UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

darebioinlinefullcolorrgb.jpg

DARÉ BIOSCIENCE, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware

Commission File No. 001-36395

20-4139823

(State or Other Jurisdiction

of Incorporation)

Commission File No. 001-36395

20-4139823
(IRS Employer

Identification No.)

3655 Nobel Drive, Suite 260

San Diego, CA

(Address of Principal Executive Offices)

(858) 926-7655

(Registrant’s telephone number, including area code)

92122

(Zip Code)

11119 North Torrey Pines Road, Suite 200, La Jolla, CA 92037

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockDARENasdaq Capital Market
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  Yes  x    NO      No  

o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  x    No

o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

o

Accelerated filer

o

Non-accelerated filer

  (Do not check if a smaller reporting company)

x

Smaller reporting company

x

Emerging growth company

x

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 pursuant to Section 13(a) of the Exchange Act.x


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  o    No  x

As of August 9, 2018, 11,422,16113, 2019, 16,683,411 shares of the Registrant’s Common Stock, par value $0.0001, were issued and outstanding.



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, in particular “Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations,” of Part I. Financial Information, and the information incorporated by reference herein contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this report, including statements regarding our strategy, future operations, future financial position, projected costs, prospects, plans and objectives of management, are forward-looking statements. Forward-looking statements, include all statements that are not historical facts and, in some cases, can be identified by terms such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect,” “could,” “plan,” “potential,” “predict,” “seek,” “should,” “would,” “contemplate,” project,” “target,” “tend to,” or the negative version of these words and similar expressions.

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, including those factors described in Part II, Item 1A, “Risk“Risk Factors,,” in this report, and elsewhere in this report. Given these uncertainties, you should not place undue reliance on any forward-looking statement. The following factors are among those that may cause such differences:

Inability to continue as a going concern;

Inability to raise additional capital, under favorable terms or at all;

Inability to successfully attract partners and enter into collaborations on acceptable terms;

Failure to select or capitalize on the most scientifically, clinically or commercially promising or profitable indications or therapeutic areas for our product candidates due to limited financial resources;

Inability to develop and commercialize our product candidates;

Failure or delay in starting, conducting and completing clinical trials or obtaining United States Food and Drug Administration, (FDA)or FDA, or foreign regulatory approval for our product candidates in a timely manner;

A change in the FDA’s primary oversight responsibility;

A change in regulatory requirements for our product candidates, including the development pathway pursuant to the FDA’s Section 505(b)(2);

of the Federal Food, Drug, and Cosmetic Act, or the FDA's 505(b)(2) pathway;

Unsuccessful clinical trialstrial outcomes stemming from clinical trial designs, failure to enroll a sufficient number of patients, higher than anticipated patient dropout rates, failure to meet established clinical endpoints, undesirable side effects and other safety concerns;

Negative publicity concerning the safety and efficacy of our product candidates, or of product candidates being developed by others that share characteristics similar to our candidates;

Inability to demonstrate sufficient efficacy of our product candidates;

Loss of our licensed rights to develop and commercialize a product candidate as a result of the termination of the underlying licensing agreement;

Monetary obligations and other requirements in connection with our exclusive, in-license agreements covering the critical patents and related intellectual property related to our product candidates;

Developments by our competitors that make our product candidates less competitive or obsolete;

Dependence on third parties to conduct clinical trials and to manufacture product candidates;

Dependence on third parties to supply clinical supplies and raw materials, drugs and other materials required to produce a finished product and to produce the quantities needed;

Failure of our product candidates, if approved, to gain market and distribute products;


Failure of our product candidates, if approved, to gain market acceptance or obtain adequate coverage for third party reimbursement;



A reduction in demand for contraceptives caused by an elimination of current requirements that health insurance plans cover and reimburse certain FDA-cleared or approved contraceptive products without cost sharing;

Lack of precedent to help assess whether health insurance plans will cover our product candidates;

The reimbursement environment relating to our product candidates at the time we obtain regulatory approval, if ever;

Difficulty in introducing branded products in a market made up of generic products;

Inability to adequately protect or enforce our, or our licensor’s, intellectual property rights;

Lack of patent protection for the active ingredients in certain of our product candidates which could expose our productsthose product candidates to competition from other formulations using the same active ingredients.

ingredients;

Higher risk of failure associated with product candidates in preclinicalpre-clinical stages of development that may lead investors to assign them little to no value and make these assets difficult to fund;

Disputes or other developments concerning our intellectual property rights;

Actual and anticipated fluctuations in our quarterly or annual operating results;

Price and volume fluctuations in the stock market, and in our stock in particular, which could subject us to securities class-action litigation;

Failure to maintain the listing of the Company’s common stock on the Nasdaq Capital Market or another nationally recognized exchange;

Litigation or public concern about the safety of our potential products;

Strict government regulations on our business, including various fraud and abuse laws, including, without limitation, the U.S. federal Anti-Kickback Statute, the U.S. federal False Claims Act and the U.S. Foreign Corrupt Practices Act;

Regulations governing the production or marketing of our product candidates;

Loss of, or inability to attract, key personnel; and

Increased costs as a result of operating as a public company, and substantial time devoted by our management to compliance initiatives and corporate governance practices.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

All forward-looking statements in this report are current only as of the date of this report. We do not undertake any obligation to publicly update any forward-looking statement to reflect events or circumstances after the date on which any statement is made or to reflect the occurrence of unanticipated events, except as required by law.





TABLE OF CONTENTS

Page

Page

Item 1.

Item 2.

Item 3.

32

Item 4.

32

Item 1.

34

Item 1A.

34

Item 2.

35

Item 3.

35

Item 4.

35

Item 5.

35

Item 6.

36

39





PART I.FINANCIAL INFORMATION
PART I.FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited).


Daré Bioscience, Inc. and Subsidiaries

Consolidated Balance Sheets

 

June 30,

2018

 

 

December 31,

2017

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

12,446,524

 

 

$

7,559,846

 

Other receivables

 

24,644

 

 

 

284,206

 

Prepaid expenses

 

347,409

 

 

 

311,571

 

Other current assets

 

 

 

 

193,495

 

Total current assets

 

12,818,577

 

 

 

8,349,118

 

Property and equipment, net

 

7,910

 

 

 

 

Goodwill

 

 

 

 

5,187,519

 

Other non-current assets

 

657,031

 

 

 

723,191

 

Total assets

$

13,483,518

 

 

$

14,259,828

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Accounts payable and accrued expenses

$

1,265,238

 

 

$

966,653

 

Total current liabilities

 

1,265,238

 

 

 

966,653

 

Deferred rent

 

317

 

 

 

392

 

Total liabilities

 

1,265,555

 

 

 

967,045

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

 

Stockholders' equity (deficit)

 

 

 

 

 

 

 

Preferred stock, $0.01 par value, 5,000,000 shares authorized

 

 

 

 

 

 

 

None issued and outstanding

 

 

 

 

 

Common stock: $0.0001 par value, 120,000,000 shares authorized, 11,422,161 and 6,047,161 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively

 

1,142

 

 

 

605

 

Accumulated other comprehensive loss

 

(59,311

)

 

 

(18,080

)

Additional paid-in capital

 

35,754,872

 

 

 

25,541,210

 

Accumulated deficit

 

(23,478,740

)

 

 

(12,230,952

)

Total stockholders' equity

 

12,217,963

 

 

 

13,292,783

 

Total liabilities and stockholders' equity

$

13,483,518

 

 

$

14,259,828

 

 June 30,
2019
 December 31,
2018
 (unaudited)  
Assets   
Current assets   
Cash and cash equivalents$5,630,569
 $6,805,889
Other receivables493,019
 31,037
Prepaid expenses437,958
 403,097
Total current assets6,561,546
 7,240,023
Property and equipment, net7,081
 9,396
Other non-current assets692,305
 577,968
Total assets$7,260,932
 $7,827,387
Liabilities and stockholders’ equity   
Current liabilities   
Accounts payable$632,118
 $459,705
Accrued expenses1,341,811
 631,351
Total current liabilities1,973,929
 1,091,056
Other liabilities203,948
 9,711
Total liabilities2,177,877
 1,100,767
Commitments and contingencies (Note 8)

 

Stockholders' equity   
Preferred stock, $0.01 par value, 5,000,000 shares authorized; None issued and outstanding
 
Common stock, $0.0001 par value; 120,000,000 shares authorized; 16,683,411 and 11,422,161 shares issued and outstanding, respectively1,668
 1,143
Accumulated other comprehensive loss(97,024) (96,728)
Additional paid-in capital41,942,062
 35,791,972
Accumulated deficit(36,763,651) (28,969,767)
Total stockholders' equity5,083,055
 6,726,620
Total liabilities and stockholders' equity$7,260,932
 $7,827,387
See accompanying notes to interim consolidated financial statements.




Daré Bioscience Inc. , Inc. andSubsidiaries

ConsolidatedStatementsofOperationsandComprehensiveLoss

(Unaudited)

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

$

1,157,174

 

 

$

476,047

 

 

$

2,460,363

 

 

$

676,711

 

Research and development expenses

 

 

2,217,622

 

 

 

3,576

 

 

 

3,304,275

 

 

 

31,376

 

License expenses

 

 

250,000

 

 

 

 

 

 

350,000

 

 

 

 

Impairment of goodwill

 

 

 

 

 

 

 

 

5,187,519

 

 

 

 

Total operating expenses

 

 

3,624,796

 

 

 

479,623

 

 

 

11,302,157

 

 

 

708,087

 

Loss from operations

 

 

(3,624,796

)

 

 

(479,623

)

 

 

(11,302,157

)

 

 

(708,087

)

Other income (expense)

 

 

42,626

 

 

 

(18,570

)

 

 

54,370

 

 

 

(33,970

)

Net loss

 

$

(3,582,170

)

 

$

(498,193

)

 

$

(11,247,787

)

 

$

(742,057

)

Foreign currency translation adjustments

 

$

(27,485

)

 

$

 

 

$

(41,231

)

 

$

 

Comprehensive loss

 

$

(3,609,655

)

 

$

(498,193

)

 

$

(11,289,018

)

 

$

(742,057

)

Loss per common share - basic and diluted

 

$

(0.32

)

 

$

(0.55

)

 

$

(1.13

)

 

$

(0.82

)

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

11,422,161

 

 

 

910,000

 

 

 

10,031,249

 

 

 

910,000

 

(Unaudited)

 Three months ended June 30, Six months ended June 30,
 2019 2018 2019 2018
Operating expenses       
General and administrative$1,307,379
 $1,157,174
 $2,584,559
 $2,460,363
Research and development expenses2,512,572
 2,217,622
 4,205,963
 3,304,275
License expenses162,500
 250,000
 275,000
 350,000
Impairment of goodwill
 
 
 5,187,519
Total operating expenses3,982,451
 3,624,796
 7,065,522
 11,302,157
Loss from operations(3,982,451) (3,624,796) (7,065,522) (11,302,157)
Other income30,001
 42,626
 61,232
 54,370
Net loss$(3,952,450) $(3,582,170) $(7,004,290) $(11,247,787)
Deemed dividend from trigger of down round provision feature(789,594) 
 (789,594) 
Net loss to common shareholders$(4,742,044) $(3,582,170) $(7,793,884) $(11,247,787)
Foreign currency translation adjustments$(7,917) $(27,485) $(296) $(41,231)
Comprehensive loss$(4,749,961) $(3,609,655) $(7,794,180) $(11,289,018)
Loss per common share - basic and diluted$(0.29) $(0.32) $(0.57) $(1.13)
Weighted average number of common shares outstanding:       
Basic and diluted16,105,252
 11,422,161
 13,776,643
 10,031,249
See accompanying notes to interim consolidated financial statements.

The operations presented in the interim consolidated financial statements and accompanying notes for the three and six months ended June 30, 2018 represent the operations of the Company following the Cerulean/Private Daré stock purchase transaction, and for the three and six months ended June 30, 2017 represent the operations of the Company when it was private, making a comparison between periods difficult. See Note 1, “Organization of the Business,” of the Notes to the Interim Consolidated Financial Statements (Unaudited) appearing in this report for a discussion of the Cerulean/Private Daré stock purchase transaction.




Daré Bioscience, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Stockholders’ Equity

(Unaudited)

 

 

Six months ended June 30,

 

 

 

2018

 

 

2017

 

Operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(11,247,787

)

 

$

(742,057

)

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

 

 

 

 

 

 

 

 

Depreciation

 

 

288

 

 

 

 

Stock-based compensation

 

 

18,547

 

 

 

6

 

Acquired in-process research and development

 

 

452,000

 

 

 

 

 

Impairment of goodwill

 

 

5,187,519

 

 

 

 

Changes in operating assets and liabilities, net impact of acquisition:

 

 

 

 

 

 

 

 

Other receivables

 

 

259,562

 

 

 

 

Prepaid expenses

 

 

(35,838

)

 

 

 

Other current assets

 

 

193,495

 

 

 

 

Other assets and deferred charges

 

 

66,160

 

 

 

 

Accounts payable and accrued expenses

 

 

298,585

 

 

 

550,666

 

Interest payable

 

 

 

 

 

33,976

 

Deferred rent

 

 

(75

)

 

 

(2,800

)

Net cash used in operating activities

 

 

(4,807,544

)

 

 

(160,209

)

Investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(8,200

)

 

 

 

Acquisition of Pear Tree

 

 

(452,000

)

 

 

 

Net cash used in investing activities

 

 

(460,200

)

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

Net proceeds from issuance of common stock and warrants

 

 

10,195,653

 

 

 

 

Proceeds from issuance of convertible promissory notes

 

 

 

 

 

155,000

 

Net cash provided by financing activities

 

 

10,195,653

 

 

 

155,000

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(41,231

)

 

 

 

Net change in cash and cash equivalents

 

 

4,886,678

 

 

 

(5,209

)

Cash and cash equivalents, beginning of period

 

 

7,559,846

 

 

 

44,614

 

Cash and cash equivalents, end of period

 

$

12,446,524

 

 

$

39,405

 

Three Months Ended June 30, 2019
     Additional Accumulated
other
   Total
 Common stock paid-in comprehensive Accumulated stockholders'
 Shares Amount capital loss deficit equity
Balance at March 31, 201911,422,161
 $1,143
 $35,889,940
 $(89,107) $(32,021,607) $3,780,369
Stock-based compensation
 
 111,351
 
 
 111,351
Issuance of common stock via public offering, net5,261,250
 525
 5,151,177
 
 
 5,151,702
Deemed dividend from trigger of down round provision
 
 789,594
 
 (789,594) 
Net loss
 
 
 
 (3,952,450) (3,952,450)
Foreign currency translation adjustments
 
 
 (7,917) 
 (7,917)
Balance at June 30, 201916,683,411
 $1,668
 $41,942,062
 $(97,024) $(36,763,651) $5,083,055
            
Six Months Ended June 30, 2019
     Additional Accumulated
other
   Total
 Common stock paid-in comprehensive Accumulated stockholders'
 Shares Amount capital loss deficit equity
Balance at December 31, 201811,422,161
 $1,143
 $35,791,972
 $(96,728) $(28,969,767) $6,726,620
Stock-based compensation
 
 209,319
 
 
 209,319
Issuance of common stock via public offering, net5,261,250
 525
 5,151,177
 
 
 5,151,702
Deemed dividend from trigger of down round provision
 
 789,594
 
 (789,594) 
Net loss
 
 
 
 (7,004,290) (7,004,290)
Foreign currency translation adjustments
 
 
 (296) 
 (296)
Balance at June 30, 201916,683,411
 $1,668
 $41,942,062
 $(97,024) $(36,763,651) $5,083,055
            
See accompanying notes to interim consolidated financial statements.

The operations presented in the interim consolidated financial statements and accompanying notes for the six months ended June 30, 2018 represent the operations of the Company following the Cerulean/Private Daré stock purchase transaction, and for the six months ended June 30, 2017 represent the operations of the Company when it was private, making a comparison between periods difficult. See Note 1, “Organization of the Business,” of the Notes to the Interim Consolidated Financial Statements (Unaudited) appearing in this report for a discussion of the Cerulean/Private Daré stock purchase transaction.






Daré Bioscience, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity
(Unaudited)

Three Months Ended June 30, 2018
     Additional Accumulated
other
   Total
 Common stock paid-in comprehensive Accumulated stockholders'
 Shares Amount capital loss deficit equity
Balance at March 31, 201811,422,161
 $1,142
 $35,747,609
 $(31,826) $(19,896,570) $15,820,356
Stock-based compensation
 
 9,423
 
 
 9,423
Public offering costs
 
 (2,160) 
 
 (2,160)
Net loss
 
 
 
 (3,582,170) (3,582,170)
Foreign currency translation adjustments
 
 
 (27,485) 
 (27,485)
Balance at June 30, 201811,422,161
 $1,142
 $35,754,872
 $(59,311) $(23,478,740) $12,217,963
            
Six Months Ended June 30, 2018
    ��Additional Accumulated
other
   Total
 Common stock paid-in comprehensive Accumulated stockholders'
 Shares Amount capital loss deficit equity
Balance at December 31, 20176,047,161
 $605
 $25,541,210
 $(18,080) $(12,230,953) $13,292,782
Stock-based compensation    18,547
 
 
 18,547
Issuance of common stock375,000
 37
 1,037,727
 
 
 1,037,764
Net proceeds from issuance of common stock and warrants5,000,000
 500
 9,157,388
 
 
 9,157,888
Net loss
 
 
 
 (11,247,787) (11,247,787)
Foreign currency translation adjustments
 
 
 (41,231) 
 (41,231)
Balance at June 30, 201811,422,161
 $1,142
 $35,754,872
 $(59,311) $(23,478,740) $12,217,963
            
See accompanying notes to interim consolidated financial statements.



Daré Bioscience, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
 Six months ended June 30,
 2019 2018
Operating activities:   
Net loss$(7,004,290) $(11,247,787)
Non-cash adjustments reconciling net loss to operating cash flows:   
Depreciation2,315
 288
Stock-based compensation209,319
 18,547
Non-cash lease expenses10,549
 
Acquired in-process research and development
 452,000
Impairment of goodwill
 5,187,519
Changes in operating assets and liabilities:   
Other receivables(461,982) 259,562
Prepaid expenses(34,861) (35,838)
Other current assets
 193,495
Other non-current assets79,063
 66,160
Accounts payable172,413
 9,739
Accrued expenses710,459
 288,846
Other liabilities(9,711) (75)
Net cash used in operating activities(6,326,726) (4,807,544)
Investing activities:   
Purchases of property and equipment
 (8,200)
Acquisition of Pear Tree and Hydra asset
 (452,000)
Net cash used in investing activities
 (460,200)
Financing activities:   
Net proceeds from issuance of common stock and warrants5,151,702
 10,195,653
Net cash provided by financing activities5,151,702
 10,195,653
Effect of exchange rate changes on cash and cash equivalents(296) (41,231)
Net change in cash and cash equivalents(1,175,320) 4,886,678
Cash and cash equivalents, beginning of period6,805,889
 7,559,846
Cash and cash equivalents, end of period$5,630,569
 $12,446,524
Supplemental disclosure of non-cash operating and financing activities:   
Operating right-of-use assets obtained in exchange for new operating lease liabilities$231,698
 
Deemed dividend from trigger of down round provision$789,594
 
    
See accompanying notes to interim consolidated financial statements.



