UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 20172018

OR

For the transition period from                     to                     

Registrant’s telephone number, including area code

(858) 926-7655

(Former Name or Former Address, if Changed Since Last Report.)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    ☒  Yes    ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“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 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 Act).    Yes  ☐    No  ☒

As of November 6, 2017 a total of 6,047,1619, 2018, 11,422,161 shares of the Registrant’s Common Stock, par value $0.0001, were issued and outstanding.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, in particular “Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations,” of Part I. Financial Information, and the information incorporated by reference herein contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q,report, including statements regarding our strategy, future operations, future financial position, projected costs, prospects, plans and objectives of management, are forward-looking statements. Forward-looking statements, include all statements that are not historical facts and, in some cases, can be identified by terms such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect,” “could,” “plan,” “potential,” “predict,” “seek,” “should,” “would”“would,” “contemplate,” project,” “target,” “tend to,” or the negative version of these words and similar expressions.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including those factors described in “Risk Factors”Part II, Item 1A, “Risk Factors,” in this report, and elsewhere in this report. Given these uncertainties, you should not place undue reliance on theseany forward-looking statements.

statement. The following factors are among those that may cause actual results to differ materially from our forward-looking statements:such differences:

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. You should also read carefully the factors described in the section “Risk Factors” of this Quarterly Report on Form 10-Q and “Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements. You are advised, however, to consult any further disclosures we make on related subjects in our subsequent Current Reports on Form 8-K, press releases, and our website. Any

All forward-looking statements that we make in this Quarterly Report on Form 10-Q speakreport are current only as of the date of this Quarterly Report on Form 10-Q, and wereport. We do not undertake noany obligation to publicly update such statementsany forward-looking statement to reflect events or circumstances after the date of this Quarterly Report on Form 10-Qwhich any statement is made or to reflect the occurrence of unanticipated events.events, except as required by law.

TABLE OF CONTENTS

PART I.PART I  ̶  FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements.Statements (Unaudited)

Daré Bioscience, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

See accompanying notes to interim consolidated financial statements.

Daré Bioscience, Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

See Accompanying Notesaccompanying notes to Interim Condensed Consolidated Financial Statements.interim consolidated financial statements.

The operations presented in the Interim Condensed Consolidated Financial Statementsinterim consolidated financial statements and Accompanying Notesaccompanying notes (A) for the three and nine months ended September 30, 2018 and that include the period from July 19, 2017 to September 30, 2017 represent the operations of the Company following the Stock Purchase Transaction. The Interim Condensed Consolidated Financial StatementsCerulean/Private Daré stock purchase transaction, and Accompanying Notes for(B) that include the three months ended September 30, 2016period from January 1, 2017 to July 18, 2017 represent the operations of the Company when it was private, making a comparison between periods difficult. See Note 4, “Acquisitions – Cerulean/Private Daré Stock Purchase Transaction,” of the Notes to the Interim Consolidated Financial Statements (Unaudited) appearing in this report for a discussion of the Cerulean/Private Daré stock purchase transaction.

Daré Bioscience, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive LossCash Flows

(Unaudited)

See Accompanying Notesaccompanying notes to Interim Condensed Consolidated Financial Statements.interim consolidated financial statements.

The operations presented in the Interim Condensed Consolidated Financial Statementsinterim consolidated financial statements and accompanying notes (A) for the three and nine months ended September 30, 2018 and that include the period from July 19, 2017 to September 30, 2017 represent the operations of the Company following the Stock Purchase Transaction. The Interim Condensed Consolidated Financial Statements forCerulean/Private Daré stock purchase transaction, and (B) that include the three months ended September 30, 2016period from January 1, 2017 to July 18, 2017 represent the operations of the Company when it was private, making a comparison between periods difficult.

See Note 4, “Acquisitions – Cerulean/Private Daré Bioscience, Inc. and Subsidiaries

Condensed Consolidated StatementsStock Purchase Transaction,” of Cash Flows

(unaudited)

See Accompanyingthe Notes to Interim Condensed Consolidated Financial Statements.

The operations presented in the Interim Condensed Consolidated Financial Statements (Unaudited) appearing in this report for the three months ended September 30, 2017 represent the operationsa discussion of the Company following the Stock Purchase Transaction. The Interim Condensed Consolidated Financial Statements for the three months ended September 30, 2016 represent the operations of the Company when it was private, making a comparison between periods difficult.Cerulean/Private Daré stock purchase transaction.

Daré Bioscience, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Description of Business and Basis of Presentation

Description of BusinessORGANIZATION AND DESCRIPTION OF THE BUSINESS

Daré Bioscience, Inc. (“Daré” or the “Company”), is a healthcareclinical-stage biopharmaceutical company committed to the development and commercializationadvancement of innovative products infor women’s reproductive health. Daré’s Bioscience, Inc. and its wholly owned subsidiaries, Daré Bioscience Operations, Inc., Daré Bioscience Australia Pty LTD, and Pear Tree Pharmaceuticals, Inc., operate in one segment. In this report, the “Company” refers collectively to Daré Bioscience, Inc. and its wholly owned subsidiaries, unless otherwise stated or the context otherwise requires.

The Company is driven by a mission to identify, develop and bring to market a diverse portfolio of differentiated therapies that expand treatment options, improve outcomes and facilitate convenience for women, primarily in the areas of contraception, vaginal health, sexual health and fertility. The Company’sbusiness strategy is to license or otherwise acquire the rights to noveldifferentiated reproductive health product candidates, some of which have existing clinical proof-of-concept data, and to take those candidates through advanced stages of clinical development.development or regulatory approval.

OnThe Company has assembled a portfolio of clinical-stage and preclinical-stage candidates addressing unmet needs in women’s reproductive health. The Company’s two clinical-stage assets—Ovaprene^® and Sildenafil Cream, 3.6%—were obtained through product license and development agreements. Ovaprene, a non-hormonal monthly contraceptive candidate was licensed in July 19,of 2017 all of the outstanding shares of capital stock of Daré Bioscience Operations, Inc.and Sildenafil Cream, 3.6%, a private Delaware corporation, (“Private Daré”) were purchased by Cerulean Pharma Inc. (“Cerulean”)potential treatment for Female Sexual Arousal Disorder was licensed in accordance with the termsFebruary of a stock purchase agreement dated as2018. In March of March 19, 2017 (the “Stock Purchase Agreement”), by and among Cerulean, Private Daré and the holders of capital stock and securities convertible into capital stock of Private Daré named therein (the “Private Daré Stockholders”). Pursuant to the Stock Purchase Agreement, each Private Daré Stockholder sold its shares of common stock in Private Daré to Cerulean in exchange for newly issued shares of Cerulean common stock. On July 19, 2017, Cerulean also completed the sale of its proprietary Dynamic Tumor Targeting™ Platform (the “Platform”) to Novartis Institutes for BioMedical Research, Inc. (“Novartis”) for $6.0 million.  

Following the closing of the transactions contemplated by the Stock Purchase Agreement (collectively, the “Stock Purchase Transaction”) and the sale of the Platform, Cerulean changed its name to Daré Bioscience, Inc.  As a result of the Stock Purchase Transaction, Private Daré became a wholly owned subsidiary of Daré Bioscience, Inc. and the Private Daré Stockholders became majority shareholders of Daré Bioscience, Inc. owning approximately 51% of the issued and outstanding shares of the Company’s shares of common stock.

On July 20, 2017,2018, the Company effectedentered into a 1-for-10 reverse stock splitcollaboration and option agreement covering new injectable contraceptive product candidates; in April of its common stock (the “Reverse Stock Split”). All share and per share amounts of common stock, options and warrants in this Quarterly Report on Form 10-Q, including those amounts included in the accompanying condensed consolidated financial statements, have been restated for all periods to give retroactive effect to the Reverse Stock Split.

The operations presented in the accompanying condensed consolidated financial statements and related notes for the period ending September 30, 2017 represent the operations of2018, the Company and give effectlicensed the worldwide rights to the Stock Purchase Transaction, including stock-based compensation awards. The condensed consolidated financial statements and related notes for all periods prior to the Stock Purchase Transaction represent the operationsa portfolio of Private Daré, making a comparison between historical and recent periods difficult.

Following the Stock Purchase Transaction,preclinical intravaginal rings; in May of 2018, the Company began trading onacquired a company that owns the Nasdaq Capital Market under the symbol “DARE.” Priorrights to the Stock Purchase Transaction,a proprietary vaginal tamoxifen tablet to treat vulvar and vaginal atrophy; and in July of 2018, the Company traded under the symbol “CERU.”

Basis of presentation

The condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) as defined by the Financial Accounting Standards Board (“FASB”). These condensed consolidated financial statements should be read in conjunction with the audited financial statementsacquired certain assets related to a novel target for non-hormonal contraceptives for both men and notes thereto for the year ended December 31, 2016 that were attached as Exhibit 99.1 to the Company’s Amendment No. 1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on October 2, 2017.

Unaudited Interim Financial Informationwomen.

The interim condensed consolidated financial statements includedCompany’s primary operations have consisted of, and are expected to continue to consist of, product research and development and advancing its portfolio of product candidates through late-stage clinical development or regulatory approval.

The Company has not generated any revenue related to its primary business purpose to date and is subject to several risks common to clinical-stage biopharmaceutical companies, including dependence on key individuals, competition from other companies, the need to develop commercially viable products in this document are unaudited.a timely and cost-effective manner, and the need to obtain adequate additional capital to fund the development of product candidates. The unaudited interim financial statements have been prepared on the same basis as the annual financial statements and reflect,Company is also subject to several risks common to other companies in the opinionindustry, including rapid technology change, regulatory approval of management, all adjustmentsproducts, uncertainty of market acceptance of products, competition from substitute products and larger companies, compliance with government regulations, protection of proprietary technology, dependence on third parties, and product liability.

2.LIQUIDITY

The Company has a normalhistory of losses from operations and recurring natureanticipates that are necessaryit will continue to incur losses for a fair statement ofat least the Company’s financial position as of September 30, 2017, and its results of operations for the three and nine months ended September 30, 2017 and 2016, and cash flows fornext several years. For the nine months ended September 30, 2017 and 2016. The results2018, the Company incurred a net loss of operations for the three and nine months ended$13.8 million. At September 30, 2017 are not necessarily indicative of the results to be expected for the year ending December 31, 2017 or for any other future annual or interim period. The December 31, 2016 consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2016.

