Registrant’s telephone number, including area code: (~~(858)~~858) 550-1900

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock, $0.0001 par value per share, outstanding as of ~~August 11,~~November 9, 2023 was ~~4,060,209~~10,730,210.

This quarterly report on Form 10-Q (Quarterly Report) contains forward-looking statements that involve substantial risks and uncertainties. The forward-looking statements are contained principally in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All statements, other than statements of historical facts, contained in this Quarterly Report, including statements regarding our strategy, future operations, future financial position, projected costs, prospects, plans and objectives of management, are forward-looking statements. Words such as, but not limited to, “anticipate,” “aim,” “believe,” “contemplate,” “continue,” “could,” “design,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “suggest,” “strategy,” “target,” “will,” “would,” and similar expressions or phrases, or the negative of those expressions or phrases, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report, we caution you that these statements are based on our projections of the future that are subject to known and unknown risks and uncertainties and other factors that may cause our actual results, level of activity, performance or achievements expressed or implied by these forward-looking statements, to differ. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. All forward-looking statements are qualified in their entirety by this cautionary statement. Forward-looking statements should be regarded solely as our current plans, estimates and beliefs. You should read this Quarterly Report and the documents that we have filed as exhibits to this Quarterly Report and incorporated by reference herein completely and with the understanding that our actual results may be materially different from the plans, intentions and expectations disclosed in the forward-looking statements we make. Moreover, we operate in a very competitive and rapidly changing environment and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. The forward-looking statements contained in this Quarterly Report are made as of the date of this Quarterly Report, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

This Quarterly Report contains estimates and other statistical data made by independent parties and by the Company relating to market size and growth and other data about its industry. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates.

Our first commercial product, Phexxi, is approved by the FDA for marketing in the United States. ~~Our other product candidates are investigational and have~~Phexxi has not ~~been submitted to or approved by the FDA. Neither Phexxi nor our other product candidates have~~ been approved by the European Medicines Agency (EMA) or any other regulatory authority anywhere else in the world except in Nigeria, where Phexxi was approved, on October 6, 2022, as Femidence™ by the National Agency for Food and Drug Administration and Control.

Unless the context requires otherwise, references in this Quarterly Report to “Evofem,” “Company,” “we,” “us” and “our” refer to Evofem Biosciences, Inc. and its subsidiaries.

This Quarterly Report includes our trademarks, trade names and service marks, including “Phexxi^®” and “Femidence™” which are protected under applicable intellectual property laws and are the property of Evofem Biosciences, Inc. or its subsidiaries. Solely for convenience, trademarks, trade names and service marks referred to in this Quarterly Report may appear without the ®, ™ or ^SM symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, trade names and service marks. We do not intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display should not be construed to imply a relationship with, or endorsement or sponsorship of us by, these other parties.

	June 30, 2023			December 31, 2022
	As of						As of
	June 30, 2023			December 31, 2022			September 30, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	-		$	2,769		$	-		$	2,769
Restricted cash		636			1,207			410			1,207
Trade accounts receivable, net		5,198			1,126			6,322			1,126
Inventories		3,674			5,379			2,526			5,379
Prepaid and other current assets		2,508			2,218			2,247			2,218
Total current assets		12,016			12,699			11,505			12,699

Property and equipment, net		1,668			3,940			1,631			3,940
Operating lease right-of-use assets		195			4,406			151			4,406
Other noncurrent assets		195			4,118			35			4,118
Total assets	$	14,074		$	25,163		$	13,322		$	25,163
Liabilities, convertible and redeemable preferred stock and stockholders’ deficit
Current liabilities:
Accounts payable	$	17,151		$	14,984		$	16,199		$	14,984
Convertible Notes - carried at fair value (Note 4)		15,600			39,416
Convertible Notes - Adjuvant (Note 4)		27,401			26,268
Convertible notes – carried at fair value (Note 4)								13,110			39,416
Convertible notes – Adjuvant (Note 4)								27,969			26,268
Accrued expenses		4,216			4,124			5,100			4,124
Accrued compensation		1,550			2,175			1,820			2,175
Operating lease liabilities-current		173			2,311			138			2,311
Derivative liabilities		-			1,676			-			1,676
Other current liabilities		3,625			2,876			3,532			2,876
Total current liabilities		69,716			93,830			67,868			93,830

Operating lease liabilities- noncurrent		22			3,133			13			3,133
Total liabilities		69,738			96,963			67,881			96,963
Commitments and contingencies (Note 7)		-			-			-			-
Convertible and redeemable preferred stock, $0.0001 par value
Series B-1, B-2, and C convertible preferred stock, 5,000, 5,000, and 1,700 shares authorized; no shares issued and outstanding at June 30, 2023 and December 31, 2022		-			-
Convertible and redeemable preferred stock, $0.0001 par value, Senior to common stock
Series B-1, B-2, C and E-1 convertible preferred stock, 5,000, 5,000, 1,700 and 2,300 shares authorized; 1,800 shares of E-1 issued and outstanding at September 30, 2023; no other shares issued and outstanding at September 30, 2023 and December 31, 2022								1,800			-
Stockholders’ deficit:
Preferred stock, $0.0001 par value; 5,000,000 shares authorized; no shares issued and outstanding at June 30, 2023 and December 31, 2022		-			-
Common Stock, $0.0001 par value; 500,000,000 shares authorized; 2,524,239 and 984,786 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		-			-
Preferred stock, $0.0001 par value; 5,000,000 shares authorized; no shares issued and outstanding at September 30, 2023 and December 31, 2022								-			-
Common stock, $0.0001 par value; 3,000,000,000 shares authorized; 5,680,210 and 984,786 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively								-			-
Additional paid-in capital		820,587			817,367			828,552			817,367
Accumulated other comprehensive income		73,355			49,527
Accumulated other comprehensive income (loss)								(287	)		49,527
Accumulated deficit		(949,606	)		(938,694	)		(884,624	)		(938,694	)
Total stockholders’ deficit		(55,664	)		(71,800	)		(56,359	)		(71,800	)
Total liabilities, convertible and redeemable preferred stock and stockholders’ deficit	$	14,074		$	25,163		$	13,322		$	25,163

See accompanying notes to the condensed consolidated financial statements (unaudited).

	2023			2022			2023			2022
	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022			2023			2022			2023			2022

Product sales, net	$	2,458			6,034		$	8,267		$	10,285		$	5,112			6,371		$	13,379		$	16,656

Operating Expenses:
Cost of goods sold		2,293			1,285			3,669			2,351			1,889			1,680			5,558			4,031
Research and development		402			7,744			942			18,135			614			5,207			1,556			23,342
Selling and marketing		2,197			12,298			6,051			25,003			2,985			11,948			9,036			36,951
General and administrative		4,902			9,126			8,520			18,144			3,176			6,260			11,696			24,404
Total operating expenses		9,794			30,453			19,182			63,633			8,664			25,095			27,846			88,728
Loss from operations		(7,336	)		(24,419	)		(10,915	)		(53,348	)		(3,552	)		(18,724	)		(14,467	)		(72,072	)
Other income (expense):
Interest income		8			4			26			5			2			50			28			55
Other expense, net		(1,127	)		(415	)		(1,445	)		(886	)		(596	)		(436	)		(2,041	)		(1,322	)
Loss on issuance of financial instruments		(27	)		(71,150	)		(111	)		(72,002	)		(5,175	)		-			(5,286	)		(72,002	)
Gain (loss) on debt extinguishment														75,337			(24,487	)		75,337			(24,487	)
Change in fair value of financial instruments		(73	)		(29,980	)		1,539			(31,614	)		-			133,116			1,539			101,502
Total other income (expense), net		(1,219	)		(101,541	)		9			(104,497	)
Loss before income tax		(8,555	)		(125,960	)		(10,906	)		(157,845	)
Total other income, net														69,568			108,243			69,577			3,746
Income (loss) before income tax														66,016			89,519			55,110			(68,326	)
Income tax expense		(3	)		(20	)		(6	)		(23	)		(11	)		(13	)		(17	)		(36	)
Net loss		(8,558	)		(125,980	)		(10,912	)		(157,868	)
Net income (loss)														66,005			89,506			55,093			(68,362	)
Convertible preferred stock deemed dividends		-			1,908			-			1,827			-			-			-			1,827
Net loss attributable to common stockholders	$	(8,558	)	$	(124,072	)	$	(10,912	)	$	(156,041	)
Net loss per share, basic and diluted	$	(5.43	)	$	(580.48	)	$	(6.60	)	$	(169.73	)
Net loss per share, basic	$	(5.43	)	$	(580.48	)	$	(6.60	)	$	(169.73	)
Weighted-average shares used to compute net loss, basic and diluted		1,576,158			217,028			1,654,026			930,112
Weighted-average shares used to compute net loss, basic		1,576,158			217,028			1,654,026			930,112
Net income (loss) attributable to common stockholders													$	66,005		$	89,506		$	55,093		$	(66,535	)
Net income (loss) per share attributable to common stockholders:
Basic (Note 2)													$	15.34		$	135.72		$	21.42		$	(206.38	)
Diluted (Note 2)													$	0.10		$	(4.39	)	$	0.09		$	(206.38	)
Weighted-average shares used to compute net income (loss):
Basic														4,236,477			659,480			2,524,302			322,385
Diluted														729,979,486			4,441,972			694,561,898			322,385

See accompanying notes to condensed consolidated financial statements (unaudited).

	2023			2022			2023			2022			2023			2022		2023			2022
	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,					Nine Months Ended September 30,
	2023			2022			2023			2022			2023			2022		2023			2022

Net loss	$	(8,558	)	$	(125,980	)	$	(10,912	)	$	(157,868	)
Net income (loss)													$	66,005		$	89,506	$	55,093		$	(68,362	)
Other comprehensive income (loss):
Change in fair value of financial instruments attributed to credit risk change		8,368			(3,675	)		23,828			(3,494	)		(455	)		35,362		23,373			31,868
Reclassification adjustment related to debt extinguishment														(73,187	)		-		(73,187	)		-
Comprehensive income (loss)	$	(190	)	$	(129,655	)	$	12,916		$	(161,362	)	$	(7,637	)	$	124,868	$	5,279		$	(36,494	)

See accompanying notes to condensed consolidated financial statements (unaudited).

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE AND REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT

	Shares		Amount		Capital		Income		Deficit			Deficit			Shares		Amount		Shares		Amount		Capital			Income			Deficit			Deficit
	Common Stock				Additional Paid-in		Accumulated Other Comprehensive		Accumulated			Total Stockholders’			Series E-1 Convertible and Redeemable Preferred Stock				Common Stock				Additional Paid-in			Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Capital		Income		Deficit			Deficit			Shares		Amount		Shares		Amount		Capital			Income (Loss)			Deficit			Deficit
Balance as of December 31, 2022		984,786	$	-	$	817,367	$	49,527	$	(938,694	)	$	(71,800	)		-	$	-		984,786	$	-	$	817,367		$	49,527		$	(938,694	)	$	(71,800	)
Issuance of common stock upon cash exercise of warrants		24,200		-		67		-		-			67			-		-		24,200		-		67			-			-			67
Issuance of common stock upon cash exercise of purchase rights		718,704		-		180		-		-			180			-		-		718,704		-		180			-			-			180
Issuance of February and March 2023 Notes (See Note 4)		-		-		1,629		-		-			1,629			-		-		-		-		1,629			-			-			1,629
Stock-based compensation		-		-		417		-		-			417			-		-		-		-		417			-			-			417
Change in fair value of financial instruments attributed to credit risk change (see Note 4)		-		-		-		15,460		-			15,460			-		-		-		-		-			15,460			-			15,460
Net loss		-		-		-		-		(2,354	)		(2,354	)		-		-		-		-		-			-			(2,354	)		(2,354	)
Balance as of March 31, 2023		1,727,690	$	-	$	819,660	$	64,987	$	(941,048	)	$	(56,401	)		-	$	-		1,727,690	$	-	$	819,660		$	64,987		$	(941,048	)	$	(56,401	)
Balance, value		1,727,690	$	-	$	819,660	$	64,987	$	(941,048	)	$	(56,401	)

Issuance of common stock upon cash exercise of warrants		122,729		-		101		-		-			101			-		-		122,729		-		101			-			-			101
Issuance of common stock upon noncash exercise of purchase rights		673,820		-		6		-		-			6			-		-		673,820		-		6			-			-			6
Noncash reclassification of liability-classified derivatives to equity		-		-		53		-		-			53			-		-		-		-		53			-			-			53
Issuance of April 2023 Notes (See Note 4)		-		-		499		-		-			499			-		-		-		-		499			-			-			499
Stock-based compensation		-		-		268		-		-			268			-		-		-		-		268			-			-			268
Change in fair value of financial instruments attributed to credit risk change (see Note 4)		-		-		-		8,368		-			8,368			-		-		-		-		-			8,368			-			8,368
Net loss		-		-		-		-		(8,558	)		(8,558	)		-		-		-		-		-			-			(8,558	)		(8,558	)
Balance as of June 30, 2023		2,524,239	$	-	$	820,587	$	73,355	$	(949,606	)	$	(55,664	)		-	$	-		2,524,239	$	-	$	820,587		$	73,355		$	(949,606	)	$	(55,664	)
Balance, value		2,524,239	$	-	$	820,587	$	73,355	$	(949,606	)	$	(55,664	)
Issuance of common stock upon cash exercise of warrants																-		-		1		-		14			-			-			14
Issuance of common stock upon noncash exercise of purchase rights																-		-		2,767,332		-		-			-			-			-
Issuance of common stock upon conversion of notes																-		-		388,638		-		-			-			-			-
Issuance of series E-1 convertible and redeemable preferred stock upon exchange of notes (Note 8)																1,800		1,800		-		-		(1,797	)		(3	)		-			(1,800	)
Issuance of Q3 2023 Notes (See Note 4)																-		-		-		-		3,563			-			-			3,563
Issuance of additional purchase rights due to price reset (Note 4)																-		-		-		-		4,904			-			-			4,904
Down round feature adjustment to financial instruments (Note 6)																-		-		-		-		1,023			-			(1,023	)		-
Stock-based compensation																-		-		-		-		258			-			-			258
Extinguishment of Baker Notes (Note 4)																-		-		-		-		-			(73,187	)		-			(73,187	)
Change in fair value of financial instruments attributed to credit risk change (Note 4)																-		-		-		-		-			(452	)		-			(452	)
Net income																-		-		-		-		-			-			66,005			66,005
Balance as of September 30, 2023																1,800	$	1,800		5,680,210	$	-	$	828,552		$	(287	)	$	(884,624	)	$	(56,359	)

	Shares			Amount			Shares			Amount			Shares			Amount		Capital			Income			Deficit			Deficit			Shares			Amount		Shares			Amount		Shares			Amount		Capital			Income			Deficit			Deficit
	Series B Convertible and Redeemable Preferred Stock						Series C Convertible and Redeemable Preferred Stock						Common Stock					Additional Paid-in			Accumulated Other Comprehensive			Accumulated			Total Stockholders’			Series B Convertible and Redeemable Preferred Stock					Series C Convertible and Redeemable Preferred Stock					Common Stock					Additional Paid-in			Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares			Amount			Shares			Amount			Shares			Amount		Capital			Income			Deficit			Deficit			Shares			Amount		Shares			Amount		Shares			Amount		Capital			Income			Deficit			Deficit
Balance as of December 31, 2021		5,000		$	4,740			-		$	-			86,666			-		751,276			5,089			(860,680	)		(104,315	)	5,000		$	4,740		-		$	-		86,666		$	-	$	751,276		$	5,089		$	(860,680	)	$	(104,315	)
Issuance of common stock - Stock Purchase Agreement (see Note 8)		-			-			-			-			9,673			-		5,400			-			-			5,400
Issuance of common stock – Stock Purchase Agreement (see Note 8)																														-			-		-			-		9,673			-		5,400			-			-			5,400
Conversion of series B-2 convertible preferred stock		(650	)		(619	)		-			-			978			-		708			-			-			708		(650	)		(619	)	-			-		978			-		708			-			-			708
Exchange of series B-2 convertible preferred stock (see Note 8)		(1,700	)		(1,616	)		1,700			1,616			-			-		-			-			-			-		(1,700	)		(1,616	)	1,700			1,616		-			-		-			-			-			-
Convertible preferred stock deemed dividends		-			16			-			1			-			-		(81	)		-			-			(81	)	-			16		-			1		-			-		(81	)		-			-			(81	)
Restricted stock awards issued		-			-			-			-			1,259			-		-			-			-			-		-			-		-			-		1,259			-		-			-			-			-
Change in fair value of financial instruments attributed to credit risk change (see Note 4)		-			-			-			-			-			-		-			181			-			181		-			-		-			-		-			-		-			181			-			181
Modification of the Baker Warrants (see Note 8)		-			-			-			-			-			-		828			-			-			828		-			-		-			-		-			-		828			-			-			828
Stock-based compensation		-			-			-			-			-			-		1,067			-			-			1,067		-			-		-			-		-			-		1,067			-			-			1,067
Net loss		-			-			-			-			-			-		-			-			(31,888	)		(31,888	)	-			-		-			-		-			-		-			-			(31,888	)		(31,888	)
Balance as of March 31, 2022		2,650		$	2,521			1,700		$	1,617			98,576		$	-	$	759,198		$	5,270		$	(892,568	)	$	(128,100	)	2,650		$	2,521		1,700		$	1,617		98,576		$	-	$	759,198		$	5,270		$	(892,568	)	$	(128,100	)
Balance, value		2,650		$	2,521			1,700		$	1,617			98,576		$	-	$	759,198		$	5,270		$	(892,568	)	$	(128,100	)

Issuance of common stock - Stock Purchase Agreement (see Note 8)		-			-			-			-			7,067			-		2,553			-			-			2,553
Issuance of common stock - May 2022 Public Offering (see Note 8)		-			-			-			-			181,320			-		1,264			-			-			1,264
Issuance of common stock – Stock Purchase Agreement (see Note 8)																														-			-		-			-		7,067			-		2,553			-			-			2,553
Issuance of common stock – May 2022 Public Offering (see Note 8)																														-			-		-			-		181,320			-		1,264			-			-			1,264
Issuance of common stock upon cash exercise of warrants		-			-			-			-			327,719			-		32,889			-			-			32,889		-			-		-			-		327,719			-		32,889			-			-			32,889
Issuance of common stock - ESPP		-			-			-			-			601			-		20			-			-			20
Issuance of common stock - a360 Media		-			-			-			-			18,547			-		858			-			-			858
Issuance of common stock – ESPP																														-			-		-			-		601			-		20			-			-			20
Issuance of common stock – a360 Media																														-			-		-			-		18,547			-		858			-			-			858
Cash repurchase of fractional common stock after the reverse stock split		-			-			-			-			(88	)		-		(18	)		-			-			(18	)	-			-		-			-		(88	)		-		(18	)		-			-			(18	)
Conversion of series B-2 convertible preferred stock		(550	)		(524	)		-			(72	)		1,369			-		543			-			-			543		(550	)		(524	)	-			(72	)	1,369			-		543			-			-			543
Convertible preferred stock deemed dividends		-			102			-			83			-			-		-			-			-			-		-			102		-			83		-			-		-			-			-			-
May 2022 exchange transaction		(2,100	)		(2,099	)		(1,700	)		(1,628	)		(2,600	)		-		3,655			-			(1,316	)		2,339		(2,100	)		(2,099	)	(1,700	)		(1,628	)	(2,600	)		-		3,655			-			(1,316	)		2,339
Restricted stock awards cancelled		-			-			-			-			(53	)		-		-			-			-			-		-			-		-			-		(53	)		-		-			-			-			-
Change in fair value of financial instruments attributed to credit risk change (see Note 4)		-			-			-			-			-			-		-			(3,675	)		-			(3,675	)	-			-		-			-		-			-		-			(3,675	)		-			(3,675	)
Modification of the Baker Warrants (see Note 8)		-			-			-			-			-			-		231			-			-			231		-			-		-			-		-			-		231			-			-			231
Stock-based compensation		-			-			-			-			-			-		1,081			-			-			1,081		-			-		-			-		-			-		1,081			-			-			1,081
Net loss		-			-			-			-			-			-		-			-			(125,980	)		(125,980	)	-			-		-			-		-			-		-			-			(125,980	)		(125,980	)
Balance as of June 30, 2022		-		$	-			-		$	-			632,458		$	-	$	802,274		$	1,595		$	(1,019,864	)	$	(215,995	)	-		$	-		-		$	-		632,458		$	-	$	802,274		$	1,595		$	(1,019,864	)	$	(215,995	)
Balance, value		-		$	-			-		$	-			632,458		$	-	$	802,274		$	1,595		$	(1,019,864	)	$	(215,995	)
Issuance of common stock upon cash exercise of warrants																														-			-		-			-		57,479			-		9,043			-			-			9,043
Issuance of common stock upon noncash exercise of Purchase Rights (see Note 4)																														-			-		-			-		90,692			-		523			-			-			523
Issuance of common stock – a360 Media																														-			-		-			-		35,361			-		2,550			-			-			2,550
Issuance costs in connection with May 2022 Public Offering																														-			-		-			-		-			-		(25	)		-			-			(25	)
Restricted stock awards cancelled																														-			-		-			-		(5	)		-		-			-			-			-
Change in fair value of financial instruments attributed to credit risk change (see Note 4)																														-			-		-			-		-			-		-			35,362			-			35,362
Modification of the Baker Warrants (see Note 8)																														-			-		-			-		-			-		11			-			-			11
Stock-based compensation																														-			-		-			-		-			-		981			-			-			981
Net Income																														-			-		-			-		-			-		-			-			89,506			89,506
Balance as of September 30, 2022																														-		$	-		-		$	-		815,985		$	-	$	815,357		$	36,957		$	(930,358	)	$	(78,044	)

See accompanying notes to condensed consolidated financial statements (unaudited).

Evofem is a San Diego-based, commercial-stage biopharmaceutical company committed to ~~developing and~~ commercializing innovative products to address unmet needs in women’s sexual and reproductive health.

The Company’s first commercial product, Phexxi^® (lactic acid, citric acid, and potassium bitartrate) vaginal gel (Phexxi), was approved by the U.S. Food and Drug Administration (FDA) on May 22, 2020, and is the first and only FDA-approved, hormone-free, woman-controlled, on-demand prescription contraceptive gel for women. The Company commercially launched Phexxi in September 2020. Phexxi net product sales were $16.8 million in 2022.

The Company prepared the unaudited interim condensed consolidated financial statements included in this Quarterly Report in accordance with accounting principles generally accepted (GAAP) in the United States for interim financial information and the rules and regulations of the Securities and Exchange Commission (SEC) related to quarterly reports on Form 10-Q.

The Company’s financial statements are presented on a consolidated basis, which include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. The unaudited interim condensed consolidated financial statements do not include all information and disclosures required by GAAP for annual audited financial statements and should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2022 included in its Annual Report on Form 10-K as filed with the SEC on April 27, 2023 (the 2022 Audited Financial Statements).

The unaudited interim condensed consolidated financial statements included in this report have been prepared on the same basis as the Company’s audited consolidated financial statements and include all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the financial position, results of operations, cash flows, and statements of convertible and redeemable preferred stock and stockholders’ deficit for the periods presented. The results for the three and ~~six~~nine months ended ~~June~~September 30, 2023 are not necessarily indicative of the results expected for the full year. The condensed consolidated balance sheet as of December 31, 2022 was derived from the 2022 Audited Financial Statements.

On March 15, 2023, the Company’s shareholders approved a reverse stock split between 1-for-20 and not more than 1-for-125 at any time on or prior to March 15, 2024. The Company ~~determined~~decided on a ratio of 1-for-125 for the Reverse Stock Split. On May 18, 2023, the Reverse Stock Split became effective. The interim condensed consolidated financial statements are retrospectively adjusted for this Reverse Stock Split.

Any disruptions in the commercialization of Phexxi and/or its supply chain could have a material adverse effect on the Company’s business, results of operations and financial condition.

The condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities, in the normal course of business, and does 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.

The Company’s principal operations have been related to research and development, including the development of Phexxi, and to its commercially related sales and marketing efforts. Additional activities have included raising capital, identifying alternative manufacturing to lower the cost of goods sold (COGS), seeking ex-U.S. licensing partners to ~~add~~commercialize Phexxi outside the U.S. and provide non-dilutive capital to the ~~consolidated balance sheet,~~Company, and establishing and maintaining a corporate infrastructure to support a commercial product. The Company has incurred operating losses and negative cash flows from operating activities since inception. In the ~~first half of~~nine months ended September 30, 2023, as described in Note 4 – Debt and Note 8 – Stockholders’ Deficit, the Company received ~~gross~~net proceeds, before issuance costs, of approximately $~~2.1~~5.3 million, in aggregate, from the sale and issuance of senior subordinated convertible notes and warrants in ~~four~~seven closings. As of ~~June~~September 30, 2023, the Company had cash and cash equivalents, including restricted cash from the Adjuvant Notes (as defined in Note 4 – Debt), of $~~0.6~~0.4 million, ~~that is available for use,~~ a working capital deficit of $~~57.7~~56.4 million and an accumulated deficit of $~~949.6~~884.6 million.

Effective October 3, 2022, the Company’s common stock is listed on the OTC Venture Market (the OTCQB) of the OTC Markets Group, Inc., a centralized electronic quotation service for over-the-counter securities, under the symbol “EVFM.” The OTCQB imposes, among other requirements, a minimum $0.01 per share bid price requirement (the Bid Price Requirement) for continued inclusion on the OTCQB. The closing bid price for the Company’s common stock must remain at or above $0.01 per share to comply with the Bid Price Requirement for continued listing. As of November 9, 2023, the closing price was $0.0651.

