The
our projected financial position and estimated cash burn rate;
our estimates regarding expenses, future revenues and capital requirements;
our ability to continue as a going concern;
our need to raise substantial additional capital to fund our operations;
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our ability to develop our Multi-purpose Prevention Technology, or MPT, vaginal gel product candidates for additional indications;
our ability to select and capitalize on the most scientifically, clinically or commercially promising indications or therapeutic areas for our MPT vaginal gel product candidates in light of our limited financial resources;
the success, cost and timing of our clinical trials;
our dependence on third parties in the conduct of our clinical trials;
our ability to obtain the necessary regulatory approvals to market and commercialize Amphora, our MPT vaginal gellead Multipurpose Vaginal
the potential that results of pre-clinical studiessuccess, cost and clinical trials indicate that our MPT vaginal gel product candidates or any future product candidate we may seek to develop are unsafe or ineffective;
the potential for us to incur substantial costs resulting from product liability lawsuits against us and the potential for these product liability lawsuits to cause us to limit our commercializationtiming of our MPT vaginal gel product candidates or any future product candidate we may seek to develop;
market acceptance of our product candidates, the size and growth of the potential markets for our MPT vaginal gel and any future product candidate we may seek to develop, and our ability to serve those markets;
the results of market research conducted by us or others;
our ability to obtain and maintain intellectual propertyadditional patent protection for our MPT vaginal gel and any other product candidate we may seek to develop;
our reliancedependence on licenses granted to us by third parties in the conduct of our clinical trials;
our ability to protect our intellectual property rights and the potential for us to incur substantial costs from lawsuits to enforce or protect our intellectual property rights;
the possibility that a third party may claim we have infringed, misappropriated or otherwise violated their intellectual property rights and that we may incur substantial costs and be required to devote substantial time defending against these claims;
the successful development of our commercialization capabilities, including sales and marketing capabilities;
our reliance on third-party suppliers and manufacturers;
the success of competing therapies and products that are or become available;
our ability to expand our organization to accommodate potential growth and our ability to retain and attract key personnel.
We undertake no obligation to reviseupdate any forward-looking statements, whether as a result of new information, future events or publicly release the results of any revision to these forward-looking statements,otherwise, except as required by applicable law. Given these risks
Merger
On January 17, 2018, Neothetics, Inc.potential protection from certain sexually transmitted infections (STIs). We are leveraging our proprietary Multi-purpose Vaginal pH Regulator
On January 17, 2018, in connection with the Merger, the Company filed a certificate of amendment to its amended and restated certificate of incorporation to affect a six-for-one reverse stock split of its common stock, or the Reverse Split, which caused the Company not to be governed by Section 203 of the Delaware General Corporation Law, or the DGCL, and to change its name from “Neothetics, Inc.” to “Evofem Biosciences, Inc.” The name change and the Reverse Split were both effected on January 17, 2018. Shares of the Company’s common stock commenced trading on The Nasdaq Capital Market under the new name and ticker symbol “EVFM” as of market open on January 18, 2018. Unless otherwise noted, all references to share amounts in this Annual Report, including references to shares or options issued in connection with the Merger and the Financing (as defined below), reflect the Reverse Split.
On January 17, 2018, immediately following the completion of the Merger, the Company issued in a private placement transaction, or the Financing, an aggregate of 1,614,289 shares of its common stock to certain accredited investors for an aggregate purchase price of $20 million pursuant to the terms of the Securities Purchase Agreement, dated October 17, 2017, by and among the Company, Private Evofem and certain accredited investors, or the Securities Purchase Agreement. Upon consummation of the Financing, the Company terminated its existing Fourth Amended and Restated Investors’ Rights Agreement, dated September 22, 2014, by and between the Company and the investors listed therein, or the Existing Investors. Additionally, the Company entered into a registration rights agreement with the accredited investors participating in the Financing and certain previous investors of Private Evofem and the Company, or the Registration Rights Agreement, pursuant to which the Company is, among other things, obligated to file a registration statement with the SEC within 60 days following completion of the Merger. The shares of Company common stock issued in the Financing were exempt from registration under Section 4(a)(2) under the Securities Act of 1933, as amended, or the Securities Act, and the rules promulgated thereunder.
In addition, pursuant to the Merger Agreement, the Company assumed Private Evofem’s Amended and Restated 2012 Equity Incentive Plan, or the Private Evofem Equity Incentive Plan, and all of the stock options outstanding under thePrivate Evofem Equity Incentive Plan, with such stock options now representing the right to purchase shares of the Company’s common stock. The Company also assumed warrants to purchase Private Evofem capital stock which were immediately amended and restated to be warrants, or the Post-Merger Warrants, to purchase up to an aggregate of 2,000,000 shares of the Company’s common stock. The Post-Merger Warrants will have an exercise price equal to the average of the closing sale prices of shares of the Company’s common stock as quoted on The Nasdaq Capital Market for the 30 consecutive trading day period immediately following January 17, 2018, and will be exercisable commencing on January 17, 2019, and until the earlier of January 17, 2022, or immediately prior to the completion of an Acceleration Event (as defined in the Post-Merger Warrants). The Post-Merger Warrants were issued as a unit with one share of the Company’s common stock, or the Unit Share. Per the terms of the Post-Merger Warrants, the Unit Shares may not be transferred separately from the Post-Merger Warrants.
Following the completion of the Reverse Split, the Merger and the Financing, there were approximately 17,757,167 shares of the Company’s common stock outstanding. The former Private Evofem stockholders owned approximately 87% of the issued and outstanding common stock of the Company, or 15,448,737 shares, and the Company’s stockholders immediately prior to the Merger and Financing, whose shares of the Company’s common stock remained outstanding after the Merger and Financing, owned approximately 13% of the issued and outstanding common stock of the Company, or 2,308,430 shares.
Prior to the Merger, Neothetics was originally incorporated in Delaware in February 2007 as Lipothera, Inc. In September 2008, Neothetics changed its name to Lithera, Inc. and in August 2014, Neothetics again changed its name to Neothetics, Inc.
Unless the context requires otherwise, references in this Annual Report to “Evofem”, “EVFM”, “we”, “us”, the “Company” and “our” refer to Evofem Biosciences, Inc. (formerly known as Neothetics).
Our principal corporate offices are located at 12400 High Bluff Drive, Suite 600, San Diego, California 92130 and our telephone number is (858) 550-1900. Our website is located at www.evofem.com. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, will be made available free of charge on our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission, or SEC. The contents of our website are not
incorporated into this Annual Report and our reference to the URL for our website is intended to be an inactive textual reference only. The information contained on, or that can be accessed through, our website is not a part of this document.
Overview
Prior to the Merger, we were a clinical-stage specialty pharmaceutical company developing therapeutics for the aesthetic market. After the Merger, we became a clinical-stage biotechnology company committed to improving the health and well-being of women throughout the world by addressing women’s unmet medical needs through the discovery, development and commercialization of innovative, next-generation women’s healthcare products. We utilize our multi-purpose prevention technology, or MPT, in two vaginal gel product candidates that are being developed for multiple indications, including contraception, sexually transmitted infections, or STIs, and bacterial vaginosis, or BV.
Our lead product candidate, Amphora® (L-lactic Acid, citric acid, and potassium bitartrate) is a hormone-free, on demand, woman-controlled vaginal gel currently in asecond, single-arm Phase 3 clinical trial with contraceptive efficacy as the primary endpoint, and in a Phase 2b/3 trial with a primary endpointfor Amphora for the prevention of urogenital chlamydiapregnancy in women. Additionally,approximately 1,400 women in the United States (AMPOWER). The last patient exited the study in November 2018. We reported top-line data from AMPOWER in December 2018, which demonstrated a cumulative pregnancy rate of 14.0% over seven cycles of use (95% CI 10.0, 18.0) in the modified intention-to-treat population (referred to as "typical use") which meets the pre-determined endpoint of this clinical trial. This corresponds to an 86.0% efficacy rate. In women who correctly used Amphora following the study protocol, the cumulative pregnancy rate was 1.3% over seven cycles of use (95% CI 0.4, 2.1), which corresponds to a 98.7% efficacy rate.
Based on our market research, we believe a majority of women seeking birth control are concerned about exposureSTI program as developing label expansion opportunities to hormones. While hormone-based contraception is the current standardfurther differentiate Amphora from other contraceptive products in female birth control, our research indicates that women are actively seeking alternative methods of contraception, but have limited options to reduce exposure to hormones. As a result, women are dissatisfied with current products on the market. Amphora is designed to empower women
Our MPT vaginal gels have also demonstrated a broad spectrumRush University Medical Center (Rush University) suggest that our MVP-R gel technology may suppress many of antimicrobial activity in vitro, including on chlamydia-, gonorrhea-,the pathogens responsible for sexually transmitted and commonly occurring bacterial vaginosis- causing microbes, the three most common causes of reproductive tract infection. There are currently no products indicated for the prevention of urogenital chlamydia or gonorrhea or the reduction of recurrent BV. We believe our MPT vaginal gel product candidates offer a significant opportunity to address these important unmet medical needs for women.
infections. Amphora has been granted Fast TrackQualified Infectious Disease Product (QIDP) designation by the FDA for the prevention of acquisition of urogenital chlamydia. A drug that receives Fast Track designation will have opportunities to expedite development and review, such as more frequent interactions with the FDA and eligibility for priority review. A priority review designation means FDA’s goal is to act on the marketing application within six months of receipt compared with 10 months under standard review.
Amphoragonorrhea in women. Our MVP-R gel has also been granted QIDP designation as a Qualified Infectious Disease Product, or QIDP, by the FDA for the prevention of acquisitionthe recurrence of urogenital gonorrhea infection in womenbacterial vaginosis (BV). QIDP designation provides several key potential advantages, including qualification for the FDA Fast Track program and longer market exclusivity, among others. We also received Fast Track designation from the FDA for reductionthe development of Amphora for the prevention of chlamydia.
up to seven days following a single administration.
Seasonique, among others.
Actively monitor the completion of the Phase 3 clinical trial for the purpose of seekingGain regulatory approval of and subsequently commercializingcommercialize Amphora for contraception. . Our initial focus is the development and successful commercialization of Amphora as athe first hormone-free, on demand,non-invasive, woman-controlled contraceptive.contraceptive drug product. We intend to build an internal sales force to commercialize Amphora in the United States, if approved. Outside the United States, we intend to evaluate collaborations for commercialization. We believe this approach will create a platform for us to advance our supplemental indications and allow us to effectively deploy investorour capital to maximize the inherent value of Amphora for the benefit of all stakeholders.
Leverage our MPT vaginalMVP-R gel technology platform to develop and commercialize novel, first-in-class products for women.women. We intend to expand on our contraceptivepotential initial indication, prevention of pregnancy, by being the first company to market a contraceptive productbirth control method with additionalsupplemental indications for the prevention of urogenital chlamydia and gonorrhea.certain STIs. In addition, we intend to developare developing a product candidate for the reduction of recurrent BV.BV, which, if approved, would be the only FDA-approved product for this indication.
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Expand our intellectual property position by pursuing opportunities to extend the exclusivity of our highly differentiated and proprietary product pipeline.candidates. We intend to aggressively pursue additional and new patent applications to broaden our intellectual property portfolio. We will continue seeking domestic and international patent protection and endeavor to proactively file patent applications for new commercially valuable inventions.
BuildEstablish a world classworld-class organization committed to the discovery, development and commercialization of products that addressaddressing unmet needs in women’s sexual and reproductive health.health. We have assembled a world classworld-class team with industry-recognized expertise in the development and commercialization of products in women’s healthcare.health. We intend to continue to build on our leadership position and grow a culture dedicated to the development and commercialization of medicines that addressaddressing the unmet medical needs of women.
The
nonoxynol-9. We believe these combined attributes may make Amphora a more desirable option than currently marketed products.
Additionally, we
We believe our key
Our MPT vaginal gel is potentially disruptive to the existing contraceptive landscapewas valued at $5.5 billion in 2016 and is designedexpected to address underservedgrow at a compound annual growth rate of 5.4% from 2013 to 2024 reaching approximately $8.4 billion in 2024. The United States represented the largest segment of the global prescription contraceptives market in 2016 at 29.4% and unmet needsis currently dominated by hormonal methods including birth control pills and other reversible methods such as hormone-releasing IUDs and injectables. Approximately four out of every five women with sexual experience in the women’s healthcare market;
We expect to benefit from favorable trends away fromAs shown in the dailychart below, 16.8 million US women use no method of oral formsbirth control, putting them at risk of hormonalpregnancy and an additional 9 million women in the United States rely on condoms or some other form of non-hormonal contraception to more innovative technologies that underpin(e.g., copper IUD, diaphragm, rhythm, withdrawal). Another 18.2 million women in the largeUnited States use hormone-based prescription birth control methods.
We have robust proprietary technology protected by an intellectual property portfolio currently extended to 2033; and
We intend to add indications to our lead product candidate, Amphora, and to add complementary products or product candidates to our pipelineis expected to provide futuregrow at an average compound annual growth opportunities withinrate of 5.4% from 2013 to 2024, reaching approximately $7.6 billion in 2024. Approximately 25% of women in the globalEU use no contraception and 16.7% use condoms. Among newer products, only IUDs have a double-digit market share in the EU.
We believe our product candidates are
Opportunity
According to the Centers for Disease Control and Prevention or the CDC,(CDC), reducing the percentage of all unintended pregnancies has been one of the National Health Promotion Objectives since they were first establishedtheir establishment in 1980. Despite the efforts to reduce their prevalence,incidence, over 2.0two million unintended pregnancies occur in the U.S.United States annually. Following decades of minimal change or increase, the percentage of unintended pregnancies in the U.S.United States decreased slightly in the period from 2008-2011.2008 to 2011. Despite this recent decrease, 45% of pregnancies in the U.S.United States are still unintended. Nearly all women with sexual experience in the U.S.United States have used contraception at some timeform of contraception in their lives, butlives. However, many women may not use contraception consistently or correctly, and subsequently become pregnant when not intending to have a child at that time.which may result in an unintended pregnancy. According to research conducted by the CDC, approximately 40% of women surveyed after giving birth to a child resulting from an unintended pregnancy who were not using contraception noted one of the following three reasons for nonuse: did not expect to have sex, worried about side effects of birth control, or male partner did not want to use birth control.
Women of Reproductive Age (millions) (2016 Projected) |
| U.S. |
|
| EU |
|
| *BRIC |
| ||
All females, age 18-49 |
| 61.0 |
|
|
| 63.8 |
|
|
| 420.9 |
|
At risk for pregnancy |
| 70.4 | % |
|
| 67.0 | % |
|
| 55.0 | % |
Relevant population for contraception |
| 43.0 |
|
|
| 43.1 |
|
|
| 231.5 |
|
|
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The U.S. Contraceptive Market
The total U.S. contraceptive market was valued at $5.5 billion in 2016 with the prescription contraceptive market expected to grow at a compound annual growth rate of 5.4% from 2013 to 2024 and reach a value of approximately $8.4 billion in 2024. The U.S. contraceptive market represented the largest segment of the global contraceptives market in 2016 at 29.4% and is currently dominated by hormonal methods including birth control pills and other reversible methods such as IUDs and injectables. Approximately four of every five women with sexual experience in the U.S. have used the pill at least one time with this percentage remaining stable since 1995.
More than 12 million women in the U.S. rely on condoms, or some other form of non-hormonal contraception (e.g. copper IUD, diaphragm, rhythm, withdrawal) as their method of choice.
We conducted market research with women of reproductive age (ages 18(18 to 49) and healthcare providers, worldwide, required some form of family planning. According to the Guttmacher Institute, there are approximately 62 million women of reproductive age in the U.S. to evaluate potential interestUnited States. There are approximately 173 million women of reproductive age located in Amphora. Of the more than 1,400 women surveyed, approximately one-third expressed interest in learning more about Amphora. Amphora’s most motivating attributesgreater European market. Additional attractive markets for women surveyed included lackglobal expansion include the APAC, where an addressable population of hormones, ease of use829 million exist. Brazil and the ability to use on demand. Physicians also expressed interestRussian Federation represent an additional 78 million women of reproductive age in Amphora, indicating they see many patients for whom they would recommend use of Amphora.
Additionally, this market research indicated that an Amphora user would receive approximately seven refills of Amphora per year based on reported frequency of intercourse.
The EU contraceptive market was valued at approximately $5.0 billion in 2016, or 24.5% of the global market, and is expected to grow at an average compound annual growth rate of 5.4% from 2013 to 2024 to reach an estimated value of approximately $7.6 billion in 2024. The EU accounted for the second largest market share in the global contraceptives market in 2016. Contraceptive use in the EU varies from region to region. As the table below shows, approximately 30% of women use no contraception and the use of male condoms is significantly higher than the U.S. population (9.4%). Permanent sterilization is also substantially lower than the U.S. (female and male sterilization rates of 14.3% and 4.5%, respectively) and among newer innovations only IUDs are in double digit market share:
States.
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| Key Attributes | Potential Benefits | ||
| Hormone-free | Amphora is hormone-free and designed to avoid known side effects of | ||
| Amphora | ||
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| Unlike methods that require a physician | |
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Personal Lubricant Properties | Amphora has benefits for | ||
| The pre-filled Amphora applicator is designed for convenience and to be stored at room temperature for ease of handling and use. | ||
| Bio-adhesive Properties | Amphora has | ||
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| Amphora | |
| No Surgical Procedures | No physician insertion or removal required. The use of Amphora is private and discrete, requiring no need for | ||
| Cost Effective | We anticipate mandated coverage in the United States under the Affordable Care Act (the ACA). Amphora is only used when needed, thereby eliminating cost for daily use methods. | ||
Postpartum < 21 days Deep venous thrombosis (current or history with higher risk of recurrence) Pulmonary embolism (current or history with higher risk of recurrence) Cardiovascular disease or multiple Uncontrolled hypertension Major surgery with prolonged immobilization Known thrombogenic mutations Migraine headaches with aura or without aura in women >/= 35 Viral Hepatitis (acute or flare) Cirrhosis (decompensated) Age > 35 years and smoke 15 cigarettes or more per day Valvular heart disease (complicated) Impaired cardiac function (moderate or severe) Systemic lupus erythematosus with positive or unknown antiphospholipid antibodies Diabetes (complicated) Breast cancer (current) Certain liver tumors Solid organ transplantation (complicated) were analyzed in accordance with the pre-specified statistical analysis plan. Summary of Initial NDA Submission (Contraceptive Indication) We reported top-line data from AMPOWER in December 2018 and plan to resubmit the NDA for Amphora for the prevention of pregnancy to the FDA in the second quarter of 2019. Per the FDA Performance Goals under PDUFA VI, the FDA review timeline for this type of Class 2 resubmitted NDA is six months. EU collaboration with a licensing partner. approval of Amphora for the prevention of chlamydia in women, for which it has been granted Fast Track designation by the As previously noted, Amphora has been versus placebo gel. the selection of commercial suppliers, which includes agency of record for the Amphora brand, hiring of sales and sales support personnel to support the optimization of manufacturing capabilities to include the installation of new equipment into manufacturers’ facilities, planning and preparing for all requisite inspections, planning for process validation and registration batch quantities, and establishing secondary (back-up) manufacturing capability. media support, and public relations efforts. We expect these campaigns to encourage patients to consult their healthcare providers and ensure payer and healthcare provider strategies are implemented. Strategy medicinal products for human use. EU member states may approve a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of offering a drug product on the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure on healthcare costs in general, particularly prescription drugs, has become intense, creating increasingly high barriers for entry of new products. In addition, in some countries, cross-border imports from lower-priced markets exert competitive pressure that may reduce pricing within a country. Therefore, the development of new drug launch strategies has become very challenging to meet both patient need/demand while ensuring products are commercially viable in those markets. The copper IUD was introduced to the market in 1988 and provides protection by disrupting sperm motility and damaging sperm so that they are prevented from joining with an ovum. Today, the copper IUD is principally marketed by Cooper Surgical, Inc. as Contraceptives OTC In addition, if during the three years after one of our products or processes has received regulatory approval and is introduced to the market, if the amounts paid to Rush University as royalties or sublicensing fees do not total a minimum royalty amount, then we must pay a minimum annual royalty to Rush University. If we have to pay a royalty or other payment to a third party in order for us to avoid infringement of third-party rights, we may offset up to 50% owed to such third party by up to 50% of the amounts owed to Rush University under the Rush License. The above-described royalty payments expire upon termination of the Rush License Agreement in accordance with its terms. our MVP-R gel. includes items or services resulting from a violation of the Act. information; and some state and local laws that require the registration of pharmaceutical sales representatives. State and foreign laws also govern the privacy and security of health submission to the FDA of an IND for human clinical testing; adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug for each indication to the FDA’s satisfaction; submission to the FDA of an NDA; satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance with cGMP regulations; FDA review and approval of the NDA. in December 2017. Other Governmental Regulations pediatric post-menarcheal females (≤17 years). of receiving the reference member state’s assessment report and related materials, each concerned member state must decide whether to approve the assessment report and related materials. We must raise significant additional funds to finance our operations to remain a going concern. Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights. us. be unable to obtain regulatory approval for Amphora prospects. for prevention of pregnancy. our research or business development methodology or search criteria and process may be unsuccessful in identifying potential product candidates; we may not be able or willing to assemble sufficient resources to acquire or discover additional product candidates; our product candidates may not succeed in our potential product candidates may be shown to have harmful side effects or may have other characteristics that may make the products unmarketable or unlikely to receive marketing approval; competitors may develop alternatives that render our product candidates obsolete or less attractive; product candidates we develop may be covered by third parties’ patents or other exclusive rights; the market for a product candidate may change during our program research and development programs are quite costly, and we may be unable to obtain the financing and resources to do so; a product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; and a product candidate may not be accepted as safe and effective by patients, the medical community or third-party payers. inability to obtain the funding necessary to initiate or complete any clinical trial; inability to generate satisfactory delays in reaching agreement on acceptable terms with clinical research organizations delays or failure in obtaining required institutional review board failure to obtain or delays in obtaining a permit from regulatory authorities to conduct a clinical trial; delays in recruiting or failure to recruit sufficient eligible patients in our clinical trials; failure to manufacture clinical trial scale quantities of our product candidate; failure by clinical sites, CROs or other third parties to perform in accordance with the good clinical practices requirements of the FDA, applicable laws or applicable foreign regulatory patients withdrawing from our clinical trials; adverse events or other issues of concern significant enough for an Institutional Review Board to suspend or terminate a clinical trial or for the FDA, or comparable foreign regulatory authority, to put an occurrence of adverse events associated with our product changes in regulatory requirements and guidance that require amending or submitting new clinical protocols; the cost of clinical trials of our product candidates; negative or inconclusive results from our clinical trials that may result in our deciding, or regulators requiring us, to conduct additional clinical trials or abandon development programs in other ongoing or planned indications for a product candidate; and delays in reaching agreement on acceptable terms with third-party manufacturers and the time for manufacture of sufficient quantities of our product candidates for use in clinical trials. Due in part to our limited financial resources, we may fail to select or capitalize on the most scientifically, clinically or commercially promising or profitable indications or therapeutic areas for our product candidates and we may be unable to pursue and complete the clinical trials While we have received a Qualified Infectious Disease Product (QIDP) designation for certain of our product candidates based on their current formulations, we may be required to reapply for this designation should we alter the formulations of these product candidates. be delayed in obtaining marketing approval for our product candidates; not obtain marketing approval at all; obtain approval with labeling that includes significant use or distribution restrictions or significant safety warnings, including boxed warnings; be subject to additional post-marketing testing or other requirements; or be required to remove the product from the market after obtaining marketing approval. Serious adverse events arising post marketing or during clinical including our lead product candidate, Amphora. regulatory authorities may impose a clinical hold, which could result in substantial delays and adversely impact our ability to continue development of our regulatory authorities may require the addition of specific warnings or contraindications to product labeling or we may be required to change the way the we may be required to conduct additional clinical we may be required to implement we may be required to limit the patients who can receive our we may be subject to promotional and marketing limitations on our sales of regulatory authorities may require us to take we may be subject to litigation or product liability claims; and our reputation may suffer. candidates. If a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or it disagrees with the promotion, marketing or labeling of a product, the regulatory agency may impose restrictions on that product or us, including requiring withdrawal of the product from the market. If we fail to comply with applicable regulatory requirements, a regulatory agency or enforcement authority may, among other things: issue warning letters; impose civil or criminal penalties; suspend or withdraw regulatory approval; suspend any of our ongoing clinical trials; refuse to approve pending applications or supplements to approved applications submitted by us; impose restrictions on our operations, including closing our contract manufacturers’ facilities; or require a product recall. Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of our candidates. jeopardizing our ability to seek patent protection. In addition, our ability to obtain and maintain valid and enforceable patents depends on whether the differences between our inventions and the prior art allow our inventions to be patentable over the prior art. Furthermore, publications of discoveries in the scientific literature often lag We may not be able to protect our intellectual property and proprietary rights throughout the world. Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements. proceedings, derivation proceedings, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could result in the revocation of, cancellation of, or amendment to our patents in such a way that they no longer cover our (SPC). trade secrets and know-how to be one of our important sources of intellectual property. Trade secrets and know-how can be difficult to protect. In particular, Third-party claims of intellectual property infringement, misappropriation or other violation against us or our collaborators may prevent or delay the development and commercialization of our proceedings could impair our ability to compete in the marketplace. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition or results of operations. Intellectual property rights do not necessarily address all potential threats. others may be able to make products that are similar to our product candidate or utilize similar technology but that are not covered by the claims of the patents that we license or may own; we, or our current or future licensors or collaborators, might not have been the first to make the inventions covered by the issued patent or pending patent application that we license or may own in the future; we, or our current or future licensors or collaborators, might not have been the first to file patent applications covering certain of our or their inventions; others may independently develop similar or alternative technologies or duplicate any of our it is possible that our current or future pending owned or licensed patent applications will not lead to issued patents; issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors or other third parties; our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; we may not develop additional proprietary technologies that are patentable; the patents of others may harm our business; and we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property. In addition, our reliance on third-party manufacturers exposes us to the following additional risks: we may be unable to identify manufacturers on acceptable terms or at all; our third-party manufacturers might be unable to timely formulate and manufacture our product or produce the quantity and quality required to meet our clinical and commercial needs, if any; our future third-party manufacturers may not perform as agreed or may not remain in the contract manufacturing business for the time required to supply our clinical trials or to successfully produce, store and distribute our products; we may not own, or may have to share, the intellectual property rights to any improvements made by our third-party manufacturers in the manufacturing process for our product candidates; and our third-party manufacturers could breach or terminate their Any delay in the production of any approved products would impair our ability to commercialize and obtain revenue from these products. These circumstances would materially harm our business, results of operations, financial conditions and prospects. We rely and intend to rely on we may not be able to control the amount and timing of resources that the collaborator devotes to the product development program; we may experience financial difficulties and thus not commit sufficient financial resources to the product development program; we may be required to relinquish important rights to the collaborator such as marketing, distribution and intellectual property rights; a collaborator could move forward with a competing product developed either independently or in collaboration with third parties, including our competitors; business combinations or significant changes in a collaborator’s business strategy may adversely affect our willingness to complete our obligations under any arrangement. services in accordance with legal and contractual requirements. Our demonstrated evidence of efficacy and safety; sufficient third-party insurance coverage effectiveness of our or our collaborators’ sales and marketing strategy; the willingness of the willingness of pharmacy chains to stock the products; the prevalence and severity of any adverse side effects; and availability of alternative products. prevention of pregnancy. minimum acceptable contraceptive efficacy rates; perceived safety differences of hormonal and/or non-hormonal contraceptive options; changes in healthcare laws and regulations, including implementation of the competition from new lower dose hormonal contraceptives with more favorable side effect profiles; and new generic contraceptive options including the possibility of a future potential generic version of Amphora as a contraceptive (if it is approved for marketing by the FDA). The proportion of the contraceptive market that is made up of generic products continues to increase, making introduction of a branded contraceptive difficult and expensive. prospects or obtaining such pricing or placement at unfavorable pricing levels, could materially adversely affect our business, financial conditions, results of others, the False Claims Act, False Statements Statute, the Health Insurance Portability and Accountability Act of 1996, The scope and enforcement of these laws and regulations is uncertain and subject to rapid If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, including, without limitation, damages, monetary fines, individual imprisonment, disgorgement of profits, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, debarment under the FDCA, additional reporting or oversight obligations if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with the law, contractual damages, reputational harm, diminished profits and future earnings, and curtailment or restructuring of our operations. and commercialization of our product candidates, hurt our ability to raise additional funds and negatively impact our ability to implement our business plan. If we lose the services of any of these individuals, it might not be able to find suitable replacements on a timely basis or at all, and our business could be harmed as a result. We do not maintain “key man” insurance policies on the lives of these individuals. operations. failures, security breaches, loss of data or other disruptions that could compromise our proprietary information or other sensitive information. Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 the results of our efforts to discover, develop, acquire or in-license product candidates or products, if any; failure or discontinuation of any of our research programs; actual or anticipated results from, and any delays in, any future clinical trials, as well as results of regulatory reviews relating to the approval of any product candidates we may choose to develop; the level of expenses related to any product candidates that we may choose to develop or clinical development programs we may choose to pursue; commencement or termination of any collaboration or licensing arrangement; disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures and capital commitments; additions or departures of key scientific or management personnel; variations in our financial results or those of companies that are perceived to be similar to us; new products, product candidates or new uses for existing products introduced or announced by our competitors, and the timing of these introductions or announcements; results of clinical trials of product candidates of our competitors; general economic and market conditions and other factors that may be unrelated to our operating performance or the operating performance of our competitors, including changes in market valuations of similar companies; regulatory or legal developments in the United States and other countries; changes in the structure of healthcare payment systems; conditions or trends in the biotechnology and biopharmaceutical industries; actual or anticipated changes in earnings estimates, development timelines or recommendations by securities analysts; announcement or expectation of additional financing efforts; sales of common stock by us or our stockholders in the future, as well as the overall trading volume of our common stock; and Two of our stockholders own a significant percentage of our issued and outstanding common stock and will be able to exercise significant influence over matters submitted to stockholders for approval. In connection with these obligations, we filed a Registration Statement on Form S-3 (No. 333-223731) which became effective on April 3, 2018. for so long as we are an emerging growth company, not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting; not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements; exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; prohibiting our stockholders from calling a special meeting of stockholders or acting by written consent other than unanimous written consent; permitting our board of directors to issue additional shares of our preferred stock, with such rights, preferences and privileges as they may designate, including the right to approve an acquisition or other changes in control; establishing an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; providing that our directors may be removed only for cause; providing that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; and requiring the approval of our board of directors or the holders of a supermajority of our outstanding shares of capital stock to amend our bylaws and certain provisions of our certificate of incorporation. We will indemnify our directors and officers for serving us in those capacities, or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful. We may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law. We will not be obligated pursuant to our amended and restated bylaws to indemnify a person with respect to proceedings initiated by that person against us or our other indemnitees, except with respect to proceedings authorized by our board of directors or brought to enforce a right to indemnification. The rights conferred in our amended and restated bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons. We may not retroactively amend our bylaw provisions to reduce our indemnification obligations to directors, officers, employees and agents. Securities. High Low Year ended December 31, 2017 Fourth Quarter $ 12.84 $ 2.52 Third Quarter $ 3.83 $ 1.80 Second Quarter $ 15.78 $ 3.02 First Quarter $ 11.88 $ 6.18 Year ended December 31, 2016 Fourth Quarter $ 8.64 $ 4.80 Third Quarter $ 9.00 $ 4.32 Second Quarter $ 9.36 $ 3.37 First Quarter $ 9.72 $ 3.19 Holders of Common Stock 1933, as amended. Year Ended December 31, 2017 2016 2015 (in thousands, except share and per share data) Statement of Operations Data: Operating expenses: Research and development $ 3,946 $ 6,579 $ 34,410 General and administrative 6,099 5,463 7,639 Total operating expenses 10,045 12,042 42,049 Loss from operations (10,045 ) (12,042 ) (42,049 ) Interest income 52 59 26 Interest expense — (1,036 ) (1,134 ) Net loss $ (9,993 ) $ (13,019 ) $ (43,157 ) Net loss per share, basic and diluted(1) $ (4.33 ) $ (5.66 ) $ (18.91 ) Weighted average shares used to compute basic and diluted net loss per share(1) 2,305,817 2,300,167 2,282,672 As of December 31, 2017 2016 2015 (in thousands) Balance sheet data: Cash and cash equivalents $ 3,417 $ 11,478 $ 37,749 Working capital $ 2,613 $ 11,605 $ 30,626 Total assets $ 4,119 $ 12,817 $ 40,112 Long-term debt, less current portion $ — $ — $ 7,205 Accumulated deficit $ (135,844 ) $ (125,850 ) $ (112,832 ) Total stockholders’ equity $ 2,707 $ 11,915 $ 23,807 You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this immaterial. future, if Amphora is approved for commercial sale in the United States, we may generate revenue from product sales. If Amphora is approved for commercial sale outside of the United States, we expect to out-license commercialization rights to Amphora to global pharmaceutical companies or other qualified potential partners or enter into collaborations for the commercialization and distribution of Amphora, from which we may generate licensing revenue. However, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and overall capital requirements. We do not expect to commercialize Amphora before 2020, if ever. external development expenses incurred under arrangements with third parties, such as fees paid to clinical unpaid dividends, and became payable upon the closing of the Merger, and loss on the extinguishment of a related-party note payable. (expense). consolidated financial statements. See Stock Options the Series D and at each valuation date to determine the fair value of the Series D 2X liquidation preference. Due to the nature of the assumptions and the sensitive nature of the PWERM, management could not reliably provide sensitivity analysis around the impact of changes in assumptions utilized in the PWERM used to estimate the fair value of the Series D and Series D 2X liquidation preference. Year Ended December 31, Change 2017 2016 $ (in thousands) Operating expenses: Research and development $ 3,946 $ 6,579 $ (2,633 ) General and administrative 6,099 5,463 636 Total operating expenses 10,045 12,042 (1,997 ) Loss from operations (10,045 ) (12,042 ) 1,997 Interest income 52 59 (7 ) Interest expense — (1,036 ) 1,036 Net loss $ (9,993 ) $ (13,019 ) $ 3,026 Year Ended December 31, Change 2016 2015 $ (in thousands) Operating expenses: Research and development $ 6,579 $ 34,410 $ (27,831 ) General and administrative 5,463 7,639 (2,176 ) Total operating expenses 12,042 42,049 (30,007 ) Loss from operations (12,042 ) (42,049 ) 30,007 Interest income 59 26 33 Interest expense (1,036 ) (1,134 ) 98 Net loss $ (13,019 ) $ (43,157 ) $ 30,138 2017. these could materially and adversely affect our liquidity, financial condition and business prospects and we would not be able to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our financial statements. earned interest on this Note immediately due. Year Ended December 31, 2017 2016 2015 Net cash used in operating activities $ (8,201 ) $ (16,255 ) $ (37,911 ) Net cash provided by (used in) investing activities 7 3 (226 ) Net cash provided by (used in) financing activities 26 (10,019 ) 139 Net decrease in cash, cash equivalents, and restricted cash $ (8,168 ) $ (26,271 ) $ (37,998 ) pregnancy as well as potential other indications and to support general and administrative operations. Activities Payments Due by Period Total 2018 2019 2020 2021 2022 More than 5 Years Operating lease $ 951,648 $ 410,848 $ 431,507 $ 109,293 $ — $ — $ — Total $ 951,648 $ 410,848 $ 431,507 $ 109,293 $ — $ — $ — Attestation Report on Internal Control over Financial Reporting The Name and Principal Position Year Ended December 31, Salary ($) Bonus ($) Option Awards(1)(2) ($) All Other Compensation ($) Total ($) Susan A. Knudson 2017 317,000 190,200 130,102 (3) 1,010 (4) 638,312 Former Chief Financial Officer 2016 281,197 59,052 19,170 (5) 1,010 (4) 360,429 Maria Feldman 2017 273,980 136,995 197,794 (6) 539 (7) 609,308 Former Vice President, Clinical Research, Operations, Regulatory and Quality 2016 243,000 46,550 10,650 (8) 539 (7) 300,739 Saundra Pelletier 2017 731,364 922,700 — 810 (9) 1,654,874 Chief Executive Officer 2016 588,527 201,562 1,477,691 (10) 1,621 (9) 2,269,401 Justin J. File 2017 562,373 306,750 — 810 (11) 869,933 Chief Financial Officer 2016 478,113 163,281 822,510 (12) 1,185 (11) 1,465,089 Kelly Culwell, M.D. 2017 428,650 123,600 — 540 (13) 552,790 Chief Medical Officer 2016 425,275 90,000 274,170 (14) 675 (13) 790,120 Name Fees Earned or Paid in Cash ($) Option Awards ($)(1)(2) All other Compensation ($) Totals ($) Kim P. Kamdar, Ph.D. 67,500 68,853 — 136,353 Maxim Gorbachev 43,500 11,683 — 55,183 Martha J. Demski 58,500 68,853 — 127,353 Jeffrey M. Nugent 52,500 68,853 — 121,353 Thomas Lynch(3)(4) 60,000 — 640,000 700,000 Colin Rutherford(3) 65,402 24,891 — 90,293 Item 12. Security Ownership of Name and Address of Beneficial Owner Shares Beneficially Owned Percent of Shares Beneficially Owned 5% Stockholders Entities affiliated with Invesco Asset Management Limited(1)† Perpetual Park 7,037,498 39.6 % Henley-on-Thames Oxfordshire, RG9 1HH, United Kingdom Entities affiliated with Woodford Investment Management Limited (2) † 7,465,538 42.0 % 9400 Garsington Road Oxford, OX4 2HN, United Kingdom Directors and Named Executive Officers Thomas Lynch(3) 3,850 * Gillian Greer, Ph.D. — * William Hall, Ph.D., M.D. — * Kim Kamdar, Ph.D.(4) 551,560 3.1 % Tony O’Brien — * Colin Rutherford(5) 770 * Saundra Pelletier(6) 33,547 * Justin J. File(7) 11,857 * Kelly Culwell, M.D.(8) 4,802 * Directors and executive officers as a group (12 Persons)(9) 612,290 3.4 % Plan Category Number of Securities to be Issued Upon Exercise of Awards (a) Weighted Average Exercise Price of Outstanding Awards Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a)) Equity compensation plans approved by stockholders 407,058 (1) $ 30.98 536,370 (2) Total: 407,058 $ 30.98 536,370 Name Shares of Common Stock Issued in the Financing Shares of Common Stock Issued in Connection with the Merger Warrants to Purchase Shares of Common Stock Issued in Connection with the Merger Omnis Income & Growth Fund a sub-fund of Omnis Portfolio Investments ICVC None. 171,975 50,000 Woodford Patient Capital Trust Plc None. 1,672,611 475,000 CF Woodford Equity Income Fund, a sub fund of CF Woodford Investment Fund None. 5,620,952 1,475,000 Invesco Perp High Income 375,000 3,144,366 None. Invesco Perp Income 1,239,289 2,278,843 None. Fiscal Year 2017 Fiscal Year 2016 Audit Fees(1) $ 485,736 $ 256,209 Audit-Related Fees N/A N/A Tax Fees N/A N/A All Other Fees N/A N/A Total $ 485,736 $ 256,209 Financial Statement Schedules. Required to Be Filed by Item 601 of Regulation S-K. Incorporated by Reference File No. Date Filed 10/17/2017 2.2 10/17/2017 3.1 3.2 4.1 4.2 10/17/2014 4.3 10/17/2014 4.4 10/17/2014 4.5 10/17/2014 4.6 11/15/2017 11/15/2017 10/17/2017 10.2 12/ 10/17/2017 Lease, dated as of July 3, 2008, by and between the Registrant and WW&LJ Gateways, LTD. 10/17/2014 10/17/2014 10/17/2014 10/17/2017 11/10/2014 10/17/2014 11/10/2014 11/10/2014 11/10/2014 11/10/2014 11/10/2014 11/10/2014 11/10/2014 11/15/2017 11/15/2017 11/15/2017 11/15/2017 11/15/2017 11/15/2017 11/15/2017 11/15/2017 11/15/2017 11/15/2017 11/15/2017 11/15/2017 11/15/2017 11/15/2017 11/15/2017 11/15/2017 10/17/2014 10/17/2017 21.1 23.1 31.1 31.2 *32.1 **101.INS XBRL Instance Document **101.SCH XBRL Taxonomy Extension Schema Document **101.CAL XBRL Taxonomy Extension Calculation Linkbase Document **101.DEF X XBRL Taxonomy Extension Presentation Linkbase Document Date: Signature Chairman of the Board Gillian Greer, /s/ William Hall, William Hall, Ph.D., M.D. /s/ Kim P. Kamdar, Kim P. Kamdar, Ph.D. /s/ Tony O’Brien Tony O’Brien /s/ Colin Rutherford Colin Rutherford of Evofem Biosciences, Inc. Statements Concern Opinion December 31, 2017 2016 Assets Current assets: Cash and cash equivalents $ 3,416,960 $ 11,477,852 Prepaid expenses and other current assets 608,432 1,029,546 Total current assets $ 4,025,392 $ 12,507,398 Restricted cash 93,382 200,000 Property and equipment, net — 109,320 Total assets $ 4,118,774 $ 12,816,718 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 566,253 $ 503,739 Accrued expenses 845,768 398,453 Total current liabilities 1,412,021 902,192 Stockholders' equity: Preferred stock, $0.0001 par value; 5,000,000 shares authorized, no shares issued and outstanding — — Common stock - $0.0001 par value; 300,000,000 shares authorized; 2,308,430 and 2,304,749 shares issued and outstanding at December 31, 2017 and 2016, respectively 231 230 Additional paid-in capital 138,550,328 137,764,651 Accumulated deficit (135,843,806 ) (125,850,355 ) Total stockholders’ equity 2,706,753 11,914,526 Total liabilities and stockholders’ equity $ 4,118,774 $ 12,816,718 Year Ended December 31, 2017 2016 2015 Expenses: Research and development $ 3,945,757 $ 6,578,678 $ 34,409,664 General and administrative 6,098,944 5,463,622 7,639,427 Total operating expenses 10,044,701 12,042,300 42,049,091 Loss from operations (10,044,701 ) (12,042,300 ) (42,049,091 ) Interest income 51,250 59,465 26,033 Interest expense — (1,035,763 ) (1,133,987 ) Net loss $ (9,993,451 ) $ (13,018,598 ) $ (43,157,045 ) Net loss per share, basic and diluted $ (4.33 ) $ (5.66 ) $ (18.91 ) Weighted average shares used to compute basic and diluted net loss per share 2,305,817 2,300,167 2,282,672 Common Stock Additional Paid-In Accumulated Total Stockholders’ Shares Amount Capital Deficit Equity Balance at December 31, 2014 2,278,554 $ 228 $ 134,921,913 $ (69,674,712 ) $ 65,247,429 Common stock issued upon exercise of options 8,027 1 96,503 — 96,504 Common stock issued upon purchase of the employee stock purchase plan 1,339 — 42,126 — 42,126 Issuance of restricted shares, net of shares repurchased for minimum tax liability 3,750 — 193,500 — 193,500 Share-based compensation — — 1,384,781 — 1,384,781 Net loss — — — (43,157,045 ) (43,157,045 ) Balance at December 31, 2015 2,291,670 $ 229 $ 136,638,823 $ (112,831,757 ) $ 23,807,295 Common stock issued upon exercise of options 4,883 — 33,542 — 33,542 Issuance of restricted shares, net of shares repurchased for minimum tax liability 8,196 1 — — 1 Debt amendment warrant costs — — 9,417 — 9,417 Share-based compensation — — 1,082,869 — 1,082,869 Net loss — — — (13,018,598 ) (13,018,598 ) Balance at December 31, 2016 2,304,749 $ 230 $ 137,764,651 $ (125,850,355 ) $ 11,914,526 Common stock issued upon exercise of options 3,681 1 26,348 — 26,349 Share-based compensation — — 759,329 — 759,329 Net loss — — — (9,993,451 ) (9,993,451 ) Balance at December 31, 2017 2,308,430 $ 231 $ 138,550,328 $ (135,843,806 ) $ 2,706,753 Year Ended December 31, 2017 2016 2015 Operating activities Net loss $ (9,993,451 ) $ (13,018,598 ) $ (43,157,045 ) Adjustments to reconcile net loss to net cash used in operating activities: Loss on sale of assets 56,350 4,858 6,140 Depreciation and amortization 45,870 69,094 58,425 Non-cash interest expense on notes payable and debt — 100,290 220,447 Share-based compensation 759,329 1,082,869 1,578,279 Changes in operating assets and liabilities: Prepaid expenses and other current assets 421,114 947,452 (1,051,224 ) Accounts payable and accrued expenses 509,829 (5,440,958 ) 4,433,561 Net cash used in operating activities (8,200,959 ) (16,254,993 ) (37,911,417 ) Investing activities Proceeds from sale of property and equipment 7,100 3,100 — Purchase of property and equipment — — (226,128 ) Net cash provided by (used in) investing activities 7,100 3,100 (226,128 ) Financing activities Prepayment resulting in debt extinguishment — (9,514,058 ) — Principal payments on bank loan — (538,342 ) — Issuance of common stock from exercise of options 26,349 33,542 96,506 Issuance of common stock from employee stock purchase plan — — 42,126 Net cash provided by (used in) financing activities 26,349 (10,018,858 ) 138,632 Net decrease in cash, cash equivalents, and restricted cash (8,167,510 ) (26,270,751 ) (37,998,913 ) Cash, cash equivalents, and restricted cash beginning of period 11,677,852 37,948,603 75,947,516 Cash, cash equivalents, and restricted cash end of period $ 3,510,342 $ 11,677,852 $ 37,948,603 Supplemental disclosure of cash flow activity Cash paid for interest $ — $ 973,115 $ 912,500 Neothetics’ wholly-owned subsidiary. liabilities. statements. assessing performance. The Company December 31, 2017 2016 2015 Cash and cash equivalents $ 3,416,960 $ 11,477,852 $ 37,748,603 Restricted cash 93,382 200,000 200,000 Total cash, cash equivalents and restricted cash $ 3,510,342 $ 11,677,852 $ 37,948,603 Flex Note (as defined below) approximates its carrying value. Leasehold improvements are stated at cost and are amortized on a straight-line basis over the lesser of the remaining term of the related lease or the estimated useful lives of the assets. Repairs and maintenance costs are charged to expense as incurred and improvements and betterments are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the consolidated balance sheets and any resulting gain or loss is reflected in the consolidated statements of operations in the period realized. made. December 31, 2017 2016 2015 Warrants for common stock 11,875 11,875 11,875 Common stock options and restricted stock awards issued and outstanding 246,810 145,188 227,157 258,685 157,063 239,032 pre-revenue and does not anticipate generating any significant revenue prior to 2020. Measurement (Topic 820 Level 3 Fair Value Measurements at Reporting Date Using Balance as of December 31, 2017 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets Money market fund(1) $ 3,416,960 $ 3,416,960 $ — $ — Total assets $ 3,416,960 $ 3,416,960 $ — $ — Fair Value Measurements at Reporting Date Using Balance as of December 31, 2016 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets Money market fund(1) $ 11,477,852 $ 11,477,852 $ — $ — Total assets $ 11,477,852 $ 11,477,852 $ — $ — December 31, 2017 2016 Office furniture and equipment $ 92,373 $ 254,049 Less accumulated depreciation and amortization (92,373 ) (144,729 ) $ — $ 109,320 shares repurchased for income tax withheld. Options Outstanding Weighted Average Exercise Price Weighted Average Contractual Life — Years Total Intrinsic Value Outstanding at December 31, 2016 145,188 $ 17.70 8.6 $ 18,363 Granted 145,877 $ 11.27 Exercised (3,681 ) $ 7.15 $ 5,725 Forfeited (40,574 ) $ 16.20 Outstanding and exercisable at December 31, 2017 246,810 $ 14.31 8.5 $ 539,259 Vested and options expected to vest at December 31, 2017 238,753 $ 14.33 8.4 $ 536,233 assuming all unvested options become fully vested. Year Ended December 31, 2017 2016 2015 Weighted Average Assumptions: Risk-free interest rate 1.74 % 1.61 % 1.69 % Expected dividend yield 0 % 0 % 0 % Expected volatility 55.17 % 44.89 % 43.72 % Expected term (in years) 5.8 5.4 5.8 0.7 year. calculation of the expected term of the award, (c) the risk-free interest rate and (d) the expected dividend Year Ended December 31, 2017 2016 2015 Research and development $ 280,140 $ 163,996 $ 410,099 General and administrative 479,189 918,873 974,682 $ 759,329 $ 1,082,869 $ 1,384,781 December 31, 2017 2016 Warrants issued and outstanding 11,875 11,875 Stock options and restricted stock awards issued and outstanding 246,810 145,188 Authorized for future option grants 366,249 379,362 Reserved for employee stock purchase plan 95,741 72,694 720,675 609,119 As of December 31, three-year period. The Company has not completed December 31, 2017 2016 Deferred tax assets: Accrued compensation 51,000 46,000 Non-qualified Stock Options 195,000 173,000 Other, net 7,000 34,000 Total deferred tax assets 253,000 253,000 Valuation allowance (253,000 ) (253,000 ) $ — $ — 2017 2016 2015 Income tax at statutory rates 34.00 % 39.80 % 39.80 % State changes (0.01 %) 0.00 % 0.00 % Transaction costs (5.52 %) 0.00 % 0.00 % NOL not recorded due to 382 limitations (25.78 %) (36.70 %) (39.30 %) Other (1.14 %) (3.10 %) (0.50 %) Tax reform - tax rate change (1.57 %) 0.00 % 0.00 % Total tax expense (0.02 %) 0.00 % 0.00 % Lease Payments Sublease Receipts 2018 $ 410,848 $ 342,374 2019 431,507 352,644 2020 109,293 90,143 Total $ 951,648 $ 785,161 contraception,birth control options, as shown below, define numerous conditions that create unacceptable health risks if hormonal contraception is used.used (known as Category 4). The number of women impacted by these conditions is significant. We believe Amphora, if approved by the FDA, will provide women an attractive solution to avoid hormones and certain other negative side effects from current prescription contraceptives. thecontraceptive methodCVcardiovascular risk factors (preexisting)• • Product Class Non-Hormonal Non-invasive Convenient Amphora* 28 Day Oral Contraceptives Extended Regimen Oral Contraceptives Hormone Releasing IUDs Copper IUD Implant Vaginal Ring Transdermal Patch * Investigational product in Contraceptionspermatozoa, or sperm as well as certain viral and bacterial pathogens. Amphora was developed to have acid-buffering (pH 3.5), bioadhesive,bio-adhesive, and viscosity-retaining properties to provide effective acidification of the male ejaculate in the vagina and to form a long-lasting layer of gel over the vaginal and cervical surfaces. Typically, the introduction of semen (pH = 7.2-8.0) into the vagina causes a rise in pH above 6.0 due to the alkalinity of the ejaculate, which neutralizes the normally acidic vaginal environment, and allows for the survival of sperm. Amphora acts as a vaginal contraceptiveprevents pregnancy by maintaining a normal vaginal pH (pH = 3.5-4.5) even in the presence of semen, inhibiting sperm from reaching the ovum to form a zygote. This buffering capacity is due to Amphora’s active pharmaceutical ingredients. Other MVP-R properties contributing to the contraceptive effectAmphora's mechanism of Amphoraaction are its capacity to reduce/inhibit cervical mucus penetration, toimmobilize sperm, maintain sufficient viscosity even upon dilution with the introduction of semen into the vagina and its bioadhesivebio-adhesive strength. After proper use ofEarly clinical testing indicated Amphora postcoital testing shows Amphora remains protective formay remain active when inserted up to 10 hours based on a lackprior to intercourse.
Amphora: (AMP001)®, a surfactant-based spermicidal gel containing 4% N-9,nonoxynol-9, which is currently available over-the-counter for use as a vaginal contraceptive. The primary endpoint of the trial was the six-month cumulative pregnancy rate. Secondary endpoints included local and systemic signs and symptoms reported by participants or observed upon medical examination, such as itching, burning, irritation, inflammation or lesions to the cervical or vaginal epithelia and vaginal infections. Trial Design and ImplementationDuring 2011 through 2014, the AMP001 Amphora Phase 3 clinical trial enrolled 3,389 women at approximately 7062 research centers located withinin the United States and Russia. It was anThis open-label, randomized, non-inferiority trial ofevaluated the repeated use of Amphora compared to Conceptrol over seven cycles of use.menstrual cycles. After completing the first seven cycles, some of the women randomized to Amphora continued for up to a total of 13 cycles.cycles (n=341). In a subset of women (75 in each treatment arm) the lower genital tract (cervix, vagina, and vulva) was observed and photographed by colposcopy. The subset was blinded to avoid possible observer bias. A second subset was also examined microbiologically to document any changes in the vaginal flora, particularly the onset of any infection by Results of AMP001 Phase 3 Clinical Trial the Modified Intent-to-Treat population, otherwise known as typical use (defined as trial subjects who had at least one episode of coitus without using the product correctly during the study and without any backup or emergency contraception), was approximately 10%.10.5% for Amphora, as compared to 10.0% for Conceptrol. For those subjects with perfect use (defined as trial subjects who used the product correctly at every episode of coitus within a given cycle), the cumulative pregnancy rate was approximately 4%.AMP001 Safety4.1% for Amphora, as compared to 4.2% for Conceptrol. In summary, Amphora met its primary endpoint of non-inferiority to Conceptrol when the combined United States and Russian data serious adverse event, or SAE, 11 were treated with Amphora (0.8%) and 19 were treated with Conceptrol (1.3%). The adverse event, or AE, reporting forThere were no SAEs reported in the 13-cyclecycle 8-13 extension did not identify additional SAEs; therefore, no subject treated with Amphora experienced an SAE with an additional six cycles of exposure to Amphora.phase. Significantly more subjects likedwere highly satisfied Amphora thanas compared to Conceptrol and significantly more Amphora users would use the product again if it were available (p<0.05 for both comparisons).The table below sets out the adverse events in the AMP001 Phase 3 clinical trial.Adverse events in greater than 2% of Amphora gel treated subjects in the AMP001 Phase 3 Clinical Trial in the seven-cycle study by decreasing order of frequency in all subjects:AmphoraConceptrolAll SubjectsSystem organ class(N=1458)(N=1477)(N=2935)Preferred termn(%)n(%)n(%)Total number (%) of subjects with at least one AE833 (57.1)857 (58.0)1690 (57.6)Urinary tract infection160 (11.0)193 (13.1)353 (12.0)Vaginitis bacterial176 (12.1)170 (11.5)346 (11.8)Vulvovaginal mycotic infection169 (11.6)168 (11.4)337 (11.5)Headache104 (7.1)80 (5.4)184 (6.3)Vulvovaginal pruritus60 (4.1)76 (5.1)136 (4.6)Nasopharyngitis79 (5.4)48 (3.2)127 (4.3)Vulvovaginal discomfort48 (3.3)53 (3.6)101 (3.4)Vulvovaginal candidiasis49 (3.4)46 (3.1)95 (3.2)Vulvovaginal burning sensation52 (3.6)41 (2.8)93 (3.2)Vaginal discharge44 (3.0)46 (3.1)90 (3.1)Dysmenorrhea34 (2.3)34 (2.3)68 (2.3)Influenza39 (2.7)20 (1.4)59 (2.0) Drug Cosmetic Act or FDCA, we submitted a new drug application, oran NDA for Amphora to the FDA for the proposed indication of prevention of pregnancy. The submission included, among other things, data from the initial Phase 3 clinical trial (AMP001) as well as other safety and efficacy information.or CRL,(CRL) was issued by the FDA on April 28, 2016. A CRL is issued if the agency determines that thean application cannot be approved in its present form and will describe all the specific deficiencies identified by the agency. A CRL will also recommend actions the applicant might take to place the application or abbreviated application in condition for approval.U.S.United States and Russian cohorts. Although the study met its primary endpoint when the combined U.S.United States and Russian data were analyzed per the statistical plan, theU.S.United States population. Additionally, the FDA excluded analysis data from certain cycles, specifically data from: cycle 0 (the time from enrollment until the subject’s first menstrual cycle); cycles that were <21 days or >42 days in duration; cycles past 196 days (the aggregate length of seven cycles of 28 days in duration); and cycles in which there was no intercourse.atduring which the FDA indicated a confirmatory efficacy trial focused on participants in North America would be required. After further consultation with the FDA, the FDA confirmed that a single-arm trial (non-comparative) would be sufficient to address the CRL clinical deficiency. All feedback received from the FDA was incorporated into a protocol for a single-arm trial which was submitted to the FDA on June 30, 2017 (AMP002)(AMPOWER).Amphora: AMP002 Confirmatory are conductingconducted a confirmatory,second, single-arm, Phase 3 trial entitled “A Single-Arm, Phase III, Open Label, Multicenter, Study in Women Aged 18-35 Years of the Contraceptive Efficacy and Safety of Amphora Contraceptive Vaginal Gel.” We refer to this trial as AMPOWER. AMPOWER or AMP002. This study was designed to enrollenrolled approximately 1,3501,400 women aged 18 to 35 at up to 115112 sites in the United States. The first subject enrolled in this trial on July 28, 2017, and enrollment was completed in February 2018.forof the study was the pregnancy rate over seven cycles of use (one cycle 21-35 days) as assessed by the Kaplan-Meier statistical method. Top-line data analysis demonstrates a cumulative pregnancy rate of 14.0% over seven cycles of use (95% CI 10.0, 18.0) in the mITT population (referred to as typical use), which meets the pre-determined endpoint of this trialclinical trial. This corresponds to an 86.0% efficacy rate.seven-cycle cumulative pregnancy rate. subset of the overall use or “typical” use population that includes all cycles in which the product was used. For a subject to qualify for the perfect use population, she had to indicate via her E-diary that she used the product correctly and without use of another contraceptive method for every act of intercourse for at least one cycle. The results demonstrate that when Amphora is used as directed, the efficacy is similar to other frequently used contraceptive methods.Amphora (N=1329) Preferred term n (%) Total number (%) of subjects with at least one AE 589 (44.3%) 34 (2.6%) 34 (2.6%) Urinary tract infection 72 (5.4%) 48 (3.7%) 263 (19.8%) 149 (11.2%) (n= 1384) Age at Enrollment (years) Mean 27.7 Median 28 Ethnicity, n (%) Hispanic or Latino origin 571 (41.3%) Not Hispanic or Latino origin 805 (58.2%) Not reported 8 (0.5%) Race, n (%) Asian 35 (2.5%) Black or African American 348 (25.1%) American Indian or Alaska Native 6 (0.4%) Native Hawaiian or Pacific Islander 2 (0.1%) White 955 (69.0%) Other 38 (2.7%) BMI (kg/m2) at screening Mean 28.8 Median 27.0 Min, Max 13.2, 110.5 our primarythe prevention of pregnancy outcome for efficacy and secondary safety outcomes, wethis trial also included an exploratory endpoint of sexual satisfaction. Since Amphora also has lubricant properties, we anticipate a positive result for the sexual satisfaction, outcome, which could be further explored in future studiestrials and potentially utilized in its labeling and marketing materials.materials for Amphora. We believe this is the first contraceptioncontraceptive registration trial to include sexual satisfaction as an outcome.European Unionor MAA,(MAA) upon submission to the EU. Scientific advice was previously sought in April 2016 from the Medical Products Agency of Sweden and the Agency of Medicine and Sanitary Products of Spain, but an MAA was not pursued due to a lack of resources to support a filing at that time. We have reinitiated the scientific advice process and plan to seek marketing authorization for Amphora in the EU through a decentralized procedure.U.S.,United States, the CDC reports thatreported there were 1.61.7 million new cases of chlamydia and approximately 468,000556,000 new cases of gonorrhea in 2016.2017. We believe this represents a significant commercial opportunity for Amphora.Pre-clinicalthat our MPT vaginal gelAmphora has the potential to suppress many of the pathogens responsible for sexually transmitted and commonly occurring bacterial infections while not affecting lactobacilli, a normal and beneficial bacterium found in a healthy vagina. WeTreatment No Treatment 2/29 (7%) 4/29 (14%) Gynol II 6/16 (38%) K-Y Plus 0/16 (0%) 1/16 (6%) Advantage-S 3/16 (19%) 3/16 (19%) Conceptrol 0/16 (0%) 0/16 (0%) Amphora 1 2 p < 0.05 vs. No Treatment 3 p < 0.001 vs. No Treatment 4 p < 0.01 vs. No Treatment Test Agent Test Agent No. Treatment PRO2000 (0.5%) 0/17 11/12 (91.7%) CAP gel 0/7 13/15 (86.7%) Cellulose sulfate 2/11 8/10 (80%) BufferGel 10/23 14/14 (100%) CarraGuard 3/20 13/17 (76.5%) T-PSS (5%) 0/17 11/12 (91.7%) Carbopol 1382 10/23 14/14 (100%) Methylcellulose 16/20 13/17 (76.5%) Amphora 1/17 13/15 (86.7%) Test Agent Number of gonorrhea strains inhibited/total number of strains tested Dilution of formulated agent 10 % 5 % 2.5 % 1.25 % 0.625 % PRO2000 6/7 4/7 2/7 0/7 0/7 CAP gel 6/7 0/7 0/7 0/7 0/7 Cellulose sulfate 1/7 1/7 1/7 0/7 0/7 BufferGel 7/7 3/7 0/7 0/7 0/7 CarraGuard 0/7 0/7 0/7 0/7 0/7 6/7 5/7 3/7 2/7 1/7 Carbopol 1382 0/7 0/7 0/7 0/7 0/7 Methylcellulose 0/7 0/7 0/7 0/7 0/7 Amphora 7/7 7/7 7/7 6/7 6/7 T-PSS =polysodium 4-styrene sulfonate advancing Amphora intocurrently conducting a double-blinded, placebo-controlled pivotal Phase 2b/32b trial to determineevaluate the extent to whichefficacy of Amphora for the gel preventsprevention of sexual transmission of two common STIs, urogenital chlamydia (primary endpoint) and gonorrhea (secondary endpoint) and intend. This trial is designed to conduct additional clinical trialsenroll 844 women 18 to determine whether the microbicide potential shown in pre-clinical results translates into protection for women. As45 years of January 2018, the first subjects are enrolledage at approximately 50 sites in the Phase 2b/3 trial.United States. Should this trial meet its primary endpoint, the FDA has indicated that it may be considered as one of two pivotal trials required for approval.FDA for the prevention of acquisition of urogenital chlamydia. A drug that receivesFDA. The FDA’s Fast Track designation will have opportunitiesprogram is intended to expedite developmentor facilitate the process of reviewing new drugs and review, such as more frequent interactions with the FDA andprovides eligibility for priority review. A priority review, designation means FDA’s goal is to act on the marketing application within 6 months of receipt compared with 10 months under standard review.designated as agranted QIDP designation by the FDA for the prevention of urogenital gonorrhea infection in women. A drug that receives QIDP designation may qualify foradditional five years of marketing exclusivity and is eligible for the FDA’s Fast Track program, intended to facilitate development and expedite review of drugs so an approved product can reach the market expeditiously. An additional benefit is that the program allows for a priority review, with a goal of FDA action on the NDA within six months.MPT Vaginal Gel for Recurrent Bacterial VaginosisThe prevalence of BV in the United States is estimated to affect 21 million women, or 29.2% of women ages 14 to 49,of reproductive age in the United States, and is considered to be the most common reproductive tract infection for women. Data suggests BV recurs in up to 58% of women ages 15 to 44.within the first 12 months of treatment. There are currently no FDA approvedFDA-approved products indicated for the reduction of recurrent BV.Pre-clinicalMPT vaginalinvestigational MVP-R gel product kills many of the microbes responsible for recurrent BV while not affecting lactobacilli, a normal and beneficial bacterium found in a healthy vagina.BV. The inhibitory mechanism comprises the MPT vaginal gel’sour BV product candidate’s buffered acidity and the presence of active pharmaceutical ingredients in the MPV vaginalMVP-R gel. Clinical studies are on-going to determine whether the anti-pathogen potential shown in the laboratory translates into protection for women.or IND,Application (IND) with the FDA in March 2016 to study the ability of our MPT vaginal gel for the reduction ofBV product candidate to reduce recurrent BV. Following submission of the IND, we conducted a Phase 1 trial (EVO-002) examiningto evaluate the ability of a single vaginal administration of the vaginal gelour BV product candidate at three different doses to reduce vaginal pH. The trial was completed in late 2016 and revealed that the highest dose of the MPT vaginal gelevaluated (5-gram) reduced vaginal pH for up to seven days following a single administration compared to placebo gel or no gel. We are currently designing a Phase 2b/32 trial to examine the ability of a 5-gram dose of our MPT vaginal gelBV product candidate compared to placebo gel to reduce recurrent BV over a 16-week intervention period.intendplan to implement a global strategy to commercialize Amphora.Amphora, if approved. In the United States, our plan is to build our own integrated sales and marketing infrastructure. Outside of the United States, we expect to leverage global pharmaceutical companies or other qualified potential partners to license commercialization rights or enter collaborations for the commercialization and distribution of Amphora.we plan to conductour planned pre-commercialization activities including:will include:theour anticipated commercialization of Amphora, launch, initiation of payer programs including the addition of medical science liaisons and national/key account managers, and the selection of third-party logistic provider(s); andthat the U.S.United States market is the largest commercial opportunity for our product candidates. If Amphora is approved for commercialization by the FDA, we intend to establish a commercial sales force to market Amphora directly to obstetricians and gynecologists, or OB/GYNs who write the majority of prescriptions for contraceptive products.or ACOG,(ACOG) reports there are approximately 36,000 fellows currently practicing in the United States. However, the top 30% of this group represents 85% of the contraceptive prescription volume. We intend to target the top 30% by deploying a sales force of approximately 85100 sales representatives.representatives and managers. Our directhealthcare provider segmentation project will aid in our targeting of those high volume potential providers whose attitudes suggest they will be early adopters based on their beliefs that the best form of birth control for women is one they will use. Evofem's sales forceteam will be complemented by print and digital advertising, social media campaigns, access programs, educational campaigns, and non-personal promotion campaigns targeting both consumers and healthcare providers.pre-launchpre-commercialization phase for Amphora, we intend to assemble an experienced team of key account managers and medical science liaisons expected to focus on ensuring key payer accounts, pharmacy benefit managers, key opinion leaders andLaunchOur pre- and post-launch commercialpost-commercialization activities are expected to include multi-channel marketing campaigns to raise brand awareness, including direct to consumerdirect-to-consumer and health care professional campaigns. These key initiatives will be supported by awareness campaigns in social media, online and print advertisements, paid and earned socialEx-U.S.aour MVP-R product candidate is approved for marketing in an individual market, we intend to establish regional and/or global partnerships by either sublicensing the commercialization rights or to entering into distribution agreements with one or more third parties for the commercialization of the applicable product candidate in that market.that covercovering approximately 70%80% of covered lives within the United States to better understand viable access and pricing strategies for Amphora. Overall, a majority of respondents were positive about the introduction of a new contraceptive method. These respondents cited the many unintended pregnancies, high costs associated with unwanted pregnancies, and the underlying limitations in the contraceptive category (i.e. the lack of non-hormonal options) as reasons a new contraceptive option is desirable. We aim to have approximately 60% of all commercial healthcare plans offering full access and complete coverage of Amphora for all theirthe reproductive aged women’s lives they are managing atby the end of the first year of commercialization of Amphora. This coverage is expected to build to approximately 85% to 90% at peak sales.strategytoand $200 for a monthly supply of a 12-applicator box (comparable to branded contraceptives), believing Amphora would ultimately offset other costs the payer may incur (i.e. unwanted pregnancies).We expect anycandidatescandidate, if approved, will depend in part on the extent to which the costs of the applicable product candidatesreimbursement for these products will be covered by healthcare plans,available from third-party payers, including government health programsadministration authorities, managed care organizations and private health insurers. Third-party payers decide which therapies they will pay for and establish reimbursement levels. Third-party payers in the United States such asoften rely upon Medicare coverage policy and Medicaid. The processpayment limitations in setting their own coverage and reimbursement policies. However, decisions regarding the extent of coverage and amount of reimbursement to be provided for determining whetherany product candidates we develop will be made on a healthcare plan willpayer-by-payer basis. One payer’s determination to provide coverage for a drug does not assure other payers will also provide coverage and adequate reimbursement for the drug. Additionally, a third-party payer’s decision to provide coverage for a therapy does not imply that an adequate reimbursement rate will be approved.is separate fromcandidates, in addition to the processcosts required to obtain FDA approvals. Third-party payer coverage may not be available to patients for setting the priceAmphora or any future product we may seek to commercialize. If third-party payers do not provide coverage and adequate reimbursement for Amphora or our other product candidates, healthcare providers may not prescribe them or patients may ask their healthcare providers to prescribe competing products with more favorable reimbursement.ratereductions. Consolidation among managed care organizations has increased the plan will pay for the product once coverage is approved. We are also aware many healthcare plans may limit coverage to specific products on an approved list, or formulary,negotiating power of these entities. Third-party payers increasingly employ formularies, which might not include all the approved products for a particular indication.indication, to control costs by negotiating discounted prices in exchange for formulary inclusion. We intend to target those healthcare plans managing the largest number of covered lives to achieve optimal access for our product portfolio.In March 2010, the ACA became law with the goals it was found that EU consumers were interested in the unique benefits of Amphora product profiles, especially since Amphora is non-hormonal. Contraceptive products are not reimbursed in all the EU member countries. For example, in Italy there is no coverage for contraceptives, in France and Spain, only oral contraceptives are generally covered, and in Germany, individual reimbursement policies apply.intendplan to outsource the manufacturing of Amphora (and our other potential product candidates) to third parties. Currently, we have contracted with Swiss-American CDMO, LLC in Carrollton, Texas, or Swiss-American,a third party to manufacture our clinical supplies of Amphora. Swiss-AmericanThis third party has agreed to manufacture Amphora and potential other product candidates in accordance with cGMPall applicable current good manufacturing practices (cGMP) regulations, as well as in compliance with all applicable laws and other relevant regulatory agency requirements for manufacture of pharmaceutical drug products and combination drug-device products.U.S.United States. This high-dose hormonal option remained the primary form of available contraception on the market until 1988 when the copper IUD was introduced, offering the first non-hormonalhormone-free option for birth control. As shown in the time line below, there was no notable innovation providing additional options in women’s reproductive health until 30 years after the introduction of “the pill,” when pharmaceutical companies introduced synthetic hormonal products with different hormonal delivery systems, including the hormonal IUD, implants, the patch, and vaginal ring.
would will grow the prescription birth control user market when considering the 16.8 million women who are currently at risk for pregnancy and using no form of contraception. Additionally, we expect Amphora toor LARC, comprised of(LARC), comprising IUDs, implants, and injectables, 3) short-term non-oral hormonal contraceptives, comprised of thecomprising weekly or monthly synthetic hormonal options including the patch and vaginal ring, and 4) over-the-counter, or OTC methods, dominated primarily by the condom.U.S.United States today. Birth control pills are marketed under a variety of brand names.names, and currently, there are only two promoted branded pills — Lo Lostrin® FE (Allergan) and Natazia® (Bayer). There are two main kinds of oral contraceptives — combination birth control pills, which contain estrogen and progestin, and the “mini pill”,pill,” which contains only progestin. Oral contraceptives typically must be taken on a regular or daily basis in order to be effective.$141$496 million.InjectablesThe primary injectable hormonal contraceptive on the market is Depo-Provera® offered by Teva Pharmaceutical Industries Ltd. Each injection provides protection for up to 12 to 14 weeks, but patients must receive injections once every 12 weeks to get full contraceptive protection. Depo Provera was introduced to the market in 1992 and has annual sales in the U.S. of approximately $211 million.