2. Summary of Significant Accounting Policies

Liquidity

As of September 30, 2017,2018, the Company had an accumulated deficit of approximately $3.10$26.1 million and had cash and cash equivalents of approximately $9.5 million. The Company also had negative cash flow from operations of approximately $1.58$7.6 million during the nine months ended September 30, 2017. The2018.

During the first quarter of 2018, the Company had cash and cash equivalentsreceived gross proceeds of approximately $8.53$11.3 million, asresulting in net proceeds of September 30, 2017. Theapproximately $10.1 million, from sales of its securities in registered offerings (see Note 7). During the third quarter, the Company will need additional capital to further fund the development of, and seek regulatory approvals for, its current product candidate and any future candidates it may license as well as to commercialize any approved products.received approximately $144,000 from a federal grant.

The Company is currently focused primarily on the development and commercialization of innovative products in women’s reproductive healthhealth. T and believes such activitieshe Company will result in the Company’s continued incurrence ofcontinue to incur significant research and development and other expenses related to those programs.these activities. If the clinical trials for any of the Company’s product candidates fail orto produce unsuccessfulsuccessful results and such that those product candidates do not advance in clinical development, then the Company’s business and prospects may suffer. Even if the product candidates advance in clinical development, they may fail to gain regulatory approval, orapproval. Even if any of the Company’s product candidates ifare approved, failsthey may fail to achieve market acceptance, and the Company may never become profitable. Even if the Company achieves profitability in the future,becomes profitable, it may not be ablesustain profitability.

As of the date of this report and based on current business plan estimates, the Company believes it has sufficient cash to sustain profitability in subsequent periods. The Company intends to coverfund its future operating expenses throughover at least the next twelve months from the date of issuance of these consolidated financial statements.  

Although the Company has cash and cash equivalents on hand andof approximately $9.5 million at September 30, 2018, the Company will need to raise additional capital through a combination of equity offerings, debt financings, government or other grant funding, collaborations and strategic alliances.alliances or other similar types of arrangements to cover its operating expenses, including the development of its product candidates and any future product candidates it may license or otherwise acquire. The Company cannot be sure that additional financingcapital will be available when needed or that, if available, financingit will be obtained on terms favorable to the Company or its stockholders.

If additional funding is not available on a timely basis or at adequate levels, the Company will need to reevaluate its operating plans. The condensedinterim consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Principles3. Summary of ConsolidationSignificant Accounting Policies

The condensedCompany’s significant accounting policies are described in Note 1 to the interim consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission, or SEC on March 28, 2018. Since the date of those financial statements, there have been no material changes to the Company’s significant accounting policies, except as described below.

Basis of Presentation

The accompanying interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, as defined by the Financial Accounting Standards Board, or FASB, for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X.  Accordingly, they do not include all of the Company are stated in U.S. dollarsinformation and are prepared using U.S. GAAP. Thesefootnotes required by GAAP for complete financial statements. In management’s opinion, the accompanying interim consolidated financial statements include the accountsreflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the Company and its wholly owned subsidiaries, Daré Bioscience Operations, Inc., and Daré Bioscience Australia PTY LTD.results of the interim periods presented.

Interim financial results are not necessarily indicative of results anticipated for any other interim period or for the full year. The accompanying interim consolidated financial statements ofshould be read in conjunction with the audited financial statements and notes thereto included in the Company’s wholly owned subsidiaries are recordedAnnual Report on Form 10-K for the year ended December 31, 2017.

Reverse Stock Split

On July 20, 2017, the Company effected a 1-for-10 reverse stock split of its common stock. All share and per share amounts of common stock, options and warrants in their functional currencythese notes and translated intothose amounts included in the reporting currency. The cumulative effect of changes in exchange rates between the foreign entity’s functional currency and the reporting currency is reported in Accumulated Other Comprehensive Income. All intercompany transactions and accountsaccompanying interim consolidated financial statements, have been eliminated in consolidation.restated for all periods to give retroactive effect to the reverse stock split.

Use of Estimates

The preparation ofPreparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the fair value of stock-based compensation, goodwill impairment and purchase accounting. Actual results could differ from those estimates and could materially affect the reported amounts of assets, liabilities and future operating results.

RisksPrinciples of Consolidation

The interim consolidated financial statements of the Company are stated in U.S. dollars and Uncertaintiesare prepared using GAAP. These financial statements include the accounts of the Company and its wholly owned subsidiaries, Daré Bioscience Operations, Inc., Daré Bioscience Australia Pty LTD, and Pear Tree Pharmaceuticals, Inc. The financial statements of the Company’s wholly owned subsidiaries are recorded in their functional currency and translated into the reporting currency. The cumulative effect of changes in exchange rates between the foreign entity’s functional currency and the reporting currency is reported in accumulated other comprehensive loss in the interim consolidated balance sheets. All significant intercompany transactions and accounts have been eliminated in consolidation.

Grant Funding

The Company will require approvals fromreceives certain research and development funding through a grant issued by a division of the U.S. Food and Drug Administration or foreign regulatory agencies prior to being able to sell any products. There can be no assurance thatNational Institutes of Health. The funding is recognized in the Company’s current or future product candidates will receive the necessary approvals. If the Company is denied regulatory approval of its product candidates, or if approval is delayed, it may have a material adverse impact on the Company’s business, resultsstatement of operations as a reduction to research and its financial position.

The Company is subject to a number of risks similar to other life science companies, including, but not limited to, risks related to the ability to license product candidates, successfully develop product candidates, raise additional capital, compete with other products, and protect proprietary technology. In the event the Company receives a regulatory approval for a product, the market’s acceptance of the product remains a risk. As a result of these and other factors anddevelopment expense as the related uncertainties, there can be no assurance of the Company’s future success.

For a more comprehensive list of risk factors, please refercosts are incurred to the Company’s interim report on Form 10-Q for the quarterly period ended June 30, 2017.

Cash and Cash Equivalents

The Company considers cash and all highly liquid debt instruments with an original maturity of three months or less to be cash and cash equivalents.

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents. The Company places its cash and cash equivalents with a limited number of high quality financial institutions and at times may exceed the amount of insurance provided on such deposits. The Company has not experienced any loss on deposits of cash and cash equivalents.

Business Combinations

Assets acquired, and liabilities assumed as part of a business acquisition are recorded at their estimated fair value at the date of acquisition. The excess of the total purchase considerationmeet those obligations over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Determining fair value of identifiable assets, particularly intangibles, and liabilities acquired also requires management to make estimates, which are based on all available information and, in some cases, assumptions with respect to the timing and amount of future revenue and expenses associated with an asset.

Goodwill

Goodwill is not amortized but is tested annually for impairment or more frequently if impairment indicators exist.grant period. The Company adopted accounting guidance related to annualthis policy in 2018. During the three and interim goodwill impairment tests which allowsnine months ended September 30, 2018, the Company recognized approximately $213,000 in the statement of operations as a reduction to first assess qualitative factors before performing a quantitative assessment of the fair value of a reporting unit. If it is determined on the basis of qualitative factors that the fair value of the reporting unit is more likely than not less than the carrying amount, a quantitative impairment test is required. The Company recorded goodwill of approximately $12.88 million related to the Stock Purchase Transaction, from the acquisition date, July 19, 2017. The Company assessed goodwill at September 30, 2017research and determined there was no impairment during the period.

Segment Reporting

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, or decision-making group, in making decisions on how to allocate resources and assess performance. Our chief operating decision maker is the chief executive officer. The Company has one operating segment, women’s reproductive health.development expense.

Fair Value of Financial InstrumentsMeasurements

Certain assets and liabilities are carried atGAAP defines fair value in accordance with Accounting Standards Codification (“ASC”) 820, Fair Value Measurement. Fair value is defined as the exchange price that would be received for an asset or the exit price that would be paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measuredate, and also establishes a fair value musthierarchy which requires an entity to maximize the use of observable inputs, and minimize the usewhere available. The three-level hierarchy of unobservable inputs. A fair value hierarchy is based on three levels of inputs which are usedvaluation techniques established to measure fair value of which the first two levels are considered observable and the last is considered unobservable:defined as follows:

The Company’s instruments that are carriedCash and cash equivalents of $9.5 million and $7.6 million measured at fair value as of September 30, 2018 and December 31, 2017, respectively, are cash and cash equivalents, accountsclassified within Level 1 of the fair value hierarchy. Other receivables are financial assets with carrying values that approximate fair value due to the short-term nature of these assets. Accounts payable and accrued interest. Theexpenses and other liabilities are financial liabilities with carrying values of accounts payable and accrued interestthat approximate their fair value due to the short-term nature of these liabilities.

Net Loss Per Share

Basic net loss attributable to common stockholders per share is calculated by dividing the net loss by the weighted average number of shares of common stock outstanding during the period without consideration of common stock equivalents. Since the Company was in a loss position for all periods presented, diluted net loss per share is the same as basic net loss per share for all periods presented as the inclusion of all potential dilutive securities would have been antidilutive. All per share figures have been retroactively adjusted for the Reverse Stock Split.

Stock-Based Compensation

The Company records compensation expense for all stock-based awards granted based on the fair value of the award at the time of grant.  The Company uses the Black-Scholes Pricing Model to determine the fair value of each of the awards which considers factors such as expected term, volatility, risk free interest rate and dividend yield.  Due to the limited history of the Company, the simplified method was utilized in order to determine the expected term of the awards.  Additionally, the Company considered comparable companies in the industry which have available share price history to calculate the volatility.  The Company compared U.S. Treasury Bills in determining the risk-free interest rate appropriate given the expected term.  Finally, the Company has not established and has no plans to establish a dividend policy or declare any dividends in the foreseeable future and thus no dividend yield was determined necessary in the calculation of fair value.

Income Taxes

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Income taxes.  Under this method deferred income taxes are provided to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.  Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company follows the two-step approach to recognizing and measuring uncertain tax positions.  The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not, that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely of being realized upon ultimate settlement.  The Company considers many factors when evaluating and estimating the Company's tax positions and tax benefits, which may require periodic adjustments. At September 30, 2017, the Company did not record any liabilities for uncertain tax positions.