In October 2022, the Company reported that its Phase 3 clinical trial (EVOGUARD) did not achieve its efficacy endpoints. The Company has discontinued investment in this development program.

In March 2023, the Company received a Notice of Event of Default and Reservation of Rights (the Notice of Default) from Baker Bros claiming that the Company ~~has~~ failed to maintain the required shares reserved amount per the Third Baker Amendment as defined in Note 4 – Debt. In addition, the Notice of Default resulted in a cross default under all outstanding debt; however, the cross default was remedied by the Reverse Stock ~~Split.~~Split in May 2023. As of June 30, 2023, the Company had ~~failed to meet~~not met the affirmative covenant requiring achievement of $100.0million in cumulative net sales of Phexxi by such date as per the First Baker Amendment (as defined in Note 4 – Debt). In September 2023, the Company entered into a Fourth Baker Amendment (as defined in Note 4 – Debt), upon which the cumulative net sales covenant was removed and all defaults existing at the time of signing were cured.

Management’s plans to meet the Company’s cash flow needs in the next 12 months include generating recurring product revenue, restructuring its current payables, ~~curing the event of default under its debt arrangements,~~ and obtaining additional funding through means such as ~~through~~ the issuance of its capital stock, non-dilutive financings, or through collaborations or partnerships with other companies, including license agreements for Phexxi in the United States or foreign ~~markets.~~markets, or other potential business combinations.

The Company anticipates it will continue to incur net losses for the foreseeable future. According to management estimates, liquidity resources as of ~~June~~September 30, 2023 are not sufficient to maintain the Company’s cash flow needs for the twelve months from the date of issuance of these condensed consolidated financial statements.

If the Company is not able to obtain the required funding through a significant increase in revenue, equity or debt financings, license agreements for Phexxi in the United States or foreign markets, or other means, or is unable to obtain funding on terms favorable to the Company, or if ~~the event of default under its existing debt arrangements is not cured or~~ there is another event of default affecting the notes payable, there will be a material adverse effect on commercialization and development operations and the Company’s ability to execute its strategic development plan for future growth. If the Company cannot successfully raise additional funding and implement its strategic development plan, the Company may be forced to make further reductions in spending, including spending in connection with its commercialization activities, extend payment terms with suppliers, liquidate assets where possible at a potentially lower amount than as recorded in the condensed consolidated financial statements, suspend or curtail planned operations, or cease operations entirely. Any of these could materially and adversely affect the Company’s liquidity, financial condition and business prospects, and the Company would not be able to continue as a going concern. The Company has concluded that these circumstances and the uncertainties associated with the Company’s ability to obtain additional equity or debt financing on terms that are favorable to the Company, or at all, and otherwise succeed in its future operations raise substantial doubt about the Company’s ability to continue as a going concern.

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and the notes thereto.

Significant estimates affecting amounts reported or disclosed in the condensed consolidated financial statements include, but are not limited to: the assumptions used in measuring the revenue gross-to-net variable consideration items; the trade accounts receivable credit loss reserve estimate; the discount rate used in estimating the fair value of the lease right-of-use (ROU) assets and lease liabilities; the assumptions used in estimating the fair value of convertible notes, warrants and purchase rights ~~issued;~~issued and modified; the useful lives of property and equipment; the recoverability of long-lived assets; clinical trial accruals; and the assumptions used in estimating the fair value of stock-based compensation expense. These assumptions are more fully described in Note 3 – Revenue, Note 4 – Debt, Note 6 – Fair Value of Financial Instruments, Note 7 – Commitments and Contingencies and Note 9 – Stock-based Compensation. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances and adjusts when facts and circumstances dictate. The estimates are the basis for making judgments about the carrying values of assets, liabilities and recorded expenses that are not readily apparent from other sources. As future events and their effects cannot be determined with precision, actual results may materially differ from those estimates or assumptions.

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker, the Chief Executive Officer of the Company, in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business in one operating segment.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents and restricted cash. Deposits in the Company’s checking and time deposit ~~and investment~~ accounts are maintained in federally insured financial institutions and are subject to federally insured limits or limits set by the Securities Investor Protection Corporation. The Company ~~invests in~~holds its 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 condensed consolidated balance sheets.

The Company has not experienced any losses in such accounts and believes it is not exposed to significant concentrations of credit risk on its cash, cash equivalents and restricted cash balances on amounts in excess of federally insured limits due to the financial position of the depository institutions in which these deposits are held. The Company’s deposits were primarily held in Silicon Valley Bank prior to its closure by regulators, however, the Company was able to regain full access to all its deposits and subsequently moved these to a different financial institution.

The Company is also subject to credit risk related to its trade accounts receivable from product sales. Its customers are located in the United States and consist of wholesale distributors, retail pharmacies, and a mail-order specialty pharmacy. The Company extends credit to its customers in the normal course of business after evaluating their overall financial condition and evaluates the collectability of its accounts receivable by periodically reviewing the age of the receivables, the financial condition of its customers and its past collection experience. Historically, the Company has not experienced any credit losses. As of ~~June~~September 30, 2023 and December 31, 2022, based on the evaluation of these factors, the Company did not record an allowance for doubtful accounts.

Phexxi is distributed primarily through three major distributors and a mail-order pharmacy, which receive service fees calculated as a percentage of the gross sales, and fee per units shipped, respectively. These entities are not obligated to purchase any set number of units and distribute Phexxi on demand as orders are received. For the three and ~~six~~nine months ended ~~June~~September 30, 2023, the Company’s three largest customers combined made up approximately 8186% and 8485% of its gross product sales, respectively. For the three and ~~six~~nine months ended ~~June~~September 30, 2022, the Company’s three largest customers combined made up approximately 7293% and 7181% of its gross product sales, respectively. As of ~~June~~September 30, 2023 ~~and December 31, 2022,~~ the Company’s three largest customers combined made up 9091% ~~and~~ , of its trade accounts receivable balance. As of December 31, 2022, the Company’s four largest customers combined made up81%~~, respectively,~~ of its trade accounts receivable balance.

Certain reclassifications have been made to the consolidated statements of operations for the three and nine months ended September 30, 2022 for consistency with the presentation of the consolidated statements of operations for the three and nine months ended September 30, 2023. There has been no effect on the Company’s financial position or stockholders’ deficit as of December 31, 2022 or results of operations for the three or nine months ended September 30, 2022.

There have been no changes to the significant accounting policies that were described in Note 2 – Summary of Significant Accounting Policies of the 2022 Audited Financial Statements in the Company’s Annual Report.

Cash and cash equivalents consist of readily available cash in checking accounts and money market funds. Restricted cash consists of cash held in monthly time deposit accounts and letters of credit, which are collateral for the Company’s credit cards and fleet leases, as described in Note 7 – Commitments and Contingencies. During the ~~six~~nine months ended ~~June~~September 30, 2023, the letters of credit of $0.3 million for its fleet leases were released. Additionally, the remaining funds of the $25.0 million received from the issuance of the Adjuvant Notes (as defined in Note 4 – Debt) in the fourth quarter of 2020, is classified as restricted cash as the Company is contractually obligated to use the funds for specific purposes. Upon receipt of a notice of default from its landlord on March 20, 2023, for failing to pay March 2023 rent timely resulting in a breach under the office lease agreement, the Company’s letter of credit in the amount of $0.8 million, in restricted cash, was recovered by the landlord.

The following table provides a reconciliation of cash, cash equivalents and restricted cash, reported within the condensed consolidated statements of cash flows (in thousands):

	2023		2022
	Six months ended June 30,				Nine months ended September 30,
	2023		2022		2023		2022
Cash and cash equivalents	$	-	$	19,885	$	-	$	7,749
Restricted cash		636		1,581		410		1,293
Restricted cash included in other noncurrent assets		-		800		-		800
Total cash, cash equivalents and restricted cash presented in the condensed consolidated statements of cash flows	$	636	$	22,266	$	410	$	9,842

Basic net ~~loss~~income (loss) per common share is calculated by dividing the net ~~loss~~income (loss) available to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. The net income (loss) available to common stockholders is adjusted for amounts in accumulated deficit related to the down round feature triggered for certain financial instruments. Such adjustment was $1.0 million in both the three and nine months ended September 30, 2023. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and potentially dilutive securities outstanding for the period determined using the treasury-stock and if-converted methods. For purposes of the diluted net loss per share calculation, potentially dilutive securities are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive and, therefore, basic and diluted net loss per share were the same for ~~all periods presented. Potentially dilutive securities excluded from~~ the ~~calculation of diluted net loss per share~~period presented below, which are summarized in the table below. Common shares were calculated for the convertible preferred stock and the convertible debt using the if-converted method.

Schedule of Potentially Dilutive Securities Excluded from Calculation of Diluted Net Loss Per Share

The following table sets forth the computation of weighted average common shares outstanding for diluted net income (loss) per share for the three months ended September 30, 2023 and 2022.

Schedule of Weighted Average Common Shares Outstanding for Diluted Net Loss Per Share

The following table sets forth the computation of weighted average common shares outstanding for diluted net loss per share for the nine months ended September 30, 2023.

In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments - Credit Losses (ASU No. 2022-02). This is an amendment to ASU 2016-13, where it eliminates the accounting guidance for troubled debt restructuring by creditors in Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. ASU No. 2022-02 was effective for the Company beginning January 1, 2023 since the Company adopted ASU 2016-13 on January 1, 2020. The adoption of this new standard did not have a material impact on the Company’s condensed consolidated financial statements.

The Company recognizes revenue from the sale of Phexxi in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers (ASC 606). The provisions of ASC 606 require the following steps to determine revenue recognition: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.

In accordance with ASC 606, the Company recognizes revenue when its performance obligation is satisfied by transferring control of the product to a customer. In accordance with the Company’s contracts with customers, control of the product is transferred upon the conveyance of title, which occurs when the product is sold to and received by a customer. The Company’s customers are located in the United States and consist of wholesale distributors, retail pharmacies, and a mail-order specialty pharmacy. Payment terms typically range from 31 to 66 days, include prompt pay discounts, and vary by customer. Trade accounts receivable due to the Company from contracts with its customers are stated separately in the condensed consolidated balance sheets, net of various allowances as described in the Trade Accounts Receivable policy in Note 2 - Summary of Significant Accounting Policies to the 2022 Audited Consolidated Financial Statements.

The amount of revenue recognized by the Company is equal to the amount of consideration that is expected to be received from the sale of product to its customers. Revenue is only recognized when the performance obligation is satisfied. To determine whether a significant reversal will occur in future periods, the Company assesses both the likelihood and magnitude of any such potential reversal of revenue.

Phexxi is sold to customers at the wholesale acquisition cost (WAC), or in some cases at a discount to WAC. However, the Company records product revenue net of reserves for applicable variable consideration. These types of variable consideration reduce revenue and include the following:

An estimate for variable consideration is made with each sale and is recorded in conjunction with the revenue being recognized. To calculate the variable consideration, the Company uses the expected value method. If the estimated amount is payable to a customer, it is recorded as a reduction to accounts receivable. If the estimated amount is payable to an entity other than a customer, it is recorded as a current liability. An estimated amount of variable consideration may differ from the actual amount. At each balance sheet date, these provisions are analyzed and adjustments are made if necessary. Any adjustments made to these provisions would also affect net product revenue and earnings.

In accordance with ASC 606, the Company must make significant judgments to determine the estimate for certain variable consideration. For example, the Company must estimate the percentage of end-users that will obtain the product through public insurance such as Medicaid or through private commercial insurance. To determine these estimates, the Company relies on historical sales data showing the amount of various end-user consumer types, inventory reports from the wholesale distributors and mail-order specialty pharmacy, and other relevant data reports. Because Phexxi was launched in September 2020, this historical data is limited. Due to limits on historical data, the Company has also used trend analysis, industry data and professional judgment in developing these estimates.

The specific considerations that the Company uses in estimating these amounts related to variable consideration are as follows:

Distribution services fees – The Company pays distribution service fees to its wholesale distributors and mail-order specialty pharmacy. These fees are a contractually fixed percentage of WAC and are calculated at the time of sale based on the purchase amount. The Company considers these fees to be separate from the customer’s purchase of the product and, therefore, they are recorded in other current liabilities on the condensed consolidated balance sheets.

Prompt pay and other discounts – The Company incentivizes its customers to pay their invoices on time through prompt pay discounts. These discounts are an industry standard practice, and the Company offers a prompt pay discount to each wholesale distributor and retail pharmacy customer. The specific prompt pay terms vary by customer and are contractually fixed. Prompt pay discounts are typically taken by the Company’s customers, so an estimate of the discount is recorded at the time of sale based on the purchase amount. Prompt pay discount estimates are recorded as contra trade accounts receivable on the condensed consolidated balance sheets.

The Company may also give other discounts to its customers to incentivize purchases and promote customer loyalty. The terms of such discounts may vary by customer. These discounts reduce gross product revenue at the time the revenue is recognized.

Chargebacks – Certain government entities and covered entities (e.g., Veterans Administration, 340B covered entities) are able to purchase Phexxi at a price discounted below WAC. The difference between the government or covered entity purchase price and the wholesale distributor purchase price of WAC will be charged back to the Company. The Company estimates the amount of each chargeback channel based on the expected number of claims in each channel and related chargeback that is associated with the revenue being recognized for product that remains in the distribution channel at the end of each reporting period. Estimated chargebacks are recorded as contra trade accounts receivable on the condensed consolidated balance sheets.

Rebates – The Company is subject to mandatory discount obligations under the Medicaid and Tricare programs. The rebate amounts for these programs are determined by statutory requirements or contractual arrangements. Rebates are owed after the product has been dispensed to an end user and the Company has been invoiced. Rebates for Medicaid and Tricare are typically invoiced in arrears. The Company estimates the amount of rebates based on the expected number of claims and related cost that is associated with the revenue being recognized for product that remains in the distribution channel at the end of each reporting period. Rebate estimates are recorded as other current liabilities on the condensed consolidated balance sheets.

Patient support programs – One type of patient support program the Company offers is a co-pay program to commercially insured patients whose insurance requires a co-pay to be made when filling their prescription. This is a voluntary program that is intended to provide financial assistance to patients meeting certain eligibility requirements. The Company estimates the amount of financial assistance for these programs based on the expected number of claims and related cost that is associated with the revenue being recognized for product that remains in the distribution channel at the end of each reporting period. Patient support programs estimates are recorded as other current liabilities on the condensed consolidated balance sheets.

Product returns – Customers have the right to return product that is within six months or less of the labeled expiration date or that is past the expiration date by no more than six months. Phexxi was commercially launched in September 2020 with a 30-month shelf life. The shelf life increased to 48 months in June 2022. The Company uses historical sales and return data to estimate future product returns. Product return estimates are recorded as other current liabilities on the condensed consolidated balance sheets.

As of ~~June~~September 30, 2023 and December 31, 2022, the variable considerations discussed above were recorded in the condensed consolidated balance sheets and consisted of $0.2 million and $0.1 million, ~~in each period~~respectively in contra trade accounts receivable and $~~3.1~~3.5 million and $2.6 million, respectively, in other current liabilities.

On April 23, 2020, the Company entered into a Securities Purchase and Security Agreement (the Baker Bros. Purchase Agreement) with certain affiliates of Baker Bros. Advisors LP, as purchasers (the Baker Purchasers), and Baker Bros. Advisors LP, as designated agent, pursuant to which the Company agreed to issue and sell to the Baker Purchasers (i) convertible senior secured promissory notes (the Baker Notes) in an aggregate principal amount of up to $25.0 million and (ii) warrants to purchase shares of common stock (the Baker Warrants) in a private placement.

At the initial closing date of April 24, 2020 (the Baker Initial Closing), the Company issued and sold Baker Notes with an aggregate principal amount of $15.0 million (the Baker First Closing Notes) and Baker Warrants exercisable for 1,639 shares of common stock.

Following the Baker Initial Closing, the Baker Purchasers had an option to purchase from the Company up to $10.0 million of Baker Notes (the Baker Purchase Rights) at the Baker Purchasers’ discretion at any time prior to the Company receiving at least $100.0 million in aggregate gross proceeds from one or more sales of equity securities.

On June 5, 2020 (the Exercise Date), the Baker Purchasers exercised the Baker Purchase Rights. At the second closing date of June 9, 2020 (the Baker Second Closing), the Baker Purchasers acquired the remaining Baker Notes with an aggregate principal amount of $10.0 million and Baker Warrants exercisable for 1,092 shares of common stock. Upon the completion of the underwritten public offering in June 2020, the exercise price of the Baker Warrants was $4,575 per share. The Baker Warrants have a five-year term with a cashless exercise provision and are immediately exercisable at any time from their respective issuance date.

The Baker Notes have a five-year term, with no pre-payment ability during the first three years. Interest on the unpaid principal balance of the Baker Notes (the Baker Outstanding Balance) accrues at 10.0% per annum with interest accrued during the first year from the two respective closing dates recognized as payment-in-kind. The effective interest rate for the period was 10.0%. Accrued interest beyond the first year of the respective closing dates is to be paid in arrears on a quarterly basis in cash or recognized as payment-in-kind, at the direction of the Baker Purchasers. As discussed below, with the amendment to the Baker Bros. Purchase Agreement, interest payments were paid-in kind. Interest pertaining to the Baker Notes for the three and ~~six~~nine months ended ~~June~~September 30, 2023 was approximately $2.4 million and $~~3.8~~6.2 million, respectively, which was added to the outstanding principal balance. Interest pertaining to the Baker Notes for the three and ~~six~~nine months ended ~~June~~September 30, 2022 was approximately $~~0.7~~0.8 million and $~~1.4~~2.2 million, respectively, which was added to the outstanding principal balance. The Company accounts for the Baker Notes under the fair value method as described below and, therefore, the interest associated with the Baker Notes is included in the fair value determination. ~~As of June 30, 2023, the Baker Notes could be converted into~~ ~~117,756,776~~ ~~shares of common stock.~~

The Baker Notes ~~are~~were callable by the Company on 10 days’ written notice beginning on the third anniversary of the initial closing date of April 24, 2020. The call price will equal 100% of the Baker Outstanding Balance plus accrued and unpaid interest if the Company’s common stock as measured using a 30~~-day~~30-day volume weighted average price (VWAP) iswas greater than the benchmark price of $9,356.25 as stated in the Baker Bros. Purchase Agreement, or 110% of the Baker Outstanding Balance plus accrued and unpaid interest if the VWAP iswas less than such benchmark price. The Baker Purchasers also ~~have~~had the option to require the Company to repurchase all or any portion of the Baker Notes in cash upon the occurrence of certain events. In a repurchase event, as defined in the Baker Bros. Purchase Agreement, the repurchase price will equal 110% of the Baker Outstanding Balance plus accrued and unpaid interest. In an event of default or the Company’s change of control, the repurchase price ~~will~~would equal to the sum of (x) three times of the Baker Outstanding Balance plus (y) the aggregate value of future interest that would have accrued. The Baker Notes were convertible at any time at the option of the Baker Purchasers at the conversion price of $4,575 per share prior to the First and Second Baker Amendments (as defined below).

On November 20, 2021, the Company entered into the first amendment to the Baker Bros. Purchase Agreement (the First Baker Amendment), in which each Baker Purchaser had the right to convert all or any portion of the Baker Notes into common stock at a conversion price equal to the lesser of (a) $$4,575 and (b) 115% of the lowest price per share of common stock (or, as applicable with respect to any equity securities convertible into common stock, 115% of the applicable conversion price) sold in one or more equity financings until the Company has met a qualified financing threshold defined as one or more equity financings resulting in aggregate gross proceeds to the Company of at least $50 million (the Financing Threshold).

The First Baker Amendment also extended, effective upon the Company’s achievement of the Financing Threshold, the affirmative covenant to achieve $100.0 million in cumulative net sales of Phexxi by June 30, 2022 to June 30, 2023. Additionally per the First Baker Amendment, if in any equity financing closing on or prior to the date the Company has met the Financing Threshold the Company ~~was required to issue~~issued warrants to purchase capital stock of the Company (or other similar consideration), the Company was ~~also~~ required to issue to the Baker Purchasers an equivalent coverage of warrants (or other similar consideration) on the same terms as if the Baker Purchasers had participated in the financing in an amount equal to the then outstanding principal of Baker Notes held by the Baker Purchasers. In satisfaction of this requirement and in connection with the closing of the May 2022 Public Offering, the Company issued warrants to purchase 582,886 shares of the Company’s common stock at an exercise price of $93.75 per share (the June 2022 Baker Warrants). As required by the terms of the First Baker Amendment, the June 2022 Baker Warrants have substantially the same terms as the warrants issued in the May 2022 Public Offering. Refer to Note 8 - Stockholders’ Deficit for further information. The exercise price of the initial Baker Warrants and the June 2022 Baker Warrants was reset to $1.625 per share with the February and March 2023 Notes issuance, ~~reset~~ to $0.8125 per share along with the April 2023 Notes issuance as discussed below, ~~and then further reset~~ to $0.40per share along with the August 2023 Preferred Stock Transaction, ~~as discussed in~~ and then further reset to $~~Note 10 – Subsequent Events~~0.0845 .per share along with the September 2023 Closing.

On March 21, 2022, the Company entered into the second amendment to the Baker Bros. Purchase Agreement (the Second Baker Amendment), ~~pursuant to~~ which granted each Baker Purchaser ~~now has~~ the right to convert all or any portion of the Baker Notes into ~~Common Stock~~common stock at a conversion price equal to the lesser of (a) $725.81 or (b) 100% of the lowest price per share of common stock (or as applicable with respect to any equity securities convertible into common stock, 100% of the applicable conversion price) sold in any equity financing until the Company has (i) met the qualified financing threshold by June 30, 2022, defined as a single underwritten financing resulting in aggregate gross proceeds to the Company of at least $20 million (Qualified Financing Threshold) and (ii) the ~~publication~~disclosure of top-line results from the EVOGUARD clinical trial (the Clinical Trial Milestone) by October 31, 2022. The Second Baker Amendment also ~~provides~~provided that the exercise price of the Baker Warrants will equal the conversion price of the Baker Notes. The Company met the Qualified Financing Threshold upon the closing of the May 2022 Public Offering, and as of September 30, 2022, the conversion price and exercise price of the Baker Warrants was reset to $93.75. The Company achieved the Clinical Trial Milestone in October 2022. Also, with the achievement of the Qualified Financing Threshold and the Clinical Trial Milestone, the affirmative covenant to achieve $100.0 million in cumulative net sales of Phexxi was extended to June 30, 2023, which was subsequently waived via the ~~Company failed to accomplish~~Baker Fourth Amendment as discussed below.

On September 15, 2022, the Company entered into the third amendment to the Baker Bros. Purchase Agreement (the Third Baker Amendment), pursuant to which the conversion price was amended to equal to $26.25, subject to adjustment for certain dilutive Company equity issuance adjustments for a two-year ~~period, removal of~~period; an interest make-whole payment due in certain circumstances was removed; and certain change of control and liquidation payment amounts were reduced from three times the outstanding amounts of the Baker Notes to two times the outstanding amounts. In addition, the Third Baker Amendment provides that the Company may make future interest payments to the Baker Purchasers in kind or in cash, at the Company’s option.

~~The Baker Notes contain various customary affirmative and negative covenants agreed to by~~ On the same day, the Company including timely payment, in cash, of the quarterly interest payment and maintaining an active listing. On September 12, 2022, the Company received a default notice from the Baker Purchasers due to its failure of making the required payments of accrued interest for the first and second quarters of 2022 in the aggregate amount of $~~1.4~~ ~~million and being delisted from Nasdaq. As a result of the cross-default provisions applicable to the Adjuvant Notes and the May 2022 Notes (both, as discussed below), the Company was~~ also ~~in default of these Notes. On September 15, 2022, the Company~~ entered into a ~~(i) Forbearance Agreement (the~~ Secured Creditor Forbearance ~~Agreement)~~Agreement with the Baker Purchasers ~~pursuant~~(Baker Forbearance Agreement), according to which the Baker Purchasers agreed to ~~forbear from exercising any of their rights and remedies during~~forebear the Forbearance Period (as defined), but solely with respect to the specified events of default (Forbearance Termination Event) provided under the Secured Creditor Forbearance Agreement, which includes among other things, the first date after December 31, 2022, on which the Company’s cash falls below $~~1.0~~ ~~million. In exchange for the forbearance and the Third Baker Amendment, the Company agreed to adjust the aggregate principal balance of the Baker Notes to $44.2~~ ~~million, which includes the delinquent interest payments of $1.4~~ ~~million~~defaults that ~~the Baker Purchasers agreed to forego in cash, as well as an immaterial amount of legal fees incurred by the Baker Purchasers’ counsel.~~existed at that time.

On December 19, 2022, the Company entered into the First Amendment to the Forbearance Agreement (the Amendment) effective as of December 15, 2022 ~~(the Amendment Effective Date)~~ to amend certain provisions of the ~~of the Secured Creditor~~ Forbearance Agreement dated September 15, 2022. The Amendment ~~revises~~revised the ~~Secured Creditor~~ Forbearance Agreement to (i) amend the Fifth Recital Clause to clarify that the Purchasers consent to any additional indebtedness pari passu, but not senior to that of the Purchasers, in an amount not to exceed $5.0 million, and (ii) strike and entirely replace Section 4 to clarify the terms of the Purchasers’ consent to Interim Financing (as defined therein). No other revisions were made to the ~~Secured Creditor~~ Forbearance ~~Agreements.~~Agreement.

