UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021MARCH 31, 2022
OR
☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___ TO ___.
Commission file number 001-38356
VYNE THERAPEUTICS INC.
(Exact name of registrant as specified in its charter)
Delaware45-3757789
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)
520 U.S. Highway 22, Suite 204
Bridgewater, New Jersey 08807
(Address of principal executive offices including zip code)
(800) 775-7936
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange
on which registered
Common Stock, par value $0.0001VYNEThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer☐Accelerated filer☐
Non-accelerated filer☒Smaller reporting company☒
Emerging growth company☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  ☐ No  ☒
As of November 3, 2021,May 5, 2022, there were 53,517,91257,908,489 shares of the registrant’s Common Stock, par value $0.0001 per share, outstanding.

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We own or have rights to various copyrights, trademarks, and trade names used in our business in the U.S.United States and/or other countries, including VYNE™, AMZEEQ®, ZILXI®,Molecule Stabilizing Technology (MST)™ and MST™.countries. This report also includes trademarks, service marks and trade names of other companies. Trademarks, service marks and trade names appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.
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Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are statements that could be deemed forward-looking statements reflecting the current beliefs and expectations of management with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These statements are often identified by the use of words such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would,” “until,” “if” and similar expressions or variations.
The following factors, among others, including any described in the section titled “Risk Factors” included in this Quarterly Report on Form 10-Q, could cause our future results to differ materially from those expressed in the forward-looking information:

•our ability to successfully complete a sale or out-license of our minocycline franchise on terms acceptable to us in a timely manner or at all;
•our ability to successfully execute our business strategy, including our ability to successfully develop our BETbromodomain and extra-terminal domain ("BET") inhibitor platform for immuno-inflammatory conditionsconditions;
•our pursuit of, and rare skin diseases;ability to successfully identify and execute, strategic transactions;
•our ability to select a lead candidate and exercise our option with respect to an oral BET inhibitor under the terms of the Evaluation and Option Agreement with In4Derm Limited;
•our ability to raise substantial additional financing to fund our operations and continue as a going concern;
•the timing of commencement of future preclinical studies and clinical trials;
•our ability to enroll patients and successfully complete, and receive favorable results in, clinical trials for our product candidates;
•disruptions related to COVID-19 or another pandemic, epidemic or outbreakestimates of a contagious disease onour expenses, capital requirements, our needs for additional financing and our ability to initiate and retain patients in our clinical trials, the ability of our suppliers to manufacture and provide materials for our products and product candidates, supply chain disruptions, distribution of our products and business sales execution, operating results, liquidity and financial condition;obtain additional capital on acceptable terms or at all;
•the regulatory approval process for our product candidates, including any delay or failure in obtaining requisite approvals;timing of commencement of future preclinical studies and clinical trials;
•the potential market size of treatments for any diseases and market adoption of our products, if approved or cleared for commercial use, by physicians and patients;
• risks and uncertainties arising out of the completed divestiture of our commercial business;
•disruptions related to COVID-19 on our ability to initiate and retain patients in our clinical trials and progress preclinical studies and the ability of our suppliers to manufacture and provide materials for our product candidates;
•our ability to create or in-license intellectual property and the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and programs, including the projected terms of patent protection;
•the regulatory approval process for our product candidates, including any delay or failure in obtaining requisite approvals;
•developments and projections relating to our competitors and the markets in which we compete, including competing drugs and therapies, particularly if we are unable to receive exclusivity;
•our intentions and our ability to establish collaborations;
•the timing or likelihood of regulatory filings and approvals or clearances for our product candidates;
•our ability to comply with various regulations applicable to our business;
•our ability to create intellectual property and the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates,business, including the projected terms of patent protection;
•the timing, costs or results of litigation, including litigation to protect our intellectual property, including the matter with Padagis Israel Pharmaceuticals Ltd.;continued listing rules imposed by Nasdaq;
•our ability to successfully challenge intellectual property claimed by others;
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•estimates of our expenses, capital requirements, our needs for additional financingintentions and our ability to establish collaborations or obtain additional capital on acceptable terms or at all;funding;
•our ability to attract and retain key scientific or management personnel;
•our defense of any future litigation that may be initiated against us;
•our expectations regarding licensing, business transactions and strategic operations; and
•our future financial performance and liquidity.liquidity
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We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss these risks in greater detail in “Risk Factors” and elsewhere in our Annual Report on Form 10-K as well as our other filings made with the Securities and Exchange Commission ("SEC"). Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
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PART I – FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
VYNE THERAPEUTICS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands, except share and per share data)
(Unaudited)
September 30December 31
20212020
Assets
Current Assets:
Cash and cash equivalents$52,306 $57,563 
Restricted cash605 855 
Investment in marketable securities (Note 6)— 1,027 
Trade receivables, net of allowances10,084 15,819 
Prepaid and other assets5,064 4,591 
Inventory (Note 7)8,070 7,404 
Total Current Assets76,129 87,259 
Property and equipment, net472 555 
Operating lease right-of-use assets (Note 10)1,036 1,583 
Prepaid and other assets3,678 4,345 
Total Assets$81,315 $93,742 
Liabilities and shareholders’ equity
Current Liabilities:
Trade payables$7,621 $4,780 
Accrued expenses (Note 4)9,613 11,452 
Debt (Note 8)— — 
Employee related obligations3,382 4,360 
Operating lease liabilities (Note 10)277 757 
Other104 104 
Total Current Liabilities20,997 21,453 
Liability for employee severance benefits206 312 
Operating lease liabilities (Note 10)775 853 
Long-term debt (Note 8)— 33,174 
Other liabilities451 457 
Total Liabilities22,429 56,249 
Commitments and Contingencies (Note 11)— — 
Shareholders' Equity:
Preferred stock: $0.0001 par value; 20,000,000 shares authorized at September 30, 2021 and December 31, 2020, respectively; no shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively— — 
Common stock: $0.0001 par value; 150,000,000 shares and 75,000,000 shares authorized at September 30, 2021 and December 31, 2020, respectively; 53,510,599 and 43,205,221 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively5 4 
Additional paid-in capital686,836 603,685 
Accumulated deficit(627,955)(566,196)
Total Shareholders' Equity58,886 37,493 
Total Liabilities and Shareholders’ Equity$81,315 $93,742 
March 31December 31
20222021
Assets
Current Assets:
Cash and cash equivalents$50,495 $42,250 
Restricted cash605 605 
Trade receivables, net of allowances535 7,583 
Amount due from sale of MST Franchise5,000 — 
Prepaid expenses and other assets3,895 4,565 
Operating lease right of use assets124 338 
Discontinued operations - current assets— 7,845 
Total Current Assets60,654 63,186 
Property and equipment, net310 354 
Non-current prepaid expenses and other assets3,355 3,506 
Total Assets$64,319 $67,046 
Liabilities and Stockholders’ Equity
Current Liabilities:
Trade payables$3,612 $6,510 
Accrued expenses3,312 8,593 
Employee related obligations1,331 2,752 
Liability for employee severance benefits216 206 
Operating lease liabilities117 349 
Total Liabilities8,588 18,410 
Commitments and Contingencies (Note 7)00
Stockholders' Equity:
Preferred stock: $0.0001 par value; 20,000,000 shares authorized at March 31, 2022 and December 31, 2021; no shares issued and outstanding at March 31, 2022 and December 31, 2021— — 
Common stock: $0.0001 par value; 150,000,000 shares authorized at March 31, 2022 and December 31, 2021; 57,908,489 and 53,577,744 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively6 5 
Additional paid-in capital690,580 688,156 
Accumulated deficit(634,855)(639,525)
Total Stockholders' Equity55,731 48,636 
Total Liabilities and Stockholders’ Equity$64,319 $67,046 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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VYNE THERAPEUTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except per share data)
(Unaudited)
Three months ended September 30Nine months ended September 30
2021202020212020
Revenues (Note 4)
Product sales$3,953 $2,863 $11,805 $6,096 
License revenues— — — 10,000 
Royalty revenues133 406 658 611 
Total Revenues4,086 3,269 12,463 16,707 
Cost of goods sold1,049 371 2,445 858 
Operating Expenses:
Research and development6,981 6,623 19,723 35,695 
Selling, general and administrative13,832 19,766 46,283 71,640 
Goodwill and in-process research & development impairments— — — 54,345 
Contingent Stock Right Remeasurement— — — 84,726 
Total Operating Expenses20,813 26,389 66,006 246,406 
Operating Loss17,776 23,491 55,988 230,557 
Interest expense (Note 8)3,474 1,092 5,610 3,229 
Other expense (income), net35 130 161 (1,141)
Loss Before Income Tax21,285 24,713 61,759 232,645 
Income tax expense (benefit)— 1 — (258)
Net Loss$21,285 $24,714 $61,759 $232,387 
Loss per share basic and diluted$0.41 $0.59 $1.22 $7.98 
Weighted average shares outstanding - basic and diluted52,028 41,934 50,776 29,132 
Three months ended March 31
20222021
Revenues
Royalty revenues$178 $230 
Total Revenues178 230 
Operating expenses:
Research and development4,452 4,255 
Selling, general and administrative4,417 5,732 
Total operating expenses8,869 9,987 
Operating loss(8,691)(9,757)
Interest expense— (1,062)
Other expense(3)(57)
Loss from continuing operations before income taxes(8,694)(10,876)
Income tax expense— — 
Loss from continuing operations$(8,694)$(10,876)
Income (loss) from discontinued operations, net of income taxes13,364 (9,674)
Net income (loss)$4,670 $(20,550)
Loss per share from continuing operations, basic and diluted$(0.16)$(0.22)
Income (loss) per share from discontinued operations, basic and diluted$0.24 $(0.20)
Income (loss) per share basic and diluted$0.08 $(0.42)
Weighted average shares outstanding - basic and diluted55,386 48,868 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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VYNE THERAPEUTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(U.S. dollars in thousands)
(Unaudited)
Three months ended September 30Nine months ended September 30
2021202020212020
Net Loss$21,285 $24,714 $61,759 $232,387 
Other Comprehensive Loss:
Net unrealized (gains) losses from marketable securities— (2)— (1)
Losses on marketable securities reclassified into net loss— 2 — 6 
Total Other Comprehensive Loss— — — 5 
Total Comprehensive Loss$21,285 $24,714 $61,759 $232,392 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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VYNE THERAPEUTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(U.S. dollars in thousands, except share data)
(Unaudited)
Common stock
Additional paid-in
capital
Accumulated deficit
Accumulated
other
comprehensive
Income (loss)
Total
Number of SharesAmountsAmounts
BALANCE AT JANUARY 1, 20209,120,078 $1 $328,156 $(310,587)$5 $17,575 
CHANGES DURING THE PERIOD:
Comprehensive (loss) income— — — (232,387)(5)(232,392)
Exercise of options, vesting of restricted stock units and shares issued under employee stock purchase plan301,913 — 342 — — 342 
Stock-based compensation— — 15,147 — — 15,147 
Deemed dividend to warrants holders due to warrant modifications— — 41 (41)— — 
Classification of stock awards to derivative liability— — (975)— — (975)
Issuance of common stock through a public offering, net of $3,903 issuance costs7,776,875 1 53,648 — — 53,649 
Issuance of stock related to merger24,765,999 2 196,168 — — 196,170 
BALANCE AT SEPTEMBER 30, 202041,964,865 $4 $592,527 $(543,015)$— $49,516 
BALANCE AT JANUARY 1, 202143,205,221 $4 $603,685 $(566,196)$— $37,493 
CHANGES DURING THE PERIOD:

Comprehensive loss— — — (61,759)— (61,759)
Exercise of options, vesting of restricted stock units and shares issued under employee stock purchase plan305,105 — 393 — — 393 
Stock-based compensation— — 6,748 — — 6,748 
Issuance of common stock under at-the-market offering, net of $998 issuance costs4,726,012 — 29,187 — — 29,187 
Issuance of common stock through a registered direct offering, net of $3,177 issuance costs5,274,261 1 46,823 — — 46,824 
BALANCE AT SEPTEMBER 30, 202153,510,599 $5 $686,836 $(627,955)$— $58,886 
Common stock
Additional paid-in
capital
Accumulated deficitTotal
Number of SharesAmountsAmounts
BALANCE AT JANUARY 1, 202143,205,221 $4 $603,685 $(566,196)$37,493 
CHANGES DURING THE PERIOD:
Net loss— — — (20,550)(20,550)
Exercise of options, vesting of restricted stock units and shares issued under employee stock purchase plan129,102 — 388 — 388 
Stock-based compensation— — 2,442 — 2,442 
Issuance of common stock, net of $3,991 in issuance costs8,052,273 1 73,127 — 73,128 
BALANCE AT MARCH 31, 202151,386,596 $5 $679,642 $(586,746)$92,901 
BALANCE AT JANUARY 1, 202253,577,744 $5 $688,156 $(639,525)$48,636 
CHANGES DURING THE PERIOD:

Net income— — — 4,670 4,670 
Vesting of restricted stock units, net of withholding tax75,297 — (25)— (25)
Stock-based compensation— — 893 — 893 
Issuance of commitment shares in March 20221,667,593 — — — — 
Issuance of common stock, net of $48 in issuance costs2,587,855 1 1,556 — 1,557 
BALANCE AT MARCH 31, 202257,908,489 $6 $690,580 $(634,855)$55,731 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


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VYNE THERAPEUTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(U.S. dollars in thousands, except share data)
(Unaudited)
Common stock
Additional paid-in
capital
Accumulated deficit
Accumulated
other
comprehensive
Income (loss)
Total
Number of SharesAmountsAmounts
BALANCE AT JULY 1, 202041,920,952 $4 $589,825 $(518,301)$— $71,528 
CHANGES DURING THE PERIOD:
Comprehensive (loss) income— — — (24,714)— (24,714)
Exercise of options, vesting of restricted stock units and shares issued under employee stock purchase plan43,913 — 82 — — 82 
Stock-based compensation— — 2,620 — — 2,620 
BALANCE AT SEPTEMBER 30, 202041,964,865 $4 $592,527 $(543,015)$— $49,516 
BALANCE AT JULY 1, 202151,511,845 $5 $681,558 $(606,670)$— $74,893 
CHANGES DURING THE PERIOD:

Comprehensive loss— — — (21,285)— (21,285)
Exercise of options, vesting of restricted stock units and shares issued under employee stock purchase plan50,754 — (10)— — (10)
Stock-based compensation— — 2,405 — — 2,405 
Issuance of common stock under at-the-market offering, net of $184 issuance costs1,948,000 — 2,883 — — 2,883 
BALANCE AT SEPTEMBER 30, 202153,510,599 $5 $686,836 $(627,955)$— $58,886 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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VYNE THERAPEUTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
(Unaudited)
Nine months ended September 30
20212020
Cash Flows From Operating Activities:
Net Loss$61,759 $232,387 
Adjustments required to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization83 254 
Goodwill and in-process research & development impairments— 54,345 
Contingent stock right remeasurement— 84,726 
Changes in marketable securities and bank deposits, net— (142)
Changes in accrued liability for employee severance benefits, net of retirement fund profit(108)(15)
Stock-based compensation6,748 15,147 
Non-cash finance loss/(income), net1,281 (727)
Debt prepayment premium1,432 — 
Changes in operating assets and liabilities, net of effects of businesses acquired:
Decrease (increase) in trade receivables, prepaid and other assets5,262 (11,383)
Decrease (increase) in other non-current assets1,217 (4,430)
Increase (decrease) in accounts payable and accruals167 (11,801)
Increase in inventory(666)(5,294)
Increase in other liabilities(6)— 
Net cash used in operating activities(46,349)(111,707)
Cash Flows From Investing Activities:
Purchase of fixed assets— (113)
Cash acquired through merger— 38,641 
Proceeds from sale and maturity of marketable securities1,027 48,577 
Net cash provided by investing activities1,027 87,105 
Cash Flows From Financing Activities:
Proceeds related to issuance of common shares through offerings, net of issuance costs76,010 53,646 
Debt repayment (see Note 8)(36,432)— 
Proceeds related to issuance of stock for stock-based compensation arrangements, net237 182 
Net cash provided by financing activities39,815 53,828 
(Decrease)/Increase in cash, cash equivalents and restricted cash(5,507)29,226 
Effect of exchange rate on cash, cash equivalents and restricted cash— 1 
Cash, cash equivalents and restricted cash at beginning of the period58,418 44,584 
Cash, cash equivalents and restricted cash at end of the period$52,911 $73,811 
Cash and cash equivalents$52,306 $72,956 
Restricted cash605 855 
Total cash, cash equivalents and restricted cash shown in statement of cash flows$52,911 $73,811 
Supplementary information on investing and financing activities not involving cash flows:
Cashless exercise of warrants and restricted stock units**
Issuance of shares under employee stock purchase plan$144 $163 
Additions to operating lease right of use assets$— $1,120 
Additions to operating lease liabilities$— $1,120 
Supplemental disclosure of cash flow information:
Interest received$15 $232 
Interest paid$2,385 $2,936 
Fair value of assets acquired$— $117,270 
Less liabilities assumed— 5,827 
Net acquired (See “Note 3- Business combination”)— 111,443 
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Less cash acquired— 38,641 
Merger net of cash acquired$— $72,802 
*Represents an amount less than one thousand
Three months ended March 31
20222021
Cash Flows From Operating Activities:
Net income (loss)4,670 (20,550)
Adjustments required to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization44 27 
Changes in accrued liability for employee severance benefits, net of retirement fund profit10 (108)
Stock-based compensation893 2,442 
Non-cash finance income, net— (66)
Gain on the disposition of the MST Franchise(13,005)— 
Changes in operating assets and liabilities:
Decrease in trade receivables7,048 5,064 
Decrease (increase) in inventory97 (688)
Decrease in prepaid expenses and other assets and operating lease right of use asset100 719 
Decrease in other non-current assets— 404 
 (Decrease) increase in trade payables, accrued expenses and liability for employee related obligations(9,600)205 
Decrease in operating lease liabilities(232)— 
Net cash used in operating activities(9,975)(12,551)
Cash Flows From Investing Activities:
Net proceeds from the sale of the MST Franchise16,688 — 
Net cash provided by investing activities16,688 — 
Cash Flows From Financing Activities:
Proceeds related to issuance of common shares through offerings, net of issuance costs1,557 73,127 
(Payments) proceeds related to issuance of stock for stock-based compensation arrangements, net(25)376 
Net cash provided by financing activities1,532 73,503 
Increase in cash, cash equivalents and restricted cash8,245 60,952 
Effect of exchange rate on cash, cash equivalents and restricted cash— 1 
Cash, cash equivalents and restricted cash at beginning of the period42,855 58,418 
Cash, cash equivalents and restricted cash at end of the period$51,100 $119,371 
Cash and cash equivalents$50,495 $118,516 
Restricted cash605 855 
Total cash, cash equivalents and restricted cash shown in statement of cash flows$51,100 $119,371 
Supplemental disclosure of cash flow information:
Amount due from sale of MST Franchise$5,000 $— 
Interest paid$— $963 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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VYNE Therapeutics Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements

NOTE 1 - NATURE OF OPERATIONS

VYNE Therapeutics Inc. ("VYNE" or the "Company") is a biopharmaceutical company focused on developing proprietary, innovative and differentiated therapies for the treatment of immuno-inflammatory conditionsconditions. The Company's most advanced product candidate, FMX114, which is in a Phase 2a clinical trial, is being evaluated for the potential treatment of mild-to-moderate atopic dermatitis ("AD"). The Company is also in the preclinical stages of developing products containing bromodomain and rareextra-terminal domain ("BET") inhibitor compounds. The Company's initial BET inhibitor candidate in development is VYN201, a locally administered pan-BET inhibitor, which the Company is exploring in various immuno-inflammatory diseases, including skin diseases of high unmet medical need.diseases. In addition, the Company continues to explore opportunistic transactions that may enhance its pipeline portfolio, as well as support its current operations and fund its future growth. The Company is a Delaware corporation, has its principal executive offices in Bridgewater, New Jersey and operates as 1 business segment. The Company currently has two commercial products, AMZEEQ® (minocycline) topical foam, 4%, and ZILXI® (minocycline) topical foam, 1.5%. In August 2021, the Company initiated a process to explore a possible sale or license of its topical minocycline franchise, as discussed in greater detail below.

