to us.
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There is substantial doubt about our ability to continue as a going concern.
Our current liquidity position raises substantial doubt about our ability to continue as a going concern and Grant Thornton LLP, our independent registered
public accounting firm for the fiscal year ended December 31, 2022, has included an explanatory paragraph in their opinion that accompanies our audited
consolidated financial statements as of and for the year ended December 31, 2022, indicating such. Our ability to continue as a going concern may depend
on our ability to obtain additional capital as well as our ability to minimize operational expenses, including any potential net working capital adjustments
relating to the Mayne Transaction. As substantial doubt about our ability to continue as a going concern exists, our ability to finance our operations through
the sale and issuance of debt or equity securities or through bank or other financing could be impaired. Our ability to obtain financing on reasonable terms
is subject to factors beyond the Company’s control, including general economic, political, and financial market conditions. The capital markets have in the
past experienced, are currently experiencing, and may in the future experience, periods of upheaval that could impact the availability and cost of equity and
debt financing and there can be no assurance that such financing will be available on terms commercially acceptable to the Company, or at all. If we are
unable to improve our liquidity position, we may not be able to continue as a going concern.
We have experienced significant turnover in our top executives, and our business could be adversely affected by these and other transitions in our
senior management team.
We have experienced turnover in our top executives and the replacement of these positions with new officers. In December 2022, following the Mayne
Transaction, all of our top executives, except for our former General Counsel, were terminated, and our former General Counsel was appointed as Chief
Executive Officer.
Management transition is often difficult and inherently causes some loss of institutional knowledge, which could negatively affect our results of operations
and financial condition. Our ability to execute our business strategies may be adversely affected by the uncertainty associated with these transitions and the
time and attention of the board and management dedicated to management transitions could disrupt our business. Further, we cannot guarantee that we will
not face similar turnover in the future. Although we generally enter into employment agreements with our executives, our executive officers may terminate
their employment relationship with us at any time, and we cannot ensure that we will be able to retain the services of any of them. Our senior
management’s knowledge of our business and industry could be difficult to replace, and management turnover could negatively affect our business, growth,
financial conditions, results of operations and cash flows.
Our dependence upon third parties for the manufacture and supply of our existing women’s healthcare products may cause delays in, or prevent our
licensees from, successfully commercializing and marketing our products.
We do not currently have, nor do we currently plan to build or acquire, the infrastructure or capability to internally manufacture our existing women’s
healthcare products, IMVEXXY, BIJUVA, and ANNOVERA. We have relied, and will continue to rely, on third parties to manufacture these products in
accordance with specifications and in compliance with applicable regulatory requirements, including the FDA’s current Good Manufacturing Practice
(“cGMPs”). We entered into long-term supply agreements with Catalent Pharma Solutions, LLC for the commercial supply of IMVEXXY and BIJUVA
which have been assigned to Mayne Pharma. We also entered into a long-term supply contract with QPharma AB, now known as Sever Pharma Solutions,
for ANNOVERA, which contract was also assigned to Mayne Pharma. We depended on Lang, a full-service, private label and corporate brand
manufacturer, to supply our vitaMedMD and BocaGreen products. We do not have long-term contracts for the commercial supply of our vitaMedMD and
BocaGreen products.
Regulatory requirements could pose barriers to the manufacture of our women’s healthcare products. All of our existing products are manufactured by
third-party contract manufacturing organizations (“CMOs”). These CMOs are required to manufacture our products in compliance with the applicable
regulatory requirements. The CMO that manufactures IMVEXXY and BIJUVA has previously been inspected by the FDA and received Form 483
observations with respect to its softgel manufacturing plant that is used for the manufacture of the commercial supply of IMVEXXY and BIJUVA. The
CMO that manufactures ANNOVERA has previously been inspected by the FDA and received Form 483 observations with respect to its facility that is
used for the commercial supply of ANNOVERA. We believe that corrective actions to address the compliance issues identified in the referenced Forms
483 have been implemented by the CMOs; however, the FDA has not yet reinspected the CMOs to confirm that the corrective actions were implemented as
described to the agency in the respective Form 483 responses.
If the manufacturers of our product cannot successfully manufacture material that conforms to specifications and the strict regulatory requirements of the
FDA and any applicable foreign regulatory authority, regulatory submissions related to our products may be delayed or disapproved, and our marketed
products may be affected. If these facilities are not in compliance for the manufacture of our products, our licensees may need to find alternative
manufacturing facilities, which would result in substantial disruptions of sales of our products. In addition, manufacturers of our products will be subject to
ongoing periodic unannounced inspections by the FDA and corresponding state and foreign agencies for compliance with cGMPs and similar regulatory
requirements. After generally suspending in-person inspections due to COVID-19, the FDA announced it would resume domestic facility inspections,
although the agency continues its
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general suspension of foreign facility inspections (although “mission-critical” inspections may be considered on a case-by-case basis). Because of the
global pandemic, decision-making around facility inspections by the FDA (including preapproval inspections) continues to evolve. Failure by any of the
manufacturers of our products to comply with applicable cGMP regulations or other applicable requirements could result in sanctions being imposed on us
or our licensees, including fines, injunctions, civil penalties, violation letters, delays, suspensions or withdrawals of approvals, operating restrictions,
interruptions in supply, recalls, withdrawals, issuance of safety alerts, and criminal prosecutions, any of which could have an adverse impact on our
business, financial condition, results of operations, and prospects. Our licensees may be able to enter into long-term agreements with alternative
manufacturers, or do so on commercially reasonable terms, and if they do enter into agreements with alternative manufacturers, those alternative
manufacturers may not be approved by the FDA, any of which could have an adverse impact on our business. We also could experience manufacturing
delays if our CMOs give greater priority to the supply of other products over our products to the delay or other detriment of our products, or otherwise do
not satisfactorily perform according to the terms of their agreements. Finally, we could experience manufacturing delays or interruptions because of the
ongoing COVID-19 pandemic.
We have also experienced a greater than expected amount of raw materials for ANNOVERA being out of specification. If any of the third-party CMOs of
our products or any suppliers of raw materials or API experience further difficulties, do not comply with the terms of their agreements, or do not devote
sufficient time, energy, and care to providing our manufacturing needs, or if any manufacturing specification modifications that we or Mayne Pharma have
requested are not approved by the FDA, we could experience additional interruptions in the supply of our products, which may have a material adverse
impact on our revenue, results of operations and financial position.
Our licensees also do not have long-term contracts for the supply of all the API used in BIJUVA, and ANNOVERA. If any supplier of the API or other
products used in our products experiences any significant difficulties in its respective manufacturing processes, does not comply with the terms of their
agreement between, or does not devote sufficient time, energy, and care to providing our manufacturing needs, we could experience significant
interruptions in the supply of our products, which could impair our licensee’s ability to supply our products at the levels required for commercialization and
prevent or delay their successful commercialization.
The commercial success of our existing products will depend upon gaining and retaining significant market acceptance of these products among
physicians and payers.
Physicians may not prescribe our products, which would prevent us from generating revenue or becoming profitable. Market acceptance of our products,
including our hormone therapy pharmaceutical products and patient-controlled, long-acting contraceptive, by physicians, patients, and payers, will depend
on a number of factors, many of which are beyond our control, including the following:
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the clinical indications for which our hormone therapy pharmaceutical products and patient-controlled, long-acting contraceptive are approved;
acceptance by physicians and payers of each product as a safe and effective treatment;
the cost of treatment in relation to alternative treatments, including numerous generic pharmaceutical products;
the relative convenience and ease of administration of our products in the treatment of the symptoms for which they are intended;
the availability and efficacy of competitive drugs and devices;
the effectiveness of our licensee’s sales force and marketing efforts;
the extent to which the product is approved for inclusion on formularies of hospitals and managed care organizations, including any access
barriers such as prior authorizations and step-edits;
the potential inclusion of a new category for one-year multi-cycle hormonal birth control methods in the FDA Birth Control Guide, which payers
may rely upon as guidance for coverage;
the availability of coverage and adequate reimbursement by third parties, such as insurance companies and other healthcare payers, or by
government healthcare programs, including Medicare and Medicaid;
limitations or warnings contained in a product’s FDA-approved labeling; and
prevalence and severity of adverse side effects.
Even if the medical community accepts that our products are safe and effective for their approved indications, physicians may not immediately be receptive
to their use or may be slow to adopt our products as an accepted treatment for the symptoms for which they are intended. Labeling approved by the FDA
may not permit our licensees to promote our products as being superior to competing products, because the FDA applies a heightened level of scrutiny to
comparative claims when applying its statutory standards for advertising and promotion, including with regard to its requirements for supporting data and
that promotional labeling be truthful and not misleading, and there is potential for differing interpretations of whether certain communications are
consistent with a product’s
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FDA-required labeling. If our products do not achieve an adequate level of acceptance by physicians and payers, we may not generate sufficient or any
revenue from royalties related to sales of these products. In addition, the efforts of our licensees to educate the medical community and third-party payers
on the benefits of our products may require significant resources and may never be successful.
Coverage and reimbursement may not be available for our products, which could make it difficult for our licensees to sell our products profitably.
Market acceptance and sales of our products, including IMVEXXY, BIJUVA, and ANNOVERA, and our prescription vitamins, will depend on coverage
and reimbursement policies and may be affected by healthcare reform measures. Government healthcare programs and third-party payers decide which
prescription pharmaceutical products they will pay for and establish reimbursement levels. Payers generally do not cover OTC products, and coverage for
prescription vitamins and dietary supplements varies. Many private third-party payers, such as managed care plans, manage access to pharmaceutical
products’ coverage partly to control costs to their plans, and may use drug formularies and medical policies to limit their exposure. Factors considered by
these payers include product efficacy, cost effectiveness, and safety, as well as the availability of other treatments including generic prescription drugs. The
ability to commercialize IMVEXXY, BIJUVA, and ANNOVERA successfully depends on coverage and reimbursement levels set by government
healthcare programs and third-party private payers. Obtaining and maintaining favorable reimbursement can be a time-consuming and expensive process,
and our licensees may not be able to negotiate or continue to negotiate reimbursement or pricing terms for our products with payers at levels that are
profitable to them, or at all.
In both the U.S. and some foreign jurisdictions, there have been several legislative and regulatory proposals to change the healthcare system in ways that
could affect our licensees’ ability to sell our products profitably. Payment or reimbursement of prescription drugs by Medicaid or Medicare requires
manufacturers of the drugs to submit pricing information to CMS. The Medicaid Drug Rebate statute requires manufacturers to calculate and report price
points, which are used to determine Medicaid rebate payments shared between the states and the federal government and Medicaid payment rates for the
drug. For drugs paid under Medicare Part B, manufacturers must also calculate and report their Average Sales Price (“ASP”), which is used to determine
the Medicare Part B payment rate for the drug. The federal government sets general guidelines for Medicaid and requires rebates on outpatient drugs. Each
state creates specific regulations that govern its individual program, including supplemental rebate programs that prioritize coverage for drugs on the state
Preferred Drug List. In the United States, private health insurers and other third-party payors often provide reimbursement for products and services based
on the level at which the government provides reimbursement through the Medicare or Medicaid programs for such products and services. In addition,
government programs like Medicaid include substantial penalties for increasing commercial prices over the rate of inflation which can affect realization
and return on investment. The cost of pharmaceuticals continues to generate substantial governmental and third-party payor interest and states have begun
to take action to increase transparency in drug pricing through mandatory reporting requirements. We expect that the pharmaceutical industry will
experience pricing pressures due to the trend toward managed healthcare, the increasing influence of managed care organizations, and additional legislative
proposals. Our results of operations could be adversely affected by current and future healthcare reforms. While we cannot predict whether any proposed
cost-containment measures will be adopted or otherwise implemented in the future, any such cost-reduction initiatives could decrease the coverage and
price that our licensees receive for our products from Medicare, if any, including IMVEXXY, BIJUVA, and ANNOVERA, and could significantly harm our
business. It was historically unclear whether products approved to treat moderate-to-severe dyspareunia, a symptom of vulvar and vaginal atrophy due to
menopause, such as IMVEXXY, were excluded under Medicare Part D, which resulted in limited Medicare coverage for such products. A clarification
issued by CMS in May 2018 indicated that drugs, such as IMVEXXY, that are approved for the treatment of moderate-to-severe dyspareunia (as well as
drugs approved for the treatment of moderate-to-severe symptoms of vulvar and vaginal atrophy associated with menopause) are not excluded from
Medicare Part D coverage. CMS’s clarification, however, is no guarantee that such coverage will be obtained or maintained for IMVEXXY and obtaining
Medicare or other government healthcare program reimbursement for any new pharmaceutical products may take up to several years following FDA
approval.
The ability of our licensees to commercialize ANNOVERA depends on coverage and reimbursement levels set by government healthcare programs and
third-party private payers. The ACA mandates that private health plans provide coverage for women’s preventative services, without imposing patient cost-
sharing requirements, as recommended by HRSA. HRSA Guidelines require private health plans to cover, with no patient out-of-pocket costs, at least one
form of treatment (e.g., one product) in each of the methods (e.g., classes of contraception) identified by the FDA for women in its Birth Control Guide. To
the extent ANNOVERA is deemed a new class of contraception by the FDA, such a designation could allow for coverage by private health plans with no
patient out-of-pocket costs. However, there is no guarantee that such coverage will be obtained, and it is possible that other FDA-approved products could
also be included in this new class. For instance, the FDA may find that ANNOVERA fits into the vaginal contraceptive ring class, which it would share
with NuvaRing and its generic equivalents, and potentially others. Pursuant to HRSA Guidelines, private payers need only provide no-cost coverage for
one product in each class and may use reasonable medical management to determine whether and to what extent to cover other products in the class.
Private payers may interpret the statute and its associated rules in ways in which they decline to cover ANNOVERA, even if we believe ANNOVERA
should be covered without cost sharing under the ACA framework. To the extent ANNOVERA is not the only FDA-approved product in a designated class
of contraception, private payers may choose not to cover our one-year vaginal contraceptive system or may require patient cost-sharing obligations. Some
states have amended and
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expanded requirements to match the standard set in the ACA mandate, specifically requiring coverage for the full range of contraceptive methods,
counseling and services used by women and eliminating out-of-pocket costs and limiting other health plan restrictions. The prior administration
implemented policies that permit certain employers to claim a religious or moral objection to the birth control coverage mandate under the ACA. In July
2020, the Supreme Court held in Little Sisters of the Poor Saints Peter and Paul Home v. Pennsylvania, et. al. that health plans sponsored by certain
exempt religious employers and non-profit religious organizations that certify they have religious objections do not need to offer contraception coverage
through their health benefit plans. This exemption could be overturned by the Biden administration through an Executive Order or other policy or
regulatory action. Further, despite our progress with commercial payers, there is no guarantee that our licensees will be able to retain our agreements or
obtain new agreements or that they will be able to negotiate favorable reimbursement or pricing terms for our products in the future. Healthcare reform
implementation, additional legislation or regulations, and other changes in government policy or regulation may affect our licensees’ reimbursement or
impose additional coverage limitations and/or cost-sharing obligations on patients, any of which could have an adverse effect on coverage and
reimbursement of our products, and our business, financial condition, results of operations, and prospects could be harmed.
We expect that our licensees will experience pricing pressures in connection with the sale of our products generally due to the trend toward managed
healthcare, the increasing influence of health maintenance organizations, the scrutiny of pharmaceutical pricing, the ongoing debates on reducing
government spending and additional legislative proposals. We cannot predict whether new proposals will be made or adopted, when they may be adopted,
or what impact they may have on us if they are adopted.
The availability of generic products at lower prices than branded products may substantially reduce the likelihood of reimbursement for branded products,
such as IMVEXXY, BIJUVA, and ANNOVERA.
If our licensees fail to successfully secure and maintain adequate coverage and reimbursement for our products or are significantly delayed in doing so,
they could have difficulty achieving market acceptance of our products and our business, financial condition, results of operations, and prospects could be
harmed.
Time and costs associated with winding down our general and administrative, commercial, and research and development activities may be significant.
There are significant costs associated with winding down our normal historic operations, such as separation of employees, termination of contracts and
engagement of external consultants, all of which have and may in the future reduce our cash resources and take up large portions of our employees’ and
consultants’ time.
Our future success depends on our ability to attract and retain qualified personnel.
We have one employee and use a limited number of external consultants for the operation of our company, any of whom may terminate their consultancy
with us at any time. We may not be able to attract and retain consultants on acceptable terms given the competition for similar personnel. Some of our
consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other
entities that may limit their availability to us. We do not maintain “key person” insurance. If we are unable to continue to use our current consultants, or if
we are unable to recruit new consultants, then our ability to operate our business will be negatively impacted and it could interfere with our ability to
receive any potential royalties.
Our financial condition and results of operations for 2021 and 2022 were, and our financial condition and results of operations for 2023 and beyond
may be, adversely affected by the ongoing COVID-19 pandemic and any future pandemics or epidemics.
Our business has been, and we anticipate that it will continue to be, impacted by the COVID-19 pandemic and any future pandemics or epidemics. The
severity of the impact of the COVID-19 pandemic on our business and operating results will depend on future developments that are highly uncertain and
cannot be accurately predicted.
Stay at home, quarantine, and social distancing orders and closures and restrictions on travel negatively affected the ability of our sales force to access
healthcare providers to promote our products and the ability of patients to visit their healthcare professionals for non-emergent matters. The sales force of
our licensees may continue to use a hybrid model of office visits when necessary and digital engagement tools and tactics and virtual detailing, which may
be less effective than their ordinary course sales and marketing programs.
Our future results of operations and liquidity could be adversely affected by extended billing and collection cycles at our company, our licensees, or
otherwise; delays in payments of outstanding receivable amounts beyond normal payment terms, including royalty payments; supply chain disruptions; and
uncertain demand.
Disruptions have occurred and may occur in the future that affect our licensees’ ability to obtain supplies or other components for our products,
manufacture additional products, or deliver inventory in a timely manner. This would result in lost sales (and royalties) and damage to our reputation.
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Our business may also be affected by negative impacts of the COVID-19 pandemic and any future pandemic or epidemic on capital markets and economies
worldwide, and it is possible that the pandemic could cause a local and/or global economic recession. While policymakers globally have responded with
fiscal policy actions to support the healthcare industry and economy as a whole, the magnitude and overall effectiveness of these actions remains uncertain.
We may also experience other unknown impacts from COVID-19 or any future pandemics or epidemics that cannot be predicted. Accordingly, disruptions
to our business as a result of COVID-19 and other pandemics or epidemics could continue to result in an adverse effect on our business, results of
operations, financial condition and prospects in the near-term and beyond 2023.
Unfavorable global economic conditions could harm our business, financial condition or results of operations.
Our results of operations could be harmed by general conditions in the global economy and in the global financial markets. A severe or prolonged
economic downturn, including the impact of increased interest rates and inflation (such as the recent rise in inflation in the United States), could result in a
variety of risks to our business, including our ability to raise additional capital when needed on acceptable terms, if at all. The foregoing could harm our
business and we cannot anticipate all of the ways in which unfavorable economic conditions and financial market conditions could harm our business.
We maintain our cash at financial institutions, often in balances that exceed federally insured limits.
The majority of our cash is held in accounts at U.S. banking institutions that we believe are of high quality. Cash held in depository accounts may exceed
the $250,000 Federal Deposit Insurance Corporation (“FDIC”) insurance limits. If such banking institutions were to fail, such as Silicon Valley Bank when
the FDIC took control in March 2023, we could lose all or a portion of those amounts held in excess of such insurance limitations. In the future, our access
to our cash in amounts adequate to finance our operations could be significantly impaired by the financial institutions with which we have arrangements
directly facing liquidity constraints or failures. Any material loss that we may experience in the future could have a material adverse effect on our financial
condition and could materially impact our ability to pay our operational expenses or make other payments.
Our products and our licensees are subject to extensive and costly government regulation.
Our products are subject to extensive and rigorous domestic government regulation, including regulation by the FDA, the Centers for Medicare & Medicaid
Services (“CMS”), other divisions of the U.S. Department of Health and Human Services, including its Office of Inspector General (“OIG”), the U.S.
Department of Justice (“DOJ”), the Departments of Defense and Veterans Affairs, to the extent our products are paid for directly or indirectly by those
departments, state and local governments, and their respective foreign equivalents. The FDA regulates dietary supplements, cosmetics, and drugs under
different regulatory schemes. For example, the FDA regulates the processing, formulation, safety, manufacturing, packaging, labeling, and distribution of
dietary supplements and cosmetics under its dietary supplement and cosmetic authority, respectively. The FDA also regulates the research, development,
pre-clinical and clinical testing, manufacture, safety, effectiveness, record keeping, reporting, labeling, storage, approval, advertising, promotion, sale,
distribution, import, and export of pharmaceutical products under various regulatory provisions. If any of our products are marketed abroad, they will also
be subject to extensive regulation by foreign governments, whether or not we have obtained FDA approval for a given product and its uses. Such foreign
regulation may be equally or more demanding than corresponding U.S. regulation.
We and our licensees are also subject to additional healthcare regulation and enforcement by the federal government and the states in which we conduct our
business. Applicable federal and state healthcare laws and regulations include the following:
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The federal Anti-Kickback Statute (“AKS”) is a criminal statute that prohibits anyone from knowingly and willfully soliciting, offering,
receiving, or providing remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of,
or arrangement for the referral of, an individual for, or the purchase, lease, order, or recommendation of, any good or service reimbursable, in whole or in
part, by government healthcare programs, such as Medicare, Medicaid, TRICARE, and the State Children’s Health Insurance Program. This statute has
been interpreted broadly to apply to, among other things, arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers
and formulary managers on the other hand. The term “remuneration” has been broadly interpreted to include anything of value, including, for example,
kickbacks, bribes, gifts, discounts, rebates, waivers of payment, ownership interest and providing anything at less than its fair market value. There are
several statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution under the AKS, however, the exceptions and
safe harbors are drawn narrowly, and practices that do not fit squarely within an exception or safe harbor may be subject to scrutiny. The safe harbors are
subject to change through legislative and regulatory action, and we may decide to adjust our business practices or be subject to heightened scrutiny as a
result. The failure to meet the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal
under the AKS. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all its facts and
circumstances. Our practices may not meet the criteria for safe harbor protection from AKS liability in all cases. Liability under the AKS may be
established without proving actual knowledge of the statute or specific intent to violate it. In addition, federal law provides that claims for items or services
resulting from a violation of the AKS constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act (“FCA”), described
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below. Violations of the AKS carry potentially significant civil, criminal, and administrative penalties, including imprisonment, fines, civil monetary
penalties, and exclusion from participation in government healthcare programs. The compliance and enforcement landscape, and related risk, is informed
by government precedent, Advisory Opinions, and OIG Special Fraud Alerts. For example, on November 16, 2020, the OIG published a Special Fraud
Alert addressing manufacturer speaker programs, signaling that such programs will be subject to an even higher degree of government scrutiny under the
AKS.
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The FCA prohibits entities and individuals from knowing and willfully (or with reckless disregard or deliberate ignorance) presenting or causing
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to be presented false or fraudulent claims or the making of false statements material to a claim for payment by Medicare, Medicaid, and other government
healthcare programs, or improperly retaining known overpayments from government healthcare programs;
Violations of the FCA carry penalties of up to three times the actual damages sustained by the government, plus mandatory civil penalties for
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each separate false claim. Suits filed under the federal FCA can be brought directly by the government or be brought by an individual (known as a “relator”
or, more commonly, as a “whistleblower”) on behalf of the government, known as “qui tam” actions. Relators bringing qui tam actions under the FCA
receive a share of any amounts paid by the entity to the government whether through judgment or settlement. Qui tam actions have increased significantly
in recent years, causing greater numbers of entities, including manufacturers, to have to defend a false claim action, even before the validity of the claim is
established and even if the government decides not to intervene in the lawsuit. Companies may decide to agree to large settlements with the government
and/or whistleblowers to avoid the cost and negative publicity associated with litigation. Criminal prosecution is possible for knowingly making or
presenting a false or fictitious or fraudulent claim to the federal government. In addition to the FCA, many states have enacted their own false claims act
statutes that address similar conduct and that may apply to claims for items or services submitted to any payor source, not just government-funded
programs.
Although we do not submit claims directly to payers, manufacturers can be held liable under the FCA if they are deemed to “cause” the
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submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers, promoting a product off-label,
marketing products of sub-standard quality, or, as noted above, paying a kickback that results in a claim for items or services. In addition, our activities
relating to the reporting of wholesaler or estimated retail prices for our products, the reporting of prices used to calculate Medicaid rebate information and
other information affecting federal, state, and third-party reimbursement for our products, and the sale and marketing of our products, are subject to
scrutiny under the FCA. For example, several pharmaceutical and other healthcare companies have faced enforcement actions under these laws for
allegedly inflating drug prices they report to pricing services, which in turn were used by the government to set Medicare and Medicaid reimbursement
rates, and for allegedly providing free product to customers with the expectation that the customers would bill government healthcare programs for the
product.
The Civil Monetary Penalties Law (“CMPL”) imposes substantial civil monetary penalties against an entity that engages in prohibited
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activities, including but not limited to violations of the AKS, knowing submission of a false or fraudulent claim, employment of an excluded
individual and the provision or offer of anything of value to a Medicare or Medicaid beneficiary that the transferring party knows or should know
is likely to influence beneficiary selection of a particular provider or supplier for the provision of items or service for which payment may be
made in whole or in part by Medicare or Medicaid;
“Remuneration” is defined under the CMPL as any transfer of items or services for free or for less than fair market value. There are certain
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exceptions to the definition of remuneration for offerings that meet the Financial Need, Preventative Care, or Promoting Access to Care exceptions.
Sanctions for violations of the CMPL include civil monetary penalties and administrative penalties up to and including exclusion from participation in
government health care programs.
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The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) imposes criminal and civil liability for knowingly and willfully
executing or attempting to execute a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any
money or property owned by, or under the control or custody of, any healthcare benefit program, including third-party private payers, knowingly
and willfully falsifying, concealing, or covering up by trick, scheme, or device, a material fact or making any materially false, fictitious, or
fraudulent statements in connection with the delivery of or payment for healthcare benefits, items, or services. Similar to the AKS, a person or
entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation.
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”), and their respective
implementing regulations, including the Final Omnibus Rule published on January 25, 2013, also imposes obligations, including mandatory
contractual terms, on certain covered entities and their business associates with respect to safeguarding the privacy, security, and transmission of
individually identifiable health information. HITECH also gave state attorneys general new authority to file civil actions for damages or
injunctions in federal court to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions.
The Department of Health and Human Services Office of Civil Rights (the “OCR”) has increased its focus on compliance and continues to train
state attorneys general for enforcement purposes. State laws may also govern the privacy and security of health information or other personal
information in certain circumstances.
According to the FTC failing to take appropriate steps to keep consumers’ personal information secure constitutes unfair acts or deceptive
practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act. The FTC expects a company’s data security
measures to be reasonable and appropriate considering the sensitivity and volume of consumer information it holds, the size and complexity of its
business, and the cost of available tools to improve security and reduce vulnerabilities. Medical data is considered sensitive data that merits
stronger safeguards.
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Federal laws require pharmaceutical manufacturers to report certain calculated product prices to the government or provide certain discounts or
rebates to government authorities or private entities, often as a condition of reimbursement under the Medicaid Program or other government
healthcare programs.
The Physician Payments Sunshine Act imposes annual reporting requirements to CMS for certain manufacturers of drugs, devices, biologics, and
medical supplies for which payment is available under certain government healthcare programs (with certain exceptions) of information related
to certain payments or other “transfers of value” made or provided to HCPs and teaching hospitals, or to other entities or individuals at the
request of, or designated on behalf of, the HCPs and teaching hospitals. Numerous state laws may also require disclosure of transfers of value to
HCPs, pharmaceutical pricing information and marketing expenditures.
Analogous state laws and regulations, such as state anti-kickback and false claims laws, and other state laws addressing the pharmaceutical and
healthcare industries, may apply to interactions between pharmaceutical manufacturers and healthcare providers, sales or marketing
arrangements, and claims involving healthcare items or services reimbursed by commercial third-party payers, including private healthcare
insurers and health maintenance organizations, and in some cases that may apply regardless of payer, i.e., payment is made by a private insurer or
even a self-paying patient; further, some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary
compliance program guidelines (the PhRMA Code) and the relevant compliance guidance promulgated by the federal government (HHS-OIG) in
addition to requiring drug manufacturers to report pricing and marketing information, including, among other things, information related to gifts,
payments, or other remuneration to physicians and other healthcare providers or marketing expenditures, state and local laws that require the
registration of pharmaceutical sales representatives, and state laws governing the privacy and security of health information and the use of
prescriber-identifiable data in certain circumstances, many of which differ from each other in significant ways and may not have the same effect,
thus complicating compliance efforts. For example, California enacted legislation – the California Consumer Privacy Act (“CCPA”) – which
went into effect January 1, 2020 and, among other things, creates new data privacy obligations for covered companies and provides new privacy
rights to California residents, including the right to opt out of certain disclosures of their information, and creates a private right of action with
statutory damages for non compliance, including for certain data breaches, thereby potentially increasing risks associated with a data breach. The
CCPA was recently amended by the California Privacy Rights Act, expanding certain consumer rights such as the right to know. It remains
unclear what, if any, additional modifications will be made to these laws by the California legislature or through ballot referendum, how these
laws will be interpreted and enforced. The potential effects of the CCPA and CPRA are significant and may cause us to incur substantial costs
and expenses to comply.
Many aspects of these laws have not been definitively interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of
subjective interpretations that increases the risk of potential violations. In addition, these laws and their interpretations are subject to change. Many state
laws differ from each other in significant ways and often are not preempted by federal laws, thus complicating compliance efforts. Moreover, the number
and complexity of both federal and state laws continues to increase, and additional governmental resources are being used to enforce these laws and to
prosecute companies and individuals who are believed to be violating them. We anticipate that government scrutiny of pharmaceutical sales and marketing
practices will continue for the foreseeable future and subject us to the risk of government investigations and enforcement actions. For example, federal
enforcement agencies recently have shown interest in pharmaceutical companies’ product and patient assistance programs, including manufacturer
reimbursement support services and relationships with specialty pharmacies. Some of these investigations have resulted in significant civil and criminal
settlements.
Efforts to ensure that our operations, including our business arrangements with third parties including our licensees, comply with applicable healthcare laws
and regulations could be costly. Although effective compliance programs can help mitigate the risk of investigation, regulatory and enforcement actions,
and prosecution for violations of these laws, the risks cannot be entirely eliminated. Moreover, achieving and sustaining compliance with applicable federal
and state fraud, privacy, security, and reporting laws may prove costly. We cannot guarantee that a government agency will agree with our interpretations,
and it is possible that an enforcement authority may find that one or more of our business practices may not comply. If our past or present operations,
including activities conducted by our sales team or agents, are found to be in violation of any of these laws or any other governmental regulations that may
apply to us, we may be subject to significant civil, criminal, and administrative penalties, damages, fines, exclusion from government healthcare programs,
and the curtailment or restructuring of our operations. Any action against us for violation of these laws, even if we successfully defend against it, could
cause us to incur significant legal expenses, divert our management’s attention from the operation of our business, and damage our reputation. In addition,
even if we are not determined to have violated these laws, government investigations into these issues typically require the expenditure of significant
resources and generate negative publicity, and could result in related stockholder suits, any of which could also have an adverse effect on our business,
financial condition and results of operations.
In addition, from time to time in the future, we may become subject to additional laws or regulations issued by federal or state agencies, all of which are
subject to influence resulting from changes in political party control. For instance, the Biden Administration may propose substantial changes to the U.S.
healthcare system, including expanding government-funded health insurance options. We are uncertain of the impact or outcome of new legislation,
regulation, Executive Orders, rescission of rules and policy statements, or new agency priorities, especially any relative impact on the healthcare regulatory
and policy landscape, or the impact they may have on our business.
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Such developments could, however, require reformulation of certain products to meet new standards, recalls or discontinuance of certain products not able
to be reformulated, additional record-keeping requirements, increased documentation of the properties of certain products, additional or different labeling,
additional scientific substantiation, additional personnel, or other new requirements. Any such developments could have an adverse effect on our business.
Future legislation or regulations may adversely affect reimbursement from government healthcare programs and third-party payers.
There have been efforts by government officials and legislators to implement measures to regulate prices or payment for pharmaceutical products,
including legislation on drug importation. For example, President Biden signed the Inflation Reduction Act of 2022 into law on August 16, 2022, which
among other things, seeks to lower prescription drug costs for Medicare beneficiaries and reduce drug spending by the federal government. Specifically,
the prescription drug provisions under the Inflation Reduction Act:
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Require that the federal government negotiate prices for certain drugs covered under Medicare Part B and Part D with the highest total spending,
beginning in 2026;
Require drug manufacturers to pay rebates to Medicare if prices rise faster than inflation for drugs used by Medicare beneficiaries, beginning in
2023;
Cap out of pocket spending for Medicare Part D enrollees and make other Part D benefit design changes, beginning in 2024;
Expand eligibility for full benefits under the Medicare Part D Low-Income Subsidy Program, beginning in 2024; and
Delay implementation of the Trump Administration’s drug rebate rule, beginning in 2027.
The law that established the Part D benefit included a provision known as the “noninterference clause”, which stipulates that the HHS Secretary “may not
interfere with the negotiations between drug manufacturers and pharmacies and PDP prescription drug plan sponsors, and may not require a particular
formulary or institute a price structure for the reimbursement of covered part D drugs.” Further, the Secretary does not currently negotiate prices for Part B
drugs, rather, Medicare reimburses providers based on 106% of the average sales price (ASP), which is the average price paid to all non-federal buyers in
the U.S., inclusive of rebates (other than Medicaid rebates). The Inflation Reduction Act amends the non-interference clause by adding an exception that
requires the Secretary of HHS to negotiate prices with drug manufacturers for a small number of single-source brand-name drugs or biologics without
generic or biosimilar competitors that are covered under Medicare Part D (starting in 2026) and Part B (starting in 2028). Under the new Drug Price
Negotiation Program, the number of drugs subject to price negotiation will be 10 Part D drugs for 2026, another 15 Part D drugs for 2027, another 15 Part
D and Part B drugs for 2028, and another 20 Part D and Part B drugs for 2029 and later years. These drugs will be selected from among the 50 drugs with
the highest total Medicare Part D spending and the 50 drugs with the highest total Medicare Part B spending. The total number of drugs with negotiated
prices will increase over time. Part D drugs with negotiated maximum fair prices are required to be covered by all Part D plans. Additionally, an excise tax
will be levied on drug manufacturers that do not comply with the negotiation process. The excise tax starts at 65% of a drug’s sales in the U.S. and
increases by 10% every quarter to a maximum of 95%. As an alternative to paying the tax, manufacturers can choose to withdraw all of their drugs from
coverage under Medicare and Medicaid. In addition, manufacturers that refuse to offer an agreed-upon negotiated price for a selected drug to Medicare
beneficiaries enrolled in Part B and/or Part D or to a provider of services to such individuals (such as a physician or hospital) will pay a civil monetary
penalty equal to 10 times the difference between the price charged and the maximum fair price of the drug.
Following passage of the Inflation Reduction Act, President Biden issued an Executive Order on October 14, 2022 titled “Lowering Prescription Drug
Costs for Americans”, calling for additional measures to complement the Inflation Reduction Act and further drive down prescription drug costs. Under
the Executive Order, the HHS Secretary is directed to consider whether to select for testing by the CMS Innovation Center new health care payment and
delivery models that would lower drug costs and promote access to innovative drug therapies for Medicare and Medicaid beneficiaries, including cost-
sharing models and value-based payments. It is unclear what additional payment and delivery models the Innovation Center may propose and how those
models may impact drug pricing, including the pricing and access to our products.
At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical pricing, including price
or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in
some cases, designed to encourage importation from other countries and bulk purchasing.
We are unable to predict the future course of federal or state healthcare legislation in the United States directed at broadening the availability of healthcare
and containing or lowering the cost of healthcare. The Patient Protection and Affordable Care Act (“ACA”) and any further changes in the law or
regulatory framework could also have an adverse effect on our business, financial condition, and results of operations.
Further, if a federal government shutdown were to occur for a prolonged period, federal government payment obligations, including its obligations under
Medicaid and Medicare, may be delayed. Similarly, if state government shutdowns were to occur, state payment
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obligations may be delayed. If the federal or state governments fail to make payments under these programs on a timely basis, the ability of our licensees to
sell our products to government payers may be limited, thereby reducing anticipated revenues and profitability.
Even after the approval of IMVEXXY, BIJUVA, and ANNOVERA, the products and the holder of the marketing authorizations will still face extensive,
ongoing regulatory requirements and review, and the products may face future development and regulatory difficulties.
With respect to IMVEXXY, BIJUVA, and ANNOVERA, the FDA may still impose significant restrictions on a product’s indicated uses or marketing or to
the conditions for approval or impose ongoing requirements for potentially costly post-approval studies, including phase 4 clinical trials or post-market
surveillance. As a condition to granting marketing approval of a product, the FDA may require a company to conduct additional clinical trials. The results
generated in these post-approval clinical trials could result in loss of marketing approval, changes in product labeling, or new or increased concerns about
side effects or efficacy of a product. For example, the labeling for IMVEXXY, BIJUVA, and ANNOVERA contains restrictions on use and warnings. The
Food and Drug Administration Amendments Act of 2007 gives the FDA enhanced post-market authority, including the imposition of a Risk Evaluation and
Mitigation Strategy (“REMS”) as well as explicit authority to require post-market studies and clinical trials, labeling changes based on new safety
information, and compliance with FDA-approved REMS programs. IMVEXXY, BIJUVA, and ANNOVERA will also be subject to ongoing FDA
requirements governing the manufacturing, labeling, packaging, storage, distribution, safety surveillance and reporting, advertising, promotion, record
keeping, and reporting of safety and other post-market information. The FDA’s exercise of its authority could result in delays or increased costs during
product development, clinical trials and regulatory review, increased costs to comply with additional post-approval regulatory requirements, and potential
restrictions on sales of approved products. Foreign regulatory agencies often have similar authority and may impose comparable requirements.
As part of the FDA’s approval of IMVEXXY, we committed to conduct a post-approval observational study to evaluate the risk of endometrial cancer in
post-menopausal women with a uterus who use a low-dose vaginal estrogen unopposed by a progestogen such as IMVEXXY, which study was assumed by
Mayne Pharma as the holder of the new drug application (“NDA”). As part of the FDA’s approval of ANNOVERA, the FDA has required four non-closed
post-marketing studies, including both post-marketing reviews and post-marketing commitments. Each study has a timeline for completion and submission
of a final report to the FDA. If a post-approval study is not fulfilled according to FDA requirements, the FDA may impose certain further requirements and
penalties against the holder of the NDA, which could include withdrawal of the NDA approval and withdrawal of the product from the market. For
ANNOVERA, post marketing studies are being performed by the Population Council and Mayne Pharma as the NDA holder. In July 2021, we received a
letter from the FDA indicating that the post-marketing commitment study being conducted by the Population Council for ANNOVERA to characterize the
in vivo release rate of ANNOVERA was not fulfilled to FDA’s satisfaction. In addition, the final reports for the two post-marketing requirement studies
being performed by the Population Council for ANNOVERA were not submitted by the initial listed submission deadline, which deadlines have since been
extended by FDA. To the extent that Mayne Pharma or the Population Council, as applicable, does not fulfil these studies to the FDA’s satisfaction, the
ability of our licensees to sell the applicable product may be limited and there may be an adverse impact on our revenue and results of operations.
Post-marketing studies, whether conducted by us or by others and whether mandated by regulatory agencies or voluntary, and other emerging data about
marketed products, such as adverse event reports, may also adversely affect sales of our pharmaceutical product candidates once approved, and potentially
our other marketed products. Further, the discovery of significant problems with a product similar to one of our products that implicate (or are perceived to
implicate) an entire class of products could have an adverse effect on sales of our approved products. Accordingly, new data about our products could
negatively affect demand because of real or perceived side effects or uncertainty regarding efficacy and, in some cases, could result in product withdrawal
or recall. Furthermore, new data and information, including information about product misuse, may lead government agencies, professional societies, and
practice management groups or organizations involved with various diseases to publish guidelines or recommendations related to the use of our products or
the use of related therapies or place restrictions on sales. Such guidelines or recommendations may lead to lower sales of our products.
Manufacturers of pharmaceutical products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory
authorities for compliance with the FDA’s cGMP regulations and other regulatory requirements, such as adverse event reporting. Facilities for the
manufacturer of pharmaceutical products also undergo internal audits as well as external audits by third parties. If our licensees or a regulatory agency
discovers problems with a product, such as adverse events of unanticipated severity or frequency or problems with the facility where the product is
manufactured, a regulatory agency may impose restrictions on that product, the manufacturing facility, or our licensees, including requiring recall or
withdrawal of the product from the market or suspension of manufacturing, requiring new warnings or other labeling changes to limit use of the drug,
requiring that additional clinical trials be conducted, imposing new monitoring requirements, or requiring the establishment of a REMS program.
Advertising and promotional materials must comply with FDA rules in addition to other potentially applicable federal and state laws and are subject to
review by FDA. If the FDA raises concerns regarding our licensees’ promotional materials or messages, they may be required to modify or discontinue
using them and may be required to provide corrective information.
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Commercial products must now meet the requirements of the Drug Supply Chain Security Act (“DSCSA”) which imposes obligations on manufacturers of
prescription pharmaceutical products for commercial distribution, regulating the distribution of the products at the federal level, and sets certain standards
for federal or state registration and compliance of entities in the supply chain (manufacturers and re-packagers, wholesale distributors, third-party logistics
providers, and dispensers). The DSCSA preempts previously enacted state pedigree laws and the pedigree requirements of the Prescription Drug Marketing
Act (“PDMA”) and its implementing regulations. Trading partners within the drug supply chain must now ensure certain product tracing requirements are
met that they are doing business with other authorized trading partners; and they are required to exchange transaction information, transaction history, and
transaction statements. Product identifier information (an aspect of the product tracing scheme) is also now required. The DSCSA requirements,
development of standards, and the system for product tracing have been and will continue to be phased in over a period of years, with FDA indicating
enforcement discretion on certain aspects due to the COVID-19 pandemic. The distribution of product samples continues to be regulated under the PDMA,
and some states also impose regulations on drug sample distribution.
Our activities and the activities of our licensees are also potentially subject to federal and state consumer protection and unfair competition laws. If we, our
licensees or our third-party suppliers fail to comply with applicable regulatory requirements, a regulatory agency may take any of the following actions:
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conduct an investigation into our or our licensees’ practices and any alleged violation of law;
seek an injunction or impose civil or criminal penalties or monetary fines;
suspend or withdraw regulatory approval;
suspend or impose restrictions on our licensees’ operations, including costly new manufacturing requirements;
seize or detain products, refuse to permit the import or export of products, or require our licensees to initiate a product recall; or
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refuse to allow our licensees to enter into supply contracts, including government contracts.
exclude our licensees from providing our products to those participating in government healthcare programs, such as Medicare and Medicaid, and
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Recent government enforcement has targeted pharmaceutical companies for violations of fraud, abuse and other laws.
The federal government has pursued actions against pharmaceutical companies for violations of the AKS, including relating to remuneration paid to
physicians for attendance at speaker programs, consulting arrangements, and marketing, among others. As noted above, the OIG released a Special Fraud
Alert in 2020 regarding manufacturer speaker programs and announced several settlements with manufacturers relating thereto. As noted above, violations
of the AKS are also per se false claims for purposes of the FCA and as a result, have resulted in large settlements between manufacturers and the
government. Separately, the government has pursued actions against manufacturers under the FCA for causing the submission of false claims arising from
manufacturer off-label marketing. These and other enforcement efforts have resulted in large civil settlements and corporate integrity agreements between
manufacturers and the government. We have adopted comprehensive compliance guidance and endeavor to structure our business arrangements and
marketing efforts in compliance with all applicable law, including the AKS and the FCA; however, we cannot guarantee that the government,
whistleblower or court will agree with our interpretations. Our practices with respect to interactions with HCPs, including but not limited to consultant
relationships, speaker programs, advisory boards, and scientific/educational grant programs, as well as our arrangements with pharmacies, may not in all
cases meet all the criteria for safe harbor protection from AKS liability. Moreover, there are no safe harbors for many common practices, such as certain
educational and research grants or patient assistance programs. The safe harbors are subject to change through legislative and regulatory action, and we
may decide to adjust our business practices or be subject to heightened scrutiny as a result.
In addition, several states have recently enacted legislation requiring pharmaceutical companies to establish marketing and promotional compliance
programs or codes of conduct and/or to file periodic reports with the state or make periodic public disclosures on sales, marketing, pricing, clinical trials,
and other activities. Several states have also adopted laws that prohibit or limit certain marketing-related activities, including the provision of gifts, meals,
or other items to certain healthcare providers.