On March 7, 2023, Baker Bros. Advisors, LP (the Designated Agent) provided a Notice of Event of Default and Reservation of Rights (the Notice of Default) relating to the Baker Bros. Purchase Agreement. The Notice of Default ~~claims~~claimed that the Company ~~has~~ failed to maintain the “Required Reserve Amount” as required by the Third Baker Amendment. The Designated Agent, at the direction of the Baker Purchasers, ~~has~~ accelerated repayment of the outstanding balance payable. As a result, approximately $92.7million, representing two times the sum of the outstanding balance and all accrued and unpaid interest thereon and all other amounts due under the Baker Bros. Purchase Agreement and other documents, was due and payable within three business days of receipt of the Notice of Default. In addition, the Company did not meet the $100.0 million cumulative net sales threshold by June 30, 2023 and as such iswas in default as of that date. ~~Baker Notes’ default resulted in a cross default under~~As discussed below, all ~~outstanding debt. As~~existing defaults were cured upon the signing of the ~~date~~Fourth Baker Amendment.

On September 8, 2023, the Company entered into the Fourth Amendment to the Baker Bros. Purchase Agreement (the Fourth Baker Amendment) with the Baker Purchasers. The Fourth Amendment amends certain provisions within the Baker Bros. Purchase Agreement including:

The current outstanding balance of ~~the filing of this Quarterly Report,~~ the Baker Notes ~~remain outstanding,~~will continue to accrue interest at 10% per annum and, in the event of a default in the agreement or a failure to pay the Repurchase Price (as defined below) on or before September 8, 2028 (the Maturity Date), the Baker Purchasers may collect on the full principal amount then outstanding. Additionally, the Company ~~has sufficient~~was required ~~reserve number of shares due~~ to ~~the effectuation~~make a $1.0 million upfront payment by October 1, 2023 (which payment was made in late September 2023) as well as quarterly cash payments based upon a percentage of the ~~Reverse Stock Split in May 2023.~~ Company’s global net product revenue. The ~~failure~~cash payments will be determined based upon the quarterly global net revenue of Phexxi such that if the global net revenue is less than or equal to ~~cure~~$5.0 million, the ~~default~~Company will pay 3%; if the global net revenue is over $5.0 million and less than or ~~otherwise settle or resolve it, could have a significant negative financial impact~~equal to $7.0 million, the Company will continue to pay 3% on net revenue up to $5.0 million and 4% on the net revenue over $5.0 million; and if the global net revenue is over $7.0 million, the Company ~~could result in litigation,~~will pay 3% on the net revenue up to $5.0 million, 4% on the net revenue over $5.0 million up to $7.0 million, and ~~could result~~5% on net revenue over $7.0 million. The cash payments will be payable beginning in the ~~assets~~fourth quarter of 2023. Regardless of the percentage paid, the quarterly cash payment amounts, along with the $1.0 million upfront payment, will be deducted from the Repurchase Price as Applicable Reductions.

The Fourth Amendment also granted the Company ~~being seized, attached or otherwise utilized~~the ability to ~~satisfy~~repurchase the ~~debt.~~principal amount and accrued and unpaid interest of the Baker Notes for up to a five-year period for the one-time Repurchase Price designated below:

The Company evaluated whether any of the Embedded Features required bifurcation as a separate ~~component of equity.~~component. The Company elected the fair value option (FVO) under ASC 825, Financial Instruments (ASC 825), as the Baker Notes are qualified financial instruments and are, in whole, classified as liabilities. Under the FVO, the Company recognized the ~~hybrid~~ debt instrument at fair value, inclusive of the Embedded Features with changes in fair value related to changes in the Company’s credit risk being recognized as a component of accumulated other comprehensive income in the condensed consolidated balance sheets. All other changes in fair value were recognized in the condensed consolidated statements of operations.

~~For~~Due to the ~~quarter ended June 30, 2023,~~execution of the Fourth Baker Amendment, the Company reviewed the Baker Notes in accordance with Topics ASC 470, Debt (ASC 470). Because the Baker Notes were recorded under the FVO, the Fourth Amendment was outside the scope of ASC 470-60 and as such did not qualify as a troubled debt restructuring (TDR). The Baker Notes were evaluated in accordance with ASC 470 and were determined to have failed certain qualitative factors to qualify as a modification and, therefore, were accounted for as an extinguishment. The Company removed the fair value of the old Baker Notes of $15.6 million and the related accumulated other comprehensive income of $73.2 million as of the date of extinguishment and recorded the fair value of the new Baker Notes, as measured on the date of the Baker Fourth Amendment as $12.5 million, and recognized a gain of approximately $75.3 million within the condensed consolidated statements of operations, in the gain (loss) on issuance of financial instruments line item, upon extinguishment. The gain includes recognizing $73.2 million that had previously been a component of other comprehensive income as part of the prior quarterly revaluations using the valuation methods discussed in Note 6 -– Fair Value of Financial Instruments~~, the Company recorded a gain of $8.2~~ million due to changes in fair value of the Baker Notes, and recorded as a component of other comprehensive income due to changes in the underlying instrument-specific credit risk for the Baker Notes. The fair value of the Baker Notes was determined by estimating the fair value of the Market Value of Invested Capital (“MVIC”) of the Company. This was estimated using forms of the cost and market approaches. In the Cost approach, an adjusted net asset value method was used to determine the net recoverable value of the Company, including an estimate of the fair of the Company’s intellectual property. The estimated fair value of the Company’s intellectual property was valued using a relief from royalty method which required management to make significant estimates and assumptions related to forecasts of future revenue, and the selection of the royalty and discount rates. If the resulting fair value is not estimated as greater than the contractual payout, the fair value of the Baker Notes then becomes the Company’s MVIC available for distribution..

As of ~~June~~September 30, 2023, the Baker Notes are recorded at fair value in the condensed consolidated balance sheet as short-term convertible notes payable with a total balance of $~~15.6~~12.5 million, and the total outstanding balance including principal and accrued interest is $~~95.7~~97.1 million.

On October 14, 2020, the Company entered into a Securities Purchase Agreement (the Adjuvant Purchase Agreement) with Adjuvant Global Health Technology Fund, L.P., and Adjuvant Global Health Technology Fund DE, L.P. (together, the Adjuvant Purchasers), pursuant to which the Company sold unsecured convertible promissory notes (the Adjuvant Notes) in aggregate principal amount of $25.0 million.

The Adjuvant Notes have a five-year term and, in connection with certain Company change of control transactions, ~~the Adjuvant Notes~~ may be prepaid at the option of the Company or will become payable on the date of the consummation of a change of control transaction at the option of the Adjuvant Purchasers. The Adjuvant Notes have interest accruing at 7.5% per annum on a quarterly basis in arrears to the outstanding balance of the Adjuvant Notes and are recognized as payment-in-kind. The effective interest rate for the ~~period~~nine months ended September 30, 2023 was ~~7.7~~8.8%.

Interest expense for the Adjuvant Notes for the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 consisted of the following (in thousands):

	2023		2022		2023		2022
	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022		2023		2022		2023		2022
Coupon interest	$	507	$	523	$	1,004	$	1,035	$	516	$	525	$	1,520	$	1,560
Amortization of issuance costs		60		10		128		19		51		25		179		45
Total	$	567	$	533	$	1,132	$	1,054	$	567	$	550	$	1,699	$	1,605

The Adjuvant Notes are convertible, subject to customary 4.99% and 19.99% beneficial ownership limitations, into shares of the Company’s common stock, par value $0.0001 per share, at any time at the option of the Adjuvant Purchasers at a conversion price of $6,843.75 per share. In connection with certain Company change of control transactions, the Adjuvant Notes may be prepaid at the option of the Company or will become payable at the option of the Adjuvant Purchasers. To the extent not previously prepaid or converted, the Adjuvant Notes were originally automatically convertible into shares of the Company’s common stock at a conversion price of $6,843.75 per share immediately following the earliest of the time at which the (i) 30-day value-weighted average price of the Company’s common stock was $18,750 per share, or (ii) the Company achieved cumulative net sales of $100.0 million, provided such net sales ~~are~~were achieved prior to July 1, 2023.

On April 4, 2022, the Company entered into the first amendment to the Adjuvant Purchase Agreement (the Adjuvant Amendment). The Adjuvant Amendment extended ~~effective as of the next date the Company achieved the Qualified Financing Threshold upon the closing of the May 2022 Public Offering,~~ the affirmative covenant to achieve $100.0 million in cumulative net sales of Phexxi by June 30, 2022 to June 30, 2023. The Adjuvant Amendment also provided for an adjustment to the conversion price of the Adjuvant Notes such that the conversion price (the Conversion Price) for these Notes, effective as of the May 2023 reverse stock split, ~~the conversion price~~ will now be the lesser of (i) $678.49 and (ii) 100% of the lowest price per share of common stock (or with respect to securities convertible into common stock, 100% of the applicable conversion price) sold in any equity financing until the Company has met the Qualified Financing Threshold. Effective as of the Company’s achievement of the Qualified Financing Threshold, the automatic conversion provisions in the Agreement were further amended to provide that the Adjuvant Notes will automatically convert into shares of the Company’s common stock at the Conversion Price immediately following the earliest of the time at which the (i) 30-day value-weighted average price of the Company’s common stock is $18,750 per share, or (ii) the Company achieves cumulative net sales of Phexxi of $100.0 million, provided such net sales ~~are~~were achieved prior to July 1, 2023.

The Adjuvant Notes contain various customary affirmative and negative covenants agreed to by the Company. On September 12, 2022, the Company was in default of the Adjuvant Notes due to the ~~default with the Baker Notes under the cross-default provision.~~failure to achieve cumulative net sales of Phexxi of $100.0 million by June 30, 2022. On September 15, 2022, the Company entered into a Forbearance Agreement (the Adjuvant Forbearance Agreement) with the Adjuvant Purchasers, pursuant to which the Adjuvant Purchasers agreed to forbear from exercising any of their rights and remedies during the Forbearance Period as defined in therein, but solely with respect to the specified events of default provided under the Adjuvant Forbearance Agreement.

On September 15, 2022, the Company also entered into the second amendment to the Adjuvant Purchase Agreement (the Second Adjuvant Amendment), pursuant to which the conversion price per share was reduced to $26.25, subject to adjustment for certain dilutive Company equity issuance adjustments for a two-year period. In addition, the Company entered into an exchange agreement, pursuant to which the Adjuvant Purchasers agreed to exchange 10% of the outstanding amount of the Adjuvant Notes as of September 15, 2022 (or $2.9 million) for rights to receive 109,842 shares of common stock (the Adjuvant Purchase Rights). The number of shares for each Adjuvant Purchase Right is initially fixed, but is subject to certain customary adjustments, and, until the second anniversary of issuance, adjustments for certain dilutive Company equity issuances. Refer to Note 8 - Stockholders’ Deficit for discussion regarding additional issuances of purchase rights under this provision. The Adjuvant Purchase Rights expire on June 28, 2027 and do not have an exercise price per share and, therefore, will not result in cash proceeds to the Company. As of ~~June~~September 30, 2023, all Adjuvant Purchase Rights remain outstanding. The conversion price of the Adjuvant Notes ~~were further~~was reset to $1.625 per share with the February 2023 Notes issuance, to $0.8125 per share in April 2023 issuance as discussed below, ~~and then further reset to~~ $0.40per share along with the August 2023 Preferred Stock Transaction, ~~as discussed in~~ and further reset to $~~Note 10 – Subsequent Events~~0.0845 .

The Adjuvant Notes are accounted for in accordance with authoritative guidance for convertible debt instruments and are classified as current liabilities in the condensed consolidated balance sheets. The aggregate proceeds of $25.0 million were initially classified as restricted cash for financial reporting purposes due to contractual stipulations that specify the types of expenses the money can be spent on and how it must be allocated. ~~Its~~The conversion feature was required to be bifurcated as an embedded derivative ~~due to the fact that~~because the Company did not have sufficient number of shares reserved upon conversion as of December 31, 2022; however, the fair value of such feature was immaterial as of December 31, 2022. As of June 30, 2023, the Company had a sufficient number of shares reserved and the conversion feature was reclassified to stockholders’ deficit in accordance with ASC 815, Derivatives and Hedging (ASC 815). at that time. As of ~~June~~September 30, 2023 and December 31, 2022, $~~0.6~~0.4 million and $0.9million, respectively in proceeds remained, which are included in restricted cash on the condensed consolidated balance sheets. See Note 6-6 - Fair Value of Financial Instruments for a description of the accounting treatment for the Adjuvant Purchase Rights.

Due to the execution of the Adjuvant Forbearance and the Second Adjuvant Amendment, the Company reviewed the Adjuvant Notes in accordance with Topics ASC 470~~Debt~~ ~~(ASC 470)~~. The Company concluded that although changes in the structure of the debt met certain qualitative factors to qualify as a ~~troubled debt restructuring (TDR),~~TDR, the effective interest rate post changes was greater than the original effective interest rate and, therefore, failed the quantitative test to be a TDR. The Adjuvant Notes were evaluated in accordance with ASC 470 and were determined to have failed certain qualitative factors to qualify as a modification and, therefore, were accounted for as an extinguishment. The Company removed the old debt from its ~~books~~financial records and recorded the new, revised debt and concurrently recognized a gain of approximately $2.5 million upon extinguishment, included in change in fair value of financial instruments within the condensed consolidated statements of operations for the third quarter of 2022. As discussed above, the ~~Baker Notes’~~Company was in default ~~resulted~~of the Adjuvant Notes at September 30, 2023, due to the failure to meet the cumulative net sales requirement. However, as discussed in ~~a cross~~Note 10 – Subsequent Events, Adjuvant forebeared such default ~~under all outstanding debt.~~in October 2023 and therefore the Company is no longer in default.

As of ~~June~~September 30, 2023, the Adjuvant Notes are recorded in the condensed consolidated balance sheet as short-term convertible notes payable with a total balance of $~~27.4~~28.0 million. The balance is comprised of $~~22.4~~22.5 million in principal, net of unamortized debt issuance costs, and $~~5.0~~5.5 million in accrued interest. As of December 31, 2022, the Adjuvant Notes were recorded in the consolidated balance sheet as short-term convertible notes payable with a total balance of $26.3 million. The balance was comprised of $22.3 million in principal, net of unamortized debt issuance costs, and $4.0 million in accrued interest.

As of ~~June~~September 30, 2023, and assuming the current conversion price of $~~0.8125~~0.0845 per share, the Adjuvant Notes could be converted into ~~33,723,393~~331,827,919 shares of common stock.

On January 13, 2022, the Company entered into a Securities Purchase Agreement (the January 2022 Purchase Agreement) with institutional investors (the January 2022 Purchasers) pursuant to which the Company agreed to sell in a registered direct offering (i) unsecured 5.0% Senior Subordinated Notes due 2025 with an aggregate issue price of $5.9 million (the January 2022 Notes), which included an original issue discount of $0.9 million, and (ii) warrants (the January 2022 Warrants) to purchase up to 8,003 shares of the Company’s common stock, $0.0001 par value per share. The January 2022 Warrants have an exercise price of $735.00 per share and were initially exercisable beginning on July 15, 2022 with a five-year term. Pursuant to the terms of the March 2022 Purchase Agreement (as defined below), the January 2022 Warrants became exercisable on March 1, 2022, as described in more detail below.

On March 1, 2022, the Company entered into a Securities Purchase Agreement (the March 2022 Purchase Agreement) with institutional investors (the March 2022 Purchasers) pursuant to which the Company agreed to sell in a registered direct offering (i) unsecured 5.0% Senior Subordinated Notes due March 2025 with an aggregate issue price of $7.45 million (the March 2022 Notes), which included an original issue discount of $2.45 million, and (ii) warrants (the March 2022 Warrants) to purchase up to 8,303 shares of the Company’s common stock, $0.0001 par value per share. The March 2022 Warrants have an exercise price of $897.56 per share and are immediately exercisable with a five-year term.

The January and March 2022 Notes carried an interest rate of 5% per annum, which was subject to increase to 18% upon an event of default. The January and March 2022 Notes were able to be prepaid, in whole or in part, at the Company’s option together with all accrued and unpaid interest and fees as of the date of the repayment. The holders of the January and March 2022 Notes were able to require the Company to redeem their respective notes upon the occurrence of an event of default with a redemption premium of 25%. The holders of the January and March 2022 Notes were also able to require the Company to redeem their respective notes upon the occurrence of certain subsequent transactions.

Pursuant to the terms of the January and March 2022 Purchase Agreements, the Company agreed to certain restrictions on effecting variable rate transactions so long as the January and March 2022 Notes were outstanding. Also, pursuant to the terms of the January and March 2022 Purchase Agreements, the January and March 2022 Purchasers had certain rights to participate in subsequent issuances of the Company’s securities, subject to certain exceptions.

On May 4, 2022, the January and March 2022 Notes were exchanged pursuant to the May 2022 Exchange, as defined below.

On May 4, 2022, the Company entered into amendment and exchange agreements (the May 2022 Exchange) with the holder of issued and outstanding Series B-2 and C Preferred Stock, Seven Knots, and the January and March 2022 Notes Purchasers (collectively, the May 2022 Notes Purchasers), pursuant to which they agreed to exchange all of the January and March 2022 Notes, 2,100 shares of Series B-2 Convertible Preferred Stock, 1,700 shares of Series C Convertible Preferred Stock, and 4,266 shares of the Company’s ~~Common Stock~~common stock for (i) new 5.0% Senior Subordinated Notes with an aggregate principal amount of $22.3 million (the May 2022 Notes), (ii) 1,666 new shares of ~~Common Stock~~common stock and (iii) new warrants to purchase up to 6,666 shares of ~~Common Stock~~common stock (the May 2022 Warrants). The May 2022 Warrants have an exercise price of $309.56 per share and were exercisable immediately with a five-year term. The 2,100 shares of Series B-2 Convertible Preferred Stock, 1,700 shares of Series C Convertible Preferred Stock, and 4,266 shares of the Company’s ~~Common Stock~~common stock that were exchanged in the May 2022 Exchange were retired by the Company. All aforementioned exchange transactions were cashless.

The May 2022 Notes are substantially similar to the January and March 2022 Notes except that (i) the maturity date of the May 2022 Notes was August 1, 2022 and (ii) the holders of the May 2022 Notes may require the Company to redeem or exchange up to 100% of the May 2022 Notes upon the occurrence of certain subsequent transactions (each, a Subsequent Transaction Optional Redemption). Pursuant to the terms of the May 2022 Notes and subject to certain conditions described in the May 2022 Notes, if the Company completed an underwritten public offering of at least $20 million complying with certain conditions (a Qualified Underwritten Offering) and the holder of the May 2022 Notes did not participate in the Qualified Underwritten Offering, then the holder would have forfeited their right to Subsequent Transaction Optional Redemption solely with respect to that Qualified Underwritten Offering and amounts that may have been due pursuant to the May 2022 Notes would not have been due and payable until the three-month anniversary of the Qualified Underwritten Offering.

The May 2022 Public Offering qualified as the Qualified Underwritten Offering and, in connection with the May 2022 Public Offering, the holders of the May 2022 Notes waived certain of their preemptive and redemption rights and the Company redeemed $5.9 million of the May 2022 Notes. The holders of the May 2022 Notes also waived the maturity date of the May 2022 Notes until October 31, 2022.

The May 2022 Notes contain various customary affirmative and negative covenants to which the Company agreed. The May 2022 Notes also include other customary events of default, which include the suspension of trading of shares of the Company’s common stock on the NASDAQ Capital Market for a period of more than five trading days. On September 12, 2022, the Company was in default of the May Notes due to the default with the Baker Notes under the cross-default provision. As a result, the interest rate was increased to 18% for the duration of the default and the holders of the May 2022 Notes had the right to request redemption for 125% of the amounts then owed pursuant to the May 2022 Notes.

On September 15, 2022, the Company entered into exchange agreements with each of the May 2022 Notes Purchasers (the May 2022 Notes Exchange Agreements), pursuant to which the May 2022 Notes Purchasers agreed to exchange all outstanding balance of the May Notes as of September 15, 2022, using the aforementioned higher interest rate and redemption premium, ~~aforementioned~~ for purchase rights (the May Note Purchase Rights) to receive 832,237 shares of common stock. As a result, the May Notes were no longer outstanding as of December 31, 2022. The number of right shares for each May Note Purchase Right is initially fixed, but is subject to certain customary adjustments, and, until the second anniversary of issuance, adjustments for certain dilutive Company equity issuances, as further discussed in Note 8 -– Stockholders’ Deficit and expire on June 28, 2027. The May 2022 Notes Purchasers also waived certain anti-dilution share adjustment provisions with respect to shares underlying the May 2022 Warrants.

The Company evaluated the May 2022 Notes and determined that in accordance with ASC 470 the notes should be accounted for as a modification of the January and March 2022 Notes. The Company further evaluated the May 2022 Notes to determine if any embedded components qualified as a derivative requiring bifurcation in accordance with ASC 815. The Company determined that the embedded put options and interest rate increase feature would all require bifurcation and separate accounting. Therefore, the Company elected to use the fair value option under ASC 825 for the May 2022 Notes inclusive of the embedded features.

The Company evaluated the May 2022 Warrants and determined that, in accordance with ASC 815, the warrants should be recorded at fair value and classified as a derivative liability in the condensed consolidated balance sheet. Both the May 2022 Notes and Warrants are marked-to-market at each reporting date before the exchange as described above.

December 2022 and February, March, April, July, August, and September 2023 Notes

~~On December 20, 2022, the~~The Company entered into aeight similar Securities Purchase ~~Agreement (the~~Agreements (SPAs) between December 2022 ~~Purchase Agreement),~~and September 2023 with certain ~~investors (the December 2022 Notes Purchasers) pursuant~~investors. Each of the agreements were materially similar. The variable details of each SPA, such as the principal amount of each note offering, net proceeds, and maturity date are outlined in the table below. Pursuant to ~~which~~each SPA, the Company agreed to sell in a registered direct offering (i) unsecured 8.0% Senior Subordinated Notes ~~due December 21, 2025~~ with anthe maturity dates and aggregate issue ~~price of $2.3~~ ~~million (the December 2022 Notes), which included an original issue discount of $0.8~~ ~~million~~prices (ii) warrants ~~(the December 2022 Warrants)~~ to purchase ~~up to~~ ~~369,230~~the number of shares of the Company’s common stock, $0.0001 par value per share ~~and~~(including prefunded common stock Warrants as a part of the September 2023 SPA) (iii) ~~an aggregate~~ 70 ~~shares of~~ Series D Preferred Stock (the Preferred ~~Shares)~~Shares; December 2022 SPA only) (collectively, the ~~Offering)~~Offerings). The ~~Offering closed on December 21, 2022, with~~Offerings had net proceeds to the Company from ~~the Offering, after deducting offering expenses, of $1.25~~ ~~million. The December 2022 Notes~~and are convertible at $~~6.25, and~~ the ~~December 2022 Warrants have a strike price of $6.25~~.amounts listed below.

The ~~December 2022~~ Notes interest ~~rate is~~rates are subject to increase to 12% upon an event of default and ~~these~~the Notes have no Company right to prepayment prior to maturity; however, the Company can redeem the respective Notes at a redemption premium of 32.5%. The ~~December 2022 Notes~~ Purchasers can also require the Company to redeem their notes at the respective premium rate tied to the occurrence of certain subsequent transactions, as well as require the Company to redeem the ~~December 2022~~ Notes in the event of subsequent placements (as defined). Also, pursuant to the terms of the ~~December 2022 Purchase Agreement, the December 2022 Notes~~SPAs, Purchasers have certain rights to participate in subsequent issuances of the Company’s securities, subject to certain exceptions. Additionally, the ~~December 2022 Notes~~ conversion rate and warrant strike price are subject to adjustment upon the issuance of other securities (as defined) less than the stated conversion rate and strike price ~~of $6.25~~.at issuance. The strike prices adjusted as discussed in the table below. Additionally, subsequent to September 30, 2023, the conversion price of the September 2023 Notes was adjusted to $~~1.625~~ ~~as of March 31, 2023, to $0.8125~~ ~~in April 2023~~ ~~issuance as discussed below, and then further reset to $0.40~~0.08 per share ~~along with~~due to the ~~August 2023 Preferred Stock Transaction as discussed~~30 day price reset requirement in ~~Note 10 – Subsequent Events~~.

The Company evaluated the ~~December 2022~~ Notes ~~and December 2022 Warrants,~~ in accordance with ASC 480 ~~Distinguishing Liabilities from Equity~~ ~~(ASC 480)~~ and determined ~~both~~that the Notes were all liability instruments at issuance. The ~~December 2022~~applicable Notes were then evaluated in accordance with the requirements of ASC 825 and ~~concluded~~ the Company ~~was~~concluded that they were not precluded from electing the fair value option for the ~~December 2022~~applicable Notes. ~~As such,~~

The Company also evaluated the Warrants in accordance with ASC 480 and determined that the Warrants issued before the Reverse Stock Split in May 2023 (i.e. the December 2022 ~~Warrants~~Notes, the February 2023 Notes, the March 2023 Notes, and the April 2023 Notes) were required to be recorded as liabilities at fair value in the Company’s condensed consolidated balance sheets as of December 31, 2022 and March 31, 2023. The ~~December 2022~~applicable Notes were marked-to-market at each reporting date with changes in fair value ~~of the December 2022 Notes~~ recognized in the condensed consolidated statement of operations, unless the change is concluded to be related to changes in the Company’s credit rating, in which case the change ~~will be~~was recognized as a component of accumulated other comprehensive income in the condensed consolidated balance sheets. As a result of the Reverse Stock Split, the Company ~~now has~~had sufficient shares available for issuance to cover the potential ~~exercises after~~exercises; therefore, the ~~Reverse Stock Split effectuated May 2023, the December 2022~~ Warrants that were ~~marked-to-market with a gain of $0.2~~ ~~million and reclassified to equity in May 2023.~~

On February 17, March 13 and March 20, 2023, the Company entered into securities purchase agreements with certain investors providing for the sale and issuance of senior subordinate convertible notes (collectively, the February and March 2023 SPAs). The February and March 2023 SPAs included (i) convertible promissory notes with aggregate original principal amounts of approximately $~~1.4~~ ~~million, $0.6~~ ~~million, and $0.5~~ ~~million, respectively (the February and March 2023 Notes), and (ii) warrants to purchase an aggregate~~ ~~553,846~~, ~~240,000, and~~ ~~215,384~~ shares of common stock, respectively (the February and March 2023 Warrants, and collectively, the February and March 2023 Offerings). The February and March 2023 Offerings closed on February 17, 2023 (the February 2023 Closing), and March 13, 2023 and March 20, 2023 (the March 2023 Closing), respectively, with gross proceeds to the Company, before deducting offering expenses, of approximately $~~0.9~~ ~~million, $0.4~~ ~~million, and $0.3~~ million, respectively. The February and March 2023 SPAs also included a Registration Rights Agreement that requires the Company to register the common stock underlying the February and March 2023 Notes and Warrants within the timeframes specified therein. In addition, the Company issued warrants to purchase an aggregate ~~99,692~~ ~~and~~ ~~43,200~~ ~~shares of common stock in the February and March 2023 Closings to the placement agent. Similar to the December 2022 Warrants, the February and March 2023 Warrants were included~~previously classified as liabilities ~~at issuance and~~were marked-to-market and reclassified to equity in May 2023.