As the Company has significant operating losses, the Company does not expect to pay any income taxes for 2017 and as such no income tax provision has been made. Management evaluated the Company’s tax positions and concluded that the Company had taken no uncertain tax positions that require adjustment to the financial statements. The tax years 2015 to 2016 remain open to examination by federal and state taxing authorities.

Recent Accounting Pronouncements

On May 28, 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue From Contracts With Customers Not Yet Adopted, which impacts the way in which some entities recognize revenue for certain types of transactions. The new standard will become effective beginning in 2018 for public companies. As the Company does not currently have any contracts with customers we do not expect any impact from this accounting standard.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The new standard is effective for public companies for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is still in the process of evaluating the effect of adoption on its financial statements and expects to adopt the standard on January 1, 2019. The adoption is expected to lead to an increase in the assets and liabilities recorded on the Company’s balance sheets due to the lease agreement attributable to leased office space.

Recently Adopted Accounting Standards

In May 2014, FASB issued Accounting Standards Update, or ASU, 2014-09, Revenue from Contracts with Customers, which impacts the way in which some entities recognize revenue for certain types of transactions. The new standard became effective beginning in 2018 for public companies. Because the Company does not currently assessinghave any contracts with customers, the potential impactCompany’s adoption of this accounting standard anddid not impact the effect it might have on theCompany’s interim consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which intended to add or clarify guidance on the classification of certain cash receipts and payments on the statement of cash flows. The new guidance addresses cash flows related to the following:to: debt prepayment or extinguishment costs, settlement of zero-coupon bonds, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies and bank-owned life insurance policies, distributions received from equity method investees, beneficial interest in securitization transactions, and the application of predominance principle to separately identifiable cash flows. The standard isbecame effective for the Company for annual periods beginning after December 15, 2017, and interim periods within those fiscal years with earlyon January 1, 2018. The Company’s adoption permitted. Daré is currently evaluating the effect of this new guidancestandard on itsJanuary 1, 2018 did not have a material impact on the Company’s interim consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which intended to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standard isbecame effective for Daré for annual periods beginning after December 15, 2017. Daré’sthe Company on January 1, 2018. The Company’s early adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (Topic 350). The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basis for the annual or any interim goodwill impairment tests beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. DaréThe Company’s adoption of this standard on September 30, 2017 did not have a material impact on the Company’s consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting, which intended to provide clarity when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The standard isbecame effective for the Daré for annual periods beginningCompany on or after December 15, 2017 with early adoption permitted.January 1, 2018. The Company’s early adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815): (I) Accounting for Certain Financial Instruments with Down Round Features, (II) Replacement for the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. This update was issued to provide additional clarity related to accounting for certain financial instruments that have characteristics of both liabilities and equity. In particular, this update addresses freestanding and embedded financial instruments with down round features and whether they should be treated as a liability or equity instrument. Part II simply replaces the indefinite deferral for certain mandatorily redeemable non-controlling interests and mandatorily redeemable financial instruments of nonpublic entities contained within the ASC Topic 480 with a scope exception and does not impact the accounting for these mandatorily redeemable instruments. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluatinghas early adopted ASU 2017-11. As a result, the impact thatCompany has not recognized the adoptionfair value of the standard may have on its consolidated financial statements.warrants containing down round features that were issued in the underwritten offering in February 2018 (see Note 7) as liabilities.

34. . Acquisitions

Cerulean/Private Dare Stock Purchase Transaction

On July 19, 2017, the Company completed its business combination with Daré Bioscience Operations, Inc., a privately held Delaware corporation, or Private Daré completed, in accordance with the terms of the Stock Purchase Transaction with CeruleanAgreement dated as discussed in Note 1. For purposes of clarity, priorMarch 19, 2017, or the Daré Stock Purchase Agreement, by and among the Company, Private Daré and the holders of capital stock and securities convertible into capital stock of Private Daré named therein, or the Private Daré Stockholders. Pursuant to the Daré Stock Purchase Transaction, we sometimes referAgreement, each Private Daré Stockholder sold their shares of capital stock in Private Daré to the Company in exchange for newly issued shares of the Company’s common stock, and as Cerulean. a result, Private Daré became a wholly owned subsidiary of the Company and the Private Daré Stockholders became majority stockholders of the Company. In connection with the closing of that transaction, the Company changed its name from “Cerulean Pharma Inc.” to “Daré Bioscience, Inc.” In this report, that transaction is referred to as the Cerulean/Private Daré stock purchase transaction and “Cerulean” refers to Cerulean Pharma Inc. before that transaction closed.

The Stock Purchase TransactionCerulean/Private Daré stock purchase transaction was accounted for as a reverse merger under the acquisition method of accounting whereby Private Daré was considered to have acquired Cerulean for financial reporting purposes because immediately upon completion of the Stock Purchase Transaction,transaction, Private Daré stockholders held a majority of the voting interest of the combined company. Pursuant to business combination accounting, the Company applied the acquisition method, which requires the assets acquired and liabilities assumed be recorded at fair value with limited exceptions. The excess of the purchase price over the assets acquired and liabilities assumed represents goodwill. The goodwill is primarily attributable to the cash and cash equivalents at closing of the transaction of approximately $9.92$9.9 million and the impact of the unamortized fair value of Cerulean stock options granted by Cerulean that were outstanding immediately before the transaction closed of approximately $3.65$3.7 million. The unamortized fair value of the Ceruleansuch stock options relates to an option modification approved on March 19, 2017 that provided for an acceleration of vesting of such options upon a change in control event. Such modification became effective upon the completionclosing of the Stock Purchase Transaction.Cerulean/Private Daré stock purchase transaction. Hence, the unamortized fair value of such stock options is deemed to be part of total purchase consideration and goodwill. Transaction costs associated with the Stock Purchase TransactionCerulean/Private Daré stock purchase transaction of $963,380$0.96 million are included in general and administrative expense. The total purchase price consideration of approximately $24.28$24.3 million represents the fair value of the shares of Cerulean stock issued in connection with the Stock Purchase TransactionCerulean/Private Daré stock purchase transaction and the unamortized fair value of Ceruleanthe stock options assumed on July 19, 2017described above, which was allocated as follows:

The final allocation of the purchase price is dependentdepended on the finalization offinalizing the valuation of the fair value of assets acquired and liabilities assumed. The Company retrospectively recorded purchase price adjustments at the acquisition date to increase current liabilities and current assets by $23,609 and $225,778, respectively, which reduced the original goodwill amount of $12.9 million by $202,169.

The Company tests its goodwill for impairment at least annually as of December 31 and between annual tests if it becomes aware of an event or change in circumstance that would indicate the carrying value may be impaired. The Company tests goodwill for impairment at the entity level because it operates on the basis of a single reporting unit. A goodwill impairment is the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. When impaired, the carrying value of goodwill is written down to fair value. Any excess of the reporting unit goodwill carrying value over the fair value is recognized as impairment loss.

The Company assessed goodwill at December 31, 2017. The Company determined there was an impairment and recognized an impairment charge of approximately $7.5 million in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2017 and reduced the goodwill carrying value from approximately $12.7 million to $5.2 million on its consolidated balance sheet as of December 31, 2017.

The Company assessed goodwill at March 31, 2018, determined there was an impairment and recognized an impairment charge of approximately $5.2 million in the interim consolidated statement of operations and comprehensive loss for the three months ended March 31, 2018. As of March 31, 2018, the goodwill carrying value on the Company’s consolidated balance sheet was written off in its entirety.

Pear Tree Merger

On April 30, 2018, the Company entered into an Agreement and Plan of Merger, the Merger Agreement, with Pear Tree Pharmaceuticals, Inc., or Pear Tree, Daré Merger Sub, Inc., a wholly-owned subsidiary of the Company, or Merger Sub, and two individuals in their respective capacities as Pear Tree stockholders’ representatives. The transactions contemplated by the Merger Agreement closed on May 16, 2018, and as a result, Pear Tree became the Company’s wholly owned subsidiary. The Company acquired Pear Tree to secure the rights to develop DARE-VVA1, a proprietary vaginal formulation of tamoxifen, as a potential treatment for vulvar and vaginal atrophy.

The Company determined that the acquisition of Pear Tree should be accounted for as an asset acquisition instead of a business combination because substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, and therefore, the asset is not considered a business. Transaction costs of approximately $452,000 associated with the merger are included in the Company’s research and development expense.

In accordance with the terms of the Merger Agreement, because the Negative Consideration Amount (as defined below) exceeded the Positive Consideration Amount (as defined below), at the time of the closing of the merger, the excess amount (approximately $132,000) will be offset against future payments otherwise due under the Merger Agreement to certain former and continuing Pear Tree service providers and former holders of Pear Tree’s capital stock, or the Holders, including the potential $75,000 payment due on the one-year anniversary of the closing of the merger. Positive Consideration Amount means the sum of $75,000, and the cash and cash equivalents held by Pear Tree at closing, and Negative Consideration Amount means the sum of (i) certain Pear Tree indebtedness and transaction expenses, (ii) transaction expenses of the stockholders’ representatives, and (iii) amounts payable under Pear Tree’s management incentive plan.

Under the Merger Agreement, the Holders will be eligible to receive, subject to certain offsets, tiered royalties, including customary provisions permitting royalty reductions and offset, based on percentages of annual net sales of certain products subject to license agreements the Company assumed and may differ from the amounts included in these financial statements.a percentage of sublicense revenue. The Company expectsmust also make contingent payments to complete the final allocation as soon as practical but no later than one year fromHolders that are based on achieving certain clinical, regulatory and commercial milestones, which may be paid, in the acquisition date.Company’s sole discretion, in cash or shares of the Company’s common stock.

4. 5. Convertible Promissory Notes

On December 4, 2015, Prior to the Cerulean/Private Daré issuedstock purchase transaction, Private Daré financed its operations through the sale of convertible promissory notes inthat entitled the aggregate principal amount of $500,000. The convertible promissory notes accrueholder to accrued interest at aan annual rate of 8% per annum, are convertible into Private Daré’s next preferred stock financing round and are payable following the delivery of a demand by the holders of a majority in interest of the outstanding principal (including the outstanding principal amount under the convertible promissory notes issued on or after November 18, 2016, as described further below) on or after December 4, 2017.. In the event of a preferred stock financing by Private Daré, all outstanding principal and unpaid interest under the convertible promissory notes will convertwould have converted into the shares of Private Daré’s preferred stock issued in such financing at the price per share paid by the purchasers of such shares and an additional number of shares equal to, 15% to 25% of the outstanding principal and unpaid interest baseddepending on the amounttime of time that has passed between the issuance of the convertible promissory notes and the closing of such preferred stock financing.

