Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are a late clinical stage biopharmaceutical company focused on developing novel medicines for the treatment of metabolic diseases, oncology, and viral-induced ARDS. Our drug development program includes two late-stage new chemical entities, enobosarm and sabizabulin. Enobosarm, a selective androgen receptor modulator (“SARM”), is being developed in two different programs: (i) obesity- enobosarm in combination with GLP-1 RA to augment fat loss, to prevent muscle loss, and maintain physical function for higher quality weight loss and (ii) breast cancer- enobosarm plus abemaciclib for the 2nd line treatment of androgen receptor positive (AR+), estrogen receptor positive (ER+) and human epidermal growth factor receptor 2 negative (HER2-) metastatic breast cancer, subject to the availability of sufficient funding. Sabizabulin, a microtubule disruptor, is being developed for the treatment of hospitalized patients with viral-induced ARDS. We do not intend to undertake further development of sabizabulin for the treatment of viral-induced ARDS unless we obtain funding from government grants, pharmaceutical company partnerships, or other similar third-party external sources. We also have an FDA-approved commercial product, the FC2 Female Condom® (Internal Condom), for the dual protection against unplanned pregnancy and sexually transmitted infections.

Obesity Program

In reported third-party clinical trials evaluating currently approved GLP-1 RA in obese patients, trial participants exhibited significant weight loss composed of reductions in both fat and lean (muscle and bone) mass. Of the total weight loss reported in certain of these third-party clinical trials, 20-50% of the total weight loss reported by patients was attributable to lean mass (muscle) loss. According to the CDC, 41.5% of older adults are obese and could benefit from weight loss medication. Up to 34.4% of people over the age of 60 with obesity in the United States have sarcopenic obesity. Sarcopenic obese patients are patients who have obesity and low muscle mass at the same time and are potentially at the greatest risk for developing critically low muscle mass when taking a currently approved GLP-1 RA. We therefore believe there is an urgent unmet need for a drug that can ameliorate the muscle wasting effects of currently approved GLP-1 RA therapies and also allow for preferential loss of fat mass in at-risk sarcopenic obese and overweight elderly patients. While older adults are at higher risk for sarcopenia and sarcopenic obesity, in discussions with the FDA, Veru intends to ultimately seek an approval in the broadest population that could benefit in all ages rather than limiting the indication to patients over the age of 60 years as younger patients (including females of child-bearing potential) with obesity on GLP-1 receptor agonists could benefit from the potential muscle-preserving effects of enobosarm.

Enobosarm is an oral, novel SARM that has demonstrated tissue-selective, dose-dependent improvement in body composition with increases in lean mass and decreases in fat mass, improvement in muscle strength and physical function, has no clinically-relevant masculinizing effects in women and has neutral prostate effects in men in previous clinical trials.

Advanced cancer can cause a loss of appetite where there is significant loss of both lean mass and fat mass. Enobosarm has been evaluated in five separate third-party clinical trials in which lean mass measurement was a primary or co-primary endpoint. These third-party clinical trials include two Phase 2 clinical trials in healthy older or sarcopenic subjects (168 subjects) and one Phase 2b clinical trial and two Phase 3 clinical trials in subjects with muscle wasting because of cancer (800 subjects), generating lean mass and safety data from a total of 968 patients. In certain of these trials, enobosarm demonstrated a dose-dependent improvement in body composition with increases in lean mass and reductions in fat mass. For example, in the Phase 2 clinical trial evaluating enobosarm in 120 men over 60 years old and postmenopausal women treated for 12 weeks, patients receiving 3mg dose of enobosarm (n=24) demonstrated a statistically significant (i) increase in total lean body mass (average increase of 1.25 kg (p = < 0.001)) and (ii) decrease in total fat mass (average decrease of 0.32 kg (p=0.049)). When measuring physical function by stair climb test, patients receiving 3mg dose of enobosarm in this trial also demonstrated statistically significant improvements compared to placebo (p=0.049) using a secondary methodology of statistical analysis provided for in the trial protocol.

Based on a large safety database which includes 1,581 men and women with treatment duration for up to 3 years, enobosarm has been generally well tolerated in clinical trials completed to date. However, no preclinical studies or clinical trials evaluating the combination of enobosarm and a GLP-1 RA have been completed to date. All the nonclinical and clinical efficacy and safety data on enobosarm including those generated by these five third-party clinical trials are owned by Veru pursuant to an assignment from the University of Tennessee Research Foundation.

We believe the clinical data we own that was generated from third-party clinical trials of enobosarm in both elderly patients and in patients with initial and ongoing muscle wasting caused by loss of appetite, provide strong clinical rationale for the co-administration of enobosarm and a GLP-1 RA in at-risk sarcopenic obese or overweight elderly patients as the combination has the potential to ameliorate the muscle wasting effects of currently approved GLP-1 RA therapies and also allow for preferential loss of fat mass.

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We submitted an Investigational New Drug Application (IND) for enobosarm for a Phase 2b clinical study in January 2024. In February 2024, the Company received FDA clearance to initiate the Phase 2b, multicenter, double-blind, placebo-controlled, randomized, dose-finding QUALITY clinical trial designed to evaluate the safety and efficacy of enobosarm 3mg, enobosarm 6mg, or placebo as a treatment to augment fat loss and to prevent muscle loss in sarcopenic obese or overweight older (>60 years of age) patients receiving semaglutide (Wegovy®). The primary endpoint is percent change from baseline in total lean body mass, and the key secondary endpoints are percent change from baseline in total body fat mass, total body weight, and physical function as measured by stair climb test at 16 weeks. In April 2024 the Company announced that it had enrolled its first patients in the Phase 2b QUALITY clinical study and in August 2024 the Company completed enrollment of 168 subjects in 14 clinical sites in the U.S. with the topline clinical results from the trial expected in January 2025. The purpose of the Phase 2b QUALITY clinical trial is to select the optimal dose of enobosarm in combination with semaglutide (Wegovy®) that best preserves muscle and reduces fat after 16 weeks of treatment to advance into a Phase 3 obesity clinical trial.

After completing the efficacy dose-finding portion of the Phase 2b QUALITY clinical trial, the participants are expected to continue into a Phase 2b extension trial where all patients will stop treatment with semaglutide (Wegovy®), but will continue taking placebo, 3mg of enobosarm, or 6mg of enobosarm in a blinded fashion for 12 weeks. The Phase 2b extension clinical trial will evaluate whether enobosarm can maintain muscle and prevent the fat and weight regain that generally occurs after discontinuing a GLP-1 RA. The topline results of the separate blinded Phase 2b extension clinical study are expected in the second quarter of calendar 2025.

Veru is also currently developing a novel, patentable, modified release formulation for enobosarm with multiple releases during a 24-hour dosing period. We anticipate the actual formulation, pharmacokinetic release profile(s), and method of manufacturing will be the subject of future patents. The purpose of the modification is to create a consistent release profile with a significantly reduced maximum exposure plus an extended-release profile to minimize any dose-related adverse events while facilitating full exposure of the patient to the drug product between doses for the entire period of 24 hours. This formulation is currently in animal trials and is anticipated to be available for Phase 1 bioavailability clinical trial during the first half of 2025. We expect that the oral enobosarm modified release drug formulation will be utilized for any Phase 3 obesity clinical studies.

Oncology Program

Our oncology drug pipeline is focused on the clinical development of enobosarm, an oral selective androgen receptor modulator, for the treatment of metastatic breast cancer. As we have prioritized our clinical programs to focus on enobosarm for obesity, the continued clinical development of enobosarm for the treatment of metastatic breast cancer is subject to the availability of sufficient funding. We completed the Stage 1a portion of our Phase 3 clinical trial in October 2023. We will not, however, begin the Stage 1b portion or otherwise advance our trial Phase 3 clinical trial until sufficient funding is available.

Enobosarm is a new class of endocrine therapy for advanced breast cancer. Enobosarm is an oral, new chemical entity, selective androgen receptor modulator designed to activate the AR in AR+ ER+ HER2- metastatic breast cancer and thereby suppress tumor growth without the unwanted masculinizing side effects. Enobosarm has extensive nonclinical and clinical experience having been evaluated in 27 separate clinical studies in 1,581 subjects dosed, including three Phase 2 clinical trials in advanced breast cancer involving more than 191 patients. In one of the Phase 2 clinical trials conducted in women with AR+ ER+ HER2- metastatic breast cancer, enobosarm demonstrated significant antitumor efficacy in heavily pretreated cohorts that failed estrogen blocking agents, chemotherapy and/or CDK 4/6 inhibitors and was well tolerated with a favorable safety profile.

The current standard of care for first line treatment of ER+ HER2- metastatic breast cancer is treatment with a CDK 4/6 inhibitor in combination with an estrogen blocking agent. Once a patient progresses while receiving this combination therapy, the FDA-approved treatment choices are limited to another estrogen blocking agent or chemotherapy. As up to 95% of ER+ HER2- metastatic breast cancers have an androgen receptor, we are developing enobosarm as another, but different, hormone therapy for the second line treatment of ER+ HER2- metastatic breast cancer. In preclinical studies, metastatic breast cancer tissue samples taken from patients who have ER+ HER2- metastatic breast cancer that had become resistant to CDK 4/6 inhibitors and estrogen blocking agents were grown in mice. In these mice, treatment with enobosarm in combination with a CDK 4/6 inhibitor suppressed the growth of human metastatic breast cancer greater than the CDK 4/6 inhibitor alone. Further, enobosarm treatment alone was also effective in suppressing the growth of CDK 4/6 inhibitor and estrogen blocking agent resistant human metastatic breast cancer tumors in mice.

On March 30, 2023 and November 3, 2023, we met with the FDA to discuss the design of our Phase 3 clinical trial in patients with AR+ ER+ HER2- metastatic breast cancer who have tumor progression while receiving palbociclib (a CDK 4/6 inhibitor) plus an estrogen blocking agent (nonsteroidal aromatase inhibitor or selective estrogen receptor degrader). The design of the Phase 3 clinical trial was amended following our November 3, 2023 meeting with the FDA to implement the recommendations that were provided by the FDA. The primary endpoint for the Stage 1 portion of the Phase 3 clinical trial is objective tumor response rates (“ORR”).

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We began patient enrollment in April 2022. As of August 2023, we had completed the target enrollment of three patients in the Stage 1a portion of the Phase 3 ENABLAR-2 clinical trial to assess the safety and pharmacokinetics of the combination of abemaciclib and enobosarm. There were no reported drug-to-drug interactions between abemaciclib and enobosarm or new safety findings in the three patients as of the data cutoff date. Further, the early preliminary clinical results showed two partial responses and one stable disease in the first three patients based on local assessments.

Subject to the availability of sufficient funding, we expect to reinitiate Stage 1b of our Phase 3 ENABLAR-2 clinical trial by early 2026. If enobosarm + abemaciclib combination therapy compared to estrogen blocking agent (active control) demonstrates significant improvement in ORR, which is considered a surrogate endpoint for clinical benefit, then we may meet with the FDA to consider an accelerated approval regulatory pathway based on the clinical data from the Stage 1b portion of the Phase 3 clinical trial. Granting accelerated approval for investigational products is within the discretion of the FDA. Accordingly, even if we believe that one of our product candidates meets the criteria for this approval pathway, the FDA may disagree and instead determine not to make such designation. Further, even if we receive a designation, such designation for a product candidate may not result in a faster development or regulatory review or approval process compared to products considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualifies for these designations, the FDA may, among other things, later decide that the product candidates no longer meet the conditions for qualification or decide that the time period for FDA review or approval will not be shortened. There can be no assurances that the FDA will accept our proposed trial design, that we will be able to cost-effectively continue development of enobosarm, or that enobosarm will receive FDA approval or be commercialized, for this application.

Infectious Disease Program

We are developing sabizabulin 9mg, which has both host targeted antiviral and broad anti-inflammatory properties, as a two-pronged approach to the treatment of hospitalized patients with viral lung infection at high risk for ARDS and death. We have completed positive Phase 2 and positive Phase 3 COVID-19 clinical trials, which have demonstrated that sabizabulin treatment resulted in a mortality benefit in hospitalized moderate to severe patients with COVID-19 viral lung infection at high risk for ARDS and death. The FDA granted Fast Track designation to our COVID-19 program in January 2022. On May 10, 2022, we had a pre-EUA meeting with the FDA to discuss next steps including the submission of an EUA application regarding sabizabulin for COVID-19. In June 2022, we submitted a request for FDA Emergency Use Authorization. In February 2023, the FDA declined to grant our request for Emergency Use Authorization for sabizabulin. In September 2023, we received agreement from the FDA on the design of a Phase 3 clinical trial to evaluate sabizabulin in broadly any viral-induced ARDS.

However, we currently plan to prioritize the use of our internal cash and the net proceeds of any future financings for the development of enobosarm, with a primary near-term focus on funding the Phase 2b clinical trial to evaluate the safety and efficacy of enobosarm as a treatment for obesity, and to seek external funding through government grants, pharmaceutical company partnerships, or similar sources to advance the development of sabizabulin as a treatment for viral-induced ARDS. Without such external funding, we do not plan to advance the Phase 3 development of sabizabulin as a treatment for viral-induced ARDS.