~~April~~ For the Warrants issued after the Reverse Stock Split (i.e. the July 2023 Notes,

~~In April~~ August 2023 ~~the Company entered into a securities purchase agreement with certain investors providing for the sale~~Notes, and ~~issuance of senior subordinate convertible notes (the April 2023 SPA). The April 2023 SPA included (i) convertible promissory notes with aggregate original principal amounts of approximately $0.8~~ ~~million (the April~~September 2023 Notes), ~~and (ii) warrants to purchase~~ ~~615,384~~ ~~shares of common stock (the April 2023 Warrants and, collectively, the April 2023 Offering). The April 2023 Offering closed on April 5, 2023 (the April 2023 Closing), with net proceeds to~~ the Company ~~after deducting offering expenses, of approximately $0.5~~ ~~million. The April 2023 SPA also included a Registration Rights Agreement that requires the Company~~determined they were required to ~~register the common stock underlying the April 2023 Notes and April 2023 Warrants within the timeframes specified therein. The April 2023 Warrants were fair valued and~~be recorded ~~into equity as of June 30, 2023.~~

Upon the April 2023 Closing, the conversion and strike prices, as applicable, of the Baker Notes, Baker Warrants, May 2022 Common Warrants, June 2022 Baker Warrants, Adjuvant Notes, December 2022 Notes and Warrants, and the Notes and Warrants in ~~the February and March 2023 Closings reset to $0.8125~~ ~~per share, accordingly. Upon the August 2023 Preferred Stock Transaction (as described in~~ ~~Note 10 – Subsequent Events), the conversion or exercise prices of all the aforementioned financial instruments, including the April 2023 Notes and April 2023 Warrants, reset to $0.40~~ ~~per share.~~equity.

Summary of Senior Subordinated Notes and Warrants (December 2022 to September 2023):

Please see Note 6 – Fair Value of Financial Instruments for discussion regarding the current fair value of the notes referenced above and Note 8 – Stockholders’ Deficit regarding the conversion of some of the notes referenced above to Series E-1 Shares.

	June 30, 2023		December 31, 2022
	As of				As of
	June 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Raw Materials(1)	$	740	$	758	$	557	$	758
Work in process ⁽¹⁾⁽²⁾		1,705		4,142		1,105		4,142
Finished Goods(3)		1,388		1,748		864		1,748
Total ⁽²⁾⁽⁴⁾	$	3,833	$	6,648	$	2,526	$	6,648

	June 30, 2023		December 31, 2022
	As of				As of
	June 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Insurance	$	1,764	$	1,387	$	1,035	$	1,387
Selling and marketing related costs		-		44
Manufacturing related costs		77		82
Receivable for September 2023 Notes proceeds						375		-
Research and development related costs						318		403
Other		667		705		519		428
Total	$	2,508	$	2,218	$	2,247	$	2,218

	Useful Life	June 30, 2023			December 31, 2022
		As of							As of
	Useful Life	June 30, 2023			December 31, 2022			Useful Life	September 30, 2023			December 31, 2022
Research equipment	5 years	$	653		$	653		5 years	$	586		$	653
Computer equipment and software	3 years		648			639		3 years		647			639
Office furniture	5 years		-			881		5 years		-			881
Leasehold improvements	5 years or less		-			3,388		5 years or less		-			3,388
Construction in-process	-		1,562			1,568		-		1,562			1,568
Property and equipment gross			2,863			7,129				2,795			7,129
Less: accumulated depreciation			(1,195	)		(3,189	)			(1,164	)		(3,189	)
Total, net		$	1,668		$	3,940			$	1,631		$	3,940

Depreciation and amortization expense for property and equipment is disclosed in the condensed consolidated statements of cash flows.

	June 30, 2023		December 31, 2022
	As of				As of
	June 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Clinical trial related costs	$	2,498	$	2,574	$	2,497	$	2,574
Selling and marketing related costs		920		674		1,015		674
Other		798		876		1,588		876
Total	$	4,216	$	4,124	$	5,100	$	4,124

The fair values of the Company’s assets, including ~~the~~ money market funds, investments in marketable fixed income debt securities classified as cash and cash equivalents ~~and restricted cash~~ measured on a recurring basis as of ~~June 30, 2023 and~~ December 31, 2022, ~~respectively,~~ are summarized in the following tables (in thousands):. There are no such instruments as of September 30, 2023.

	As of																				As of
	June 30, 2023										December 31, 2022										December 31, 2022
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (level 2)		Significant Unobservable Inputs (Level 3)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (level 2)		Significant Unobservable Inputs (Level 3)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (level 2)		Significant Unobservable Inputs (Level 3)		Significant Unobservable Inputs (Level 3)		Total
Money market funds ⁽¹⁾	$	-	$	-	$	-	$	-	$	-	$	2,612	$	-	$	-	$	-	$	2,612	$	2,612	$	-	$	-	$	-	$	2,612
Total assets	$	-	$	-	$	-	$	-	$	-	$	2,612	$	-	$	-	$	-	$	2,612	$	2,612	$	-	$	-	$	-	$	2,612

The following tables summarize the Company’s convertible debt instruments as of ~~June~~September 30, 2023 and December 31, 2022, respectively (in thousands):

										Fair Value												Fair Value
As of June 30, 2023	Principal Amount		Unamortized Issuance Costs			Accrued Interest		Net Carrying Amount		Amount		Leveling
As of September 30, 2023													Principal Amount		Unamortized Issuance Costs			Accrued Interest		Net Carrying Amount		Amount		Leveling
Baker Notes⁽¹⁾⁽²⁾	$	95,677	$	-		$	-	$	95,677	$	15,600	Level 3	$	97,122	$	-		$	-	$	97,122	$	12,450		Level 3
Adjuvant Notes⁽³⁾⁽⁴⁾		22,500		(123	)		5,023		27,400		-	N/A		22,500		(72	)		5,541		27,969		N/A		N/A
December 2022 Notes⁽¹⁾		2,391		-			-		2,391		-	Level 3		881		-			-		881		63		Level 3
February and March 2023 Notes ⁽¹⁾		2,590		-			-		2,590		-	Level 3
February 2023 Notes ⁽¹⁾														886		-			-		886		64		Level 3
March 2023 Notes ⁽¹⁾														1,189		-			-		1,189		85		Level 3
April 2023 Notes ⁽¹⁾		784		-			-		784		-	Level 3		800		-			-		800		58		Level 3
July 2023 Notes ⁽¹⁾														1,530		-			-		1,530		110		Level 3
August 2023 Notes ⁽¹⁾														1,013		-			-		1,013		72		Level 3
September 2023 Notes ⁽¹⁾														2,887		-			-		2,887		208		Level 3

The following tables summarize the Company’s derivative liabilities as of ~~June~~September 30, 2023 and December 31, 2022 as discussed in Note 8 - Stockholders’ Deficit (in thousands):

Fair Value

June 30, 2023 ⁽²⁾

December 31, 2022⁽¹⁾

Leveling

September 30, 2023 ⁽²⁾

December 31, 2022⁽¹⁾

Leveling

April and June 2020 Baker Warrants

N/A

Level 3

N/A

Level 3

May 2022 Public Offering Warrants

N/A

303

Level 3

N/A

303

Level 3

June 2022 Baker Warrants

N/A

170

Level 3

N/A

170

Level 3

December 2022 Warrants

N/A

107

Level 3

N/A

107

Level 3

February and March 2023 Warrants

N/A

Level 3

Purchase rights

N/A

1,095

Level 3

N/A

1,095

Level 3

Total Derivative Liabilities

1,676

The following tables summarize the changes in Level 3 financial liabilities related to Term Notes, Baker Notes and December 2022 Notes, and February, March, April, July, August, and ~~April~~September 2023 Notes measured at fair value on a recurring basis for the three and ~~six~~nine months ended ~~June~~September 30, 2023 (in thousands).

The following tables summarize the changes in Level 3 financial liabilities related to the January 2022 Notes, the March 2022 Notes, the May 2022 Notes, and the Baker Notes measured at fair value on a recurring basis for the three and ~~six~~nine months ended ~~June~~September 30, 2022 (in thousands):

The following tables summarize the changes in Level 3 financial liabilities related to derivative liabilities measured at fair value on a recurring basis for the nine months ended September 30, 2023 (in thousands). There was no such activity for the three months ended September 30, 2023.

The following tables summarize the changes in Level 3 financial liabilities related to derivative liabilities measured at fair value on a recurring basis for the three and ~~six~~nine months ended ~~June 30, 2023 (in thousands):~~

~~The following tables summarize the changes in Level 3 financial liabilities related to derivative liabilities measured at fair value on a recurring basis for the three and six months ended June~~September 30, 2022 (in thousands):

Through June 30, 2022, the fair value of the Baker Notes issued, and the change in fair value of the Baker Notes at the reporting date, were determined using a Monte Carlo simulation-based model. The Monte Carlo simulation was used to take into account several embedded features and factors, including the future value of our common stock, a potential change of control event, the probability of meeting certain debt covenants, the maturity term of the Baker Notes, the probability of an event of voluntary conversion of the Baker Notes, the probability of the failure to meet the affirmative covenant to achieve $100.0 million in cumulative net sales of Phexxi by June 30, 2023, and the probability of exercise of the put right and the probability of exercise of the call right.

The fair value of the Baker Notes is subject to uncertainty due to the assumptions that are used in the Monte Carlo simulation-based model. These factors include but are not limited to the future value of the Company’s common stock, the probability and timing of a potential change of control event, the probability of meeting certain debt covenants, the probability of an event of voluntary conversion of the Baker Notes, exercise of the put right, and exercise of the Company’s call right. The fair value of the Baker Notes is sensitive to these estimated inputs made by management that are used in the calculation.

~~Since~~From the third quarter of 2022 through the second quarter of 2023, the fair value of the Baker Notes issued as described in Note 4 - Debt, and subsequent changes in fair value recorded at each reporting date, ~~has been~~was determined by estimating the fair value of the Market Value of Invested Capital (“MVIC”) of the Company. This was estimated using forms of the cost and market approaches. In the Cost approach, an adjusted net asset value method was used to determine the net recoverable value of the Company, including an estimate of the fair of the Company’s intellectual property. The estimated fair value of the Company’s intellectual property was valued using a relief from royalty method which required management to make significant estimates and assumptions related to forecasts of future revenue, and the selection of the royalty (~~3.5~~%) and discount (~~19.0~~%) rates. The guideline public company method served as another valuation indicator. In this form of the Market approach, comparable market revenue multiples were elected and applied to the Company’s forward revenue forecast to ultimately derive a MVIC indication. If the resulting fair value from these approaches iswas not estimated as greater than the contractual payout, ~~the~~then fair value of the Baker Notes ~~then becomes~~became only the Company MVIC available for distribution to this first lien note holder.

Starting in the third quarter of 2023, the fair value of the Baker Notes issued as described in Note 4 - Debt is determined using a Monte Carlo simulation-based model. The Monte Carlo simulation was used to take into account several embedded features and factors, including the exercise of the repurchase right, the Company’s future revenues, meeting certain debt covenants, the maturity term of the note and dissolution. For the dissolution scenario, the cost approach, an adjusted net asset value method was used to determine the net recoverable value of the Company, including an estimate of the fair value of the Company’s intellectual property. The estimated fair value of the Company’s intellectual property was valued using a relief from royalty method which required management to make significant estimates and assumptions related to forecasts of future revenue, and the selection of the royalty (3.5%) and discount (15.0%) rates.

The fair value of the Baker Notes is subject to uncertainty due to the assumptions that are used in the Monte Carlo simulation-based model. These factors include but are not limited to the Company’s future revenue, and the probability and timing of the exercise of the repurchase right. The fair value of the Baker Notes is sensitive to these estimated inputs made by management that are used in the calculation.

The fair value of the January and March 2022 Notes issued as described in Note 4 - Debt, and subsequent changes in fair value recorded at each reporting date, was determined using a probability weighted expected return method (PWERM) model. PWERM was used to take into account several factors, including the future value of the Company’s common stock, a potential change of control event, the probability of meeting certain debt covenants, the maturity term of the January and March 2022 Notes, exercise of the put right, and exercise of the Company’s call right.

The fair value of the May 2022 Notes issued as described in Note 4 - Debt, and subsequent changes in fair value recorded at each reporting date, was determined using a PWERM model. PWERM was used to take into account several factors, including the future value of the Company’s common stock, a potential change of control event, the probability of meeting certain debt covenants, the maturity term of the May 2022 Notes, exercise of the put right, and exercise of the Company’s call right.

December 2022 Notes and February, March, April, July, August, and ~~April~~September 2023 Notes

The fair value of the December 2022 Notes and February, March, April, July, August, and ~~April~~September 2023 Notes issued as described in Note 4 – Debt, were determined using ~~a Black-Scholes option pricing model~~the methods described above in Valuation Methodology, using ~~typical inputs such as underlying market price~~the residual value of the ~~Company’s common stock,~~Company after the ~~conversion/strike price, time to maturity~~fair value of the ~~December 2022 Notes and February, March and April~~Baker Notes. The quarterly valuation for the three months ended September 30, 2023 ~~Notes~~, ~~guideline public company volatilities and a risk-free interest rate.~~resulted in an adjustment of $0.3 million to loss on issuance of financial instruments in the condensed consolidated statement of operations.

The Adjuvant Purchase Rights and the May Note Purchase Rights (collectively the Purchase Rights) contain certain provisions that are outside the Company’s control under which the holders can force settlement in cash; as such, the Purchase Rights are recorded as derivative liabilities in the condensed consolidated balance sheets. The Purchase Rights are valued using an option pricing model (OPM), like a Black-Scholes Methodology with changes in the fair value being recorded in the condensed consolidated statements of operations. The assumptions used in the OPM are considered level 3 assumptions and include, but are not limited to, the market value of invested capital, the cumulative equity value of the Company as a proxy for the exercise price and the expected term the Purchase Rights will be held prior to exercise and a risk-free interest rate.

The warrants contain ~~certain provisions, which are outside the Company’s control,~~a provision, under which the holders can force settlement in ~~cash.~~cash if the Company does not have sufficient shares authorized to satisfy the warrants. As such, the warrants were recorded as derivative liabilities in the condensed consolidated balance sheet as of December 31, 2022. In accordance with ASC 815, warrants previously classified as equity instruments were determined to be liability classified (the Reclassified Warrants) due to the Company having an insufficient number of authorized shares as of December 31, 2022; however, the impacted warrants were reclassified as equity instruments asduring the second quarter of ~~June 30,~~ 2023 as a result of the Reverse Stock Split. The Company will continue to re-evaluate the classification of its warrants at the close of each reporting period to determine their proper balance sheet classification. The warrants are valued using an OPM based on the applicable assumptions, which include the exercise price of the warrants, time to expiration, expected volatility of our peer group, risk-free interest rate, and expected dividends. The assumptions used in the OPM are considered level 3 assumptions and include, but are not limited to, the market value of invested capital, the cumulative equity value of the Company as a proxy for the exercise price, the expected term the warrants will be held prior to exercise and a risk-free interest rate and probability of change of control event. Additionally, as the warrants are re-priced under certain provisions in the agreements; at each re-pricing event, the Company must value the warrants using a Black-Scholes model immediately prior to and immediately following the re-pricing event. The incremental fair value is recorded as an increase to accumulated deficit and additional paid-in-capital, in accordance with ASC 470.

The Company recorded $1.0 million adjustment into accumulated deficit in the condensed consolidated statement of convertible and redeemable preferred stock and stockholders’ deficit during the three months ended September 30, 2023 in accordance with ASC 260, Earnings per Share (ASC 260), related to the down round features triggered due to reset of exercise price for equity classified Purchase Rights and warrants.

In December 2019, the Company and Enterprise FM Trust (the Lessor) entered into a Master Equity Lease Agreement whereby the Company leases vehicles to be delivered by the Lessor from time to time with various monthly costs depending on whether the vehicles are delivered for a term of 24 or 36 months, commencing on each corresponding delivery date. The leased vehicles are for use by eligible employees of the Company’s commercial operations personnel. As of ~~June~~September 30, 2023, there was a total of 21 leased vehicles. The Company maintained a letter of credit as collateral in favor of the Lessor, which was included in restricted cash in the condensed consolidated balance sheet as December 31, 2022. This letter of credit was $0.3 million, which was released by the Lessor during the first quarter of 2023. The Company determined that the leased vehicles are accounted for as operating leases under ASC 842, Leases (ASC 842). In September 2022, the Company extended the lease term for an additional 12 months for the vehicles with a term of 24 months. The Company determined that such extension is accounted for as a modification, for which the Company reassessed the lease classification and the incremental borrowing rate on the modification date and accounted for accordingly.

On October 3, 2019, the Company entered into an office lease for approximately 24,474 square feet (the High Bluff Premises) pursuant to a non-cancelable lease agreement (the 2020 Lease). The 2020 Lease commenced on April 1, 2020 ~~and expires on~~with an expiry of September 30, 2025, unless terminated earlier in accordance with its terms. ~~The Company has a right to extend the term of the lease for an additional~~ ~~five years, although at this time the Company does not anticipate exercising such extension.~~ The Company provided the landlord with a $0.75 million security deposit in the form of a letter of credit for the High Bluff Premises.

On April 14, 2020, the Company entered into the first amendment to the 2020 Lease for an additional 8,816 rentable square feet of the same office location (the Expansion Premises), which commenced on September 1, 2020 ~~and will expire on~~with an expiry of September 30, 2025. The Company provided an additional $0.05 million in a letter of credit for the Expansion Premises. As of December 31, 2022, restricted cash maintained as collateral for the Company’s security deposit was $0.8 million.

On March 20 2023, the Company received a notice of default from its landlord for failing to timely pay March 2023 rent, resulting in a breach under the agreement. As a result, the Company’s letter of credit in the amount of $0.8 million, in restricted cash, was recovered by the landlord. In June 2023, the Company reached a settlement with the landlord. As a result of such settlement, the Company reversed its associated remaining ROU assets of $3.3 million and lease liabilities of $4.2 million and recognized a gain of $0.2 million.

On May 27, 2022, the Company entered into a sublease agreement with AMN Healthcare, Inc. (AMN), pursuant to which the Company agreed to sublease 16,637 rentable square feet of the High Bluff Premises to AMN for a term commencing on June 15, 2022 and ending coterminous with the 2020 Lease on September 30, 2025, in exchange for the sum of approximately $0.1 million per month, subject to an annual 3.5% increase each year. Gross sublease income was zero for the three and $0.3 million for the nine months ended September 30, 2023 and was $0.3 million for the three and ~~six~~nine months ended ~~June 30, 2023 and was immaterial for the three and six months ended June~~September 30, 2022. The sublease was terminated along with the settlement of the 2020 ~~Lease.~~Lease in June 2023.

		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
Lease Cost (in thousands)	Classification	2023		2022		2023		2022		Classification	2023		2022		2023		2022
Operating lease expense	Research and development	$	59	$	85	$	125	$	171	Research and development	$	1	$	37	$	126	$	208
Operating lease expense	Selling and marketing		88		268		247		499	Selling and marketing		55		225		302		724
Operating lease expense	General and administrative		103		250		334		509	General and administrative		2		81		336		590
Total		$	250	$	603	$	706	$	1,179		$	58	$	343	$	764	$	1,522

Lease Term and Discount Rate	June 30, 2023			December 31, 2022			September 30, 2023			December 31, 2022
Weighted Average Remaining Lease Term (in years)		1.17			2.68			0.95			2.68
Weighted Average Discount Rate		12	%		12	%		12	%		12	%

Other information (in thousands)	2023		2022		2023		2022
	Six Months Ended June 30,				Nine Months Ended September 30,
Other information (in thousands)	2023		2022		2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows in operating leases	$	1,427	$	1,289	$	1,470	$	1,969

In November 2019, the Company entered into a supply and manufacturing agreement with a third party to manufacture Phexxi, with potential to manufacture other product candidates in accordance with all applicable current good manufacturing practice regulations, pursuant to which the Company has certain minimum purchase commitments based on the forecasted product sales. There were no purchases under the supply and manufacturing agreement for the three- and ~~six-month~~nine- month periods ended ~~June~~September 30, 2023 ~~or June 30,~~and 2022.

From time to time the Company may be involved in various lawsuits, legal proceedings, or claims that arise in the ordinary course of business. During the ~~six~~nine months ended ~~June~~September 30, 2023, the Company settled a portion of its trade payables with numerous vendors, which resulted in a $~~1.3~~1.5 million reduction in trade ~~payables recorded in the second quarter of 2023.~~payables. As of ~~June~~September 30, 2023, there were no claims or actions pending against the Company which management believes has a probable or reasonably possible probability of an unfavorable outcome. However, the Company may receive trade payable demand letters from its vendors that could lead to potential litigation. As of ~~June~~September 30, 2023, approximately 9889% of ~~our~~the Company’s trade payables were greater than 90 days past due.

In April 2023, the Company received a Paragraph IV certification notice letter (the ~~“Padagis~~Padagis Notice ~~Letter”)~~Letter) regarding an Abbreviated New Drug Application (“ANDA”) submitted to the FDA by Padagis Israel Pharmaceuticals Inc. ~~(“Padagis”)~~(Padagis). The ANDA seeks approval from the FDA to commercially manufacture, use, or sell a generic version of Phexxi^®under 21 U.S.C. § 355(j) prior to the expiration of United States Patent Nos. 10,568,855; 11,337,989; and 11,439,610 listed in the FDA’s Orange Book: Approved Drug Products with Therapeutic Equivalence Evaluations (collectively the “Phexxi Patents”). In the Padagis Notice Letter, Padagis claims that the Phexxi Patents are invalid under various ~~grounds~~.grounds.

On June 1, 2023, the Company filed a complaint for patent infringement in Evofem Biosciences, Inc. et al. v. Padagis Israel Pharmaceuticals, et al., in the United States District Court for the District of New Jersey. The case was assigned number 2:23-cv-03003. The complaint alleges that Padagis’ proposed generic version of Phexxi infringes the Phexxi Patents. The relief sought by the Company is a declaration of infringement and an injunction of FDA approval of Padagis’ proposed generic version of Phexxi until expiration of the Phexxi Patents in 2033. Until the earlier of final judgment or the passage of 30 months from the receipt of the Padagis Notice Letter, the FDA is prohibited from approving Padagis’ ANDA to market its proposed generic version of Phexxi. The Company also subsequently filed a substantively identical action in the United States District Court for the District of Delaware, Evofem Biosciences, Inc. et al. v. Padagis Israel Pharmaceuticals, et al., which was assigned number 1:23-cv-00606-UNA.

On August 7, 2023, Padagis filed its Answer and Defenses to Complaint for Patent Infringement and Defendant’s Counterclaims (the “Counterclaim”). In the Counterclaim, Padagis is seeking for the Court to dismiss the Complaint, declare the Patents-in-Suit invalid, a declaration that the filing of Padagis’ ANDA or the manufacture, use, sale, offer for sale or importation of Padagis’ Proposed Product has not, does not and would not infringe any valid claim, if any, of the Patents-in-Suit. Padagis is not seeking monetary damages in its Counterclaim.

On September 18, 2023, Padagis withdrew the Paragraph IV certification in the previously-submitted ANDA and has instead converted to a Paragraph III certification. With the pivot to Paragraph III certification, rather than challenging the Phexxi patents and seeking approval of the ANDA prior to expiration of any of these patents, Padagis is instead now asking the FDA to wait until after all the Phexxi patents expire before issuing final approval of the ANDA; the latest-expiring Phexxi patents do not expire until 2033.

Both companies requested dismissal on September 21, 2023. The case was dismissed on September 22, 2023.