IUDsIUDsParagard® and has annual sales in the U.S. of approximately $290 million.Paragard. The hormonal IUD is principally offered under the brand names, Kyleena®, Skyla® and Mirena,®, a family of products from Bayer Pharmaceuticals, and hasPharmaceuticals. IUDs have annual sales in the U.S.North America of approximately $1.2$1.3 billion. All IUDs must be inserted or removed by a physician.thus making this method appealingwhich appeals to those who benefit from a passive form of birth control with no daily requirement to take a pill, howeverpill. However, many women have decided to remove their LARC due to the hormonal side effects they experience.Short-termNon-oral or VTE, due to hormonal exposure had a significant negative impact on the patch and led to label changes restricting utilization. Following the loss of exclusivity, Johnson & Johnson’s Janssen division exited women’s healthcare and contraception as a promotional category.hashad annual sales in 2017 in the U.S.United States of approximately $650$564 million. The ring is used for three weeks and then removed for a week during menses and a new hormonal vaginal ring is inserted. The efficacy for the vaginal ring is similar to hormonal oral contraception. Users of the vaginal ring report the same incidence of hormonal related side-effectsside effects as those using oral hormonal contraception.Over-the-Counter (OTC)® (Church & Dwight) and Durex® (Reckitt Benckiser) brands, with approximately six million women who depend on condom use as their only method of birth control. The market size in the U.S.United States for male condoms in 20162017 was over $900 million.Global Sales by Leading Contraceptive Companies:BayerMerckAllerganCooper
SurgicalChurch & DwightOral ContraceptiveNataziaLo Loestrin® FeShort-term Non-OralNuvaringIUD/ImplantKyleena, Mirena,SkylaNexplanonLilettaParagardOTCTrojan Condoms1)(1) those women seeking an alternative to hormonal contraception; and 2)(2) those women who are expected to utilize Amphora as added protection to their current form of birth control. Our market research has indicated that the hormone-free, on demand, woman-controlled aspect of Amphora makes it an attractive option across the entire competitive set.As discussed above, we entered into an Amended AgreementRestated License Agreementrestated our license agreement with Rush University dated March 27, 2014, or the(the Rush License Agreement,Agreement), pursuant to which Rush University granted us an exclusive, worldwide license of certain patents and know-how or the(the Rush Licensed IP,IP) related to our MPT vaginalMVP-R gel technology authorizing us to make, distribute and commercialize products and processes for any and all therapeutic, prophylactic and/or diagnostic uses, including, without limitation, use for female vaginal health and/or contraception. of such products or processes during the term of the agreement. Additionally, within one month of the end of each fiscal quarter until the date of first commercial sale of a product, we must provide Rush University with a written development report summarizing our product development activities since the prior such report, as well as any necessary adjustments to the plan of development.2017;2017, or until March 27, 2019; and (ii) in a given country as regards our rights in such country, upon sixty (60) days’ notice if, prior to March 27, 2022, we have not, in such country, engaged in certain specified activities in such country in an effort to exploit the products and processes covered by the licensed patents and technology in such country.We To date, we have not paid any royalties pursuant to the Rush License Agreement. However, to the extent an extension of the Rush License Agreement is required, we believe we have a strong and growing intellectual property portfolio. would be able to obtain such an extension on commercially reasonable terms.that we believe is important to our business, including seekingboth internationally and maintainingdomestically. We seek and maintain patents intended to cover our product candidates, and their methods of use, as well as any other inventions that are commercially important to the development of our business. We seek to obtain domestic and international patent protection, and endeavor to promptlyproperly file patent applications for new commercially valuable inventions. We also may rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection.2018, regarding our MPT technology,22, 2019, we own or have exclusively licensed approximately 27owned 29 issued patents and allowed applications in the U.S.United States and other countries and jurisdictions, and have approximately 29had 31 applications pending in the U.S.United States and other countries and jurisdictions. Furthermore, we own two pending Patent Cooperation Treaty applications that can be converted into national stage applications in U.S. and other countries and jurisdictions.Amphora,our MVP-R gel asset, which expire in 2021 and could be eligible for extensions to at least 2024 in the United States and to 2026 in certain European jurisdictions, if granted by those regulatory bodies. Further, we solely own multipleseveral patent application families relating to the composition and therapeutic use of Amphora,our MVP-R gel, which, upon grant,issue, would expire at the earliest in 2033. We believe that our licensed and solely owned non-hormonal contraceptivebirth control gel patents and pending patent filings,applications combined with our substantial know-how in this field, will continue to provide opportunities for us to establish a significant barrier to competitor entry into the market.as Amphora is a productwe commissioned an expert opinion in 2015 whose view was that acts locally in the vagina, we believe thatbioequivalence for our MVP-R gel would be difficult to show, thus making it potentially more difficult to develop a generic version of Amphora gel cannot be evaluated for bioequivalence with the comparative pharmacokinetic blood testing that is commonly used to establish bioequivalence of systemic generic drugs. The comparative clinical endpoint studies that are generally conducted to establish bioequivalence of a locally-acting generic drug would not likely be adequately sensitive for detecting differences in performance between the generic drug and its reference listed drug.any breach.these incidents. In addition, our trade secrets and know-how may otherwise become known or may be independently discovered by competitors. To the extent that our consultants, contractors or collaborators use intellectual property owned by third parties in their work for us, disputes may arise as to the rights in related or resulting intellectual property, including trade secret, know-how and inventions.ArrangementsOur current and future arrangements with healthcare professionals, principal investigators, consultants, third-party payers and customers are subjectmay expose us to broadly applicable fraud and abuse and other healthcare laws and regulations. Such restrictions under applicable federal and state healthcare laws and regulations, include but are not limited to the following:federalFederal Anti-Kickback Statute, among other things, prohibits persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federally funded healthcare programs such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate the statute in order to have committed a violation. In addition, the government may assert that a claim thatfederalFederal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;ActLaws — the federal civil and criminal false claims laws, including the False Claims Act, imposes criminal and civil penalties, which can be enforced by private citizens through civil whistleblower and qui tam actions, againstprohibit, among other things, individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;government.HIPAA, imposes criminal and civil liability forentities from executing a scheme to defraud any healthcare benefit program or for making any false statements relating to healthcare matters; as in the case of the federal healthcareFederal Anti-Kickback Statutes,Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate the statute in order to have committed a violation; additionally, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH) and their respective implementing regulations, impose certain obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information without appropriate authorization, on entities subject to the law, such as certain healthcare providers, health plans, and healthcare clearinghouses and their respective business associates that perform services for them that involve the creation, use, maintenance or disclosure of, individually identifiable health information;statuteStatutes prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services;services. which prohibits, subject to certain exceptions, physician referrals of Medicare or Medicaid patients to an entity providing certain “designated health services” if the physician or an immediate family member of the physician has any financial relationships, including compensation arrangements or ownership interests, with the entity;that entity.or the DHHS,(the DHHS) information related to physician payments and other transfers of value made to physicians and physicianteaching hospitals, as well as ownership and investment interests;interests held by physicians and their immediate family members.U.S.United States state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to healthcare providers and other healthcare providers or marketing expenditures, andexpenditures; some state laws require pharmaceutical companies to implement compliance programs and to track and report gifts, compensation and other remuneration provided to physicians, in addition to requiring drug manufacturers to report information related to payments to physicians and other healthcare providers or marketing expenditures and pricing information.Analogousinformation in some circumstances, many of whichand personal information. These laws differ from each other in significant ways and often are not pre-empted bywhile applying simultaneously with HIPAA, thus complicating compliance efforts. — FDA Processcomprisedcomprising of components from two or more regulatory categories (e.g., drug/device, device/biologic, drug/biologic). Each component of a combination product is subject to the requirements established by the FDA for that type of component, whether a new drug, biologic or device. To facilitate pre-market review of combination products, the FDA designates one of its centers to have primary jurisdiction for the pre-market review and regulation of the overall product based upon a determination by the FDA of the primary mode of action of the combination product. Amphora is subject to review by the FDA, and it is anticipated that Amphora will be regulated as a drug/device combination product underwith a drug mode of action that requires the submission and approval of an NDA standards.by the Center for Drug Evaluation and Research prior to marketing.pre-clinicalpreclinical laboratory tests, animal studies, and formulation studies, all performed in accordance with the FDA’s Good Laboratory Practice or GLP, regulations;Pre-clinicalpre-clinicalpreclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND, which must become effective before human clinical trials in the U.S.United States may begin and is required to be updated annually. An IND will automatically become effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions about issues such as the conduct of the trials as outlined in the IND.IND and imposes a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding FDA concerns or questions before clinical trials can proceed. Our first IND submitted in 2011 relates to Amphora for the prevention of pregnancy (AMP001). Our second IND relates to the MPT vaginal gel for the prevention of recurrentour BV product candidate (EVO-002). We have also been allowed to conduct a clinical trial relating to prevention of urogenital chlamydia and gonorrhea (AMPREVENCE) under this second IND, and the first subject was enrolled in this trial on January 23, 2018.or IRB,(IRB) for each institution where the trials will be conducted, and each IRB must monitor the trial until completion.completion; an IRB may halt a trial under its jurisdiction for safety reasons. Trial subjects must sign an informed consent form before participating in a clinical trial. Clinical testing also must satisfy extensive good clinical practice regulations and regulations for informed consent and privacy of individually identifiable information.pre-clinicalpreclinical studies and of the clinical trials, together with other detailed information, including information on the manufacture and composition of the drug, are submitted to the FDA in the form of an NDA requesting approval to market the product for one or more indications. An NDA must be accompanied by payment of a significant user fee to the FDA, and establishment and product fees are payable annually after a drug’s approval. Section 505(b)(1) and Section 505(b)(2) of the FDCA are the provisions governing the type of NDAs that may be submitted under the FDCA. Section 505(b)(1) is the traditional pathway for new chemical entities when no other new drug containing the same active pharmaceutical ingredient or active moiety, which is the molecule or ion responsible for the action of the drug substance, has been approved by the FDA. As an alternate pathway to FDA approval for new or improved formulations of previously approved products, a company may file a Section 505(b)(2) NDA. Section 505(b)(2) permits the submission of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference. TheDuring the sixty days after submission, the FDA reviews any NDA submitted to ensure that it is sufficiently complete for substantive review before the FDA accepts the NDA for filing. The FDA may request additional information rather than accept the NDA for filing. Even if the NDA is filed by the FDA, companies cannot be sure that any approval will be granted on a timely basis, if at all. The FDA may also refer the application to an appropriate advisory committee, typically a panel of clinicians, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendations of the advisory committee, but it typically follows such recommendations. We submitted our NDA for Amphora on July 2, 2015 via the 505(b)(2) regulatory pathway. No advisory committee was convened by the FDA on the first-round review and no advisory committee is expected upon resubmission of our NDA.We have used and intend to continue to use third-party manufacturers to produce active pharmaceutical ingredients for our products in clinical and commercial quantities, and for final, finished product, and future FDA inspections may identify compliance issues at the facilities of our contract manufacturers that may disrupt production or distribution, or require substantial resources to correct. In addition, discovery of problems with a product after approval may result in restrictions on a product, including withdrawal of the product from the market.enacted, otherwise known as the Hatch-Waxman Amendments.enacted. Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicantThe Hatch-Waxman Amendments permitA Section 505(b)(2) applicant may eliminate the applicantneed to rely uponconduct certain pre-clinicalpreclinical or clinical studies, if it can establish that reliance on studies conducted for an approved product.a previously-approved product is scientifically appropriate. The FDA may also require companies to perform additional studiestrials or measurements to support the change from the approved product. The FDA may then approve the new product for all or some of the label indications for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2) applicant. that the Section 505(b)(2) applicant is relying on studiestrials conducted for an already approved product, which is referred to as the Reference Listed Drug, the applicant is required to certify to the FDA concerning any listed patents in the FDA’s Orange Book publication that relate to the Reference Listed Drug. Specifically, the applicant must certify for all listed patents one of the following certifications: (i) the required patent information has not been filed by the original applicant; (ii) the listed patent already has expired; (iii) the listed patent has not expired, but will expire on a specified date and approval is sought after patent expiration; or (iv) the listed patent is invalid or will not be infringed by the manufacture, use or sale of the new product.Referenced Listed Drug has expired. Reference Listed Drug’s listed patents or that such patents are invalid is called a Paragraph IV certification. If the applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders for the Reference Listed Drug once the applicant’s NDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a legal challenge to the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of their receipt of a Paragraph IV certification automatically prevents the FDA from approving the Section 505(b)(2) NDA by imposing a 30-month automatic statutory injunction, which may be shortened by the court in a pending patent case if either party fails to reasonably cooperate in expediting the case. The 30-month stay terminates if a court issues a final order determining that the patent is invalid, unenforceable or not infringed. Alternatively, if the listed patent holder does not file a patent infringement lawsuit within the required 45-day period, the applicant’s NDA will not be subject to the 30-month stay.The Hatch-Waxman Amendments provide five years of data exclusivity for new chemical entities which prevents the FDA from accepting Abbreviated New Drug Applications and 505(b)(2) applications containing the protected active ingredient. The Hatch-Waxman Amendments also provide three years of exclusivity for applications containing the results of new clinical investigations (other than bioavailability studies) essential to the FDA’s approval of new uses of approved products such as new indications, delivery mechanisms, dosage forms, strengths, or conditions of use.Pricing and ReimbursementSales of products that we may market in the future, and our ability to generate revenues on such sales, are dependent, in significant part, on the availability and level of reimbursement from third-party payers such as state and federal governments, managed care providers and private insurance plans. If our products are approved by the FDA, we intend to work with payers to demonstrate the clinical benefits of our products over other delivery modalities to secure adequate and commercially favorable pricing and reimbursement levels.Healthcare Laws and Environmental Mattersor the PREA,(the PREA), an NDA or supplement to an NDA must contain data that are adequate to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA has indicated that Amphora is covered by the PREA, but the FDA may, on its own initiative or at the request of an applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. We have requested and were granted a partial waiver for pre-menarcheal females and all pediatric males, as these populations are not at risk of the PREApregnancy. Extrapolation of efficacy and safety data based on data in our NDA.Although we currently do not have any products on the market, we may be subject to additional healthcare regulation and enforcement by the federal government and by authorities in the United States and foreign jurisdictions in which we conduct business. Such laws include, without limitation, state and federal fraud and abuse laws such as anti-kickback statutes, physician self-referral prohibitions, and false claims laws, privacy and security, and the Sunshine Act, many of which may become more applicable to us if our product candidates are approvedadult populations is planned for commercialization. If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to it, we may be subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare programs and imprisonment, any of which could adversely affect our ability to operate our business and our financial results.or the FCPA,of 1977, as amended (the FCPA), which prohibits corporations and individuals from paying, offering to pay, or authorizing the payment of anything of value to any foreign government official, government staff member, political party, or political candidate to obtain or retain business or to otherwise influence a person working in an official capacity. We also may be implicated under the FCPA for activities by our partners, collaborators, contract research organizations, vendors or other agents.a Marketing Authorization Application, oran MAA, either under a centralized or decentralized procedure. The centralized procedure provides for the grant of a single marketing authorization by the European Commission that is valid for all EU member states, Iceland, Lichtenstein and Norway. The centralized procedure is compulsory for specific products, including for medicines produced by certain biotechnological processes, products designated as orphan medicinal products, advanced therapy products and products with a new active substance indicated for the treatment of certain diseases. For products with a new active substance indicated for the treatment of certain diseases and products that are highly innovative or for which a centralized process is in the interest of patients, the centralized procedure may be optional.one memberone-member state to assess the application (the reference member state) and specifically list other member states in which it wishes to obtain approval (concerned member states). Under this procedure, an applicant submits an application based on identical dossiers and related materials, including a draft summary of product characteristics, and draft labelling and package leaflet, to the reference member state and each concerned member state. The reference member state prepares a draft assessment report and drafts of the related materials within 210 days after receipt of a valid application which is then reviewed and approved commented on by the concerned member states. Within 90 days$1.0$1.07 billion, (3) the day we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million, as measured as of each June 30th,our most recently completed second fiscal quarter, and (4) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. We refer to the Jumpstart Our Business Startup Act of 2012 herein as the “JOBS Act,” and references herein to “emerging growth company” shall have the meaning associated with it in the JOBS Act.RisRisk Factors.k Factors.Except forAn investment in our securities involves a high degree of risk. Before deciding whether to invest in our securities, you should carefully consider the historicalrisks described below together with the information contained herein or incorporated by reference,included in this Annual Reportreport including our financial statements and the information incorporated by reference contains forward-looking statements that involve risksrelated notes and uncertainties. These statements include projections about our accounting and finances, plans and objectives for the future, future operating and economic performance and other statements regarding future performance. These statements are not guarantees of future performance or events. Our actual results may differ materially from those discussed here. Factors that could cause or contribute to differences in our actual results include those discussed in the following section as well as those discussed in Part II, Item 7 entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere throughout this Annual Report and in. If any other documents incorporated by reference into this Annual Report. You should consider carefully the following risk factors, together with all of the other information included or incorporated in this Annual Report. Each of these risk factors, either alone or taken together, could adversely affectrisks occur, our business, operating results and financial condition, as well as adversely affectresults of operations or cash flow could be harmed. This could cause the valuetrading price of an investment in our common stock.stock to decline, resulting in a loss of all or part of your investment. There may be additional risks that we do not presently know of or that we currently believe are immaterial which could also impair our business and financial position.Risks Related to Our BusinessWe have incurred losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.We are a development-stage biotechnology company with a limited operating history. Neothetics and Private Evofem each incurred net yearly losses since their respective inceptions. Private Evofem incurred net losses of $105.3 million and $66.7 million for the years ended December 31, 2017 and 2016, respectively. As of December 31, 2017, Private Evofem had an accumulated deficit of $307.3 million. Negative cash flows from our operations are expected to continue for the foreseeable future. Our utilization of cash has been and will continue to be highly dependent on our product development programs, particularly our programs for the development of our MPT vaginal gel and our lead product candidate, Amphora. Our cash expenses will be highly dependent on the product development programs we choose to pursue, the progress of these product development programs, the results of our pre-clinical studies and clinical trials, the cost, timing and outcomes of regulatory decisions regarding potential approval for our product candidate or any future product candidate we may choose to develop, the terms and conditions of our contracts with service providers and license partners, and the rate of recruitment of patients in our clinical trials. In addition, the continuation of our clinical trials, and quite possibly our entire business, will depend on results of upcoming clinical data analyses and our financial resources at the time. Failure to raise capital as and when needed, on favorable terms or at all, would have a negative impact on our financial condition and our ability to develop our product candidates.We have devoted substantially all of our financial resources to develop our product candidates, including conducting clinical trials and providing general and administrative support for our operations. To date, we have financed our operations primarily through the sale of equity securities. The amount of our future net losses will depend, in part, on the rate of our future expenditures and our ability to obtain funding through equity or debt financings, strategic collaborations or grants. Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk.We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future and our expenses will increase substantially if and as we:continue the clinical development of our MPT vaginal gel and our lead product candidate, Amphora;continue efforts to discover new product candidates;undertake the manufacturing of our product candidates or increase volumes manufactured by third parties;advance our programs into larger, more expensive clinical trials;initiate additional pre-clinical, clinical, or other trials or studies for our product candidates or any product candidates we may choose to develop in the future;seek regulatory and marketing approvals and reimbursement for our product candidates or any product candidates we may choose to develop in the future;establish a sales, marketing, and distribution infrastructure to commercialize any products for which we may obtain marketing approval and market for ourselves;seek to identify, assess, acquire, and/or develop other product candidates;make milestone, royalty or other payments under third-party license agreements;seek to maintain, protect, and expand our intellectual property portfolio;experience any delays or encounter issues with the development and regulatory approval of our product candidates such as safety issues, clinical trial accrual delays, longer follow-up for planned studies, additional major studies or supportive studies necessary to support marketing approval.Further, the net losses we incur may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance.Based on our cash balance, recurring losses since inception and inadequacy of existing capital resources to fund planned operations for a twelve-month period, we will, during the remainder of 2018, require significant additional funding to continue operations. If we are unable to raise additional funds when needed, we will not be able to continue development of our MPT vaginal gel or our lead product candidate, Amphora, or we will be required to delay, scale back or eliminate some or all of our development programs or cease operations. Any additional equity or debt financing that we are able to obtain may be dilutive to our current stockholders and debt financing, if available, may involve restrictive covenants or unfavorable terms. If we raise funds through collaborative or licensing arrangements, we may be required to relinquish, on terms that are not favorable to us, rights to some of our technologies or product candidates that we would otherwise seek to develop or commercialize. Moreover, if we are unable to continue as a going concern, we may be forced to liquidate our assets and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements.We have never generated any revenue from product sales and may never be profitable.We have no products approved for commercialization and have never generated any material amount of revenue from product sales. Our ability to generate revenue and achieve profitability depends on our ability, alone or with strategic collaborators, to successfully complete the development of, and obtain the regulatory and marketing approvals necessary to commercialize one or more of our current or future product candidates. We do not anticipate generating revenue from product sales until 2020. Our ability to generate future revenue from product sales depends heavily on our success in many areas, including, but not limited to:completing research and development of our MPT vaginal gel, Amphora, our lead product candidate, and one or more of our current or future product candidates;obtaining regulatory and marketing approvals for one or more of our current or future product candidates;manufacturing one or more product candidates and establishing and maintaining supply and manufacturing relationships with third parties that are commercially feasible, meet regulatory requirements and our supply needs in sufficient quantities to meet market demand for our product candidates, if approved;marketing, launching and commercializing one or more product candidates for which we obtain regulatory and marketing approval, either directly or with a collaborator or distributor;gaining market acceptance of one or more of our product candidates as treatment options;addressing any competing products;protecting, maintaining and enforcing our intellectual property rights, including patents, trade secrets and know-how;negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter;obtaining reimbursement or pricing for our MPT vaginal gel, our lead product candidate, Amphora, or one or more of our current or future product candidates that supports profitability; andattracting, hiring and retaining qualified personnel.Even if one or more of the product candidates that we develop is approved for commercial sale, we anticipate incurring significant costs associated with launching and commercializing any approved product candidate. We also will have to develop or acquire manufacturing capabilities or continue to contract with contract manufacturers in order to continue development and potential commercialization of our product candidates. If we are not able to generate revenue from the sale of any approved products, we may never become profitable.We are heavily reliant on our ability to access funding through capital market transactions. Due to our small public float, limited operating history and lack of revenue, it may be difficult and expensive for us to raise additional funds.We are heavily reliant on our ability to raise funds through the issuance of shares of our common stock or securities linked to our common stock. Our ability to raise these funds may be dependent on a number of factors, including the risk factors further described herein and the low trading volume and volatile trading price of our shares of common stock. The stocks of small cap companies in the biotechnologysector similar to us tend to be highly volatile. We expect that the price of our common stock will be highly volatile for the next several years. Even if we expand our portfolio of products and product candidates, we may never successfully commercialize or monetize our current product candidate or any future product candidate that we may seek to develop.As a result, we may be unable to access funding through sales of our common stock or other equity-linked securities. Even if we are able to access funding, the cost of capital may be substantial. The terms of any funding we are able to obtain may not be favorable to us and may be highly dilutive to our stockholders. We may be unable to access capital due to unfavorable market conditions or other market factors outside of our control. There can be no assurance that we will be able to raise additional capital when needed. The failure to obtain additional capital when needed would have a material adverse effect on our business.In orderMPT vaginal gel and our leadBV product candidate until we raise additional funds. If we are unable to raise additional funds when needed, we may be unable to continue development of Amphora, we must raise significant additional capital.may be required to delay, scale back or eliminate some or all our development programs, planned commercialization strategies or cease operations entirely. To the extent that we raise additional capital through the sale of equity, convertible debt or other securities convertible into equity, the ownership interest of our stockholders will be diluted, and the terms of these new securities may include liquidation or other preferences that adversely affect rights of our stockholders. Debt financing, if available at all, would likely involve agreements that includewith covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, making additional product acquisitions or declaring dividends. If we raise additional funds through strategic collaborations or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates or future revenue streams or grant licenses on terms that are not favorable to us. Moreover, if we are unable to continue as a going concern, we may be forced to liquidate our assets and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements.knowanticipate generating revenue from product sales until early 2020. Our ability to generate future revenue from product sales depends heavily on our success in many areas, including, but not limited to:funding if andcapital when necessaryneeded would have a material adverse effect on our business.entire portfolioplanned operations through April 2019. These resources will not be sufficient for us to complete the development of Amphora for prevention of STIs and our BV product candidatescandidate, and we must raise significant additional capital to meetcomplete the clinical trials required for these indications. To the extent we raise additional capital through the sale of equity, convertible debt or other securities convertible into equity, the ownership interest of our projected plans.stockholders will be diluted, and the terms of these new securities may include liquidation or other preferences that adversely affect rights of our stockholders. Debt financing, if available at all, would likely involve agreements with covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, making additional product acquisitions or declaring dividends. If we are unable to obtain funding on a timely basis,raise additional funds through strategic collaborations or licensing arrangements with third parties, we may be requiredhave to delay or discontinue one or more ofrelinquish valuable rights to our development programs or the commercialization of any product candidates or be unablefuture revenue streams or grant licenses on terms that are not favorable to expand our operations or otherwise capitalize on potential business opportunities, which could materially harm our business, financial condition, and results of operations.technology,MVP-R gel product candidates, identifying potential productsnew product candidates and undertaking pre-clinicalpreclinical and clinical studiestrials of our current product candidates. We have a limited operating history that makes it difficult to evaluate our business and prospects. Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of uncertainty. As a largely development stageclinical-stage company, we have not yet demonstrated our ability to obtain regulatory approvals, generate significant revenue or conduct biopharmaceutical marketing activities necessary for successful product commercialization. In addition, given our limited operating history, we may encounter unforeseen expenses, difficulties, complications, delays, and other known and unknown factors. Our likelihood of success must be evaluated in light of such challenges and variables associated with a clinical-stage biopharmaceutical product development company and we may not be successful in our commercialization efforts or may incur greater costs than expected, both of which would materially and adversely affect our business, results of operations or financial condition.The recently passed comprehensive tax reform bill could adversely affect our business and financial condition.On December 22, 2017, the President signed into law the “Tax Cuts and Jobs Act,” or TCJA, that significantly reforms the Internal Revenue Code of 1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on the deductibility of interest and net operating loss carryforwards, allows for the expensing of capital expenditures, and puts into effect the migration from a “worldwide” system of taxation to a territorial system. Our net deferred tax assets and liabilities will be revalued at the newly enacted U.S. corporate rate, and the impact, if any, will be recognized in our tax expense in the year of enactment. We continue to examine the impact this tax reform legislation may have on our business. The impact of this tax reform is uncertain and could be adverse. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential tax consequences of investing in our common stock.as a contraceptive.for prevention of pregnancy. Failure to develop Amphora as a contraceptivefor prevention of pregnancy would likely cause our business to fail.MPT vaginalMVP-R gel, from which we intend to create multiple product candidates. However, we will rely primarily on our lead product candidate, Amphora for use as a contraceptiveprevention of pregnancy for our commercial success. Amphora is currently the subject of an ongoingOur second Phase 3 clinical trial intended to demonstrate efficacy as a contraceptive.for prevention of pregnancy had its last patient exit the study on November 8, 2018, and we released top-line results from this trial on December 17, 2018. While we believe that our MPT vaginalMVP-R gel product candidate may also be useful in preventing other indications, currently our business depends almost entirely on the successful clinical development and regulatory approval of Amphora for use as a contraceptive,prevention of pregnancy, which may never occur. We intend to resubmit an NDA for Amphora for this indication in 2019, however the FDA may not approve Amphora for this indication and numerous factors may delay our ability to resubmit the NDA in a timely manner. We have never received a regulatory approval for any product. Accordingly, even ifEven though we arewere able to successfully complete our clinical trial for Amphora as a contraceptive,for prevention of pregnancy, we mayas a contraceptive,for prevention of pregnancy, which would have a material adverse effect on our business, financial position, results of operations and operations.abilityinability to develop our MPT vaginalMVP-R gel product candidates for additional indications could have an adverse effect on our business and our ability to successfully market Amphora as a contraceptive. that Amphora may also be useful in certain other indications and we are conducting a Phase 2b/32b clinical trial designed to assess the product candidate for the prevention of urogenital chlamydiaChlamydia trachomatis infection (chlamydia) in women and gonorrheafor the prevention of urogenital Neisseria gonorrhoeae infection (gonorrhea) in women. In addition, we are currently designing a Phase 2b/32 trial of our MPT vaginal gelBV product candidate for the reduction of recurrent BV.candidate. We do not know if we will successfully complete either of these clinical trials. Even if we do complete these clinical trials, there is no assurance that we will obtain regulatory approval of Amphora for the prevention of either chlamydia or gonorrhea or of our MPT vaginal gel for additional indications.BV product candidate. Such a failure could impede our ability to market Amphora as a contraceptivefor prevention of pregnancy or our BV product candidate because theseall our product candidates are based on the same active ingredients.ingredients and technology. Also, any failure to obtain regulatory approvals for additional indications will likely have a material adverse effect on the company’sour business, results of or financial condition and operations.futureother product candidate thatcandidates we may develop.theseour clinical trial sites obligating us to defend the sites against third party claims or reimburse thesethe sites should they incur certain costs or liability in connection with our clinical trials.andor other health related claims, we may incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in decreased demand for Amphora, our MPT vaginal gel and our leadBV product candidate, Amphoraor, as applicable,and any futureother product candidatecandidates we may develop, injury to our reputation, negative media attention and the diversion of our management’s time and attention from our product development and commercialization efforts to address claim related matters.itsour ability to identify, license, discover, develop or commercialize additional product candidates. Failure to identify additional product candidates would have a negative impact on our business and operations.continued clinical testing, potential approval and commercialization of our MPT vaginal gel as a contraceptive, as a possibleAmphora for prevention of pregnancy and for the preventative forof certain STIs and preventiondevelopment of recurrentour BV product candidate, the success of our business is also expected to depend in part upon our ability to identify, license, discover, develop or commercialize additional product candidates. We are seeking to license, or otherwise obtain, product and technology rights to a variety of products and product candidates in the field of women’s health, but there can be no assurance we will be able to do so, or do so on favorable terms. Research programs to identify new product candidates require substantial technical, financial and human resources. There are risks, uncertainties and costs associated with identifying, licensing and advancing product candidates through successful clinical development. We may focus our efforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful. Our research programs or licensing efforts may fail to yield additional product candidates for clinical development and commercialization for a number of reasons, including but not limited to the following:pre-clinicalpreclinical or clinical testing;sosuch that such a product may become unreasonable to continue to develop;that these candidates will ever be advanced successfully through clinical development. that any clinical trials will be conducted as planned or completed on schedule, if at all. In addition, certain of our product candidates are targeted toward pregnancy prevention and the prevention of certain infectioussexually transmitted diseases. Therefore, it may be especially difficult to recruit patients to participate in our clinical trials when doing so will require that patients to refrain from other methods of contraception and disease prevention. A failure of one or more clinical trials can occur at any stage of development. Events that may prevent successful or timely completion of clinical development include, but are not limited to:pre-clinical,preclinical, toxicology or other in vivoor in vitro data or to develop diagnostics capable of supporting the initiation or continuation of clinical trials;or CROs,(CROs) and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites;or IRB, approval at each clinical trial site; or CROs or other third parties to adhere to clinical trial requirements;guidelines;INDInvestigational New Drug Application or comparable foreign application on clinical hold;candidates;nonclinicalnon-clinical studies and/or clinical trials to show that the results obtained from such new formulation are consistent with previous results obtained. Clinical trial delays could also shorten any periods during which our products have patent protection and may allow competitors to develop and bring products to market before we do, which could impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.Contraception is a highly competitive healthcare niche. The success of Amphora and any other future contraceptive product candidate we may pursue will be related to our efficacy and safety outcomes during clinical trials.Today, there are a variety of hormonal and non-hormonal contraceptive options available to women, including oral contraceptive pills and intrauterine devices; newer hormonal contraceptive products including implants, injectables, vaginal rings, patches, and hormonal intrauterine systems; and non-hormonal methods such as female condoms, novel diaphragms, and new methods of female sterilization. Basedon our market research, clinical testing of Amphora may need to demonstrate efficacy for typical use of at least 80% to be commercially viable. Should Amphora fail to generate the safety and efficacy data expected, our business prospects would be materially damaged.that we would like to pursue and complete.that we may in the future choose to develop, through the regulatory and development processes. We may make incorrect determinations with regard toregarding the indications and clinical trials on which to focus theour available resources that we do have.resources. The decisions to allocate our research, management and financial resources towardtowards particular indications may not lead to the development of viable commercial products and may divert resources from better opportunities. Similarly, our decisions to delay or terminate development programs may also cause us to miss valuable opportunities.In order toTo obtain regulatory approval, we must complete our clinicalpreclinical studies and pre-clinicalclinical trials in compliance with the regulatory approval requirements of the FDA and any applicable and comparable foreign regulators. If our clinical trials of our product candidates fail to satisfactorily demonstrate safety and efficacy of our product candidates to the FDA and other comparable foreign regulators, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.pre-clinicalpreclinical development and clinical trials to demonstrate the safety and efficacy of our product candidates before we willmay be able to obtain these approvals.pre-clinicalpreclinical and clinical development successfully could result in additional costs to us and impair our ability to generate revenues. Moreover, if (1) we are required to conduct additional clinical trials or other nonclinical testing of our product candidates beyond the trials and testing that we currently contemplate, (2) we are unable to successfully complete clinical trials of our product candidates or other testing, (3) the results of these clinical trials or tests are unfavorable, uncertain or are only modestly favorable or (4) there are unacceptable safety concerns associated with our product candidates, we may:comprisedcomposed of both drug and device components and is considered a combination product by the FDA. It is a method of self-applied contraception that uses a pre-filled applicator to apply a semi-solid topicalbio-adhesive gel. The key active ingredient has been shown to be an active anti-inflammatory and anti-infective andthat works in combination with other active ingredients to stabilize the pH levels in the vagina without altering the vaginal microbiome, which results in both the inhibition and the immobilization of sperm. Other properties contributing to the contraceptivebirth control effect of Amphora are its capacity to reduce/inhibit cervical mucus penetration, its ability to maintain sufficient viscosity even on dilution, and its bioadhesivebio-adhesive strength.or CDER,(CDER) has responsibility for drug products, while the Center for Devices and Radiological Health or CDRH,(CDRH) has oversight responsibility for medical devices. Amphora previously underwent a request for designation process with the FDA that determined thatthe CDER would lead the review.review and that the product should be submitted for marketing authorization pursuant to an NDA. If the designation of the lead center were to be changed to CDRH, or if either division or the FDA Office of Combination Products were to institute additional requirements for the approval of Amphora, we could be required to complete clinical studiestrials with more patients and over longer periods of time than is currently anticipated or comply with regulatory requirements that are not currently anticipated. This would likely require us to raise additional funds and would cause us to miss anticipated timelines. The impact of either a change in lead agency center for pre-market review agency or the imposition of additional requirements for approval would be significant to us and would have a material adverse effect on the prospects for the development of Amphora, our business and our financial condition.studiestrials of our MPT vaginal gel product candidates or post marketing could have a material, adverse effect on our product development timeline or our ability to develop and market our MPT vaginalMVP-R gel product candidates, at all.MPT vaginal gel or our lead product candidate, Amphora,candidates or post marketing, the following events could materially and adversely affect our business:MPT vaginal gel and Amphora;fieldthe issuance of alerts to physicians and pharmacies;MPT vaginal gel and/or Amphora isproduct candidates are administered or to revise the labeling of the MPT vaginal gel and/or Amphora;studiestrials with more patients or over longer periods of time than anticipated;a risk minimization action plan,evaluation and mitigation strategies, which could result in substantial cost increases and have a negative impact on our ability to commercialize our MPT vaginal gel and/or Amphora;MPT vaginal gel and/or Amphora;MPT vaginal gel and/or Amphora;our MPT vaginal gel and/or Amphoraapproved products, if any, may decrease significantly;an approved productproducts, if any, off the market;MPT vaginal gel or our lead product candidate, Amphora, or any future product candidate we may seek to develop,candidates, or