Daré Bioscience, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)

1. Organization and Description of the Business


1.ORGANIZATION AND DESCRIPTION OF THE BUSINESS
Daré Bioscience, Inc., is a Delaware corporation, was formed on November 28, 2005.clinical-stage biopharmaceutical company committed to the advancement of innovative products for women’s health. Daré Bioscience, Inc. and its wholly owned subsidiaries Daré Bioscience Operations, Inc., Daré Bioscience Australia Pty LTD, and Pear Tree Pharmaceuticals, Inc., operate in one segment. The termIn this report, the “Company” as used herein refers collectively to Daré Bioscience, Inc. and its wholly owned subsidiaries, unless otherwise stated or the context otherwise requires.

The Company is a clinical-stage biopharmaceutical company committed to the advancement of innovative products for women’s reproductive health.

The Company is driven by a mission to identify, develop and bring to market a diverse portfolio of differentiated therapies that expand treatment options, improve outcomes and facilitate convenience for women, primarily in the areas of contraception, vaginal health, sexual health and fertility. The Company’sCompany's business strategy is to license or otherwise acquire the rights to differentiated reproductive health product candidates in women's health, some of which have existing clinical proof-of-concept data, and to takeadvance those candidates through advanced stages of clinical development.

On July 19, 2017, the Company completed its business combinationdevelopment and regulatory approval alone or in collaboration with Daré Bioscience Operations, Inc., a privately held Delaware corporation, or Private Daré, in accordance with the terms of the Stock Purchase Agreement dated as of March 19, 2017, or the Daré Stock Purchase Agreement, by and among the Company, Private Daré and the holders of capital stock and securities convertible into capital stock of Private Daré named therein, or the Private Daré Stockholders. Pursuant to the Daré Stock Purchase Agreement, each Private Daré Stockholder sold their shares of capital stock in Private Daré to the Company in exchange for newly issued shares of the Company’s common stock, and as a result, Private Daré became a wholly owned subsidiary of the Company and the Private Daré Stockholders became majority shareholders of the Company. That transaction is referred to as the Cerulean/Private Daré stock purchase transaction. In accordance with the terms of the Daré Stock Purchase Agreement, the Company changed its name from “Cerulean Pharma Inc.” to “Daré Bioscience, Inc.”   References in this report to “Cerulean” refer to Cerulean Pharma Inc. prior to the closing of the Cerulean/Private Daré stock purchase transaction.

Since July of 2017, thestrategic partners.

The Company has assembled a portfolio of clinical-stage and preclinical-stagepre-clinical-stage candidates addressing unmet needs in women’s reproductive health. The Company has usedCompany’s portfolio includes these six clinical-stage candidates:
DARE-BV1, a variety of transaction structuresnovel solution-to-gel formulation containing clindamycin phosphate 2% to license, acquire,treat bacterial vaginosis, or obtain an option to acquire, the rights to these assets. The Company’s two clinical-stage assets were obtained through product license and development agreements. The first, Ovaprene®, isBV;
Ovaprene, a non-hormonal monthly contraceptive candidate that was licensedintravaginal ring;
Sildenafil Cream, 3.6%, a novel cream formulation of sildenafil to treat female sexual arousal disorder, or FSAD;
DARE-HRT1, a combination bio-identical estradiol and progesterone intravaginal ring for hormone replacement therapy following menopause;
DARE-VVA1, a vaginally delivered formulation of tamoxifen to treat vulvar vaginal atrophy, or VVA, in Julypatients with hormone-receptor positive breast cancer; and
DARE-FRT1, an intravaginal ring containing bio-identical progesterone for the prevention of 2017;preterm birth and for fertility support as part of an in vitro fertilization, or IVF, treatment plan.
The Company's portfolio also includes several pre-clinical stage product candidates:
ORB-204 and ORB-214, 6-month and 12-month formulations of injectable etonogestrel for contraception;
DARE-RH1, a novel approach to non-hormonal contraception for both men and women by targeting the second, Topical 5% Sildenafil Citrate Cream, is a potential treatment for Female Sexual Arousal Disorder that was licensed in February of 2018. The Company has also assembled a portfolio of preclinical candidates. In March of 2018, the Company entered into a collaborationCatSper ion channel; and option agreement covering new injectable contraceptive product candidates; in April of 2018, the Company licensed the worldwide rights to a portfolio of preclinical
DARE-OAB1, an intravaginal rings; in May of 2018, the Company acquired a company that owns the rights to a proprietary vaginal tamoxifen tabletring containing oxybutynin for the treatment of vulvar and vaginal atrophy; and in July of 2018, the Company acquired certain assets related to a novel target for non-hormonal contraceptives for both men and women.

  The operations presented in the accompanying interim consolidated financial statements and in these notes for the three and six months ended June 30, 2018 represent the operations of the Company after giving effect to the Cerulean/Private Daré stock purchase transaction and as a public company. The interim consolidated financial statements and accompanying notes for the three and six months ended June 30, 2017 represent the operations of Private Daré, making a comparison between periods difficult.

overactive bladder.

The Company’s primary operations have consisted of, and are expected to continue to consist of, product research and development and advancing its portfolio of product candidates through late-stage clinical development orand regulatory approval.

We expect that the bulk of our development expenses over the next two years will support the advancement of our clinical-stage product candidates.

TheTo date, the Company has not obtained any regulatory approvals for any of its product candidates, commercialized any of its product candidates or generated any revenue related to its primary business purpose to date andproduct revenue. The Company is subject to a number ofseveral risks common to other clinical-stage biopharmaceutical companies, including dependence on key individuals, competition from other companies, the need to develop commercially viable products in a timely and cost effectivecost-effective manner, and the need to obtain adequate additional financingcapital to fund the development of product candidates. The Company is also subject to a number ofseveral risks similarcommon to other companies in the industry, including rapid technology change, regulatory



approval of products, uncertainty of market acceptance of products, competition from substitute products, andcompetition from larger companies with recognized brands, greater capital resources and higher levels of dedicated staff, and compliance with government regulations, protection of proprietary technology, dependence on third parties, and product liability.

2.Liquidity

2.GOING CONCERN
The Company has prepared its consolidated financial statements on a historygoing concern basis, which assumes that the Company will realize its assets and satisfy its liabilities in the normal course of losses from operations and anticipates that it will continue to incur losses for at least the next several years. For the six months endedbusiness. However, as of June 30, 2018, the Company incurred a net loss of $11.2 million. At June 30, 2018,2019, the Company had an accumulated deficit of approximately $23.5$36.8 million and had cash and cash equivalents of approximately $12.4$5.6 million. The Company also had negative cash flow from operations of approximately $4.8$6.3 million during the six months ended June 30, 2018.

On January 4, 2018,2019.

In March of 2019, the Company entered intoannounced that it received a second Notice of Award for an at-the-market,additional $982,851 of the anticipated $1.9 million from the Eunice Kennedy Shriver National Institute of Child Health and Human Development, or ATM, sales agreement, underthe NIH Grant, which is being applied to the clinical development efforts supporting Ovaprene. As of June 30, 2019, the Company may sell stock from time to time up to an aggregaterecorded a receivable in the amount of $10.0 million in gross proceeds. During January and February 2018,$456,484 for expenses eligible for reimbursement under the NIH Grant that were incurred through June 30, 2019. See Note 9, "Grant Award," herein.
In April of 2019, the Company generated gross proceedscompleted a sale of approximately $1.1 million, resulting incommon stock raising net proceeds of approximately $803,000 on sales of 375,000 shares of common stock under this agreement. In February 2018, the Company also generated gross proceeds of approximately $10.3 million, resulting in net proceeds of $9.4 million from an underwritten offering of 5.0 million shares of common stock and warrants to purchase up to 3.5 million shares of common stock. All of the financing transactions completed during the first quarter of 2018 were registered pursuant to the Company’s effective shelf registration statement on Form S-3 and the related base prospectus included in that registration statement, as supplemented by the prospectus supplements dated January 4, 2018 and February 14, 2018.

$5.2 million. See Note 6, "Stockholders' Equity," herein. The Company will needneeds to raise additional capital to furthercontinue to fund its operations and to successfully execute its current operating plan, including the development of and seek regulatory approvals for, its current product candidates.

The Company has a history of losses from operations, expects negative cash flows from its operations will continue for the foreseeable future, and expects that its net losses will continue for at least the next several years as it develops its existing product candidates and any future candidates it mayseeks to acquire, license or otherwise acquire,develop additional product candidates. These circumstances raise substantial doubt about the Company's ability to continue as well as to commercialize any products, if approved. If additional funding is not available on a timely basis, on terms favorable to the Company and its stockholders, or at adequate levels, the Company will need to reevaluate its operating plans.going concern. The interimaccompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that mightmay result from the outcome of this uncertainty.

the uncertainty of the Company's ability to continue as a going concern.

The Company is currently focused primarily on the development and commercialization of innovative products in women’s reproductive health and believes such activitieshealth. The Company will result in the Company’s continued incurrence ofcontinue to incur significant research and development and other expenses related to these programs.activities. If the clinical trials for any of the Company’s product candidates fail to produce successful results such that those product candidates do not advance in clinical development, then the Company’s business and prospects may suffer. Even if the product candidates advance in clinical development, they may fail to gain regulatory approval. Even if the product candidates are approved, they may fail to achieve market acceptance, and the Company may never become profitable. Even if the Company becomes profitable, it may not be able to sustain profitability.
The Company intendsbelieves that its current available cash resources will be sufficient to coverfund planned operations into the first quarter of 2020. For the foreseeable future, the Company's ability to continue its future operating expenses through cash and cash equivalentsoperations will depend on hand and throughits ability to obtain additional capital.
The Company is currently evaluating a combinationvariety of equity offerings, debtcapital raising options, including financings, government or other grant funding, collaborations and strategic alliances.alliances or other similar types of arrangements to cover its operating expenses, including the development of its product candidates and any future product candidates it may license or otherwise acquire. The amount and timing of the Company's capital needs have been and will continue to depend highly on many factors, including the product development programs the Company cannotchooses to pursue and the pace and results of its clinical development efforts. If the Company raises capital through collaborations, strategic alliances or other similar types of arrangements, it may have to relinquish, on terms that are not favorable to the Company, rights to some of its technologies or product candidates it would otherwise seek to develop or commercialize. There can be sureno assurance that additional financingcapital will be available when needed or that, if available, it will be obtained on terms favorable to the Company orand its stockholders.


As Additionally, equity or debt financings may have a dilutive effect on the holdings of the date of this report and based on current business plan estimates,Company's existing stockholders. If the Company believes it has sufficient cash to fund its operating expenses overcannot raise capital when needed, on favorable terms or at least the next twelve months from issuance of these condensed consolidated financial statements.  In the event the Company acquires, licenses or develops any new products or product candidates that are not contemplated in its current business plan, or if the clinical development plans for its existing product candidates materially change, then the amount required to fund future operations could increase, possibly materially. In order to acquire or develop additional products and product candidates,all, the Company will require additional capital over time.

Thenot be able to continue development of its product candidates, will need to reevaluate its planned operations and may need to delay, scale back or eliminate some or all of its development programs, reduce expenses, file for bankruptcy, reorganize, merge with another entity, or cease operations. If the Company expects that its net losses willbecomes unable to continue for at least the next several years as it seeks to acquire, license or develop additional products and product candidates. Such losses may fluctuate, the fluctuations may be substantial, anda going concern, the Company may never become profitable.

3. Significant Accounting Policies

have to liquidate its assets, and might realize significantly less than the values at which they are carried on its consolidated financial statements, and stockholders may lose all or part of their investment in the Company's common stock. The interim consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.




3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company’s significant accounting policies are described in Note 1 to the interim consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017,2018, filed with the Securities and Exchange Commission, or SEC on March 28, 2018.April 1, 2019. Since the date of those consolidated financial statements, there have been no material changes to the Company’s significant accounting policies.

policies, except as described below.

Basis of Presentation

The accompanying interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, as defined by the Financial Accounting Standards Board, or FASB, for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In management’s opinion, the accompanying interim consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the results of the interim periods presented.

Interim financial results are not necessarily indicative of results anticipated for any other interim period or for the full year. The accompanying interim consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

Reverse Stock Split

On July 20, 2017,2018.

Leases
The Company determines if an arrangement is a lease at inception. Operating leases are included in right-of-use, or ROU, lease assets, current portion of lease obligations, and long-term lease obligations on the Company's balance sheets.
ROU lease assets represent the Company's right to use an underlying asset for the lease term and lease obligations represent the Company's obligation to make lease payments arising from the lease. Operating ROU lease assets and obligations are recognized at the commencement date based on the present value of lease payments over the lease term. If the lease does not provide an implicit rate, the Company effected a 1-for-10 reverse stock split uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of its common stock. All sharelease payments. The ROU lease asset also includes any lease payments made and per share amounts of common stock,excludes lease incentives. The Company's lease terms may include options to extend or terminate the lease and warrants in these notes and those amountsthe related payments are only included in the accompanying interim consolidated financial statements, have been restatedlease liability when it is reasonably certain that the Company will exercise that option. Lease expense for all periodslease payments is recognized on a straight-line basis over the lease term. (See Note 7, Leased Properties.)
Fair Value Measurements
GAAP defines fair value as the price that would be received for an asset or the exit price that would be paid to give retroactive effecttransfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date, and also establishes a fair value hierarchy which requires an entity to maximize the reverse stock split.

Useuse of Estimates

observable inputs, where available. The preparationthree-level hierarchy of financial statements requires managementvaluation techniques established to make estimates and assumptionsmeasure fair value is defined as follows:

Level 1: inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: inputs other than level 1 that affect the reported amounts ofare observable, either directly or indirectly, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of assets or liabilities.
Level 3: unobservable inputs that are supported by little or no market activity and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates includethat are significant to the fair value of stock-based compensation, goodwill impairmentthe assets or liabilities.
Cash and purchase accounting. Actual results could differcash equivalents of $5.6 million and $6.8 million are measured at fair value as of June 30, 2019 and December 31, 2018, respectively, and are classified within Level 1 of the fair value hierarchy. Other receivables are financial assets with carrying values that approximate fair value due to the short-term nature of these assets. Accounts payable and accrued expenses and other liabilities are financial liabilities with carrying values that approximate fair value due to the short-term nature of these liabilities.


Recently Adopted Accounting Standards
In May 2014, FASB issued Accounting Standards Update, or ASU, 2014-09, Revenue from those estimates and could materially affectContracts with Customers, which impacts the reported amountsway in which some entities recognize revenue for certain types of assets, liabilities and future operating results.


Principlestransactions. The new standard became effective beginning in 2018 for public companies. Because the Company does not currently have any contracts with customers, the Company’s adoption of Consolidation

Thethis accounting standard did not impact the Company’s interim consolidated financial statements of the Company are stated in U.S. dollars and are prepared using GAAP. These financial statements include the accounts of the Company and its wholly owned subsidiaries, Daré Bioscience Operations, Inc., Daré Bioscience Australia Pty LTD, and Pear Tree Pharmaceuticals, Inc. The financial statements of the Company’s wholly owned subsidiaries are recorded in their functional currency and translated into the reporting currency. The cumulative effect of changes in exchange rates between the foreign entity’s functional currency and the reporting currency is reported in accumulated other comprehensive loss in the interim consolidated balance sheets. All significant intercompany transactions and accounts have been eliminated in consolidation.

Recent Pronouncements Not Yet Adopted

statements.

In February 2016, FASB issued ASU 2016-02, Leases (Topic 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The new standard is effective for public companies for fiscal years beginning after December 15, 2018, with early adoption permitted. ASU 2016-02 became effective for the Company on January 1, 2019 and was adopted using a modified retrospective approach and the effective date is as of the initial application. Consequently, financial information was not updated, and the disclosures required under ASU 2016-02 are not provided for dates and periods prior to January 1, 2019. ASU 2016-02 provides a number of optional practical expedients and accounting policy elections. The Company is currently assessingelected the potential impactpackage of this accounting standard andpractical expedients requiring no reassessment of whether any expired or existing contracts are or contain leases, the effect it might have on its financial statements.

Recently Adopted Accounting Standards

In May 2014, FASB issued Accounting Standards Update, or ASU, 2014-09, Revenue from Contracts with Customers, which impacts the way in which some entities recognize revenue for certain types of transactions. The new standard became effective beginning in 2018 for public companies. Because the Company does not currently have any contracts with customers, the Company’s adoption of this accounting standard did not impact the Company.

In August 2016, FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which intended to add or clarify guidance on thelease classification of certain cash receiptsany expired or existing leases, or initial direct costs for any existing leases. The Company recorded approximately $232,000 right-of-use assets and payments on$241,000 lease liabilities related to its lease of office space as of the adoption date in the consolidated balance sheets. There are no changes to the statement of cash flows. The new guidance addressesoperations or cash flows related toas a result of the following: debt prepayment or extinguishment costs, settlement of zero-coupon bonds, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies and bank-owned life insurance policies, distributions received from equity method investees, beneficial interest in securitization transactions, and the application of predominance principle to separately identifiable cash flows. The standard became effective on January 1, 2018. The Company’s adoption of this standard on January 1, 2018 did not have a material impact on the Company’s interim consolidated financial statements.adoption.

In January 2017, FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which intended to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standard became effective for the Company on January 1, 2018. The Company’s early adoption of this standard did not have a material impact on the Company’s consolidated financial statements.


In January 2017, FASB issued ASU 2017-04,August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, SimplifyingDisclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the Testamendments expanded the disclosure requirements relating to the analysis of stockholders' equity for Goodwill Impairment (Topic 350).interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. The guidance removes Step 2analysis should present a reconciliation of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now bebeginning balance to the amount byending balance of each period for which a reporting unit’s carrying value exceedsstatement of income is required to be filed. This final rule was effective November 5, 2018. In accordance with the new rule, the Company added a Consolidated Statement of Stockholders' Equity in this report and elected to present a reconciliation in a single statement that shows the changes in stockholders' equity for each interim period, as well as each comparable period.

4.ACQUISITIONS
Cerulean/Private Daré Stock Purchase Transaction
In July 2017, the Company completed its fair value, notbusiness combination with Daré Bioscience Operations, Inc., a privately held Delaware corporation, or Private Daré, in which Private Daré stockholders sold their shares to exceed the carrying amountCompany in exchange for newly issued shares of goodwill. The guidance should be adopted on a prospective basis for the annual or any interim goodwill impairment tests beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company’s adoption of this standard on September 30, 2017 did not have a material impact on the Company’s consolidated financial statements.

In May 2017, FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting, which intended to provide clarity when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changescommon stock, and as a result, Private Daré became a wholly owned subsidiary of the change in terms or conditions. The standardCompany and the Private Daré stockholders became effective formajority stockholders of the Company. In connection with the closing of that transaction, the Company on January 1, 2018. The Company’s adoption ofchanged its name from “Cerulean Pharma Inc.” to “Daré Bioscience, Inc.” In this standard did not have a material impact on the Company’s consolidated financial statements.

In July 2017, FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815): (I) Accounting for Certain Financial Instruments with Down Round Features, (II) Replacement for the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. This update was issuedreport, that transaction is referred to provide additional clarity related to accounting for certain financial instruments that have characteristics of both liabilities and equity. In particular, this update addresses freestanding and embedded financial instruments with down round features and whether they should be treated as a liability or equity instrument. Part II simply replaces the indefinite deferral for certain mandatorily redeemable non-controlling interests and mandatorily redeemable financial instruments of nonpublic entities contained within the ASC Topic 480 with a scope exception and does not impact the accounting for these mandatorily redeemable instruments. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company has early adopted ASU 2017-11. As a result, the Company has not recognized the fair value of the warrants containing down round features that were issued in the underwritten offering in February 2018 (see Note 7) as liabilities.

Fair Value Measurements

U.S. generally accepted accounting principles define fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date, and also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The three-level hierarchy of valuation techniques established to measure fair value is defined as follows:

Level 1: inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2: inputs other than level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of assets or liabilities.

Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Cash and cash equivalents of $12.4 million and $7.6 million measured at fair value as of June 30, 2018 and December 31, 2017, respectively, are classified within Level 1 of the fair value hierarchy. Other receivables are financial assets with carrying values that approximate fair value due to the short-term nature of these assets. Accounts payable and accrued expenses and other liabilities are financial liabilities with carrying values that approximate fair value due to the short-term nature of these liabilities.


4. Acquisitions

Cerulean/Private Dare Stock Purchase Transaction

As further discussed in Note 1, on July 19, 2017, the Cerulean/Private Daré stock purchase transaction and “Cerulean” refers to Cerulean Pharma Inc. before that transaction closed.

The Cerulean/Private Daré stock purchase transaction was accounted for as a reverse merger under the acquisition method of accounting whereby Private Daré was considered to have acquired Cerulean for financial reporting purposes because immediately upon completion of the transaction, Private Daré stockholders held a majority of the voting interest of the combined company.purposes. Pursuant to business combination accounting, the Company applied the acquisition method, which requires the assets acquired and liabilities assumed be recorded at fair value with limited exceptions. The excess of


the purchase price over the assets acquired and liabilities assumed represents goodwill. The goodwill iswas primarily attributable to the cash and cash equivalents at closing of the transaction of approximately $9.9 million and the impact of the unamortized fair value of stock options that were granted by Cerulean andthat were outstanding prior toimmediately before the closing of the transaction closed of approximately $3.7 million. The unamortized fair value of such stock options relates to an option modification approved on March 19, 2017 that provided for an acceleration of vesting of such options upon a change in control event. Such modification became effective upon the closing of the Cerulean/Private Daré stock purchase transaction. Hence, the unamortized fair value of such stock options is deemed to be part of total purchase consideration and goodwill. Transaction costs associated with the Cerulean/Private Daré stock purchase transaction of $0.96 million are included in general and administrative expense. The total purchase price consideration of approximately $24.3 million represents the fair value of the shares of Cerulean stock issued in connection with the Cerulean/Private Daré stock purchase transaction and the unamortized fair value of the stock options that were granted by Cerulean and outstanding prior to the closing of the transaction that were assumed on July 19, 2017 in connection with the closing of the transaction, which was allocated as follows:

Purchase Consideration

 

(in thousands)

 

Fair value of shares issued

 

$

20,625

 

Unamortized fair value of Cerulean options

 

 

3,654

 

Fair value of total consideration

 

$

24,279

 

Assets acquired and liabilities assumed

 

 

 

 

Cash and cash equivalents

 

$

9,918

 

Prepaid expense and other current assets

 

 

1,915

 

Accounts payable

 

 

(233

)

Total assets acquired and liabilities assumed

 

 

11,600

 

Goodwill

 

$

12,679

 

The final allocation of the purchase price was dependent on the finalization of the valuation of the fair value of assets acquired and liabilities assumed and may have differed from the amounts included in the interim consolidated financial statements. The Company retrospectively recorded purchase price adjustments at the acquisition date to increase current liabilities by $23,609 and increase current assets by $225,778, resulting in a $202,169 reduction to the original goodwill amount of approximately $12.9 million.

The Company tests its goodwill for impairment at least annually as of December 31 and between annual tests if it becomes aware of an event or change in circumstance that would indicate the carrying value may be impaired. The Company testedtests goodwill for impairment at the entity level because it operates on the basis of a single reporting unit. A goodwill impairment is the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. When impaired, the carrying value of goodwill is written down to fair value. Any excess of the reporting unit goodwill carrying value over the fair value is recognized as impairment loss.

The Company assessed goodwill at December 31, 2017, determined there was an impairment and recognized an impairment charge of approximately $7.5 million in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2017. Further, it reduced the


carrying value of goodwill from approximately $12.7 million to $5.2 million on its consolidated balance sheet as of December 31, 2017.

The Company assessed goodwill at March 31, 2018, determined that there was an impairment and recognized an impairment charge of approximately $5.2 million in the interim consolidated statement of operations and comprehensive loss for the three months ended March 31, 2018. As of March 31, 2018, the goodwill carrying value of goodwill on the Company’s consolidated balance sheet was written off in its entirety.

Pear Tree Merger

On April 30, 2018, the Company entered into an Agreement and Plan of Merger, the Merger Agreement, with Pear Tree Pharmaceuticals, Inc., or Pear Tree, Daré Merger Sub, Inc., a wholly-owned subsidiary of the Company, or Merger Sub, and two individuals in their respective capacities as Pear Tree stockholders’ representatives. The transactions contemplated by the Merger Agreement closed on May 16, 2018, and as a result, Pear Tree became the Company’s wholly owned subsidiary. The Company acquired Pear Tree to secure the rights to develop PT-101,DARE-VVA1, a proprietary vaginal formulation of tamoxifen, as a potential treatment for vulvar and vaginal atrophy.

The Company determined that the acquisition of Pear Tree should be accounted for as an asset acquisition instead of a business combination sincebecause substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, and therefore, the asset is not considered a business.

Transaction costs of approximately $452,000 associated with the merger were included in the Company’s research and development expense.

Under the Merger Agreement, upon the closing of the merger, if the Positive Consideration Amount (as defined below) exceeded the Negative Consideration Amount (as defined below), certain former and continuing Pear Tree service providers and former holders of Pear Tree’s capital stock, or the Holders, would have been entitledwere eligible to receive an amount of cash equal to such excess, and if the Negative Consideration Amount exceeded the Positive Consideration Amount, then the Company would be able to offset such excess from future payments that would otherwise be due to the Holders, including the potentiala $75,000 payment of $75,000 due on the one-year anniversary of the closing of the merger.merger and are eligible to receive tiered royalties, subject to customary provisions permitting royalty reductions and offset, based on percentages of annual net sales of certain products subject to license agreements the Company assumed and a percentage of sublicense revenue. The Company must also make contingent payments to the Holders based on achieving certain clinical, regulatory and commercial milestones, which may be paid, in the Company’s sole discretion, in cash or shares of the Company’s common stock.
In accordance with the terms of the Merger Agreement, because the Negative Consideration Amount (as defined below) exceeded the Positive Consideration Amount by approximately $132,000(as defined below), at the time of the closing of the merger. As such, approximately $132,000merger, the excess amount (approximately $132,000) offset the $75,000 payment due on the one-year anniversary of the closing of the merger and the balance will be offset from future payments that would otherwise be due under the Merger Agreement to the Holders. Under the Merger Agreement, Positive Consideration Amount means the sum of $75,000, and thethe cash and cash equivalents held by Pear Tree at closing, and Negative Consideration Amount means the sum of (i) certain Pear Tree indebtedness and transaction expenses, (ii) transaction expenses of the stockholders’ representatives, and (iii) amounts payablepayable under Pear Tree’s management incentive plan.


Under the Merger Agreement, the Holders will be eligible to receive, subject to certain offsets, tiered royalties, including customary provisions permitting royalty reductions
5.STOCK-BASED COMPENSATION

The 2015 Employee, Director and offset, based on percentages of annual net sales of certain products subject to license agreements assumed by the Company and a percentage of sublicense revenue. The Company must also make payments to the Holders that are contingent on achieving certain clinical, regulatory and commercial milestones, and may be paid, in the Company’s sole discretion, in cash or shares of the Company’s common stock. The parties made customary representations, warranties, and covenants in the Merger Agreement, including provisions regarding indemnification. Transaction costs associated with the merger of approximately $452,000 are included in the Company’s research and development expense.

5. Convertible Promissory Notes

Consultant Equity Incentive Plan

Prior to the Cerulean/Private Daré stock purchase transaction, Private Daré financed its operations through the sale of convertible promissory notes that entitled the holder to accrued interest at an annual rate of 8%. In the event of a preferred stock financing by Private Daré, all outstanding principal and unpaid interest under the convertible promissory notes would have converted into the shares of Private Daré’s preferred stock issued in such financing at the price per share paid by the purchasers of such shares and an additional number of shares equal to, depending on the time of purchase, 20% to 40% of the outstanding principal and unpaid interest, or the conversion benefit. Private Daré issued a convertible promissory note in the principal amount of $100,000 in February 2017, and between April 1, 2017 and June 6, 2017, Private Daré issued additional convertible promissory notes in the aggregate principal amount of $55,000.

In connection with the Cerulean/Private Daré stock purchase transaction, all outstanding convertible promissory notes were amended such that the principal amount of each note plus accrued interest thereon and taking into account the conversion benefit of such note, would convert into shares of common stock of Private Daré immediately prior to the closing of the Cerulean/Private Daré stock purchase transaction. The number of shares of Private Daré common stock issued upon conversion of the convertible promissory notes issued prior to March 31, 2017 was equal to (i) their outstanding principal amount plus accrued interest through March 31, 2017 multiplied by the respective conversion benefit, which ranged from 125% to 140%, divided by (ii) $0.18727. The number of shares of Private Daré common stock issued upon conversion of the convertible promissory notes issued after March 31, 2017 was equal to (i) 120% of their outstanding principal amount, divided by (ii) $0.38.

In connection with the closing of the Cerulean/Private Daré stock purchase transaction, all the outstanding shares of common stock of Private Daré, including the shares issued upon conversion of the above described convertible promissory notes, were exchanged for shares of common stock of the Company at the exchange ratio specified in the Daré Stock Purchase Agreement.

The Company recognized interest expense of $0 and $18,570 at June 30, 2018 and June 30, 2017, respectively, relating to the convertible promissory notes.


6. Stock-based Compensation

The 2015 Employee, Director and Consultant Equity Incentive Plan

Prior to the Cerulean/Private Daré stock purchase transaction,maintained the 2015 Employee, Director and Consultant Equity Incentive Plan, of Private Daré, or the 2015 Private Daré Plan, governed the issuance of incentive stock options, non-qualified stock options, stock grants and other stock-based awards to individuals who were then employees, officers, non-employee directors or consultants of Private Daré. Options granted under the 2015 Private Daré Plan have terms of ten years from the date of grant unless earlier terminated and generally vest over a three-year period.Plan. Upon closing of the Cerulean/Private Daré stock purchase transaction, the 2015 Private Daré Plan wasCompany assumed by the Company and each outstanding option to acquire stock of Private Daré that was not exercised prior to such closing was assumed on the same terms and conditions as were applicable under the 2015 Private Daré Plan and became an option to acquire such numbereach then outstanding award granted thereunder, which consisted of shares of the Company’s common stock as was equal to the number of Private Daré shares subject to such unexercised option multiplied byoptions and restricted stock. Based on the exchange ratio specified in the Daré Stock Purchase Agreement, at a correspondingly adjusted exercise price. There were outstanding unexercised options to purchase 50,000 shares of Private Daré stock that were assumed in connection with the closing offor the Cerulean/Private Daré stock purchase transaction and which, based on the exchange ratio and after giving effect to the reverse stock split effected in connection with the closing of that transaction, the Cerulean/outstanding options and restricted stock awards granted under the 2015 Private Daré stock purchase transactionPlan were replaced with options to purchase 10,149 shares of the Company’s common stock with a correspondingly adjusted exercise price, all of which were outstanding as of June 30, 2018.

Private Daré issued 900,0002019, and 200,000 shares of fully vested restricted stock to non-employees under the 2015 Private Daré Plan during the years ended December 31, 2016 and December 31, 2015, respectively. On July 19, 2017, these shares were assumed by the Company and were replaced with 223,295 restricted shares of the Company’s common stock (after giving effect to the reverse stock split effectedstock. Those options are fully vested and expire in connection with the closing of the Cerulean/Private Daré stock purchase transaction), all of which were outstanding as of June 30, 2018.

December 2025.



No options or restricted stock were granted under the 2015 Private Daré Plan during the six months ended June 30, 2017, and no further awards may be granted under the 2015 Private Daré Plan following the closing of the Cerulean/Private Daré stock purchase transaction on July 19, 2017.

transaction.

2014 Employee Stock Purchase Plan

In March 2014, the

The Company’s board of directors adopted, and its stockholders approved the 2014 Employee Stock Purchase Plan, or the ESPP, which became effective in April 2014. The ESPP permits eligible employees to enroll in a six-month2014, but no offering period whereby participants may purchase shares of the Company’s common stock, through payroll deductions, at a price equal to 85% of the closing price of the common stock on the first day of the offering period or on the last day of the offering period, whichever is lower. Purchase dates under the ESPP occur on or about June 30has been initiated thereunder since January 2017 and December 31 each year. The board of directors decided against initiating a new offering period beginning January 1, 2017. Therethere was no stock-based compensation related to the ESPP for the six months ended June 30, 20182019 or June 30, 2017.

2018.

Amended and Restated 2014 Stock Incentive Plan

The Company also maintains the Company’s 2014 Stock Incentive Plan, or the 2014 Plan. When the 2014 Plan was initially adopted, 240,000 shares of common stock were reserved for issuance under the 2014 Plan. In addition, “returning shares” that may become available from time to time are added back to the 2014 Plan. “Returning shares” are shares that are subject to outstanding awards granted under the 2014 Plan and the Company’s 2007 Stock Incentive Plan that expire or terminate prior to exercise or settlement, are forfeited because of failure to vest, or are repurchased. Options granted under the 2014 Plan have terms of no more than ten years from the date of grant unless earlier terminated.

On March 19, 2017, the Company’s board of directors approved two modifications to outstanding stock options granted under the 2014 Plan to participants who were providing services to the Company


as of that date. One modification extended the exercise period of such stock options to two years after such participant’s termination date, unless the exercise period absent such modification would be longer. The other modification provided for accelerated vesting of such stock options upon a change in control event. These modifications resulted in unamortized fair value expense of approximately $3.7 million and was recorded as part of the total consideration in the Cerulean/Private Daré stock purchase transaction and discussed in Note 4.

At June 30, 2018, 138,804 shares of common stock were reserved for future issuance under the 2014 Plan, and options to purchase 537,422 shares of the Company’s common stock granted under the 2014 Plan were outstanding.

On May 28, 2018, the Company’s board of directors approved the Amended and Restated 2014 Plan, or the Amended 2014 Plan, which was subsequently approved by the Company’s stockholders on July 10, 2018. The numberPlan. There were 2,046,885 shares of sharescommon stock authorized for issuance of awards under the Amended 2014 Plan when it was increased from 621,841 to 2,046,885, which isapproved by the sumCompany's stockholders in July 2018. The number of (a) 1,509,463authorized shares of common stock plus (b) 537,422 shares of common stock subject to awards granted under the 2014 Plan. An annual increase is to be addedincreases annually on the first day of each fiscal year until, and including, the fiscal year ending December 31, 2024 equal toby the least of (i) 2,000,000, shares of common stock, (ii) 4% of the number of outstanding shares of common stock on such date, or (iii) an amount determined by the Company’s board of directors.

On January 1, 2019, the number of authorized shares increased by 456,886 to 2,503,771, which increase represented 4% of the number of outstanding shares of common stock on such date.

Summary of Stock Option Activity

A summary of

The table below summarizes stock option activity with regard tounder the 2015 Private Daré Plan and theAmended 2014 Plan, and related information for the six months ended June 30, 2018 is set forth in the table below.2019. The exercise price of all options granted during the six months ended June 30, 2018 and 20172019 was equal to the market value of the Company’s common stock on the date of the grant. As of June 30, 2018,2019, unamortized stock-based compensation expense of $35,123$1,348,159 will be amortized over a weighted average period of 2.332.9 years.

 

 

Number of Shares

 

 

Weighted Average

Exercise Price

 

Outstanding at December 31, 2017 (1)

 

 

539,896

 

 

$

31.40

 

Granted

 

 

7,675

 

 

 

1.68

 

Exercised

 

 

 

 

 

 

Cancelled/expired

 

 

 

 

 

 

Outstanding at June 30, 2018 (unaudited)

 

 

547,571

 

 

$

30.98

 

Exercisable at June 30, 2018 (unaudited)

 

 

529,721

 

 

$

31.89

 

At June 30, 2019, 497,032 shares of common stock were reserved for future issuance under the Amended 2014 Plan.

(1)

Includes 10,149 shares subject to options granted under the 2015 Private Daré Plan that were assumed in connection with the Cerulean/Private Daré stock purchase transaction.

 Number of Shares 
Weighted Average
Exercise Price
Outstanding at December 31, 2018 (1)1,635,790
 $11.08
Granted698,000
 0.79
Exercised
 
Canceled/forfeited(316,832) 24.55
Expired(70) 59.48
Outstanding at June 30, 2019 (unaudited) (1)2,016,888
 $5.40
Exercisable at June 30, 2019 (unaudited)427,702
 $21.83
(1)Includes 10,149 shares subject to options granted under the 2015 Private Daré Plan assumed in connection with the Cerulean/Private Daré stock purchase transaction.
Compensation Expense

Total stock-based compensation expense related to the issuance of stock option awardsoptions granted to employees that wasand directors recognized in the consolidated statement of operations is as follows:

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Research and development

$

 

 

$

 

 

$

 

 

$

 

General and administrative

 

9,423

 

 

 

3

 

 

 

18,547

 

 

 

6

 

  Total

$

9,423

 

 

$

3

 

 

$

18,547

 

 

$

6

 

 Three Months Ended
June 30,
Six Months Ended
June 30,
 2019 20182019 2018
Research and development$26,996
 $
$51,699
 $
General and administrative84,355
 9,423
157,620
 18,547
Total$111,351
 $9,423
$209,319
 $18,547

There were no stock options granted during the six months ended June 30, 2017.


The assumptions used in the Black-Scholes option-pricing model for stock options granted to employees and to directors in respect of board services during the six months ended June 30, 20182019 are as follows:

 

 

Six months ended

 

 

 

June 30, 2018

 

Expected life in years

 

 

10.0

 

Risk-free interest rate

 

2.76%

 

Expected volatility

 

124%

 

Forfeiture rate

 

0.0%

 

Dividend yield

 

0.0%

 

Weighted-average fair value of options granted

 

$

1.61

 

Restricted Stock After the Cerulean/Private Daré Stock Purchase Transaction

The 3.14 million shares of common stock issued in connection with the Cerulean/Private Daré stock purchase transaction to the shareholders of Private Daré have not been registered with the SEC and may only be sold if registered under the Securities Act of 1933, as amended, or pursuant to an exemption from the SEC’s registration requirements. The shares held by non-affiliates became eligible for sale pursuant to Rule 144 beginning six months after the closing date of the Cerulean/Private Daré stock purchase transaction.

7.Stockholders’ Equity

  Three Months Ended
June 30, 2019
 Six Months Ended
June 30, 2019
Expected life in years 10.0 10.0
Risk-free interest rate 2.09% 2.58%
Expected volatility 123% 121%
Forfeiture rate 0.0% 0.0%
Dividend yield 0.0% 0.0%
Weighted-average fair value of options granted $0.86 $0.75
6.STOCKHOLDERS’ EQUITY
ATM Sales Agreement

On

In January 4, 2018, the Company entered into a common stock sales agreement pursuant tounder which the Company may sell up to an aggregate of $10 million in gross proceeds through the sale of shares of common stock from time to time in “at-the-market” equity offerings (as defined in Rule 415 promulgated under the Securities Act of 1933, as amended), including in sales made directly on the Nasdaq Capital Market, or Nasdaq, to or through a market maker or, subject to our prior approval, in negotiated transactions.. The Company agreed towill pay a commission of up to 3% of the gross proceeds of any common stock sold under this agreement plus certain legal expenses.

This agreement was amended in August 2018 to refer to the Company’s shelf registration statement on Form S-3 (File No. 333-227019) that was filed to replace the Company’s shelf registration statement on Form S-3 (File No. 333-206396) that expired on August 28, 2018.