During the week of November 18, 2016, Private Daré’s issued additional convertible promissory notes, and amended the terms of certain of the outstanding convertible promissory notes held by persons who purchased additional convertible promissory notes on or after November 18, 2016. These convertible promissory notes (including the convertible promissory notes issued in December 2015 and amended in connection with the sale of additional convertible promissory notes in November 2016) accrue interest at a rate of 8% per annum, are convertible into Private Daré’s next preferred stock financing round and are payable following the delivery of a demand by the holders of a majority in interest of the outstanding principal (including the outstanding principal amount under the convertible promissory notes issued in December 2015) on or after December 4, 2017. In the event of a preferred stock financing, all outstanding principal and unpaid interest under the convertible promissory notes (including the amended convertible promissory notes originally issued in December 2015) will convert into the shares of Private Daré’s preferred stock issued in such financing at the price per share paid by the purchasers of such shares and an additional number of shares equalpurchase, 20% to 40% of the outstanding principal and unpaid interest. In addition, ininterest, or the event of a change of control in which the convertible promissory notes (including the amended convertible promissory notes originally issued in December 2015) are repaid, the holders of such notes are entitled to receive 2 to 5 times the amount of the principal based on the proceeds payable to Private Daré or its stockholders in connection with such change of control. During the week of November 18, 2016,conversion benefit. Private Daré issued convertible promissory notes in the aggregate principal amount of $197,500 and amended the terms of prior notes in the aggregate principal amount of $275,000 to correspond with the terms of such additional convertible promissory notes. On February 17, 2017 the Company issued an additionala convertible promissory note in the principal amount of $100,000.

In connection with the Stock Purchase Transaction, described$100,000 in further detail below, all outstanding convertible promissory notes issued prior to March 31,February 2017 were further amended to provide that such notes will convert into shares of Private Daré common stock at a price per share of $0.18727 (subject to stock splits, combinations and similar events) effective as of immediately prior to the closing of the Stock Purchase Transaction and that the Stock Purchase Transaction would not constitute a change of control, including for purposes of the repayment premium described above.

On July 19, 2017, Private Daré amended the notes to provide that (i) the interest on the notes be subject to compounding on an annual basis as of December 31 of each year and (ii) the number of shares of common stock issuable upon conversion of the convertible promissory notes issued prior to March 31, 2017 will be equal to the outstanding principal amount plus accrued interest through March 31, 2017 divided by $0.18727 (subject to stock splits, combinations and similar events) plus, in the case of the convertible promissory notes issued in December 2015, 25% of the principal amount plus accrued interest through March 31, 2017 divided by $0.18727 (subject to stock splits, combinations and similar events), and, in the case of the convertible promissory notes issued on or after November 18, 2016 (including certain of the amended convertible promissory notes originally issued in December 2015 the holders of which also participated in the November 2016 note offering), 40% of the principal amount plus accrued interest through March 31, 2017 divided by $0.18727 (subject to stock splits, combinations and similar events).

Between April 1, 2017 and June 6, 2017 Private Daré issued additional convertible promissory notes in the aggregate principal amount of $55,000 pursuant to a new note purchase agreement. One note in the principal amount of $20,000 was issued on May 31,between April 1, 2017 and two notes inJune 6, 2017.

In connection with the aggregate principal amount of $35,000 were issued during the first week of June. The new noteCerulean/Private Daré stock purchase agreement provides for one or more additional closings through the earlier to occur of September 28, 2017 and the date on which the Company’s stockholders approve the Stock Purchase Transaction, and limits the aggregate principal amount of thetransaction, all outstanding convertible promissory notes issued thereunderwere amended to $2.0 million. The convertible promissory notes issued pursuant to the May 31, 2017 note purchase agreement bear an annualprovide that their principal amount plus accrued interest rateand taking into account their conversion benefit, would convert into shares of 8% and will automatically convertPrivate Daré common stock immediately prior to the closing of the transaction into theCerulean/Private Daré stock purchase transaction. The number of shares of Private Daré common stock equal to 120% of the original principal amount of each such note divided by $0.38. The interest on such notes will not convert into shares of Private Daré’s common stock. In addition, the holders of such notes issued pursuant to the new note purchase agreement are entitled to convert the value of any then outstanding notes plus unpaid and accrued interest plus an additional 20% of the principal amount of their notes into Qualified and Non-Qualified Equity Financings (with such terms having the same meaning as in the December 2015 note purchase agreement) at the price paid by investors in the Qualified and Non-Qualified Equity Financings. Each purchaser of notes pursuant to the new note purchase agreement also executed and delivered a counterpart signature page to the Stock Purchase Agreement.

Immediately prior to the closing of the Stock Purchase Transaction, allupon conversion of the convertible promissory notes of Private Daré, in aggregateissued before March 31, 2017 was equal to (i) their outstanding principal of, andamount plus accrued interest on, were converted intothrough March 31, 2017 multiplied by the respective conversion benefit, which ranged from 125% to 140%, divided by (ii) $0.18727. The number of shares of common stock of Private Daré andcommon stock issued upon conversion of the convertible promissory notes issued after March 31, 2017 was equal to (i) 120% of their outstanding principal amount, divided by (ii) $0.38.

In connection with the closing of the Cerulean/Private Daré stock purchase transaction, all of the outstanding shares of Private Daré common stock, including the shares issued upon conversion of Private Daréthe above described convertible promissory notes, were exchanged for shares of the Company’s common stock of the Company pursuant toat the exchange ratio definedspecified in the Daré Stock Purchase Agreement. As a result of the conversion, the

The Company recognized aninterest expense of $0 and $316,804 at September 30, 2018 and September 30, 2017, respectively, relating to the beneficial conversion feature present in each of the note agreements.convertible promissory notes.

5. 6. Stock-based Compensation

The 2015 Employee, Director and Consultant Equity Incentive Plan

Prior to the Stock Purchase Transaction,Cerulean/Private Daré stock purchase transaction, the 2015 Employee, Director and Consultant Equity Incentive Plan of Private Daré, (the “2015 Plan”)or the 2015 Private Daré Plan, governed the issuance of incentive stock options, non-qualified stock options, stock grants and stock-basedequity awards to individuals who were thenPrivate Daré employees, officers, non-employee directors or consultants of the Company. Upon closing of the Stock Purchase Transaction, the 2015 Plan was assumed by the Company and each outstanding option to acquire stock of Private Daré that was not exercised prior to the closing of the Stock Purchase Transaction was assumed on the same terms and conditions as were applicable under the 2015 Plan, and became an option to acquire such shares of the Company’s common stock as was equal to the number of Private Daré shares subject to such unexercised option multiplied by the exchange ratio defined in the Stock Purchase Agreement, at a correspondingly adjusted exercise price.  

Stock Options Under the 2015 Plan of Private Daré (the 2015 Plan)

consultants. Options granted under the 2015 Private Daré Plan have terms of ten years from the date of grant unless earlier terminated and generally vest over a three-year period. ThereUpon closing of the Cerulean/Private Daré stock purchase transaction, the Company assumed the 2015 Private Daré Plan and each outstanding option to acquire Private Daré stock that was not exercised prior to the closing. Options to purchase 50,000 shares of Private Daré stock were noassumed. Such options were assumed on the same terms as were applicable to them under the 2015 Private Daré Plan and became an option to purchase such number of shares of the Company’s common stock equal to the number of Private Daré shares subject to such option multiplied by the exchange ratio specified in the Daré Stock Purchase Agreement, at a correspondingly adjusted exercise price. Based on the exchange ratio and after giving effect to the reverse stock split effected in connection with the closing of the Cerulean/Private Daré stock purchase transaction, such options were replaced with options to purchase 10,149 shares of the Company’s common stock, all of which were outstanding as of September 30, 2018.

Private Daré issued 900,000 and 200,000 shares of fully vested restricted stock to non-employees under the 2015 Private Daré Plan during 2015 and 2016, respectively. In connection with the closing of the Cerulean/Private Daré stock purchase transaction, the Company assumed these shares and replaced them with 223,295 restricted shares of the Company’s common stock (after giving effect to the reverse stock split effected in connection with the closing of the Cerulean/Private Daré stock purchase transaction).

No further awards may be granted under the 2015 Private Daré Plan duringfollowing the closing of the Cerulean/Private Daré stock purchase transaction.

2014 Employee Stock Purchase Plan

In March 2014, the Company’s board of directors adopted, and its stockholders approved the 2014 Employee Stock Purchase Plan, or the ESPP, which became effective in April 2014. The ESPP permits eligible employees to enroll in a six-month offering period whereby participants may purchase shares of the Company’s common stock, through payroll deductions, at a price equal to 85% of the closing price of the common stock on the first day of the offering period or on the last day of the offering period, whichever is lower. Purchase dates under the ESPP occur on or about June 30 and December 31 each year. The Company’s board of directors decided not to initiate a new offering period beginning January 1, 2017 and no offering period has been initiated since then. There was no stock-based compensation related to the ESPP for the nine months ended September 30, 20172018 or September 30, 2017.

Amended and effective as of July 19, 2017 following closing ofRestated 2014 Stock Incentive Plan

The Company maintains the Stock Purchase Transaction, no further options may be granted underAmended and Restated 2014 Plan, or the 2015 Plan.

The exercise price of the 50,000 options granted for the year ended December 31, 2016Amended 2014 Plan, which was equal to the estimated fair value of the common stock of Private Daré on the date of grant. On July 19, 2017, these options in Private Daré were assumedapproved by the Company and 10,148 options were outstanding as of September 30, 2017 after adjustments for the Stock Purchase Transaction and Reverse Stock Split.        

Stock Options Under theCompany’s stockholders on July 10, 2018. The Amended 2014 Plan (the Current Plan)

Options granted underwas an amendment and restatement of the Company’s 2014 Stock Incentive Plan, (the “2014 Plan” or “Current Plan”) have termsthe 2014 Plan.