could substantially increase commercialization costs and expenses, which in turn could delay or prevent us from generating significant revenues from our MPT vaginal gel or Amphora sales or the sales from any future product candidate.MPT vaginalMVP-R gel our lead product candidate,candidates, including Amphora, or any other future product candidatecandidates we may develop, serious adverse events or side effects could require the product to be taken off of the market, may require the product to be packaged with safety warnings or may otherwise limit our sales of the product. MPT product candidates are approved, we will be subject to ongoing regulatory requirements with respect to manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing clinical trials and submission of safety, efficacy and other post-approval information, including both federal and state requirements in the United States and requirements of comparable foreign regulatory authorities.that quality control and manufacturing procedures conform to current good manufacturing practices or cGMP,(cGMP) regulations and corresponding foreign regulatory manufacturing requirements. As such,Accordingly, we and our contract manufacturers will be subject to continual review and inspections to assess compliance with cGMP and adherence to commitments made in any NDA submission to the FDA or any other type of domestic or foreign marketing authorization application. that we receive for any of our product candidates may be subject to limitations on the approved indicated uses for which the product candidate may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the product candidate. We will be required to report adverse reactions and production problems, if any, to the FDA and comparable foreign regulatory authorities. Any new legislation addressing drug safety issues could result in delays in product development or commercialization, or increased costs to assure compliance. If our original marketing approval for a product candidate was obtained through an accelerated approval pathway, we could be required to conduct a successful post-marketing clinical trial in order to confirm the clinical benefit for our products. An unsuccessful post-marketing clinical trial or failure to complete such a trial could result in the withdrawal of marketing approval.U.S.United States to market our MPT vaginal gel product candidates, or a future product candidate we may seek to develop, we may fail to receive similar approval outside the U.S.In order toUnited States.of the risks associated with obtaining FDA approval in the United States, as well as other risks. Further, we may be unable to obtain rights to the necessary clinical data and may be required to developgenerate our own. In addition, in many countries outside the United States, a new product must receive pricing and reimbursement approval prior to commercialization. This can result inoperationoperations and prospects.MPT vaginal gel product candidates depend,depends, in part, on published scientific literature and the FDA’s prior findings regarding the safety and efficacy of approved products based on data developed by others that the FDA may rely on in reviewing our NDA.FDCA.Federal Food, Drug and Cosmetic Act (the FDCA). Section 505(b)(2) of the FDCA permits the filing of aan NDA where at least some of the information required for approval comes from investigations that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted. The FDA interprets section 505(b)(2) of the FDCA, for the purposes of approving an NDA, to permit the applicant to rely, in part, upon published literature or the FDA’s previous findings of safety and efficacy for an approved product. The FDA may also require the applicant to perform additional clinical trials or measurements to support any deviation from the previously approved product. The FDA may then approve the new product candidate for all or some of the label indications for which the referenced product candidate has been approved, as well as for any new indication sought by the section 505(b)(2) applicant. The FDA may require an applicant’s product label however, may requireto have all or some of the limitations, contraindications, warnings or precautions included in the reference product’s label, including a black box warning, or may require the label to have additional limitations, contraindications, warnings or precautions.have submitted aplan to submit an NDA for Amphoraunder section 505(b)(2) of the FDCA and as such the NDA relied,it will rely, in part, on the FDA’s previous findings of safety and efficacy from investigations for approved products and published scientific literature for which we have not received a right of reference. We have previously had to certify against patents in the Orange Book covering reference products identified in our NDA and anticipate that we will have to make such certifications upon resubmission of our Amphora NDA, which could result in patent litigation and delay of approval for our NDA. In addition, notwithstanding the approval of many products by the FDA pursuant to section 505(b)(2) of the FDCA, over the last few years some pharmaceutical companies and others have objected to the FDA’s interpretation of section 505(b)(2) of the FDCA. If the FDA changes its interpretation of section 505(b)(2) of the FDCA, or if the FDA’s interpretation is successfully challenged in court, this could delay or even prevent the FDA from approving any section 505(b)(2) NDAs that we submit. Such a result could require us to conduct additional testing and costly clinical trials, which could substantially delay or prevent the approval and launchcommercialization of our product candidates.MPT vaginal gel product candidates and any future product candidate that we may develop.should we commercialize Amphora. We willin conducting clinical trials and face similar risks with any other future indications for our MPT vaginal gelcurrent product candidates or other product candidates that we may seek to develop or commercialize. If we cannot successfully defend ourselves against these product liability claims, we may incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in decreased demand for our MPT vaginal gel, Amphoraor, as applicable, any future product candidate we may develop,candidates, or, injury to our reputation, negative media attentionMPT vaginal gel and Amphora.product candidates. Such insurance may become increasingly expensive and difficult to procure. In the future, such insurance may not be available to us at all or may only be available at a very high cost and, if available, may not be adequate to cover all liabilities that we may incur. In addition, we may need to increase our liability insurance coverage in connection with the commercialization of our MPT vaginal gel, Amphoraor any other product candidate we may commercialize.candidates. If we are not able to obtain and maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise, our business could be harmed, possibly materially.aremay be stored at our and our manufacturers’ facilities pending their use and disposal. We cannot eliminate the risk of contamination, which could cause an interruption of our commercialization efforts, research and development efforts and business operations; environmental damage resulting in costly clean-up; and liabilities under applicable laws and regulations governing the use, storage, handling, and disposal of these materials and specified waste products. Although we believe that the safety procedures utilized by us and our third-party manufacturers for handling and disposing of these materials generally comply with the standards prescribed by these laws and regulations, we cannot guarantee that this is the case or eliminate the risk of accidental contamination or injury from these materials. In such an event, we may be held liable for any resulting damages and such liability could exceed our resources and state or federal or other applicable authorities may curtail our use of specified materials and/or interrupt our business operations. Furthermore, environmental laws and regulations are complex, change frequently, and have tended to become more stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance. We do not currently carry biological or hazardous waste insurance coverage.MPT vaginal gelproduct candidates, including our lead product candidate, Amphora, and other proprietary technologies we may develop, or if the scope of the patent protection we have or will obtain is not sufficiently broad, our competitors could develop and commercialize products and technology similar or identical to ours,our products and technology, and our ability to successfully commercialize Amphora, other MPT vaginal gelour product candidates,and other proprietary technologies we may develop may be adversely affected.MPT vaginal gel, our lead product candidate, Amphora,candidates and other proprietary technologies we may develop. We seek to protect our proprietary position by in-licensing intellectual property and filing patent applications in the United States and abroad relating to Amphora, our MPT vaginal gel, our AmphoraBV product candidate and other proprietary technologies we may develop. If we or our licensors are unable to obtain or maintain patent protection with respect to Amphora, our MPT vaginal gel, our AmphoraBV product candidate and other proprietary technologies we may develop, our business, financial condition, results of operations, and prospects could be materially harmed. that we will fail to identify patentable aspects of our research and development output in time to obtain patent protection. Although we enter into non-disclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of our research and development output, such as our employees, corporate collaborators, outside scientific collaborators, CROs, contract manufacturers, consultants, advisors, and other third parties, any of these parties may breach the agreements and disclose such output before a patent application is filed, thereby behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we or our licensors were the first to make the inventions claimed in any of our owned or licensed patents or pending patent applications, or that we or our licensors were the first to file for patent protection of such inventions.pharmaceuticalbiopharmaceutical companies generally is highly uncertain, involves complex legal and factual questions, and has been the subject of much litigation in recent years. As a result, the issuance, scope, validity, enforceability, and commercial value of our patent rights are highly uncertain. Our owned or in-licensed pending and future patent applications may not result in patents being issued which protect Amphoraour MVP-R gel product candidatecandidates and other product candidates or proprietary technologies that we may seek to develop or which effectively prevent others from commercializing competitive technologies and product candidates.that we own or in-license may be challenged, narrowed, circumvented, or invalidated by third parties. Consequently, we do not know whether our MPT vaginal gel, Amphoraproduct candidateor the USPTO,(the USPTO), or become involved in opposition, derivation, revocation, reexamination, post-grant and inter partes review, or interference proceedings or other similar proceedings challenging our owned or licensed patent rights. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate or render unenforceable, our owned or in-licensed patent rights, allow third parties to commercialize generic versions of our MPT vaginal gel, Amphoraproduct candidatecandidates and other proprietary technologies we may develop and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. Moreover, we, or one of our licensors, may have to participate in interference proceedings declared by the USPTO to determine priority of invention or in post-grant challenge proceedings, such as oppositions in a foreign patent office, that challenge our or our licensor’s priority of invention or other features of patentability with respect to our owned or in-licensed patents and patent applications. Such challenges may result in loss of patent rights, loss of exclusivity, or in patent claims being narrowed, invalidated, or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our MPT vaginal gel, Amphoraproduct candidatecandidates and other proprietary technologies we may develop. Such proceedings also may result in substantial cost and require significant time from our scientists and management, even if the eventual outcome is favorable to us.MPT vaginal gel and Amphoraproduct candidate,candidates, patents protecting such product candidates might expire before or shortly after such product candidates are commercialized. As a result, our intellectual property may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. Moreover, some of our owned and in-licensed patents and patent applications are, and may in the future be, co-owned with third parties. If we are unable to obtain an exclusive license to any such third-party co-owners’ interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products and technology. In addition, we may need the cooperation of any such co-owners of our patents in order to enforce such patents against third parties, and such cooperation may not be provided to us. Furthermore, our owned and in-licensed patents may be subject to a reservation of rights by one or more third parties. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.Our rights to develop and commercialize our MPT vaginal gel product candidates are subject, in part, to the terms and conditions of licenses granted to us by others.We are reliant upon licenses to certain patent rights and proprietary technology from third parties that are important or necessary to the development of our Amphora product candidate. For example, our license agreement with Rush University includes intellectual property rights to our MPT vaginal gel and our Amphora product candidate. This agreement requires us, as a condition to the maintenance of our license and other rights, to make milestone and royalty payments and satisfy certain performance obligations. Our obligations under this in-license agreement impose significant financial and logistical burdens upon our ability to carry out our business plan. Furthermore, if we do not meet such obligations in a timely manner, and, in the case of milestone payment requirements, if we were unable to obtain an extension of the deadlines for meeting such payment requirements, we could lose the rights to this proprietary technology, which would have a material adverse effect on our business, financial condition and results of operations.There is no assurance that the existing Rush License Agreement covering the rights related to our MPT vaginal gel or our Amphora product candidate will not be terminated due to a material breach of the underlying agreement. This would include a failure on our part to make the milestone and royalty payments, our failure to obtain applicable approvals from governmental authorities, or the loss of rights to the underlying intellectual property by any such licensors. There is no assurance that we will be able to renew or renegotiate a license agreement on acceptable terms if the agreement is terminated. We cannot guarantee that any license agreement will be enforceable. The termination of this license agreement or our inability to enforce our rights under this license agreement would materially and adversely affect our ability to commercialize our MPT vaginal gel and our Amphora product candidate.In addition, with respect to our MPT vaginal gel and our Amphora product candidate, Rush University has the right, in certain instances, to control the defense against any infringement litigation arising from the manufacture or development (but not the sale) of our MPT vaginal gel and our Amphora product candidate. While our license agreement with Rush University requires Rush University to indemnify us for certain losses arising from these claims, this indemnification may not be sufficient to adequately compensate us for any related losses or the potential loss of our ability to manufacture and develop our MPT vaginal gel or Amphora product candidate.In addition, the agreements under which we currently license intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could have a material adverse effect on our business, financial condition, results of operations, and prospects. Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product candidate, which could have a material adverse effect on our business, financial conditions, results of operations, and prospects.Our licensors may have relied on third-party consultants or collaborators or on funds from third parties such that our licensors are not the sole and exclusive owners of the patents we in-licensed. If other third parties have ownership rights to our in-licensed patents, they may be able to license such patents to our competitors, and our competitors could market competing products and technology. This could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects. MPT vaginal gel product candidates and other proprietary technologies we may develop in all countries throughout the world would be prohibitively expensive, and the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologiestechnology in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection but enforcement is not as strong as that in the United States. These products may compete with our products, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.biotechnologybiopharmaceutical products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our intellectual property and proprietary rights generally. In addition, some jurisdictions, such as Europe, Japan, and China, may have a higher standard for patentability than in the U.S.,United States, including for example the requirement of claims having literal support in the original patent filing and the limitation on using supporting data that is not in the original patent filing. Under those heightened patentability requirements, we may not be able to obtain sufficient patent protection in certain jurisdictions even though the same or similar patent protection can be secured in U.S.United States and other jurisdictions.that we develop or license.U.S.United States and non-U.S.non-United States patent agencies. The USPTO and various non-U.S.non-United States government agencies require compliance with several procedural, documentary, fee payment, and other similar provisions during the patent application process. We are also dependent on our licensors to take the necessary action to comply with these requirements with respect to our licensed intellectual property. In some cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. There are situations, however, in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in a partial or complete loss of patent rights in the relevant jurisdiction. In such an event, potential competitors might be able to enter the market with similar or identical products or technology, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.U.S.United States patent law could diminish the value of patents in general, thereby impairing our ability to protect our products. that other requirements for patentability are met, prior to March 2013, in the United States, the first to invent the claimed invention was entitled to the patent, while outside the United States, the first to file a patent application was entitled to the patent. After March 2013, under the Leahy-Smith America Invents Act or the(the America Invents Act,Act) enacted in September 2011, the United States transitioned to a first inventor to file system in which, assuming that other requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. A third party that files a patent application in the USPTO after March 2013, but before we could therefore be awarded a patent covering an invention of ours even if we had made the invention before it was made by such third party. This will require us to be cognizant going forward of the time from invention to filing of a patent application. Since patent applications in the United States and most other countries are confidential for a period of time after filing or until issuance, we cannot be certain that we or our licensors were the first to either (i) file any patent application related to our MPT vaginal gel, ourproduct candidates, including Amphora,product candidate and other proprietary technologies we may develop or (ii) invent any of the inventions claimed in our or our licensor’s patents or patent applications.of which could have a material adverse effect on our business, financial condition, results of operations, and prospects.U.S.United States Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. This combination of events has created uncertainty with respect to the validity and enforceability of patents, once obtained. Depending on future actions by the U.S.United States Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could have a material adverse effect on our existing patent portfolio and our ability to protect and enforce our intellectual property in the future. MPT vaginal gel product candidates and other proprietary technologies we may develop could be found invalid or unenforceable if challenged in court or before administrative bodies in the United States or abroad.MPT vaginal gel, ourproduct candidates, including Amphora, product candidate and other proprietary technologies we may develop, the defendant could counterclaim that such patent is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. Third parties may raise claims challenging the validity or enforceability of our owned or in-licensed patents before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post-grant review, inter partes review, interferenceMPT vaginal gel, ourproduct candidates, including Amphora,product candidate and other proprietary technologies we may develop. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we or our licensing partners and the patent examiner were unaware during prosecution. If a third party were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on Amphoraour product candidatecandidates and other proprietary technologies we may develop. Such a loss of patent protection would have a material adverse impact on our business, financial condition, results of operations, and prospects. MPT vaginal gel product candidates, our business may be materially harmed.U.S.United States patents may be eligible for limited patent term extensionPTE under the Drug Price Competition and Patent Term Restoration Action of 1984 or the(the Hatch-Waxman Amendments.Amendments). The Hatch-Waxman Amendments permit a patent extension term, or PTE of up to five years as compensation for patent term lost during the FDA regulatory review process. A patent term extensionPTE cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent may be extended and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. Similar patent term restoration provisions to compensate for commercialization delay caused by regulatory review are also available in certain foreign jurisdictions, such as in Europe under Supplemental Protection Certificate or the SPC.patent term extensionPTE on the patents licensed from Rush University.University, which currently expire in 2021. However, we may not be granted an extension, such as PTE for the U.S.United States patent and SPC for the European patents because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents, or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than our request. If we are unable to obtain patent term extensionPTE or the term of any such extension is shorter than what we request, our competitors may obtain approval of competing products following our patent expiration, and our business, financial condition, results of operations, and prospects could be materially harmed.MPT vaginal gel product candidates are dependent on third parties.MPT vaginal gel and Amphoraproduct candidate,candidates, there may be times when the filing and prosecution activities for patents relating to our product candidate are controlled by our licensors or collaboration partners. If any of our current or future licensing or collaboration partners fail to prosecute, maintain and enforce such patents and patent applications in a manner consistent with the best interests of our business, including by payment of all applicable fees for patents covering our product candidate, we could lose our rights to the intellectual property or our exclusivity with respect to those rights, our ability to develop and commercialize our product candidate may be adversely affected and we may not be able to prevent competitors from making, using and selling competing products. In addition, even where we have the right to control patent prosecution of patents and patent applications we have licensed to and from third parties, we may still be adversely affected or prejudiced by actions or inactions of our licensees, our licensors and their counsel that took place prior to the date upon which we assumed control over patent prosecution.Amphoraour product candidatecandidates and other proprietary technologies we may develop. Litigation may be necessary to defend against these and other claims challenging inventorship or our or our licensor’s ownership of our owned or in-licensed patents, trade secrets or other intellectual property. If we or our licensors fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to Amphoraour product candidatecandidates and other proprietary technologies we may develop. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to managementMPT vaginal gel, ourproduct candidates, including Amphora,product candidate and other proprietary technologies we may develop, we also rely on trade secrets and confidentiality agreements to protect our unpatented know-how, technology, and other proprietary information and to maintain our competitive position. With respect to our MPT vaginal gel and our Amphora product candidate,candidates, we considertheour trade secrets and know-how in connection with our MPT vaginal gel and our Amphoraproduct candidatecandidates and other proprietary technology we may develop over time may be disseminated within the industry through independent development, the publication of journal articles describing the methodology, and the movement of personnel with scientific positions in academic and industry. that we have entered into such agreements with each party that may have or have had access to our trade secrets or proprietary technology and processes. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive, and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent them from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor or other third party, our competitive position would be materially and adversely harmed.Amphoraa product candidate and other proprietary technologies we may develop. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.MPT vaginalMVP-R gel our Amphoraproduct candidate and other proprietary technologies we may develop.candidates. Other pharmaceutical companies and academic institutions may also have filed or are planning to file patent applications potentially relevant to our business. In order toTo avoid infringing these third-party patents, we may find it necessary or prudent to obtain licenses to such patents from such third-party intellectual property holders. However, we may be unable to secure such licenses or otherwise acquire or in-license any compositions, methods of use, processes, or other intellectual property rights from third parties that we identify as necessary for our MPT vaginalMVP-R gel our Amphoraproduct candidatecandidates and other proprietary technologies we may develop. The licensing or acquisition of third-party intellectual property rights is a competitive area, and several more established companies may pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive or necessary. These established companies may have a competitive advantage over us due to their size, capital resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow it to make an appropriate return on our investment or at all. If we are unable to successfully obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights we have, we may have to abandon development of the relevant program or product candidate, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.pharmaceuticalbiopharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants, and advisors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these individuals have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such individual’s current or former employer. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuableMPT vaginal gelproduct candidates and other proprietary technologies we may develop. field of contraceptive and/or anti-STDs vaginal gelanti-STIs market is competitive and dynamic. Due to the significant research and development activities that isare taking place by several companies, including us and our competitors, in this field, the intellectual property landscape is in flux, and it may remain uncertain in the future. There may be significant intellectual property related litigation and proceedings, in addition to the ongoing interference proceedings, relating to our owned and in-licensed, and other third party, intellectual property and proprietary rights in the future.pharmaceuticalbiopharmaceutical industries, as well as administrative proceedings for challenging patents, including interference, derivation and reexamination proceedings before the USPTO or oppositions and other comparable proceedings in foreign jurisdictions. As discussed above, recently, due to changes in United States law referred to as patent reform, new procedures including inter partes review and post-grant review have been implemented. As stated above, this reform adds uncertainty to the possibility of challenge to our patents in the future.U.S.United States and foreign issued patents and pending patent applications owned by third parties exist in the fields in which we intend to commercialize Amphora and our MPT vaginal gelBV product candidate and in which we are developing other proprietary technologies. As the biotechnology and pharmaceuticalbiopharmaceutical industries expand and more patents are issued, the risk increases that our product candidate may give rise to claims of infringement of the patent rights of others. We cannot assure you that our MPT vaginal gel, our Amphora product candidatecandidates and other proprietary technologies we may develop will not infringe existing or future patents owned by third parties. We may not be aware of patents that have already been issued and that a third party, for example, a competitor in the fields in which we are developing our product candidate, might assert are infringed by our current or future product candidate,candidates, including claims to compositions, formulations, methods of manufacture or methods of use or treatment that cover our product candidate. It is also possible that patents owned by third parties of which we are aware, but which we do not believe are relevant to our MPT vaginal gel, our Amphoraproduct candidatecandidates and other proprietary technologies we may develop, could be found to be infringed by our product candidate. In addition, because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our product candidate may infringe.technologiestechnology or the manufacture, use or sale of our MPT vaginal gel or our Amphoraproduct candidatecandidates infringes upon these patents. In the event that any third-partya third party claims that we infringeinfringed their patents or that we are otherwise employing their proprietary technology without authorization and initiates litigation against us, even if we believe such claims are without merit, a court of competent jurisdiction could hold that such patents are valid, enforceable and infringed by our technologiestechnology or product candidate. In this case, the holders of such patents may be able to block our ability to commercialize the applicable product candidate or technology unless we obtain a license under the applicable patents, or until such patents expire or are finally determined to be held invalid or unenforceable. Such a license may not be available on commercially reasonable terms or at all. Even if we are able to obtain a license, the license would likely obligate us to pay license fees or royalties or both, and the rights granted to us might be nonexclusive, which could result in our competitors gaining access to the same intellectual property. If we are unable to obtain a necessary license to a third-party patent on commercially reasonable terms, we may be unable to commercialize our product candidate or technologiestechnology or such commercialization efforts may be significantly delayed, which could in turn significantly harm our business.technologies.technology. In addition, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties and/or redesign our infringing products or technologies,technology, which may be impossible or require substantial time and monetary expenditure. In that event, we would be unable to further develop and commercialize our product candidate or technologies,technology, which could harm our business significantly. Further, we cannot predict whether any required license would be available at all or whether we would be available on commercially reasonable terms. In the event that we could not obtain a license, we may be unable to further develop our product candidate and commercialize our product and product candidate, if approved, which could harm our businessinto licenses on acceptable terms.that a patent owned or in-licensed by us is invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our owned and in-licensed patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our owned or in-licensed patents at risk of being invalidated or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.in an effort to identify a suitable substitute name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA. Furthermore, in many countries, owning and maintaining a trademark registration may not provide an adequate defense against a subsequent infringement claim asserted by the owner of a senior trademark.technologiestechnology without infringing our owned or licensed intellectual property rights;suchthese third parties, including failure to successfully perform and comply with regulatory requirements, could negatively impact our business and our ability to develop and market Amphora and potential futureour product candidates, and our business could be substantially harmed.Swiss-American, has only produced a small quantity of our MPT vaginal gelproduct candidates for clinical testing.purposes, and has not previously manufactured prescription drug products and will need to successfully pass a pre-approval inspection by FDA during review of any NDA resubmission for Amphora. Furthermore, we have only a single source of supply for some of the key raw materials and components of our MPT vaginalMVP-R gel product candidates, and while we believe we would be able to obtain supplies through alternative sources if needed, alternate sources of supply may not be readily available.MPT vaginal gel or any of our other future products or product candidates we may seek to develop, which must be made in accordance with relevant regulations and includes,including, among other things, quality control, quality assurance, compliance with cGMP and the maintenance of records and documentation. In the future, it is possible that our suppliers or manufacturers may fail to comply with FDA regulations, the requirements of other regulatory bodies or our own requirements, allany of which would result in suspension or prevention of commercialization and/or manufacturing of our products or product candidates, including our MPT vaginal gel and our lead product candidate, Amphora,Amphora; suspension of ongoing research,research; disqualification of data or other enforcement actions such as product recall, injunctions, civil penalties or criminal prosecutions against us. Furthermore, we may be unable to replace any supplier or manufacturer with an alternate supplier or manufacturer on a commercially reasonable or timely basis, or at all.studiestrials or commercialization. We might be unable to find alternative suppliers or manufacturers with FDA approval, of acceptable quality, and that are able to supply products/ingredients in the appropriate volumes and at an acceptable cost. The long transition periods necessary to switch manufacturers and suppliers would significantly delay our timelines, which would materially adversely affect our business, financial conditions, results of operationoperations and prospects.Contractcontract manufacturers may not be able to execute our manufacturing procedures appropriately;Manufacturersmanufacturers are subject to ongoing periodic unannounced inspectioninspections by the FDA and corresponding state agencies to ensure strict compliance with cGMPs and other government regulations and corresponding foreign standards, and we do not have control over third-party manufacturers’ compliance with these regulations and standards;agreementagreements with us.of time to investigate and remedy the contamination. We cannot be assured that any stability or other issues relating to the manufacture of our product candidates will not occur in the future. Additionally, our manufacturers may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments. If our manufacturers were to encounter any of these difficulties, or otherwise fail to comply with their contractual obligations, our ability to provide our product candidates to patients in clinical trials would be jeopardized.jeopardized and our ability to distribute any approved products would be harmed. Any delay or interruption in the supply of clinical trial supplies could delay the completion of clinical trials, increase the costs associated with maintaining clinical trial programs and, depending upon the period of delay, require us to commence new clinical trials at additional expense or terminate clinical trials completely.TheOur inability to identify, or enter into an agreement with, any such third-party distributor, would likely have a material adverse effect on our business and operations.guarantyguarantee that we will be able to enter into any such distribution agreement on commercially reasonable terms, or at all. If we were to outsource product distribution, including the distribution of Amphora or any future product candidatecandidates or product, this outsourcing would also be subject to uncertainties related to such distribution services, including the quality of such distribution services. For example, distributors may not have the capacity to supply sufficient product if demand increases rapidly. Further, we would be dependent on the distributors to ensure that the distribution process accords with relevantapplicable foreign and United States regulations, which includes,include, among other things, compliance with current good documentation practices, the maintenance of certain records, and documentation and compliance with other regulations, including, without limitation, the FCPA. Failure to comply with these requirements could result in significant remedial action, including improvement ofenforcement action requiring distributors to implement physical changes or improvements to their facilities, suspension of distribution or recall of product. Additionally, any failure by us to forecast demand for finished product, including Amphora, and failure by us to ensure our distributors have appropriate capacity to distribute such quantities of finished product, could result in an interruption in the supply of certain products and a decline in sales of that product. Further, third-party distributors may not perform as agreed or may terminate their agreements with us. Any significant problem that our distributors experience could delay or interrupt our sale of products in the applicable jurisdiction until the applicable distributor cures the problem or until we identify and negotiate an acceptable agreement with an alternative distributor, if one is available. Any failure or delay in distributing products would likely have a negative impact on our business and operations.third-partiesthird parties for the execution of our development programs for our MPT vaginal gel product candidates and our potential future product candidates. Failure of these third parties to provide services of a suitable quality and within acceptable timeframestime frames may cause the delay or failure of our development programs.In terms of Amphora, weWe have engaged PAREXEL International Corporation asa single CRO to run substantially all aspects of the AMPOWERour clinical trial.trials. We also intend to engage a CRO for all future clinical trial requirements needed to file for regulatory approvals. There is no assurance that such organizations or individuals will be able to provide the functions, tests or services as agreed upon, or to the requisite quality. We will rely on the efforts of these organizations and individuals and could suffer significant delays in the development of our product or processes should they fail to perform as expected.MPT vaginal gel product candidatescurrent or any future product candidates may be delayed, prevented or cost significantly more than expected, all of which would have a material adverse effect on our business, financial conditions, results of operationoperations and prospects.studies,trials, the collaborator’s history of regulatory compliance, the likelihood of approval by regulatory authorities, the potential market for the product, the costs and complexities of manufacturing and delivering such products to customers, the potential of competing products, the strength of the intellectual property and industry and market conditions generally. The collaborator may also consider alternative products or technologies for similar indications that may be available to collaborate on with one of our competitors and whether such collaboration could be more attractive than the one with us for our products or product candidates.have tomust perform under these indemnification provisions, it could have a material adverse effect on our business, financial condition and results of operations.the good faith performance of their services.We currently have limited marketing and sales experience. launchedcommercialized and sold other pharmaceutical products, including contraceptives, in the past while employed at other companies, we have no experience selling and marketing our product candidates, and we currently have no marketing or sales organization. To successfully commercialize any products that may result from our development programs, we will need to find one or more collaborators to commercialize our products or invest in and develop these capabilities, either on our own or with others, which would be expensive, difficult and time consuming. Any failure or delay in the timely development of our internal commercialization capabilities could adversely impact the potential for success of our products.pharmaceuticalbiopharmaceutical companies and our operating results will suffer if we fail to compete effectively.pharmaceuticalbiopharmaceutical industries are intensely competitive. Significant competition among various contraceptive products already exists. Existing products have name recognition, are marketed by companies with established commercial infrastructures and are marketed with greater financial, technical and personnel resources than us. In order towe have. To compete and gain market share, any new product will need to demonstrate advantages in efficacy, convenience, tolerability or safety. In addition, new products developed by others could emerge as competitors to Amphora, if approved.it is approved for our lead indication, the prevention of pregnancy. Such products could offer an alternative form of non-hormonal contraceptive that provides protection over longer periods of time. If we are not able to compete effectively against our current and future competitors, our business will not grow and our financial condition and operations will suffer.plc, Teva Pharmaceutical Industries Ltd.PLC, Pfizer Inc., Bayer AG, Johnson & Johnson, Cooper and Mylan Inc. Additionally, several generic manufacturers currently market and continue to introduce new generic contraceptives. There are other contraceptive product candidates in development that, if approved, would potentially compete with Amphora, including hormonal patches and hormonal vaginal rings. MPT vaginal gel product candidates and any of our future potential product candidates, may not gain acceptance among physicians, patients or the medical community, thereby limiting our potential to generate revenue, which will undermine our future growth prospects. MPT vaginal gel, our lead product candidate, Amphora, or any of our future product candidates are approved for commercial sale by the FDA or other regulatory authorities, the degree of market acceptance of any new product by physicians, health care professionals and third-party payers will depend on a number of factors, including:orand adequate reimbursement;uninsured consumers, without third-party insurance coverage and adequate reimbursement, to pay for the product;our MPT vaginal gelany product candidatescandidate that we may license, develop or sell does not provide a benefit over currently available options, that product candidate is unlikely to achieve market acceptance and we will not generate sufficient revenues to achieve profitability.our MPT vaginal gel product candidatesAmphora or any future contraceptive product candidate we may seek to develop will depend on the availability of contraceptive alternatives and women’s preferences, in addition to the market’s acceptance of this specific methodour new form of contraception. our MPT vaginal gel, Amphora or any other future contraceptive product candidate we may seek to develop will depend upon the contraceptive market as well as market acceptance of this alternative method.our new form of prevention of pregnancy. Risks related to market acceptance include, among other things:ACA,Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively the ACA) and its effect on pharmaceutical coverage, reimbursement and pricing, and the birth control mandate;• Amphoraas a contraceptive.If one or more of these risks occur it could reduce the market potential for our MPT vagina gel, Amphora or any future contraceptive product we may seek to develop, and place pressure on our business, financial condition, results of operationoperations and prospects.continueexpect to expectcontinue to rely, on market research conducted on our behalf to evaluate the potential commercial acceptance of Amphora, our MPT vaginal gelBV product candidatescandidate, and other future product candidates.candidatecandidates we may develop.The commercial success of our MPT vaginal gel product candidates and any future product candidates will depend in significant measure on the label claims that the FDA or other regulatory authorities approve for the product.The commercial success of our MPT vaginal gel, our lead product candidate, Amphora, and any of our future product candidates will depend in significant measure upon our ability to obtain approval from the FDA or other regulatory authorities of labeling describing a product candidate’s expected features or benefits. Failure to achieve approval from the FDA or other regulatory authorities of product labeling containing adequate information on features or benefits will prevent or substantially limit our advertising and promotion of such features in order to differentiate Amphora or any future product candidate from those products that already exist in the market. This failure would have a material adverse impact on our business, financial condition, results of operation and prospects.U.S.United States market that is made up of generic products has been increasing over time. In 2005, generic contraceptive products held 47% of prescription volume and 34% of sales and, by 2011, those values had risen to 68% and 44%, respectively. ForThis trend is consistent in the year ended December 31, 2016, approximately 83%women’s health segment, as well, where many of the prescription volumemost popular oral contraceptive pills (OCP) brands have experienced genericization. Currently, only two branded OCPs remain and approximately 43% of sales of combined hormonal contraceptives in the United States were generated by generic products. Ifboth have a relatively low market share. Assuming this trend continues, it may be more difficultchallenging to introduce Amphora, if approved, or any future approved contraceptive product candidate we may develop, as a branded contraceptive, at a price that will maximize our revenue and profits. Also, there may be additional marketing costs to introduce Amphora in order to overcome the trend towards generics and to gain access to reimbursement by payers. If we are unable to introduce Amphora or any future approved contraceptive product candidate at a price that is commensurate with that of current branded contraceptive products, or we are unable to gain reimbursement from payers for Amphora, or if patients are unwilling to pay any price differential between Amphora and a generic contraceptive product, our revenues will be limited.thatfor health insurance plans to cover and reimburse FDA-cleared or approvedFDA-approved contraceptive products without cost sharing, which could reduce demand for products such as Amphora. Even if Amphora is approved for commercialization, our management expects that our success will be dependent on the willingness or ability of patients to pay out-of-pocket should they not be able to obtain third-party reimbursement or should such reimbursement be limited.andif it is approved for the prevention of pregnancy, or if reimbursement is available, the amount of any such reimbursement. The ACA and subsequent regulations enacted by the DHHSUnited States Department of Health and Human Services (the DHHS) require, under certain conditions, health plans to provide coverage for women’s preventive care, including all forms of FDA-cleared or approvedFDA-approved contraception, without imposing any cost sharing on the plan beneficiary. These regulations ensure that women who wish to use an approved form of contraception may request it from their doctors and their health insurance plan must cover all costs associated with such products.products, under certain conditions. However, after the 2016 election, the U.S. Federal Government isTrump administration and Congress are attempting to repeal or repeal and replace the ACA and corresponding regulations, as more fully described below, which would likelycould eliminate the requirement for health plans to cover women’s preventive care without cost sharing. Even if the ACA is not repealed, the DHHS regulations to specifically enforce the preventive health coverage mandate could be repealed or modified under the Congressional Review Act.Trump Administration, which in 2017 altered the mandate to allow certain employers and insurers to opt-out of birth control coverage for religious or moral reasons. We cannot predict the timing or impact of any future rule making or changes in the law. Any repeal or elimination of the preventive care coverage rules would mean that women seeking to use prescribed forms of contraceptives may have to pay some portion of the cost for such products out-of-pocket, which could deter some women from using prescription contraceptive products, such as Amphora, at all. As a result, we expect that our success, to some degree, will be dependent on the willingness of patients to pay out-of-pocket for Amphora in the event that their third-party payer either they dodoes not have insurancecover and reimburse Amphora or their insurance requires payment of a portion of Amphora by the patient, thus increasing the patient’s overall cost to use Amphora. This could reduce market demand for Amphora or any future product candidates we may seek to develop, if and when they receive FDA approval, which would have a material adverse effect on our business, financial conditions, and prospects. that we are successful in obtaining regulatory approval to market our MPT vaginal gel product candidates or a future product in the United States, revenues may be adversely affected if the product fails to obtain insurance coverage orand adequate reimbursement from third-party payers and administrators in the United States.administrators, including state Medicaid programsestablish reimbursement levels. Third-party payers in the United States often rely upon Medicare coverage policy and Medicare, have recently beenpayment limitations in setting their own coverage and reimbursement policies. However, decisions regarding the extent of coverage and amount of reimbursement to be provided for any product candidates that we develop will be made on a payer-by-payer basis. One payer’s determination to provide coverage for a drug does not assure that other payers will also provide coverage and adequate reimbursement for the drug. Additionally, a third-party payer’s decision to provide coverage for a therapy does not imply that an adequate reimbursement rate will be approved.devices.devices, in addition to questioning their safety and efficacy. We may incur significant costs to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of our product candidates, in addition to the costs required to obtain FDA approvals. Third-party insurancepayer coverage may not be available to patients for Amphora or any future product we may seek to commercialize. If such government and other third-party payers do not provide adequate coverage and adequate reimbursement for Amphora, our BV product candidate or such products,our other product candidates, if approved, healthcare providers may not prescribe them or patients may ask their healthcare providers to prescribe competing products with more favorable reimbursement.Private third-partyThird-party payers as well as governments, increasingly employ formularies to control costs by negotiating discounted prices in exchange for formulary inclusion. Failure to obtain timely or adequate pricing or formulary placement for Amphora, our MPT vaginal gel, AmphoraBV product candidate or any future product we may seek to commercialize,operationoperations and prospects.U.S. federalUnited States Federal Anti-Kickback Statute, the U.S. federalUnited States Federal False Claims Act and the U.S. FCPA.other things:federal healthcare programs’ anti-kickback law, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce eitherAnti-Kickback Statute, the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs;false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payers that are false or fraudulent;which created federal criminalthe FCPA, the FDCA, Stark Law, “sunshine” laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; andthe U.S. FCPA, which prohibits corrupt payments, gifts or transfers of value to non-U.S. officials.change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations.change. Regulatory authorities might challenge our current or future activities under these laws. Any such challenge could have a material adverse effect on our reputation, business, results of operations and financial condition. In addition, efforts to ensure that our business arrangements with third parties will comply with these laws will involve substantial costs. Any investigation of us or the third parties with whom we contract, regardless of the outcome, would be costly and time consuming.9, 2018,22, 2019, we had a total of 2330 full-time employees and useused third-party consultants to assist with research and development activities, including regulatory filings and clinical trial operations and support, sales and marketing research and programs, as well as general and administrative activities. As our development and commercialization plans and strategies develop, we expect that we will expand the size of our employee base for managerial, operational, sales, marketing, financial, regulatory affairs and other resources. Future growth would impose significant added responsibilities on members of management, including the need to identify, recruit, maintain, motivate and integrate additional employees. In addition, management may have to divert a disproportionate amount of its attention away from day-to-day activities and devote a substantial amount of time to managing these growth activities, which would lead to disruptions in our operations. We cannot provide assurance that we will be able to retain adequate staffing levels to run our operations and/or to accomplish all of the objectives that we otherwise would seek to accomplish.including our President and Chief Executive Officer, Saundra Pelletier, our Chief Financial Officer, Justin J. File, Kelly Culwell, M.D., our Chief Medical Officer and Russell Barrans, our Chief Commercial Officer. Thethe loss of the services of any members of these individualsour senior management team could impede, delay or prevent the developmentpharmaceuticalbiopharmaceutical and other businesses, particularly in the San Diego area where we are headquartered. As a result, we may be required to expend significant financial resources in our employee recruitment and retention efforts, including the grant of significant equity incentive awards which would be dilutive to stockholders. Many of the other companies within the contraceptive industry with whom we compete for qualified personnel have greater financial and other resources, different risk profiles and longer histories in the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. If we are not able to attract and retain the necessary personnel to accomplish our business objectives or if we are not able to effectively manage any future growth, we may experience constraints that will harm our ability to implement our business strategy and achieve our business objectives.failuresconduct such as failures: (i) to comply with FDA or other regulators’ regulations, (ii) to provide accurate information to such regulators or (iii) to comply with manufacturing standards established by us and/or required by law. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws, regulations and industry guidance intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Misconduct by current or future employees, independent contractors, principal investigators, consultants, suppliers, commercial partners and vendors could also involve the improper use of information obtained in the course of clinical studies,trials, which could result in regulatory or civil sanctions and serious harm to our reputation. It is not always possible to identify and deter misconduct by employees, independent contractors, principal investigators, consultants, suppliers, commercial partners and vendors, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses, or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending or asserting our rights, those actions could have a significant adverse impact on our business and we may be subject to significant civil, criminal and administrative penalties, including, the impositionwithout limitation, damages, monetary fines, individual imprisonment, disgorgement of significant finesprofits, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, additional reporting or oversight obligations if we become subject to a corporate integrity agreement or other sanctions,agreement to resolve allegations of non-compliance with the law, contractual damages, reputational harm, diminished profits and future earnings, and curtailment or restructuring of our reputation.failures.terrorism, war,malicious attack, and telecommunication and electrical failure. Any system failure, accident, security breach or data breach that causes interruptions in our own or in third-party service vendors’ operations could result in a material disruption of our product development programs. For example, the loss of clinical study data from future clinical studiestrials could result in delays in our or our partners’ regulatory approval efforts and significantly increase our costs in order to recover or reproduce the lost data. Further, our information technology and other internal infrastructure systems, including firewalls, servers, leased lines and connection to the Internet, face the risk of systemic failure, which could disrupt our operations. To the extent that any disruption or security breach results in a loss or damage to our data or applications, sensitive information or inappropriate disclosure of confidential or proprietary information, we may incur resulting liability and reputation damage, our product development programs and competitive position may be adversely affected and the further development of our products may be delayed. Furthermore, we may incur additional costs to remedy the damage caused by these disruptions or security breaches.“emergingemerging growth company.” We may need to hire additional accounting, finance and other personnel in connection with our continuing efforts to comply with the requirements of being a public company, and our management and other personnel will need to continue to devote a substantial amount of time towards maintaining compliance with these requirements. In addition, the Sarbanes-Oxley Act of 2002 and rules subsequently implemented by the SEC and Nasdaq have imposed various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantialor Section 404,(Section 404), we will be required to furnish a report by our management on our internal controls over financial reporting, including an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. However, while we remain an “emergingemerging growth company,” we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. If we identify one or more material weaknesses, this could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.ourOur Common Stockthecompanies operating performance of particular companies.performance. The market price for our common stock may be influenced by many factors, including:technologies;the other factors described in this “Risk Factors”“Risk Factors” section.If we were to be delisted from Nasdaq, it could reduce the visibility, liquidity and price of our common stock.There are various quantitative listing requirements for a company to remain listed on The Nasdaq Capital Market, including maintaining a minimum bid price of $1.00 per share and Nasdaq equity standards. There is no guarantee that we will be able to continue complying with the minimum bid price rule, the minimum equity standard or other Nasdaq requirements.Delisting from The Nasdaq Capital Market could reduce the visibility, liquidity and price of our common stock.FundsAsset ManagementLtd. and funds affiliated with or discretionarily managed by Woodford Investment Management hold approximately 39.6%34.0% and 42.0%42.6%, respectively, of our outstanding common stock. We have entered into voting agreements with certain funds affiliated withmanaged by Woodford Investment Management providing that the shares held by such holders in excess of 19.5% of our issued and outstanding common stock shall be voted in the same proportion as the shares voted by all other stockholders. Notwithstanding the voting agreements, if the funds affiliated withmanaged by Woodford Investment Management and Invesco Asset ManagementLtd. were to choose to act together, they would be able to exert a significant degree of influence over matters submitted to our stockholders for approval, as well as our management and affairs. This concentration of voting power could delay or prevent an acquisition on terms that other stockholders may desire. For example, these entities, if they choose to act together, would be able to have significant influence on the election of directors, approval of any increase in the number of shares reserved under equity incentive plans, approval of new equity incentive plans, and approval of any merger, consolidation or sale of all or substantially all of our assets.DGCL,Delaware General Corporation Law (the DGCL), which prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder,” and the combined entity will bewe are able to enter into transactions with our principal stockholders. A concentration of ownership may have the effect of delaying, preventing or deterring a change of control of the Company,a company, could deprive ourits stockholders of an opportunity to receive a premium for their common stock as part of a sale of the Companya company and may materially adversely affect the market price of ourits common stock.occur at any time.occur. These sales, or the perception in the market that holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. Outstanding shares of our common stock may be freely sold in the public market at any time to the extent permitted by Rules 144 and 701 under the Securities Act of 1933, as amended (the Securities Act) or to the extent such shares have already been registered under the Securities Act and are held by non-affiliates.February 9,December 31, 2018, there were 399,9625,767,627 shares of our common stock subject to outstanding options, 240,637 shares of which, 4,316,914 shares have been registered on registration statements on Form S-8.S-8 (No. 333-225366), which became effective on June 1, 2018, and 94,000 shares have been registered on registration statement on Form S-8 (No. 333-226517), which became effective on August 2, 2018. Shares registered on a Form S-8 can be freely sold in the public market upon exercise, except to the extent they will be held by our affiliates, in which case such shares will become eligible for sale in the public market as permitted by Rule 144 under the Securities Act. Furthermore, as of February 9,December 31, 2018, there were 2,011,8754,775,886 shares subject to outstanding warrants to purchase our common stock. These shares will become eligible for sale in the public market,stock, of which 2,764,011 are registered pursuant to the extent such warrants are exercised, as permitted by Rule 144 under the Securities Act.a Registration Statement onapproximately 15,026,968 shares of our common stock and the holders of outstanding warrants to purchase up to 2,000,000 shares of our common stock have rights, subject to conditions, to require us to file registration statements covering theirthe resale of these shares and the shares underlying these warrants or to include theirthese shares and shares underlying these warrants in registration statements that we may file.“emergingemerging growth company,” and a “smaller reporting company”, and the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors.“emergingemerging growth company,” as defined in under the JOBS Act and may remain an emerging growth company through 2019.a “smaller reporting company” under SEC regulations. For so long as we remain an emerging growth company or smaller reporting company, we will be permitted to and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies or smaller reporting companies. These exemptions include:approved.capitalcommon stock. We currently plan to retain all of our future earnings, if any, and any cash received as a result ofthrough future financings to finance the growth and development of our business. Accordingly, capital appreciation, if any, of our common stock will be the sole source of gain for our common stockholders for the foreseeable future.that stockholders may consider favorable, including transactions in which our stockholders might otherwise receive a premium for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions might frustrate or prevent any attempts by our stockholders to replace or remove the current management by making it more difficult for our stockholders to replace members of our board of directors. These provisions include the following:into with our directors and officers provide that:do not publishcease publishing research or reports about our business, or if they publish negative evaluations of our common stock, the price of our common stock could decline. that industry or financial analysts publish about us or our business. We do not have any control over these analysts. If one or more of the analysts covering our business downgrade their evaluations of our common stock, the price of our common stock could decline. In addition, if one or more of these analysts cease coverage or fail to regularly publish reports on our business, we could lose visibility in the financial markets, which in turn could cause our common stock price or trading volume to decline.SecuritiesThethe Nasdaq Global Market on November 20, 2014, under the tradingticker symbol “NEOT”. and corporate name Neothetics, Inc. Prior to November 20, 2014, there was no public market for our common stock. On January 17, 2018, Neotheticswe completed a merger with privately-held Evofem Biosciences Operations, Inc. (Private Evofem) in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of October 17, 2017 by and among the Company, Nobelli Merger Sub, Inc., our wholly owned subsidiary (Merger Sub) and Private Evofem completedpursuant to which the Merger.Merger Sub merged with and into Private Evofem, with Private Evofem surviving as our wholly owned subsidiary (the Merger). In connection with the Merger, we changed theour name of the Companyfrom “Neothetics, Inc.” to Evofem“Evofem Biosciences, Inc.” and changed the tradingticker symbol for our common stock to “EVFM”. Shares of our common stock began trading on Thethe Nasdaq Capital Market under the ticker symbol EVFM on January 18, 2018. The table below provides the high and low sales prices of our common stock for the periods indicated, as reported by The Nasdaq Global Market and The Nasdaq Capital Market (as adjusted for the Reverse Split effected on January 17, 2018).The last sale price for our common stock as reported by The Nasdaq Capital Market on February 9, 2018, was $7.20 per share.9, 2018,22, 2019, there were 17,763,34028,156,567 shares of our common stock outstanding and 3125 holders of record of our common stock. This number was derived from our stockholder records and does not include beneficial owners of our common stock whose shares are held in the name of various dealers, clearing agencies, banks, brokers and other fiduciaries.year ended December 31, 2017,fourth quarter of 2018, we did not issue any securities that were not registered under the Securities Act. Information describing the Financing is incorporated herein by reference to the section entitled “MergerAct of Neothetics, Inc. and Evofem Biosciences Operations, Inc.” in Part I, Item 1 of this Annual Report.None.Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs October 1- October 31 17,377 $3.78 — — ItemThe following table shows selected financial data as of, and for the periods ended on, the dates indicated. Our historical resultsnecessarily indicativerequired to provide the information required by this item. Operations” included elsewhere in this report. The selected financial data included in this section are not intended to replace the financial statements and the related notes included elsewhere in this report.The financial information included in this Selected Financial Data is that of Neothetics prior to the Merger because the Merger was consummated after the period covered by the financial statements in this Annual Report. Accordingly, the historical information included in this Annual Report, unless otherwise indicated or as the context otherwise requires, is that of Neothetics prior to the Merger.(1)Please see Note 2 of our financial statements included elsewhere in this document for an explanation of the calculations of our actual basic and diluted net loss per share.Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.report.Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this document,report, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.Recent DevelopmentsOnand PrivateInc. (Neothetics), now known as Evofem Biosciences, Inc., completed the Mergerits reverse merger (the Merger) with privately-held Evofem Biosciences Operations, Inc. (Private Evofem) in accordance with the terms of an agreement and plan of merger and reorganization, dated October 17, 2017. Since Private Evofem was determined to be the accounting acquirer in connection with the Merger, Agreement, wherebyit recorded Neothetics’ assets and liabilities at fair value as of the Closing Date. To reflect the close of the Merger, Sub mergedwe recorded the following items:and into Private Evofem, with Private Evofem surviving as a wholly owned subsidiary of Neothetics. Immediately following the Merger, Neothetics changed its nameInvesco Ltd., immediately prior to “Evofem Biosciences, Inc.” In connection with the closing of the Merger and on January 18, 2018, ourrecognized the fair value of the Invesco Warrants upon issuance;began trading on The Nasdaq Capital Market under(the WIM Warrants) and related capital contribution upon issuance of the ticker symbol “EVFM”.EffectiveWIM Warrants;17,6, 2018 we completed a six-for-oneand the Closing Date, paid upon closing of the Merger to WIM;split, which we refersplit;Reverse Split, ofMerger (the Private Evofem Plan Options). The Private Evofem Plan Options, were converted into options to purchase 159,325 shares of our common stock. Sharestock, as adjusted for the Exchange Ratio and per share amounts this Management’s DiscussionReverse Stock Split, at a weighted average price of $56.72; and AnalysisFinancial Condition and Results1,614,289 shares of Operations reflect the Reverse Split.The financial information includedour common stock in this Management’s Discussion and Analysis of Financial Condition and Results of Operations is that of Neothetics prior to the Merger because the Merger was consummateda private placement completed immediately after the period covered by the financial statements included in this Annual Report. Accordingly, the historical financial information included in this Annual Report, unless otherwise indicated or as the context otherwise requires, is that of Neothetics prior to the Merger.Neothetics OverviewAs a resultclosing of the Merger (the Private Placement).historic business operations ceasedprimarily through sales of our common stock, convertible preferred stock, related-party advances and our going forward operations will be thosea note payable from Cosmederm Biosciences, Inc., a prior related party.Private Evofem. Accordingly, the resultscommon stock at a public offering price of operations reported for the years ended December 31, 2017$4.69 per share and 2016, in this Management’s Discussionpre-funded warrants to purchase 1,063,829 shares of common stock at a public offering price of $4.68 per warrant and Analysis are not indicativean exercise price of $0.01 per share. Each share of common stock and each pre-funded warrant was issued together with a common warrant to purchase one-fifth of a share of the resultsCompany's common stock at a public offering price of operations expected$0.01 per warrant and an exercise price of $7.50 per share. An aggregate of 8,500,000 common warrants were issued in connection with the Offering and are exercisable to purchase an aggregate of 1,700,000 shares of common stock.future years due toexercise price were the termination of our historic business operations.Prior tosame as the Merger, wecommon warrants issued on May 24, 2018. The net proceeds received from this issuance were a clinical-stage specialty pharmaceutical company that developed therapeutics for the aesthetic market. Our initial focus was on localized fat reduction and body contouring.We have never been profitable and, as of December 31, 2017, we had an accumulated deficit of $135.8 million. We incurred net losses of $10.0 million and $13.0 million for the years ended December 31, 2017 and 2016, respectively.Basis of PresentationPrior to the Merger, we did not generate revenue, andfollowingfrom our lead product candidate, Amphora. We do not expect to generate any revenue from any product candidates we develop unless, and until we obtain regulatory approval and commercialize our products or enter into collaborative agreements with third parties. In the Merger. Development ExpensesPrior to the Merger, ourdevelopment expensesconsisted primarily of:consist of costs associated with the clinical and preclinical development of our MVP-R product candidates. Our research and development expenses include:consultants, clinical trial sites and vendors, including CROs in conjunction with implementing and monitoringresearch organizations (CROs) relating to our pre-clinical and clinical trials, andcosts of acquiring and evaluating pre-clinical and clinical trial data including all related fees, such as for investigator grants, patient screening fees, laboratory work and statistical compilation and analysis;expenses relatedcosts to pre-clinical studies,acquire, develop and manufacture clinical trials and related clinical manufacturing,trial materials, and supplies;expensescosts related to compliance with drug development regulatory requirements in the United Statesrequirements;foreign jurisdictions;allocated expenses, which include direct andpersonnel costs, including cash compensation, benefits and share-based compensation expense.Prior to the Merger, we expensed bothWe expense internal and externalthird-party research and development costs as incurred. The following table summarizes research and development expenses by product candidate (in thousands): Years Ended December 31, 2018 2017 Allocated third-party development expenses: Amphora for prevention of pregnancy $ 23,650 $ 17,700 Chlamydia/gonorrhea 10,162 1,687 Bacterial vaginosis 608 358 Total allocated third-party development expenses 34,420 19,745 Unallocated internal research and development expenses: Stock-based compensation expenses 3,193 184 Payroll related expenses 2,942 2,833 Other 2,860 777 Total unallocated internal research and development expenses 8,995 3,794 Total research and development expenses $ 43,415 $ 23,539 periods in which they were incurred. Substantially allresults of ongoing and future clinical trials, regulatory developments, and our ongoing assessments as to each current or future product candidates’ commercial potential. With the completion of the clinical phase of AMPOWER, we expect our research and development expenses were relatedto decrease significantly in 2019. We will need to raise substantial additional capital in the future to complete clinical development for our current and future product candidates.LIPO-202. For the years ended December 31, 2017, 2016product candidate; and 2015, we incurredof $3.9 million, $6.6 millionfor our employees and $34.4 million respectively, onconsultants in executive, administrative, finance and human resource functions. Other general and administrative expenses include facility-related costs not otherwise included in research and development expenses.Prior to the Merger, we did not allocate compensation expense to individualand professional fees for accounting, auditing, tax and legal fees, and other costs associated with obtaining and maintaining our patent portfolio, and conducting commercial assessments for our product candidates, as we were organized and recorded expense by functional department and our employees were able to allocate time to more than one development project. candidates.did not utilize a formal time allocation system to capture expenses on a project-by-project basis.General and Administrative ExpensesPrior to the Merger,expect our general and administrative expenses primarily consisted ofto increase, specifically sales and marketing expenses, as we hire additional personnel costs, including cash compensation, benefits and share-based compensation expense, associated with our executive, accounting and finance departments. Other general and administrative expenses included costs in connection with patent filings, director and officer insurance premiums to support the growth of our operationsbusiness and various pre-commercialization activities in early preparation of the potential launch of Amphora in early 2020, if approved, and as a public company, facilities expenses, information technology costsresult of being a publicly-traded company.professional feesthe change in fair value of the Series D 2X liquidation preference, which for legal, consulting, marketing, auditeach share of Series D is equal to two times the issuance price per share of Series D, plus accrued and tax services.Interest IncomeMerger, our interest income consisted primarilyclosing of interest received or earned on our cash and cash equivalents. Prior to the Merger, our interestthe Series D 2X liquidation preference was revalued at each reporting date and changes in fair value were recognized as increases in or decreases to other income was not significant in any individual period.Interest ExpensePrior to the Merger, our interest expense consisted of cash and non-cash interest costs related to our borrowings.management’s discussion and analysis of our financial condition and results of operations are based on ourconsolidated financial statements which have been prepared in accordance with U.S. generally accepted accounting principles or GAAP.in the United States. The preparation of ourconsolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of ourthe consolidated financial statements as well asand the reported revenues andamounts of expenses during the reportedapplicable periods. On an ongoing basis, we evaluate ourManagement bases its estimates, assumptions and judgments, including those related to accrued expenses and share-based compensation. We base our estimates on historical experience and on various other factors that we believe areit believes to be reasonable under the circumstances,circumstances. Different estimates, assumptions and judgments may change the estimated used in the preparation of our consolidated financial statements, which, in turn, could materially change our results from those reported. Management evaluates its estimates, assumptions and judgments on an ongoing basis. However, if our assumptions change, we may need to revise our estimates, or take other corrective actions, either of which form the basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources. Actual results may differ materially from these estimates. To the extent that there arealso have a material differences between these estimates and actual results,adverse effect on our future financial statement presentation, financial condition, resultsconsolidated statements of operations, liquidity and cash flows will be affected.While our significant accounting policies are described in the notes to our financial statements appearing elsewhere in this document, wecondition. We believe that the following critical accounting policies are most important to understandinginvolve significant areas where management applies estimates, assumptions and evaluating our reported financial results.As a result ofjudgments in the Merger, our historic business operations ceased and our going forward operations will be those of Private Evofem. Accordingly, the results of operations reported for the years ended December 31, 2017 and 2016, in this Management’s Discussion and Analysis are not indicative of the results of operations expected in 2018 and future years due to the terminationpreparation of our historic business operations.Accrued Research and Development Expenses accrued researchobligations under contracts with vendors, CROs and development expenses. This process involves reviewing contractsconsultants and purchase orders, reviewing theunder clinical site agreements relating to conducting our clinical trials. The financial terms of these contracts vary and may result in payment flows that do not match the periods over which materials or services are provided under such contracts.vendor agreements, communicatingconsolidated financial statements by recording those expenses in the period in which services are performed and efforts are expended. We account for these expenses according to the progress of the clinical trial as measured by patient progression and the timing of various aspects of the trial. We determine accrual estimates through financial models and discussions with our applicable personnel to identify services that have been performed on our behalf, and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost. The majority of ouroutside service providers invoice us monthly in arrears for services performed.as to the progress of clinical trials. our accrued expenses as of each balance sheet date in our financial statements based on the facts and circumstances known to us at that time.Examples of estimated accrued research and development expenses include:fees paid to CROs in connection with clinical trials;fees paid to investigative sites in connection with clinical trials;fees paid to vendors in connection with pre-clinical development activities; andfees paid to vendors related to product manufacturing, development and distribution of clinical supplies.We base our expenses related to clinical trials on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that conduct and manage clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract, and may result in uneven payment flows and expense recognition. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of Our clinical trial milestones. In accruing service fees,accruals are partially dependent upon accurate reporting by CROs and other third-party vendors. Although we estimate the time period over which services will be performed and the level of effortdo not expect estimates to be expended in each period. If thediffer materially from actual timing of the performance of services or the level of effort varies fromamounts, our estimate, we adjust the accrual accordingly. Our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in our reporting changes in estimates inamounts that are too high or too low for any particularreporting period. ThroughFor the years ended December 31, 2018 and 2017, there have beenwere no material adjustments to our prior period estimates of accrued expenses for clinical trials. Nonrefundable advance payments for goods and services, including fees for process development or manufacturing and distributionclinical supplies that will be used in future research and development activities, are deferred and recognized as expense in the period that the related goods are consumed or services are performed.Share-Based Compensation accounted for all share-based compensation paymentsdetermined significant value generating or diminishing internal and/or external events have occurred, which would significantly increase or decrease the fair value of the common stock underlying our stock-based awards. Post the Merger, the fair value of our common stock will be equal to the closing price of our stock.an option pricing model for estimating fair value. Accordingly, share-based compensation expense for employeesa PWERM, which is sensitive to changes in assumptions regarding the timing of additional financings, potential exit scenarios and directors was measured basedrevisions in our financial forecast. Changes in any one of the assumptions could have had a material impact on the estimated fair value of the awards onSeries D and Series D 2X liquidation preference. Management used the datemost reliably available information at each issuance of grant, net of estimated forfeitures. Compensation expense was recognized for the portion that is ultimately expectedSeries D to vest over the period during which the recipient renders the required services to us using the straight-line single option method. In accordance with authoritative guidance, the fair value of non-employee share-based awards was remeasured as the awards vest, and the resulting change in value, if any, is recognized as expense during the period the related services are rendered.Prior to the Merger, we estimated the fair value of our share-based awards using the Black-Scholes option pricing model. The Black-Scholes model requires the use of subjective and complex assumptions, including (a) the expected stock price volatility, (b) the calculation of the expected term of the award, (c) the risk-free interest rate and (d) the expected dividend yield, which determine the fair value of share-based awards.Year Ended December 31, 2018 vs. 2017 2018 2017 $ Change % Change Research and development $ 43,415 $ 23,539 $ 19,876 84 % Year Ended December 31, 2018 vs. 2017 2018 2017 $ Change % Change General and administrative $ 34,227 $ 12,148 $ 22,079 182 % Year Ended December 31, 2018 vs. 2017 2018 2017 $ Change % Change Loss on issuance of Series D redeemable convertible preferred stock $ — $ (8,522 ) $ 8,522 (100 )% Change in fair value of Series D 2X liquidation preference (130 ) (61,175 ) 61,045 (100 )% will continue to use judgmenthad an external valuation completed at the closing date that determined the Series D was issued below fair value. Since no unstated rights and/or privileges were identified with the Series D, the loss on issuance of Series D of $8.5 million was recognized in evaluatingour consolidated statements of operations for the year ended December 31, 2017. There was no such issuance for the year ended December 31, 2018.common stock and expected term and expected volatility, related to our share-based compensation on a prospective basis. As we continue to accumulate additional data related to our common stock, we may make refinementsinstrument to the estimatesSeries D 2X liquidation preference. The variance in change in fair value represents changes in assumptions in the valuation model.our expected term and expected volatility, which could materially impact our future share-based compensation expense.Results of OperationsComparison ofwarrants Year Ended December 31, 2018 vs. 2017 2018 2017 $ Change % Change Loss on issuance of warrants $ (47,920 ) $ — $ (47,920 ) 100 % Years Ended December 31, 2017 and 2016Research and Development Expenses. Research and development expenses decreased by $2.6 million to $3.9 million for the year ended December 31, 2017 from $6.6 million for the year ended December 31, 2016. Approximately $2.3 million of the decrease was dueInvesco Warrants immediately prior to the completion of close out activities for our AbCONTOUR1 and AbCONTOUR2 U.S. Phase 3 clinical trials and related supplemental clinical trials, $1.4 million decrease from the reduction of other research and development activities, and $0.5 million decrease due to additional reductionClosing Date in workforce. The decreases were offset by $1.5 million of expenses incurred in 2017 related to the Phase 2 proof-of-concept clinical trial for the reduction of localized fat deposits under the chin.General and Administrative Expenses. General and administrative expenses increased by $0.6 million to $6.1 million for the year ended December 31, 2017, from $5.5 million for the year ended December 31, 2016. An increase of $1.9 million was due to legal, accounting, and banker fees associatedconnection with the Merger, with Private Evofem. The increase was offset by a decreasethe Company recognizing the fair value of $0.9 million due to the reduction in workforce and a reduction of $0.2 million in patent expense.Interest Income. Interest income decreased by $7,000 to $52,000 for the year ended December 31, 2017 from $59,000 for the year ended December 31, 2016. The decrease was due to lower cash balance in 2017, compared to prior year.Interest Expense. Interest expense decreased by $1.0 million to $0 for the year ended December 31, 2017 from $1.0 million for the year ended December 31, 2016. The decrease in interest expense was due to the prepayment in full of the loan from Hercules Technology Growth Capital Inc., or Hercules, debt facility in September 2016. Comparison of Years Ended December 31, 2016 and 2015Research and Development Expenses. Research and development expenses decreased by $27.8 million to $6.6 million for the year ended December 31, 2016 from $34.4 million for the year ended December 31, 2015. Approximately $19.1 million of the decrease was due to the completion of our AbCONTOUR1 and AbCONTOUR2 U.S. Phase 3 clinical trials and $4.7 million of the decrease was due to the termination of the supplemental clinical trials. Approximately $1.1 million of the decrease was due to the reduction of consulting and other outside services, the elimination of the Corporate Advisory Board, as wellthese warrants as a decrease of $1.4 million due to a reduction in headcount in research and development. The remaining decrease of approximately $1.5 million was due to a reduction of regulatory, pre-clinical and CMC activities.General and Administrative Expenses. General and administrative expenses decreased by $2.2 million to $5.5 million for the year ended December 31, 2016, from $7.6 million for the year ended December 31, 2015. The decrease of approximately $2.0 million was due to reduction in general legal fees, public and investor relation expenses, accounting fees and outside services expenses. The remaining decrease of $0.1 million was related to a reduction of headcount for the year ended December 31, 2016.Interest Income. Interest income increased by $33,000 to $59,000 for the year ended December 31, 2016 from $26,000 for the year ended December 31, 2015. The increase resulted from higher rates of returnloss on issuance during the year ended December 31, 2016.Interest Expense. Interest expense decreased by $0.1 to $1 million for2018. No such activity occurred during the year ended December 31, 2016 from $1.1 million for the year ended December 31, 2015. The decrease in interest expense was due to the prepayment in full of the Hercules debt facility in September 2016.forsince inception. The Company received proceeds of approximately $36.0 million, net of underwriting discounts and commissions and estimated offering costs, from the years ended December 31, 2017 and 2016.Offering that closed on May 24, 2018. As of December 31, 2018 and 2017, we had $1.3 million and $1.2 million in cash and cash equivalents, a working capital deficit of $24.9 million and $101.0 million and an accumulated deficit of $135.8 million. $433.1 million and $307.3 million, respectively. that we will continue to incur net losses for the foreseeable future as we continue the development and potential commercialization of our product candidates and incur additional costs associated with being a public company.At We expect research and development expenses to decrease significantly in 2019 compared to 2018 as the last patient for the second Phase 3 clinical trial of Amphora for prevention of pregnancy exited the study in late 2018. We expect general and administrative expenses to increase in 2019, specifically sales and marketing expenses, as we hire additional personnel to support the growth of our business and various pre-commercialization activities in early preparation of potential launch of Amphora in early 2020, if approved. According to management estimates, liquidity resources as of December 31, 2018 are not sufficient to maintain our planned level of operations for the next 12 months. In addition, the uncertainties associated with our ability to (i) obtain additional equity financing on terms that are favorable to us, (ii) enter into collaborative agreements with strategic partners and (iii) succeed in our future operations, raise substantial doubt about our ability to continue as a going concern.had cashbe unable to continue our operations.cash equivalentsstrategic development plan for future growth. If we cannot successfully raise additional funding and implement our strategic development plan, we may be forced to make reductions in spending, suspend or terminate development programs, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs. Any of approximately $3.4 million.wethe Company entered into a Controlled Equity Offering Sales Agreement or the(the Sales Agreement,Agreement) with Cantor Fitzgerald & Co., or Canter Fitzgerald, (Cantor Fitzgerald) as a sales agent pursuant to which wethe Company may offer and sell from time to time, through Cantor Fitzgerald shares of our common stock, par value $0.0001 per share, having an aggregate offering price of up to $20.0 million. AsThe minimum share price for any Sales Agreement is selected at the discretion of the Company's board of directors. This at the market program expired in early December 31, 2017,2018 and no shares of common stock were issuedsold pursuant to this Sales Agreement during 2018.Sales Agreement.On January 17, 2018, immediately followingCompany entered into a promissory note (Note) with our CRO for AMPOWER, where the completionCompany agreed to pay the CRO existing invoiced amounts totaling approximately $4.0 million for clinical trial related services which Note has a due date of February 15, 2019. Any matured and unpaid amounts pursuant to this Note bears an annual interest rate of the Merger, we issued, inlesser of 1% per month or the Financing, an aggregate of 1,614,289 shares of its common stock to certain accredited investors for an aggregate purchase price of $20 million pursuant tomaximum amount permitted by the termsLaws of the Securities Purchase Agreement, dated October 17, 2017, by and among us, Private Evofem and certain investors.Management believes that there is substantial doubt about our ability to continue as a going concern for twelve months after the date that the financial statements for the year ended December 31, 2017, are issued. We plan to continue to fund our operating expenses and capital expenditure requirements through additional debt or equity financing or through collaborations and partnerships with other entities. Debt or equity financing or collaborations and partnerships with other entities may not be available on a timely basis, on acceptable terms, or at all. In addition,late February 2019, the Company may be requiredamended the Note, which extended the due date to scale back or discontinueApril 15, 2019. All other terms and conditions under the advancement of product candidates, reduce headcount or reduce other operating expenses. This could have an adverse impactinitial Note remain the same. Company’s ability to achieve certainpayment of its planned objectives during 2018,this Note, the CRO may declare the unpaid principal balance and thus, materially harm the Company’s business. Our ability to successfully transition to profitability will be dependent upon obtaining additional financing and achieving a level of product sales adequate to support our cost structure. We cannot be assured that we will ever be profitable or generate positive cash flow from operating activities.StatementStatements of Cash Flowseach of the periodsyears ended December 31, 2018 and 2017 set forth below (in thousands): Year Ended December 31, 2018 vs. 2017 2018 2017 $ Change % Change Net cash, cash equivalents and restricted cash used in operating activities $ (56,500 ) $ (19,242 ) $ (37,258 ) 194 % Net cash, cash equivalents and restricted cash provided by investing activities 2,143 244 1,899 778 % Net cash, cash equivalents and restricted cash provided by financing activities 54,417 9,212 45,205 491 % Net decrease in cash, cash equivalents and restricted cash $ 60 $ (9,786 ) $ 9,846 (101 )% Activities. Net cash used in operating activities was $8.2 million, $16.3 million and $37.9 million forActivities years ended December 31, 2017, 2016 and 2015, respectively. The primary use of cash, cash equivalents and restricted cash was to fund our operations related to thefurther development of our lead MVP-R product candidates in eachcandidate, Amphora, for prevention of these periods.Activities. was $7,000 and $3,000 for the years ended December 31, 2017 and December 31, 2016, respectively. Net cash used in investing activities was $226,000 for the year ended December 31, 2015. 2018 increased by $1.9 million compared to the same period in 2017 primarily due to cash acquired from Neothetics in connection with the Merger as described in Note 1- Description of Business and Basis of Presentation.provided by investing activities consisted of proceedsFlows from the sale of equipment and furniture for the years ended December 31, 2017 and December 31, 2016. Cash used for investing activities consisted primarily of the purchase of equipment and furniture duringFinancing Activities. During the year ended December 31, 2015.Cash Flows from Financing Activities. Financing2018, the primary source of cash, cash equivalents and restricted cash provided by financing activities providedwas the sale of 1,614,289 shares of the Company's common stock for gross proceeds of $20.0 million in the Private Placement, the May 2018 sale of 7,436,171 shares of common stock and pre-funded warrants to purchase 1,063,829 shares of common stock for aggregate net proceeds of $37.5 million in connection with the Offering, offset by $1.6 million cash paid for income tax withheld upon vesting of $26,000restricted stock awards, $1.4 million for payments of offering costs, and a $0.2 million payment of Series D dividends upon conversion of Series D into the Company's common stock. During the year ended December 31, 2017, from the issuanceprimary source of common stock from the exercise of stock options.Net cash, used incash equivalents and restricted cash provided by financing activities was $10.0the sale of 20 shares of Series D for net proceeds of $9.9 million, forwhich was partially offset by the year ended December 31, 2016, primarily from the prepaymentpayment of debtdeferred financing costs of $9.5 million and principal payments on debt$0.7 million.Until such time, if ever, as we can generate substantial product revenues,finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic partnerships and licensing arrangements. We do not have any committed external source of funds. To the extent that we raiseincur additional capital throughexpenditures for serialization equipment to be utilized in the salemanufacturing of equityAmphora prior to commercialization, but cannot adequately predict the cost of the equipment in the future or convertible debt securities,other potential capital expenditure requirements, if any.ownership interestlast patient for AMPOWER exited the study in the fourth quarter of 2018 and we subsequently released positive top-line data in December 2018. In addition, we expect to incur costs as we make improvements to our manufacturing process. The process of conducting preclinical and clinical trials necessary to obtain regulatory approval is costly and time consuming and we may never succeed in achieving regulatory approval for any of our stockholdersproduct candidates. The probability of success for each product candidate will be diluted,affected by numerous factors, including preclinical data, clinical trial data, competition, manufacturing capability and commercial viability. We are responsible for all research and development costs for our programs.terms of these securities may include liquidation or other preferences that adversely affect the rightsgrowth of our common stockholders. Debt financing,business and various pre-commercialization activities in early preparation of the potential launch of Amphora in early 2020, if available, may involve agreements that include covenants limiting or restricting our abilityapproved. We also anticipate increased expenses related to take specific actions, suchaudit, legal, regulatory, and tax-related services associated with maintaining compliance with stock exchange listing and SEC requirements, and directors' and officers' liability insurance premiums.incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic partnerships or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, our other technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to developestablish a sales and market our product candidates even if we would otherwise prefer to developmarketing infrastructure for distribution, promotion and market them ourselves.sales of it.
Off-Balance Sheet ArrangementsContractual obligations and commitmentsThe following table summarizes our contractual obligations at2017:Off-balance sheet arrangementsWe do2018 and 2017, we did not have any off-balance sheet arrangements, (asas such term is defined by applicable regulationsunder Item 303 of the SEC)Regulation S-K, that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.2017,2018, our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (Exchange Act) as of December 31, 2017.2018. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls and procedures were effective.Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.2017,2018, our internal control over financial reporting was effective based on those criteria.yearquarter ended December 31, 2017,2018, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.The following table lists the names, ages as of February 9, 2018, and positions of the individuals who serve as our executive officers and directors:Name Age Position(s)Executive OfficersSaundra Pelletier48Chief Executive Officer and Class III DirectorJustin J. File47Chief Financial OfficerKelly Culwell, M.D.43Chief Medical OfficerRuss Barrans58Chief Commercial OfficerAlexander A. Fitzpatrick, Esq.51General Counsel and SecretaryNon-Employee DirectorsThomas Lynch61Class III Director, Chairman of the BoardGillian Greer, Ph.D.73Class II DirectorWilliam Hall, Ph.D., M.D.68Class II DirectorKim P. Kamdar, Ph.D.50Class I DirectorTony O’Brien54Class II DirectorColin Rutherford59Class I DirectorAs noted above, our Board currently consists of seven members and is divided into three classes each serving staggered three-year terms until their respective successors are duly elected and qualified and their terms expire on a staggered basis as set forth below:Class I directors’ terms expire at the annual meeting of our stockholders in 2018;Class II directors’ terms expire at the annual meeting of stockholders in 2019; andClass III directors’ terms expire at the annual meeting of stockholders in 2020.Executive OfficersSaundra PelletierSaundra Pelletier has served as Private Evofem’s President and CEO since February 2013 and has served as our President and Chief Executive Officer since January 2018. From 2009 to 2016, Ms. Pelletier was the founding Chief Executive Officer of WomenCare Global International, or WCGI, an international non-profit organization focused on empowering, educating and enabling women and girls to make informed choices about their health. Under her leadership, WCGI secured approximately $68 million in committed funding from major foundations and governmental organizations, and launched an innovative U.S. educational campaign with American actress/activist Jessica Biel. Since November 2017, Ms. Pelletier has served as the Chair of the board of WCG Cares, a non-profit California corporation whose primary purpose is to directly engage in and/or fund the development and implementation of programs that promote reproductive health, education, research and increased access to high-quality, innovative and affordable reproductive healthcare and healthcare products around the world. Ms. Pelletier also served as WCG Cares’ Chief Executive Officer and President from 2013 until November 2017. From 2005 to 2009, Ms. Pelletier was founder and Chief Executive Officer of Saundra Pelletier International, where she served as a management consultant, executive coach, entrepreneur, author and keynote speaker. From 2000 until 2004, Ms. Pelletier served as Vice President, Pharmaceuticals at Women First Healthcare, a specialty healthcare company dedicated to improving the health of women in mid-life, andfrom 1992 until 2000 she was Global Franchise Leader (Vice President), with G.D. Searle, developer of the first female birth control pill and now a wholly owned trademark of Pfizer. In her capacity as a corporate vice president and global franchise leader, Ms. Pelletier managed a $250 million business unit, reorganized companies from the ground up, raised $40 million in capital, managed worldwide partnerships, negotiated cost saving licensing agreements, assessed country infrastructures, developed commercialization plans and hired full scale teams, including contract sales forces, support women’s healthcare initiatives. Ms. Pelletier has launched pharmaceutical brands worldwide and expanded indications on female healthcare brands in multiple countries. She has had oversight and accountability for Sales, Marketing, Operations, Medical Affairs, Regulatory Affairs, Manufacturing, Customer Service, Business Development and Strategic Partnerships. In 2015, Ms. Pelletier was profiled by the United Nations Foundation as a New Champion for Reproductive Health, and in 2014 was awarded the Athena Pinnacle Award for Life Sciences, recognizing extraordinary leadership in the life sciences. She is a published author and an international keynote speaker on the economic return of investing in women and has spoken at the Clinton Global Initiative, Women Deliver, the Harvard School of Public Health, the Cavendish Global Health Impact Forum at Biocom, the University of Virginia’s Darden School of Business; and was the keynote speaker at the June 2016 Women’s Global Health Symposium. Her accomplishments have been frequently profiled in various media, including The New York Times, Inc. Magazine, Cosmopolitan, Devex, Refinery 29, Bustle, CNN, NBC News, Glamour, Marie Claire, BBC Radio, Global Grind and Vogue. Ms. Pelletier is the Chair of the Women Deliver Board of Directors and she is on the board of directors of ClearFast. We believe Ms. Pelletier’s service as our Chief Executive Officer and extensive professional experience in women’s healthcare qualifies her to serve as a member of our board of directors.Justin J. FileJustin J. File has served as Private Evofem’s Chief Financial Officer since July 2015 and has served as our Chief Financial Officer since January 2018. He has approximately 25 years of diverse accounting and finance experience within a variety of both public and private biotechnology companies. Most recently, he provided executive financial and accounting oversight services to various biotechnology companies in San Diego, California, assisting in their initial public offering process and helping to establish and improve their accounting and finance operations as publicly-traded entities. Prior to this, Mr. File was Senior Director and Controller of Sequenom, Inc., a diagnostic company that developed and commercialized molecular diagnostics testing services for the women’s health market. During that time, he served as Treasurer of their diagnostic subsidiary and providing assistance in the raise of over $400 million in combined equity and convertible note offerings. He also assisted in the commercial launch of four diagnostic tests in a two-year period, which included Sequenom’s revolutionary noninvasive prenatal test for Down syndrome. Earlier in his career he worked for approximately ten years in public accounting, primarily with Arthur Andersen LLP, where he worked with a variety of clients assisting with attestation and periodic reporting requirements, public offerings and acquisitions. He graduated from Central Washington University with a Bachelor’s of Science in Accounting and International Business and is a Certified Public Accountant (inactive).Kelly Culwell, M.D.Dr. Kelly Culwell is an Obstetrician/Gynecologist with over 16 years specializing in women’s health and contraceptive research. She has served as our Chief Medical Officer since January 2018 and has served as Private Evofem’s Chief Medical Officer since April 2015. Prior to joining Evofem Biosciences, she was a trainer Merck and maintained an academic clinical practice as the Director of Family Planning and Associate Clinical Professor at University of California, Davis. She previously served as a Medical Officer with the World Health Organization where she developed global guidelines for clinical practice and is widely published in peer reviewed journals. Dr. Culwell received a Bachelor’s of Science from California Lutheran University, a Medical Doctorate from the University of California, Davis and a Masters of Public Health from Northwestern University. She completed her post-graduate training in Obstetrics and Gynecology at University of California San Diego and her Family Planning Fellowship at Northwestern University. Dr. Culwell maintains appointments as Volunteer Assistant Clinical Professor in the Departments of Obstetrics and Gynecology at the University of California, Davis and San Diego campuses. She is qualified as a Diplomat from the American Board of Obstetrics and Gynecology.Russ BarransRuss Barrans has served as our Chief Commercial Officer since January 2018 and has served as Private Evofem’s Chief Commercial Officer since 2016. Mr. Barrans has over 25 years in the women’s healthcare pharmaceuticals and biotechnology space. As the Chief Commercial Officer, he is responsible for the commercial launch and lifecycle management of the Evofem Biosciences product portfolio, oversees manufacturing and supply chain, and provides executive leadership to the sales and marketing team. Prior to joining Evofem Biosciences, Mr. Barrans was the Senior Director of Women’s Healthcare Marketing for TEVA Pharmaceuticals. With significant tenure in life sciences and pharmaceutical companies, he has held senior level positions at global and domestic companies including Bayer Healthcare and Wyeth Pfizer (formerly Wyeth), as well as, being Chief Executive Officer of FusionRx, a strategic consulting firm servicing biotech and pharmaceutical brands of which Russ was the founding partner. He has overseen directed the launch of over half a dozen brands worldwide including the launch of Mirena®, and Plan B One-Step® OTC. He graduated from California Coast University with a Bachelor’s of Science in Business Administration and holds an MBA from California Coast University. Mr. Barrans is an Accredited Pharmaceutical Manufactures Representative of Canada in General Healthcare and Oncology, and has earned his certification as a Business Coach from Brian Tracy International.Alexander A. Fitzpatrick, Esq.Alexander A. Fitzpatrick has served as our Executive Vice President, General Counsel and Secretary since January 2018 and as the Executive Vice President, General Counsel and Secretary of Private Evofem since October 2017. He is responsible for the Company’s corporate governance, legal, corporate development, intellectual property and risk management functions. Prior to joining Evofem, Mr. Fitzpatrick served as Senior Vice President, General Counsel, Compliance Officer and Secretary of Verenium Corporation, a publicly traded biotechnology company. Prior to that, Mr. Fitzpatrick served as Senior Vice President, General Counsel and Secretary of Kintera, Inc., a publicly traded technology company. Following the sale of Kintera, Mr. Fitzpatrick continued to serve in a similar position for a major division of Blackbaud, Inc. Prior to that, as a member of the business, corporate and technology departments with the law firms Cooley LLP and Latham & Watkins LLP in San Diego, and Rogers & Wells LLP (now Clifford Chance) in London, Mr. Fitzpatrick represented pharmaceutical and other technology companies, investment banks and venture capitalists in a variety of transactions including numerous collaborations, mergers and acquisitions, intellectual property matters, licensing and financing activity. Mr. Fitzpatrick received a B.S. in mathematics from Georgetown University and a J.D. from the University of California, Berkeley.Non-Employee Directors Thomas LynchMr. Lynch has served as the Chairman of the Board since January 2018 and served as the Chairman of the Board of Private Evofem from November 2015 until January 2018. Mr. Lynch also currently serves as Chairman of the Boards of Profectus Biosciences Inc. and Adherium Inc. and as a non-executive director of GW Pharmaceuticals where he serves as Chairman of both its remuneration and nomination committees. Mr. Lynch is also the non-executive chairman of the Ireland East Hospital Group and the Mater Misericordiae University Hospital, a non-profit charitable foundation providing acute hospital services to both public patients funded by the HSE (defined below) and private patients. Mr. Lynch serves on the board of a number of other privately held biotechnology companies. Mr. Lynch previously served as Chairman of ICON plc and was a member of its board for 22 years. Mr. Lynch has also worked in a variety of capacities in Amarin Corporation plc, Elan Corporation plc and Warner Chilcott plc. From 2001 to 2010, Mr. Lynch was a member of the Board of IDA Ireland (an Irish government investment agency). Mr. Lynch received his B.Sc. in Economics from Queen’s University of Belfast in 1978, and qualified as a chartered accountant with KPMG in 1983 and served as a partner in that firm from 1990 to 1993. We believe Mr. Lynch is qualified to serve as a member of our board of directors because of his decades of business, operational and board of director experience with pharmaceutical and life sciences companies and because of his prior experience as Chairman of Private Evofem’s board of directors.Gillian Greer, Ph.D.Dr. Gillian Greer has served as a member of our Board since January 2018 and most recently served, from 2011 – 2017, as the Chief Executive Officer of Volunteer Service Abroad, a New Zealand non-profit organization that sends volunteers to work with partner organizations in the Pacific and Asia region. She is currently Chief Executive Officer of the National Council of Women of New Zealand. From 2006-2011 Dr. Greer served as Director General of the International Planned Parenthood Federation, or IPPF, the world’s largest international sexual and reproductive health non-profit organization, working in 172 countries providing advocacy, education and sexual and reproductive health services, including maternal health, HIV/AIDS, family planning and adolescent health. During this time she also worked closely with UN agencies and governments to advocate for investment in health and human rights and served on the Board of ICON plc. Prior to her work with IPPF, Dr. Greer served as Executive Director of the Family Planning Association of New Zealand where she was involved in international and regional advocacy training and initiatives, including chairing the Asia Pacific Alliance, and was made a Member of the New Zealand Order of Merit for services to family planning in 2005. From 1996-1998 Dr. Greer was Assistant Vice Chancellor Equity and Human Resources, Victoria University of Wellington, New Zealand. Her early career was in education at secondary and tertiary levels. Throughout her career Dr. Greer has demonstrated an ongoing commitment to health, education, sustainable development, women’s empowerment, and human rights. She is passionate about strengthening civil society and building high performing organizations that are effective, ethical, and accountable and can clearly demonstrate their impact. She has also served in a governance capacity for a number of charities and a university Council, as well as advisory panels to New Zealand Ministers of Foreign Affairs and Trade. Dr. Greer was made a Commander of the British Empire (CBE) for services to international health and women’s rights in 2012. She continues to be in high demand as a speaker, facilitator, chairperson, and board member. Dr. Greer holds a B.A. in English from the University of Auckland and a Ph.D. in New Zealand Literature from the Victoria University of Wellington. We believe Dr. Greer’s long experience as an executive officer and board member of organizations dedicated to women’s sexual health qualifies her to serve as a member of our board of directors.William Hall, Ph.D., M.D.Professor Hall has served as a member of our Board since January 2018 and is a renowned expert in infectious diseases and virology. He currently serves as Distinguished Professor in Hokkaido University in Japan and is Professor Emeritus of Medical Microbiology and the Centre for Research in Infectious Diseases at University College Dublin’s, or UCD, School of Medicine and Medical Science. He is also Executive Chairman of the UCD National Virus Reference Laboratory and is a Consultant Microbiologist at St. Vincent’s University Hospital Dublin. Professor Hall also serves as a consultant to the Minister of Heath and Children in the Republic of Ireland, providing input on a range of topics including influenza pandemic preparedness and bioterrorism. Prior to his tenure at UCD, Professor Hall was Professor and Head of the Laboratory of Medical Virology, Senior Physician and Director of the Clinical Research Centre at the Rockefeller Universityin New York. He previously served as an Assistant and Associate Professor of Medicine at Cornell University. Professor Hall is a Board member of The Atlantic Philanthropies and is a co-founder of the Global Virus Network. Professor Hall has served as a non-executive director of ICON plc, based in Dublin, Ireland, since February 2013. He is a member of its audit committee and the compensation committee and is chair of the nominating and governance committee. Professor Hall holds a B.Sc.(Honors.) in Biochemistry and a Ph.D. in Biochemistry/Virology from Queen’s University Belfast. He received his M.D. from Cornell University Medical College, New York and a Diploma of Tropical Medicine and Hygiene from the London School of Hygiene and Tropical Medicine in London, England. We believe Dr. Hall is qualified to serve on our board of directors based on his extensive experience working in infectious diseases and virology and prior experiences on other board of directors.Kim P. Kamdar, Ph.D.Dr. Kamdar has served as a member of our Board since April 2011. Dr. Kamdar is a Managing Member of Domain Associates, LLC, a life sciences venture capital firm, which she joined in 2005.Dr. Kamdar is currently Chair of the board of directors of Obalon (Nasdaq: OBLN). She also serves on the board of directors of several private companies including Epic Sciences, Omniome, ROX Medical, Sera Prognostics and Singular Genomics. Dr. Kamdar is founder and Chairman of the board of directors, and was formerly acting CEO of Truvian Sciences, a consumer-focused health and wellness company. Past investments include Ariosa (acquired by Roche), Corthera (acquired by Novartis), BiPar Sciences (acquired by Sanofi-Aventis) and Achaogen (Nasdaq: AKAO).Formerly, Dr. Kamdar was a Kauffman Fellow with MPM Capital. Prior to joining MPM, she was a research director at Novartis, where she built and led a research team that focused on the biology, genetics and genomics of model organisms. Dr. Kamdar is the author of ten papers as well as the inventor on seven patents. She received her B.A. from Northwestern University and her Ph.D. in biochemistry and genetics from Emory University. Dr. Kamdar serves as an advisory board member of Dr. Eric Topol’s NIH supported Clinical and Translational Science Award for Scripps Medicine and is also on the non-profit board for Access Youth Academy, an organization that is transforming the lives of underserved youth through academic enrichment, health and wellness, social responsibility and leadership through squash. We believe Dr. Kamdar is qualified to serve on our board of directors based on her extensive experience working and serving on the boards of directors of life sciences companies and her experience working in the venture capital industry.Tony O’BrienMr. O’Brien has served as a member of our board of directors since January 2018 and as the Director General of Ireland’s Health Service Executive, or HSE, an organization responsible for the provision of health and personal social services for the residents of Ireland, since July 2012. Prior to his role as Director General, Mr. O’Brien was the Chief Operating Officer of the Department of Health’s Special Delivery Unit and a member of the Department’s Management Board. From May 2011 to September 2011 Mr. O’Brien was Director of Clinical Strategy and Programs in the HSE. From December 2011 until October 2012 he held the post of Chief Executive Officer of the National Treatment Purchase Fund. He served as Chief Advisor to the HSE on the implementation of the National Cancer Control Strategy, Project Director for the National Plan for Radiation Oncology and is a former Chairman of the National Cancer Registry Board. He was the founding Chief Executive Officer of the National Cancer Screening Service, Director of BreastCheck, CervicalCheck and an Associate and Interim Director of the National Cancer Control Programme. Prior to joining the HSE, Mr. O’Brien served as Chief Executive of the Irish Family Planning Association and as the Chief Executive of the UK Family Planning Association. Mr. O’Brien is a Council Member of the Irish Management Institute, a Member of the Healthy Ireland Council and a Member of the Institute of Directors in Ireland. Mr. O’Brien holds a Master of Sciences in Management Practice from Trinity College, University of Dublin. He is Adjunct Ass. Professor in Health Strategy and Management at Trinity College Dublin. He is also Vice President of the Institute of Public Administration and a Council Member of the Irish Management Institute. In 2016, he was admitted as a Chartered Director by the Institute of Directors. We believe Mr. O’Brien’s extensive experience as an executive and member of the boards of directors for healthcare and life sciences companies qualifies him to be a member of our board of directors.Colin RutherfordMr. Rutherford has served as a member of our board of directors since January 2018 and served as a member of the board of directors of Private Evofem from November 2015 until January 2018. He currently serves as the audit committee chairman of Mitchells & Butlers’ Plc., and Renaissance Services SAOG. Mr. Rutherford is also serving as the Chairman of Brookgate, Limited, TPG and Teachers Media Group Plc. Prior to this, Mr. Rutherford worked for European Healthcare Group as Non-Executive Chairman from 2012 to 2014 until its acquisition by two hedge funds. From 2008 to 2011, Mr. Rutherford also worked as Chief Executive Officer and Chairman to restructure MAM Funds Plc that had significant debt. From 2003 to 2006, Mr. Rutherford was Chairman and oversaw the restructuring of Noble House Group Limited which was sold in 2006. In 2002, as Chairman and Chief Executive Officer, he led the restructuring and sale of Euro-Sales Plc. with 18 offices across Europe. While a director of Private Evofem, Mr. Rutherford was Chair of its audit committee and a member of its remuneration committee. Mr. Rutherford graduated in Accountancy and Finance from Heriot Watt University and qualified as a chartered accountant with Touche Ross in 1984. Mr. Rutherford is a Harvard Business School Alumni. We believe that Mr. Rutherford is qualified toserve as a member of our board of directors because of his prior experience as a member of Private Evofem’s board of directors and his many years of finance and operations leadership experience in the healthcare and life sciences industries.Audit Committee and Financial ExpertThe audit committee of our board was established by our board of directors in accordance with Section 3(a)(58)(A) of the Exchange Act. The current members of our audit committee are Mr. Rutherford, Dr. Kamdar and Mr. O’Brien. Mr. Rutherford serves as Chairperson of the committee. Our board of directors has determined that all of the members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and Nasdaq. Our board of directors has determined that Mr. Rutherford is an audit committee financial expert as defined under the applicable rules of the SEC and has the requisite financial sophistication as defined under the applicable rules and regulations of Nasdaq. Our board of directors has determined that all of the members of our audit committee are independent directors as defined under the applicable rules and regulations of the SEC and Nasdaq.Stockholder Recommendations for Director NomineesIn nominating candidates for election as a director, the Nominating and Corporate Governance Committee will consider a reasonable number of candidates for director recommended by a single stockholder who has held over 0.1% of our common stock for over one year and who satisfies the notice, information and consent provisions set forth in our Bylaws and corporate governance guidelines. Stockholders who wish to recommend a candidate may do so by writing to the Nominating and Corporate Governance Committee in care of the Corporate Secretary, Evofem Biosciences, Inc., 12400 High Bluff Drive, Suite 600, San Diego, CA 92130. Our amended and restated bylaws state the procedures for a stockholder to bring a stockholder proposal or nominate an individual to serve as a director of the Board. Our amended and restated bylaws provide that advance notice of a stockholder’s proposal or nomination of an individual to serve as a director must be delivered to our Corporate Secretary at our principal executive offices not earlier than the one hundred twentieth (120th) day, nor later than the close of business on the ninetieth (90th) day, prior to the anniversary of the previous year’s annual meeting of stockholders. However, our amended and restated bylaws also provide that in the event that the date of the annual meeting is advanced by more than thirty (30) days, or delayed by more than seventy (70) days, from the anniversary date of the preceding year’s annual meeting, notice must be received no earlier than the one hundred twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or, if the first public announcement of the date of such annual meeting is less than one-hundred (100) days prior to the date of such annual meeting, the tenth (10th) day following the day on which the public announcement of the date of such meeting is first made. In addition to meeting the advance notice provisions mentioned above, the stockholder in its notice must provide the information required by this item is incorporated by reference from the discussions set forth under the headings “ELECTION OF DIRECTORS (Notice Item 1)”, “EXECUTIVE OFFICER AND DIRECTOR COMPENSATION”, “SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE”, and “MANAGEMENT AND CORPORATE GOVERNANCE” in our Bylaws to bring a stockholder proposal or nominate an individual to serve as a directorproxy statement for the 2019 Annual Meeting of the Board.A copy of the full text of the provisions of our Bylaws dealing with stockholder nominations and proposals is available to stockholders from our Corporate Secretary upon written request. The Nominating and Corporate Governance Committee will use the same evaluation process for director nominees recommended by stockholders as it uses for other director nominees.Section 16 (a) Beneficial Ownership Reporting ComplianceUnder Section 16(a) of the Exchange Act and SEC rules, the Company’s directors, executive officers and beneficial owners of more than 10% of any class of equity security are required to file periodic reports of their ownership, and changes in that ownership, with the SEC. Based solely on its review of copies of reports provided to the Company pursuant to Rule 16a-3(e) of the Exchange Act and representations of such reporting persons, the Company believes that during fiscal year 2017, such SEC filing requirements were satisfied.Code of Business Conduct and EthicsWe have adopted a Code of Business Conduct and Ethics that applies to our officers, directors and employees, which is available on our website at www.evofem.com. The Code of Business Conduct and Ethics contains general guidelines for conducting the business of our company consistent with the highest standards of business ethics and is intended to qualify as a “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002 and Item 406 of Regulation S-K. In addition, we intend to promptly disclose (1) the nature of any amendment to our Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions and (2) the nature of any waiver, including an implicit waiver, from a provision of our code of ethics that is granted to one of these specified officers, the name of such person who is granted the waiver and the date of the waiver on our website in the future.Our named executive officers, which consisted of our principal executive officer and our only other executive officer were:Susan A. Knudson, Former Principal Executive Officer and Chief Financial Officer; andMaria Feldman, Former Vice President, Clinical Operations, Regulatory Affairs and Quality AssuranceWe have also included the principal executive officer and the two most highly compensated officers of Private Evofem during 2017 below:•Saundra Pelletier, Chief Executive Officer(1)•Justin J. File, Chief Financial Officer(1)•Kelly Culwell, M.D., Chief Medical Officer(1)(1)Pursuant to the closing of the Merger as described within this Form 10-K, this individual became an executive officer of the Company in January 2018.following table summarizes information concerning the compensation awarded to, earned by, or paid for services rendered in all capacities by our named executive officers and the principal executive officer and two most highly compensated officers of Private Evofem during the years ended December 31, 2017 and 2016. As our management team transitions from operating a private company to operating a publicly traded company, our Compensation Committee will evaluate our compensation practices, philosophy and arrangements to ensure alignment with our structure and the roles of the executives as they relate to managing and oversight of a public company. The compensation described in this table does not include medical or other benefits that are available generally to all our salaried employees:(1)Amounts listed in this column for Ms. Knudson and Ms. Feldman represent the aggregate fair value of the option awards computed as of the grant date of each option award in accordance with Financial Accounting Standards Board Accounting Standards Codification No. 718, Compensation-Stock Compensation, or FASB ASC Topic 718, rather than amounts paid to or realized by the named individual. There can be no assurance that options will be exercised (in which case no value will be realized by the individual) or that the value on exercise will approximate the fair value as computed in accordance with FASB ASC Topic 718. The assumptions used in the valuation of these awards are set forth in Note 6 to our financial statements for the year ended December 31, 2017, which are included in this Annual Report.(2)Amounts listed in this column for Ms. Pelletier, Mr. File and Dr. Culwell represent the aggregate fair value of Private Evofem option awards computed as of the grant date of each option award in accordance with FASB ASC Topic 718, rather than amounts paid to or realized by the named individual. The fair value of the stock-based payments for these awards was estimated on the date of grant using the Black-Scholes-Merton option-pricing model based on the following weighted-average assumptions for the year ended December 31, 2016:Expected volatility 89.2%Risk-free interest rate1.3%Expected dividend yield0.0%Expected term (years)5.6There can be no assurance that options will be exercised (in which case no value will be realized by the individual) or that the value on exercise will approximate the fair value as computed in accordance with FASB ASC Topic 718.(3)In March 2017, Ms. Knudson received options to purchase up to 16,666 shares of the Company’s common stock with a performance-based vesting schedule, all of which were vested by December 31, 2017. In June 2017, Ms. Knudson received options to purchase up to 10,832 shares of the Company’s common stock with a two-year vesting schedule.(4)All Other Compensation for Ms. Knudson in 2017 and 2016 includes premiums paid for group term life insurance of $1,010.(5)In February 2016, Ms. Knudson received an option to purchase up to 7,500 shares of the Company’s common stock with a four-year vesting schedule. (6)In March 2017, Ms. Feldman received options to purchase up to 15,000 shares of the Company’s common stock with a performance-based vesting schedule, all of which were vested on December 31, 2017. In June 2017, Ms. Feldman received options to purchase up to 23,332 shares of the Company’s common stock with a two-year vesting schedule.(7)All Other Compensation for Ms. Feldman in 2017 and 2016 includes premiums paid for group term life insurance of $539.(8)In February 2016, Ms. Feldman received an option to purchase up to 4,166 shares of the Company’s common stock with a four-year vesting schedule.(9)All Other Compensation for Ms. Pelletier in 2017 and 2016 includes premiums paid for group term life insurance of $810 and $1,621, respectively.(10)On September 28, 2016, Ms. Pelletier received (i) options to purchase up to 750,000 and 500,000 shares of Private Evofem common stock with a three-year vesting schedule and a four-year vesting schedule, respectively, pursuant to which the unvested shares under each option grant agreement will become fully vested and exercisable upon a “change in control” (as defined in the agreements) and (ii) a fully vested option to purchase up to 389,404 shares of Private Evofem common stock. Each such option has been exchanged for an option to purchase shares of the Company’s common stock, equal to approximately 0.1540 multiplied by the number of Private Evofem common stock issuable upon the exercise of the option to purchase shares of Private Evofem’s common stock, on the same terms, in accordance with the terms of the Merger Agreement.(11)All Other Compensation for Mr. File in 2017 and 2016 includes premiums paid for group term life insurance of $810 and $1,185, respectively.(12)On September 28, 2016, Mr. File received options to purchase up to 500,000 and 400,000 shares of Private Evofem common stock with a three-year vesting schedule and a four-year vesting schedule, respectively, pursuant to which the unvested shares under each option grant agreement will become fully vested and exercisable upon a “change in control” (as defined in the agreements). Each such option has been exchanged for an option to purchase shares of the Company’s common stock, equal to approximately 0.1540 multiplied by the number of Private Evofem common stock issuable upon the exercise of the option to purchase shares of Private Evofem’s common stock, on the same terms, in accordance with the terms of the Merger Agreement.(13)All Other Compensation for Dr. Culwell in 2017 and 2016 includes premiums paid for group term life insurance of $540 and $675, respectively.(14)On September 28, 2016, Dr. Culwell received an option to purchase up to 300,000 shares of Private Evofem common stock with a three-year vesting schedule, pursuant to which the unvested shares under such option grant agreement will become fully vested and exercisable upon a “change in control” (as defined in the agreement), and such option has been exchanged for an option to purchase shares of the Company’s common stock, equal to approximately 0.1540 multiplied by the number of Private Evofem common stock issuable upon the exercise of the option to purchase shares of Private Evofem’s common stock, on the same terms, in accordance with the terms of the Merger Agreement.Employment, Severance and Separation AgreementsSusan A. Knudson Employment Agreement and Golden Parachute CompensationOn October 15, 2014, the Company entered into an executive employment agreement with Ms. Knudson which provided that, if Ms. Knudson was terminated by us without cause or if she resigned for good reason, she was entitled to a severance package consisting of (a) a payment equal to six months of her then in effect base salary payable in accordance with our regular payroll cycle beginning on the first regular payday occurring 60 days following the termination date and (b) payment by us of the premiums required to continue Ms. Knudson’s group health coverage for a period of six months following termination.On January 31, 2018, after the Merger, Ms. Knudson’s employment with us was terminated, pursuantresponse to the Separation and Release Agreement entered intoinformation required by this item is incorporated by reference from the Company and Ms. Knudson on January 17, 2018, which provided that in the event that Ms. Knudson was terminated within 12 months following a change in control, she was entitled to a severance package consisting of (a) a lump sum payment equal to $317,000, or 12 months of her then in effect base salary, (b) payment by us of the premiums required to continue Ms. Knudson’s group health coverage for a period of 12 months following termination, valued at $24,939 and (c) full acceleration of all unvested equity awardsdiscussions set forth under the 2007 Stock Plan and 2014 Plan, which had an intrinsic value of $11,344. Ms. Knudson was also entitled to receive a $150,000 cash bonusheading “EXECUTIVE OFFICER AND DIRECTOR COMPENSATION” in connection with the consummation of the Merger, as approved the board of directors in July 2017. The exercise period for all options held by Ms. Knudson was extended to the earlier of (i) the expiration of the stock option pursuant to its terms or (ii) March 31, 2019.Maria Feldman Compensation and Severance and Separation AgreementOn February 28, 2014, the Company entered into an employment agreement with Maria Feldman and on February 15, 2018, Ms. Feldman’s employment with us was terminated. Pursuant to the Separation and Release Agreement entered into by the Company and Ms. Feldman on February 6, 2018, upon Ms. Feldman’s termination without cause following the Merger, which constituted a change of control, she was entitled to a severance package consisting of (a) a lump sum payment equal to $136,990, or six (6) months of her then in effect base salary, (b) payment by us of the premiums required to continue Ms. Feldman’s group health coverage for a period of six (6) months following termination, valued at $8,326 and (c) full acceleration of all unvested equity awards under the 2007 Stock Plan and 2014 Plan, which had an intrinsic value of $2,575. The exercise period for all options held by Ms. Feldman was extended to the earlier of (i) the expiration of the stock option pursuant to its terms or (ii) March 31, 2019.Pelletier, File and Culwell Private Evofem Employment and Severance ArrangementsSaundra PelletierMs. Pelletier’s employment with the Company is at-will and she is party to a Severance Agreement, dated April 27, 2015, by and between Private Evofem and Ms. Pelletier, or the Pelletier Severance Agreement. Ms. Pelletier is also eligible to participate in the Company’s 401K plan, to receive paid vacation each year and to participate in other benefit plans and programs generally available to the Company’s employees.Pursuant to the terms of the Pelletier Severance Agreement, if Ms. Pelletier’s employment is terminated other than for “Cause” or “Good Reason” (as defined in the Pelletier Severance Agreement), death, or disability, then, subject to Ms. Pelletier signing and not revoking a separation and release of claims agreement, Ms. Pelletier would be entitled to receive the following, regardless of whether the termination occurs within or outside the change of control period:an amount equal to Ms. Pelletier’s Highest Monthly Salary (as defined in the Pelletier Severance Agreement) with such amount payable in each month following the date of termination of employment for a period of 12 months.paymentsour proxy statement for the employer share2019 Annual Meeting of any applicable COBRA premiums for a period of 12 months following the date of termination.Justin J. FileMr. File’s employment with the Company is at-will and he is party to a Severance Agreement, dated November 16, 2015, by and between Private Evofem and Mr. File, or the File Severance Agreement. Mr. File is also eligible to participate in the Company’s 401K plan, to receive paid vacation each year and to participate in other benefit plans and programs generally available to the Company’s employees.Pursuant to the terms of the File Severance Agreement, if Mr. File’s employment is terminated other than for “Cause” or “Good Reason” (as defined in the File Severance Agreement), death, or disability, then, subject to Mr. File signing and not revoking a separation and release of claims agreement, Mr. File would be entitled to receive the following, regardless of whether the termination occurs within or outside the change of control period:an amount equal to Mr. File’s Highest Monthly Salary (as defined in the File Severance Agreement) with such amount payable in each month following the date of termination of employment for a period of 12 months.payments for the employer share of any applicable COBRA premiums for a period of 12 months following the date of termination.Kelly Culwell, M.D.Dr. Culwell’s employment with the Company is at-will. Dr. Culwell is eligible to participate in the Company’s 401K plan, to receive paid vacation each year and to participate in other benefit plans and programs generally available to the Company’s employees.The Merger did not constitute a “change in control” for the purposes of the above described Private Evofem employment arrangements. The Private Evofem offer letters and severance agreements described above are currently in effect and will remain in effect until amended by our board of directors.Outstanding Equity Awards at December 31, 2017The following table presents the outstanding equity awards held by our named executive officers as of December 31, 2017, and includes outstanding equity awards held by the principal executive officer and the two most highly compensated executive officers of Private Evofem as of December 31, 2017, giving retroactive effect to the Merger.Option AwardsNameNumber of Securities Underlying Unexercised Options Exercisable(1)Number of SecuritiesUnderlying UnexercisedOptions Unexercisable(2)Option ExercisepriceOption ExpirationdateSusan A. Knudson5,119(3)—$7.322/11/20205,544(3)—$8.052/6/20244,160(3)—$27.457/17/20242,454(3)—$40.742/10/20255,146(3)—$40.742/10/20257,500(3)—$5.822/4/202611,655(3)—$8.583/2/20275,011(3)—$8.583/2/20275,249(3)—$13.626/22/20275,583(3)—$13.626/22/2027Maria Feldman3,583(3)— $8.053/10/20242,454(3)—$40.742/10/2025545(3)—$40.742/10/20254,166(3)— $5.822/4/202611,655(3)— $8.583/2/20273,345(3)— $8.583/2/20274,724(3)— $13.623/22/202718,608(3)— $13.623/22/2027Saundra Pelletier6,719(4)—$79.876/3/20239,994(5)—$46.369/28/202610,821(6)8,428(6)$46.369/28/20264,009(7)8,824(7)$46.369/28/2026Justin J. File7,209(8)5,624(8)$46.369/28/20263,205(9)7,061(9)$46.369/28/2026Kelly Culwell, M.D.4,322(10)3,377(10)$46.369/28/2016(1)The number of shares under the option that have vested.(2)The number of shares under the option that have not vested.(3)Pursuant to the 2014 Plan, all options issued under the 2014 Plan are immediately exercisable regardless of whether they have vested.(4)The share numbers and exercise prices reflected are those of options issued to the executive upon completion of the Merger in January 2018. These options were issued upon completion of the Merger in exchange for options to purchase 261,784 shares of Private Evofem common stock, which were fully vested upon grant, at an exercise price of $2.05 per share awarded to the executive by Private Evofem in 2013.(5)The share numbers and exercise prices reflected are those of options issued to the executive upon completion of the Merger in January 2018. These options were issued upon completion of the Merger in exchange for options to purchase 389,404 shares of Private Evofem common stock, which were fully vested upon grant, at an exercise price of $1.19 per share awarded to the executive by Private Evofem in 2016.(6)The share numbers and exercise prices reflected are those of options issued to the executive upon completion of the Merger in January 2018. These options were issued upon completion of the Merger in exchange for options to purchase 750,000 shares of Private Evofem common stock at an exercise price of $1.19 per share awarded to the executive by Private Evofem in 2016. Twenty-five percent of the award vested upon grant and the remaining 75% vests monthly over three years.(7)The share numbers and exercise prices reflected are those of options issued to the executive upon completion of the Merger in January 2018. These options were issued upon completion of the Merger in exchange for options to purchase 500,000 shares of Private Evofem common stock, which vests over four years, with 25% vesting after one year and the remaining vesting monthly, at an exercise price of $1.19 per share awarded to the executive by Private Evofem in 2016.(8)The share numbers and exercise prices reflected are those of options issued to the executive upon completion of the Merger in January 2018. These options were issued upon completion of the Merger in exchange for options to purchase 500,000 shares of Private Evofem common stock at an exercise price of $1.19 per share awarded to the executive by Private Evofem in 2016. Twenty-five percent of the award vested upon grant and the remaining 75% vests monthly over three years.(10)The share numbers and exercise prices reflected are those of options issued to the executive upon completion of the Merger in January 2018. These options were issued upon completion of the Merger in exchange for options to purchase 300,000 shares of Private Evofem Common stock at an exercise price of $1.19 per share awarded to the executive by Private Evofem in 2016. Twenty-five percent of the award vested upon grant and the remaining 75% vests monthly over three years.Employee Benefit and Equity Incentive PlansStock Compensation PlansThe Company initially adopted the 2007 Plan in March 2007, under which 211,893 shares of common stock were reserved for issuance to employees, non-employee directors, and consultants of the Company. The Company ceased granting any additional awards under our 2007 Plan, and presently grants equity awards under the 2014 Plan Equity Incentive Plan, or 2014 Plan.Our standard option awards provide for a “double trigger” acceleration of vesting upon certain terminations occurring within eighteen months following a termination of service after a change of control or similar transaction.On September 15, 2014, our board of directors adopted, and our stockholders approved, the 2014 Plan. The 2014 Plan provides incentives that will assist us to attract, retain, and motivate employees, including officers, consultants, and directors. We may provide these incentives through the grant of stock options, stock appreciation rights, restricted stock, RSUs, performance shares, and units and other cash-based or share-based awards. In addition, the 2014 Plan contains a mechanism through which we may adopt a deferred compensation arrangement in the future.A total of 166,666 shares of our common stock was initially authorized and reserved for issuance under the 2014 Plan. This reserve will automatically increase on each January 1 through 2024, by an amount equal to the smaller of:4% of the number of shares of common stock issued and outstanding on the immediately preceding December 31; andan amount determined by our board of directors.As of February 9, 2018, a total of 458,586 shares of our common stock were reserved and available for issuance under the 2014 Plan.Appropriate adjustments will be made in the number of authorized shares and other numerical limits in the 2014 Plan and in outstanding awards to prevent dilution or enlargement of participants’ rights in the event of a stock split or other change in our capital structure. Shares subject to awards which expire or are cancelled or forfeited will again become available for issuance under the 2014 Plan.The 2014 Plan is administered by the Compensation Committee of our board of directors. Pursuant to the provisions of the 2014 Plan, the Compensation Committee determines, in its discretion, the persons to whom and the times at which awards are granted, the sizes of such awards and all of their terms and conditions. The Compensation Committee has the authority to construe and interpret the terms of the 2014 Plan and awards granted under it. The 2014 Plan provides, subject to certain limitations, for indemnification by us of any director, officer, or employee against all reasonable expenses, including attorneys’ fees, incurred in connection with any legal action arising from such person’s action or failure to act in administering the 2014 Plan.The 2014 Plan authorizes the Compensation Committee, without further stockholder approval, to provide for the cancellation of stock options or stock appreciation rights with exercise prices in excess of the fair market value of the underlying shares of common stock on the date of grant in exchange for new options or other equity awards with exercise prices equal to the fair market value of the underlying common stock on the date of grant or a cash payment.In the event of a change in control as described in the 2014 Plan, the acquiring or successor entity may assume or continue all or any awards outstanding under the 2014 Plan or substitute substantially equivalent awards. The Compensation Committee may provide for the acceleration of vesting of any or all outstanding awards upon such terms and to such extent as it determines, except that the vesting of all awards held by members of the board of directors who are not employees will automatically be accelerated in full. Any awards that are not assumed, continued, or substituted for in connection with a change in control or are not exercised or settled prior to the change in control will terminate effective as of the time of the change in control. Notwithstanding the foregoing, except as otherwise provided in an award agreement governing any award, as determined by the Compensation Committee, any award that is not assumed, continued, or substituted for in connection with a change in control shall, subject to the provisions of applicable law, become fully vested and exercisable and/or settleable immediately prior to, but conditioned upon, the consummation of the change in control. The 2014 Plan also authorizes the Compensation Committee, in its discretion and without the consent of any participant, to cancel each or any outstanding award denominated in shares upon a change in control in exchange for a payment to the participant with respect to each share subject to the cancelled award of an amount equalto the excess of the consideration to be paid per share of common stock in the change in control transaction over the exercise price per share, if any, under the award. The vesting schedules of all outstanding options of the Company were fully accelerated in connection with the Merger and termination of employment or service arrangement with the Company.The 2014 Plan will continue in effect until it is terminated by our board of directors, provided, however, that all awards will be granted, if at all, within ten years of its effective date. The board of directors may amend, suspend or terminate the 2014 Plan at any time, provided that without stockholder approval, the plan cannot be amended to increase the number of shares authorized, change the class of persons eligible to receive incentive stock options, or effect any other change that would require stockholder approval under any applicable law or listing rule.Private Evofem Equity Incentive PlanThe Private Evofem Equity Incentive Plan was assumed by the Company in connection with the Merger and shares of Private Evofem common stock issuable pursuant to options previously granted under the Private Evofem Equity Incentive Plan became options to purchase our common stock upon completion of the Merger. No new awards may be granted under the Private Evofem Equity Incentive Plan. As of February 9, 2018, a total of 159,325 shares of our common stock were reserved for issuance upon the exercise of outstanding options under the Private Evofem Equity Incentive Plan.Perquisites, Health and Retirement BenefitsHealth, Welfare and Retirement BenefitsOur named executive officers and the Private Evofem officers listed above are eligible to participate in all of our employee benefit plans, including our medical, dental, vision, group life and disability insurance plans, in each case on the same basis as other employees.Director CompensationThe following table sets forth the compensation (cash and equity) received by our non-employee directors and the Private Evofem non-employee directors during the year ended December 31, 2017. Ms. Demski, Mr. Gorbachev, and Mr. Nugent resigned as members of our board of directors on January 17, 2018, in connection with the Merger.