| NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Trade
Accounts Receivable and Allowance for Doubtful Accounts Trade
accounts receivable are customer obligations due under normal trade terms. We review accounts receivable for uncollectible accounts
and credit card chargebacks and provide an allowance for doubtful accounts, which is based upon a review of outstanding receivables,
historical collection information, reasonable supportable forecasts and existing economic conditions and we record an allowance
that presents the net amount expected to be collected. We evaluate trade accounts receivable for delinquency. We write off delinquent
receivables against our allowance for doubtful accounts based on individual credit evaluations, the results of collection efforts,
and specific circumstances of customers. We record recoveries of accounts previously written off when received as an increase
in the allowance for doubtful accounts. To the extent data we use to calculate these estimates does not accurately reflect bad
debts, adjustments to these reserves may be required. Our exposure to credit losses may increase if our customers are adversely
affected by changes in healthcare laws, coverage, and reimbursement, economic pressures or uncertainty associated with local or
global economic recessions, disruption associated with the current COVID-19 pandemic, or other customer-specific factors. Although
we have historically not experienced significant credit losses, it is possible that there could be a material adverse impact from
potential adjustments of the carrying amount of trade receivables in the future. Fair
Value of Financial Instruments Our
financial instruments consist primarily of cash, accounts receivable, accounts payable, accrued expenses and long-term debt. The
carrying amount of cash, accounts receivable, accounts payable and accrued expenses approximates their fair value because of the
short-term maturity of such instruments, which are considered Level 1 assets under the fair value hierarchy. The carrying amount
for long-term debt as of September 30, 2020 (as disclosed in Note 9) approximates fair value based on market activity for other
debt instruments with similar characteristics and comparable risk (Level 2). We
categorize our assets and liabilities that are valued at fair value on a recurring basis into a three-level fair value hierarchy
as defined by ASC 820, Fair Value Measurements, or ASC 820. The fair value hierarchy gives the highest priority to quoted prices
in active markets for identical assets and liabilities (Level 1) and lowest priority to unobservable inputs (Level 3). Assets
and liabilities recorded in the consolidated balance sheet at fair value are categorized based on a hierarchy of inputs, as follows:
Level 1 unadjusted
quoted prices in active markets for identical assets or liabilities;
Level 2 quoted
prices for similar assets or liabilities in active markets or inputs that are observable for the asset or liability, either directly
or indirectly through market corroboration, for substantially the full term of the financial instrument; and
Level 3 unobservable
inputs for the assets or liabilities. At
September 30, 2020 and 2019, we had no The
fair value of indefinite-lived assets is measured on a non-recurring basis using significant unobservable inputs (Level 3) in
connection with any required impairment test. During the nine months ended September 30, 2020 and 2019, we wrote off $ 584,509 78,864 Share-Based
Compensation We
measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs
in the financial statements over the period during which employees are required to provide services. Share-based compensation
arrangements include options, restricted stock, restricted stock units, performance-based awards, share appreciation rights, and
employee share purchase plans. We amortize such compensation amounts, if any, over the respective service periods of the award.
We use the Black-Scholes-Merton option pricing model, or the Black-Scholes Model, an acceptable model in accordance with ASC 718,
Compensation-Stock Compensation, to value options. Option valuation models require the input of assumptions, including the expected
life of the stock-based awards, the estimated stock price volatility, the risk-free interest rate, and the expected dividend yield.
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 term of the instrument. Estimated volatility is a measure of the amount by which our stock price
is expected to fluctuate each year during the term of the award. On January 1, 2017, we began using our own stock price in our
volatility calculation along with the other peer entities whose stock prices were publicly available that were similar to our
company and in 2019 we started using only our own stock price in the volatility calculation. Our calculation of estimated volatility
is based on historical stock prices over a period equal to the expected term of the awards. On January 1, 2020, we began calculating
the expected term of our stock-based awards, which represents the period that the stock-based awards are expected to be outstanding.
Prior to January 1, 2020, the average expected life of options was based on the contractual terms of the stock option using the
simplified method. We utilize a dividend yield of zero based on the fact that we have never paid cash dividends and have no current
intention to pay cash dividends. The assumptions used in calculating the fair value of stock-based awards represent our best estimates,
but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change
and we use different assumptions, our share-based compensation expense could be materially different in the future. We recognize
the compensation expense for share-based compensation granted based on the grant date fair value estimated in accordance with
ASC 718. We generally recognize the compensation expense on a straight-line basis over the employee’s requisite service
period. Effective January 1, 2017, we account for forfeitures when they occur. On January 1, 2019, we adopted ASU 2018-07 which
simplified the accounting for share-based payments to non-employees by aligning it with the accounting for share-based payments
to employees, with certain exceptions. The new guidance expanded the scope of ASC 718 to include share-based payments granted
to non-employees in exchange for goods or services used or consumed in an entity’s own operations and superseded the guidance
in ASC 505-50. Prior to January 1, 2019, equity instruments issued to non-employees were recorded on a fair value basis, as required
by ASC 505, Equity - Based Payments to Non-Employees. We
grant performance-based stock units and restricted stock units for shares of common stock, par value $ 0.001 Revenue
Recognition In
accordance with ASC 606, Revenue from Contracts with Customers Prescription
Products As
of September 30, 2020, our products consisted primarily of prescription vitamins and our FDA-approved products: IMVEXXY, which
we began selling during the third quarter of 2018, BIJUVA, which we began selling in the second quarter of 2019, and ANNOVERA,
which we began selling in the third quarter of 2019. As a result of the uncertainty surrounding the COVID-19 pandemic, we paused
the commercial launch of ANNOVERA in the first quarter of 2020 and deferred sales and marketing initiatives into subsequent quarters.
We resumed the launch of ANNOVERA on July 1, 2020. We
sell our name brand and generic prescription products primarily through wholesale distributors and retail pharmacies. We have
one performance obligation related to prescription products sold through wholesale distributors, which is to transfer promised
goods to a customer, and two performance obligations related to products sold through retail pharmacies, which are to: (1) transfer
promised goods and (2) provide customer service for an immaterial fee. We treat shipping as a fulfillment activity rather than
as a separate obligation. We recognize prescription product revenue only when we satisfy performance obligations by transferring
a promised good or service to a customer. A good or service is considered to be transferred when the customer receives the goods
or service or obtains control. Control refers to the customer’s ability to direct the use of, and obtain substantially all
of the remaining benefits from, an asset. Based on our contracts, we invoice customers once our performance obligations have been
satisfied, at which point payment is unconditional. We disclose receivables from contracts with customers separately in the statement
of financial position. Payment for goods or services sold by us is typically due between 30 and 60 days after an invoice is sent
to the customer. The
transaction price of a contract is the amount of consideration which we expect to be entitled to in exchange for transferring
promised goods or services to a customer. Prescription products are sold at fixed wholesale acquisition cost, or WAC, determined
based on our list price. However, the total transaction price is variable as it is calculated net of estimated product returns,
chargebacks, rebates, coupons, discounts and wholesaler fees. These estimates are based on the amounts earned or to be claimed
on the related sales and are classified as reductions of accounts receivable (if the amount is payable to the customer) or a current
liability (if the amount is payable to a party other than a customer). In order to determine the transaction price, we estimate
the amount of variable consideration at the outset of the contract either utilizing the expected value or most likely amount method,
depending on the facts and circumstances relative to the contract or each variable consideration. The estimated amount of variable
consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount
of cumulative product revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently
resolved. In determining amounts of variable consideration to include in a contract’s transaction price, we rely on our
historical experience and other evidence that supports our qualitative assessment of whether product revenue would be subject
to a significant reversal. We consider all the facts and circumstances associated with both the risk of a product revenue reversal
arising from an uncertain future event and the magnitude of the reversal if that uncertain event were to occur. Actual amounts
of consideration ultimately received may differ from our estimates. If actual results in the future vary from our original estimates,
we will adjust these estimates, which would affect net product revenue and earnings in the period such changes in estimates become
known. We
accept returns of unsalable prescription products sold through wholesale distributors within a return period of six months 12 24 18 We
offer various rebate and discount programs in an effort to maintain a competitive position in the marketplace and to promote sales
and customer loyalty. We estimate the allowance for consumer rebates and coupons that we have offered based on our experience
and industry averages, which is reviewed, and adjusted if necessary, on a quarterly basis. Estimates relating to these rebates
and coupons are deducted from gross product revenues at the time the product revenues are recognized. We record distributor fees
based on amounts stated in contracts. Rebate and coupon estimates and distributor fees are recorded in other current liabilities
on the consolidated balance sheet. We estimate chargebacks based on number of units sold during the period taking into account
prices stated in contracts and our historical experience. Estimates related to distributors fees, rebates, coupons and returns
are disclosed in Note 8. We provide invoice discounts to our customers for prompt payment. Estimates relating to invoice discounts
and chargebacks are deducted from gross product revenues at the time the product revenues are recognized. As
part of commercial launches for our FDA-approved prescription products, we introduced a co-pay assistance program for eligible
enrolled patients whose out of pocket costs are reduced to a more affordable price. This allows patients to access the product
at a reasonable cost and is in line with our responsible pricing approach. We reimburse pharmacies for this discount through third-party
vendors. The variable consideration is estimated based on contract prices, the estimated percentage of patients that will utilize
the copay assistance, the average assistance paid, the estimated levels of inventory in the distribution channel and the current
level of prescriptions covered by patients’ insurance. Payers may change coverage levels for our prescription products positively
or negatively, at any time up to the time that we have formally contracted coverage with the payer. As such, the net transaction
price of our prescription products is susceptible to such changes in coverage levels, which are outside the influence of the Company.
As a result, we constrain variable consideration for our prescription products to an amount that will not result in a significant
product revenue reversal in future periods. Our ability to estimate the net transaction price for our prescription products is
constrained by our estimates of the amount to be paid for the co-pay assistance program which is directly related to the level
of prescriptions paid for by insurance. As such, we record an accrual to reduce gross sales for the estimated co-pay and other
patient assistance based on currently available third-party data and our internal analyses. We re-evaluate variable consideration
each reporting period. License
Revenue License
arrangements may consist of non-refundable upfront license fees, exclusive licensed rights to patented or patent pending
technology, and various performance or sales milestones and future product royalty payments. Some of these arrangements may
include multiple performance obligations. Non-refundable up-front fees that are not contingent on any future performance by
us, and do not require continuing involvement on our part, are recognized as revenue when the right to use functional IP is
transferred to the customer. Disaggregation
of revenue The
following table provides information about disaggregated revenue by product mix
Three Months Ended Nine Months Ended
2020 2019 2020 2019
Prescription vitamins $ 2,435,903 $ 2,550,330 $ 7,337,976 $ 7,309,174
IMVEXXY 6,841,592 4,772,354 18,319,382 9,904,744
BIJUVA 1,646,320 490,705 4,109,925 624,987
ANNOVERA 6,418,990 399,952 10,527,212 399,952
License revenue 2,000,000 15,506,400 2,000,000 15,506,400
Net revenue $ 19,342,805 $ 23,719,741 $ 42,294,495 $ 33,745,257 License
Agreement with the Population Council On
July 30, 2018, we entered into the Population Council License Agreement to commercialize ANNOVERA in the U.S. We began selling
ANNOVERA in a “test and learn” market introduction in the third quarter of 2019. As a result of the uncertainty surrounding
the COVID-19 pandemic, we paused the commercial launch of ANNOVERA in the first quarter of 2020 and deferred sales and marketing
initiatives into subsequent quarters. We resumed the launch of ANNOVERA on July 1, 2020. Under
the terms of the Population Council License Agreement, we paid the Population Council a milestone payment of $ 20,000,000 20,000,000 20,000,000 762,389 2,262,002 15,998 The
Population Council is also eligible to receive milestone payments and royalties from commercial sales of ANNOVERA. We are responsible
for marketing expenses related to the commercialization of ANNOVERA. In addition, we are required to pay the Population Council,
on a quarterly basis, step-based royalty payments based on annual net sales of ANNOVERA in the U.S. by the Company and its affiliates
and permitted licensees as follows: (i) if annual net sales are less than or equal to $ 50,000,000 5 50,000,000 150,000,000 10 150,000,000 15 50 20 40 million 200 400 1 20,000,000 License
Agreement with Knight In
July 2018, we entered into a license and supply agreement, or the Knight License Agreement, with Knight pursuant to which we
granted Knight an exclusive license to commercialize IMVEXXY and BIJUVA in Canada and Israel. Pursuant to the terms of the
Knight License Agreement, Knight paid us $ 2,000,000 Cost
of Sales Cost
of sales includes the cost of inventory, manufacturing, manufacturing overhead and supply chain costs, and product shipping and
handling costs. The Population Council License Agreement requires payment of royalties based on the sale of future products. Such
royalties are recorded as a component of cost of sales. Additionally, the amortization of license fees or milestone payments related
to licensed products are classified as components of cost of sales to the extent such payments become due in the future. Inventory
Obsolescence Reserve We
evaluate inventory quarterly and record an allowance for obsolescence primarily associated with materials that are not
currently or likely to be used in production in the near future. As of September 30, 2020 and December 31, 2019, we recorded
an inventory obsolescence reserve of $ 5,744,464 0 Segment
Reporting We
are managed and operated as one business, which is focused on creating and commercializing products targeted exclusively for women.
Our business operations are managed by a single executive leadership team that is chaired by the Chief Executive Officer of our
Company, who oversees all operations. We do not operate separate lines of business with respect to any of our products and we
do not prepare discrete financial information with respect to separate products. All product sales are derived from sales in the
United States. Accordingly, we view our business as one reportable operating segment. Research
and Development Expenses Research
and development, or R&D, expenses include internal R&D activities, services of external contract research organizations,
or CROs, costs of their clinical research sites, manufacturing, scale-up and validation costs, and other activities. Internal
R&D activity expenses include laboratory supplies, salaries, benefits, and non-cash share-based compensation expenses. CRO
activity expenses include preclinical laboratory experiments and clinical trial studies. Other activity expenses include regulatory
consulting and other costs. The activities undertaken by our regulatory consultants that were classified as R&D expenses include
assisting, consulting with, and advising our in-house staff with respect to various FDA submission processes, clinical trial processes,
and scientific writing matters, including preparing protocols and FDA submissions. These consulting expenses were direct costs
associated with preparing, reviewing, and undertaking work for our clinical trials and investigative drugs. We charge internal
R&D activities and other activity expenses to operations as incurred. We make payments to CROs based on agreed-upon terms,
which may include payments in advance of a study starting date. We expense nonrefundable advance payments for goods and services
that will be used in future R&D activities when the activity has been performed or when the goods have been received rather
than when the payment is made. We review and accrue CRO expenses and clinical trial study expenses based on services performed
and rely on estimates of those costs applicable to the completion stage of a study as provided by CROs. Estimated accrued CRO
costs are subject to revisions as such studies progress to completion. We charge revisions to expenses in the period in which
the facts that give rise to the revision become known. |