The number of no more than ten years fromshares authorized for issuance under the Amended 2014 Plan is 2,046,885, which is the sum of (a) 1,509,463 shares of common stock plus (b) 537,422 shares of common stock subject to awards granted under the 2014 Plan. The number of authorized shares will increase annually on the first day of each fiscal year until, and including, the fiscal year ending December 31, 2024 by the least of (i) 2,000,000, (ii) 4% of the number of outstanding shares of common stock on such date, or (iii) an amount determined by the Company’s board of grant unless earlier terminated.directors.

TheIn March 2017, the Company’s board of directors approved two modifications to theoutstanding stock options issuedgranted under the 2014 Plan to participants who were providing services to the Company as of March 19, 2017.  The Companythat date. One modification extended the exercise period forof such stock options to two years beyondafter such participant’s termination date, unless the original option termsexercise period absent such modification would be longer. The other modification provided for a longer exercise period, and provided for the accelerationaccelerated vesting of vesting for such stock options upon a change in control event (such as the Stock Purchase Transaction). Modifications to the existing option termsevent. These modifications resulted in unamortized fair value expense of approximately $3.7 million and was recorded as part of the total consideration in the Stock Purchase TransactionCerulean/Private Daré stock purchase transaction (see Note 4). The two modifications resulted in certain options remaining outstanding that would have otherwise expired.

At September 30, 2018, 451,244 shares of common stock were reserved for future issuance under the Amended 2014 Plan, and discussed in Note 3.

As partoptions to purchase 1,605,790 shares of the Company’s common stock granted under the Amended 2014 Plan were outstanding.

Summary of Stock Purchase Transaction, 544,040 Cerulean stock options were assumed by the Company and remain outstanding as of September 30, 2017. Together with the Private Daré options assumed in connection with the Stock Purchase Transaction, the Company had 554,040 options outstanding as of September 30, 2017.Option Activity

A summary ofThe table below summarizes stock option activity with regards tounder the 2015 Plan and the CurrentAmended 2014 Plan, and related information for the nine months ended September 30, 2017 is as follows:

Options outstanding and exercisable at September 30, 2017 had a weighted average contractual life2018. The exercise price of 8.15 years.  As of September 30, 2017, $44,460 represents unamortized stock-based compensation expense which will be amortized over the weighted average period of 1.79 years.

Compensation Expense

The Company has recorded stock-based compensation expense related to the issuance of stock option awards to employees of $6,947 for the three months ended September 30, 2017 with no comparable expense in the same period of the prior year, and $6,953 and $3 forall options granted during the nine months ended September 30, 2017 and 2016, respectively. There were no2018 was equal to the market value of the Company’s common stock on the date of the grant. As of September 30, 2018, unamortized stock-based compensation expense of $1,089,491 will be amortized over a weighted average period of 3.6 years.

Compensation Expense

Total stock-based compensation expense related to stock options granted duringto employees and directors recognized in the three or nine months ended September 30, 2016.consolidated statement of operations is as follows:

The assumptions used in the Black-Scholes option-pricing model for stock options granted to employees and to directors in respect of board services during the three and nine months ended September 30, 20172018 are as follows:

Restricted Stock After the Cerulean/Private Daré Stock Purchase Transaction

The 3.14 million shares of common stock issued in connection with the Stock Purchase TransactionCerulean/Private Daré stock purchase transaction to the shareholders of Private Daré havestockholders were not been registered with the SEC and may only be sold if registered under the Securities Act of 1933, as amended, or pursuant to an exemption from the SEC’s registration requirements. Some of theserequirements thereunder. The shares may becomeheld by non-affiliates became eligible for sale under Rule 144 beginning six months after the dateclosing of the Stock Purchase Transaction Cerulean/Private Daré stock purchase transactionpursuant to Rule 144..

7.Stockholders’ Equity

ATM Sales Agreement

In January 2018, the Company entered into a common stock sales agreement under which the Company may sell up to an aggregate of $10 million in gross proceeds through the sale of shares of common stock from time to time in “at-the-market” equity offerings (as defined in Rule 415 promulgated under the Securities Act of 1933, as amended), including in sales made directly on the Nasdaq Capital Market, or Nasdaq, to or through a market maker or, subject to our prior approval, in negotiated transactions. The Company agreed to pay a commission of up to 3% of the gross proceeds of any common stock sold under this agreement plus certain legal expenses. The common stock sales agreement was amended in August 2018 to refer to the Company’s shelf registration statement on Form S-3 (File No. 333-227019) that was filed to replace the Company’s shelf registration statement on Form S-3 (File No. 333-206396) that expired on August 28, 2018.

During the nine months ended September 30, 2018, the Company issued and sold 375,000 shares under the common stock sales agreement for gross proceeds of approximately $1.0 million and incurred offering expenses of approximately $336,000. All such shares were sold during January and February 2018.

Underwritten Public Offering

In February 2018, the Company closed an underwritten public offering of 5.0 million shares of its common stock and warrants to purchase up to 3.5 million shares of its common stock. Each share of common stock was sold with a warrant to purchase up to 0.70 of a share of the Company’s common stock. The Company granted the underwriter a 30-day overallotment option to purchase up to an additional 750,000 shares of common stock and/or warrants to purchase up to 525,000 shares of common stock.  The underwriter exercised the option with respect to warrants to purchase 220,500 shares of common stock. The Company received gross proceeds of $10.3 million, including the proceeds from the sale of the warrants upon exercise of the underwriter’s overallotment option, and net proceeds of approximately $9.4 million.

Common Stock Warrants

The warrants issued in the February 2018 underwritten offering have an exercise price of $3.00 per share and are exercisable immediately and for five years from issuance. The warrants include a price-based anti-dilution provision, which provides that, subject to certain limited exceptions, the exercise price of the warrants will be adjusted downward if the Company issues or sells (or is deemed to issue or sell) securities at a price that is less than the exercise price in effect immediately prior to such issuance or sale (or deemed issuance or sale). In that case, the exercise price of the warrants will be adjusted to equal the price at which the new securities are issued or sold (or are deemed to have been issued or sold). In addition, subject to certain exceptions, if the Company issues, sells or enters into any agreement to issue or sell securities at a price which varies or may vary with the market price of the shares of the Company’s common stock, the warrant holders have the right to substitute such variable price for the exercise price of the warrant then in effect. The warrants are exercisable only for cash, unless a registration statement covering the shares issued upon exercise of the warrants is not effective, in which case the warrants may be exercised on a cashless basis.

The Company has estimated the fair value of the warrants as of February 15, 2018 to be approximately $3.0 million which has been recorded in equity as of the grant date. The Company early adopted ASU 2017-11 and as a result has recorded the fair value of the warrants as equity (see Note 3).

No warrants were exercised during the nine months ended September 30, 2018 or 2017. The following table summarizesDuring the outstandingnine months ended September 30, 2018, warrants forto purchase 170 shares of the Company’s common stock asexpired. As of September 30, 2017:2018, the Company had these warrants outstanding:

6. 8. Commitments and Contingencies

Operating LeasesLicense and Research Agreements

TheADVA-Tec License Agreement

In March 2017, the Company entered into a leaselicense agreement, that commenced on January 1, 2017 and provided for termination by either party upon 30 days’ notice. In July 2017,or the ADVA-Tec Agreement, with ADVA-Tec, Inc., or ADVA-Tec, under which the Company provided notice of termination of this lease agreement.

The Company entered into a new sublease agreement on July 27, 2017 which provides facilities space as well as other administrative services for a monthly fee of $5,651 that increases 3% annually. The sublease agreement commenced on August 1, 2017 and expires on June 30, 2019. The parties have agreed to negotiate in good faith for an extension of this sublease agreement under similar terms. The Company may terminate the sublease by providing 30 days’ written notice.

Other Legal Contingencies

From time to time, the Company may be involved in various claims arising in the normal course of business. Management is not aware of any material claims, disputes or unsettled matters that would have a material adverse effect on the Company’s results of operations, liquidity or financial position that the Company has not adequately provided for in the accompanying financial statements.

Risk Management

The Company maintains various forms of insurance that the Company’s management believes are adequate to reduce the exposure to these risks to an acceptable level.

Employment Agreements

Certain executive officers are entitled to payments if they are terminated without cause or as a result of a change in control of the Company. Upon termination without cause, and not as a result of death or disability, each officer is entitled to receive a payment of an amount equal to six to twelve months of base salary and to receive continuing health benefits coverage for periods ranging between six to twelve months following the termination of employment or until such officer is covered under a separate plan from another employer. Upon termination other than for cause or for good reason within three months prior or twelve months following a change in control of the Company, each officer will be entitled to receive a payment of an amount equal to nine to eighteen months of base salary and target bonus and to receive continuing health benefits coverage for periods ranging between nine to eighteen months following the termination of employment. In addition, upon a change in control of the Company, each officer’s outstanding unvested options shall fully vest and accelerate subject to the conditions outlined in such officer’s employment agreement.

License and Royalty Agreements

The Company signed an agreement to obtain a license from ADVA-Tec (the “ADVA-Tec Agreement”) forwas granted the exclusive right to develop and commercialize Ovaprene for human contraceptive use worldwide that became effective once the initial funding called for by the ADVA-Tec Agreement was secured.worldwide. ADVA-Tec and its affiliates own issued patents or patent applications covering Ovaprene and control proprietary trade secrets covering the manufacture of Ovaprene. As of the date of these financial statements,this report, this patent portfolio includes 12 issued patents worldwide along withand 8 patent applications, all of which are exclusively licensed to the Company in accordance withfor the human contraceptive use of Ovaprene under the terms of the ADVA-Tec Agreement. The license continues on a country-by-country basis until the later of the life of the licensed patents or the Company’s last commercial sale of Ovaprene. The Company also has a right of first refusal to license these patents and patent applications for purposes of additional indications for Ovaprene. Under

The following is a summary of certain terms of the ADVA-Tec Agreement,Agreement:

•Research and Development. ADVA-Tec will conduct certain research and development work as necessary to allow the Company to seek a Premarket Approval, (“PMA”)or PMA, from the United States Food and Drug Administration, (“FDA”),or the FDA, and will supply the Company with its requirements of Ovaprene for clinical and commercial use on commercially reasonable terms.