There can be no assurances that we will be able to obtain external funding through government grants, pharmaceutical company partnerships, or similar sources, that we will be able to cost-effectively continue development of sabizabulin, or that sabizabulin will receive FDA approval or be commercialized, for this application.

Sexual Health Program

Our sexual health program consists of FC2, the only FDA-approved, female controlled, hormone-free and latex-free female condom indicated for the dual protection against unplanned pregnancy and sexually transmitted infections, including HIV/AIDS.

We sell FC2 in the U.S. in both the prescription channel and in the public health sector and globally we sell FC2 in the public sector.

In the U.S. prescription channel, FC2 is available through multiple telehealth and telepharmacy channels as well as retail pharmacies. While there has been recent consolidation in the telehealth industry, we continue to believe that telehealth will be an important commercial strategy in the U.S. for access to birth control products, including FC2, given both healthcare industry dynamics and our product’s profile. In order to maximize its reach and to have more direct control of the promotion, distribution, and sales of FC2, we launched our own telehealth portal in April 2022.

We expect revenue from the U.S. prescription channel to demonstrate growth from our dedicated FC2 telehealth portal as we continue to refine the infrastructure of the portal. We intend to continue leveraging relationships with entities in the U.S. public health sector such as state departments of health and 501(c)(3) organizations.

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In the global public health sector outside the U.S., we market FC2 to entities, including ministries of health, government health agencies, U.N. agencies, nonprofit organizations and commercial partners, that work to support and improve the lives, health and well-being of women around the world. We are currently supplying a large multi-year South African tender for female condoms, which is expected to continue until 2025 and have been successful in securing supply under a new tender in Brazil, which we started to supply during the fourth quarter of fiscal 2024.

Sale of ENTADFI

On April 19, 2023, the Company entered into an asset purchase agreement (the “Asset Purchase Agreement”) to sell substantially all of the assets related to ENTADFI® (finasteride and tadalafil) capsules for oral use, a new treatment for benign prostatic hyperplasia that was approved by the FDA in December 2021, with Onconetix, Inc. formerly known as Blue Water Vaccines Inc. (“ONCO”). The transaction closed on April 19, 2023. The purchase price for the transaction was $20.0 million, consisting of $6.0 million paid at closing, $4.0 million payable pursuant to a promissory note due on September 30, 2023, $5.0 million payable pursuant to a Promissory Note due on April 19, 2024 (the “April 2024 Promissory Note”), and $5.0 million payable pursuant to a Promissory Note due on September 30, 2024 (the “September 2024 Promissory Note” and, together with the April 2024 Promissory Note, the “ONCO Promissory Notes”), plus up to $80.0 million based on ONCO’s net revenues from ENTADFI after closing (the “Milestone Payments”). The Company believes the probability of receiving any Milestone Payments is remote.

On September 29, 2023, the Company entered into an Amendment to the Asset Purchase Agreement providing that the promissory note for the $4.0 million installment of the purchase price due September 30, 2023 would be deemed paid and fully satisfied upon (1) the payment to the Company of the sum of $1.0 million in immediately available funds on September 29, 2023 and (2) the issuance to the Company by October 3, 2023 of 3,000 shares of Series A Convertible Preferred Stock of ONCO (the “ONCO Preferred Stock”). The Company received payment of $1.0 million on September 29, 2023 and the ONCO Preferred Stock on October 3, 2023. The shares of ONCO Preferred Stock held by the Company were converted into 142,749 shares of ONCO common stock on September 24, 2024.

On April 24, 2024, the Company entered into a Forbearance Agreement with ONCO, which was amended and restated as of September 19, 2024 (as amended and restated, the "Forbearance Agreement"), relating to certain defaults under the ONCO Promissory Notes. Pursuant to the Forbearance Agreement, (a) ONCO agreed to make a payment of $50,000 of the principal payable under the April 2024 Promissory Note not later than April 29, 2024, which was paid on April 25, 2024, and (b) the Company agreed, subject to the terms and conditions set forth in the Forbearance Agreement, to forbear from exercising its rights and remedies on account of the failure by ONCO to pay the amounts due under the April 2024 Promissory Note on the due date of April 19, 2024, and on account of any failure by ONCO to make any mandatory repayment under the ONCO Promissory Notes that may have become due or may become due in connection with certain transactions relating to ONCO’s acquisition of Proteomedix AG, in each case for a period (the “April 2024 Forbearance Period”) commencing on April 24, 2024 and ending on the earlier of (a) March 31, 2025 and (b) the occurrence of an Event of Default (as defined in the Forbearance Agreement). The Company also agreed that during the Forbearance Period the default provision in the ONCO Promissory Notes relating to insolvency of ONCO will not apply. The Forbearance Agreement also amended certain terms of the September 2024 Promissory Note as described below.

ONCO agreed in the Forbearance Agreement to make the following required payments (the “Required Payments”) to Veru during the April 2024 Forbearance Period first to accrued and unpaid interest under the April 2024 Promissory Note and then any remainder to the outstanding principal balance of the April 2024 Promissory Note: (1) monthly payments equal to 25% (increased from 15% in the original April 24, 2024 Forbearance Agreement) of cash receipts of ONCO or its subsidiaries from certain sale or licensing revenues or payments, which increased amount began on October 20, 2024 for cash receipts in September 2024; and (2) payment of 20% (increased from 10% in the original April 24, 2024 Forbearance Agreement) of the net proceeds from certain financing or other transactions outside the ordinary course of business completed by ONCO or any of its subsidiaries during the April 24 Forbearance Period, which increased amount began for any net proceeds received after September 19, 2024. The remaining balance of the April 2024 Promissory Note will be due at the end of the April 2024 Forbearance Period. The remaining balance of the April 2024 Promissory Note will be due at the end of the Forbearance Period. The Company and ONCO entered into a Waiver and Amendment No. 1 to Forbearance Agreement, dated November 26, 2024, that (x) extended the time for the payment by ONCO of the monthly payment of a percentage of its cash receipts referenced in clause (1) above in this paragraph and conditioned the payment of those amounts upon ONCO being able to raise capital of at least $97,000 and (y) increased the percentage of the net proceeds from certain financings payable to the Company from 20% to 25%.

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ONCO and the Company also agreed to the following amendments to the September 2024 Promissory Note in the Forbearance Agreement: (1) the maturity date of the September 2024 Promissory Note was extended to June 30, 2025; (2) the accrual of interest at the rate of 10% per annum on any unpaid principal balance of the September 2024 Promissory Note commencing on October 1, 2024 through the date that the outstanding principal balance under the September 2024 Promissory Note is paid in full; (3) any amounts owed on the September 2024 Promissory Note, including but not limited to unpaid principal and accrued interest, will be paid in cash or, upon the mutual written consent of ONCO and the Company, in shares of the ONCO common stock or a combination of cash and ONCO common stock; (4) following full repayment of all principal and interest under the April 2024 Promissory Note, ONCO will make the Required Payments first towards accrued and unpaid interest under the September 2024 Promissory Note and then towards the remaining principal balance payable under the September 2024 Promissory Note; and (5) if the aggregate unpaid principal outstanding under the April 2024 Promissory Note and the September 2024 Promissory Note and all accrued and unpaid interest thereon is repaid in cash on or before December 31, 2024, then the total principal balance under the September 2024 Promissory Note that will be payable by ONCO in satisfaction of its obligations under the September 2024 Promissory Note will be reduced from $5,000,000 to $3,500,000.

Consolidated Operations

Revenues. The Company's revenues are primarily derived from sales of FC2 in the U.S. prescription channel and global public health sector. These sales are recognized upon shipment or delivery of the product to the customers depending on contract terms.

We have developed and continue to refine our own telehealth portal to grow revenues from the U.S. prescription channel. The Company is exploring additional commercial distribution strategies and expects to continue generating revenue from global public health sector agencies who purchase and distribute FC2 for HIV/AIDS prevention and family planning. The Company has experienced revenue growth from the U.S. and global public sector through its relationship with customers and will continue to work with these customers to identify future growth opportunities.

The Pill Club had historically been our largest telehealth customer for FC2, accounting for 24% of our net revenues (including 67% of our U.S. prescription channel revenue) in fiscal 2023. We sold FC2 to The Pill Club at a wholesale price pursuant to purchase orders received from The Pill Club from time to time. The Pill Club took title to FC2 and then acted as a distributor of FC2. The Pill Club was solely responsible for its interactions with health care providers and patients (including, without limitation, the conduct of the telehealth physician-patient interactions), pricing of the FC2 products that it distributed, and legal and regulatory compliance. We had no oversight of The Pill Club’s operations.

On February 7, 2023, the California Attorney General announced a settlement with The Pill Club over a number of alleged improper actions by The Pill Club, including alleged overbilling for FC2. Notwithstanding the statements in the California Attorney General’s press release, California’s allegations against The Pill Club, according to the publicly available Settlement Agreement executed as of January 18, 2023, involved not only billing related to FC2 but also billing related to emergency contraceptives, improper coding of asynchronous telemedicine visits, and billing for prescriptions sent to California patients by a Texas pharmacy not then-licensed to provide pharmacy services to California patients.

While the California Attorney General’s allegations included The Pill Club’s practices with respect to sales of FC2 by The Pill Club, we were not involved in such business practices and no claims against Veru have been made by the California Attorney General.

We also had a concentration of accounts receivable with The Pill Club, which totaled $3.9 million as of September 30, 2024 and 2023. In March 2023, the Company recorded a provision for credit losses for the entire amount of these receivables, due to the uncertainty as to whether or when The Pill Club would pay these amounts. The Pill Club filed for Chapter 11 bankruptcy on April 18, 2023 and its assets have been sold to satisfy a secured creditor. Our claims against The Pill Club for these receivables, and an additional claim of $1.4 million for contractual damages, have been filed with The Pill Club bankruptcy estate. It is uncertain at this time what assets will be available to satisfy unsecured creditors such as Veru. The Company maintains an allowance for credit losses for the full amount of receivables as of September 30, 2024.

Due to The Pill Club’s recent Chapter 11 bankruptcy and the termination of our contract with The Pill Club, we will not have any future revenues from The Pill Club.

In February 2022, the Company received a tender award to supply 57% of a tender covering up to 120 million female condoms over three years in the Republic of South Africa (the “2022 South Africa Tender”). The Company began shipping units under the 2022 South Africa Tender in the second quarter of fiscal 2023.

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The Company manufactures FC2 in a leased facility located in Selangor D.E., Malaysia, resulting in a portion of the Company's operating costs being denominated in foreign currencies. While a significant portion of the Company's future unit sales are likely to be in foreign markets, all sales are denominated in the U.S. dollar. Effective October 1, 2009, the Company’s U.K. and Malaysia subsidiaries adopted the U.S. dollar as their functional currency, further reducing the Company’s foreign currency risk.

The Company relies on supply for its principal raw material for FC2 from one supplier who is a technical market leader in synthetic polymers. We intend to move to an alternative grade of nitrile, which will require us to incur costs to formulate and test the alternative grade and seek FDA approval of the alternative grade. The supplier has stated that it will assist in providing continuity of supply while we transfer to the standardized grade of nitrile.

Operating Expenses. The Company manufactures FC2 at its Malaysian facility. The Company's cost of sales consists primarily of direct material costs, direct labor costs and indirect production and distribution costs. Direct material costs include raw materials used to make FC2, principally a nitrile polymer. Indirect production costs include logistics, quality control and maintenance expenses, as well as costs for electricity and other utilities. All the key components for the manufacture of FC2 are essentially available from either multiple sources or multiple locations within a source.

We have seen increases in the cost of the nitrile polymer used to produce FC2, as well as transportation costs, and may also experience increases in other material costs due to the impact of inflation. Also, the Company's decision to launch a telehealth portal may result in increases in expenses associated with acquiring new FC2 users. As a result, there may be an unfavorable impact on the Company's selling expenses and income from operations if it cannot pass through these increases to its customers.

Conducting research and development is central to our drug development programs. The Company has several products under development and management routinely evaluates each product in its portfolio of products. Advancement is limited to available working capital and management’s understanding of the prospects for each product. If future prospects do not meet management’s strategic goals, advancement may be discontinued. We have invested and expect to continue to invest significant time and capital in our research and development operations. Our research and development expenses were $12.8 million and $51.2 million for fiscal 2024 and 2023, respectively. The decrease in expense is due to the termination of various trials during fiscal 2023 as a result of the Company's updated strategy to refocus development efforts on those drug candidates which it believes have the best opportunity to lead to long-term success and shareholder value creation. We expect to continue investing significant resources in research and development in the future in order to advance our drug candidates.

Results of Operations

YEAR ENDED September 30, 2024 COMPARED TO YEAR ENDED September 30, 2023

The Company generated net revenues of $16.9 million and net loss of $37.8 million, or $(0.28) per basic and diluted common share, in fiscal 2024, compared to net revenues of $16.3 million and net loss of $93.2 million, or $(1.10) per basic and diluted common share, in fiscal 2023. Net revenues increased 4% year over year.