In 2014, the Company entered into an amended and restated license agreement (the Rush License Agreement) with Rush University Medical Center (Rush University) pursuant to which Rush University granted the Company an exclusive, worldwide license of certain patents and know-how related to its multipurpose vaginal pH modulator technology. For the U.S. patent that the Company licensed from Rush University, three Orders Granting Interim Extension (OGIEs) were received from the USPTO, extending the expiration of this patent to ~~September 2023.~~March 2024. Pursuant to the Rush License Agreement, the Company is obligated to pay Rush University an earned royalty based upon a percentage of net sales in the range of mid-single digits until the expiration of this patent. In September 2020, the Company entered into the first amendment to the Rush License Agreement, pursuant to which the Company is also obligated to pay a minimum annual royalty amount of $0.1 million to the extent the earned royalties do not equal or exceed $0.1 million commencing January 1, 2021. Such royalty costs, included in cost of goods sold, were $0.2 million and $~~0.3~~0.4 million for the three and ~~six~~nine months ended ~~June~~September 30, 2023, respectively, and $0.2 million and $~~0.5~~0.7 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively. As of ~~June~~September 30, 2023 and December 31, 2022, approximately $~~0.7~~0.9 million and $0.6 million, respectively, was included in accrued expenses in the condensed consolidated balance sheets.

In April and June 2020, pursuant to the Baker Bros. Purchase Agreement, as discussed in Note 4 – Debt, the Company issued warrants to purchase up to 2,732 shares of common stock in a private placement at an exercise price of $4,575 per share. The Second Baker Amendment provides that the exercise price of the Baker Warrants will equal the conversion price of the Baker Notes. The exercise price of the Baker warrants was reset to $1.625 per share in the first quarter of 2023, to $0.8125 per share in ~~April~~the second quarter of 2023, and to $~~0.40~~0.0845 per share in ~~August~~September 2023.

In January 2022, pursuant to the January 2022 Securities Purchase Agreement as discussed in Note 4 – Debt, the Company issued warrants to purchase up to 8,003 shares of the Company’s common stock in a registered direct offering at an exercise price of $735 per share. In March 2022, pursuant to the March 2022 Securities Purchase Agreement as discussed in Note 4 – Debt, the Company issued warrants to purchase up to 8,303 shares of common stock in a registered direct offering at an exercise price of $897.56 per share.

In May 2022, pursuant to the exchange agreement as described in Note 4 – Debt, the Company issued common warrants to purchase up to 6,666 shares of common stock at an exercise price of $309.56 per share. The warrants have a five-year term and were exercisable beginning on May 4, 2022.

In May 2022, pursuant to the May 2022 Public Offering as described below, the Company issued common warrants to purchase up to 568,000shares of common stock at an exercise price of $93.75per share, and pre-funded warrants to purchase up to 102,680shares of common stock at an exercise price of $0.125per share. The warrants have a five-yearterm and were exercisable beginning May 24, 2022. The common warrants contain (and the pre-funded warrants contained) customary 4.99% and 19.99% limitations on exercise provisions. The exercise price and number of shares issuable upon exercise of the common warrants is subject to adjustment for certain dilutive issuances, stock splits and similar recapitalization transactions. During the second quarter of 2022, all pre-funded warrants were exercised for an immaterial amount of cash and 225,039shares of common warrants were exercised for total proceeds of $21.1million.

In June 2022, as required by the Second Baker Amendment, the Company issued the June 2022 Baker Warrants to purchase up to 582,886shares of the Company’s common stock, $0.0001par value per share. The June 2022 Baker Warrants have an exercise price of $93.75per share and a five-yearterm and were exercisable beginning June 28, 2022. The June 2022 Baker Warrants also contain customary 4.99% and 19.99% limitations on exercise provisions. The exercise price and number of shares issuable upon exercise of the June 2022 Baker Warrants is subject to adjustment for certain dilutive issuances, stock splits and similar recapitalization transactions. The strike price of these warrants reset to $1.625during the first quarter of 2023, to $0.8125per share in ~~April~~the second quarter of 2023, and to $~~0.40~~0.0845 per share in ~~August~~September 2023.

In February, March, April, July, August, and ~~April~~September 2023, pursuant to the 2023 Securities Purchase ~~Agreement~~Agreements as discussed in Note 4 – Debt, the Company issued warrants to purchase up to 1,152,122 shares of the Company’s common stock at an exercise price of $2.50 per share, ~~and~~ up to 615,384shares of the Company’s common stock at an exercise price of $1.25per share and up to 1,999,999 shares of the Company’s common stock at an exercise price of $0.19 per share. In April 2023, the strike price of the February and March 2023 Warrants reset to $0.8125. In ~~August~~September 2023, the strike price of the February, March, April, July, and ~~March~~August 2023 Warrants ~~and April 2023 Warrants~~ reset to $~~0.40~~0.0845 per share.

As of ~~June~~September 30, 2023, warrants to purchase up to ~~3,642,343~~32,639,382 shares of the Company’s common stock remain outstanding at a weighted average exercise price of $~~14.64~~1.64 per share. In accordance with ASC 815, certain warrants previously classified as equity instruments were determined to be liability classified (the Reclassified Warrants) due to the Company having an insufficient number of authorized shares as of December 31, 2022; however, the impacted warrants were reclassified back to as equity instruments asduring the second quarter of ~~June 30,~~ 2023 as a result of the May 2023 Reverse Stock Split. The Company will continue to re-evaluate the classification of its warrants at the close of each reporting period to determine the proper balance sheet classification for them. These warrants are summarized below:

Type of Warrants	Underlying Common Stock to be Purchased		Exercise Price		Issue Date	Exercise Period	Underlying common stock to be Purchased		Exercise Price		Issue Date	Exercise Period
Common Warrants		4	$	6,918.75	June 11, 2014	June 11, 2014 to June 11, 2024		4	$	6,918.75	June 11, 2014		June 11, 2014 to June 11, 2024
Common Warrants		452	$	14,062.50	May 24, 2018	May 24, 2018 to May 24 2025		451	$	14,062.50	May 24, 2018		May 24, 2018 to May 24 2025
Common Warrants		-	$	14,062.50	June 26, 2018	June 26, 2018 to June 26, 2025		888	$	11,962.50	April 11, 2019		October 11, 2019 to April 11, 2026
Common Warrants		888	$	11,962.50	April 11, 2019	October 11, 2019 to April 11, 2026		1,480	$	11,962.50	June 10, 2019		December 10, 2019 to June 10, 2026
Common Warrants		1,480	$	11,962.50	June 10, 2019	December 10, 2019 to June 10, 2026		1,639	$	0.0845	April 24, 2020		April 24, 2020 to April 24, 2025
Common Warrants		1,639	$	0.8125	April 24, 2020	April 24, 2020 to April 24, 2025		1,092	$	0.0845	June 9, 2020		June 9, 2020 to June 9, 2025
Common Warrants		1,092	$	0.8125	June 9, 2020	June 9, 2020 to June 9, 2025		8,003	$	735.00	January 13, 2022		March 1, 2022 to March 1, 2027
Common Warrants		8,003	$	735.00	January 13, 2022	March 1, 2022 to March 1, 2027		8,303	$	897.56	March 1, 2022		March 1, 2022 to March 1, 2027
Common Warrants		8,303	$	897.56	March 1, 2022	March 1, 2022 to March 1, 2027		6,666	$	309.56	May 4, 2022		May 4, 2022 to May 4, 2027
Common Warrants		6,666	$	309.56	May 4, 2022	May 4, 2022 to May 4, 2027		894,194	$	0.0845	May 24, 2022		May 24, 2022 to May 24, 2027
Common Warrants		894,194	$	0.8125	May 24, 2022	May 24, 2022 to May 24, 2027		582,886	$	0.0845	June 28, 2022		May 24, 2022 to June 28, 2027
Common Warrants		582,886	$	0.8125	June 28, 2022	May 24, 2022 to June 28, 2027		369,230	$	0.0845	December 21, 2022		December 21, 2022 to December 21, 2027
Common Warrants		369,230	$	0.8125	December 21, 2022	December 21, 2022 to December 21, 2027		653,538	$	0.0845	February 17, 2023		February 17, 2023 to February 17, 2028
Common Warrants		653,538	$	0.8125	February 17, 2023	February 17, 2023 to February 17, 2028		240,000	$	0.0845	March 13, 2023		March 13, 2023 to March 13, 2028
Common Warrants		240,000	$	0.8125	March 13, 2023	March 13, 2023 to March 13, 2028		258,584	$	0.0845	March 20, 2023		March 20, 2023 to March 20, 2028
Common Warrants		258,584	$	0.8125	March 20, 2023	March 20, 2023 to March 20, 2028		615,384	$	0.0845	April 5, 2023		April 5, 2023 to April 5, 2028
Common Warrants		615,384	$	1.25	April 5, 2023	April 5, 2023 to April 5, 2028		1,200,000	$	0.0845	July 3, 2023		July 3, 2023 to July 3, 2028
Common Warrants								799,999	$	0.0845	August 4, 2023		August 4, 2023 to August 4, 2028
Common Warrants								22,189,349	$	0.1300	September 27, 2023		September 27, 2023 to September 27, 2028
Pre-funded Warrants								4,807,692	$	0.0010	September 27, 2023		September 27, 2023 to September 27, 2028
Total		3,642,343						32,639,382

Effective December 15, 2021, the Company amended and restated its certificate of incorporation, under which the Company is currently authorized to issue up to 5,000,000 shares of total preferred stock, including the authorized convertible preferred stock designated for Series B-1 and B-2, Series C and Series E-1, and nonconvertible and redeemable preferred stock (Series D), par value $0.0001 per share.

In October 2021, the Company issued 5,000 shares of Series B-1 Convertible Preferred Stock, par value $0.0001 per share, at a price of $1,000.00 per share, and 5,000 shares of Series B-2 Convertible Preferred Stock, par value $0.0001 per share, at a price of $1,000.00 per share to Keystone Capital Partners (Keystone Capital) through a registered direct offering.

The Series B-1 and B-2 Convertible Preferred Stock were convertible into shares of common stock at any time at a conversion price per share of the greater of Fixed Conversion Price or Variable Conversion Price as defined. All 5,000shares of B-1 Convertible Preferred Stock were converted in 2021. Pursuant to the terms of the Series B-2 Convertible Preferred Stock, the Fixed Conversion Price was adjusted during the first quarter of 2022 for certain dilutive issuances. The adjustment period ended on April 25, 2022 and the Fixed Conversion Price was fixed at $332.50from the sale of common stock pursuant to the Seven Knots Purchase Agreement. During March and April 2022, Keystone Capital converted their 1,200shares of B-2 Convertible Preferred Stock into 2,347shares of the Company’s common stock at a conversion price of $587.50 per share.

On March 24, 2022, the Company, entered into an exchange agreement with the holder of its Series B-2 Convertible Preferred Stock, pursuant to which the holder agreed to exchange 1,700 shares of the Series B-2 Convertible Preferred Stock in consideration for 1,700 shares of the Company’s Series C Convertible Preferred Stock, par value $0.0001 per share, $1,000.00 per share stated value. Except with respect to voting provisions, the Series C and Series B-2 Preferred Stock had substantially similar terms.

On May 4, 2022, pursuant to the May 2022 Exchange, the remaining 2,100 shares of Series B-2 Convertible Preferred Stock and 1,700 shares of Series C Convertible Preferred Stock were exchanged for Senior Subordinated Notes with an aggregate principal amount of $4.8 million and warrants to purchase up to 6,666 shares of common stock.

~~Effective December 15, 2021,~~On August 7, 2023, the Company ~~amended and restated its certificate~~filed a Certificate of ~~incorporation, under which the Company is currently authorized to issue up to~~ ~~5,000,000~~ ~~shares~~Designation of ~~preferred stock,~~Series E-1 Convertible Preferred Stock (Certificate of Designation), par value $0.0001per ~~share.~~share (the Series E-1 Shares). An aggregate of 2,300 shares was authorized. The Series E-1 Shares are convertible into shares of common stock at a conversion price of $0.40 per share and are both counted toward quorum on the basis of and have voting rights equal to the number of shares of common stock into which the Series E-1 Shares are then convertible. The Series E-1 Shares are senior to all common stock with respect to preferences as to dividends, distributions and payments upon a dissolution event. In the event of a liquidation event, the Series E-1 Shares are entitled to receive an amount per share equal to the Black Scholes Value as of the liquidation event plus the greater of 125% of the conversion amount (as defined in the Certificate of Designation) and the amount the holder of the Series E-1 Shares would receive if the shares were converted into common stock immediately prior to the liquidation event. If the funds available for liquidation are insufficient to pay the full amount due to the holders of the Series E-1 Shares, each holder will receive a percentage payout. The Series E-1 Shares are entitled to dividends at a rate of 10% per annum or 12% upon a triggering event. Dividends are payable in shares of common stock and may, at the Company’s election, be capitalized and added to the principal monthly. The Series E-1 Shares also have a provision that allows them to be converted to common stock at a conversion rate equal to the Alternate Conversion Price (as defined in the Certificate of Designation) times the number of shares subject to conversion times the 25% redemption premium in the event of a Triggering Event (as defined in the Certificate of Designation) such as in a liquidation event.

On August 7, 2023, certain investors party to the December 2022 Notes and the February 2023 Notes exchanged $1.8 million total in principal and accrued interest under the outstanding convertible promissory notes for 1,800 shares of Series E-1 Shares (the August 2023 Preferred Stock Transaction). Per the Series E-1 Convertible Preferred Stock Certificate of Designation, the conversion rate can also be adjusted in several future circumstances, such as on certain dates after the exchange date and upon the issuance of additional convertible securities with a lower conversion rate or in the instance of a Triggering Event. As such, the conversion price as of September 30, 2023 was adjusted to $0.0845 per share. The 1,800 Series E-1 Shares are classified as mezzanine equity within the condensed consolidated balance sheets in accordance with ASC 480 due the Series E-1 Shares having a fixed 25% redemption premium upon a Triggering Event and no mandatory redemption feature. During the three months ended September 30, 2023, $1.8 million was recorded as an increase to additional paid-in-capital for the preferred shares in the condensed consolidated statement of convertible and redeemable preferred stock and stockholders’ deficit related to the August 2023 Preferred Stock Transaction.

On December 16, 2022, the Company filed a Certificate of Designation of Series D Non-Convertible Preferred Stock, par value $0.0001per share (the Series D Preferred Shares). An aggregate of 70shares was authorized; these shares were not convertible into shares of common stock, had limited voting rights equal to 1% of the total voting power of the then-outstanding shares of common stock entitled to vote, were not entitled to dividends, and were required to be redeemed by the Company once its shareholders approved a reverse split, as described in the Certificate of Designation. All 70shares of the Series D Preferred were subsequently issued in connection with the December 2022 Securities Purchase Agreement as discussed in Note 54 - Debt. The Series D Preferred Shares, which were classified as liabilities as of December 31, 2022, were redeemed in July 2023.

Effective ~~December 15, 2021,~~September 14, 2023, the Company further amended its amended and restated certificate of incorporation to increase the number of authorized shares of common stock to ~~500,000,000~~3,000,000,000 shares.

In May 2022, the Company completed an underwritten public offering (the May 2022 Public Offering), whereby the Company issued 181,320 shares of common stock and common warrants (the May Common Stock Warrants) to purchase 362,640 shares of common stock at a price to the public of $93.75. The common warrants have an exercise price of $93.75 per share, a ~~five-year~~ five-year term, and were exercisable beginning on May 24, 2022. In the May 2022 Public Offering the Company also issued pre-funded warrants to purchase 102,680 shares of common stock and common warrants to purchase 205,360 shares of common stock at a price to the public of $93.63. The pre-funded warrants had an exercise price of $0.125 per share, were exercisable beginning on May 24, 2022, and were fully exercised after completion of this offering. The Company received proceeds from the May 2022 Public Offering of $18.1 million, net of $5.9 million debt repayment, underwriting discounts and offering expenses. As discussed above in Warrants, the May Common Stock Warrants were impacted by dilution adjustments and the strike price was reset to $1.625 during the first quarter of 2023, to $0.8125 in ~~April~~the second quarter of 2023, and ~~with a further strike price reset~~ to $~~0.40~~0.0845 in ~~August 2023 (as described in~~ ~~Note 10 – Subsequent Events~~).September 2023.

On February 15, 2022, the Company entered into a common stock purchase agreement (the Stock Purchase Agreement) with Seven Knots, LLC (Seven Knots), pursuant to which Seven Knots agreed to purchase from the Company up to $50.0 million in shares of the Company’s common stock. Sales made to Seven Knots were at the Company’s sole discretion, and the Company controlled the timing and amount of any and all sales. The price per share was based on the market price of the Company’s common stock at the time of sale as computed under the Stock Purchase Agreement. As consideration for Seven Knots’ commitment to purchase shares of common stock, the Company issued 1,025 shares of common stock to Seven Knots as commitment fee shares, and as of March 31, 2022, issued 8,648 shares of its common stock at a weighted average purchase price of $675.00 per share.

Sales of common stock to Seven Knots were subject to customary 4.99% and 19.99% beneficial ownership limitations. The Stock Purchase Agreement had a termination date of the earliest of March 1, 2024, or when Seven Knots has purchased from the Company $50.0 million in shares of the Company’s common stock, or as otherwise determined by the Stock Purchase Agreement at the Company’s option.

Effective May 18, 2022, the Company and Seven Knots elected to terminate the Stock Purchase Agreement without any penalty or additional cost to the Company.

On September 15, 2022, the Company entered into certain exchange agreements with the Adjuvant Purchasers and the May 2022 Notes Purchasers to exchange, upon request, the Purchase Rights for an aggregate of 942,080shares of the Company’s common stock. The number of right shares for each Purchase Right is initially fixed at issuance, but is subject to certain customary adjustments, and, until the second anniversary of issuance, adjustments for certain dilutive Company equity issuances and expire on June 28, 2027. Refer to Note 6 - Fair Value of Financial Instruments for the accounting treatment of the Purchase Rights. In connection with the February, March, April, July, August, and ~~April~~September 2023 Notes ~~issuance,~~issuances, during the ~~period~~three months ended ~~June~~September 30, 2023, the Company increased the number of outstanding Purchase Rights by ~~15,218,227~~262,221,766 due to the reset of its exercise ~~price. During the three months ended June 30, 2023, the~~price, which resulted in a loss on issuance of financial instruments of $4.9 million. The Company also issued ~~673,820~~2,767,332 shares of common stock upon the exercises of certain Purchase Rights. As of ~~June~~September 30, 2023, Purchase Rights of ~~28,783,233~~288,237,667 shares of the Company’s common stock remained outstanding. ~~The Purchase Rights had an additional dilution adjustment in the third quarter of 2023.~~

On June 8, 2022, the Company entered into an agreement for services with a360 Media, LLC (a360 Media), pursuant to which a360 Media will provide professional media support and advertising services in exchange for, at a360 Media’s option, either (a) $860,119 in cash, or (b) 18,547 shares of the Company’s common stock at a value of $46.375 per share. On July 18, 2022, the Company and a360 Media entered into a similar agreement for professional media support and advertising services in exchange for, at a360 Media’s option, either (a) $1,409,858 in cash, or (b) 12,802 shares of the Company’s common stock at a value of $110.125 per share. Pursuant to these two agreements, the company issued an aggregate 31,349 unregistered shares of the Company’s common stock to a360 Media. These shares were issued in reliance upon an exemption from registration afforded by Section 4(a)(2) promulgated under the Securities Act of 1933, as amended. The Company evaluated the a360 Media agreement and determined that in accordance with ASC 480 and ASC 718, Compensation-Stock Compensation (ASC 718), the common stock issued to a360 should be equity classified and recorded as a prepaid asset in the condensed consolidated balance sheets. When the requisite service condition was met, the Company recognized the noncash stock-based compensation expense.

Common stock reserved for future issuance is as follows in common equivalent shares as of ~~June~~September 30, 2023:

The following table summarizes stock-based compensation expense related to stock options, restricted stock awards (RSAs) granted to employees, non-employee directors and consultants, and the 2019 Employee Stock Purchase Plan (the 2019 ESPP) included in the condensed consolidated statements of operations as follows (in thousands):

	2023		2022		2023		2022		2023		2022		2023		2022
	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022		2023		2022		2023		2022

Research and development		29		166		69		341	$	30		150	$	99		491
Selling and marketing		47		152		104		315		42		144		146		459
General and administrative		192		763		512		1,492		186		687		698		2,179
Total	$	268	$	1,081	$	685	$	2,148	$	258	$	981	$	943	$	3,129

There were noshares of stock options granted during the three and ~~six~~nine months ended ~~June~~September 30, 2023, respectively. As of ~~June~~September 30, 2023, unrecognized stock-based compensation expense for employee stock options was approximately $~~1.6~~1.4 million, which the Company expects to recognize over a weighted-average remaining period of ~~2.1~~1.9 years, assuming all unvested options become fully vested.

There were no shares of performance-based RSAs granted ~~during the three and six months ended June 30,~~in 2023 ~~respectively,~~ to the Company’s executive management team.

For ~~the~~ performance-based RSAs, (i) the fair value of the award is determined on the grant date; (ii) the Company assesses the probability of achieving each individual milestone associated with the award using reasonable assumptions based on the Company’s operation performance towards each milestone; (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; and (iv) the Company reassesses the probability of achieving each individual milestone at each reporting date, and any change in estimate is accounted for through a cumulative adjustment in the period when the change in estimate occurs. ~~The non-performance~~Non-performance based RSAs are valued at the fair value on the grant date and the associated expenses will be recognized over the vesting period.

As of ~~June~~September 30, 2023, there was no unrecognized noncash stock-based compensation expense related to unvested RSAs.

The purchase price under the 2019 ESPP is 85% of the lesser of the fair market value of the common stock on the first or the last business day of an offering period. The maximum number of shares of common stock that may be purchased by any participant during an offering period is equal to $~~25,000~~0.025 million divided by the fair market value of the common stock on the first business day of an offering period. In October 2022, the Board terminated the offering period ending December 15, 2022, refunded all employee contributions, and suspended future offering periods.

There were no shares of common stock purchased under the 2019 ESPP during the three and ~~six~~nine months ended ~~June~~September 30, 2023 ~~while there were~~ ~~601~~ ~~shares purchased during the three and six months ended June 30,~~or 2022.

The fair market value of shares to be issued to employees under the 2019 ESPP is estimated using a Black-Scholes option-pricing model at the grant date, which requires the use of subjective and complex assumptions, including (i) the expected stock price volatility, (ii) the calculation of the expected term of the award, (iii) the risk-free interest rate and (iv) the expected dividend yield. The following weighted average assumptions were used in the calculation of fair value of shares under the 2019 ESPP at the grant dates for the three and ~~six~~nine months ended ~~June~~September 30, ~~2022~~. 2022. No grant date fair value calculation was performed during the three and ~~six~~nine months ended ~~June~~September 30, 2023.

Subsequent events were evaluated through the filing date of this Quarterly Report, ~~August~~November 14, 2023.

In October 2023, the Company received a forbearance from the Adjuvant Purchasers to forebear the Company’s noncompliance of certain covenant of the Adjuvants Notes due to not having met the $100 million net revenue of Phexxi by June 30, 2023. As such, as of the filing date, the Company is not in default of any of its outstanding debt.

In July 2023, the Company entered into a securities purchase agreement with certain investors providing for the sale and issuance of senior subordinate convertible notes (the July 2023 SPA). The July 2023 SPA included (i) convertible promissory notes with aggregate original principal amounts of approximately $~~1.5~~ ~~million (the July 2023 Notes), and (ii) warrants to purchase~~ ~~1,200,000~~ shares of common stock (the July 2023 Warrants and collectively, the July 2023 Offering). The July 2023 Offering closed on July 3, 2023 (the July 2023 Closing), with net proceeds to the Company, after deducting offering expenses, of approximately $~~1.0~~ million. The July 2023 SPA also included a Registration Rights Agreement that requires the Company to register the common stock underlying the July 2023 Notes and July 2023 Warrants within the timeframes specified therein.

In August 2023, the Company entered into a securities purchase agreement with certain investors providing for the sale and issuance of senior subordinate convertible notes (the August 2023 SPA). The August 2023 SPA included (i) convertible promissory notes with aggregate original principal amounts of approximately $~~1.0~~ ~~million (the August 2023 Notes), and (ii) warrants to purchase~~ ~~799,999~~ shares of common stock (the August 2023 Warrants and collectively, the August 2023 Offering). The August 2023 Offering closed on August 4, 2023 (the August 2023 Closing), with net proceeds to the Company, after deducting offering expenses, of approximately $~~0.5~~ million. The August 2023 SPA also included a Registration Rights Agreement that requires the Company to register the common stock underlying the August 2023 Notes and August 2023 Warrants within the timeframes specified therein.

Subsequent to ~~June~~September 30, 2023, the Company settled a portion of its trade payables with several ~~vendors, which resulted in~~vendors. As a result, a $~~0.1~~0.6 million reduction in trade payables ~~being~~will be recorded as contra expense in the ~~third~~fourth quarter of 2023.

On November 8, 2023, the Company entered into amended employment agreements with Ms. Pelletier and Ms. Zhang. If Ms. Pelletier is terminated other than for cause or Ms. Pelletier resigns for good reason, then pursuant to ~~Authorized Shares~~her amended employment agreement, the Company will pay and provide to Ms. Pelletier: (i) all accrued obligations as of the date of termination, (ii) any accrued but unpaid bonus for the prior fiscal year, (iii) a pro-rated bonus for the year in which the termination occurs as of her termination date, (iv) an amount equal to twenty-four months of her then-current base salary in a lump sum and (v) eighteen months of continuing health benefits coverage, each subject to the conditions outlined in the agreement. In addition, fifty percent (50%) of any unvested and outstanding equity interests Ms. Pelletier may have shall immediately vest and become exercisable, in each case subject to the conditions outlined in her equity agreements. If Ms. Pelletier’s employment is terminated without cause or if Ms. Pelletier resigns for good reason, in each case within three months prior to or twelve months following a change of control, then the Company will pay and provide to Ms. Pelletier: (i) all accrued obligations as of the date of termination, (ii) an amount equal to thirty-six months of her then-current base salary in a lump sum, (iii) any accrued but unpaid bonus for the prior fiscal year, (iv) her target annual bonus for the year in which the termination occurs at the rate in effect immediately prior to such termination multiplied by a factor of 2.0 and (v) twenty-four months of continuing health benefits coverage, each subject to the conditions outlined in the agreement. In addition, any unvested and outstanding equity interests Ms. Pelletier may have shall fully vest and become exercisable, in each case subject to the conditions outlined in her equity agreements.