Under the ADVA-Tec Agreement, the Company is required to make payments of up to $14.6 million in the aggregate to ADVA-Tec based on the achievement of specified development and regulatory milestones, which include the completion of a successful Postcoital Clinical Trial (“PCT”) Study (as defined in the ADVA-Tec Agreement); approval by the FDA to commence the Phase 3 pivotal human clinical trial; successful completion of the Phase 3 pivotal human clinical trial; the FDA’s acceptance of the filing of a PMA for Ovaprene; the FDA’s approval of the PMA for Ovaprene; Conformite Europeene (“CE”) Marking of Ovaprene in at least three designated European countries; obtaining regulatory approval in at least three designated European countries; and obtaining regulatory approval in Japan.  In addition, after the commercial launch of Ovaprene, the Company is also required to make royalty payments to ADVA-Tec based on aggregate annual net sales of Ovaprene in specified regions, which percentage royalty rate will vary between 1% and 10% and will increase based on various net sales thresholds.  Finally, the Company is also required to make up to $20.0 million in the aggregate in commercial milestone payments to ADVA-Tec upon reaching certain worldwide net sales milestones. 

The Company is obligated tomust use commercially reasonable efforts to develop and commercialize Ovaprene, and must meet certain

minimum spending amounts per year, such amounts totaling $5.0 million in the aggregate over the first three years, to cover such activities until a final PMA is filed, or until the first commercial sale of Ovaprene, whichever occurs first.

The ADVA-Tec license continues on a country-by-country basis until the later of the life of the licensed patents or the Company’s last commercial sale of Ovaprene, and the ADVA-Tec Agreement includes customary termination rights for both parties, and provides the Company the right to terminate with or without cause in whole or on a country-by-country basis upon 60 days prior written notice. In addition, ADVA-Tec may terminate the ADVA-Tec Agreement if the Company fails to do any of the following: (i) satisfy the annual spending obligation described above, (ii) fail to use commercially reasonable efforts to complete all necessary pre-clinical and clinical studies required to support and submit a PMA, (iii) fail to conduct clinical trials as set forth in the development plan that is agreed by Daré and ADVA-Tec, and as may be modified by a joint research committee, where such failure is not caused by events outside of the Company’s reasonable control, or (iv) fail to enroll a patient in the first non-significant risk medical device study or clinical trial as allowed by an institutional review board within six months of the production and release of Ovaprene, where non-enrollment is not caused by events outside of the its reasonable control. In addition, ADVA-Tec may terminate the ADVA-Tec Agreement if the Company develops or commercializes any non-hormonal ring-based vaginal contraceptive device which is deemed competitive to Ovaprene or, in certain limited circumstances, if the Company fails to commercialize Ovaprene in certain designated countries within three years of the first commercial sale of Ovaprene.

•Item 2. Management's Discussion and Analysis oMilestone Payments.f Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements of Daré Bioscience, Inc. and accompanying notes appearing elsewhere in this report. For additional context with which to understand our financial condition and results of operations, see the discussion and analysis included in the discussion and analysis included in our Current Report on Amendment No. 1 to Form 8-K filed with the SEC on October 2, 2017, and the unaudited condensed consolidated financial statements and accompanying notes contained therein. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including but not limited to those identified under “Forward Looking Statements” below, those discussed in Item 1A Risk Factors of Part II of this report and included in “Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017. Ovaprene™ is a trademark licensed by our company. All trademarks, service marks or trade names appearing in this report are the property of their respective owners. Use or display by us of other parties’ trademarks, service marks or trade names is not intended to and does not imply a relationship with, or endorsements or sponsorship of, us by the trademark, service mark or trade name owners.

Overview

Daré Bioscience, Inc. (“Daré,” “we,” “us,” “our,” and “our Company”), a Delaware corporation, was formed on November 28, 2005. The Company and its wholly owned subsidiaries, Daré Bioscience Operations, Inc. and Daré Bioscience Australia Pty LTD, operate in one segment with its principal office in San Diego, California. The Company is a healthcare company committed to the development and commercialization of innovative products in women’s reproductive health. The Company seeks product candidates that expand options, improve outcomes and are easy for women to use. The Company’s first product candidate is Ovaprene, a non-hormonal contraceptive intravaginal ring intended to provide protection over multiple weeks of use, requiring no intervention at the time of intercourse.

Since our inception, we have devoted significant resources to license and prepare for the development of Ovaprene. As of September 30, 2017, Daré had cash of approximately $8.53 million. We will continue to require additional capital to continue our clinical development activities, expand our product portfolio and if successful, to commercialize approved products. Accordingly, we will need to raise substantial additional capital to continue to fund our operations. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our clinical development efforts. Failure to raise capital as and when needed, on favorable terms or at all, would have a negative impact on our financial condition and our ability to advance Ovaprene and to acquire or license the rights to other potential product candidates.

Recent Events

On July 19, 2017, all of the outstanding shares of capital stock of Daré Bioscience Operations, Inc., a private Delaware corporation (“Private Daré”), were purchased by the Company in accordance with the terms of a stock purchase agreement dated as of March 19, 2017 (the “Stock Purchase Agreement”), by and among the Company, Private Daré and the holders of capital stock and securities convertible into capital stock of Private Daré named therein (the “Private Daré Stockholders”). Pursuant to the Stock Purchase Agreement, each Private Daré Stockholder sold its shares of common stock in Private Daré to the Company in exchange for newly issued shares of the Company’s common stock.

On July 19, 2017, the Company also completed the sale of its proprietary Dynamic Tumor Targeting™ Platform (the “Platform”) to Novartis Institutes for BioMedical Research, Inc. (“Novartis”) for $6.0 million.  

Following the closing of the transactions contemplated by the Stock Purchase Agreement (collectively, the “Stock Purchase Transaction”) and the sale of the Platform, the Company changed its name to Daré Bioscience, Inc.  As a result of the Stock Purchase Transaction, Private Daré became a wholly owned subsidiary of Daré Bioscience, Inc. and the Private Daré Stockholders became majority shareholders of Daré Bioscience, Inc. owning approximately 51% of the issued and outstanding shares of the Company’s shares of common stock.

Immediately prior to the closing of the Stock Purchase Transaction, all the convertible promissory notes, principal and accrued interest of Private Daré were converted into shares of common stock of Private Daré at conversion prices of $0.18 and $0.36 per share in accordance with their respective note agreements.  

In addition, the holders of the convertible promissory notes received additional common shares of Private Daré ranging from 20% to 40% of total outstanding principal and accrued interest as of the date of conversion. All outstanding shares of common stock of Private Daré were exchanged for newly-issued shares of common stock of the Company and outstanding stock options of Private Daré were assumed by the Company pursuant to the terms of the Stock Purchase Transaction. For purposes of clarity, we sometimes refer to our business as “Private Daré” when discussing the results of operations and financial condition when we were a private company prior to the Stock Purchase Transaction.

Immediately after the Stock Purchase Transaction, the Company implemented a reverse stock split (“Reverse Stock Split”) at a ratio of one new share for every ten shares of its common stock outstanding. No fractional shares were issued and instead, shareholders received cash for the value of their fractional shares. Following the closing of the Stock Purchase Transaction, the previous Cerulean equity holders of the Company immediately prior to the closing of the Stock Purchase Transaction owned approximately 49% and equity holders of Private Daré owned approximately 51% of the shares of the Company.

Financial Operations Overview

Research and Development Expenses

Research and development expenses represent costs incurred to conduct research and development of Daré’s product candidates. We recognize all research and development costs as they are incurred. Research and development expenses consist primarily of the following:

Daré expects research and development expenses will increase in the future as we advance Ovaprene or other potential product candidates into and through clinical trials and as we pursue regulatory approvals, which will require a significant increased investment in regulatory support and contract manufacturing and inventory build-up related costs. In addition, Daré continues to evaluate opportunities to acquire or in-license other product candidates and technologies, which may result in higher research and development expenses due to license fee and/or milestone payments.

The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in timely developing and achieving regulatory approval for our product candidates. The probability of success of Daré’s product candidates may be affected by numerous factors, including clinical data, competition, intellectual property rights, manufacturing capability and commercial viability. As a result, we are unable to accurately determine the duration and completion costs of development projects or when and to what extent we will generate revenue from the commercialization of any of our product candidates.

General and Administrative Expense

General and administrative expenses consist of personnel costs, facility expenses, expenses for outside professional services, including legal, audit and accounting services. Personnel costs consist of salaries, benefits and stock-based compensation. Facility expenses consist of rent and other related costs. Daré expects to incur additional expenses as a result of increased costs associated with being a public company, including expenses related to compliance with the rules and regulations of the SEC and Nasdaq, additional insurance, investor relations, and other administrative expenses and professional services.

Critical Accounting Policies and Significant Judgments and Estimates

Management’s discussion and analysis of financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. On an ongoing basis, Daré evaluates these estimates and judgments. We base our estimates on historical experience and on various assumptions that Daré believes to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially from these estimates. Daré believes that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

Results of Operations — Comparison of Three Months Ended September 30, 2017 and 2016

The operations presented in the interim condensed consolidated financial statements and accompanying notes for the three months ended September 30, 2017 represent the operations of the Company following the Stock Purchase Transaction. The interim condensed consolidated financial statements and accompanying notes for the three months ended September 30, 2016 represent the operations of Private Daré, making a comparison between periods difficult.

The following table summarizes Daré’s consolidated results for the three months ended September 30, 2017 and 2016, together with the changes in those items in dollars:

General and administrative

General and administrative expenses increased by $1,046,665 to $1,052,628 for the three months ended September 30, 2017 from $5,963 for the three months ended September 30, 2016. The increase was primarily due to $535,003 of legal expense, accounting expense and other expenses incurred in connection with the Stock Purchase Transaction. Daré personnel costs increased $319,197 due to salaries expense in the current period, including bonuses, with no comparable expense in the same period of the prior year. Following the Stock Purchase Transaction, and based upon the market data presented and recommendation of Radford, the Company’s compensation consultant, and upon approval of the Compensation Committee of the Company’s Board of Directors, the Company began paying its newly appointed executives compensation at a level in line with market rates for executive officers of early stage, pre-commercial biopharmaceutical public companies.

Research and development

Research and development expenses for the three months ended September 30, 2017 were $280,793 with no related expenses for the three months ended September 30, 2016. The expenses are all related to Ovaprene development costs in the current period.

Interest income (expense)

Interest expense increased by $286,120 to $296,262 for the three months ended September 30, 2017 from $10,142 for the three months ended September 30, 2016. The increase was primarily due to $316,804 expense associated with the beneficial conversion of the Convertible Promissory Notes.