Substantially all of the Company’s net revenues were derived from sales of FC2 in the U.S. prescription channel and global public health sector. In the U.S. prescription channel, the Company’s customers include primarily telehealth providers. In the global public health sector, the Company’s customers are primarily health care distributors, large global agencies, non-government organizations, ministries of health and other governmental agencies that purchase and distribute FC2 for use in HIV/AIDS prevention and family planning programs. The Company had net revenues from the U.S. prescription channel of $2.4 million and $5.8 million in fiscal 2024 and fiscal 2023, respectively and net revenues from the global public health sector of $14.5 million and $10.5 million in fiscal 2024 and fiscal 2023, respectively. There was a change in the sales mix with the U.S. prescription channel representing 14% of total FC2 net revenues in the current year compared to 36% in the prior year and the global public health sector representing 86% of total FC2 net revenues in the current year compared to 64% in the prior year.

The decrease in FC2 net revenues in the U.S. prescription channel is due to sales in the prior year to The Pill Club of $3.9 million, which was 67% of net revenues from the U.S. prescription channel in the prior year. The Pill Club filed for Chapter 11 bankruptcy in April 2023. We recorded a provision for credit losses of $3.9 million during fiscal 2023, which offset the net revenues from The Pill Club during the prior year.

The increase in FC2 net revenues in the global public health sector is primarily due to timing and shipment of orders. Significant variances in the Company’s results have historically resulted from the timing and shipment of large orders rather than from any fundamental changes in the business or the underlying demand for FC2. The Company is also currently seeing pressure on pricing for FC2 by large global agencies and governments that donate to those global agencies. As a result, the Company may continue to experience challenges for revenue from sales of FC2 in the global public health sector.

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Cost of sales increased to $11.0 million in fiscal 2024 from $8.7 million in fiscal 2023, primarily due to an increase in units sold and an increase in the provision for obsolete inventory of $1.2 million related to inventory in the U.S. prescription channel, partially offset by a decrease in cost per unit sold due to increased production volume.

Gross profit decreased to $5.9 million in fiscal 2024 from $7.6 million in fiscal 2023. Gross profit margin for fiscal 2024 was 35% of net revenues, compared to 46% of net revenues in fiscal 2023. The decrease in gross profit and gross profit margin is primarily due to the change in our sales mix, which included a decrease in FC2 net revenues in the U.S. prescription channel due to The Pill Club’s Chapter 11 bankruptcy, as sales in the U.S. prescription channel have higher gross profit margins.

Research and development expenses decreased to $12.8 million in fiscal 2024 from $51.2 million in fiscal 2023. The decrease is due to the Company's updated strategy to refocus development efforts on those drug candidates that it believes have the best opportunity to lead to long-term success and shareholder value creation. The Company had reduced research and development activity during fiscal 2024 due to a pause in the development of its drug programs as the Company was preparing to submit an IND for enobosarm for a Phase 2b clinical study for weight loss, which was initiated in April 2024. The Company incurred $26.2 million of expenses in the prior year related to sabizabulin for COVID-19 and the Company's related emergency use authorization application. The Company had other ongoing drug developments programs, such as for prostate and breast cancers, which were paused or canceled during fiscal 2023 but for which significant costs were incurred during fiscal 2023. The Company now has one active clinical development program and has plans for a second clinical program.

Selling, general and administrative expenses were $31.2 million in fiscal 2024, which is a decrease from $48.1 million in fiscal 2023. The decrease is due primarily to commercialization costs of $13.4 million in the prior year related to preparation for the potential launch of sabizabulin for COVID-19 prior to the FDA’s declination decision on the Company’s EUA application and selling costs of $1.2 million in the prior year related to ENTADFI, which was sold in April 2023.

The Company recorded a provision for credit losses of $3.9 million in fiscal 2023 for the total amount of receivables due from The Pill Club due to their Chapter 11 bankruptcy. There was no provision for credit losses recorded in fiscal 2024.

In fiscal 2023, the Company recorded an impairment charge of $3.9 million related to in-process research and development (“IPR&D”) assets recorded for sabizabulin for prostate cancer and zuclomiphene, as a result of the Company’s strategic decision to refocus its drug development efforts on those drug candidates that it believes have the best opportunity to lead to long-term success and shareholder value creation. There was no impairment charge recorded in fiscal 2024.

The Company recorded a gain on sale of ENTADFI assets of $1.2 million in fiscal 2024, compared to $5.7 million in fiscal 2023. The Company recognizes a gain on sale of ENTADFI assets as nonrefundable consideration is received. See Note 15 to the financial statements included in this report for additional information.

Interest expense, which is related to the accretion of the liability for the Residual Royalty Agreement, was $0.6 million in fiscal 2024, which is a decrease from $2.4 million in fiscal 2023. The decrease relates to a decrease in projected FC2 sales.

The loss associated with the change in fair value of the embedded derivatives related to Residual Royalty Agreement was $0.2 million in fiscal 2024 compared to a gain of $3.0 million in fiscal 2023. The liabilities associated with embedded derivatives represent the fair value of the change of control provision in the Residual Royalty Agreement. The increase in the fair value of the embedded derivates is due to an increase in the probability of a change in control and a decrease in discount rates. See Note 3 and Note 9 to the financial statements included in this report for additional information.

The loss associated with the change in fair value of equity securities was $0.2 million in fiscal 2024. This is due to the change in fair value of the shares received from ONCO during fiscal 2024. See Note 3 to the financial statements included in this report for additional information.

Income tax expense in fiscal 2024 was $0.7 million, compared to income tax expense of $0.5 million in fiscal 2023. The change in income tax expense is primarily due to an increase of $0.2 million in tax expense recorded in the current year due to an increase in income recognized by our U.K. subsidiary. The U.S. continues to have a full valuation allowance on its deferred tax assets; therefore, activity in the U.S. does not have a material effect on income tax expense.

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Liquidity and Sources of Capital

Liquidity

Our cash and cash equivalents on hand at September 30, 2024 was $24.9 million, compared to $9.6 million at September 30, 2023. At September 30, 2024, the Company had working capital of $23.4 million and stockholders’ equity of $32.3 million compared to working capital of $5.1 million and stockholders’ equity of $19.7 million as of September 30, 2023. The increase in working capital is primarily due to the increase in cash on hand and a decrease in accounts payable.

The Company is not profitable and has had negative cash flow from operations. We will need substantial capital to support our drug development and any related commercialization efforts for our drug candidates. Based upon the Company’s current operating plan, it estimates that its cash and cash equivalents as of the issuance date of the financial statements included in this report are insufficient for the Company to fund operating, investing and financing cash flow needs for the twelve months subsequent to the issuance date of the financial statements included in this report. To obtain the capital necessary to fund our operations, we expect to finance our cash needs through public or private equity offerings, debt financing transactions and/or other capital sources. Additional capital may not be available at such times and in such amounts as needed by us to fund our activities on a timely basis.

These uncertainties raise substantial doubt regarding our ability to continue as a going concern for a period of twelve months subsequent to the issuance date of the financial statements included in this report. Certain elements of our operating plan to alleviate the conditions that raise substantial doubt, including but not limited to our ability to secure equity financing or other financing alternatives, are outside of our control and cannot be included in management’s evaluation under the requirements of ASC 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. Accordingly, we have concluded that substantial doubt exists about our ability to continue as a going concern for a period of at least twelve months subsequent to the issuance date of the financial statements included in this report.

Operating activities

Our operating activities used cash of $21.7 million in fiscal 2024. Cash used in operating activities included net loss of $37.8 million, adjustments to reconcile net loss to net cash used in operating activities totaling an increase of $15.9 million and changes in operating assets and liabilities, which net to an immaterial amount. Adjustments to net loss primarily consisted of share-based compensation of $13.6 million and a provision for obsolete inventory of $1.6 million. Changes in operating assets and liabilities included a decrease in accounts payable of $5.4 million, partially offset by an increase in accrued expenses and other liabilities of $3.9 million and a decrease in inventories of $1.0 million.

Our operating activities used cash of $88.0 million in fiscal 2023. Cash used in operating activities included net loss of $93.2 million, adjustments to reconcile net loss to net cash used in operating activities totaling an increase of $20.3 million and changes in operating assets and liabilities totaling a decrease of $15.2 million. Adjustments to net loss primarily consisted of share-based compensation of $17.9 million, a provision for credit losses of $3.9 million, and an impairment of intangible assets of $3.9 million, partially offset by the gain on the sale of ENTADFI assets of $5.7 million. The decrease in cash from changes in operating assets and liabilities included a decrease in accrued expenses and other current liabilities of $11.7 million, a decrease in accounts payable of $9.1 million, and an increase in accounts receivable of $4.2 million, partially offset by a decrease in prepaid expenses and other assets of $9.8 million.

Investing activities

Net cash provided by investing activities was $0.1 million in fiscal 2024, attributed to $0.3 million received from the sale of the Company’s ENTADFI® assets, partially offset by $0.2 million in capital expenditures for property and equipment, primarily at our Malaysia location.

Net cash provided by investing activities was $6.3 million in fiscal 2023, attributed to $7.0 million received from the sale of the Company’s ENTADFI® assets, partially offset by $0.7 million in capital expenditures for manufacturing equipment and leasehold improvements.

Financing activities

Net cash provided by financing activities in fiscal 2024 was $36.8 million and primarily consisted of proceeds from the sale of shares in a public offering, net of commissions and costs, of $35.2 million and proceeds from sale of shares under the common stock purchase agreement with Lincoln Park (see discussion below) of $1.7 million.

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Net cash provided by financing activities in fiscal 2023 was $11.1 million and primarily consisted of proceeds from the sale of shares under common stock purchase agreements of $4.8 million, proceeds from the sale of shares in a private investment in public equity of $5.0 million, and proceeds from the sale of shares pursuant to the Jefferies Sales Agreement of $1.0 million.

Sources of Capital

SWK Credit Agreement and Residual Royalty Agreement

On March 5, 2018, the Company entered into a Credit Agreement (as amended, the “Credit Agreement”) with the financial institutions party thereto from time to time (the “Lenders”) and SWK Funding LLC, as agent for the Lenders (the “Agent”), for a synthetic royalty financing transaction. On and subject to the terms of the Credit Agreement, the Lenders provided the Company with a term loan of $10.0 million, which was advanced to the Company on the date of the Credit Agreement. The Company repaid the loan and return premium specified in the Credit Agreement in August 2021, and as a result has no further obligations under the Credit Agreement. The Agent has released its security interest in Company collateral previously pledged to secure its obligations under the Credit Agreement.

In connection with the Credit Agreement, Veru and the Agent also entered into a Residual Royalty Agreement, dated as of March 5, 2018 (as amended, the “Residual Royalty Agreement”), which provides for an ongoing royalty payment of 5% of product revenue from net sales of FC2, which continues after the repayment of the loan and return premium under the Credit Agreement. The Residual Royalty Agreement will terminate upon (i) a change of control or sale of the FC2 business and the payment by the Company of the amount due in connection therewith pursuant to the Residual Royalty Agreement, or (ii) mutual agreement of the parties.

The Company made total payments under the Residual Royalty Agreement of $0.7 million and $0.6 million during the year ended September 30, 2024 and 2023, respectively. The Company currently estimates the aggregate amount of quarterly revenue-based payments payable during the 12-month period subsequent to September 30, 2024 will be approximately $1.0 million under the Residual Royalty Agreement.

Common Stock Offering

On December 18, 2023, we completed an underwritten public offering of 52,708,332 shares of our common stock, which included the exercise in full of the underwriters’ option to purchase additional shares, at a public offering price of $0.72 per share. Net proceeds to the Company from this offering were approximately $35.2 million after deducting underwriting discounts and commissions and costs paid by the Company. All of the shares sold in the offering were by the Company. The offering was made pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-270606).

Aspire Capital Purchase Agreement

On June 26, 2020, the Company entered into a common stock purchase agreement (the “Aspire Purchase Agreement”) with Aspire Capital Fund, LLC (“Aspire Capital”) which provided that, upon the terms and subject to the conditions and limitations set forth therein, the Company had the right, from time to time in its sole discretion during the 36-month term of the Aspire Purchase Agreement, to direct Aspire Capital to purchase up to $23.9 million of the Company’s common stock in the aggregate. Upon execution of the Aspire Purchase Agreement, the Company issued and sold to Aspire Capital under the Aspire Purchase Agreement 1,644,737 shares of common stock at a price per share of $3.04, for an aggregate purchase price of $5,000,000. Other than the 212,130 shares of common stock issued to Aspire Capital in consideration for entering into the Aspire Purchase Agreement and the initial sale of 1,644,737 shares of common stock, the Company had no obligation to sell any shares of common stock pursuant to the Aspire Purchase Agreement and the timing and amount of any such sales were in the Company's sole discretion subject to the conditions and terms set forth in the Aspire Purchase Agreement.

During the year ended September 30, 2023, prior to the expiration of the Aspire Purchase Agreement on June 26, 2023, we sold 2,779,713 shares of common stock to Aspire Capital under the Aspire Purchase Agreement, resulting in proceeds to the Company of $3.4 million. During the 36-month term of the Aspire Purchase Agreement, we sold 4,424,450 shares of common stock to Aspire Capital resulting in proceeds to the Company of $8.4 million. On June 26, 2023, the term of the Aspire Purchase Agreement expired and no additional shares of common stock will be sold under the agreement.

