| STOCKHOLDERS' EQUITY | NOTE
11 STOCKHOLDERS EQUITY Preferred
Stock At
June 30, 2015, we had 10,000,000 shares of Preferred Stock, par value $0.001, authorized for issuance, of which no shares of Preferred
Stock were issued or outstanding. Common
Stock At
June 30, 2015, we had 350,000,000 shares of Common Stock authorized, of which 173,037,653 shares of Common Stock were issued and
outstanding. On
February 10, 2015, we entered into an underwriting agreement, or the Cowen Agreement, with Cowen and Company, LLC, as the representative
of the several underwriters, or the Cowen Underwriters, relating to an underwritten public offering of 13,580,246 shares of Common
Stock, at a public offering price of $4.05 per share. Under the terms of the Cowen Agreement, we granted the Cowen Underwriters
a 30-day option to purchase up to an aggregate of 2,037,036 additional shares of Common Stock, which option was exercised in full.
The net proceeds from the offering were approximately $59,100,000, after deducting underwriting discounts and commissions and
other estimated offering expenses payable by us. The offering closed on February 17, 2015. Exercises
During 2015 During
the three months ended June 30, 2015, certain individuals exercised stock options to purchase 366,617 shares of Common Stock for
$484,143 in cash. During the six months ended June 30, 2015, certain individuals exercised stock options to purchase 377,867 shares
of Common Stock for $491,351 in cash. Exercises
During 2014 During
the six months ended June 30, 2014, certain individuals exercised stock options to purchase 728,844 shares of Common Stock. Stock
options to purchase shares of our Common Stock were exercised as follows: (i) 615,007 options for $287,288 in cash and (ii) 119,607
options, pursuant to the stock options cashless provision, wherein 113,837 shares of Common Stock were issued. Also, during
the six months ended June 30, 2014, we granted 50,000 shares of Common Stock to an employee upon the vesting of restricted stock
units that were granted in December 2013. Warrants
to Purchase Common Stock As
of June 30, 2015, we had warrants outstanding to purchase an aggregate of 13,032,431 shares of Common Stock with a weighted-average
contractual remaining life of 2.2 years, and exercise prices ranging from $0.24 to $6.35 per share, resulting in a weighted average
exercise price of $1.94 per share. The
valuation methodology used to determine the fair value of our warrants is the Black-Scholes-Merton valuation model, or the Black-Scholes
Model. The Black-Scholes Model requires the use of a number of assumptions, including volatility of the stock price, the risk-free
interest rate and the term of the warrant. In
January 2013, we granted warrants to purchase 1,250,000 shares of Common Stock in connection with the issuance of a Revolving
Credit Note to Plato and Associates, LLC, or the Plato Warrant. The Plato Warrant has an exercise price of $3.20 per share. The
Plato Warrant vested on October 31, 2013 and may be exercised prior to its expiration on January 31, 2019. The Plato Warrant,
with a fair value of $1,711,956, was valued on the date of the grant using a term of six years; a volatility of 44.29%; risk free
rate of 0.88%; and a dividend yield of 0%. For the six months ended June 30, 2015 and 2014, $0 and $260,027, respectively, was
recorded as financing costs in connection with the issuance of the Plato Warrant on the accompanying consolidated financial statements. In
May 2013, we entered into a consulting agreement with Sancilio & Company, Inc., or SCI, to develop drug technology to be used
in our hormone replacement drug candidates. These services include support of our efforts to successfully obtain U.S. Food and
Drug Administration, or the FDA, approval for our drug candidates, including a vaginal capsule for the treatment of vulvar and
vaginal atrophy, or VVA. In connection with the agreement, SCI agreed to forfeit its rights to receive warrants to purchase 833,000
shares of Common Stock that were to be granted pursuant to the terms of a prior consulting agreement dated May 17, 2012. As consideration
under the agreement, we agreed to grant to SCI a warrant to purchase 850,000 shares of Common Stock at $2.01 per share that has
vested or will vest, as applicable, as follows:
1. 283,333 shares were earned on May 11, 2013 upon acceptance of an Investigational New Drug application by the FDA for an estradiol-based drug candidate in a softgel vaginal capsule for the treatment of VVA; however, pursuant to the terms of the consulting agreement, the shares did not vest until June 30, 2013. The fair value of $405,066 for the shares vested on June 30, 2013 was determined by using the Black-Scholes Model on the date of vesting using a term of five years; a volatility of 45.89%; risk free rate of 1.12%; and a dividend yield of 0%. We recorded the entire $405,066 as non-cash compensation as of June 30, 2013;
2. 283,333 shares vested on June 30, 2013. The fair value of $462,196 for these shares was determined by using the Black-Scholes Model on the date of the vesting using a term of five years; a volatility of 45.84%; risk free rate of 1.41%; and a dividend yield of 0%. As of June 30, 2015, we recorded $154,060 in other current assets in the accompanying consolidated financial statements. During both of the three and six month periods ended June 30, 2015 and 2014, we recorded $38,517 and $77,034, respectively, as non-cash compensation in the accompanying consolidated financial statements; and
3. 283,334 shares will vest upon the receipt by us of any final FDA approval of a drug candidate that SCI helped us design. It is anticipated that this event will not occur before December 2015. As
of June 30, 2015, unamortized costs associated with the SCI warrants issued in 2013 and 2012 totaled approximately $670,000. During
the three and six months ended June 30, 2015, we granted warrants to purchase 50,000 shares of Common Stock at an exercise price
of $6.35 to an outside consultant. Warrant
exercises During
the three months ended June 30, 2015, certain individuals exercised warrants to purchase 20,000 shares of our Common Stock
for $7,600 in cash and during the six months ended June 30, 2015, certain individuals exercised warrants to purchase 945,485
shares of our Common Stock for $366,000 in cash. During the three and six months ended June 30, 2014, certain individuals
exercised warrants to purchase 171,372 shares of Common Stock for $87,000 in cash. Options
to Purchase Common Stock In
2009, we adopted the 2009 Long Term Incentive Compensation Plan, or the 2009 Plan, to provide financial incentives to employees,
directors, advisers, and consultants of our company who are able to contribute towards the creation of or who have created stockholder
value by providing them stock options and other stock and cash incentives, or the Awards. The Awards available under the 2009
Plan consist of stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock, performance
units, and other stock or cash awards as described in the 2009 Plan. There are 25,000,000 shares authorized for issuance thereunder.
During the six months ended June 30, 2015, we granted 1,231,000 non-qualified stock options under 2009 Plan. As of June 30, 2015,
there were non-qualified stock options to purchase 15,556,726 shares of Common Stock outstanding under the 2009 Plan. In
2012, we adopted the 2012 Stock Incentive Plan, or the 2012 Plan, a non-qualified plan that was amended in August 2013. The 2012
Plan was designed to serve as an incentive for retaining qualified and competent key employees, officers, directors, and certain
consultants and advisors of our company. There are 10,000,000 shares of Common Stock authorized for issuance thereunder. As of
June 30, 2015, there were non-qualified stock options to purchase 1,968,474 shares of Common Stock outstanding under the 2012
Plan. The
valuation methodology used to determine the fair value of stock options is the Black-Scholes Model. The Black-Scholes Model requires
the use of a number of assumptions including volatility of the stock price, the risk-free interest rate, and the expected life
of the stock options. The assumptions used in the Black-Scholes Model during the six months ended June 30, 2015 and 2014 are set
forth in the table below.
Six Months Ended June 30,
2015 2014
Risk-free interest rate 1.47-1.54 % 1.70-1.77 %
Volatility 58.77-62.94 % 69.15-70.93 %
Term (in years) 5.27-6.25 5-6.25
Dividend yield 0.00 % 0.00 % The
risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period
is appropriate for the expected term. Estimated volatility is a measure of the amount by which the price of our Common Stock is
expected to fluctuate each year during the term of an award. Our estimated volatility is an average of the historical volatility
of the stock prices of our peer entities whose stock prices were publicly available. Our calculation of estimated volatility is
based on historical stock prices over a period equal to the term of the awards. We used the historical volatility of our peer
entities due to the lack of sufficient historical data on our stock price. The average expected life is based on the contractual
terms of the stock option using the simplified method. A summary
of activity under the 2009 and 2012 Plans and related information follows:
Number of Shares Underlying Stock Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life in Years Aggregate Intrinsic Value
Balance at December 31, 2014 16,792,443 $ 1.88 6.92 $ 43,996,311
Granted 1,231,000 $ 6.38
Exercised (377,867 ) $ 1.30
Cancelled (120,376 ) $ 2.87
Balance at June 30, 2015 17,525,200 $ 2.20 6.35 $ 99,168,915
Vested and Exercisable at June 30, 2015 13,746,672 $ 1.56 5.71 $ 86,604,012 At
June 30, 2015, our outstanding stock options had exercise prices ranging from $0.10 to $7.72 per share. Share-based
compensation expense for options recognized in our results of operations (based on vested awards) for the three and six months
ended June 30, 2015 were $1,973,675 and $2,702,102, respectively, and $1,288,086 and $2,294,111, respectively, for the same periods
in 2014. ASC 718-10 requires forfeitures to be estimated at the time of grant and revised in subsequent periods if actual forfeitures
differ from the estimates. At June 30, 2015, total unrecognized estimated compensation expense related to unvested options granted
prior to that date was approximately $7,110,000 which may be adjusted for future changes in forfeitures. This cost is expected
to be recognized over a weighted-average period of 2.3 years. No tax benefit was realized due to a continued pattern of operating
losses. |