Results of Operations — Comparison of Nine Months Ended September 30, 2017 and 2016

The operations presented in the interim condensed consolidated financial statements and accompanying notes for the nine months ended September 30, 2017 represent the operations of the Company and give effect to the Stock Purchase Transaction. The interim condensed consolidated financial statements and accompanying notes for the nine months ended September 30, 2016 represent the operations of Private Daré, making a comparison between periods difficult.

The following table summarizes Daré’s consolidated results for the nine months ended September 30, 2017 and 2016, together with the changes in those items in dollars:

General and administrative

General and administrative expenses increased by $1,610,055 to $1,729,338 for the nine months ended September 30, 2017 from $119,283 for the nine months ended September 30, 2016. The increase was primarily due to $963,380 of legal expense, accounting expense and other expenses incurred in connection with the Stock Purchase Transaction. Daré personnel costs increased $326,349 due to salaries expense, including bonuses, in the current period with no comparable expense in the same period of the prior year. Following the Stock Purchase Transaction, and based upon the market data presented and recommendation of Radford, the Company’s compensation consultant, and upon approval of the Compensation Committee of the Company’s Board of Directors, the Company began paying its newly appointed executives compensation at a level in line with market rates for executive officers of early stage, pre-commercial biopharmaceutical public companies.

Research and development

Research and development expenses increased by $239,503 to $312,169 for the nine months ended September 30, 2017 from $72,666 for the nine months ended September 30, 2016. The expenses are primarily due to direct and indirect Ovaprene development costs.

License expense

The license expense of $250,000 for the nine months ended September 30, 2016 related to fees paid to ADVA-Tec for exclusive option related to the Ovaprene technology. For further discussion of the ADVA-Tec Agreement, see Note 6 of Notes to the Condensed Consolidated Financial Statements.

Interest income (expense)

Interest expense increased by $300,028 to $330,233 for the nine months ended September 30, 2017 from $30,205 for the nine months ended September 30, 2016. The increase was primarily due to the $316,804 expense associated with the beneficial conversion of Convertible Promissory Notes.

Liquidity and Capital Resources

As of September 30, 2017, Daré had $8.53 million in cash and cash equivalents and an accumulated deficit of $3.1 million. Daré expects that over time, its general and administrative and research and development expenses will increase. As a result, Daré anticipates that it will continue to incur increasing losses in the foreseeable future. Therefore, Daré will need to raise additional capital to fund its operations, which may include the issuance of public and private equity and debt financings, as well as government grants and strategic alliances.

Plan of Operations and Future Funding Requirements

Our primary uses of capital are, and we expect will continue to be, staff-related expenses, clinical trial costs, contract manufacturing services, third-party clinical research and development services, legal and other regulatory expenses and general overhead costs.

Following the closing on July 19, 2017 of the Stock Purchase Transaction and the sale of our right, title and interest in and to the patent rights, know-how and third-party license agreements relating to the Platform to Novartis for $6.0 million, we believe that our existing resources will be sufficient to fund our planned operations for approximately two years. Based on our current plans and existing cash balances, we believe that our available funds will be sufficient for us to commence and complete a postcoital clinical trial of our lead clinical candidate, Ovaprene during this period. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our available cash resources sooner than we currently expect. We will need to raise additional financing to continue the clinical development of Ovaprene, including a pivotal contraceptive study, and to support new licenses or other rights related to future portfolio candidates. We intend to cover future operating expenses through cash and cash equivalents on hand and through a combination of equity offerings, debt financings, government or other grant funding, collaborations and strategic alliances. Adequate additional financing may not be available to us on acceptable terms, or at all. We can make no assurances that we will be able to raise the cash needed to fund the development of Ovaprene, potential other product candidates and our operating expenses.

Cash Flows

The following table summarizes Daré’s cash flows for the periods indicated:

Net cash used in operating activities

Cash used in operating activities for the nine months ended September 30, 2017 was $1,579,060. Cash used in operating activities included the net loss of $2,371,740, decreased by noncash charges of $6,953 and non-cash interest of $$316,804. A major component reducing operating cash was a $224,433 increase of prepaid expenses and other current assets, offset by a $659,223 increase accounts payable and accrued expenses.

Cash used in operating activities for the nine months ended September 30, 2016 was $205,347. Cash used in operating activities included the net loss of $472,154, decreased by noncash charges of $3. A major component reducing operating cash was a $13,401 decrease in accounts payable and accrued expenses, offset by a $250,000 decrease in other receivables.

Net cash provided by investing activities

Cash provided by investing activities for the nine months ended September 30, 2017 was $9.9 million, consisting of cash acquired through the Stock Purchase Transaction. No cash was provided by investing activities for the nine months ended September 30, 2016.

Net cash provided by financing activities

Cash provided by financing activities for the nine months ended September 30, 2017 was $155,000, consisting of proceeds from issuance of Convertible Promissory Notes.

No cash was provided by financing activities for the nine months ended September 30, 2016.

Future Funding Requirements

We have not generated any revenue to date, and we cannot anticipate if, and when we will generate any revenue. Future product revenue will require us to obtain regulatory approvals in order to sell any products. Revenue from potential strategic partnerships will also require us to advance clinical candidates to meaningful development milestones. At the same time, we expect our expenses to increase in connection with the postcoital clinical study of Ovaprene and any other development activities we may undertake in the future.  We also expect to incur additional costs given the requirements of operating as a public company.

As of September 30, 2017, we had cash of approximately $8.53 million. We will continue to require additional capital to continue to fund our operations, our clinical development activities, expand our product portfolio and if successful, to commercialize any approved products. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of clinical development efforts. Failure to raise capital as and when needed, on favorable terms or at all, would have a negative impact on our financial condition.

We intend to cover our future operating expenses through cash and cash equivalents on hand and through a combination of equity offerings, debt financings, government or other grant funding, collaborations and strategic alliances. To the extent that we raise additional capital through the issuance of additional equity or convertible debt securities, the ownership interest of our current stockholders will be diluted.

License and Royalty Agreements

We signed an agreement to obtain a license from ADVA-Tec (the “ADVA-Tec Agreement”) for the exclusive right to develop and commercialize Ovaprene for human contraceptive use worldwide that became effective once the initial funding called for by the ADVA-Tec Agreement was secured. ADVA-Tec and its affiliates own issued patents or patent applications covering Ovaprene, and control proprietary trade secrets covering the manufacture of Ovaprene. As of the date of these financial statements, this patent portfolio includes 12 issued patents worldwide, along with eight patent applications, all of which in accordance with the terms of the ADVA-Tec Agreement are exclusively licensed to the Company. We also have a right of first refusal to license these patents and patent applications for purposes of additional indications for Ovaprene. Under the ADVA-Tec Agreement, ADVA-Tec will conduct certain research and development work as necessary to allow us to seek a Premarket Approval (“PMA”) from the FDA, and will supply us with our requirements of Ovaprene for clinical and commercial use on commercially reasonable terms. 

Under the ADVA-Tec Agreement, we are required tomust make payments of up to $14.6 million in the aggregate to ADVA-Tec based on the achievement of specified development and regulatory milestones, which include the completion of a successful Postcoital Clinical Trial Study (as defined in the ADVA-Tec Agreement); approval by the FDA to commence the Phase 3 pivotal human clinical trial; successful completion of the Phase 3 pivotal human clinical trial; the FDA’s acceptance of the filing of a PMA for Ovaprene; the FDA’s approval of the PMA for Ovaprene; Conformite Europeeneobtaining Conformité Européenne Marking of Ovaprene in at least three designated European countries; obtaining regulatory approval in at least three designated European countries; and obtaining regulatory approval in Japan. In addition, afterThe Company is also required to make up to $20 million in the aggregate in commercial milestone payments to ADVA-Tec upon reaching certain worldwide net sales milestones. Because these milestone payments depend upon the successful progress of the Company’s product development programs, the Company cannot estimate with certainty when these payments will occur, if ever.

•Royalty Payments. After the commercial launch of Ovaprene, we are alsothe Company is required to make royalty payments to ADVA-Tec based on aggregate annual net sales of Ovaprene in specified regions, which percentage royalty rate will vary between 1% and 10% and will increase based on various net sales thresholds.  Finally, we are also required to make up to $20.0 million in the aggregate in commercial milestone payments to ADVA-Tec upon reaching certain worldwide net sales milestones. 

We are obligated to use commercially reasonable efforts to develop and commercialize Ovaprene, and must meet certain minimum spending amounts per year, such amounts totaling $5.0 million in the aggregate over the first three years, to cover such activities until a final PMA is filed, or until the first commercial sale of Ovaprene, whichever occurs first. 

•Termination Rights.The ADVA-Tec license continues on a country-by-country basis until the later of the life of the licensed patents or the Company’s last commercial sale of Ovaprene, and the ADVA-Tec Agreement includes customary termination rights for both parties and provides usthe Company the right to terminate with or without cause in whole or on a country-by-country basis upon 60 days prior written notice. In addition, ADVA-Tec may terminate the ADVA-Tec Agreementagreement if we failthe Company fails to do any of the following: (i) satisfy the annual spending obligation described above, (ii) fail to use commercially reasonable efforts to complete all necessary pre-clinical and clinical studies required to support and submit a PMA, (iii) fail to conduct clinical trials as set forth in the development plan that is agreed by Daréthe Company and ADVA-Tec, and as may be modified by a joint research committee, where such failure is not caused by events outside of ourthe Company’s reasonable control, or (iv) fail to enroll a patient in the first non-significant risk medical device study or clinical trial as allowed by an institutional review board within six months of the production and release of Ovaprene, where non-enrollment is not caused by events outside of the ourits reasonable control. In addition, ADVA-Tec may terminate the ADVA-Tec Agreement if we developthe Company develops or commercializecommercializes any non-hormonal ring-based vaginal contraceptive device which is deemed competitive to Ovaprene or, in certain limited circumstances, if we failthe Company fails to commercialize Ovaprene in certain designateddesignated countries within three years of the first commercial sale of Ovaprene.