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Private Investment in Public Equity

On April 12, 2023, the Company entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Frost Gamma Investments Trust (“FGI”), pursuant to which, on the date thereof, the Company issued and sold 5,000,000 shares of the Company’s common stock to FGI at a price of $1.00 per share, for a total investment of $5,000,000, through a private investment in public equity financing. The shares of common stock issued to FGI pursuant to the Stock Purchase Agreement were not registered under the Securities Act and may be resold pursuant to Rule 144 under the Securities Act.

Lincoln Park Capital Fund, LLC Purchase Agreement

On May 2, 2023, the Company entered into a common stock purchase agreement (as amended, the “Lincoln Park Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”) which provides that, upon the terms and subject to the conditions and limitations set forth therein, the Company has the right, but not the obligation, to sell to Lincoln Park up to $100.0 million of shares (the “Purchase Shares”) of the Company’s common stock over the 36-month term of the Lincoln Park Purchase Agreement. On the date the Company executed the Lincoln Park Purchase Agreement, we also issued 800,000 shares of the Company’s common stock to Lincoln Park as an initial fee for Lincoln Park’s commitment to purchase shares of the Company’s common stock under the Lincoln Park Purchase Agreement, and we are obligated to issue $1.0 million of shares of the Company’s common stock at the time Lincoln Park’s purchases cumulatively reach an aggregate amount of $50.0 million (such shares, collectively, the “Commitment Shares”). On December 13, 2023, the Company entered into an amendment (the “Lincoln Park Amendment”) with Lincoln Park to reduce the amount of shares of common stock subject to the registration from $100.0 million to $50.0 million until the Company has sold at least $50.0 million of shares of common stock under the Lincoln Park Purchase Agreement. The Purchase Shares up to $50.0 million and Commitment Shares under the Lincoln Park Purchase Agreement have been registered pursuant to the Company’s effective shelf registration statement on Form S-3 (File No. 333-270606), and a related prospectus supplement that was filed with the SEC on May 3, 2023, as further supplemented on December 13, 2023 to reflect the Lincoln Park Amendment.

During the year ended September 30, 2024, we sold 1,800,000 shares of common stock to Lincoln Park under the Lincoln Park Purchase Agreement, resulting in proceeds to the Company of $1.7 million. Since inception of the Lincoln Park Purchase Agreement through September 30, 2024, we have sold 3,025,000 shares of common stock to Lincoln Park under the Lincoln Park Purchase Agreement, resulting in proceeds to the Company of $3.1 million. Until March 1, 2025, we will not be able to sell any securities pursuant to the Lincoln Park Purchase Agreement.

Open Market Sale Agreement with Jefferies LLC

On May 12, 2023, the Company entered into an Open Market Sale AgreementSM (the “Jefferies Sales Agreement”) with Jefferies LLC (“Jefferies”), as sales agent, pursuant to which we may issue and sell, from time to time, through Jefferies, shares of the Company’s common stock, with an aggregate value of up to $75 million (not to exceed the lesser of 39,609,072 shares of common stock or the number of authorized, unissued and available shares of common stock at any time). On August 19, 2024, the Company delivered notice to Jefferies to terminate the Jefferies Sales Agreement, which was effective on September 3, 2024. Pursuant to the terms of the Jefferies Sales Agreement, the Company could issue and sell, from time to time through or to Jefferies, shares of its common stock as set forth in the Jefferies Sales Agreement with an aggregate value of up to $75 million. As a result of the termination of the Jefferies Sales Agreement, the Company will not issue or sell any additional shares of common stock under the Jefferies Sales Agreement.

During the year ended September 30, 2024, we sold 90,156 shares of common stock under the Jefferies Sales Agreement, resulting in net proceeds to the Company of $67,000. Since inception of the Jefferies Sales Agreement through the date the Jefferies Sales Agreement was terminated, we sold 1,367,415 shares of common stock resulting in net proceeds to the Company of $1.1 million.

Critical Accounting Estimates

The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States. The Company is required to adopt various accounting policies and to make estimates and assumptions in preparing its financial statements that affect the reported amounts of assets, liabilities, net revenues and expenses. On an ongoing basis, the Company evaluates its estimates and assumptions. The Company bases its estimates on historical experience to the extent practicable and on various other assumptions that it believes are reasonable under the circumstances and at the time they are made. If the Company’s assumptions prove inaccurate or if future results are not consistent with historical experience, the Company may be required to make adjustments in its policies that affect reported results. The Company’s significant accounting policies are disclosed in Note 1 to the financial statements included in this report.

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The Company’s most critical accounting estimates include: valuation of tax assets and liabilities, measurement of fair value, and valuation of goodwill and intangible assets. The Company has other key accounting policies that are less subjective and, therefore, their application is less subject to variations that would have a material impact on the Company’s reported results of operations. The following is a discussion of the Company’s most critical policies, as well as the estimates and judgments involved.

Income Taxes

The Company files separate income tax returns for its foreign subsidiaries. ASC Topic 740 requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are also provided for carryforwards for income tax purposes. In addition, the amount of any future tax benefits is reduced by a valuation allowance to the extent such benefits are not expected to be realized.

The Company accounts for income taxes using the liability method, which requires the recognition of deferred tax assets or liabilities for the tax-effected temporary differences between the financial reporting and tax bases of assets and liabilities, and for net operating loss and tax credit carryforwards.

The Company completes a detailed analysis of its deferred income tax valuation allowances on an annual basis or more frequently if information comes to its attention that would indicate that a revision to its estimates is necessary. In evaluating the Company’s ability to realize its deferred tax assets, management considers all available positive and negative evidence on a country by country basis, including past operating results and forecasts of future taxable income, and the potential Section 382 limitation on the net operating loss carryforwards due to a change in control. In determining future taxable income, management makes assumptions to forecast U.S. federal and state, U.K. and Malaysia operating income, the reversal of temporary differences, and the implementation of any feasible and prudent tax planning strategies. These assumptions require significant judgment regarding the forecasts of the future taxable income in each tax jurisdiction and are consistent with the forecasts used to manage the Company’s business. It should be noted that the Company realized significant losses through 2005 on a consolidated basis. From fiscal 2006 through fiscal 2015, the Company generated taxable income on a consolidated basis. However, the Company had a cumulative pretax loss in the U.S. for fiscal 2024 and the three preceding fiscal years. Forming a conclusion that a valuation allowance is not needed is difficult when there is significant negative evidence such as cumulative losses in recent years. Management has projected future pretax losses in the U.S. driven by the investment in research and development and based on their analysis concluded that an additional valuation allowance of $7.3 million should be recorded against the U.S. deferred tax assets related to federal and state net operating loss carryforwards as of September 30, 2024. In addition, the Company’s U.K. holding company for the non-U.S. operating companies, The Female Health Company Limited, continues to have a full valuation allowance of $3.2 million. The operating U.K. subsidiary, The Female Health Company (UK) plc does not have a valuation allowance due to projections of future taxable income for the next 10 years. Veru Biopharma UK Limited has a full valuation allowance of $0.4 million.

Although management uses the best information available, it is reasonably possible that the estimates used by the Company will be materially different from the actual results. These differences could have a material effect on the Company's future results of operations and financial condition.

Our effective tax rates have differed from the statutory rate primarily due to the tax impact of foreign operations, state taxes and addition of the valuation allowance against the NOL carryforwards. Our future effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates, changes in the valuation of our deferred tax assets or liabilities, or changes in tax laws, regulations, and accounting principles. In addition, we may be subject to the examination of our income tax returns by the IRS and other tax authorities. We assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.

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Fair Value Measurements

As of September 30, 2024, the Company’s financial liabilities measured at fair value on a recurring basis, which consisted of embedded derivatives, represents the fair value of the change of control provisions in the Residual Royalty Agreement. See Note 9 to the financial statements included in this report.

The fair values of these liabilities were estimated based on unobservable inputs (Level 3 measurement), which requires highly subjective judgment and assumptions. The Company estimates the fair value of the embedded derivative within the Residual Royalty Agreement using a scenario-based method, whereby different scenarios are valued and probability weighted. The scenario-based valuation model incorporates transaction details such as the contractual terms of the instrument and assumptions including projected FC2 revenues, expected cash outflows, probability and estimated dates of a change of control, risk-free interest rates and applicable credit risk. As a result, the use of different estimates or assumptions would result in a higher or lower fair value and different amounts being recorded in the Company’s financial statements. Material changes in any of these inputs could result in a significantly higher or lower fair value measurement at future reporting dates, which could have a material effect on our results of operations. See Note 3 to the financial statements included in this report.

The fair value of the embedded derivatives at September 30, 2024 was $1.6 million compared to $1.3 million at September 30, 2023. The Company recognized non-operating expense of $0.3 million to adjust the fair value of these instruments. The increase in the fair value of the embedded derivates is due primarily to an increase in the probability of a change in control of FC2.

Goodwill and Intangible Assets

The Company has $6.9 million recorded as goodwill at September 30, 2024 and 2023. The Company evaluates the carrying value of its goodwill on an annual basis in the fourth quarter of each fiscal year or more frequently when indicators of impairment exist. An impairment of goodwill could occur if the carrying amount of a reporting unit exceeded the fair value of that reporting unit. The estimated fair value of a reporting unit is highly sensitive to changes in projections and assumptions; therefore, in some instances changes in these assumptions could potentially lead to impairment. We perform sensitivity analyses around our assumptions in order to assess the reasonableness of the assumptions and the results of our testing. The Company’s goodwill is assigned to the Research and Development reporting unit, which has a negative carrying amount as of September 30, 2024.

Intangible assets are highly vulnerable to impairment charges, particularly IPR&D. These assets are initially measured at fair value and therefore any reduction in expectations used in the valuations could potentially lead to impairment. Some of the more common potential risks leading to impairment include competition, earlier than expected loss of exclusivity, pricing pressures, adverse regulatory changes or clinical trial results, delay or failure to obtain regulatory approval, additional development costs, inability to achieve expected synergies, higher operating costs, changes in tax laws and other macro-economic changes. The complexity in estimating the fair value of intangible assets in connection with an impairment test is similar to the initial valuation. During fiscal 2023, the Company recorded an impairment charge of $3.9 million related to IPR&D. The charge was primarily a result of the Company’s strategic decision to refocus its drug development efforts on those drug candidates that it believes to have the best opportunity to lead to long-term success and shareholder value creation, which led the Company to indefinitely cease development of sabizabulin for prostate cancer and zuclomiphene. The Company’s intangible asset balance for IPR&D at September 30, 2024 and 2023, after the impairment charge was recorded, is zero.

Research and Development Costs

Research and development costs are expensed as they are incurred and include salaries and benefits, costs to conduct clinical trials, and contract services. The Company records estimated costs of research and development activities conducted by third-party service providers, which include the conduct of preclinical studies and clinical trials and contract manufacturing activities. These costs are a significant component of the Company’s research and development expenses. The Company accrues for these costs based on factors such as estimates of the work completed and in accordance with agreements established with its third-party service providers under the service agreements. The Company makes significant judgments and estimates in determining the accrued liabilities balance in each reporting period. As actual costs become known, the Company adjusts its accrued liabilities. The Company has not experienced any material differences between accrued costs and actual costs incurred. However, the status and timing of actual services performed, number of patients enrolled and the rate of patient enrollments may vary from the Company’s estimates, resulting in adjustments to expense in future periods. Changes in these estimates that result in material changes to the Company’s accruals could materially affect the Company’s results of operations.

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Recent Accounting Pronouncements

See Note 1 to the financial statements included in this report for additional information on recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.

Impact of Inflation and Changing Prices

Although the Company cannot accurately determine the precise effect of inflation, the Company has experienced increased costs of product, supplies, salaries and benefits, and increased general and administrative expenses. The Company has, where possible, increased selling prices to offset such increases in costs.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The Company's exposure to market risk is limited to fluctuations in raw material commodity prices, particularly the nitrile polymer used to manufacture FC2, and foreign currency exchange rate risk associated with the Company's foreign operations. The Company does not utilize financial instruments for trading purposes or to hedge risk and holds no derivative financial instruments which would expose it to significant market risk. Effective October 1, 2009, the Company's U.K. subsidiary and Malaysia subsidiary each adopted the U.S. dollar as its functional currency. The consistent use of the U.S. dollar as the functional currency across the Company reduces its foreign currency risk and stabilizes its operating results. The Company’s distributors are subject to exchange rate risk as their orders are denominated in U.S. dollars and they generally sell to their customers in the local country currency. If currency fluctuations have a material impact on a distributor it may ask the Company for pricing concessions or other financial accommodations. The Company currently has no significant exposure to interest rate risk.