Strategic Business Review and Sale of the MST Franchise

Beginning in the second quarter of 2021, the Company conducted a review of its commercial and research and development portfolio to determine how to optimally deploy capital and drive shareholder value. During the course of this review, the Company carefully considered the revenues received from the commercialization of AMZEEQ and ZILXI and the associated costs to drive those revenues, the protracted negative impact of the COVID-19 pandemic during the commercial launches of both AMZEEQ and ZILXI, the current payor landscape, as well as the costs to develop each of its pipeline products. During this process, the Company evaluated several strategic options including the acquisition of marketed assets, out-licensing its approved products outside of the United States, and possible partnering or co-development relationships with interested parties. Following its review, the Company determined to initiate a process to explore a possible sale or license of its topical minocycline franchise, including AMZEEQ, ZILXI, FCD105 (the Company’s former Phase 3 proprietary novel topical combination foam formulation of minocycline and adapalene for the treatment of moderate-to-severe acne vulgaris) and the underlying Molecule Stabilizing Technology ("MST") platform.

By leveraging its drug development and clinical development capabilities and strong network of discovery and preclinical science partners,On January 12, 2022, the Company has transitionedentered into an Asset Purchase Agreement (the “Purchase Agreement”) with Journey Medical Corporation (”Journey”) pursuant to which the Company sold its strategic focusMolecule Stabilizing Technology franchise, including AMZEEQ, ZILXI, and FCD105 (the “MST Franchise”), to develop therapies forJourney. The assets include certain contracts, including the treatmentlicense agreement with Cutia Therapeutics (HK) Limited, inventory and intellectual property related to the MST Franchise (together, the “Assets”). Pursuant to the Purchase Agreement, Journey assumed certain liabilities of immuno-inflammatory conditionsthe MST Franchise including, among others, those arising from the Company's patent infringement suit initiated against Padagis Israel Pharmaceuticals Ltd. There were no current or long-term liabilities recorded by the Company which were transferred to Journey.

Pursuant to the Purchase Agreement, the Company received an upfront payment of $20.0 million and rare skin diseaseswill receive an additional $5.0 million on the one-year anniversary of high unmet medical need.the closing of the transaction. The Company expectsis also eligible to continuereceive sales milestone payments of up to invest in FMX114 for the treatment of mild to moderate atopic dermatitis and enrolled the first patient in its Phase 1b/2a proof-of-concept study in October 2021. The Company expects results from this study early$450.0 million in the first quarteraggregate upon the achievement of 2022. specified levels of net sales on a product-by-product basis, beginning with annual net sales exceeding $100.0 million (with products covered in three categories (1) AMZEEQ (and certain modifications), (2) ZILXI (and certain modifications), and (3) FCD105 and other products covered by the patents being transferred, including certain modifications). In addition, the Company is entitled to receive certain payments from any licensing or sublicensing of the assets by Journey outside of the United States. See "Note 3 - Discontinued Operations" for additional discussion of the disposition.

In addition, on August 12, 2021, the Company announced a transaction with In4Derm Limited, a company incorporated and registered in Scotland (“In4Derm”). In4Derm is a spin-out of the University of Dundee’s School of Life Sciences which has discovered and is developing proprietary Bromodomain and Extra-Terminal Domain ("BET")BET inhibitors for the treatment of immunology and oncology conditions. On April 30, 2021, the parties entered into an Evaluation and Option Agreement (the “Option Agreement”) pursuant to which In4Derm granted the Company an exclusive option to obtain exclusive worldwide rights to research, develop and commercialize products containing In4Derm’s BET inhibitor compounds, which are new chemical entities in both topical (the “Topical BETi Option”) and oral (the “Oral BETi Option”)for treatments in all fields for any disease, disorder or condition in humans. On August 6, 2021, the Company exercised the Topical BETi Option and the parties entered into a License Agreement granting the Company a worldwide, exclusive license that is sublicensable through multiple tiers to exploit certain of In4Derm’s pan-BD BET inhibitor compounds identified to be suitable for topical administration in all fields. The Company paid a $1.0 million cash payment to In4Derm upon the execution of the Option Agreement and $0.5 million in connection with entering into the exercise of the Topical BETi Option.License Agreement. Pursuant to the License Agreement, the Company has agreed to make cash payments to In4Derm upon the achievement of specified clinical development and
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regulatory approval milestones with respect to each licensed topical product in the U.S.United States of up to $15.75 million for all indications. In addition, the Company currently expects to exercise the Oral BETi Option following the selection of a lead candidate for the program. Upon exercise of the exclusive Oral BETi Option, the parties will sign a license agreement (the “Oral License Agreement”), and the Company will be required to pay In4Derm a $4.0 million cash payment. The Oral License Agreement will include cash payments of up to $43.75 million payable to In4Derm upon the achievement of specified clinical development and regulatory approval milestones with respect to each licensed oral product in the U.S.United States for all indications. The license agreements also provide for tiered royalty payments of up to 10% of net annual sales across licensed BET inhibitor products by the Company. In4Derm is entitled to additional milestones upon the achievement of regulatory approvals in certain jurisdictions outside the U.S.

The initial BET inhibitor candidates that the Company plans to develop are VYN201 and VYN202. VYN201 is a pan-bromodomain or pan-BD BET inhibitor.It is a first-in-class “soft” pan-BD BET inhibitor that is designed to mitigate systemic drug exposure and will be developed for topical applications. The Company intends to progress VYN201 into rare dermatological indications where there is significant unmet need due to a lack of indicated treatment options. The Company
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plans to communicate the initial indication it will be pursuing for VYN201 after the prerequisite non-clinical safety assessments have been completed and enter this program into the clinic in 2022.

The second candidate, VYN202, is an orally-delivered, first-in-class BET inhibitor that is highly selective for Bromodomain 2 (“BD2”). By selectively inhibiting BD2, the Company believes VYN202 could have a more targeted anti-inflammatory effect with an improved benefit/risk profile. Upon the selection of a lead candidate, VYNE intends to exercise its exclusive option with In4Derm Limited and commence an IND-enabling non-clinical safety program.United States.

As the Company continues to transitiontransitioned from a commercial organization to one focused on research and development, the Company expects to further streamlinestreamlined operations by continuing to eliminateeliminating the vast majority of planned expenditures supporting its commercial operations.operations Furthermore, following its decision to divest the MST Franchise, the Company is in the process of reducingreduced its workforce to approximately 28 employees by terminating approximately 70 employees, which the Company expects to be completed by December 31, 2021.completion of the sale of the MST Franchise. The Company incurreddoes not expect to incur any material expenses in 2022 as a one-time charge of $1.0 million in the three months ended September 30, 2021 in connection with this restructuring plan, consisting of $0.9 million of employee termination costs, including severance and other benefits, and retention payments of $0.1 million. The Company anticipates incurring an additional charge of $0.3 million related to employee termination costs, including severance and other benefits during the fourth quarter of 2021. These charges will be substantially paid out by December 31, 2021. Additional charges of $0.4 million related to retention payments are anticipated through June 30, 2022.

Reverse Merger
On November 10, 2019, Menlo, Foamix Pharmaceuticals Ltd. (“Foamix”) and Giants Merger Subsidiary Ltd. (“Merger Sub”), a wholly-owned subsidiary of Menlo, entered into an Agreement and Plan of Merger (as amended by Amendment No. 1 to the Agreement and Plan of Merger, dated as of December 4, 2019, the “Merger Agreement”). Pursuant to the termsresult of the Merger Agreement, Merger Sub merged with and into Foamix, with Foamix surviving as a wholly-owned subsidiary of Menlo (the “Merger”) on March 9, 2020 (the “Effective Date”).
For accounting purposes, the Merger is treated as a “reverse acquisition” under generally accepted accounting principles in the United States (“U.S. GAAP”) and Foamix is considered the accounting acquirer. Accordingly, upon consummation of the Merger, the historical financial statements of Foamix became the Company’s historical financial statements, and the historical financial statements of Foamix are included in the comparative prior periods. See “Note 3 – Business Combination” for more information on the Merger.restructuring plan.
Reverse stock split and recasting of per-share amounts
On February 10, 2021, the Company's Board of Directors approved a one-for-four reverse stock split of its outstanding shares of common stock. The reverse stock split was effected on February 12, 2021, at 5:00 p.m. Eastern time. At the effective time, every four issued and outstanding shares of the Company's common stock were converted into one share of common stock. No fractional shares were issued in connection with the reverse stock split, and in lieu thereof, each stockholder holding fractional shares was entitled to receive a cash payment (without interest or deduction) from the Company's transfer agent in an amount equal to such stockholder's respective pro rata shares of the total net proceeds from the Company's transfer agent sale of all fractional shares at the then-prevailing prices on the open market. In connection with the reverse stock split, the number of authorized shares of the Company's common stock was also reduced on a one-for-four basis, from 300 million shares to 75 million shares. The par value of each share of common stock remained unchanged. A proportionate adjustment was also made to the maximum number of shares issuable under the Company's 2019 Equity Incentive Plan, 2018 Omnibus Incentive Plan and 2019 Employee Share Purchase Plan and 2018 Omnibus Incentive Plan.
Unless otherwise noted, all common shares and per share amounts contained in the unaudited interim condensed consolidated financial statements have been retroactively adjusted to reflect the reverse stock split.
Topical Minocycline Franchise
In January 2020, the Company launched AMZEEQ®, a once-daily topical antibiotic for the treatment of inflammatory lesions of non-nodular moderate-to-severe acne vulgaris in patients 9 years of age and older. On May 28, 2020, the U.S. Food and Drug Administration (the "FDA") approved ZILXI® for the treatment of inflammatory lesions of rosacea in adults.ZILXI became available in pharmacies nationwide in October 2020. AMZEEQ and ZILXI are the first topical minocycline products approved by the FDA for any condition.
AMZEEQ and ZILXI utilize the Company’s proprietary Molecule Stabilizing Technology (MST)™ that is also being used in the development of the Company’s product candidate FCD105, a topical foam comprising minocycline and adapalene for the treatment of acne vulgaris. On June 2, 2020, the Company announced positive results from a Phase II clinical trial evaluating the preliminary safety and efficacy of FCD105 (3% minocycline / 0.3% adapalene foam), the first ever topical minocycline-
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based combination product, for the treatment of moderate-to-severe acne vulgaris.The Company held an end-of-Phase II meeting with the FDA in the fourth quarter of 2020. See "Note 1 - Strategic Business Review" for more information.
Serlopitant
Additionally, the Company was developing serlopitant, a small molecule inhibitor of the neurokinin 1 receptor, or NK1-R, given as a once-daily, oral tablet, for the treatment of pruritus, or itch, associated with various conditions including prurigo nodularis, or PN. On April 6, 2020, the Company announced top line results from two Phase III clinical trials evaluating the safety and efficacy of once-daily oral serlopitant for the treatment of pruritus (itch) associated with PN, studies MTI-105 and MTI-106. Neither study met their respective primary endpoint of demonstrating statistically significant reduction in pruritus in patients treated with serlopitant compared to placebo based on a 4-point improvement responder analysis. The Company does not currently intend to further pursue the development of serlopitant. As a result, in the second quarter of 2020, the Company recorded a full impairment charge related to the IPR&D and Goodwill assets in its unaudited condensed consolidated statement of operations and comprehensive loss. See "Note 3 - Business Combination" for more information.
Liquidity and Capital Resources
The Company launched AMZEEQ in the United States in January 2020 and commenced generating product revenues in the first quarter of 2020. The Company also launched ZILXI in the United States in October 2020 and commenced generating revenues in the fourth quarter of 2020. The Company’s activities prior to the commercial launches of AMZEEQ and ZILXI had primarily consisted of raising capital, developing product candidates, and performing research and development activities. Since inception, the Company has funded operations primarily through private and public placements of its equity, debt and warrants and through fees, cost reimbursements and payments received from its licensees. The Company commenced generating product revenues related to sales of AMZEEQ and ZILXI in January 2020 and October 2020, respectively. AMZEEQ and ZILXI were sold as part of the sale of the MST Franchise on January 12, 2022 and, as such, the Company no longer generates revenue from the sale of these products. The Company has incurred recurring losses from continuing operations and experienced negative operating cash flows since its inception and anticipates that it will continue to incur losses until such a time when its product candidates, if approved, are commercially successful, if at all. The Company will not generate any revenue from operations.any current or future product candidates unless and until it obtains regulatory approval and commercializes such products. For the ninethree months ended September 30, 2021,March 31, 2022, the Company incurred agenerated net lossincome of $61.8$4.7 million and used $46.3$10.0 million of cash in operations. Net income was the result of income from discontinued operations of $13.4 million and loss from continuing operations of $8.7 million
As of September 30, 2021,March 31, 2022, the Company had cash, cash equivalents and restricted cash of $52.9$51.1 million and an accumulated deficit of $628.0$634.9 million. On August 11, 2021,The Company received gross proceeds of $20.0 million from the Company prepaidsale of the entiretyMST Franchise in January 2022 and will receive an additional payment of its outstanding indebtedness, including a prepayment premium and accrued but unpaid interest, for a total amount$5.0 million on the one-year anniversary of approximately $36.5 million.the sale. The Company had no outstanding debt as of September 30, 2021.March 31, 2022.
The COVID-19 pandemicCompany has taken a number of actions to support its operations and government measures takenmeet its liquidity needs. Beginning in response to the pandemic have had a negative impact on the Company's operations. Access to healthcare providers has been limited, which has negatively impacted sales and the Company's ability to execute its commercial strategy with respect to AMZEEQ and ZILXI. In addition, the commercial launches of both AMZEEQ and ZILXI have been negatively impacted by unfavorable payor decisions in March 2021 on product pricing. These conditions have impaired the Company's ability to generate revenue consistent with internal forecasts, which has had a negative impact on its financial condition and liquidity. Following discussions with the Company's lenders during the second quarter of 2021, regarding the revenue targets included in the Amended and Restated Credit Agreement, the revenue expected to be generated for the trailing twelve month period ended June 30, 2021 and the Company's strategic transition discussed above, the Company determined to prepay its outstanding indebtedness in addition toconducted a 4% prepayment fee and accrued but unpaid interest in the total amount of approximately $36.5 million on August 11, 2021. Following the prepayment, the Amended and Restated Credit Agreement and the security interests thereunder were terminated. As a result of the foregoing, the Company determined that its projected cash flows from operations, combined with its cash balance after the debt prepayment, would not provide sufficient resources to fund its existing operations, for at least the next twelve months from the issuance of these financial statements.

As discussed above, the Company completed a strategic review of its businesscommercial and research and development portfolio to determine how to optimally deploy capital and drive shareholder value. Following its review, the Company initiated a process to explore a possible sale or license of its minocycline franchise,MST Franchise, including AMZEEQ, ZILXI, FCD105 and the underlying MST platform. The Company willMolecule Stabilizing Technology platform and refocus its resources on its immuno-inflammatory development programs. As a result of this decision, the Company restructured its operations and reduced its workforce, which lowered operating costs. In January 2022, the Company sold its MST Franchise.
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In March 2022, the Company entered into an equity purchase agreement (the “Equity Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”) which provides that, upon the terms and subject to the conditions and limitations set forth therein, the Company may sell to Lincoln Park up to $30.0 million of shares of its common stock over the 36-month term of the Equity Purchase Agreement. The Company has not made any sales pursuant to the Equity Purchase Agreement to date.
As described above, the Company has refocused its limited resources on its immuno-inflammatory pipeline and intends to support theincluding FMX114 and the BET inhibitor development programs. Research and development activities for these programs, including preclinical and clinical testing of the Company’s drugCompany's product candidates, will require significant additional financing. The future viability of the Company is dependent onand its ability to successfully pivot to its research and development business strategy and develop commercially viable drug candidates and raise additional capital to finance its operations.The Company’s ability to continue as a going concern is contingentdependent on its ability to sell or license its minocycline franchise, develop future commercially viable products and/or to raise sufficient working capital through either debt or equity financing.financings to fund its operations and successfully develop commercially viable product candidates. There is no assurance the Company will be able to achieve these objectives under acceptable terms or at all.

In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’sits ability to continue as a going concern within one year after the date that its unaudited interim condensed consolidated financial statements are issued. The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern
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and contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. The Company’sCompany's ability to continue as a going concern is expected to be impacted by the outcome of the plans outlined above, including the successful sale or license ofCompany's ability to raise additional capital to fund its minocycline franchise, positiveoperations, results from clinical trials for FMX114, and the successful development and positive results from clinical trials for the BET inhibitor programs. Based on its current plans and assumptions, the Company believes that absent sufficient proceeds received from a salefinancing transactions or license of the minocycline franchise, business development transactions, or financing transactions, which are all beyond its control, itthe Company will not have sufficient cash and cash equivalents to fund its operations beyond one year from the issuance of these financial statements. This assumption does not include proceeds that can be drawn from Lincoln Park. Accordingly, the Company will, over the course of the next twelve months, require significant additional financing to continue its operations. Eachoperations, including potentially selling a significant amount of these factors areshares pursuant to the Equity Purchase Agreement. In addition, the amount of proceeds the Company may be able to raise pursuant to its existing shelf registration statement on Form S-3 may be limited. As of the filing of this Quarterly Report on Form 10-Q, the Company is subject to uncertainty, and therefore,the general instructions of Form S-3 known as the "baby shelf rules." Under these instructions, the amount of funds the Company can raise through primary public offerings of securities in any 12-month period using its registration statement on Form S-3 is limited to one-third of the aggregate market value of the shares of its common stock held by non-affiliates of the Company. Therefore, the Company will be limited in the amount of proceeds it is able to raise by selling shares of its common stock using its Form S-3 until such time as its public float exceeds $75.0 million. These factors raise substantial doubt about the Company’sCompany's ability to continue as a going concern. Failure to successfully complete a sale or license of the minocycline franchise, develop the above noted assets, and receive additional financing will require the Company to delay, scale back or otherwise modify its business and its research and development activities and other operations. The accompanying financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern.


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
a.Basis of Presentation
The unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial statements. In the opinion of management, the Company has made all necessary adjustments, which include normal recurring adjustments necessary for a fair statement of the Company’s unaudited condensed consolidated financial position, results of operations, cash flow and statement of stockholders' equity for the interim periods presented. Certain information and disclosures normally included in the annual audited consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Certain prior period amounts have been reclassified to conform to current year presentation.
These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements contained in the Company's CurrentAnnual Report on Form 8-K dated August 12, 2021.10-K for the year ended December 31, 2021, as filed with the SEC on March 17, 2022.
The results for the three and nine months ended September 30, 2021March 31, 2022 are not necessarily indicative of the results expected for the year ending December 31, 2021.2022.