The Company sold no shares under this agreement during either the three or six months ended June 30, 2019 or the three months ended June 30, 2018. During the six months ended June 30, 2018, the Company generatedsold an aggregate of 375,000 shares common stock under this agreement for gross proceeds of approximately $1.1 million and incurred issuance costs of $270,000 under this agreement on sales of an aggregate of 375,000 shares of the Company’s common stock, all of which were sold during January and $237,403.
February 2018.

2018 Underwritten Public Offering

On

In February 15, 2018, the Company closed an underwritten public offering of 5.0 million shares of its common stock and warrants to purchase up to 3.5 million shares of its common stock. Each share of common stock was sold together with a warrant to purchase up to 0.70 of a share of the Company’s common stock. The Company granted the underwriter a 30-day over-allotment option to purchase up to an additional 750,000 shares of common stock atand/or warrants to purchase up to 525,000 shares of common stock.  The underwriter exercised the option with respect to warrants to purchase 220,500 shares of common stock. The Company received gross proceeds of $10.3 million, including the proceeds from the sale of the warrants upon exercise of the underwriter’s over-allotment option, and net proceeds of approximately $9.4 million.
Common Stock Warrants
The warrants issued in the February 2018 underwritten offering initially had an exercise price of $3.00 per share. The offering, including shares issued upon exercise of the underwriter’s overallotment option, generated gross proceeds of $10.3 million,share and after the payment of expenses, the Company received net proceeds of approximately $9.4 million. The warrants are exercisable immediately and for a period of five years from the date of issuance. through February 2023.The warrants include a price-based anti-dilution provision, which provides that, subject to certain limited exceptions, the exercise price of the warrants will be adjusted downward ifreduced each time the Company issues or sells (or is deemed to issue or sell) securities atfor a consideration per share less than a price that is less thanequal to the exercise price of those warrants in effect immediately prior to such issuance or sale (or deemed issuance or sale), before the expiration of the warrant term. In that case, the new exercise price of the warrants would equal the price at which the new securities are issued or sold (or are deemed to have been issued or sold).sale. In addition, subject to certain exceptions, if the Company issues, sells or enters into any agreement to issue or sell securities at a price which varies or may vary with the


market price of the shares of the Company’s common stock, the warrant holders of the warrants shall have the right to substitute such variable price for the exercise price of the warrant then in effect. TheThese warrants are exercisable only for cash, unless thea registration statement covering the shares issued upon exercise of which the prospectus registering the offering was partwarrants is not effective, for the issuance of the shares underlying the warrants, in which case the warrants may be exercised on a cashless basis. A registration statement covering the shares issued upon exercise of the warrants is currently effective. The Company granted the underwriters a 30-day option to purchase up to an additional 750,000 shares of its common stock and warrants to purchase up to 525,000 shares of its common stock directly from the Company at a price of $2.05 per common share and accompanying warrant. The Company received an overallotment notice from the underwriter for warrants to purchase up to 220,500 shares of its common stock, which were issued on February 15, 2018.

The Company has estimated the fair value of the warrants as of February 15, 2018 to be approximately $3.0 million which has been recorded in equity as of the grant date. As described above at Note 3, Recently Adopted Accounting Standards, theThe Company early adopted ASU 2017-11 and as a result hasof January 1, 2018 and recorded the fair value of the warrants as equity.

Common Stock Warrants



On April 11, 2019, in accordance with the anti-dilution provision of these warrants and as a result of the sale of shares in the public offering that closed on that date and which is discussed below, the exercise price of these warrants was automatically reduced to $0.98 per share. For the three and six months ended June 30, 2019 the Company recorded $0.8 million to additional paid in capital as a result of the triggering of the anti-dilution provisions.
In addition to the warrants issued in the February 2018 underwritten offering, as of June 30, 2019, there are outstanding warrants to purchase 30,333 shares of the Company’s common stock, which are further described in the table below.
No warrants were exercised during the six months ended June 30, 20182019 or 2017.2018. As of June 30, 2018,2019, the Company had the following warrants outstanding:

Shares Underlying

Outstanding Warrants

 

 

Exercise Price

 

 

Expiration Date

 

169

 

 

$

177.00

 

 

August 8, 2018

 

2,906

 

 

$

120.40

 

 

December 1, 2021

 

3,737

 

 

$

120.40

 

 

December 6, 2021

 

17,190

 

 

$

60.50

 

 

January 8, 2020

 

6,500

 

 

$

10.00

 

 

April 4, 2026

 

3,720,500

 

 

$

3.00

 

 

February 15, 2023

 

3,751,002

 

 

 

 

 

 

 

8. Commitments

Shares Underlying
Outstanding Warrants
 Exercise Price Expiration Date
2,906 $120.40 December 1, 2021
3,737 $120.40 December 6, 2021
17,190 $60.50 January 8, 2020
6,500 $10.00 April 4, 2026
3,720,500 $0.98 February 15, 2023
3,750,833     
April 2019 Underwritten Public Offering
On April 11, 2019, the Company closed an underwritten public offering of 4,575,000 shares of its common stock at a public offering price of $1.10 per share. The Company granted the underwriters a 30-day over-allotment option to purchase up to an additional 686,250 shares which was exercised in full on April 12, 2019. Including the over-allotment shares, the Company issued a total of 5,261,250 shares in the underwritten public offering, and Contingencies

received gross proceeds of approximately $5.8 million and net proceeds of approximately $5.2 million after deducting underwriting discounts and offering expenses.

7.LEASED PROPERTIES
Effective January 1, 2019, the Company adopted ASC 842, which requires recognition of a right-of-use asset and lease liability for all leases at the commencement date based on the present value of lease payments over the lease term. Additional qualitative and quantitative disclosures regarding the Company's leasing arrangements are also required. The Company adopted ASC 842 prospectively and elected the package of transition practical expedients that does not require reassessment of: (1) whether any existing or expired contracts are or contain leases, (2) lease classification and (3) initial direct costs. In addition, the Company has elected other available practical expedients to not separate lease and nonlease components, which consist principally of common area maintenance charges, for all classes of underlying assets and to exclude leases with an initial term of 12 months or less.
The Company's lease for its corporate headquarters (3,169 square feet of office space) commenced on July 1, 2018, has term of 37 months, and terminates on July 31, 2021. The Company has the option to extend the term of the lease for one year at the Company's discretion. The gross monthly base rent is $8,873, which increases approximately 4% per year, subject to certain future adjustments. The base rent was abated during the second month of the lease. The Company evaluates renewal options at lease inception and on an ongoing basis, and includes renewal options that it is reasonably certain to exercise in its expected lease terms when classifying leases and measuring lease liabilities. The lease does not require material variable lease payments, a residual value guarantee or restrictive covenants. This is the Company’s only lease.
The lease does not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease within a particular currency environment. The Company used an incremental borrowing rate of 7% as of January 1, 2019 for the operating lease that commenced prior to that date. The depreciable lives of operating lease assets and leasehold improvements are limited by the expected lease term.


As of June 30, 2019, the Company recorded a right of use asset of $193,399 in other non-current assets, and $87,859 and $116,089, respectively, in current and non-current other liabilities on the consolidated balance sheet.
As of June 30, 2019, future minimum lease payments for the Company's corporate headquarters are:
Years ending December 31: 
Remainder of 2019$55,531
2020112,943
202167,595
Total future minimum lease payments236,069
Less: Difference between future minimum lease payments and discounted operating lease liabilities42,669
Total operating lease liabilities$193,400

Operating lease costs were $27,038 and $54,076 for the three and six months ended June 30, 2019, respectively. Operating lease costs are included in general and administrative expenses in the condensed consolidated statement of operations.
Cash paid for amounts included in the measurement of operating lease liabilities were $26,620 and $53,240 for the three and six months ended June 30, 2019, respectively, and these amounts are included in operating activities in the condensed consolidated statements of cash flows.
8.COMMITMENTS AND CONTINGENCIES
License and Research Agreements

ADVA-Tec License Agreement

On

In March 19, 2017, the Company entered into a license agreement, or the ADVA-Tec License Agreement, with ADVA-Tec, Inc., or ADVA-Tec, under which the Company was granted the exclusive right to develop and commercialize Ovaprene for human contraceptive use worldwide. The ADVA-Tec Agreement became effective once the Company secured the initial funding required in accordance with its terms. ADVA-Tec and its affiliates own issued patents or patent applications covering Ovaprene and control proprietary trade secrets covering the manufacture of Ovaprene. As of the date of these interim consolidated financial statements,this report, this patent portfolio includes 12nine issued U.S. patents worldwide, along with 8and one pending U.S. patent application, and 59 granted patents and four pending patent applications in other major markets, all of which in accordance with the terms of the ADVA-Tec Agreement are exclusively licensed to the Company for the human contraceptive use of Ovaprene. TheOvaprene as a human contraceptive device. Under the terms of the ADVA-Tec Agreement, the Company also has a right of first refusal to license these patents and patent applications for purposesadditional indications.
The following is a summary of additional indications for Ovaprene. Underother terms of the ADVA-Tec Agreement, License Agreement:
Research and Development.ADVA-Tec will conduct certain research and development work as necessary to allow the Company to seek a Premarket Approval, or PMA, from the United States Food and Drug Administration, or the FDA, and will supply the Company with its requirements of Ovaprene for clinical and commercial use on commercially reasonable terms.

Under the ADVA-Tec Agreement, the Company is required to make payments of up to $14.6 million in the aggregate to ADVA-Tec based on the achievement of specified development and regulatory milestones, which include the completion of a successful Postcoital Clinical Trial Study (as defined in the ADVA-Tec Agreement); approval by the FDA to commence the Phase 3 pivotal human clinical trial; successful completion of the Phase 3 pivotal human clinical trial; the FDA’s acceptance of the filing of a


PMA for Ovaprene; the FDA’s approval of the PMA for Ovaprene; obtaining Conformité Européenne Marking of Ovaprene in at least three designated European countries; obtaining regulatory approval in at least three designated European countries; and obtaining regulatory approval in Japan. In addition, after the commercial launch of Ovaprene, the Company is also required to make royalty payments to ADVA-Tec based on aggregate annual net sales of Ovaprene in specified regions, which percentage royalty rate will vary between 1% and 10% and will increase based on various net sales thresholds. Finally, the Company is also required to make up to $20 million in the aggregate in commercial milestone payments to ADVA-Tec upon reaching certain worldwide net sales milestones.

The Company is obligated tomust use commercially reasonable efforts to develop and commercialize Ovaprene, and must meet certain minimum spending amounts per year, such amounts totaling $5.0 million in the aggregate over the first three years, to cover such activities until a final PMA is filed, or until the first commercial sale of Ovaprene, whichever occurs first.

Milestone Payments.The Company will pay ADVA-Tec: (1) up to $14.6 million in the aggregate based on the achievement of specified development and regulatory milestones; and (2) up to $20 million in the aggregate based on the achievement of certain worldwide net sales milestones. The development and regulatory milestones include: the completion of a successful postcoital clinical study, which is required before the Company can commence a Phase 3 pivotal human clinical trial; approval by the FDA to commence such Phase 3 pivotal human clinical trial; successful completion of such Phase 3 pivotal human clinical trial; the FDA’s acceptance of a PMA filing for Ovaprene; the FDA’s approval of the PMA for Ovaprene; obtaining Conformité Européenne Marking of Ovaprene in at least three designated European countries; obtaining regulatory approval in at least three designated European countries; and obtaining regulatory approval in Japan. Because these milestone payments depend upon the successful progress of


the Company’s product development programs, the Company cannot estimate with certainty when these payments will occur, if ever.
For products currently in development, future potential milestone payments based on product development are approximately $14.6 million as of June 30, 2019. Future potential milestone payments related to commercialization totaled $20 million at June 30, 2019. The Company is unable to estimate with certainty the timing on when these milestone payments will occur as these payments depend on the Company's product development programs.
Royalty Payments.After the commercial launch of Ovaprene, the Company will pay to ADVA-Tec royalties based on aggregate annual net sales of Ovaprene in specified regions, at a royalty rate that will vary between 1% and 10% and will increase based on various net sales thresholds. The Company is unable to estimate with certainty the timing on when these royalty payments will occur as these payments depend on the Company's product development programs.
Termination Rights.Unless earlier terminated, the license the Company received under the ADVA-Tec License Agreement continues on a country-by-country basis until the later of the life of the licensed patents or the Company’sCompany's last commercial sale of Ovaprene. The ADVA-Tec Agreement includesIn addition to customary termination rights for both parties and providesparties: (A) the Company may terminate the right to terminateagreement with or without cause in whole or on a country-by-country basis upon 60 days prior written notice. In addition,notice; and (B) ADVA-Tec may terminate the ADVA-Tec Agreementagreement if the Company develops or commercializes any non-hormonal ring-based vaginal contraceptive device competitive to Ovaprene or if the Company fails to do anyto: (1) in certain limited circumstances, commercialize Ovaprene in certain designated countries within three years of the following: (i)first commercial sale of Ovaprene, (2) satisfy the annual spending obligation described above, (ii)(3) use commercially reasonable efforts to complete all necessary pre-clinical and clinical studies required to support and submit a PMA, (iii)(4) conduct clinical trials as set forth in the development plan that is agreed by the Company and ADVA-Tec, and as may be modified by a joint research committee, whereunless such failure is not caused by events outside of the Company’s reasonable control, or (iv)(5) enroll a patient in the first non-significant risk medical device study or clinical trial as allowed by an institutional review board within six months of the production and release of Ovaprene, where non-enrollmentunless such failure is not caused by events outside of its reasonable control. In addition, ADVA-Tec may terminate the ADVA-Tec Agreement if the Company develops or commercializes any non-hormonal ring-based vaginal contraceptive device that is deemed competitive to Ovaprene or, in certain limited circumstances, if the Company fails to commercialize Ovaprene in certain designated countries within three years of the first commercial sale of Ovaprene.

Under the ADVA-Tec Agreement, the Company is required to make payments to ADVA-Tec of up to $14.6 million in aggregate based on the achievement of specified development and regulatory milestones and is also required to make payments of up to $20 million in the aggregate based on the achievement of specified commercial milestones. Because these payments are dependent upon the successful progress of the Company’s product development programs, the Company is unable to estimate with certainty when these milestone payments will occur, if ever.

SST License and Collaboration Agreement

On

In February 11, 2018, the Company entered into a license and collaboration agreement, or the SST License Agreement, with Strategic Science & Technologies-D, LLC and Strategic Science & Technologies, LLC, referred to collectively as SST, pursuant to which the Company was required to secure an investment of at least $10 million by March 31, 2018. The Company announced that it had met this funding requirement on February 15, 2018.SST. The SST License Agreement provides the Company with an exclusive, royalty-bearing, sublicensable license to develop and commercialize, in all countries and geographic territories of the world, for all indications for women related to female sexual dysfunction and/or female reproductive health, including treatment of female sexual arousal disorder, or the Field of Use, SST’s topical formulation of Topical 5% Sildenafil Citrate Cream, 3.6% as it exists as of the effective date of the SST License Agreement, or any other topically applied pharmaceutical product containing sildenafil or a salt thereof as a pharmaceutically active ingredient, alone or with other active ingredients, but specifically excluding any product containing ibuprofen or any salt derivative of ibuprofen, or the Licensed Products.

Under the

The following is a summary of other terms of the SST License Agreement, theAgreement:
Invention Ownership.The Company retains rights to inventions made by its employees, SST retains rights to inventions made by its employees, and each party shall own a 50% undivided interest in all joint inventions. Each party has agreed to
Joint Development Committee. The parties will collaborate through a Joint


Development Committee, or JDC, which shall be responsible for determiningjoint development committee that will determine the strategic objectives for, and generally overseeing,oversee, the development efforts of both parties under the SST License Agreement. Further, the

Development.The Company has agreed tomust use commercially reasonable efforts to develop the Licensed Products in the Field of Use in accordance with a development plan contained in the SST License Agreement, and to commercialize the Licensed Products in the Field of Use.

The Company is responsible for all reasonable internal and external costs and expenses incurred by SST in its performance of the development activities it must perform under the SST License Agreement provides that, in consideration of the rights to be granted to the Company, Agreement.

Royalty Payments.SST will be eligible to receive (1) tiered royalties based on percentages of annual net sales of Licensed Products in the single digits to the mid double digits, includingsubject to customary provisions permitting royalty reductions and offset,offsets, and (2) a percentage of sublicense revenue. The Company is also responsible for all reasonable internal and external costs and expenses incurred by
Milestone Payments.SST in its performance of the development activities it is requiredwill be eligible to perform under the SST License Agreement. Further, the SST License Agreement provides that the Company shall make milestonereceive payments to SST(1) ranging from $0.5 million to $18.0 million in the aggregate on achieving certain clinical and regulatory milestones in the U.S. and worldwide, and an additional(2) between $10.0 million toand $100 million in the aggregate upon achieving certain commercial sales milestones. ShouldIf the


Company enterenters into strategic development or distribution partnerships related to the Licensed Products, additional milestone payments would be due to SST.

License Term.The Company’s license received under the SST License Agreement continues on a country-by-country basis until the later of 10 years from the date of the first commercial sale of such Licensed Product or the expiration of the last valid claim of patent rights covering the Licensed Product in the Field of Use. The SST License Agreement provides that each party will have customary rights to terminateUpon expiration (but not termination) of the SST License Agreement in a particular country, the event of material uncured breach byCompany will have a fully paid-up license under the other party,licensed intellectual property to develop and (i)commercialize the applicable Licensed Products in the applicable country on a non-exclusive basis.
Termination.In addition to customary termination rights for both parties: (1) prior to receipt of approval by a regulatory authority necessary for commercialization of a Licensed Product in the corresponding jurisdiction, including New Drug Application Approval, or NDA Approval, the Company will have the right tomay terminate the SST License Agreement without cause upon 90 days prior written notice to SST, and (ii)SST; (2) following receipt of approval by a regulatory authority necessary for commercialization of a Licensed Product in the corresponding jurisdiction, including NDA Approval, the Company will have a right tomay terminate the SST License Agreement without cause upon one 180 days prior written notice. In addition, thenotice; and (3) SST License Agreement provides SST with the right tomay terminate the SST License Agreement with respect to the applicable Licensed Product(s) in the applicable country(ies) upon 30 days’ notice to the Company if the Company fails to use commercially reasonable efforts to perform development activities in substantial accordance with the development plan and does not cure such failure within 60 days of receipt of SST’s notice thereof.

Upon expiration (but not termination) of the SST License Agreement in a particular country, the Company shall have a fully paid-up license under the licensed intellectual property to develop and commercialize the applicable Licensed Products in the applicable country on a non-exclusive basis.

Orbis Development and Option Agreement

On

In March 12, 2018, the Company entered into an exclusive development and option agreement, or the Orbis Agreement, with Orbis Biosciences, or Orbis, for the development of long-acting injectable etonogestrel contraceptive with 6- and 12-month durations (ORB-204 and ORB-214, respectively). TheUnder the Orbis Agreement, the Company has agreed to paypaid Orbis $300,000 to conduct the first stage of development work, Stage 1, as follows: $150,000 upon signing the Orbis Agreement, $75,000 at the 50% completion point, not later than 6 months following the date the Orbis Agreement was signed (which the Company paid in September 2018), and $75,000 upon delivery by Orbis of the 6-month batch, not later than 11 months following the date the Orbis Agreement was signed.signed (which the Company paid in January 2019). Upon Orbis successfully completing Stage 1 of the development program and achieving the predetermined target milestones for Stage 1, the Company will have 90 days to instruct Orbis whether to commence the second stage of development work, Stage 2. Should the Company execute its option to proceed to Stage 2, it will be obligatedhave to provide additional funding to Orbis for such activities.