(1)With respect to awardsgranted to Dr. Kamdar, Mr. Gorbachev, Ms. Demski and Mr. Nugent, amounts listed in this column represent the aggregate fair value of the option awards computed as of the grant date of each option award in accordance with FASB ASC Topic 718, rather than amounts paid to or realized by the named individual. There can be no assurance that options will be exercised (in which case no value will be realized by the individual) or that the value on exercise will approximate the fair value as computed in accordance with FASB ASC Topic 718. The assumptions used in the valuation of these awards are set forth in Note 6 to our financial statements for the year ended December 31, 2017, which are included in this Annual Report.(2)With respect to an award granted to Mr. Rutherford, amounts listed in this column present the aggregate fair value of the Private Evofem option awards on the issuance date of these awards in accordance with FASB ASC Topic 718, rather than amounts paid to or realized by Mr. Rutherford. The fair value of the stock-based payments for Mr. Rutherford’s award was estimated on the date of grant using the Black-Scholes-Merton option-pricing model based on the following weighted-average assumptions for the years ended December 31, 2017:Expected volatility91.2 %Risk-free interest rate2.2 %Expected dividend yield0.0 %Expected term (years)5.7 There can be no assurance that options will be exercised (in which case no value will be realized by the individual) or that the value on exercise will approximate the fair value as computed in accordance with FASB ASC Topic 718.(4)Mr. Lynch’s fees earned include $60,000 payable as board fees under his Consulting Agreement. Mr. Lynch’s other compensation consists of $290,000 in consulting fees payable under his Consulting Agreement and a $350,000 bonus earned by Mr. Lynch in connection with consulting services provided during 2017. Mr. Lynch did not receive an equity award in 2017 in his capacity as a member of Private Evofem’s board of directors.In June 2015, our board of directors approved a compensation policy for our non-employee directors to adjust compensation based upon current market rates. This policy remained in effect for the fiscal year ended December 31, 2017, and provided the following compensation:Each non-employee director will receive an annual cash retainer in the amount of $35,000 per year.The Lead Independent Director will receive an additional annual cash retainer in the amount of $17,500 per year.The chairperson of the audit committee will receive additional annual cash compensation in the amount of $15,000 per year for such chairperson's service on the audit committee. Each non-chairperson member of the audit committee will receive additional annual cash compensation in the amount of $7,500 per year for such member's service on the audit committee.The chairperson of the compensation committee will receive additional annual cash compensation in the amount of $10,000 per year for such chairperson's service on the compensation committee. Each non-chairperson member of the compensation committee will receive additional annual cash compensation in the amount of $5,000 per year for such member's service on the compensation committee.The chairperson of the nominating and corporate governance committee will receive additional annual cash compensation in the amount of $7,500 per year for such chairperson's service on the nominating and corporate governance committee. Each non-chairperson member of the nominating and corporate governance committee will receive additional annual cash compensation in the amount of $3,500 per year for such member's service on the nominating and corporate governance committee.Each non-employee directors will receive a stock option grant with an initial grant equal to a cash value of $125,000 in shares of the Company’s common stock upon a director’s initial appointment or election to the board of directors, vesting quarterly over a three-year period and an annual stock option grant equal to a cash value of $65,000 in shares of the Company’s common stock on the date of each annual stockholder’s meeting thereafter, fully vesting in one year from the date of grant.In January 2018, our Board amended our Non-Employee Director Compensation Policy to provide the compensation set forth below:Each non-employee director will receive an annual cash retainer in the amount of $50,000 per year.The Chairman of the Board will receive an additional annual cash retainer in the amount of $17,500 per year.The chairperson of the Audit Committee will receive additional annual cash compensation in the amount of $10,000 per year for such chairperson’s service on the Audit Committee. Each non-chairperson member of the Audit Committee will receive additional annual cash compensation in the amount of $5,000 per year for such member’s service on the Audit Committee.The chairperson of the Compensation Committee will receive additional annual cash compensation in the amount of $10,000 per year for such chairperson’s service on the Compensation Committee. Each non-chairperson member of the Compensation Committee will receive additional annual cash compensation in the amount of $5,000 per year for such member’s service on the Compensation Committee.The chairperson of the Nominating and Corporate Governance Committee will receive additional annual cash compensation in the amount of $7,500 per year for such chairperson’s service on the Nominating and Corporate Governance Committee. Each non-chairperson member of the Nominating and Corporate Governance Committee will receive additional annual cash compensation in the amount of $3,500 per year for such member’s service on the Nominating and Corporate Governance Committee. Each non-employee director will receive a stock option grant with an initial grant equal to a cash value of $180,000 in shares of our common stock upon a director’s initial appointment or election to our board of directors, vesting quarterly over a three-year period and an annual stock option grant equal to a cash value of $90,000 in shares of our common stock on the date of each annual stockholder’s meeting thereafter, beginning in 2018, fully vesting in one year from the date of grant.CertainCertain Beneficial Owners and Management and Related Stockholder Matters.Security Ownership of Certain Beneficial Ownersfollowing table sets forth certain information concerning the ownership of our common stock as of February 9, 2018, by (i) those persons who are knownresponse to us to be the beneficial owner(s) of more than five percent of our common stock, (ii) each of our directors and named executive officers and (iii) all of our directors and named executive officers as a group.The number of shares beneficially owned by each entity, person, director or executive officer is determined in accordance with the rules of the SEC, and the information required by this item is not necessarily indicativeincorporated by reference from the discussions set forth under the headings “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT” and “EXECUTIVE OFFICER AND DIRECTOR COMPENSATION” in our proxy statement for the 2019 Annual Meeting of beneficial ownership for any other purpose. Under such rules, beneficial ownership generally includes any shares over which the individual has sole or shared voting power or investment power as well as any shares that the individual has the right to acquire within 60 days of February 9, 2018, through the exercise of stock options, warrants or other rights. Unless otherwise indicated in the footnotes to this table, we believe that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned.*Includes beneficial ownership of less than 1% of the outstanding shares of Evofem’s common stock.†Party to the Support Agreement, pursuant to which stockholder agreed to vote shares of Evofem stock owned by stockholder or over which stockholder has voting control in a certain manner.(1)Includes (i) 3,519,366 shares of common stock held by Invesco Perpetual High Income Fund, or PHIF, and (ii) 3,518,132 shares of common stock held by Invesco Perpetual Income Fund, or PIF. Invesco Asset Management Limited acts as agent for and on behalf of PHIF and PIF, each as a discretionary managed client. Invesco Asset Management Limited has the power to direct the vote and disposition of the common stock held by the PHIF and PIF. Accordingly, Invesco Asset Management Limited may be deemed to be the beneficial owner of an aggregate amount of 7,037,498 shares of common stock, consisting of the shares held directly by PHIF and PIF, as described above.(2)Includes (i) 5,620,952 shares of common stock held by CF Woodford Equity Income Fund, a sub fund of CF Woodford Investment Fund, or WEIF, (ii) 171,195 shares of common stock held by Omnibus Income & Growth Fund, a sub fund of Omnis Portfolio Investments ICVC, or OIGF, and (iii) 1,672,611 shares of common stock held by Woodford Patient Capital Trust Plc., or WPCT. Woodford Investment Management Limited acts as agent for and on behalf of WEIF, OIGF and WPCT, each as a discretionary managed client. Woodford Investment Management Limited has the power to direct the vote and disposition of the common stock held by WEIF, OIGF and WPCT. Accordingly, Woodford Investment Management Limited may be deemed to be the beneficial owner of an aggregate amount of 7,465,538 shares of common stock, consisting of the shares held by WEIF, OIGF and WPCT, as described above.(3)Includes 3,850 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of February 9, 2018.LLC, or One Palmer Square, is the general partner of Domain Partners VII and DP VII Associates. Dr. Kamdar is a member of One Palmer Square. The managing members of One Palmer Square are James Blair, Jesse Treu, Brian Dovey, Brian Halak and Nicole Vitullo. Each of James Blair, Jesse Treu, Brian Dovey, Brian Halak and Nicole Vitullo share voting and investment power with respect to the securities held by Domain Partners VII and DP VII Associates. The managing members of Domain Associates are James Blair, Brian Dovey, Nicole Vitullo, Brian Halak and Dr. Kamdar. Each of James Blair, Brian Dovey, Nicole Vitullo, and Brian Halak share voting and investment power with respect to the securities held by Domain Associates. Each of James Blair, Jesse Treu, Brian Dovey, Brian Halak and Nicole Vitullo disclaims beneficial ownership of the securities held by Domain Partners VII and DP VII Associates except to the extent of his or her pecuniary interest therein, if any. Each of James Blair, Brian Dovey, Nicole Vitullo, Brian Halak, and Dr. Kamdar disclaims beneficial ownership of the securities held by Domain Associates except to the extent of his or her pecuniary interest therein, if any. Dr. Kamdar is a member of our board of directors.(5)Includes 770 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of February 9, 2018.(6)Includes 33,547 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of February 9, 2018.(7)Includes 11,857 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of February 9, 2018.(8)Includes 4,802 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of February 9, 2018.(9)Includes (1) 515,273 shares of common stock owned by Domain Partners VII, L.P., but deemed to be beneficially owned by Dr. Kamdar, (2) 8,004 shares of common stock owned by DP VII Associates, L.P, but deemed to be beneficially owned by Dr. Kamdar, (3) 655 shares of common stock owned by Domain Associates, LLC, but deemed to be beneficially owned by Dr. Kamdar. Dr. Kamdar has a pecuniary interest in the securities held by Domain Associates as described in note 4, (ii) 88,358 shares of common stock that may be acquired by our current executive officers and directors pursuant to the exercise of stock options within 60 days of February 9, 2018.Securities Authorized for Issuance Under Equity Compensation PlansThe following table provides certain aggregate information with respect to all of our equity compensation plans in effect as of December 31, 2017:(1)Includes our 2007 Plan, 2014 Plan and the Private Evofem Equity Incentive Plan.(2)As of December 31, 2017, an aggregate of 366,249 shares of common stock were available for grant under the 2014 Plan and an aggregate of 95,741 shares were available for issuance under 2014 ESPP, and an aggregate of 74,380 shares available for grant under the Private Evofem Equity Incentive Plan. The 2014 Plan contains a provision for an automatic increase in the number of shares available for grant each January 1st until and including January 1, 2024, subject to certain limitations, by a number of shares equal to the lesser of 4% of the number of shares of our common stock issued and outstanding on the immediately preceding December 31 or a number of shares set by our board of directors. The ESPP contains a provision for an automatic increase in the number of shares available for issuance under the ESPP each January 1st and including January 1, 2024, subject to certain limitations, by a number of shares equal to the lesser of 1% of our common stock issued and outstanding on the immediately preceding December 31 or a number of shares set by our board of directors.Company Policy Regarding Related Party TransactionsOur Audit Committee is responsible for reviewing and approving all transactions in which we are a participant and in which any parties related to us, including our executive officers, directors, beneficial owners of more than 5% of our securities, immediate family members of the foregoing persons, and any other persons whom our board of directors determines may be considered related parties, has or will have a direct or indirect material interest. If advanced approval is not feasible, the Audit Committee has the authority to ratify a related party transaction at the next Audit Committee meeting. For purposes of our Audit Committee charter, a material interest is deemed to be any consideration received by such a party in excess of $120,000 per year.In reviewing and approving such transactions, the Audit Committee shall obtain, or shall direct our management to obtain on its behalf, all information that our committee believes to be relevant and important to a review of the transaction prior to its approval. Following receipt of the necessary information, a discussion shall be held of the relevant factors if deemed to be necessary by our committee prior to approval. If a discussion is not deemed to be necessary, approval may be given by written consent of our committee. This approval authority may also be delegatedThe response to the Chairperson of the Audit Committee in respect of any transaction in which the expected amountinformation required by this item is less than $500,000.The Audit Committee or its chairperson, as the case may be, shall approve only those related party transactions that are determined to be in, or not inconsistent with, the best interests of us and our stockholders, taking into account all available facts and circumstances as our committee or the Chairperson determines in good faith to be necessary. These facts and circumstances will typically include, but not be limited to, the material terms of the transaction, the nature of the related party’s interest in the transaction, the significance of the transaction to the related party and the nature of our relationship with the related party, the significance of the transaction to us, and whether the transaction would be likely to impair (or create an appearance of impairing) the judgment of a director or executive officer to act in our best interest. No member of the Audit Committee may participate in any review, consideration, or approval of any related party transaction with respect to which the member or any of his or her immediate family members is the related party, except that such member of the Audit Committee will be required to provide all material information concerning the related party transaction to the Audit Committee.Financing and the MergerAs discussed in Item 1 of this Annual Report, which is hereby incorporated by reference we issued sharesfrom the discussions set forth under the headings “CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS” and “ELECTION OF DIRECTORS (Notice Item 1)” in our proxy statement for the 2019 Annual Meeting of our common stock to certain investors in Private Evofem, including funds affiliated with Invesco Asset Management, at a purchase price of $12.389355 per share in the Financing. In addition, we issued shares of our common stock and, with respect to funds affiliated with Woodford Investment Management, the Post-Merger Warrants. As of February 9, 2018, and upon the closing of the Merger, the funds affiliated with Invesco Asset Management and the funds affiliated with Woodford Asset Management each beneficially owned more than 10% of our issued and outstanding capital stock. The issuances to funds affiliated with Invesco Asset Management and to funds affiliated with Woodford Asset Management in connection with the Merger and Financing are reflected below:Post-Merger Voting AgreementsOn January 17, 2018, the Company entered into Post-Merger Voting Agreements with funds affiliated with Woodford Investment Management, or the Voting Agreement Holders, regarding shares of our common stock then representing more than 19.5% of the then issued and outstanding shares of our common stock, or the Threshold. The Post-Merger Voting Agreements grant us or our designee a proxy to vote on matters presented to our stockholders, or the Proxy Matters, any and all shares of our common stock held by a Voting Agreement Holder in excess of the Threshold, or the Proxy Shares. In accordance with the proxies granted to us by the Post-Merger Voting Agreements, the Proxy Shares shall be voted in the same proportions as the shares voted by all other stockholders voting on the Proxy Matters. The Post-Merger Voting Agreements may not be revoked by a Voting Agreement Holder so long as such holder holds shares of our common stock in excess of the Threshold.Private Evofem Series D Preferred Stock IssuancePrior to the Merger in July 2017 and November 2017, Private Evofem issued additional shares of its Series D Preferred Stock and warrant rights to purchase shares of its capital stock to funds affiliated with Woodford Investment Management at a purchase price of $500,000 per share and an aggregate purchase price of $10 million in a private placement transaction in reliance upon Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder. Registration Rights AgreementAs noted in Item 1 of this Annual Report, which is hereby incorporated by reference, we have entered into the Registration Rights Agreement, pursuant to which the Company is, among other things, obligated to file a registration statement with the SEC within 60 days following completion of the Merger. Funds affiliated with Invesco Asset Management, Domain Partners and Woodford InvestmentManagement are party to the Registration Rights Agreement. Funds affiliated with Domain Partners were beneficial owners of more than 10% of our issued and outstanding common stock at the time of the Merger.Audit Committee appointed Ernst & Young LLP asresponse to the Company’s independent registered public accounting firminformation required by this item is incorporated by reference from the discussions set forth under the headings “INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Notice Item 3)” in our proxy statement for the fiscal year ending December 31, 2017.The following table presents the fees for professional audit services and other services rendered by Ernst & Young LLP, as2019 Annual Meeting of February 9, 2018, for fiscal year 2017 and 2016.(1)Audit Fees represent fees and out-of-pocket expenses whether or not yet invoiced for professional services provided in connection with the audit of the Company’s financial statements, the review of our registration statement on Form S-4, the review of the Company’s quarterly financial statements, and audit services provided in connection with other regulatory filings.Pre-Approval Policies and ProceduresThe Audit Committee annually reviews and pre-approves certain audit and non-audit services that may be provided by our independent registered public accounting firm and establishes and pre-approves the aggregate fee level for these services. Any proposed services that would cause us to exceed the pre-approved aggregate fee amount must be pre-approved by the Audit Committee. All audit services for 2017 were pre-approved by the Audit Committee.Neothetics,Evofem Biosciences, Inc., together with the report thereon of ErnstDeloitte & YoungTouche LLP, an independent registered public accounting firm, are included in this Annual Report:F-2F-3F-4F-5F-6F-7F-2,F-1, immediately following the signature pages of this Annual Report.List of financial statement schedules.Exhibit NumberExhibit Title Filed with this
Form 10 KForm Form2. 1^8-K 8-K001-36754-1711399168-K 8-K001-36754-171139916X001-36754 2/26/2018 8-K 8-K001-36754-1854668701/1/17/2018X001-36754 2/26/2018 S-1 S-1333-199449S-1 S-1333-199449S-1 S-1333-199449S-1 S-1333-199449S-1333-19944910/17/20144.7X001-36754 2/26/2018 4.8S-4 S-4333-2215924.9S-4 S-4333-22159210.1S-1 333-224958 5/16/2018 4.10 S-1 333-224958 5/16/2018 10.1 8-K 8-K001-36754-1711399168-K 8-K001-36754-17124775808/8/201710.3†S-1333-19944910/17/201410.4D8-K 8-K001-36754-1854668701/1/17/201810.5DX001-36754 2/26/2018 10.68-K 8-K001-36754-17113991610.7†S-1333-19944910/17/2014Exhibit NumberExhibit TitleFiled with this
Form 10 KIncorporated by ReferenceFormFile No.Date FiledS-1333-19944910/17/201410.9†Contract No. 0702/12, dated July 2, 2013, by and between the Registrant and NovaMedica LLC.S-1333-19944910/17/201410.10S-1 S-1333-19944910.11S-1 S-1333-19944910.1210-K 10-K001-36754-16153365303/3/29/201510.138-K 8-K001-363754-1760963402/2/14/201710.148-K 8-K001-363754-1760963402/2/14/201710.15S-1333-19944910/17/201410.16DS-1 S-1333-19944910.17D10.12Δ S-1 S-1333-19944910.18DS-1/A S-1/A333-19944910.19DS-1 S-1333-19944910.20DS-1/A333-19944911/10/201410.21D10-Q 10-Q001-36754-16182304608/8/11/201610.22D8-K 5/8/2018 10.17Δ S-1/A S-1/A333-19944910.23DS-1/A S-1/A333-19944910.24DS-1/A S-1/A333-19944910.25DS-1/A S-1/A333-19944910.26DS-1/A S-1/A33-19944910.27DS-1/A S-1/A33-19944910.28DS-1/A S-1/A33-19944910.29DX001-36754 2/26/2018 10.30S-4333-22159211/15/2017Exhibit NumberExhibit TitleFiled with this
Form 10 KIncorporated by ReferenceFormFile No.Date FiledS-4333-22159211/15/201710.32S-4333-22159211/15/201710.33S-4333-22159211/15/201710.34S-4 S-4333-22159210.35DS-4 S-4333-22159210.36DS-4 S-4333-22159210.37DS-4 S-4333-22159210.38DS-4 S-4333-22159210.39DS-4 S-4333-22159210.40DS-4 S-4333-22159210.41DS-4 S-4333-22159210.42DS-4 S-4333-22159210.43DS-4 S-4333-22159210.44†S-4 S-4333-22159210.45S-4 S-4333-22159210.46S-4 S-4333-22159210.4710.38 S-4 S-4333-22159210.48S-4 S-4333-22159210.49S-4 S-4333-22159210.50S-4333-22159211/15/2017Exhibit NumberExhibit TitleFiled with this
Form 10 KIncorporated by ReferenceFormFile No.Date FiledS-4333-22159211/15/201710.52S-4333-22159211/15/201710.53S-4333-22159211/15/201710.54S-4333-22159211/15/201710.55S-4333-22159211/15/201710.56S-1/A333-19944911/10/201410.5710-Q001-36754-161641685/12/201610.58DS-1 S-1333-19944910.598-K 8-K001-36754-17113991610.60D8-K 10-K001-36754-16153365303/29/201616.18-K 001-36754 7/3/2018 10.45Δ 8-K 001-36754 7/3/2018 10.46Δ 8-K 001-36754 7/3/2018 10.47Δ 8-K 001-36754 7/3/2018 10.48Δ 10-Q 001-36754 8/2/2018 10.49Δ 10-Q 001-36754 8/2/2018 16.1 8-K 8-K001-36754-1854668701/1/25/2018X001-36754 2/26/2018 X XX XX XX XX XX XX XXBRL Definition Linkbase Document **101.LAB XBRL Taxonomy Extension DefinitionLabels Linkbase DocumentX X101.LABXBRL Taxonomy Extension Label Linkbase DocumentX101.PREX XDΔ Management Compensation Plan or arrangement †† Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment pursuant to Rule 406 under the Securities Act of 1933 ^^ The schedules and exhibits to the Merger Agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the Securities and Exchange Commission upon request. * ** Summary.None.Registrantregistrant has duly caused this report to be signed on its behalf by the undersigned thereuntohereunto duly authorized.EVOFEM BIOSCIENCES, INC. February 26, 2018By: By:Name: Name: Title: Title:President and Chief Executive OfficerSignatureTitleDateTitle Date /s/ Saundra Pelletier Saundra PelletierOfficer)Officer)February 26, 2018Saundra Pelletier /s/ Justin J. File Justin J. FileOfficer)Officer)February 26, 2018Justin J. File /s/ Thomas Lynch Thomas LynchFebruary 26, 2018Thomas Lynch /s/ Gillian Greer, Ph.D. Director March 1, 2019 CBE, Ph.D.DirectorFebruary 26, 2018Director March 1, 2019 DirectorFebruary 26, 2018Director March 1, 2019 DirectorFebruary 26, 2018Director March 1, 2019 DirectorFebruary 26, 2018Director March 1, 2019 DirectorFebruary 26, 201884F-2F-3F-4F-5F-6F-7F-1Report of Independent Registered Public Accounting FirmTheand Stockholders (formerly Neothetics, Inc.)Statements:(formerly Neothetics, Inc.and subsidiaries (the "Company"), or the Company, as of December 31, 20172018 and 2016,2017, the related consolidated statements of operations, stockholders’ equityconvertible preferred stock and stockholders' deficit, and cash flows, for each of the threetwo years in the period ended December 31, 2017,2018, and the related notes (collectively referred to as the “financial statements”"financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company atas of December 31, 20172018 and 2016,2017, and the results of its operations and its cash flows for each of the threetwo years in the period ended December 31, 2017,2018, in conformity with U.S.accounting principles generally accepted accounting principles.The Company’s Ability to Continue as a in the United States of America.Concern:stated thatnegative working capital and a net capital deficiency at December 31, 2018. These conditions raise substantial doubt exists about the Company’s ability to continue as a going concern. Management's evaluation of the events and conditions and management’s plans regardingin regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.Opinion:Company’sCompany's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.Company'sCompany’s internal control over financial reporting. Accordingly, we express no such opinion.We have served as the Company’s auditor since 2011.San Diego, CaliforniaFebruary 26, 2018/s/ Ernst & Young LLPF-2 December 31, 2018 December 31, 2017 Assets Current assets: Cash and cash equivalents $ 1,330 $ 1,211 Restricted cash 431 490 Prepaid and other current assets 717 653 Total current assets 2,478 2,354 Property and equipment, net 593 848 Other noncurrent assets 939 750 Total assets $ 4,010 $ 3,952 Liabilities, convertible preferred stock and stockholders’ deficit Current liabilities: Accounts payable $ 8,882 $ 8,999 Note payable 4,010 — Accrued expenses 11,513 12,086 Accrued compensation 2,924 2,392 Series D 2X liquidation preference — 79,870 Total current liabilities 27,329 103,347 Deferred rent 37 114 Other noncurrent liabilities — 166 Total liabilities 27,366 103,627 Commitments and contingencies (Note 6) Preferred stock, $0.0001 par value; 5,000,000 and 57,501,624 shares authorized at December 31, 2018 and 2017, respectively: Series A convertible preferred stock, no shares issued and outstanding at December 31, 2018, and 12,618,279 shares issued and outstanding at December 31, 2017 — 23,848 Series B convertible preferred stock, no shares issued and outstanding at December 31, 2018, and 13,801,318 shares issued and outstanding at December 31, 2017 — 43,616 Series C-1 convertible preferred stock, no shares issued and outstanding at December 31, 2018, and 8,558,686 shares issued and outstanding at December 31, 2017 — 34,382 Series C convertible preferred stock, no shares issued and outstanding at December 31, 2018, and 5,037,784 shares issued and outstanding at December 31, 2017 — 19,469 Series D redeemable convertible preferred stock, no shares issued and outstanding at December 31, 2018, and 80 shares issued and outstanding at December 31, 2017 — 68,556 Stockholders’ deficit: Common stock, $0.0001 par value; 300,000,000 and 4,051,137 shares authorized at December 31, 2018 and 2017, respectively; 25,867,248 and 2,082,053 shares issued and outstanding at December 31, 2018 and 2017, respectively 3 — Additional paid-in capital 409,787 17,731 Accumulated deficit (433,146 ) (307,277 ) Total stockholders’ deficit (23,356 ) (289,546 ) Total liabilities, convertible preferred stock and stockholders’ deficit $ 4,010 $ 3,952 Years Ended December 31, 2018 2017 Operating expenses: Research and development $ 43,415 $ 23,539 General and administrative 34,227 12,148 Total operating expenses 77,642 35,687 Loss from operations (77,642 ) (35,687 ) Other income (expense): Interest income 127 128 Other expense, net (145 ) (46 ) Loss on issuance of Series D redeemable convertible preferred stock — (8,522 ) Loss on issuance of warrants (47,920 ) — Change in fair value of Series D 2X liquidation preference (130 ) (61,175 ) Total other expense, net (48,068 ) (69,615 ) Loss before income tax (125,710 ) (105,302 ) Income tax expense (2 ) (3 ) Net loss (125,712 ) (105,305 ) Accretion of Series D redeemable convertible preferred stock dividends (66 ) (4,017 ) Net loss attributable to common stockholders $ (125,778 ) $ (109,322 ) Net loss per share attributable to common stockholders, basic and diluted $ (5.74 ) $ (55.78 ) Weighted-average shares used to compute net loss attributable to common stockholders, basic and diluted 21,900,574 1,959,904 notes.F-3 Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Deficit Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Balance at December 31, 2016 12,618,279 $ 23,848 13,801,318 $ 43,616 8,558,686 $ 34,382 5,037,784 $ 19,469 60 $ 56,757 2,082,053 $ — $ 20,887 $ (201,972 ) $ (181,085 ) Issuance of Series D at fair value for cash, net of issuance costs of $75 — — — — — — — — 20 7,782 — — — — — Accretion of Series D dividends — — — — — — — — — 4,017 — — (4,017 ) — (4,017 ) Stock-based compensation — — — — — — — — — — — — 861 — 861 Net loss — — — — — — — — — — — — — (105,305 ) (105,305 ) Balance at December 31, 2017 12,618,279 23,848 13,801,318 43,616 8,558,686 34,382 5,037,784 19,469 80 68,556 2,082,053 — 17,731 (307,277 ) (289,546 ) Conversion of convertible preferred stock into Private Evofem common stock, excluding Series D (see Note 8) (12,618,279 ) (23,848 ) (13,801,318 ) (43,616 ) (8,558,686 ) (34,382 ) (5,037,784 ) (19,469 ) — — 1,027,079 — 121,315 — 121,315 Cancellation of restricted stock awards (see Note 11) — — — — — — — — — — (122,149 ) — — — — Issuance of common stock upon cashless exercise of Invesco Warrants (see Note 10) — — — — — — — — — — 3,968,473 1 47,919 — 47,920 Accretion and payment of Series D dividends (see Note 8) — — — — — — — — — 66 — — (66 ) (157 ) (223 ) Conversion of Series D dividends and Series D (see Note 8) — — — — — — — — (80 ) (5,226 ) 6,878,989 1 5,225 — 5,226 Redemption of Series D 2X liquidation preference upon conversion of Series D (see Note 8) — — — — — — — — — — — — 80,000 — 80,000 Deemed contribution upon conversion of Series D (see Note 8) — — — — — — — — — (49,334 ) — — 49,334 — 49,334 Issuance of common stock and WIM Warrants (see Note 8) — — — — — — — — — (14,062 ) 3 — 14,062 — 14,062 Private placement of common stock (see Note 3) — — — — — — — — — — 1,614,289 — 20,000 — 20,000 Record pre-merger Neothetics' stockholders' equity and elimination of Neothetics' historical accumulated deficit (see Note 3) — — — — — — — — — — 2,308,430 — 1,946 — 1,946 Issuance of common stock, pre-funded warrants and common warrants in connection with the Offering, net of underwriting discounts, commissions and offering costs (see Note 9) — — — — — — — — — — 7,436,171 1 36,029 — 36,030 Issuance of common stock - exercise of stock options — — — — — — — — — — 6,173 — 42 — 42 Restricted stock awards/units issued — — — — — — — — — — 1,305,399 — — — — Shares withheld to cover taxes related to vesting of restricted stock awards — — — — — — — — — — (637,662 ) — (1,592 ) — (1,592 ) Stock-based compensation — — — — — — — — — — — — 17,842 — 17,842 Net loss — — — — — — — — — — — — — (125,712 ) (125,712 ) Balance at December 31, 2018 — $ — — $ — — $ — — $ — — $ — 25,867,248 $ 3 $ 409,787 $ (433,146 ) $ (23,356 ) notes.F-4 Years Ended December 31, 2018 2017 Cash flows from operating activities: Net loss $ (125,712 ) $ (105,305 ) Adjustments to reconcile net loss to net cash, cash equivalents and restricted cash used in operating activities: Loss on issuance of warrants 47,920 — Loss on issuance of Series D redeemable convertible preferred stock — 8,522 Change in fair value of Series D 2X liquidation preference 130 61,175 Stock-based compensation 17,842 861 Depreciation 262 244 Changes in operating assets and liabilities: Prepaid and other assets (11 ) 145 Accounts payable 3,799 7,052 Accrued expenses and other liabilities (795 ) 7,319 Accrued compensation 307 775 Deferred rent, net of current portion (242 ) (30 ) Net cash, cash equivalents and restricted cash used in operating activities (56,500 ) (19,242 ) Cash flows from investing activities: Purchases of property and equipment (7 ) (6 ) Proceeds from sale of Softcup line of business 250 250 Cash acquired in connection with the Merger 1,900 — Net cash, cash equivalents and restricted cash provided by investing activities 2,143 244 Cash flows from financing activities: Proceeds from issuance of Series D redeemable convertible preferred stock, net of issuance costs — 9,925 Proceeds from issuance of common stock - private placement 20,000 — Proceeds from issuance of common stock, pre-funded warrants and common warrants in connection with the Offering, net of underwriting discounts and commissions 37,542 — Proceeds from issuance of common stock - exercise of stock options 42 — Payment of cash dividends for Series D redeemable convertible preferred stock (157 ) — Cash paid for offering costs (1,418 ) (713 ) Payments of tax withholdings related to vesting of restricted stock awards (1,592 ) — Net cash, cash equivalents and restricted cash provided by financing activities 54,417 9,212 Net change in cash, cash equivalents and restricted cash 60 (9,786 ) Cash, cash equivalents and restricted cash, beginning of period 1,701 11,487 Cash, cash equivalents and restricted cash, end of period $ 1,761 $ 1,701 Supplemental cash flow information: Cash paid for interest $ — $ 15 Cash paid for taxes $ 2 $ 3 Supplemental disclosure of noncash investing and financing activities: Issuance of Series D liquidation preference $ — $ 10,665 Net assets acquired in connection with the Merger $ 46 $ — Public offering costs included in accounts payable and accrued expenses $ 94 $ 137 Conversion of convertible preferred stock into common stock (excluding Series D) $ 121,315 $ — Conversion of Series D redeemable convertible preferred stock into common stock $ 68,622 $ — Redemption of Series D 2X liquidation preference upon conversion of Series D redeemable convertible preferred stock into common stock $ 80,000 $ — Issuance of Promissory Note $ 4,010 $ — notes.F-51. Description of Business and Basis of Presentation See accompanying notes.F-6NOTES TO FINANCIAL STATEMENTS1. Organization and Basis of PresentationNeothetics, Inc. (the “Company” or “Neothetics”), was originally incorporated in Delaware on February 1, 2007, under the name Lipothera, Inc. In September 2008, Lipothera, Inc. changed its name to Lithera, Inc. In August 2014, Lithera, Inc. changed its name to Neothetics, Inc. Neothetics was a clinical-stage specialty pharmaceutical company that developed therapeutics for the aesthetic market.Merger of Neothetics, Inc. and Evofem Biosciences Operations, Inc.andInc., a Delaware corporation (Neothetics), now known as Evofem Biosciences, Inc. (the Company), completed its merger (the Merger) with privately-held Evofem Biosciences Operations, Inc. (Private Evofem), or Private Evofem, completed a merger and reorganization, or the Merger, in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated October 17, 2017 or the(the Merger Agreement, by and among Neothetics, Private Evofem and a wholly owned subsidiary of Neothetics,Agreement), whereby Nobelli Merger Sub, Inc., or Merger Sub, whereby Merger Suba Delaware corporation and wholly-owned subsidiary of Neothetics, merged with and into Private Evofem, with Private Evofem surviving as a wholly owned subsidiary of Neothetics.on January 17, 2018, the CompanyNeothetics filed a certificate of amendment to itsthe amended and restated certificate of incorporation to, effectamong other things, affect a six-for-one6:1 reverse stock split of its common stock or the(the Reverse Split, cause the Company not to be governed by Section 203 of the Delaware General Corporation Law, or the DGCL,Stock Split) and change its name from “Neothetics, Inc.” to “Evofem Biosciences, Inc.” TheBoth the name change and the Reverse Stock Split were both effectedeffective on January 17, 2018.2018 (the Closing Date). Shares of the Company’sCompany's common stock commenced trading on The Nasdaq Capital Market under the new name and ticker symbol “EVFM” as of market open on January 18, 2018.No fractional shares were issued See discussions of the transactions in connection with the Reverse Split. The accompanying financial statementsMerger at notesRelated Transactions.financial statements give retroactive effectclosing the Merger on the Closing Date, (iii) references to “Neothetics” refer to Neothetics, Inc. and its subsidiaries prior to the closing of the Merger on the Closing Date, and (iv) references to share amounts, figures (other than exchange ratios) and other information have been adjusted to reflect the Reverse SplitStock Split.allmultiple potential indications, including prevention of pregnancy, prevention of STIs, and reduction of recurrent bacterial vaginosis (BV).periods presented.normal range of 3.5 to 4.5. This vaginal pH range is inhospitable to spermatozoa, as well as certain viral and bacterial pathogens associated with STIs, but is integral to the survival of healthy bacteria in the vagina.Merger was structured asCompany is planning a reverse capitalization,Phase 2 clinical trial for this indication, building on favorable Phase 1 trial results. based onin connection with the termsMerger, it recorded Neothetics’ assets and liabilities at fair value as of the Merger and other factors. The financial information included in the financial statements is that of NeotheticsClosing Date. Therefore, for periods prior to the Merger, becausethe consolidated financial statements were prepared on a stand-alone basis for Private Evofem and did not include the combined entities'was consummated after the period covered by theseconsolidated financial statements. Asstatements as of and for the year ended December 31, 2017, Neothetics had devoted substantially all of its efforts to product development, raising capital,2018 from the Closing Date included Neothetics' assets and building infrastructure and has not realized revenues from its planned principal operations.Basis of Presentation and Liquidityhasprepared the consolidated financial statements in accordance with accounting principles generally accepted in the U.S. (GAAP) and the rules and regulations of the Securities and Exchange Commission (SEC) related to annual reports on Form 10-K. The Company’s financial statements are presented on a limited operating history. consolidated basis, which include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. accompanying financial statements have been prepared assuming the Company will continue ason a going concern basis, which contemplates the realization of assets and the satisfactionsettlement of liabilities, in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts and classification of liabilities that may result from the outcome of this uncertainty.expectshas no revenues and, as such, has incurred operating losses and negative cash flows from operating activities since inception, and has negative working capital and a net capital deficiency at December 31, 2018. As described in Note 9- Public Offering, the Company received proceeds of approximately $36.0 million, net of underwriting discounts and commissions and estimated offering costs, from a public offering that closed on May 24, 2018. As of December 31, 2018, the Company had cash and cash equivalents of $1.3 million, working capital deficit of $24.9 million and an accumulated deficit of $433.1 million.intofor the foreseeable future.In accordancefuture and incur additional costs associated with ASU 2014-15, Presentationbeing a public company. R&D expenses are expected to decrease for the foreseeable future due to the completion of Financial Statements – Going Concern (Subtopic 205-40): Disclosurethe clinical phase of Uncertaintiesconfirmatory Phase 3 clinical trial for Amphora for prevention of pregnancy. According to management estimates, liquidity resources as of December 31, 2018 are not sufficient to maintain its planned level of operations for the 12 months from the date of issuance of the financial statements.an Entity’s Ability to Continue as a Going Concern, management is required to perform a two-step analysis over itsthe Company's ability to continue as a going concern. Management must first evaluate whether there are conditionsevents thatstrategic development plan for future growth. If the Company cannot successfully raise substantial doubt aboutadditional funding and implement its strategic development plan, the Company’s abilityCompany may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, suspend or curtail planned programs or cease operations entirely. Any of these could materially and adversely affect its liquidity, financial condition and business prospects and the Company would not be able to continue as a going concern. If the Company is unable to continue as a going concern, (step 1). If management concludes that substantial doubt is raised, management is also requiredit may have to consider whetherliquidate its plans alleviate that doubt (step 2).The Company has incurred net losses from operations since inceptionassets and has an accumulated deficit of $135.8 millionmay receive less than the value at December 31, 2017. Management has prepared cash flows forecasts which indicate that basedthose assets are carried on the Company’s expected operating losses and negative cash flows, there is substantial doubt about the Company’s ability to continue as a going concern for twelve months after the date that the financial statements for the year ended December 31, 2017, are issued. Even with the Merger that was completed on January 17, 2018, uncertainties associated with the Company’s ability to obtain additional funding raise substantial doubt about the Company’s ability to continue as a going concern. The Company plans to continue to fund its losses from operations and capital funding needs through debt and equity financing or through collaborations and partnerships with other entities. Debt or equity financing or collaborations and partnerships with other entities may not be available, on a timely basis on terms that are acceptable to the Company, or at all. In addition, the Company may be required to scale back or discontinue advancement of product candidates, reduce headcount or reduce other operating expenses. This could have an adverse impact on the Company’s ability to achieve certain of its planned objectives during 2018, and thus, could materially harm the Company’s business. F-72. Summary of Significant Accounting Policies accounting principles generally accepted in the United States, or GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the notes thereto. Significant estimates affecting amounts reported or disclosed in the consolidated financial statements include, but not limited to, the measurement of the Series D 2X liquidation preference, assumptions used in estimating the fair value of warrants issued in connection with the Merger, the useful lives of property and equipment, the recoverability of long-lived assets, preclinical and clinical trial accruals, assumptions used in estimating the fair value of stock-based compensation expense and other contingencies. The Company’s assumptions regarding the measurement of the Series D 2X liquidation preference and stock-based compensation are more fully described in Note 5 — Fair Value of Financial Instruments and Note 11 — Stock-baseddisclosure of contingent assetsrecorded expenses that are not readily apparent from other sources. As future events and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actualtheir effects cannot be determined with precision, actual results couldmay materially differ from those estimates.Cashestimates or assumptions.Cash Equivalentsconsiders all highly liquid investments with a maturity of 90 days or less at the date of purchase to be cash equivalents. Cashviews its operations and cash equivalents include cashmanages its business in readily available checking and money market accounts.Restricted CashRestricted cash as of December 31, 2017 represents a $93,382 restricted money market account used to secure the standby letter of credit issued in connection with a lease (see Note 5 “Debt”).The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheets that sum to the total of the same such amounts shown in the statement of cash flows.cash equivalents. The Company maintains depositsrestricted cash. Deposits in the Company’s checking and time deposit accounts are maintained in federally insured financial institutions in excess of federally insured limits. The Company invests in funds through a major U.S. bank and is exposed to credit risk in the event of default to the extent of amounts recorded on the consolidated balance sheets.institutioninstitutions in which thosethese deposits are held. Years Ended December 31, 2018 2017 Cash and cash equivalents $ 1,330 $ 1,211 Restricted cash 431 490 Total cash, cash equivalents and restricted cash presented in the consolidated statements of cash flows $ 1,761 $ 1,701 Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2: Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity). of prepaidreported in the consolidated balance sheets for cash and other current assets,cash equivalents, restricted cash, accounts payable, note payable, accrued expenses and accrued expenses are reasonable estimates ofcompensation approximate their fair values due to their short-term nature. because of the short term maturity of these items.which primarilygenerally consist of research equipment, computer equipment and software and office furniture, and equipment and computer equipment, are statedrecorded at cost and depreciated over the estimated useful lives of the assets (three(generally three to five years) using the straight-line method.Long-LivedLong-lived AssetsLong-lived assets consist primarily ofequipment.equipment for impairment on an annual basis and whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. An impairment loss would be recognized when estimated future undiscounted cash flows relating to the asset or asset group are less than its carrying amount. An impairment loss is recorded if and when events and circumstances indicate that assets might be impaired andmeasured as the undiscounted cash flows estimated to be generatedamount by those assets are less thanwhich the carrying amount of those assets.an asset or asset group exceeds its fair value. While the Company'sCompany’s current and historical operating losses and negative cash flows are possible indicators of impairment, management believes that future cash flows to be receivedgenerated by these assets support the carrying value of its long-lived assets and, accordingly, hasdid not recognizedrecognize any impairment losses since inception.Researchduring the years ended December 31, 2018 and Development CostsResearch and development2017.consist primarily of salaries and related overhead expenses; fees paid toresulting from our obligations under contracts with vendors, clinical research organizations (CROs), consultants and contract research organizations; costs relatedunder clinical site agreements relating to acquiringconducting our clinical trials. The financial terms of these contracts vary and manufacturingmay result in payment flows that do not match the periods over which materials or services are provided under such contracts.materials;expenses in our consolidated financial statements by recording those expenses in the period in which services are performed and costs relatedefforts are expended. The Company accounts for these expenses according to compliancethe progress of the clinical trial as measured by patient progression and the timing of various aspects of the trial. Management determines accrual estimates through financial models and discussions with regulatory requirements.All researchapplicable personnel and development costsoutside service providers as to the progress of clinical trials.chargedpartially dependent upon accurate reporting by CROs and other third-party vendors. Although the Company does not expect its estimates to expensediffer materially from actual amounts incurred, the Company’s understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low for any period. For the years ended December 31, 2018 and 2017 there were no material adjustments to the Company’s prior period estimates of accrued expenses for clinical trials.incurred.F-8Employees and Nonemployee Consultants After Adopting ASU 2018-07 Service only condition Straight-line based on the grant date fair value Re-value at each reporting date through the service commitment date Performance criterion is probable of being met: Service criterion is complete Recognize the grant date fair value of the award(s) once the performance criterion is considered probable of occurrence Re-value the award(s) once the performance criterion is considered probable of occurrence and recognize expense for the then fair value of the award(s) Service criterion is not complete Same as for employees, except the award will be marked-to-market through the performance commitment date Performance criterion is not probable of being met and: Is not tied to the successful completion of an initial public offering of the Company’s common stock (IPO) No expense recognition is required until the performance criterion is considered probable at which point expense is recognized using an accelerated multiple-option approach Same as for employees, except the award will be marked-to-market through the performance commitment date Is tied to the successful completion of an IPO by the Company Upon closing of an IPO by the Company, recognize the grant date fair value of the award(s) Same as for employees, except expense is recognized based upon the fair value of the Company’s common stock sold in the IPO (1) The accelerated multiple-option approach results in compensation expense being recognized for each separately vesting tranche of the award as though the award was in substance multiple awards and, therefore, results in accelerated expense recognition during the earlier vesting periods. Valuation allowances are recorded when the realizability of suchThe Company provides a valuation allowance against net deferred tax assets is not more likely than not.The guidance on accounting for uncertainty in income taxes prescribes a recognition threshold and measurement attribute criteria forunless, based upon the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must beavailable evidence, it is more likely than not tothat the deferred tax assets will be sustained upon examination by taxing authorities. The Company’s policy is to recognize interest expense and penalties related to income tax matters as a component of income tax expense. During 2017 and 2016,realized. When the Company had not recognized interest and penaltiesestablishes or reduces the valuation allowance against its deferred tax assets, its provision for income taxes will increase or decrease, respectively, in the balance sheets or statements of operations. The Companyperiod such determination is subject to taxation in the U.S. and state jurisdictions. The Company’s tax years from inception are subject to examination by the United States and California authorities due to the carryforwards of unutilized net operating losses, or NOLs, and research and development credits.Share-Based CompensationShare-based compensation for the Company includes amortization related to all stock options, restricted stock awards and shares issued under the employee stock purchase plan, based on the grant-date fair value. The fair value of each option and restricted stock award is estimated on the date of grant using the Black-Scholes option pricing model. The expected life of the awards is based on the simplified method described in SEC Staff Accounting Bulletin No. 107. The expected volatility assumption is based upon the historical volatility of a number of publicly traded companies in similar stages of clinical development. The risk-free interest rate is based on the yield of U.S. Treasury bills with a life that approximates the expected life of the awards. The Company recognizes share-based compensation on a straight-line basis over the vesting term of the options and the actual forfeitures by reducing the employee share-based compensation expense in the same period as the forfeitures occur.Option grants to non-employees are valued at fair value and are expensed over the period services are provided. These options are subject to periodic revaluation to reflect the current fair value at each reporting period until the non-employee completes the performance obligation or the date on which a performance commitment is reached. There were 10,000 and 41,666 shares issued to non-employee consultants during the years ended December 31, 2017 and 2016, respectively. There was no non-cash compensation to consultants for the year ended December 31, 2015.perPer Shareweighted averageweighted-average number of common shares outstanding during the period, without consideration for common stock equivalents.potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted averageweighted-average number of common shares and common share equivalents outstanding during the period. Common stock equivalents are only included when their effect is dilutive. The Company’s potentially dilutive securities which include common stock warrantsoutstanding for the period determined using the treasury-stock and outstanding stock options underif-converted methods. For purposes of the stock option plan, have been excluded from the computation of diluted net loss per share as they would be anti-dilutive. For all periods presented, there is no difference in the number of shares used to compute basic and diluted shares outstanding due to the Company’s net loss position.The following table sets forth the outstandingcalculation, potentially dilutive securities that have beenare excluded infrom the calculation of diluted net loss per share because to do sotheir effect would be anti-dilutive.Recent Adopted Accounting PronouncementsIn March 2016,anti-dilutive and therefore, basic and diluted net loss per share were the FASB issued ASU 2016-09, Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, or ASU 2016-09. ASU 2016-09 simplifies several aspectssame for all periods presented. Potentially dilutive securities excluded from the calculation of diluted net loss per share are summarized in the table below. For the year ended December 31, 2018, the shares in the table also included 1,013,375 shares of options granted out of the accounting for employee share-based payments, including accounting for income taxes, forfeitures, statutory tax withholding requirements,share reserve increase approved by the board of directors under the Amended and classificationRestated 2014 Plan (as defined below) on November 28, 2018, and are subject to the statement of cash flows. The amendments in this ASU are effective forCompany obtaining the requisite stockholder approval (the Contingent Options) at the 2019 annual periods beginning after December 15, 2016. The Company adopted ASU 2016-09 during its fiscalmeeting. For the year ended December 31, 2017, the shares in the table have been adjusted to reflect the conversion of Series A, B, C-1, and C convertible preferred stock and Series D as fully described in Years Ended December 31, 2018 2017 Convertible preferred stock — 1,027,079 Series D redeemable convertible preferred stock — 6,878,986 Unvested restricted common stock subject to repurchase — 122,149 Unvested restricted stock units — 2,566 Options to purchase common stock 5,767,627 160,248 Warrants to purchase common stock 4,775,886 — Total 10,543,513 8,191,028 a material effectan impact on the Company’s financial statements and related disclosures. F-9Tableposition or results of ContentsIn August 2016,operations as the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, or ASU 2016-15. This pronouncement gives guidance to clarify how certain cash receipts and payments should be presented and classified in the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and early adoption is permitted. The Company adopted ASU 2016-15 during its fiscal year ended December 31, 2017, which did not have a material effect on the Company’s financial statements and related disclosures.Recent Accounting PronouncementsIn February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), or ASU 2016-02. ASU 2016-02 requires that lessees recognize assets and liabilities for the rights and obligations for leases with a lease term of more than one year. The amendments in this ASU are effective for annual periods ending after December 15, 2018. Early adoption is permitted. The Company is evaluating the impact of adoption on its financial statements.JanuaryMay 2017, the FASB issued ASU No. 2017-1, 2017-09,Business Combinations Compensation—Stock Compensation (Topic 805)718): ClarifyingScope of Modification Accounting (ASU No. 2017-09), which clarifies when to account for a change to the Definitionterms or conditions of a Business,share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. ASU 2017-1. ASU 2017-1 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-1 will beNo. 2017-09 was effective for the Company beginning January 1, 2018. The adoption of this guidance isnew standard did not expected to have a material impact on the Company’s financial position or results of operations.3.Measurements Years Ended December 31, 2018 2017 Flex note receivable (1) $ 250 $ 250 Insurance 199 96 Clinical supplies 62 119 Rent 66 63 Other receivable from related parties 11 17 Other 129 108 Total $ 717 $ 653 Years Ended December 31, Useful Life 2018 2017 Research equipment 5 years $ 639 $ 639 Computer equipment and software 3 years 13 6 Office furniture 5 years 205 205 Leasehold improvements 5 years or less 340 340 1,197 1,190 Less: accumulated depreciation and amortization (604 ) (342 ) Total, net $ 593 $ 848 Years Ended December 31, 2018 2017 Flex note receivable, net of current portion $ 500 $ 750 Prepaid Directors & Officers insurance 439 — Total $ 939 $ 750 Years Ended December 31, 2018 2017 Clinical studies $ 9,153 $ 8,789 Sublicense fees 1,117 2,000 Accrued interest on unpaid sublicense fees 174 76 Legal and other professional fees 549 727 Accrued franchise tax 188 12 Public offering costs 127 135 Board of directors’ fees and related expenses 67 247 Other 138 100 Total $ 11,513 $ 12,086 financial instruments consistassets and liabilities, including the money market fund, Flex Note receivable and Series D 2X liquidation preference, measured on a recurring basis are summarized in the following tables, as applicable (in thousands): December 31, 2018 Money market fund (1) $ 154 $ 154 $ — $ — Flex note receivable 750 — 750 — Total assets $ 904 $ 154 $ 750 $ — accounts payable, accrued expenses, including warrants issuedon the accompanying consolidated balance sheet. December 31, 2017 Flex note receivable $ 1,000 $ — $ 1,000 $ — Series D 2X liquidation preference (79,870 ) — — (79,870 ) Total assets (liabilities) $ (78,870 ) $ — $ 1,000 $ (79,870 ) connection with financing arrangements, and long-term debt. Fair value estimates of these instruments are made at a specific pointpart, on significant inputs not observed in time based on relevant market information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. The carrying amount of cash and cash equivalents, accounts payable, and accrued expenses are generally considered to be representative of their respective fair values because of the short-term nature of these instruments.market. The Company believes thatdetermined the fair value of long-term debt approximates its carrying value based onSeries D 2X liquidation preference as described below.borrowing rates currently available to the Company for loans with similar terms.The authoritative guidance for fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price)changes in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Market participants are buyers or sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact. The guidance prioritizes three levels of inputs into the following hierarchy:Level 1 — Quoted prices in active markets for identical assets or liabilities.Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.Assets and financial liabilities measured at fair value on a recurring basis for the year ended December 31, 2018 and 2017 (in thousands). Series D 2X Liquidation Preference Liability Balance at December 31, 2016 $ 8,030 Issuance of Series D 2X liquidation preference 10,665 Change in fair value of Series D 2X liquidation preference 61,175 Balance at December 31, 2017 $ 79,870 Change in fair value of Series D 2X liquidation preference 130 Redemption of Series D 2X liquidation preference upon conversion of Series D (80,000 ) Balance at December 31, 2018 $ — and 2016 are as follows:approximated the final redemption value.(1)Included as a component of cash and cash equivalents on accompanying balance sheet.F-10TableIn connection with the Merger, Private Evofem converted 80 shares of Contents(1)Included as a component of cash and cash equivalents on accompanying balance sheet.4. Property and EquipmentProperty and equipment consistSeries D into the Company's common stock. The valuations resulted in a concluded fair value of the following:Depreciation and amortization expense relatedSeries D 2X liquidation preference of $80.0 million as of the Closing Date based on the hybrid valuation model, which was reclassified from a Series D 2X liquidation preference to furniture and equipment amounted to $45,870, $69,094, and $58,425,additional paid-in capital upon the conversion into the Company' common stock.2016,was $0.1 million and 2015$61.2 million, respectively.5. DebtLoansFebruary 2010, and as amended during 2012, the CompanyNovember 2009, Private Evofem entered into a loanlease for office space under a noncancelable lease agreement thatagreement (2010 Loandeposit receivable from the landlord and Security Agreement) with Silicon Valley Bank, or SVB, for borrowings of $3,750,000, collateralized by all assetspayable to Cosmederm. Upon execution of the Company.UTC Lease Termination, Private Evofem was relieved of all obligations under the UTC Lease.borrowings,LJ Gateway Lease, Neothetics issued a stand-by letter of credit in lieu of a security deposit. On January 31, 2017, Neothetics entered into an Eleventh Amendment to the LJ Gateway Lease (the Lease Amendment), which provided Neothetics with additional office space located at Suite No. 250.issued warrantsrepaid the sublessee's approximately $30,000 security deposit. Operating Leases Year ending December 31, 2019 $ 777 Year ending December 31, 2020 201 Total $ 978 bankextent the earned royalty or sublicensing fees, as applicable, do not exceed the minimum annual royalties.a total of 64,8653,850 shares of common stock with an exercise price of $46.36 per share, which vest over a one-year period through March 1, 2017 and (iii) was issued a restricted stock unit (RSU) for the rights to 2,566 shares of common stock. Upon closing of the Merger, Mr. Lynch agreed to cancel all of his unvested RSUs received pursuant to the 2016 Consulting Agreement. See Restricted Stock Units discussion in Note 11 — Stock-based Compensation for the accounting treatment for Mr. Lynch’s RSUs granted in 2016. On July 2, 2018, under the Amended and Restated 2014 Plan (as defined below), the Company issued 75,000 shares of RSUs to Mr. Lynch in consideration for certain consulting services provided to the Company in connection with the 2016 Consulting Agreement. The RSUs were fully vested on the grant date. 2018 2017 Receivables $ 3 $ 17 Payables $ 1,292 $ 2,077 Payments $ 883 $ 1,026 Expenses $ 98 $ 89 2018 2017 Receivables $ 7 $ — Payables $ — $ 175 Payments $ 302 $ — Expenses $ 127 $ 175 warrants to purchase 75,000 shares of Series C convertible preferred stock. Effective upon the IPO, thisstock was converted to the Company's common stock on a one-for-one basis effecting the Exchange Ratio and the Reverse Stock Split for an aggregate of 1,027,079 shares. In addition, each share of Private Evofem’s Series D was converted into approximately 85,987 shares of the Company's common stock for an aggregate of 6,878,989 shares. As of December 31, 2018, no shares of convertible preferred stock were issued and outstanding. Shares
Designated Original
Issue Price Shares
Issued and
Outstanding Common
Stock
Equivalents (1) Aggregate
Liquidation
Amount Proceeds,
Net of
Issuance
CostsSeries A 12,768,492 $ 1.9579445 12,618,279 12,618,279 $ 24,706 $ 23,848 Series B 31,034,696 $ 3.2222 13,801,318 13,801,318 44,471 43,616 Series C-1 8,660,572 $ 3.97 8,558,686 8,558,686 33,978 34,382 Series C 5,037,784 $ 3.97 5,037,784 5,037,784 20,000 19,469 Series D (2)(3) 80 $ 500,000 80 85,160 39,739 Total 57,501,624 40,016,147 $ 208,315 $ 161,054 (1) The Series D shares were convertible into shares in the next equity financing (either preferred or common) at a 50% discount to the fair value price per share of the shares to be issued in the next financing, therefore, the Series D common stock equivalents and the totals for common stock equivalents have been left blank. (2) Aggregate liquidation amount included accrued and unpaid dividends of $5.2 million as of December 31, 2017. (3) Proceeds, net of issuance costs, included $35.0 million in cash and $5.0 million from the conversion of the Amended Cosmederm Note (see more discussions below) less issuance costs of approximately $0.3 million. This line excluded the Series D 2X liquidation preference net issuance price of $18.2 million, the loss on the issuance of Series D of $35.2 million, loss on extinguishment of related-party note payable of $6.7 million and accrued Series D dividends of $5.2 million. 4,069one-fifth of a share of the Company's common stock at a public offering price of $0.01 per warrant and an exercise price of $7.50 per share. An aggregate of 8,500,000 common warrants were issued in connection with the Offering and are exercisable to purchase an aggregate of 1,700,000 shares of common stock. The common warrants issued to the three funds affiliated with WIM that participated in the Offering were issued as a unit with one share of common stock totaling three unit shares in the aggregate (the Unit Shares). Except with respect to the Unit Shares, the shares of common stock, pre-funded warrants and common warrants are separately transferable. The Company determined that the pre-funded warrants and common warrants are free standing financial instruments and equity classified in accordance with ASC 480- Distinguish Liabilities from Equity.$59.43 and expire ten years from the date$6.23 per share. These warrants include:• shares of Series C convertible preferred stock equal to 4% of the amount advanced under the loan. Effective upon the IPO, this was converted to a warrant to purchase 7,80611,875 shares of common stock at $51.24,that were issued prior to the Merger, which expires on June 11, 2024. The fair valuewere exercisable as of the warrants issued was $207,429, based on the fair value of such Series C warrants at the date of issuance. The warrants’ fair valueDecember 31, 2018 and financing fees of approximately $133,000 were recorded as a debt discount.In March 2016, the Company entered into the second amendment of the Loan Agreement that provided for a prepayment of the outstanding loan carrying amount of $5.5 million with a prepayment fee of $110,000. In connection with the second amendment, the Company re-priced the outstandingshall remain exercisable until 2020, 2022 and 2024;• 7,8061,700,000 shares of common stock issued in the Offering, which were exercisable on May 24, 2018 and shall remain exercisable for seven years; andnewreduced exercise price of $3.72, which will expire in September 2022 unless exercised prior to such expiration date.2.64 per share. The Company recorded a debt discountreceived gross proceeds of $9,417 associated withapproximately $6.3 million from these exercises. In addition, the fair valueCompany issued new warrants to purchase 1,188,029 shares of thecommon stock to investors who exercised warrants issuedas aforementioned. See Note 15 - Subsequent Events for details.amendment. In addition,Merger, the Company incurred loan amendment feesamended and legal feesrestated its certificate of $52,400,incorporation, under which the Company is currently authorized to issue up to 300,000,000 shares of common stock, $0.0001 par value per share, and 5,000,000 shares of preferred stock, $0.0001 par value per share.debt discount.In September 2016,loss on the issuance of Invesco Warrants within other income (expense) in the consolidated statement of operations, with corresponding entries to common stock par value for the shares issued and additional paid-in capital in the consolidated balance sheet. See prepaid the remaining outstanding balance under the Loan Agreement at a carrying amountissued 7,436,171 shares of $4.0 million with a prepayment fee of $120,000 and an end of term fee of $300,000. Accordingly, the Loan Agreement was terminated on September 23, 2016. Upon terminationcommon stock upon closing of the Loan Agreement,Offering as described in Note 9- Public Offering. During the prepayment fees of $230,000 and unamortized end of term fee of $260,000 were recorded as interest expenseF-11From June 2014 through payoff in September 2016, the Company paid interest equal to the greater of either 9.0%, plus the Prime Rate as reported in The Wall Street Journal, less 3.25% or 9.0%. The Company recorded total interest expense of $0, $1,035,763 and $1,133,987 for the twelve monthsyear ended December 31, 2017, December 31, 2016 and December 31, 2015, respectively.Letter of CreditIn January 2015, the Company executed a lease amendment with LJ Gateway, LLC for new office space. In connection with this lease amendment2018, the Company issued a stand-by lettertotal of credit in the amount622,737 shares of $200,000 in lieu of a security deposit. Pursuant to the terms set forth in the lease amendment, as of March 31, 2017, the stand-by letter of credit was reduced to $93,382. The standby letter of credit is secured by a restricted money market account. The termscommon stock upon vesting of the standby letterRSAs and RSUs, net of credit expire in May 2020 and are subject to automatic yearly renewal prior to this date. 6. Convertible Preferred Stock and Stockholders’ EquityCommon Stockor the Sales Agreement,(Sales Agreement) with Cantor Fitzgerald & Co., or Cantor Fitzgerald, (Cantor Fitzgerald) as a sales agent, pursuant to which the Company may offer and sell from time to time, through Cantor Fitzgerald, shares of Neotheticsthe Company's common stock, par value $0.0001 per share, having an aggregate offering price of up to $20.0 million. The minimum share price for this Controlled Equity Offering is selected at the discretion of the Company’s board of directors.The Company cannot provide any assurances that it will issue any This at the market program expired in early December 2018 and no shares of common stock have been sold pursuant to this Sales Agreement during 2018.Common stock issuable upon the exercise of stock options outstanding 5,767,627 Common stock issuable upon the exercise of common stock warrants 4,775,886 Common stock available for future issuance under the 2014 ESPP 118,825 Common stock available for future issuance under the Amended and Restated 2014 Plan 74,094 Common stock available for future issuance under the Inducement Plan 156,000 Total common stock reserved for future issuance 10,892,432 Sales Agreement. Subject2012 Equity Incentive Plan (the 2012 Plan) that provides for the issuance of RSAs, RSUs, or non-qualified and incentive common stock options to its employees, non-employee directors and consultants, from its authorized shares. In general, the termsoptions expire ten years from the date of grant and conditionsgenerally vest either (i) over a four-year period, with 25% exercisable at the end of one year from the employee’s hire date and the balance vesting ratably thereafter or (ii) over a three-year period, with 25% exercisable at the grant date and the balance vesting ratably thereafter. Upon completion of the Sales Agreement, Cantor Fitzgerald will use commercially reasonable efforts consistent with its normal tradingMerger, Private Evofem's 2012 Plan was assumed by the Company and sales practices, applicable state and federal law, rules and regulations and applicable Nasdaq rules to sell shares from time to time based upon Neothetics’ instructions, including any price, time or size limits specified by Neothetics. Under the Sales Agreement, Cantor Fitzgerald may sell shares by any method deemed to be an “at-the-market” offering as defined in Rule 415awards outstanding under the U.S. Securities Act of 1933,2012 Plan became awards for the Company's common stock. Effective as amended, or any other method permitted by law, including in privately negotiated transactions. Neothetics will pay Cantor Fitzgerald a commission of 3.0% of the aggregate gross proceeds from each sale of shares and has agreed to provide Cantor Fitzgerald with customary indemnification and contribution rights. Neothetics has also agreed to reimburse Cantor Fitzgerald for legal fees and disbursements, not to exceed $50,000 in the aggregate, in connection with entering into the Sales Agreement.The Sales AgreementMerger, no further awards may be terminated by Cantor Fitzgerald or Neotheticsissued under the 2012 Plan.any time upon noticethe annual meeting held on May 8, 2018, the amendment and restatement of the 2014 Plan (the Amended and Restated 2014 Plan), that, among other things, would increase the number of authorized shares under the 2014 Plan from 749,305 to an aggregate of 5,300,000 shares. Such stockholder approval was obtained on May 8, 2018. On November 28, 2018, the other party, or by Cantor FitzgeraldCompany's board of directors approved, subject to stockholder approval, and recommended its stockholders approve at any time in certain circumstances, including the occurrence2019 annual meeting, an additional 2,500,000 authorized shares reserved for issuance under the Amended and Restated 2014 Plan to an aggregate of a material and adverse change in Neothetics’ business or financial condition that makes it impractical or inadvisable to market the shares or to enforce contracts for the sale of the7,800,000 shares. As of December 31, 2017, no2018, there were 74,094 shares were issued pursuantavailable to grant under the Sales Agreement.Stock CompensationAmended and Restated 2014 Plan,The Company adopted a Stock Option Plan in 2007, or which did not include the 2007 Plan under which 211,893 shares of common stock were reserved for issuance to employees, non-employee directors,additional share increase aforementioned and consultants of the Company. Effective1,013,375 Contingent Options granted.completion ofrecommendation by the Company’s IPO,Compensation Committee, the board of directors determined notadopted the Evofem Biosciences, Inc. 2018 Inducement Equity Incentive Plan (the Inducement Plan), pursuant to grant any furtherwhich the Company reserved 250,000 shares for the issuance of equity awards under the 2007 Plan.In September 2014, the Company’s board of directors and stockholders approved and adopted the 2014 Equity Incentive Plan, or the 2014Inducement Plan. The 2014only persons eligible to receive awards under the Inducement Plan became effective immediately priorare individuals who satisfy the standards for inducement grant recipients under Nasdaq Marketplace Rule 5635(c)(4), generally, a person not previously an employee or director of the Company, or following a Company’s IPO. A totalindividual's entering into employment with the Company. As of 166,666December 31, 2018, there were 156,000 shares of common stock were initially reserved for issuanceavailable to grant under the 2014Inducement Plan. This reserve automatically increased on January 1, 2015, and will continue to increase each subsequent anniversary through 2024, by an amount equal to the smaller of (a) 4% of the number of shares of common stock issued and outstanding on the date immediately preceding December 31 and (b) an amount determined by our board of directors. All shares that remained available, expired, or otherwise terminated without having been exercised in full and unvested shares that were forfeited to or repurchased by us under the 2007 Plan were rolled into 2014 Plan. The 2014 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, or RSU’s, performance shares, and units and other cash-based or share-based awards. In addition, the 2014 Plan contains a mechanism through which we may adopt a deferred compensation arrangement in the future. Recipients of stock options shall be eligible to purchase shares of the Company’s common stock at an exercise price equal to no less than the estimated fair market value of such stock on the date of grant.F-12stock option and restricted stock award transactions under the 2014 Plan during the year ended December 31, 2017:The 2014 Plan allows for the exercise of unvested options, which are subjectstock-based compensation expense related to repurchase until vesting occurs. All options exercised to date were fully vested at date of exercise. No grants expired during the year ended December 31, 2017.The weighted average fair value of options granted was $4.96 and $2.71 for the twelve months ended December 31, 2017 and 2016, respectively. The weighted average fair value of options vested was $5.43 at December 31, 2017. Total cash received upon the exercise of stock options, was $26,349RSAs and RSUs granted to employees and nonemployees included in the consolidated statements of operations as follows (in thousands): Years Ended December 31, 2018 2017 Research and development $ 3,193 $ 184 General and administrative 14,649 677 Total $ 17,842 $ 861 2017. The unrecognized compensation cost related to non-vested stock options and restricted stock awards outstanding at2018: Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in Years) Outstanding as of December 31, 2017 160,248 $ 56.66 7.80 — 5,570,675 $ 6.33 246,810 $ 14.31 Exercised (6,173 ) $ 6.78 Forfeited (203,933 ) $ 11.71 Outstanding as of December 31, 2018 5,767,627 $ 7.00 9.01 $ 3,211 Options exercisable as of December 31, 2018 3,034,283 $ 9.58 8.59 $ 342 Options vested and expected to vest as of December 31, 2018 5,767,627 $ 7.00 9.01 $ 3,211 2016, netRestated 2014 Plan, and were subject to the Company obtaining the requisite stockholder approval at the 2019 annual meeting.expected forfeitures,shares assumed from Neothetics represents outstanding stock options as of January 17, 2018 owned by Neothetics' employees in conjunction with the Merger. 2018 2017 Weighted average grant date fair value per share of options granted during the period $ 3.99 $ 32.34 Fair value per share of options vested during the period $ 4.58 $ 35.52 Cash received from options exercised during the period $ 42 $ — Intrinsic value of options exercised during the period $ 12 $ — $263,206 and $420,339, respectively,approximately $5.1 million, which the Company expects to be recognizedrecognize over a weighted-average remaining vesting period of approximately 1.1 and 1.72.2 years, respectively.Share-Based Compensation estimated fair value of each option awardstock-based compensation for stock options granted to employees and nonemployees was determinedestimated on the date of grant using the Black-ScholesBSM option-pricing valuation model withbased on the following weighted-average assumptions for options grants.granted for the periods indicated. Years Ended December 31, 2018 2017 Expected volatility 87.0 % 90.9 % Risk-free interest rate 2.9 % 2.2 % Expected dividend yield — % — % Expected term (years) 5.5 5.9 wasis based on the yield of an applicable rateobserved interest rates appropriate for U.S. Treasury instruments with maturities similar to those of the expected term of the award being valued.stock option grants.assumedexpected dividend yield wasassumption is based on the fact that the Company has never payingpaid cash dividends and havinghas no expectation of payingpresent intention to pay cash dividends in the foreseeable future.dividends. weighted average expected term ofrepresents the period options was calculatedare expected to be outstanding. Because the Company does not have historical exercise behavior, it determines the expected term assumption using the simplified methodpractical expedient as permitted by accounting guidanceprovided for stock-based compensation. under ASC 718 — Compensation — Stock Compensation, which is the midpoint between the requisite service period and the contractual term of the option. Shares (RSAs) Weighted Average Fair Value per Share Shares (RSUs) Weighted Average Fair Value per Share Unvested as of December 31, 2017 122,149 $ 48.72 2,566 $ 48.72 Granted 1,230,399 $ 2.46 75,000 $ 2.46 Canceled (122,149 ) $ 48.72 (2,566 ) $ 48.72 Released (1,185,399 ) $ 2.72 (75,000 ) $ 2.46 Unvested as of December 31, 2018 45,000 $ 2.46 — $ — addition, dueSeptember 2016, under the 2012 Equity Incentive Plan, Private Evofem issued an aggregate of 122,149 shares of restricted stock to members of management (the Management RSAs) with vesting terms subject to the completion of an initial public offering (IPO) by Private Evofem. In October 2016, as previously described in Note 7 — Related-party Transactions, Private Evofem issued a restricted stock unit for the right to 2,566 shares of common stock to the chairman of the Company’s limited historical data,board of directors (the Chairman RSUs). Upon closing of the estimated volatilityMerger, as more fully described in Note 1 – Description of Business and Basis of Presentation, the members of management and the chairman of the board of directors agreed to cancel their RSAs and RSUs. As a result, all 122,149 shares of unvested Management RSAs and 2,566 shares of unvested Chairman RSUs were canceled in January 2018, and there was calculatedno unrecognized stock-based compensation expense related to the canceled Management RSAs and Chairman RSUs.historical volatilitygrantee's services for the Company, and the remaining 1,150,399 shares immediately vested on the grant date. The non-performance-based RSAs were valued at the fair value on the grant date and the associated expenses were fully recognized on the grant date. For the performance-based RSAs, (i) the fair value of comparable companiesthe award was determined on the grant date, (ii) the Company assessed the probability of the individual milestone under the award being achieved and (iii) the fair value of the shares subject to the milestone is expensed over the implicit service period commencing once management believes the performance criteria is probable of being met.biotechnology industry whose share prices are publicly availableCompany in connection with the 2016 Consulting Agreement. The RSUs were fully vested on the grant date.sufficientweighted-average remaining period of time.the CompanyNeothetics adopted the 2014 Employee Stock Purchase Plan (the “ESPP”)ESPP), which enables eligible employees to purchase shares of the Company’sits common stock using their after taxafter-tax payroll deductions of up to 15% of their eligible compensation, subject to certain restrictions.Sharesshares on the preceding December 31, and (b) a number of Sharesshares determined by the board of directors of the Company.Neothetics. The ESPP is intended to qualify as an “employeeemployee stock purchase plan”plan within the meaning of Section 423 of the Internal Revenue Code of 1986, as amended or the Code. Company estimates the fair value of shares issued to employees under the ESPP is estimated using a Black-ScholesBSM option-pricing model. The Black-Scholes model, which requires the use of subjective and complex assumptions, including (a) the expected stock price volatility, (b) theF-13yield, which determineyield.fair value of share-based awards.There wereMerger, there was no shares issued underenrollment in the ESPP duringESPP. During the years ended December 31, 2018 and 2017, and 2016.The weighted average assumptions used to estimate the fair valuethere were no shares of shares issuedcommon stock purchased under the ESPPESPP.yearplan beginning on the first day of the month following their three-month anniversary of employment. Under the terms of the plan, employees may make voluntary contributions as a percent of their compensation. The Company makes a safe-harbor contribution of three percent (3.0)% of each employee’s gross earnings, subject to Internal Revenue Service limitations. In the years ended December 31, 2015, using2018 and 2017, the Black-Scholes option pricing modelCompany made safe-harbor contributions of approximately $0.1 million for both periods. 2018 2017 United States $ (125,670 ) $ (105,222 ) Foreign (40 ) (80 ) Total $ (125,710 ) $ (105,302 ) 2018 2017 United States $ — $ — State (2 ) (3 ) Foreign — — Total current tax provision (2 ) (3 ) Total deferred tax provision — — Total $ (2 ) $ (3 ) Weighted Average Assumptions:Risk-free interest rate0.39%Expected dividend yield0%Expected volatility45.13%Expected term (in years)1.23 2018 2017 Statutory rate 21.00 % 34.00 % State income tax, net of federal benefit 0.21 % (0.34 )% Nondeductible expenses (0.56 )% (0.46 )% Equity-based expenses (1.03 )% (2.93 )% Loss on issuance of warrants (8.01 )% — % Change in fair value of Series D 2X liquidation preference (0.02 )% (19.75 )% Return to provision 0.03 % 0.19 % Tax credits 1.60 % 1.35 % Uncertain tax positions (0.57 )% (0.34 )% Foreign rate differential (0.01 )% (0.03 )% Rate adjustment 0.19 % (22.26 )% Change in valuation allowance (12.83 )% 10.57 % Effective tax rate — % — % Company recognized non-cash share-based compensation expense relatedCompany’s net deferred tax assets arising from its taxable subsidiaries consisted of the following components as of December 31, 2018 and 2017 (in thousands): 2018 2017 Deferred tax assets: Net loss carryforwards $ 53,933 $ 42,281 Fixed assets and intangibles 672 89 Research and development credits 5,948 3,808 Stock-based compensation 3,905 1,394 Other 747 846 Total deferred tax assets 65,205 48,418 Less: valuation allowance (65,205 ) (48,418 ) Net deferred tax assets $ — $ — ESPP, restricted stock awards and stock options granted to employees and directors in its research and development and its general and administrative functions as follows:ending deferred tax assets.Common Stock Reserved for Future IssuanceCommon stock reserved for future issuance is as follows:7. Income Taxes2017,2018, the Company had net operating loss (NOL) carryforwards for federal and Californiaincome tax NOL carryforwards available to reduce its future taxable incomepurposes of approximately $139,064,000 and $62,808,000, respectively. The federal NOL begins$227.9 million, which will begin to expire in 2027, unless previously2029 if not utilized. AtAs of December 31, 2018, the Company had NOL carryforwards in various states of approximately $106.7 million. The state carryforwards have varying expiration dates beginning in 2029. The Company has foreign NOLs of $0.6 million that do not expire.researchR&D tax creditscredit carryforwards of $3,976,000approximately $4.1 million and $2,786,000,$1.2 million, respectively. The federal research credit expiresR&D tax credits begin to expire in 20272031, unless previously utilized. utilized, and the state credits do not expire.California research creditfollowing table summarized the activity related to the Company’s gross unrecognized tax benefits as of December 31, 2018 and 2017 (in thousands): 2018 2017 Balance at the beginning of the year $ 1,335 $ 970 Adjustments related to prior year tax positions 162 (5 ) Increases related to current year tax positions 564 370 Decreases due to statute of limitation expiration — — Balance at end of year $ 2,061 $ 1,335 carry forward indefinitely until utilized.Utilizationbe sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits, and uncertain income tax positions must meet a more likely than not recognition threshold to be recognized. The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the consolidated statements of operations. There were no accrued interest and penalties associated with unrecognized tax benefits as of December 31, 2018. The Company does not anticipate a significant change in its uncertain tax benefits over the next 12 months.NOLCompany’s NOLs and R&D credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occurlimited in the future, as required by Section 382 of the Code as well as similar state and foreign provisions. Theseevent a cumulative change in ownership changes may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an "ownership change" as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of50.0% occurs within a company by certain stockholders. Since the Company's formation, the Company has raised capital through the issuance of capital stock on several occasions, including the IPO in 2014, which on their own or combined with the purchasing stockholders' subsequent disposition of those shares, may have resulted in such an ownership change, or could result in an ownership change in the future.a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes sinceIRC Section 382/383 analysis regarding the Company's formationlimitation of NOLs and R&D credit carryforwards; due to the complexity and cost associated with such a study and the fact that there may be additional such ownership changes in the future. The Company does not expect this analysis to be completed within the next 12 months and as a result, the Company does not expect the unrecognized tax benefits will change within 12 months of this reporting date. Due to the existence of the valuation allowances, future changes in the Company’s unrecognized tax benefits will not impact the Company’s effective tax rate. If the Company has experienced an ownership change at any time since itsits’s formation, utilization of the NOLNOLs or R&D tax credit carryforwards would be subject to an annual limitation under Section 382 of the Code,IRC, which is determined by first multiplying the value of the Company'sCompany’s stock at the time of the ownership change by the applicable long-term tax-exempt rate and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the NOLNOLs or R&D tax credit carryforwards before utilization. Further, until a study is completed and any limitation known, no amounts are being consideredan uncertain tax position or disclosed as an unrecognized tax benefit. Due to the existence of the valuation allowance, future changes in theF-14Company's unrecognized tax benefits will not impact its effective tax rate. Any carryforwards that will expire prior to utilization as a result of such limitations will be removed from deferred tax assets, with a corresponding reduction of the valuation allowance.Until the study is completed, the Company has removed federal and state operating losses of approximately $33,590,000 and federal and state research and development credits of approximately $6,177,000 from its deferred tax asset schedule and has recorded a corresponding decrease to its valuation allowance.Significant components of the Company's deferred tax assets for federal and state income taxes at December 31, 2017 and 2016 are shown below. A valuation allowance has been established as realization of such deferred tax assets is uncertain.There was no material income tax expense for the years ended December 31, 2017 and 2016.A reconciliation of income tax expense as compared to the tax expense calculated by applying the statutory federal and state tax rate to income before taxes for the years ended December 31, is as follows:The Tax Cuts and Jobs Act or the(the Tax Act). The Tax Act was enacted on December 22, 2017. The Act reducesmakes broad and complex changes to the U.S. tax code, including but not limited to (i) reducing the U.S. federal and corporate tax rate from 35% to 21%. At as of January 1, 2018, (ii) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries, (iii) generally eliminating the U.S. federal income tax on dividends from foreign subsidiaries, (iv) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations, (v) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized, (vi) creating the base erosion anti-abuse tax, a new minimum tax, (vii) creating a new limitation on deductible interest expense, and (viii) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017,2017.has not completed the accounting for the tax effects of enactment of the Act; however, in certain cases, we have maderecorded a reasonable estimate of the effects on our existing deferred tax balances. As part of the Act, we remeasured ourdecrease related to its deferred tax assets of approximately $0.2 million and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. Due to our full valuations, the remeasurement of our deferred tax assets and liabilities had no impact on the statement of operations. However, we are still analyzing certain aspects of the Act and refining our calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts.The Company follows the provisions under the Income Taxes topic of the Codification which addresses accounting for the uncertainty in income taxes. The evaluation of$18.4 million, with a tax position in accordance with this topic is a two-step process. The first step involves recognition. The Company determines whether it is more likely than not that a tax position will be sustained upon tax examination, including resolution of any related appeals or litigation, based on only the technical merits of the position. The technical merits of a tax position derive from both statutory and judicial authority (legislation and statutes, legislative intent, regulations, rulings, and case law) and their applicabilitycorresponding net adjustment to the facts and circumstances of the tax position. If a tax position does not meet the more-likely-than-not recognition threshold, the benefit of that position is not recognized in the financial statements. The second step is measurement. A tax position that meets the more-likely-than-not recognition threshold is measures to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate resolution with a taxing authority.The Company files income tax returns in the United States and California. The Company currently has no years under examination by any jurisdiction; however, the Company is subject to income tax examination by federal and state for years beginning in 2013 and 2012, respectively. However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where NOLs and tax credits were generated and carried forward, and make adjustment up to the amount of the carryforwards. The Company does not have any unrecognized tax benefits as of December 31, 2017 and does not anticipate that the amount of unrecognized tax benefits will significantly change within the next twelve months. The Company has not recognized interest or penalties in its consolidated statements of operations and comprehensive loss since inception.F-15The Company's practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest and/or penalties in the statements of operations for the years ended December 31, 2017, 2016, and 2015 or for the period from February 1, 2007 to December 31, 2017.8. CommitmentsOperating LeasesThe Company entered into a non-cancelable operating lease for its facilities on January 20, 2015. The lease expires in March 2020. On January 31, 2017, the Company entered into an Eleventh Amendment to the Lease with LJ Gateway Office LLC, or LJ Gateway. Concurrent with entering into the Lease Amendment, the Company entered into a Sublease with Abacus Data Systems, Inc., or Abacus, providing for the sublease of existing office space located at Suite No. 270. This Lease Amendment also provides the Company with additional office space located at Suite No. 250, 9171 Towne Centre Drive, San Diego California, which the Company occupies as its headquarters.Upon occurrence of Abacus retaining possession of the original premises in February 2017, Abacus received rent abatement for months one, three, and four as well as a discount of 50% off the base rent for months five through nine. Abacus paid the Company a base rent of $27,768 for the second month’s rent and $30,317 security deposit. The base rent will increase by three percent on each annual anniversary. In February 2017, the Company recorded $353,000 of sublease liability. The Company has recorded the rental income collected or accrued under the sublease as a reduction of rent expense. Rent expense and sublease rental income under the Lease Amendment and Subleasevaluation allowance for the year ended December 31, 2018 and 2017, were $326,000respectively.$264,000, respectively. Rent expense were $429,927 and $388,9972017. The Company believes that the following information reflects all normal recurring adjustments necessary for a fair statement of the information for the years ended December 31, 2016 and 2015, respectively.periods presented. The payments escalate overoperating results for any quarter are not necessarily indicative of results for any future period. First Quarter Second Quarter Third Quarter Fourth Quarter (in thousands, except per share data) Year Ended December 31, 2018 Total operating expense $ 20,986 $ 23,242 $ 18,433 $ 14,981 Other (income) expense 48,070 — (2 ) — Net loss (69,056 ) (23,244 ) (18,431 ) (14,981 ) Net loss attributable to common stockholders (69,122 ) (23,244 ) (18,431 ) (14,981 ) Net loss per share attributable to common stockholders, basic and diluted (4.62 ) (1.11 ) (0.71 ) (0.58 ) Year Ended December 31, 2017 Total operating expense $ 4,913 $ 6,358 $ 9,070 $ 15,346 Other expense 353 154 64,961 4,147 Net loss (5,269 ) (6,512 ) (74,031 ) (19,493 ) Net loss attributable to common stockholders (6,157 ) (7,409 ) (75,085 ) (20,671 ) Net loss per share attributable to common stockholders, basic and diluted (3.14 ) (3.78 ) (38.31 ) (10.55 ) termfiling date of the lease; however, the Company recognizes the expense on a straight-line basis over the term of the lease. In December 2017,this Annual Report, March 1, 2019. On February 5, 2019, the Company entered into letter agreements (Repricing Letter Agreements) with certain holders (Holders) of issued and outstanding warrants (Warrants) to purchase the Twelfth AmendmentCompany's common stock. The Repricing Letter Agreements offered the Holders the opportunity to exercise their Warrants for cash at reduced exercise prices equal to 80% of the Lease with LJ Gateway whereby uponclosing price of the mutualCompany’s stock reported by the Nasdaq Capital Market on the respective dates of the Repricing Letter Agreements.and delivery of a new lease between LJ Gateway’s affiliate and Abacus and Abacus vacates Suite No. 270, LJ Gateway andthe Repricing Letter Agreements, Holders exercised their Warrants to purchase an aggregate 2,376,062 shares of common stock at an exercise price of $2.64 per share. The Company received gross proceeds of approximately $6.3 million from these exercises.agree thatissued warrants to purchase up to 1,188,029 shares of the LeaseCompany's common stock (Reload Warrants) to Holders at an exercise price of $5.20 per share, which is equal to 160% multiplied by the closing price as reported by the Nasdaq Capital Market on the issue date of February 8, 2019 of the Reload Warrants.respectthe authorization of the Board of Directors, approved a total ofthe office space located at Suite No. 270 shall be terminated. As of December 31, 2017, the sublease had not been terminated. The following table summarizes the minimum lease paymentsits executive management team and sublease receiptscertain non-executive employees under the lease agreement.9. Subsequent EventsPer the discussion in Note 1 “OrganizationAmended and Basis of Presentation”, Neothetics and Private Evofem completed the MergerRestated 2014 Plan. The performance-based RSAs will vest in accordance with the termsCompany's achievement of the Merger Agreement whereby Merger Sub merged with and into Private Evofem, with Private Evofem surviving as a wholly owned subsidiary of Neothetics.F-16