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b.Principles of Consolidation
The unaudited interim condensed consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany balances and transactions have been eliminated upon consolidation.
c.Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and reported amounts of income and expenses during the reporting periods. Significant items subject to such estimates and assumptions include accountingresearch and development accruals and valuation assumptions for business combinations, impairments of goodwill and intangible assets and revenue recognition.share based compensation. Actual results could differ from the Company’s estimates.
The COVID-19 pandemic and government measures taken in response to the pandemic have had a negative impact on the Company's operations.commercial operations in 2021. Access to healthcare providers has beenwas limited, which has negatively impacted sales and the Company's ability to execute its commercial strategy with respect to AMZEEQ and ZILXI. The lengthZILXI prior to the sale of time and extentthe assets to which the COVID-19 pandemic will directly or indirectly impact the Company's business, results of operations and financial condition and liquidity will depend on future developments that are highly uncertain, subject to change and will continue to evolve with geographical re-openings, surgesJourney in cases, the emergence of new strains and the vaccination effort.January 2022. In addition, the Company further assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of September 30, 2021March 31, 2022 and through the date of this report. The accounting matters assessed included, but were not limited to, the Company’s allowance for doubtful accounts and credit losses, inventory and related reserves, impairments of long-lived assets and revenue recognition.In 2020, the Company recorded impairments of goodwill and certain indefinite-lived intangible assets; however, these were unrelated to the impact of COVID-19 (See "Note 3 - Business Combination" for more information).The Company’s future assessmentissuance of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to the Company’scondensed consolidated financial statements in future reporting periods
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statements.
d.Business AcquisitionInventories
The Company’s unaudited interim condensed consolidated financial statements includeAs of December 31, 2021 and January 12, 2022, the operations of an acquired business afterdate the completioninventory was sold as part of the acquisition.sale of the MST franchise, inventories were stated at the lower of cost and net realizable value with cost determined on a first-in, first-out basis by product. The Company accounts for acquired businesses usingcapitalized inventory costs associated with products following regulatory approval when future commercialization is considered probable and the acquisition methodfuture economic benefit was expected to be realized. The Company periodically reviewed its inventory levels and, if necessary, wrote down inventory that was expected to expire prior to being sold, inventory in excess of accounting, which requires, among other things,expected sales requirements and inventory that most assets acquiredfailed to meet commercial sale specifications, with a corresponding charge to cost of goods sold. There were no material write-downs during the three months ended March 31, 2021 or in the period from December 31, 2021 and liabilities assumed be recognized at their estimated fair values asJanuary 12, 2022. As a result of the acquisition date and that the fair value of In-Process Research and Development and Goodwill be recorded on the balance sheet. Transaction costs are expensed as incurred.
Amounts recorded in connection with an acquisition can result from a complex series of judgments about future events and uncertainties and can rely heavily on estimates and assumptions.
The Company is required to measure certain assets and liabilities at fair value, either upon initial recognition or for subsequent accounting or reporting.  For example, the Company uses fair value in the initial recognition of net assets acquired in a business combination and when measuring impairment losses.  The Company estimates fair value using an exit price approach, which requires, among other things, that Company determine the price that would be received to sell an asset or paid to transfer a liability in an orderly market. The determination of an exit price is considered from the perspective of market participants, considering the highest and best use of non-financial assets and, for liabilities, assuming that the risk of non-performance will be the same before and after the transfer.
When estimating fair value, depending on the nature and complexitysale of the asset or liability, the Company may use one or all of the following techniques:
•Income approach, which is based on the present value of a future stream of net cash flows.
•Market approach, which is based on market prices and other information from market transactions involving identical or comparable assets or liabilities.
•Cost approach, which is based on the cost to acquire or construct comparable assets, less an allowance for functional and/or economic obsolescence.
Our fair value methodologies depend on the following types of inputs:
•Quoted prices for identical assets or liabilities in active markets (Level 1 inputs).
•Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are directly or indirectly observable, or inputs that are derived principally from, or corroborated by, observable market data by correlation or other means (Level 2 inputs).
•Unobservable inputs that reflect estimates and assumptions (Level 3 inputs).
A single estimate of fair value can result from a complex series of judgments about future events and uncertainties and can rely heavily on estimates and assumptions.
Asset Impairment
The Company reviews all of its long-lived assets for impairment indicators throughout the year. Impairment testing is performed for indefinite-lived intangible assets annually (or sooner if warranted) and for all other long-lived assets whenever impairment indicators are present. When necessary, the Company records charges for impairments of long-lived assets for the amount by which the fair value is less than the carrying value of these assets.MST Franchise there were no inventory balances at March 31, 2022.
e.Revenue Recognition
As a result of the disposition of the MST Franchise in January 2022, the Company no longer has any revenue generating products; however, it still receives certain royalty revenues (see Note 3 Discontinued Operations). The Company accounts for its revenue transactions under FASB ASCFinancial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers.Customers. In accordance with ASC Topic 606, the Company recognizes revenues when its customers obtain control of its product for an amount that reflects the consideration it expects to receive from its customers in exchange for that product. To determine revenue recognition for contracts that are determined to be in scope of ASC Topic 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it
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transfers to the customer. Once the contract is determined to be within the scope of ASC Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when such performance obligation is satisfied.
The Company’s customers includewere a limited number of national and select regional wholesalers (the “distributors”) and certain independent and specialty pharmacies (together, the “customers”). These distributors would subsequently resell the product, primarily to retail pharmacies that dispense the product to patients. Net product revenue iswas typically recognized when customers obtainobtained control of the Company’s products, which occursoccurred at a point in time, typically upon delivery of product to the customers. The Company evaluatesevaluated the creditworthiness of its customers to determine whether it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur. The Company doesdid not assess whether a contract hashad a significant financing component if the expectation iswas such that the period between the transfer of the promised goods to the customer and the receipt of payment willwould be less than one year. Standard credit terms dodid not exceed 75 days. The Company expensesexpensed incremental costs of obtaining a contract as and when incurred if the expected amortization period of
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the asset that would have been recognized is one year or less or the amount is immaterial. Shipping and handling costs related to the Company’s product sales arewere included in selling, general and administrative expenses.
The Company’s net product revenues through September 30, 2021 were generated through sales of AMZEEQ, which was approved by the FDA in October 2019 and was commercially launched in the United States in January 2020, and ZILXI, which was approved by the FDA in May 2020 and was commercially launched in the United States in October 2020. The Company sold the MST Franchise on January 12, 2022 and, as such, the Company no longer generates revenue from the sale of these products. Product revenue is recorded net of distribution fees, trade discounts, allowances, rebates, copay program coupons, chargebacks, estimated returns and other incentives. These reserves are classified as either reductions of accounts receivable or as current liabilities. The estimates of reserves established for variable consideration reflect current contractual and statutory requirements, known market events and trends, industry data and forecasted customer mix. The transaction price, which includes variable consideration reflecting the impact of discounts and allowances, may be subject to constraint and is included in the net product revenues only to the extent that it is probable that a significant reversal of the amount of the cumulative revenues recognized will not occur in a future period. Actual amounts may ultimately differ from these estimates. If actual results vary, estimates may be adjusted in the period such change in estimate becomes known, which could have an impact on earnings in the period of adjustment. See “Note 4 – Revenue Recognition” for more information.
On April 23, 2020,The Company is entitled to royalty payments with respect to sales of a product developed by a customer in collaboration with the Company. Royalties are recognized as the products developed by a customer in collaboration with the Company announced that it entered into a license agreement with Cutia for our minocycline products and product candidate, if approved, on an exclusive basis in Greater China. Under the terms of the agreement, Cutia will have an exclusive license to obtain regulatory approval of and commercialize AMZEEQ, ZILXI and, if approved in the U.S., FCD105 in the Greater China territory. The Company will supply the finished licensed products to Cutia for clinical and commercial use. The Company received an upfront cash payment of $10.0 million in 2020 ($6.0 million received in the three months ended June 30, 2020 and $4.0 million received in the three months ended September 30, 2020) and will be eligible to receive an additional $1.0 million payment upon the receipt of marketing approval in China of the first licensed product. The Company will also receive royalties on net sales of any licensed products. The license is determined to be a distinct performance obligation of the arrangement, therefore the Company recognized the revenues from the upfront license fee when the license was transferred to the licensee and the licensee was able to use and benefit from the license. See "Note 4 - Revenue Recognition" for more information.are sold.
f.Allowance for credit lossesdoubtful accounts
An allowance for doubtful accounts is maintained for potential credit losses based on the aging of trade receivables, historical bad debts experience and changes in customer payment patterns. Trade receivable balances are written off against the allowance when it is deemed probable that the receivable will not be collected. Trade receivables, net are stated net of reserves for certain sales allowances and provisions for doubtful accounts. Provisions for doubtful accounts were not material for the three and nine months ended September 30, 2021 and September 30, 2020.March 31, 2022 or March 31, 2021.
g.Fair value measurement
Fair value is based on the price that would be received from the sale of an asset or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, the guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described as follows:
Level 1:    Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
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Level 2:    Observable prices that are based on inputs not quoted on active markets, but corroborated by market data or active market data of similar or identical assets or liabilities.
Level 3:    Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and considers counterparty credit risk in its assessment of fair value. The Company did not have any assets or liabilities which were required to be measured at fair value as of March 31, 2022 or December 31, 2021.
h.LossIncome (loss) per share
Net lossincome (loss) per share, basic and diluted, is computed on the basis of the net loss from continuing operations for the period divided by the weighted average number of common shares outstanding during the period. Diluted net loss per share is based upon the weighted average number of common stock and of common stock equivalents outstanding when dilutive. Common stock equivalents include outstanding stock options and warrants which are included under the treasury share method when dilutive.
The calculation of the weighted-average number of common stock outstanding during the period in which the reverse merger occured was based on:
a.The number of common stock outstanding from the beginning of that period to the merge date was computed on the basis of the weighted-average number of common stock of the legal acquiree (accounting acquirer) outstanding during the period multiplied by the exchange ratio established in the merger agreement
b.The number of common stock outstanding from the merge date to the end of that period was the actual number of common stock of the legal acquirer (the accounting acquiree) outstanding during that period.
The following weighted average stock options, restricted stock units (“RSUs”), warrants and incremental shares to be issued under the employee stock purchase plan (“ESPP”) were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented (share data):
Three months ended September 30Nine months ended September 30
2021202020212020
Outstanding stock options, RSUs and shares under the ESPP5,223,466 5,191,299 5,303,135 3,756,049 
Warrants495,165 495,165 495,165 377,542 
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In addition to
Three months ended March 31
20222021
Outstanding stock options, RSUs and shares under the ESPP6,346,175 5,321,517 
Warrants495,165 495,165 
j.Discontinued operations
The Company accounted for the above,sale of the CSR was excludedMST Franchise in accordance with ASC 205, Discontinued Operations, and ASU No. 2014-08, Reporting of Discontinued Operations and Disclosures of Disposals of Components of an Entity. The Company followed the held-for-sale criteria as defined in ASC 360 Property, Plant and Equipment and ASC 205. ASC 205 requires that a component of an entity that has been disposed of or is classified as held for sale and has operations and cash flows that can be clearly distinguished from the calculationrest of the 2020 diluted net loss per share because its effect would haveentity be reported as assets held for sale and discontinued operations. In the period a component of an entity has been anti-dilutivedisposed of or classified as held for sale, the results of operations for the periods presented are reclassified into separate line items in the consolidated statements of operations. Assets and liabilities are also reclassified into separate line items on the related unaudited condensed consolidated balance sheets for the periods presented. On April 6, 2020,Non-cash items presented in the statement of cash flows and related to discontinued operations are presented in Note 3 - Discontinued Operations. ASU 2014-08 requires that only a disposal of a component of an entity, or a group of components of an entity, that represents a strategic shift that has, or will have, a major effect on the reporting entity’s operations and financial results be reported in the financial statements as discontinued operations. ASU 2014-08 also provides guidance on the financial statement presentations and disclosures of discontinued operations.

Due to the sale of the MST Franchise during the first quarter of 2022, in accordance with ASC 205, the Company announced that eachhas classified the results of Menlo’s Phase III PN Trials (study MTI-105the MST Franchise as discontinued operations in its unaudited condensed consolidated statements of operations and study MTI-106) did not meet their respective primary endpointcash flows for all periods presented, see Note 3, Discontinued Operations. All disposed assets and liabilities associated with the MST Franchise were therefore classified as assets and liabilities of demonstrating statistically significant reduction in pruritus in patients treated with serlopitant compared to placebo based upon a 4-point improvement responder analysis. Each CSR was converted into 1.2082 shares of Menlo common stock, resulting in an effective exchange ratio (the "Exchange Ratio")discontinued operations in the Merger of 1.8006 shares of Menlo common stockCompany's unaudited condensed consolidated balance sheets for each Foamix ordinary share. The conversion of the CSR also affectedperiods presented. All amounts included in the Exchange Ratio ofnotes to the pre-Merger Foamix equity awards and warrants outstanding as of March 9, 2020. See "Note 3 - Business Combination" for more information.unaudited condensed consolidated financial statements relate to continuing operations unless otherwise noted.
j.k.Newly issued and recently adopted accounting pronouncements
Recent Accounting Guidance Issued:
In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes," which clarifies and simplifies certain aspects of the accounting for income taxes. The standard is effective for years beginning after December 15, 2020, and interim periods beginning after December 15, 2020. This guidance became effective during the first quarter of 2021. The adoption of the new standard did not have a material impact to the Company's consolidated financial statements.
In March 2020, the FASB issued Accounting Standards UpdateASU No. 2020-4, "Reference2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting" (ASU 2020-4)Reporting (Topic 848)", which provides guidance to alleviate the burden in accounting for reference rate reform by allowing certain expedients and exceptions in applying generally accepted accounting principles to contracts, hedging relationships, and other transactions impacted by reference rate reform. The provisions of ASU 2020-42020-04 apply only to those transactions that reference LIBOR or another reference rate expected to be
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discontinued due to reference rate reform. Adoption of the provisions of ASU 2020-42020-04 are optional and are effective from March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact of ASU 2020-42020-04 on its consolidated financial statements. Currently, the Company does not expect the adoption of the new standard to have a material impact to the consolidated financial statements.
In June 2016, the FASB issued Accounting Standards UpdateASU No. 2016-13, “Financial“Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (ASU 2016-13), which requires companies to measure credit losses of financial instruments, including customer accounts receivable, utilizing a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Subsequent to the issuance of ASU 2016-13, the FASB issued several additional Accounting Standard UpdatesASUs to clarify implementation guidance, provide narrow-scope improvements and provide additional disclosure guidance. As a smaller reporting company, the Company will adopt ASU 2016-13 effective January 1, 2023 or at such time where it is no longer a smaller reporting company. Currently, the Company does not expect the adoption of the new standard to have a material impact to the consolidated financial statements.
NOTE 3 – BUSINESS COMBINATIONDISCONTINUED OPERATIONS
On November 10, 2019, MenloJanuary 12, 2022, the Company entered into the MergerPurchase Agreement with Foamix, and Merger Sub, a direct and wholly-owned Israeli subsidiary of Menlo. On March 9, 2020,Journey pursuant to which the Merger was completed and Foamix is now a wholly-owned subsidiaryCompany sold its MST Franchise to Journey. The Company has determined that the sale of the Company.
On the Effective Date, each ordinary share of Foamix was exchanged for 0.5924 shares of common stock of Menlo. In addition,MST Franchise represents a strategic shift that had a major effect on the Effective Date, Foamix shareholders received 1 contingent stock right (a “CSR”)business and therefore the MST Franchise met the criteria for each Foamix ordinary share held by them. The CSRs were issued pursuant toclassification as discontinued operations at March 31, 2022. Accordingly the Contingent Stock Rights Agreement (the “CSR Agreement”), datedMST Franchise is reported as of March 9, 2020, by and between Menlo and American Stock Transfer & Trust Company, LLC, and represented the non-transferable contractual right to receive shares of common stock of Menlo depending on the results of Menlo’s phase III clinical trials evaluating the safety and efficacy of once daily oral serlopitant for the treatment of prurigo nodularis (the “Phase III PN Trials”).
On April 6, 2020, the Company announced that each of Menlo’s Phase III PN Trials (study MTI-105 and study MTI-106) did not meet their respective primary endpoint of demonstrating statistically significant reductiondiscontinued operations in pruritus in patients treatedaccordance with serlopitant compared to placebo based upon a 4-point improvement responder analysis. Accordingly, on April 6, 2020, pursuant to the terms of the CSR Agreement, each CSR was converted into 1.2082 additional shares of Menlo common stock, resulting in an effective Exchange Ratio in the Merger of 1.8006 shares of Menlo common stock for each Foamix ordinary share. The CSR conversion resulted in the issuance and delivery of 74,544,413 additional shares of Menlo common stock underlying the CSRs, adjusted retrospectively to 18,636,103 shares of common stock upon the reverse stock split effective February 12, 2021. Following the conversion of the CSRs, pre-Merger Foamix shareholders and pre-Merger Menlo stockholders owned approximately 82% and 18% of post-Merger Menlo, respectively, each calculated on a fully diluted basis.
For accounting purposes, the Merger is treated as a “reverse acquisition” under U.S. GAAP and Foamix is considered the accounting acquirer. Accordingly, upon consummation of the Merger, the historical financial statements of Foamix became the Company’s historical financial statements, and the historical financial statements of Foamix are included in the comparative prior periods.
Under reverse acquisition accounting, the U.S. dollar amount for common stock in the financial statements is based on the value and number of shares issued by Menlo (reflecting the legal structure of Menlo as the legal acquirer) on the Merger date plus subsequent shares issued by the Company. The amounts in additional paid-in capital represent that of Foamix and include the fair value of shares deemed for accounting purposes to have been issued by Foamix on the merger date and the fair value of the Menlo equity awards included in the purchase price calculation. The Foamix additional paid-in capital was also adjusted for the difference between the number of common stock and the historical number of shares of Foamix’s ordinary shares.
During the nine months ended September 30, 2020, the Company incurred transaction costs of approximately $11.7 million, which are recorded in the unaudited condensed consolidated statements of operations and comprehensive income. This amount includes $8.1 million of severance benefits for employees terminated after the Effective Date.
Purchase Price
The following is the Merger Consideration (as defined in the Merger Agreement) was transferred to effect the Merger:ASC 205-20,
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(in thousands)Total
Deemed (for accounting purposes only) issuance of Foamix sharesDiscontinued Operations. Amounts applicable to Menlo stockholders$123,757 
Deemed (for accounting purposes only) conversion of Menlo equity awards7,322 
Total consideration*$131,079 
* This amount reflects total consideration prior years have been recast to reduction in respectconform to the discontinued operations presentation. The Company recognized a gain on the sale of the CSRs (which had a fair valueMST Franchise upon closing.
The following table presents the combined results of $19.6 million asdiscontinued operations of the Merger Date) that were issued to Foamix shareholders and that reducedMST Franchise:
(in thousands)Three months ended March 31, 2022Three months ended March 31, 2021
Product sales$106 $3,889 
Cost of goods sold80 601 
Operating expenses:
Research and development— 2,078 
Selling, general and administrative(333)10,884 
Total operating expenses(333)12,962 
Income (loss) from discontinued operations359 (9,674)
Gain on the sale of the MST Franchise13,005 — 
Income (loss) from discontinued operations, before income taxes13,364 (9,674)
Income tax expense— — 
Net income (loss) from discontinued operations$13,364 $(9,674)
The following table presents the Menlo stockholders’ relative ownership in the combined company. If the effectcarrying amounts of the CSRs is included,classes of assets and liabilities related to the total consideration deemed paid by Foamix, asdiscontinued operations of the accounting acquirer, to Menlo stockholders and equity award holders in the Merger would be reduced to approximately $111.4 million, as shown in the purchase price allocation table below.
Based on Foamix’s closing share price of $2.99MST Franchise as of March 9, 2020, the Merger Consideration under reverse acquisition accounting was approximately $131.1 million, consisting of $123.8 million for the deemed (for accounting purposes only) issuance of 41.4 million Foamix shares assuming that no upwards adjustment was made to the Exchange Ratio relating to the CSR,31, 2022 and $7.3 million for the fair value of Menlo equity awards deemed (for accounting purposes only) to be converted into Foamix equity awards. The converted stock options represent the fair value of such options attributable to service prior to the Merger date using the Foamix closing share price of $2.99 as of March 9, 2020 as an input to the Black Scholes valuation model to determine the fair value of the options.
Purchase Price Allocation
The Company completed its analysis of the allocation of the purchase price to the fair values of assets acquired and liabilities assumed as follows:December 31, 2021:
(in thousands)March 9, 2020
Cash and cash equivalents$38,641 
Investment in marketable securities22,703 
Prepaid expenses and other current assets1,581 
In-process research and development49,800 
Goodwill4,545 
Total assets117,270 
Current liabilities(5,827)
Total liabilities(5,827)
Purchase price*$111,443 
* Reflects reduction in the purchase price deemed paid to Menlo stockholders in the Merger on the assumption that the CSRs, in an aggregate value of $19.6 million, convert into additional shares of the combined company for the Foamix shareholders, thereby resulting in a lower percentage of the combined company’s outstanding shares being owned by Menlo stockholders following the Merger.
Goodwill
Goodwill is recorded with the acquisition of a business and is calculated as the difference between the acquisition date fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed. Goodwill is not amortized but is tested for impairment at least annually. None of the goodwill recognized is expected to be deductible for income tax purposes. The purchase price of the transaction and the excess purchase price over the fair value of the identifiable net assets acquired, are calculated as follows:
(in thousands)March 9, 202031, 2022December 31, 2021
Purchase priceCurrent assets:
Inventory$111,443— $7,291 
Less: fair value of netPrepaid expenses and other assets acquired, including other identifiable intangibles(106,898)— 554 
GoodwillTotal current assets of discontinued operations$4,545— $7,845 
On April 6, 2020,The following table presents non-cash items related to discontinued operations, which are included in the Company announced that eachCompany's unaudited condensed consolidated statement of Menlo’s Phase III PN Trials (study MTI-105cash flows for the three months ended March 31, 2022 and study MTI-106) did not meet their respective primary endpoint of demonstrating statistically significant reduction in pruritus in patients treated with serlopitant compared2021:
(in thousands)Three months ended March 31, 2022Three months ended March 31, 2021
Cash Flows From Operating Activities:
Stock-based compensation (income) expense*$(352)$382 
(Gain) on the sale of the MST Franchise(13,005)— 
Total non-cash items of discontinued operations$(13,357)$382 
Supplemental disclosure of cash flow information:
Amount due from sale of MST Franchise$5,000 $— 
*Income from stock based compensation is related to placebo based upon a 4-point improvement responder analysis. The Company does not intend to further pursue the development of serlopitant. As such, the Company recorded a full impairment charge of $4.5 million related toforfeitures.