The initial development on Orbis’s long-acting injectable contraceptive program was carried out under a subcontract funded by Family Health International, or FHI 360, through a grant from the Bill and Melinda Gates Foundation, or the Gates Foundation. The Gates Foundation and FHI 360 are world leaders in the funding and development of novel contraceptive products and programs. In July of 2017, the Gates Foundation announced a commitment of $375 million over three years in support of Family Planning 2020, a global public/private partnership aimed at providing access to contraception.


An injectable contraceptive is designed to provide discreet, non-implanted, protection over periods of months. Limitations of the currently marketed injectable contraceptive is that it provides contraceptive protection for only three months and can delay the ability to get pregnant for up to ten months after receiving the injection. The target product profiles of ORB-204 and ORB-214 include prolonged duration (6 to 12 months), improved ease of use, with an improved side effect profile and predictable return to fertility.

Pre-clinical studies for the 6- and 12-month formulations have been completed, to date, including establishing pharmacokinetics and pharmacodynamics profiles. The collaboration with Orbis will continue to advance the program through formulation optimization with the goal of achieving sustained release over the target time period.

The Orbis Agreement provides the Company with an option to enter into a license agreement for ORB-204 and ORB-214 should upcoming development efforts be successful.

Juniper Pharmaceuticals - License Agreement

On

In April 24, 2018, the Company entered into an Exclusive License Agreement, or the Juniper License Agreement, with Juniper Pharmaceuticals, Inc., or Juniper, pursuant tounder which Juniper granted the Company (a) an exclusive, royalty-bearing worldwide license under certain patent rights, either owned by or exclusively licensed to Juniper, to make, have made, use, have used, sell, have sold, import and have imported products and processes; and (b) a non-exclusive, royalty-bearing worldwide license to use certain technological information owned by Juniper to make, have made, use, have used, sell, have sold, import and have imported products and processes. The Company is entitled to sublicense the rights granted to it under the Juniper License Agreement.

The following is a summary of the materialcertain terms of the Juniper License Agreement:

Upfront FeeFee.. The Company paid a $250,000 $250,000 non-creditable upfront license fee to Juniper in connection with the execution of the Juniper License Agreement.

Annual Maintenance Fee. The Company will pay an annual license maintenance fee to Juniper on each anniversary of the date of the Juniper License Agreement, the amount of which will be $50,000 $50,000 for the first two years and $100,000 $100,000 thereafter, and which will be creditable against royalties and other payments due to Juniper in the same calendar year but may not be carried forward to any other year.

Milestone Payments. Payments.The Company is required tomust make potential future development and sales milestone payments of (1) up to $43.8 million (up to $13.5 million in the aggregate upon achieving certain clinical and regulatory milestones, and (2)


up to $30.3 million in the aggregate upon achieving certain commercial sales milestones)milestones for each product or process covered by the licenses granted under the Juniper License Agreement.

Royalty Payments. During the royalty term, the Company will pay Juniper mid-single-digit to low double-digit royalties based on worldwide net sales of products and processes covered by the licenses granted under the JuniperLicenseAgreement. In lieu of such royalty payments, the Company will pay Juniper a low double-digit percentage of all sublicense income that the Company receives for the sublicense of rights under the Juniper License Agreement to a third party. The royalty term, which is determined on a country-by-country basis and product-by-product basis (or process-by-process basis), begins with the first commercial sale of a product or process in a country and terminates on the latest of (1) the expiration date of the last valid claim within the licensed patent rights with respect to such product or process in such country, (2) 10 years following the first commercial sale of such product or process in such country, and (3) when one or more generic products for such product or process are commercially available in such country, except that if there is no such generic product by the 10th year following the first commercial sale in such country, then the royalty term will terminate on the 10-year anniversary of the first commercial sale in such country.

Efforts. The Company is required tomust use commercially reasonable efforts to develop and make at least one product or process available to the public, which efforts include achieving specific diligence requirements by specific dates specified in the Juniper License Agreement.

TermT.erm. Unless earlier terminated, the term of the Juniper License Agreement will continue on a country-by-country basis until the later of (1) the expiration date of the last valid claim within such country, or (2) 10 years from the date of first commercial sale of a product or process in such country.


Upon expiration (but not early termination) of the Juniper License Agreement, the licenses granted thereunder will convert automatically to fully-paid irrevocable licenses. Juniper may terminate the Juniper License Agreement (1) upon 30 days’ notice for the Company’s uncured breach of any payment obligation under the Juniper License Agreement, (2) if the Company fails to maintain required insurance, (3) immediately upon the Company’s insolvency or the making of an assignment for the benefit of the Company’s creditors or if a bankruptcy petition is filed for or against the Company, which petition is not dismissed within 90 days, or (4) upon 60 days’ notice for any uncured material breach by the Company of any of its other obligations under the Juniper License Agreement. The Company may terminate the Juniper License Agreement on a country-by-country basis for any reason by giving 180 days’ notice (or 90 days’ notice if such termination occurs prior to receipt of marketing approval in the United States). If Juniper terminates the Juniper License Agreement for the reason described in clause (4) above or if the Company terminates the Juniper License Agreement, Juniper will have full access including the right to use and reference all product data generated during the term of the Juniper License Agreement that is owned by the Company.

Pear Tree Acquisition

The Company must alsomay be required to make certain royalty and milestone payments under the Merger Agreement. See the discussion under the “Pear Tree Merger” heading inAgreement (see Note 4, “Acquisitions,” above.

Funding Award from the National Institutes of Health

4).

Hammock/MilanaPharm Assignment and License Agreement
On April 30,December 5, 2018, the Company announcedentered into (a) an Assignment Agreement with Hammock Pharmaceuticals, Inc., or the Assignment Agreement, and (b) a First Amendment to License Agreement with TriLogic Pharma, LLC and MilanaPharm LLC, or the License Amendment. Both agreements relate to the Exclusive License Agreement among Hammock, TriLogic and MilanaPharm dated as of January 9, 2017, or the MilanaPharm License Agreement. Under the Assignment Agreement and the MilanaPharm License Agreement, as amended by the License Amendment, the Company acquired an exclusive, worldwide license under certain intellectual property to, among other things, develop and commercialize products for the diagnosis, treatment and prevention of human diseases or conditions in or through any intravaginal or urological applications. The licensed intellectual property relates to the hydrogel drug delivery platform of TriLogic and MilanaPharm known as TRI-726. In DARE-BV1, this proprietary technology is formulated with clindamycin, an antibiotic used to treat certain bacterial infections, including BV, and has been engineered to produce a dual release pattern after vaginal application, providing maximum duration of exposure to clindamycin at the site of infection.
The following is a summary of other terms of the License Amendment:
License Fees. The Company paid $25,000 to MilanaPharm in connection with the execution of the License Amendment and must pay $200,000 to MilanaPharm (in the Company's discretion, either in cash or with shares of the Company's common stock) within 15 days of the first to occur of December 5, 2019 or the closing of an equity financing in which the Company raises aggregate proceeds of at least $10.0 million.


Milestone Payments. The Company will pay to MilanaPharm (1) up to $300,000 in the aggregate upon achievement of certain development milestones; and (2) up to $1.75 million in the aggregate upon achieving certain commercial sales milestones.
Foreign Sublicense Income. The Company will pay MilanaPharm a low double-digit percentage of all income received by the Company or its affiliates in connection with any sublicense granted to a third party for use outside of the United States, subject to certain exclusions.
Royalty Payments. During the royalty term, the Company will pay MilanaPharm high single-digit to low double-digit royalties based on annual worldwide net sales of licensed products and processes. The royalty term, which is determined on a country-by-country basis and licensed product-by-product basis (or process-by-process basis), begins with the first commercial sale of a licensed product or process in a country and terminates on the latest of (a) the expiration date of the last valid claim of the licensed patent rights that cover the method of use of such product or process in such country, or (b) 10 years following the first commercial sale of such product or process in such country. Royalty payments are subject to reduction in certain circumstances, including as a result of generic competition, patent prosecution expenses incurred by the Company, or payments to third parties for rights or know-how that are required for the Company to exercise the licenses granted to it under the MilanaPharm License Agreement or that are strategically important or could add value to a licensed product or process in a manner expected to materially generate or increase sales.
Efforts. The Company must use commercially reasonable efforts and resources to (1) develop and commercialize at least one licensed product or process in the United States and at least one licensed product or process in at least one of Canada, the United Kingdom, France, Germany, Italy or Spain, and (2) continue to commercialize that product or process following the first commercial sale of a licensed product or process in the applicable jurisdiction.
Term. Unless earlier terminated, the term of the MilanaPharm License Agreement will continue until (1) on a licensed product-by-product (or process-by-process basis) and country-by-country basis, the date of expiration of the royalty term with respect to such licensed product in such country, and (2) the expiration of all applicable royalty terms under the MilanaPharm License Agreement with respect to all licensed products and processes in all countries. Upon expiration of the term with respect to any licensed product or process in a country (but not upon earlier termination of the MilanaPharm License Agreement), the licenses granted to the Company under the MilanaPharm License Agreement will convert automatically to an exclusive, fully paid-up, royalty-free, perpetual, non-terminable and irrevocable right and license under the licensed intellectual property.
In addition to customary termination rights for all parties, MilanaPharm may terminate the license granted to the Company solely with respect to a licensed product or process in a country if, after having launched such product or process in such country, (1) the Company, or its affiliates or sublicensees, discontinue the sale of such product or process in such country and MilanaPharm notifies the Company of such termination within 60 days of having first been notified by the Company of such discontinuation, or (2) the Company, or its affiliates or sublicensees, (A) discontinues all commercially reasonable marketing efforts to sell, and discontinues all sales of, such product or process in such country for nine months or more, (B) fails to resume such commercially reasonable marketing efforts within 120 days of having been notified of such failure by MilanaPharm, (C) fails to reasonably demonstrate a strategic justification for the discontinuation and failure to resume to MilanaPharm, and (D) MilanaPharm gives 90 days’ notice to the Company.
The following is a summary of other terms of the Assignment Agreement with Hammock:
Assignment; Technology Transfer. Hammock assigned and transferred to the Company all of its right, title and interest in and to the MilanaPharm License Agreement and agreed to cooperate to transfer to the Company all of the data, materials and the licensed technology in its possession pursuant to a technology transfer plan to be agreed upon by the parties, with a goal for the Company to independently practice the licensed intellectual property as soon as commercially practical in order to develop and commercialize the licensed products and processes.
Fees. The Company paid $250,000 to Hammock in connection with the execution of the Assignment Agreement and must pay $250,000 to Hammock (in the Company's discretion either in cash or with shares of the Company's common stock) within 15 days of the first to occur of December 5, 2019 or the closing of an equity financing in which the Company raises aggregate proceeds of at least $10.0 million.
Milestone Payments. The Company will pay Hammock up to $1.1 million in the aggregate upon achievement of certain clinical and regulatory development milestones.


Term. The Assignment Agreement will terminate upon the later of (1) completion of the parties’ technology transfer plan, and (2) payment to Hammock of the last of the payments described above, including the milestone payments.
9.GRANT AWARD
In April 2018, the Company received a Notice of Award for the first $224,665 of the anticipated $1.9 million in grant funding from the Eunice Kennedy Shriver National Institute of Child Health and Human Development, a division of the National Institutes of Health.  The award will be applied to important clinical development efforts supportingHealth, or the Company’s lead product candidate, Ovaprene. The balance of the award is contingent upon, among other matters, assessment of the results of the first phase of the research and availability of funds.NIH. The Company must incur and track expenses eligible for reimbursement under the award and submit a detailed accounting of such expenses in order to receive payment.

9. Net Loss Per Share

The Company received all $224,665 of the award payments under this Notice of Award. Such payments were applied to clinical development efforts supporting Ovaprene and were recognized in the statement of operations as a reduction to research and development activities as the related costs were incurred to meet those obligations over the period.

On March 11, 2019, the Company received a second Notice of Award for an additional $982,851 of the anticipated $1.9 million in grant funding from the Eunice Kennedy Shriver National Institute of Child Health and Human Development. The second award followed the NIH's review of an interim data analysis and other results of the first phase of the research supporting Ovaprene. Award payments under this second notice of award ($161,007 received through June 30, 2019) are being applied to clinical development efforts supporting Ovaprene. At June 30, 2019, the Company recorded a receivable of $456,484 for expenses incurred through such date that are eligible for reimbursement under this second notice of award.
The remaining portion of the award under the grant, $730,722, is contingent upon, among other matters, assessment that the results of the ongoing Ovaprene study satisfy specified requirements set out in the award notice, and the availability of funds.
10.NET LOSS PER SHARE
The Company computes basic net loss per share using the weighted average number of common shares outstanding during the period. Diluted net income per share is based upon the weighted average number of common shares and potentially dilutive securities (common share equivalents) outstanding during the period. Common share equivalents outstanding, determined using the treasury stock method, are comprised of shares that may be issued under outstanding options and warrants to purchase shares of the Company’s common stock. Common share equivalents are excluded from the diluted net loss per share calculation if their effect is anti-dilutive.

The following potentially dilutive outstanding securities were excluded from diluted net loss per common share for the period indicated because of their anti-dilutive effect:

 

 

Three months ended

 

 

Six months ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Stock options

 

 

547,571

 

 

 

10,519

 

 

 

547,571

 

 

 

10,519

 

Warrants

 

 

3,751,002

 

 

 

 

 

 

3,751,002

 

 

 

 

Total

 

 

4,298,573

 

 

 

10,519

 

 

 

4,298,573

 

 

 

10,519

 

Potentially dilutive securities Three Months Ended
June 30,
 Six Months Ended
June 30,
  2019 2018 2019 2018
Stock options 2,190,360
 547,571
 2,190,360
 547,571
Warrants 3,750,833
 3,751,002
 3,750,833
 3,751,002
Total 5,941,193
 4,298,573
 5,941,193
 4,298,573


Item 2. Management's Discussion and Analysis ofof Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our interim consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q and our audited financial statements and notes thereto for the year ended December 31, 20172018 included in our Annual Report on Form 10-K for the year ended December 31, 2018, or our 2018 10-K, filed with the Securities and Exchange Commission, or SEC, on March 28, 2018.April 1, 2019. Past operating results are not necessarily indicative of results that may occur in future periods.

The following discussion includes forward-looking statements. See “CAUTIONARY NOTE REGARDING FORWARD-LOOKINGFORWARD-LOOKING STATEMENTS,” above. Forward-looking statements are not guarantees of future performance and our actual results may differ materially from those currently anticipated and from historical results depending upon a variety of factors, including, but not limited to, those discussed in Part I, Item 1A. Risk Factors in our 2018 10-K and in our subsequent filings with the SEC, including any discussed in Part II, Item 1A of this report under the heading “Risk Factors,” which are incorporated herein by reference.

References in

In this report: (a) to “Cerulean” refer to Cerulean Pharma, Inc. prior to the closing of the Cerulean/Private Daré stock purchase transaction (as described in the “2017 Business Combination and Related Transactions” section below); and (b) toreport, “we,” “us,” “our,” “Daré” or the “Company” refer collectively to Daré Bioscience, Inc. and its wholly owned subsidiaries, unless otherwise stated or the context otherwise requires. All information presented in this report is based on our fiscal year. Unless otherwise stated, references to particular years, quarters, months or periods refer to our fiscal years ending December 31 and the associated quarters, months and periods of those fiscal years.

Daré Bioscience®Bioscience® is a registered trademark of Daré Bioscience, Inc. Ovaprene®Ovaprene® is a registered trademark licensed to Daré Bioscience, Inc. All other trademarks, service marks or trade names appearing in this report are the property of their respective owners. Use or display by us of other parties’ trademarks, service marks or trade names is not intended to and does not imply a relationship with, or endorsements or sponsorship of, us by the trademark, service mark or trade name owners.

Business Overview

We are a clinical-stage biopharmaceutical company committed to the advancement of innovative products for women’s reproductive health. We are driven by a mission to identify, develop and bring to market a diverse portfolio of differentiated therapies that expand treatment options, improve outcomes and facilitate convenience for women, primarily in the areas of contraception, vaginal health, sexual health and fertility.fertility. Our business strategy is to license or otherwise acquire the rights to differentiated product candidates in suchour areas of focus, some of which have existing clinical proof-of-concept data, and to take those candidates through advanced stages of clinical development.

We and our wholly owned subsidiaries operate in one business segment.

Since July of 2017, we have assembled a portfolio of clinical-stage and preclinical-stagepre-clinical stage candidates addressing unmet needs in women’s reproductivewomen's health. We have usedOur portfolio includes these six clinical-stage product candidates:
DARE-BV1, a variety of transaction structures to license, acquire,novel solution-to-gel formulation containing clindamycin phosphate 2% for bacterial vaginosis, or obtain an option to acquire the rights to these assets.

Our two clinical-stage assets were obtained through product license and development agreements:

BV;

Ovaprene,Ovaprene®, a non-hormonal monthly contraceptive candidate, was licensedintravaginal ring;

Sildenafil Cream, 3.6%, a novel cream formulation of sildenafil for female sexual arousal disorder, or FSAD;
DARE-HRT1, a combination bio-identical estradiol and progesterone intravaginal ring for hormone replacement therapy, or HRT, following menopause;
DARE-VVA1, a vaginally delivered formulation of tamoxifen to treat vulvar vaginal atrophy, or VVA, in Julypatients with hormone-receptor positive breast cancer;
DARE-FRT1, an intravaginal ring containing bio-identical progesterone for the prevention of 2017 from ADVA-Tec, Inc.;

preterm birth and for fertility support as part of an IVF treatment plan; and
Our portfolio also includes these pre-clinical stage product candidates:

Topical 5% Sildenafil Citrate Cream,DARE-RH1, a potential treatmentnovel approach to non-hormonal contraception for Female Sexual Arousal Disorder, or FSAD, was licensed in February of 2018 from Strategic Science & Technologies-D, LLCboth men and Strategic Science & Technologies, LLC, or referred to collectively as SST.

Our preclinical candidates were obtained throughwomen by targeting the following agreements:

In March of 2018, we entered into a collaboration and option agreement with Orbis Biosciences Inc., or Orbis, covering new injectable contraceptive product candidates;

CatSper ion channel;

in April of 2018, we licensed the worldwide rights to a portfolio of preclinical intravaginal rings from Juniper Pharmaceuticals, Inc., or Juniper;


in MayORB-204 and ORB-214, 6-month and 12-month formulations of 2018, we acquired Pear Tree Pharmaceuticals, Inc., or Pear Tree, a company that owns the rights to a proprietary vaginal tamoxifen tabletinjectable etonogestrel for contraception; and

DARE-OAB1, an intravaginal ring containing oxybutynin for the treatment of vulvaroveractive bladder.
Our primary operations have consisted of, and vaginal atrophy;are expected to continue to consist of, product research and

in July development and advancing our portfolio of 2018, we acquired certain assets from Hydra Bioscience, Inc., or Hydra, related to a novel target for non-hormonal contraceptives for both menproduct candidates through clinical development and women.

regulatory approval. We expect that the bulk of our development expenses over the next two years will support the advancement of our two clinical-stage product candidates.