The FDA also strictly regulates marketing, labeling, advertising, and promotion of prescription drug products that are placed into interstate commerce in
the United States. A company can make only those claims relating to safety and efficacy, purity, and potency that are approved by the FDA. Physicians, in
their independent professional medical judgment, may prescribe legally available products for unapproved indications that are not described in the
product’s labeling and that differ from those tested and approved by the FDA. Pharmaceutical companies, however, are required to promote their
pharmaceutical products only for the approved indications and consistent with the FDA-required, approved label. The FDA and other agencies actively
monitoring promotional activities and enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have
improperly promoted off label uses may be subject to significant liability, including, but not limited to, criminal and civil penalties under the FDCA and the
FCA, exclusion from participation in federal healthcare programs, mandatory compliance programs under corporate integrity agreements, debarment, and
refusal of government contracts.
We cannot ensure that ours or our licensee’s compliance controls, policies, and procedures will be sufficient to protect against acts of ours or their
employees, business partners, licenses, or vendors that may violate federal or state fraud and abuse laws or other applicable requirements.
Federal enforcement agencies and private whistleblowers have shown and continue to show interest in pharmaceutical companies’ product and patient
assistance programs (PAPs), including reimbursement support, co-pay support, nursing, adherence and educational services, referrals to other providers,
donations to independent patient assistance charities, and relationships with specialty pharmacies. We believe that Mayne Pharma offers co-pay assistance
for our vitamin products and IMVEXXY and BIJUVA, including co-pay assistance and free drug sample packs for IMVEXXY and BIJUVA, and
potentially will enter into similar programs for ANNOVERA. Our co-pay assistance programs are intended to assist qualified patients with private
insurance with any out-of-pocket financial obligations but exclude any government healthcare program beneficiaries. Several investigations into patient
assistance practices have resulted in significant civil and criminal settlements. While the OIG has approved certain independent charitable PAPs that help
financially needy beneficiaries, advisory opinions on this issue have primarily focused on charities that provide assistance to patients who cannot afford
cost-sharing obligations for prescription drugs. A key element for the OIG has been whether the charities are sufficiently independent from drug
manufacturer donors. In May 2014, the OIG issued a Supplemental Special Advisory Bulletin regarding Independent Charity Patient Assistance Programs,
or the 2014 Special Advisory Bulletin, which updated its 2005 Special Advisory Bulletin relating to PAPs. In the 2014 Special Advisory Bulletin, the OIG
stated that although PAPs provide important safety net assistance to financially needy patients, these programs also present a risk of fraud, waste, and abuse
with respect to federal health care programs. One of the three factors set forth in the revised guidance was that the PAP could not limit assistance to a single
product. In September of 2014, the OIG also released a Special Advisory Bulletin on pharmaceutical manufacturer copayment coupons, specifically stating
that manufacturers that did not comply with the law may be subject to sanctions if they fail to take appropriate steps to ensure that such coupons do not
induce the purchase of Federal health care program items or services, including, but not limited to, drugs paid for by Medicare Part D. Failure to take such
steps may be evidence of intent to induce the purchase of drugs paid for by these programs, in violations of the AKS. PAPs have also been the subject of
Congressional review. If patient assistance programs are structure incorrectly or support programs fail to comply with applicable law, Mayne Pharma risks
becoming subject to government investigations, and potentially, facing penalties or other consequences for violations under fraud and abuse laws, which
may inhibit revenues through royalties due to reduced sales volume. Although we believe that ours and our licensees business practices are structured to be
compliant with applicable laws, it is possible that governmental authorities will conclude that ours or our licensees business practices may not comply with
current or future statutes, regulations, or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our past operations and
our licensees current operations, including activities conducted by our former sales team or agents or our licensees current sales team or agents, are found
to be in violation of any of these laws or any other governmental regulations that
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may apply to us, we or our licensees may be subject to significant civil, criminal, and administrative penalties, damages, fines, exclusion from government
healthcare programs, and the curtailment or restructuring of ours or their operations. Any action against us for violation of these laws, even if we
successfully defend against it, could cause us to incur significant legal expenses, divert our management’s attention from the operation of our business, and
damage our reputation. In addition, even if we are not determined to have violated these laws, government investigations into these issues typically require
the expenditure of significant resources and generate negative publicity, which could also have an adverse effect on our business, financial condition, and
results of operations.
In addition, to the extent we, our licensees, or our other contractors or agents receive or obtain individually identifiable health information from patients,
healthcare professionals, pharmacies, or other individuals or entities, we or they could be subject to criminal penalties if we mishandle individually
identifiable health information in a manner that is not authorized or permitted by HIPAA or other applicable privacy and security laws. Claims that we have
violated individuals’ privacy rights or breached our contractual obligations, even if we are not found liable, could be expensive and time-consuming to
defend and could result in adverse publicity that could harm our business.
The occurrence of any of the foregoing events or penalties may force us to expend significant amounts of time and money and may significantly inhibit our
licensee’s ability to continue to market our products and generate revenue. Following the closing of the vitaCare Divestiture, we may still be required to
indemnify the buyer of vitaCare in the event any enforcement related to activities prior to the vitaCare Divestiture. Similar regulations apply in foreign
jurisdictions.
Some of our products can be prescribed to patients via a virtual health or telehealth platform, subject to state telehealth and prescribing laws. The federal
Ryan Haight Act substantially limits the ability of prescribers to prescribe controlled substances via telehealth. While this federal law applies only to
federally controlled substances, the permissibility of prescribing other non-controlled substances via a telehealth encounter is addressed at the state level.
Constant changes to the telehealth laws and regulations as well as state pharmacy and prescribing laws and emerging enforcement priorities by state
legislatures, licensing bodies, and attorney generals’ offices, make it difficult to predict our licensees’ ability to effectively provide patient access to our
products via virtual care offerings. There have been recent waivers of telehealth restrictions, including many of those pertaining to electronic prescribing
based on a telehealth encounter, to assist in expanding access to care during the COVID-19 pandemic. Many of these waivers are tied to the federal public
health emergency declaration but some state laws have different expiration dates. Following the expiration of the COVID-19 public health emergency on
May 11, 2023, prescribing of controlled substances via a virtual encounter will be more limited. We cannot guarantee that prescribers will be able, or
willing, to prescribe our products to patients via a telehealth encounter and any limitations on such remote prescribing at the state level may impede our
ability to expand access to our products.
Licensing of intellectual property involves complex legal, business, and scientific issues, and disputes could jeopardize our rights under such
agreements.
We are currently and may in the future be a party to license agreements of importance to our business and to our products. Disputes may arise between us
and any of these counterparties regarding intellectual property subject to and each parties’ obligations under such agreements, including:
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the scope of rights granted under the agreement and other interpretation-related issues;
our or our licensees’ obligations to make milestone, royalty, or other payments under those agreements;
our or our licensees’ obligations to prosecute existing and new patent applications;
our or our licensees’ obligations to enforce infringement of our intellectual property;
whether and the extent to which the ANNOVERA technology and processes infringe on intellectual property of the Population Council that is not
subject to the ANNOVERA license agreement;
the ownership of inventions and know-how arising under the agreement or resulting from the joint creation or use of intellectual property by our
licensees and us and our partners;
our right, or the right of our licensees, to transfer or assign the license; and
the effects of termination.
These or other disputes over our obligations, our licensees’ obligations, or intellectual property that we have licensed may prevent or impair our ability to
maintain our current arrangements on acceptable terms, or may impair the value of the arrangement to us. Any such dispute could have an adverse effect on
our business.
If we, or, with respect to the ANNOVERA license agreement that we have assigned to Mayne Pharma, Mayne Pharma, fail to meet obligations under that
license agreement in a material respect, the respective licensor could have the right to terminate the respective agreement and upon the effective date of
such termination, have the right to re-obtain the related technology as well as, potentially, aspects of any intellectual property controlled by us or Mayne
Pharma and developed during the period the agreement was in force that relate to the applicable technology. This means that the licensor to each of these
agreements could effectively take control of the
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development and commercialization of the applicable product after an uncured, material breach of the agreement by us. Any uncured, material breach
under a license agreement could result in our loss of exclusive rights and may lead to a complete termination of any commercialization efforts for the
applicable product.
In July 2018, we entered into the Population Council License Agreement to obtain exclusive U.S. rights to commercialize ANNOVERA. The agreement
required us to commercialize this product and enter into certain manufacturing agreements, make timely milestone and other payments, provide certain
information regarding our activities under the agreement, and indemnify the other party with respect to our development and commercialization activities
under the terms of the agreements. The Company’s license under the Population Council License Agreement was sold to Mayne Pharma as part of the
Mayne Transaction.
In connection with the Mayne Transaction, we granted a license to Mayne Pharma (i) to research, develop, register, manufacture, have manufactured,
market, sell, use, and commercialize the Licensed Products in the United States and its possessions and territories and (ii) to manufacture, have
manufactured, import and have imported the Licensed Products outside the United States for commercialization in the United States and its possessions and
territories. Any disputes arising under the agreements governing the Mayne Transaction may have a material adverse impact on our revenue, results of
operations and financial position.
We have also entered into licensing and supply agreements with Knight pursuant to which we granted Knight an exclusive license to commercialize
IMVEXXY and BIJUVA in Canada and Israel and with Theramex pursuant to which we granted Theramex an exclusive license to commercialize BIJUVA,
and IMVEXXY outside of the U.S., except for Canada and Israel.
Sales of our products in the U.S. and our rights to receive royalties with respect to such sales could be adversely affected if products manufactured outside
of the U.S. or for sale outside of the U.S. under the terms of these licensing and supply agreements are reimported and sold in the U.S. In addition, our
rights to receive royalties with respect to our products sold outside the U.S. could be adversely affected if our licensees fail to diligently pursue approval of
our products, or opt not to sell our products, in certain jurisdictions where they are not required to do so.
If our dietary supplement, hormone therapy pharmaceutical products or patient-controlled, long-acting contraceptive products do not have the effects
intended or cause undesirable side effects, our business may suffer.
Although many of the ingredients in our dietary supplement products are vitamins, minerals, and other substances for which there is a long history of
human consumption, they also contain innovative ingredients or combinations of ingredients. Furthermore, our hormone therapy or patient-controlled,
long-acting contraceptive pharmaceutical products have been approved by the FDA based on its assessment of the safety and efficacy of these products.
While we believe that all of these products and the combinations of ingredients in them are safe when taken as directed, the products could have certain
undesirable side effects if not taken as directed or if taken by a consumer who has certain medical conditions. In addition, these products may not have the
effect intended if they are not taken in accordance with certain instructions, which include certain dietary or other labeling restrictions. Furthermore, there
can be no assurance that any of the products, even when used as directed, will have the effects intended or will not have harmful side effects in an
unforeseen way or on an unforeseen cohort. If any of our are shown to be harmful or generate negative publicity from perceived harmful effects, our
business, financial condition, results of operations, and prospects could be harmed significantly.
Our products face significant competition from branded and generic products, and our operating results will suffer if we fail to compete effectively.
Development and awareness of our products will depend largely upon our licensee’s success in increasing the consumer base for our products. The
pharmaceutical and dietary supplement industries are intensely competitive and subject to rapid and significant technological change. Our products face
intense competition, including from major multinational pharmaceutical and dietary supplement companies, established biotechnology companies,
specialty pharmaceutical, and generic drug companies. Many of these companies have greater financial and other resources, such as larger R&D staffs and
more experienced marketing and manufacturing organizations. As a result, these companies may obtain regulatory approval more rapidly and may be more
effective in selling and marketing their products. They also may invest heavily to accelerate discovery and development of novel compounds or to in-
license novel compounds that could make the products that we sell or develop obsolete. Smaller or early-stage companies may also prove to be significant
competitors, particularly through collaborative arrangements with large, established companies. If our licensees are unable to economically promote or
maintain our brand, our business, results of operations and financial condition could be severely harmed. In addition, loss of exclusivity may provide
opportunity for competing products, particularly generics, to erode siphon off our consumers.
In February 2020, we received a Paragraph IV certification notice letter (the “IMVEXXY Notice Letter”) regarding an ANDA submitted to the FDA by
Teva Pharmaceuticals USA, Inc. (“Teva”). See “If the efforts of our licensees to protect the proprietary nature of the intellectual property covering our
hormone therapy pharmaceutical products and other products are not adequate, we may not be able to compete effectively in our market” below for more
information regarding the IMVEXXY Notice Letter. Additionally, on March 2020, we received a Paragraph IV certification notice letter (the “BIJUVA
Notice Letter”) regarding an ANDA submitted to FDA by Amneal
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Pharmaceuticals. See Item 1. Business – Pharmaceutical Regulation – Regulatory Exclusivity for more information on the BIJUVA Notice Letter.
In addition, we cannot predict what additional ANDAs could be filed by Teva or other potential generic competitors requesting approval to market generic
forms of our products, which if approved, could result in significant decreases in the revenue derived from royalties sales of our marketed products and
thereby harm our business and financial condition.
Failure to obtain regulatory approval outside the U.S. will prevent our licensees from marketing our hormone therapy pharmaceutical products in non-
U.S. markets.
We have entered into licensing and supply agreements with Knight and Theramex to commercialize IMVEXXY and BIJUVA in non-U.S. markets. To
market these products in the European Union and many other non-U.S. jurisdictions, our licensees must obtain separate regulatory approvals. We have had
limited interactions with non-U.S. regulatory authorities, the approval procedures vary among countries and can involve additional testing, and the time
required to obtain approval may differ from that required to obtain FDA approval or clearance. Approval or clearance by the FDA does not ensure approval
by regulatory authorities in other countries, and approval by one or more non-U.S. regulatory authorities does not ensure approval by other regulatory
authorities in other countries or by the FDA. The non-U.S. regulatory approval process may include all risks associated with obtaining FDA approval or
clearance. For these non-U.S. regulatory approvals, our licensees may not obtain them on a timely basis, if at all. Our licensees’ failure to receive necessary
non-U.S. regulatory approvals to commercialize IMVEXXY and BIJUVA in a given market could have an adverse effect on our business, financial
condition, results of operations, and prospects.
In addition, by seeking to obtain approval to market IMVEXXY and BIJUVA in one or more non-U.S. markets, we or our licensees will be subject to rules
and regulations in those markets relating to our products. In some countries, particularly countries of the European Union, each of which has developed its
own rules and regulations, pricing is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take
considerable time after the receipt of regulatory approval for a drug. To obtain reimbursement or pricing approval in some countries, our licensees may be
required to conduct a clinical trial that compares the cost-effectiveness of our pharmaceutical product to other available products. If reimbursement of our
pharmaceutical product is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our licensees may be unable to generate
revenues and achieve or sustain profitability with respect to any given market, which could have an adverse effect on our business, financial condition,
results of operations, and prospects. If our licensees obtain approval to market IMVEXXY or BIJUVA in one or more non-U.S. markets, there will be
additional pharmacovigilance reporting requirements for our products. To the extent that the non-U.S. markets in which our licensees distribute our
products have different pharmacovigilance reporting requirements than the U.S., there is a risk that the marketing of our drugs in those countries may
increase the number of adverse events reported for our products.
Our success is tied to our licensees’ distribution channels.
Our revenue is dependent on our licensees’ distribution through wholesale distributors and retail pharmacy distributors. Our business would be harmed if
our licensees’ customers refused to distribute our products and if our licensees were not able to replace such customers through their distribution channels.
Our ability to utilize net operating loss carryforwards may be limited.
As of December 31, 2022, we had federal net operating loss (“NOL”) carryforwards of $640.0 million. Subject to applicable limitations, our NOL may be
used to offset future taxable income, to the extent we generate any taxable income, and thereby reduce our future federal income taxes otherwise payable.
Section 382 of the Internal Revenue Code of 1986, as amended, imposes limitations on a corporation’s ability to utilize NOL carryforwards if it
experiences an ownership change as defined in Section 382. In general terms, an ownership change may result from transactions increasing the ownership
of certain stockholders in the stock of a corporation by more than 50 percent over a three-year period. If an ownership change has occurred, or were to
occur, utilization of our NOL carryforwards would be subject to an annual limitation under Section 382 determined by multiplying the value of our stock at
the time of the ownership change by the applicable long-term tax-exempt rate. Any unused annual limitation may be carried over to later years. We may be
found to have experienced an ownership change under Section 382 because of events in the past or the issuance of shares of our common stock in the
future. If so, the use of our NOL carryforwards, or a portion thereof, against our future taxable income may be subject to an annual limitation under Section
382.
In 2017, the U.S. federal government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “2017 Tax Act”). The
2017 Tax Act makes broad and complex changes to the U.S. federal tax code, including, but not limited to reducing the U.S. federal corporate tax rate from
34 percent to 21 percent and imposing new restrictions on the use of NOL carryforwards. The 2017 Tax Act reduced the corporate tax rate to 21 percent,
effective January 1, 2018. Management assessed the valuation allowance analyses with respect to our NOL carryforwards as affected by various aspects of
the 2017 Tax Act and determined
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that a full valuation allowance continues to be appropriate. Additionally, to address the impact of the COVID-19 pandemic, the Coronavirus Aid, Relief,
and Economic Security Act, or the CARES Act, was enacted into law in March 2020. The CARES Act includes several significant business tax provisions
that, among other things, includes further statutory amendments to the rules governing NOL carryforwards, as amended by the 2017 Tax Act. The CARES
Act limits the NOL deduction in taxable years beginning in 2021 to the lesser of the NOL carryforwards or 80% of the taxpayer's taxable income (after
considering the deduction for NOL arising in tax years beginning before January 1, 2018), which may restrict our ability to offset future taxable income
with NOL carryforwards and increase our future federal income taxes otherwise payable.
Any failure of our licensees to adequately maintain a sales force or adequately promote our products will impede our growth.
We are substantially dependent on the sales forces of our licensees to attract new business and to manage existing customer relationships. There is
significant competition for qualified, productive direct sales personnel with advanced sales skills and technical knowledge. Our ability to achieve growth in
revenue in the future will depend, in large part, on our licensees’ success in recruiting, training, and retaining direct sales personnel, and their decision to
adequately promote our products. If our licensees are unable to hire, engage, and develop enough productive sales personnel or fails to adequately promote
our products, our business prospects could suffer.
Risks related to our intellectual property
If our efforts to protect the proprietary nature of the intellectual property covering our hormone therapy pharmaceutical products and other products
are not adequate, we may not be able to compete effectively in our market.
Our commercial success will depend in part on ours and our licensees’ ability to obtain additional patents and protect our existing patent positions as well
as our ability to maintain adequate protection of other intellectual property for our hormone therapy pharmaceutical products. If we do not adequately
protect our intellectual property, competitors may be able to use our technologies and erode or negate any competitive advantage we may have, which
could harm our business and ability to achieve profitability. The patent positions of pharmaceutical companies are highly uncertain. The legal principles
applicable to patents are in transition due to changing court precedent and legislative action, and we cannot be certain that the historical legal standards
surrounding questions of validity will continue to be applied or that current defenses relating to issued patents in these fields will be sufficient in the future.
Changes in patent laws in the U.S., such as the America Invents Act of 2011, may affect the scope, strength, and enforceability of our patent rights or the
nature of proceedings that may be brought by us related to our patent rights. In addition, the laws of some foreign countries do not protect proprietary rights
to the same extent as the laws of the U.S., and we may encounter significant problems in protecting our proprietary rights in these countries. We will be
able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary technologies are covered by valid and
enforceable patents or are effectively maintained as trade secrets.
These risks include the possibility of the following:
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the patent applications that we have filed to that our licensees may fail to result in issued patents in the U.S. or in foreign jurisdictions;
patents issued or licensed to us, or our partners, may be challenged or discovered to have been issued on the basis of insufficient, incomplete, or
incorrect information, and thus held to be invalid or unenforceable;
the scope of any patent protection may be too narrow to exclude competitors from developing or designing around these patents;
we, the Population Council, or our licensees were not the first to make the inventions covered by each of our issued patents and pending patent
applications;
we, the Population Council, or our licensees may not have been the first inventors to invent or file patent applications for these technologies in
the U.S. or were not the first to file patent applications directed to these technologies abroad;
we may fail to comply with procedural, documentary, fee payment, and other similar provisions during the patent application process, which can
result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights;
future pharmaceutical product candidates may not be patentable;
others may claim rights or ownership regarding patents and other proprietary rights that we hold or license;
delays in development, testing, clinical trials, and regulatory review may reduce the period during which we could market our pharmaceutical
products under patent protection; and
we or our licensees may fail to timely apply for patents on our technologies or products.
While we apply for patents covering our technologies and products, as we deem appropriate, many third parties may already have filed patent applications
or have received patents in our areas of product development. These entities’ applications, patents, and other
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intellectual property rights may conflict with patent applications to which we have rights and could prevent us from obtaining patents or could call into
question the validity of any of our patents, if issued, or could otherwise adversely affect our ability to develop, manufacture, or commercialize our
pharmaceutical products. In addition, if third parties file patent applications in the technologies that also claim technology to which we have rights, we may
have to participate in interference, derivation, or other proceedings with the USPTO or foreign patent regulatory authorities to determine our rights in the
technologies, which may be time-consuming and expensive. Moreover, issued patents may be challenged in the courts or in post-grant proceedings at the
USPTO, or in similar proceedings in foreign countries. These proceedings may result in loss of patent claims or adverse changes to the scope of the claims.
If we, the Population Council, our licensees, or our strategic partners fail to obtain and maintain patent protection for our products, or our proprietary
technologies and their uses, companies may be dissuaded from collaborating with us. In such event, our ability to commercialize our pharmaceutical
products may be threatened, we could lose our competitive advantage, and the competition we face could increase, all of which could adversely affect our
business, financial condition, results of operations, and prospects.
In addition, mechanisms exist in much of the world permitting some form of challenge by generic drug marketers to our patents before, or immediately
following, the expiration of any regulatory exclusivity, and generic companies are increasingly employing aggressive strategies, such as “at risk” launches
to challenge relevant patent rights. In February 2020, we received the IMVEXXY Notice Letter regarding an ANDA submitted to the FDA by Teva. The
ANDA submitted by Teva seeks approval from the FDA to commercially manufacture, use, or sell a generic version of the 4 mcg and 10 mcg doses of
IMVEXXY.
In the IMVEXXY Notice Letter, Teva alleges that IMVEXXY Patents listed in the FDA’s Orange Book that claim compositions and methods of
IMVEXXY are invalid, unenforceable, and/or will not be infringed by Teva’s commercial manufacture, use, or sale of its proposed generic drug product.
The IMVEXXY Patents identified in the IMVEXXY Notice Letter expire in 2032 or 2033. In April 2020, we filed a complaint for patent infringement
against Teva in the United States District Court for the District of New Jersey arising from Teva’s ANDA filing with the FDA. We are seeking, among
other relief, an order that the effective date of any FDA approval of Teva’s ANDA would be a date no earlier than the expiration of the IMVEXXY Patents
and equitable relief enjoining Teva from infringing the IMVEXXY Patents. Teva has filed its answer and counterclaim to the complaint, alleging that the
IMVEXXY Patents are invalid and not infringed. In September 2021, the District Court made available a public version of the order following the parties’
agreement to a consent motion to redact information Teva contended was confidential. The order provides that the statutory stay that prevents FDA from
granting final approval of the ANDA for 30 months from the date of the Notice Letter will be extended for the number of days that the stay of the
IMVEXXY litigation is in place. The length of the stay of the IMVEXXY litigation is dependent on further action by Teva.
We cannot assure you that any patent infringement lawsuit that we or our licensees may file will prevent the introduction of a generic version of
IMVEXXY for any particular length of time, or at all. If Teva’s ANDA is approved, and a generic version of IMVEXXY is introduced, the sales of
IMVEXXY could be adversely affected and our license revenue could be significantly decreased. In addition, we cannot predict what additional ANDAs
could be filed by Teva, or other potential generic competitors requesting approval to market generic forms of our products, which could require us to incur
significant additional expense and result in distraction for our management team, and if approved, result in significant decreases in the revenue derived
from sales of our marketed products and thereby harm our business and financial condition.
Our business also may rely on unpatented proprietary technology, know-how, and trade secrets. If the confidentiality of this intellectual property is
breached, it could adversely impact our business.
We must rely on Mayne Pharma to file lawsuits or take other actions to protect or enforce our patents and there can be no assurance they will be take
such actions or be successful.
Competitors may infringe our patents or the patents of the ANNOVERA licensor. Following the Mayne Transaction, we no longer have the express right to
enforce our intellectual property. To counter infringement or unauthorized use, we must rely on Mayne Pharma to file infringement claims, including with
respect to Teva’s IMVEXXY Notice Letter. There can be no assurance that Mayne Pharma will have sufficient financial or other resources to file and
pursue such infringement claims in the United States, which typically last for years before they are concluded. The legal systems of certain countries,
particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to
pharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our
proprietary rights generally.
In addition, in an infringement proceeding, a court may decide that a patent of ours or of the ANNOVERA licensor is not valid or is unenforceable or may
refuse to stop the other party from using the technology at issue on the grounds that our patents, or those of the ANNOVERA licensor, do not cover the
technology in question or on other grounds. An adverse result in any litigation or defense proceedings could put one or more of our patents, or those of the
ANNOVERA licensor, at risk of being invalidated, held unenforceable, or interpreted narrowly. Moreover, we may not be able to prevent, alone or with our
licensees, or the ANNOVERA licensor, misappropriation of our proprietary rights, particularly in countries in which the laws may not protect those rights
as fully as in the U.S.
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or in those countries in which we do not file national phase patent applications. Furthermore, because of the substantial amount of discovery required in
connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this
type of litigation. In addition, if securities analysts or investors perceive public announcements of the results of hearings, motions, or other interim
proceedings or developments to be negative, the price of our common stock could be adversely affected. The occurrence of any of the above could
adversely affect our business, financial condition, results of operations, and prospects.
Risks related to ownership of our common stock
Our failure to maintain compliance with Nasdaq’s continued listing requirements could result in the delisting of our common stock.
In January 2023, we received a deficiency letter (the “Notice”) from the Listing Qualifications Department of the Nasdaq Stock Market, LLC (“Nasdaq”)
notifying us that we were not in compliance with the rules for continued listing as set forth in Nasdaq Listing Rule 5620(a) (the “Annual Meeting Rule”)
due to our failure to hold an annual meeting of stockholders within 12 months after our fiscal year ended December 31, 2021. The Notice had no immediate
effect on the listing of our Common Stock. We did not hold an annual meeting of stockholders during 2022 due to our then ongoing strategic processes.
The Notice stated that, under Nasdaq Listing Rule 5810(c)(2)(G), we had 45 calendar days, or until February 20, 2023, to submit a plan to regain
compliance with the Annual Meeting Rule. We timely submitted such plan, and Nasdaq granted us an extension until June 29, 2023, to regain compliance.
It our intent to hold an annual meeting of stockholders in 2023 prior to such deadline and to fully regain compliance with all applicable Nasdaq listing
standards.
However, there can be no assurance that we will be able to regain compliance with the Annual Meeting Rule or that we will otherwise remain in
compliance with the other listing standards for the Nasdaq listing requirements. If we are unable to comply with the Nasdaq listing requirements, our
common stock could be delisted from Nasdaq, which could have material adverse effects on our ability to finance our operations and our stockholders’
ability to monetize the investment in our Company.
Our principal stockholder owns a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder
approval.
As of December 31, 2022, Rubric Capital Management LP (“Rubric”) and its affiliates beneficially owned approximately 18.5% of our common stock.
Rubric may be able to largely determine the outcome of all matters requiring stockholder approval. For example, Rubric may be able to largely control
elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This
may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our
stockholders.
If we fail to maintain proper internal controls, our ability to produce accurate financial statements or comply with applicable regulations could be
impaired.
Pursuant to Section 404 of the Sarbanes-Oxley Act, our management is required annually to deliver a report that assesses the effectiveness of our internal
control over financial reporting. Due to our current filing status, we are not required to have our independent registered public accounting firm deliver an
attestation report on the effectiveness of our internal control over financial reporting. If we are unable to maintain effective internal control over financial
reporting or our independent auditors are unwilling or unable to provide us with an attestation report on the effectiveness of internal control over financial
reporting for future periods as required by, or voluntarily followed under, Section 404 of the Sarbanes-Oxley Act, we may not be able to produce accurate
financial statements, and investors may therefore lose confidence in our operating results, our stock price could decline and we may be subject to
litigation or regulatory enforcement actions.
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We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.
We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain any future earnings for the operation
of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. In addition, the terms of any future debt agreements
may also preclude us from paying dividends. Any return to stockholders will be limited to the capital appreciation, if any, of their stock.
Some provisions of our charter documents and Nevada law may have anti-takeover effects that could discourage an acquisition of us by others, even if
an acquisition would be beneficial to our stockholders and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in our articles of incorporation and bylaws, as well as certain provisions of Nevada law, could make it more difficult for a third-party to acquire
us or increase the cost of acquiring us, even if an acquisition would benefit our stockholders, and could also make it more difficult to remove our current
management. These provisions in our articles of incorporation and bylaws include the following:
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authorizing the issuance of “blank check” preferred stock that could be issued by our board of directors to increase the number of outstanding
shares and thwart a takeover attempt;
prohibiting cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director
candidates; and
advance notice provisions in connection with stockholder proposals that may prevent or hinder any attempt by our stockholders to bring business
to be considered by our stockholders at a meeting or replace our board of directors.
In addition, we are subject to Nevada’s Combination with Interested Stockholders statute (Nevada Revised Statute Sections 78.411 – 78.444), which
prohibits an “interested stockholder” from entering into a “combination” with a company, unless certain conditions are met. An “interested stockholder” is
a person who, together with affiliates and associates, beneficially owns (or within the prior two years, did beneficially own) 10% or more of the
corporation’s capital stock entitled to vote.
Our business may be affected by unfavorable publicity or lack of consumer acceptance.
General risks related to our business
We are highly dependent upon consumer acceptance of the safety and quality of our products, as well as similar products distributed by other companies.
Consumer acceptance of a product can be significantly influenced by scientific research or findings, national media attention, and other publicity about
product use, products themselves, or marketing campaigns for our products. A product may be received favorably, resulting in high sales associated with
that product that may not be sustainable as consumer preferences change. Future scientific research or publicity could be unfavorable to our industry or any
of our products and may not be consistent with earlier favorable research or publicity. A future research report or publicity that is perceived by consumers
as less than favorable or that may question earlier favorable research or publicity could have an adverse effect on sales of our products and our ability to
generate revenue. Adverse publicity in the form of published scientific research, statements by regulatory authorities or otherwise, whether or not accurate,
that associates use of our products or any other similar products with illness or other adverse effects, or that questions the benefits of our products or similar
products, or that claims that such products do not have the effect intended, or that question the marketing of our products, could have an adverse effect on
our business, reputation, financial condition, or results of operations.
Our licensees may initiate product recalls or withdrawals or may be subject to regulatory enforcement actions that could negatively affect our business.
Our products may be subject to product recalls, withdrawals, or seizures if any of our products are believed to cause injury or illness or if our licensees are
alleged to have violated governmental regulations in the manufacture, labeling, promotion, sale, or distribution of any of our products. A recall, withdrawal,
or seizure of any of our products could adversely affect consumer confidence in our brands and lead to decreased demand for our products, which could
adversely affect our business, financial condition and results of operations.
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Product liability lawsuits could divert our resources, result in substantial liabilities, and reduce the commercial potential of our products.
We face an inherent risk of product liability claims because of the commercial availability of our current products. Additionally, considering the history of
product liability claims related to other hormone therapy products and contraceptives, we will face an even greater risk through commercialization of our
products. For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during manufacturing,
marketing, or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, failures to warn of dangers
associated with the use of the product, negligence, strict liability, or breaches of warranties. Claims could also be asserted under state consumer fraud and
protection statutes. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit
commercialization of our existing products or pharmaceutical product candidates. Regardless of the merits or eventual outcome, product liability claims
may result in any of the following:
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the inability to commercialize our products;
difficulty recruiting subjects for clinical trials or withdrawal of these subjects before a trial is completed;
labeling, marketing, or promotional changes and/or restrictions;
product recalls or withdrawals;
decreased demand for our products or products that we may develop in the future;
loss of revenue;
injury to our reputation;
initiation of investigations by regulators or actions by state attorney generals or the U.S. Department of Justice;
costs to defend the related litigation;
a diversion of management’s time and our resources;
substantial monetary awards to trial participants or patients;
exhaustion of any available insurance and our capital resources; and
the obligation to indemnify our licensees that would be a diversion of managements time and resources; and
a decline in our stock price.
Although we maintain general liability insurance and clinical trial liability insurance for our products and product candidates, this insurance may not fully
cover potential liabilities. The cost of any product liability litigation or other proceeding, even if resolved in our favor, could be substantial. In addition, our
inability to obtain or maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potential product liability claims could
prevent or inhibit the development and commercial production and sale of our products, which could adversely affect our business, financial condition,
results of operations, and prospects.
A failure to maintain optimal inventory levels to meet commercial demand for our products could harm our and out licensees’ reputation and subject
us to financial losses.
Our licensees' ability to maintain optimal inventory levels to meet commercial demand depends on the performance of third-party contract manufacturers.
In some instances, our products have unique ingredients used under license arrangements. One of our third-party contract manufacturers has recently
experienced an increase in difficulties with manufacturing of ANNOVERA, resulting in intermittent supply of ANNOVERA for commercial distribution.
See “Our dependence upon third parties for the manufacture and supply of our existing women’s healthcare products may cause delays in, or prevent our
licensees from, successfully commercializing, and marketing our products” above. If the manufacturers of our products are unsuccessful in obtaining raw
materials, if are licensees are unable to manufacture and release inventory on a timely and consistent basis, if our licensees fail to maintain an adequate
level of product inventory, if inventory is destroyed or damaged, or if our licensees’ inventory reaches its expiration date, patients might not have access to
our products, our reputation and brands could be harmed, and physicians may be less likely to recommend our products in the future, each of which could
have an adverse effect on our business, financial condition, results of operations, and cash flows.
Our business may be impacted by new or changing tax laws or regulations and actions by federal, state, and/or local agencies, or how judicial
authorities apply tax laws.
In connection with the products we previously sold and the royalties we receive, we calculate, collect, and remit various federal, state, and local taxes,
surcharges and regulatory fees, or taxes, to numerous federal, state and local governmental authorities. In addition, we incur and pay state and local taxes
and fees on purchases of goods and services used in our business.
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Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. In many cases, the application
of tax laws (including the recently enacted Tax Act) is uncertain and subject to differing interpretations, especially when evaluated against new
technologies and services. The impact of this tax reform on holders of our common stock is also uncertain and could be adverse.
If we have incorrectly described, disclosed, calculated, assessed, or remitted amounts that were due to governmental authorities, we could be subject to
additional taxes, fines, penalties, or other adverse actions, which could impact our business, results of operations, and financial condition.
We may not be able to maintain effective and efficient information systems or properly safeguard our information systems.
Our operations are dependent on uninterrupted performance of our information systems. Failure to maintain reliable information systems, disruptions in our
existing information systems or the implementation of new systems could cause disruptions in our business operations, including violations of patient
privacy and confidentiality requirements and other regulatory requirements, increased administrative expenses and other adverse consequences.
In addition, information security risks have generally increased in recent years because of new technologies and the increased activities of perpetrators of
cyber-attacks resulting in the theft of protected health, business, or financial information. During the COVID-19 pandemic, in particular, cyber-attacks
increased as companies shifted to remote work environments, including several high-profile, sophisticated attacks impacting government agencies and
security firms alike, the impacts of which are still being uncovered. Despite our layered security controls, experienced computer programmers and hackers
may be able to penetrate our information systems and misappropriate or compromise sensitive patient or personnel information or proprietary or
confidential information, create system disruptions or cause shutdowns. They also may be able to develop and deploy viruses, worms and other malicious
software programs that disable our systems or otherwise exploit any security vulnerabilities. Outside parties may also attempt to fraudulently induce
employees to take actions, including the release of confidential or sensitive information or to make fraudulent payments, through illegal electronic
spamming, phishing, or other tactics.
A failure in or breach of our information systems because of cyber-attacks or other tactics could disrupt our business, result in the release or misuse of
protected health information, or PHI, confidential or proprietary business information or financial loss, damage our reputation, increase our administrative
expenses, and expose us to additional risk of liability to federal or state governments or individuals. Although we believe that we have robust information
security procedures and other safeguards in place, as cyber threats continue to evolve, we may be required to expend additional resources to continue to
enhance our information security measures or to investigate and remediate any information security vulnerabilities. Our remediation efforts may not be
successful and could result in interruptions, delays or cessation of service and loss of existing or potential patients and disruption of our operations. In
addition, breaches of our security measures and the unauthorized dissemination of patient healthcare and other sensitive information, proprietary or
confidential information about us or other third-parties could expose such persons’ private information to the risk of financial or medical identity theft or
expose us or such persons to a risk of loss or misuse of this information, result in litigation and potential liability for us, damage our brand and reputation or
otherwise harm our business. Any of these disruptions or breaches of security could have an adverse effect on our business, financial condition, and results
of operations.
Our failure to comply with foreign data protection laws and regulations could lead to government enforcement actions and significant penalties against
us, and adversely impact our operating results.
European Union member states and other foreign jurisdictions, including Switzerland, have adopted data protection laws and regulations which impose
significant compliance obligations. Moreover, the collection and use of personal health data in the European Union, which was formerly governed by the
provisions of the European Union Data Protection Directive, was replaced with the European Union General Data Protection Regulation the (“GDPR”) in
May 2018. The GDPR, which is wide-ranging in scope, imposes several requirements relating to the consent of the individuals to whom the personal data
relates, the information provided to the individuals, the security and confidentiality of the personal data, data breach notification and the use of third-party
processors in connection with the processing of personal data. The GDPR also imposes strict rules on the transfer of personal data out of the European
Union to the U.S., provides an enforcement authority and imposes large penalties for noncompliance, including the potential for fines of up to €20 million
or 4% of the annual global revenues of the non-compliant company, whichever is greater. The recent implementation of the GDPR has increased our
responsibility and liability in relation to personal data that we process, including in clinical trials, and we may in the future be required to put in place
additional mechanisms to ensure compliance with the GDPR, which could divert management’s attention and increase our cost of doing business.
In July 2020, the Court of Justice of the European Union issued its long-awaited decision in the case Data Protection Commission v. Facebook Ireland,
Schrems. The decision on this case invalidates the European Commission’s adequacy decision for the EU-U.S. Privacy Shield Framework, calling into
question personal data transfers from the EU to the U.S. While we have yet to determine the full impact of the invalidation of the EU-US Privacy
Framework on our business, we anticipate increased legal and technological costs as we evaluate any trans-Atlantic transfers as well as the impact on any
business that we may conduct in the EU.
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In addition, new regulation or legislative actions regarding data privacy and security (together with applicable industry standards) may increase our costs of
doing business. In this regard, we expect that there will continue to be new proposed laws, regulations and industry standards relating to privacy and data
protection in the U.S., the European Union and other jurisdictions, and we cannot determine the impact such future laws, regulations and standards may
have on our business.
Our employees and business partners may not appropriately secure and protect confidential information in their possession.
Each of our employees and business partners is responsible for the security of the information in our systems or under our control and to ensure that private
and financial information is kept confidential. Should an employee or business partner not follow appropriate security measures, including those related to
cyber threats or attacks or other tactics, as well as our privacy and security policies and procedures, the improper release of personal information, including
PHI, or confidential business or financial information, or misappropriation of assets could result. The release of such information or misappropriation of
assets could have an adverse effect on our business, financial condition, and results of operations.
Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements and
insider trading.
We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDA
regulations, to provide accurate information to the FDA, to comply with federal and state healthcare fraud and abuse laws and regulations, to report
financial information or data accurately, or to disclose unauthorized activities to us. In particular, sales, marketing, and business arrangements in the
healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing, and other abusive
practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer
incentive programs, and other business arrangements. We have adopted a Code of Conduct and Ethics, but it is not always possible to identify and deter
employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or
losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with these laws or
regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a
significant impact on our business, including the imposition of significant fines or other sanctions.
General risks related to our intellectual property
If we are sued for infringing intellectual property rights of third parties, litigation will be costly and time consuming and could prevent or delay us from
developing or commercializing our pharmaceutical product candidates.
Our commercial success depends, in part, on our not infringing the patents and proprietary rights of other parties and not breaching any collaboration or
other agreements we entered with regard to our technologies and products. We are aware of numerous third-party U.S. and non-U.S. issued patents and
pending applications that exist in the technical areas of our pharmaceutical products, including compounds, formulations, treatment methods, and synthetic
processes, which may be applied towards the synthesis of hormones, for example. Patent applications are confidential when filed and remain confidential
until publication, approximately 18 months after initial filing, while some patent applications remain unpublished until issuance. As such, there may be
other third-party patents and pending applications of which we are currently unaware with claims directed towards composition of matter, formulations,
methods of manufacture, or methods for treatment related to the use or manufacture of our products or product candidates. Therefore, we cannot ever know
with certainty the nature or existence of every third-party patent filing. We cannot provide assurances that our licensees or their partners will be free to
manufacture or market our products as planned or that we or the ANNOVERA licensors’ and partners’ patents will not be opposed or litigated by third
parties. If any third-party patent was held by a court of competent jurisdiction to cover aspects of our materials, formulations, methods of manufacture, or
methods of treatment related to the use or manufacture of any of our products, the holders of any such patent may be able to block our ability to
commercialize the applicable product unless we obtained a license or until such patent expires or is finally determined to be held invalid or unenforceable.
There can be no assurances that we will be able to obtain a license to such patent on favorable terms or at all. Failure to obtain such license may have an
adverse effect on our business.
There is a substantial amount of litigation involving intellectual property in the pharmaceutical industry generally. If a third-party asserts that we infringe
its patents or other proprietary rights, we could face many risks that could adversely affect our business, financial condition, results of operations, and
prospects, including the following:
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infringement and other intellectual property claims, which would be costly and time-consuming to defend, whether or not we are ultimately
successful, which in turn could delay the regulatory approval process, consume our capital, and divert management’s attention from our business;
substantial damages for past infringement, which we may have to pay if a court determines that our products or technologies infringe a
competitor’s patent or other proprietary rights;
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a court prohibiting us from selling or licensing our technologies or future products unless the third-party licenses its patents or other proprietary
rights to us on commercially reasonable terms, which it is not required to do;
if a license is available from a third-party, we may have to pay substantial royalties or lump sum payments or grant cross licenses to our patents
or other proprietary rights to obtain that license; or
redesigning our products so they do not infringe, which may not be possible or may require substantial monetary expenditures and time.
We are party from time to time to legal proceedings relating to our intellectual property, and third parties in the future may file claims asserting that our
technologies, processes, or products infringe on their intellectual property. We cannot predict whether third parties will assert these claims against us or our
strategic partners or against the licensors of technology licensed to us or our licensees, or whether those claims will harm our business. In addition, the
outcome of intellectual property litigation is subject to uncertainties that cannot be adequately quantified in advance. If we or our partners were to face
infringement claims or challenges by third parties relating to our pharmaceutical product candidates, an adverse outcome could subject us to significant
liabilities to such third parties, and force us or our partners to curtail or cease the development of some or all of our pharmaceutical product candidates,
which could adversely affect our business, financial condition, results of operations, and prospects.
If we are unable to protect the confidentiality of certain information, the value of our products and technology could be adversely affected.
We previously relied on trade secrets, know-how, and continuing technological advancement to develop and maintain our competitive position. To protect
this competitive position, we regularly enter into confidentiality and proprietary information agreements with third parties, including employees,
independent contractors, suppliers, and collaborators. We cannot, however, ensure that these protective arrangements will be honored by third parties, and
we may not have adequate remedies if these arrangements are breached. In addition, enforcement of claims that a third-party has illegally obtained and is
using trade secrets, know-how, or technological advancements is expensive, time-consuming, and uncertain. Non-U.S. courts are sometimes less willing
than U.S. courts to protect this information. Moreover, our trade secrets, know-how, and technological advancements may otherwise become known or be
independently developed by competitors in a manner providing us with no practical recourse against the competing parties. If any such events were to
occur, they could adversely affect our business, financial condition, results of operations, and prospects.
We may be subject to claims that our former employees wrongfully used or disclosed alleged trade secrets of their former employers or of other third
parties with whom we have obligations of confidentiality.
As is common in the pharmaceutical industry, prior to the Mayne Transaction we previously employed individuals who were previously employed at other
biotechnology or pharmaceutical companies, including our competitors or potential competitors. We may be subject to claims that these former employees,
or we, have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be
necessary to defend against these claims. Such claims may lead to material costs for us, or an inability to protect or use valuable intellectual property rights,
which could adversely affect our business, financial condition, results of operations, and prospects.