~~On August 4, 2023,~~If Ms. Zhang is terminated other than for cause or resigns for good reason, then the ~~Company’s board~~Company will pay and provide to Ms. Zhang: (i) all accrued obligations as of ~~directors~~ ~~approved,~~the date of termination, (ii) any accrued but unpaid bonus for the prior fiscal year, (iii) a pro-rated bonus for the year in which the termination occurs as of her termination date, (iv) an amount equal to twelve months of her then current base salary in a lump sum and (v) twelve months of continuing health benefits coverage, each subject to ~~stockholder approval,~~the conditions outlined in her agreement. In addition, fifty percent (50%) of any unvested and ~~recommended its stockholders approve~~outstanding equity interests Ms. Zhang may have shall immediately vest and become exercisable, in each case subject to the conditions outlined in her equity agreements. If Ms. Zhang’s employment is terminated without cause or if she resigns for good reason, in each case within three months prior to or twelve months following a change of control, then the Company will pay and provide to Ms. Zhang: (i) all accrued obligations as of the date of termination, (ii) an amount equal to eighteen months of her then-current base salary in a lump sum, (iii) any accrued but unpaid bonus for the prior fiscal year, (iv) her target annual bonus for the year in which the termination occurs at the ~~2023 shareholders’ annual meeting~~rate in ~~September 2023,~~ effect immediately prior to ~~increase~~such termination multiplied by a factor of 1.5 and (v) eighteen months of continuing health benefits coverage, each subject to the ~~number of shares of common stock authorized for issuance from~~ ~~500,000,000~~ ~~shares to~~ ~~1,200,000,000~~ ~~shares~~conditions outlined in the ~~best~~agreement. In addition, any unvested and outstanding equity interests ofMs. Zhang may have shall fully vest and become exercisable subject to the ~~Company and its shareholders.~~conditions outlined in her equity agreements.

Subsequent to ~~June~~September 30, 2023, ~~there was the noncash exercise~~an aggregate of ~~1,147,332~~ ~~Purchase Rights for an equivalent number of shares of common stock and issuance of~~ ~~388,638~~5,050,000 shares of common stock ~~upon~~were issued via the noncash ~~conversion~~exercise of ~~December 2022 Notes.~~

~~On August 7, 2023, the Company filed a Certificate of Designation of Series E-1 Convertible Preferred Stock, par value $0.0001~~ ~~per share (the Series E-1 Convertible Preferred Shares). An aggregate of 2,300 shares was authorized. They are convertible into shares of common stock at a conversion price of $0.40~~ per share and are both counted toward quorum on the basis of and have voting rights equal to the number of shares of Common Stock into which the Series E-1 Convertible Preferred Shares are then convertible. The Series E-1 Convertible Preferred Shares are entitled to dividends, payable in shares of Common Stock. On August 7, 2023, certain investors party to the December 2022 Notes and the February 2023 Notes exchanged $~~1.8~~ ~~million total in principal and accrued interest under the outstanding convertible promissory notes for~~ ~~1,800~~ ~~shares of Series E-1 Preferred Stock (the August 2023 Preferred Stock Transaction).~~Purchase Rights.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The terms “we,” “us,” “our,” “Evofem” or the “Company” refer collectively to Evofem Biosciences, Inc. and its wholly-owned subsidiaries, unless otherwise stated. All information presented in this quarterly report on Form 10-Q (Quarterly Report) is based on our fiscal year. Unless otherwise stated, references to particular years, quarters, months or periods refer to our fiscal years ending December 31 and the associated quarters, months and periods of those fiscal years.

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report. Some of the information contained in this discussion and analysis is set forth elsewhere in this Quarterly 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 Quarterly Report, and in our Annual Report on Form 10-K, filed with the SEC, 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.

We are a San Diego-based commercial-stage biopharmaceutical company committed to ~~developing and~~ commercializing innovative products to address unmet needs in women’s sexual and reproductive health. Our first commercial product, Phexxi, was approved by the FDA on May 22, 2020. It is the first and only FDA-approved, hormone-free, woman-controlled, on-demand prescription contraceptive gel for women. We commercially launched Phexxi in September 2020 in the United States. We intend to commercialize Phexxi in all other global markets through partnerships or licensing agreements.

Our sales force promotes Phexxi directly to obstetrician/gynecologists and their affiliated health professionals, who collectively write the majority of prescriptions for contraceptive products. As of ~~June~~September 30, 2023, our sales force comprises approximately 16 regional sales representatives, three business managers and a VP of sales, supported by a self-guided virtual health care provider (HCP) learning platform. Additionally, we offer women direct access to Phexxi via our telehealth platform. Using the platform, women can directly meet with ~~an HCP~~a board-certified doctor to determine their eligibility for a Phexxi prescription and, if eligible, have the prescription written by the HCP, filled, and mailed directly to them by a third-party pharmacy.

Our comprehensive commercial strategy for Phexxi includes marketing and product awareness campaigns targeting women of reproductive potential in the U.S., including the approximately 23 million women who are not using hormonal contraception and the approximately 18.8 million women who are using a prescription contraceptive, some of whom, particularly pill users, may be ready to move to an FDA-approved, non-invasive hormone-free contraceptive, as well as certain identified target HCP segments. In addition to marketing and product awareness campaigns, our commercial strategy includes payer outreach and execution of our consumer digital and media strategy.

According to our post-commercial launch market research, HCPs indicated they would recommend Phexxi to approximately 60% of patients who are currently using natural contraceptive methods, approximately 58% of patients who are currently using over-the-counter contraceptive products and approximately 26% of patients who are currently using prescription contraception or methods requiring an HCP to perform a procedure. Additional research into the demographics of more than 1,300 women who are using Phexxi revealed that 60% of Phexxi users are between the ages of 18 to 34 years of age. Among the subset of Phexxi users for whom prior contraceptive data is available (n=413), 39% of women who had recently started Phexxi switched over from either an oral contraceptive, hormone patch/ring, or long-acting reversible contraception.

We continue working to increase the number of lives covered and to gain a preferred formulary position for Phexxi. We gained coverage for 32.5 million lives in 2022 and have added ~~22.1~~21.3 million lives since December 31, 2022. We currently have ~~65%~~73% coverage within our Commercial and Medicaid books of business, including ~~19.3~~19.2 million lives covered at no out-of-pocket cost as of ~~May 9, 2023 and approximately 13.7 million lives~~October 5, 2023. This includes women covered under our December 2020 contract award from the U.S. Department of Veterans ~~Affairs.~~Affairs, which encompasses the Veteran’s Health Administration (VA), Tricare, Department of Defense, Coast Guard and Indian Health Services. As of ~~June~~September 2023, the Phexxi approved claims rate has reached ~~81%~~82%.

On January 1, 2021, as a result of our participation in the Medicaid National Drug Rebate Program, the U.S. Medicaid population gained access to Phexxi. As of June 30, 2023, Medicaid provides health coverage to approximately 6885.6 million ~~members, including approximately 16.8~~members. Approximately 20.2 million of these are women between 19 to 4954 years of age.

Phexxi is classified in the databases and pricing compendia of Medi-Span and First Databank, two major drug information databases that payers can consult for pricing and product information, as the first and only “Vaginal pH Modulator.”

As of January 1, 2023, most insurers and pharmacy benefit managers (PBMs) must provide coverage, with no out-of-pocket costs (e.g., $0 copay) to the subscriber or dependent, for FDA-approved contraceptive products, like Phexxi, prescribed by healthcare providers.

As a result, to comply with these Guidelines, payers are increasingly covering Phexxi by:

In 2022 Evofem developed and introduced a new educational chart for patients and HCPs that details high-level information about birth control methods currently available to women in the U.S., including the vaginal pH modulator. This new educational tool has been extremely well received and has had a positive impact with HCPs and patients alike.

In markets outside of the United States, we intend to establish regional and/or global partnerships by either sublicensing the commercialization rights or entering into distribution agreements with one or more third parties for the commercialization of Phexxi in that market. ~~We are currently in discussion with potential partners for various geographies.~~ We cannot forecast when or if these arrangements will be secured, the structure or potential amount of revenues from these arrangements, whether such revenues would be upfront, triggered by the achievement of milestones or related to future Phexxi sales (assuming approval of Phexxi for commercial sale outside of the United States), or to what degree these arrangements would affect our development plans, future revenues and overall capital requirements.

In October 2021, we submitted the registration for our hormone-free contraceptive vaginal gel to the Mexican Regulatory Agency COFEPRIS (Comisión Federal para la Protección contra Riesgos Sanitarios) (COFEPRIS). We have also submitted marketing applications for Phexxi under the trademark Femidence™ in Nigeria, Ethiopia, and Ghana. These were the first of several strategic regulatory submissions planned under Evofem’s 2020 Global Health Agreement with Adjuvant Capital.

In October 2022, Phexxi was approved in Nigeria as Femidence™. This is the first regulatory approval for the contraceptive vaginal gel outside the U.S.

Until October 2022, we were evaluating EVO100 for the prevention of urogenital chlamydia and gonorrhea in women. Chlamydia and gonorrhea are among the many bacterial and viral pathogens that require a higher pH environment to thrive. In 2018, the CDC reported that infections with these two sexually transmitted pathogens cost the U.S. healthcare system $1 billion, in aggregate direct and indirect costs. There are no FDA-approved drugs to prevent these sexually transmitted diseases (STIs), and we believe there is a clear need for new prophylactics given the rising incidence and increasing antibiotic resistance of gonorrhea.

The FDA granted Fast Track designation and Qualified Infectious Disease Product (QIDP) designation to EVO100 for the prevention of both chlamydia and gonorrhea in women.

Our Phase 2B/3 trial (AMPREVENCE) achieved its primary and secondary endpoints, demonstrating statistically significant reductions in chlamydia and gonorrhea infections of 50% and 78%, respectively, in women receiving EVO100 vs. placebo. Based on these highly positive clinical outcomes we initiated a Phase 3 clinical trial (EVOGUARD) to evaluate EVO100 for these potential indications in 2020. This randomized, placebo-controlled clinical trial enrolled 1,903 women with a prior chlamydia or gonorrhea infection who were at risk for future infection.

On October 11, 2022, we reported that EVOGUARD did not meet its primary efficacy endpoint. We believe COVID-19 related changes in clinical site operations, subject behavior and actions including deviations from following the clinical study protocol requirements related to STI acquisition, detection, and prevention contributed to this outcome. The product safety profile was consistent with what has been observed in prior clinical trials, and only two women (0.1%) of total) in the study discontinued due to adverse events.

We believe there is a path forward for EVO100 and may in the future conduct a new Phase 3 clinical trial of EVO100 for these potential indications. However, due to financial constraints, we discontinued investment in this clinical program in October 2022.

Our investigational candidate for the reduction of recurrent bacterial vaginosis (BV), EVO200 vaginal gel, uses the same proprietary vaginal pH modulator platform as Phexxi. In a Phase 1 dose-finding trial for this indication, the highest dose formulation of the study drug demonstrated reduced vaginal pH for up to seven days following a single administration. The FDA has designated EVO200 as a QIDP for this indication. Due to financial constraints, all further development of EVO200 is on hold.

In December 2021, we launched a collaboration with Orion Biotechnology Canada Ltd. (Orion) to evaluate the compatibility and stability of Orion’s novel CCR5 antagonist, OB-002, in Phexxi with the goal of developing a Multipurpose Prevention Technology (MPT) product candidate for indications including the prevention of HIV in women. Assuming positive preclinical results, Evofem and Orion will seek government and philanthropic funding for subsequent clinical trials of any resulting MPT vaginal gel product candidate.

In February 2020, we contracted with the University of South Australia to explore the development of a vaginally applied thin film as a second-generation vaginal pH modulator product. The lead thin film candidates have been selected, and stability data has been generated with positive results. The project is currently on hold due to financial constraints.

Our revenue recognition is based on unit shipments from our third-party logistics warehouse to our customers, which consist of wholesale distributors, retail pharmacies, and a mail-order specialty pharmacy. We have recognized net product sales in the United States since the commercial launch of Phexxi in September 2020.

Inventory costs include all purchased materials, direct labor and manufacturing overhead.

We are obligated to pay quarterly royalty payments through March 2024, pursuant to our license agreement with Rush University, in amounts equal to a single-digit percentage of the gross amounts we receive on a quarterly basis less certain deductions incurred in the quarter based on a sliding scale. We are also obligated to pay a minimum annual royalty amount of $0.1 million to the extent these earned royalties do not equal or exceed $0.1 million in any given year. A minimum annual royalty amount of $0.1 million was first required for the annual period commencing on January 1, 2021. These royalty costs were $0.2 million in each of the ~~three months~~three-month periods ended ~~June~~September 30, 2023 and 2022, respectively, and ~~$0.3~~$0.4 million and ~~$0.5~~$0.7 million for the ~~six months~~nine-month periods ended ~~June~~September 30, 2023 and 2022, respectively, and were included in the cost of goods sold in the condensed consolidated financial statements.

Research and development expenses decreased significantly in the three months ended ~~June~~September 30, 2023 compared to the prior year quarter primarily due to the completion of EVOGUARD clinical trial in the fourth quarter of 2022. As previously noted, we have discontinued this program and placed additional programs on hold, and therefore expect a significant reduction in clinical trial expense in 2023 versus 2022 levels.

Our research and development expenses primarily consist of costs associated with the continuous improvements related to Phexxi commercialization efforts. These expenses include:

In prior years, research and development expenses also included costs associated with clinical development programs including the now-complete EVOGUARD trial, including:

We expense internal and third-party research and development expenses as incurred. The following table summarizes research and development expenses by product candidate (in thousands):

	Three Months Ended June					Six Months Ended June					Three Months Ended September				Nine Months Ended September
	2023			2022		2023			2022		2023		2022		2023			2022
Allocated third-party development expenses:
EVO100 for prevention of chlamydia/gonorrhea - Phase 3 (EVOGUARD)	$	(186	)	$	5,455	$	(93	)	$	13,742	$	-	$	2,811	$	(93	)	$	16,553
Total allocated third-party development expenses		(186	)		5,455		(93	)		13,742		-		2,811		(93	)		16,553
Unallocated internal research and development expenses:
Noncash stock-based compensation expenses		29			166		69			341		29		150		99			491
Payroll related expenses		321			1,296		634			2,662		315		607		949			3,269
Outside services costs		41			546		71			791		167		408		237			1,199
Other		197			281		261			599		103		1,231		364			1,830
Total unallocated internal research and development expenses		588			2,289		1,035			4,393		614		2,396		1,649			6,789
Total research and development expenses	$	402		$	7,744	$	942		$	18,135	$	614	$	5,207	$	1,556		$	23,342

In connection with our overall cost reduction strategy, our selling and marketing expenses decreased significantly in the three months ended ~~June~~September 30, 2023 compared to the prior year quarter due to the downsizing of the sales and marketing team in the fourth quarter of 2022 and first quarter of 2023 and reductions in media and marketing activities related to ongoing Phexxi promotional strategies, including direct to consumer (DTC) and HCP advertising as well as the sample program, and the Phexxi telehealth platform.

Our selling and marketing expenses consist primarily of Phexxi commercialization costs, the Phexxi telehealth platform, our sample program, training, salaries, benefits, travel, noncash stock-based compensation expense and other related costs for our employees and consultants.

Our general and administrative expenses decreased significantly in the three months ended ~~June~~September 30, 2023 compared to the prior year quarter primarily due to decreased professional fees and reduced headcounts.

Our general and administrative expenses consist primarily of salaries, benefits, travel, business development expenses, investor relations expenses, noncash stock-based compensation and other related costs for our employees and consultants performing executive, administrative, finance, legal and human resource functions. Other general and administrative expenses include facility-related costs not otherwise included in research and development or selling and marketing, and professional fees for accounting, auditing, tax and legal fees and other costs associated with obtaining and maintaining our patent portfolio.

Other income (expense) consists primarily of interest expense and the change in fair value of financial instruments issued in various capital raise transactions. The change in fair value of financial instruments was recognized as a result of mark-to-market adjustments for those financial instruments. In the current quarter and comparison quarter, other income (expense) also includes the applicable gain or loss on debt modification or extinguishment.

Three Months Ended ~~June~~September 30, 2023 Compared to Three Months Ended ~~June~~September 30, 2022 (in thousands):

The decrease in product sales, net, was primarily due to lower Phexxi ex-factory unit sales ~~reflecting lower demand~~ in the current period due to a shift in the timing of restocking orders (as further described below), as well as the absence of marketing and DTC promotion and the 73% sales force reduction since the third quarter of 2022. These factors were offset, in part, by more favorable payer coverage in the current period as well as the impact of the Phexxi wholesaler acquisition cost (WAC) increase that went into effect on October 1, 2022.

The third quarter of 2022 included a high level of restocking orders ahead of the October 2022 Phexxi WAC increase, followed by the near absence of sales in the fourth quarter of 2022. Because the Company elected not to increase the Phexxi WAC in 2023, there was no comparable increase in ex-factory unit sales in the third quarter of 2023. The Company expects a level of net sales in the fourth quarter of 2023 that, when coupled with third quarter 2023 net sales, will exceed net sales for the second half of 2022.

The increase in cost of goods sold was primarily due to an increase in an inventory excess and obsolete write-down recorded in the current period. Additionally, several lots were re-packaged to reflect the extended shelf life approved by the FDA in June 2022, which added costs to each re-worked unit.

The decrease in research and development expenses was primarily due to a $2.5 million decrease in clinical trial costs, outside services, and regulatory related activities associated with EVOGUARD, which was completed in the fourth quarter of 2022. A decrease of $1.2 million related to travel, facilities costs, and other expenses as well as a $0.4 million decrease in personnel costs due to reduced headcount and lower noncash stock-based compensation and $0.5 million in marketing and professional fees that also contributed.

The decrease in selling and marketing expenses was primarily due to a $3.4 million decrease in marketing and DTC promotion costs, including media agency and other outside services fees, and a $4.6 million decrease in personnel costs due to reduced headcount and lower noncash stock-based compensation as well as a reduction in facilities, travel and other expenses of $0.9 million.

The decrease in general and administrative expenses was primarily due to a $1.3 million decrease in professional services fees related to legal and finance and outside services, a $1.3 million decrease in personnel costs due to reduced headcount and lower noncash stock-based compensation and a decrease of $0.5 million in facilities costs.

Total other income, net, for the three months ended September 30, 2023 primarily included a $75.3 million gain related to the Baker Fourth Amendment, which was treated as a debt extinguishment, offset in part by a $5.3 million loss on the quarterly valuation of the senior subordinated convertible notes and purchase rights and warrant modifications, and $0.5 million of interest expense related to the Adjuvant Note.

Total other income, net, for the three months ended September 30, 2022 primarily included a $106.9 million gain from the change in fair value of the liability-classified warrants issued in 2022 and a $2.5 million gain on the partial extinguishment of the Adjuvant debt, partially offset by a $0.8 million loss from change in fair value of the May 2022 Notes due to mark-to-market adjustments at the time of the debt extinguishment as part of the September debt restructuring and $0.6 million in interest expense related to the Adjuvant Note.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022 (in thousands):

The decrease in product sales, net, was primarily due to lower Phexxi ex-factory unit sales in the current period due to the timing of restocking orders (as previously described), the absence of marketing and DTC promotion and the 73% sales force reduction. Additionally, ~~$1.6~~$1.5 million in product returns was recorded in the ~~three~~nine months ending ~~June~~September 30, 2023. This product was ~~product~~ manufactured to meet anticipated demand based on pre-launch, pre-COVID sales forecasting. At the time of manufacture, the product shelf life was 30 months. We succeeded in extending the product shelf life to 48 months in June 2022, but product sold prior to that date could not be relabeled. COVID hindered our ability to access HCP’s, fully execute on our commercial strategy and meet forecasted sales levels, resulting in product returns. These factors were offset, in part, by more favorable payer coverage in the current period.

The increase in cost of goods sold was primarily due to an increase in an inventory excess and obsolete reserve recorded in the current period. Additionally, several lots were re-packaged in order to comply with the extended shelf life recently approved by the FDA, which will result in less excess and obsolete inventory but also added costs to each re-worked unit.

The decrease in research and development expenses was primarily due to a $6.1 million decrease in clinical trial costs, outside services and regulatory related activities (inclusive of the $0.2 million in AP settlements reached with various vendors) associated with ~~EVOGUARD,~~ ~~which was completed in the fourth quarter of 2022, and a $1.1 million decrease in personnel costs due to reduced headcount, and lower noncash stock-based compensation.~~

The decrease in selling and marketing expenses was primarily due to a $6.1 million decrease in marketing and DTC promotion costs, including media agency and other outside services fees (inclusive of the $0.6 million in AP settlements reached with various vendors), a $2.9 million decrease in personnel costs due to reduced headcount and lower noncash stock-based compensation, a $0.5 million decrease in facilities costs and a reduction in travel and other expenses of $0.6 million.

The decrease in general and administrative expenses was primarily due to a $3.0 million decrease in professional services fees related to legal and finance (inclusive of the $0.5 million in AP settlements reached with various vendors), a $1.2 million decrease in personnel costs due to reduced headcount and lower noncash stock-based compensation, and a $0.9 million decrease in costs for outside services. The decreases were offset by a net loss of $1.4 million related to the settlements of several fleet leases and the office lease, and the disposal of the office furniture and leasehold improvements.

~~Total other expense, net, for the three months ended June 30, 2023 primarily included $0.6 million of interest expense related to the Adjuvant Note.~~

Total other expense, net, for the three months ended June 30, 2022 primarily included a $71.2 million recorded loss on issuance of warrants, primarily from the June 2022 Baker Warrants, and a $30.0 million recorded loss from the change in fair value of the May 2022 Public Offering common warrants, the January and March 2022 Warrants, the May 2022 Warrants, and the Baker Notes.

~~Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022 (in thousands):~~

The decrease in product sales, net, was primarily due to lower Phexxi ex-factory unit sales reflecting lower demand in the current period due to the absence of marketing and DTC promotion and the 73% sales force reduction. Additionally, $1.6 million in product returns was recorded in the six months ending June 30, 2023. This was product manufactured to meet anticipated demand based on pre-launch, pre-COVID sales forecasting. At the time of manufacture, the product shelf life was 30 months. We succeeded in extending the product shelf life to 48 months in June 2022, but product sold prior to that date could not be relabeled. COVID hindered our ability to access HCP’s,HCPs, fully execute on our commercial strategy and meet forecasted sales levels, resulting in product returns. These factors were offset, in part, by more favorable payer coverage in the current period.

The increase in cost of goods sold was primarily due to an increase in write-downs related to an anticipated increase inventory excess and obsolete ~~reserve~~ recorded in the current period. Additionally, several lots were re-packaged in order to comply with the extended shelf life recently approved by the FDA, which ~~will result~~resulted in less excess and obsolete inventory but also added costs to each re-worked unit.

The decrease in research and development expenses was primarily due to a ~~$13.0~~$15.5 million decrease in clinical trial costs ~~(inclusive of the $0.2 million in AP settlements reached with various vendors)~~ associated with EVOGUARD, which was completed in the fourth quarter of 2022, a ~~$2.3~~$2.7 million decrease in personnel costs due to reduced headcount and lower noncash stock-based compensation, and a ~~$1.5~~$3.4 million decrease in outside services and facilities costs.

The decrease in selling and marketing expenses was primarily due to a ~~$13.1~~$17.2 million reduction in outside services, facilities and media and marketing costs, ~~(inclusive of the $0.6 million in AP settlements reached with various vendors),~~ a ~~$4.9~~$9.5 million decrease in payroll and related expenses due to lower headcount, and a ~~$0.9~~$1.2 million reduction in travel and other expenses.

The decrease in general and administrative expenses was primarily due to a ~~$5.0~~$5.9 million decrease in legal, corporate, and ~~financing related~~financing-related expenses ~~(inclusive of the $0.5 million in AP settlements reached with various vendors)~~ as well as a ~~$3.8~~$5.0 million decrease in personnel costs due to reduced headcount. ~~Further, there was also a~~A reduction of ~~$1.8~~$2.0 million in ~~facilities and~~ outside services ~~as well as~~and a reduction of $0.2 million related to business development expenses. The decreases were offset by a net loss of $1.4 million related to the settlements of several fleet leases and the office lease, and the disposal of the office furniture and leasehold improvements.expenses also contributed.

Total other ~~expense,~~income, net, for the ~~six~~nine months ended ~~June~~September 30, 2023 primarily ~~$1.1~~included a $75.3 million gain related to the Baker Fourth Amendment, which was treated as a debt extinguishment offset in part by a $4.3 million loss on the quarterly valuation of the senior subordinated convertible notes and $1.5 million of interest expense related to the Adjuvant ~~Note partially offset by~~Note.

Total other income, net, for the nine months ended September 30, 2022 primarily included a $86.8 million recorded gain ~~of approximately $1.5 million related to~~primarily from the change in fair value of ~~financial instruments.~~

~~Total other expense, net for~~ the ~~six months ended June 30,~~liability-classified warrants issued in 2022 ~~primarily included~~and a $2.5 million gain on the partial extinguishment of the Adjuvant debt, partially offset by a $72.0 million recorded loss on the issuance of warrants, primarily from the June 2022 Baker Warrants, losses of $10.3 million and ~~a $31.6~~$2.0 million ~~recorded loss primarily~~ from the change in fair value of the Baker Notes and May 2022 ~~Public Offering common warrants,~~Notes, respectively, as a result of mark-to-market adjustments, and $1.6 million in interest expense related to the ~~January and March 2022 Warrants, the May 2022 Warrants, and the Baker Notes.~~Adjuvant Note.