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goodwill in its unaudited condensed consolidated statements
The following table presents the gain on the sale of operations and comprehensive loss for the nine months ended September 30, 2020. There were no impairment charges in the three and nine months ended September 30, 2021.
In-Process Research and Development (“IPR&D")MST Franchise:
The IPR&D recognized relates to Menlo’s once-daily oral serlopitant for the treatment of pruritus (itch) associated with PN that has not reached technological feasibility as follows:
(in thousands)March 31, 2022
Intangible assetEstimated Fair Value
Acquired indefinite life intangible assets*Cash proceeds$49,80020,000 
FairProceeds to be paid in January 20235,000
25,000 
Less transaction costs:(4,247)
Less book value of identified intangiblesold assets(7,748)
Gain on sale, before income taxes13,005
Income tax expense— 
Gain on sale net of tax$49,80013,005 
* Represents acquired IPR&D assets which are initially recognized at fair valueIn accordance with ASC 205-20, only expenses specifically identifiable and are classified as indefinite-lived assets until the successful completion or abandonment of the associated research and development efforts. Accordingly, duringrelated to a business to be disposed may be presented in discontinued operations. As such, the research and development, period, these assets will not be amortized into earnings; instead these assets will be subjectmarketing, selling and general and administrative expenses in discontinued operations include corporate costs incurred directly to periodic impairment testing.solely support the MST Franchise.
The fair valueCompany has also entered into a Transition Services Agreement ("TSA") with Journey, through which the Company will provide transitional services related to discovery, clinical development, technical operations, commercial and general and administrative related activities into early 2023. Amounts to be earned under the TSA are anticipated to be immaterial.

The milestone payment for sales of IPR&DZILXI, AMZEEQ and FCD105 represent contingent consideration. Contingent consideration has been estimated utilizingaccounted for as a multi-period excess earnings method under the income approach, which reflects the present value of the projected cash flows that are expected to be generated, less charges representing the contribution of other assets to those cash flows that use projected cash flows with and without the intangible asset in place. 
On April 6, 2020, the Company announced that each of Menlo’s Phase III PN Trials (study MTI-105 and study MTI-106) did not meet their respective primary endpoint of demonstrating statistically significant reduction in pruritus in patients treated with serlopitant compared to placebo based upon a 4-point improvement responder analysis. The Company does not intend to further pursue the development of serlopitant. As such, the Company recorded a full impairment charge of $49.8 million related to the IPR&D asset in its unaudited condensed consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2020. There were no impairment charges in the three and nine months ended September 30, 2021.
CSR
The CSR was issued pursuant to the CSR Agreement, dated as of March 9, 2020, by and between Menlo and American Stock Transfer & Trust Company, LLC, and represented the non-transferable contractual right to receive shares of common stock of Menlo depending on the results of Menlo’s Phase III PN Trials. The Company recognized a liability of $19.6 million in the unaudited condensed consolidated balance sheet as of March 9, 2020. The liability was measured at fair value and categorized as level 3 as of the acquisition dategain contingency in accordance with ASC 805-31-25-5 and subsequently at each reporting date thereafter. The fair value of the CSR was estimated as the incremental value that Foamix would be able to achieve on a probability weighted basis assuming three different potential probabilities of the following scenarios: (a) serlopitant significance was achieved in both Phase III PN Trials (b) serlopitant significance was achieved in only one Phase III PN Trial and (c) serlopitant significance was not achieved or was not determined on or before May 31, 2020.
On April 6, 2020, the Company announced that each of Menlo’s Phase III PN Trials (study MTI-105 and study MTI-106) did not meet their respective primary endpoint of demonstrating statistically significant reduction in pruritus in patients treated with serlopitant compared to placebo based upon a 4-point improvement responder analysis. Accordingly, on April 6, 2020, pursuant to the terms of the CSR Agreement, each CSR was converted into 1.2082 additional shares of Menlo common stock, resulting in an effective Exchange Ratio in the Merger of 1.8006 shares of Menlo common stock for each Foamix ordinary share. The CSR conversion resulted in the issuance and delivery of 74,544,413 additional shares of Menlo common stock underlying the CSRs, adjusted retrospectively to 18,636,103 shares of common stock upon the reverse stock split effective February 12, 2021. Following the conversion of the CSRs, pre-Merger Foamix shareholders and pre-Merger Menlo stockholders own approximately 82% and 18% of post-Merger Menlo, respectively, each calculated on a fully diluted basis. The conversion of the CSR also affected the Exchange Ratio of the pre-Merger Foamix equity awards and warrants outstanding as of March 9, 2020 and increased the awards available for grant under the Company's equity plan.
The contingent consideration associated with the CSR was recognized and measured at fair value as of the acquisition date in accordance with ASC 805-30-25-5. An acquirer's obligation to pay contingent consideration should be classified as a liability or equity in accordance with ASC 480, Distinguishing Liabilities from Equity, ASC 815 Derivatives and Hedging, and other applicable U.S. GAAP. The contingent consideration associated with the CSR was initially measured at fair value and will subsequently be measured at fair value at each reporting date. The CSR was classified as a liability, as it is settled by issuing a variable number of the Company's common stock. On April 6, 2020, the Company recorded $84.7 million of expense in its
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unaudited condensed consolidated statements of operations and comprehensive loss to remeasure the CSR liability in its consolidated balance sheet to its fair value of $104.4 million (calculated based on 74,544,413 shares issued, adjusted retrospectively to 18,636,103 shares of common stock upon the reverse stock split effective February 12, 2021, and a share price of $1.40 on April 6, 2020) and then settled in connection with the issuance of shares.
Pro Forma
The actual Menlo net loss included in the Company’s unaudited condensed consolidated statements of operations and comprehensive income for the three and nine months ended September 30, 2020 (for the period from the March 9, 2020, the Effective Date, through September 30, 2020, which are not indicative of the results to be expected for a full year) and the supplemental unaudited pro forma revenue and net loss of the combined entity had the acquisition been completed on January 1, 2019 are as follows:
Actual Menlo results of operations included in the unaudited condensed consolidated statement of operation for the three and nine months ended September 30, 2020:
(in thousands)Three months ended September 30, 2020Nine months ended September 30, 2020
(Unaudited)
Revenues$— $— 
Loss attributable to Menlo$4,100 $23,737 

Three months ended
September 30, 2020		Nine months ended
September 30, 2020
(in thousands, except per share data)(Unaudited)(Unaudited)
SUPPLEMENTAL PRO FORMA COMBINED RESULTS OF OPERATIONS:
Revenues$3,269 $16,707 
Net loss$24,912 $229,994 
Loss per share - basic and diluted$0.59 $7.89 
Adjustments to the supplemental pro forma combined results of operations, included in the above, are as follows:
Transaction costs$— $(14,931)
Acceleration of stock based compensation— (7,199)
Total Adjustments$— $(22,130)

These unaudited pro forma condensed consolidated financial results have been prepared for illustrative purposes only and do not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred on the first day of the earliest period presented, or of future results of the consolidated entities. The unaudited pro forma condensed consolidated financial information does not reflect any operating efficiencies and cost savings that may be realized from the integration of the Merger.
NOTE 4 – REVENUE RECOGNITION
Product Sales
Product revenues for the three and nine months ended September 30, 2021 were generated from sales of AMZEEQ and ZILXI. The Company’s customers include a limited number of national and select regional distributors and certain independent and specialty pharmacies, together (the "customers"). The distributors subsequently resell the product, primarily to retail pharmacies that dispense the product to patients. Net product revenue is typically recognized when customers obtain control of the Company’s products, which occurs at a point in time, typically upon delivery of product to the customers. For the three months ended September 30, 2021, there were three major customers that each accounted for more than 10% of total product revenues and, as a group, represented 52% of total product revenues. For the nine months ended September 30, 2021, there were four major customers that each accounted for more than 10% of total product revenues and, as a group, represented 66%
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of total product revenues. For the three months ended September 30, 2020, there were three major customers that each accounted for more than 10% of total product revenues and as a group, represented 100% of total product revenues. For the nine months ended September 30, 2020, there were three major customers that each accounted for more than 10% of total product revenues and as a group, represented 99% of total product revenues.
Product Sales Provisions
Product revenue is recorded net of distribution fees, trade discounts, allowances, rebates, chargebacks, estimated returns and other incentives, described below.450, The Company calculates its net product revenue based on the wholesale acquisition cost that the Company charges its customers less provisions for (i) trade discounts and allowances, such as distributor fees and discounts for prompt payment, (ii) estimated rebates to third-party payers, patient co-pay assistance programs, chargebacks and other discount programs and (iii) reserves for expected product returns.
Provisions for distribution fees, trade discounts and chargebacks are reflected as a reduction to trade receivables, net on the unaudited condensed consolidated balance sheet. All other provisions, including rebates, other discounts and return provisions are reflected as a liability within accrued expenses on the unaudited condensed consolidated balance sheet. Provisions for revenue reserves described below reduced product revenues by $16.6 million and $11.0 million for the three months ended September 30, 2021 and September 30, 2020, respectively. Provisions for revenue reserves described below reduced product revenues by $48.4 million and $25.1 million for the nine months ended September 30, 2021 and September 30, 2020, respectively. The revenue reserve accrual at September 30, 2021 and December 31, 2020 was $7.3 million and $5.8 million, respectively, reflected in accrued expense in the consolidated balance sheet.
Distribution Fees and Trade Discounts and Allowances: The Company pays fees for distribution services and for certain data that distributors provide to the Company and generally provides discounts on sales to its distributors for prompt payment. These fees and discounts are contractual in nature and the Company expects its distributors to earn these fees and discounts, and accordingly deducts the full amount of these fees and discounts from its gross product revenues at the time such revenues are recognized.
Rebates, Chargebacks and Other Discounts: Product sales made under managed-care and governmental pricing programs in the U.S. are subject to rebates. Managed Care rebates relate to contractual agreements to sell products to managed care organizations and pharmacy benefit managers at contractual rebate percentages in exchange for volume and/or market share. Chargebacks relate to contractual agreements to sell products to government agencies and other indirect customers at contractual prices that are lower than the list prices the Company charges wholesalers. When these government agencies or other indirect customers purchase products through wholesalers at these reduced prices, the wholesaler charges the Company for the difference between the prices they paid the Company and the prices at which they sold the products to the indirect customers. The Company estimates the rebates and chargebacks it expects to be obligated to provide and deducts these estimated amounts from its gross product revenue at the time the revenue is recognized. The Company estimates the rebates and chargebacks that it expects to be obligated to provide based upon (i) the Company's current contracts and negotiations, (ii) estimates regarding the payer mix based on third-party data and utilization, (iii) inventory held by distributors and (iv) estimates of inventory held at the retail channel. Other discounts include the Company’s co-pay assistance coupon programs for commercially-insured patients meeting certain eligibility requirements. The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that the Company expects to pay associated with product that has been recognized as revenue.
Product Returns: Consistent with industry practice, customers are generally allowed to return products within a specified period of time before and after its expiration date. The Company estimates the amount of product that will be returned and deducts these estimated amounts from its gross revenue at the time the revenue is recognized. The information utilized to estimate the returns provision includes: (i) historical industry information regarding rates for comparable pharmaceutical products and product portfoliosContingencies, (ii) external data with respect to inventory levels in the wholesale distribution channel, (iii) external data with respect to prescription demand for products and (iv) remaining shelf lives of products at the date of sale. The Company estimates that approximately 2% of product will be returned.
License Revenues
On April 23, 2020, the Company announced that it entered into a license agreement with Cutia for AMZEEQ as well as certain of the Company's other topical minocycline product candidates, once approved, on an exclusive basis in Greater China. Under the terms of the agreement, Cutia will have an exclusive license to obtain regulatory approval of and commercialize AMZEEQ, ZILXI and, if approved in the U.S., FCD105 in the Greater China territory. The Company will supply the finished licensed products to Cutia for clinical and commercial use. Outside of the license transferred, the Company does not have any additional performance obligations under the arrangement. In exchange for the license, the Company received an upfront cash payment of
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$10.0 million in 2020 ($6.0 million received in the three months ended June 30, 2020 and $4.0 million received in the three months ended September 30, 2020) and will be eligible to receive an additional $1.0 million payment upon the receipt of marketing approval in China of the first licensed product. The license is considered functional IP as the licensee is able to use and benefit from the license without the continued involvement of the Company. There was no license revenue in the three months ended September 30, 2021. The Company recorded $10.0 million of license revenue in the nine months ended September 30, 2020. The Company will also receive royalties on net sales of any licensed products, such royalties will be recognized in earnings in the period the sales or usage occurs under the royalties sales-and usage based exception. The Company has not recorded revenue related to the $1.0 million payment due upon receipt of marketing approval for the licensed product as such amount is constrained under the variable consideration guidance under ASC 606, Revenue from Contracts with Customers.
Contract Assets and Contract Liabilities 
The Company did not have any contract assets (unbilled receivables) related to product sales as of September 30, 2021 and December 31, 2020, as customer invoicing generally occurs before or at the time of revenue recognition. The Company did not have any contract assets (unbilled receivables) related to its license revenues as of September 30, 2021 and December 31, 2020.
The Company did not have any contract liabilities as of September 30, 2021 and December 31, 2020, as the Company did not receive payments in advance of fulfilling its performance obligations to its customers.
Sales Commissions
Sales commissions are generally attributed to periods shorter than one year and therefore are expensed when incurred. Sales commissions are included in selling, general and administrative expenses.
Financing Component
The Company has elected not to adjust consideration for the effects of a significant financing component when the period between the transfer of a promised good or service to the customer and when the customer pays for that good or service will be one year or less. Standard credit terms do not exceed 75 days.
Royalty Revenues 
The Company is entitled to royalty payments with respect to sales of a product developed by a customer in collaboration with the Company. Revenues in the amount of $0.1 million and $0.7 million were recorded during the three and nine months ended September 30, 2021, respectively. Revenues in the amount of $0.4 million and $0.6 million were recorded during the three and nine months ended September 30, 2020, respectively.
NOTE 5 - FAIR VALUE MEASUREMENT
The Company’s assets and liabilities that are measured at fair value as of December 31, 2020, are classified in the table below in one of the three categories described in Note 2 above:
December 31, 2020
Level 1Level 2Level 3Total
Marketable securities$1,027 $— $— $1,027 

realizable.
The Company sold its marketable securities during the nine months ended September 30, 2021.

NOTE 6 - MARKETABLE SECURITIES
Marketable securities as of December 31, 2020 consist mainly of mutual funds securities. The debt securities are classified as available-for-sale and are recorded at fair value. Changes in fair value, net of taxes (if applicable), are reflected in other comprehensive loss. Realized gains and losses on sales of the securities, as well as premium or discount amortization, are included in the unaudited condensed consolidated statement of operations as other expense (income), net.
Equity securities with readily determinable fair value are measured at fair value. The changes in the fair value of equity investments are recognized through other expense (income), net in the unaudited condensed consolidated statements of operations.
The following table sets forth the Company’s marketable securities:
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September 30December 31
(in thousands)20212020
Israeli mutual funds$— $1,027 

As of September 30, 2021 and December 31, 2020 there were no available-for-sale debt securities.