Item 8. Financial Statements and Supplementary Data

The response to this item is submitted in a separate section of this report. See “Index to Consolidated Financial Statements” for a list of the financial statements being filed herein.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act), as of the end of the period covered by this Annual Report on Form 10-K (the “Evaluation Date”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

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Remediated Material Weaknesses in Internal Control Over Financial Reporting

As previously disclosed in Part II, Item 9A. “Controls and Procedures” in the Company’s Annual Report on Form 10-K for the year ended September 30, 2023, as amended by Amendment No. 1 to the Company’s Annual Report on Form 10-K/A as filed with the Securities and Exchange Commission on April 1, 2024, we identified deficiencies in our internal control over financial reporting that we believe rose to the level of a material weaknesses. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

With respect to nonrecurring events and transactions, specific to the evaluation of information that was known or knowable at the time of the transaction or event, our internal control over financial reporting was not designed to adequately accumulate and evaluate all information that was known or knowable at the time and apply that information to the applicable accounting guidance. This resulted in a restatement of our financial statements as of and for the three and nine months ended June 30, 2023.

To address the material weakness related to nonrecurring events and transactions, the Company implemented changes in processes that include enhanced controls over complex and nonrecurring events and transactions and additional review procedures with respect to the evaluation of information that is known or knowable to the Company at the time a complex and nonrecurring event or transaction is executed, including development of a review checklist. During the quarter ended September 30, 2024, we successfully completed the testing necessary to conclude that this material weakness has been remediated.

With respect to the estimate of research and development expenses associated with activities conducted by third-party service providers, our internal controls did not define the precision at which the control activity operated such that the control was not properly designed to detect or prevent material errors in the inputs used in the calculation. This resulted in a restatement of our financial statements as of and for the years ended September 30, 2023 and 2022 and for each of the quarterly periods within fiscal 2023.

To address the material weakness related to the Company’s estimate of research and development expenses associated with activities conducted by third-party service providers, the Company implemented changes in processes that include enhanced controls over the review of the inputs, by defining the precision at which the control activity operates, and additional procedures, including obtaining confirmation of the work completed by third-parties or performing alternative procedures if confirmations are not available. During the quarter ended September 30, 2024, we successfully completed the testing necessary to conclude that this material weakness has been remediated.

Changes in Internal Control over Financial Reporting

Other than as described above, relating to the Company's remediation efforts, there were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this Annual Report on Form 10-K that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. As required by Rule 13a-15(c) under the Exchange Act, our management has carried out an evaluation, with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of its internal control over financial reporting as of the end of the last fiscal year. The framework on which such evaluation was based is contained in the report entitled “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Report”) in 2013.

Our system of internal control over financial reporting is designed 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. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Based on its assessment, management has concluded that we maintained effective internal control over financial reporting as of September 30, 2024, based on criteria in “Internal Control - Integrated Framework” issued by the COSO in 2013.

Report of Independent Registered Public Accounting Firm

Because we are a non-accelerated filer, our independent registered public accounting firm is not required to express an opinion on the effectiveness of our internal control over financial reporting.

Item 9B. Other Information

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not Applicable.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

Information with respect to this item is incorporated herein by reference to the discussion under the headings “Proposal 1: Election of Directors,” “Executive Officers,” “Delinquent Section 16(a) Reports,” “Corporate Governance Matters-Director Nominations,” “Corporate Governance Matters – Insider Trading Policy” and “Audit Committee Matters – Audit Committee Financial Expert” in the Company’s Proxy Statement for the 2025 Annual Meeting of Shareholders, which will be filed with the SEC on or before January 28, 2025. Information regarding the Company’s Code of Business Ethics is incorporated herein by reference to the discussion under “Corporate Governance Matters – Code of Business Ethics” in the Company’s Proxy Statement for the 2025 Annual Meeting of Shareholders, which will be filed with the SEC on or before January 28, 2025.

The Audit Committee of the Company’s Board of Directors is an “audit committee” for purposes of Section 3(a)(58)(A) of the Exchange Act. The members of the Audit Committee are Lucy Lu, M.D. (Chairperson), Michael L. Rankowitz and Loren Mark Katzovitz.

Item 11. Executive Compensation

Information with respect to this item is incorporated herein by reference to the discussion under the headings “Director Compensation and Benefits” and “Executive Compensation” in the Company’s Proxy Statement for the 2025 Annual Meeting of Shareholders, which will be filed with the SEC on or before January 28, 2025.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information with respect to this item is incorporated herein by reference to the discussion under the headings “Security Ownership” and “Equity Compensation Plan Information” in the Company’s Proxy Statement for the 2025 Annual Meeting of Shareholders, which will be filed with the SEC on or before January 28, 2025.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Information with respect to this item is incorporated herein by reference to the discussion under the heading “Certain Relationships and Related Transactions” in the Company’s Proxy Statement for the 2025 Annual Meeting of Shareholders, which will be filed with the SEC on or before January 28, 2025. Information regarding director independence is incorporated by reference to the discussion under “Corporate Governance Matters – Director Independence” in the Company’s Proxy Statement for the 2025 Annual Meeting of Shareholders, which will be filed with the SEC on or before January 28, 2025.

Item 14. Principal Accountant Fees and Services.

Information with respect to this item is incorporated herein by reference to the discussion under the heading “Audit Committee Matters – Fees of Independent Registered Public Accounting Firm” in the Company’s Proxy Statement for the 2025 Annual Meeting of Shareholders, which will be filed with the SEC on or before January 28, 2025.

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PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a) The following documents are filed as part of this report:

1. Financial Statements

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of September 30, 2024 and 2023

Notes to Consolidated Financial Statements

2. Financial Statement Schedules

All schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions, are inapplicable or the required information is shown in the financial statements or notes thereto, and therefore, have been omitted.

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3. Exhibit Index

Exhibit Number Description

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19 Veru Inc. Insider Trading Policy. **

21 Subsidiaries of Registrant. **

23.1 Consent of Cherry Bekaert LLP. **

23.2 Consent of RSM US LLP. **

24.1 Power of Attorney (included as part of the signature page hereof).

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* Management contract or compensatory plan or arrangement

** Filed herewith

Item 16. Form 10-K Summary

Not Applicable.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: December 16, 2024 VERU INC.

BY: /s/ Mitchell S. Steiner

Mitchell S. Steiner Chairman, Chief Executive Officer and President

BY: /s/ Michele Greco

Michele Greco Chief Financial Officer and Chief Administrative Officer

POWER OF ATTORNEY

Each person whose signature appears below hereby appoints Mitchell S. Steiner and Michele Greco, and each of them individually, as his or her true and lawful attorney-in-fact and agent, with power to act with or without the other and with full power of substitution and resubstitution, in any and all capacities, to sign any or all amendments to the Form 10-K and file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitutes, may lawfully cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

Signature Title Date

Mitchell S. Steiner (Principal Executive Officer)

Michele Greco (Principal Accounting and Financial Officer)

/s/ Mario Eisenberger Director December 16, 2024

Mario Eisenberger

/s/ Harry Fisch Vice Chairman of the Board and Director December 16, 2024

Harry Fisch

/s/ Grace S. Hyun Director December 16, 2024

Grace S. Hyun

/s/ Lucy Lu Director December 16, 2024

Lucy Lu

/s/ Loren Mark Katzovitz Director December 16, 2024

Loren Mark Katzovitz

/s/ Michael L. Rankowitz Director December 16, 2024

Michael L. Rankowitz

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Veru Inc.

Index to Consolidated Financial Statements

Page No.

Audited Consolidated Financial Statements.

Consolidated Balance Sheets as of September 30, 2024 and 2023. F-4

Notes to Consolidated Financial Statements. F-8

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Veru Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Veru Inc. (collectively, the “Company”) as of September 30, 2024, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2024 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company is not profitable, has recorded negative cash flows from operations, and will need substantial capital to support its drug development operations. This raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters also are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. 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 audit, 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 audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical AuditMatters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

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Accrued and Prepaid Clinical Trial Expenses

Description of Matter

The Company’s accrued research and development costs totaled $120,448 at September 30, 2024, which is included in accrued expenses and other current liabilities on the consolidated balance sheet and the Company’s prepaid research and development costs totaled $419,371 at September 30, 2024.

As discussed in Note 1 to the consolidated financial statements, the Company records estimated costs of research and development activities conducted by third-party service providers, which include the conduct of preclinical studies, clinical trials and contract manufacturing activities. These costs are a significant component of the Company’s clinical trial expenses. The Company accrues for these costs based on factors such as estimates of the work completed and in accordance with agreement established with its third-party service providers under the service agreement. The status and timing of actual services performed, number of patients enrolled and the rate of patient enrollments may vary from the Company’s estimates, resulting in adjustments to expense in future periods.

Auditing the Company’s accrued and prepaid clinical trial expenses is especially challenging due to the large volume of information received from multiple third-party service providers that perform services on the Company’s behalf. While the Company’s estimates of accrued and prepaid clinical trial expenses are primarily based on information received related to each trial project from its third-party service providers, the Company may need to make an estimate for additional costs incurred. Additionally, due to the long duration of clinical trials and the timing of invoicing received from third-party service providers, the actual amounts incurred are not typically known at the time the financial statements are issued.

How We Addressed the Matter in Our Audit

Our audit procedures included, among others, the following:

/s/ Cherry Bekaert LLP

We have served as the Company’s auditor since 2024.

Atlanta, Georgia

December 16, 2024

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Veru Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Veru Inc. (the Company) as of September 30, 2023, the related consolidated statements of operations, stockholders’ equity and cash flows, for the year then ended, and the related notes (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2023, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Restatement of 2023 Financial Statements

As discussed in Note 18 to the 2023 financial statements, the 2023 financial statements have been restated to correct a misstatement.

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

The accompanying 2023 financial statements were prepared assuming that the Company would continue as a going concern. As discussed in Note 2 to the 2023 financial statements, the Company was not profitable, had recorded negative cash flows from operations, and needed substantial capital to support its drug development operations. This raised substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters were also described in Note 2 to the 2023 financial statements. The 2023 financial statements did 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 audit. 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 U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit 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. Our audit 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 audit 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 audit provides a reasonable basis for our opinion.

/s/ RSM US LLP

We served as the Company's auditor from 1996 to 2024.

Chicago, Illinois

December 8, 2023, except for Notes 18 and 19 to the 2023 financial statements, as to which the date is April 1, 2024

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VERU INC.

CONSOLIDATED BALANCE SHEETS

AS OF September 30, 2024 and 2023

Assets

Current assets:

Intangible assets, net — 5,952

Liabilities and Stockholders' Equity

Current liabilities:

Residual royalty agreement, short-term portion (Note 9) 1,025,837 864,623

Commitments and contingencies (Note 13)

Stockholders' equity:

See notes to consolidated financial statements.

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VERU INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED September 30, 2024 and 2023

Operating expenses:

Provision for (recovery of) credit losses — 3,911,714

Impairment of intangible assets — 3,900,000

Non-operating income (expenses):

Change in fair value of derivative liabilities (239,000 ) 2,963,000

Change in fair value of equity securities (176,077 ) —

Net loss per basic and diluted common shares outstanding $ (0.28 ) $ (1.10 )

See notes to consolidated financial statements.

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VERU INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

YEARS ENDED September 30, 2024 and 2023

Accumulated

Additional Other Treasury

Common Stock Paid-in Comprehensive Accumulated Stock,

Shares Amount Capital Loss Deficit at Cost Total

Issuance of shares pursuant to share-based awards 2,734 27 3,253 — — — 3,280

Amortization of deferred costs — — (164,313 ) — — — (164,313 )

See notes to consolidated financial statements.

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VERU INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED September 30, 2024 and 2023

OPERATING ACTIVITIES

Adjustments to reconcile net loss to net cash used in operating activities:

Impairment of intangible assets — 3,900,000

Provision for credit losses — 3,911,714

Noncash interest expense, net of interest paid (97,130 ) 1,872,223

Change in fair value of derivative liabilities 239,000 (2,963,000 )

Change in fair value of equity securities 176,077 —

Changes in operating assets and liabilities:

Decrease in operating lease liabilities (683,827 ) (666,863 )

INVESTING ACTIVITIES

FINANCING ACTIVITIES

Payment of deferred equity financing issuance costs — (263,757 )

Proceeds from premium finance agreement — 1,425,174

Installment payments on premium finance agreement (132,975 ) (1,292,199 )

Supplemental disclosure of cash flow information:

Schedule of non-cash investing and financing activities:

Equity securities received for sale of ENTADFI® assets $ 918,372 $ —

Shares issued in connection with common stock purchase agreement $ — $ 1,008,000

Right-of-use assets recorded in exchange for lease liabilities $ — $ 286,815

See notes to consolidated financial statements.