As of ~~June~~September 30, 2023, we had a working capital deficit of ~~$57.7~~$56.4 million and an accumulated deficit of ~~$949.6~~$884.6 million. We have financed our operations to date primarily through the issuance of preferred stock, common stock, warrants, and convertible and term notes; cash received from private placement transactions; and, to a lesser extent, product sales. As of ~~June~~September 30, 2023, we had approximately ~~$0.6~~$0.4 million in restricted cash from the Adjuvant Notes (as defined in Note 4 - Debt). Management believes that the Company’s cash and cash equivalents ~~and short term investments~~ as of ~~June~~September 30, 2023 are insufficient to fund operations for at least the next 12 months from the date ofon which this Quarterly Report on Form 10-Q is filed with the SEC.

We have incurred losses and negative cash flows from operating activities since inception. During the ~~six~~nine months ended ~~June~~September 30, 2023, we received gross proceeds, before issuance costs, of approximately ~~$2.1~~$5.3 million, in aggregate, from the sale and issuance of senior subordinated convertible notes and warrants, and $0.2 million from the exercise of common warrants.

Subsequent to quarter end on June 30, 2023, the Company entered into a securities purchase agreement with certain investors providing for the sale and issuance of senior subordinate convertible notes (the July 2023 SPA). The July 2023 SPA included (i) convertible promissory notes with aggregate original principal amounts of approximately $1.5 million (the July 2023 Notes), and (ii) warrants to purchase 1,200,000 shares of common stock (the July 2023 Warrants and collectively, the July 2023 Offering). The July 2023 Offering closed on July 3, 2023 (the July 2023 Closing), with net proceeds to the Company, after deducting offering expenses, of approximately $1.0 million. The July 2023 SPA also included a Registration Rights Agreement that requires the Company to register the common stock underlying the July 2023 Notes and July 2023 Warrants within the timeframes specified therein.

In August 2023, the Company entered into a securities purchase agreement with certain investors providing for the sale and issuance of senior subordinate convertible notes (the August 2023 SPA). The August 2023 SPA included (i) convertible promissory notes with aggregate original principal amounts of approximately $1.0 million (the August 2023 Notes), and (ii) warrants to purchase 799,999 shares of common stock (the August 2023 Warrants and collectively, the August 2023 Offering). The August 2023 Offering closed on August 4, 2023 (the August 2023 Closing), with net proceeds to the Company, after deducting offering expenses, of approximately $0.5 million. The August 2023 SPA also included a Registration Rights Agreement that requires the Company to register the common stock underlying the August 2023 Notes and August 2023 Warrants within the timeframes specified therein.

We ~~aim~~are focused in 2023 on further improving and increasing Phexxi access and delivering our third consecutive year of Phexxi net sales growth. We expect to ~~reach operational earnings before interest, taxes, depreciation, amortization (EBITDA) break even on a quarterly basis by year-end 2023 and anticipate that we will~~ continue to restructure our trade payables with extended ~~terms and to attempt to cure existing defaults.~~terms. We have implemented measures, including headcount reductions in November 2022 and March 2023, to better align our cost structure with projected revenues. ~~For~~Compared to the prior year, for 2023, we ~~expect:~~expect that:

As mentioned above, all defaults existing in prior quarters and at September 30, 2023 have been resolved as of the filing date.

Despite the letter of default, which was resolved via the Reverse Stock Split in May 2023, and the default as of June 30, 2023 due to not meeting the affirmative covenant requiring cumulative net sales of Phexxi of $100.0 million by such date, our senior lenders have not yet taken additional actions in accordance with their contractual rights. If we can cure existing defaults, weWe currently expect our liquidity resources as of ~~June~~September 30, 2023, together with the net proceeds from the 2023 Offerings ~~defined below,~~(defined below), cost reductions, restructuring of outstanding ~~account~~accounts payable and liquidity tactics to be sufficient to fund our planned operations through the ~~third~~fourth quarter of 2023. As of ~~June~~September 30, 2023, our significant commitments include the Baker Notes, as described in Note 4 - Debt, our fleet leases, and our supply and manufacturing agreement with our Phexxi manufacturer, as described in Note 7 - Commitments and Contingencies. The purpose of these commitments is to further the commercialization of Phexxi. We expect to fund these commitments through debt and equity issuances and product sales.

Management is ~~currently~~ evaluating different strategies to obtain the required funding for our operations. These strategies may include but are not limited to: public and private placements of equity and/or debt, licensing and/or collaboration arrangements and strategic alternatives with third parties, corporate restructuring, or other potential funding from third parties. Our ability to secure funding is subject to numerous risks and uncertainties, including the impact of geopolitical turmoil related to the ongoing hostilities in Ukraine and economic uncertainty related to rising inflation and disruptions in the global supply chain. As a result, there can be no assurance that these funding efforts will be successful. Our ability to raise additional funds, and the terms on which those funds may be raised, will be dependent, in part, on how successful the commercialization of Phexxi is, the success of our cost reduction and gross-to-net improvement efforts, the accuracy of our estimates regarding cash needed to fund our operations, our ability to comply with the terms of our debt arrangements, and whether we are able to gain revenue traction prior to raising additional funds.

If we are not able to obtain required additional funding when and as needed, through equity financings or other means, or if we are unable to obtain funding on terms favorable to us, the shortfall in funds raised, or such unfavorable terms, will likely have a material adverse effect on our operations and strategic plan for future growth. If we cannot successfully raise the funding necessary to implement our current and ongoing liquidity tactics or as necessary to comply with obligations pursuant to our debt arrangements (including any acceleration of those obligations), we may be forced to make further reductions in spending, expand on our extended payment terms with suppliers, liquidate assets where possible, suspend or curtail planned programs, and/or cease operations entirely. Any of these developments would materially and adversely affect our financial condition and business prospects and could even cause us to be unable to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets and, in doing so, we may receive less than the value at which those assets are carried on our consolidated financial statements. Any of these developments would materially and adversely affect the price of our stock and the value of an investment in our stock. As a result, our financial statements include explanatory disclosures expressing substantial doubt about our ability to continue as a going concern.

The opinion of our independent registered public accounting firm on our audited consolidated financial statements as of and for the year ended December 31, 2022 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Future reports on our consolidated financial statements may include an explanatory paragraph with respect to our ability to continue as a going concern. Our unaudited condensed consolidated financial statements as of ~~June~~September 30, 2023 and for the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 included in this Quarterly Report do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts of liabilities that might be necessary should we be unable to continue our operations.

As described in Note 4 - Debt, we received gross proceeds of approximately ~~$2.1~~$5.3 million, before issuance costs, from the sale of notes and warrants in ~~four~~seven registered direct offerings in the first ~~half~~three quarters of 2023.

As described in Note 8 - Stockholders’ Deficit, we received approximately $0.2 million in the first ~~half~~three quarters of 2023 from the exercise of common warrants.

~~As described in~~ ~~Note 10 – Subsequent Events, we received approximately $1.0 million from the closing of the July Offering and $0.5 million from the closing of the August Offering.~~

As described in Note 4 - Debt, we received gross proceeds of approximately $10.0 million, before issuance costs, from the sale of notes and warrants in two registered direct offerings in the first quarter of 2022. These notes were then exchanged for the May 2022 Notes during the May 2022 Exchange transaction, as defined in Note 4 - Debt, which were subsequently exchanged for Purchase Rights during the debt restructuring in September 2022, with a total outstanding balance of ~~$16.4~~$21.8 million ~~as of June 30, 2022.~~immediately prior to restructuring.

As described in Note 8 - Stockholders’ Deficit, we received proceeds of approximately $18.1 million upon the sale and issuance of common stock and warrants from an underwritten public offering, gross proceeds of approximately $7.4 million from the sale and issuance of common stock pursuant to the Stock Purchase Agreement, and ~~$21.1~~$25.2 million ~~in the first half of 2022~~ from the exercise of common warrants.

The following table sets forth a summary of the net cash flow activity for each of the periods set forth below (in thousands):

	Six Months Ended June 30,						2023 vs. 2022						Nine Months Ended September 30,						2023 vs. 2022
	2023			2022			$ Change			% Change			2023			2022			$ Change			% Change
Net cash and restricted cash used in operating activities	$	(6,434	)	$	(47,579	)	$	41,145			(86	)%	$	(8,798	)	$	(63,879	)	$	55,081			(86	)%
Net cash and restricted cash used in investing activities		(4	)		(236	)		232			(98	)%		(4	)		(306	)		302			(99	)%
Net cash and restricted provided by financing activities		2,298			56,493			(54,195	)		(96	)%		4,436			60,439			(56,003	)		(93	)%
Net change in cash and restricted cash	$	(4,140	)	$	8,678		$	(12,818	)		(148	)%	$	(4,366	)	$	(3,746	)	$	(620	)		17	%

Cash Flows from Operating Activities. During the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, the primary use of cash, cash equivalents and restricted cash was to fund the commercialization of Phexxi and to support general and administrative ~~operations and,~~operations; including the funding of the Phase 3 EVOGUARD trial in the 2022 ~~period, to fund the Phase 3 EVOGUARD trial.~~period.

Cash Flows from Investing Activities. During the ~~six~~nine months ended ~~June~~September 30, 2022, the change in net cash, cash equivalents and restricted cash used in investing activities was primarily due to ~~$0.2~~$0.3 million in purchases of property and equipment.

Cash Flows from Financing Activities. During the ~~six~~nine months ended ~~June~~September 30, 2023, the primary source of cash, cash equivalents and restricted cash was the sale of senior ~~subordinate~~subordinated convertible notes and warrants for proceeds of approximately ~~$2.1~~$5.3 million, in aggregate, before debt issuance ~~costs.~~costs, which was offset by the $1.0 million upfront payment required under the Baker Fourth Amendment.

During the ~~six~~nine months ended ~~June~~September 30, 2022, the primary source of cash, cash equivalents and restricted cash was provided from the ~~sale~~issuance of 181,320 shares of common stock, warrants to purchase 568,000 shares of common stock and pre-funded warrants to purchase 102,680 shares of common stock for net proceeds of ~~approximately~~ $18.1 million; the issuance of ~~225,038~~282,518 shares of our common stock for net proceeds of ~~approximately $21.1~~$25.2 million from the exercise of common warrants; and the issuance of 15,714 shares of common stock for ~~net~~gross proceeds of ~~approximately~~ $7.4 million and gross proceeds of $10.0 million from the sale of term notes and warrants ~~respectively.~~.

Our specific future operating and capital expense requirements are difficult to forecast. However, we can anticipate the general types of expenses and areas in which they might ~~occur, and for 2023 we~~occur. We expect ~~all our~~ operating expenses to ~~decrease~~be significantly lower in 2023 and 2024 than 2022 levels due to the reasons stated under “Operating Expenses” above.

Operating lease right-of-use assets and lease liabilities were $0.2 million each on ~~June~~September 30, 2023, and were $4.4 million and $5.4 million on December 31, 2022, respectively. See Note 7 - Commitments and Contingencies for more detailed discussions on leases and financial statements information under ASC 842.

In November 2019, the Company entered into a supply and manufacturing agreement with a third party to manufacture Phexxi, with potential to manufacture other product candidates in accordance with all applicable current good manufacturing practice regulations. Pursuant to this agreement, the Company has certain minimum purchase commitments, which have not materially changed since December 31, 2022, based on forecasted Phexxi product sales.

As described in Note 7 - Commitments and Contingencies, royalty costs owed to Rush University pursuant to the Rush License Agreement were $0.2 million and ~~$0.3~~$0.4 million for the three and ~~six~~nine months ended ~~June~~September 30, 2023, respectively, and $0.2 million and ~~$0.5~~$0.7 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively.

For information with respect to recent accounting pronouncements, see Note 2 - Summary of Significant Accounting Policies to our condensed consolidated financial statements appearing in Part I, Item 1 of this Quarterly Report.

There have not been any material changes to the critical accounting policies disclosed in our Form 10-K for the year ended December 31, 2022.

Disclosure controls and procedures are controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the Exchange Act) is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

As described in our Annual Report on Form 10-K for the year ended December 31, 2022, we identified material weaknesses in our internal control over financial reporting. As a result of these material weaknesses, our Chief Executive Officer (CEO) and Chief Financial Officer (CFO) have concluded that our disclosure controls and procedures are not effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Securities and Exchange Act is recorded, processed, summarized, and reported as and when required.

Notwithstanding the conclusion by our CEO and CFO that our Disclosure Controls as of ~~June~~September 30, 2023 were not effective, and notwithstanding the material weaknesses in our internal control over financial reporting described more fully under Item 9A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, management believes that the condensed consolidated financial statements and related financial information included in this Quarterly Report on Form 10-Q fairly present in all material respects our financial condition, results of operations and cash flows as of the date presented, and for the periods ended on such dates, in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Management is continuing to evaluate the material weaknesses discussed above and is in the process of implementing its remediation plan, which includes the hiring of additional resources. However, we cannot provide assurance as to when our remediation efforts will be complete and the material weaknesses cannot be considered remediated until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We cannot assure readers that the measures we have taken to date, and are continuing to implement, will be sufficient to remediate the material weaknesses we have identified or avoid potential future material weaknesses.

There were no changes in our internal control over financial reporting that occurred during our latest fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our management, including our CEO and CFO, does not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Due to 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 controls. 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.

Refer to Note 7 - Commitments and Contingencies to the unaudited condensed consolidated financial statements in this Form 10-Q for any required disclosure.

Except as described in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, as filed with the SEC on June 16, 2023, in our Quarterly Reporting on Form 10-Q for the quarter ended June 20, 2023, as filed with the SEC on August 14, 2023, and as set forth below, there have not been any material changes to the risk factors disclosed in our Form 10-K for the year ended December 31, 2022, as filed with the SEC on April 27, 2023.

Our strategy relating to potential mergers and acquisitions involves a number of risks and we have a limited history of such activity. Even if an acquisition or merger is completed, it may not produce results as positive as management may have projected.

The Company continues evaluating various opportunities and negotiating to acquire other companies, assets and technologies, and in certain circumstances, may consider transactions wherein the Company may be a target. Mergers and Acquisitions entail numerous risks, including difficulties in the assimilation of operations and products, diversion of management’s attention from other business concerns, amortization of acquired intangible assets and potential loss of key employees post-combination. We have limited experience in assimilating organizations into our operations. Although potential synergy may be achieved by mergers or acquisitions of related technologies and businesses, no assurance can be given as to the Company’s ability to successfully integrate any operations, personnel, services or products in any sort of merger or acquisition. Failure to successfully assimilate could have a material adverse effect on the Company’s business, financial condition and operating results.

These risks could have a material adverse effect on our business, results of operations and financial condition since the values of the securities received or issued at the execution of the acquisition depend on the success of the company/companies involved in any acquisition, merger or similar transaction. In addition, our ability to further expand our operations through acquisitions, mergers or similar transactions may be dependent on our ability to obtain sufficient working capital, either through cash flows generated through operations or financing activities or both. There can be no assurance that we will be able to obtain any additional financing on terms that are acceptable to us, or at all.

In the ordinary course, we have been and again may become involved in lawsuits to protect or enforce our patents and other intellectual property rights, which could be expensive, time consuming, and unsuccessful.

Competitors or other third parties may infringe our patents or the patents of our licensing partners. We have and may again be required to defend against claims of infringement or otherwise engage in legal action to protect our intellectual property. Any commercial success we may achieve with Phexxi for the prevention of pregnancy may incentivize third parties to challenge or infringe our intellectual property. In addition, our patents or the patents of our licensing partners also may become involved in inventorship, priority or validity disputes. To counter or defend against these claims is expensive and time consuming. In an infringement proceeding, a court may decide 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 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.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. These litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing, or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

In particular, in April 2023, the Company received a Paragraph IV certification notice letter (the “Padagis Notice Letter”) regarding an Abbreviated New Drug Application (“ANDA”) submitted to the FDA by Padagis Israel Pharmaceuticals Inc. (“Padagis”). The ANDA seeks approval from the FDA to commercially manufacture, use, or sell a generic version of Phexxi^®~~under 21 U.S.C. § 355(j) prior to the expiration of~~ ~~United States Patent Nos. 10,568,855; 11,337,989; and 11,439,610~~ ~~listed in the FDA’s~~ ~~Orange Book: Approved Drug Products with Therapeutic Equivalence Evaluations~~ ~~(collectively the “Phexxi Patents”). In the Padagis Notice Letter, Padagis claims that the Phexxi Patents~~ ~~are invalid under various grounds~~.

~~On June 1, 2023, the Company filed a complaint for patent infringement in Evofem Biosciences, Inc.~~ ~~et al.~~ ~~v. Padagis Israel Pharmaceuticals,~~ ~~et al.~~, in the United States District Court for the District of New Jersey. The case was assigned number 2:23-cv-03003. The complaint alleges that Padagis’ proposed generic version of Phexxi infringes the Phexxi Patents. The relief sought by the Company is a declaration of infringement and an injunction of FDA approval of Padagis’ proposed generic version of Phexxi until expiration of the Phexxi Patents in 2033. Until the earlier of final judgment or the passage of 30 months from the receipt of the Padagis Notice Letter, the FDA is prohibited from approving Padagis’ ANDA to market its proposed generic version of Phexxi. The Company also subsequently filed a substantively identical action in the United States District Court for the District of Delaware, Evofem Biosciences, Inc. ~~et al~~~~. v. Padagis Israel Pharmaceuticals,~~ ~~et al~~~~., which was assigned number 1:23-cv-00606-UNA~~

~~On March 7, 2023, Baker Bros. Advisors, LP (the Designated Agent) provided a Notice~~As of ~~Event of Default and Reservation of Rights (the Notice of Default) relating to~~ the ~~Securities Purchase and Security Agreement dated April 23, 2020, and subsequently amended (the SPA), by and among~~filing date, the Company Designated Agent, the Guarantors and Baker Purchasers. The Notice of Default claims that the Company has failed to maintain the “Required Reserve Amount” as required by Section 2.7 of the Third Amendment to the Securities Purchase Agreement and Section 8.1(e) of the SPA. The Designated Agent claims such failure constitutes an immediate Event of Default pursuant to Section 9.1(e) of the SPA. The Designated Agent, at the direction of the Baker Purchasers, has accelerated repayment of the outstanding balance payable and elected its remedies pursuant to Section 5.07(b) of the Securities Purchase Agreement. As a result, approximately $92.7 million, representing two times the sum of the outstanding balance and all accrued and unpaid interest thereon and all other amounts due under the SPA and other documents, was due and payable within three business days of receipt of the Notice of Default. Upon the effectuation of the Reverse Stock Splitdoes not have any defaults on ~~May 18, 2023, the Company has sufficient required reserve number of shares.~~

~~As of June 30, 2023, the Company had failed to meet the affirmative covenant requiring achievement of $100.0 million in cumulative net sales of Phexxi by such date as per the First Baker Amendment.~~any Senior Securities.

The exhibits filed as part of this Quarterly Report on Form 10-Q are set forth on the Exhibit Index.

~~4.12~~	~~Form of Senior Subordinated Convertible Note.~~	~~8-K~~	~~001-36754~~	~~3/14/2023~~53
~~4.13~~	~~Form of Warrant.~~	~~8-K~~	~~001-36754~~	~~3/14/2023~~
~~4.14~~	~~Form of Registration Rights Agreement.~~	~~8-K~~	~~001-36754~~	~~3/14/2023~~
~~4.15~~	~~Form of Senior Subordinated Convertible Note.~~	~~8-K~~	~~001-36754~~	~~3/24/2023~~
~~4.16~~	~~Form of Warrant.~~	~~8-K~~	~~001-36754~~	~~3/24/2023~~
~~4.17~~	~~Form of Registration Rights Agreement.~~	~~8-K~~	~~001-36754~~	~~3/24/2023~~
~~4.18~~	~~Form of Senior Subordinated Convertible Note.~~	~~8-K~~	~~001-36754~~	~~4/10/2023~~
~~4.19~~	~~Form of Warrant.~~	~~8-K~~	~~001-36754~~	~~4/10/2023~~
~~4.20~~	~~Form of Registration Rights Agreement.~~	~~8-K~~	~~001-36754~~	~~4/10/2023~~
~~4.21~~	~~Form of Warrant.~~	~~8-K~~	~~001-36754~~	~~2/23/2023~~
~~4.22~~	~~Form of Registration Rights Agreement.~~	~~8-K~~	~~001-36754~~	~~2/23/2023~~
~~4.23~~	~~Form of Senior Subordinated Convertible Note.~~	~~8-K~~	~~001-36754~~	~~3/14/2023~~
~~4.24~~	~~Form of Warrant.~~	~~8-K~~	~~001-36754~~	~~3/14/2023~~
~~4.25~~	~~Form of Registration Rights Agreement.~~	~~8-K~~	~~001-36754~~	~~3/14/2023~~
~~4.26~~	~~Form of Senior Subordinated Convertible Note.~~	~~8-K~~	~~001-36754~~	~~3/24/2023~~
~~4.27~~	~~Form of Warrant.~~	~~8-K~~	~~001-36754~~	~~3/24/2023~~
~~4.28~~	~~Form of Registration Rights Agreement.~~	~~8-K~~	~~001-36754~~	~~3/24/2023~~
~~4.29~~	~~Form of Senior Subordinated Convertible Note.~~	~~8-K~~	~~001-36754~~	~~4/10/2023~~
~~4.30~~	~~Form of Warrant.~~	~~8-K~~	~~001-36754~~	~~4/10/2023~~
~~4.31~~	~~Form of Registration Rights Agreement.~~	~~8-K~~	~~001-36754~~	~~4/10/2023~~
~~4.32~~	~~Form of Senior Subordinated Convertible Note.~~	~~8-K~~	~~001-36754~~	~~7/10/2023~~
~~4.33~~	~~Form of Warrant.~~	~~8-K~~	~~001-36754~~	~~7/10/2023~~
~~4.34~~	~~Form of Registration Rights Agreement.~~	~~8-K~~	~~001-36754~~	~~7/10/2023~~
~~4.35~~	~~Form of Senior Subordinated Convertible Note.~~	~~8-K~~	~~001-36754~~	~~8/10/2023~~
~~4.36~~	~~Form of Warrant.~~	~~8-K~~	~~001-36754~~	~~8/10/2023~~
~~4.37~~	~~Form of Registration Rights Agreement.~~	~~8-K~~	~~001-36754~~	~~8/4/2023~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.0001 per share		EVFM		OTCQB

Large accelerated filer ☐		Accelerated filer ☐

Non-accelerated filer ☒		Smaller reporting company ☒
		Emerging growth company ☐

		Page
	FORWARD-LOOKING STATEMENTS	1
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Operations	5
	Condensed Consolidated Statements of Convertible and Redeemable Preferred Stock and Stockholders’ Deficit	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3839
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4849
Item 4.	Controls and Procedures	4849

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	5051
Item 1A.	Risk Factors	5051
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5152
Item 3.	Defaults Upon Senior Securities	5152
Item 4.	Mine Safety Disclosures	5152
Item 5.	Other Information	5152
Item 6.	Exhibits	5253
Signatures		5355

	●	our ability to continue as a going concern;
	●	our ability to remediate the material weaknesses in our internal controls and procedures identified by management;
	●	~~the effect of the Notice of Default received from Baker Bros. Advisors, LP and our ability to resolve the same;~~
	●	our ability to obtain necessary approvals of any corporate action needing stockholder, FINRA, or other approvals;
	●	our ability to file Annual and Quarterly Reports on a timely basis;
	●	our ability to raise additional capital to fund our operations;
	●	our ability to achieve and sustain profitability;
	●	our estimates regarding our future performance including, without limitation, any estimates of potential future revenues;
	●	estimates regarding market size;
	●	our estimates regarding expenses, revenues, financial performance and capital requirements, including the length of time our capital resources will sustain our operations;
	●	our ability to maintain the listing of our shares on the OTCQB^® Venture Market;
	●	our ability to comply with the provisions and requirements of our debt arrangements, to ~~manage the current~~avoid future defaults pursuant to our debt arrangements and to pay amounts owed, including any amounts that may be accelerated, pursuant to our debt arrangements;
	●	estimates regarding health care providers’ (HCPs) recommendations of Phexxi^® (lactic acid, citric acid, and potassium bitartrate) vaginal gel (Phexxi) to patients;
	●	the rate and degree of market acceptance of Phexxi;
	●	our ability to successfully commercialize and distribute Phexxi and continue to develop our sales and marketing capabilities;
	●	our estimates regarding the effectiveness of our marketing campaigns;
	●	our strategic plans for our business, including the commercialization of Phexxi;
	●	the potential for changes to current regulatory mandates requiring health insurance plans to cover U.S. Food and Drug Administration (FDA)-cleared or -approved contraceptive products without cost sharing;
	●	our ability to obtain or maintain third-party payer coverage and adequate reimbursement, and our reliance on the willingness of patients to pay out-of-pocket for Phexxi absent full or partial third-party payer reimbursement;
	●	our ability to obtain the necessary regulatory approvals to market and commercialize any product candidate we may seek to develop;
	●	the success, cost and timing of our potential future clinical trials, if any;
	●	our ability to protect and defend our intellectual property position and our reliance on third party licensors;
	●	our ability to obtain additional patent protection for our product and product candidates;
	●	our dependence on third parties for the manufacture of Phexxi and in the conduct of potential future clinical trials, if any;
	●	our ability to expand our organization to accommodate potential growth; and
	●	our ability to retain and attract key personnel.

	2023			2022
	Six months ended June 30,
	2023			2022
Cash flows from operating activities:
Net loss		(10,912	)		(157,868	)
Adjustments to reconcile net loss to net cash and restricted cash used in operating activities:
Loss on issuance of financial instruments		111			72,002
Change in fair value of financial instruments		(1,539	)		31,614
Financial instrument modification expense		-			1,056
Stock-based compensation		685			2,148
Depreciation		418			515
Noncash interest expense		1,134			1,055
Noncash lease expenses		1,208			301
Net gain on lease termination		(459	)		-
Net loss on disposal of property and equipment		1,858			-
Noncash instrument exchange expense		-			514
Changes in operating assets and liabilities:
Trade accounts receivable		(4,072	)		(855	)
Inventories		1,705			1,542
Prepaid and other assets		2,435			(2,749	)
Accounts payable		2,167			4,728
Accrued expenses and other liabilities		840			(1,929	)
Accrued compensation		(625	)		816
Operating lease liabilities		(1,388	)		(469	)
Net cash and restricted cash used in operating activities		(6,434	)		(47,579	)
Cash flows from investing activities:
Purchases of property and equipment		(4	)		(236	)
Net cash and restricted cash used in investing activities		(4	)		(236	)
Cash flows from financing activities:
Proceeds from issuance of common stock - Stock Purchase Agreement		-			7,438
Proceeds from issuance of common stock and warrants, net of discounts, fees and commissions - Public Offerings		-			24,882
Proceeds from issuance of common stock - exercise of warrants		160			20,922
Proceeds from issuance of common stock - ESPP and exercise of stock options		-			20
Borrowings under term notes		2,138			10,000
Payments under term notes		-			(5,892	)
Cash paid for financing costs		-			(859	)
Cash repurchase of fractional common stock after the reverse stock split		-			(18	)
Net cash and restricted cash provided by financing activities		2,298			56,493
Net change in cash, cash equivalents and restricted cash		(4,140	)		8,678
Cash, cash equivalents and restricted cash, beginning of period		4,776			13,588
Cash, cash equivalents and restricted cash, end of period	$	636		$	22,266
Supplemental disclosure of noncash investing and financing activities:
Financing costs included in accounts payable and accrued expenses		-			563
Purchases of property and equipment included in accounts payable and accrued expenses		-			189
Conversion of Series B-2 convertible preferred stock to common stock		-			1,187
Exchange of series B-2 convertible preferred stock to series C convertible preferred stock		-			1,616
Issuance of common stock for prepaid advertising		-			858
Issuance of common stock upon exercise of purchase rights		186			-

	2022
	Nine months ended September 30, 2022
Unvested restricted common stock subject to repurchase		1,200
Common stock to be purchased under the 2019 ESPP		5,854
Options to purchase common stock		6,629
Warrants to purchase common stock		1,546,832
Purchase rights to purchase common stock		851,388
Convertible debt		2,682,066
Total		5,093,969

	Nine months ended September 30,
	2023
Numerator:
Net income attributable to common stockholders	$	55,093
Adjustments:
Change in fair value of purchase rights		5,008
Noncash interest expense on convertible debt, net of tax		1,064
Net income attributable to common stockholders	$	61,165
Denominator:
Weighted average shares used to compute net loss attributable to common stockholder, basic		2,524,302
Add:
Pro forma adjustments to reflect assumed conversion of convertible debt		376,225,027
Pro forma adjustments to reflect assumed exercise of outstanding warrants and purchase rights		311,456,630
Pro forma adjustments to reflect the assumed conversion of Series E-1 Convertible Preferred Shares		4,355,940
Weighted average shares used to compute net loss attributable to common stockholder, diluted		694,561,899
Net loss per share attributable to common stockholders, diluted	$	0.09

	●	Distribution services fees
	●	Prompt pay and other discounts
	●	Product returns
	●	Chargebacks
	●	Rebates
	●	Patient support programs, including our co-pay programs

	(i)	the rescission of the Notice of Default delivered to the Company on March 7, 2023 and waiving the Events of Default named therein;

	(ii)	the waiver of any and all other Events of Default existing as of the Fourth Amendment date;

	(iii)	the removal of the conversion feature into shares of Company common stock, including the removal of any requirement to reserve shares of common stock for conversion of the Baker Notes as well as any registration rights related thereto;

	(iv)	the clarification that for the sole purpose of enabling an ex-U.S. license agreement for such assets, any Patents, Trademarks or Copyrights acquired after the Effective Date shall be excluded from the definition of Collateral; and,

	(v)	the removal of the requirement for the Company to obtain $100 million in cumulative net Phexxi sales in the specified timeframe.

Date of Notes’ Repurchase		Repurchase Price
On or prior to September 8, 2024		$14,000,000 (less Applicable Reductions)
September 9, 2024-September 8, 2025		$16,750,000 (less Applicable Reductions)
September 9, 2025-September 8, 2026		$19,500,000 (less Applicable Reductions)
September 9, 2026-September 8, 2027		$22,250,000 (less Applicable Reductions)
September 9, 2027-September 8, 2028		$25,000,000 (less Applicable Reductions)

										Conversion Price
Notes	Principal at issuance (in thousands)		Net Proceeds before issuance costs (in thousands)		Warrants (common stock)		Preferred Shares		Maturity Date	At Issuance		At 12/31/2022		At 3/31/2023		At 6/30/2023		At 9/30/2023
December 2022 Notes	$	2,308	$	1,500		369,230		70 - Series D	12/21/2025	$	6.25	$	6.25	$	1.625	$	0.8125	$	0.0845
February 2023 Notes⁽¹⁾		1,385		900		653,538		-	2/17/2026	$	2.50		N/A	$	1.625	$	0.8125	$	0.0845
March 2023 Notes		600		390		240,000		-	3/17/2026	$	2.50		N/A	$	1.625	$	0.8125	$	0.0845
March 2023 Notes⁽²⁾		538		350		258,584		-	3/20/2026	$	2.50		N/A	$	1.625	$	0.8125	$	0.0845
April 2023 Notes		769		500		615,384		-	3/6/2026	$	1.25		N/A		N/A	$	0.8125	$	0.0845
July 2023 Notes		1,500		975		1,200,000		-	3/6/2026	$	1.25		N/A		N/A		N/A	$	0.0845
August 2023 Notes		1,000		650		799,999		-	8/4/2026	$	1.25		N/A		N/A		N/A	$	0.0845
September 2023 Notes⁽³⁾		2,885		1,875		26,997,040		-	9/26/2026	$	0.13		N/A		N/A		N/A	$	0.13
Total Offerings	$	10,985	$	7,140		31,133,775

(1)	Warrants include 99,692 issued to the placement agent.
(2)	Warrants include 43,200 issued to the placement agent.
(3)	Warrants include 22,189,349 common warrants and 4,807,692 pre-funded warrants and $0.4 million of the net proceeds were recorded in prepaid and other current assets at September 30, 2023 as they were received in October 2023.

⁽¹⁾	The raw materials balance was written down by $0.2 million in the nine months period ended September 30, 2023 for estimated obsolescence and excess inventory based upon assumptions about future manufacturing needs.

⁽¹⁾⁽²⁾	The work in process balance represents all production costs incurred for partially completed ~~goods.~~goods and was written down by $0.9 million in the nine months ending September 30, 2023 for estimated obsolescence and excess inventory based upon assumptions about the future gross sales of Phexxi.

⁽³⁾	The finished goods balance was written down by $0.4 million in the nine months ended September 30, 2023 for estimated obsolescence and excess inventory based upon assumptions about the future gross sales of Phexxi.

															Fair Value
As of December 31, 2022	Principal Amount		Unamortized Issuance Costs			Accrued Interest		Redemption Amount		Amount Exchanged			Net Carrying Amount		Amount		Leveling
Baker Notes ⁽¹⁾⁽²⁾	$	45,528	$	-		$	-	$	-	$	-		$	45,528	$	39,260		Level 3
Adjuvant Notes ⁽³⁾⁽⁴⁾		22,500		(252	)		4,020		-		-			26,268		-		N/A
May 2022 Notes ⁽¹⁾		16,376		-			1,101		4,369		(21,846	)		-		-		N/A
December 2022 Notes ⁽¹⁾		2,308		-			-		-		-			2,308		156		Level 3

⁽¹⁾	As of December 31, 2022, all warrants issued by the Company are subject to liability accounting due to potential settlement in cash, an insufficient number of authorized shares and other adjustment mechanics. However, warrants with an exercise price greater than $2.50 per share were considered to be significantly out of the money and therefore the value ascribed to those warrants was considered to be de minimus and is therefore excluded from the above table.

⁽²⁾	Upon the effectuation of the reverse split on May 18, 2023, the Company has a sufficient number of authorized shares. As a result, asduring the second quarter of ~~June 30,~~ 2023, all derivatives in the table above were marked-to-market with an immaterial amount on May 18, 2023, and then reclassified to equity.

	Baker First Closing Notes			Baker Second Closing Notes			December 2022 Notes			February and March 2023 Notes			April 2023 Notes			Total
Balance at March 31, 2023	$	14,280		$	9,520		$	3		$	4		$	-		$	23,807
Balance at issuance		-			-			-			-			1			1
Change in fair value presented in the Condensed Consolidated Statements of Operations		-			-			153			7			-			160
Change in fair value presented in the Condensed Consolidated Statements of Comprehensive Operations		(4,920	)		(3,280	)		(156	)		(11	)		(1	)		(8,368	)
May 2022 exchange transaction
Reclassified to equity
Balance at June 30, 2023	$	9,360		$	6,240		$	-		$	-		$	-		$	15,600

	Baker First Closing Notes			Baker Second Closing Notes			Baker Notes- Fourth Amendment			Total Offerings (Note 4)		Total
Balance at June 30, 2023	$	9,360		$	6,240		$	-		$	-	$	15,600
Balance at issuance		-			-			13,450			208		13,658
Debt repayment		-						(1,000	)		-		(1,000	)
Extinguishment		(9,360	)		(6,240	)		-			-		(15,600	)
Change in fair value presented in the Condensed Consolidated Statements of Comprehensive Operations		-			-			-			452		452
Balance at September 30, 2023	$	-		$	-		$	12,450		$	660	$	13,110

	Term Notes - January 2022 Notes			Term Notes - March 2022 Notes			Term Notes - May 2022 Notes			Term Notes Total			Baker First Closing Notes			Baker Second Closing Notes			Baker Notes Total
Balance at March 31, 2022	$	118		$	149		$	-		$	267		$	51,653		$	34,436		$	86,089
Balance at issuance		-			-			447			447			-			-			-
Debt repayment		-			-			(5,892	)		(5,892	)		-			-			-
Change in fair value presented in the Condensed Consolidated Statements of Operations		2			2			9,499			9,503			(1,543	)		(1,029	)		(2,572	)
Change in fair value presented in the Condensed Consolidated Statements of Comprehensive Operations		-			-			-			-			2,205			1,470			3,675
May 2022 exchange transaction		(120	)		(151	)		-			(271	)		-			-			-
Balance at June 30, 2022	$	-		$	-		$	4,054		$	4,054		$	52,315		$	34,877		$	87,192

	April and June 2020 Baker Warrants			May 2022 Public Offering Common Warrants			June 2022 Baker Warrants			December 2022 Warrants			February and March 2023 Warrants			Purchase Rights			Derivative Liabilities Total
Balance at December 31, 2022	$	1		$	303		$	170		$	107		$	-		$	1,095		$	1,676
Balance	$	1		$	303		$	170		$	107		$	-		$	1,095		$	1,676
Balance at issuance		-			-			-			-			6			105			111
Exercises		-			(7	)		-			-			-			(186	)		(193	)
Change in fair value presented in the Condensed Consolidated Statements of Operations		(1	)		(295	)		(169	)		(107	)		(6	)		(961	)		(1,539	)
Reclassified to equity		-			(1	)		(1	)		-			-			(53	)		(55	)
Balance at September 30, 2023	$	-		$	-		$	-		$	-		$	-		$	-		$	-
Balance	$	-		$	-		$	-		$	-		$	-		$	-		$	-


	Derivative Liability - Convertible Preferred Stock Conversion Feature			Derivative Liability - January 2022 Warrants			Derivative Liability - March 2022 Warrants			Derivative Liability - May 2022 Warrants			May 2022 Public Offering Common Warrants			May 2022 Public Offering Pre-Funded Warrants			June 2022 Baker Warrants		Derivative Liabilities Total
Balance at March 31, 2022	$	92		$	3,857		$	3,893		$	-		$	-		$	-		$	-	$	7,842
Balance at issuance		-			-			-			1,613			18,034			4,633			70,238		94,518
Warrant exercises		-			-			-			-			(7,145	)		(4,633	)		-		(11,778	)
Change in fair value presented in the Condensed Consolidated Statements of Operations		-			(3,168	)		(3,210	)		(926	)		30,352			-			-		23,048
Conversion of series B-2 convertible preferred stock		(19	)		-			-			-			-			-			-		(19	)
May 2022 exchange transaction		(73	)		-			-			-			-			-			-		(73	)
Balance at June 30, 2022	$	-		$	689		$	683		$	687		$	41,241		$	-		$	70,238	$	113,538

Maturity of Operating Lease Liabilities (in thousands)	June 30, 2023
Remainder of 2023 (6 months)	$	94
Year ending December 31, 2024		109
Year ending December 31, 2025		9
Total lease payments		212
Less imputed interest		(17	)
Total	$	195

Maturity of Operating Lease Liabilities (in thousands)	September 30, 2023
Remainder of 2023 (3 months)	$	47
Year ending December 31, 2024		109
Year ending December 31, 2025		9
Total lease payments		165
Less imputed interest		(14	)
Total	$	151

Common stock issuable upon the exercise of stock options outstanding			~~4,268~~3,754
Common stock issuable upon the exercise of common stock warrants			~~3,642,343~~32,639,382
Common stock available for future issuance under the 2019 ESPP			509
Common stock available for future issuance under the Amended and Restated 2014 Plan			~~5,276~~5,781
Common stock available for future issuance under the Amended Inducement Plan			~~601~~609
Common stock reserved for the exercise of purchase rights			~~28,783,233~~288,237,667
Common stock reserved for the conversion of convertible notes			~~158,575,812~~428,570,789
Common stock reserved for the conversion of series E-1 preferred stock			21,621,302
Total common stock reserved for future issuance			~~191,012,042~~771,079,793

	Three and ~~Six~~Nine months ended ~~June~~September 30,
	2022
Expected volatility		177.2	%
Risk-free interest rate		2.3	%
Expected dividend yield		0.0	%
Expected term (years)		0.5

	●	continuous improvements of manufacturing and analytical efficiency;
	●	on-going product characterization and process optimization;
	●	evaluation of back-up contract manufacturing organizations to support future commercial forecast and reduce cost of goods sold;
	●	alternative raw material evaluation to secure an uninterrupted supply chain and reduce cost of goods sold;
	●	employee-related expenses, including salaries, benefits, travel and noncash stock-based compensation expense; and
	●	facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation of leasehold improvements and equipment, and research and other supplies.

	●	costs related to compliance with drug development regulatory requirements;
	●	external development expenses incurred under arrangements with third parties, such as fees paid to clinical research organizations (CROs) relating to our clinical trials;
	●	costs of acquiring and evaluating clinical trial data such as investigator grants, patient screening fees, laboratory work and statistical compilation and analysis, and fees paid to consultants; and,
	●	costs to acquire, develop and manufacture clinical trial materials, including fees paid to contract manufacturers.

	Three Months Ended June 30,				2023 vs. 2022
	2023		2022		$ Change			% Change
Product sales, net	$	2,458	$	6,034	$	(3,576	)		(59	)%

	Three Months Ended September 30,				2023 vs. 2022
	2023		2022		$ Change			% Change
Selling and marketing	$	2,985	$	11,948	$	(8,963	)		(75	)%

	●	research and development expenses towill decrease significantly primarily due to the completion of EVOGUARD and discontinuation of this and all other clinical programs in October ~~2022;~~2022 as well as reductions in headcount;
	●	selling and marketing expenses towill decrease significantly due to reductions in media and marketing activities related to ongoing Phexxi promotional ~~strategies;~~strategies as well as reductions in headcount; and
	●	general and administrative expenses towill decrease slightly due to reductions in headcount partially offset by increased professional and consulting expenses.

●	failure of the acquired or combined business to achieve expected results;
●	diversion of management’s attention;
●	failure to retain key personnel of the acquired business;
●	additional financing, if necessary and available, could increase leverage, dilute equity, or both;
●	the potential negative effect on our financial statements from the increase in goodwill and other intangibles;
●	the high cost and expenses of completing acquisitions and risks associated with unanticipated events or liabilities.

	Risks Related to Our Financial Condition and Capital Requirements

	●	~~We received a Notice of Default on the Baker Bros. Purchase Agreement.~~

	●	We are currently over 90 days past due on a significant amount of vendor obligations. We may not be able to refinance, extend or repay our substantial indebtedness owed to our secured and unsecured lenders, which would have a material adverse effect on our financial condition and ability to continue as a going concern.

	●	We have incurred significant losses and negative cash flows since our inception and anticipate we will continue to incur significant losses and negative cash flow for the foreseeable future.

	●	We must raise significant additional funds to finance our operations and to remain a going concern. If we are unable to raise additional capital when needed or on acceptable terms, we may be forced to delay, reduce and/or eliminate one or more of our business initiatives.

	●	We have ~~a limited number of shares of common stock available~~not paid our Fiscal Year 2023 or 2024 PDUFA invoice for ~~future issuance which could adversely affect our ability~~Phexxi to ~~raise capital~~the FDA and the balance due continues to incur interest, penalties, and may apply retroactively. We cannot submit any new applications or ~~consummate strategic transactions.~~supplements until paid.

	Risks Related to Potential Bankruptcy

	●	We are subject to risks and uncertainties associated with potential bankruptcy proceedings including a long and protracted restructuring.

	●	Our financial results may be volatile and may not reflect historical trends.

	Risks Related to Our Common and Preferred Stock

	●	Our management has identified material weaknesses in our internal controls and procedures.

	●	Our shares of common stock have been delisted from the ~~Nasdaq~~NASDAQ Capital Market which has and could further result in, among other things, a decline in the price of our common stock and ~~less~~reduced liquidity for holders of shares of our common stock.

	●	Our stock price is and may continue to be volatile.

	●	There may not be an active, liquid trading market for our equity securities.

	●	Because our ~~Common Stock~~common stock is subject to the “penny stock” rules, brokers cannot generally solicit the purchase of our ~~Common Stock,~~common stock, which adversely affects its liquidity and market price.

	●	Our common stock could be further diluted as the result of the issuance of additional shares of common stock, convertible securities, warrants or options.

	●	We are and may continue to be subject to short selling strategies.

	●	Our business could be negatively affected as a result of the actions of activist stockholders.

	●	We may become a defendant in one or more stockholder derivative or class action litigation(s), and any such future lawsuit(s) may adversely affect our business, financial condition, results of operations and cash flows.

Exhibit			Filed	Incorporated by Reference
No.	Exhibit Title		Herewith	Form		File No.		Date Filed
3.1	Amended and Restated Certificate of Incorporation			8-K	~~8-K~~	001-36754	~~001-36754~~		~~8/10/~~9/15/2023
3.2	Certificate of Amendment to the Amended and Restated Certificate of Incorporation			8-K		001-36754		5/17/2023
3.3	Amended and Restated Bylaws of the Registrant.				8-K		001-36754		07/17/2023
3.4	Certificate of Designation of Series E-1 Preferred Stock.				8-K		001-36754		8/10/2023
3.5	Amendment to the amended and Restated Certificate of Incorporation of Evofem Biosciences, Inc			8-K		001-36754		9/15/2023
4.1	Form of Warrant.	~~Reference is made to Exhibits~~ ~~3.1~~ ~~and~~ ~~3.2~~.		8-K		001-36754			1/13/2022
4.2	Form of ~~Warrant.~~Senior Subordinated Note.				8-K		001-36754		1/13/2022
4.3	Form of ~~Senior Subordinated Note.~~Warrant.				8-K		001-36754		3/1/~~13/~~2022
4.4	Form of ~~Warrant.~~Senior Subordinated Note.				8-K		001-36754		3/1/2022
4.5	Form of Senior Subordinated Note.				8-K		001-36754		~~3/1/~~5/5/2022
4.6	Form of Senior Subordinated Note.				8-K		001-36754		5/5/2022
4.7	Form of ~~Senior Subordinated Note.~~Warrant.				8-K		001-36754		5/5/2022
4.8	Form of ~~Warrant.~~Senior Subordinated Convertible Note.				8-K		001-36754		~~5/5/2022~~2/23/2023
4.9	Form of Warrant.			8-K		001-36754		2/23/2023
4.10	Form of Registration Rights Agreement.			8-K		001-36754		2/23/2023
4.11	Form of Senior Subordinated Convertible Note.			8-K		001-36754		3/14/2023
4.12	Form of Warrant.			8-K		001-36754		3/14/2023
4.13	Form of Registration Rights Agreement.			8-K		001-36754		3/14/2023
4.14	Form of Senior Subordinated Convertible Note.			8-K		001-36754		3/24/2023
4.15	Form of Warrant.			8-K		001-36754		3/24/2023
4.16	Form of Registration Rights Agreement.			8-K		001-36754		3/24/2023
4.17	Form of Senior Subordinated Convertible Note.			8-K		001-36754		4/10/2023
4.18	Form of Warrant.			8-K		001-36754		4/10/2023
4.19	Form of Registration Rights Agreement.			8-K		001-36754		4/10/2023
4.20	Form of Warrant.			8-K		001-36754		2/23/2023
4.21	Form of Registration Rights Agreement.			8-K		001-36754		2/23/2023
4.22	Form of Senior Subordinated Convertible Note.			8-K		001-36754		3/14/2023
4.23	Form of Warrant.			8-K		001-36754		3/14/2023
4.24	Form of Registration Rights Agreement.			8-K		001-36754		3/14/2023
4.25	Form of Senior Subordinated Convertible Note.			8-K		001-36754		3/24/2023
4.26	Form of Warrant.			8-K		001-36754		3/24/2023
4.27	Form of Registration Rights Agreement.			8-K		001-36754		3/24/2023
4.28	Form of Senior Subordinated Convertible Note.			8-K		001-36754		4/10/2023
4.29	Form of Warrant.			8-K		001-36754		4/10/2023
4.30	Form of Registration Rights Agreement.			8-K		001-36754		4/10/2023
4.31	Form of Senior Subordinated Convertible Note.			8-K		001-36754		7/10/2023
4.32	Form of Warrant.			8-K		001-36754		7/10/2023
4.33	Form of Registration Rights Agreement.			8-K		001-36754		7/10/2023
4.34	Form of Senior Subordinated Convertible Note.			8-K		001-36754		8/10/2023
4.35	Form of Warrant.			8-K		001-36754		8/10/2023
4.36	Form of Registration Rights Agreement.			8-K		001-36754		8/4/2023
4.37	Form of Senior Subordinated Convertible Note.			8-K		001-36754		~~2/23/~~10/3/2023
~~4.10~~4.38	Form of Warrant.			8-K		001-36754		~~2/23/~~10/3/2023
~~4.11~~4.39	Form of Registration Rights Agreement.			8-K		001-36754		~~2/23/~~10/3/2023

10.1	^^	Securities Purchase Agreement, by and between the Investors therein and the Registrant, dated as of February 17, 2023.			8-K	001-36754	2/23/2023
10.2	^^	Securities Purchase Agreement, by and between the Investors therein and the Registrant, dated as of March 13, 2023.			8-K	001-36754	3/14/2023
10.3	^^	Securities Purchase Agreement, by and between the Investors therein and the Registrant, dated as of March 20, 2023.			8-K	001-36754	3/24/2023
10.4	^^	Securities Purchase Agreement, by and between the Investors therein and the Registrant, dated as of April 5, 2023.			8-K	001-36754	4/10/2023
10.5	^^	Securities Purchase Agreement, by and between the Investors therein and the Registrant, dated as of July 3, 2023.			8-K	001-36754	7/10/2023
10.6	^^	Securities Purchase Agreement, by and between the Investors therein and the Registrant, dated as of August 4, 2023.			8-K	001-36754	8/10/2023
10.7	^^	Equity Exchange Agreement, by and between the Investors therein and the Registrant, dated as of August 7, 2023.			8-K	001-36754	8/10/2023
10.8		Offer Letter, by and between the Registrant and Ivy Zhang, dated as of April 10, 2023.			10-Q	001-36754	6/16/2023
10.9	^^	Fourth Amendment to Securities Purchase and Security Agreement			8-K	001-36754	9/11/2023
10.10	^^	Securities Purchase Agreement, by and between the Investors therein and the Registrant, dated as of September 27, 2023.		~~10-Q~~	8-K	001-36754	~~6/16/~~10/3/2023
10.11		Amended Employment Agreement, by and between the Registrant and Ivy Zhang, dated as of November 8, 2023	X
10.12		Amended Employment Agreement, by and between the Registrant and Saundra Pelletier, dated as of November 8, 2023	X
31.1	*	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X
31.2	*	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X
32.1	*	Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	X
101.INS	†	Inline XBRL Instance Document	X
101.SCH	†	Inline XBRL Taxonomy Extension Schema Document	X
101.CAL	†	Inline XBRL Taxonomy Extension Calculation Linkbase Document	X
101.DEF	†	Inline XBRL Definition Linkbase Document	X
101.LAB	†	Inline XBRL Taxonomy Extension Labels Linkbase Document	X
101.PRE	†	Inline XBRL Taxonomy Extension Presentation Linkbase Document	X
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)	X