| Business, basis of presentation, new accounting standards and summary of significant accounting policies | 1.
Business, basis of presentation, new accounting standards and summary of significant accounting policies General TherapeuticsMD, Inc., a Nevada corporation (the “Company”) and its consolidated subsidiaries are referred to collectively in this Quarterly Report on Form 10-Q (“10-Q Report”) as “TherapeuticsMD,” “we,” “our” and “us.” This 10-Q Report includes our trademarks, trade names and service marks, such as TherapeuticsMD ® ® ® ® ® ® ® TM SM We are a women’s healthcare company with a mission of creating and commercializing innovative products to support the lifespan of women from pregnancy prevention through menopause. At TherapeuticsMD, we combine entrepreneurial spirit, clinical expertise, and business leadership to develop and commercialize health solutions that enable new standards of care for women. Our solutions range from a patient-controlled, long-lasting contraceptive to advanced hormone therapy pharmaceutical products. We also have a portfolio of branded and generic prescription prenatal vitamins under the vitaMedMD and BocaGreenMD brands. Our portfolio of products focused on women’s health allows us to efficiently leverage our sales and marketing plan to grow our recently approved products. vitaCare Divestiture On April 14, 2022, we completed the divestiture of vitaCare Prescription Services, Inc. (“vitaCare”) with the sale of all of vitaCare’s issued and outstanding capital stock (the “vitaCare Divestiture”). We received net proceeds of $142.6 million, net of transaction costs of $7.2 million, and we recognized a gain on sale of business of $143.4 million. Included in the net proceeds amount was $11.3 million of customary holdbacks as provided in the stock purchase agreement (the “Purchase Agreement”), which is recorded as restricted cash in the consolidated balance sheets. The restricted cash is held by an escrow agent and will be released to us in April 2023 upon a joint written direction from the buyer and us being delivered to the escrow agent to disburse to us an amount equal to the amount of escrow funds less any amounts subject to a claim notice in accordance with the terms set forth in the Purchase Agreement. Any amounts subject to a claim notice in accordance with the terms set forth in the Purchase Agreement shall be retained by the escrow agent until each such claim subject thereto is resolved. Additionally, we may receive up to an additional $7.0 million in earn-out consideration, contingent upon vitaCare’s financial performance through 2023 as determined in accordance with the terms of the Purchase Agreement. We will record the contingent consideration at the settlement amount when the consideration is realized or realizable. The Purchase Agreement contains customary representations and warranties, covenants, and indemnities of the parties thereto. In addition, upon closing of the vitaCare Divestiture, (i) we entered into a long-term services agreement with vitaCare to continue utilization of the vitaCare platform with respect to our products, and (ii) we entered into a transition services agreement with vitaCare for us to provide certain transition services to vitaCare for up to 12 months following the closing. Under the long-term services agreement, we are required to pay to vitaCare a minimum service fee for each respective annual contract year. Our estimated minimum service fee commitments for vitaCare are as follows: $2.0 million for the period from October 1, 2022 to December 31, 2022, $10.7 million for 2023, $13.4 million for 2024, $15.4 million for 2025, $16.2 million for 2026, and $5.5 million for the period from January 1, 2027 to April 14, 2027. COVID-19 With multiple variant strains of the SARS-Cov-2 virus and the COVID-19 disease that it causes (collectively, “COVID-19”) still circulating, we continue to be subject to risks and uncertainties in connection with the COVID-19 pandemic. The extent of the future impact of the COVID-19 pandemic on our business continues to be highly uncertain and difficult to predict. The ultimate global recovery from the pandemic will be dependent on, among other things, actions taken by governments and businesses to contain and combat the virus, including any variant strains, the speed and effectiveness of vaccine production and global distribution, as well as how quickly, and to what extent, normal economic and operating conditions can resume on a sustainable basis globally. Since the early phase of the COVID-19 pandemic, we have been using substantial virtual options to ensure business continuity. We have also partnered with independent community pharmacies and multiple third-party online pharmacies and telemedicine providers that focus on contraception or menopause which provide patients real-time access to both diagnosis and treatment. We continue to support prescribers’ needs with samples and product materials through our sales force. If access is restricted, we have mailing options in place for these materials. We also have business continuity plans and infrastructure in place that allows for live virtual e-detailing of our products. As part of our response to the COVID-19 pandemic, we implemented measures to reduce marketing expenses and implemented cost saving measures, which included negotiating lower fees or suspending services from third-party vendors; implementing a company-wide hiring restriction; delaying or cancelling non-critical information technology projects; and eliminating non-essential travel, entertainment, meeting, and event expenses. In addition, we implemented a significant cost savings initiative that wa s designed to reduce our annual operating costs in 2022 , and we reduced the operating costs of the vitaCare business with the completion of the vitaCare Divestiture on April 14, 2022 . See above for additional information regarding the vitaCare Divestiture. The full impact of the COVID-19 pandemic continues to evolve. As of the date of issuance of these consolidated financial statements, the future extent to which the COVID-19 pandemic may continue to materially impact our financial condition, liquidity, or results of operations remains uncertain. We are continuing to assess the effect of the COVID-19 pandemic on our operations by monitoring the spread of COVID-19 and the various actions implemented to combat the pandemic throughout the world. Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business as a result of any economic recession or depression that has occurred or may occur in the future. While we currently believe that our COVID-19 contingency plan has the ability to mitigate many of the negative effects of the COVID-19 pandemic on our business, the severity of the impact of the COVID-19 pandemic on our business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic, the duration of “social distancing” orders, the ability of our sales force to access healthcare providers to promote our products, increases in unemployment, which could reduce access to commercial health insurance for our patients, thus limiting payer coverage for our products, and the impact of the pandemic on our global supply chain, all of which remain uncertain. Our future results of operations and liquidity could be materially adversely affected by delays in payments of outstanding receivable amounts beyond normal payment terms, supply chain disruptions, uncertain demand, and the impact of any initiatives or programs that we may undertake to address financial and operations challenges that we may face. Going concern We incurred a loss from operations of $65.8 million and interest expense and other financing costs of $30.9 million during the nine months ended September 30, 2022, and as of that date, our current liabilities exceeded our current assets by $86.6 million and our total liabilities exceeded our total assets by $48.3 million. We will need to raise additional capital to repay the entire principal balance of the Financing Agreement, dated as of April 24, 2019, as amended (the “Financing Agreement”), with Sixth Street Specialty Lending, Inc., as administrative agent (the “Administrative Agent” or “Sixth Street”), various lenders from time to time party thereto ( the “Lenders”) On July 29, 2022, we closed on a private placement offering with Rubric Capital Management LP (the “Preferred Stock Investor”), pursuant to which we issued and sold (i) 15,000 shares of the Company’s newly-designated Series A Preferred Stock, par value $0.001 per share (“Preferred Stock”) and (ii) 565,000 shares of the Company’s common stock, par value $0.001 per share (“Common Stock”), and 66 2/3% See Note 10, Mandatory Redeemable Preferred Stock and Stockholders’ Deficit for additional information regarding the financing with the Preferred Stock Investor. On July 29, 2022, we entered into Amendment No. 16 to the Financing Agreement pursuant to which the maturity date of the Financing Agreement was extended to September 30, 2022, with the option to further extend the maturity date to October 31, 2022, and November 30, 2022, in each case if we receive not less than $7.0 million in cash proceeds from an equity issuance, which, if preferred equity, is on substantially the same terms as the Preferred Stock. In connection with the closing of the private placement offering with the Preferred Stock Investor on September 30, 2022, and in accordance with Amendment No. 16 to the Financing Agreement, on September 30, 2022, we issued warrants (“Lender Warrants”) to the Lenders to purchase an aggregate of 125,000 shares of Common Stock and the maturity date of the Financing Agreement was extended to October 31, 2022. The Lender Warrants have an exercise price of $0.01 per share of Common Stock, subject to certain adjustment as provided therein, and an expiration date of September 30, 2032. The Lender Warrants may also be exercised via cashless exercise pursuant to the terms thereof. On October 28, 2022, we closed on an additional private placement offering with the Preferred Stock Investor, pursuant to which we issued and sold 7,000 shares of the Company’s Preferred Stock for an aggregate offering price of $ 7.0 million. In addition, in lieu of issuing, selling and delivering 263,666 shares of Common Stock to the Preferred Stock Investor, we agreed to pay the Preferred Stock Investor, on the later of (i) the Preferred Stock Maturity Date or (ii) the date our obligations under the Financing Agreement are paid in full, a make-whole payment equal to 263,666 multiplied by the closing price of our Common Stock on the principal securities exchange or securities market on which the Common Stock is then traded, on the day prior to the date of payment of the make-whole payment. In connection with the closing of the private placement offering with the Preferred Stock Investor on October 28, 2022, and in accordance with Amendment No. 16 to the Financing Agreement, on October 28, 2022, we issued Lender Warrants to purchase an aggregate of 125,000 shares of Common Stock, pursuant to a subscription agreement and the maturity date of the Financing Agreement was extended to November 30, 2022. See Note 16, Subsequent Events for additional information regarding amendments to the Financing Agreement. To address our capital needs, we are pursuing various equity and debt refinancing and other strategic alternatives, including the possibility that we will file for Chapter 11 protection if our equity and debt refinancing or other strategic alternatives fail prior to the maturity date of our Financing Agreement. The equity financing alternatives may include the private placement of equity, equity-linked, or other similar instruments or obligations with one or more investors, lenders, or other institutional counterparties or an underwritten public equity or equity-linked securities offering. Our ability to sell equity securities may be limited by market conditions, including the market price of our common stock, and our available authorized shares. To the extent that we raise additional capital through the sale of such securities, the ownership interests of our existing stockholders will be diluted, and the terms of these new securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders. If we are not successful in obtaining additional financing, we could be forced to discontinue or curtail our business operations, sell assets at unfavorable prices, or merge, consolidate, or combine with a company with greater financial resources in a transaction that might be unfavorable to us. Along with considering additional financings and other strategic alternatives, we have reviewed numerous potential scenarios in connection with steps that we may take to reduce our operating expenses. If we are unsuccessful with future financings, if the successful commercialization of ANNOVERA, IMVEXXY, or BIJUVA is delayed, or if the continued impact of the COVID-19 pandemic or issues in our supply chains related to our third-party contract manufacturers on our business is worse than we anticipate, our existing cash reserves would be insufficient to repay the entire principal balance of the Financing Agreement or satisfy our liquidity needs. The presence of these projected factors in conjunction with the uncertainty of the capital markets raises substantial doubt about the Company's ability to continue as a going concern for the next twelve months from the issuance of these financial statements. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Common stock r everse stock split On May 6, 2022, we completed a reverse stock split of our Common Stock. As a result, outstanding shares of our Common Stock were split at a ratio of 50-for-1 (the “Reverse Stock Split”) with any fractional shares resulting from the Reserve Stock Split rounded up to the next whole share of Common Stock. The number of authorized shares of Common Stock was also correspondingly reduced from 600.0 million shares to 12.0 million shares to give effect to the Reverse Stock Split. Additionally, all rights to receive shares of Common Stock under outstanding warrants, options, restricted stock units (“RSUs”) and performance stock units (“PSUs”) were adjusted to give effect of the Reverse Stock Split. Furthermore, remaining shares of Common Stock available for future issuance under share-based payment award plans and our employee stock purchase plan were adjusted to give effect of the Reverse Stock Split. Pursuant to Section 78.209 of the Nevada Revised Statutes, the approval of our stockholders was not required for our Board of Directors (the “Board”) to effectuate the Reverse Stock Split. In this 10-Q Report, all historical number of shares of Common Stock and per share data have been adjusted to give effect to the Reverse Stock Split. Additionally, since the Common Stock par value was unchanged, historical amounts for Common Stock and additional paid-in capital have been adjusted to give effect to the Reverse Stock Split.
A.
Basis of presentation We prepared the consolidated financial statements included in this 10-Q Report following the requirements of the United States (“U.S.”) Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain notes or other financial information that are normally required by accounting principles generally accepted in the U.S. (“U.S. GAAP”) for complete financial statements can be condensed or omitted. However, except as disclosed herein, there has been no material change in the information disclosed in the notes included in our 2021 Annual Report on Form 10-K ("2021 10-K Report"). Revenues, expenses, assets, liabilities, and equities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be representative of those for the full year. In our opinion, all adjustments necessary for a fair statement of the financial statements, which are of a normal and recurring nature, have been made for the interim periods reported. The information included in this 10-Q Report should be read in conjunction with the consolidated financial statements and accompanying notes included in our 2021 10-K Report. Certain amounts in the consolidated financial statements and accompanying notes may not add due to rounding, and all percentages have been calculated using unrounded amounts .
B.
New accounting standards Adoption of new accounting standards New accounting standards or accounting standards updates were assessed and determined to be either not applicable or did not have a material impact on the Company’s consolidated financial statements or processes. Accounting standards issued but not yet adopted Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and Scope. In March 2020 and January 2021, Accounting Standards Update (“ASU”) 2020-04 and ASU 2021-01 were issued, respectively. These ASUs provide optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as London Interbank Offered Rate (LIBOR). These ASUs include practical expedients for contract modifications due to reference rate reform. Generally, contract modifications related to reference rate reform may be considered an event that does not require remeasurement or reassessment of a previous accounting determination at the modification date. These ASUs were effective upon issuance and may be applied prospectively to contract modifications made or evaluated on or before December 31, 2022. Our debt agreements currently include the use of alternate rates when LIBOR is not available. We do not expect the change from LIBOR to an alternate rate will have a material impact to our financial statements and, to the extent we enter into modifications of agreements that are impacted by the LIBOR phase-out, we will apply such guidance to those contract modifications. Other recently issued accounting standards not yet adopted by us are not expected, upon adoption, to have a material impact on our consolidated financial statements or processes.
C.
Estimates and assumptions The preparation of consolidated financial statements in conformity to U.S. GAAP requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. We evaluate our estimated assumptions based on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ, at times in material amounts, from these estimates under different assumptions or conditions.
D.
Significant accounting policies The significant accounting policies we use for quarterly financial reporting are disclosed in Note 1, Business, basis of presentation, new accounting standards and summary of significant accounting policies of the accompanying notes to the consolidated financial statements included in our 2021 10-K Report, and in the section below. Restricted Cash Restricted cash is comprised of escrowed funds deposited with a bank relating to the vitaCare Divestiture .
E.
Reclassification of prior year presentation Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported consolidated balance sheets and consolidated statements of cash flows. An adjustment has been made to the consolidated statements of operations for the three and nine months ended September 30, 2021 to reclassify vitaCare service revenue. |