SST License and Collaboration Agreement

In February 2018, the Company entered into a license and collaboration agreement, or the SST License Agreement, with Strategic Science & Technologies-D, LLC and Strategic Science & Technologies, LLC, referred to collectively as SST. Under the SST License Agreement, the Company was required to secure an investment of at least $10 million by March 31, 2018, which it did. The above descriptionSST License Agreement provides the Company with an exclusive, royalty-bearing, sublicensable license to develop and commercialize, in all countries and geographic territories of the ADVA-Tecworld, for all indications for women related to female sexual dysfunction and/or female reproductive health, including treatment of female sexual arousal disorder, or the Field of Use, SST’s topical formulation of Sildenafil Cream, 3.6% as it exists as of the effective date of the SST License Agreement, or any other topically applied pharmaceutical product containing sildenafil or a salt thereof as a pharmaceutically active ingredient, alone or with other active ingredients, but specifically excluding any product containing ibuprofen or any salt derivative of ibuprofen, or the Licensed Products.

The following is qualifieda summary of certain terms of the SST License Agreement:

•Invention Ownership. The Company retains rights to inventions made by its employees, SST retains rights to inventions made by its employees, and each party shall own a 50% undivided interest in all joint inventions.

•Joint Development Committee. The parties will collaborate through a joint development committee that will determine the strategic objectives for, and generally oversee, the development efforts of both parties under the SST License Agreement.

•Development. The Company must use commercially reasonable efforts to develop the Licensed Products in the Field of Use in accordance with a development plan in the SST License Agreement, and to commercialize the Licensed Products in the Field of Use. The Company is responsible for all reasonable internal and external costs and expenses incurred by SST in its entiretyperformance of the development activities it must perform under the SST License Agreement.

•Royalty Payments. SST will be eligible to receive tiered royalties based on percentages of annual net sales of Licensed Products in the single digits to the mid double digits, subject to customary royalty reductions and offsets, and a percentage of sublicense revenue.

•Milestone Payments. SST will be eligible to receive payments ranging from $0.5 million to $18.0 million on achieving certain clinical and regulatory milestones in the U.S. and worldwide, and an additional $10.0 million to $100 million upon achieving certain commercial milestones. If the Company enters into strategic development or distribution partnerships related to the Licensed Products, additional milestone payments would be due to SST.

•License Term. The Company’s license received under the SST License Agreement continues on a country-by-country basis until the later of 10 years from the date of the first commercial sale of such Licensed Product or the expiration of the last valid claim of patent rights covering the Licensed Product in the Field of Use. Upon expiration (but not termination) of the SST License Agreement in a particular country, the Company will have a fully paid-up license under the licensed intellectual property to develop and commercialize the applicable Licensed Products in the applicable country on a non-exclusive basis.

•Termination. Each party has customary rights to terminate the SST License Agreement in the event of material uncured breach by the full textother party. In addition: (1) prior to receipt of approval by a regulatory authority necessary for commercialization of a Licensed Product in the corresponding jurisdiction, including New Drug Application Approval, or NDA Approval, the Company may terminate the SST License Agreement without cause upon 90 days prior written notice to SST; (2) following receipt of approval by a regulatory authority necessary for commercialization of a Licensed Product in the corresponding jurisdiction, including NDA Approval, the Company may terminate the SST License Agreement without cause upon one 180 days prior written notice; and (3) SST may terminate the SST License Agreement with respect to the applicable Licensed Product(s) in the applicable country(ies) upon 30 days’ notice to the Company if the Company fails to use commercially reasonable efforts to perform development activities in substantial accordance with the development plan and does not cure such failure within 60 days of receipt of SST’s notice thereof.

Orbis Development and Option Agreement

In March 2018, the Company entered into an exclusive development and option agreement, or the Orbis Agreement, with Orbis Biosciences, or Orbis, for the development of long-acting injectable etonogestrel contraceptive with 6- and 12-month durations (ORB-204 and ORB-214, respectively). The Company agreed to pay Orbis $300,000 to conduct the first stage of development work, Stage 1, as follows: $150,000 upon signing the Orbis Agreement, $75,000 at the 50% completion point, not later than 6 months following the date the Orbis Agreement was signed, and $75,000 upon delivery by Orbis of the 6-month batch, not later than 11 months following the date the Orbis Agreement was signed. Upon Orbis successfully completing Stage 1 of the development program and achieving the predetermined target

milestones for Stage 1, the Company will have 90 days to instruct Orbis whether to commence the second stage of development work, Stage 2. Should the Company execute its option to proceed to Stage 2, it will have to provide additional funding to Orbis for such activities.

Pre-clinical studies for the 6- and 12-month formulations have been completed, including establishing pharmacokinetics and pharmacodynamics profiles. The collaboration with Orbis will continue to advance the program through formulation optimization with the goal of achieving sustained release over the target time period.

The Orbis Agreement provides the Company with an option to enter into a license agreement for ORB-204 and ORB-214 should development efforts be successful.

Juniper Pharmaceuticals - License Agreement

In April 2018, the Company entered into an Exclusive License Agreement, or the Juniper License Agreement, with Juniper Pharmaceuticals, Inc., or Juniper, under which Juniper granted the Company (a) an exclusive, royalty-bearing worldwide license under certain patent rights, either owned by or exclusively licensed to Juniper, to make, have made, use, have used, sell, have sold, import and have imported products and processes; and (b) a copynon-exclusive, royalty-bearing worldwide license to use certain technological information owned by Juniper to make, have made, use, have used, sell, have sold, import and have imported products and processes. The Company is entitled to sublicense the rights granted to it under the Juniper License Agreement.

The following is a summary of certain terms of the Juniper License Agreement:

•Upfront Fee. The Company paid a $250,000 non-creditable upfront license fee to Juniper in connection with the execution of the Juniper License Agreement.

•Annual Maintenance Fee. The Company will pay an annual license maintenance fee to Juniper on each anniversary of the date of the Juniper License Agreement, the amount of which will be $50,000 for the first two years and $100,000 thereafter, and which will be creditable against royalties and other payments due to Juniper in the same calendar year but may not be carried forward to any other year.

•Milestone Payments. The Company must make potential future development and sales milestone payments of up to $43.8 million (up to $13.5 million in clinical and regulatory milestones and up to $30.3 million in sales milestones) for each product or process covered by the licenses granted under the Juniper License Agreement.

•Royalty Payments. During the royalty term, the Company will pay Juniper mid-single-digit to low double-digit royalties based on worldwide net sales of products and processes covered by the licenses granted under the Juniper License Agreement. In lieu of such royalty payments, the Company will pay Juniper a low double-digit percentage of all sublicense income that the Company receives for the sublicense of rights under the Juniper License Agreement to a third party. The royalty term, which is determined on a country-by-country basis and product-by-product basis (or process-by-process basis), begins with the first commercial sale of a product or process in a country and terminates on the latest of (1) the expiration date of the last valid claim within the licensed patent rights with respect to such product or process in such country, (2) 10 years following the first commercial sale of such product or process in such country, and (3) when one or more generic products for such product or process are commercially available in such country, except that if there is no such generic product by the 10th year following the first commercial sale in such country, then the royalty term will terminate on the 10-year anniversary of the first commercial sale in such country.

•Efforts. The Company must use commercially reasonable efforts to develop and make at least one product or process available to the public, which efforts include achieving specific diligence requirements by specific dates specified in the Juniper License Agreement.

•Term. Unless earlier terminated, the term of the Juniper License Agreement will continue on a country-by-country basis until the later of (1) the expiration date of the last valid claim within such country, or (2) 10 years from the date of first commercial sale of a product or process in such country. Upon expiration (but not early termination) of the Juniper License Agreement, the licenses granted thereunder will convert automatically to fully-paid irrevocable licenses. Juniper may terminate the Juniper License Agreement (1) upon 30 days’ notice for the Company’s uncured breach of any payment obligation under the Juniper License Agreement, (2) if the Company fails to maintain required insurance, (3) immediately upon the Company’s insolvency or the making of an assignment for the benefit of the Company’s creditors or if a bankruptcy petition is filed for or against the Company, which petition is not dismissed within 90 days, or (4) upon 60 days’ notice for any uncured material breach by the Company of any of its other obligations under the Juniper License Agreement. The Company may terminate the Juniper License Agreement on a country-by-country basis for any reason by giving 180 days’ notice (or 90 days’ notice if such termination occurs prior to receipt of marketing approval in the United States). If Juniper terminates the Juniper License Agreement for the reason described in clause (4) above or if the Company terminates the Juniper License Agreement, Juniper will have full access including the right to use and reference all product data generated during the term of the Juniper License Agreement that is owned by the Company.

Pear Tree Acquisition

The Company may be required to make certain royalty and milestone payments under the Merger Agreement (see Note 4).

Operating Lease

The Company entered into a facility lease agreement that commenced on July 1, 2018 for 3,169 square feet of office space for its corporate headquarters. The term of the lease is 37 months and terminates on July 31, 2021. The Company has the option to extend the term of the lease for one year. The gross monthly base rent is $8,873, which will increase approximately 4% per year, subject to certain future adjustments. The base rent was abated during the second month of the lease. Future minimum lease payments at September 30, 2018 total $315,727. The Company recognizes rent expense by the straight-line method over the lease term. As of September 30, 2018, deferred rent totaled $9,292.

9. Grant Award

In April 2018, the Company received a Notice of Award for the first $224,665 of the anticipated $1.9 million in grant funding from the Eunice Kennedy Shriver National Institute of Child Health and Human Development, a division of the National Institutes of Health.  The award will be applied to clinical development efforts supporting Ovaprene. The balance of the award is contingent upon, among other matters, assessment of the results of the first phase of the research and availability of funds. The Company must incur and track expenses eligible for reimbursement under the award and submit a detailed accounting of such expenses to receive payment. As of September 30, 2018, the Company has received payments totaling approximately $144,000. The funding is recognized in the statement of operations as Exhibit 10.1a reduction to research and development activities as the related costs are incurred to meet those obligations over the period. At September 30, 2018, the Company has recorded a receivable of approximately $69,000 for expenses believed to be eligible for reimbursement incurred through September 30, 2018.

10. Net Loss Per Share

The Company computes basic net loss per share using the weighted average number of common shares outstanding during the period. Diluted net income per share is based upon the weighted average number of common shares and potentially dilutive securities (common share equivalents) outstanding during the period. Common share equivalents outstanding, determined using the treasury stock method, are comprised of shares that may be issued under outstanding options and warrants to purchase shares of the Company’s common stock. Common share equivalents are excluded from the diluted net loss per share calculation if their effect is anti-dilutive.

The following potentially dilutive outstanding securities were excluded from diluted net loss per common share for the period indicated because of their anti-dilutive effect: