| STOCKHOLDERS' EQUITY | Financing Transactions – For the three months ended September 30, 2019, 657,894 shares of
common stock were sold through Canaccord under the 2019 Equity Distribution Agreement for net proceeds of $579,730 after payment
of commission fees of $19,940 and other related expenses of $65,000. From inception of the 2019 Equity Distribution Agreement through
September 30, 2019, a total of 8,222,469 shares of common Stock were sold for net proceeds of $10,868,566 after payment of commission
fees of $338,152 and other related expenses of $65,000. For the three months ended September 30, 2018, 2,225,145 shares of common
stock were sold through Canaccord under the 2018 Equity Distribution Agreement for net proceeds of $2,222,447 after payment of
commission fees of $68,735. From inception of the 2018 Equity Distribution Agreement through September 30, 2019, a total of 18,504,993
shares of common Stock were sold for net proceeds of $24,249,997 after payment of commission fees of $750,000, and the 2018 Equity
Distribution Agreement is deemed completed. Stock Purchase Warrants During the three months ended September 30, 2019, the Company entered
into several warrant termination agreements to repurchase and cancel previously issued Series H and Series J warrants. The Company
repurchased and cancelled 474,045 and 2,866,809 Series H and Series J warrants, respectively, at an aggregate buyback price of
$186,773 and $1,146,724, respectively, plus additional consideration upon any sale of the Company within six months of the respective
agreement. Stock Options – In July 2018, the terms of certain options were modified to accelerate
vesting and extend the option exercise period. As a result, the Company recorded additional stock-based compensation of $109,004
during the three months ended September 30, 2018. A summary of stock option activity is as follows:
Number of Shares
Weighted Average Exercise Price
Weighted Average Remaining Term in Years
Aggregate Intrinsic Value
Outstanding - June 30, 2019 14,435,650 0.85 7.3
Granted - -
Forfeited - -
Exercised - -
Expired (77,100 ) 2.72
Outstanding - September 30, 2019 14,358,550 $ 0.84 7.1 $ 2,402,286
Exercisable at September 30, 2019 8,461,000 $ 0.76 5.9 $ 1,627,979
Expected to vest at September 30, 2019 5,897,550 $ 0.96 8.7 $ 774,907 Stock options granted to the Company’s executive officers and
employees generally vest over a 48-month period, while stock options granted to its non-employee directors vest over a 12-month
period. Included in the options outstanding above are 1,075,000 and 117,500
performance-based options granted in December 2017 to executive officers and employees, respectively, which vest during a performance
period ending on December 31, 2020, if and upon either i) as to 100% of the target number of shares upon achievement of a closing
price for the Company’s common stock equal to or greater than $1.50 per share for 20 consecutive trading days, which is considered
a market condition; or ii) as to thirty percent (30%) of the target number of shares, upon the acceptance for filing by the FDA
of an NDA for Vyleesi for HSDD in premenopausal women during the performance period, which is considered a performance condition;
iii) as to fifty percent (50%) of the target number of shares, upon the approval by the FDA of an NDA for Vyleesi for HSDD in premenopausal
women during the performance period, which is also considered a performance condition; iv) as to twenty percent (20%) of the target
number of shares, upon entry into a licensing agreement during the performance period for the commercialization of Vyleesi for
FSD in at least two of the following geographic areas (a) four or more countries in Europe, (b) Japan, (c) two or more countries
in Central and/or South America, (d) two or more countries in Asia, excluding Japan and China, and (e) Australia, which is also
considered a performance condition. The fair value of these options was $602,760. The Company amortized the fair value over the
derived service period of 1.1 years or upon the attainment of the performance condition. Pursuant to the FDA acceptance of the
NDA filing of Vyleesi, 30% of the target number of options vested in June 2018 and 50% of the target number of options vested in
June 2019 upon FDA approval of Vyleesi. Restricted Stock Units – A summary of restricted stock unit activity is as follows:
RSU's
Outstanding at July 1, 2019 10,327,833
Granted -
Forfeited -
Vested (224,000 )
Outstanding at September 30, 2019 10,103,833 Included in outstanding restricted stock units in the table above
are 5,978,150 vested shares that have not been issued as of September 30, 2019 due to a provision in the restricted stock unit
agreements to delay delivery. Time-based restricted stock units granted to the Company’s
executive officers, employees and non-employee directors generally vest over 24 months, 48 months and 12 months, respectively. In June 2019, the Company granted 438,000 performance-based restricted
stock units to its executive officers and 182,725 performance-based restricted stock units to other employees which vest during
a performance period ending June 24, 2023. The performance-based restricted stock units vest on performance criteria relating to
advancement of MC1r programs, including initiation of clinical trials and licensing of Vyleesi in additional countries or regions. In December 2017, the Company granted 1,075,000 performance-based
restricted stock units to its executive officers and 670,000 performance-based restricted stock units to other employees which
vest during a performance period, ending on December 31, 2020, if and upon either i) as to 100% of the target number of shares
upon achievement of a closing price for the Company’s common stock equal to or greater than $1.50 per share for 20 consecutive
trading days, which is considered a market condition; or ii) as to thirty percent (30%) of the target number of shares, upon the
acceptance for filing by the FDA of an NDA for Vyleesi for HSDD in premenopausal women during the performance period, which is
considered a performance condition; iii) as to fifty percent (50%) of the target number of shares, upon the approval by the FDA
of an NDA for Vyleesi for HSDD in premenopausal women during the performance period, which is also considered a performance condition;
iv) as to twenty percent (20%) of the target number of shares, upon entry into a licensing agreement during the performance period
for the commercialization of Vyleesi for FSD in at least two of the following geographic areas (a) four or more countries in Europe,
(b) Japan, (c) two or more countries in Central and/or South America, (d) two or more countries in Asia, excluding Japan and China,
and (e) Australia, which is also considered a performance condition. The fair value of these awards was $913,750 and $569,500,
respectively. The Company amortized the fair value over the derived service period of 1.1 years or upon the attainment of the performance
condition. Pursuant to the FDA acceptance of the NDA filing for Vyleesi, 30% of the target number of shares vested in June 2018.
Pursuant to the FDA approval of Vyleesi, 50% of the target number of shares vested in June 2019. |