The Company has considered factors regarding other than temporary impaired securities and determined that there are no securities with impairment that is other than temporary as of September 30, 2021 and December 31, 2020.
During the nine months ended September 30, 2021 and September 30, 2020 the Company received aggregate proceeds of $1.0 million and $36.4 million, respectively, upon sale and maturity of marketable securities.
As of September 30, 2021 and December 31, 2020, there were no restricted marketable securities.
NOTE 7 – INVENTORY
Inventories are stated at the lower of cost and net realizable value with cost determined on a first-in, first-out basis by product. The Company capitalizes inventory costs associated with products following regulatory approval when future commercialization is considered probable and the future economic benefit is expected to be realized. The Company commenced capitalizing inventory for AMZEEQ and ZILXI upon FDA approval in October 2019 and May 2020, respectively. The Company periodically reviews its inventory levels and, if necessary, writes down inventory that is expected to expire prior to being sold, inventory in excess of expected sales requirements and inventory that fails to meet commercial sale specifications, with a corresponding charge to cost of goods sold. There were no material write-downs during the three and nine months ended September 30, 2021 and September 30, 2020.
The Company evaluated the realizability of inventory giving consideration to the strategic business review discussed in Note 1 and no impairment charges resulted from this review as of September 30, 2021. The Company will continue to evaluate the realizability of its inventory during the process to explore a possible sale or license of its topical minocycline franchise.
The following table sets forth the Company’s inventory:
September 30December 31
(in thousands)20212020
Raw materials$3,247 $4,042 
Work-in-process339 662 
Finished goods4,484 2,700 
Total$8,070 $7,404 
NOTE 8 - DEBT
On July 29, 2019, Foamix entered into a Credit Agreement (the "Credit Agreement") to secure up to $50 million from two lenders, one of which is a significant stockholder of the Company and is considered a related party, and a Securities Purchase Agreement with 1 of the lenders for gross proceeds of approximately $14 million, before deducting offering expenses (see “Note 9- Share Capital” for more information). On March 9, 2020, the Company entered into an Amended and Restated Credit Agreement and Guaranty (as further amended on August 5, 2020, the “Amended and Restated Credit Agreement”), whereby the Company has guaranteed the indebtedness obligations of the borrower and granted a first priority security interest in substantially all of the Company's assets for the benefit of the lenders. As December 31, 2020, $35.0 million was drawn under the Amended and Restated Credit Agreement. The Company did not incur the remaining $15.0 million under the Amended and Restated Credit Agreement.
The term loans available under the Amended and Restated Credit Agreement were comprised as follows: (a) $15 million that was funded on July 29, 2019 (the “Tranche 1 Loan”), (b) $20 million that was funded on December 17, 2019 (the “Tranche 2 Loan”) and (c) up to $15 million that was available prior to September 30, 2020 (the “Tranche 3 Loan”). The Tranche 2 Loan was borrowed following the FDA’s approval of the NDA for AMZEEQ and listing of AMZEEQ in the FDA’s “Orange Book,” in addition to maintaining arrangements with a third party for the commercial supply and manufacture of AMZEEQ. The Company did not incur the Tranche 3 Loan. Interest on the loans was equal to the sum of (A) 8.25% (subject to increase in accordance with the terms of the Amended and Restated Credit Agreement) plus (B) the greater of (x) the one-month LIBOR as
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of the second business day immediately preceding the first day of the calendar month or the date of borrowing (if such loan is not outstanding as of the first day of the calendar month), as applicable, and (y) 2.75%.
The loans were scheduled to mature on July 29, 2024. However, following discussions with the Company's lenders regarding the revenue targets included in the Amended and Restated Credit Agreement, the revenue expected to be generated for the trailing twelve month period ended June 30, 2021 and the Company's strategic transition discussed in Note 1, the Company determined to prepay its outstanding indebtedness in addition to a 4% prepayment fee and accrued but unpaid interest in the total amount of approximately $36.5 million on August 11, 2021. Following the prepayment, the Amended and Restated Credit Agreement and the security interests thereunder were terminated. As of September 30, 2021 there was no debt outstanding.
Perceptive Credit Holdings II, LP (“Perceptive”) was one of the lenders and the administrative agent under the Amended and Restated Credit Agreement. As of September 30, 2021 and August 11, 2021, the date of the prepayment, affiliates of Perceptive were holders of more than 5% of the Company's outstanding common stock. In connection with the prepayment of the Company's indebtedness, Perceptive received $18.3 million, representing their portion of the principal amount, interest and prepayment premium.
In addition, on July 29, 2019, the lenders under the Credit Agreement were issued warrants to purchase up to an aggregate of 1,100,000 of Foamix ordinary shares, at an exercise price of $2.09 per share (the “Warrants”), which represented the five-day volume weighted average price of the Foamix ordinary shares as of the trading day immediately prior to the issuance of the Warrants. In connection with the completion of the Merger, the exchange ratio was applied to the Warrants such that they became exercisable for 651,640 shares of the Company’s common stock, and the exercise price was adjusted to $3.53. Following the Phase 3 PN Trial results, the Warrants were further adjusted for the CSR and reverse stock split and they are currently exercisable for 495,165 shares of our common stock with an exercise price of $4.64 per share. Payment of the exercise price will be made, at the option of the holder, either in cash or as a reduction of common stock issuable upon exercise of the Warrant, with an aggregate fair value equal to the aggregate exercise price ("cashless exercise"), or any combination of the foregoing. The Warrants are exercisable pursuant to the terms, and subject to the conditions, thereof and expire on July 29, 2026. Any Warrants left outstanding will be cashless exercised on the Warrants' expiration date, if in the money. The Warrants issued were classified as equity in accordance with ASC 815-40. Proceeds received under the Tranche 1 Loan were allocated to the Warrants and the Tranche 1 Loan on a relative fair value basis.
The Company incurred offering expenses of $1.1 million in connection with transactions contemplated by the Credit Agreement and the Securities Purchase Agreement, which were allocated to the Warrants, shares and debt consistently with the allocation of proceeds. The Company incurred additional expenses in the amount of $0.3 million from the borrowing of Tranche 2 Loan, allocated only to the debt. Debt issuance costs are recorded on the consolidated balance sheet as a reduction of liabilities. Amounts allocated to the debt, net of issuance cost, were subsequently recognized at amortized cost using the effective interest method.
During the three months ended September 30, 2021, the Company recorded interest expense of $3.5 million, comprised of interest expense of $1.9 million and discount cost of $1.6 million. During the nine months ended September 30, 2021, the Company recorded interest expense of $5.6 million, comprised of interest expense of $3.8 million and discount cost of $1.8 million. For the three month and nine month periods ended September 30, 2021, interest expense includes a debt prepayment fee of $1.4 million and the write-off of discount costs of $1.6 million associated with the Company's prepayment of outstanding indebtedness resulting in a total loss on the extinguishment of debt of $3.0 million. During the three months ended September 30, 2020, the Company recorded interest expense of $1.0 million and discount cost of $0.1 million. During the nine months ended September 30, 2020, the Company recorded interest expense of $2.9 million and discount cost of $0.3 million.
NOTE 94 – SHARE CAPITAL
PreferredCommon stock and preferred stock
As of September 30, 2021,March 31, 2022, the Company's Certificate of Incorporation, as amended, authorizes the Company to issue 150,000,000 shares of common stock and 20,000,000 shares of preferred stock, par value $0.0001 per share. There were no shares of preferred stock issued and outstanding as of September 30, 2021March 31, 2022 and December 31, 2020.2021.
Shares of preferred stock may be issued from time to time in one or more series. The voting powers (if any), preferences and relative, participating, optional or other special rights, and the qualifications, limitations and restrictions of any series of preferred stock will be set forth in a Certificate of Designation filed pursuant to the Delaware General Corporation Law, as determined by the Company's Board of Directors.
Common stock
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The number of shares of common stock authorized under the Company's Amended and Restated Certificate of Incorporation was proportionately reduced in connection with the Company's one-for-four reverse stock split in February 2021. On July 19, 2021, the Company held its annual meeting of stockholders (the "Annual Meeting"). Following the approval by the holders of a majority of the outstanding shares of common stock at the Annual Meeting, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 75,000,000 to 150,000,000 shares, effective as of July 19, 2021. Accordingly, the Company is authorized to issue 150,000,000 shares of common stock, par value $0.0001 per share.
Each share of common stock is entitled to 1 vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when and if declared by the board of directors, subject to the prior rights of holders of all classes of preferred stock outstanding. The Company has never declared any dividends on common stock.
Issuance of stock
On February 1, 2019, the Company entered into a Sales Agreement (the "2019 Sales Agreement") with Cantor Fitzgerald & Co., or ("Cantor Fitzgerald,Fitzgerald") to sell shares of the Company's common stock, from time to time, with aggregate gross sales proceeds of up to $50.0 million through an at-the-market ("ATM") equity offering program under which Cantor Fitzgerald acted as the Company's sales agent. The issuance and sale of shares of common stock by us pursuant to the 2019 Sales Agreement were deemed an "at-the-market" offering under the Securities Act. Cantor Fitzgerald was entitled to compensation for its services equal to up to 3.0% of the gross proceeds of any shares of common stock sold under the 2019 Sales Agreement. From January 1, 2021 through January 25, 2021, the Company issued and sold 2,778,012 shares of common stock at a weighted average price per share of $9.76 pursuant to the 2019 Sales Agreement for $26.3 million in net proceeds. Effective as of January 25, 2021, the Company terminated the 2019 Sales Agreement.
On August 12, 2021, the Company entered into a new sales agreement with Cantor Fitzgerald to sell shares
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Table of the Company's common stock, from time to time, with aggregate gross sales proceeds of up to $50.0 million through an at-the-market equity offering program under which Cantor Fitzgerald will act as the Company's sales agent. The issuance and sale of shares of common stock by us pursuant to the Sales Agreement are deemed an "at-the-market" offering under the Securities Act. Cantor Fitzgerald is entitled to compensation for its services equal to up to 3.0% of the gross proceeds of any shares of common stock sold under the Sales Agreement. During the three months ended September 30, 2021, the Company issued and sold 1,948,000 shares of common stock at a weighted average per share price of $1.57 pursuant to the Sales Agreement for $2.9 million in net proceeds.contents
On January 26, 2021, the Company entered into a Securities Purchase Agreement with certain institutional and accredited investors for the sale of an aggregate of 5,274,261 shares of common stock of the Company, at a purchase price of $9.48 per share in a registered direct offering. The offering was completed on January 28, 2021 and the Company received approximately $46.8 million in net proceeds, after deducting placement agent fees and other offering expenses.
On June 9, 2020,August 12, 2021, the Company completedentered into a Sales Agreement (the "2021 Sales Agreement") with Cantor Fitzgerald to sell shares of the Company's common stock, from time to time, with aggregate gross sales proceeds of up to $50.0 million through an underwritten publicat-the-market equity offering program under which Cantor Fitzgerald will act as the Company's sales agent. Cantor Fitzgerald is entitled to compensation for its services equal to up to 3.0% of 7,776,875the gross proceeds of any shares of common stock sold under the 2021 Sales Agreement. During the three months ended March 31, 2022, the Company issued and sold 2,587,855 shares of common stock at a weighted average per share price to the public of $7.40 per share. The net proceeds of the offering were approximately $53.6 million, after deducting underwriting discounts and commissions and other offering expenses.
Pursuant to the completion of the Merger, on March 9, 2020, the Company issued 36,550,335 shares to legacy Foamix shareholders. On April 6, 2020,$0.62 pursuant to the 2021 Sales Agreement for $1.6 million in net proceeds.
On March 15, 2022, the Company entered into the Equity Purchase Agreement, with Lincoln Park which provides that, upon the terms and subject to the conditions and limitations set forth therein, the Company may sell to Lincoln Park, at the Company's discretion, up to $30.0 million of shares of its common stock over the 36-month term of the CSREquity Purchase Agreement. Upon execution of the Equity Purchase Agreement, the Company issued 1,667,593 shares of its common stock to Lincoln Park as commitment shares in accordance with the closing conditions contained within the Equity Purchase Agreement. The issuance of these shares were specific incremental costs directly attributable to the proposed offering. The commitment shares were valued at $0.9 million and recorded as an additional 74,544,413 sharesaddition to legacy Foamix shareholders, adjusted retrospectively to 18,636,103 sharesequity for the issuance of common stock uponand treated as a reduction to equity as a cost of capital to be raised under the reverse stock split effective February 12, 2021.
Warrants
In connection with entering intoEquity Purchase Agreement. Lincoln Park has covenanted not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the CreditCompany’s common stock. The Equity Purchase Agreement on July 29, 2019, Foamix issued tomay be terminated by the lenders Warrants to purchase up to an aggregateCompany at any time, at its sole discretion, without any additional cost or penalty. As of 1,100,000March 31, 2022, the Company had not sold any shares of its ordinary shares, later exchanged to Warrants to purchase up to 1,980,660 shares of Menlo’s common stock adjusted retrospectively to 495,165 shares of common stock uponLincoln Park under the reverse stock split effective February 12, 2021. Upon the closing of the Merger, each Warrant received 1 CSR as described in Note 3- Business Combinations. The Warrants were exercisable immediately following the closing of the Credit Agreement, subject to the terms of the warrant, and are due to expire on July 29, 2026. Any Warrants left outstanding will be cashless exercised on the Warrants’ expiration date, if in the money.Equity Purchase Agreement.
The exchange of Warrants from Foamix warrants to Menlo warrants and the additional CSR was accounted for as a modification, by analogy, from the modification’s guidance under ASC 260-10-S99-2. The Company assessed the significance of the modification of the Warrants by comparing the fair value of the Warrants immediately before and after the amendments.
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In its assessment, it also considered additional qualitative factors. The Company concluded that the change of terms was not significant. Therefore, the incremental fair value, in the amount of $41,000, of the modified Warrants over the original ones (as of modification date) was recognized in retained earnings as a deemed dividend to the Warrants holders in the nine months ended September 30, 2020.
Share-based compensationNOTE 5 – SHARE BASED COMPENSATION
Equity incentive plans:
Upon closing of the Merger, the Company adopted Foamix’s 2019 Equity incentive plan (the “2019 Plan”). As of September 30, 2021, 509,158March 31, 2022, 724,589 shares remain issuable under the 2019 Plan.Equity Incentive Plan (the "2019 Plan"). In addition, the Company adoptedmaintains the 2018 Omnibus Incentive Plan (the "2018 Plan") in January 2018.. In January 2020,2022, the number of shares reserved under the 2018 Plan automatically increased by 750,000 shares of common stock pursuant to the terms thereof.of the 2018 Plan. As of September 30, 2021, 81,925March 31, 2022, 6,566 shares remain issuable under the 2018 Plan.
Employee Share Purchase Plan:
Upon closing of the Merger, theThe Company adopted Foamix’salso has an Employee Share Purchase Plan ("ESPP") pursuant to which qualified employees (as defined in the ESPP) may elect to purchase designated shares of the Company’s common stock at a price equal to 85% of the lesser of the fair market value of the common stock at the beginning or end of each semi-annual share purchase period (“Purchase Period”). Employees are permitted to purchase the number of shares purchasable with up to 15% of the earnings paid (as such term is defined in the ESPP) to each of the participating employees during the Purchase Period, subject to certain limitations under Section 423 of the U.S. Internal Revenue Code.
As of September 30, 2021, 2,261,108March 31, 2022, 2,232,207 shares remain available for grant under the ESPP.
During the nine months ended September 30, 2021, 42,989There were no shares were issued to employees pursuant to the ESPP. During the nine months ended September 30, 2020, 61,031 Foamix ordinary shares wereof common stock purchased by Foamix employees pursuant to the ESPP prior toduring the Merger. Such shares were later exchanged for 36,155 shares of the Company's common stock and 1 CSR in the Merger, adjusted retrospectively to 9,038 shares of common stock and 1 CSR upon the reverse stock split effective February 12,three months ended March 31, 2022 or March 31, 2021.
Options and RSUs granted to employees and directors:
In the ninethree months ended September 30, 2021 and 2020,March 31, 2022, the Company granted options and RSUs as follows:
Nine months ended September 30, 2021
Award
amount*		Exercise price
range*		Vesting periodExpiration
Employees and Directors:
Options1,686,405 $1.68-$11.081 year - 4 years10 years
RSUs970,813 — 2 years - 4 years— 
Nine months ended September 30, 2020
Award
amount*		Exercise price
range*		Vesting periodExpiration
Employees and Directors:
Options1,316,637 $5.84-$12.521 year - 4 years10 years
RSUs647,427 — 1 year - 4 years— 
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* All amounts and exercise prices for pre-Merger grants are presented following the exchange to Menlo options and RSUs at the Exchange Ratio described in Note 3-Business Combination.
Three months ended March 31, 2022
Award
amount		Exercise price
range		Vesting periodExpiration
Employees and Directors:
Options774,503 $0.612 years - 4 years10 years
RSUs726,102 — 4 years - 4 years— 


The fair value of options and RSUs granted to employees and directors during the ninethree months ended September 30, 2021March 31, 2022 and the ninethree months ended September 30, 2020March 31, 2021 was $9.4$0.8 million and $11.8$7.5 million, respectively.
The fair value of RSUs granted is based on the share price on the grant date.
The fair value of options granted was computed using the Black-Scholes model. The underlying data used for computing the fair value of the options are as follows:
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Nine months ended
September 30,
Three months ended
March 31
2021202020222021
Dividend yieldDividend yield0 %0 %Dividend yield0 %0 %
Expected volatilityExpected volatility68.38% - 69.38%60.44% - 69.83%Expected volatility74.40 %68.38% - 69.12%
Risk-free interest rateRisk-free interest rate0.5% - 1.29%0.31% - 1.26%Risk-free interest rate2.2%0.50% - 1.05%
Expected termExpected term6 years6 yearsExpected term6 years6 years

Pursuant to the Merger, all outstanding options and RSUs granted by Foamix were exchanged for stock options and RSUs of Menlo’s common stock according to the Exchange Ratio. In addition, for each option and RSU the holder received a CSR as described in Note 3- Business Combination. This transaction was considered by the company to be a modification under ASC 718, Compensation - Stock Compensation. The modification did not affect the remaining requisite service period. As a result of the modification, for outstanding options and RSUs granted to Foamix employees and consultants, the Company recorded immaterial incrementalStock-based compensation expense for the three months ended March 31, 2020. As describedis reflected in Note 3 - Business Combination, on April 6, 2020, pursuant to the terms of the CSR Agreement, each CSR was converted into 1.2082 shares of Menlo common stock, resulting in an effective Exchange Ratio in the Merger of 1.8006 shares of Menlo common stock for each Foamix ordinary share. The conversion was considered by the company to be a modification under ASC 718. As a result of the modification, for outstanding options and RSUs granted to Foamix employees and consultants, the Company recorded incremental compensation of $0.5 million and $1.8 million for the three and nine months ended September 30, 2021, respectively, and $1.1 million and $10.4 million for the three and nine months ended September 30, 2020, respectively. As of September 30, 2021 there is $1.5 million of unrecognized incremental compensation expense related to the modification which will primarily be amortized using a graded vesting method over the next 2 years.
Awards granted to holders who are no longer employed or providing services to the Company are accounted for in accordance with ASC 815-40, Derivatives and Hedging. Under this guidance, the awards are classified as a derivative liability because the award no longer exchanges a fixed amount of cash for a fixed number of shares. Accordingly, as of March 9, 2020 the Company reclassified $1.6 million from additional paid-in capital to derivative liability on the unaudited condensed consolidated balance sheet. Prior to the reclassification of these awards as a liability instrument, the Company recorded an incremental compensation expense of $0.6 million due to the above mentioned modification in accordance with ASC 718. Subsequent to the reclassification of these awards as a liability instrument, the Company recorded incremental compensation expense of $1.0 million for the nine months ended September 30, 2020. There was no incremental compensation expense for the three and nine months ended September 30, 2021. As described in Note 3 - Business Combination, on April 6, 2020, the Company announced that study MTI-105 and study MTI-106 did not meet their respective primary endpoint of demonstrating statistically significant reduction in pruritus in patients treated with serlopitant compared to placebo based upon a 4-point improvement responder analysis. Accordingly, on April 6, 2020, pursuant to the terms of the CSR Agreement, each CSR was converted into 1.2082 shares of Menlo common stock, resulting in an effective Exchange Ratio in the Merger of 1.8006 shares of Menlo common stock for each Foamix ordinary share. On April 6, 2020, the awards are exchangeable for a fixed amount of cash for a fixed number of shares and were remeasured to fair value and reclassified from derivative liability to additional paid-in capital.
Prior to the Merger, Menlo recognized all expenses relating to awards outstanding as of the Effective Date. These awards were subject to acceleration upon the change of control per the previous Menlo stock option plan.
The following table illustrates the effect of share-based compensation on the statements of operations:operations as follows:
Three months ended
September 30
Nine months ended
September 30
Three months ended
March 31
(in thousands)(in thousands)2021202020212020(in thousands)20222021
Research and development expensesResearch and development expenses$435 $361 $1,335 $3,927 Research and development expenses$229 $458 
Selling, general and administrativeSelling, general and administrative1,970 2,259 5,413 11,220 Selling, general and administrative1,016 1,602 
Discontinued operationsDiscontinued operations(352)382 
TotalTotal$2,405 $2,620 $6,748 $15,147 Total$893 $2,442 

NOTE 106 – OPERATING LEASELEASES
Operating lease agreements
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TheMarch 31, 2022, the Company has operating leases for corporate offices and vehicles.offices. The properties primarily relate to the Company’s principal executive office in Bridgewater, New Jersey and office space in Israel.
On March 13, 2019, the Company signed an amendment to the original lease agreement for its principal executive office in Bridgewater, New Jersey (the “Lease Amendment”). The Lease Amendment includes an extension of the lease period of the 10,000 square feet previously leased under the original agreement (the “Original Space”) and an addition of 4,639 square feet (the “Additional Space”). The Company entered the Additional Space following a period of preparation by the lessor completed during September 2019 (the “Commencement Date”). The Lease Amendment is due to expire on August 31,September 30, 2022.
Pursuant to the Lease Amendment, the Company recognized an additional right of use asset and liability in the amount of $0.7 million. The Additional Space was considered a new lease agreement and was recognized as a right of use asset and liability, in the amount of $0.3 million, on the Commencement Date.
The lease liability matures September 30, 2022. The remaining lease liability of $0.1 million is reflective of the remaining principal payments with an immaterial amount of imputed interest.
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The lease agreement for the office space in Israel is a one year lease that expires in December 2021.2022. Given the short-term nature of the lease term, the Company did not recognize a right-of-use asset and liability.
Additionally, the Company entered into operating lease agreements in connection with the leasing of vehicles. The lease periods are generally for three years.
Maturities of lease liabilities are as follows:
(in thousands)
2021$229 
2022761 
2023151 
Total lease payments1,141 
Less imputed interest89 
Total lease liability$1,052 

As of September 30, 2021,March 31, 2022, the Company had a lien in the amount of $0.6 million related to a letter of credit on the Company’s cash in respect of bank guarantees granted in order to secure the lease agreements. This amount is presented as restricted cash in the Company's unaudited condensed consolidated balance sheet.
NOTE 117 – COMMITMENTS AND CONTINGENCIES
The Company may periodically become subject to legal proceedings and claims arising in connection with its business. As of September 30, 2021,March 31, 2022, no claims or actions are pending against the Company that, in the opinion of management, are likely to have a material adverse effect on the Company.
As previously disclosed, on June 30, 2021, the Company received a paragraph IV certification notice (the “Notice”) from Padagis Israel Pharmaceuticals Ltd. (f/k/a Perrigo Israel Pharmaceuticals Ltd. (“Padagis”)) advising that Padagis has submitted to the U.S. Food and Drug Administration (the “FDA”) an Abbreviated New Drug Application (“ANDA”) seeking approval to manufacture and sell a generic version of the Company’s product AMZEEQ® (minocycline) topical foam, 4% in the United States prior to the expiration of the Company’s U.S. patents Nos. 8,865,139, 8,945,516, 8,992,896, 9,675,700, 10,086,080, 10,137,200, 10,213,512, 10,265,404, 10,398,641, 10,517,882, 10,821,187, and 10,849,847 (the “Listed Patents”), which are listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, otherwise known as the “Orange Book.” The Notice alleges that the Listed Patents are invalid, unenforceable, and/or will not be infringed by the commercial manufacture, use or sale of the generic product described in Padagis’s ANDA.