To date, we have not obtained any regulatory approvals for any of our product candidates, Ovaprenecommercialized any of our product candidates or generated any revenue. We are subject to several risks common to clinical-stage biopharmaceutical companies, including dependence on key individuals, competition from other companies, the need to develop commercially viable products in a timely and Topical 5% Sildenafil Citrate Cream.cost-effective manner, and the need to obtain adequate additional capital to fund the development of product candidates. We are also subject to several risks common to other companies in the industry, including rapid technology change, regulatory approval of products, uncertainty of market acceptance of products, competition from substitute products and larger companies, compliance with government regulations, protection of proprietary technology, dependence on third parties, and product liability.
Clinical Stage Product Candidates
The following provides a brief overview of the clinical stage product candidates on which we are primarily focusing our development efforts at this time.
DARE-BV1
DARE-BV1 is a novel solution-to-gel formulation containing clindamycin, an antibiotic used to treat certain bacterial infections, including BV. DARE-BV1 is designed to be administered in a convenient, single vaginal dose with a dual release pattern to prolong the duration of exposure to clindamycin at the site of infection and to potentially improve the rate of effectiveness compared to existing FDA-approved therapies. Current FDA-approved therapies for BV have clinical cure rates of less than 70 percent. In an investigator initiated proof-of-concept study that enrolled 30 women, DARE-BV1 demonstrated an 86 percent clinical cure rate in evaluable subjects (n=26) at the test-of-cure visit (Day 7-14) after one administration. We plan to utilize the FDA's 505(b)(2) pathway to obtain marketing approval of DARE-BV1 for BV in the U.S.
In August 2019, the FDA granted DARE-BV1 Qualified Infectious Disease Product (QIDP) designation for the treatment of BV in women. QIPD designation is available under Title VIII of the FDA Safety and Innovation Act, titled General Antibiotic Incentive Now (GAIN), which creates incentives for the development of antibacterial and antifungal drug products that treat serious or life-threatening infections. The primary incentive is a postcoital test, or PCT, clinical trial of Ovaprene in May 2018. five-year exclusivity extension added to any exclusivity for which a QIDP qualifies upon FDA approval. Additionally, DARE BV-1's QIDP designation makes it eligible for Fast Track designation and Priority Review.
We intendexpect to commence variousa Phase 3 clinical and other studies related to Topical 5% Sildenafil Citrate Creamstudy of DARE-BV1 in approximately 250 women in the second halffourth quarter of 2018. We are2019 and, if the study is successful, to be in the process of seeking guidance froma position to file a new drug application, or NDA, with the FDA regardingin 2020. We anticipate that the design of our Phase 2b clinical trial for Topical 5% Sildenafil Citrate Cream. The timing of when we initiate any clinical studies related to Topical 5% Sildenafil Citrate Cream, including our Phase 2b clinical trial, will be influenced by such guidance. In addition to our clinical-stage programs, we also intend to fund a portioncost of the development expenses of our other preclinical stage assets. Any additional product candidates we may obtain inPhase 3 clinical study, including manufacturing activities, and the future will also require cashNDA filing thereafter to fund their development.

The be less than $10.0 million.

Ovaprene
Ovaprene is an intravaginal ring that, if approved, for marketing, requireswould represent a new category of birth control. Ovaprene does not contain hormones and is designed to be worn conveniently over multiple weeks and to require no intervention at the time of intercourse, does not use hormones and would be intended to provide protection over multiple weeks of use.intercourse. Ovaprene consists ofis a silicone-reinforced ring with a soft, absorbable scaffolding that encircles a fluid-permeable barrier. A non-braided, multi-filament meshpolymer matrix in the center of the ring functions as a physical barrier to sperm. The silicone ring also releases two ingredients—ascorbic acid and ferrous gluconate—that act togethergluconate to create a spermiostatic environment within the vagina.

Ovaprene is a combination product that previously underwentand, following a request for designation process, within the Office of Combination Products at the U.S. Food and Drug Administration, or FDA. The FDA designated Center for Devices and Radiological Health, or CDRH, as the lead agency FDA program center for premarket review and product regulation; it also provided notice thatregulation. CDRH has determined that a Premarket Approval, or PMA will be required. We intendrequired to developmarket Ovaprene based on PMA guidelines. If approved, Ovaprene would representin the U.S.


In May 2018, we announced initiation of a new category of birth control. In a PCT pilot study conducted in 20 women and published in The Journal of Reproductive Medicine® in 2009, Ovaprene demonstrated the ability to immobilize sperm and prevent their progression into the cervical mucus.

The ongoingpostcoital test, or PCT, clinical trial of Ovaprene and in July 2019 we announced that we completed recruitment.  This ongoing clinical trial is designed to assess general safety, acceptability, and effectiveness in preventing progressively motile sperm, or PMS, from reaching the cervical canal following intercourse. The study is enrollingwill enroll approximately 50 couples, with the woman to be evaluated over the course of five menstrual cycles,, with a target of having at leastapproximately 25 women complete a total of 21 visits. Each woman’s cervical mucus will be measured at several points during the study, including a baseline measurement at menstrual cycle 1 that excludes the use of any product. Subsequent cycles and visits will include the use of a diaphragm (menstrual cycle 2) and the Ovaprene non-hormonal vaginal ring (menstrual cycles 3, 4 and 5). DataTopline data from the PCT clinical trial isare expected to be available in the second halffourth quarter of 2019.  If there

PCT clinical trials have been used as a surrogate marker for contraceptive effectiveness. Infertility research suggests that higher rates of pregnancy are associated with PMS per high power field, or HPF, of from greater than one to greater than 20 sperm, and less than 5 PMS per HPF is demonstrationconsidered reflective of feasibility incontraceptive effectiveness.
If the PCT clinical trial demonstrates that less than 5 PMS per HPF progressed into the cervical canal in most women and that Ovaprene can be safely worn over multiple weeks, we intend to prepare and file an Investigational Device Exemption, or IDE, with the FDA to commence a pivotal clinical trial to support marketing approvals of Ovaprene in the United States, Europe and other countries worldwide.

Our Topical 5%

Sildenafil Citrate Cream, 3.6%
Sildenafil Cream, 3.6%, which incorporates sildenafil, the same active ingredient in the male erectile dysfunction drug Viagra®, if approved, could be the first FDA-approved FSAD treatment option for women. FSAD is characterized primarily by ana persistent or recurrent inability to attain or maintain sufficient physical sexual arousal, frequently resulting in distress or interpersonal difficulty. Topical 5% Sildenafil Citrate Cream, 3.6% is specifically designedformulated to increase blood flow locally to the vulvar-vaginal tissue, in women, leading to a potential improvement in genital arousal response and overall sexual experience.

response.

We plan to pursue the 505(b)(2) regulatory pathway for Topical 5% Sildenafil Citrate Cream in the U.S. to leverage the existing data and established safety profile of sildenafil and the Viagra® brand. We intendbrand to


commence various clinical and other studies related utilize the FDA’s 505(b)(2) pathway to Topical 5%obtain marketing approval of Sildenafil Citrate Cream, 3.6% in the second halfU.S. During the third quarter of 2018. We are in the process of seeking guidance from2018, we had a Type C meeting with the FDA regarding the design of our Phase 2b clinical trial for Topical 5% Sildenafil Citrate Cream.Cream, 3.6% and the overall development program for this product candidate. Based on the FDA guidance we received from that meeting, we commenced Phase 2b related activities during the fourth quarter of 2018 with the initiation of a non-interventional content validity study intended to support the validity of specific patient reported outcome, or PRO, measures. This study seeks to identify and document the genital arousal symptoms that will be assessed in our planned at-home Phase 2b trial, as well as our Phase 3 studies, and to demonstrate that these symptoms are the most important and relevant to our target population and are also acceptable endpoints for the FDA. We are in the final stages of completing this study. We believe that completing this study will be a significant de-risking event for our Sildenafil Cream, 3.6% program because it will position us to hold a Type C meeting with the FDA to review the study's findings and to obtain the FDA’s guidance on the endpoints for our Phase 2b and Phase 3 clinical trials, including whether the FDA agrees that the PRO instruments are content valid for the target population. Our plan is for the endpoints used in the Phase 2b trial to reflect the endpoints used in the Phase 3 trial. The timing of when we initiate any clinical studies related to Topical 5% Sildenafil Citrate Cream, including ourthe Phase 2b clinicalat-home trial will be influenced by suchthe FDA's guidance. Currently,We continue to explore additional clinical and non-clinical work that might be valuable or required to support the plannedoverall program and anticipated design of the Phase 2b studytrial.

DARE-HRT1
DARE-HRT1 is expectedan intravaginal ring, or IVR, containing bio-identical estradiol and bio-identical progesterone to evaluatetreat the product candidate under real-life conditionsvasomotor symptoms (VMS) associated with menopause as part of a hormone replacement therapy regimen. There are currently no FDA-approved IVRs that deliver bio-identical progesterone in womencombination with FSAD. Clinical endpoints are expected to include patient reported outcomes (PROs) using validated questionnaires, and we are seeking inputbio-identical estradiol. The IVR technology used in DARE-HRT1 was developed by Dr. Robert Langer from the FDA onMassachusetts Institute of Technology and Dr. William Crowley from Massachusetts General Hospital and Harvard Medical School. We plan to utilize the proposed PROsFDA's 505(b)(2) pathway to obtain marketing approval of DARE-HRT1 in the U.S. We intend to initiate a Phase 1 clinical study for DARE-HRT1 during 2019 and questionnaire tools as well.

to report topline results in 2020. DARE-HRT1 has the potential to be a first-in-class product.

Financial Overview

We incurred lossesa loss of approximately $11.5$7.0 million for the yearsix months ended December 31, 2017.June 30, 2019. As of December 31, 2017,June 30, 2019, we had (a) an accumulated deficit of approximately $12.2$36.8 million and (b) cash and cash equivalents of $7.6approximately


$5.6 million. We also had negative cash flow from operations of approximately $2.5 million for the year ended December 31, 2017. As of June 30, 2018, we had (a) an accumulated deficit of approximately $23.5 million and (b) cash and cash equivalents of approximately $12.4 million. We also had negative cash flow from operations of approximately $4.8$6.3 million during the six months ended June 30,, 2018. 2019. As further discussed below, in “Recent Events – Capital Raising,”an underwritten public offering we closed in April 2019, we received aggregate net proceeds of approximately $10.2 million in the aggregate in early 2018 through the sale of equity securities.$5.2 million. We will need to raise substantial additional capital to continue to fund our operations.operations and to successfully execute our current operating plan, including the development of our current product candidates. The amount and timing of future funding requirements will depend on many factors, including the pace and results of our clinical development efforts. If we do not raise capital as and when needed, we will not be able to continue development of our product candidates or we will be required to delay, scale back or eliminate some or all of our development programs or cease operations.

2017 Business Combination and Related Transactions

Until July 20, 2017, our corporate name was Cerulean Pharma Inc., or Cerulean. Cerulean was incorporated in Delaware in December 2005. On July 19, 2017, Cerulean and Daré Bioscience Operations, Inc., a privately held Delaware corporation, or Private Daré, completed a transaction in which the holders of capital stock and securities convertible into capital stock of Private Daré, which holders are collectively referred to as the Private Daré Stockholders, sold their shares of capital stock of Private Daré to Cerulean in exchange for newly issued shares of Cerulean common stock. As a result of that transaction, Private Daré became a wholly owned subsidiary of Cerulean. As of immediately following the closing of that transaction: (i) the Private Daré Stockholders owned approximately 51% of the outstanding common stock of Cerulean, and (ii) the equity holders of Cerulean immediately prior to the closing, collectively, owned approximately 49% of the outstanding common stock of Cerulean. In connection with the transaction, Cerulean changed its name from “Cerulean Pharma, Inc.” to “Daré Bioscience, Inc.” We refer to the transaction described above as the Cerulean/Private Daré stock purchase transaction.

On July 19, 2017, Cerulean also completed the sale of its proprietary Dynamic Tumor Targeting™ Platform to Novartis Institutes for BioMedical Research, Inc. for $6.0 million.  

We and our wholly owned subsidiaries, Private Daré, Daré Bioscience Australia Pty LTD, and Pear Tree Pharmaceuticals, Inc. operate in one business segment.

On July 20, 2017, we effected a 1-for-10 reverse stock split of our common stock. All share and per share amounts of common stock, options and warrants in this report, including those amounts included in the accompanying interim consolidated financial statements, have been restated for all periods to give retroactive effect to the reverse stock split

Recent Events

Capital Raising

Underwritten Public Offering
On January 4, 2018, we entered into a common stock sales agreement pursuant to which we may sell up to an aggregate of $10 million worth of shares of our common stock from time to time in “at-the-


market” offerings (as defined in Rule 415 promulgated under the Securities Act of 1933, as amended), including in sales made directly on Nasdaq, to or through a market maker or, subject to our prior approval, in negotiated transactions. We will pay an aggregate commission rate of up to 3% of the gross proceeds of any common stock sold under this agreement. In January and February 2018, we generated gross proceeds of approximately $1.1 million resulting in net proceeds of an aggregate of approximately $803,000 on sales of 375,000 shares of our common stock under this agreement.

On February 15, 2018,April 11, 2019, we closed an underwritten public offering of 5.0 million4,575,000 shares of our common stock and warrants to purchase up to 3.5 million shares of common stock. Each share of common stock was sold together withat a warrant to purchase up to 0.70 of a share of common stock, at an exercisepublic offering price of $3.00$1.10 per share. We generated gross proceeds of approximately $10.3 million, resulting in net proceeds of approximately $9.4 million. The warrants are exercisable immediately and for a period of five years from the date of issuance. The warrants include a price-based anti-dilution provision, which provides that the exercise price of the warrants will be adjusted downward if we issue or sell (or are deemed to issue or sell) securities at a price that is less than the exercise price in effect immediately prior to such issuance or sale (or deemed issuance or sale), before the expiration of the warrant term. In that case, the new exercise price of the warrants would equal the price at which the new securities are issued or sold (or are deemed to have been issued or sold). In addition, if we issue, sell or enter into any agreement to issue or sell securities at a price which varies or may vary with the market price of the shares of our common stock, the holders of the warrants shall have the right to substitute such variable price for the exercise price of the warrant then in effect. The warrants are exercisable only for cash, unless the registration statement of which the prospectus registering the offering was part is not effective for the issuance of the shares underlying the warrants, in which case the warrants may be exercised on a cashless basis. We granted the underwriters a 30-day over-allotment option to purchase up to an additional 750,000686,250 shares, which was exercised in full on April 12, 2019. Including the over-allotment shares, we issued a total of 5,261,250 shares, and received gross proceeds of approximately $5.8 million and net proceeds of approximately $5.2 million after deducting underwriting discounts and offering expenses.

As a result of the sale of shares of our common stock and warrants to purchase up to 525,000 shares of our common stock directly from us at a price of $2.05 per common share and accompanying warrant. We received an overallotment notice from the underwriter for warrants to purchase up to 220,500 shares of our common stock, which shares were issued on February 15, 2018.

Topical 5% Sildenafil Citrate Cream License and Collaboration Agreement

On February 11, 2018, we entered into a license and collaboration agreement, or the SST License Agreement, with SST. Under the SST License Agreement, subject to our securing an investment of at least $10.0 million by March 31, 2018, which we secured as a result of the underwritten public offering that closed on February 15, 2018 discussed above, we obtained a worldwide exclusive, royalty-bearing, sublicensable license to develop and commercialize in all countries and geographic territories of the world, for all indications for women related to female sexual dysfunction and/or female reproductive health, including treatment of female sexual arousal disorder, or the Field of Use, SST’s topical formulation of Topical 5% Sildenafil Citrate Cream as it exists as of the effective date of the SST License Agreement, or any other topically applied pharmaceutical product containing sildenafil or a salt thereof as a pharmaceutically active ingredient, alone or with other active ingredients, but specifically excluding any product containing ibuprofen or any salt derivative of ibuprofen, or the SST Licensed Products.

We agreed to use commercially reasonable efforts to develop the SST Licensed Products in the Field of Use in accordance with a development plan contained inoffering described above, per the SST License Agreement, and to commercialize the SST Licensed Products in the Field of Use.

SST will be eligible to receive tiered royalties based on percentages of annual net sales of the SST Licensed Products in the single digits to the mid-double digits, including customary provisions permitting royalty reductions and offset, and a percentage of sublicense revenue. We are responsible for all reasonable internal and external costs and expenses incurred by SST in its performance of the development activities it is required to perform under the SST License Agreement. Further, the SST License Agreement provides that we shall make base milestone payments to SST ranging from $0.5 million to $18.0 million on achieving certain clinical and regulatory milestones in the U.S. and worldwide, and an additional $10.0 million to $100 million upon achieving certain commercial milestones. Should we enter into strategic development or distribution partnerships related to the SST Licensed Products, additional milestone payments would be due to SST.


Orbis Development and Option Agreement

On March 12, 2018, we entered into an exclusive development and option agreement, or the Orbis Agreement, with Orbis, for the development of long-acting injectable etonogestrel contraceptive with 6- and 12-month durations (ORB-204 and ORB-214, respectively). The collaboration represents our first partnership that leverages funds and development work supported to date by investment from a donor and non-profit development community devoted to improving options in women’s reproductive health, positioning us as a committed industry partner to advance innovation that addresses global gaps in therapeutic options. We have agreed to pay Orbis $300,000 to conduct the first stage of development work, Stage 1, as follows: $150,000 upon signing the Orbis Agreement, $75,000 at the 50% completion point, not later than 6 months following the date the Orbis Agreement was signed, and $75,000 upon delivery by Orbis of the 6-month batch, not later than 11 months following the date the Orbis Agreement was signed. Upon Orbis successfully completing Stage 1 of the development program and achieving the predetermined target milestones for Stage 1, we will have 90 days to instruct Orbis whether to commence the second stage of development work, Stage 2. Should we execute our option to proceed to Stage 2, we will be obligated to provide additional funding to Orbis for such activities.

The initial development on Orbis’s long-acting injectable contraceptive program was carried out under a subcontract funded by Family Health International, or FHI 360, through a grant from the Bill and Melinda Gates Foundation, or the Gates Foundation. The Gates Foundation and FHI 360 are world leaders in the funding and development of novel contraceptive products and programs. In July of 2017, the Gates Foundation announced a commitment of $375 million over three years in support of Family Planning 2020, a global public/private partnership aimed at providing access to contraception.

An injectable contraceptive is designed to provide discreet, non-implanted protection over periods of months. Limitations of the currently marketed injectable contraceptive is that it provides contraceptive protection for only three months and can delay the ability to get pregnant for up to ten months after receiving the injection. The target product profiles of ORB-204 and ORB-214 include prolonged duration (6 to 12 months), improved ease of use, with an improved side effect profile and predictable return to fertility.

Pre-clinical studies for the 6- and 12-month formulations have been completed to date, including establishing pharmacokinetics and pharmacodynamics profiles. The collaboration with Orbis will continue to advance the program through formulation optimization with the goal of achieving sustained release over the target time period.

The Orbis Agreement provides us with an option to enter into a license agreement for ORB-204 and ORB-214 should upcoming development efforts be successful.

Juniper Exclusive License Agreement

On April 24, 2018, we entered into an Exclusive License Agreement, or the Juniper License Agreement, with Juniper, pursuant to which Juniper granted us (a) an exclusive, royalty-bearing worldwide license under certain patent rights, either owned by or exclusively licensed to Juniper, to make, have made, use, have used, sell, have sold, import and have imported products and processes; and (b) a non-exclusive, royalty-bearing worldwide license to use certain technological information owned by Juniper to make, have made, use, have used, sell, have sold, import and have imported products and processes.  We are entitled to sublicense the rights granted to us under the Juniper License Agreement.  

The following is a summary of the material terms of the Juniper License Agreement:

Upfront Fee. We paid a $250,000 non-creditable upfront license feewarrants we issued in February 2018, their exercise price was automatically reduced from $3.00 to Juniper in connection with the execution of the Juniper License Agreement.