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VERU INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1– Nature of Business and Significant Accounting Policies

Principles of consolidation and nature of operations: Veru Inc. is referred to in these notes collectively with its subsidiaries as “we,” “our,” “us,” “Veru” or the “Company.” The consolidated financial statements include the accounts of Veru and its wholly owned subsidiaries, Veru International Holdco Inc., Aspen Park Pharmaceuticals, Inc. (APP) and The Female Health Company Limited; The Female Health Company Limited’s wholly owned subsidiary, The Female Health Company (UK) plc (The Female Health Company Limited and The Female Health Company (UK) plc, collectively, the “U.K. subsidiary”); The Female Health Company (UK) plc’s wholly owned subsidiary, The Female Health Company (M) SDN.BHD (the “Malaysia subsidiary”); and Veru International Holdco Inc.’s wholly owned subsidiaries, Veru Biopharma UK Limited, Veru Biopharma Europe Limited, and Veru Biopharma Netherlands B.V. All significant intercompany transactions and accounts have been eliminated in consolidation. The Company is a late clinical stage biopharmaceutical company focused on developing novel medicines for the treatment of metabolic diseases, oncology, and ARDS. Our drug development program includes enobosarm, an oral selective androgen receptor modulator, to augment fat loss and to prevent lean mass loss in combination with a GLP-1 RA, and for the management of advanced breast cancer and sabizabulin, a microtubule disruptor, for the treatment of hospitalized patients with viral-induced ARDS. The Company also has the FC2 Female Condom/FC2 Internal Condom® (FC2), an FDA-approved commercial product for the dual protection against unplanned pregnancy and sexually transmitted infections. The Company had ENTADFI® (finasteride and tadalafil) capsules for oral use (ENTADFI), a new treatment for benign prostatic hyperplasia that was approved by the FDA in December 2021. We sold substantially all of the assets related to ENTADFI on April 19, 2023. See Note 15 for additional information. Most of the Company’s net revenues during fiscal 2024 and 2023 were derived from sales of FC2.

FC2 has been distributed in either or both commercial (private sector) and public health sector markets in 150 countries. It is marketed to consumers in various countries through distributors, public health programs, and/or retailers and in the U.S. by prescription.

Reclassifications: Certain prior period amounts in the accompanying consolidated financial statements have been reclassified to conform with the current period presentation. The reclassifications had no effect on the results of operations or financial position for any period presented.

Use of estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

Segments: We regularly review our operating segments and the approach used by management to evaluate performance and allocate resources. The Company operates as a single operating segment. Our determination that we operate as a single segment is consistent with the financial information regularly reviewed by the chief operating decision maker (CODM) for purposes of evaluating performance, allocating resources, setting incentive compensation targets, and planning and forecasting for future periods. Our CODM allocates resources and assesses financial performance on a consolidated basis.

Cash and cash equivalents and concentration: Cash and cash equivalents, which primarily consist of cash on deposit with financial institutions and highly liquid money market funds, are recorded in the consolidated balance sheets at cost, which approximates fair value. The Company treats short-term, highly liquid funds that are readily convertible to known amounts of cash and have original maturities of three months or less as cash equivalents. The Company’s cash is maintained primarily in three financial institutions, located in Chicago, Illinois; London, England; and Kuala Lumpur, Malaysia.

Investments in equity securities: Investments in equity securities consist of 142,749 shares of common stock (“ONCO Common Stock”) of Onconetix, Inc., formerly known as Blue Water Vaccines Inc. (“ONCO”). The Company has elected to measure the ONCO Common Stock using the fair value option, as provided for by FASB Accounting Standards Codification (ASC) 825,Financial Instruments, which allows entities to make an irrevocable election of fair value as the initial and subsequent measurement attribute for certain eligible financial assets and liabilities. Under the fair value option, related gains and losses on the financial instrument will be reflected in non-operating income (expenses) in the Company’s statements of operations. The decision to elect the fair value option is determined on an instrument-by-instrument basis and must be applied to an entire instrument and is irrevocable once elected. Pursuant to this guidance, the carrying value will be adjusted to estimated fair value at the end of each quarter. The value of the ONCO Common Stock is $0.7 million as of September 30, 2024 and is included in prepaid expenses and other current assets on the accompanying consolidated balance sheet. See Note 3 for additional discussion.

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Accounts receivable and concentration of credit risk: Accounts receivable are carried at original invoice amount less an estimate made for returns, discounts, and credit losses based on a review of all outstanding amounts on a periodic basis.

Inventories: Inventories are valued at the lower of cost or net realizable value. The cost is determined using the first-in, first-out (FIFO) method. Inventories are also written down for management’s estimates of product which will not sell prior to its expiration date. Write-downs of inventories establish a new cost basis which is not increased for future increases in the net realizable value of inventories or changes in estimated obsolescence.

The Company capitalizes inventory costs associated with its drug products following regulatory approval when future commercialization is considered probable and the future economic benefit is expected to be realized. Prior to an initial regulatory approval for our drug products under clinical development, we expense costs relating to the production of inventory as research and development expense in the Company’s consolidated statements of operations, in the period incurred.

Fixed assets: We record equipment, furniture and fixtures, and leasehold improvements at historical cost. Expenditures for maintenance and repairs are recorded to expense. Depreciation and amortization are primarily computed using the straight-line method, over the estimated useful lives of the assets. Leasehold improvements are depreciated on a straight-line basis over the lesser of the remaining lease term or the estimated useful lives of the assets.

Leases: Leases are classified as either operating or finance leases at inception. A right-of-use (ROU) asset and corresponding lease liability are established at an amount equal to the present value of fixed lease payments over the lease term at the commencement date. The ROU asset includes any initial direct costs incurred and lease payments made at or before the commencement date and is reduced by lease incentive payments. The Company has elected not to separate the lease and nonlease components for all classes of underlying assets. The Company uses its incremental borrowing rate as the discount rate to determine the present value of the lease payments for leases that do not have a readily determinable implicit discount rate. The incremental borrowing rate is the rate of interest that the Company would be charged to borrow on a collateralized basis over a similar term and amount in a similar economic environment. The Company determines the incremental borrowing rates for its leases by adjusting the risk-free interest rate with a credit risk premium corresponding to the Company’s credit rating.

Operating lease costs are recognized for fixed lease payments on a straight-line basis over the term of the lease. Finance lease costs are a combination of the amortization expense for the ROU asset and interest expense for the outstanding lease liability using the applicable discount rate. Variable lease payments are recognized when incurred based on occurrence or usage. Short-term leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for short-term leases on a straight-line basis over the lease term.

Patents and trademarks: The costs for patents and trademarks are expensed when incurred.

Goodwill and intangible assets: The Company’s goodwill and intangible assets, primarily developed technology and in-process research and development (IPR&D), arose from the acquisition of APP (the “APP Acquisition”) on October 31, 2016. Goodwill and indefinite-lived intangible assets are not amortized. IPR&D was accounted for as indefinite-lived intangible assets until the underlying projects were discontinued, at which point the intangible assets were written off. Goodwill and indefinite-lived assets are subject to an impairment review annually, in the fourth quarter of each fiscal year, and more frequently when indicators of impairment exist. An impairment of goodwill could occur if the carrying amount of a reporting unit exceeded the fair value of that reporting unit. An impairment of indefinite-lived intangible assets would occur if the fair value of the intangible asset is less than the carrying value. Intangible assets with finite lives were tested for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. These intangible assets were carried at cost less accumulated amortization.

Goodwill consists of the cost of an acquired business in excess of the fair value of the net assets acquired. The Company’s goodwill is assigned to the reporting unit that is expected to benefit from the synergies of a business combination. The Company has identified two reporting units within its single operating segment. The Company tests goodwill and indefinite-lived intangible assets for impairment by first assessing qualitative factors to determine whether it is more likely than not that the fair value is less than its carrying amount. If the Company concludes it is more likely than not that the fair value is less than its carrying amount, a quantitative impairment test is performed. For its quantitative impairment tests, the Company uses an estimated future cash flow approach that requires significant judgment with respect to future volume, revenue and expense growth rates, changes in working capital use, the selection of an appropriate discount rate, asset groupings and other assumptions and estimates. The estimates and assumptions used are consistent with the Company's business plans and a market participant's views. The use of alternative estimates and assumptions could increase or decrease the estimated fair value of the assets and potentially result in different impacts to the Company's results of operations. Actual results may differ from the Company's estimates. The fair value of the reporting unit is compared with its carrying amount and an impairment charge would be recognized for the amount by which the carrying value exceeds the reporting unit’s fair value.

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Regarding goodwill, the estimated fair value of a reporting unit is highly sensitive to changes in projections and assumptions; therefore, in some instances changes in these assumptions could potentially lead to impairment. We perform sensitivity analyses around our assumptions in order to assess the reasonableness of the assumptions and the results of our testing. Changes in these assumptions may impact the estimated fair value of a reporting unit and cause the fair value of the reporting unit to be below its carrying value. We believe that our estimates are consistent with assumptions that marketplace participants would use in their estimates of fair value; however, if actual results are not consistent with our estimates and assumptions, we may be exposed to an impairment charge that could be material.

Intangible assets are highly vulnerable to impairment charges, particularly IPR&D. These assets are initially measured at fair value and therefore any reduction in expectations used in the valuations could potentially lead to impairment. Some of the more common potential risks leading to impairment include competition, earlier than expected loss of exclusivity, pricing pressures, adverse regulatory changes or clinical trial results, delay or failure to obtain regulatory approval, additional development costs, inability to achieve expected synergies, higher operating costs, changes in tax laws and other macro-economic changes. The complexity in estimating the fair value of intangible assets in connection with an impairment test is similar to the initial valuation. During fiscal 2023, the Company recorded an impairment charge of $3.9 million related to IPR&D. The charge was primarily a result of the Company’s strategic decision to refocus its drug development efforts on those drug candidates that it believes to have the best opportunity to lead to long-term success and shareholder value creation, which led the Company to indefinitely cease development of sabizabulin for prostate cancer and zuclomiphene. See Note 8 for additional information. The Company’s intangible asset balance for IPR&D at September 30,2024 and 2023, after the impairment charge was recorded, is zero.

Deferred financing costs: Costs incurred in connection with the common stock purchase agreements and the at-the-market sale agreement discussed in Note 10 have been included in other assets on the accompanying consolidated balance sheets at September 30, 2024 and 2023. When shares of the Company’s common stock are sold under the common stock purchase agreement or at-the market sale agreement, a pro-rata portion of the deferred costs is recorded to additional paid-in-capital.

Fair value measurements: Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 820 – Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC Topic 820 requires disclosures about the fair value of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about the fair value of financial instruments are based on pertinent information available to us as of the reporting dates. Accordingly, the estimates presented in the accompanying consolidated financial statements are not necessarily indicative of the amounts that could be realized on disposition of the financial instruments. See Note 3 for a discussion of fair value measurements.

The carrying amounts reported in the accompanying consolidated balance sheets for cash, accounts receivable, accounts payable and other accrued liabilities approximate their fair value based on the short-term nature of these instruments. The carrying value of the residual royalty agreement liabilities, taking into consideration the related derivative instruments, is estimated to approximate fair value.

Derivative instruments: The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company reviews the terms of debt instruments it enters into to determine whether there are embedded derivative instruments, which are required to be bifurcated and accounted for separately as derivative financial instruments. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. Liabilities incurred in connection with an embedded derivative are discussed in Note 9.

Revenue recognition: Revenue is recognized when control of the promised goods is transferred to the customer in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those products. See Note 4 for further discussion on revenue.

Research and development costs: Research and development costs are expensed as they are incurred and include salaries and benefits, costs to conduct clinical trials, and contract services. Nonrefundable advance payments made for goods or services to be used in research and development activities are deferred and capitalized until the goods have been delivered or the related services have been performed. If the goods are no longer expected to be delivered or the services are no longer expected to be performed, the Company would be required to expense the related capitalized advance payments. The Company did not have any material capitalized nonrefundable advance payments as of September 30, 2024 or 2023.

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The Company records estimated costs of research and development activities conducted by third-party service providers, which include the conduct of preclinical studies and clinical trials and contract manufacturing activities. These costs are a significant component of the Company’s research and development expenses. The Company accrues for these costs based on factors such as estimates of the work completed and in accordance with agreements established with its third-party service providers under the service agreements. The Company makes significant judgments and estimates in determining the accrued liabilities balance in each reporting period. As actual costs become known, the Company adjusts its accrued liabilities. The Company has not experienced any material differences between accrued costs and actual costs incurred. However, the status and timing of actual services performed, number of patients enrolled and the rate of patient enrollments may vary from the Company’s estimates, resulting in adjustments to expense in future periods. Changes in these estimates that result in material changes to the Company’s accruals could materially affect the Company’s results of operations.

Share-based compensation: The Company recognizes share-based compensation expense in connection with its share-based awards, based on the estimated fair value of the awards on the date of grant, on a straight-line basis over the vesting period. Calculating share-based compensation expense requires the input of highly subjective judgment and assumptions, including estimates of the expected life of the share-based award, stock price volatility and risk-free interest rate.

Advertising: The Company's policy is to expense advertising costs as incurred. Advertising costs were $0.8 million and $0.9 million for the years ended September 30, 2024 and 2023, respectively.

Income taxes: The Company files separate income tax returns for its foreign subsidiaries. FASB ASC Topic 740 requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are also provided for carryforwards for income tax purposes. In addition, the amount of any future tax benefits is reduced by a valuation allowance to the extent such benefits are not expected to be realized.

Foreign currency translation and operations: Effective October 1,2009, the Company determined that there were significant changes in facts and circumstances, triggering an evaluation of its subsidiaries’ functional currency, resulting in the adoption of the U.S. dollar as the functional currency for all foreign subsidiaries. The consistent use of the U.S. dollar as the functional currency across the Company reduces its foreign currency risk and stabilizes its operating results. The cumulative foreign currency translation loss included in accumulated other comprehensive loss was $0.6 million as of September 30, 2024 and September 30, 2023. Assets located outside of the U.S. totaled approximately $9.2 million and $10.5 million at September 30, 2024 and September 30, 2023, respectively.

Other comprehensive loss: Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net loss. Although certain changes in assets and liabilities, such as foreign currency translation adjustments, are reported as a separate component of the equity section of the accompanying consolidated balance sheets, these items, along with net loss, are components of other comprehensive loss.

The U.S. parent company and its U.K. subsidiary routinely purchase inventory produced by its Malaysia subsidiary for sale to their respective customers. These intercompany trade accounts are eliminated in consolidation. The Company’s policy and intent is to settle the intercompany trade account on a current basis. Since the U.K. and Malaysia subsidiaries adopted the U.S. dollar as their functional currencies effective October 1,2009,no foreign currency gains or losses from intercompany trade are recognized. In fiscal 2024 and 2023, comprehensive income (loss) is equivalent to the reported net income (loss).

Recent accounting pronouncements not yet adopted: In November 2023, the FASB issued Accounting Standards Update (ASU) 2023-07,Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly reviewed by the CODM and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The ASU also allows, in addition to the measure that is most consistent with U.S. GAAP, the disclosure of additional measures of segment profit or loss that are used by the CODM in assessing segment performance and deciding how to allocate resources. All disclosure requirements under ASU 2023-07 are also required for public entities with a single reportable segment. ASU 2023-07 is effective for the Company’s Annual Report on Form 10-K for the fiscal year ending September 30,2025, and subsequent interim periods, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-07 on its consolidated financial statements and disclosures.

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In December 2023, the FASB issued ASU 2023-09,Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. ASU 2023-09 is effective for the Company’s annual periods beginning with the fiscal year ending September 30,2026, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company is currently evaluating the impact of adopting ASU 2023-09 on its disclosures.

In November 2024, the FASB issued ASU 2024-03,Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires more detailed disclosures about specified categories of expenses (including employee compensation, depreciation, and selling expenses) included in certain expense captions presented on the face of the statement of operations. ASU 2024-03 is effective for the Company's annual reporting periods beginning fiscal year ending September 30, 2028, and subsequent interim periods, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2024-03 on its consolidated financial statements and disclosures.

We have reviewed all other recently issued accounting pronouncements and have determined that such standards that are not yet effective will not have a material impact on our financial statements or do not otherwise apply to our operations.

Note 2– Going Concern

The Company is not profitable and has had negative cash flow from operations. We will need substantial capital to support our drug development and any related commercialization efforts for our drug candidates. Based upon the Company’s current operating plan, it estimates that its cash and cash equivalents as of the issuance date of these financial statements are insufficient for the Company to fund operating, investing and financing cash flow needs for the twelve months subsequent to the issuance date of these financial statements. To obtain the capital necessary to fund our operations, we expect to finance our cash needs through public or private equity offerings, debt financing transactions and/or other capital sources. Additional capital may not be available at such times and in such amounts as needed by us to fund our activities on a timely basis.

These uncertainties raise substantial doubt regarding our ability to continue as a going concern for a period of twelve months subsequent to the issuance date of these financial statements. Certain elements of our operating plan to alleviate the conditions that raise substantial doubt, including but not limited to our ability to secure equity financing or other financing alternatives, are outside of our control and cannot be included in management’s evaluation under the requirement of ASC 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. Accordingly, we have concluded that substantial doubt exists about our ability to continue as a going concern for a period of at least twelve months subsequent to the issuance date of these financial statements.

Note 3– Fair Value Measurements

FASB ASC Topic 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions.

The three levels of the fair value hierarchy are as follows:

Level 1 – Quoted prices for identical instruments in active markets.

Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 – Instruments with primarily unobservable value drivers.

There were no transfers between Level 1, Level 2 and Level 3 during fiscal 2024 and 2023.

Amounts capitalized as IPR&D are subject to impairment testing until the completion or abandonment of the associated research and development efforts. We use probability-adjusted discounted cash flow calculations using Level 3 fair value measurements and inputs including estimated revenues, costs, probability of technical and regulatory success and discount rates to measure impairment, if any. During the second quarter of fiscal 2023, we recognized an impairment charge of $3.9 million associated with IPR&D intangible assets due to their meeting the criteria for abandonment under the accounting standards. See Note 8 for additional information.

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As of September 30, 2024 and 2023, the Company’s financial liabilities measured at fair value on a recurring basis, which consisted of embedded derivatives, are also classified within Level 3 of the fair value hierarchy.

The Company determines the fair value of hybrid instruments based on available market data using appropriate valuation models, considering all of the rights and obligations of each instrument. The Company estimates the fair value of hybrid instruments using various techniques (and combinations thereof) that are considered to be consistent with the objective of measuring fair value. In selecting the appropriate technique, the Company considers, among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. Estimating the fair value of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. Increases in fair value during a given financial quarter result in the recognition of non-cash derivative expense. Conversely, decreases in fair value during a given financial quarter would result in the recognition of non-cash derivative income.

The following table provides a reconciliation of the beginning and ending liability balance associated with embedded derivatives measured at fair value using significant unobservable inputs (Level 3) for the years ended September 30, 2024 and 2023:

Change in fair value of derivative liabilities 239,000 (2,963,000 )

The expense or income associated with the change in fair value of the embedded derivatives is presented as a separate line item in the accompanying consolidated statements of operations.

The liabilities associated with embedded derivatives represent the fair value of the change of control provisions in the Residual Royalty Agreement. See Note 9 for additional information. There is no current observable market for these types of derivatives. The Company estimates the fair value of the embedded derivative within the Residual Royalty Agreement by using a scenario-based method, whereby different scenarios are valued and probability weighted. The scenario-based valuation model incorporates transaction details such as the contractual terms of the instrument and assumptions including projected FC2 revenues, expected cash outflows, probability and estimated dates of a change of control, risk-free interest rates and applicable credit risk. Material changes in any of these inputs could result in a significantly higher or lower fair value measurement at future reporting dates, which could have a material effect on our results of operations. The increase in the fair value of derivative liabilities in fiscal 2024 was driven by an increase in the probability of a change of control and decreases in the discount rates used, due primarily to external market factors. The decrease in the fair value of derivative liabilities in fiscal 2023 was driven by a decrease in the expected cash outflows under the Residual Royalty Agreement, due to decreases in projected FC2 net revenues in future periods, and increases in the discount rates used, due primarily to external market factors.

The following table presents quantitative information about the inputs and valuation methodologies used to determine the fair value of the embedded derivatives classified in Level 3 of the fair value hierarchy as of September 30, 2024 and 2023:

Valuation Methodology Significant Unobservable Input 2024 2023

Probability of change of control 60% to 90% 20% to 90%

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The Company also has an investment in equity securities consisting of 142,749 shares of ONCO Common Stock. The Company received 3,000 shares of Series A Convertible Preferred Stock (the “ONCO Preferred Stock”) of ONCO on October 3,2023 as part of a settlement of the receivable due on September 30,2023 related to the sale of ENTADFI. See Note 15 for additional information. The Company elected to measure the ONCO Preferred Stock at fair value in accordance with ASC 825. The investment in the ONCO Preferred Stock was classified within Level 3 of the fair value hierarchy because there is no market for the ONCO Preferred Stock and the fair value was determined using significant unobservable inputs. The fair value of the ONCO Preferred Stock was determined on the date received using a probability-weighted bond plus call option model, which incorporated the stock price of ONCO on the valuation date, expected volatility of 79%, expected term of 3 years, and a discount rate of 35%. The Company also applied a 15% discount for lack of marketability due to the fact that there is no market for the preferred stock and a 60% probability of dissolution. The valuation was determined to be $0.9 million at October 3, 2023.

On September 24, 2024, the Company converted all of the shares of ONCO Preferred Stock it holds into 142,749 shares of ONCO Common Stock. Following this conversion, the ONCO Common Stock is classified within Level 1 of the fair value hierarchy and the valuation is determined based on the closing price of the ONCO Common Stock. The value of the ONCO Common Stock is $0.7 million as of September 30, 2024, which is included in prepaid expenses and other current assets on the accompanying consolidated balance sheet, and the Company recognized a loss from the change in fair value of securities of $0.2 million during the year ended September 30, 2024 on the accompanying consolidated statement of operations. Subsequent to September 30, 2024, the Company sold all of the shares of ONCO Common Stock it held for net proceeds of $0.4 million.

Note 4– Revenue from Contracts with Customers

The Company generates all its revenue from direct product sales. Revenue from direct product sales is generally recognized when the customer obtains control of the product, which occurs at a point in time, and may be upon shipment or upon delivery based on the contractual shipping terms of a contract. Sales taxes and other similar taxes that the Company collects concurrent with revenue-producing activities are excluded from revenue.

The amount of consideration the Company ultimately receives varies depending upon sales discounts, and other incentives that the Company may offer, which are accounted for as variable consideration when estimating the amount of revenue to recognize. The estimate of variable consideration requires significant judgment. The Company includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely upon an assessment of current contract sales terms and historical payment experience.

Product returns are typically not significant because returns are generally not allowed unless the product is damaged at time of receipt.

The Company’s revenue is primarily from sales of FC2 in the U.S. prescription channel and direct sales of FC2 in the global public health sector, and also included sales of ENTADFI through the date the ENTADFI assets were sold on April 19,2023. The following table presents net revenues by product and sector for the years ended September 30, 2024 and 2023:

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The following table presents net revenue by geographic area for the years ended September 30, 2024 and 2023:

*Less than 10% of total net revenues

The Company’s performance obligations consist mainly of transferring control of products identified in the contracts which occurs either when: i) the product is made available to the customer for shipment; ii) the product is shipped via common carrier; or iii) the product is delivered to the customer or distributor, in accordance with the terms of the agreement. Some of the Company’s contracts require the customer to make advanced payments prior to transferring control of the products. These advanced payments create a contract liability for the Company. The balances of the Company’s contract liability, included in accrued expenses and other current liabilities on the accompanying consolidated balances sheets, was approximately $0.4 million and $0.1 million at September 30, 2024 and 2023, respectively. The opening balance of the Company's contract liabilities at October 1, 2022 was $0.3 million.

The amount of revenue recognized that was included in the contract liabilities and unearned revenues balance at the beginning of the period was $0.1 million and $0.3 million during the years ended September 30, 2024 and 2023, respectively, after satisfying its contract obligations and transferring control.

Note 5– Accounts Receivable and Concentration of Credit Risk

The Company’s standard credit terms vary from 30 to 120 days, depending on the class of trade and customary terms within a territory, so accounts receivable is affected by the mix of sales within the period. As is typical in the Company’s business, extended credit terms may occasionally be offered as a sales promotion or for certain sales. For sales to the Company’s distributor in Brazil, the Company has agreed to credit terms of up to one year.

The components of accounts receivable consist of the following at September 30, 2024 and 2023:

Less: allowance for sales returns and payment term discounts (13,577 ) (15,005 )

The opening balance of the Company's net accounts receivable at October 1, 2022 was $3.6 million.

No customer had a current accounts receivable balance that represented 10% of current assets at September 30, 2024 and 2023.

At September 30, 2024, two customers had an accounts receivable balance greater than 10% of net accounts receivable, representing 64% of net accounts receivable in the aggregate. At September 30, 2023, three customers had an accounts receivable balance greater than 10% of net accounts receivable, representing 71% of the Company’s net accounts receivable in the aggregate.

For the year ended September 30, 2024, there were four customers whose individual net revenue to the Company exceeded 10% of the Company’s net revenues, representing 60% of the Company’s net revenues in the aggregate. For the year ended September 30, 2023, there were two customers whose individual net revenue to the Company exceeded 10% of the Company’s net revenues, representing 47% of the Company’s net revenues in the aggregate, including The Pill Club that represented 24% of the Company’s net revenues.

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The Company maintains an allowance for credit losses for estimated losses resulting from the inability of its customers to make required payments on accounts receivable. Management determines the allowance for credit losses by identifying troubled accounts and by using historical experience applied to an aging of accounts. Management also periodically evaluates individual customer receivables and considers a customer’s financial condition, credit history, and the current economic conditions. Accounts receivable are charged-off when deemed uncollectible. During the year ended September 30,2023, the Company recorded a provision for credit losses of $3.9 million related to the total amount of receivables due from The Pill Club due to its Chapter 11 bankruptcy, filed on April 18,2023.

The table below summarizes the change in the allowance for credit losses on trade receivables for the years ended September 30, 2024 and 2023:

Charge-offs, net of recoveries — 3,911,714

Recoveries of accounts receivable previously charged-off are recorded when received. In the global public health sector, the Company’s customers are primarily health care distributors, large global agencies, non-government organizations, ministries of health and other governmental agencies which purchase and distribute FC2 for use in HIV/AIDS prevention and family planning programs. In the U.S. prescription channel, the Company’s customers include primarily telemedicine providers.

