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Deferred Royalty Obligation

9 Months Ended

Sep. 30, 2025

13. Deferred Royalty Obligation

The Company’s deferred royalty obligation liability is a debt obligation of Ironshore that was assumed as part of the Ironshore Acquisition. The deferred royalty obligation relates to royalty payments on net sales of Jornay PM that are paid to debtholders in exchange for funding provided to Ironshore by the debtholders. The royalty rate is 7.4% for net sales prior to July 1, 2025 and 9.7% thereafter through March 2032. The royalty payments are an unsecured obligation of the Company and there are no financial covenants or other restrictive covenants. The royalty payments are to be made semi-annually in February and August of each year related to the prior six-month calendar year period.

The deferred royalty obligation will be accreted to the total estimated royalty payments over the life of the agreement, which is recorded as interest expense using the effective interest rate. The carrying value of the obligation will decrease for royalty payments made to the extent that payments exceed the recognized interest expense. The effective interest rate is calculated based on current estimates of future royalty payments over the life of the arrangement. To the extent estimates of future royalty payments are greater or less than previous estimates or the estimated timing of such payments is materially different than previous estimates, the Company accounts for any such changes by adjusting the effective interest rate on a prospective basis, which will adjust future interest expense. The effective interest rate as of September 30, 2025 was approximately 11.88%.

A rollforward of the deferred royalty obligation is as follows:


	Deferred Royalty Obligation
Balance as of December 31, 2024	$	120,613
Net accretion		1,666
Net carrying amount at September 30, 2025	$	122,279

The total interest expense recognized related to the deferred royalty obligation during the nine months ended September 30, 2025 was $10,841, including net accretion of $1,666. The total interest expense recognized related to the deferred royalty obligation during the nine months ended September 30, 2024 was $1,526, including net accretion of $473. Total royalty payments made under the agreement during nine months ended September 30, 2025 was $8,582 and were recorded as a reduction to accrued interest.