| STOCKHOLDERS' EQUITY | NOTE
10 – STOCKHOLDERS’ EQUITY Preferred
Stock At
March 31, 2017, 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, 2017, we had 350,000,000 shares of Common Stock authorized for issuance, of which 198,593,268 shares of Common Stock
were issued and outstanding. Issuances
During the Three Months Ended March 31, 2017 During
the three months ended March 31, 2017, certain individuals exercised stock options to purchase 95,046 shares of Common Stock for
$192,310 in cash. Issuances
During the Three Months Ended March 31, 2016 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 $134,864,000, 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. 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. Warrants
to Purchase Common Stock As
of March 31, 2017, we had warrants outstanding to purchase an aggregate of 10,374,071 shares of Common Stock with a weighted-average
contractual remaining life of approximately 1 year, and exercise prices ranging from $0.24 to $8.20 per share, resulting in a
weighted average exercise price of $2.27 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, 2017, we granted warrants to purchase 125,000
shares of Common Stock to outside consultants at an exercise price of $6.83. 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 63.24%; risk free rate of 1.47%;
and dividend yield of 0%. The grant date fair value of the warrants was $3.67 per share. The warrants are vesting ratably over
a 12-month period and have an expiration date of March 15, 2022. 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 are
vesting ratably over a 12-month period and have an expiration date of January 21, 2021. During
the three months ended March 31, 2017 and 2016, we recorded $47,686 and $127,465, respectively, as share based compensation expense
in the accompanying consolidated financial statements related to warrants. As of March 31, 2017, unamortized costs associated
with these warrants totaled approximately $569,000. In
May 2013, we entered into a consulting agreement with Sancilio and Company, Inc., or SCI, to develop drug platforms 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 our 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 issue to SCI a warrant to purchase 850,000 shares of our 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 5 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 vesting using a term of 5 years; a volatility of 45.84%; risk free rate of 1.41%; and a dividend yield of 0%. During the
three months ended March 31 2017 and 2016, we recorded $0 and $38,517, respectively, as non-cash compensation in the accompanying
consolidated financial statements related to this warrant. As of June 30, 2016 this warrant was fully amortized; 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 May 2017. In
May 2012, we issued warrants to purchase an aggregate of 1,300,000 shares of Common Stock to an unaffiliated entity for services
to be rendered over approximately five years beginning in May 2012. The warrants vested upon issuance. Services provided are to
include (a) services in support of our drug development efforts, including services in support our ongoing and future drug development
and commercialization efforts, regulatory approval efforts, third-party investment and financing efforts, marketing efforts, chemistry,
manufacturing and controls efforts, drug launch and post-approval activities, and other intellectual property and know-how transfer
associated therewith; (b) services in support of our efforts to successfully obtain New Drug Approval; and (c) other consulting
services as mutually agreed upon from time to time in relation to new drug development opportunities. The warrants were valued
at $1,532,228 on the date of the issuance using an exercise price of $2.57; a term of five years; a volatility of 44.71%; risk
free rate of 0.74%; and a dividend yield of 0%. At March 31, 2017, we had $64,449 reported as prepaid expense-short term, associated
with these warrants. During both the three months ended March 31, 2017 and 2016, we recorded $64,449 as non-cash compensation
expense with respect to these warrants in the accompanying consolidated statements of operations. The contract will expire upon
the commercial manufacture of a drug product. As of March 31, 2017, unamortized costs associated with the SCI warrants issued
in 2013 and 2012 totaled approximately $64,449 and will be recognized over a period of three months. During
the three months ended March 31, 2017, certain individuals exercised warrants to purchase 1,810,000 shares of our Common Stock
for $2,460,000 in cash. 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. 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.
Generally, the options vest annually over four years or as determined by our board of directors, upon each option grant. Options
may be exercised by paying the price for shares or on a cashless exercise basis after they have vested and prior to the specified
expiration date provided and applicable exercise conditions are met, if any. The expiration date is generally ten years from the
date the option is issued. As of March 31, 2017, there were non-qualified stock options to purchase 18,163,459 shares of Common
Stock outstanding under the 2009 Plan. As of March 31, 2017, there were 2,593,003 shares available to be issued 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. The Awards available under the 2012 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 2012 Plan. Generally, the options vest annually over four years or as determined by our board of directors, upon each option
grant. Options may be exercised by paying the price for shares or on a cashless exercise basis after they have vested and prior
to the specified expiration date provided and applicable exercise conditions are met, if any. The expiration date is generally
ten years from the date the option is issued. There are 10,000,000 shares of Common Stock authorized for issuance thereunder.
As of March 31, 2017, there were non-qualified stock options to purchase 5,123,474 shares of Common Stock outstanding under the
2012 Plan. As of March 31, 2017, there were 4,795,000 shares available to be issued 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 for options granted during the three months ended March
31, 2017 and 2016 are set forth in the table below.
Three
Months Three
Months
Risk-free
interest rate 1.90% 1.70%
Volatility 61.56-62.83% 71.22%
Term (in years) 6-6.25 6.25
Dividend yield 0.00% 0.00% A
summary of activity under the 2009 and 2012 Plans and related information follows:
Number
of Weighted
Weighted
Aggregate
Balance
at December 31, 2016 21,767,854 $ 3.56 5.8 $ 60,495,730
Granted 1,730,500 $ 6.83
Exercised (95,046 ) $ 2.02 $ 421,767
Expired/Forfeited (116,375 ) $ 7.46
Balance
at March 31, 2017 23,286,933 $ 3.78 5.9 $ 85,606,859
Vested
and Exercisable at March 31, 2017 18,514,058 $ 3.09 5.1 $ 81,091,380
Unvested
at March 31, 2017 4,772,875 $ 6.48 9.2 $ 4,515,479 At
March 31, 2017, 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 $3.96 and $4.91 during the three months ended March 31, 2017 and 2016,
respectively. Share-based compensation expense for options recognized in our results for the three months ended March 31, 2017
and 2016 ($1,301,060 and $4,151,259, respectively) is based on vested awards. At March 31, 2017, total unrecognized estimated
compensation expense related to unvested options granted prior to that date was approximately $16,173,000 which may be adjusted
for future changes in forfeitures. This cost is expected to be recognized over a weighted-average period of 2.7 years. No tax
benefit was realized due to a continued pattern of operating losses. |