The market price of our common stock may be highly volatile, and you could lose all or part of your investment.
General risks related to ownership of our Common Stock
The trading price of our common stock on Nasdaq is likely to be volatile. This volatility may prevent you from being able to sell your shares at or above
the price you paid for your shares. Our stock price could be subject to wide fluctuations in response to a variety of factors, which include the following:
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changes in laws or regulations applicable to our products;
unanticipated serious safety concerns related to the use of our products;
the inability for our licensees to obtain adequate supply for our products or the inability to do so at acceptable prices;
adverse regulatory decisions;
the introduction of new products or technologies offered by our competitors;
the effectiveness of our licensees’ commercialization efforts;
the perception of the pharmaceutical industry by the public, legislatures, regulators, and the investment community;
disputes or other developments relating to proprietary rights, including patents, litigation matters, and our ability to obtain patent protection for
our technologies;
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actual or anticipated variations in quarterly operating results;
the failure to meet or exceed the estimates and projections of the investment community;
the overall performance of the U.S. equity markets and general political and economic conditions;
announcements of significant acquisitions, strategic partnerships, joint ventures, or capital commitments by us or our competitors;
additions or departures of key management personnel;
adverse market reaction to any indebtedness we may incur or securities we may issue in the future;
sales of our common stock by us or our stockholders in the future;
significant lawsuits, including patent or stockholder litigation;
changes in the market valuations of similar companies;
the trading volume of our common stock;
increases in our common stock available for sale upon expiration of lock-up agreements;
effects of natural or man-made catastrophic events or other business interruptions; and
other events or factors, many of which are beyond our control.
In addition, the stock market in general, and the stock of biotechnology companies in particular, have experienced extreme price and volume fluctuations
that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively
affect the market price of our common stock, regardless of our actual operating performance.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading
volume could decline.
The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our
business. If one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price
would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial
markets, which might cause our stock price and trading volume to decline.
Future sales and issuances of equity securities, convertible securities or other securities could result in additional dilution of the percentage ownership
of holders of our common stock.
Our stockholders may experience dilution upon future equity issuances, including convertible debt or equity securities we may issue in the future, the
exercise of stock options to purchase common stock granted to our employees, consultants and directors, including options to purchase common stock
granted under our stock option and equity incentive plans or the issuance of common stock in settlement of previously issued awards under our stock
option and equity incentive plans that may vest in the future.
We expect that additional capital will be needed in the future to continue our planned operations. To raise capital, we may sell equity securities, convertible
securities or other securities in one or more transactions at prices and in a manner we determine from time to time. If we sell equity securities, convertible
securities or other securities current investors may be materially diluted by subsequent sales. We may also need our stockholders to authorize the issuance
of additional shares of common stock under our articles of incorporation if we do not have sufficient authorized shares to raise such additional capital or
issue future awards under our stock option and equity incentive plans. New investors could also gain rights, preferences, and privileges senior to those of
holders of our existing equity securities.
Item 1B. Unresolved staff comments
None.
Item 2. Properties
Our headquarters is in Boca Raton, Florida. The lease includes 56,212 rentable square feet, or the full premises, of which the lease on 7,561 square feet
commenced in 2018 and the lease on the remaining 48,651 square feet commenced in August 2019, or the full premises commencement date. The lease
will expire 11 years after the full premises commencement date, unless terminated earlier in accordance with the terms of the lease. We have the option to
extend the term of the lease for two additional consecutive periods of five years. The extension option is not included in the determination of the lease term
as it is not reasonably certain to be exercised. The term of the lease includes escalating rent and free rent periods. We are also responsible for certain other
operating costs under the lease, including
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electricity and utility expenses. In June 2019, we entered into an agreement with the same lessors to lease an additional 6,536 square feet of administrative
office space in the same location, pursuant to an addendum to such lease, which commenced in May 2020. We are in a process of subleasing our
headquarters in Boca Raton as a result of shifting our business to become a pharmaceutical royalty company and terminating our employees.
Item 3. Legal proceedings
In February 2020, we received a Paragraph IV certification notice letter (the “IMVEXXY Notice Letter”) regarding an Abbreviated New Drug Application
(“ANDA”) submitted to the FDA by Teva Pharmaceuticals USA, Inc. (“Teva”). The ANDA seeks approval from the FDA to commercially manufacture,
use, or sell a generic version of the 4 mcg and 10 mcg doses of IMVEXXY. In the IMVEXXY Notice Letter, Teva alleges that TherapeuticsMD patents
listed in the FDA’s Orange Book that claim compositions and methods of IMVEXXY (the “IMVEXXY Patents”) are invalid, unenforceable, and/or will
not be infringed by Teva’s commercial manufacture, use, or sale of its proposed generic drug product. The IMVEXXY Patents identified in the IMVEXXY
Notice Letter expire in 2032 or 2033. In April 2020, we filed a complaint for patent infringement against Teva in the United States District Court for the
District of New Jersey arising from Teva’s ANDA filing with the FDA. We are seeking, among other relief, an order that the effective date of any FDA
approval of Teva’s ANDA would be a date no earlier than the expiration of the IMVEXXY Patents and equitable relief enjoining Teva from infringing the
IMVEXXY Patents. Teva has filed its answer and counterclaim to the complaint, alleging that the IMVEXXY Patents are invalid and not infringed. In July
2021, following a proposal by Teva, the District Court entered an order temporarily staying all proceedings in the IMVEXXY litigation, which order was
filed under seal. In September 2021, the District Court made available a public version of the order following the parties’ agreement to a consent motion to
redact information Teva contended was confidential. The order provides that the statutory stay that prevents the FDA from granting final approval of the
ANDA for 30 months from the date of the IMVEXXY Notice Letter will be extended for the number of days that the stay of the IMVEXXY litigation is in
place. The length of the stay of the IMVEXXY litigation is dependent on further action by Teva. As of December 31, 2022, for the IMVEXXY Paragraph
IV legal proceeding, we have incurred and recorded legal costs amounting to $2.3 million in prepaid expenses and other current assets since we believe that
we will successfully prevail in this legal proceeding. Upon the successful conclusion of the legal proceeding, the related capitalized legal costs will be
reclassified to patents, in license rights and other intangible assets, net, in the accompanying consolidated balance sheets, and such costs will be amortized
over the remaining useful life of the patents. If we are unsuccessful in this legal proceeding, then the related capitalized legal costs for this legal preceding
and any unamortized IMVEXXY patent costs that were previously capitalized will be immediately expensed in the period in which we become aware of an
unsuccessful legal proceeding. As of December 30, 2022, and per the Mayne License Agreement, Mayne Pharma is responsible for all enforcement of our
patents, including this litigation with Teva.
From time to time, we are involved in other litigations and proceedings in the ordinary course of business. We are currently not involved in any other
litigations and proceedings that we believe would have a material effect on our consolidated financial condition, results of operations, or cash flows.
Item 4. Mine safety disclosures
Not applicable.
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PART II
Item 5. Market for registrant’s common equity, related stockholder matters, and issuer purchases of equity securities market information on
common stock
Since October 2017, our common stock has been listed on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “TXMD.”
As of December 30, 2022, the closing price of our common stock on Nasdaq was $5.59 per share. As of February 28, 2023, there were 40,366 stockholders
of record of our common stock.
Performance graph
As a “smaller reporting company,” as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and pursuant to
Instruction 6 to Item 201(e) of Regulation S-K, we are not required to provide this information.
Dividends
Historically, we have not paid dividends on our common stock, and we currently do not intend to pay any dividends on our common stock in the
foreseeable future. We currently plan to retain any earnings for the operation of our business rather than to pay cash dividends. Payments of any cash
dividends in the future will depend on our financial condition, results of operations, and capital requirements as well as other factors deemed relevant by
our board of directors.
Item 6. Reserved
Item 7.
Management’s discussion and analysis of financial condition and results of operations
You should read the following discussion and analysis in conjunction with the information set forth under our consolidated financial statements and the
notes to those financial statements included elsewhere in this 2022 10-K Report. This discussion contains forward-looking statements based upon current
expectations that involve risks and uncertainties. See “Statement Regarding Forward-Looking Information.” Our actual results may differ materially from
those contained in or implied by any forward-looking statements as a result of various factors, including, but not limited to, the risks and uncertainties
described under “Risk Factors” elsewhere in this 2022 10-K Report.
Certain amounts in the Management’s discussion and analysis of financial condition and results of operations may not add due to rounding, and all
percentages have been calculated using unrounded amounts.
Business overview
TherapeuticsMD was previously a women’s healthcare company with a mission of creating and commercializing innovative products to support the
lifespan of women from pregnancy prevention through menopause.
In December 2022, we changed our business to become a pharmaceutical royalty company, currently receiving royalties on products licensed to
pharmaceutical organizations that possess commercial capabilities in the relevant territories. On December 30, 2022, the Company completed the Mayne
Transaction pursuant to which the Company and its subsidiaries (i) granted Mayne Pharma an exclusive license to commercialize the Company’s
IMVEXXY, BIJUVA and prescription prenatal vitamin products sold under the BocaGreenMD® and vitaMedMD® brands in the United States and its
possessions and territories, (ii) assigned to Mayne Pharma the Company’s exclusive license to commercialize ANNOVERA in the United States and its
possessions and territories, and (iii) sold certain other assets to Mayne Pharma in connection therewith.
Pursuant to a License Agreement, dated December 4, 2022, the Company granted Mayne Pharma, on the Closing Date, (i) an exclusive, sublicensable,
perpetual, irrevocable license to research, develop, register, manufacture, have manufactured, market, sell, use, and commercialize the Licensed Products in
the United States and its possessions and territories and (ii) an exclusive, sublicensable, perpetual, irrevocable license to manufacture, have manufactured,
import and have imported the Licensed Products outside the United States for commercialization in the United States and its possessions and territories.
Pursuant to the Mayne License Agreement, Mayne Pharma will make one-time, milestone payments to the Company of each of (i) $5.0 million if aggregate
net sales of all Products in the United States during a calendar year reach $100.0 million, (ii) $10.0 million if aggregate net sales of all Products in the
United States during a calendar year reach $200.0 million and (iii) $15.0 million if aggregate net sales of all Products in the United States during a calendar
year reach $300.0 million. Further, Mayne Pharma will pay to the Company royalties on net sales of all Products in the United States at a royalty rate of
8.0% on the first $80 million in annual net sales and 7.5% on annual net sales above $80.0 million, subject to certain adjustments, for a period of 20 years
following the Closing Date.
42
The royalty rate will decrease to 2.0% on a Product-by-Product basis upon the earlier to occur of (i) the expiration or revocation of the last patent covering
a Product and (ii) a generic version of a Product launching in the United States. Mayne Pharma will pay to the Company minimal annual royalties of $3.0
million per year for 12 years, adjusted for inflation at an annual rate of 3%, subject to certain further adjustments, including as described below. Upon the
expiry of the 20-year royalty term, the licenses granted to Mayne Pharma under the Mayne License Agreement will become a fully paid-up and royalty free
license for the Licensed Products.
Pursuant to a Transaction Agreement, dated December 4, 2022, between the Company and Mayne Pharma, the Company sold to Mayne Pharma, at closing,
certain assets for Mayne Pharma to commercialize the Products in the United States, including the Company’s exclusive license from the Population
Council to commercialize ANNOVERA.
The total consideration from Mayne Pharma to the Company for the purchase of the Transferred Assets and the grant of the licenses under the Mayne
License Agreement was (i) a cash payment of $140.0 million at closing, (ii) a cash payment of approximately $12.1 million at closing for the acquisition of
net working capital as determined in accordance with the Transaction Agreement and subject to certain adjustments, (iii) a cash payment of approximately
$1.0 million at closing for prepaid royalties in connection with the Mayne License Agreement Amendment and (iv) the right to receive the contingent
consideration set forth in the Mayne License Agreement, as amended.
On the Closing Date, the Company and Mayne Pharma entered into Amendment No. 1 to the Mayne License Agreement. Pursuant to the Mayne License
Agreement Amendment, Mayne Pharma agreed to pay the Company approximately $1.0 million in prepaid royalties on the Closing Date. The prepaid
royalties will reduce the first four quarterly payments that would have otherwise been payable pursuant to the Mayne License Agreement by an amount
equal to $257,250 per quarterly royalty payment plus interest calculated at 19% per annum accruing from the Closing Date until the date such quarterly
royalty payment is paid to the Company. In addition, the parties agreed that Mayne Pharma will reduce one quarterly royalty payment (other than the first
quarterly royalty payment) otherwise payable to the Company by $1.5 million in consideration of Mayne Pharma assuming the Company’s obligations
under a long-term services agreement, including the Company’s minimum payment obligations thereunder.
As part of the transformation that included the Mayne License Agreement, historical results of commercial operations have been reflected as discontinued
operations in the Company’s consolidated financial statements for all periods prior to the Closing Date. Assets and liabilities associated with the
commercial business are classified as assets and liabilities of discontinued operations in the Company’s consolidated balance sheets. Additional disclosures
regarding discontinued operations are provided in Note 2 Discontinued Operations to the consolidated financial statements included in this Annual Report.
The Company also has license agreements with strategic partners to commercialize IMVEXXY and BIJUVA outside of the U.S.
•
•
In July 2018, we entered into a the Knight License Agreement with Knight pursuant to which we granted Knight an exclusive license to
commercialize IMVEXXY and BIJUVA in Canada and Israel.
In June 2019, we entered into the “Theramex License Agreement with Theramex to commercialize IMVEXXY and BIJUVA outside of the U.S.,
excluding Canada and Israel. In 2021, Theramex secured regulatory approval for BIJUVA in certain European countries and began
commercialization efforts in those countries.
In connection with the Company’s transformation into a pharmaceutical royalty company, the termination of our executive management team (except for
Mr. Marlan Walker, our former General Counsel and current Chief Executive Officer) and all other employees was completed by December 31, 2022.
Severance obligations for all employees other than executive officers were paid in full in the first quarter of 2023 and severance obligations for terminated
executive officers will be paid in accordance with their employment agreements and separation agreements as previously disclosed. As of December 31,
2022, we employed one full-time employee primarily engaged in an executive position. We have engaged external consultants, including certain former
members of our management team, who support our relationship with current partners and assist with certain financial, legal and regulatory matters and the
continued wind-down of our historical business operations.
vitaCare divestiture
On April 14, 2022, we completed the divestiture of vitaCare with the sale of all vitaCare’s issued and outstanding capital stock (the “vitaCare Divestiture”).
We received net proceeds of $142.6 million, net of transaction costs of $7.2 million, and we recognized a gain on sale of business of $143.4 million.
Included in the net proceeds amount was $11.3 million of customary holdbacks as provided in the Purchase Agreement, which is recorded as restricted cash
in the consolidated balance sheets. The restricted cash was held by an escrow agent and was released to us in March 2023. Additionally, we may receive up
to an additional $7.0 million in earn-out consideration,
43
contingent upon vitaCare’s financial performance through 2023 as determined in accordance with the terms of the Purchase Agreement. We will record the
contingent consideration at the settlement amount when the consideration is realized or realizable.
The Purchase Agreement contains customary representations and warranties, covenants, and indemnities of the parties thereto. The commitments under a
long-term services agreement related to vitaCare was transferred to Mayne Pharma as part of the Mayne Transaction. In addition, under the Mayne License
Agreement Amendment, Mayne Pharma will reduce one quarterly royalty payment (other than the first quarterly royalty payment) otherwise payable to us
by $1.5 million in consideration of Mayne Pharma assuming our obligations under the long-term services agreement related to vitaCare.
The operations of vitaCare were classified as discontinued operations in December 2022, when the Company completed the change in its business by
becoming a royalty company.
COVID-19
With multiple variant strains of the SARS-Cov-2 virus and the COVID-19 disease that it causes (collectively, “COVID-19”) still circulating, we continue to
be subject to risks and uncertainties in connection with the COVID-19 pandemic. The extent of the future impact of the COVID-19 pandemic on our
business continues to be highly uncertain and difficult to predict.
As of the date of the filing of this Annual Report, the future extent to which the COVID-19 pandemic may continue to materially impact our financial
condition, liquidity, or results of operations remains uncertain and difficult to predict. Even after the COVID-19 pandemic has subsided, we may continue
to experience adverse impacts to our business as a result of any economic recession or depression that has occurred or may occur in the future.
Portfolio of our licensed products
In December 2022, we changed our business to become a pharmaceutical royalty company, currently receiving royalties on products licensed to
pharmaceutical organizations that possess commercial capabilities in the relevant territories. On December 30, 2022, we granted an exclusive license to
commercialize the Company’s IMVEXXY, BIJUVA, and prescription prenatal vitamin products sold under the BocaGreenMD® and vitaMedMD® brands
and assigning the Company’s exclusive license to commercialize ANNOVERA to Mayne Pharma.
IMVEXXY (estradiol vaginal inserts), 4-μg and 10-μg
This pharmaceutical product is for the treatment of moderate-to-severe dyspareunia (vaginal pain associated with sexual activity), a symptom of vulvar and
vaginal atrophy due to menopause. As part of the FDA’s approval of IMVEXXY, we committed to conduct a post-approval observational study to evaluate
the risk of endometrial cancer in post-menopausal women with a uterus who use a low-dose vaginal estrogen unopposed by a progestogen.
On December 30, 2022, we granted an exclusive license to commercialize the Company’s IMVEXXY in the United States and its possessions and
territories to Mayne Pharma. We also have entered into licensing agreements with third parties to market and sell IMVEXXY outside of the U.S. We
entered into the Knight License Agreement, with Knight pursuant to which, we granted Knight an exclusive license to commercialize IMVEXXY in
Canada and Israel. We entered into the Theramex License Agreement with Theramex HQ UK Limited (“Theramex”) pursuant to which we granted
Theramex an exclusive license to commercialize IMVEXXY for human use outside of the U.S., except for Canada and Israel. As of December 31, 2022, no
IMVEXXY sales had been made through these licensing agreements.
The FDA has also asked the sponsors of other vaginal estrogen products to participate in the observational study. In connection with the observational
study, we would have been required to provide progress reports to the FDA on an annual basis. The obligation to conduct this study was transferred to
Mayne Pharma as part of the License Agreement.
BIJUVA (estradiol and progesterone) capsules, 1 mg/100 mg
This pharmaceutical product is the first and only FDA approved bioidentical hormone therapy combination of estradiol and progesterone in a single, oral
capsule for the treatment of moderate-to-severe vasomotor symptoms (commonly known as hot flashes or flushes) due to menopause in women with a
uterus.
On December 30, 2022, we granted an exclusive license commercialize the Company’s BIJUVA in the United States and its possessions and territories to
Mayne Pharma. We also have entered into the Knight License Agreement with Knight pursuant to which we granted Knight an exclusive license to
commercialize BIJUVA in Canada and Israel. We have entered into the Theramex License Agreement with Theramex pursuant to which we granted
Theramex an exclusive license to commercialize BIJUVA for human use outside of the
44
U.S., except for Canada and Israel. During 2022 and 2021, we had BIJUVA sales of $1.4 million made through the Theramex License Agreement, and such
sales were included as license revenue in the statements of operations. In addition, in 2021, we received milestone payments comprised of an aggregate of
EUR 1.0 million, or $1.2 million, in regulatory milestone payments based on regulatory approvals for BIJUVA in certain specified markets.
ANNOVERA (segesterone acetate (“SA”) and ethinyl estradiol (“EE”) vaginal system)
On December 30, 2022, we assigned the Company’s exclusive license to commercialize ANNOVERA to Mayne Pharma. This pharmaceutical product is a
one-year ring-shaped contraceptive vaginal system (“CVS”) and the first and only patient-controlled, procedure-free, reversible prescription contraceptive
that can prevent pregnancy for up to a total of 13 cycles (one year). ANNOVERA is commercially sold in the U.S. pursuant to the terms of the Population
Council License Agreement. As part of the approval of ANNOVERA, the FDA has required a post-approval observational study be performed to measure
the risk of venous thromboembolism. We agreed to perform and pay the costs and expenses associated with this post-approval study, provided that if the
costs and expenses associated with such post-approval study exceed $20.0 million, half of such excess will offset against royalties or other payments owed
by us under the Population Council License Agreement. In August 2021, we filed a supplemental New Drug Application (“NDA”) with the FDA to modify
the testing specifications for ANNOVERA to allow increased consistency of supply of ANNOVERA. In May 2022, the FDA approved the supplemental
NDA for ANNOVERA.
Prenatal vitamin products
On December 30, 2022, we granted an exclusive license to commercialize, in the United States and its possessions and territories, our prescription prenatal
vitamin product lines under our vitaMedMD brand name and authorized generic formulations of some of our prescription prenatal vitamin products under
our BocaGreenMD Prena1 name to Mayne Pharma.
Results of operations
In December 2022, we granted an exclusive license to commercialize our IMVEXXY, BIJUVA, and prescription prenatal vitamin products and assigning
the Company’s exclusive license to commercialize ANNOVERA to Mayne Pharma, which resulted in a business shift that had a major effect on our
operations and financial results.
As part of the transformation that included the Mayne License Agreement, historical results of commercial operations have been reflected as discontinued
operations in the Company’s consolidated financial statements for all periods prior to the Closing Date. Assets and liabilities associated with the
commercial business are classified as assets and liabilities of discontinued operations in the Company’s consolidated balance sheets. Additional disclosures
regarding discontinued operations are provided in Note 2 to the financial statements included in this Annual Report.
45
The discussion below, and the revenues and expenses discussed below, are based on and relate to the continuing operations of the company.
2022 compared to 2021
Revenue:
Product revenue, net
License revenue
Total revenue, net
Cost of revenue
Gross profit
Operating expenses:
Selling and marketing
General and administrative
Research and development
Restructuring expense
Total operating expenses
Income (loss) from operations
Other (expense) income:
Other (expense) income, net
Total other (expense) income, net
Income (loss) from continuing operations before income taxes
Provision for income taxes
Net income (loss) from continuing operations
Income (loss) from discontinued operations, net of income taxes
Year ended December 31,
2021
2022
$
— $
69,963
69,963
1,397
68,566
—
57,903
—
9,472
67,375
1,191
(117)
(117)
1,074
—
1,074
110,923
—
2,573
2,573
1,402
1,171
—
80,748
—
—
80,748
(79,577)
272
272
(79,305)
—
(79,305)
(93,110)
Net income (loss)
$
111,997
$
(172,415)
Revenue. As part of the transformation of our Company and the Mayne License Agreement, historical results of commercial operations have been reflected
as discontinued operations in the Company’s consolidated financial statements for all periods presented.
Revenue from continuing operations is related to our license agreements. We recorded $70.0 million in license revenue related to the allocation of the initial
upfront payment and guaranteed minimum royalties from the Mayne License Agreement during the year ended December 31, 2022, and $2.6 million in
license revenue related to achieving previously established milestone payment targets and sales from other licensee during the year ended December 31,
2021.
Gross profit. Our gross profit for 2022 was $68.6 million, an increase of $67.4 million, compared to 2021. The increase in our gross profit was primarily a
result of an increase in license revenue related to the initial upfront payment and guaranteed minimums from the Mayne Transaction.
Operating expenses. Total operating expenses for 2022 were $67.4 million, a decrease of $13.4 million, or 16.6%, compared to 2021. Total operating
expenses decreased primarily due to lower general and administrative expenses described below during 2022, partially offset by $9.5 million of
restructuring expenses including severance, employee termination costs contract termination costs and write off of fixed assets related to restructuring
activities following the Mayne Transaction.
Our general and administrative costs were $57.9 million for 2022, a decrease of $22.8 million, or 28.3%, compared to 2021. This decrease was primarily
related to $12.7 million in lower compensation and employee benefit costs, $6.7 million in lower stock-based compensation expenses, and $3.6 million in
lower information technology expenses. These decreases were partially offset by $3.2 million in higher expenditures attributable to various professional
fees, such as legal, consulting, etc.
Income (loss) from operations. For 2022, we had an income from operations of $1.2 million, as compared to a loss from operations of $79.6 million for
2021. This change was attributable to $13.4 million in lower operating expenses and $67.4 million in higher gross profit.
Other income (expense), net. In 2022, we had non-operating expense of $0.1 million compared to non-operating income of $0.2 million in 2021.
46
Provision for income taxes. In 2022 or 2021, we recorded no provision for income taxes for continuing operations.
Net income (loss) from continuing operations. For 2022, we had a net income of $1.1 million, or $0.12 per basic and $0.11 per diluted common share,
compared to a loss of $79.3 million, or $9.96 per basic and diluted common share, for 2021.
Discontinued Operations—Revenues were $80.7 million for 2022, a decrease of $3.6 million, or 4.3%, as compared to the prior year. The decrease was
driven by a decrease in IMVEXXY revenue of $4.7 million, lower BIJUVA revenue of $0.5 million and lower prenatal vitamins revenue of $2.2 million,
partially offset by higher revenue of ANNOVERA of $3.8 million. Operating expenses were $97.6 million for 2022, a decrease of $35.7 million, as
compared to the prior year. Operating expenses decreased due to lower selling and marketing expenses of $33.0 million and lower research and
development expenses of $2.1 million as compared to the prior year, partially offset by restructuring charges of $6.2 million recorded in 2022, which were
recorded due to our business shift after granting an exclusive license to commercialize the Company’s IMVEXXY, BIJUVA, and prescription prenatal
vitamin products and assigning the Company’s exclusive license to commercialize ANNOVERA to Mayne Pharma. The decrease in opera ng expenses
also reflected the reduc on of vitaCare opera ng expenses in connec on with its dives ture in April 2022 and the termination of employees on December
31, 2022 following the Mayne Transaction. Operating loss from discontinued operations was $32.5 million, a decrease of $27.7 million as compared to the
prior year.
We reclassified certain expenses that were associated with debt that was required to be repaid as a result of transaction with Mayne Pharma and the
vitaCare divestiture to discontinued operations, which included interest, amortization of deferred financing costs as well as expense for accretion of the
Company’s newly-designated Series A Preferred Stock, par value $0.001 per share (the “Series A Preferred Stock”) and loss on extinguishment of debt.
Discontinued operations other income (expense) reflects a $143.4 million gain on the sale of the vitaCare business and a $62.0 million gain on sale of
ANNOVERA, net of transaction costs partially offset by $17.0 million in expense for accretion of Series A Preferred Stock in 2022, $8.4 million in loss on
extinguishment of debt in connection with amendments to the Financing Agreement (as defined below) during 2022 and $3.1 million in higher interest
expense and amortization of deferred financing costs as compared to 2021. For additional information, see Note 2 - Discontinued Operations, in the notes
to the consolidated financial statements appearing elsewhere in this Annual Report.
Liquidity and capital resources
Our primary use of cash is to fund the continued operations of our company. We have funded our operations primarily through public offerings of our
common stock and private placements of equity and debt securities. As of December 31, 2022, we had cash totaling $38.1 million. We maintain cash at
financial institutions that at times may exceed the Federal Deposit Insurance Corporation insured limits of $0.25 million per bank. We have never
experienced any losses related to these funds.
On April 14, 2022, we completed the vitaCare Divestiture and included $11.3 million of customary holdbacks, as provided in the Purchase Agreement,
which is recorded as restricted cash in the consolidated balance sheets. The restricted cash was held by an escrow agent and was be released to us in March
2023. Additionally, we may receive up to an additional $7.0 million in earn-out consideration, contingent upon vitaCare’s financial performance through
2023 as determined in accordance with the terms of the Purchase Agreement. We utilized $120.0 million of net proceeds from the vitaCare Divestiture to
make a prepayment of the loans under the Financing Agreement under the terms of Amendment No. 9 of the Financing Agreement.
On December 30, 2022, we granted Mayne Pharma (i) an exclusive, sublicensable, perpetual, irrevocable license to research, develop, register,
manufacture, have manufactured, market, sell, use, and commercialize the Licensed Products in the United States and its possessions and territories and (ii)
an exclusive, sublicensable, perpetual, irrevocable license to manufacture, have manufactured, import and have imported the Licensed Products outside the
United States for commercialization in the United States and its possessions and territories. The total consideration from Mayne Pharma to us under the
License Agreement was (i) a cash payment of $140.0 million at closing, (ii) a cash payment of approximately $12.1 million at closing for the acquisition of
net working capital as determined in accordance with the transaction agreement dated December 4, 2022, and subject to certain adjustments, (iii) a cash
payment of approximately $1.0 million at closing for prepaid royalties in connection with the License Agreement Amendment and (iv) the right to receive
the contingent consideration set forth in the License Agreement, as amended.
Pursuant to the Mayne License Agreement, Mayne Pharma will make one-time, milestone payments to the Company of each of (i) $5.0 million if aggregate
net sales of all Products in the United States during a calendar year reach $100.0 million, (ii) $10.0 million if aggregate net sales of all Products in the
United States during a calendar year reach $200.0 million and (iii) $15.0 million if aggregate net sales of all Products in the United States during a calendar
year reach $300.0 million. Further, Mayne Pharma will pay to the Company royalties on net sales of all Products in the United States at a royalty rate of
8.0% on the first $80 million in annual net sales and 7.5% on annual net sales above $80.0 million, subject to certain adjustments, for a period of 20 years
following the Closing Date. The royalty rate will decrease to 2.0% on a Product-by-Product basis upon the earlier to occur of (i) the expiration or
revocation of the last patent covering a Product and (ii) a generic version of a Product launching in the United States. Mayne Pharma will pay to the
Company minimal annual royalties of $3.0 million per year for 12 years, adjusted for inflation at an annual rate of 3%, subject to certain
47
further adjustments, including as described below. Upon the expiry of the 20-year royalty term, the licenses granted to Mayne Pharma under the Mayne
License Agreement will become a fully paid-up and royalty free license for the Licensed Products.
See “Going Concern” below for further discussion related to our ability to generate and obtain adequate amounts of cash to meet our liquidity needs and
our plans for to satisfy our such needs in the short-term and in the long-term.
Cash flows
The following table reflects the major categories of cash flows from continuing operations for each of the periods (in thousands).
Cash flow from continuing operations
Net cash provided by (used in) operating activities
Net cash used in investing activities
Net cash (used in) provided by financing activities
2022 compared to 2021
$
2022
2021
9,359 $
(355)
(235,206)
(55,133)
(2,223)
129,552
Operating Activities from continuing operations. Net cash provided by operating activities in 2022 was $9.4 million, compared to net cash used in
operating activities of $55.1 million for 2021. This decrease of $64.5 million or 117%, was primarily due to a $80.4 million decrease in our net loss from
continuing operations resulting from allocated to day one license revenue from the Mayne Transaction, a $8.7 million decrease in cash usage related to
changes in operating assets and liabilities, and a $7.2 million increase in non-cash expenditure adjustments as compared to 2021.
Investing Activities from continuing operations. Net cash used in investing activities for 2022 was $0.4 million, compared to net cash used in investing
activities of $2.2 million for 2021. This change was due to lower fixed asset and patent related costs as compared to 2021.
Financing Activities from continuing operations. Net cash used in financing activities for 2022 was $235.2 million, compared to net cash provided by
financing activities of $129.6 million for 2021. This change of $364.8 million, or 281.6%, was primarily related to higher repayment of debt of $169.4
million as compared to 2021, the redemption of our Series A Preferred Stock of $38.7 million at liquidation preference, and the repayment of make-whole
derivative of $3.0 million as compared to 2021. This was partially offset by proceeds from Series A Preferred Stock of $21.7 million, proceeds from make-
whole payment of $3.3 million, lower proceeds from sale of common stock of $181.7 million, lower payment for financing fees of $3.5 million and lower
proceeds from sale of stock related to employee stock purchase plan of $0.2 million as compared to 2021.
Operating Activities from discontinued operations. Net cash used in operating activities in 2022 was $13.4 million as compared to net cash used in
operating activities of $87.6 million for 2021. This decrease relates to a decrease in net loss of $204.0 million reflecting four months of vitaCare activities
in 2022 as compared to a full year in 2021 and reductions in marketing expenses for the commercial business as well as lower research and development
expenses to preserve cash in 2022, as well as increase in non-cash expenditure adjustments which included debt financing fees, non-cash interest expense,
accretion of Series A Preferred Stock and make-whole payment accretion and the loss of extinguishment of debt as compared to 2021.
Investing Activities from discontinued operations. Net cash provided by investing activities for 2022 was $223.8 million which included proceeds from
divesture of vitaCare of $142.6 million and proceeds from the sale of ANNOVERA of $81.2 million in 2022.
For additional details, see the consolidated statements of cash flows included in this 2022 10-K Report.
Other liquidity measures
Receivable. On December 30, Mayne Pharma acquired our account receivable balance of approximately $29.3 million which is subject to certain working
capital adjustments. As of December 31, 2022, we had a royalty receivable of $1.5 million relating to the short-term portion of receivable from Mayne
Pharma and $20.3 million relating to the long term portion of royalty receivable which includes royalties recognized from the Minimum Annual Royalty.
See Note 1 Business, basis of presentation, new accounting standards and summary of significant accounting policies (L Revenue Recognition) to the
consolidated financial statements included in this Annual Report.
Inventory. On December 30, Mayne Pharma acquired our inventory balance of approximately $8.4 million, which is subject to certain net working capital
adjustments.
Debt. On December 30, 2022, we repaid all obligations under the Financing Agreement and the Financing Agreement was terminated. See Note 7. Debt to
the consolidated financial statements included in this Annual Report.
48
Going concern
On December 4, 2022, we entered into agreements with Mayne Pharma pursuant to which we (i) granted Mayne Pharma an exclusive license to
commercialize IMVEXXY, BIJUVA, and prescription prenatal vitamin products (in the United States and its possessions and territories), (ii) assigned to
Mayne Pharma the Company’s exclusive license to commercialize ANNOVERA in the United States and its possessions and territories, and (iii) sold
certain other assets to Mayne Pharma.
The total consideration from Mayne Pharma to the Company for the purchase of the Transferred Assets and the grant of the licenses under the License
Agreement was (i) a cash payment of $140.0 million at closing, (ii) a cash payment of approximately $12.1 million at closing for the acquisition of net
working capital subject to certain adjustments, (iii) a cash payment of approximately $1.0 million at closing for prepaid royalties in connection with the
License Agreement Amendment and (iv) the right to receive the contingent consideration set forth in the License Agreement, as amended.
On the Closing Date, we repaid all obligations under the Financing Agreement, dated as of April 24, 2019, as amended, with Sixth Street Specialty
Lending, Inc., as administrative agent, the various lenders from time-to-time party thereto, and certain of the Company’s subsidiaries party thereto from
time to time as guarantors (the “Financing Agreement”) and the Financing Agreement was terminated.
Following the transaction with Mayne Pharma, we changed our business to become a royalty company, currently receiving royalties on products licensed to
pharmaceutical organizations that possess commercial capabilities in the relevant territories. We may need to raise additional capital to provide additional
liquidity to fund our operations until we become cash flow positive. To address our capital needs, we are pursuing various equity and debt financing and
other alternatives. The equity financing alternatives may include the private placement of equity, equity-linked, or other similar instruments or obligations
with one or more investors, lenders, or other institutional counterparties or an underwritten public equity or equity-linked securities offering. Our ability to
sell equity securities may be limited by market conditions, including the market price of our common stock, and our available authorized shares. To the
extent that we raise additional capital through the sale of such securities, the ownership interests of our existing stockholders will be diluted, and the terms
of these new securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders. If we are not successful in
obtaining additional financing, we could be forced to discontinue or curtail our business operations, sell assets at unfavorable prices, or merge, consolidate,
or combine with a company with greater financial resources in a transaction that might be unfavorable to us. Along with considering additional financing
and other strategic alternatives, we have reviewed numerous potential scenarios in connection with steps that we may take to reduce our operating
expenses.
Our ability to sell equity securities may be limited by market conditions, including the market price of our common stock and the potential delisting of our
common stock from the Nasdaq Global Select Market, and our available authorized shares.
To the extent that we raise additional capital through the sale of such securities, the ownership interests of our existing stockholders will be diluted, and the
terms of these new securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders. If we are not
successful in obtaining additional financing, we could be forced to discontinue or curtail our business operations, sell assets at unfavorable prices, or merge,
consolidate, or combine with a company with greater financial resources in a transaction that might be unfavorable to us.
If Mayne Pharma’s sales of IMVEXXY, BIJUVA, or ANNOVERA are delayed, if the net working capital settlement with Mayne Pharma under the
Transaction Agreement is greater than estimated, or if we are unsuccessful with future financings and or the continued impact of the COVID-19 pandemic
or the supply chains related to the third-party contract manufacturers is worse than we anticipate, our existing cash reserves would be insufficient to satisfy
our liquidity. The presence of these projected factors in conjunction with the uncertainty of the capital markets raises substantial doubt about the Company's
ability to continue as a going concern for the next twelve months from the issuance of these financial statements.
The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a
going concern.
Contractual obligations, off-balance sheet arrangements, purchase commitments and employment agreements
Our contractual obligations and off-balance sheet arrangements are set forth below. For additional information on any of the following and other
obligations and arrangements, see "Note 7. Debt" and "Note 8. Commitments and Contingencies" to the consolidated financial statements included in this
2022 10-K Report.
49
Contractual obligations
A summary of contractual obligations is as follows:
Total
Year 1
Operating lease obligations
Total contractual obligations
$
$
11,868 $
11,868 $
Years 2-3 Years 4-5 > 5 years
4,294
4,294
3,141 $
3,141 $
2,990 $
2,990 $
1,443 $
1,443 $
In the ordinary course of business, we enter into agreements with third parties that include indemnification provisions, which, in our judgment, are normal
and customary for companies in our industry sector. Pursuant to these agreements, we generally agree to indemnify, hold harmless, and reimburse
indemnified parties for losses suffered or omitted by us. The maximum potential amount of future payments we could be required to make under these
indemnification provisions is sometimes unlimited. We have not incurred material costs to defend lawsuits or settle claims related to these indemnification
provisions. As a result, the estimated fair value of liabilities relating to these provisions is minimal. Accordingly, we have no liabilities recorded for these
provisions as of December 31, 2022 and 2021.
In the normal course of business, we may be confronted with issues or events that may result in contingent liability. These generally relate to lawsuits,
claims, environmental actions, or the actions of various regulatory agencies. We consult with counsel and other appropriate experts to assess the claim. If,
in our opinion, we have incurred a probable loss as set forth by U.S. GAAP, an estimate is made of the loss and the appropriate accounting entries are
reflected in our financial statements.
Purchase commitments
Information regarding purchase commitments is in "Note 8. Commitments and contingencies" to the consolidated financial statements included in this 2022
10-K Report.
Employment agreements
Information regarding employment agreements is in "Note 8. Commitments and contingencies" to the consolidated financial statements included in this
2022 10-K Report.
Critical accounting policies and estimates
Management's discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements included
elsewhere in this 2022 10-K Report, which has been prepared in accordance with U.S. GAAP (“U.S. GAAP”). The preparation of these financial
statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related
disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to unbilled revenue, identifiable
intangible assets, certain accrued liabilities, and income taxes. We base our estimates on historical experience and on other assumptions that are believed to
be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We have identified the areas described below as critical to our business operations and the understanding of our results of operations given the uncertainties
associated with the assumptions underlying each estimate. For a detailed discussion on the application of these and other significant accounting policies,
see “Note 1. Basis of presentation, new accounting standards and summary of significant accounting policies” to the consolidated financial statements
included in this 2022 10-K Report.
Discontinued Operations
Discontinued operations comprise activities that were disposed of at the end of the period, represent a separate major line of business that can be clearly
distinguished for operational and financial reporting purposes and represent a business shift having a major effect on the Company’s operations and
financial results according to Accounting Standard Codification (“ASC”) Topic 205, Presentation of Financial Statements. An adjustment has been made to
the consolidated statements of operations for the twelve months ended December 31, 2022 and 2021 to reclassify commercial activities and vitaCare
activities to discontinued operations as the cessation of these operations, in the aggregate, represented a business shift that will have a major effect on the
Company’s operations and financial results. For additional information, see Note 2 - Discontinued Operations, in the notes to the consolidated financial
statements appearing elsewhere in this Report.
50
Segment reporting
We manage and operate as one business, which prior to December 2022 was focused on creating and commercializing products targeted exclusively for
women and after we signed License Agreement with Mayne Pharma, it is focused on collecting royalties from licensing our products. Our business is led
by our chief executive officer. We do not operate separate lines of business with respect to any of our products, and we do not prepare discrete financial
information with respect to separate products. Accordingly, we view our business as one reportable operating segment.
License revenue
License arrangements may consist of non-refundable upfront license fees, exclusive licensed rights to patented or patent pending technology, and various
performance or sales milestones and future product royalty payments. Some of these arrangements may include multiple performance obligations. Non-
refundable up-front fees that are not contingent on any future performance by us, and do not require continuing involvement on our part, are recognized as
revenue when the right to use functional intellectual property is transferred to the customer.
On December 30, 2022, we closed a License Agreement with Mayne Pharma pursuant to which we sold to Mayne Pharma the exclusive license rights in
our product ANNOVERA and granted an exclusive license in other products, including IMVEXXY and BIJUVA. Under the terms of the License
Agreement, we received $140 million at closing and we are eligible to receive additional payments in the aggregate of up to an additional $30 million based
on the achievement of sales milestones (collectively, the “Milestone Amounts”). The proceeds at closing were allocated between consideration for the sale
of ANNOVERA and the initial license fee for the Licensed Products, as the sale of ANNOVERA was accounted for under ASC 610-20, Gains and Losses
from Derecognition of Nonfinancial Assets in arriving at the gain on disposal (see Note 2 to the financial statements included in this Annual Report), while
the license grant of the other products were recognized under the provisions of ASC 606, Revenue from Contracts with Customers, as a license of
functional intellectual asset. The proceeds were allocated among the Licensed Products on the relative net present value of forecasted future product sales
from those products. The Milestone Amounts will be recognized, as applicable, in subsequent periods based on actual product sales that exceed the
respective net sales milestones as such variable consideration is constrained by the occurrence of the subsequent sales.
Our royalty revenue recognized in 2022 primarily related to royalties provided for under the Mayne License Agreement based on Mayne Pharma’s sales of
the Licensed Products subject to that agreement. Under the agreement, the Mayne License Agreement, the Company is entitled to earn royalties on net sales
of all of the Licensed Products at a royalty rate of (i) 8% on the first $80 million of net sales of the Licensed Products and (ii) 7.5% on net sales of all of the
Licensed Products a er the first $80 million of net sales. The royalty rate is subject to a 2% reduction upon the earlier to occur of (i) the expiration or
revocation of the last valid claim covering a Licensed Product, and (ii) a generic product launch (a “LOE”). We are entitled to minimum annual royalties
beginning with the year ending December 31, 2023 ($3 million annual minimum) and continuing with 3% annual increases through the year ending
December 31, 2034 (the “Minimum Annual Royalty”). The Minimum Annual Royalty totaled $42.6 million, and this total amount was allocated among the
Licensed Products on the relative net present value of forecasted future product sales from those products. The portion allocated to consideration for the
sale of ANNOVERA was attributed towards the gain on disposal of that asset. For the remaining portion allocated to the license grants for the other
products, we determined that the minimum guarantee underlying the Minimum Annual Royalty should be treated as fixed consideration and recognized
under ASC 606 at the point in time when the license was transferred. Since the Minimum Annual Royalty will be received in annual installments through
2034, we determined the transaction price allocated under ASC 606 contained a significant financing component, and we therefore determined the initial
royalty revenue and corresponding receivable based on the present value of the allocated Minimum Annual Royalty. The present value was calculated using
a discount rate of 10.45%, based on the credit characteristics of Mayne Pharma and the timing of future payments, and the value will be accreted to full
value through the earlier of January 1, 2034 or a LOE. This royalty receivable is a contract asset as of December 31, 2022, and is further subject to offset
by Mayne Pharma.
Royalty revenue earned in excess of the Minimum Annual Royalty will be recognized under ASC 606, which provides revenue recognition constraints by
requiring the recognition of revenue at the later of the following: 1) when the subsequent sale occurs or 2) when the performance obligation to which some
or all of the sales-based royalty has been allocated has been satisfied (or partially satisfied). We applied the royalty recognition constraint required under
the guidance for sales-based royalties, which requires a sales-based royalty to be recorded no sooner than the underlying sale. Therefore, royalties on sales
of products commercialized by Mayne Pharma will be recognized in the subsequent periods that the Licensed Products are sold.
For additional discussion on revenue, see “L. Revenue recognition” in Note 1. Basis of presentation, new accounting standards and summary of significant
accounting policies to the consolidated financial statements included in this 2022 10-K Report.
51
During 2022 and 2021, we had BIJUVA sales of $1.4 million made through the Theramex License Agreement, and such sales were included as license
revenue in the statements of operations. In addition, in 2021, we received milestone payments comprised of an aggregate of EUR 1.0 million, or $1.2
million, in regulatory milestone payments based on regulatory approvals for BIJUVA in certain specified markets. We previously granted licenses to
commercialize the Company’s BIJUVA product outside of the United States to Theramex and Knight.
Share-based payment awards
We account for share-based payment awards on a fair value basis of the equity instrument issued. Under fair value accounting, the grant-date fair value of
the share-based payment award is amortized as compensation expense, on a straight-line basis, over the service period (generally, the vesting period) for
both graded and cliff vesting awards. We have elected to account for forfeitures as they occur.
Income taxes
Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases,
and operating loss and income tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of
a change in income tax rates is recorded as a component of the income tax provision in the period that includes the enactment date.
Regular assessments are made on the likelihood that our deferred tax assets will be recovered from our future taxable income. Our evaluation is based on
estimates, assumptions, and includes an analysis of available positive and negative evidence, giving weight based on the evidence’s relative objectivity.
Sources of positive evidence include estimates of future taxable income, future reversal of existing taxable temporary differences, taxable income in
carryback years, and available tax planning strategies. Sources of negative evidence include current and cumulative losses in recent years, losses expected
in early future years, any history of operating losses or tax credit carryforwards expiring unused, and unsettled circumstances that, if unfavorably resolved,
would adversely affect future profit levels.
The remaining carrying value of our deferred tax assets, after recording the valuation allowance on our deferred tax assets, is based on our present belief
that it is more likely than not that we will be able to generate sufficient future taxable income to utilize such deferred tax assets. The amount of the
remaining deferred tax assets considered recoverable could be adjusted if our estimates of future taxable income during the carryforward period change
favorably or unfavorably. To the extent we believe that it is more likely than not that some or all the remaining deferred tax assets will not be realized, we
must establish a valuation allowance against those deferred tax assets, resulting in additional income tax expense in the period such determination is made.
To the extent a valuation allowance currently exists, we will continue to monitor all positive and negative evidence until we believe it is more likely than
not that it is no longer necessary, resulting in an income tax benefit in the period such determination is made.
Our policy is to recognize both interest and penalties related to uncertain tax positions as part of the income tax provision. Significant judgment is required
in evaluating our tax positions, and in determining our provisions for income taxes, our deferred tax assets and liabilities and any valuation allowance
recorded against our net deferred tax assets. We establish reserves when, despite our belief that the income tax return positions are fully supportable, certain
positions are likely to be challenged and we may ultimately not prevail in defending those positions.
Restructuring Costs.
Our restructuring costs consist primarily of severance, employee termination costs contract termination costs and write off of fixed assets related to
restructuring activities.
Recent accounting pronouncements
Information regarding accounting standards adopted during 2022 is included in "Note 1. Basis of Presentation, New Accounting Standards and Significant
Accounting Policies" to the consolidated financial statements.
Item 7A. Quantitative and qualitative disclosures about market risk
As a “smaller reporting company,” as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and pursuant to
Instruction 6 to Item 201(e) of Regulation S-K, we are not required to provide this information.
52
Item 8. Financial statements and supplementary data
Reference is made to the financial statements, the notes thereto, and the report thereon, commencing on page F-1 of this 2022 10-K Report, which financial
statements, notes, and reports are incorporated herein by reference.
Item 9. Change in and disagreements with accountants on accounting and financial disclosure
None.
Item 9A. Controls and procedures
Evaluation of disclosure controls and procedures
Our management evaluated the effectiveness of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e)
or 15d-15(e)) as of the end of the period covered by this 2022 10-K Report. Based on that evaluation, our Principal Executive Officer and Principal
Financial Officer concluded that, as of December 31, 2022, our disclosure controls and procedures were effective to ensure that information required to be
disclosed by us in the reports we file or submit under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods
specified in the SEC rules and forms, and (ii) is accumulated and communicated to our management, including our Principal Executive Officer and
Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in internal control over financial reporting
There was no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
Inherent limitations on effectiveness of controls
Our management does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system,
no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, misstatements,
errors, and instances of fraud, if any, within our company have been or will be prevented or detected. Further, internal controls may become inadequate
because of changes in conditions, or through the deterioration of the degree of compliance with policies or procedures.
53
Management’s report on internal control over financial reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined under Exchange Act Rules
13a-15(f) and 15d-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Internal control over financial
reporting includes those policies and procedures that:
•
•
•
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of
our management and directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could
have a material effect on the financial statements.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022. In making this assessment, our
management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—
Integrated Framework (2013). Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of
the operational effectiveness of its internal control over financial reporting. Based on management’s assessment, we believe that our internal controls over
financial reporting were effective as of December 31, 2022.
This 2022 10-K Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the rules of the SEC that
permit the Company to provide only management’s report in this 2022 10-K Report.
Item 9B. Other information
None.
Item 9C. Disclosure regarding foreign jurisdictions that prevent inspections
None.
54
PART III
Item 10.
Directors, executive officers, and corporate governance
The information required by this Item relating to our directors and corporate governance is incorporated herein by reference to the definitive Proxy
Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2023 Annual Meeting of Stockholders.
Item 11.
Executive compensation
The information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the
Exchange Act for our 2023 Annual Meeting of Stockholders.
Item 12.
Security ownership of certain beneficial owners and management and related stockholder matters
The information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the
Exchange Act for our 2023 Annual Meeting of Stockholders.
Item 13.
Certain relationships and related transactions, and director independence
The information required by this Item is incorporated herein by reference to the definitive Proxy Statements to be filed pursuant to Regulation 14A of the
Exchange Act for our 2023 Annual Meeting of Stockholders.
Item 14.
Principal accountant fees and services
The information required by this Item is incorporated herein by reference to the definitive Proxy Statements to be filed pursuant to Regulation 14A of the
Exchange Act for our 2023 Annual Meeting of Stockholders.
55
PART IV
Item 15.
Exhibits and financial statement schedules
(a) Financial statements and financial statements schedules
(1) Financial Statements are listed in the Index to Financial Statements on page F-1 of this 2022 10-K Report.
(2) No financial statement schedules are included because such schedules are not applicable, are not required, or because required
information is included in the consolidated financial statements or notes thereto.
(b) Exhibits
Exhibit No.
2.1
2.2
2.3
2.4
Description
Agreement and Plan of Reorganization, dated July 6, 2009, among
Croff Enterprises, Inc., AMHN Acquisition Corp., America’s Minority
Health Network, Inc., and the Major Shareholders(1)
Agreement and Plan of Reorganization, dated June 11, 2010, among
AMHN, Inc., SHN Acquisition Corp., Spectrum Health Network, Inc.,
and the Sole Shareholder of Spectrum Health Network, Inc.(2)
Croff Enterprises, Inc. Plan of Corporate Division and Reorganization,
dated October 25, 2007(3)
Agreement and Plan of Merger, dated July 18, 2011, among
vitaMedMD, LLC, AMHN, Inc., and vitaMed Acquisition, LLC(4)
2.5***+
Stock Purchase Agreement, dated March 6, 2022, by and between TherapeuticsMD, Inc. and GoodRx, Inc.(33)
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.8
4.1
4.2†
10.1
10.2*
10.3*
10.4*
10.5*
10.6*
10.7*
10.8
10.9
10.10
10.11
Articles of Conversion of AMHN, Inc. filed in the State of Nevada,
dated July 20, 2010(5)
Articles of Incorporation of AMHN, Inc. filed in the State of Nevada,
dated July 20, 2010(5)
Composite Amended and Restated Articles of Incorporation of the Company, as amended(35)
Bylaws of the AMHN, Inc.(7)
First Amendment to Bylaws of the Company, dated December 17, 2015(8)
Second Amendment to Bylaws of the Company, adopted May 27, 2022(36)
Third Amendment to Bylaws of the Company, dated July 29, 2022(37)
Certificate of Change to Articles of Incorporation of the Company(38)
Certificate of Designation, Preferences and Rights of Series A Preferred Stock (37)
Form of Certificate of Common Stock(9)
Description of Securities of the Company
Form of Common Stock Purchase Warrant(11)
Form of Non-Qualified Stock Option Agreement(11)
TherapeuticsMD, Inc. 2019 Stock Incentive Plan(12)
First Amendment to the TherapeuticsMD, Inc. 2019 Stock Incentive Plan(27)
Amended and Restated 2012 Stock Incentive Plan(13)
2009 Long Term Incentive Compensation Plan, as amended(14)
TherapeuticsMD, Inc. 2020 Employee Stock Purchase Plan(15)
Form of Common Stock Purchase Warrant, dated February 24, 2012(17)
Common Stock Purchase Warrant, issued to Plato & Associates, LLC, dated January 31, 2013(18)
Form of Warrant to Purchase Common Stock, dated August 5, 2020(6)
Amendment to Company Warrant issued by the Company to the Subscribers party to that certain Subscription Agreement, dated as of
August 5, 2020, dated November 8, 2020(19)
56
10.12
Second Amendment to Company Warrant issued by the Company to the Subscribers party to that certain Subscription Agreement, dated as
10.13
10.14
10.15*
10.16*
10.17
of August 5, 2020(20)
Warrant issued by the Company to Robert Finizio(20)
Amendment to Warrant issued by the Company to Robert Finizio(20)
Warrant issued by the Company to John C.K. Milligan, IV(20)
Amendment to Warrant issued by the Company to John C.K. Milligan, IV(20)
Subscription Agreement, dated August 5, 2020, by and among TherapeuticsMD, Inc. and the Subscribers identified on the Schedule of
Subscribers attached thereto(6)
10.18***
License Agreement, dated July 30, 2018, by and between TherapeuticsMD, Inc. and The Population Council, Inc.(22)
10.19***
Lease, dated October 5, 2018, by and between 951 Yamato Acquisition Company, LLC and TherapeuticsMD, Inc.(23)
10.20*
10.21*
10.22*
10.23*
10.24*
10.25*
10.26*
10.27*
10.28*
10.29*
10.30*
10.31*
Executive Employment Agreement, dated as of August 3, 2021, by and between TherapeuticsMD, Inc. and Hugh O’Dowd(28)
TherapeuticsMD, Inc. Inducement Grant Restricted Stock Unit Agreement, dated as of August 31, 2021, by and between TherapeuticsMD,
Inc. and Hugh O’Dowd(29)
Employment Agreement, dated June 1, 2020, between the Company and James C. D’Arecca(6)
Amendment to Employment Agreement, dated October 15, 2021, between TherapeuticsMD, Inc. and James C. D’Arecca(30)
Executive Employment Agreement, dated October 15, 2021, by and between TherapeuticsMD, Inc. and Mark Glickman(31)
TherapeuticsMD, Inc. Inducement Grant Restricted Stock Unit Agreement, dated October 15, 2021, by and between TherapeuticsMD, Inc.
and Mark Glickman(32)
Amended and Restated Employment Agreement, dated November 24, 2020, between the Company and Michael Donegan(24)
Amended and Restated Employment Agreement, dated November 24, 2020, between the Company and Robert G. Finizio(24)
Amended and Restated Employment Agreement, dated November 24, 2020, between the Company and John C.K. Milligan, IV(24)
Amendment, dated April 8, 2021, to the Amended and Restated Employment Agreement, dated as of November 24, 2020, by and between
TherapeuticsMD, Inc. and John C.K. Milligan, IV(26)
Employment Agreement, October 30, 2019, between the Company and Edward J. Borkowski(20)
Amendment to Employment Agreement between the Company and Edward J. Borkowski(20)
10.32***
License and Supply Agreement, dated June 6, 2019, by and between TherapeuticsMD, Inc. and Theramex HQ UK Limited(21)
10.33*
10.34
Form of Indemnification Agreement between TherapeuticsMD, Inc. and each of its executive officers and directors(19)
Controlled Equity OfferingSM Sales Agreement, dated November 27, 2020, by and between TherapeuticsMD, Inc. and Cantor Fitzgerald &
Co.(24)
10.35
Controlled Equity OfferingSM Sales Agreement, dated March 3, 2021, by and between TherapeuticsMD, Inc. and Cantor Fitzgerald & Co.
(25)
10.36*
2022 Executive Retention and Performance Bonus Plan. (ERB-Plan)(34)
10.37
10.38
10.39
10.40
Subscription Agreement between TherapeuticsMD, Inc. and Rubric Capital Management LP, dated July 29, 2022(37)
Subscription Agreement by and among TherapeuticsMD, Inc., Sixth Street Specialty Lending, Inc., TOP IV Talents, LLC and TOA
Talents, LLC, dated July 29, 2022(37)
Subscription Agreement between TherapeuticsMD, Inc. and Rubric Capital Management LP, dated September 30, 2022(39)
Subscription Agreement by and among TherapeuticsMD, Inc., Sixth Street Specialty Lending, Inc., TOP IV Talents, LLC and TAO Talents,
LLC, dated September 30, 2022(39)
57
10.41
10.42
Subscription Agreement between TherapeuticsMD, Inc. and Rubric Capital Management LP, dated October 28, 2022(40)
Subscription Agreement by and among TherapeuticsMD, Inc., Sixth Street Specialty Lending, Inc., TOP IV Talents, LLC and TAO Talents,
LLC, dated October 28, 2022(40)
10.43***+
License Agreement by and between TherapeuticsMD, Inc. and Mayne Pharma LLC, dated December 4, 2022(41)
10.44***+
Transaction Agreement by and between TherapeuticsMD, Inc. and Mayne Pharma LLC, dated December 4, 2022(41)
10.45**†
Amendment No. 1 to the License Agreement between TherapeuticsMD, Inc. and Mayne Pharma LLC, dated as of December 30, 2022
10.46†
Amendment No. 1 to the Transaction Agreement between TherapeuticsMD, Inc. and Mayne Pharma LLC, dated as of December 30, 2022
10.47*†
Amended and Restated Employment Agreement, dated as of December 18, 2018, by and between TherapeuticsMD, Inc. and Marlan
Walker
10.48*†
Amendment, effective October 15, 2021, to the Employment Agreement, dated as of December 18, 2018, by and between TherapeuticsMD,
Inc. and Marlan Walker
10.49*
Amendment, dated February 21, 2023, to the Employment Agreement, dated as of December 18, 2018, as extended effective October 15,
2021, by and between TherapeuticsMD, Inc. and Marlan Walker(16)
10.50*
General Consulting and Services Agreement by and between TherapeuticsMD, Inc. and MCD Consulting Management Services, LLC,
21.1†
23.1†
31.1†
31.2†
32.1††
32.2††
101†
dated February 21, 2023(16)
Subsidiaries of the Company
Consent of Grant Thornton LLP
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)
Section 1350 Certification of Chief Executive Officer
Section 1350 Certification of Chief Financial Officer
Inline XBRL Document Set for the consolidated financial statements and accompanying notes in Part IV, Item 15(a), “Financial Statements
and Financial Statements Schedules” of this Annual Report on Form 10-K
104†
Inline XBRL for the cover page of this Annual Report on Form 10-K, included in the Exhibit 101 Inline XBRL Document Set
*
Indicates a contract with management or compensatory plan or arrangement.
** Certain confidential material contained in the document has been omitted and filed separately with the Securities and Exchange Commission.
Confidential treatment has been granted with respect to this omitted information.
*** Portions of this exhibit have been redacted in compliance with Regulation S-K Item 601(b)(2). The omitted information is not material and would
likely cause competitive harm to the Company if publicly disclosed.
+
†
Certain of the exhibits and schedules to this exhibit have been omitted in accordance with Item 601(a)(5) of Regulation S-K. The Company agrees to
furnish a copy of all omitted exhibits and schedules to the SEC upon its request.
Filed herewith.
†† Furnished herewith.
(1) Filed as an exhibit to Form 8-K filed with the Commission on July 10, 2009 and incorporated herein by reference (SEC File No. 000-16731).
(2) Filed as an exhibit to Form 8-K filed with the Commission on June 14, 2010 and incorporated herein by reference (SEC File No. 000-16731).
(3) Filed as an exhibit to Form 10-K for the year ended December 31, 2007 filed with the Commission on May 1, 2008 and incorporated herein by
reference (SEC File No. 000-16731).
(4) Filed as an exhibit to Form 8-K filed with the Commission on July 21, 2011 and incorporated herein by reference (SEC File No. 000-16731).
58
(5) Filed as an exhibit to Form 10-Q for the quarter ended June 30, 2010 filed with the Commission on August 3, 2010 and incorporated herein by
reference (SEC File No. 000-16731).
(6) Filed as an exhibit to Form 10-Q for the quarter ended June 30, 2020 filed with the Commission on August 7, 2020 and incorporated herein by
reference (SEC File No. 001-00100).
(7) Filed as an exhibit to Definitive 14C Information Statement filed with the Commission on June 29, 2010 and incorporated herein by reference (SEC
File No. 000-16731).
(8) Filed as an exhibit to Form 8-K filed with the Commission on December 22, 2015 and incorporated herein by reference (SEC File No. 001-00100).
(9) Filed as an exhibit to Form S-3 filed with the Commission on January 25, 2013 and incorporated hereby by reference (SEC File No. 333-186189).
(10) Filed as an exhibit to Form 10-K for the year ended December 31, 2019 filed with the Commission on February 24, 2020 and incorporated herein by
reference (SEC File No. 001-00100).
(11) Filed as an exhibit to Form 8-K filed with the Commission on October 11, 2011 and incorporated herein by reference (SEC File No. 000-16731).
(12) Filed as an exhibit to Form S-8 filed with the Commission on June 21, 2019 and incorporated herein by reference (SEC File No. 333-232268).
(13) Filed as an exhibit to Form 8-K filed with the Commission on August 22, 2013 and incorporated herein by reference (SEC File No. 001-00100).
(14) Filed as an exhibit to Registration Statement on Form S-8 filed with the Commission on October 15, 2013 and incorporated herein by reference (SEC
File No. 333-191730).
(15) Filed as an appendix to the Definitive Proxy Statement filed with the Commission on May 4, 2020 and incorporated herein by reference (SEC File No.
001-00100).
(16) Filed as an exhibit to Form 8-K filed with the Commission on February 27, 2023 and incorporated herein by reference (SEC File No. 001-00100).
(17) Filed as an exhibit to Form 8-K filed with the Commission on February 24, 2012 and incorporated herein by reference (SEC File No. 000-16731).
(18) Filed as an exhibit to Form 8-K filed with the Commission on February 6, 2013 and incorporated herein by reference (SEC File No. 000-16731).
(19) Filed as an exhibit to Form 10-Q filed with the Commission on November 9, 2020 and incorporated herein by reference (SEC File No. 001-00100).
(20) Filed as an exhibit to Form 10-K for the year ended December 31, 2020 filed with the Commission on March 4, 2021 and incorporated herein by
reference (SEC File No. 001-00100).
(21) Filed as an exhibit to Form 10-Q for the quarter ended June 30, 2019 filed with the Commission on August 9, 2019 and incorporated herein by
reference (SEC File No. 001-00100).
(22) Filed as an exhibit to Form 10-Q for the quarter ended September 30, 2018 filed with the Commission on November 8, 2018 and incorporated herein
by reference (SEC File No. 001-00100).
(23) Filed as an exhibit to Form 10-Q for the quarter ended September 30, 2019 filed with the Commission on November 8, 2019 and incorporated herein
by reference (SEC File No. 001-00100).
(24) Filed as an exhibit to Form 8-K filed with the Commission on November 27, 2020 and incorporated herein by reference (SEC File No. 001-00100).
(25) Filed as an exhibit to Registration Statement on Form S-3 filed with the Commission on March 4, 2021 and incorporated herein by reference (SEC
File No. 333-253851).
(26) Filed as an exhibit to Form 8-K filed with the Commission on April 12, 2021 and incorporated herein by reference (File No. 001-00100).
(27) Filed as an appendix to the Definitive Proxy Statement filed with the Commission on April 14, 2021 and incorporated herein by reference (File No.
001-00100).
(28) Filed as an exhibit to Form 8-K filed with the Commission on August 9, 2021 and incorporated herein by reference (File No. 001-00100).
59
(29) Filed as exhibit to Form S-8 filed with the Commission on August 31, 2021 and incorporated herein by reference (File No. 333-259221)
(30) Filed as an exhibit to Form 10-Q for the quarterly period ended September 30, 2021 filed with the Commission on November 11, 2021 and
incorporated herein by reference (SEC File No. 001-00100).
(31) Filed as an exhibit to Form S-8 filed with the Commission on October 15, 2021 and incorporated herein by reference (File No. 333-260295).
(32) Filed as an exhibit to Form S-8 filed with the Commission on October 15, 2021 and incorporated herein by reference (File No. 333-260295).
(33) Filed as an exhibit to Form 8-K filed with the Commission on March 10, 2022 and incorporated herein by reference (File No. 001-00100).
(34) Filed as an exhibit to Form 10-K for the year ended December 31, 2021, filed with the Commission on March 23, 2022 and incorporated herein by
reference (File No. 001-00100).
(35) Filed as an exhibit to Form 10-Q for the quarter ended March 31, 2022, filed with the Commission on May 16, 2022 and incorporated herein by
reference (File No. 001-00100).
(36) Filed as an exhibit to Form 8-K filed with the Commission on June 3, 2022 and incorporated herein by reference (File No. 001-00100).
(37) Filed as an exhibit to Form 8-K filed with the Commission on August 1, 2022 and incorporated herein by reference (File No. 001-00100).
(38) Filed as an exhibit to Form 8-K filed with the Commission on May 9, 2022 and incorporated herein by reference (File No. 001-00100).
(39) Filed as an exhibit to Form 8-K filed with the Commission on October 3, 2022 and incorporated herein by reference (File No. 001-00100).
(40) Filed as an exhibit to Form 8-K filed with the Commission on October 31, 2022 and incorporated herein by reference (File No. 001-00100).
(41) Filed as an exhibit to Form 8-K filed with the Commission on December 5, 2022 and incorporated herein by reference (File No. 001-00100).
Item 16.
Form 10-K summary
None.
60
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this 2022 10-K Report to be
signed on its behalf by the undersigned, thereunto duly authorized, on April 7, 2023
Signatures
THERAPEUTICSMD, INC.
/s/ Marlan D. Walker
Marlan D. Walker
Chief Executive Officer
/s/ Michael C. Donegan
Michael C. Donegan
Principal Financial and Accounting
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this 2022 10-K Report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the date indicated on April 7, 2023.
Signature
Title
/s/ Marlan D. Walker
Marlan D. Walker
Chief Executive Officer
(Principal Executive Officer)
/s/ Michael C. Donegan
Michael C. Donegan
/s/ Tommy G. Thompson
Tommy G. Thompson
/s/ Cooper C. Collins
Cooper C. Collins
/s/ Gail K. Naughton, Ph.D.
Gail K. Naughton, Ph.D.
/s/ Justin Roberts
Justin Roberts
Principal Financial and Accounting Officer
Chairman
Director
Director
Director
61
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders’ Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
F-1
Page
F-2
F-3
F-4
F-5
F-6
F-7
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
TherapeuticsMD, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of TherapeuticsMD, Inc. (a Nevada corporation) and subsidiaries (the “Company”) as of
December 31, 2022 and 2021, the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the two years in
the period ended December 31, 2022, and the related notes collectively referred to as the “financial statements”). In our opinion, the financial statements
present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its
cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United
States of America.
Going concern
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1
to the financial statements, the Company has recently changed its business strategy to become a royalty company. The Company has limited experience
operating as a royalty company and may need to raise additional capital to fund its operations until the Company becomes cash flow positive. These
conditions, along with other matters as set forth in Note 1, raise substantial doubt about the Company’s ability to continue as a going
concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s 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 audits 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 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. As part of our audits we are required to obtain an understanding of
internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the 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 financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matter
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated
to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2015.
Miami, Florida
April 7, 2023
F-2
TherapeuticsMD, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except per share amounts)
Assets:
Current assets:
Cash
Restricted cash
Prepaid and other current assets
Current assets of discontinued operations
Total current assets
Fixed assets, net
License rights and other intangible assets, net
Right of use assets
Royalty receivable, long term
Other non-current assets
Non-current assets of discontinued operations
Total assets
Liabilities and stockholders' equity (deficit):
Current liabilities:
Current maturities of long-term debt
Accounts payable
Accrued expenses and other current liabilities
Current liabilities of discontinued operations
Total current liabilities
Operating lease liabilities, non-current
Other non-current liabilities
Total liabilities
Commitments and contingencies (Note 8)
Stockholders' equity (deficit):
Preferred stock, par value $0.001; 10,000 shares authorized
Common stock, par value $0.001; 12,000 shares authorized, 9,498 and 8,598
(adjusted for the 50-for-1 reverse stock split) issued and outstanding as of December 31, 2022 and
2021, respectively
Additional paid-in capital
Accumulated deficit
Total stockholders' equity (deficit)
Total liabilities and stockholders' equity (deficit)
As of December 31,
2022
2021
38,067 $
11,250
6,034
—
55,351
78
6,943
7,580
20,253
253
—
90,458 $
— $
2,162
18,846
25,831
46,839
7,369
1,107
55,315
64,907
—
5,859
48,702
119,468
823
7,144
8,234
—
253
33,550
169,472
188,269
3,373
13,338
47,911
252,891
8,063
2,139
263,093
—
—
9
974,497
(939,363)
35,143
90,458 $
9
957,730
(1,051,360)
(93,621)
169,472
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-3
TherapeuticsMD, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
Revenue:
Product revenue, net
License revenue
Total revenue, net
Cost of revenue
Gross profit
Operating expenses:
Selling and marketing
General and administrative
Research and development
Restructuring expense
Total operating expenses
Income (loss) from operations
Other (expense) income:
Other (expense) income, net
Total other (expense) income, net
Income (loss) from continuing operations before income taxes
Provision for income taxes
Net income (loss) from continuing operations
Income (loss) from discontinued operations, net of income taxes
Net income (loss)
Income (loss) per common share, basic:
Continuing operations
Discontinued operations, net
Net income (loss)
Income (loss) per common share, diluted:
Continuing operations
Discontinued operations, net
Net income (loss)
Weighted average common shares, basic
Weighted average common shares, diluted
Comprehensive income (loss):
Net income (loss)
Other comprehensive income
Comprehensive income (loss)
Year ended December 31,
2021
2022
$
— $
69,963
69,963
1,397
68,566
—
57,903
—
9,472
67,375
1,191
(117)
(117)
1,074
—
1,074
110,923
—
2,573
2,573
1,402
1,171
—
80,748
—
—
80,748
(79,577)
272
272
(79,305)
—
(79,305)
(93,110)
$
$
$
$
$
$
$
111,997
$
(172,415)
0.12 $
12.29
12.41 $
0.11
11.84
11.96
$
$
9,028
9,366
(9.96)
(11.70)
(21.66)
(9.96)
(11.70)
(21.66)
7,960
7,960
111,997
—
111,997
$
$
(172,415)
—
(172,415)
The accompanying notes are an integral part of these consolidated financial statements.
F-4
TherapeuticsMD, Inc. and Subsidiaries
Consolidated Statements of Stockholders' (Deficit) Equity
(In thousands)
Balance, December 31, 2020
Shares issued for sale of common stock, net of cost
Shares issued for exercise of warrants, net of cashless
exercises
Shares issued for exercise of options
Shares issued for vested restricted and performance stock units
Shares issued for sale of common stock related to employee stock purchase
plan
Share-based payment award compensation costs
Net loss
Balance, December 31, 2021
Shares issued for sale of common stock, net of cost
Lender warrants
Rounding for fractional shares in connection with the reverse stock split
Shares issued for vested restricted and performance stock units
Shares issued for sale of common stock related to
employee stock purchase plan
Share-based payment award compensation costs
Net income
Balance, December 31, 2022
Common Stock
Shares
Amount
Additional
Paid in
Capital
Accumulated
Deficit
Total
5,995
$
2,435
22
2
136
7
—
—
8,597
565
—
142
189
5
—
—
9,498 $
6
$
3
754,938
$
184,112
(878,945)
$
—
(124,001)
184,115
—
—
—
—
—
—
9
—
—
—
—
—
—
—
9 $
278
44
—
233
18,125
—
957,730
2,454
2,727
—
—
—
—
—
—
—
(172,415)
(1,051,360)
—
—
—
—
14
11,572
—
974,497 $
—
—
111,997
(939,363) $
278
44
-
233
18,125
(172,415)
(93,621)
2,454
2,727
—
—
14
11,572
111,997
35,143
The accompanying notes are an integral part of these consolidated financial statements.
F-5
TherapeuticsMD, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Net income (loss)
Less: Loss from discontinued operations, net of tax
Net income (loss) from continuing operations
Adjustments to reconcile net income (loss) to net cash used in continuing operating activities:
Depreciation and amortization
Share-based payment compensation costs
Make-whole payment accretion
Other
Changes in operating assets and liabilities:
Prepaid and other current assets
Other assets
Accounts payable
Accrued expenses and other current liabilities
Other non-current liabilities
Total adjustments
Net cash used in continuing operating activities
Cash flows from continuing investing activities:
Payment for patent related costs
Purchase of fixed assets
Net cash provided by (used in) continuing investing activities
Cash flows from continuing financing activities:
Proceeds from sale of common stock, net of costs
Proceeds from exercise of options and warrants
Proceeds from sale of common stock related to employee stock
purchase plan
Repayments of debt
Proceeds from Series A Preferred Stock, net of transaction costs
Repurchase of Preferred Stock at liquidation preference
Proceeds from make-whole derivative
Repayment of make-whole derivative
Payment of debt financing fees
Net cash (used in) provided by continuing financing activities
Discontinued operations:
Net cash used in operating activities
Net cash provided by investing activities
Net cash provided by financing activities
Net cash provided by (used in) discontinued operations
Net decrease in cash
Cash and restricted cash - continuing operations, beginning of period
Cash and restricted cash - discontinued operations, beginning of period
Total cash and restricted cash, end of period
Supplemental disclosure of cash flow information:
Interest paid
Supplemental disclosure of noncash financing activities:
Warrants issued in relation to debt financing agreement
Year ended December 31,
2022
2021
$
111,997 $
110,923
1,074
(172,415)
(93,110)
(79,305)
1,193
11,572
(354)
(40)
620
(7,636)
(1,211)
4,262
(121)
8,285
9,359
(355)
—
(355)
2,454
—
14
(219,432)
21,684
(38,657)
3,322
(2,969)
(1,622)
(235,206)
(13,437)
223,834
—
210,397
(15,805)
64,907
215
$
$
$
49,317
$
13,545 $
2,727 $
736
18,125
—
720
(1,125)
—
(1,062)
4,639
2,139
24,172
(55,133)
(2,189)
(34)
(2,223)
184,115
322
233
(50,000)
—
—
—
—
(5,118)
129,552
(87,560)
—
—
(87,560)
(15,364)
79,019
1,467
65,122
25,068
-
The accompanying notes are an integral part of these consolidated financial statements.
F-6
TherapeuticsMD, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
1. Business, basis of presentation, new accounting standards and summary of significant accounting policies
General
TherapeuticsMD, Inc. (the “Company”), a Nevada corporation, and its consolidated subsidiaries are referred to collectively in this Annual Report on Form
10-K (“2022 10-K Report”) as “TherapeuticsMD,” “we,” “our” and “us.” This 2022 10-K Report includes our trademarks, trade names and service marks,
such as TherapeuticsMD®, vitaMedMD®, BocaGreenMD®, vitaCareTM, IMVEXXY®, BIJUVA® and ANNOVERA®, which are protected under
applicable intellectual property laws and are the property of, or licensed to, the Company. Solely for convenience, trademarks, trade names and service
marks referred to in this 2022 10-K Report may appear without the ®, TM or SM symbols, but such references are not intended to indicate, in any way, that
we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, trade names and service
marks. We do not intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display should not be
construed to imply a relationship with, or endorsement or sponsorship of us by, these other parties.
TherapeuticsMD was previously a women’s healthcare company with a mission of creating and commercializing innovative products to support the
lifespan of women from pregnancy prevention through menopause. In December 2022, we changed our business to become a pharmaceutical royalty
company, currently receiving royalties on products licensed to pharmaceutical organizations that possess commercial capabilities in the relevant territories.
On December 30, 2022 (the “Closing Date”), the Company completed a transaction (the “Mayne Transaction”) with Mayne Pharma LLC, a Delaware
limited liability company (“Mayne Pharma”) and subsidiary of Mayne Pharma Group Limited, an Australian public company, pursuant to which the
Company and its subsidiaries (i) granted Mayne Pharma an exclusive license to commercialize the Company’s IMVEXXY, BIJUVA and prescription
prenatal vitamin products sold under the BocaGreenMD® and vitaMedMD® brands (collectively, the “Licensed Products”) in the United States and its
possessions and territories, (ii) assigned to Mayne Pharma the Company’s exclusive license to commercialize ANNOVERA (together with the Licensed
Products, collectively, the “Products”) in the United States and its possessions and territories, and (iii) sold certain other assets to Mayne Pharma in
connection therewith.
Pursuant to a License Agreement, dated December 4, 2022, between the Company and Mayne Pharma (the “Mayne License Agreement”), the Company
granted Mayne Pharma, on the Closing Date, (i) an exclusive, sublicensable, perpetual, irrevocable license to research, develop, register, manufacture, have
manufactured, market, sell, use, and commercialize the Licensed Products in the United States and its possessions and territories and (ii) an exclusive,
sublicensable, perpetual, irrevocable license to manufacture, have manufactured, import and have imported the Licensed Products outside the United States
for commercialization in the United States and its possessions and territories.
Pursuant to the Mayne License Agreement, Mayne Pharma will make one-time, milestone payments to the Company of each of (i) $5.0 million if aggregate
net sales of all Products in the United States during a calendar year reach $100.0 million, (ii) $10.0 million if aggregate net sales of all Products in the
United States during a calendar year reach $200.0 million and (iii) $15.0 million if aggregate net sales of all Products in the United States during a calendar
year reach $300.0 million. Further, Mayne Pharma will pay to the Company royalties on net sales of all Products in the United States at a royalty rate of
8.0% on the first $80 million in annual net sales and 7.5% on annual net sales above $80.0 million, subject to certain adjustments, for a period of 20 years
following the Closing Date. The royalty rate will decrease to 2.0% on a Product-by-Product basis upon the earlier to occur of (i) the expiration or
revocation of the last patent covering a Product and (ii) a generic version of a Product launching in the United States. Mayne Pharma will pay to the
Company minimal annual royalties of $3.0 million per year for 12 years, adjusted for inflation at an annual rate of 3%, subject to certain further
adjustments, including as described below. Upon the expiry of the 20-year royalty term, the licenses granted to Mayne Pharma under the Mayne License
Agreement will become a fully paid-up and royalty free license for the Licensed Products.
Pursuant to a Transaction Agreement, dated December 4, 2022, between the Company and Mayne Pharma (the “Transaction Agreement”), the Company
sold to Mayne Pharma, at closing, certain assets for Mayne Pharma to commercialize the Products in the United States, including, with the Populations
Council’s consent, the Company’s exclusive license from the Population Council to commercialize ANNOVERA (the “Transferred Assets”).
The total consideration from Mayne Pharma to the Company for the purchase of the Transferred Assets and the grant of the licenses under the Mayne
Transaction Agreement was (i) a cash payment of $140.0 million at closing, (ii) a cash payment of approximately $12.1 million at closing for the
acquisition of net working capital as determined in accordance with the Transaction Agreement and subject to certain adjustments, (iii) a cash payment of
approximately $1.0 million at closing for prepaid royalties in connection with the Mayne License Agreement Amendment (as defined below) and (iv) the
right to receive the contingent consideration set forth in the
F-7
Mayne License Agreement, as amended. The acquisition of net working capital was determined in accordance with the Transaction Agreement and
included significant estimates which could change materially for a period of up to two years following the Closing Date.
On the Closing Date, the Company and Mayne Pharma entered into Amendment No. 1 to the Mayne License Agreement (the “Mayne License Agreement
Amendment”). Pursuant to the Mayne License Agreement Amendment, Mayne Pharma agreed to pay the Company approximately $1.0 million in prepaid
royalties on the Closing Date. The prepaid royalties will reduce the first four quarterly payments that would have otherwise been payable pursuant to the
Mayne License Agreement by an amount equal to $257,250 per quarterly royalty payment plus interest calculated at 19% per annum accruing from the
Closing Date until the date such quarterly royalty payment is paid to the Company. In addition, the parties agreed that Mayne Pharma will reduce one
quarterly royalty payment (other than the first quarterly royalty payment) otherwise payable to the Company by $1.5 million in consideration of Mayne
Pharma assuming the Company’s obligations under a long-term services agreement (see vitaCare divestiture below), including the Company’s minimum
payment obligations thereunder.
As part of the transformation that included Mayne License Agreement, historical results of commercial operations have been reflected as discontinued
operations in the Company’s consolidated financial statements for all periods prior to the Closing Date. Assets and liabilities associated with the
commercial business are classified as assets and liabilities of discontinued operations in the Company’s consolidated balance sheets. Additional disclosures
regarding discontinued operations are provided in Note 2.
The Company also has license agreements with strategic partners to commercialize IMVEXXY and BIJUVA outside of the U.S.
•
•
In July 2018, we entered into a license and supply agreement (the “Knight License Agreement”) with Knight Therapeutics Inc. (“Knight”)
pursuant to which we granted Knight an exclusive license to commercialize IMVEXXY and BIJUVA in Canada and Israel.
In June 2019, we entered into an exclusive license and supply agreement (the “Theramex License Agreement”) with Theramex HQ UK Limited
(“Theramex”) to commercialize IMVEXXY and BIJUVA outside of the U.S., excluding Canada and Israel. In 2021, Theramex secured
regulatory approval for BIJUVA in certain European countries and began commercialization efforts in those countries.
In connection with the Company’s transformation into a pharmaceutical royalty company, the termination of our executive management team (except for
Mr. Marlan Walker, our former General Counsel and current Chief Executive Officer) and all other employees was completed by December 31, 2022.
Severance obligations for all employees other than executive officers were paid in full in January 2023 and severance obligations for terminated executive
officers will be paid in accordance with their employment agreements and separation agreements as previously disclosed. As of December 31, 2022, we
employed 1 full-time employee primarily engaged in an executive position. We have also entered into consulting agreements with certain former members
of our management team who support our relationship with current partners and assist with certain financial, legal and regulatory matters and the continued
wind-down of our historical business operations.
vitaCare Divestiture
On April 14, 2022, we completed the divestiture of vitaCare Prescription Services, Inc. (“vitaCare”) with the sale of all of vitaCare’s issued and outstanding
capital stock (the “vitaCare Divestiture”). We received net proceeds of $142.6 million, net of transaction costs of $7.2 million, and we recognized a gain on
sale of business of $143.4 million. Included in the net proceeds amount was $11.3 million of customary holdbacks as provided in the stock purchase
agreement (the “Purchase Agreement”), which is recorded as restricted cash in the consolidated balance sheets. The restricted cash was held by an escrow
agent and was be released to us in March 2023. Additionally, we may receive up to an additional $7.0 million in earn-out consideration, contingent upon
vitaCare’s financial performance through 2023 as determined in accordance with the terms of the Purchase Agreement. We will record the contingent
consideration at the settlement amount when the consideration is realized or realizable.
The Purchase Agreement contains customary representations and warranties, covenants, and indemnities of the parties thereto. The commitments under a
long-term services agreement related to vitaCare were transferred to Mayne Pharma as part of the Mayne Transaction. In addition, under the Mayne
License Agreement Amendment, Mayne Pharma will reduce one quarterly royalty payment (other than the first quarterly royalty payment) otherwise
payable to us by $1.5 million in consideration of Mayne Pharma assuming our obligations under the long-term services agreement related to vitaCare.
The divestiture of vitaCare was determined to be a component of discontinued operations in December 2022, when the Company changed its business by
becoming a royalty company and as a result vitaCare activities were reclassified to discontinued operations for 2022 and 2021.
F-8
COVID-19
With multiple variant strains of the SARS-Cov-2 virus and the COVID-19 disease that it causes (collectively, “COVID-19”) still circulating, we continue to
be subject to risks and uncertainties in connection with the COVID-19 pandemic. The extent of the future impact of the COVID-19 pandemic on our
business continues to be highly uncertain and difficult to predict.
As of the date of issuance of these consolidated financial statements, the future extent to which the COVID-19 pandemic may continue to materially impact
our financial condition, liquidity, or results of operations remains uncertain and difficult to predict. Even after the COVID-19 pandemic has subsided, we
may continue to experience adverse impacts to our business as a result of any economic recession or depression that has occurred or may occur in the
future.
Going Concern
On December 4, 2022, we entered into agreements with Mayne Pharma pursuant to which we granted Mayne Pharma an exclusive license to
commercialize IMVEXXY, BIJUVA, and prescription prenatal vitamin products (in the United States and its possessions and territories), (ii) assign to
Mayne Pharma the Company’s exclusive license to commercialize ANNOVERA in the United States and its possessions and territories, and (iii) sell
certain other assets to Mayne Pharma.
The total consideration from Mayne Pharma to the Company for the purchase of the Transferred Assets and the grant of the licenses under the License
Agreement was (i) a cash payment of $140.0 million at closing, (ii) a cash payment of approximately $12.1 million at closing for the acquisition of net
working capital subject to certain adjustments, (iii) a cash payment of approximately $1.0 million at closing for prepaid royalties in connection with the
License Agreement Amendment and (iv) the right to receive the contingent consideration set forth in the License Agreement, as amended.
On the Closing Date, we repaid all obligations under the Financing Agreement, dated as of April 24, 2019, as amended, with Sixth Street Specialty
Lending, Inc., as administrative agent, the various lenders from time-to-time party thereto, and certain of the Company’s subsidiaries party thereto from
time to time as guarantors (the “Financing Agreement”) and the Financing Agreement was terminated.
Following the transaction with Mayne Pharma, our primary source of revenue will be from royalties on products licensed to pharmaceutical organizations
that possess commercial capabilities in the relevant territories. We may need to raise additional capital to provide additional liquidity to fund our operations
until we become cash flow positive. To address our capital needs, we may pursue various equity and debt financing and other alternatives. The equity
financing alternatives may include the private placement of equity, equity-linked, or other similar instruments or obligations with one or more investors,
lenders, or other institutional counterparties or an underwritten public equity or equity-linked securities offering. Our ability to sell equity securities may be
limited by market conditions, including the market price of our common stock, and our available authorized shares.
Our ability to sell equity securities may be limited by market conditions, including the market price of our common stock and our available authorized
shares.
To the extent that we raise additional capital through the sale of such securities, the ownership interests of our existing stockholders will be diluted, and the
terms of these new securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders. If we are not
successful in obtaining additional financing, we could be forced to discontinue or curtail our business operations, sell assets at unfavorable prices, or merge,
consolidate, or combine with a company with greater financial resources in a transaction that might be unfavorable to us.
If Mayne Pharma’s sales of IMVEXXY, BIJUVA, or ANNOVERA are delayed, if the net working capital settlement with Mayne Pharma under the
Transaction Agreement, or if we are unsuccessful with future financings and or the continued impact of the COVID-19 pandemic or the supply chains
related to the third-party contract manufacturers is worse than we anticipate, our existing cash reserves would be insufficient to satisfy our liquidity. The
presence of these projected factors in conjunction with the uncertainty of the capital markets raises substantial doubt about the Company's ability to
continue as a going concern for the next twelve months from the issuance of these financial statements.
The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a
going concern.
A. Basis of presentation
The consolidated financial statements and related notes include our parent company and all wholly-owned subsidiaries. The consolidated financial
statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
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GAAP”). Our fiscal year-end is as of and for the year ended December 31st for each year presented. All intercompany transactions among our businesses
have been eliminated.
As part of the transformation as a result of Mayne License Agreement, historical results of commercial operations have been reflected as discontinued
operations in the Company’s consolidated financial statements for all periods prior to the Closing Date. Assets and liabilities associated with the
commercial business are classified as assets and liabilities of discontinued operations in the Company’s consolidated balance sheets. Additional disclosures
regarding discontinued operations are provided in Note 2.
Certain amounts in the notes to the consolidated financial statements may not add due to rounding, and all percentages have been calculated using
unrounded amounts.
B. New accounting standards
Adoption of new accounting standards
New accounting standards or accounting standards updates were assessed and determined to be either not applicable or did not have a material impact on
the Company’s consolidated financial statements or processes.
Accounting standards issued but not yet adopted
Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and Scope. These ASUs provide optional
guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be
discontinued, such as London Interbank Offered Rate (LIBOR). These ASUs include practical expedients for contract modifications due to reference rate
reform. Generally, contract modifications related to reference rate reform may be considered an event that does not require remeasurement or reassessment
of a previous accounting determination at the modification date. These ASUs were effective upon issuance and may be applied prospectively to contract
modifications made or evaluated on or before December 31, 2022. We paid off our debt as of December 30, 2022, and as a result the adoption of this
guidance will not have an impact on our financial statements and, to the extent we enter into new debt agreements, we will apply such guidance to those
contracts.
Other recently issued accounting standards not yet adopted by us are not expected, upon adoption, to have a material impact on the Company’s
consolidated financial statements or processes.
C. Discontinued Operations
Discontinued operations comprise activities that were disposed of at the end of the period, represent a separate major line of business that can be clearly
distinguished for operational and financial reporting purposes and represent a business shift having a major effect on the Company’s operations and
financial results according to Accounting Standard Codification (“ASC”) Topic 205, Presentation of Financial Statements. An adjustment has been made to
the consolidated statements of operations for the twelve months ended December 31, 2022 and 2021 to reclassify commercial activities and vitaCare
activities to discontinued operations as both components, in the aggregate, represented a business shift that will have a major effect on the Company’s
operations and financial results. No amounts for shared general and administrative operating support expense were allocated to discontinued operations. As
required by the terms of our Financing Agreement, the proceeds from both transactions were used to fully repay our outstanding debt borrowings. As a
result, interest expense and amortization of deferred financing costs as well as expense for accretion of Series A Preferred Stock and loss on extinguishment
of debt are included within income (loss) from discontinued operations, net of tax. Additionally, the related assets and liabilities have been reported as
assets and liabilities of discontinued operations in the Company’s consolidated balance sheet as of December 31, 2022 and 2021. For additional
information, see Note 2 - Discontinued Operations.
D. Estimates and assumptions
The preparation of consolidated financial statements in conformity to U.S. GAAP requires us to make certain estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. We evaluate our estimated assumptions based on historical experience and on various other assumptions
that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ, at times in material amounts, from these estimates under different assumptions or conditions.
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E. Cash and Restricted Cash
We maintain cash at financial institutions that at times may exceed the Federal Deposit Insurance Corporation (“FDIC”) insured limits of $0.25 million per
bank. We have never experienced any losses related to these funds.
Restricted cash is comprised of escrowed funds deposited with a bank relating to the vitaCare Divestiture. All restrictions were lifted in March 2023 and it
is no longer restricted, see Note 15.
F. Accounts receivable and allowance for doubtful accounts
Accounts receivable are customer obligations due under normal trade terms and are measured at amortized cost. We historically extended credit on an
unsecured basis to most of our customers based on an evaluation of a customer’s financial condition, and collateral was not required. Our accounts
receivable concentration of credit risk is primarily limited to customers who are drug wholesalers and retail pharmacy distributors.
We review accounts receivable for uncollectible and delinquent accounts and credit card chargebacks, and we provide an allowance for doubtful accounts,
which is based upon a review of outstanding receivables, historical collection information, reasonable supportable forecasts, and existing economic
conditions, and we record an allowance that presents the net amount expected to be collected. We write off uncollectible and delinquent receivables against
our allowance for doubtful accounts based on individual credit evaluations, the results of collection efforts, and specific circumstances of customers. We
record recoveries of accounts previously written off when received as an increase in the allowance for doubtful accounts. To the extent data we use to
calculate these estimates does not accurately reflect bad debts, adjustments to these reserves may be required. Our exposure to credit losses may increase if
our customers are adversely affected by changes in healthcare laws, coverage, and reimbursement, economic pressures or uncertainty associated with local
or global economic recessions, disruption associated with the current COVID-19 pandemic, or other customer-specific factors. Although we have
historically not experienced significant credit losses, it is possible that there could be a material adverse impact from potential adjustments of the carrying
amount of trade receivables in the future. On December 30, 2022, Mayne Pharma acquired our accounts receivable balance of approximately $29.3 million
which is subject to certain working capital adjustments.
G.
Inventories
Inventories are valued at the lower of cost or net realizable value. Our pharmaceutical products are valued using first in first out method and our vitamins
are valued using the average-cost method. We review inventories for excess and obsolescence, and we write-down obsolete or otherwise unmarketable
inventory to its estimated net realizable value. Obsolescence may occur due to product expiring, product improvements rendering previous versions
obsolete, or decreases in demand for our products. On December 30, 2022, Mayne Pharma acquired our inventory balance of approximately $8.4 million,
which is subject to certain net working capital adjustments.
H. Fair Value Measurements
Fair value is the price to sell an asset or transfer a liability and therefore represents an exit price in the principal market (or in the absence of a principal
market, the most advantageous market). It represents a market-based measurement that contemplates a hypothetical transaction between market participants
at the measurement date.
The unique characteristics of an asset or liability and the availability of observable prices affect the number of valuation approaches and/or techniques used
in a fair value analysis. We measure fair value using observable and unobservable inputs. We give the highest priority to quoted prices (unadjusted) in
active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs).
We apply the following fair value hierarchy:
•
•
•
Level 1 - Quoted prices (unadjusted) in active markets for identical assets and liabilities.
Level 2 - Quoted prices in non-active markets or in active markets for similar assets or liabilities, observable inputs other than quoted prices; and
inputs that are not directly observable but are corroborated by observable market data.
Level 3 - Inputs that are unobservable.
The carrying amount of our cash, restricted cash, accounts receivable, accounts payable and accrued expenses approximate their fair value because of the
short-term maturity of such instruments, which are considered Level 1 under the fair value hierarchy.
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I.
Fixed assets
Fixed assets are carried at cost less accumulated depreciation and amortization. We charge maintenance costs, which do not significantly extend the useful
lives of the respective assets, and repair costs to operating expenses as incurred. We compute depreciation using the straight-line method over the estimated
useful lives of the related assets, which range from three to seven years. Leasehold improvements are depreciated over the shorter of their useful life or the
term of the lease. Long-lived assets held and used by us, including fixed assets, are assessed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
We capitalize software and software development costs incurred to create and acquire computer software for internal use, principally related to software
coding and application development. We begin to capitalize software development costs when both the preliminary project stage is completed, and it is
probable that the software will be used as intended. Capitalized software costs include only external direct costs and services utilized in developing or
obtaining computer software. Capitalized software costs are amortized on a straight-line basis when placed into service over the estimated useful life,
generally five to seven years.
J. License rights and other intangibles assets
We record license rights and other intangible assets at cost, which includes external costs, consisting primary of legal costs, incurred in securing our patents
and trademarks.
License rights cost related to ANNOVERA were amortized until December 30, 2022 over the useful life over which the license rights would contribute
directly or indirectly to our cash flows. The cost was amortized using the straight-line method as the pattern of economic benefit could not be reliably
determined. On December 30, 2022, we assigned our ANNOVERA license to Mayne Pharma and included the remaining ANNOVERA license cost of
$30.2 million in our calculation of the gain on sale of assets. In addition, amortization of license rights of $3.0 million for years 2022 and 2021 was
reclassified to discontinued operations.
Intangible assets subject to amortization, such as patents, are amortized over the useful life of the patent using the straight-line method. If the patent is not
granted, we write off any capitalized patent costs at that time. Intangible assets not subject to amortization, such as trademarks, are perpetual and have
indefinite lives.
We review license rights and other intangible assets subject to amortization on a periodic basis to determine whether events and circumstances would
indicate impairment or warrant a revision to their remaining useful lives. We assess other intangible assets not subject to amortization for potential
impairment at least annually during the fourth quarter of each year, or more frequently if events occur or circumstances change that would more likely than
not reduce the fair value of the intangible assets below their carrying value.
K. Segment reporting
We manage and operate as one business, which prior to December 2022 was focused on creating and commercializing products targeted exclusively for
women and after we signed Mayne License Agreement, is focused on collecting royalties from licensing our products. Our business is led by our chief
executive officer. We do not operate separate lines of business with respect to any of our products, and we do not prepare discrete financial information
with respect to separate products. Accordingly, we view our business as one reportable operating segment.
L. Revenue recognition
We determine the amount of revenue to be recognized through application of the following steps:
•
•
•
•
•
Identification of the contract with a customer;
Identification of the performance obligations in the contract;
Determination of the transaction price;
Allocation of the transaction price to the performance obligations in the contract; and
Recognition of revenue when or as we satisfy the performance obligations.
Essentially all of our revenue is generated through contracts with our customers. A performance obligation is a promise in a contract to transfer a product or
service to a customer. A good or service is considered to be transferred when the customer receives the goods or service or obtains control, and we treat
shipping as a fulfillment activity rather than as a separate obligation. We generally recognize revenue at a point in time when all of our performance
obligations under the terms of a contract are satisfied. Revenue is recognized upon transfer of control of promised products or services in an amount that
reflects the consideration we expect to receive in exchange
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for those products or services. The collectability of consideration on the contract is reasonably assured before revenue is recognized. To the extent that
customer payment has been received before all recognition criteria are met, these revenues are initially deferred in other accruals on the balance sheet and
the revenue is recognized in the period that all recognition criteria have been met.
Prescription products
On December 30, 2022, we granted an exclusive license to commercialize our prescription products and assigning the Company’s exclusive license to
commercialize ANNOVERA to Mayne Pharma, which resulted in a business shift that had a major effect on our operations and financial results. As part of
the transformation that included the Mayne License Agreement, historical results of commercial operations have been reflected as discontinued operations
in the Company’s consolidated financial statements for all periods prior to the Closing Date. As of December 31, 2022, we are no longer directly engaged
in the sale of prescription products.
Prior to the business shift in December 2022, prescription products were sold at fixed wholesale acquisition cost, or WAC, determined based on our list
price. However, the total transaction price was variable as it was calculated net of estimated product returns, chargebacks, rebates, coupons, discounts and
wholesaler fees. These estimates were based on the amounts earned or to be claimed on the related sales and were classified as reductions of accounts
receivable (if the amount was payable to the customer) or a current liability (if the amount was payable to a party other than a customer). To determine the
transaction price, we estimated the amount of variable consideration at the outset of the contract either utilizing the expected value or most likely amount
method, depending on the facts and circumstances relative to the contract or each variable consideration. The estimated amount of variable consideration
was included in the transaction price only to the extent that it was probable that a significant reversal in the amount of cumulative product revenue
recognized would not occur when the uncertainty associated with the variable consideration was subsequently resolved. In determining amounts of variable
consideration to include in a contract’s transaction price, we relied on our historical experience and other evidence that supported our qualitative assessment
of whether product revenue would be subject to a significant reversal. We considered all the facts and circumstances associated with both the risk of a
product revenue reversal arising from an uncertain future event and the magnitude of the reversal if that uncertain event were to occur. Actual amounts of
consideration ultimately received could differ from our estimates. If actual results in the future varied from our original estimates, we would adjust these
estimates, which would affect net product revenue and earnings in the period such changes in estimates become known.
We accepted returns of unsalable prescription products sold through wholesale distributors within a return period of six months prior to and up to 12
months following product expiration. ANNOVERA can not be returned before the expiration date and expired ANNOVERA can be returned up to 12
months past the expiration date. Our prescription vitamins, IMVEXXY and BIJUVA have a shelf life of 24 months from the date of manufacture and
ANNOVERA currently has a shelf life of 18 months from the date of manufacture. We did not allow product returns for prescription products that have
been dispensed to a patient. We estimated the amount of our product sales that could be returned by our customers and recorded this estimate as a reduction
of product revenue in the period the related product revenue was recognized. Where historical rates of return existed, we used history as a basis to establish
a returns reserve for products shipped to wholesalers. For newly launched products, for which the right of return existed but for which we did not have
history of product returns, we estimated returns based on available industry data, our own sales information and our visibility into the inventory remaining
in the distribution channel. At the end of each reporting period, sometimes we constrained product revenue, if necessary, for product returns based on
information from various sources, including channel inventory levels and dating and sell-through data, the expiration dates of products being shipped, price
changes of competitive products and any introductions of generic products. We recognized the amount of expected returns as a refund liability, representing
the obligation to return the customer’s consideration. Since our returns primarily consisted of expired and short dated products that would not be resold, we
did not record a return asset for the right to recover the goods returned by the customer at the time of the initial sale (when recognition of product revenue
is deferred due to the anticipated return).
We offered various rebate and discount programs in an effort to maintain a competitive position in the marketplace and to promote sales and customer
loyalty. We estimated the allowance for consumer rebates and coupons that we have offered based on our experience and industry averages, which was
reviewed and adjusted, if necessary, on a quarterly basis. We recorded distributor fees based on amounts stated in contracts. We estimated chargebacks
based on number of units sold during the period taking into account prices stated in contracts and our historical experience. We provided discounts to our
customers for prompt payment. Consumer rebates and coupons costs, distribution fees, chargebacks and discounts were deducted from gross product
revenue at the time the product revenue was recognized.
For our prescription products, we offered a co-pay assistance program for eligible enrolled patients whose out of pocket costs were reduced to a more
affordable price. This allowed patients to access the product at a reasonable cost and was in line with our responsible pricing approach. We reimbursed
pharmacies for this discount through third-party vendors. The variable consideration was estimated based on contract prices, the estimated percentage of
patients that would utilize the copay assistance, the average assistance paid, the estimated levels of inventory in the distribution channel and the current
level of prescriptions covered by patients’ insurance. Payers could change coverage levels for our prescription products positively or negatively, at any time
up to the time that we have formally
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contracted coverage with the payer. As such, the net transaction price of our prescription products was susceptible to such changes in coverage levels,
which was outside the influence of the Company. As a result, we constrained variable consideration for our prescription products to an amount that would
not result in a significant product revenue reversal in future periods. Our ability to estimate the net transaction price for our prescription products was
constrained by our estimates of the amount to be paid for the co-pay assistance program which was directly related to the level of prescriptions paid for by
insurance. As such, we recorded an accrual to reduce gross sales for the estimated co-pay and other patient assistance based on currently available third-
party data and our internal analyses. We re-evaluated variable consideration each reporting period.
License revenue
License arrangements may consist of non-refundable upfront license fees, exclusive licensed rights to patented or patent pending technology, and various
performance or sales milestones and future product royalty payments. Some of these arrangements may include multiple performance obligations. Non-
refundable up-front fees that are not contingent on any future performance by us, and do not require continuing involvement on our part, are recognized as
revenue when the right to use functional intellectual property is transferred to the customer.
On December 30, 2022, we and closed the Mayne Transaction pursuant to which we sold to Mayne Pharma the exclusive license rights in our product
ANNOVERA and granted an exclusive license in other products, including IMVEXXY and BIJUVA (together, the three products being the “Licensed
Products” - see Note 1). Under the terms of the Mayne License Agreement, we received $140 million at closing and we are eligible to receive additional
payments in the aggregate of up to an additional $30 million, based on the achievement of sales milestones (collectively, the “Milestone Amounts”). The
proceeds at closing were allocated between consideration for the sale of ANNOVERA and the initial license fee for the Licensed Products, as the sale of
ANNOVERA was accounted for under ASC 610-20, Gains and Losses from Derecognition of Nonfinancial Assets in arriving at the gain on disposal (see
Note 2), while the license grant of the other products were recognized under the provisions of ASC 606, Revenue from Contracts with Customers, as a
license of functional intellectual property. The proceeds were allocated among the Licensed Products on the relative net present value of forecasted future
product sales from those products. The Milestone Amounts will be recognized, as applicable, in subsequent periods based on actual product sales that
exceed the respective net sales milestones as such variable consideration is constrained by the occurrence of the subsequent sales.
Our royalty revenue in 2022 related to royalties provided for under the Mayne License Agreement based on Mayne Pharma’s sales of the licensed products
subject to that agreement. Under the Mayne License Agreement, the Company is entitled to earn royalties on net sales of all of the Licensed Products at a
royalty rate of (i) 8% on the first $80 million of net sales of the Licensed Products and (ii) 7.5% on net sales of all of the Licensed Products a er the first
$80 million of net sales. The royalty rate is subject to a 2% reduction upon the earlier to occur of (i) the expiration or revocation of the last valid claim
covering a Licensed Product, and (ii) a generic product launch (a “LOE”). We are entitled to minimum annual royalties beginning with the year ending
December 31, 2023 ($3 million annual minimum) and continuing with 3% annual increases through the year ending December 31, 2034 (the “Minimum
Annual Royalty”). The total Minimum Annual Royalty we are entitled to is $42.6 million, and this total amount was allocated among the Licensed
Products on the relative net present value of forecasted future product sales from those products. The portion allocated to consideration for the sale of
ANNOVERA was attributed towards the gain on disposal of that asset. For the remaining portion allocated to the license grants for the other products, we
determined that the minimum guarantee underlying the Minimum Annual Royalty should be treated as fixed consideration and recognized under ASC 606
at the point in time when the license was transferred. Since the Minimum Annual Royalty will be received in annual installments through 2034, we
determined the transaction price allocated under ASC 606 contained a significant financing component, and we therefore determined the initial royalty
revenue and corresponding receivable based on the present value of the allocated Minimum Annual Royalty. The present value was calculated using a
discount rate of 10.45%, based on the credit characteristics of Mayne Pharma and the timing of future payments, and the value will be accreted to full value
through the earlier of January 1, 2034 or a LOE. This royalty receivable is a contract asset as of December 31, 2022, and is further subject to offset by
Mayne Pharma (see N. Contract Assets and Liabilities below).
Royalty revenue earned in excess of the Minimum Annual Royalty will be recognized under ASC 606, which provides revenue recognition constraints by
requiring the recognition of revenue at the later of the following: 1) when the subsequent sale occurs or 2) when the performance obligation to which some
or all of the sales-based royalty has been allocated has been satisfied (or partially satisfied). We applied the royalty recognition constraint required under
the guidance for sales-based royalties, which requires a sales-based royalty to be recorded no sooner than the underlying sale. Therefore, royalties on sales
of products commercialized by Mayne Pharma will be recognized in the subsequent periods that the Licensed Products are sold.
In 2021, we received milestone payments comprised of an aggregate of EUR 1.0 million, or $1.2 million, in regulatory milestone payments based on
regulatory approvals for BIJUVA in certain specified markets. In 2022 and 2021, we recorded BIJUVA sales of $1.4 million made through the Theramex
License Agreement which was recorded as license revenue.
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M. Cost of revenue
Cost of revenue includes the cost of inventory, manufacturing, manufacturing overhead and supply chain costs and product shipping and handling costs.
Costs related to the Population Council License Agreement, which were based on our net sales of ANNOVERA, and amortization of license rights were
reclassified to discontinued operations for 2022 and 2021 as a result of the transaction with Mayne Pharma.
N. Contract Assets and Liabilities
Contract assets as of December 31, 2022, include royalties recognized from the Minimum Annual Royalty (see L. Revenue Recognition above). Pursuant
to the Mayne License Agreement, this asset was reduced in December 2022 by $1.5 million in consideration for Mayne Pharma assuming an obligation
payable to vitaCare, and will be further reduced, other than from future payments on receivables from Mayne Pharma, for $1.0 million in prepaid royalties
that we received from Mayne Pharma on the closing date. The prepaid royalties will reduce the first four quarterly payments that would have otherwise
been payable to us under the Minimum Annual Royalty by an amount equal to $257,250 per quarter plus interest calculated at 19% per annum.
O. Research and development
Research and development expenses included internal R&D activities, costs of services of third-party contract research organizations (“CROs”) and usage
of their clinical research sites, manufacturing, scale-up and validation costs, and other activities. Internal R&D activity expenses included laboratory
supplies, salaries, benefits, and share-based payment award compensation costs. CRO activity expenses included preclinical laboratory experiments and
clinical trial studies. Other activity expenses included regulatory consulting and other costs. These consulting expenses were direct costs associated with
preparing, reviewing, and undertaking work for our clinical trials and investigative drugs which were reclassified to discontinued operations for 2022 and
2021 as a result of the transaction with Mayne Pharma. As of December 31, 2022, we do not have any ongoing research and development activities.
P.
Share-based payment awards
We account for share-based payment awards on a fair value basis of the equity instrument issued. Under fair value accounting, the grant-date fair value of
the share-based payment award is amortized as compensation expense, on a straight-line basis, over the service period (generally, the vesting period) for
both graded and cliff vesting awards. We have elected to account for forfeitures as they occur.
Q. Common stock reverse stock split
On May 6, 2022, we completed a reverse stock split of our Common Stock. As a result, outstanding shares of our Common Stock were split at a ratio of 50-
for-1 (the “Reverse Stock Split”) with any fractional shares resulting from the Reserve Stock Split rounded up to the next whole share of Common Stock.
The number of authorized shares of Common Stock was also correspondingly reduced from 600.0 million shares to 12.0 million shares to give effect to the
Reverse Stock Split. Additionally, all rights to receive shares of Common Stock under outstanding warrants, options, restricted stock units (“RSUs”) and
performance stock units (“PSUs”) were adjusted to give effect of the Reverse Stock Split. Furthermore, remaining shares of Common Stock available for
future issuance under share-based payment award plans and our employee stock purchase plan were adjusted to give effect of the Reverse Stock Split.
Pursuant to Section 78.209 of the Nevada Revised Statutes, the approval of our stockholders was not required for our Board of Directors (the “Board”) to
effectuate the Reverse Stock Split.
All historical number of shares of Common Stock and per share data have been adjusted to give effect to the Reverse Stock Split. Additionally, since the
Common Stock par value was unchanged, historical amounts for Common Stock and additional paid-in capital have been adjusted to give effect to the
Reverse Stock Split.
R.
Income taxes
Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases,
and operating loss and income tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of
a change in income tax rates is recorded as a component of the income tax provision in the period that includes the enactment date.
Regular assessments are made on the likelihood that our deferred tax assets will be recovered from our future taxable income. Our evaluation is based on
estimates, assumptions, and includes an analysis of available positive and negative evidence, giving weight based on the evidence’s relative objectivity.
Sources of positive evidence include estimates of future taxable income, future reversal of existing
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taxable temporary differences, taxable income in carryback years, and available tax planning strategies. Sources of negative evidence include current and
cumulative losses in recent years, losses expected in early future years, any history of operating losses or tax credit carryforwards expiring unused, and
unsettled circumstances that, if unfavorably resolved, would adversely affect future profit levels.
The remaining carrying value of our deferred tax assets, after recording the valuation allowance on our deferred tax assets, is based on our present belief
that it is more likely than not that we will be able to generate sufficient future taxable income to utilize such deferred tax assets. The amount of the
remaining deferred tax assets considered recoverable could be adjusted if our estimates of future taxable income during the carryforward period change
favorably or unfavorably. To the extent we believe that it is more likely than not that some or all the remaining deferred tax assets will not be realized, we
must establish a valuation allowance against those deferred tax assets, resulting in additional income tax expense in the period such determination is made.
To the extent a valuation allowance currently exists, we will continue to monitor all positive and negative evidence until we believe it is more likely than
not that it is no longer necessary, resulting in an income tax benefit in the period such determination is made.
Our policy is to recognize both interest and penalties related to uncertain tax positions as part of the income tax provision. Significant judgment is required
in evaluating our tax positions, and in determining our provisions for income taxes, our deferred tax assets and liabilities and any valuation allowance
recorded against our net deferred tax assets. We establish reserves when, despite our belief that the income tax return positions are fully supportable, certain
positions are likely to be challenged and we may ultimately not prevail in defending those positions.
S. Earnings per common share
Basic earnings or loss per common share is computed by dividing net income or loss available to common stockholders by the sum of the weighted average
number of shares of common stock. Diluted earnings per common share is computed by dividing net income available to common stockholders by the sum
of the weighted average number of shares of common stock and the number of additional shares of common stock that would have been outstanding if our
outstanding potentially dilutive securities had been issued. Potentially dilutive securities include awards of non-vested or vested and not settled restricted
stock units, performance stock units where the performance requirements have been met and not settled, warrants and options. The dilutive effect of
potentially dilutive securities is reflected in diluted earnings per common share by application of the treasury stock method, except if its impact is anti-
dilutive. Under the treasury stock method, an increase in the fair market value of our common stock can result in a greater dilutive effect from potentially
dilutive securities.
T. Leases
We determine if an arrangement is a lease at inception. Determining whether a contract contains a lease includes judgment regarding whether the contract
conveys the right to control the use of identified property or equipment for a period of time in exchange for consideration.
We account for our lease-related assets and liabilities based on their classification as operating leases or finance leases, following the relevant accounting
guidance. For all the lessee arrangements, we have elected an accounting policy to combine non-lease components with the related-lease components and
treat the combined items as a lease for accounting purposes. We measure lease related assets and liabilities based on the present value of lease payments,
including in-substance fixed payments, variable payments that depend on an index or rate measured at the commencement date, and the amount we believe
is probable we will pay the lessor under residual value guarantees when applicable. We discount lease payments based on our estimated incremental
borrowing rate at lease commencement (or modification), which is primarily based on our estimated credit rating, the lease term at commencement, and the
contract currency of the lease arrangement. We have elected to exclude short-term leases (leases with an original lease term less than one year) from the
measurement of lease-related assets and liabilities.
We test right-of-use asset in an operating or finance lease at the asset group level (because these assets are long-lived nonfinancial assets and should be
accounted for the same way as other long-lived nonfinancial assets) whenever events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable.
U. Loss Contingencies
In determining whether an accrual for a loss contingency is required, we first assess the likelihood of occurrence of the future event or events that will
confirm the loss. When a loss is probable (the future event or events are likely to occur) and the amount of the loss can be reasonably estimated, the
estimated loss is accrued. If the reasonable estimate of the loss is a range and an amount within the range appears to be a better estimate than any other
amount within the range, that amount should be accrued. However, if no amount within the range is a better estimate, the minimum amount in the range
should be accrued.
F-16
When a loss is reasonably possible (the chance of the future event or events occurring is more than remote but less than likely), no accrual is recognized.
V. Restructuring charges
During the year ended December 31, 2022, the Company initiated and completed a restructuring plan that resulted in a reduction of its workforce to one
employee. One-time termination benefits include severance, continuation of health insurance coverage, and other benefits for a specified period of time, as
well as contract terminations and fixed assets write-downs, which resulted in $15.7 million of restructuring costs for the year ended December 31, 2022.
These costs have been recognized in the accompanying consolidated statement of operations as follows (in thousands):
Executive termination benefits
Consulting and legal expenses
Other contract termination costs
Total restructuring expenses - general and administrative expenses
Employee termination benefits
Other contract termination costs
Total restructuring expenses - discontinued operations
Year ended
December 31,
2022
3,897
3,060
2,515
9,472
4,813
1,367
6,180
$
$
$
$
At December 31, 2022, $9.3 million related to restructuring costs was included in accrued expenses and other current liabilities and $6.2 million was
included in current liabilities of discontinued operations in the accompanying consolidated balance sheets.
W. Reclassification of prior year presentation
Certain prior year amounts have been reclassified for consistency with the current year presentation. An adjustment has been made to the consolidated
statements of operations for 2022 and 2021 to reclassify commercial operations and vitaCare operations to discontinued operations as both components, in
the aggregate, represented a business shift that will have a major effect on the Company’s operations and financial results.
2. Discontinued Operations
We changed our business in 2022, by out-licensing our products to receive royalties and future sales related milestone payments, after granting an exclusive
license to commercialize the Company’s IMVEXXY, BIJUVA, and prescription prenatal vitamin products sold under the BocaGreenMD and vitaMedMD
brands in the United States and assigning the Company’s exclusive license to commercialize ANNOVERA to Mayne Pharma.
This plan represented a strategic shift having a major effect on the Company's operations and financial results. Upon the completion of the Company’s
restructuring and ultimate conversion from a commercial pharmaceutical company to a licensing only company with the consummation of the Mayne
Transaction, the Company classified all direct revenues, costs and expenses related to commercial operations, within income (loss) from discontinued
operations, net of tax, in the consolidated statements of operations for all periods presented. No amounts for shared general and administrative operating
support expense were allocated to discontinued operations. As required by the terms of our Financing Agreement, the proceeds from both transactions were
used to fully repay our outstanding debt borrowings, and as a result interest expense and amortization of deferred financing costs as well as expense for
accretion of Series A Preferred Stock and loss on extinguishment of debt are included within income (loss) from discontinued operations, net of tax (as
disclosed below).
Additionally, the related assets and liabilities have been reported as assets and liabilities of discontinued operations in the Company’s consolidated balance
sheet as of December 31, 2022 and 2021.
The total consideration from Mayne Pharma was (i) a cash payment of $140.0 million at closing, (ii) a cash payment of $12.1 million for the acquisition of
net working capital subject to certain adjustments, (iii) a cash payment of approximately $1.0 million for prepaid royalties in connection with the License
Agreement Amendment and (iv) the right to receive the contingent consideration set forth in the License Agreement, as amended.
F-17
The Company’s estimate of net working capital at closing was determined in accordance with the Transaction Agreement which establishes the process for
the determination of final net working capital. The determination of net working capital includes significant estimates which could change materially for a
period of up to two years following the Closing Date. On March 29, 2023, the Company received Mayne Pharma’s closing net working capital calculation
which differed significantly from the Company’s estimate of closing net working capital. The Company believes that its estimate of net working capital is
reasonable and intends to resolve this matter through the process outlined in the Transaction Agreement. Given the recent receipt of Mayne Pharma’s
calculation and the nature of the estimates involved, the outcome of this matter is uncertain at this point. As a result, the Company cannot reasonably
estimate a range of loss, and accordingly, the Company has not accrued any additional liability associated with Mayne Pharma’s calculation.
The proceeds at closing were allocated separately to the sale of ANNOVERA and the license grant related to the other products, as the sale of
ANNOVERA was accounted for under ASC 610-20, Gains and Losses from Derecognition of Nonfinancial Assets in arriving at the gain on disposal. We
recognized $70.0 million in revenue from transaction with Mayne Pharma, which represented license to commercialize the Company’s IMVEXXY,
BIJUVA, and prescription prenatal vitamin products as well as present value of future minimum royalty payments (as discussed in Note 1).
The Company classified the $143.4 million gain on the sale of the vitaCare business and $62.0 gain on sale of ANNOVERA, net of transaction costs in
discontinued operations.
The Company recorded a restructuring expense of $15.7 million, for the year ended December 31, 2022 for contract terminations, severance, and fixed
asset write-downs, of which $6.2 million was recorded in discontinued operations.
The following table presents results of discontinued operations (in thousands):
Product revenue, net
Cost of goods sold
Gross profit
Operating expenses:
Selling and marketing
General and administrative
Research and development
Restructuring charges
Total operating expenses
Loss from discontinued operations
Other (expense) income:
Gain on sale of vitaCare
Gain on ANNOVERA sale
Loss on the extinguishment of debt
Interest expense and other financing costs
Expense for accretion of Series A Preferred Stock
Other income, net
Total other income (expense), net
Loss before from income taxes
Provision for income taxes
Net income (loss) from discontinued operations
F-18
Year ended December 31,
2022
2021
$
$
80,749 $
15,640
65,109
75,208
11,301
4,942
6,180
97,631
(32,522)
143,384
62,031
(8,380)
(36,065)
(16,973)
—
143,997
111,475
(552)
110,923
$
84,378
17,436
66,942
108,195
11,854
7,086
—
127,135
(60,193)
—
—
—
(32,917)
—
—
(32,917)
(93,110)
—
(93,110)
The following table presents the carrying amounts of the classes of assets and liabilities of discontinued operations as of December 31, 2022 and December
31, 2021 (in thousands):
Assets:
Current assets:
Cash
Accounts receivable
Inventory
Prepaid and other current assets
Total current assets
Fixed assets, net
License rights and other intangible assets, net
Total assets
Liabilities:
Current liabilities:
Accounts payable
Accrued expenses and other current liabilities
Total current liabilities
3.
Prepaid and other current assets
Our prepaid and other current assets consisted of the following (in thousands):
Insurance
Paragraph IV legal proceeding costs
Other
Prepaid and other current assets
4.
Fixed assets
Our fixed assets, net consisted of the following (in thousands):
Furniture and fixtures
Computer and office equipment
Computer software
Leasehold improvements
Fixed assets
Less: accumulated depreciation and amortization
Fixed assets, net
We recorded depreciation expense of $0.6 million for 2022 and $0.4 million for 2021.
F-19
As of December 31,
2022
2021
— $
—
—
—
—
—
—
— $
12,243 $
13,588
25,831 $
215
36,176
7,622
4,689
48,702
376
33,174
82,252
16,945
30,966
47,911
As of December 31,
2022
2021
1,167 $
2,334
2,533
6,034 $
2,731
2,304
824
5,859
$
$
$
$
$
$
As of December 31,
2022
2021
$
931 $
1,168
375
49
2,523
2,445
$
78 $
891
1,448
375
80
2,794
1,971
823
5. Licensed rights and other intangible assets
The following provides information about our license rights and other intangible assets, net (in thousands):
Intangible assets
subject to amortization:
Hormone therapy drug patents
Hormone therapy drug patents applied
and pending approval
Intangible assets
subject to amortization
Intangible assets not subject to amortization:
Trademarks/trade name rights
Intangible assets, net
As of December 31, 2022
As of December 31, 2021
Gross
Carrying
Amount
Accumulated
Amortization
Net
Gross
Carrying
Amount
Accumulated
Amortization
Net
$
6,225 $
1,598 $
4,627 $
5,834 $
1,042 $
4,792
1,995
—
1,995
2,020
—
2,020
8,220
1,598
6,622
7,854
1,042
6,812
321
8,541 $
—
1,598 $
321
6,943 $
332
8,186 $
—
1,042 $
332
7,144
$
We recorded, in continuing operations, amortization expense related to patents of $0.6 million for 2022 and $0.3 million for 2021.We recorded amortization
expense related to the exclusive license rights agreement with Population Council of $3.0 million for 2022 and 2021, which was reclassified to
discontinued operations after we completed transaction with Mayne Pharma in December 2022, which are excluded from the table above.
Our intangible assets subject to amortization are expected to be amortized as follows (in thousands):
Year ending December 31,
2023
2024
2025
2026
2027
Thereafter
Total
$
$
337
439
438
438
438
2,537
4,627
We use a combination of qualitative and quantitative factors to assess licensed rights and intangible assets for impairment. As a result of performing
these assessments, we determined that no impairment existed as of December 31, 2022 or 2021, therefore, no write downs were recorded to our licensed
rights and other intangible assets.
6. Accrued expenses and other current liabilities
Other accrued expenses and other current liabilities consisted of the following (in thousands):
Payroll and related costs
Accrued contract termination costs
Research and development expenses
Professional fees
Operating lease liabilities
Prepaid royalty
Other
Accrued expenses and other current liabilities
As of December 31,
2022
2021
8,748 $
4,700
978
415
1,390
1,011
1,604
18,846 $
6,549
-
-
2,571
1,361
-
2,857
13,338
$
$
We expense advertising costs when incurred, which amounted to $13.2 million and $39.7 million for 2022 and 2021, respectively, which was reclassified to
discontinued operations as a result of business shift following transaction with Mayne Pharma.
F-20
7. Debt
Our debt consisted of the following (in thousands):
Financing Agreement
Less: deferred financing fees
Debt, net
Current maturities of long-term debt
Long-term debt
Financing agreement
As of December 31,
2022
2021
- $
-
-
-
- $
200,000
11,731
188,269
188,269
-
$
$
We were party to a Financing Agreement with Sixth Street Specialty Lending, Inc., as administrative agent (the “Administrative Agent”), various lenders
from time-to-time party thereto, and certain of our subsidiaries party thereto from time to time as guarantors. On December 30, 2022, we repaid all
obligations under the Financing Agreement and the Financing Agreement was terminated.
The Financing Agreement was entered into in April 2019, and it provided us with up to a $300.0 million first lien secured term loan credit facility. The
credit facility provided for availability to us in three tranches: (i) $200.0 million was drawn upon entering into the Financing Agreement; (ii) $50.0 million
was drawn in February 2020 and (iii) $50.0 million was previously available to us in the Administrative Agent’s sole and absolute discretion either
contemporaneously with the delivery of our financial statements for the quarterly period ended June 30, 2020 or at such earlier date as the Administrative
Agent may have consented to. In the third quarter of 2020, the Administrative Agent terminated the undrawn $50.0 million tranche under the Financing
Agreement, therefore, such amount was no longer available to us to borrow.
In connection with the initial borrowing under the Financing Agreement, we paid, for the benefit of the lenders, a facility fee equal to 2.5% of the initial
amount borrowed and were required to pay such a facility fee in connection with subsequent borrowings under the Financing Agreement. Borrowings
under the Financing Agreement accrued interest at either (i) 3-month LIBOR plus 7.75%, subject to a LIBOR floor of 2.70% or (ii) the prime rate plus
6.75%, subject to a prime rate floor of 5.2% as selected by us. As of December 30, 2022, our interest rate was 10.45%. Interest on amounts borrowed under
the Financing Agreement was due and payable quarterly in arrears. In addition, we were required to pay an annual administrative fee, and other fees and
expenses.
In August 2020, we entered into Amendment No. 5 to the Financing Agreement (“Amendment No. 5”) pursuant to which, among other amendments, the
covenant in the Financing Agreement regarding our achievement of minimum consolidated net revenue attributable to commercial sales of our IMVEXXY,
BIJUVA and ANNOVERA products were adjusted in order to reflect the impact of COVID-19 on our business. In lieu of a cash amendment fee, we issued
to the Administrative Agent and the lenders under the Financing Agreement warrants to purchase an aggregate of 95,042 shares of our common stock with
an exercise price of $79 per share and a ten-year term (the “Lender Warrants”). The Lender Warrants were issued pursuant to an exemption from
registration under the Securities Act of 1933, as amended, and no registration rights were issued. The estimated fair value of the Lender Warrants was $7.4
million and was recorded as deferred financing cost since Amendment No. 5 was accounted for as a debt modification.
In November 2020, in connection with Amendment No. 6 to the Financing Agreement (“Amendment No. 6”), we amended the Lender Warrants to provide
for an adjustment to the exercise price if we conduct certain dilutive issuances prior to December 31, 2020, or if the volume-weighted average price of our
common stock for the fifteen trading days ending December 31, 2020 was lower than the then current exercise price. Also, in November 2020, we
concluded an underwritten public offering of our common stock and received consideration of $59.5 per share, after deducting for underwriting discounts
and commissions. This offering of our common stock automatically triggered the down round provision to the exercise price of the Lender Warrants, which
lowered the exercise price from $79 to $59.5 per share. The estimated fair value of the adjustment to the exercise price of Lender Warrants was $0.2 million
and was recorded as deferred financing cost since Amendment No. 6 was accounted for as a debt modification. No other amendment financing fees were
paid.
In January 2021, we entered into Amendment No. 7 to the Financing Agreement (“Amendment No. 7”) pursuant to which, among other amendments, the
minimum quarterly product net revenue requirements attributable to commercial sales of IMVEXXY, BIJUVA, and ANNOVERA for the fiscal quarters
ending March 31, 2021 and June 30, 2021 were reduced, and we paid amendment financing fees of $5.0 million, which was recorded as deferred financing
fees since Amendment No 7 was accounted for as debt modification. Additionally, in connection with entering into Amendment No. 7, the warrants issued
to the Administrative Agent and the lenders under the Financing Agreement in August 2020 were further amended to provide for an additional adjustment
to the exercise price if we conducted certain dilutive issuances prior to March 31, 2021. No adjustments were made to the exercise price of these warrants
prior to the expiration of such period.
F-21
In March 2021, we entered into Amendment No. 8 to the Financing Agreement (“Amendment No. 8”) pursuant to which, among other amendments, the
minimum quarterly product net revenue requirements attributable to commercial sales of IMVEXXY, BIJUVA, and ANNOVERA were revised, the
amortization and prepayment terms of the borrowings under the Financing Agreement were revised, and the Administrative Agent consented to a
framework for our potential disposition of our vitaCare business. In connection with Amendment No. 8, we (i) repaid $50.0 million in principal under the
Financing Agreement during the three months ended March 31, 2021, plus a 5.0% prepayment fee and (ii) agreed to make additional quarterly principal
repayments plus the prepayment fees as follows: (a) $5.0 million due in March 2022, June 2022 and September 2022; (b) $10.0 million due in December
2022 and March 2023; and (c) $41.25 million due in June 2023, September 2023, December 2023 and March 2024. Additionally, the prepayment fees on
principal amounts being prepaid under the Financing Agreement were revised as follows: (i) 30.0% of the principal amount being repaid through March 31,
2022 (excluding the scheduled $5.0 million principal repayment on such date, which is subject to a 5.0% prepayment fee); (ii) 5.0% of the principal amount
being repaid from April 2022 through March 2023; (iii) 3.0% of the principal amount being repaid from April 2023 through March 2024; and (iv)
thereafter, none, in each case subject to certain limited exceptions, including with respect to a repayment in full of the obligations under the Financing
Agreement.
In March 2022, we entered into Amendment No. 9 to the Financing Agreement (“Amendment No. 9”) pursuant to which, among other amendments, (i) the
lenders waived various Company breaches of the Financing Agreement, including breaches of the $60.0 million minimum cash covenant and the minimum
net revenue covenants for the fourth quarter of 2021; (ii) the Company and the lenders agreed to a reduced minimum cash covenant and to the removal of
the minimum net revenue covenant for the first quarter of 2022; (iii) the lenders waived the existing $60.0 million prepayment penalty under the Financing
Agreement and the Company agreed to pay a paid in kind (“PIK”) amendment financing fee of $30.0 million, which fee was added to the principal amount
of the loans under the Financing Agreement, $16.0 million of which fee was waivable in certain conditions; (iv) the maturity date of the Financing
Agreement was amended to June 1, 2022; and (v) the Company agreed to pay to the Lenders as a prepayment of the loans under the Financing Agreement
the first $120.0 million of net proceeds from the vitaCare Divestiture and all net proceeds of the vitaCare Divestiture in excess of $135.0 million.
Amendment No. 9 was accounted for as an extinguishment of debt modification in accordance with U.S. GAAP. Accordingly, in March 2022, we recorded
an $8.4 million loss on extinguishment of debt, which represented the unamortized deferred financing fees, net of previously accrued prepayment fees.
Additionally, Amendment No. 9 PIK financing fee was recorded as deferred financing fees and was amortized over the remaining term of the Financing
Agreement. In April 2022, we utilized $120.0 million of net proceeds from the vitaCare Divestiture to make a prepayment of the loans under the Financing
Agreement under the terms of Amendment No. 9. Additionally, with the prepayment on the debt, $16.0 million of the PIK financing fee was waived in
accordance with Amendment No. 9.
In May 2022, we entered into Amendment No. 10 to the Financing Agreement (“Amendment No. 10”) pursuant to which, among other amendments, (i)
interest payments under the Financing Agreement were paused, such that interest on each term loan was payable in cash and in arrears (a) upon any
prepayment of that term loan, whether voluntary or mandatory, to the extent accrued on the amount being prepaid and (b) on the maturity date, (ii) the
minimum cash covenant was set at $10.0 million, (iii) the maturity date of the Financing Agreement was amended to July 13, 2022, (iv) the termination of
the Company’s merger agreement with an affiliate of EW Healthcare Partners was added as an event of default, and (v) we agreed to a PIK financing fee of
$1.8 million, which fee was added to the principal amount of the loans under the Financing Agreement. Amendment No. 10 was accounted for as a debt
amendment in accordance with U.S. GAAP. Accordingly, in May 2022, Amendment No. 10 PIK financing fee was recorded as deferred financing fees and
was amortized over the remaining term of the Financing Agreement.
Also in May 2022, we entered into Amendment No. 11 (“Amendment No. 11”) to the Financing Agreement. Amendment No. 11 contains amendments to
the Financing Agreement that would have gone into effect upon the satisfaction of certain conditions on or before July 13, 2022 (the “Amendment
Effective Date”), including (i) the consummation of the merger with an affiliate of EW Healthcare Partners (the “Merger”), (ii) the payment in cash of (a)
all accrued and unpaid interest under the Financing Agreement through and including the Amendment Effective Date and (b) all fees, costs, expenses and
taxes then payable pursuant to Section 2.7 or 10.2 of the Financing Agreement, and (iii) the delivery to the administrative agent of certain customary
documents with respect to the pledge of 100% of the capital stock of the Company. Since the consummation of the Merger did not occur, Amendment No.
11 never became effective.
On July 13, 2022, we entered into Amendment No. 12 to the Financing Agreement pursuant to which the maturity date of the Financing Agreement was
extended to July 24, 2022, and we agreed to pay the Lenders a PIK amendment fee in the amount of $1.2 million. On July 24, 2022, we entered into
Amendment No. 13 to the Financing Agreement pursuant to which the maturity date of the Financing Agreement was extended to July 27, 2022, we agreed
to pay the Lenders a payment of accrued and unpaid interest of $2.9 million, and we agreed to retain Jeffrey Varsalone from G2 Capital Advisors as our
chief restructuring officer. On July 27, 2022, we entered into Amendment No. 14 to the Financing Agreement pursuant to which the maturity date of the
Financing Agreement was extended to July 28, 2022. On July 28, 2022, we entered into Amendment No. 15 to the Financing Agreement pursuant to which
the maturity date of the Financing Agreement was extended to July 29, 2022.
F-22
On July 29, 2022, we entered into Amendment No. 16 to the Financing Agreement pursuant to which the maturity date of the Financing Agreement was
extended to September 30, 2022, with the option for us to further extend the maturity date to October 31, 2022, and November 30, 2022, in each case if we
receive not less than $7.0 million in cash proceeds from an equity issuance, which, if preferred equity, is on substantially the same terms as the Preferred
Stock. In lieu of a cash amendment fee, to induce the Lenders to enter into Amendment No. 16, on July 29, 2022, we issued Lender Warrants to purchase
an aggregate of 185,000 shares of Common Stock, pursuant to a subscription agreement by and among the Company and the Lenders (the “July Lender
Subscription Agreement”). The Lender Warrants to purchase 185,000 shares of our Common Stock issued pursuant to the July Lender Subscription
Agreement have an exercise price of $0.01 per warrant, subject to certain adjustment as provided therein, and an expiration date of July 29, 2032, and may
be exercised via cashless exercise pursuant to the terms thereof. These Lender Warrants were initially valued at $1.2 million based on the market price of
our Common Stock on July 29, 2022 and entirely expensed as financing costs.
In connection with the closing of a private placement offering with Rubric Capital Management LP (“the Preferred Stock Investor”) on September 30,
2022, and in accordance with Amendment No. 16 to the Financing Agreement, on September 30, 2022, we issued Lender Warrants to purchase an
aggregate of 125,000 shares of Common Stock, pursuant to a subscription agreement by and among the Company and the Lenders (the “September Lender
Subscription Agreement”), and the maturity date of the Financing Agreement was extended to October 31, 2022. These Lender Warrants have an exercise
price of $0.01 per share of Common Stock, subject to certain adjustment as provided therein, and an expiration date of September 30, 2032 and may be
exercised via cashless exercise pursuant to the terms thereof. These Lender Warrants were initially valued at $0.8 million based on the market price of our
Common Stock on September 30, 2022 and recorded as deferred financing fees, which were expensed with maturity of the Financing Agreement on
October 31, 2022. Additionally, in September 2022, we and the Lenders agreed to PIK interest of $2.5 million related to the outstanding debt balance.
In connection with the closing of the private placement offering with the Preferred Stock Investor on October 28, 2022, and in accordance with
Amendment No. 16 to the Financing Agreement, on October 28, 2022, we issued Lender Warrants to purchase an aggregate of 125,000 shares of Common
Stock, pursuant to a subscription agreement by and among the Company and the Lenders, and the maturity date of the Financing Agreement was extended
to November 30, 2022. These Lender Warrants have an exercise price of $0.01 per share of Common Stock, subject to certain adjustment as provided
therein, and an expiration date of October 28, 2032 and may be exercised via cashless exercise pursuant to the terms thereof. These Lender Warrants were
initially valued at $0.7 million based on the market price of our Common Stock on October 28, 2022 and recorded as financing costs.
The fair value of the Lender Warrants was based on the date of grant using our Common Stock’s closing price at measurement date and was recorded to
“Additional paid-in-capital” in the consolidated balance sheets. See Note 9, Mandatory Redeemable Preferred Stock and Stockholders’ Equity (Deficit) for
additional information regarding the equity financing with the Preferred Stock Investor.
On November 30, 2022, we entered into Amendment No. 17 (“Amendment No. 17”) to the Financing Agreement. Pursuant to Amendment No. 17, among
other things, (i) the maturity date of the Financing Agreement was extended to December 31, 2022, subject to the achievement of certain milestones by the
Company, (ii) the minimum cash covenant was set at $7.5 million, (iii) the Company agreed to pay the Lenders an amendment fee in the amount of
$750,000 and (iv) the Company paid the Lenders all accrued and unpaid interest under the Financing Agreement as of the Amendment Date, in the amount
of approximately $4.2 million. On December 30, 2022, we repaid remaining obligations under the Financing Agreement of $75.0 million, PIK financing
fees of $17.0 million and the remaining accrued interest, and the Financing Agreement was terminated.
Interest and financing costs
Interest expense and other financing costs consisted of the following (in thousands):
Interest expense
Prepayment fees
Financing fees amortization
Total
8. Commitments and contingencies
Leases
2022
2021
$
$
13,545 $
-
22,520
36,065 $
22,568
4,660
5,689
32,917
Substantially all of our leases are for rental of office space used to conduct our business. In October 2018, we entered into a lease for executive,
administrative, operations and sales offices in Boca Raton, Florida. The lease includes 56,212 rentable square feet, or the full premises, of which the lease
on 7,561 square feet commenced in 2018 and the lease on the remaining 48,651 square feet commenced in August 2019, or the full premises
commencement date. The lease will expire 11 years after the full premises commencement date, unless
F-23
terminated earlier in accordance with the terms of the lease. We have the option to extend the term of the lease for two additional consecutive periods of
five years. The extension option is not included in the determination of the lease term as it is not reasonably certain to be exercised. The term of the lease
includes escalating rent and free rent periods. We are also responsible for certain other operating costs under the lease, including electricity and utility
expenses. In June 2019, we entered into an agreement with the same lessors to lease additional 6,536 square feet of administrative office space in the same
location, pursuant to an addendum to such lease, which commenced in May 2020. We are in the process of subleasing our headquarters as a result of
shifting our business to become a license company and terminating our employees. We anticipate that sublease income will approximate the amounts due
under our existing leases, therefore no impairment of the right of use asset was recorded in 2022.
For 2022, operating lease expense related to our real estate leases was $1.4 million and variable lease expense was $0.7 million. For 2021, operating lease
expense related to our real estate leases was $2.1 million and variable lease expense was $0.7 million. In 2022, our rental income was $0.4 million on
sublease of our two suites which were subleased following vitaCare transaction.
As of December 31, 2022, our remaining lease payments were as follows (in thousands):
Year ending December 31,
2023
2024
2025
2026
2027
Thereafter
Total undiscounted lease payments
Less: imputed interest
Present value of lease payments
$
$
1,443
1,477
1,513
1,551
1,590
4,294
11,868
3,109
8,759
The following table sets forth supplemental balance sheet information related to leases (in thousands):
Assets:
Operating lease right-of-use assets
Liabilities:
Operating lease liabilities current (included in accrued
expenses and other current liabilities)
Operating lease liabilities, non-current
Total operating lease liabilities
The following table presents other information related to leases:
Weighted average remaining term (years) - operating leases
Weighted average discount rate - operating leases
Cash paid for amounts included in the measurement of
lease liabilities from operating lease (in thousands)
Right-of-use assets obtained in exchange for new operating
lease obligations (non-cash in thousands)
Mayne Pharma Agreement
As of December 31,
2022
2021
$
7,580 $
8,234
$
$
1,390 $
7,369
8,759 $
1,361
8,063
9,424
2022
2021
7.7
8.3%
8.7
8.3%
$
$
1,413
$
2,335
—
$
—
Mayne Pharma paid us approximately $12.1 million at closing for the acquisition of net working capital, as determined in accordance with the Transaction
Agreement, and is subject to certain adjustments for a period of up to two years following the Closing Date.
Pursuant to the Mayne License Agreement Amendment, Mayne Pharma also paid the Company approximately $1.0 million in prepaid royalties on the
Closing Date. The prepaid royalties will reduce the first four quarterly payments that would have otherwise been payable pursuant to the Mayne License
Agreement by an amount equal to $257,250 per quarterly royalty payment plus interest calculated at 19% per annum accruing from the Closing Date until
the date such quarterly royalty payment is paid to the Company. In addition,
F-24
Mayne Pharma will reduce one quarterly royalty payment (other than the first quarterly royalty payment) otherwise payable to the Company by $1.5
million in consideration of Mayne Pharma assuming the Company’s obligations under a long-term services agreement, including the Company’s minimum
payment obligations thereunder.
Population Council license agreement
Under the terms of the Population Council License Agreement, we paid the Population Council a milestone payment of $20.0 million in 2018, which was
within 30 days following the approval by the FDA of the NDA for ANNOVERA, and $20.0 million in 2019 following the first commercial batch release of
ANNOVERA. The aggregate $40.0 million of milestone payments were recorded as license rights. The Population Council was also eligible to receive
future payments upon the achievement of certain commercial sales milestones of ANNOVERA. On December 30, 3022, we assigned the ANNOVERA
license to Mayne Pharma. The rights and obligations under the Population Council License Agreement have been transferred to Mayne Pharma and will
revert back to us upon certain events.
The Population Council has agreed to perform and pay the costs and expenses associated with four post-approval studies required by the FDA for
ANNOVERA, and we had agreed to perform and pay the costs and expenses associated with a post approval study required by the FDA to measure risk for
venous thromboembolism, provided that if the costs and expenses associated with such post-approval study exceed $20.0 million, half of such excess was
to be offset against royalties or other payments owed by us to the Population Council under the Population Council License Agreement. In July 2021, we
received a letter from FDA indicating that the post-marketing commitment study being conducted by the Population Council for ANNOVERA to
characterize the in vivo release rate of ANNOVERA was not fulfilled to FDA’s satisfaction. In addition, the final reports for the two post-marketing
requirement studies being performed by the Population Council for ANNOVERA were not submitted by the initial listed submission deadline, which
deadlines have since been extended by FDA. Our obligations to perform the post-approval study have been transferred to Mayne Pharma as part of the
Mayne License Agreement. We believe that Mayne Pharma is working with Population Council to complete the post-marketing commitment study to
FDA’s satisfaction and reduce the delay in submitting the post-marketing requirement final reports. To the extent that the Population Council does not fulfil
these studies to FDA’s satisfaction, FDA may impose additional requirements and penalties against the NDA holder for ANNOVERA.
Unless earlier terminated, the Population Council License Agreement will remain in effect until the later of the expiration of the last-to-expire of the
Population Council’s U.S. patents that are licensed to Mayne Pharma, or the date following such expiration that follows a continuous period of six months
during which Mayne Pharma has not made a commercial sale of ANNOVERA in the U.S. The Population Council License Agreement may also be
terminated for certain breach and bankruptcy-related events and by Mayne Pharma on 180 days’ prior notice to the Population Council.
Purchase commitments
We had manufacturing and supply agreements whereby we were required to purchase from Catalent, Inc. (“Catalent”) a minimum number of units of
BIJUVA and IMVEXXY softgels during each respective annual contract year. The annual contract period for BIJUVA and IMVEXXY ended each April
and July, respectively. If the minimum order quantities of BIJUVA or IMVEXXY were not met, we were required to pay a minimum commitment fee equal
to 50% or 60%, respectively, of the difference between the total amount we would have paid if the minimum requirement had been fulfilled and the total
amount of purchases of BIJUVA or IMVEXXY during each product’s respective contract year.
Additionally, with another third-party manufacturer, we had a manufacturing and supply agreement, renewable annually, whereby we were required to
purchase a minimum number of units of ANNOVERA during a contract year. The annual contract period for ANNOVERA ended each August. If the
minimum order quantities of ANNOVERA were not met, we were required to pay a minimum commitment fee equal to the difference between the total
amount we would have paid if the minimum requirement had been fulfilled and the total amount of purchases of ANNOVERA during the contract year.
On December 30, 2022, after granting an exclusive license to commercialize the Company’s IMVEXXY, BIJUVA, and prescription prenatal vitamin
products sold under the BocaGreenMD and vitaMedMD brands and assigning the Company’s exclusive license to commercialize ANNOVERA to Mayne
Pharma, the rights and obligations under the Catalent minimum manufacturing and supply agreements and other supply agreements have been transferred
to Mayne Pharma.
Legal proceedings
In February 2020, we received a Paragraph IV certification notice letter (the “IMVEXXY Notice Letter”) regarding an Abbreviated New Drug Application
(“ANDA”) submitted to the FDA by Teva Pharmaceuticals USA, Inc. (“Teva”). The ANDA seeks approval from the FDA to commercially manufacture,
use, or sell a generic version of the 4 mcg and 10 mcg doses of IMVEXXY. In the IMVEXXY
F-25
Notice Letter, Teva alleges that TherapeuticsMD patents listed in the FDA’s Orange Book that claim compositions and methods of IMVEXXY (the
“IMVEXXY Patents”) are invalid, unenforceable, and/or will not be infringed by Teva’s commercial manufacture, use, or sale of its proposed generic drug
product. The IMVEXXY Patents identified in the IMVEXXY Notice Letter expire in 2032 or 2033. In April 2020, we filed a complaint for patent
infringement against Teva in the United States District Court for the District of New Jersey arising from Teva’s ANDA filing with the FDA. We are
seeking, among other relief, an order that the effective date of any FDA approval of Teva’s ANDA would be a date no earlier than the expiration of the
IMVEXXY Patents and equitable relief enjoining Teva from infringing the IMVEXXY Patents. Teva has filed its answer and counterclaim to the
complaint, alleging that the IMVEXXY Patents are invalid and not infringed. In July 2021, following a proposal by Teva, the District Court entered an
order temporarily staying all proceedings in the IMVEXXY litigation, which order was filed under seal. In September 2021, the District Court made
available a public version of the order following the parties’ agreement to a consent motion to redact information Teva contended was confidential. The
order provides that the statutory stay that prevents the FDA from granting final approval of the ANDA for 30 months from the date of the IMVEXXY
Notice Letter will be extended for the number of days that the stay of the IMVEXXY litigation is in place. The length of the stay of the IMVEXXY
litigation is dependent on further action by Teva. As of December 31, 2022, for the IMVEXXY Paragraph IV legal proceeding, we have incurred and
recorded legal costs amounting to $2.3 million in prepaid expenses and other current assets since we believe that we will successfully prevail in this legal
proceeding. Upon the successful conclusion of the legal proceeding, the related capitalized legal costs will be reclassified to patents, in license rights and
other intangible assets, net, in the accompanying consolidated balance sheets, and such costs will be amortized over the remaining useful life of the patents.
If we are unsuccessful in this legal proceeding, then the related capitalized legal costs for this legal preceding and any unamortized IMVEXXY patent costs
that were previously capitalized will be immediately expensed in the period in which we become aware of an unsuccessful legal proceeding.
In March 2020, we received a Paragraph IV certification notice letter (the “BIJUVA Notice Letter”) regarding an ANDA submitted to FDA by Amneal
Pharmaceuticals (“Amneal”). In April 2020, we filed a complaint for patent infringement against Amneal in the United States District Court for the District
of New Jersey arising from Amneal’s ANDA filing with FDA. In December 2021, we entered into a settlement agreement (the “Settlement Agreement”)
with Amneal Pharmaceuticals, Inc., Amneal Pharmaceuticals, LLC and Amneal Pharmaceuticals of New York LLC (collectively “Amneal”) to resolve the
litigation over our patents listed in FDA’s Orange Book that claim compositions and methods of BIJUVA (the “BIJUVA Patents”). Under the terms of
the Settlement Agreement, the parties filed a consent judgment with the U.S. District Court for the District of New Jersey that enjoins Amneal from
marketing a generic version of BIJUVA (1 mg estradiol and 100 mg progesterone) before the expiration of the patents-in-suit, except as provided in the
Settlement Agreement, and the Company granted Amneal a non-exclusive, non-transferable, royalty-free license to commercialize Amneal’s generic
formulation of BIJUVA in the U.S. commencing in May 2032 (180 days before the current expiration date in November 2032 for the last to expire of our
BIJUVA Patents), or earlier under certain circumstances customary for settlement agreements of this nature. As of December 30, 2022 and per the license
agreement, Mayne Pharma is responsible for all enforcement of our patents, including this litigation with Teva.
From time to time, we are involved in other litigations and proceedings in the ordinary course of business. We are currently not involved in any other
litigations and proceedings that we believe would have a material effect on our consolidated financial condition, results of operations, or cash flows.
Compliance with Nasdaq’s continued listing requirements
In January 2023, we received a deficiency letter (the “Notice”) from the Listing Qualifications Department of the Nasdaq Stock Market, LLC (“Nasdaq”)
notifying us that we were not in compliance with the rules for continued listing as set forth in Nasdaq Listing Rule 5620(a) (the “Annual Meeting Rule”)
due to our failure to hold an annual meeting of stockholders within 12 months after our fiscal year ended December 31, 2021. The Notice had no immediate
effect on the listing of our Common Stock. We did not hold an annual meeting of stockholders during 2022 due to our then ongoing strategic processes.
The Notice stated that, under Nasdaq Listing Rule 5810(c)(2)(G), we had 45 calendar days, or until February 20, 2023, to submit a plan to regain
compliance with the Annual Meeting Rule. We timely submitted such plan, and Nasdaq granted us an extension until June 29, 2023, to regain compliance.
It is our intent to hold an annual meeting of stockholders in 2023 prior to such deadline and to fully regain compliance with all applicable Nasdaq listing
standards.
Off-balance sheet arrangements
As of December 31, 2022 and 2021 we had no off-balance sheet arrangements that have had or are reasonably likely to have current or future effects on our
financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are
material to investors.
F-26
Employment agreements
In connection with the Company’s transformation into a pharmaceutical royalty company, the termination of our executive management team (except for
Mr. Marlan Walker, our former General Counsel and current Chief Executive Officer) and all other employees was completed by December 31, 2022.
Severance obligations for all employees other than executive officers were paid in full in the first quarter of 2023 and severance obligations for terminated
executive officers will be paid in accordance with their employment agreements and separation agreements as previously disclosed. As of December 31,
2022, we have employed one full-time employee primarily engaged in executive position. We have engaged external consultants, including certain former
members of our management team, who support our relationship with current partners and assist with certain financial, legal and regulatory matters and the
continued wind-down of our historical business operations. The separation of our former Interim Co-Chief Executive Officers, former Interim Chief
Financial Officer and other executives from the Company was a termination without “Good Cause,” as defined in their employment agreements. In the
aggregate, in December 2022, we recorded severance expenses for executive termination obligations of $6.0 million, of which $1.1 million was related to
share-based compensation recorded in connection with accelerated vesting of certain share-based payment awards.
On September 6, 2022, our Board appointed interim Co-Chief Executive Officers. The separation of our former chief executive officer from the Company
was a termination without “Good Cause,” as defined in his employment agreement. Accordingly, our former chief executive officer received the separation
benefits provided therein, and we recorded executive officer severance expenses of $4.8 million, of which $3.2 million was related to share-based
compensation recorded in connection with accelerated vesting of certain share-based payment awards for the former chief executive officer. In connection
with our former chief executive officer’s separation from the Company, he ceased to serve as a member of our Board.
In September 2021, our former Executive Vice President of Operations (“EVP of Operations”) and us mutually agreed that the EVP of Operations would
separate from the company. The separation was for “Good Reason” under the employment agreement of the EVP of Operations; accordingly, he received
the separation benefits provided therein. Then, in December 2021, our Board of Directors (the “Board”) appointed a new Chief Executive Officer (“CEO”).
Our former CEO’s separation as CEO was a termination without “Cause,” as defined in his employment agreement. Accordingly, our former CEO received
the separation benefits provided therein. Additionally, in 2021, three other senior executives separated from the Company, and they received separation
benefits provided by their respective employment agreements. In the aggregate, for 2021, we recorded executive officer severance expenses of $12.4
million, of which $8.0 million was related to share-based compensation recorded in connection with accelerated vesting of certain share-based payment
awards for the former senior executives.
Employee benefit plan
We maintained a voluntary defined contribution 401(k) plan covering all eligible employees as defined in the plan documents. The plan provided for
discretionary matching contribution, which is equal to up to four percent of each eligible contributing participant’s elective deferral not to exceed two
thousand per year. Employees who elected to participate in the plan were generally fully vested in any existing matching contribution after five years of
service with the Company. As part of termination of employees, all contributions made by the Company to each participant became 100% vested.
Contributions by the Company under the plan amounted to $0.5 million and $0.6 million for 2022 and 2021, respectively.
9. Mandatory Redeemable Preferred Stock and Stockholders’ Equity (Deficit)
Rubric Capital Management LP Subscription Agreements (Sale of Mandatory Redeemable Preferred Stock and Common Stock)
On July 29, 2022, we entered into a Subscription Agreement with the Preferred Stock Investor, pursuant to which we issued and sold, in a private
placement offering, (i) 15,000 shares of the Company’s newly- designated Series A Preferred Stock, par value $0.001 per share (the “Series A Preferred
Stock”) for a purchase price per share of Series A Preferred Stock equal to $822.21 and an aggregate purchase price of $12.3 million, and (ii) 565,000
shares of the Company’s Common Stock, for a purchase price per share of Common Stock equal to $4.72 and an aggregate purchase price of $2.7 million.
This offering closed on July 29, 2022, and we received aggregate gross proceeds of $15.0 million, before expenses.
On September 30, 2022, we entered into a Subscription Agreement with the Preferred Stock Investor, pursuant to which we issued and sold, in a private
placement offering, 7,000 shares of the Company’s Series A Preferred Stock for an aggregate offering price of $7.0 million. In addition, in lieu of issuing,
selling and delivering 263,666 shares of the Company’s Common Stock to the Preferred Stock Investor, we agreed to pay the Preferred Stock Investor, on
the later of (i) the Maturity Date (as defined in the Certificate of Designation, Preferences and Rights of Series A Preferred Stock, establishing the powers,
designations, preferences and privileges and the
F-27
qualifications, limitations or restrictions of the Series A Preferred Stock (the “Certificate of Designation”)) or (ii) the date our obligations under the
Financing Agreement were paid in full, a make-whole payment equal to 263,666 multiplied by the closing price of our Common Stock on the principal
securities exchange or securities market on which the Common Stock is then traded, on the day prior to the date of payment of the make-whole payment.
This offering closed on September 30, 2022, and we received gross proceeds of $7.0 million, before expenses.
On October 28, 2022, we entered into a Subscription Agreement with the Preferred Stock Investor, pursuant to which we issued and sold, in a private
placement offering, 7,000 shares of the Company’s Series A Preferred Stock for an aggregate offering price of $7.0 million. In addition, in lieu of issuing,
selling and delivering 263,666 shares of the Company’s Common Stock to the Preferred Stock Investor, we agreed to pay the Preferred Stock Investor, on
the later of (i) Maturity Date or (ii) the date our obligations under the Financing Agreement were paid in full, a make-whole payment equal to 263,666
multiplied by the closing price of our Common Stock on the principal securities exchange or securities market on which the Common Stock is then traded,
on the day prior to the date of payment of the make-whole payment. This offering closed on October 28, 2022, and we received gross proceeds of $7.0
million, before expenses. The Company received gross proceeds of $7 million from the Offering, before expenses.
The Series A Preferred Stock was not convertible into Common Stock and ranked senior to Common Stock, with respect to rights on the distribution of
assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company, the Series A Preferred Stock had a liquidation preference equal to $1,333 per share.
The Series A Preferred Stock did not have any voting rights other than as required by applicable law. The holders of Series A Preferred Stock were entitled
to dividends equal to 25% of cash dividends actually paid, if any, on shares of Common Stock, paid pro rata on the outstanding shares of Series A Preferred
Stock. Upon the occurrence of change of control, the holders of Series A Preferred Stock could have required the Company to redeem all or part of such
holder’s Series A Preferred Stock at a redemption price per share of Series A Preferred Stock, payable in cash, equal to the liquidation preference of $1,333
per share of Series A Preferred Stock.
We also had the option to redeem all the outstanding shares of Series A Preferred Stock on such terms if we consummated a change of control transaction.
Each holder of Series A Preferred Stock also had the right to cause the Company to redeem all, but not less than all, of their shares of the Series A Preferred
Stock upon the occurrence of certain events, including, without limitation, the Company’s failure to comply with any covenants under the Certificate of
Designation or if the Company commenced a bankruptcy proceeding, subject to certain conditions. Under such circumstances, the Company was required
to redeem all, but not less than all, of the holder’s outstanding shares of Series A Preferred Stock at a redemption price per share of Series A Preferred
Stock, payable in cash, equal to the liquidation preference of $1,333 per share.
We were required to redeem from each holder of Series A Preferred Stock all outstanding shares of Series A Preferred Stock held by such holder, at a
redemption price per share of Series A Preferred Stock, payable in cash, equal to the liquidation preference of $1,333 per share of Series A Preferred Stock,
upon the earlier to occur of (i) the Maturity Date and (ii) the incurrence of Permitted Refinancing Indebtedness (as defined in the Certificate of
Designation). The Company accreted the Series A Preferred Stock from its fair value on the date of issuance to its redemption value using the effective
interest rate method.
On December 30, 2022, and in accordance with the terms of the Certificate of Designation, the Company mandatorily redeemed all 29,000 outstanding
shares of Series A Preferred Stock at a purchase price of $1,333 per share. The Company also paid certain affiliates of the Preferred Stock Investor
approximately $3.0 million as a make-whole payment pursuant to the subscription agreements previously entered into between the Company and the
Preferred Stock Investor.
F-28
Common stock
In March 2021, we entered into an at-the-market equity offering program (the “2021 ATM Program”) relating to shares of our common stock. The 2021
ATM Program permitted us to offer and sell shares of our common stock having an aggregate offering price of up to $100.0 million from time to time
through or to the sales agent under the 2021 ATM Program. Sales of our common stock could be made from time to time in at-the-market offerings as
defined in Rule 415 of the Securities Act, including by means of ordinary broker’s transactions on The Nasdaq Stock Market LLC (“Nasdaq”) or otherwise
at market prices prevailing at the time of sale, at prices related to prevailing market prices, or as otherwise agreed to with the sales agent. The sales agent
was entitled to compensation at a fixed commission rate of 3.0% of the aggregate gross sales price per share sold. The sales agent was not required to sell
any specific number or dollar amounts of securities but acted as sales agent and used commercially reasonable efforts to sell on our behalf all the shares of
common stock requested to be sold by us, consistent with its normal trading and sales practices, on mutually agreed terms between us and the sales agent.
Through December 31, 2021, we sold a total of 674,106 shares of our common stock under the 2021 ATM Program at an average sale price of $60.5 per
share and we received estimated net proceeds of $39.4 million, after deducting discounts and commissions to the sales agent and estimated offering
expenses. Subsequently, through the date of this 2022 10-K Report, we have not sold any additional shares of our common stock under the 2021 ATM
Program. The Company does not currently have an effective shelf registration statement in place and therefore, the 2021 ATM program has been
suspended. Future sales, if any, under the 2021 ATM Program will depend on a variety of factors, including among others, market conditions, the trading
price of our common stock, determinations by us of the appropriate sources of funding, and potential uses of funding available to us.
In February 2021, we closed on an underwritten public offering of our common stock, pursuant to which we issued 1,189,189 shares of our common stock
at an offering price of $92.5 per share, and we received net proceeds of $96.6 million, after deducting the underwriting discounts and commissions and
estimated offering expenses.
Warrants
As disclosed in Note 7. Debt, in 2022 we issued to the Administrative Agent and the lenders under the Financing Agreement Lender Warrants to purchase
an aggregate of 435,000 shares of common stock in relation to Amendment No.16 to the Financing Agreement. In 2020, we issued to the Administrative
Agent and the lenders under the Financing Agreement warrants to purchase an aggregate of 95,042 shares of our common stock.
The following table summarizes the status of our outstanding and exercisable warrants and related for each of the following years (in thousands, except
weighed average exercise price and weighted average remaining contractual life data):
Warrants outstanding and exercisable
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
Warrants
131 $
(23) $
(5) $
103 $
436 $
(3) $
536 $
77.50 $
15.50 $
395.00
76.19 $
0.14
341.50
13.10 $
1,041
1,146
-
2,427
Weighted
Average
Remaining
Contractual
Life
(in Years)
7.3
8.3
9.3
Balance, December 31, 2020
Exercised
Expired
Balance, December 31, 2021
Granted
Expired
Balance, December 31, 2022
We used the Black Scholes option pricing model to estimate the fair value of warrants issued. The weighted average fair value of the warrants issued in
2022 was $0.13 per warrant and the assumptions used to determine such fair value were as follows: expected term of 10 years, volatility of 69.4%,
dividend yields of 0% and risk-free interest rates of 2.9%. The fair value of the Lender Warrants was based on the date of grant using our Common Stock’s
closing price at measurement date and was recorded to “Additional paid-in-capital” in the consolidated balance sheets. There were no warrant grants in
2021.
F-29
Share-based payment award plans
Plan summary and description
In June 2019, our stockholders approved the TherapeuticsMD, Inc. 2019 Stock Incentive Plan, as amended (the “2019 Plan”), which replaced our
previously adopted 2012 Stock Incentive Plan, as amended, and the 2009 Long-Term Incentive Compensation Plan (referred to collectively as the “Prior
Plans”). Outstanding awards granted under the Prior Plans will remain subject to the terms and conditions in the Prior Plans.
The 2019 Plan is administered by the Compensation Committee of the Board. The purpose of the 2019 Plan is to provide a means for us and our
subsidiaries and other designated affiliates (the “Related Entities”) to attract key personnel to provide services to us and the Related Entities, as well as to
provide a means by which those key persons can acquire and maintain stock ownership, resulting in a strengthening of their commitment to our welfare and
the welfare of the Related Entities and promoting the mutuality of interests between participants and our stockholders. A further purpose of the 2019 Stock
Incentive Plan is to provide participants with additional incentive and reward opportunities designed to enhance our profitable growth and the profitable
growth of the Related Entities, and provide participants with annual and long-term performance incentives to expend their maximum efforts in the creation
of stockholder value. The persons eligible to receive awards under the 2019 Plan are our employees, officers, members of the Board, and consultants who
provide services to us or any subsidiary.
The provisions of the 2019 Plan authorize the grant of (i) stock options, which can be “qualified” or “nonqualified” under the Internal Revenue Code of
1986, as amended, (ii) stock appreciation rights, (iii) restricted stock, (iv) restricted stock units (“RSUs”), (v) performance shares and performance units,
such as performance stock units (“PSUs”), and (vi) other share-based awards. The 2019 Plan will terminate at the earliest of (i) such time as no shares
remain available for issuance under the 2019 Stock Plan, (ii) termination of the 2019 by the Board, or (iii) the tenth anniversary of the effective date of the
2019 Stock Incentive Plan. Awards outstanding upon termination of the 2019 Plan will remain in effect until they have been exercised or terminated,
or have expired. The term and vesting period of awards granted under the 2019 Plan are established on a per grant basis, and option expiration date is
generally ten years from the date of grant.
Under the 2019 Plan, 749,500 shares of common stock are authorized for issuance, which includes 449,500 shares from the First Amendment to the 2019
Plan, which was approved by our stockholders in May 2021 plus any unallocated shares previously available for issuance under the Prior Plans that were
not then subject to outstanding awards. Any shares subject to outstanding share-based payment awards under the 2019 Plan and Prior Plans that are
forfeited, expire or otherwise terminate without issuance of the underlying shares, or if any such award is settled for cash or otherwise does not result in the
issuance of all or a portion of the shares subject to such award (other than shares tendered or withheld in connection with the exercise of an award or the
satisfaction of withholding tax liabilities), the shares to which those awards were subject, shall, to the extent of such forfeiture, expiration, termination, cash
settlement or non-issuance, again be available for delivery with respect to awards under the 2019 Plan.
In August 2021, the Company hired a new President, who became our CEO in December 2021, and granted an “inducement grant” under Listing Rule
5635(c)(4) of Nasdaq of 55,000 RSUs (designated as “Time-Based Units”) and 55,000 PSUs (designated as “Performance Units”). In October 2021, the
Company appointed a new Chief Business Officer and granted an “inducement grant” under Listing Rule 5635(c)(4) of Nasdaq of 13,200 RSUs
(designated as “Time-Based Units”) and 5,200 PSUs (designated as “Performance Units”). The Time-Based Units and Performance Units were granted
pursuant to certain Inducement Grant Restricted Stock Unit Agreement; accordingly, these equity awards were not counted against the shares of common
stock available for issuance under the 2019 Plan. As part of the termination agreement with our CEO, 55,000 Performance Units were cancelled and 55,000
RSUs vested in 2022. As part of the termination agreements with our Chief Business Officer, 3,900 Performance Units and 11,466 RSUs vested in 2022.
As of December 31, 2022, 518,074 shares of common stock were subject to outstanding awards under our share-based payment award plans and
inducement grants including outstanding PSUs that were vested at 100% as a result of termination of employees.
F-30
The following table summarizes the outstanding awards issued pursuant to our share-based payment award plans and inducement grants as of
December 31, 2022 and the remaining shares of common stock available for future issuance (in thousands):
Plan Name
2019 Plan (3)
2012 Plan (4)
2009 Plan (5)
2021 Inducement Grants
Options
RSUs
PSUs (1)
47
11
114
—
198
—
—
48
96
—
—
4
Remaining shares of
common stock available
for future issuance (2)
352
—
—
—
(1) The number of PSUs represents the number of PSUs that will vest.
(2) The number of remaining shares of common stock available for future issuance is based on the number of PSUs that will vest.
(3) As of December 31, 2022, outstanding options have exercise prices ranging from $53.5 to $136.5 and will expire on March 30, 2023, due to
termination of employees except for awards for one employee and several consultants. Unvested RSUs will vest until July 2024. The unvested
PSUs will vest until April 2025.
(4) As of December 31, 2022, outstanding options have exercise prices ranging from $221.5 to $446 and will expire on March 30, 2023, due to
termination of employees except for awards for one employee and several consultants.
(5) As of December 31, 2022, outstanding options have exercise prices ranging from $90 to $446 and will expire on March 30, 2023 due to
termination of employees except for awards for one employee and several consultants.
2021 Exchange of eligible options for RSUs
In May 2021, our stockholders approved an Offer to Exchange Eligible Options for Restricted Stock Units (the “Exchange Offer”). The Exchange Offer
allowed certain employee option holders, excluding the Company’s named executive officers, advisers, consultants, contractors, or present or past non-
employee directors, to exchange some or all of their outstanding options to purchase shares of common stock that were granted before August 26, 2019,
and had a per share exercise price equal to or greater than $250.5 (“Eligible Options”), for an award of RSUs of the Company (“New RSUs”), subject to
specified conditions. In September 2021, following the expiration of the Exchange Offer, 69 eligible employees elected to exchange Eligible Options, and
the Company accepted for cancellation Eligible Options to purchase an aggregate of 89,860 shares of common stock, representing approximately 91.5% of
the total shares of common stock underlying the Eligible Options. Also, in September 2021, promptly following the expiration of the Exchange Offer, the
Company granted 14,005 New RSUs in exchange for the cancellation of the tendered Eligible Options. The New RSUs vest in three equal annual
installments beginning in September 2022, subject to the terms and conditions of the 2019 Plan.
F-31
Options
The following table summarizes the status of our outstanding and exercisable options and related transactions, including the Exchange Offer, for each for
the following years (in thousands, except weighed average exercise price and weighted average remaining contractual life data):
Options awards outstanding
Options awards exercisable
Balance, December 31, 2020
Granted
Exercised
Cancelled/Forfeited
Expired
Balance, December 31, 2021
Granted
Exercised
Cancelled/Forfeited
Expired
Balance, December 31, 2022
Options
Awards
Weighted
Average
Exercise
Price
240.00 $
60.50
1.50 $
300.50
201.00
225.98 $
-
- $
94.99
226.56
228.28 $
476 $
1 $
(2) $
(101) $
(21) $
353 $
- $
- $
(4) $
(177) $
172 $
Weighted
Average
Remaining
Contractual
Life
(in Years)
Options
Awards
Aggregate
Intrinsic
Value
Weighted
Average
Exercise
Price
253.00 $
Aggregate
Intrinsic
Value
397 $
117
Weighted
Average
Remaining
Contractual
Life
(in Years)
4.6
152
5.2
61
-
3.8
336 $
230.93 $
-
3.6
-
-
3.6
170 $
229.43 $
-
3.6
We used the Black Scholes option pricing model to estimate the fair value of options granted. There were no option grants in 2022. The weighted average
fair value of the options granted in 2021 was $0.77 per option, and the assumptions used to determine such fair value were as follows: expected term of 6.9
years, volatility of 67.6%, dividend yields of 0% and risk-free interest rates of 1.1%.
Restricted stock units
The following table summarizes the status of our RSUs and related transactions, including the Exchange Offer, for each for the following years (in
thousands, except weighed average grant date fair value):
RSUs awards outstanding
Weighted
Average
Grant Date
Fair Value
Aggregate
Intrinsic
Value
RSUs
RSUs awards vested
and not settled
Weighted
Average
Grant Date
Fair Value
Aggregate
Intrinsic
Value
RSUs
Balance, December 31, 2020
Granted
Vested and settled
Cancelled/Forfeited
Balance, December 31, 2021
Granted
Vested and settled
Cancelled/Forfeited
Balance, December 31, 2022
88.00 $
52.50
78.50 $
73.50
58.00 $
16.05
67.50 $
37.49
29.64 $
141 $
260 $
(103) $
(27) $
272 $
170 $
(138) $
(58) $
246 $
F-32
8,544
— $
- $
-
4,021
4,890
31 $
105.00 $
566
1,343
1,376
189 $
26.28 $
1,059
Performance stock units
The following table summarizes the status of our PSUs and related transactions for each for the following years (in thousands, except weighed average
grant date fair value):
Balance, January 1, 2020
Granted
Vested and settled
Cancelled/Forfeited
Balance, December 31, 2021
Granted
Vested and settled
Cancelled/Forfeited
Balance, December 31, 2022
PSUs awards outstanding
Weighted
Average
Grant Date
Fair Value
Aggregate
Intrinsic
Value
PSUs
PSUs awards vested
and not settled
Weighted
Average
Grant Date
Fair Value
Aggregate
Intrinsic
Value
PSUs
$
48
$
152
$
(34)
$
(2)
$
164
$
63
$
(52)
(75)
$
100 (1) $
54.00 $
52.00
58.00 $
53.50
51.50 $
34.50
58.26 $
44.85
42.30 $
2,909
— $
— $
—
1,057
2,953
39 $
59.00 $
709
108
558
81 $
39.95 $
450
(1) The number of PSUs represents the number of PSUs that will vest.
Employee stock purchase plan
In June 2020, our stockholders approved the TherapeuticsMD, Inc. 2020 Employee Stock Purchase Plan (“ESPP”), which reserved 108,000 shares of our
common stock for purchase by eligible employees. The ESPP permits eligible employees to purchase our common stock at a price per share which is equal
to 85% of the lesser of (i) the fair market value of the shares on the offering date of the offering period or (ii) the fair market value of the shares on the
purchase date. In 2022, 5,229 shares were sold under the ESPP at the average price of $2.6 per share and we received proceeds of approximately $14,000.
In 2021, 6,721 shares were sold under the ESPP at an average sale price of $34.5 per share and we received proceeds of $0.2 million. In the second quarter
of 2022, the ESPP Plan was suspended.
Share-based payment compensation cost
Share-based payment compensation expense for PSUs is based on 100% vesting which was a part of termination of benefits for all employees who were
terminated in 2022. We recorded share-based payment award compensation costs related to previously issued options, RSU and PSUs, as well as shares of
common stock issued under the ESPP totaling $11.6 million for 2022 and $18.1 million for 2021.
As of December 31, 2022, we had $0.7 million of unrecognized share-based payment award compensation cost related to unvested options, RSUs and
PSUs as well as shares issuable under the ESPP, which may be adjusted for future changes in forfeitures and is included as additional paid-in capital in the
accompanying consolidated balance sheets. No tax benefit was realized due to a continued pattern of net losses.
The unrecognized compensation cost as of December 31, 2022, is expected to be recognized as share-based payment award compensation over a weighted
average period of 1.4 years.
F-33
10. Revenue
Disaggregated revenue
The following table provides information about disaggregated revenue (in thousands) recognized in continuing operations:
License revenue:
Mayne Pharma
Theramex
Total revenue, net
License agreements
Mayne license agreement
2022
2021
$
$
68,561 $
1,402
69,963 $
-
2,573
2,573
Pursuant to a License Agreement, dated December 4, 2022, between the Company and Mayne Pharma (the “Mayne License Agreement”), the Company
granted Mayne Pharma, on the Closing Date, (i) an exclusive, sublicensable, perpetual, irrevocable license to research, develop, register, manufacture, have
manufactured, market, sell, use, and commercialize the Licensed Products in the United States and its possessions and territories and (ii) an exclusive,
sublicensable, perpetual, irrevocable license to manufacture, have manufactured, import and have imported the Licensed Products outside the United States
for commercialization in the United States and its possessions and territories.
Pursuant to the Mayne License Agreement, Mayne Pharma will make one-time, milestone payments to the Company of each of (i) $5.0 million if aggregate
net sales of all Products in the United States during a calendar year reach $100.0 million, (ii) $10.0 million if aggregate net sales of all Products in the
United States during a calendar year reach $200.0 million and (iii) $15.0 million if aggregate net sales of all Products in the United States during a calendar
year reach $300.0 million. Further, Mayne Pharma will pay to the Company royalties on net sales of all Products in the United States at a royalty rate of
8.0% on the first $80 million in annual net sales and 7.5% on annual net sales above $80.0 million, subject to certain adjustments, for a period of 20 years
following the Closing Date. The royalty rate will decrease to 2.0% on a Product-by-Product basis upon the earlier to occur of (i) the expiration or
revocation of the last patent covering a Product and (ii) a generic version of a Product launching in the United States. Mayne Pharma will pay to the
Company minimal annual royalties of $3.0 million per year for 12 years, adjusted for inflation at an annual rate of 3%, subject to certain further
adjustments, including as described below. Upon the expiry of the 20-year royalty term, the licenses granted to Mayne Pharma under the Mayne License
Agreement will become a fully paid-up and royalty free license for the Licensed Products.
The total consideration from Mayne Pharma to the Company for the purchase of the Transferred Assets and the grant of the licenses under the Mayne
Transaction Agreement was (i) a cash payment of $140.0 million at closing, (ii) a cash payment of approximately $12.1 million at closing for the
acquisition of net working capital as determined in accordance with the Transaction Agreement and subject to certain adjustments, (iii) a cash payment of
approximately $1.0 million at closing for prepaid royalties in connection with the Mayne License Agreement Amendment and (iv) the right to receive the
contingent consideration set forth in the Mayne License Agreement, as amended.
The proceeds at closing were allocated separately to the sale of ANNOVERA and the license grant related to the Company’s IMVEXXY, BIJUVA, and
prescription prenatal vitamin products, as the sale of ANNOVERA was accounted for under ASC 610-20, Gains and Losses from Derecognition of
Nonfinancial Assets in arriving at the gain on disposal of approximately $62.0 million. We also recognized approximately $70.0 million in revenue from
transaction with Mayne Pharma which represented license to commercialize the Company’s IMVEXXY, BIJUVA, and prescription prenatal vitamin
products as well as present value of future minimum royalty payments (as discussed in Note 1).
On the Closing Date, the Company and Mayne Pharma entered into Amendment No. 1 to the Mayne License Agreement (the “Mayne License Agreement
Amendment”). Pursuant to the Mayne License Agreement Amendment, Mayne Pharma agreed to pay the Company approximately $1.0 million in prepaid
royalties on the Closing Date. The prepaid royalties will reduce the first four quarterly payments that would have otherwise been payable pursuant to the
Mayne License Agreement by an amount equal to $257,250 per quarterly royalty payment plus interest calculated at 19% per annum accruing from the
Closing Date until the date such quarterly royalty payment is paid to the Company. In addition, the parties agreed that Mayne Pharma will reduce one
quarterly royalty payment (other than the first quarterly royalty payment) otherwise payable to the Company by $1.5 million in consideration of Mayne
Pharma assuming the Company’s obligations under a long-term services agreement, including the Company’s minimum payment obligations thereunder.
F-34
Knight license agreement
Pursuant to the terms of the Knight License Agreement, in 2020, Knight paid us $2.0 million in milestone fees upon the first regulatory approval in Canada
for IMVEXXY and BIJUVA, and is required to pay us sales milestone fees based upon certain aggregate annual sales in Canada and Israel of each of
IMVEXXY and BIJUVA and royalties based on aggregate annual sales of each of IMVEXXY and BIJUVA in Canada and Israel.
We may terminate the Knight License Agreement if Knight does not submit all regulatory applications, submissions and/or registrations required for
regulatory approval to use and commercialize IMVEXXY and BIJUVA in Canada within certain specified time periods. We also may terminate the Knight
License Agreement if Knight challenges our patents. Either party may terminate the Knight License Agreement for any material breach by the other party
that is not cured within certain specified time periods or if the other party files for bankruptcy or other related matters. As part of the Knight License
Agreement, Knight is prohibited from exporting IMVEXXY and BIJUVA to the United States.
As of December 31, 2022, no IMVEXXY or BIJUVA sales have been made through the Knight License Agreement.
Theramex license agreement
Under the terms of the Theramex License Agreement, Theramex paid us EUR 14 million, or $15.5 million, in cash as an upfront fee in August 2019.
Within thirty days of signing the Theramex License Agreement, we provided Theramex the regulatory materials and clinical data that were necessary for
Theramex to obtain marketing authorizations and other applicable regulatory approvals for commercializing BIJUVA and IMVEXXY. In 2019, at a point in
time when Theramex was able to use and benefit from the license which was when the knowledge transfer of regulatory documents occurred, we
recognized the revenue related to the upfront fee, which was a non-refundable payment.
In 2021, we received additional milestone payments comprised of an aggregate of EUR 1.0 million, or $1.2 million, in regulatory milestone payments
based on regulatory approvals for BIJUVA in certain specified markets. Additionally, in December 2021, we received EUR 0.5 million, or $0.6 million, in
additional upfront payments for the license grants of IMVEXXY in Brazil and Mexico. The additional upfront payment for the license grants of
IMVEXXY in Brazil and Mexico may be returned to Theramex under certain conditions if IMVEXXY fails to obtain marketing authorization in one of
Brazil or Mexico within a prespecified period. Accordingly, the additional upfront payment for the license grants of IMVEXXY in Brazil and Mexico was
recorded as other non-current liabilities as of December 31, 2021 in the accompanying balance sheets.
We are eligible to receive additional sales milestone payments up to an aggregate of EUR 27.5 million in sales milestone payments to be paid in escalating
tranches based on Theramex first attaining certain aggregate annual net sales milestones of BIJUVA and IMVEXXY outside of the U.S., excluding Canada
and Israel (collectively the “Theramex Territory”) ranging from EUR 25 million to EUR 100 million. We are also entitled to receive quarterly royalty
payments at a rate of 5% on net sales of BIJUVA and IMVEXXY in the Theramex Territory. Theramex is responsible for all regulatory and commercial
activities for BIJUVA and IMVEXXY in the Theramex Territory.
Theramex may sublicense its rights to commercialize BIJUVA and IMVEXXY in the Theramex Territory, except for certain specified markets. We may
terminate the Theramex License Agreement if Theramex does not submit all regulatory applications, submissions and/or registrations required for
regulatory approval to use and commercialize BIJUVA and IMVEXXY within certain specified time periods. We also may terminate the Theramex License
Agreement if Theramex challenges our patents. Either party may terminate the Theramex License Agreement for any material breach by the other party
that is not cured within certain specified time periods or if the other party files for bankruptcy or other related matters.
In both 2022 and 2021, we recorded BIJUVA sales of $1.4 million made through the Theramex License Agreement. In addition, in 2021, we received
milestone payments comprised of an aggregate of EUR 1.0 million, or $1.2 million, in regulatory milestone payments based on regulatory approvals for
BIJUVA in certain specified markets. As of December 31, 2022, no IMVEXXY sales have been made through the either of the licensing agreements.
F-35
11. Income taxes
Our income (loss) from continuing operations before income taxes is as follows (in thousands):
United States
2022
2021
$
1,074 $
(79,305)
For the year ended December 31, 2022, there was 0% and 0.5% provision for income taxes in continuing and discontinued operations, respectively, current
or deferred. For the year ended December 31, 2021, there was no provision for income taxes in continuing and discontinued operations, current or deferred.
As of December 31, 2022, we had a federal net operating loss (“NOL”) carryforwards of $640.0 million, which is available to offset future taxable income.
Approximately $92.8 million of the federal NOLs can be carried forward for 20 years and will begin to expire in 2031. The remaining $547.2 million can
be carried forward indefinitely. In the event of future income, the NOL deduction arising from NOLs generated in taxable years beginning in 2021 will be
limited to 80% of the excess taxable income. The Company experienced an ownership change pursuant to IRC Sec. 382. As a result, our NOLs
carryforward as of December 31, 2022 will be limited.
A reconciliation between taxes computed at the federal statutory rate and the consolidated effective tax rate is as follows:
Federal statutory tax rate
State tax rate, net of federal tax benefit
Adjustment in valuation allowances
Excess stock benefits
Interest expense accretion
Permanent and other differences
Provision for income taxes
2022
2021
21.0%
3.9%
(3228.6%)
835.2%
0.0%
2368.5%
0.0%
21.0%
4.7%
(17.8%)
(3.2%)
0.0%
(4.6%)
0.0%
Deferred income taxes result from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax
purposes. The components of the net deferred income tax asset as of December 31, 2022 and 2021 are as follows (in thousands):
Deferred income tax assets:
Net operating loss
Share-based payment compensation
Interest expense limitation
Gain on sale of ANNOVERA
Accrual for sales returns and coupons
R&D credit
Other, net
Deferred income tax asset
Valuation allowance
Deferred income tax assets, net
As of December 31,
2022
2021
$
$
176,631 $
8,590
19,707
(3,624)
-
186
(1,062)
200,428
(200,428)
— $
224,660
17,698
20,391
-
-
186
(1,250)
261,685
(261,685)
—
We believe that it is more likely than not that we will not generate sufficient future taxable income to realize a portion of tax benefits related to the deferred
tax assets and as such, a valuation allowance has been established against a portion of the deferred tax assets as of both December 31, 2022 and 2021.
Since our first year of operations in 2011, we generated net operating losses, and our U.S. federal and state tax returns remain open to examination.
As of December 31, 2022 and 2021, we had no tax positions relating to open tax returns that were considered to be uncertain, and we had no unrecognized
tax benefits.
F-36
12. Income (loss) per common share
The following table sets forth the computation of basic and diluted income (loss) per common share for the periods presented (in thousands, except per
share amounts):
Numerator:
Net income (loss) from continuing operations
Net income (loss) from discontinued operations
Net income (loss)
Denominator:
Weighted average common shares for basic income (loss) per
common share
Effect of dilutive securities
Weighted average common shares for diluted income (loss) per
common share
Income (loss) per common share, continuing operations
Basic
Diluted
Income (loss) per common share, discontinued operations
Basic
Diluted
2022
2021
$
$
1,074 $
110,923
111,997 $
(79,305)
(93,110)
(172,415)
9,028
338
9,366
7,960
-
7,960
$
$
$
$
0.12 $
0.11 $
(9.96)
(9.96)
12.29 $
11.84 $
(11.70)
(11.70)
Since we reported a net loss for 2021, our potentially dilutive securities are deemed to be anti-dilutive, accordingly, there was no effect of dilutive
securities. Therefore, our basic and diluted loss per common share and our basic and diluted weighted average common share are the same for 2021.
The following table sets forth the outstanding securities as of the periods presented which were not included in the calculation of diluted earnings per
common share during 2022 and 2021 (in thousands):
Stock options
RSUs
PSUs
Warrants
13. Related parties
As of December 31,
2021
2022
172
-
-
101
273
353
272
164
103
892
A former member of our Board, J. Martin Carrol, who resigned in December 2021, is also a director of Catalent. From time to time, we have entered into
agreements with Catalent and its affiliates in the normal course of business. From July 2015 to December 2021, agreements with Catalent have been
reviewed by independent directors of our Company, or a committee consisting of independent directors of our Company. For manufacturing activities,
Catalent billed us $4.1 million and $3.0 million for 2021 and 2020, respectively. As of December 31, 2021, estimated amounts payable to Catalent was $0.9
million. In addition, we have minimum purchase requirements in place with Catalent as disclosed in Note 8, Commitments and contingencies to the
financial statements included in this Annual Report. The Catalent supply agreements were assigned to Mayne as part of our transaction with Mayne
Pharma.
On August 23, 2022, we appointed Mr. Justin Roberts as a director to fill a newly created vacancy on the Board. Mr. Roberts will serve until the
Company’s 2022 Annual Meeting of Stockholders or until his successor is duly elected or appointed or his earlier death or resignation. As a director of the
Company, Mr. Roberts is entitled to receive compensation in the same manner as our other non-employee directors, described in the section entitled
“Director Compensation” in our Amendment No. 1 to Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange
Commission on April 29, 2022, but he has elected not to receive any
F-37
compensation for his service as a non-employee director at this time. Mr. Roberts currently serves as a Partner of the Preferred Stock Investor. On July 29,
2022, September 30, 2022 and October 28, 2022, we entered into subscription agreements with Preferred Stock Investor. On December 30, 2022, and in
accordance with the terms of the Certificate of Designation, the Company redeemed all 29,000 outstanding shares of Series A Preferred Stock at a purchase
price of $1,333 per share. The Company also paid certain affiliates of the Preferred Stock Investor approximately $3.0 million as a make-whole payment
pursuant to the subscription agreements previously entered into between the Company and Preferred Stock Investor. See Note 9, Mandatory Redeemable
Preferred Stock and Stockholders’ Equity (Deficit) for additional information.
In April 2020, Karen L. Ling was appointed to our Board, who was an executive vice president and chief human resources officer of American
International Group, Inc. (“AIG”) until May 2021. From time to time, we have entered into agreements with AIG in the normal course of business. From
April 2020 to May 2021, agreements with AIG were reviewed by independent directors of our Company, or a committee consisting of independent
directors of our Company. For various insurance premiums, AIG billed us less than $0.1 million and $0.2 million for 2021 and 2020, respectively. As of
December 31, 2021, we had no amounts payable to AIG.
14. Business concentrations
TherapeuticsMD was previously a women’s healthcare company with a mission of creating and commercializing innovative products to support the
lifespan of women from pregnancy prevention through menopause. In December 2022, we changed our business to become a pharmaceutical royalty
company, currently receiving royalties on products licensed to pharmaceutical organizations that possess commercial capabilities in the relevant territories.
As part of the transformation that included License Agreement with Mayne Pharma, historical results of commercial operations have been reflected as
discontinued operations in the Company’s consolidated financial statements for all periods prior to the Closing Date. Assets and liabilities associated with
the commercial business are classified as assets and liabilities of discontinued operations in the Company’s consolidated balance sheets. Additional
disclosures regarding discontinued operations are provided in Note 2.
In 2022, 98% of license revenue related to one customer - Mayne Pharma. In 2021, 100% of license revenue related to one customer - Theramex.
As of December 31, 2022, we had a royalty receivable of $1.5 million relating to the short-term portion of receivable from Mayne Pharma and $20.3
million relating to long term portion of royalty receivable which includes royalties recognized from the Minimum Annual Royalty (see L. Revenue
Recognition above). As of December 31, 2022, we also recorded $1.0 million in prepaid royalties that we received from Mayne Pharma which were
recorded in accrued expenses and other current liabilities.
As of December 31, 2022, three vendors each accounted for more than 10% of our accounts payable related to continued operations. As of December 31,
2021, one vendor accounted for 54.5% of our accounts payable balance at December 31, 2021 related to continued operations.
15.
Subsequent events
On March 28, 2023, we received escrowed funds of $11.3 million related to customary holdbacks related to the vitaCare transaction that were recorded as
restricted cash in the consolidated balance sheets as of December 31, 2022.
F-38
Exhibit 4.2
DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12
OF THE SECURITIES EXCHANGE ACT OF 1934
As of December 31, 2022, the only class of securities of TherapeuticsMD, Inc., a Nevada corporation (the “Company”), registered under Section 12 of the
Securities Exchange Act of 1934, as amended, is common stock, par value $0.001 per share (“common stock”).
Overview
This section describes the general terms of the Company’s common stock. The Company’s common stock and the rights of the holders of its common stock
are subject to the applicable provisions of the Nevada Private Corporation Code, which is referred to herein as “Nevada law,” the Company’s amended and
restated articles of incorporation, as amended, the Company’s bylaws, as amended, and the rights of the holders of the Company’s preferred stock, if any, as
well as some of the terms of the Company’s outstanding indebtedness.
Under the Company’s amended and restated articles of incorporation, as amended, the Company has the authority to issue 12,000,000 shares of common
stock, par value $0.001 per share. As of April 5, 2023, there were 9,953,290 shares of common stock outstanding.
The following description of the Company’s common stock may not be complete and is subject to, and qualified in its entirety by reference to, Nevada law
and the actual terms and provisions contained in the Company’s amended and restated articles of incorporation and the Company’s bylaws, each as may be
amended from time to time.
Voting Rights
Each outstanding share of the Company’s common stock is entitled to one vote per share of record on all matters submitted to a vote of stockholders and to
vote together as a single class for the election of directors and in respect of other corporate matters. At a meeting of stockholders at which a quorum is
present, for all matters other than the election of directors, an affirmative vote of the majority of shares entitled to vote on a matter and that are represented
either in person or by proxy at a meeting of stockholders decides all questions, unless the matter is one upon which a different vote is required by express
provision of law or the Company’s amended and restated articles incorporation or the Company’s bylaws, each as may be amended from time to time.
Directors will be elected by a plurality of the votes of the shares present at a meeting. Holders of shares of common stock do not have cumulative voting
rights with respect to the election of directors or any other matter. The Company has adopted a majority voting policy as part of its Corporate Governance
Guidelines. The majority voting policy is applicable solely to uncontested elections, which are those elections in which the number of nominees for
election is less than or equal to the number of directors to be elected. Under the majority voting policy, any nominee for director who receives more
“withheld” votes than “for” votes in an uncontested election must submit a written offer to resign as director. Any such resignation will be reviewed by the
independent members of the Company's board of directors and, within 90 days after the election, the independent members of the Company’s board of
directors will determine whether to accept, reject or take other appropriate action with respect to, the resignation, in furtherance of the best interests of the
Company and its stockholders.
Dividends
Holders of the Company’s common stock are entitled to receive dividends or other distributions when, as and if declared by the Company’s board of
directors. The right of the Company’s board of directors to declare dividends, however, is subject to any rights of the holders of other classes of the
Company’s capital stock, any indebtedness outstanding from time to time and the availability of sufficient funds, as determined under Nevada law, to pay
dividends.
Preemptive Rights
The holders of the Company’s common stock do not have preemptive rights to purchase or subscribe for any of the Company’s capital stock or other
securities.
Redemption
Shares of the Company’s common stock are not subject to redemption by operation of a sinking fund or otherwise.
Liquidation Rights
In the event of any liquidation, dissolution, or winding up of the Company, subject to the rights, if any, of the holders of other classes of the Company’s
capital stock, the holders of shares of the Company’s common stock are entitled to receive any of the Company’s assets available for distribution to its
stockholders ratably in proportion to the number of shares held by them.
Options and Other Stock-Based Rights
From time to time, the Company has issued and expect to continue to issue options and other stock-based rights to various lenders, investors, consultants,
employees, officers and directors of the Company.
Listing
The Company’s common stock is listed on the Nasdaq Global Select Market of the Nasdaq Stock Market LLC under the symbol “TXMD.”
Transfer Agent and Registrar
The transfer agent and registrar for the Company’s common stock is Computershare Trust Company, N.A.
Certain Provisions of Nevada Law and the Company’s Articles of Incorporation and Bylaws
The following paragraphs summarize certain provisions of Nevada law and the Company’s amended and restated articles of incorporation, as amended, and
bylaws, as amended. The summary does not purport to be complete and is subject to and qualified in its entirety by reference to Nevada law and to the
Company’s amended and restated articles of incorporation, as amended, and bylaws, as amended, copies of which are on file with the Securities and
Exchange Commission as exhibits to reports previously filed by the Company.
General
Certain provisions of the Company’s amended and restated articles of incorporation, as amended, and bylaws, as amended, and Nevada law could make an
acquisition of the Company by a third party, a change in the Company’s incumbent management, or a similar change in control more difficult, including:
•
•
•
an acquisition of the Company by means of a tender or exchange offer;
an acquisition of the Company by means of a proxy contest or otherwise; or
the removal of a majority or all of the Company’s incumbent officers and directors.
These provisions, which are summarized below, are likely to discourage certain types of coercive takeover practices and inadequate takeover bids. These
provisions are also designed to encourage persons seeking to acquire control of the Company to first negotiate with the Company’s board of directors. The
Company believes that these provisions help to protect its potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to
acquire or restructure the Company, and that this benefit outweighs the potential disadvantages of discouraging such a proposal because the Company’s
ability to negotiate with the proponent could result in an improvement of the terms of the proposal. The existence of these provisions which are described
below could limit the price that investors might otherwise pay in the future for the Company’s securities.
Articles of Incorporation and Bylaws
Authorized But Unissued Capital Stock. The Company has shares of common stock and preferred stock available for future issuance without stockholder
approval, subject to any limitations imposed by the listing standards of any securities exchange on which the Company’s stock may be listed. The Company
may utilize these additional shares for a variety of corporate purposes, including for future public offerings to raise additional capital or facilitate corporate
acquisitions or for payment as a dividend on the Company’s capital stock. The existence of unissued and unreserved common stock and preferred stock
may enable the Company’s board of directors to issue shares to persons friendly to current management or to issue preferred stock with terms that could
have the effect of making it more difficult for a third party to acquire, or could discourage a third party from seeking to acquire, a controlling interest in the
Company by means of a merger, tender offer, proxy contest, or otherwise. In addition, if the Company issues preferred stock, the issuance could adversely
affect the voting power of holders of common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation.
Blank Check Preferred Stock. The Company’s board of directors, without stockholder approval, has the authority under the Company’s amended and
restated articles of incorporation, as amended, to issue preferred stock with rights superior to the rights of the holders of common stock. As a result,
preferred stock could be issued quickly and easily, could impair the rights of holders of common stock, and could be issued with terms calculated to delay
or prevent a change in control or make removal of management more difficult.
Election of Directors. The Company’s bylaws provide that a majority of directors then in office may fill any vacancy occurring on the Company’s board of
directors, even though less than a quorum may then be in office. These provisions may discourage a third party from voting to remove incumbent directors
and simultaneously gaining control of the Company’s board of directors by filling the vacancies created by that removal with its own nominees.
Removal of Directors. Except in certain cases for directors elected by the holders of any series of preferred stock, a director may be removed only by the
affirmative vote of two-thirds or more of the combined voting power of the then issued and outstanding shares of the Company’s capital stock entitled to
vote in the election of directors, voting together as a single class.
Stockholder Meetings. The Company’s bylaws do not permit stockholders to call a special meeting of stockholders. Rather, only the Company’s board of
directors or such person or persons authorized by the Company’s board of directors will be able to call special meetings of stockholders. This provision
may discourage another person or entity from making a tender offer, even if it acquired a majority of the Company’s outstanding voting stock, because the
person or entity could only take action at a duly called stockholders’ meeting or by written consent.
Anti-takeover Effects of Nevada Law
Business Combinations with Interested Stockholders
The “business combination with interested stockholders” provisions of Sections 78.411 to 78.444, inclusive, of the Nevada Revised Statutes, or NRS,
generally prohibit a Nevada corporation with at least 200 stockholders of record from engaging in various “combination” transactions with any interested
stockholder for a period of two years after the date of the transaction in which the person became an interested stockholder, unless the combination is
approved by the Company’s board of directors prior to the date the interested stockholder obtained such status or the combination is approved by the
Company’s board of directors and at such time or thereafter is approved at a meeting of the stockholders by the affirmative vote of stockholders
representing at least 60% of the outstanding voting power held by disinterested stockholders, and extends beyond the expiration of the two-year period,
unless:
•
•
the combination was approved by the Company’s board of directors prior to the person becoming an interested stockholder or the transaction by
which the person first became an interested stockholder was approved by the Company’s board of directors before the person became an
interested stockholder or the combination is later approved by a majority of the voting power held by disinterested stockholders; or
if the consideration to be paid by the interested stockholder is at least equal to the highest of: (a) the highest price per share paid by the
interested stockholder within the two years immediately preceding the date of
the announcement of the combination or in the transaction in which it became an interested stockholder, whichever is higher; (b) the market
value per share of common stock on the date of announcement of the combination and the date the interested stockholder acquired the shares,
whichever is higher; or (c) for holders of preferred stock, the highest liquidation value of the preferred stock, if it is higher.
Notwithstanding the foregoing, NRS 78.411 to 78.444, inclusive, do not apply to any combination of a resident domestic corporation with an interested
stockholder after the expiration of four years after the person first became an interested stockholder.
A “combination” is generally defined to include mergers or consolidations or any sale, lease exchange, mortgage, pledge, transfer, or other disposition, in
one transaction or a series of transactions, with an “interested stockholder” having: (a) an aggregate market value equal to more than 5% of the aggregate
market value of the assets of the corporation, (b) an aggregate market value equal to more than 5% of the aggregate market value of all outstanding voting
shares of the corporation, (c) more than 10% of the earning power or net income of the corporation, and (d) certain other transactions with an interested
stockholder or an affiliate or associate of an interested stockholder.
In general, an “interested stockholder” is a person who, together with affiliates and associates, owns (or within two years, did own) 10% or more of a
corporation’s voting stock. The statute could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage
attempts to acquire the Company even though such a transaction may offer the Company’s stockholders the opportunity to sell their stock at a price above
the prevailing market price.
Control Share Acquisitions
The “control share” provisions of Sections 78.378 to 78.3793, inclusive, of the NRS apply to “issuing corporations” that are Nevada corporations with at
least 200 stockholders of record, including at least 100 stockholders of record who are Nevada residents, and that conduct business directly or indirectly in
Nevada. The control share statute prohibits an acquirer, under certain circumstances, from voting its shares of a target corporation’s stock after crossing
certain ownership threshold percentages, unless the acquirer obtains approval of the target corporation’s disinterested stockholders. The statute specifies
three thresholds: one-fifth or more but less than one-third, one-third but less than a majority, and a majority or more, of the outstanding voting power.
Generally, once an acquirer crosses one of the above thresholds, those shares in an offer or acquisition and acquired within 90 days thereof become “control
shares” and such control shares are deprived of the right to vote until disinterested stockholders restore the right. These provisions also provide that if
control shares are accorded full voting rights and the acquiring person has acquired a majority or more of all voting power, all other stockholders who do
not vote in favor of authorizing voting rights to the control shares are entitled to demand payment for the fair value of their shares in accordance with
statutory procedures established for dissenters’ rights.
A corporation may elect to not be governed by, or “opt out” of, the control share provisions by making an election in its articles of incorporation or bylaws,
provided that the opt-out election must be in place on the 10th day following the date an acquiring person has acquired a controlling interest, that is,
crossing any of the three thresholds described above. The Company has not opted out of the control share statutes, and will be subject to these statutes if we
are an “issuing corporation” as defined in such statutes.
The effect of the Nevada control share statutes is that the acquiring person, and those acting in association with the acquiring person, will obtain only such
voting rights in the control shares as are conferred by a resolution of the stockholders at an annual or special meeting. The Nevada control share law, if
applicable, could have the effect of discouraging takeovers of the Company.
[***] CERTAIN INFORMATION IN THIS DOCUMENT HAS BEEN EXCLUDED PURSUANT TO REGULATION S-K, ITEM
601(B)(2). SUCH EXCLUDED INFORMATION IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE REGISTRANT
TREATS AS PRIVATE OR CONFIDENTIAL.
Execution Version
Exhibit 10.45
AMENDMENT No. 1
to the License Agreement
between Mayne Pharma LLC and TherapeuticsMD, Inc.
This Amendment No. 1 (“Amendment”) is entered into as of December 30, 2022 (“Amendment Effective Date”) by and
between Mayne Pharma LLC, a limited liability company formed under the laws of Delaware and located at 3301 Benson Drive
Suite 401, Raleigh NC 27609 (“Mayne”), and TherapeuticsMD, Inc., a corporation formed under the laws of Nevada and located
at 951 Yamato Road, Suite 220, Boca Raton, Florida 33431 (“TXMD”). TXMD and Mayne are each referred to individually as a
“Party” and together as the “Parties.”
WHEREAS, Mayne and TXMD are parties to a License Agreement dated as of December 4, 2022 (the
“Agreement”), concerning the development and commercialization of the Licensed IP; and
WHEREAS, the Parties mutually desire to amend, modify and restate certain terms and conditions of the
Agreement regarding the Parties’ pharmacovigilance obligations and payment of certain royalties;
NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained, it is mutually
agreed as follows:
1.
DEFINITIONS
Unless otherwise defined herein, capitalized words in this Amendment shall have the meaning attributed to them in the
Agreement.
2.
AMENDMENTS
The Parties agree that, as of the Amendment Effective Date, the Agreement is amended as set forth in this Section 2.
2.1
The following definitions shall be added to Section 1.1:
[***]
“Vitacare Agreement” means the Master Pharmacy Services Agreement between vitaCare Prescription Services, Inc.
and TXMD, dated April 14, 2022 and Consignment Sales and Services Addendum, dated as of April 14, 2022, vitaCare
Prescription Services, Inc., a Florida corporation, and TXMD.
2.2
The following Section 5.4 shall be added to Article 5:
“As between Mayne and TXMD, Mayne shall have primary responsibility for all matters related to pharmacovigilance,
including maintenance of all safety databases; provided that all ex-US licensees of TXMD shall retain their respective
reporting obligations. In connection with the foregoing, TXMD shall assign to Mayne, and Mayne shall assume, the
[***] Agreement. In consideration for the additional costs and obligations arising from the foregoing and based on
labels and products on the market owned, controlled or licensed by TXMD outside the US as of the Effective Date,
Mayne shall offset against royalties otherwise payable under Section 6.2 (including Minimum Annual Royalty payments
under Section 6.2(c)), the following: (i) the portion of the [***] Agreement costs allocated or necessary for ex-US
compliance and reporting by ex-US licensees and (ii) all internal costs of Mayne or third party personnel necessary and
related to the maintenance of all safety databases and communication and reporting to ex-US licensees, currently
expected to be one full time equivalent pharmacovigilance specialist. Any changes to approved labels or indications, or
additional licenses in additional countries or territories, will result in adjusted costs. Upon any such changes, the Parties
agree to negotiate in good faith and adjust the amounts set forth herein accordingly. Mayne will use commercially
reasonable efforts to minimize all costs and expenses under this Section 5.4”
2.3
The following Section 6.2(f) shall be added to Article 6:
“At Closing (as defined in the Transaction Agreement), Mayne shall pay an additional amount equal to $1.029 million
(one million twenty-nine thousand U.S. dollars) as partial prepayment of the royalties. Such prepaid royalties shall
reduce the first four quarterly payments that would have otherwise been payable pursuant to Section 6.2 by an amount
equal to $257,250 per quarterly Minimum Annual Royalty payment plus interest calculated at 19% per annum accruing
from the Closing Date until the date such quarterly Minimum Annual Royalty payment is paid to TXMD. The $1.029
million paid pursuant to this Section 6.2(f) shall be taken into account and constitute payment of royalties for all
purposes of calculating Minimum Annual Royalties under Section 6.1(c).”
2.4
The following Section 6.2(g) shall be added to Article 6:
“In consideration of Mayne Pharma assuming the Vitacare Agreement and TXMD’s $1.5million liability thereunder
existing as of the Amendment Effective Date, Mayne shall reduce one quarterly royalty payment, otherwise payable to
TXMD by an amount equal to such $1.5 million. Such reduction will be taken no earlier than the second quarterly
royalty payment due. The full amount of such reduction pursuant to this Section 6.2(g) shall be taken into account and
constitute payment of royalties for all purposes of calculating Minimum Annual Royalties under Section 6.1(c).”
3.
INTEGRATION
Except for the sections of the Agreement specifically amended hereunder, all terms and conditions of the Agreement
remain and shall remain in full force and effect. This Amendment shall hereafter be incorporated into and deemed part
of the Agreement and any future reference to the Agreement shall include the terms and conditions of this Amendment.
4.
APPLICABLE LAW & JURISDICTION
This Amendment shall be governed by, and construed in accordance with, the laws which govern the Agreement, and
the Parties submit to the jurisdiction and dispute resolution provisions as set forth in the Agreement.
5.
COUNTERPARTS
This Amendment may be executed in counterparts with the same effect as if both Parties had signed the same document.
All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same
instrument. Signature pages of this Amendment may be exchanged by facsimile or other electronic means without
affecting the validity thereof.
[Remainder of Page Intentionally Left Blank – Signature Page to Follow]
IN WITNESS WHEREOF, the Parties intending to be bound have caused this Amendment to be executed by their duly
authorized representatives.
MAYNE PHARMA LLC
THERAPEUTICSMD, INC.
By: /s/ Kimberly Parker
Name: Kimberly Parker
By: /s/ Marlan Walker
Name: Marlan Walker
Title: Authorized Signatory
Title: Secretary
Date: December 30, 2022
Date: December 30, 2022
[Signature page to License Agreement Amendment No. 1]
Exhibit 10.46
Execution Version
AMENDMENT No. 1
to the Transaction Agreement
between Mayne Pharma LLC and TherapeuticsMD, Inc.
This Amendment No. 1 (“Amendment”) is entered into as of December 30, 2022 (“Amendment Effective Date”) by and
between Mayne Pharma LLC, a limited liability company formed under the laws of Delaware and located at 3301 Benson Drive
Suite 401, Raleigh NC 27609 (“Mayne”), and TherapeuticsMD, Inc., a corporation formed under the laws of Nevada and located
at 951 Yamato Road, Suite 220, Boca Raton, Florida 33431 (“TXMD”). TXMD and Mayne are each referred to individually as a
“Party” and together as the “Parties.”
WHEREAS, Mayne and TXMD are parties to a Transaction Agreement dated as of December 4, 2022 (the
“Agreement”), to govern the sale, transfer, and conveyance to Purchaser of certain Transferred Assets that are necessary or
useful for the Product Exploitation;
WHEREAS, the Parties mutually desire to amend, modify and restate certain terms and conditions of the
Agreement regarding adjustments to Net Working Capital;
NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained, it is mutually
agreed as follows:
1.
DEFINITIONS
Unless otherwise defined herein, capitalized words in this Amendment shall have the meaning attributed to them in the
Agreement.
2.
AMENDMENTS
The Parties agree that, as of the Amendment Effective Date, Section 5.3(h) shall be amended and restated with the
following:
“For a period of two years following the Closing Date in the case of Allowance for Returns and one year following the
Closing date in the case of Wholesale Distributor Fees and Payer Rebates, Purchaser shall continue to provide updated
Closing Statements solely with respect to calculation of the Closing Net Working Capital conduct solely with respect to
the matters included in the items entitled Allowance for Returns, Allowance for Wholesale Distributor Fees and Payer
Rebates, in each case, comparing actual invoices against accruals on a quarterly basis (using Purchaser’s fiscal
quarters). The amounts set forth in the updated Closing Statements for such fiscal quarter shall become final and
binding on the parties on the date that is thirty (30) Calendar Days following Purchaser’s delivery thereof to TXMD,
unless TXMD delivers written Notice of Disagreement to Purchaser on or prior to such date. The matter may be
referred by either party to the Firm in same manner as clause (c) above. In the event that the Firm determines that
amounts are due and payable to Purchaser, the amount, plus interest from the date of the Notice of Disagreement with
interest calculated at the Interest Rate, shall be applied against the applicable accrual (e.g., Allowance for Returns, on
the one hand, and Allowance for Wholesale Distributor Fees and Payer Rebates, on the other), provided, however, that
if and when the applicable accrual has been depleted, TXMD shall pay the amount in excess and Purchaser shall be
entitled to set off such amount, plus costs or attorneys’ fees and other costs of collection pursuant to Section
12.8(a). In the event that the Firm determines that amounts are due and payable to TXMD (i) prior to two years
following the Closing Date in the case of Allowance for Returns and one year following the Closing date in the case of
Wholesale Distributor Fees and Payer Rebates, such amount in favor of TXMD shall be applied to the applicable
accrual in favor of TXMD and rolled to subsequent periods and (ii) from and after two years following the Closing Date
in the case of Allowance for Returns and one year following the Closing date in the case of Wholesale Distributor Fees
and Payer Rebates, if such aggregate amount of returns, rebates or distributor fees, as applicable (after taking into
account all prior applications to the applicable accruals or allowances), results in the total of such returns, rebates or
distributor fees as being less than the applicable allowance or accrual, Purchaser shall pay to TXMD such amount due
plus interest from the date of the Notice of Disagreement with interest calculated at the Interest Rate, plus costs or
attorneys’ fees and other costs of collection. At the end of the two year period following the Closing Date in the case of
Allowance for Returns and one year following the Closing Date in the case of Wholesale Distributor Fees and Payer
Rebates, if the undisputed aggregate amount of returns, rebates or distributor fees, as applicable (after taking into
account all prior applications to the applicable accruals or allowances), results in the total of such returns, rebates or
distributor fees as being (x) less than the applicable allowance or accrual, Purchaser shall pay to TXMD such amount
due or (y) more than the applicable allowance or accrual, TXMD shall pay to Purchaser such amount due. The term
“Final Net Working Capital” as used in this Agreement means the Closing Net Working Capital as finally determined
pursuant to this Section 5.3, as adjusted pursuant to this Section 5.3(h).”
3.
INTEGRATION
Except for the sections of the Agreement specifically amended hereunder, all terms and conditions of the Agreement
remain and shall remain in full force and effect. This Amendment shall hereafter be incorporated into and deemed part
of the Agreement and any future reference to the Agreement shall include the terms and conditions of this Amendment.
4.
APPLICABLE LAW & JURISDICTION
This Amendment shall be governed by, and construed in accordance with, the laws which govern the Agreement, and
the Parties submit to the jurisdiction and dispute resolution provisions as set forth in the Agreement.
5.
COUNTERPARTS
This Amendment may be executed in counterparts with the same effect as if both Parties had signed the same document.
All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same
instrument. Signature pages of this Amendment may be exchanged by facsimile or other electronic means without
affecting the validity thereof.
[Remainder of Page Intentionally Left Blank – Signature Page to Follow]
IN WITNESS WHEREOF, the Parties intending to be bound have caused this Amendment to be executed by their duly
authorized representatives.
MAYNE PHARMA LLC
THERAPEUTICSMD, INC.
By:
/s/ Kimberly Parker
Name:
Kimberly Parker
Title:
Authorized Signatory
Date:
December 30, 2022
By:
/s/ Marlan Walker
Name:
Marlan Walker
Title:
Secretary
Date:
December 30, 2022
Exhibit 10.47
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”), by and between
TherapeuticsMD, Inc., a Nevada corporation (the “Company”), and Marlan Walker (“Executive”) is entered into and effective as
of the 18 day of December 2018 (the “Effective Date”).
WHEREAS, the Company and Executive previously entered into an employment agreement effective as of August 1,
2016 (the “Prior Agreement”); and
WHEREAS, the Company and Executive now wish to amend and restate the Prior Agreement in its entirety to provide
for amended terms and conditions of Executive’s continued employment with the Company, pursuant to the terms and conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants set forth in this Agreement, the
parties hereto agree as follows:
1.
Employment and Duties.
(a)
Employment and Term. The Company hereby agrees to continue to employ Executive, and
Executive hereby agrees to continue to serve the Company, in accordance with the terms and conditions set forth herein, for a
period of three (3) years, commencing as of the Effective Date (such three (3) year period, as it may be extended pursuant to this
Section 1(a), the “Term”), unless sooner terminated pursuant to Section 3 hereof. Commencing on the third anniversary of the
Effective Date, and each anniversary thereafter, the Term shall automatically be extended for one (1) additional year, unless at
least ninety (90) days prior to such anniversary, the Company or Executive shall have given notice in accordance with Section 8
that it or Executive does not wish to extend the Term.
(b)
Duties of Executive. Executive shall serve as the General Counsel and Chief Development Officer
of the Company, shall diligently perform all services as may be reasonably assigned to Executive by the Company’s Board of
Directors (the “Board”) or the Company’s Chief Executive Officer, and shall exercise such power and authority as may from time
to time be delegated to Executive by the Board or the Chief Executive Officer of the Company. During Executive’s employment,
Executive shall devote Executive’s full business time, energy, and ability exclusively to the business and interests of the
Company, shall be physically present at the Company’s offices in Boca Raton, Florida during normal business hours each week
(other than permitted periods of working remotely, paid time off (“PTO”) and on appropriate business travel for the benefit of the
Company and shall not, without the Company’s prior written consent, be engaged in any other business activity pursued for gain,
profit, or other pecuniary advantage if such activity interferes in any material respect with Executive’s duties and responsibilities
hereunder. In Executive’s capacity as the General Counsel and Chief Development Officer of the Company, Executive shall do
and perform all services, acts, or things necessary or advisable to manage and conduct the business of the Company, subject to
the policies and procedures set by the Company, including, but not limited to providing general management of
the Company's legal affairs; providing legal advice to the Company; managing litigation and other disputes; drafting and
negotiating agreements; procuring intellectual property; encouraging Company compliance with all laws and regulations;
apprising company of risks; development and management of product life cycle, pipeline products, and early stage development;
support of in- and out-licensing; development and execution of of non-patent exclusivity; and generation of data supporting
defensive positions and potential new products. Except as otherwise agreed in writing by the Company, it shall not be a violation
of this Agreement for Executive, and Executive shall be permitted, to (i) serve on any civic or charitable boards; (ii) deliver
lectures, fulfill speaking engagements, or teach at educational institutions and other institutions; (iii) subject to any applicable
Company policies, make personal investments in such form or manner as will neither require Executive’s services in the
operation or affairs of the companies or enterprises in which such investments are made nor subject Executive to any conflict of
interest with respect to Executive’s duties to the Company; and (iv) serve, with the written approval of the Board, as a director of
one or more private or public companies, in each case so long as any such activities do not significantly interfere with the
performance of Executive’s responsibilities under this Agreement, create a conflict of interest, or create an adverse interest or
position detrimental to Company.
the Company as are communicated to Executive by the Company.
(c)
Policies. Executive shall faithfully adhere to, execute, and fulfill all lawful policies established by
shall be based at the Company’s principal executive offices in Boca Raton, Florida.
(d)
Place of Performance. In connection with Executive’s employment by the Company, Executive
2.
Compensation. For all services rendered by Executive, the Company shall compensate Executive as follows:
(a)
Base Salary. Effective on the Effective Date, the base salary (“Base Salary”) payable to Executive
shall be three hundred fifty thousand dollars ($350,000) per year, payable on a regular basis in accordance with the Company’s
standard payroll procedures, but not less than monthly. The Board or a committee of the Board shall review Executive’s
performance on at least an annual basis and may make increases to such Base Salary if, in its sole discretion, any such increase is
warranted. The Board may reduce the Base Salary without Executive’s consent only if such reduction applies in the same or
greater percentage to all other executives of the Company at the Vice President level and above.
(b)
Annual Short-Term Incentive. Executive shall be entitled to participate in the Company’s annual
short-term incentive compensation program, as such program may exist from time to time, at a level commensurate with that
being offered to other executives of the Company at the Vice President level and above. For calendar years beginning on or after
January 1, 2018, the percentage of Base Salary targeted as annual cash short-term incentive compensation for each calendar year
during the Term shall be thirty percent (30%) of Base Salary (the “Targeted Annual Bonus Award”). Executive acknowledges that
the amount of annual short-term incentive compensation, if any, to be awarded shall be at the sole, good faith discretion of the
Board or a committee of the Board, may be less or more than the Targeted Annual Bonus Award, and will be based on a number
of factors determined by the Board or a committee of the Board for each
2
calendar year, including the Company’s performance in connection with, among other factors, the clinical program, regulatory
filings, commercialization and/or sales, and Executive’s individual performance. Any annual short-term incentive compensation
earned for any calendar year shall be paid quarterly, as soon as practicable. Except as set forth in Sections 3(b)(ii), 3(b)(iii), and
3(b)(iv), Executive must be employed by the Company on the date on which short-term incentive compensation is paid in order
to receive such short-term incentive compensation.
(c)
Long-Term Incentive(d). Executive shall be entitled to participate in the Company’s long-term
incentive compensation program, as such program may exist from time to time, at a level commensurate with that being offered
to other executives of the Company at the Vice President level and above. Executive acknowledges that the amount of long-term
incentive compensation, if any, to be awarded shall be at the sole, good faith discretion of the Board or a committee of the Board,
and will be based on a number of factors determined by the Board or a committee of the Board for the applicable performance
period, including the Company’s performance in connection with, among other factors, the clinical program, regulatory filings,
commercialization and/or sales, and Executive’s individual performance. Any long-term incentive compensation earned for the
applicable performance period shall be paid within the first 2 ½ months of the calendar year immediately following the calendar
year in which the applicable performance period ends. Except as otherwise set forth herein, Executive must be employed by the
Company on the date on which long-term incentive compensation is paid to receive such long-term incentive compensation.
(d)
Stock Options. The Company previously granted to Executive, pursuant to the Company’s 2009
Amended and Restated Stock Incentive Plan, as the same may be amended from time to time (the “2009 Plan”), and the
Company’s 2012 Amended and Restated Stock Incentive Plan, as the same may be amended from time to time (the “2012 Plan”
and, together with the 2009 Plan, collectively, the “Plans”), stock options to purchase 985,000 shares of the Company’s common
stock (the “Previously Granted Stock Options”). The Previously Granted Stock Options are subject to the terms and conditions
set forth in the applicable Plans and in the stock option agreement(s) previously executed by the Company and Executive.
Additional options or other equity compensation may be granted at the Board’s discretion. The Previously Granted Stock Options
shall fully and completely vest upon a Change in Control (as defined in the applicable Plans).
(e)
Restricted Stock Units. As soon as practicable following the Effective Date, the Company will
grant to Executive two hudrend thirty thousand (230,000) restricted stock units (“RSUs”) under the 2012 Plan as consideration
for Executive entering into this Agreement, which RSUs will not vest in whole or in part until three (3) years after the Effective
Date, at which time the RSUs will fully and completely vest, subject to Executive’ continued employment with the Company and
the terms and conditions in the 2012 Plan and an award agreement to be entered into between the Company and Executive. The
RSUs shall fully and completely vest upon a Change in Control (as defined in the 2012 Plan).
3
additional benefits and compensation from the Company in such form and to such extent as specified below:
(f)
Executive Perquisites, Benefits, and Other Compensation. Executive shall be entitled to receive
(i)
Insurance Coverage. During the Term, and as otherwise provided within the provisions
of each of the respective plans, the Company shall make available to Executive all employee benefits to which other executives
of the Company are entitled to receive, subject to the eligibility requirements and other provisions of such arrangements as
applicable to executives of the Company generally. Such benefits shall include, but shall not be limited to, comprehensive health
and major medical insurance, dental and life insurance, and short-term and long-term disability. During the Term, the Company
will maintain customary director and officer insurance and other insurance coverage typically provided for the benefit of in-house
legal counsel, including legal liability coverage, as reasonably necessary.
(ii)
Reimbursement for Expenses. Reimbursement for business travel and other out-of-
pocket expenses reasonably incurred by Executive in the performance of Executive’s services under this Agreement, including,
but not limited to, industry appropriate seminars and subscriptions and applicable licensing and continuing education expenses.
All reimbursable expenses shall be appropriately documented in reasonable detail by Executive upon submission of any request
for reimbursement and shall be in a format and manner consistent with the Company’s expense reporting policy.
Paid Time Off. Executive shall be eligible to accrue PTO and utilize and carryover
from year to year such PTO, consistent with the Company’s policies and procedures in effect from time to time for officers of
Executive’s level.
(iii)
(iv)
Other Executive Perquisites. The Company shall provide Executive with other
executive perquisites as may be made available to or deemed appropriate for Executive by the Board or a committee of the Board
and participation in all other Company‑wide employee benefits as are available to the Company’s executives from time to time,
including any plans, programs, or arrangements relating to retirement, deferred compensation, profit sharing, 401(k), and
employee stock ownership.
Working Facilities. During the Term, the Company shall furnish Executive with an
office, staffing and administrative support and such other facilities and services suitable to Executive’s position with the
Company and adequate for the performance of Executive’s duties hereunder, which will be reviewed and provided based on the
Company’s needs.
(v)
(i)
Office Equipment. In the event that the Executive’s employment and the Term are
terminated pursuant to Sections 3(a)(iv) (Termination by the Company Without Good Cause) or 3(a)(vi) (Termination by
Executive With Good Reason), the Executive will be permitted to retain (i) the computers, monitors, printers, and peripheral
equipment that are used exclusively by the Executive during the Term including, but not limited to, speakers, mice, and
keyboards, provided, however, that the Executive shall not be permitted to retain any data, hard drives, flash drives, other media,
or software and (ii) any desk equipment, furniture, and the like specially ordered or provided for the Executive by the Company.
The Executive understands and
4
acknowledges that the retention of any such equipment by the Executive may be taxable to the Executive and the Executive shall
be responsible for any such tax obligations.
3.
Term of Employment.
(a)
Termination Under Certain Circumstances.
notice, effective upon the date of Executive’s death.
(i)
Death. Executive’s employment and the Term shall be automatically terminated, without
(ii)
Disability. If, as a result of incapacity due to physical or mental illness or injury,
Executive shall have been absent from Executive’s full-time duties hereunder for six (6) consecutive months, then thirty (30)
days after giving written notice to Executive (which notice may occur before or after the end of such six (6) month period, but
which shall not be effective earlier than the last day of such six (6) month period), the Company may terminate Executive’s
employment and the Term, provided Executive is unable to resume Executive’s full-time duties at the conclusion of such notice
period.
(iii)
Termination by the Company for Good Cause. The Company may terminate
Executive’s employment and the Term upon ten (10) days prior written notice to Executive for “Good Cause,” which shall mean
any one or more of the following: (A) Executive’s material breach of this Agreement (continuing for thirty (30) days after receipt
of written notice of need to cure, if, in the Company’s determination, such breach is curable); (B) Executive’s negligence in the
performance or intentional nonperformance (continuing for thirty (30) days after receipt of written notice of need to cure, if, in
the Company’s determination, such breach is curable) of any of Executive’s material duties and responsibilities; (C) Executive’s
willful dishonesty, fraud, or misconduct with respect to the business or affairs of the Company; (D) Executive’s indictment for,
charge of, conviction of, or guilty or nolo contendre plea to a felony crime involving dishonesty or moral turpitude whether or not
relating to the Company; (E) a confirmed positive drug test result for an illegal drug; or (F) a material sanction is imposed on
Executive by any applicable professional organization or professional governing body including, for the avoidance of doubt, a
legal regulatory board.
Executive’s employment and the Term at any time without Good Cause.
(iv)
Termination by the Company Without Good Cause. The Company may terminate
Termination by Executive Without Good Reason. Executive, at Executive’s option
and upon written notice to the Company, may terminate Executive’s employment and the Term without Good Reason (as defined
below) at any time, effective on the date of that notice.
(v)
(vi)
Termination by Executive With Good Reason. At any time during the Term,
Executive may terminate Executive’s employment and the Term for Good Reason. For purposes of this Agreement, “Good
Reason” shall mean (A) the assignment to Executive of material duties inconsistent with Executive’s position as the General
Counsel and Chief Development Officer (including status, office, titles and reporting requirements), or any other action by the
Company that results in a material diminution in such position, excluding for this purpose (i) any action not taken in bad faith and
that is remedied by the Company promptly after
5
receipt of a Notice of Termination for Good Reason (as defined below) thereof given by Executive and (ii) any change in status,
office, titles and reporting requirements following a Change in Control of the Company in which the Company ceases to be a
standalone public reporting company, provided that the material duties of Executive following such Change in Control are not
inconsistent with those of Executive immediately prior to such Change in Control; (B) the Company requiring Executive to be
based at any office or location other than in Palm Beach County, Florida, or within thirty-five (35) miles of such location, or such
other location as mutually agreed to by the Company and Executive, except for travel reasonably required in the performance of
Executive's responsibilities; or (C) any material failure by the Company to comply with any of the provisions of this Agreement,
other than a failure not occurring in bad faith and that is remedied by the Company promptly after receipt of a Notice of
Termination for Good Reason given thereof by Executive. A termination of employment by Executive for Good Reason shall be
effected by Executive’s giving the Board written notice (“Notice of Termination for Good Reason”) of the termination, setting
forth in reasonable detail the specific conduct of the Company that constitutes Good Reason and the specific provision(s) of this
Agreement on which Executive relies, within ninety (90) days of the initial existence of one of the conditions constituting Good
Reason. A termination of employment by Executive for Good Reason shall be effective on the thirty-first (31st) day following the
date when the Notice of Termination for Good Reason is given to the Company; provided that such a termination of employment
shall not become effective if the Company shall have substantially corrected the circumstance giving rise to the Notice of
Termination for Good Reason within thirty (30) days after the Company’s receipt of such Notice of Termination for Good
Reason.
(b)
Result of Termination.
(i)
Except as otherwise set forth in this Agreement, in the event of the termination of
Executive’s employment and the Term pursuant to Sections 3(a)(iii) (“Termination by the Company for Good Cause”) or 3(a)
(v) (“Termination by Executive Without Good Reason”) above, Executive shall receive no further compensation under this
Agreement other than the payment of Base Salary as shall have accrued and remained unpaid as of the date of termination and
accrued but unused PTO consistent with the Company’s policies and procedures therefor in effect at the time of such termination
for officers of Executive’s level.
(ii)
In the event of the termination of Executive’s employment and the Term pursuant to
Sections 3(a)(iv) (“Termination by the Company Without Good Cause”) or 3(a)(vi) (“Termination by Executive With Good
Reason”) above, (a) Executive shall, for a period of twelve (12) months following the effective date of such termination, continue
to receive Executive’s then current annual Base Salary, as provided in Section 2(a), (b) Executive shall receive an amount equal
to Executive’s Targeted Annual Bonus Award for the calendar year in which the termination of Executive’s employment occurs,
which amount shall be paid to Executive in a single lump sum, which is unpaid on the effective date of Executive’s termination,
and which shall be paid to Executive when paid to other similarly situated executives of the Company in accordance with Section
2(b) hereof, (c) Executive shall receive, beginning on the first payroll date occurring on or after the thirtieth (30th) day following
the effective date of the termination of Executive’s employment under this Agreement and for a period of twenty-four (24)
months thereafter for a total of twenty-four (24) monthly payments, a monthly cash payment equal to the one (1) month cost of
COBRA continuation of the health insurance benefits for Executive and
6
Executive’s immediate family as applicable, as the effective date of such termination, less, the one (1) month cost for the same
health insurance benefits for Executive and Executive’s immediate family as applicable that would have been incurred by
Executive immediately prior to the effective date of such termination if Executive remained employed with the Company, (d) all
unvested equity compensation of any kind (including, without limitation, stock options, restricted stock, or restricted stock units)
held by Executive in Executive’s capacity as an employee of the Company on the effective date of the termination shall vest as of
the effective date of such termination, (e) Executive shall receive payment for accrued but unused PTO consistent with the
Company’s policies and procedures therefor in effect at the time of such termination for officers of Executive’s level, and (f)
Executive shall receive payment for any annual short-term incentive compensation earned pursuant to Section 2(b) hereof for the
calendar year immediately preceding the calendar year in which the termination of Executive’s employment occurs which is
unpaid on the effective date of Executive’s termination, which shall be paid to Executive when paid to other similarly situated
executives of the Company in accordance with Section 2(b) hereof.
(iii)
In the event of the termination of Executive’s employment and the Term pursuant to
Sections 3(a)(i) (“Death”) or 3(a)(ii) (“Disability”) above, (a) Executive shall receive an amount equal to Executive’s Targeted
Annual Bonus Award for the calendar year in which the termination of Executive’s employment occurs, multiplied by a fraction,
the numerator of which is the number of full months of such calendar year during which Executive was employed with the
Company, and the denominator of which is twelve (12), which amount shall be paid to Executive in a single lump sum on the
first payroll date occurring on or after the thirtieth (30th) day following the effective date of the termination of Executive’s
employment under this Agreement, (b) all unvested equity compensation of any kind (including, without limitation, stock
options, restricted stock, or restricted stock units) held by Executive in Executive’s capacity as an employee of the Company on
the effective date of the termination shall vest as of the effective date of such termination, (c) Executive shall receive payment for
accrued but unused PTO consistent with the Company’s policies and procedures therefor in effect at the time of such termination
for officers of Executive’s level, and (d) Executive shall receive payment for any annual short-term incentive compensation
earned pursuant to Section 2(b) hereof for the calendar year immediately preceding the calendar year in which the termination of
Executive’s employment occurs which is unpaid on the effective date of Executive’s termination, which shall be paid to
Executive when paid to other similarly situated executives of the Company in accordance with Section 2(b) hereof.
(iv)
In the event of the termination of Executive’s employment and the Term pursuant to
Sections 3(a)(iv) (“Termination by the Company Without Good Cause”) or 3(a)(vi) (“Termination by Executive With Good
Reason”) during the twelve (12) month period immediately following a Change in Control, then in lieu of any benefits or
amounts otherwise payable under Section 3(b)(ii) hereof, (a) Executive shall, for a period of eighteen (18) months following the
effective date of such termination, continue to receive Executive’s then current annual Base Salary, as provided in Section 2(a),
(b) Executive shall receive an amount equal to one and one half times (1.5x) Executive’s Targeted Annual Bonus Award for the
calendar year in which the termination of Executive’s employment occurs, which amount shall be paid to Executive in a single
lump sum on the first payroll date occurring on or after the thirtieth (30th) day following the effective date of the termination of
Executive’s employment under this Agreement, (c) Executive shall receive, beginning on the first payroll date occurring on or
after the thirtieth (30th)
7
day following the effective date of the termination of Executive’s employment under this Agreement and for a period of eighteen
(18) months thereafter for a total of eighteen (18) monthly payments, a monthly cash payment equal to the one (1) month cost of
COBRA continuation of the health insurance benefits for Executive and Executive’s immediate family as applicable, as the
effective date of such termination, less, the one (1) month cost for the same health insurance benefits for Executive and
Executive’s immediate family as applicable that would have been incurred by Executive immediately prior to the effective date of
such termination if Executive remained employed with the Company, (d) all unvested equity compensation of any kind
(including, without limitation, stock options, restricted stock, or restricted stock units) held by Executive in Executive’s capacity
as an employee of the Company on the effective date of the termination shall vest as of the effective date of such termination, (e)
Executive shall receive payment for accrued but unused PTO consistent with the Company’s policies and procedures therefor in
effect at the time of such termination for officers of Executive’s level, and (f) Executive shall receive payment for any annual
short-term incentive compensation earned pursuant to Section 2(b) hereof for the calendar year immediately preceding the
calendar year in which the termination of Executive’s employment occurs which is unpaid on the effective date of Executive’s
termination, which shall be paid to Executive when paid to other similarly situated executives of the Company in accordance with
Section 2(b) hereof.
(c)
Release. Notwithstanding any other provision in this Agreement to the contrary, as a condition
precedent to receiving any post-termination payments or benefits identified in Sections 3(b)(ii), 3(b)(iii) and 3(b)(iv) of this
Agreement, Executive agrees to execute (and not revoke) a full and complete release of all claims against the Company and its
affiliates, in the form attached hereto as Exhibit A (subject to such modifications as the Company reasonably may request) (the
“Release”). If Executive fails to execute and deliver to the Company the Release within twenty-one (21) days following the date
of termination, or revokes the Release, within seven (7) days following the date Executive executes and delivers the Release, or
materially breaches any term of this Agreement or any other agreement between Executive and the Company while receiving
such post-termination payments or benefits, Executive agrees that Executive shall not be entitled to receive any such post-
termination payments. For purposes of this Agreement, the Release shall be deemed to have been executed by Executive if it is
signed by Executive’s legal representative in the case of legal incompetence or on behalf of Executive’s estate in the case of
Executive’s death. Payment of any post-termination payments or benefits identified in Sections 3(b)(ii), 3(b)(iii) and 3(b)(iv) of
this Agreement shall be delayed until the first payroll date occurring on or after the thirtieth (30th) day following the effective
date of the termination of Executive’s employment under this Agreement, and any payments that are so delayed shall be paid on
the first payroll date occurring on or after the thirtieth (30th) day following the effective date of the termination of Executive’s
employment under this Agreement.
(d)
Section 409A. Any payments made by the Company pursuant to Sections 3(b)(ii), 3(b)(iii) and
3(b)(iv) of this Agreement (except for unpaid annual short-term incentive compensation earned in the calendar year immediately
preceding the calendar year in which the termination of Executive’s employment occurs, which shall be paid to Executive when
paid to other similarly situated executives of the Company) shall be paid or commence on the first payroll date occurring on or
after the thirtieth (30th) day following the effective date of Executive’s “separation from service” within the meaning of Section
409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended (the “Code”). For purposes of applying the provisions
of
8
Section 409A to this Agreement, each separately identified amount to which Executive is entitled under this Agreement shall be
treated as a separate payment. In addition, to the extent permissible under Section 409A, any series of installment payments under
this Agreement shall be treated as a right to a series of separate payments. Executive shall receive no additional compensation
following any termination except as provided herein. In the event of any termination, Executive shall resign all positions with the
Company and its subsidiaries. If Executive is a “specified employee” within the meaning of Section 409A, then payments
identified in Section 3(b) of this Agreement shall not commence until six (6) months following “separation from service” within
the meaning of Section 409A to the extent necessary to avoid the imposition of the additional twenty percent (20%) tax under
Section 409A (and in the case of installment payments, the first payment shall include all installment payments required by this
subsection that otherwise would have been made during such six-month period). If the payments described in Section 3(b) must
be delayed for six (6) months pursuant to the preceding sentence, Executive shall not be entitled to additional compensation to
compensate for such delay period. Upon the date such payment would otherwise commence, the Company shall reimburse
Executive for such payments, to the extent that such payments otherwise would have been paid by the Company had such
payments commenced upon Executive’s “separation from service” within the meaning of Section 409A. Any remaining payments
shall be provided by the Company in accordance with the schedule and procedures specified herein. This Agreement is intended
to satisfy the requirements of Section 409A with respect to amounts subject thereto, and shall be interpreted and construed
consistent with such intent. Any reimbursements by the Company to Executive of any eligible expenses under this Agreement
that are not excludable from Executive’s income for Federal income tax purposes (the “Taxable Reimbursements”) shall be made
by no later than the last day of the taxable year of Executive following the year in which the expense was incurred. The amount
of any Taxable Reimbursements, and the value of any in-kind benefits to be provided to Executive, during any taxable year of
Executive shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year of
Executive. The right to Taxable Reimbursement, or in-kind benefits, shall not be subject to liquidation or exchange for another
benefit. Notwithstanding the foregoing, the Company does not make any representation to Executive that the payments or
benefits provided under this Agreement are exempt from, or satisfy, the requirements of Section 409A, and the Company shall
have no liability or other obligation to indemnify or hold harmless Executive or any beneficiary for any tax, additional tax,
interest or penalties that Executive or any beneficiary may incur in the event that any provision of this Agreement, or any
amendment or modification thereof, or any other action taken with respect thereto, is deemed to violate any of the requirements
of Section 409A.
(e)
Section 280G.
(i)
Certain Reductions in Agreement Payments. Anything in this Agreement to the
contrary notwithstanding, in the event a nationally recognized independent accounting firm designated by the Company and
reasonably acceptable to Executive (the “Accounting Firm”) shall determine that receipt of all payments or distributions by the
Company and its affiliates in the nature of compensation to or for Executive’s benefit, whether paid or payable pursuant to this
Agreement or otherwise (a “Payment”), would subject Executive to the excise tax under Section 4999 of the Code, the
Accounting Firm shall determine as required below in this Section 3(e) whether to reduce any of the Payments paid or payable
pursuant to this Agreement (the “Agreement Payments”) to the Reduced Amount (as defined below). The
9
Agreement Payments shall be reduced to the Reduced Amount only if the Accounting Firm determines that Executive would
have a greater Net After-Tax Receipt (as defined below) of aggregate Payments if Executive’s Agreement Payments were so
reduced. If the Accounting Firm determines that Executive would not have a greater Net After-Tax Receipt of aggregate
Payments if Executive’s Agreement Payments were so reduced, then Executive shall receive all Agreement Payments to which
Executive is entitled.
(ii)
Accounting Firm Determinations. If the Accounting Firm determines that aggregate
Agreement Payments should be reduced to the Reduced Amount, then the Company shall promptly give Executive notice to that
effect and a copy of the detailed calculation thereof. All determinations made by the Accounting Firm under this Section 3(e)
shall be binding upon the Company and Executive and shall be made as soon as reasonably practicable and in no event later than
twenty (20) days following the effective date of the termination of Executive’s employment with the Company. For purposes of
reducing the Agreement Payments to the Reduced Amount, only amounts payable under this Agreement (and no other Payments)
shall be reduced. The reduction of the amounts payable hereunder, if applicable, shall be made (A) only from Payments that the
Accounting Firm determines reasonably may be characterized as “parachute payments” under Section 280G of the Code; (B)
only from Payments that are required to be made in cash, (C) only with respect to any amounts that are not payable pursuant to a
“nonqualified deferred compensation plan” subject to Section 409A of the Code, until those payments have been reduced to zero,
and (D) in reverse chronological order, to the extent that any Payments subject to reduction are made over time (e.g., in
installments). In no event, however, shall any Payments be reduced if and to the extent such reduction would cause a violation of
Section 409A of the Code or other applicable law. All fees and expenses of the Accounting Firm shall be borne solely by the
Company.
(iii)
Overpayments; Underpayments. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts
will have been paid or distributed by the Company to or for the benefit of Executive pursuant to this Agreement which should not
have been so paid or distributed (an “Overpayment”) or that additional amounts which will have not been paid or distributed by
the Company to or for the benefit of Executive pursuant to this Agreement which should have been so paid or distributed (an
“Underpayment”), in each case consistent with the calculation of the Reduced Amount hereunder. In the event that the
Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against either the Company or
Executive which the Accounting Firm believes has a high probability of success determines that an Overpayment has been made,
Executive shall pay any such Overpayment to the Company together with interest at the applicable federal rate provided for in
Section 7872(f)(2) of the Code; provided, however, that no amount shall be payable by Executive to the Company if and to the
extent such payment would not either reduce the amount on which Executive is subject to tax under Section 1 and Section 4999
of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or other
substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be paid promptly (and in no
event later than 60 days following the date on which the Underpayment is determined) by the Company to or for the benefit of
Executive together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.
10
Section 3:
(iv)
Definitions. The following terms shall have the following meanings for purposes of this
(A)
“Net After-Tax Receipt” shall mean the present value (as determined in
accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code) of a Payment net of all taxes imposed on Executive
with respect thereto under Sections 1 and 4999 of the Code and under applicable state and local laws, determined by applying the
highest marginal rate under Section 1 of the Code and under state and local laws which applied to Executive’s taxable income for
the immediately preceding taxable year, or such other rate(s) as the Accounting Firm determined to be likely to apply to
Executive in the relevant taxable year(s).
“Reduced Amount” shall mean the greatest amount of Agreement Payments
that can be paid that would not result in the imposition of the excise tax under Section 4999 of the Code if the Accounting Firm
determines to reduce Agreement Payments pursuant to Section 3(e)(i).
(B)
4.
Competition and Non-Solicitation.
(a)
Interests to be Protected. The parties acknowledge that Executive will perform essential services
for the Company, its employees, and its stockholders during the term of Executive’s employment with the Company. Executive
will be exposed to, have access to, and work with, a considerable amount of confidential information. The parties also expressly
recognize and acknowledge that the personnel of the Company have been trained by, and are valuable to, the Company and that
the Company will incur substantial recruiting and training expenses if the Company must hire new personnel or retrain existing
personnel to fill vacancies. The parties expressly recognize that it could seriously impair the goodwill and diminish the value of
the Company’s business should Executive compete with the Company in any manner whatsoever. The parties acknowledge that
this covenant has an extended duration; however, they agree that this covenant is reasonable and it is necessary for the protection
of the Company, its stockholders, and employees. For these and other reasons, and the fact that there are many other employment
opportunities available to Executive if Executive’s employment is terminated, the parties are in full and complete agreement that
the following restrictive covenants are fair and reasonable and are entered into freely, voluntarily, and knowingly. Furthermore,
each party was given the opportunity to consult with independent legal counsel before entering into this Agreement.
(b)
Non-Competition. During the term of Executive’s employment with the Company and for
eighteen (18) months after the termination of Executive’s employment with the Company, which may be extended an additional
twelve (12) months in the sole and absolute discretion of the Company for a total of thirty (30) months after termination of
Executive’s employment with the Company, regardless of the reason therefor, Executive shall not (whether directly or indirectly,
as owner, principal, agent, stockholder, director, officer, manager, employee, partner, participant, or in any other capacity) engage
or become substantially and directly financially interested in any Competitive Business Activities conducted within the Restricted
Territory (as defined below). In the event of the termination of Executive’s employment and the Term pursuant to Sections 3(a)
(iv) (“Termination by the Company Without Good Cause”) or 3(a)(vi) (“Termination by Executive With Good Reason”), if the
Company exercises its right to extend this non-competition clause by the additional twelve (12) months, then Executive will, (a)
11
for a period of twelve (12) additional months, continue to receive Executive’s then current annual Base Salary, as provided in
Section 2(a), and (b) Executive will receive for a period of an additional six (6), a monthly cash payment equal to the one (1)
month cost of COBRA continuation of the health insurance benefits for Executive and Executive’s immediate family as
applicable. As used herein, the term “Competitive Business Activities” shall mean business activities that are competitive with
the business of the Company, including but not limited to, business activities in the pharmaceutical industry related to products
that compete with the Company’s products, and the term “Restricted Territory” shall mean any state or other geographical area in
which the Company has demonstrated an intent to develop, commercialize, and/or distribute products during Executive’s
employment with the Company. Executive hereby agrees that, as of the date hereof, during Executive’s employment with the
Company, the Company has demonstrated an intent to develop, commercialize, and/or distribute products throughout the United
States of America, Canada, Mexico, Brazil, Argentina, Europe, Australia, South Africa, Russia, Israel, Japan, and South Korea.
(c)
Non-Solicitation of Employees. During the term of Executive’s employment and for a period of
twenty-four (24) months after the termination of Executive’s employment with the Company, regardless of the reason therefor,
Executive shall not directly or indirectly, for the Company, or on behalf of or in conjunction with any other person, company,
partnership, corporation, or governmental or other entity, solicit for employment, seek to hire, or hire any person who is
employed by the Company, is a consultant of the Company, or is an independent contractor of the Company, within twenty-four
(24) months of the termination of Executive’s employment, and, as related solely to consultants, for the purpose of having any
such consultant engage in services that are the same as, similar to, or related to the services that such consultant provided for the
Company and that are competitive with the services provided by the consultant for the Company.
(d)
Non-Solicitation of Customers. During the term of Executive’s employment and for a period of
twenty-four (24) months after the termination of Executive’s employment with the Company, regardless of the reason therefor,
Executive shall not directly or indirectly, for the Company, or on behalf of, or in conjunction with, any other person, company,
partnership, corporation, or governmental entity, call on, solicit, or engage in business with, any of the actual or targeted
prospective customers or clients of the Company on behalf of any person or entity in connection with any Competitive Business,
nor shall Executive make known the names and addresses of such actual or targeted prospective customers or clients, or any
information relating in any manner to the trade or business relationships of the Company with such customers or clients, other
than in connection with the performance of Executive’s duties under this Agreement, and/or persuade or encourage or attempt to
persuade or encourage any persons or entities with whom the Company does business or has some business relationship to cease
doing business or to terminate its business relationship with the Company or to engage in any Competitive Business Activities on
its own or with any competitor of the Company. As used herein, the term “Competitive Business” shall mean business that is
directly competitive with the business of the Company, including but not limited to, business in the pharmaceutical industry
related to products that directly compete with the Company’s products.
12
(e)
Employee Assignment, Invention and Confidentiality Agreement. Executive hereby reaffirms,
acknowledges, and agrees that Executive is subject to the terms and conditions set forth in that certain Employee Assignment,
Invention, and Confidentiality Agreement (the “EAICA”) previously entered into by and between the Company and Executive
and that this Agreement does not modify or amend the EAICA.
(f)
Equitable Relief. In the event a violation of any of the restrictions contained in this Section 4
occurs, the Company shall be entitled to preliminary and permanent injunctive relief (without being required to post bond),
reasonable attorneys’ fees, and damages and an equitable accounting of all earnings, profits, and other benefits arising from such
violation, which right shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled.
In the event of a violation of any provision of Section 4(b), Section 4(c), or Section 4(d), the period for which those provisions
would remain in effect shall be extended for a period of time equal to that period beginning when such violation commenced and
ending when the activities constituting such violation shall have been finally terminated in good faith.
(g)
Restrictions Separable. If the scope of any provision of this Agreement (whether in this Section 4
or otherwise) is found by a court to be too broad to permit enforcement to its full extent, then such provision shall be enforced to
the maximum extent permitted by law. The parties agree that the scope of any provision of this Agreement may be modified by a
judge in any proceeding to enforce this Agreement, so that such provision can be enforced to the maximum extent permitted by
law. Each and every restriction set forth in this Section 4 is independent and severable from the others, and no such restriction
shall be rendered unenforceable by virtue of the fact that, for any reason, any other or others of them may be unenforceable in
whole or in part.
5.
Return of Company Property. At any time as requested by the Company, or upon the termination of
Executive’s employment with the Company for any reason, Executive shall deliver promptly to the Company all files, lists,
books, records, manuals, memoranda, drawings, and specifications; all other written or printed materials and computers, cell
phones, and other equipment that are the property of the Company (and any copies of them); and all other materials that may
contain confidential information relating to the business of the Company, which Executive may then have in Executive’s
possession or control, whether prepared by Executive or not.
6.
Cooperation. Following the Term, Executive shall give assistance and cooperation willingly, upon reasonable
advance notice with due consideration for Executive’s other business or personal commitments, in any matter relating to
Executive’s position with the Company, or Executive’s expertise or experience as the Company may reasonably request,
including Executive’s attendance and truthful testimony where deemed appropriate by the Company, with respect to any
investigation or the Company’s defense or prosecution of any existing or future claims or litigations or other proceedings relating
to matters in which Executive was involved or potentially had knowledge by virtue of Executive’s employment with the
Company. The Company agrees that (a) it shall promptly reimburse Executive for Executive’s reasonable and documented
expenses in connection with rendering assistance and/or cooperation under this Section 6 upon Executive’s presentation of
documentation for such expenses and (b) Executive shall be reasonably compensated for any continued material services as
required under this Section 6.
13
7.
No Prior Agreements. Executive hereby represents and warrants to the Company that the execution of this
Agreement by Executive and Executive’s employment by the Company and the performance of Executive’s duties hereunder will
not violate or be a breach of any agreement with a former employer, client, or any other person or entity. Further, Executive
agrees to indemnify the Company for any claim, including, but not limited to, attorneys’ fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to have against the Company based upon or
arising out of any non-competition, invention, or secrecy agreement between Executive and such third party that was in existence
as of the date of this Agreement.
8.
Miscellaneous.
(a)
Notice. All notices, requests, demands, and other communications required or permitted under this
Agreement shall be in writing and shall be deemed to have been duly given, made, and received (i) if personally delivered, on the
date of delivery, (ii) if by e-mail transmission, upon receipt, (iii) if mailed United States mail, registered or certified, return
receipt requested, postage prepaid, and addressed as provided below, upon receipt or refusal of delivery, or (iv) if by a courier
delivery service providing overnight or “next-day” delivery, upon receipt or refusal of delivery, in each case addressed as follows:
To the Company:
TherapeuticsMD, Inc.
6800 Broken Sound Parkway NW, 3rd Floor
Boca Raton, Florida 33487
Attention: Chief Executive Officer
Phone: (561) 961-1900
E-Mail: RFinizio@TherapeuticsMD.com
With a copy, which shall not constitute notice, to:
TherapeuticsMD, Inc.
6800 Broken Sound Parkway NW, 3rd Floor
Boca Raton, Florida 33487
Attention: Chief Financial Officer
Phone: (561) 961-1900
E-Mail: DCartwright@TherapeuticsMD.com
To Executive:
Marlan Walker
8929 Hidden Pine Street
Parkland, Fl 33067
Phone: 714.922.0639
E-Mail: M@WalkerPro.org
Either party may alter the address to which communications or copies are to be sent by giving notice of such change of address in
conformity with the provisions of this Section 8 for the giving of notice.
14
(b)
Indulgences; Waivers. Neither any failure nor any delay on the part of either party to exercise any
right, remedy, power, or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise
of any right, remedy, power, or privilege preclude any other or further exercise of the same or of any other right, remedy, power,
or privilege, nor shall any waiver of any right, remedy, power, or privilege with respect to any occurrence be construed as a
waiver of such right, remedy, power, or privilege with respect to any other occurrence. No waiver shall be binding unless
executed in writing by the party making the waiver.
(c)
Controlling Law. This Agreement and all questions relating to its validity, interpretation,
performance and enforcement, shall be governed by and construed in accordance with the laws of the State of Florida,
notwithstanding any Florida or other conflict‑of‑interest provisions to the contrary. Venue for any action arising out of this
Agreement or the employment relationship shall be brought only in courts of competent jurisdiction in or for Palm Beach County,
Florida and each party hereby irrevocably waives, to the fullest extent permitted by law, any objection which they may now or
hereafter have to the laying of venue in such courts and submits to the jurisdiction of such courts. THE PARTIES (BY THEIR
ACCEPTANCE HEREOF) HEREBY KNOWINGLY, IRREVOCABLY, VOLUNTARILY, AND INTENTIONALLY WAIVE
ANY RIGHT EACH MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY DISPUTES BASED UPON OR
ARISING OUT OF THIS AGREEMENT.
(d)
Execution in Counterpart. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof,
individually or taken together, shall bear the signatures of the parties reflected hereon as the signatories.
(e)
Entire Agreement. Except as herein contained, this Agreement contains the entire understanding
between the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and
understandings, inducements, and conditions, express or implied, oral or written, which shall no longer have any force or effect,
expressly including the Prior Agreement. The express terms hereof control and supersede any course of performance and/or
usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an
agreement in writing.
form no part of this Agreement and shall not affect its interpretation.
(f)
Paragraph Headings. The paragraph headings in this Agreement are for convenience only; they
Number of Days. In computing the number of days for purposes of this Agreement, all days shall
be counted, including Saturdays, Sundays, and holidays; provided, however, that if the final day of any time period falls on a
Saturday, Sunday, or holiday, then the final day shall be deemed to be the next day that is not a Saturday, Sunday, or holiday.
(g)
(h)
Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of the parties hereto; provided that because the obligations of Executive hereunder involve the
performance of personal services, such obligations shall not be delegated by Executive. For purposes of this Agreement,
successors and assigns shall
15
include, but not be limited to, any individual, corporation, trust, partnership, or other entity that acquires a majority of the stock
or assets of the Company by sale, merger, consolidation, liquidation, or other form of transfer. The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession had taken place.
federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling.
(i)
Tax Withholding. The Company may withhold from any benefits payable under this Agreement all
(j)
Survival. The respective rights and obligations of the parties hereunder shall survive any
termination of Executive’s employment hereunder, including without limitation, the Company’s obligations under Section 3 and
Executive’s obligations under Section 4 above, and the expiration of the Term, to the extent necessary to the intended
preservation of such rights and obligations.
(k)
Right to Consult with Counsel; No Drafting Party. Executive acknowledges having read and
considered all of the provisions of this Agreement carefully, and having had the opportunity to consult with counsel of
Executive’s own choosing, and, given this, Executive agrees that the obligations created hereby are not unreasonable. Executive
acknowledges that Executive has had an opportunity to negotiate any and all of these provisions and no rule of construction shall
be used that would interpret any provision in favor of or against a party on the basis of who drafted the Agreement.
[Signature Page Follows]
16
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
THERAPEUTICSMD, INC.
/s/ Robert Finizio
Robert Finizio
EXECUTIVE:
/s/ Marlan Walker
Marlan Walker
[Signature Page to Employment Agreement]
EXHIBIT A
FORM OF RELEASE
This Separation Agreement
(“Company”) and
____________________ (“Employee”), intending to be legally bound, and in consideration of the mutual covenants contained
herein, and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
is made between TherapeuticsMD,
(“Agreement”)
Inc.
1.
eparation and Severance. Employee’s final day of employment with Company was ____________________. Although the parties
agree that Company does not owe Employee any further consideration, as severance, Company agrees to pay Employee as set
forth in Employee’s Employment Agreement dated __________________ (the “Employment Agreement”), provided Employee
executes this Agreement, complies with its terms and the terms of Employee’s Employment Agreement[[, and does not revoke
this Agreement during the Revocation Period as defined in Section 8 below.]]1 Employee acknowledges that no other
compensation of any kind remains outstanding, that the consideration provided herein is more than Employee would otherwise be
entitled to receive, that Employee shall not be entitled to any other payments or benefits from Company, and that no other
amounts are due or owing or shall become due or owing relating to any obligation, agreement, or otherwise.
xecution of Separation Agreement. Should employee wish to accept this Agreement, it must be signed and returned to
1.
________________________________ by ______________.
2.
EAICA. Employee acknowledges and agrees that Employee’s obligations contained in the paragraphs 2, 3, 4,
6, 8, 9, 10 and 11 of the Employee Assignment, Invention, and Confidentiality Agreement (“EAICA”) that Employee signed on
_____________________, a copy of which is attached as Exhibit A, remain in full force and effect. The terms of this Agreement
are in additional to and do not supersede the surviving terms of the EAICA.
3.
Confidentiality of Agreement. Employee understands and agrees that the existence of this Agreement and the
terms and conditions thereof, shall be considered confidential, and shall not be disclosed by Employee to any third party or entity
except with the prior written approval of Company, to Employee’s attorney, or upon the order of a court of competent
jurisdiction. Notwithstanding anything in this Agreement to the contrary, nothing in this Agreement or any other agreement
between the Company and Employee shall prevent Employee from sharing information and communicating in good faith,
without prior notice to the Company, with any federal government agency having jurisdiction over the Company or its operations,
and cooperating in any investigation by any such federal government agency; provided that Employee receives no monies for
compensatory or other damages as a result of participating in any such communication or cooperation with the EEOC.
4.
Non-Disparagement. At all time Employee will refrain from and will not directly or indirectly engage in any
conversation that would tend to negatively impact Company or any of the Releasees as defined in Section 8 below.
1 Employee will be entitled to a revocation period only if over the age of 40 at the date of termination.
A-1
5.
Return of Company Property. Employee agrees to immediately return to Company any and all property of
Company in Employee’s possession, custody, or control. No severance shall be paid pursuant to this Agreement until all
Company property is returned.
6.
Confidential Information. Employee acknowledges that Employee has had access to Company confidential
and proprietary information and agrees that all such Confidential Information is and shall remain the exclusive property of
Company. Employee further agrees that Employee shall not publish, disclose, or otherwise make available to any third party any
such Confidential Information. Employee acknowledges and agrees that Employee has continuing confidentiality obligations
under the EAICA. Employee warrants that Employee has no materials containing Confidential Information, but if Employee
does, Employee shall return immediately to Company any and all materials containing any Confidential Information in
Employee’s possession, custody, or control. The terms of this Separation Agreement comprise confidential information of the
Company.
7.
Release. That the undersigned, ________________, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, intending to be legally bound, and Employee’s past, present and future agents,
representatives, attorneys, affiliates, heirs, executors, assigns and successors, and all other persons connected therewith, and on
behalf of all successors and assigns, hereby releases and forever discharges TherapeuticsMD, Inc., vitaMedMD, LLC,
BocaGreenMD, Inc., vitaCare Prescription Services and all of their past, present and future agents, representatives, principals,
attorneys, affiliates, owners, parent corporations, subsidiaries, officers, directors, employees, assigns and successors, and all other
persons, firms or corporations connected or affiliated therewith (collectively “Releasees”), of and from any and all legal,
equitable or other claims, demands, setoffs, defenses, contracts, accounts, suits, debts, agreements, actions, causes of action, sums
of money, judgments, findings, controversies, disputes, or past, present and future duties, responsibilities, obligations, or suits at
law and/or equity of whatsoever kind, from the beginning of the world to the date hereof, in addition, without limitation, any and
all actions, causes of action, claims, counterclaims, third party claims, and any and all other federal, state, local and/or
municipality statutes, laws and/or regulations and any ordinance and/or common law pertaining to employment or otherwise and
any and all other claims which have been or which could have been asserted against any party in any forum.
By signing this Agreement, Employee knowingly and voluntarily fully releases and forever discharges Releasees of and
from all claims, demands and liability of any kind arising under any statute, law or ordinance, including, without limitation, Title
VII of the Civil Rights Act of 1964, the Fair Labor Standards Act, the National Labor Relations Act, the Americans with
Disabilities Act, any state Human Rights Act, Fla. Stat. 448, or any facts or claims arising under the Age Discrimination in
Employment Act (“ADEA”). This release is intended to cover all actions, causes of action, claims and demands for damages, loss
or injury arising from the beginning of time until the date of this Agreement, whether presently known or unknown to Employee.
However, Employee does not waive Employee’s rights to claims which may arise after this Agreement becomes effective.
A-2
In addition, Employee is hereby advised to consult with an attorney prior to executing this Agreement. Employee
agrees that Employee has been given a reasonable time in which to consider the Agreement and seek such consultation.
Employee further warrants that Employee has consulted with knowledgeable persons concerning the effect of this Agreement and
all rights which Employee might have under any and all state and federal laws relating to employment and employment
discrimination and otherwise. Employee fully understands these rights and that by signing this Agreement Employee forfeits all
rights to sue Releasees for matters relating to or arising out of employment, separation, or otherwise.
In accordance with provisions of the ADEA, as amended, 29 U.S.C. §601-634, Employee is hereby provided a period
of twenty-one (21) days from the date Employee receives this Agreement to review the waiver of rights under the ADEA and
sign this Agreement. Furthermore, Employee has seven (7) days after the date Employee signs the Agreement (“Revocation
Period”) to revoke Employee’s consent. This Agreement shall not become effective or enforceable until the Revocation Period
has expired. If Employee does not deliver a written revocation to ___________________________ before the Revocation Period
expires, this Agreement will become effective.
Notwithstanding anything in this Section 8 to the contrary, releases contained in this Agreement shall not apply to (i)
any rights to receive any payments or benefits pursuant to Sections 3(b)(ii), 3(b)(iii) or 3(b)(iv) of the Employment Agreement,
(ii) any rights or claims that may arise as a result of events occurring after the date this Agreement is executed, (iii) any
indemnification rights Employee may have as a former officer or director of the Company or its subsidiaries or affiliated
companies, (iv) any claims for benefits under any directors’ and officers’ liability policy maintained by the Company or its
subsidiaries or affiliated companies in accordance with the terms of such policy, and (v) any rights as a holder of equity securities
of the Company.
8.
Opportunity to Seek Counsel. The parties represent that they have had an opportunity to retain legal counsel
to represent them in connection with this matter, that they have been advised of the legal effect and consequences of this
Agreement, that they have entered into this Agreement knowingly, freely and voluntarily of their own volition, and that they have
not been coerced, forced, harassed, threatened or otherwise unduly pressured to enter into this Agreement.
9.
Reporting of Known Issues. As a further condition to your receipt of the benefits described in this Agreement,
you hereby represent and warrant that you have reported in writing to ___________________________ any unethical conduct or
violations of laws, regulations, Company policies and procedures by the Company, a Company employee, or a Company officer
of which you are aware.
10.
No Admissions. This Agreement is not and shall not in any way be construed as an admission by either party
of any wrongful act or omission, or any liability due and owing, or any violation of any federal, state or local law or regulation.
A-3
11.
Miscellaneous. This Agreement may not be amended or modified except in writing signed by Employee and
an authorized representative with actual authority to bind Company, specifically stating that it is an amendment to this
Agreement. This Agreement shall be governed by and construed in accordance with Sections 4(g) (Restrictions Separable), 8(a)
(Notice), 8(b) (Indulgences; Waivers), 8(c) (Controlling Law), 8(d) (Execution in Counterpart), 8(f) (Paragraph Headings), and
8(k) (Right to Consult with Counsel; No Drafting Party) of the Employment Agreement. This Agreement and the Employment
Agreement constitute the entire Agreement between the parties hereto with respect to the subject matter hereof; provided,
however, that Employee’s continuing obligations to the Company under the terms of the EAICA are incorporated herein and shall
remain in full force and effect as set forth herein.
IN WITNESS THEREOF, the parties hereto acknowledge, understand and agree to this Agreement and intend to be
bound by all of the clauses contained in this document.
EMPLOYEE
[Employee]
Date:
THERAPEUTICSMD, INC.
By:
Its:
Date:
A-4
AMENDMENT TO EMPLOYMENT AGREEMENT
Exhibit 10.48
This Amendment (“Amendment”) to the Employment Agreement (“Agreement”), effective December 18, 2018, by and
between TherapeuticsMD, Inc. with a place of business at 6800 Broken Sound Parkway NW, 3rd Floor, Boca Raton, Florida
33487 (“TherapeuticsMD”); and Marlan Walker (“Executive”).
WHEREAS, the Agreement exists between TherapeuticsMD and Executive (collectively herein as the “Parties”)
relating to Executive’s employment with TherapeuticsMD; and
WHEREAS, the Parties have agreed to extend the term of the Agreement.
NOW, THEREFORE, in consideration of the mutual promises set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which the Parties hereby acknowledge, intending to be legally bound, the Parties
hereby agree as follows:
1. To replace Section 1(a) with the following:
Employment and Term. The Company hereby agrees to continue to employ Executive, and Executive hereby agrees
to continue to serve the Company, in accordance with the terms and conditions set forth herein, for a period of six (6)
years, commencing as of the Effective Date (such six (6) year period, as it may be extended pursuant to this Section
1(a), the “Term”), unless sooner terminated pursuant to Section 3 hereof. Commencing on the sixth anniversary of the
Effective Date, and each anniversary thereafter, the Term shall automatically be extended for one (1) additional year,
unless at least ninety (90) days prior to such anniversary, the Company or Executive shall have given notice in
accordance with Section 8 that it or Executive does not wish to extend the Term.
2. To update the definition of Base Salary as set forth in Section 2(a) with the following: the base salary (“Base Salary”) payable
to Executive shall be four hundred fifteen thousand dollars ($415,000) per year, payable on a regular basis in accordance
with the Company’s standard payroll procedures, but not less than monthly.
3. To update the definition of Targeted Annual Bonus Award as set forth in Section 2(b) with the following: the percentage of
Base Salary targeted as annual cash short-term incentive compensation for each calendar year during the Term shall be forty
percent (40%) of Base Salary
4. Except as specifically referenced herein, the Agreement shall remain unchanged and shall continue in full force and effect.
This Amendment may be executed in any number of counterparts, each of which shall be enforceable against the
Parties actually executing such counterparts, and all of which shall constitute one instrument.
TherapeuticsMD, Inc.
/s/ Robert Finizio
Signature
Robert Finizio, Chief Executive Officer
Printed Name and Title
Marlan Walker
/s/ Marlan D. Walker
Signature
Marlan D. Walker, General Counsel
Printed Name and Title
Date:
10/15/2021 | 9:38 AM EDT
Date:
9/29/2021 | 5:02 PM EDT
Subsidiaries of the Company
Exhibit 21.1
Name
VitaMedMD, LLC
BocagreenMD, Inc.
State or Jurisdiction of Incorporation or Organization
Delaware
Nevada
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
We have issued our report dated April 7, 2023, with respect to the consolidated financial statements included in the annual report of TherapeuticsMD, Inc.
on Form 10-K for the year ended December 31, 2022. We consent to the incorporation by reference of said report in the Registration Statements of
TherapeuticsMD, Inc. on Form S-3 (File No. 333-253851) and on Forms S-8 (File No. 333-191730, File No. 333-232268, File No. 333-242363, File No.
333-256879, and File No. 333-259221).
/s/ GRANT THORNTON LLP
Miami, Florida
April 7, 2023
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Marlan D. Walker, certify that:
(1)
I have reviewed this Annual Report on Form 10-K of TherapeuticsMD, Inc. (the “10-K Report”);
(2) Based on my knowledge, this 10-K Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4)
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this 10-K Report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this 10-K Report based on such evaluation; and
disclosed in this 10-K Report any change in the registrant's internal control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting.
(5)
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
(b)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date: April 7, 2023
/s/ Marlan D. Walker
Marlan D. Walker
Principal Executive Officer
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Michael C. Donegan, certify that:
(1)
I have reviewed this Annual Report on Form 10-K of TherapeuticsMD, Inc. (the “10-K Report”);
(2) Based on my knowledge, this 10-K Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4)
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this 10-K Report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this 10-K Report based on such evaluation; and
disclosed in this 10-K Report any change in the registrant's internal control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting.
(5)
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
(b)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date: April 7, 2023
/s/ Michael C. Donegan
Michael C. Donegan
Principal Financial Officer
Exhibit 32.1
SECTION 1350 CERTIFICATION OF CHIEF EXECUTIVE OFFICER
In connection with the Annual Report on Form 10-K of TherapeuticsMD, Inc. (the “Company”) for the year ended December 31, 2022 (the “10-K
Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Marlan D. Walker, Chief Executive Officer of the Company, certify,
to my best knowledge and belief, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
(2)
April 7, 2023
The 10-K Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C.
78m(a) or 78o(d)); and
The information contained in the 10-K Report fairly presents, in all material respects, the financial condition and results of operations of
the Company.
/s/ Marlan D. Walker
Marlan D. Walker
Principal Executive Officer
A signed original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange
Commission or its staff upon request.
Exhibit 32.2
SECTION 1350 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
In connection with the Annual Report on Form 10-K of TherapeuticsMD, Inc. (the “Company”) for the year ended December 31, 2022 (the “10-K
Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Michael C. Donegan, Principal Financial Officer of the Company,
certify, to my best knowledge and belief, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
(2)
April 7, 2023
The 10-K Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C.
78m(a) or 78o(d)); and
The information contained in the 10-K Report fairly presents, in all material respects, the financial condition and results of operations of
the Company.
A signed original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange
Commission or its staff upon request.
/s/ Michael C. Donegan
Michael C. Donegan
Principal Financial Officer