Annual Maintenance Fee. We will pay an annual license maintenance fee$0.98 per share on April 11, 2019. For additional information, see Note 6 to Juniper on each anniversary of the date of the Juniper License Agreement, the amount of which will be $50,000 for the first two years and $100,000 thereafter, and which will be creditable against royalties and other payments due to Juniper in the same calendar year but may not be carried forward to any other year.

Milestone Payments. We are required to make potential future development and sales milestone payments of up to $43.8 million (up to $13.5 million in clinical and regulatory milestones and up to $30.3 million in sales milestones) for each product or process covered by the licenses granted under the Juniper License Agreement.


Royalty Payments. During the royalty term, we will pay Juniper mid-single-digit to low double-digit royalties based on worldwide net sales of products and processes covered by the licenses granted under the Juniper License Agreement. In lieu of such royalty payments, we will pay Juniper a low double-digit percentage of all sublicense income that we receive for the sublicense of rights under the Juniper License Agreement to a third party. The royalty term, which is determined on a country-by-country basis and product-by-product basis (or process-by-process basis), begins with the first commercial sale of a product or process in a country and terminates on the latest of (1) the expiration date of the last valid claim within the licensed patent rights with respect to such product or process in such country, (2) 10 years following the first commercial sale of such product or process in such country, and (3) when one or more generic products for such product or process are commercially available in such country, except that if there is no such generic product by the 10th year following the first commercial sale in such country, then the royalty term will terminate on the 10 year anniversary of the first commercial sale in such country.

Efforts. We are required to use commercially reasonable efforts to develop and make at least one product or process available to the public, which efforts include achieving specific diligence requirements by specific dates specified in the Juniper License Agreement.

Term. Unless earlier terminated, the term of the Juniper License Agreement will continue on a country-by-country basis until the later of (1) the expiration date of the last valid claim within such country, or (2) 10 years from the date of first commercial sale of a product or process in such country. Upon expiration (but not earlier termination) of the Juniper License Agreement, the licenses granted thereunder will convert automatically to fully-paid irrevocable licenses. Juniper may terminate the Juniper License Agreement (1) upon 30 days’ notice for our uncured breach of any payment obligation under the Juniper License Agreement, (2) if we fail to maintain required insurance, (3) immediately upon our insolvency or the making of an assignment for the benefit of our creditors or if a bankruptcy petition is filed for or against us, which petition is not dismissed within 90 days, or (4) upon 60 days’ notice for any uncured material breach by us of any of our other obligations under the Juniper License Agreement. We may terminate the Juniper License Agreement on a country-by-country basis for any reason by giving 180 days’ notice (or 90 days’ notice if such termination occurs prior to receipt of marketing approval in the United States). If Juniper terminates the Juniper License Agreement for the reason described in clause (4) above or if we terminate the Juniper License Agreement, Juniper will have full access including the right to use and reference all product data generated during the term of the Juniper License Agreement that is owned by us.

Pear Tree Pharmaceuticals Acquisition

On April 30, 2018, we entered into an Agreement and Plan of Merger, the Merger Agreement, with Pear Tree, Daré Merger Sub, Inc., our wholly-owned subsidiary, or Merger Sub, and Pear Tree stockholders’ representatives. The transactions contemplated by the Merger Agreement closed on May 16, 2018, and as a result, Pear Tree became our wholly owned subsidiary. We acquired Pear Tree to secure the rights to develop PT-101, a proprietary vaginal formulation of tamoxifen, as a potential treatment for vulvar and vaginal atrophy.

Under the Merger Agreement, upon the closing of the merger, if the Positive Consideration Amount (as defined below) exceeded the Negative Consideration Amount (as defined below), certain former and continuing Pear Tree service providers and former holders of Pear Tree’s capital stock, or the Holders, would have been entitled to receive an amount of cash equal to such excess, and if the Negative Consideration Amount exceeded the Positive Consideration Amount, then we would be able to offset such excess from future payments that would otherwise be due to the Holders, including the potential payment of $75,000 due on the one-year anniversary of the closing. The Negative Consideration Amount exceeded the Positive Consideration Amount by approximately $132,000.  As such, approximately $132,000 will be offset from future payments that would otherwise be due to the Holders. Under the Merger Agreement, Positive Consideration Amount means the sum of $75,000 and the cash and cash equivalents held by Pear Tree at closing, and Negative Consideration Amount means the sum of (i) certain Pear Tree indebtedness and transaction expenses, (ii) transaction expenses of the stockholders’ representatives, and (iii) amounts payable under Pear Tree’s management incentive plan.


Under the Merger Agreement, the Holders will be eligible to receive, subject to certain offsets, tiered royalties, including customary provisions permitting royalty reductions and offset, based on percentages of annual net sales of certain products subject to license agreements we assumed, and a percentage of sublicense revenue. We must also make payments to the Holders that are contingent on achieving certain clinical, regulatory and commercial milestones, and may be paid, in our sole discretion, in cash or shares of our common stock. The parties made customary representations, warranties, and covenants in the Merger Agreement, including provisions regarding indemnification.

Financial Operations Overview

The results of our operations discussed in this section and the operations presented in theunaudited interim consolidated financial statements and accompanying notes for the three and six months ended June 30, 2018 represent our operations after giving effect to the Cerulean/Private Daré stock purchase transaction. The interim consolidated financial statements and accompanying notes for the three and six months ended June 30, 2017 represent the operations of Private Daré, making a comparison between periods difficult.

contained in this report.

Financial Operations Overview
Revenue

To date we have not generated any revenue and do not expect to generate any revenue for the foreseeable future. In the future, we may generate revenue from a combination of product sales, license fees, milestone and research and development payments in connection with strategic partnerships, and royalties resulting from the sales of products developed under licenses of intellectual property. Any revenue generated is expected to fluctuate from quarter to quarter as a result of the timing and amounts of any such payments. Our ability to generate product revenue will depend on the successful clinical development of our product candidates, the receipt ofreceiving regulatory approvals to market such products and the eventual successful commercialization of product candidates. If we fail to complete the development of productproducts candidates in a timely manner, or to obtainreceive regulatory approval for such product candidates, our ability to generate future revenue and our results of operations would be materially adversely affected.

Research and Development Expenses

Research and development expenses primarily represent costs incurred to conductinclude research and development ofcosts for our product candidates. Also, included in researchcandidates and development expenses are transaction costs related to the Pear Tree acquisition, which we acquired to secure the rights to develop PT-101, a proprietary vaginal formulation of tamoxifen, as a potential treatment for vulvar and vaginal atrophy.our acquisitions. We recognize all research and development expenses as they are incurred. Research and development expenses consist primarily of:

expenses incurred under agreements with consultants and clinical trial sites that conduct research and development activities on our behalf;

laboratory and vendor expenses related to the execution of clinical trials;

contract manufacturing expenses, primarily for the production of clinical supplies;

transaction costs related to the Pear Tree acquisition;acquisition of technologies and

related intellectual property; and

internal costs that are associated with activities performed by our research and development organization and generally benefit multiple programs.


We expect research and development expenses to increase in the future as we invest in the development of Ovaprene, Topical 5% Sildenafil Citrate Cream, an intravaginal hormonal ring, vaginal tamoxifenour clinical-stage product candidates and as any other potential product candidates that we may choose to develop are advanced into and through clinical trials in the pursuit of regulatory approvals. Such activities will require a significant increase in investment in regulatory support, clinical supplies, and inventory build-up related costs, and the payment of success-based milestones. In addition, we continue to evaluate opportunities to acquire or in-license other product candidates and technologies, which may result in higher research and development expenses due to, among other factors, license fee and/or milestone payments.

The process of conducting



Conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. We may not obtain regulatory approval for any product candidate on a timely and cost-effective basis or at all. The probability of success of our product candidates may be affected by numerous factors, including clinical results and data, competition, intellectual property rights, manufacturing capability and commercial viability. As a result, we are unable tocannot accurately determine the duration and completion costs of development projects or when and to what extent we will generate revenue from the commercialization of any of our product candidates.

General and Administrative Expense

General and administrative expenses consist of personnel costs, facility expenses, expenses for outside professional services, including legal, audit and accounting services. Personnel costs consist of salaries, benefits and stock-based compensation. Facility expenses consist of rent and other related costs. We expect to continue to incur additional expenses because of additional costs associated with being a public company, including expenses related to compliance with SEC and Nasdaq rules and regulations, additional insurance, investor relations, and other administrative expenses and professional services.

Critical Accounting Policies and Significant Judgments and Estimates

Management’s discussion and analysis of financial condition and results of operations is based on our interim consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation ofPreparing these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. On an ongoing basis, we evaluate these estimates and judgments. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially from these estimates. We believe that theFor a description of critical accounting policies discussed below are critical to understandingthat affect our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.


estimates used in the preparation of our unaudited consolidated interim financial statements, refer to Item 7 in Management’s Discussion and Analysis of Financial Condition and Results of Operations

and Note 1 to our financial statements contained in our 2018 10-K and Note 3 to our unaudited interim consolidated financial statements contained in this report.

Results of Operations
Comparison of Three Months Ended June 30, 2019 and 2018 and 2017 (Unaudited)

The following table summarizes our results for the periods indicated, together with the changes in those items in dollars:

 

 

Three months ended June 30,

 

 

Change

 

 

 

2018

 

 

2017

 

 

Dollars

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative expense

 

$

1,157,174

 

 

$

476,047

 

 

 

681,127

 

Research and development expenses

 

 

2,217,622

 

 

 

3,576

 

 

 

2,214,046

 

License expenses

 

 

250,000

 

 

 

 

 

 

250,000

 

Total operating expenses

 

 

3,624,796

 

 

 

479,623

 

 

 

3,145,173

 

Loss from operations

 

 

(3,624,796

)

 

 

(479,623

)

 

 

(3,145,173

)

Other income (expense)

 

 

42,626

 

 

 

(18,570

)

 

 

61,196

 

Net loss

 

$

(3,582,170

)

 

$

(498,193

)

 

 

(3,083,977

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

$

(27,485

)

 

$

 

 

 

(27,485

)

Comprehensive loss

 

$

(3,609,655

)

 

$

(498,193

)

 

 

(3,111,462

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 Three months ended June 30, Dollar
 2019 2018 Change
Operating expenses:     
General and administrative expense$1,307,379
 $1,157,174
 $150,205
Research and development expenses2,512,572
 2,217,622
 294,950
License expenses162,500
 250,000
 (87,500)
Total operating expenses3,982,451
 3,624,796
 357,655
Loss from operations(3,982,451) (3,624,796) (357,655)
Other income30,001
 42,626
 (12,625)
Net loss(3,952,450) (3,582,170) (370,280)
Deemed dividend from trigger of down round provision feature(789,594) 
 (789,594)
Net loss to common shareholders(4,742,044) (3,582,170) (1,159,874)
Other comprehensive loss:    

Foreign currency translation adjustments(7,917) (27,485) 19,568
Comprehensive loss$(4,749,961) $(3,609,655) $(1,140,306)
Revenues

We did not recognize any revenuerevenues for either of the three months ended June 30, 20182019 or 2017.

2018.



General and administrative expenses

The increase of $681,127$150,205 in general and administrative expenses for the three months ended June 30, 20182019 as compared to the three months ended June 30, 20172018 was primarily attributable to an increase in (i) personnel costs of approximately $384,000 due to$102,422 reflecting the hiring of additional employees which resulted in higher salary, expensebenefit and bonus expenses in the current period, including bonuses, with no comparableand (ii) an increase in stock-based compensation expense of $74,932. Those increases were partially offset by a decrease of approximately $53,612 in expenses for outside professional services in the current period as compared to the same period of the prior year, an increase in legal and professional services of approximately $57,000 related to the costs of being a public company, an increase in insurance costs of approximately $93,000 related to directors and officers insurance policies and employee benefits with no comparable expense in the prior period, and an increase in taxes and licenses of approximately $29,000 with no comparable expense in the prior period. Following the Cerulean/Private Daré stock purchase transaction and based upon the recommendation of our compensation consultant and approval of the Compensation Committee of our Board of Directors, we began paying our newly appointed executive officers compensation at a level in line with market rates for executive officers of early stage, pre-commercial biopharmaceutical public companies.

year.

Research and development expenses

The increase of $2,214,046$294,950 in research and development expenses for the three months ended June 30, 20182019 as compared to the three months ended June 30, 20172018 was primarily attributable to (i) an increase in costs related to development activities of approximately $1,475,000 of development costs associated with our lead product candidates,$518,051 for Ovaprene and Topical 5% Sildenafil Citrate Cream, 3.6%, and to a lesser extent, for DARE-BV1 and DARE-HRT1, offset by grant funding recorded as a reduction to research and development expense related to Ovaprene of approximately $452,000$456,484, (ii) an increase in personnel costs of transaction costs associated with our acquisitionapproximately $233,382 reflecting the hiring of Pear Tree,additional employees which resulted in higher salary, benefit and approximately $233,000bonus expenses, and (iii) an increase in stock-based compensation expense of payroll and related expense.

$26,996.

License expenses

The increaselicense expenses of $162,500 for the three months ended June 30, 2019 related to (i) the accrual of $112,500 of deferred license fees in the aggregate due under the Assignment Agreement with Hammock Pharmaceuticals, Inc. and the First Amendment to License Agreement with TriLogic Pharma, LLC and MilanaPharm LLC, and (ii) the $50,000 annual license maintenance fee due under the Juniper License Agreement. During the quarter, we accrued (y) $62,500 of the $250,000 of license fees payable under the Assignment Agreement and (z) $50,000 of the $200,000 of license fees payable under the First Amendment to License Agreement. Both of these license fees are due in December 2019, and in our discretion, may be paid either in cash or with shares of our common stock.
The license expense of $250,000 in license expenses for the three months ended June 30, 2018 as compared to the three months ended June 30, 2017 was entirely related to the $250,000$250,000 non-creditable upfront license fee payment to Juniper in connection with the execution of the Juniper License Agreement. Agreement.
For further discussion of these license fees, see Note 8 “Commitments and Contingencies”to our unaudited interim consolidated financial statements contained in this report.
Other income
The decrease of the Notes to the Interim Consolidated Financial Statements (Unaudited).


Other income (expense)

The increase of $61,196$12,625 in other income (expense) for the three months ended June 30, 20182019 as compared to the three months ended June 30, 20172018 was primarily due to dividendsinterest earned on cash balances in the current period.



Comparison of Six Months Ended June 30, 2019 and 2018 and 2017 (Unaudited)

The following table summarizes our results for the periods indicated, together with the changes in those items in dollars:

 

 

Six months ended June 30,

 

 

Change

 

 

 

2018

 

 

2017

 

 

Dollars

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

$

2,460,363

 

 

$

676,711

 

 

 

1,783,652

 

Research and development expenses

 

 

3,304,275

 

 

 

31,376

 

 

 

3,272,899

 

License expenses

 

 

350,000

 

 

 

 

 

 

350,000

 

Impairment of goodwill

 

 

5,187,519

 

 

 

 

 

 

5,187,519

 

Total operating expenses

 

 

11,302,157

 

 

 

708,087

 

 

 

10,594,070

 

Loss from operations

 

 

(11,302,157

)

 

 

(708,087

)

 

 

(10,594,070

)

Other income (expense)

 

 

54,370

 

 

 

(33,970

)

 

 

88,340

 

Net loss

 

$

(11,247,787

)

 

$

(742,057

)

 

 

(10,505,730

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

$

(41,231

)

 

$

 

 

 

(41,231

)

Comprehensive loss

 

$

(11,289,018

)

 

$

(742,057

)

 

 

(10,546,961

)

 Six months ended June 30, Dollar
 2019 2018 Change
Operating expenses:     
General and administrative expense$2,584,559
 $2,460,363
 $124,196
Research and development expenses4,205,963
 3,304,275
 $901,688
License expenses275,000
 350,000
 $(75,000)
Impairment of goodwill
 5,187,519
 $(5,187,519)
Total operating expenses7,065,522
 11,302,157
 $(4,236,635)
Loss from operations(7,065,522)
 (11,302,157)
 (4,236,635)
Other income61,232
 54,370
 $6,862
Net loss(7,004,290)
 (11,247,787)
 $4,243,497
Deemed dividend from trigger of down round provision feature(789,594) 
 789,594
Net loss to common shareholders(7,793,884) (11,247,787) (3,453,903)
Other comprehensive loss:     
Foreign currency translation adjustments(296)
 (41,231)
 $40,935
Comprehensive loss$(7,794,180) $(11,289,018) $3,494,838
Revenues

We did not recognize any revenuerevenues for either of the six months ended June 30, 20182019 or 2017.

2018.

General and administrative expenses

The increase of $1,783,652$124,196 in general and administrative expenses for the six months ended June 30, 20182019 as compared to the six months ended June 30, 20172018 was primarily attributable to an increase in legal and professional services of approximately $625,000 related to being a public company, the completion of two financings and multiple product acquisition transactions, an increase in(i) personnel costs of approximately $642,000 due to$344,028 reflecting the hiring of additional employees which resulted in higher salary, expensebenefit and bonus expenses in the current period, including bonuses, with no comparable expense in the same period of the prior year, and (ii) an increase in insurance costsstock-based compensation expense of $139,073. Those increases were partially offset by a decrease of approximately $221,000 related to directors and officers insurance policies and employee benefits, with no comparable expense$365,465 in the prior period,  and an increase in taxes and licenses of approximately $71,000 with no comparable expense in the prior period. Following the Cerulean/Private Daré stock purchase transaction and based upon the recommendation of our compensation consultant and approval of the Compensation Committee of our Board of Directors, we began paying our newly appointed executive officers compensation at a level in line with market ratesexpenses for executive officers of early stage, pre-commercial biopharmaceutical public companies.

outside professional services

Research and development expenses

The increase of $3,272,899$901,688 in research and development expenses for the six months ended June 30, 20182019 as compared to the six months ended June 30, 20172018 was primarily attributable to (i) an increase in costs related to development activities of approximately $2,273,000 of development costs associated with our lead product candidates,$922,064 for Ovaprene and Topical 5% Sildenafil Citrate Cream, approximately $452,000 of transaction costs associated with our acquisition of Pear Tree, approximately $338,000 of payroll3.6%, and relatedto a lesser extent, for DARE-BV1 and DARE-HRT1, offset by grant funding recorded as a reduction to research and development expense and $150,000 related to Ovaprene of approximately $617,491, (ii) an increase in personnel costs of approximately $344,028 due to increased salary, benefit and bonus expenses due to staff additions, and (iii) an increase in stock-based compensation expense of $51,699.
License expenses
The license expenses of $275,000 for the executionsix months ended June 30, 2019 related to (i) the accrual of deferred license fees due under the Assignment Agreement with Hammock Pharmaceuticals, Inc. and the First Amendment to License Agreement with TriLogic Pharma, LLC and MilanaPharm LLC; and (ii) the $50,000 annual license maintenance fee due under the Juniper License Agreement. During the six months ended June 30, 2019, we accrued (y) $125,000 of the Orbis$250,000 of license fees payable under the Assignment Agreement and (z) $100,000 of the $200,000 of license fees payable under the First Amendment to License Agreement.

Both of these license fees are due in December 2019, and in our discretion, may be paid either in cash or with shares of our common stock

License expenses

The increaselicense expenses of $350,000 in license expenses for the six months ended June 30, 2018 as compared to the six months ended June 30, 2017 was related to the $250,000$250,000 non-creditable upfront license fee payment to Juniper in connection with the execution of the Juniper License Agreement and to the $100,000 in license fees paid to SST.



For further discussion of these license fees, see Note 8 “Commitments and Contingencies” of the Notes to the Interim Consolidated Financial Statements (Unaudited).

our unaudited interim consolidated financial statements contained in this report.

Goodwill impairment expense

We incurred an impairment loss of $5,187,519 for the six months ended June 30, 2018 due to our determination that the carrying amount of our goodwill exceeded its estimated fair value at March 31,June 30, 2018. See Note 4, “Acquisitions,” of the Notes to the Interim Consolidated Financial Statements (Unaudited) appearing in this report forFor a discussion of our goodwill analysis.

analysis, see Note 4 to our unaudited interim consolidated financial statements contained in this report.

Other income (expense)

The increase of $88,340$6,862 in other income (expense) for the six months ended June 30, 20182019 as compared to the six months ended June 30, 20172018 was primarily due to dividendsinterest earned on cash balances in the current period.


Liquidity and capital resources

Capital Resources and Financial Condition

We prepared the accompanying consolidated financial statements on a going concern basis, which assumes that we will realize our assets and satisfy our liabilities in the normal course of business. In addition, we have a history of annual losses from operations, we expect negative cash flows from our operations to continue for the foreseeable future, and we anticipateexpect that weour net losses will continue to incur losses for at least the next several years. As ofyears as we develop our existing product candidates and seek to acquire, license or develop additional product candidates.
At June 30, 2018,2019, our accumulated deficit was approximately $36.8 million, our cash and cash equivalents were approximately $5.6 million, our working capital was approximately $4.6 million, and we had incurred a net loss from operations of $11.2$7.1 million. We had negative cash flow from operations of approximately $6.3 million during the six months ended June 30, 2019. We received gross proceeds of approximately $5.8 million, and net proceeds of approximately $5.2 million after deducting underwriting discounts and offering expenses, from our accumulated deficit was $23.5 million,underwritten public offering that closed in April 2019. Considering our current cash resources, we had $12.4 million in cashbelieve our existing resources will be sufficient to fund planned operations into the first quarter of 2020. For the foreseeable future, our ability to continue our operations will depend upon our ability to obtain additional capital.
These circumstances raise substantial doubt about our ability to continue as a going concern. The accompanying interim consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and cash equivalentsreclassification of assets or the amounts and working capitalclassifications of $11.6 million.

We have not generated any revenue to date, and we cannot anticipate if, and when we will generate any revenue. We must obtain regulatory approvals in order to sell anyliabilities that may result from the outcome of the uncertainty of our products in the future. We will needability to generate sufficient safetyremain a going concern.

Plan of Operations and efficacy data on our product candidates in order for them to be attractive assets for potential strategic partners to license or for pharmaceutical companies to acquire, and for us to generate cash and other license fees related to such product candidates. At the same time, we expect our expenses to increase in connection with the PCT clinical trial of Ovaprene, clinical and other studies related to Topical 5% Sildenafil Citrate Cream, other efforts to advance our portfolio, and any other development activities we may undertake in the future. We also expect to continue to incur additional costs given the requirements of operating as a public company.

Future Funding Requirements

Our primary uses of capital are, and we expect will continue to be, staff-related expenses, the cost of clinical trials and regulatory activities related to our product candidates, costs associated with contract manufacturing services and third-party clinical research and development services, milestone payments due under license agreements upon the successful advancementachievement of milestones of our product candidates, legal expenses, other regulatory expenses and general overhead costs.

We expect our expenses to increase during the rest of 2019 as we continue the development of our product candidates, including as we (1) complete the Ovaprene PCT clinical trial, (2) prepare for the initiation of a Phase 3 clinical trial of DARE-BV1, (3) continue Phase 2b-related activities and prepare for the potential commencement of the at-home Phase 2b clinical study of Sildenafil Cream, 3.6%, (4) prepare for the initiation of a Phase 1 clinical study of DARE-HRT1, and (5) to a lesser extent, continue to advance our other product candidates.
To date, we have not obtained any regulatory approvals for any of our product candidates, commercialized any of our product candidates or generated any product revenue, and we cannot anticipate if, and when we will generate any revenue. We have devoted significant resources to acquiring our portfolio of product candidates and to research and development activities for our product candidates. We must obtain regulatory approvals to sell any of our products in the future. We will need to generate sufficient safety and efficacy data on our product candidates for them to be attractive assets for potential strategic partners to license or for pharmaceutical companies to acquire, and for us to generate cash and other license fees related to such product candidates.

We believe


Based on our existingcurrent operating plan estimates, we do not have sufficient cash balances will be sufficient to satisfy our working capital needs and other liquidity requirements associated with our planned operations forover at least the next 12 months.

Based on our current plans and existing cash balances, we believe that our available funds will be sufficient for us to completemonths from the PCT clinical trialdate of Ovaprene that commenced in mid-2018 and to advance Topical 5% Sildenafil Citrate Cream into a Phase 2b clinical trial. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our available cash resources sooner than we currently expect.

issuance of the accompanying interim consolidated financial statements.

We will continueneed to requireraise substantial additional capital to continue to fund our operations and to successfully execute our current operating plan, including the development of our current product portfolio, and wecandidates. We are currently evaluating a variety of financing options. Our operating expenses will increase as we advance into later stages of product development,capital raising options, including a pivotal contraceptive study, and expand our product portfolio. If we obtain regulatory approval for any of our product candidates, we will need additional funds to commercialize them. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of clinical development efforts.

We intend to cover our future operating expenses through cash and cash equivalents on hand and through a combination of equity offerings, debt financings, government or other grant funding, collaborations and strategic alliances. Toalliances or other similar types of arrangements to cover our operating expenses, including the extent thatdevelopment of our product candidates and any future product candidates we may license or otherwise acquire. The amount and timing of our capital needs have been and will continue to depend highly on many factors, including the product development programs we choose to pursue and the pace and results of our clinical development efforts. If we raise additional capital through the issuancecollaborations, strategic alliances or other similar types of additional equity or convertible debt securities, the ownership interestarrangements, we may have to relinquish, on terms that are not favorable to us, rights to some of our current stockholders will be diluted.technologies or product candidates we would otherwise seek to develop or commercialize. There can be no assurance that wecapital will be able to raise additional capitalavailable when needed or that, if available, it will be obtained on terms favorable to us and our stockholders. In addition, equity or debt financings may have a dilutive effect on the holdings of our existing stockholders. If we are unable tocannot raise additional capital when needed, on favorable terms or at all, we will not be able to continue development of our product candidates, or we will be requiredneed to reevaluate our planned operations and may need to delay, scale back or eliminate some or all of our development programs, reduce expenses, file for bankruptcy, reorganize, merge with another entity, or cease operations, any ofoperations. If we become unable to continue as a going concern, we may have to liquidate our assets, and might realize significantly less than the values at which would have a negative impactthey are carried on our financial condition.

statements, and stockholders may lose all or part of their investment in our common stock. See “ITEM 1A. RISK FACTORS—Risks Related to Our Business—We will need to raise additional capital to continue our operations,” in our 2018 10-K.

Cash Flows

The following table shows a summary of our cash flows for the periods indicated:

 

 

Six months ended June 30,

 

 

 

2018

 

 

2017

 

Net cash used in operating activities

 

$

(4,807,544

)

 

$

(160,209

)

Net cash used in investing activities

 

 

(460,200

)

 

 

 

Net cash provided by financing activities

 

 

10,195,653

 

 

 

155,000

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(41,231

)

 

 

 

Net increase (decrease) in cash

 

$

4,886,678

 

 

$

(5,209

)

 Six months ended June 30,
 2019 2018
Net cash used in operating activities(6,326,726) (4,807,544)
Net cash used in investing activities
 (460,200)
Net cash provided by financing activities5,151,702
 10,195,653
Effect of exchange rate changes on cash and cash equivalents(296) (41,231)
Net increase (decrease) in cash$(1,175,320) $4,886,678
Net cash used in operating activities

Cash used in operating activities for the six months ended June 30, 2019 included the net loss of $7,004,290, decreased by non-cash stock-based compensation expense of $209,319. Major components reducing operating cash in this period were a $461,982 increase in other receivables and a $34,861 increase in prepaid expenses. Major components providing operating cash in this period were a $710,459 increase in accrued expenses, a $172,413 increase in accounts payable, and a $79,063 increase in other non-current assets.
Cash used in operating activities for the six months ended June 30, 2018 included the net loss of $11.2 million,$11,247,787, decreased by non-cash impairment of goodwill of $5,187,519, acquired in-process research and development expense of approximately $452,000 and non-cash stock-based compensation expense of $18,547. Major components providing operating cash in this period were a $298,585$288,846 increase of accounts payable, anda $9,739 increase of accrued expenses, a $259,562 decrease in other receivables and a $193,495 decrease in other current assets.

Cash

Net cash used in operatinginvesting activities
No cash was provided by or used in investing activities for the six months ended June 30, 2017 included the net loss of $742,057. A component reducing operating cash in this period was a $2,800 increase in other current liabilities. Major components providing operating cash included a $550,666 increase in accounts payable and accrued expenses.

2019.

Net cash used in investing activities

Cash used in investing activities for the six months ended June 30, 2018 consisted of approximately $452,000 of transaction costs associated with our acquisition of Pear Tree and approximately $8,200 related to the purchase of property and equipment, with no comparable expense in the same period of the prior year.

equipment.



Net cash provided by financing activities

Cash provided by financing activities for the six months ended June 30, 2019 consisted of proceeds from the underwritten public offering completed in April 2019.
Cash provided by financing activities for the six months ended June 30, 2018 consisted of proceeds from the underwritten public offering completed in February 2018 and sales under the common stock salesat-the-market offering agreement completed in January and February 2018.

Cash provided by financing activities for the six months ended June 30, 2017 consisted of proceeds from the issuance of convertible promissory notes.

License and Royalty Agreements

We may be requiredhave to make various royalty and milestone payments under the product license and development agreements related to our two clinical-stage assets,DARE-BV1, Ovaprene, and Topical 5% Sildenafil Citrate Cream, 3.6%, and under the various other agreements related to our other clinical and preclinical candidates. For further discussion of these potential payments, see Note 8 “Commitments and Contingencies,” of the Notes to the Interim Consolidated Financial Statements (Unaudited).

our unaudited interim consolidated financial statements contained in this report.

Other Contracts

We enter into contracts in the normal course of business with various third parties for research studies, clinical trials, testing and other services. These contracts generally provide for termination upon notice, and we do not believe that our non-cancelable obligations under these agreements are material.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable SEC rules.



Item 3. Quantitative and Qualitative Disclosures About Market Risk

Under SEC rules and regulations, as a smaller reporting company we are not required to provide the information required by this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.


Based on an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) were effective as of June 30, 20182019 at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the fiscal quarter ended June 30, 2018to which this report relates that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become involved in various claims and legal proceedings. Regardless of outcome, litigation and other legal and administrative proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. There are no material pending legal proceedings, other than ordinary routine litigation incidental to our business, to which we are a party or of which any of our property is in the subject.

Item 1A. Risk Factors

An investment in shares of our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described in our Annual Report on Form2018 10-K, for the year ended December 31, 2017, or our 2017 10-K, and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, or our 2018 Q1 10Q, in addition to other information included in this report, including the information below and our financial statements and related notes thereto, before deciding to investinvesting in our common stock. The occurrence of any of these risks could have a material adverse effect on our business, financial condition, results of operations and future growth prospects. In these circumstances, the market price of our common stock could decline, and you may lose all or part of your investment. There have been no material changes from the risk factors disclosed in Part I, Item 1A. Risk Factors in our 20172018 10-K and in Part II, Item 1A. Risk Factors in our 2018 Q1 10-Q other than as described below.

below:


Risks Related to Our Business

We have incurred significant losses since our inception and expect to incur continued losses in the future due to the active expansion of our portfolio of product candidates. We must raise additional funds to finance our operations and remain a going concern.

Since inception,Securities

There is no assurance that we have incurred significant operating losses. We incurred a net loss of approximately $11.2 million for the six months ended June 30, 2018. At June 30, 2018, our accumulated deficit was approximately $23.5 million. Negative cash flows from our operations are expected to continue for the foreseeable future. Based on our current operating plan, our current cash reserves are sufficient to fund operations for at least the next 12 months.

Our utilization of cash has been and will continue to be highly dependentsatisfy the listing requirements of the Nasdaq Capital Market.

Our common stock is listed on the product development programsNasdaq Capital Market. As previously reported, on June 21, 2019, we choosereceived a letter from the Listing Qualifications Department (the “Nasdaq Staff”) of the Nasdaq Stock Market (“Nasdaq”) notifying us that, for the last 30 consecutive business days, the closing bid price for our common stock was below the minimum $1.00 per share requirement for continued listing on The Nasdaq Capital Market as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”), and that we have until December 18, 2019 to pursue, particularly our programs for Ovaprene and Topical 5% Sildenafil Citrate Cream ,regain compliance. We will regain compliance if the progress of these programs, the resultsclosing bid price of our preclinical studiescommon stock is at least $1.00 for a minimum of 10 consecutive business days at any time between June 21, 2019 and clinical trials,December 18, 2019, unless the cost, timing and outcomes of regulatory decisions regarding a potential approval for any one or moreNasdaq Staff exercises its discretion to extend such 10-day period. From June 21, 2019 through August 13, 2019, the closing bid price of our current or future product candidatescommon stock has been less than $1.00.
If we have not regained compliance by December 18, 2019, we may choosebe eligible for an additional 180-day compliance period. To qualify for this additional compliance period, we would be required to develop,meet the termscontinued listing requirement for market value of publicly held shares and conditionsall other initial listing standards for The Nasdaq Capital Market, other than the Minimum Bid Price Requirement, including having stockholders’ equity of at least $5 million. In addition, we would also be required to notify Nasdaq of our contracts with service providersintent to cure the minimum bid price deficiency during the additional compliance period, which may include, if necessary, implementing a reverse stock split. Our stockholders' equity at June 30, 2019 was $5.1 million, and, license partners, and the rate of recruitment of patients in our clinical trials. In addition, the continuation of our clinical trials, and possibly our entire business, will depend on results of upcoming analyses and our financial resources atas such, we expect that time. Should our product development efforts be successful, we will need to develop a commercialization plan for each product developed, which would also require significant resources to develop and implement.

We will need to raise additional capital through public or private equity financings, debt financings, strategic partnerships or other types of arrangements in order to successfully execute our current operating plan and to continue the development of our current product candidates. See also “—We expectcapital to be heavily reliant oneligible for the additional compliance period. If our abilitystockholders' equity is not at least $5.0 million at September 30, 2019 but increases to raise capital through capital market transactions. Dueat least $5.0 million after September 30, 2019 and before December 18, 2019, we understand that the Nasdaq Staff has discretion whether to consider such increase for purposes of determining our small public float, low market capitalization, limited operating history and lack of revenue, it may be difficult and expensiveeligibility for us to raisethe additional funds.”compliance period. If we raise capital through strategic partnerships or other similar types of arrangements,are not granted the additional compliance period for any reason, the Nasdaq Staff will provide written notice to us that our common stock will be subject to delisting. At that time, we may be requiredappeal the Nasdaq Staff’s delisting determination to relinquish, on terms that are not favorable to us, rights to some of our technologies or product candidates that we would otherwise seek to develop or commercialize. a Nasdaq Hearing Panel.

There can be no assurance that we will be ableregain compliance with the Minimum Bid Price Requirement or continue to satisfy the other continued listing requirements of The Nasdaq Capital Market. The delisting of our common stock for whatever reason could, among other things, substantially impair our ability to raise additional capital when needed. If we are unable to raise additional capital when needed, we will not be able to continue development of our


product candidates or we will be required to delay, scale back or eliminate some or all of our development programs or cease operations.

Risks Related to Clinical Development, Manufacturing and Commercialization

Delayscapital; result in the commencement or completionloss of clinical testinginterest from institutional investors, the loss of confidence in our currentcompany by investors and any other future product candidates we may seek to developemployees, and in fewer financing, strategic and business development opportunities; and could result in increased costspotential breaches of agreements under which we made representations or covenants relating to our compliance with applicable listing requirements. Claims related to any such breaches, with or without merit, could result in costly litigation, significant liabilities and longer timelinesdiversion of our management’s time and attention and could impacthave a material adverse effect on our ability to ever become profitable. Clinical testing is time consuming and expensive and its outcome is uncertain.

We commenced a PCT clinical trial in May 2018 to assess the safety and preliminary efficacy of Ovaprene. We intend to commence various clinical and other studies related to Topical 5% Sildenafil Citrate Cream in the second half of 2018. We are in the process of seeking guidance from the FDA regarding the design of our Phase 2b clinical trial for Topical 5% Sildenafil Citrate Cream. The timing of when we initiate any clinical studies related to Topical 5% Sildenafil Citrate Cream, including our Phase 2b clinical trial, will be influenced by such guidance. All of our IVR product candidates have only been tested in preclinical studies, and we will need to obtain authorizations from the FDA as well as from the institutional review boards of universities and clinics, as appropriate, in order to commence clinical testing of those candidates in humans. The initiation and completion of these and other clinical trials for our product candidates may vary dramatically due to factors within and outside of our control, and the results from early clinical trials may not necessarily be predictive of results obtained in later clinical trials; even if results from early clinical trials are positive, we may not be able to confirm those results in future clinical trials. Further, clinical trials may not ever demonstrate sufficient safety and effectiveness to obtain the requisite regulatory approvals for our product candidates. Any change in, or termination of, clinical trials could materially harm our business, financial condition, business and results of operations.

In addition, the delisting of our common stock for whatever reason may materially impair our stockholders’ ability to buy and sell shares of our common stock and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)

None.

(b)

None.

(a)None.

(c)

None.

(b)None.
(c)None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

(a) None.

(b) None.



Item 6. Exhibits

Exhibits

Incorporated by Reference

Exhibit

Number

Description of Exhibit

Form

File

Number

No.

Filing Date of 

Filing

Exhibit
Number

No.

Filed
Herewith

10.8Δ

Exclusive License Agreement, dated as of February 13, 2017, by and between GYN Holdings, Inc., a wholly owned subsidiary of Pear Tree Pharmaceuticals, Inc. and Bernadette Klamerus

X

10.9Δ

31.1

Exclusive License Agreement, dated as of September 15, 2017, by and between Fred Mermelstein, Ph.D., Janet Chollet, M.D., Pear Tree Pharmaceuticals, Inc., and Stephen C. Rocamboli

X

10.10Δ

Agreement and Plan of Merger, dated as of April 30, 2018, by and among Daré Bioscience, Inc., Daré Merger Sub, Inc., Pear Tree Pharmaceuticals, Inc., and Fred Mermelstein and Stephen C. Rocamboli, as Holders’ Representatives

X

31.1

X

31.2

X

32.1#

32.1

X

#

32.2#

32.2

X

#

101.INS

XBRL Instance Document

X

101.SCH

XBRL Taxonomy Extension Schema Document

X

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

X


Incorporated by Reference

Exhibit

Number

101.DEF

Description of Exhibit

Form

File 

Number

Date of 

Filing

Exhibit
Number

Filed
Herewith

101.DEF

XBRL Taxonomy Extension Definition

Linkbase Document

X

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

X

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

X

Δ Portions of this document are subject to a confidential treatment request submitted to the SEC

@ Management contract or compensatory plan or arrangement.

# Furnished herewith. This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is


not to be incorporated herein by reference into any filing of the registrant whether made before or after the date hereof, regardless of any general incorporation in such filing.


Signatures


Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Daré Bioscience, Inc.

Date: August 13, 2018

14, 2019

By:

/s/ Sabrina Martucci Johnson

Sabrina Martucci Johnson

President and Chief Executive Officer

(Principal Executive Officer)

Date: August 13, 2018

14, 2019

By:

/s/ Lisa Walters-Hoffert

Lisa Walters-Hoffert

Chief Financial Officer

(Principal Financial and Accounting Officer)

39


34