Note 6– Inventories

Inventories consisted of the following at September 30, 2024 and September 30, 2023:

The Company recorded a provision for obsolete inventory of $1.6 million and $0.2 million during the years ended September 30, 2024 and 2023, respectively, which is included in cost of sales on the accompanying consolidated statements of operations.

Note 7– Property and Equipment

Property and equipment consisted of the following at September 30, 2024 and 2023:

Estimated

Property and equipment:

Less: accumulated depreciation and amortization (4,019,025 ) (3,787,954 )

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Depreciation expense for the years ended September 30, 2024 and 2023 was approximately $0.3 million and $0.2 million, respectively. Property and equipment included $0.2 million at September 30, 2023 for deposits on equipment, furniture, and leasehold improvements, which had not been placed into service; therefore, the Company had not started to record depreciation expense. Deposits on equipment, furniture, and leasehold improvements at September 30, 2024 were immaterial.

Note 8–Intangible Assets and Goodwill

Intangible Assets

Intangible assets included IPR&D and covenants not-to-compete. As of September 30, 2024, the net book value of intangible assets was zero.

The gross carrying amounts and net book value of intangible assets, which is included in other assets on the accompanying consolidated balance sheet, were as follows at September 30, 2023:

Gross Carrying Accumulated Net Book

Amount Amortization Value

Intangible asset with finite life:

Indefinite-lived intangible assets:

Acquired in-process research and development assets — — —

Amortization was recorded on a straight-line basis over seven years for the covenants not-to-compete. The amortization expense was recorded in selling, general and administrative expenses in the accompanying consolidated statements of operations. Amortization expense was approximately $71,000 for the year ended September 30, 2023. Amortization expense recorded for the year ended September 30, 2024 was immaterial.

In March 2023, the Company announced its strategic decision to refocus its drug development efforts on those drug candidates that it believes have the best opportunity to lead to long-term success and shareholder value creation. As part of this strategic decision, the Company has indefinitely ceased development of sabizabulin for prostate cancer and zuclomiphene. The Company has no current plans that would invest funds in the development of these two assets or that would lead to the Company deriving value from these two assets, which has met the criteria for abandonment under the accounting standards. This resulted in writing off the carrying amount of these two acquired in-process research and development assets and recording an impairment charge of $3.9 million for the year ended September 30,2023.

Goodwill

The carrying amount of goodwill at September 30, 2024 and 2023 was $6.9 million. There was no change in the balance during the years ended September 30, 2024 and 2023. The Company’s goodwill is assigned to the Research and Development reporting unit, which had a negative carrying amount as of September 30, 2024.

Note 9– Debt

SWK Residual Royalty Agreement

On March 5,2018, the Company entered into a Credit Agreement (the “Credit Agreement”) with the financial institutions party thereto from time to time (the “Lenders”) and SWK Funding LLC, as agent for the Lenders (the “Agent”), for a synthetic royalty financing transaction. On and subject to the terms of the Credit Agreement, the Lenders provided the Company with a term loan of $10.0 million, which was advanced to the Company on the date of the Credit Agreement. The Company repaid the loan and return premium specified in the Credit Agreement in August 2021, and as a result has no further obligations under the Credit Agreement. The Agent has released its security interest in Company collateral previously pledged to secure its obligations under the Credit Agreement.

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In connection with the Credit Agreement, the Company and the Agent also entered into a Residual Royalty Agreement, dated as of March 5,2018 (as amended, the “Residual Royalty Agreement”), which provides for an ongoing royalty payment of 5% of product revenue from net sales of FC2. The Residual Royalty Agreement will terminate upon (i) a change of control or sale of the FC2 business and the payment by the Company of the amount due in connection therewith pursuant to the Residual Royalty Agreement, or (ii) mutual agreement of the parties. If a change of control or sale of the FC2 business occurs, the Agent will receive a payment that is the greater of (A) $2.0 million or (B) the product of (x) 5% of the product revenue from net sales of FC2 for the most recently completed 12-month period multiplied by (y) five.

For accounting purposes, the $10.0 million advance under the Credit Agreement was allocated between the Credit Agreement and the Residual Royalty Agreement on a relative fair value basis. A portion of the amount allocated to the Residual Royalty Agreement, equal to the fair value of the change of control provision, was allocated to an embedded derivative liability. The derivative liability is adjusted to fair market value at each reporting period.

At September 30, 2024 and 2023, the Residual Royalty Agreement liability consisted of the following:

Residual royalty agreement liability, short-term portion (1,025,837 ) (864,623 )

Residual royalty agreement liability, long-term portion $ 8,850,792 $ 8,870,136

As the Company has repaid the original principal of $10.0 million advanced in connection with the Credit Agreement and the Residual Royalty Agreement, payments under the Residual Royalty Agreement are classified as interest payments and included in operating activities on the accompanying consolidated statements of cash flows. The short-term portion of the Residual Royalty Agreement liability represents the aggregate of the estimated quarterly royalty payments payable during the 12-month period subsequent to the balance sheet dates.

Interest expense on the accompanying consolidated statements of operations relates to the accretion of the liability for the Residual Royalty Agreement. The accretion of the liability is based on projected FC2 revenues.

Premium Finance Agreement

On November 1,2022, the Company entered into an agreement to finance $1.4 million of its directors and officers liability insurance premium at an annual percentage rate of 6.3%. The financing agreement was payable in eleven monthly installments of principal and interest, which began on December 1,2022. The balance of the insurance premium liability is $0.1 million as of September 30, 2023 and is included in accrued expenses and other current liabilities on the accompanying consolidated balance sheet. The last payment was made in October 2023 and there is no balance outstanding as of September 30, 2024.

Note 10– Stockholders’ Equity

Preferred Stock

The Company has 5,000,000 shares designated as Class A Preferred Stock with a par value of $0.01 per share. There are 1,040,000 shares of Class A Preferred Stock – Series 1 authorized; 1,500,000 shares of Class A Preferred Stock – Series 2 authorized; 700,000 shares of Class A Preferred Stock – Series 3 authorized; and 548,000 shares of Class A Preferred Stock – Series 4 authorized. There were no shares of Class A Preferred Stock of any series issued and outstanding at September 30, 2024 and September 30, 2023. The Company has 15,000 shares designated as Class B Preferred Stock with a par value of $0.50 per share. There were no shares of Class B Preferred Stock issued and outstanding at September 30, 2024 and September 30, 2023.

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Common Stock

We are authorized to issue up to 308,000,000 shares of common stock, $0.01 par value per share. Holders are entitled to one vote for each share of common stock.

Shelf Registration Statement

In March 2023, the Company filed a shelf registration statement on Form S-3 (File No.333-270606) with a capacity of $200 million, which was declared effective by the SEC on April 14,2023. As of September 30, 2024, $109 million remains available under that shelf registration statement. As a result of the Company’s failure to timely file the Quarterly Report on Form 10-Q for the quarter ended December 31,2023 and a Current Report on Form 8-K that was due on February 27,2024, the Company is not eligible to use its current effective shelf registration statement on Form S-3 (File No.333-270606) or file new registration statements on Form S-3 until no earlier than March 1, 2025, which could impair its ability to raise capital. See Part I, Item 1A, “Risk Factors.”

Common Stock Offering

On December 18,2023, we completed an underwritten public offering of 52,708,332 shares of our common stock, which included the exercise in full of the underwriters’ option to purchase additional shares, at a public offering price of $0.72 per share. Net proceeds to the Company from this offering were approximately $35.2 million after deducting underwriting discounts and commissions and costs incurred by the Company. All of the shares sold in the offering were by the Company. The offering was made pursuant to the Company’s shelf registration statement on Form S-3 (File No.333-270606).

Aspire Capital Purchase Agreement

During the year ended September 30, 2023, we sold 2,779,713 shares of common stock to Aspire Capital under the Aspire Purchase Agreement resulting in proceeds to the Company of $3.4 million. As a result of these sales, we recorded approximately $105,000 of deferred costs to additional paid-in capital.

During the 36-month term of the Aspire Purchase Agreement, we sold 4,424,450 shares of common stock to Aspire Capital resulting in proceeds to the Company of $8.4 million. On June 26,2023, the term of the Aspire Purchase Agreement expired and no additional shares of common stock will be sold under the agreement.

In consideration for entering into the Aspire Purchase Agreement, concurrently with the execution of the Aspire Purchase Agreement, the Company issued to Aspire Capital 212,130 shares of the Company’s common stock. The shares of common stock issued as consideration were valued at $0.7 million, based on the closing price per share of the Company’s common stock on the date the shares were issued. This amount and related expenses, which totaled approximately $0.7 million, were recorded as deferred costs. The unamortized amount of deferred costs related to the Aspire Purchase Agreement remaining when the agreement terminated was $0.5 million and was expensed at the time of termination. It is included in selling, general and administrative expenses on the accompanying consolidated statement of operations for the year ended September 30,2023.

Private Investment in Public Equity

On April 12,2023, the Company entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Frost Gamma Investments Trust (“FGI”), pursuant to which, on the date thereof, the Company issued and sold 5,000,000 shares of the Company’s common stock to FGI at a price of $1.00 per share, for a total investment of $5.0 million, through a private investment in public equity financing. Proceeds were recorded net of issuance costs of $31,000. The shares of common stock issued to FGI pursuant to the Stock Purchase Agreement were not registered under the Securities Act.

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Lincoln Park Capital Fund LLC Purchase Agreement

On May 2,2023, the Company entered into a purchase agreement (as amended, the “Lincoln Park Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, the Company may sell to Lincoln Park up to $100.0 million of shares (the “Purchase Shares”) of the Company’s common stock over the 36 month term of the Lincoln Park Purchase Agreement. The Lincoln Park Purchase Agreement may be terminated by the Company at any time, at its sole discretion, without any cost or penalty, by giving one business day notice to Lincoln Park. Lincoln Park has covenanted not to in any manner whatsoever enter into or effect, directly or indirectly, any short selling or hedging of the Company’s common stock. On December 13,2023, the Company entered into an amendment (the “Lincoln Park Amendment”) with Lincoln Park to reduce the amount of shares of common stock subject to the registration from $100.0 million to $50.0 million until the Company has sold at least $50.0 million of shares of common stock under the Lincoln Park Purchase Agreement. The issuance of shares of common stock pursuant to the Lincoln Park Purchase Agreement up to $50.0 million have been registered pursuant to the Company’s effective shelf registration statement on Form S-3 (File No.333-270606), and a related prospectus supplement that was filed with the SEC on May 3,2023, as further supplemented on December 13,2023 to reflect the Lincoln Park Amendment.

Under the Lincoln Park Purchase Agreement, the Company has the right, but not the obligation, on any business day selected by the Company (the “Purchase Date”), provided that on such day the closing sale price per share of the Company’s common stock is above the Floor Price, as defined in the Lincoln Park Purchase Agreement, to require Lincoln Park to purchase up to 225,000 shares of the Company’s common stock (the “Regular Purchase Amount”) at the Purchase Price (as defined below) per purchase notice (each such purchase, a “Regular Purchase”) provided, however, that (1) the limit on the Regular Purchase Amount will be increased to 250,000 shares, if the closing sale price of the Company’s common stock on the applicable Purchase Date is not below $6.00 and to 275,000 shares, if the closing sale price of the Company’s common stock on the applicable Purchase Date is not below $8.00. Lincoln Park’s committed obligation under each Regular Purchase shall not exceed $2,500,000 or 2,000,000 Purchase Shares per each Regular Purchase. The purchase price for Regular Purchases (the “Purchase Price”) shall be equal to the lesser of: (i) the lowest sale price of the Company’s common stock during the Purchase Date, or (ii) the average of the three lowest closing sale prices of the Company’s common stock on the 10 consecutive business days ending on the business day immediately preceding such Purchase Date. The Company shall have the right to submit a Regular Purchase notice to Lincoln Park as often as every business day. A Regular Purchase notice is delivered to Lincoln Park after the market has closed (i.e., after 4:00 P.M. Eastern Time) so that the Purchase Price is always fixed and known at the time the Company elects to sell shares to Lincoln Park.

In addition to Regular Purchases and provided that the Company has directed a Regular Purchase in full, the Company in its sole discretion may require Lincoln Park on each Purchase Date to purchase on the following business day (“Accelerated Purchase Date”) up to the lesser of (i) three (3) times the number of shares purchased pursuant to such Regular Purchase or (ii) 30% of the trading volume on the Accelerated Purchase Date (the “Accelerated Purchase”) at a purchase price equal to the lesser of 97% of (i) the closing sale price on the Accelerated Purchase Date, or (ii) the Accelerated Purchase Date’s volume weighted average price (the “Accelerated Purchase Price”). The Company may also direct Lincoln Park, on any business day on which an Accelerated Purchase has been completed and all of the shares to be purchased thereunder have been properly delivered to Lincoln Park in accordance with the Lincoln Park Purchase Agreement, to make additional purchases upon the same terms as an Accelerated Purchase (an “Additional Accelerated Purchase”).

VERU US Equity

VERU · 10-K · period ended 2024-09-30

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

VERU US Equity☆

VERU · 10-K · period ended 2024-09-30

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

VERU US Equity