On August 9, 2021, the Company initiated a patent infringement suit against Padagis in the United States District Court for the District of Delaware arising from Padagis’s ANDA filing with the FDA. The patent infringement suit asserts each of the Listed Patents. As a result, under applicable law, the FDA cannot grant final approval to Padagis’s ANDA before December 30, 2023, or a court decision in Padagis’s favor. VYNE is seeking, among other relief, an order that the effective date of any FDA approval of Padagis’s ANDA be no earlier than the expiration of the Listed Patents, the latest of which expires on September 8, 2037, and such further and other relief as the court may deem appropriate. Padagis filed its response and counterclaim on October 1, 2021. The Company filed its response to such counterclaim on October 22, 2021.

The Company intends to vigorously defend its intellectual property rights, including the Listed Patents.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q for the period ended March 31, 2022 and our Annual Report on Form 10-K for the year ended December 31, 2020, as updated by our Current Report on Form 8-K filed on August 12, 2021. In this Quarterly Report on Form 10-Q, unless otherwise indicated, all references to the “Company,” “we,” “us” and “our” or similar terms refer to VYNE Therapeutics Inc. The disclosure set forth in this section reflects the Company'sour 1-for-4 reverse stock split, which was effected on February 12, 2021. Accordingly, all share amounts and per share amounts have been adjusted.
Company Overview

We are a biopharmaceutical company focused on developing proprietary, innovative and differentiated therapies for the treatment of immuno-inflammatory conditions. Our most advanced product candidate, FMX114, which is in a Phase 2a clinical trial, is being evaluated for the potential treatment of mild-to-moderate atopic dermatitis ("AD"). We are also in the preclinical stages of developing products containing bromodomain and extra-terminal domain ("BET") inhibitor compounds. Our initial BET inhibitor candidate in development is VYN201, a locally administered pan-BET inhibitor, which we are exploring in various immuno-inflammatory diseases, including skin diseases. In addition, we continue to explore opportunistic transactions that may enhance our pipeline portfolio, as well as support our current operations and fund our future growth.
Beginning in the second quarter of 2021, we conducted a review of our commercial and research and development portfolio to determine how to optimally deploy capital and drive shareholder value. During the course of this review, we carefully considered the revenues received from the commercialization of AMZEEQ (minocycline) topical foam, 4%, and ZILXI (minocycline) topical foam, 1.5%, and the associated costs to drive those revenues, the protracted negative impact of the COVID-19 pandemic during the commercial launches of both AMZEEQ and ZILXI, the current payor landscape, as well as the costs to develop each of our pipeline products. During this process, we evaluated several strategic options, including the acquisition of marketed assets, out-licensing our approved products outside of the United States, and possible partnering or co-development relationships with interested parties. Following our review, we determined to initiate a process to explore a possible sale or license ofdivest our topical minocycline franchise, including AMZEEQ, ZILXI, FCD105 (the Company’s(our former Phase 3 proprietary novel topical combination foam formulation of minocycline and adapalene for the treatment of moderate-to-severe acne vulgaris) and the underlying Molecule Stabilizing Technology ("MST") platform.

By leveraging our drug development and clinical development capabilities and strong network of discovery and preclinical science partners,On January 12, 2022, we are transitioning our strategic focus to develop therapies for the treatment of immuno-inflammatory conditions and rare skin diseases of high unmet medical need. We expect to continue to invest in FMX114 for the treatment of mild to moderate atopic dermatitis and enrolled the first patient in our Phase 1b/2a proof-of-concept study in October 2021. We expect results from this study early in the first quarter of 2022. In addition, on August 12, 2021, we announced a transaction with In4Derm Limited, a company incorporated and registered in Scotland (“In4Derm”). In4Derm is a spin-out of the University of Dundee’s School of Life Sciences which has discovered and is developing proprietary Bromodomain and Extra-Terminal Domain (“BET”) inhibitors for the treatment of immunology and oncology conditions. On April 30, 2021, the parties entered into an Evaluation and OptionAsset Purchase Agreement (the “Option“Purchase Agreement”) with Journey Medical Corporation ("Journey”) pursuant to which In4Derm granted us an exclusive optionwe sold our Molecule Stabilizing Technology franchise, including AMZEEQ, ZILXI, and FCD105 (the “MST Franchise”), to obtain exclusive worldwide rightsJourney. The assets included certain contracts, including the license agreement with Cutia Therapeutics (HK) Limited (the “Cutia License Agreement”), inventory and intellectual property related to research, develop and commercialize products containing In4Derm’s BET inhibitor compounds, which are new chemical entities, in both topical (the “Topical BETi Option”) and oral (the “Oral BETi Option”) treatments in all fields for any disease, disorder or condition in humans. On August 6, 2021, we exercised the Topical BETi Option andMST Franchise (together, the parties entered into a License Agreement granting VYNE a worldwide, exclusive license that is sublicensable through multiple tiers to exploit certain of In4Derm’s BET inhibitor compounds identified to be suitable for topical administration in all fields. We paid a $1.0 million cash payment to In4Derm upon the execution of the Option Agreement and $0.5 million in connection with the exercise of the Topical BETi Option.“Assets”). Pursuant to the LicensePurchase Agreement, Journey assumed certain liabilities of the MST Franchise including, among others, those arising from our patent infringement suit initiated against Padagis Israel Pharmaceuticals Ltd. There were no current or long-term liabilities recorded by us which were transferred to Journey.

Pursuant to the Purchase Agreement, we have agreedreceived an upfront payment of $20.0 million at the closing of the sale and will receive an additional $5.0 million on the one-year anniversary of the closing of the transaction. We are also eligible to make cashreceive sales milestone payments of up to In4Derm$450.0 million in the aggregate upon the achievement of specified clinical developmentlevels of net sales on a product-by-product basis, beginning with annual net sales exceeding $100.0 million (with products covered in three categories (1) AMZEEQ (and certain modifications), (2) ZILXI (and certain modifications), and regulatory approval milestones with respect to each licensed topical product in(3) FCD105 and other products covered by the U.S. of up to $15.75 million for all indications.patents being transferred, including certain modifications). In addition, we currently expectare entitled to exercise the Oral BETi Option following the selection of a lead candidate for the program. Upon exercisereceive certain payments from any licensing or sublicensing of the exclusive Oral BETi Option,assets by Journey outside of the parties will sign a license agreement (the “Oral License Agreement”), and we will pay In4Derm a $4.0 million cash payment. The Oral License Agreement will include cash payments of up to $43.75 million payable to In4Derm upon the achievement of specified clinical development and regulatory approval milestones with respect to each licensed oral product in the U.S. for all indications. The license agreements also provide for tiered royalty payments of up to 10% of net annual sales across licensed BET inhibitor products by VYNE. In4Derm is entitled to additional milestones upon the achievement of regulatory approvals in certain jurisdictions outside the U.S.

The initial BET inhibitor candidates that the Company plans to develop are VYN201 and VYN202. VYN201 is a pan-bromodomain or pan-BD BET inhibitor.It is a first-in-class “soft” pan-BD BET inhibitor that is designed to mitigate systemic drug exposure and will be developed for topical applications. The Company intends to progress VYN201 into rare dermatological indications where there is significant unmet need due to a lack of indicated treatment options. The Company plans to communicate the initial indication it will be pursuing for VYN201 after the prerequisite non-clinical safety assessments have been completed and enter this program into the clinic in 2022.

The second candidate, VYN202, is an orally-delivered, first-in-class BET inhibitor that is highly selective for Bromodomain 2 (“BD2”). By selectively inhibiting BD2, the Company believes VYN202 could have a more targeted anti-inflammatory effect
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with an improved benefit/risk profile. Upon the selection of a lead candidate, VYNE intends to exercise its exclusive option with In4Derm Limited and commence an IND-enabling non-clinical safety program.United States.

As we continue to transitiontransitioned from a commercial organization to one focused on research and development, we expect to further streamlinestreamlined operations by continuing to eliminate the vast majority of planned expenditures supporting our commercial operations. Furthermore, we are in the process of reducingreduced our workforce by terminating approximately 70 employees, which we expect to be completed byof 106 as of December 31, 2021. We incurred a one-time charge2020 to 28 at the time of $1.0 million in the three months ended September 30, 2021 in connection with this restructuring plan, consistingsale of $0.9 million of employee termination costs, including severance and other benefits, and retention payments of $0.1 million. We anticipate incurring an additional charge of $0.3 million related to employee termination costs, including severance and other benefits during the fourth quarter of 2021. These charges will be substantially paid out by December 31, 2021. Additional charges of $0.4 million related to retention payments are anticipated through June 30, 2022.MST Franchise.

Key Developments
Below is a summary of selected key developments affecting our business that have occurred since December 31, 2020:
•From January 1, 2021 through January 25, 2021, the Company issued and sold 2,778,012 shares of common stock at a weighted average price per share of $9.76 for $26.3 million in net proceeds pursuant to a Sales Agreement (the "2019 Sales Agreement") with Cantor Fitzgerald & Co. ("Cantor Fitzgerald") through an at-the-market equity offering program under which Cantor Fitzgerald acted as our sales agent. Effective as of January 25, 2021, the Company terminated the 2019 Sales Agreement.2021:
•On January 21, 2021,12, 2022, we entered into the Company announcedPurchase Agreement with Journey pursuant to which we divested the executionAssets for $25.0 million and milestone payments of a contract with CVS Caremark ("Caremark"), oneup to $450.0 million in aggregate upon the achievement of specified levels of net sales of the largest pharmacy benefit managers inproducts covered by the U.S., with respect to AMZEEQPurchase Agreement. Of the $25.0 million, $20.0 million was received at closing and ZILXI. In late March 2021, Caremark informed$5.0 million is due upon the Company that it decided to not include these products, and other new branded comparator drugs, on its national formulary for 2021. Certain custom plans under the Caremark umbrella have decided to add the Company's drugs to their respective formularies.
•On January 28, 2021, the Company completed a registered direct offering of 5,274,261 shares of common stock at a price of $9.48 per share. The net proceedsone-year anniversary of the offering were approximately $46.8 million, after deducting placement agent fees and other offering expenses.
•On February 1, 2021, we announced that the FDA approved a label update for AMZEEQ, including new information indicating the low propensity of Propionibacterium acnes (more commonly known as P. acnes) to develop resistance to minocycline.
•On February 10, 2021, our Board of Directors approved a one-for-four reverse stock split of our outstanding shares of common stock. The reverse stock splittransaction. This transaction was effected on February 12, 2021 at 5:00 p.m. Eastern time. At the effective time, every four issued and outstanding shares of our common stock were converted into one share of common stock. No fractional shares were issued in connection with the reverse stock split, and in lieu thereof, each stockholder holding fractional shares was entitled to receive a cash payment (without interest or deduction) from the Company’s transfer agent in an amount equal to such stockholder’s respective pro rata share of the total net proceeds from the Company’s transfer agent sale of all fractional shares at the then-prevailing prices on the open market. In connection with the reverse stock split, the number of authorized shares of our common stock was also reduced on a one-for-four basis, from 300 million to 75 million. The par value of each share of common stock remained unchanged. A proportionate adjustment was also made to the maximum number of shares issuable under the Company’s 2019 Equity Incentive Plan, 2018 Omnibus Incentive Plan and 2019 Employee Share Purchase Plan.
•On March 1, 2021, we announced development plans for FMX114 for the potential treatment of mild-to-moderate atopic dermatitis. FMX114 is a fixed combination of tofacitinib, which is a pan-Janus kinase (JAK) inhibitor, and fingolimod, a sphingosine 1-phosphate receptor modulator. FMX114 attempts to address both the source and cause of inflammation in atopic dermatitis and support skin barrier recovery.
•Tyler Zeronda was appointed as our interim Chief Financial Officer and Treasurer, effective as of June 18, 2021, following the resignation of Andrew Saik.
•On July 19, 2021, the Company amended its Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 75,000,000 to 150,000,000 shares. The increase in the number of authorized shares was approved by the holders of a majority of the outstanding shares of common stock at the Company's annual meeting of stockholders held on July 19, 2021.
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accounted for in 2022. See discussion in "Note 3 - Discontinued Operations" to the unaudited condensed consolidated financial statements.
•On August 9, 2021,January 19, 2022, we initiated a patent infringement suit against Padagis Israel Pharmaceuticals Ltd. (f/k/a Perrigo Israel Pharmaceuticals Ltd. (“Padagis”)) inannounced preliminary clinical safety, dermal tolerance and pharmacokinetics findings from the United States District Court for the District of Delaware arising from Padagis’s ANDA filing with the FDA. The patent infringement suit asserts eachPhase 1b safety portion of the patents related to AMZEEQ listed in the Orange Book (the “Listed Patents”). As a result, under applicable law, the FDA cannot grant final approval to Padagis’s ANDA before December 30, 2023, or a court decision in Padagis’s favor. VYNE is seeking, among other relief, an order that the effective date of any FDA approval of Padagis’s ANDA be no earlier than the expiration of the Listed Patents, the latest of which expires on September 8, 2037, and such further and other relief as the court may deem appropriate.Phase 1b/2a trial evaluating FMX114.
•On February 28, 2022, we received a notification from Nasdaq that we are not in compliance with the requirement to maintain a minimum closing bid price of $1.00 per share, as set forth in Nasdaq Listing Rule 5550(a)(2), because the closing bid price of our common stock was below $1.00 per share for 30 consecutive business days. We have a period of 180 calendar days from the date of notification, or until August 11, 2021,29, 2022, to regain compliance with the Company prepaid its outstanding indebtedness in addition to a 4% prepayment fee and accrued but unpaid interest. Followingminimum bid price requirement. The notification does not impact the prepayment,listing of our common stock on the Amended and Restated Credit Agreement has been terminated and the security interests thereunder will be terminated. See "Part I—Item 1. Unaudited Condensed Consolidated Financial Statements—Note 8. Debt."Nasdaq Global Select Market at this time.
•On August 12, 2021,March 7, 2022, we announced positive preclinical data for VYN201 in a licensing arrangement with In4Derm, giving us accesshuman skin model of vitiligo. In the model, VYN201 reduced the expression of key pro-inflammatory biomarkers relevant to their librarythe pathogenesis of novel BET inhibitor compounds. See "—Company Overview."vitiligo, and demonstrated marked reduction in melanocyte loss.
•On August 12, 2021, we announced that we initiated a process to explore a sale or license of our topical minocycline franchise. In addition, we are refocusing our resources on our immuno-inflammatory development programs, including the compounds that we licensed from In4Derm. See“—Company Overview.”
•On August 12, 2021,March 15, 2022, we entered into a salespurchase agreement (the "Equity Purchase Agreement"), with Cantor Fitzgerald & Co.Lincoln Park which provides that, upon the terms and subject to the conditions and limitations set forth therein, we may sell to Lincoln Park, at our discretion, up to $30.0 million of shares of our common stock from time to time, with aggregate gross sales proceedsover the 36-month term of up to $50.0 million through an at-the-market equity offering program under which Cantor Fitzgerald will act as our sales agent. From August 12, 2021 to September 30, 2021,the Equity Purchase Agreement. Upon execution of the Equity Purchase Agreement, we issued and sold 1,948,0001,667,593 shares of our common stock at a weighted average sales price per shareto Lincoln Park as commitment shares in accordance with the closing conditions contained within the Equity Purchase Agreement. We have not sold any shares of $1.57 for $2.9 million in net proceeds. See "Part I—Item 1. Unaudited Condensed Consolidated Financial Statements—Note 9. Share Capital."our common stock to Lincoln Park under the Equity Purchase Agreement to date.
•On October 5, 2021,March 30, 2022, we announced that the first patient was enrolledpositive preclinical data for an intra-articular injection of VYN201 in Cutia's Phase 3 studyan in China evaluating AMZEEQ for the purposesvivo model of seeking regulatory approval in China.rheumatoid arthritis.
•On October 19, 2021,April 7, 2022, we announced that the first patient was enrolled inpositive phase 1b efficacy data for FMX114 from our Phase 1b/2a clinical trial evaluating FMX114 for the treatment of mild-to-moderate atopic dermatitis. We expect topline results from the study earlyAD. At week 2, FMX114 demonstrated a statistically significant reduction in the first quarter of 2022.
•On October 21, 2021, we announced the formation of a scientific advisory board ("SAB") composed of leading scientistsboth absolute and academics specializingpercent change in immunological and inflammatory diseases. The SAB will provide scientific expertise and guidancemean Atopic Dermatitis Severity Index score compared to the VYNE management team and Board, as the Company progresses its pipeline of innovative treatments for immuno-inflammatory conditions.
•On October 26, 2021, we announced preclinical data showing that our pan-BET inhibitor, VYN201, significantly reduced the expression of several key pro-inflammatory cytokines relevant to Th17-mediated autoimmune diseases in an animal model and an ex vivo human tissue study.vehicle.
Financial Overview
We have incurred net losses since our inception. UntilExcept from the first quarter of 2020 until January 2022, when we commencedconducted commercial operations, our business activities werehave been primarily limited to developing product candidates, raising capital and performing research and development activities. As of September 30, 2021,March 31, 2022, we had an accumulated deficit of $628.0$634.9 million. We recorded net lossesincome of $21.3$4.7 million and $24.7net loss of $20.6 million for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively. The net income for the three months ended March 31, 2022 was driven by an approximate $13.0 million gain on the sale of the MST Franchise offset by loss from continuing operations of $8.7 million.
OurPrior to the sale of the MST Franchise, our capital resources and business efforts havewere largely been focused on activities relating to the commercialization of AMZEEQ and ZILXI and advancing our product candidates and pipeline. As discussed above, we completed a strategic reviewthe sale of our business and have determined to explore a possible sale or license of our minocycline franchise, including AMZEEQ, ZILXI, FCD105 and the underlying MST platform. WeAssets in January 2022. Going forward, we will refocusfocus our resources on our immuno-inflammatory pipeline and expect to support the continued development of FMX114 and the BET inhibitor research and development programs.pipeline. Research and development activities for these programs, including preclinical and clinical testing of the Company’s drugour product candidates, will require significant additional financing. TheOur future viability of the Company is dependent on our ability to successfully execute our business strategy and develop our drugproduct candidates and raise additional capital to finance operations. Our failure to raise
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capital as and when needed could have a negative impact on our financial condition and ability to pursue our business strategies.
Components of Operating Results
Revenues
Our revenue during the periods presented has been comprised of AMZEEQ and ZILXI product sales and collaborationroyalty revenue.
We received FDA approval for AMZEEQ on October 18, 2019 and ZILXI were commercially launched AMZEEQ in the United States in January 2020. We commercially launched ZILXI onand October 1, 2020. We have generated product revenue of $11.8 million for the nine months ended September 30, 2021.2020, respectively. We will not commercially launch our other product candidates in the United States or generate any revenues from sales of any of our product candidates unless and until we obtain marketing approval. Our abilityWe will not generate revenue from the sales of AMZEEQ or ZILXI after January 12, 2022 as a result of the sale of the Assets. Product sales has been reclassified to generate revenues from sales will depend on the successful commercializationdiscontinued operations for all periods presented.
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Table of our drug products AMZEEQ and ZILXI and any other product candidates that receive marketing approval.contents
Historically, we have generated revenues under development and license agreements including royalty payments in relation to Finacea, the prescription foam product that we developed in collaboration with Bayer, which later assigned it to Leo Pharma A/S ("LEO"). In each of the three months ended March 31, 2020, we did not receive or become entitled to any royalty payments due to the suspension of the manufacturing of Finacea by LEO, following inadequate supply of quality-compliant batches of the API used in such product. In April 2020, LEO informed us that it had reestablished the supply of Finacea foam2022 and resumed commercial sale in the United States. In the nine months ended September 30, 2021 we received royalties of $0.7$0.2 million.
We may become entitled to additional contingent payments in the future, subject to achievement of the applicable clinical results by our other licensees. However, in light of the current phase of development and associated milestone schedules under these agreements, we do not expect to receive significant payments in the near term, if at all. We are also entitled to additional royalties from net sales or net profits generated by other products to be developed under these agreements, if they are successfully commercialized.
Additionally, on April 23, 2020, we entered into a licensing agreement with Cutia for AMZEEQ as well as certain of our other topical minocycline product candidates, once approved, on an exclusive basis in Greater China. Under the terms of the agreement, Cutia will have an exclusive license to obtain regulatory approval of and commercialize AMZEEQ, ZILXI and, if approved in the U.S., FCD105 in the Greater China territory. We will supply the finished licensed products to Cutia for clinical and commercial use. We received an upfront cash payment of $10.0 million in 2020 ($6.0 million received in the three months ended June 30, 2020 and $4.0 million received in the three months ended September 30, 2020) and will be eligible to receive an additional $1 million payment upon the receipt of marketing approval in China of the first licensed product. We will also receive royalties on net sales of any licensed products pursuant to the agreement. There was no license revenue for the nine months ended September 30, 2021.
Cost of Goods Sold
Cost of goods sold for the nine months ended September 30, 2021consists of direct and 2020 were approximately $2.4 millionindirect costs to procure and $0.9 million, respectively.
Our gross margin percentage of 79%manufacture AMZEEQ and 86% was favorably impacted during the nine months ended September 30, 2021ZILXI and September 30, 2020, respectively, by product sales with certain materials produced prior to FDA approval and therefore expensed in prior periods. If inventory sold during the nine months ended September 30, 2021 and September 30, 2020 was valued at cost, our gross margin for the period then ended would have been 78% and 82%, respectively.
Cost of goods sold expensesprimarily consist primarily of:
◦third party expenses incurred in manufacturing product for sale;
◦transportation costs incurred in shipping manufacturing materials between third parties; and
◦other costs associated with delivery and manufacturing of product.


Prior to receiving FDA approval, these costs for AMZEEQ and ZILXI were expensed as research and development expenses. We began capitalizing inventory costs for AMZEEQ and ZILXI after receipt of FDA approval. As a result of the sale of the MST Franchise, cost of goods sold have been reclassified to discontinued operations for all periods presented.
Operating Expenses
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Research and Development Expenses
Our research and development expenses to date relate primarily to the development of AMZEEQ, ZILXI, serlopitant, FCD105FMX114, VYN201 and FMX114. Our total research and development expenses for the nine months ended September 30, 2021 and 2020 were approximately $19.7 million and $35.7 million, respectively.VYN202. We charge all research and development expenses to operations as they are incurred. Following the sale of the MST Franchise in January 2022, our research and development will be focused on our BET inhibitor platform and FMX114. As a result of the sale of the MST Franchise in January 2022, research and development expenses related to the MST Franchise have been reclassified to discontinued operations for all periods presented.
Research and development expenses consist primarily of:
•employee-related expenses, including salaries, benefits and related expenses, including share-based compensation expenses;
◦•expenses incurred under agreements with third parties, including subcontractors, suppliers and consultants that conduct regulatory activities, clinical trials and preclinical studies;
◦•expenses incurred to acquire, develop and manufacture preclinical study and clinical trial materials;
◦•facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance, and other operating costs;
◦•costs associated with the creation, development and protection of intellectual property;
◦•other costs associated with preclinical and clinical activities and regulatory operations; and
•materials and manufacturing costs related to commercial production prior to FDA approval.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses for the nine months ended September 30, 2021 and 2020 were approximately $46.3 million and $71.6 million, respectively. The decline in these costs is primarily associated with cost savings measures related to our shift from a commercial organization to a research and development organization and merger costs incurred during 2020. No merger related costs were incurred in 2021.
Our selling, general and administrative expenses consist principally of:
•employee-related expenses, including salaries, benefits and related expenses, including share-based compensation expenses;
•costs associated with selling, marketing and shipping and handling costs;
•legal and professional fees for auditors and other consulting expenses; and
•facility, information technology and depreciation expenses.
As a result of the sale of the MST Franchise in January 2022, selling, general and administrative expenses related to the MST Franchise have been reclassified to discontinued operations for all periods presented.
Interest Expenseexpense
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Interest expense primarily consistsis typically comprised of interest expense on our long-termbank debt. DuringNo interest was incurred during the three months ended September 30, 2021, our interest expense also included prepayment penalties of $1.4 million and the write off of deferred financing costs of $1.6 million.March 31, 2022.
Other Expense, net
Other Expense,expense, net primarily consists of gains from interest earned from our bank deposits, foreign exchange losses and financial income on our marketable securities and a revaluation of our derivative liability.losses.
Income Taxes and Net Operating Loss Carryforwards
We have incurred significant net operating losses (“NOLs”) since our inception. We expect to continue to incur NOLs until such a time when we generate adequate revenues for us to reach profitability. As of December 31, 2020,2021, we had federal and state net operating loss carryforwards of $243.2$315.0 million and $66.3$105.6 million, respectively, of which $44.3 million and $66.3$105.6 million of these carryforwards will begin to expire starting in 2031 through 2040 for federal and state purposes, respectively. As of December 31, 2020,2021, we had federal and state research and development tax credit carryforwards of $6.2$6.7 million and $1.2 million,
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respectively. The federal credits begin to expire in 2031 and the California research credits have no expiration dates. As of December 31, 2020, the company2021, we had $198.9$270.7 million in federal and state NOLs with no limited period of use. There are no significant updates through September 30, 2021.March 31, 2022.
NOLs and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders of a corporation over a three-year period in excess of 50%, as defined under Sections 382 andSection 383 of the Internal Revenue Code of 1986, as amended. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. State NOLs and tax credit carryforwards may be subject to similar limitations under state laws. We believe that certain of our NOLs and tax credit carryforwards may be subject to limitation under Sections 382 or 383, and potentially, similar limitations under state law. As a result, even if we earn net taxable income, our ability to use the NOL and tax credit carryforwards may be materially limited, which could harm our future operating results by effectively increasing our future tax obligations.


















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Results of Operations
Comparison of the Three-Month Periods Ended September 30,March 31, 2022 and 2021 and 2020
Summary of operations
Three months ended March 31,
20222021Variance
Revenues
Royalty revenues$178 $230 $(52)(22.6)%
Total revenues178 230 (52)(22.6)%
Operating expenses:
Research and development4,452 4,255 197 4.6 %
Selling, general and administrative4,417 5,732 (1,315)(22.9)%
Total operating expenses8,869 9,987 (1,118)(11.2)%
Operating loss(8,691)(9,757)1,066 (10.9)%
Interest expense— (1,062)1,062 (100.0)%
Other expense(3)(57)54 (94.7)%
Loss from continuing operations before income taxes(8,694)(10,876)2,182 (20.1)%
Income tax expense— — — — %
Loss from continuing operations(8,694)(10,876)2,182 (20.1)%
Income (loss) from discontinued operations13,364 (9,674)23,038 (238.1)%
Net income (loss)$4,670 $(20,550)$25,220 (122.7)%
Revenue 
Revenues totaled $4.1$0.2 million and $3.3 million for each of the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively. For the three months ended September 30, 2021, our revenue consisted of $4.0 million of product sales and $0.1 million of royalty revenue. For the three months ended September 30, 2020, revenues consisted of $2.9 million of product sales and $0.4 millionconsisting of royalty revenue.
The COVID-19 pandemic and government measures taken in response toWe divested our minocycline business on January 12, 2022. As a result of the pandemic have had a negative impact on our operations. Access to healthcare providers has been limited throughsale, we will not generate revenue from the third quartersales of 2021, which has negatively impacted sales and the Company's ability to execute its commercial strategy with respect to AMZEEQ and ZILXI. The length of time and extent to which the COVID-19 pandemic will directly or indirectly impact the Company's business, results of operations and financial condition and liquidity will depend on future developments that are highly uncertain, subject to change and will continue to evolve with geographical re-openings, surges in cases, the emergence of new strains and the vaccination effort.
ZILXI following such date. In addition, on August 12, 2021,the Cutia License Agreement was assigned to Journey in connection with the sale. Therefore, we announced that we commenced a processwill not be entitled to explore a possible sale or license of our topical minocycline franchise. In connection this announcement, we immediately began reducing expenditures supporting commercial operations, including terminating commercial employees, which is expected to be complete by December 31, 2021.
Cost of Goods Sold
Cost of goods sold was $1.0 million and $0.4 million forpayments under the three months ended September 30, 2021 and 2020, respectively. The increase in cost of goods sold is primarily due to an increase in sales volume.
Our gross margin percentage was 73% for the three months ended September 30, 2021. Our gross margin percentage of 87% for the three months ended September 30, 2020 was favorably impacted by product sales with certain materials produced prior to FDA approval and therefore expensed in prior periods. If inventory sold during the three months ended September 30, 2020 was valued at cost, our gross margin for the period then ended would have been 85%. The inventory sold during the third quarter of 2021 was valued at cost.Cutia License Agreement going forward.
Research and Development Expenses
Our research and development expenses for the three months ended September 30, 2021March 31, 2022 were $7.0$4.5 million, representing an increase of $0.4$0.2 million, or 5.4%4.6%, compared to $6.6$4.3 million for the three months ended September 30, 2020. Employee-relatedMarch 31, 2021. The increase relates to $1.7 million of increased expenditures for VYN201, partially offset by $0.6 million decrease in expenses including stock based compensation, increased by $1.0 million. Expenditures forassociated with FMX114, and our BET inhibitor programs increased by $1.8a $0.7 million including fees due to In4Derm upon the execution of the Option Agreementdecrease in employee related expenses and in connection with the exercise of the Topical BETi Option. The increases were offset by a decrease in clinical trialother research and manufacturing expenses due to the completion of FCD105 and serlopitant clinical trials and the product launches of AMZEEQ and ZILXI during 2020.development costs.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses for the three months ended September 30, 2021March 31, 2022 were $13.8$4.4 million, representing a decrease of $5.9$1.3 million, or 30.0%22.9%, compared to $19.8$5.7 million for the three months ended September 30, 2020. Employee-related expenses decreased by $2.0March 31, 2021. The decrease primarily relates to a decrease of $0.8 million primarilyassociated with lower headcount in 2022. The balance of the decrease was due to lower headcountprofessional fees.
Interest Expense
No interest expense was incurred in the three months ended March 31, 2022. In the three months ended March 31, 2021, $1.1 million of interest expense was incurred. The decrease is attributable to the payment of all outstanding debt on August 11, 2021. Commercial operations and

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marketing expenditures decreased by $2.5 million as a result of the strategic shift of the business announced in August 2021. The balance of the decrease is primarily due to corporate costs incurred during 2020 following the Merger that were eliminated or reduced in 2021.
InterestOther Expense
InterestOther expense for the three months ended September 30, 2021 and September 30, 2020March 31, 2022 was $3.5 million and $1.1 million, respectively. The increase is primarily attributable to the prepayment penalty of $1.4 million associated$3.0 thousand as compared with the prepayment of outstanding debt and the write off of deferred financing costs of $1.6 million, offset by the elimination of ongoing interest expense and deferred cost amortization after the debt was paid off on August 11, 2021.
Other Expense (Income), net
Other expense (income), net$57.0 thousand for the three months ended September 30, 2021 was $35.0 thousand of expense as compared with $0.1 million of income for the three months ended September 30, 2020.March 31, 2021.
Income Taxes
During the three months ended September 30,March 31, 2022 and March 31, 2021 there waswere no material income tax expense. Income tax expense for the three months ended September 30, 2020 was $1.0 thousand.
Comparison of the Nine-Month Periods Ended September 30, 2021 and 2020
Revenue
Revenues totaled $12.5 million and $16.7 million for the nine months ended September 30, 2021 and 2020, respectively. For the nine months ended September 30, 2021, our revenue consisted of $11.8 million of product sales and $0.7 million of royalty revenue. For the nine months ended September 30, 2020, revenues consisted of $6.1 million of product sales, $0.6 million of royalty revenue and $10.0 million of license revenue.
The increase in product sales is due to the ZILXI product launch in October 2020 and an increase in demand for AMZEEQ. The decrease in license revenue for the nine months ended September 30, 2021 as compared to license revenue for the nine months ended September 30, 2020 is due to the upfront cash payment received in 2020 under the licensing agreement with Cutia for the sale and marketing of our topical minocycline products in China.
Cost of Goods Sold
Cost of goods sold was $2.4 million and $0.9 million for the nine months ended September 30, 2021 and 2020, respectively. The increase in cost of goods sold is primarily due to an increase in sales volume.
Our gross margin percentage of 79% and 86% for the nine months ended September 30, 2021 and September 30, 2020, respectively, was favorably impacted by product sales with certain materials produced prior to FDA approval and therefore expensed in prior periods. If inventory sold during the nine months ended September 30, 2021 and September 30, 2020 was valued at cost, our gross margin for the period then ended would have been 78% and 82%, respectively.
Research and Development Expenses
Our research and development expenses for the nine months ended September 30, 2021 were $19.7 million, representing a decrease of $16.0 million, or 44.7%, compared to $35.7 million for the nine months ended September 30, 2020. Employee-related expenses, including stock based compensation, decreased $9.2 million primarily due to severance costs incurred in 2020 related to the Merger. Clinical trial and manufacturing expenses decreased by $10.4 million with the completion of FCD105 and serlopitant clinical trials and the product launches of AMZEEQ and ZILXI during 2020. The decreases were offset by approximately $4.0 million of increased expenditures related to FMX114 and our BET inhibitor programs, including fees due to In4Derm upon the execution of the Option Agreement and in connection with the exercise of the Topical BETi Option.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses for the nine months ended September 30, 2021 were $46.3 million, representing a decrease of $25.4 million, or 35.4%, compared to $71.6 million for the nine months ended September 30, 2020. Employee-related expenses, including stock based compensation, decreased by $16.2 million primarily due to severance costs incurred in 2020 due to the Merger. Professional service and corporate costs decreased by approximately $13.2 million as
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certain of these expenses were eliminated or reduced in 2021 following the Merger. Commercial related expenditures associated with the launches of AMZEEQ and ZILXI increased by approximately $4.0 million.
Interest Expense
Interest expense for the nine months ended September 30, 2021 and September 30, 2020 was $5.6 million and $3.2 million, respectively. The increase is primarily attributable to the prepayment penalty of $1.4 million associated with the prepayment of outstanding debt and the write off of deferred financing costs of $1.6 million offset by the elimination of ongoing interest expense and deferred cost amortization after the debt was paid off on August 11, 2021.
Other Expense (Income), net
Other expense (income), net for the nine months ended September 30, 2021 was $0.2 million of expense as compared with $1.1 million of income for the nine months ended September 30, 2020. Other income decreased primarily due to gains on derivative liabilities and marketable securities in 2020. No such gains occurred in 2021.
Income Taxes
During the nine months ended September 30, 2021 there was no income tax expense. Income tax benefit for the nine months ended September 30, 2020 was $0.3 million.expenses.
Liquidity and Capital Resources

In January 2020,Since inception, we launched AMZEEQ in the United Stateshave funded operations primarily through private and public placements of our equity, debt and warrants and through fees, cost reimbursements and payments received from our licensees. We commenced generating product revenues in the first quarter of 2020. We also launched ZILXI in the United States in October 2020 and commenced generating revenues in the fourth quarter of 2020. Our activities priorrelated to the commercial launchessales of AMZEEQ and ZILXI primarily consistedin January 2020 and October 2020, respectively. AMZEEQ and ZILXI were sold as part of raising capital, developingthe sale of the MST Franchise on January 12, 2022 and, as such, we will no longer generate revenue from the sale of these products. We have incurred losses and experienced negative operating cash flows since our inception and anticipate that we will continue to incur losses until such a time when our product candidates, if approved, are commercially successful, if at all. We will not generate any revenue from any current or future product candidates unless and performing researchuntil we obtain regulatory approval and development activities. Since inception,commercializes such products. For the three months ended March 31, 2022, we have incurred recurring lossesgenerated net income of $4.7 million and negativeused $10.0 million of cash flowsin operations. The net income was comprised of $13.4 million of income from discontinued operations and $8.7 million loss from continuing operations.
As of September 30, 2021,March 31, 2022, we had cash, cash equivalents and restricted cash of $52.9$51.1 million and an accumulated deficit of $628.0$634.9 million. On August 11, 2021, we prepaidWe received proceeds of $20.0 million from the entiretysale of our outstanding indebtedness, including a prepayment premiumthe MST Franchise in January 2022 and accrued but unpaid interest, for a total amountwill receive an additional payment of approximately $36.5 million.$5.0 million on the one-year anniversary of the sale. We had no outstanding debt as of September 30, 2021.March 31, 2022.
The COVID-19 pandemicWe have taken a number of actions to support our operations and government measures taken in response to the pandemic have had a negative impact onmeet our operations. Access to healthcare providers has been limited, which has negatively impacted sales and our ability to execute our commercial strategy with respect to AMZEEQ and ZILXI. In addition, the commercial launches of both AMZEEQ and ZILXI have been negatively impacted by unfavorable payor decisions in March 2021 on product pricing. These conditions have impaired our ability to generate revenue consistent with internal forecasts, which has had a negative impact on our financial condition and liquidity. Following discussions with our lenders regarding the revenue targets includedliquidity needs. Beginning in the Amended and Restated Credit Agreement, the revenue expected to be generated for the trailing twelve month period ended June 30,second quarter of 2021, and the strategic transition discussed above, we determined to prepay our outstanding indebtedness in addition toconducted a 4% prepayment fee and accrued but unpaid interest in the total amount of approximately $36.5 million on August 11, 2021. Following the prepayment, the Amended and Restated Credit Agreement and the security interests thereunder were terminated. See "Part I—Item 1. Unaudited Condensed Consolidated Financial Statements—Note 1. Nature of Operations—Liquidity and Capital Resources and —Note 8. Debt."

As discussed above, we completed a strategic review of our businesscommercial and research and development portfolio to determine how to optimally deploy capital and drive shareholder value. Following our review, we initiated a process to explore a possible sale or license of our minocycline franchise,MST Franchise, including AMZEEQ, ZILXI, FCD105 and the underlying MST platform. We are refocusingMolecule Stabilizing Technology platform and refocus our resources on our immuno-inflammatory pipelinedevelopment programs. As a result of this decision, we restructured our operations and intendreduced our workforce, which lowered operating costs. In January 2022, we sold our MST Franchise. In addition, in March 2022, we entered into the Equity Purchase Agreement with Lincoln Park Capital which provides that, upon the terms and subject to continuethe conditions and limitations set forth therein, we may sell to supportLincoln Park up to $30.0 million of shares of common stock over the FMX114 and36-month term of the BET inhibitor development programs.Equity Purchase Agreement.
As described above, following the sale of the MST Franchise, we refocused our limited resources on our immuno-inflammatory pipeline. Research and development activities for these programs, including preclinical and clinical testing of our drugproduct candidates, will require significant additional financing. Our future viability is dependent onand our ability to successfully pivot to a research and development business strategy and develop commercially viable drug candidates and raise additional capital to finance our operations.Our ability to continue as a going concern is contingentdependent on our ability to sell or license the minocycline franchise, develop future commercially viable products and/or to raise sufficient working capital through either debt or equity financing.financings to fund our operations and successfully develop commercially viable product candidates. There is no assurance the we will be able to achieve these objectives under acceptable terms or at all.

In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), we have evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that our unaudited condensed consolidated financial statements are issued. The accompanying unaudited condensed consolidated financial statements have been prepared assuming that we will continue as a going concern and contemplate the realization of
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assets and the satisfaction of liabilities in the normal course of business. Our ability to continue as a going concern is expected to be impacted by the outcome of the plans outlined above, including the successful sale or license of the minocycline franchise, positiveour ability to raise additional capital to fund our operations, results from clinical trials for FMX114, and the successful development and positive results from clinical trials for the BET inhibitor programs. We doBased on our current plans and assumptions, we believe that absent sufficient proceeds received from equity transactions, financing transactions or business development transactions, we will not have sufficient cash and cash equivalents to fund our operations beyond one year from the issuance of our September 30, 2021the accompanying unaudited condensed consolidated financial statements. Based on our plans to conduct a Phase 2b clinical trial for FMX114 (assuming positive results inThis assumption does not include proceeds that can be drawn from Lincoln Park under the Phase 2a study) and progress both the topical and oral BET inhibitor programs into the clinic in 2022, we currently believe we has sufficient cash and cash equivalents to fund operations through the end of the second quarter of 2022.This assumes that operating expenses will be significantly reduced in connection with the disposition of the minocycline franchise and projected clinical trial costs. This excludes potential proceeds received from a sale or license of the minocycline franchise, business development transactions or financing transactions which are all beyond our control. As such,Equity Purchase Agreement. Accordingly, we will, over the course of the next twelve months, require significant additional financing to continue our operations. Eachoperations, including potentially selling a significant amount of these factorsshares pursuant to the Equity Purchase Agreement. In addition, the amount of proceeds we may be able to raise pursuant to our existing shelf registration statement on Form S-3 may be limited. As of the filing of this Quarterly Report on Form 10-Q, we are subject to uncertainty, and therefore,the general instructions of Form S-3 known as
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the "baby shelf rules." Under these instructions, the amount of funds we can raise through primary public offerings of securities in any 12-month period using our registration statement on Form S-3 is limited to one-third of the aggregate market value of the shares of our common stock held by our non-affiliates. Therefore, we will be limited in the amount of proceeds we are able to raise by selling shares of our common stock using our Form S-3 until such time as our public float exceeds $75 million. These factors raise substantial doubt about our ability to continue as a going concern. Failure to successfully complete a sale or license of the minocycline franchise, develop the above noted assets, and receive additional financing will require us to delay, scale back or otherwise modify our business and our research and development activities and other operations. The accompanying financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that might be necessary should we be unable to continue as a going concern.
Summary Statement of Cash Flows
The following table summarizes our statement of cash flows for the ninethree months ended September 30, 2021March 31, 2022 and 2020:2021:
Nine months ended September 30Three months ended March 31
2021202020222021
(in thousands of U.S. dollars)(in thousands of U.S. dollars)
Net cash (used in) / provided by:Net cash (used in) / provided by:Net cash (used in) / provided by:
Operating activitiesOperating activities$(46,349)$(111,707)Operating activities$(9,975)$(12,551)
Investing activitiesInvesting activities1,027 87,105 Investing activities16,688 — 
Financing activitiesFinancing activities$39,815 $53,828 Financing activities$1,532 $73,503 

Cash Used in Operating Activities
The use of cash in all periods resulted primarily from ourDuring the three months ended March 31, 2022, net losses adjusted for non-cash charges and changes in components of working capital. Adjustments to net income for non-cash items mainly include depreciation and amortization, share-based compensation, goodwill and in-process research and development impairment, and contingent stock right remeasurement.
Net cash used in operating activities was $46.3$10.0 million and primarily reflected our net income of $4.7 million adjusted for the gain on the sale of the MST Franchise of $13.0 million and stock-based compensation of $0.9 million. The remainder of the cash used in operations is driven by net change in operating assets and liabilities.
During the ninethree months ended September 30,March 31, 2021, compared to $111.7net cash used in operations was $12.6 million in the nine months ended September 30, 2020. The decrease was attributableand primarily to increases in revenues with the launch of AMZEEQ and ZILXI in January 2020 and October 2020, respectively, as well as decreased costs associated with the Merger, which resulted in a decrease toreflected our net loss of $170.6$20.6 million, partially offset by non-cash stock-based compensation charges of $2.4 million. The decrease is offset by add backs inremainder of the nine months ended September 30, 2020 of which $54.3 million related to impairments and $84.7 million related to the remeasurement of a contingent stock right. The remaining decrease in cash used in operations was driven by working capital fluctuations.a net change in operating assets and liabilities.
Cash Used in (Provided by)Provided by Investing Activities
NetIn the three months ended March 31, 2022, net cash provided by investing activities was $1.0$16.7 million inand was the nineresult of net proceeds from the disposition of the MST Franchise.
In the three months ended September 30,March 31, 2021, compared to $87.1 million in the nine months ended September 30, 2020. The changeno cash was primarily attributable to the cash acquired through the Merger and a decrease in investments in bank deposits and marketable securities in the nine months ended September 30, 2020.provided by or used for investing activities.
Cash Provided by Financing Activities
ThereIn the three months ended March 31, 2022, $1.5 million was $39.8 million provided by financing activities inand was primarily attributable to the nineissuance of common stock.
In the three months ended September 30,March 31, 2021, compared to $53.8$73.5 million in the nine months ended September 30, 2020. The increase was provided by financing activities and was primarily attributable to proceeds from the offeringissuance of common stock in January 2021 and August 2021, along with the exercise of options and issuance of shares under our equity incentive plan. This increase is offset by the prepayment of outstanding debt on August 11, 2021.
Cash and Funding Sources
Our sources of liquidity in the ninethree months ended September 30,March 31, 2022 consisted primarily of proceeds from the issuance of common stock pursuant to our at-the-market offering facility and proceeds from the sale of the MST Franchise.
Our sources of liquidity in the three months ended March 31, 2021 consisted primarily of proceeds from the issuance of common stock in thepursuant to our at-the-market offering facility and the registered direct offering in January 2021 and sales of AMZEEQ and ZILXI.
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Our sources of liquidity in the nine months ended September 30, 2020 consisted primarily of cash and investments acquired in the Merger.
We have no ongoing material financial commitments (such as lines of credit) that may affect our liquidity over the next five years.
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Funding Requirements
Our present and future funding requirements will depend on many factors, including, among other things:
•the amount of proceeds, if any, received from the possible sale or license of the minocycline franchise, other business transactions or financing activities;
•our ability to reduce selling, marketing and patent-related activities undertaken in connectioncosts associated with the commercializationresearch and development of AMZEEQ, ZILXI, as well as costs involved to support an effective sales and marketing organization as we go through the divestiture process;
•the progress, timing and completion of preclinical testing and clinical trials for pipeline product candidates, including FMX114, VYN201 and VYN202;candidates;
•the time and costs involved in obtaining regulatory approval for our other pipeline product candidates and any delays we may encounter as a result of evolving regulatory requirements or adverse results with respect to any of these product candidates;
•terms and timing of any acquisitions, collaborations or other arrangements;
•the number of potential new products we identify and decide to develop;
•business development opportunities we may engage in; and
•the costs involved in filing and prosecuting patent applications and obtaining, maintaining and enforcing patents or defending against claims or infringements raised by third parties, and license royalties or other amounts we may be required to pay to obtain rights to third party intellectual property rights.
Our operating plan may change as a result of many factors currently unknown to us, and any such change may affect our funding requirements. We may therefore need to seek additional capital sooner than planned, through public or private equity or debt financings or other sources, such as strategic collaborations or additional license arrangements. Such financings may result in dilution to stockholders, imposition of debt covenants and repayment obligations or other restrictions that may affect our business.
For more information as to the risks associated with our future funding needs, see “Item 1A—Risk Factors” included herein and in our Annual Report on Form 10-K for the year ended December 31, 2021.
Critical Accounting Policies, Significant Judgments and Use of Estimates
Our condensed unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles or GAAP.("GAAP"). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
Our critical accounting policies are described in our Annual Report on Form 10-K for the year ended December 31, 20202021 filed with the SEC on March 4, 2021, as updated by our Current Report on Form 8-K filed on August 12, 2021.17, 2022.
While our significant accounting policies are described in the Notes to our financial statements, we believe that the following critical accounting policies are most important to understanding and evaluating our reported financial results. These policies relate to the more significant areas involving management’s judgments and estimates and they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
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COVID-19
The COVID-19 pandemic and government measures taken in response to the pandemic have had a negative impact on the Company's operations. Access to healthcare providers has been limited, which has negatively impacted sales and the Company's ability to execute its commercial strategy with respect to AMZEEQ and ZILXI. The length of time and extent to which the COVID-19 pandemic will directly or indirectly impact the Company's business, results of operations and financial condition and liquidity will depend on future developments that are highly uncertain, subject to change and will continue to evolve with geographical re-openings, surges in cases, the emergence of new strains and the vaccination effort. In addition, the Company further assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of September 30, 2021 and through the date of this report. The accounting matters assessed included, but were not limited to, the Company’s allowance for doubtful accounts and credit losses, inventory and related reserves, impairments of long-lived assets and revenue recognition. In 2020, the Company recorded impairments of goodwill and certain indefinite-lived intangibles; however, these impairments were unrelated to the impact of COVID-19 (See “Note 3 – Business Combination” for more information). The Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to the Company’s consolidated financial statements in future reporting periods.
Revenue Recognition
We record revenue based on a five-step model in accordance with Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers ("ASC 606"). For the Collaboration Agreement under ASC 606, we identify the performance obligations, determine the transaction price, allocate the contract transaction price to the performance obligations, and recognize the revenue when (or as) the performance obligation is satisfied.
We identify the performance obligations included within the agreement and evaluate which performance obligations are distinct. Upfront payments for licenses are evaluated to determine if the license is capable of being distinct from the obligations to participate on certain development and/or commercialization committees with the collaboration partners and supply manufactured drug product for clinical trials. For performance obligations that are satisfied over time, we utilize the input method and revenue is recognized by consistently applying a method of measuring progress toward complete satisfaction of
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that performance obligation. We periodically review our estimated periods of performance based on the progress under each arrangement and account for the impact of any changes in estimated periods of performance on a prospective basis.
Milestone payments are a form of variable consideration as the payments are contingent upon achievement of a substantive event. Milestone payments are estimated and included in the transaction price when we determine that it is probable that there will not be a significant reversal of cumulative revenue recognized in future periods.
Business AcquisitionDiscontinued Operations
OurWe accounted for the sale of the MST Franchise in accordance with Accounting Standards Codification, ASC, 205 Discontinued Operations and Accounting Standards Update, ASU, No. 2014-08, Reporting of Discontinued Operations and Disclosures of Disposals of Components of an Entity. We followed the held-for-sale criteria as defined in ASC 360 and ASC 205. ASC 205 requires that a component of an entity that has been disposed of or is classified as held for sale and has operations and cash flows that can be clearly distinguished from the rest of the entity be reported as assets held for sale and discontinued operations. In the period a component of an entity has been disposed of or classified as held for sale, the results of operations for the periods presented are reclassified into separate line items in the condensed consolidated statements of operations. Assets and liabilities are also reclassified into separate line items on the related condensed consolidated balance sheets for the periods presented. ASU 2014-08 requires that only a disposal of a component of an entity, or a group of components of an entity, that represents a strategic shift that has, or will have, a major effect on the reporting entity’s operations and financial results be reported in the financial statements includeas discontinued operations. ASU 2014-08 also provides guidance on the operationsfinancial statement presentations and disclosures of an acquired business afterdiscontinued operations.

Due to the completionsale of the acquisition. We account for acquired businesses usingMST Franchise during the acquisition methodfirst quarter of accounting, which requires, among other things, that most assets acquired and liabilities assumed be recognized at their estimated fair values as2022, in accordance with ASC 205, Discontinued Operations, we have classified the results of the acquisition dateoncology business as discontinued operations in our condensed consolidated statements of operations and thatcash flows for all periods presented, see Note 3, Discontinued Operations in the fair value of In-Process Research and Development and Goodwill be recorded on the balance sheet. Transaction costs are expensed as incurred.
Amounts recorded in connection with an acquisition can result from a complex series of judgments about future events and uncertainties and can rely heavily on estimates and assumptions.
We are required to measure certainunaudited condensed consolidated financial statements. All disposed assets and liabilities at fair value, either upon initial recognition orassociated with our MST Franchise were therefore classified as assets and liabilities of discontinued operations in our unaudited condensed consolidated balance sheets for subsequent accounting or reporting.  For example, we use fair valuethe periods presented. All amounts included in the initial recognition of net assets acquired in a business combination and when measuring impairment losses.  We estimate fair value using an exit price approach, which requires, among other things, that we determinenotes to the price that would be receivedunaudited condensed consolidated financial statements relate to sell an asset or paid to transfer a liability in an orderly market. The determination of an exit price is considered from the perspective of market participants, considering the highest and best use of non-financial assets and, for liabilities, assuming that the risk of non-performance will be the same before and after the transfer.
When estimating fair value, depending on the nature and complexity of the asset or liability, we may use one or all of the following techniques:
•continuing operations unless otherwise noted.Income approach, which is based on the present value of a future stream of net cash flows.
•Market approach, which is based on market prices and other information from market transactions involving identical or comparable assets or liabilities.
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•Cost approach, which is based on the cost to acquire or construct comparable assets, less an allowance for functional and/or economic obsolescence.
Our fair value methodologies depend on the following types of inputs:
•Quoted prices for identical assets or liabilities in active markets (Level 1 inputs).
•Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are directly or indirectly observable, or inputs that are derived principally from, or corroborated by, observable market data by correlation or other means (Level 2 inputs).
•Unobservable inputs that reflect estimates and assumptions (Level 3 inputs).
A single estimate of fair value can result from a complex series of judgments about future events and uncertainties and can rely heavily on estimates and assumptions.
Asset Impairment
We review all of our long-lived assets for impairment indicators throughout the year. We perform impairment testing for indefinite-lived intangible assets annually and for all other long-lived assets whenever impairment indicators are present. When necessary, we record charges for impairments of long-lived assets for the amount by which the fair value is less than the carrying value of these assets.
Off-Balance Sheet Arrangements
We are not party to any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Indemnification
As permitted under Delaware law and in accordance with our bylaws, we are required to indemnify our officers and directors for certain events or occurrences while the officer or director is or was serving in such capacity. We are also party to indemnification agreements with our directors. We believe the fair value of the indemnification rights and agreements is minimal. Accordingly, we have not recorded any liabilities for these indemnification rights and agreements as of September 30, 2021 and December 31, 2020.
JOBS Act Accounting Election
The Jumpstart Our Business Startups Act of 2012 or the JOBS Act,(the "JOBS Act") permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We are choosing to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.
Recently Issued and Adopted Accounting Pronouncements
See “Recent“Newly Issued and Recently Adopted Accounting Pronouncements” in Note 2, “Significant Accounting Policies” in the Notes to Unaudited Interim Condensed Consolidated Financial Statements for a discussion of recently adopted accounting pronouncements and accounting pronouncements not yet adopted, and their expected impact on our financial position and results of operations.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and Item 10 of Regulation S-K. As such, we are not required to provide the information set forth in this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our chief executive and financial officers, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of September 30, 2021.March 31, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’sour management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2021March 31, 2022 our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at a reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting during the three months ended September 30, 2021March 31, 2022 identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Part II. OTHER INFORMATION
Item 1. Legal Proceedings.
The CompanyWe may periodically become subject to legal proceedings and claims arising in connection with its business. As of September 30, 2021,March 31, 2022, no claims or actions are pending against the Companyus that, in the opinion in management, are likely to have a material adverse effect on the Company.
As previously disclosed, on June 30, 2021, the Company received a paragraph IV certification notice (the “Notice”) from Padagis Israel Pharmaceuticals Ltd. (f/k/a Perrigo Israel Pharmaceuticals Ltd. (“Padagis”)) advising that Padagis has submitted to the U.S. Food and Drug Administration (the “FDA”) an Abbreviated New Drug Application (“ANDA”) seeking approval to manufacture and sell a generic version of the Company’s product AMZEEQ® (minocycline) topical foam, 4% in the United States prior to the expiration of the Company’s U.S. patents Nos. 8,865,139, 8,945,516, 8,992,896, 9,675,700, 10,086,080, 10,137,200, 10,213,512, 10,265,404, 10,398,641, 10,517,882, 10,821,187, and 10,849,847 (the “Listed Patents”), which are listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, otherwise known as the “Orange Book.” The Notice alleges that the Listed Patents are invalid, unenforceable, and/or will not be infringed by the commercial manufacture, use or sale of the generic product described in Padagis’s ANDA.
On August 9, 2021, the Company initiated a patent infringement suit against Padagis in the United States District Court for the District of Delaware arising from Padagis’s ANDA filing with the FDA. The patent infringement suit asserts each of the Listed Patents. As a result, under applicable law, the FDA cannot grant final approval to Padagis’s ANDA before December 30, 2023, or a court decision in Padagis’s favor. VYNE is seeking, among other relief, an order that the effective date of any FDA approval of Padagis’s ANDA be no earlier than the expiration of the Listed Patents, the latest of which expires on September 8, 2037, and such further and other relief as the court may deem appropriate. Padagis filed its response and counterclaim on October 1, 2021. The Company filed its response to such counterclaim on October 22, 2021.
The Company intends to vigorously defend its intellectual property rights, including the Listed Patentsus.
1A. Risk Factors.
Information about our risk factors is contained in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 20202021 filed with the SEC on March 4, 2021, as well as subsequent reports.17, 2022. As of September 30, 2021,March 31, 2022, there have been no material changes in our risk factors from those disclosed in Item 1A of our Annual Report on Form 10-K and subsequent reports, except as set forth below.
Risks Related to our Liquidity

We will need substantial additional funding to fund our operations, and we may not be able to continue as a going concern if we are unable to do so. We could also be forced to delay, reduce or terminate our research and development activities which would have a material adverse effect on our financial condition.

Developing and commercializing biopharmaceutical products, including launching new products into the marketplace and conducting preclinical studies and clinical trials, is an expensive and highly uncertain process that takes years to complete. As of September 30, 2021,March 31, 2022, we had approximately $52.9$51.1 million in cash, cash equivalents and restricted cash as well as negative cash flows from operating activities. Following the prepayment of our indebtedness, weWe do not have sufficient cash and cash equivalents to fund our anticipated level of operations as they become due during the twelve months following the date of filingissuance of this Quarterly Report on Form 10-Q.the unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2022. The aforementioned factors raise substantial doubt about our ability to continue as a going concern. See “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for further discussion regarding our liquidity. We may not be able to raise adequate proceeds from the salefinancing or license of our minocycline franchise or from other financingbusiness development transactions. Accordingly, additional funds may not be obtained for our ongoing operations and we may not succeed in our future operations. Unless we are able to raise additional capital to finance our operations, our long-term business plans may not be accomplished, and we may be forced to cease, reduce, or delay operations. Furthermore, if the Company issueswe issue equity or debt securities to raise additional funds, its existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of its existing stockholders. If the Company raiseswe raise additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to its potential products or proprietary technologies, or grant licenses on terms that are not favorable to the Company.us.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.

None.



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Item 6.  Exhibits.
The following documents are filed, or furnished as applicable, as part of this Quarterly Report on Form 10-Q:
Exhibit Index
Exhibit NumberIncorporated by ReferenceFiled
Exhibit DescriptionFormDateNumberHerewith
3.1(a)10-K3/4/20213.1
3.1(b)8-K7/19/20213.1
3.28-K9/08/20203.2
10.1#X
10.2#X
31.1X
31.2X
32.1*X
32.2*X
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.X
101.SCHXBRL Taxonomy Extension Schema Document.X
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.X
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.X
Exhibit NumberIncorporated by ReferenceFiled
Exhibit DescriptionFormDateNumberHerewith
2.1#8-K1/13/20222.1
3.110-K3/17/20223.1
3.28-K9/08/20203.2
10.18-K3/15/202210.1
10.28-K3/15/202210.2
31.1X
31.2X
32.1*X
32.2*X
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.X
101.SCHXBRL Taxonomy Extension Schema Document.X
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.X
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.X
101.LABXBRL Taxonomy Extension Label Linkbase Document.X
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101.LABXBRL Taxonomy Extension Label Linkbase Document.X
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.X
104The cover page of VYNE Therapeutics Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021,March 31, 2022, formatted in Inline XBRL (included within Exhibit 101 attachments).

#    Certain schedules and attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K.
*    The certifications attached as Exhibit 32.1 and Exhibit 32.2 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of VYNE Therapeutics Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

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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.
Dated: November 10, 2021May 12, 2022
VYNE Therapeutics Inc.
By:/s/ David Domzalski
David Domzalski
President and Chief Executive Officer
(Principal Executive Officer)
By:/s/ Tyler Zeronda
Tyler Zeronda
Chief Financial Officer and Treasurer
(Principal Financial Officer and Principal Accounting Officer)
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