| STOCKHOLDERS' EQUITY | NOTE 11 – STOCKHOLDERS’ EQUITY Preferred Stock At March 31, 2016, 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 March 31, 2016, we had 350,000,000 shares of Common Stock authorized, of which 196,253,700 shares of Common Stock were issued and outstanding. On January 6, 2016, we entered into an underwriting agreement with Goldman Sachs & Co. and Cowen and Company, LLC, as the representatives of the several underwriters, or the Underwriters, relating to an underwritten public offering of 15,151,515 shares of our Common Stock at a public offering price of $8.25 per share. Under the terms of the underwriting agreement, we granted the Underwriters a 30-day option to purchase up to an aggregate of 2,272,727 additional shares of Common Stock, which option was exercised in full. The net proceeds to us from the offering were approximately $134.9 million, after deducting underwriting discounts and commissions and other estimated offering expenses payable by us. The offering closed on January 12, 2016 and we issued 17,424,242 shares of our Common Stock. On July 9, 2015, we entered into an underwriting agreement with Stifel, Nicolaus & Company, Incorporated and Guggenheim Securities, LLC, as the representatives of the several underwriters, or the Stifel Underwriters, relating to an underwritten public offering of 3,846,154 shares of Common Stock at a public offering price of $7.80 per share. Under the terms of the underwriting agreement, we granted the Stifel Underwriters a 30-day option to purchase up to an aggregate of 576,923 additional shares of Common Stock, which option was exercised in full. The net proceeds to us from the offering were approximately $32.2 million, after deducting underwriting discounts and commissions and other estimated offering expenses payable by us. The offering closed on July 15, 2015 and we issued 4,423,077 shares of our Common Stock. 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 $59.1 million, after deducting underwriting discounts and commissions and other estimated offering expenses payable by us. The offering closed on February 17, 2015 and we issued 15,617,282 shares of our Common Stock. During the three months ended March 31, 2016, certain individuals exercised stock options to purchase 340,045 shares of Common Stock for $786,450 in cash. During the three months ended March 31, 2015, a certain individual exercised stock options to purchase 11,250 shares of Common Stock for $7,208 in cash. Warrants to Purchase Common Stock As of March 31, 2016, we had warrants outstanding to purchase an aggregate of 12,281,059 shares of Common Stock with a weighted-average contractual remaining life of 1.5 years, and exercise prices ranging from $0.24 to $7.59 per share, resulting in a weighted average exercise price of $1.97 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. During the three months ended March 31, 2016, we granted warrants to purchase 120,000 shares of Common Stock to
outside consultants at an exercise price of $7.59. The fair value for these shares was determined by using the Black-Scholes Model
on the date of the vesting using a term of five years; volatility of 74.15%; risk free rate of 1.28%; and dividend yield of 0%.
The grant date fair value of the warrants was $4.60 per share. The warrants vest ratably over a 12-month period and have an expiration
date of January 21, 2021. During the three months ended March 31, 2015, we did not grant any warrants. During the three months
ended March 31, 2016 and 2015, we recorded $127,465 and $9,071, respectively, as share based compensation expense in the accompanying
consolidated financial statements related to vested warrants. As of March 31, 2016, unamortized costs associated with these warrants
totaled approximately $449,000. In May 2013, we entered into a consulting agreement to develop drug platforms to be used in our hormone replacement drug candidates. As consideration under the agreement, we agreed to issue the consultant a warrant to purchase 850,000 shares of our Common Stock at $2.01 per share, that has vested or will vest as follows:
1. Warrants to purchase 283,333 shares were earned on May 11, 2013 upon acceptance of an Investigational New Drug application by FDA for an estradiol-based drug candidate in a softgel vaginal capsule for the treatment of VVA; however, pursuant to the terms of the agreement, the shares did not vest until June 30, 2013;
2. Warrants to purchase 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%. During both the three months ended March 31, 2016 and 2015, we recorded $38,517 as share based compensation expense in the accompanying consolidated financial statements related to these warrants. As of March 31, 2016, there was a remaining balance of $38,509 related to these warrants which was included in other current assets in the accompanying consolidated financial statements;
3. Warrants to purchase 283,334 shares will vest upon the receipt by us of any final FDA approval of a drug candidate which the warrant holder helped us design. It is anticipated that this event will not occur before December 2016. As of March 31, 2016, unamortized costs associated with these warrants and warrants issued to the same holder in 2012 totaled approximately $361,000. During the three months ended March 31, 2016, certain
individuals exercised warrants to purchase 561,372 shares of our Common Stock for $1,310,000 in cash. During the three months
ended March 31, 2015, an outside service provider exercised warrants to purchase 925,485 shares of our Common Stock
for $358,400 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. As of March 31, 2016, there were non-qualified stock options to purchase 17,701,181 shares of Common Stock outstanding under the 2009 Plan. As of March 31, 2016, there were 3,423,477 shares available to be issued under 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 March 31, 2016, there were non-qualified stock options to purchase 2,868,474 shares of Common Stock outstanding under the 2012 Plan. As of March 31, 2016, there were 7,050,000 shares available to be issued under 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 for options granted during the three months ended March 31, 2016 and 2015 are set forth in the table below.
Three Months Ended Three Months Ended
Risk-free interest rate 1.70 % 1.47 %
Volatility 71.22 % 58.78-62.59 %
Term (in years) 6.25 5.27-6.25
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 expected term 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 Weighted Average Remaining Contractual Life in Years Aggregate
Balance at December 31, 2015 20,725,325 $ 3.28 6.5 $ 146,864,184
Granted 185,500 $ 7.59
Exercised (340,045 ) $ 2.31 $ 2,051,619
Expired/Forfeited (1,125 ) $ 3.59
Balance at March 31, 2016 20,569,655 $ 3.34 6.3 $ 71,940,245
Vested and Exercisable at March 31, 2016 15,988,578 $ 2.17 5.5 $ 69,261,183
Unvested at March 31, 2016 4,581,077 $ 7.42 9.2 $ 2,679,062 At March 31, 2016, our outstanding stock options had exercise prices ranging from $0.10 to $8.92 per share. The weighted average grant date fair value per share of options granted was $4.91 and $3.17 during the three months ended March 31, 2016 and 2015, respectively. Share-based compensation expense for options recognized in our results of operations for the three months ended March 31, 2016 and 2015 ($4,151,259 and $728,426, respectively) is based on vested awards. We estimate forfeitures at the time of grant and revise the forfeiture rate in subsequent periods if actual forfeitures differ from the estimates. At March 31, 2016, total unrecognized estimated compensation expense related to unvested options granted prior to that date was approximately $16,285,000 which may be adjusted for future changes in forfeitures. This cost is expected to be recognized over a weighted-average period of 1.7 years. No tax benefit was realized due to a continued pattern of operating losses. |
