Item 7. Management’s discussion and analysis of financial
condition and results of operations
You should read the following discussion and analysis in conjunction
with the information set forth under our consolidated financial statements and the notes to those financial statements included elsewhere
in this 2025 10-K Report. This discussion contains forward-looking statements based upon current expectations that involve risks and
uncertainties. See “Statement Regarding Forward-Looking Information.” Our actual results may differ materially from those
contained in or implied by any forward-looking statements as a result of various factors, including, but not limited to, the risks and
uncertainties described under “Risk Factors” elsewhere in this 2025 10-K Report.
Certain amounts in the Management’s discussion and analysis
of financial condition and results of operations may not add due to rounding, and all percentages have been calculated using unrounded
amounts.
Business overview
TherapeuticsMD was previously a women’s healthcare company with
a mission of creating and commercializing innovative products to support the lifespan of women from pregnancy prevention through menopause.
In December 2022, we changed our business to become a pharmaceutical royalty company, currently receiving royalties on products licensed
to pharmaceutical organizations that possess commercial capabilities in relevant territories. On December 30, 2022 (the “Closing
Date”), we completed a transaction (the “Mayne Transaction”) with Mayne Pharma LLC, a Delaware limited liability company
(“Mayne Pharma”) and subsidiary of Mayne Pharma Group Limited, an Australian public company (“Mayne Pharma Group”),
in which we and our subsidiaries (i) granted Mayne Pharma an exclusive license to commercialize our IMVEXXY, BIJUVA and prescription
prenatal vitamin products sold under the BocaGreenMD and vitaMedMD brands (collectively, the “Licensed Products”) in the
United States and its possessions and territories, (ii) assigned to Mayne Pharma our exclusive license to commercialize ANNOVERA®
(together with the Licensed Products, collectively, the “Products”) in the United States and its possessions and territories,
and (iii) sold certain other assets to Mayne Pharma in connection therewith.
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In a License Agreement, dated December 4, 2022, between TherapeuticsMD
and Mayne Pharma (the “Mayne License Agreement”), we granted Mayne Pharma, on the Closing Date, (i) an exclusive, sublicensable,
perpetual, irrevocable license to research, develop, register, manufacture, have manufactured, market, sell, use, and commercialize the
Licensed Products in the United States and its possessions and territories and (ii) an exclusive, sublicensable, perpetual, irrevocable
license to manufacture, have manufactured, import and have imported the Licensed Products outside the United States for commercialization
in the United States and its possessions and territories.
Under the Mayne License Agreement, Mayne Pharma agreed to pay us one-time
milestone payments of each of (i) $5.0 million if aggregate net sales of all Products in the United States during a calendar year reach
$100.0 million, (ii) $10.0 million if aggregate net sales of all Products in the United States during a calendar year reach $200.0 million
and (iii) $15.0 million if aggregate net sales of all Products in the United States during a calendar year reach $300.0 million. Further,
Mayne Pharma agreed to pay us royalties on net sales of all Products in the United States at a royalty rate of 8.0% on the first $80.0
million in annual net sales and 7.5% on annual net sales above $80.0 million, subject to certain adjustments, for a period of 20 years
following the Closing Date. The royalty rate will decrease to 2.0% on a Product-by-Product basis upon the earlier to occur of (i) the
expiration or revocation of the last patent covering a Product and (ii) a generic version of a Product launching in the United States.
Mayne Pharma agreed to pay us minimum annual royalties of $3.0 million per year for 12 years, adjusted for inflation at an annual rate
of 3%, subject to certain further adjustments, including as described below. Upon the expiry of the 20-year royalty term, the licenses
granted to Mayne Pharma under the Mayne License Agreement will become a fully paid-up and royalty free license for the Licensed Products.
Under the Transaction Agreement, dated December 4, 2022, between TherapeuticsMD
and Mayne Pharma (the “Transaction Agreement”), we sold to Mayne Pharma, at closing, certain assets for Mayne Pharma to commercialize
the Products in the United States, including, with the Population Council’s consent, our exclusive license from the Population
Council to commercialize ANNOVERA (the “Transferred Assets”).
The total consideration from Mayne Pharma to TherapeuticsMD for the
purchase of the Transferred Assets under the Transaction Agreement and the grant of the licenses under the Mayne License Agreement was
(i) a cash payment of $140.0 million at closing, (ii) a cash payment of approximately $12.1 million at closing for the acquisition of
net working capital as determined in accordance with the Transaction Agreement and subject to certain adjustments, (iii) a cash payment
of approximately $1.0 million at closing for prepaid royalties in connection with the Mayne License Agreement Amendment (as defined below)
and (iv) the right to receive the contingent consideration set forth in the Mayne License Agreement, as amended. The acquisition of net
working capital was determined in accordance with the Transaction Agreement and included significant estimates which could change materially
for a period of up to two years following the Closing Date.
On the Closing Date, TherapeuticsMD and Mayne Pharma entered into Amendment
No. 1 to the Mayne License Agreement (the “Mayne License Agreement Amendment”). Pursuant to the Mayne License Agreement Amendment,
Mayne Pharma agreed to pay us approximately $1.0 million in prepaid royalties on the Closing Date. The prepaid royalties reduced the first
four quarterly payments that would have otherwise been payable pursuant to the Mayne License Agreement by an amount equal to $257 thousand
per quarterly royalty payment plus interest calculated at 19% per annum accruing from the Closing Date until the date such quarterly royalty
payment was paid to us. We and Mayne Pharma settled the $1.5 million of consideration due to Mayne for the assumed obligations under a
long-term services agreement, including our minimum payment obligations thereunder. As the parties agreed, during the second quarter of
2023, Mayne Pharma held back our royalty payment of $0.6 million and we funded an additional $0.9 million in August 2023 to settle the
original $1.5 million payable.
As part of the transformation that included the Mayne License Agreement,
all results associated with former commercial operations have been reflected as discontinued operations in our consolidated financial
statements. Assets and liabilities associated with the commercial business are classified as assets and liabilities of discontinued operations
in our consolidated balance sheets. Additional disclosures regarding discontinued operations are provided in Note 2 of our consolidated
financial statements.
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The Company also has license agreements with strategic partners to
commercialize IMVEXXY and BIJUVA outside of the U.S.
Employees
As of December 31, 2025, we employed one full-time employee primarily
engaged in an executive position. We have engaged external consultants who support our relationship with current partners and assist
with certain financial, IT, legal, and regulatory matters and the continued wind-down of our historical business operations. On August
15, 2023, we entered into a master services agreement with JZ Advisory Group, pursuant to which Joseph Ziegler serves as our Principal
Financial and Accounting Officer.
Portfolio of our licensed products
In December 2022, we changed our business to become a pharmaceutical
royalty company, currently receiving royalties on products licensed to pharmaceutical organizations that possess commercial capabilities
in the relevant territories. On December 30, 2022, we granted an exclusive license to commercialize IMVEXXY, BIJUVA, and prescription
prenatal vitamin products sold under the BocaGreenMD and vitaMedMD brands and assigning our exclusive license to commercialize ANNOVERA
to Mayne Pharma.
IMVEXXY (estradiol vaginal inserts), 4-μg and 10-μg
This pharmaceutical product is for the treatment of moderate-to-severe
dyspareunia (vaginal pain associated with sexual activity), a symptom of vulvar and vaginal atrophy due to menopause. As part of the
FDA’s approval of IMVEXXY, we committed to conduct a post-approval observational study to evaluate the risk of endometrial cancer
in post-menopausal women with a uterus who use a low-dose vaginal estrogen unopposed by a progestogen.
On December 30, 2022, we granted an exclusive license to commercialize
IMVEXXY in the United States and its possessions and territories to Mayne Pharma. We also have entered into licensing agreements with
third parties to market and sell IMVEXXY outside of the U.S. We entered into the Knight License Agreement, with Knight pursuant to which,
we granted Knight an exclusive license to commercialize IMVEXXY in Canada and Israel. We entered into the Theramex License Agreement
with Theramex pursuant to which we granted Theramex an exclusive license to commercialize IMVEXXY for human use outside of the U.S.,
except for Canada and Israel. In December 2024, we transferred the right to commercialize IMVEXXY in Israel from Knight to Theramex.
The FDA has also asked the sponsors of other vaginal estrogen products
to participate in the observational study. In connection with the observational study, we would have been required to provide progress
reports to the FDA on an annual basis. The obligation to conduct this study was transferred to Mayne Pharma as part of the Mayne License
Agreement.
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BIJUVA (estradiol and progesterone) capsules, 1 mg/100 mg
This pharmaceutical product is the first and only FDA approved bioidentical
hormone therapy combination of estradiol and progesterone in a single, oral capsule for the treatment of moderate-to-severe vasomotor
symptoms (commonly known as hot flashes or flushes) due to menopause in women with a uterus.
On December 30, 2022, we granted an exclusive license to commercialize
BIJUVA in the United States and its possessions and territories to Mayne Pharma. We also have entered into the Knight License Agreement
with Knight pursuant to which we granted Knight an exclusive license to commercialize BIJUVA in Canada and Israel. We have entered into
the Theramex License Agreement with Theramex pursuant to which we granted Theramex an exclusive license to commercialize BIJUVA for human
use outside of the U.S., except for Canada and Israel. In December 2024, we transferred the right to commercialize BIJUVA in Israel from
Knight to Theramex.
ANNOVERA (segesterone acetate (“SA”) and ethinyl estradiol
(“EE”) vaginal system)
This pharmaceutical product is a one-year ring-shaped contraceptive
vaginal system (“CVS”) and the first and only patient-controlled, procedure-free, reversible prescription contraceptive that
can prevent pregnancy for up to a total of 13 cycles (one year).
On December 30, 2022, we assigned our exclusive license to commercialize
ANNOVERA in the United States and its possessions and territories to Mayne Pharma.
Prenatal vitamin products
On December 30, 2022, we granted an exclusive license to commercialize,
in the United States and its possessions and territories, our prescription prenatal vitamin product lines under our vitaMedMD brand name
and authorized generic formulations of some of our prescription prenatal vitamin products under our BocaGreenMD Prenatal name to Mayne
Pharma.
Results of operations
As part of the transformation that included the Mayne License Agreement,
all results associated with former commercial operations have been reflected as discontinued operations in the Company’s consolidated
financial statements for all periods prior to the Closing Date. Assets and liabilities associated with the commercial business are classified
as assets and liabilities of discontinued operations in the Company’s consolidated balance sheets. Additional disclosures regarding
discontinued operations are provided in Note 2 to the consolidated financial statements included in this 2025 10-K Report.
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The following table sets forth the results of our operations (in thousands):
Years ended December 31,
Revenue, net:
Operating expenses:
Write-off and impairment of patents 176 1,268
Depreciation & amortization 384 509
Other income (expense):
Loss from continuing operations before income taxes (653 ) (2,343 )
Income tax benefit - 31
Net loss from continuing operations (653 ) (2,312 )
Income from discontinued operations, net of income taxes 84 131
Revenue. As part of our transformation and the Mayne License
Agreement, all results associated with former commercial operations have been reflected as discontinued operations in the Company’s
consolidated financial statements for all periods presented.
We recorded $3,022 thousand in license revenue during the year ended
December 31, 2025 primarily from the Mayne License Agreement, an increase of $1,261 thousand, or 71.6%, compared to $1,761 thousand in
license revenue during the year ended December 31, 2024. The increase is primarily attributable to changes in sales of licensed products.
General and administrative. General and administrative
expenses for 2025 were $6,852 thousand, an increase of $756 thousand, or 12.4%, compared to $6,096 thousand for 2024. This increase was
primarily attributable to higher bonus expense and increased investor relations costs in 2025.
Write-off and impairment of patents. We recognized a $176 thousand
write-off for abandoned patents and application in 2025, compared to a $1,268 thousand impairment loss in 2024.
Depreciation & amortization. Depreciation and amortization
expense for 2025 was $384 thousand, a decrease of $125 thousand, or 24.6%, compared to $509 thousand for 2024. This balance is entirely
comprised of amortization of license rights and intangible assets.
Operating expenses. Total operating expenses for 2025 were $7,412
thousand, a decrease of $461 thousand, or 5.9%, compared to $7,873 thousand for 2024. The decrease was primarily attributable to lower
impairment charges recognized in 2025 compared to 2024, which was partially offset by higher bonus expense and increased costs related
to investor communications.
Loss from operations. For 2025, we had a loss from operations of $4,390 thousand, a decrease in
loss of $1,722 thousand, or 28.2%, compared to loss from operations of $6,112 thousand for 2024. This change reflects the increase in
sales from licensed products and the increased efficiencies realized as a royalty-based business.
Other income. In 2025, we had other income of $3,737 thousand, a decrease of $32 thousand,
or 0.8%, compared to other income of $3,769 thousand in 2024. The decrease was primarily attributable to the absence of rental settlement
gain and contract breakage settlements recognized in 2024, which was partially offset by the higher sublease income and increased royalty
income from Mayne Pharma in 2025.
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Benefit for income taxes. For 2025, no income tax benefits was recognized from continuing operations. In 2024,
the Company recognized $31 thousand income tax benefits from continuing operations.
Net loss from continuing operations. For 2025, we had net loss
from continuing operations of $653 thousand, or $0.06 per basic and diluted common share, a decrease in loss of $1,659 thousand, compared
to net loss from continuing operations of $2,312 thousand, or $0.20 per basic and diluted common share, for 2024.
Discontinued Operations. For 2025, net income from discontinued
operations was $84 thousand, a decrease of $47 thousand, compared to net income from discontinued operations of $131 thousand for 2024.
For additional information, see “Note 2. Discontinued Operations”,
in the notes to the consolidated financial statements appearing elsewhere in this 2025 10-K Report for further details.
Liquidity and capital resources
Our primary use of cash is to fund our continuing operations. We have
funded our operations primarily through revenue from licensed royalties, public offerings of our common stock and private placements
of equity and debt securities, and the transactions with Mayne Pharma. As of December 31, 2025, we had cash and cash equivalents totaling
$7,483 thousand. We maintain cash at financial institutions that at times may exceed the Federal Deposit Insurance Corporation insured
limits of $250 thousand per bank. We have never experienced any losses related to these funds.
Mayne Pharma License Agreement
On December 30, 2022, we granted Mayne Pharma (i) an exclusive, sublicensable,
perpetual, irrevocable license to research, develop, register, manufacture, have manufactured, market, sell, use, and commercialize the
Licensed Products in the United States and its possessions and territories and (ii) an exclusive, sublicensable, perpetual, irrevocable
license to manufacture, have manufactured, import and have imported the Licensed Products outside the United States for commercialization
in the United States and its possessions and territories. The total consideration from Mayne Pharma to us under the Mayne License Agreement
consisted of (i) a cash payment of $140.0 million at closing, (ii) a cash payment of approximately $12.1 million at closing for the acquisition
of net working capital as determined in accordance with the Transaction Agreement, and subject to certain adjustments, (iii) a cash payment
of approximately $1.0 million at closing for prepaid royalties in connection with the Mayne License Agreement Amendment and (iv) the
right to receive the contingent consideration set forth in the Mayne License Agreement, as amended.
Pursuant to the Mayne License Agreement, Mayne Pharma has agreed to
pay us one-time, milestone payments of each of (i) $5.0 million if aggregate net sales of all Products in the United States during a calendar
year reach $100.0 million, (ii) $10.0 million if aggregate net sales of all Products in the United States during a calendar year reach
$200.0 million and (iii) $15.0 million if aggregate net sales of all Products in the United States during a calendar year reach $300.0
million. Further, Mayne Pharma has agreed to pay us royalties on net sales of all Products in the United States at a royalty rate of 8.0%
on the first $80 million in annual net sales and 7.5% on annual net sales above $80.0 million, subject to certain adjustments, for a period
of 20 years following the Closing Date. The royalty rate will decrease to 2.0% on a Product-by-Product basis upon the earlier to occur
of (i) the expiration or revocation of the last patent covering a Product and (ii) a generic version of a Product launching in the United
States. Mayne Pharma has agreed to pay us minimum annual royalties of $3.0 million per year for 12 years, adjusted for inflation at an
annual rate of 3%, subject to certain further adjustments, including as described below. Upon the expiry of the 20-year royalty term,
the licenses granted to Mayne Pharma under the Mayne License Agreement will become a fully paid-up and royalty free license for the Licensed
Products.
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Subscription Agreement with Rubric Capital Management LP
On May 1, 2023, we entered into the Subscription Agreement with Rubric,
pursuant to which we agreed to sell to Rubric, or one or more of its affiliates, up to an aggregate of 5,000,000 shares of Common Stock,
from time to time during the term of the Subscription Agreement in separate drawdowns at our election, at a purchase price of the five-day
volume-weighted average price of our common stock at the time of the sale of such shares, at an aggregate purchase price of up to $5,000,000
(collectively, the “Private Placement”).
The initial draw-down occurred on June 29, 2023, consisting of a sale
of 312,525 shares of Common Stock at a price per share equal to $3.6797. We received gross proceeds of $1.15 million from the drawdown,
before expenses. On November 15, 2023, Rubric drew an additional 877,192 shares of Common Stock at a price per share equal to $2.2761.
We received gross proceeds of $2.0 million from the draw-down, before expenses. There were no draw-downs in 2025 and 2024.
See “Going Concern” above for further discussion related
to our ability to generate and obtain adequate amounts of cash to meet our liquidity needs and our plans to satisfy our such needs in
the short-term and in the long-term. As a result, there is substantial doubt about our ability to continue as a going concern for the
next twelve months from the issuance of the financial statements included in this 2025 10-K Report.
Cash flows
The following table reflects the major categories of cash flows from
continuing operations for each of the periods (in thousands).
Years ended December 31,
Cash flow from continuing operations 2025 2024
Net cash provided by operating activities $ 2,454 $ 1,170
Net cash used in discontinued operations (30 ) (438 )
Operating Activities from continuing operations. Net cash provided by operating activities in 2025 was $2,454 thousand, an
increase of $1,284 thousand, compared to net cash provided in operating activities of $1,170 thousand for 2024. This increase was primarily
driven by the significant reduction in loss from continuing operations and favorable changes in accrued expenses and other current liabilities,
partially offset by lower non-cash adjustments such decreased long-lived asset impairment charges in 2025.
Financing Activities from continuing operations. There
was no cash received from financing activities for both 2025 and 2024.
Net cash used in discontinued operations. Net cash used in discontinued operations for 2025 was $30 thousand, a decrease
of $408 thousand, as compared to net cash used in discontinued operations of $438 thousand for 2024. This change relates primarily to
a decreased level of activities associated with our discontinued operations.
For additional details, see the consolidated statements of cash flows
included in our consolidated financial statements in this 2025 10-K Report.
Other liquidity measure
Receivable from Mayne Pharma. On December 30, 2022, Mayne Pharma acquired our accounts receivable
balance of approximately $29.3 million which is subject to certain working capital adjustments. As of December 31, 2025, and 2024, we
had a royalty receivable of $3,159 thousand and $3,327 thousand, respectively, relating to the short-term portion of royalty receivable
from Mayne Pharma and $13,713 thousand and $16,010 thousand, respectively relating to the long-term portion of royalty receivable which
includes royalties recognized from the Minimum Annual Royalty. See “Note 1 Business, basis of presentation, new accounting standards
and summary of significant accounting policies (Revenue Recognition)” to the consolidated financial statements included in this
2025 10-K Report.
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Contractual obligations, off-balance sheet arrangements, purchase
commitments and employment agreements
Our contractual obligations and off-balance sheet arrangements are
discussed below. For additional information on any of the following and other obligations and arrangements, see “Note 7. Commitments
and Contingencies” to the consolidated financial statements included in this 2025 10-K Report.
In the ordinary course of business, we enter into agreements with
third parties that include indemnification provisions, which, in our judgment, are normal and customary for companies in our industry
sector. Pursuant to these agreements, we agree to indemnify, hold harmless, and reimburse indemnified parties for losses suffered, for
which there may or may not be limitations on potential damages. The maximum potential amount of future payments we could be required
to make under these indemnification provisions is sometimes unlimited. As a result, the estimated fair value of liabilities relating
to these provisions is minimal. Accordingly, we had no liabilities recorded for these provisions as of December 31, 2025.
In the normal course of business, we may be confronted with issues
or events that may result in contingent liability. These generally relate to lawsuits, claims, environmental actions, or the actions
of various regulatory agencies. We consult with counsel and other appropriate experts to assess the claim. If, in our opinion, we have
incurred a probable loss as set forth by accounting principles generally accepted in the United States of America (“U.S. GAAP”),
an estimate is made of the loss and the appropriate accounting entries are reflected in our consolidated financial statements.
Commitments
Information regarding commitments is in “Note 7. Commitments
and contingencies” to the consolidated financial statements included in this 2025 10-K Report.
Employment agreements
Information regarding employment agreements is in “Note 7. Commitments
and contingencies” to the consolidated financial statements included in this 2025 10-K Report.
Critical accounting policies and estimates
Management’s discussion and analysis of our financial condition
and results of operations are based upon our consolidated financial statements included elsewhere in this 2025 10-K Report, which has
been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities.
On an ongoing basis, we evaluate our estimates, including those related to identifiable intangible assets, certain accrued liabilities,
and income taxes. We base our estimates on historical experience and on other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We have identified the areas described below as critical to our business
operations and the understanding of our results of operations given the uncertainties associated with the assumptions underlying each
estimate. For a detailed discussion on the application of these and other significant accounting policies, see “Note 1. Basis of
presentation, new accounting standards and summary of significant accounting policies” to the consolidated financial statements
included in this 2025 10-K Report.
Discontinued Operations
Discontinued operations comprise activities that were disposed of at
the end of the period, represent a separate major line of business that can be clearly distinguished for operational and financial reporting
purposes and represent a business shift having a major effect on the Company’s operations and financial results according to Accounting
Standard Codification (“ASC”) Topic 205, Presentation of Financial Statements. In 2022, we started classifying commercial
activities as discontinued operations due to the cessation of these operations. For additional information, see “Note 2. Discontinued
Operations”, in the notes to the consolidated financial statements appearing elsewhere in this 2025 10-K Report.
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Loss
contingencies – Mayne Pharma
In determining whether an accrual for a loss contingency is required,
we first assess the likelihood of occurrence of the future event or events that will confirm the loss. When a loss is probable (the future
event or events are likely to occur) and the amount of the loss can be reasonably estimated, the estimated loss is accrued. If the reasonable
estimate of the loss is a range and an amount within the range appears to be a better estimate than any other amount within the range,
that amount should be accrued. However, if no amount within the range is a better estimate, the minimum amount in the range should be
accrued.
In February 2024, we received Mayne Pharma’s
calculation of the net working capital allowances for payer rebates and wholesale distributor fees pursuant to the Transaction Agreement,
which differed significantly from our estimate of the allowances. We continue to believe our estimated allowances for payer rebates and
wholesale distributor fees are reasonable. In August 2024 and in February 2025, we also received information from Mayne Pharma pertaining
to the net working capital allowance for returns that differs significantly from our estimate of the allowance.
On April 8, 2025, we filed the Mayne Lawsuit seeking
damages for breach of contract, breach of the implied covenant of good faith and fair dealing, fraudulent inducement, and unjust enrichment
related to Mayne Pharma’s actions in relation to the License Agreement and the Transaction Agreement, primarily relating to the
net working capital allowances and certain actions or inactions by Mayne Pharma relating thereto. On June 20, 2025, we filed an amended
complaint against Mayne Pharma and on July 22, 2025, Mayne Pharma filed a motion to dismiss the Mayne Lawsuit. On March 23, 2026, a magistrate
judge recommended that the court grant-in-part and deny-in-part Mayne Pharma’s motion to dismiss. The magistrate judge recommended granting
Mayne’s motion to dismiss our claims for breach of the covenant of good faith and fair dealing, certain of our breach of contract
claims and our claim for fraudulent inducement, but recommended the court grant us leave to amend the fraudulent inducement claim. The
magistrate judge recommended denying Mayne’s motion to dismiss our other claims. The magistrate judge further recommended the court
stay the Mayne Lawsuit while the parties submit the net working capital claims to a dispute resolution process. The parties have 14 days
to object to these recommendations.
On May 30, 2025, Mayne Pharma filed the Mayne Countersuit seeking damages
for breach of contract and fraudulent inducement related to the Transaction Agreement. As part of the Mayne Countersuit, Mayne Pharma
also made certain indemnification demands under the Transaction Agreement, which we dispute. On July 28, 2025, we filed a motion to dismiss
the fraudulent inducement claim in the Mayne Countersuit. On March 23, 2026, a magistrate judge recommended that the court grant our motion
to dismiss Mayne Pharma’s claim for fraudulent inducement, but recommended the court deny our motion to dismiss Mayne Pharma’s
other claims. The parties have 14 days to object to this recommendation. As of December 31, 2025, we believed no additional accrual was
required for such claims, as we could not reasonably estimate a range of loss.
The outcome of this matter is uncertain at this point. As a result,
we cannot reasonably estimate a range of loss, and accordingly, we have not accrued any additional liability associated with Mayne Pharma’s
allowance calculation for payer rebates and wholesale distributor fees, particularly as we believe the outcome of this matter to be intertwined
with the resolution of the net working capital allowance for returns.
As of December 31, 2025, we also believed no additional accrual was
required for amounts that may be owed for the allowance for returns under the Transaction Agreement. We have not recorded any contingent
gains or receivables for any such allowances. Management continues to monitor the unresolved and pending net working capital items as
changes to estimated amounts owed or amounts due from Mayne Pharma may be material.
License revenue
License arrangements may consist of non-refundable upfront license
fees, exclusive licensed rights to patented or patent pending technology, and various performance or sales milestones and future product
royalty payments. Some of these arrangements may include multiple performance obligations. Non-refundable up-front fees that are not
contingent on any future performance by us, and do not require continuing involvement on our part, are recognized as revenue when the
right to use functional intellectual property is transferred to the customer.
On December 30, 2022, we closed a License Agreement with Mayne Pharma
pursuant to which we sold to Mayne Pharma the exclusive license rights in our product ANNOVERA and granted an exclusive license in other
products, including IMVEXXY and BIJUVA. Under the terms of the License Agreement, we received $140 million at closing and we are eligible
to receive additional payments in the aggregate of up to an additional $30 million based on the achievement of sales milestones (collectively,
the “Milestone Amounts”). The proceeds at closing were allocated between consideration for the sale of ANNOVERA and the initial
license fee for the Licensed Products, as the sale of ANNOVERA was accounted for under ASC 610-20, Gains and Losses from Derecognition
of Nonfinancial Assets in arriving at the gain on disposal (see Note 2 to the consolidated financial statements included in this 2025
10-K Report), while the license grant of the other products were recognized under the provisions of ASC 606, Revenue from Contracts with
Customers, as a license of functional intellectual asset. The proceeds were allocated among the Licensed Products on the relative net
present value of forecasted future product sales from those products. The Milestone Amounts will be recognized, as applicable, in subsequent
periods based on actual product sales that exceed the respective net sales milestones as such variable consideration is constrained by
the occurrence of the subsequent sales.
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Our royalty revenue recognized in 2025 and 2024 primarily related
to royalties provided for under the Mayne License Agreement based on Mayne Pharma’s sales of the Licensed Products subject to that
agreement. Under the Mayne License Agreement, the Company is entitled to earn royalties on net sales of all of the Licensed Products
at a royalty rate of (i) 8% on the first $80 million of net sales of the Licensed Products and (ii) 7.5% on net sales of all of the Licensed
Products after the first $80 million of net sales. The royalty rate is subject to a 2% reduction upon the earlier to occur of (i) the
expiration or revocation of the last valid claim covering a Licensed Product, and (ii) a generic product launch (a “LOE”).
We are entitled to minimum annual royalties beginning with the year ending December 31, 2023 ($3 million annual minimum) and continuing
with 3% annual increases through the year ending December 31, 2034 (the “Minimum Annual Royalty”). The Minimum Annual Royalty
originally totaled $42.6 million, and this total amount was allocated among the Licensed Products on the relative net present value of
forecasted future product sales from those products. The portion allocated to consideration for the sale of ANNOVERA was attributed towards
the gain on disposal of that asset. For the remaining portion allocated to the license grants for the other products, we determined that
the minimum guarantee underlying the Minimum Annual Royalty should be treated as fixed consideration and recognized under ASC 606 at
the point in time when the license was transferred. Since the Minimum Annual Royalty will be received in annual installments through
2034, we determined the transaction price allocated under ASC 606 contained a significant financing component, and we therefore determined
the initial royalty revenue and corresponding receivable based on the present value of the allocated Minimum Annual Royalty. The present
value was calculated using a discount rate of 10.45%, based on the credit characteristics of Mayne Pharma and the timing of future payments,
and the value will be accreted to full value through the earlier of January 1, 2034 or a LOE. This royalty receivable is a contract asset
as of December 31, 2025, and is further subject to offset by Mayne Pharma.
Royalty revenue earned in excess of the Minimum Annual Royalty will
be recognized under ASC 606, which provides revenue recognition constraints by requiring the recognition of revenue at the later of the
following: 1) when the subsequent sale occurs or 2) when the performance obligation to which some or all of the sales-based royalty has
been allocated has been satisfied (or partially satisfied). We applied the royalty recognition constraint required under the guidance
for sales-based royalties, which requires a sales-based royalty to be recorded no sooner than the underlying sale. Therefore, royalties
on sales of products commercialized by Mayne Pharma will be recognized in the subsequent periods that the Licensed Products are sold.
For additional discussion on revenue, see “I. Revenue recognition”
in “Note 1. Basis of presentation, new accounting standards and summary of significant accounting policies” to the consolidated
financial statements included in this 2025 10-K Report.
Recent accounting pronouncements
Information regarding accounting standards issued or effective in
2025 is included in “Note 1. Basis of Presentation, New Accounting Standards and Significant Accounting Policies” to the
consolidated financial statements.
Item 7A. Quantitative and qualitative disclosures about market
risk
As a “smaller reporting company,” as defined by Rule 12b-2
of the Exchange Act, and pursuant to Instruction 6 to Item 201(e) of Regulation S-K, we are not required to provide this information.
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 2025 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.
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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 Exchange Act Rules 13a-15(e) or 15d-15(e)) as of the end of the period covered by this 2025 10-K Report.
Based on that evaluation, our Principal Executive Officer and Principal Financial and Accounting Officer concluded that, as of December
31, 2025, 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 and Accounting 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 errors 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.
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:
Our management assessed the effectiveness of our internal control
over financial reporting as of December 31, 2025. 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, 2025.
This 2025 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 2025 10-K Report.
Item 9B. Other information
None.
Item 9C. Disclosure regarding foreign jurisdictions that prevent
inspections
None.
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PART III
Item 10. Directors, executive officers and corporate governance
Directors1
The following table sets forth certain information regarding the current
directors of the Company.
Name Age Position
Tommy G. Thompson 84 Chairman of the Board (2)
Cooper C. Collins 47 Director (1)(2)
Gail K. Naughton, Ph.D. 70 Director (1)
Justin H. Roberts 43 Director (1)(2)
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
1 NTD: Biographies to be confirmed per D&O questionnaires.
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Executive Officers
The following table sets forth certain information regarding our current
executive officers:
Name Age Position
Marlan D. Walker 51 Chief Executive Officer
Joseph Ziegler 53 Principal Financial and Accounting Officer
Listed below are biographical descriptions of our current executive
officers.
Marlan Walker has served as Chief Executive Officer of our Company
since December 2022. Previously he served as General Counsel of our Company from March 2016. Mr. Walker previously also served as Chief
Development Officer from April 2018 to December 2019 and as our Corporate and Intellectual Property Counsel from June 2013 until he became
our General Counsel. Mr. Walker’s experience is focused in management of legal issues and risk in the life science industries across
a variety of disciplines. His legal practice prior to his time at TherapeuticsMD included long-term portfolio strategy and management,
patent preparation and prosecution, contract negotiation and drafting, life-cycle management, and Hatch-Waxman matters. After law school,
he took a position at Greenberg Traurig, LLP in August 2005. In March of 2009, he moved to Luce Forward Hamilton & Scripps. Mr. Walker
accepted an in-house position as Intellectual Property Counsel for Medicis Pharmaceutical Corp. in June 2011, which was acquired by Valeant
Pharmaceutical International, Inc. in December 2012. In February 2013, Mr. Walker accepted a position at Kilpatrick Townsend & Stockton,
but chose to move in-house again in June 2013, when he accepted a position at our Company. Mr. Walker graduated from Arizona State University
Sandra Day O’Connor College of Law with his J.D. in 2004, and an L.L.M. in Intellectual Property Law at The George Washington University
Law School in 2005. He holds a Master’s Degree in Molecular Biology and a B.S. degree, both earned from Brigham Young University.
Joseph Ziegler has served as Principal Financial and Accounting Officer
of our Company since August 2023 and has served as founder and chief executive officer of JZ Advisory Group, a consulting company largely
focused on providing fractional CFO and outsourced accounting services to middle-market and entrepreneurial businesses, since January
2022. He previously served as the Chief Financial Officer of DAS Health, a private equity owned provider of IT Services to healthcare
providers, from April 2021 to December 2021 and as the Chief Financial Officer of Encompass Onsite, a provider of end-to-end property
solutions, from November 2018 to February 2021. Prior to joining Encompass Onsite, he held multiple roles as a CFO in the healthcare industry,
including private equity backed specialty pharmacy Biomatrix and Novis Pharmaceuticals. Mr. Ziegler served as a director of Progressive
Care Inc. from December 2021 until December 2024. He earned his B.S. in Finance and an M.B.A. from Florida Atlantic University.
CORPORATE GOVERNANCE
Director Independence
Since October 9, 2017, our common stock has been listed on the Nasdaq
Global Select Market of the Nasdaq Stock Market LLC, or Nasdaq, under the symbol “TXMD.” From April 23, 2013 to October 6,
2017, our common stock was listed on the NYSE American under the symbol “TXMD.” Under the rules of Nasdaq, independent directors
must comprise a majority of a listed company’s board of directors.
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Our Board of Directors has affirmatively determined, after considering
all the relevant facts and circumstances, that each of Dr. Gail Naughton, and Messrs. Tommy G. Thompson, Cooper C. Collins and Justin
Roberts is an independent director, as “independence” is defined under the applicable rules and regulations of the SEC and
the listing standards of Nasdaq, and does not have a relationship with us (either directly or as a partner, stockholder, or officer of
an organization that has a relationship with us) that would interfere with their exercise of independent judgment in carrying out their
responsibilities as directors. Accordingly, a majority of our directors are independent, as required under the applicable Nasdaq rules.
No director is related by blood, marriage, or adoption to any director,
executive officer or person chosen to become a director or executive officer. No arrangements or understandings exist between any director
and any other person pursuant to which such person was selected as a director. Further, there are no legal proceedings to which any director
is a party adverse to us or any of our subsidiaries or in which any such person has a material interest adverse to us or any of our subsidiaries.
Committee Charters, Corporate Governance, and Code of Ethics
Our Board of Directors has adopted charters for the Audit and Compensation
Committees describing the authority and responsibilities delegated to each committee by our Board of Directors. Our Board of Directors
has also adopted Corporate Governance Guidelines, a Code of Conduct and Ethics, and a Code of Ethics for the Chief Executive Officer and
senior financial officers of our Company. We post on our website, at www.therapeuticsmd.com: the charters of our Audit and Compensation
Committees; our Corporate Governance Guidelines, Code of Conduct and Ethics, and Code of Ethics for the Chief Executive Officer and senior
financial officers, and any amendments or waivers thereto; and any other corporate governance materials contemplated by the SEC or Nasdaq.
These documents are also available in print to any stockholder requesting a copy in writing from our corporate secretary at our executive
offices.
Executive Sessions
We regularly schedule executive sessions in which non-employee directors
will meet without the presence or participation of management, with at least one of such sessions including only independent directors.
Mr. Thompson, as the Chairman of our Board of Directors, chairs the executive sessions.
Board Committees
Our Board of Directors has an Audit Committee and a Compensation Committee,
each consisting entirely of independent directors.
Given the relatively small size of our Board of Directors and the desire
to involve the entire Board of Directors in nominating decisions, we have elected to no longer have a separate Nominating Committee. Since
we do not have a Nominating Committee, our independent directors, who currently constitute all of the Board of Directors, determine the
director nominees. Our Board of Directors may employ a variety of methods for identifying and evaluating director nominees. If vacancies
are anticipated or arise, our Board of Directors considers various potential candidates who may come to their attention through current
Board members, professional search firms, stockholders or other persons. These candidates may be evaluated by our Board of Directors at
any time during the year.
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In evaluating a director candidate, our Board of Directors will review
their qualifications including capability, availability to serve, conflicts of interest, general understanding of business, understanding
of our business and technology, educational and professional background, personal accomplishments and other relevant factors. Our Board
of Directors has not established any specific qualification standards for director nominees, and we do not have a formal diversity policy
relating to the identification and evaluation of nominees for director, although from time to time the Board of Directors may identify
certain skills or attributes as being particularly desirable to help meet specific needs that have arisen. Our Board of Directors may
also interview prospective nominees in person or by telephone. After completing this evaluation, the Board of Directors will determine
the nominees. The Board has not adopted a formal process for considering director candidates who may be recommended by stockholders. However,
our policy is to give due consideration to any and all such candidates.
Audit Committee Members
Compensation Committee Members
Board’s Role in Risk Oversight
Risk is inherent in every business. As is the case in virtually all
businesses, we face a number of risks, including operational, economic, financial, legal, regulatory, and competitive risks. Our management
is responsible for the day-to-day management of the risks we face. Our Board of Directors, as a whole and through its committees, has
responsibility for the oversight of risk management.
Our Board of Directors’ involvement in our business strategy
and strategic plans plays a key role in its oversight of risk management, its assessment of management’s risk appetite, and its
determination of the appropriate level of enterprise risk. Our Board of Directors receives updates at least quarterly from senior management
and periodically from outside advisors regarding the various risks we face, including operational, cybersecurity and information technology,
economic, financial, legal, regulatory, and competitive risks. Our Board of Directors also reviews the various risks we identify in our
filings with the SEC as well as risks relating to various specific developments, such as debt and equity issuances.
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The committees of our Board of Directors assist our Board of Directors
in fulfilling its oversight role in certain areas of risks. The Audit Committee oversees the financial and reporting processes of our
Company and the audit of the financial statements of our Company and provides assistance to our Board of Directors with respect to the
oversight and integrity of the financial statements of our Company, our Company’s compliance with legal and regulatory matters,
the independent auditor’s qualification and independence, and the performance of our independent auditor. The Audit Committee also
receives reports regarding our compliance program and our cybersecurity and information technology programs. The Compensation Committee
considers the risks that our compensation policies and practices may have in attracting, retaining, and motivating valued employees and
endeavors to assure that it is not reasonably likely that our compensation plans and policies would create undue risk or have a material
adverse effect on our Company.
Director Attributes
We seek a broad range of experiences, viewpoints, educational backgrounds,
skills, and other individual qualities and attributes to be represented on our Board of Directors. We believe directors should have various
qualifications, including individual character and integrity; business experience and leadership ability; strategic planning skills, ability,
and experience; requisite knowledge of our industry and finance, accounting, and legal matters; communications and interpersonal skills;
and the ability and willingness to devote time to our Company. We also believe the skill sets, backgrounds, and qualifications of our
directors, taken as a whole, should provide a significant mix of diversity in personal and professional experience, background, viewpoints,
perspectives, knowledge, and abilities. Nominees are not to be discriminated against on the basis of race, religion, national origin,
sex, sexual orientation, disability, or any other basis prohibited by law. The assessment of directors is made in the context of the perceived
needs of our Board of Directors from time to time.
All of our directors have held high-level positions in business or
professional service firms and have experience in dealing with complex issues. We believe that all of our directors are individuals of
high character and integrity, are able to work well with others, and have committed to devote sufficient time to the business and affairs
of our Company. In addition to these attributes, the description of each director’s background set forth above indicates the specific
experience, qualifications, and skills necessary to conclude that each individual should continue to serve as a director of our Company.
Board Leadership Structure
We believe that effective board leadership structure depends on the
experience, skills, and personal interaction among persons in leadership roles as well as the needs of our Company at any point in time.
We currently maintain separate roles between the Chief Executive Officer and the Chairman of the Board of Directors in recognition of
the differences between the two responsibilities. Our Chief Executive Officer is responsible for setting our strategic direction and day
-to-day leadership and performance of our Company. The Chairman of the Board of Directors provides input to the Chief Executive Officer,
sets the agenda for board meetings, and presides over meetings of the full Board of Directors as well as executive sessions of our Board
of Directors. Our Board of Directors believes that our current leadership structure provides the most effective leadership model for our
Company, as it promotes balance between the Board of Directors’ independent authority to oversee our business and the Chief Executive
Officer and his management team, which manage the business on a day-to-day basis.
Compensation Committee Interlocks and Insider Participation
During our fiscal year ended December 31, 2025, Dr. Naughton and Messrs.
Collins and Roberts served as members of the Compensation Committee.
None of Dr. Naughton and Messrs. Collins and Roberts have been at any
time one of our officers or employees or had any relationship with us that requires disclosure under Item 404 of Regulation S-K under
the Exchange Act.
During the fiscal year ended December 31, 2025, none of our executive
officers served on the compensation committee or board of directors of any entity whose executive officers serve as a member of our Board
of Directors or Compensation Committee.
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Compensation Recovery Policy
In 2023, we adopted a policy on recoupment of incentive compensation,
or clawback policy, which provides for recoupment of compensation in certain circumstances in the event of a restatement of our financial
results, in accordance with the requirements of SEC rules and Nasdaq listing standards implementing the requirement of Section 954 of
the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. A copy of our policy on recoupment of incentive compensation is
incorporated by reference as Exhibit 97 to this 2025 10-K Report.
Anti-Hedging and Anti-Pledging Policy
In April 2020, the Board of Directors amended the Company’s Code
of Conduct and Ethics to include a policy regarding hedging and pledging transactions. Pursuant to the policy, directors, officers, and
employees are prohibited from: (1) directly or indirectly engaging in any hedging transactions with respect to any directly or indirectly
owned securities of the Company, which includes the purchase of any financial instrument (including puts, calls, equity swaps, forward
contracts, collars, exchange funds or other derivative securities) on an exchange or in any other market in order to hedge or offset any
decrease in the market value of such securities; (2) engaging in short sale transactions or forward sale transactions or any short-term
or speculative transactions in the Company’s securities or in other transactions in the Company’s securities that may lead
to inadvertent violations of insider trading laws; and (3) pledging securities of the Company as collateral for a loan or otherwise using
securities of the Company to secure a debt, including through the use of traditional margin accounts with a broker.