DARE · Read the filing

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto included in Part II, Item 8 of this report. This following discussion includes forward-looking statements. See PART I "CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS,” above. Forward-looking statements are not guarantees of future performance and our actual results may differ materially from those currently anticipated and from historical results depending upon a variety of factors, including, but not limited to, those discussed in Part I, Item 1A of this report under the heading “Risk Factors,” which are incorporated herein by reference.

Business Overview

We are a biopharmaceutical company committed to advancing innovative products for women’s health. We are driven by a mission to identify, develop and bring to market a diverse portfolio of differentiated therapies that prioritize women's health and well-being, expand treatment options, and improve outcomes, primarily in the areas of contraception, vaginal health, reproductive health, menopause, sexual health and fertility. Our business strategy is to in-license or otherwise acquire the rights to differentiated product candidates in our areas of focus, some of which have existing clinical proof-of-concept data, to take those candidates through mid to late-stage clinical development or regulatory approval, and to establish and leverage strategic collaborations to achieve commercialization. We and our wholly owned subsidiaries operate in one business segment.

Our first product, XACIATO [zah-she-AH-toe] (clindamycin phosphate) vaginal gel, 2%, was approved by the FDA in December 2021 as a single-dose prescription medication for the treatment of bacterial vaginosis in female patients 12 years of age and older. In March 2022, we entered into an exclusive global license agreement with an affiliate of Organon & Co., Organon International GmbH, or Organon, to commercialize XACIATO. Accordingly, our potential future revenue from the commercialization of XACIATO will consist of royalties based on net sales and

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milestone payments from Organon. We anticipate the first commercial sale of XACIATO in the U.S. in the first half of 2023.

Our product pipeline includes diverse programs that target unmet needs in women's health in the areas of contraception, vaginal health, reproductive health, menopause, sexual health and fertility, and aim to expand treatment options, enhance outcomes and improve ease of use for women. We are primarily focused on progressing the development of our existing portfolio of product candidates. However, we are also exploring opportunities to expand our portfolio by leveraging assets to which we hold rights or obtaining rights to new assets, with continued focus solely on women's health.

Our current portfolio includes three product candidates in advanced clinical development:

•Ovaprene®, a hormone-free, monthly contraceptive;

•Sildenafil Cream, 3.6%, a proprietary cream formulation of sildenafil for topical administration to the vulva and vagina for the treatment of female sexual arousal disorder; and

•DARE-HRT1, a combination bio-identical estradiol and progesterone intravaginal ring, for the treatment of menopausal symptoms, including vasomotor symptoms, as part of hormone therapy following menopause;

Our portfolio also includes six product candidates in Phase 1 or Phase 1/2 clinical development or that we believe are Phase 1-ready:

•DARE-VVA1, a proprietary formulation of tamoxifen for intravaginal administration being developed to treat moderate to severe vulvar vaginal atrophy in women with or at risk for hormone-receptor positive (HR+) breast cancer;

•DARE-PDM1, a proprietary hydrogel formulation of diclofenac, a nonsteroidal anti-inflammatory drug, for vaginal administration as a treatment for primary dysmenorrhea;

•DARE-204 and DARE-214, injectable formulations of etonogestrel designed to provide contraception over 6-month and 12-month periods, respectively;

•DARE-FRT1, an intravaginal ring containing bio-identical progesterone for broader luteal phase support as part of an in vitro fertilization treatment plan; and

•DARE-PTB1, an intravaginal ring containing bio-identical progesterone for the prevention of preterm birth.

In addition, our portfolio includes four pre-clinical stage product candidates:

•DARE-LARC1, a contraceptive implant delivering levonorgestrel with a woman-centered design that has the potential to be a long-acting, yet convenient and user-controlled contraceptive option;

•DARE-GML, an intravaginally-delivered potential multi-target antimicrobial agent formulated with glycerol monolaurate (GML), which has shown broad antimicrobial activity, killing bacteria and viruses;

•DARE-LBT, a novel hydrogel formulation for vaginal delivery of live biotherapeutics to support vaginal health; and

•DARE-RH1, a novel approach to non-hormonal contraception for both men and women by targeting the CatSper ion channel.

The product candidates we are developing will require review and approval from the FDA, or a comparable foreign regulatory authority, prior to being marketed or sold. See ITEM 1. "BUSINESS," in Part I of this report for additional information regarding our product and product candidates.

Our primary operations have consisted of research and development activities to advance our portfolio of product candidates through late-stage clinical development and/or regulatory approval. We expect our research and development expenses will continue to represent the majority of our operating expenses for at least the next twelve months. In 2023, we expect to focus our resources on advancement of Ovaprene, Sildenafil Cream, 3.6%, DARE-HRT1 and our other product candidates that have reached the human clinical study development phase. In addition, we expect to incur significant research and development expenses for the DARE-LARC1 program for the next several

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years, but we also expect such expenses will be supported by non-dilutive funding provided under a grant agreement we entered into in June 2021.

The process of developing and obtaining regulatory approvals for prescription drug and drug/device products in the United States and in foreign jurisdictions is inherently uncertain and requires the expenditure of substantial financial resources without any guarantee of success. As discussed below, we will need to raise substantial additional capital to continue to fund our operations and execute our current business strategy. To the extent we receive regulatory approvals, such as the FDA’s approval of XACIATO, the commercialization of any product and compliance with subsequently applicable laws and regulations requires the expenditure of further substantial financial resources without any guarantee of commercial success. The amount of post-approval financial resources required for commercialization and the potential revenue we may receive from sales of any product will vary significantly depending on many factors, including whether, and the extent to which, we establish our own sales and marketing capabilities and/or enter into and maintain commercial collaborations with third parties with established commercialization infrastructure. We are also subject to a number of other risks common to biopharmaceutical companies, including, but not limited to, dependence on key employees, reliance on third-party collaborators and service providers, being able to develop commercially viable products in a timely and cost-effective manner, dependence on intellectual property we own or in-license and the need to protect that intellectual property and maintain those license agreements, uncertainty of market acceptance of products, uncertainty of third-party payor coverage, pricing and reimbursement for products, rapid technology change, intense competition, compliance with government regulations, product liability, and exposure to cybersecurity threats and incidents.

The COVID-19 pandemic remains an evolving and uncertain risk to our business, operating results, financial condition and stock price. To date, we believe the pandemic contributed to a slower than expected initial pace of enrollment in our exploratory Phase 2b clinical study of Sildenafil Cream, 3.6% and delays in commencement of clinical studies and nonclinical testing for more than one of our earlier stage clinical programs, but it has not had a material adverse effect on our business as a whole. Future impacts may include delay or disruption of our clinical trials, including as a result of potential constraints or disruptions in the supply chains for our product candidates. Continued uncertainty regarding the duration and impact of the pandemic on the U.S. and global economies, healthcare systems, workplace environments and capital markets, preclude any prediction as to the ultimate effect of the pandemic on our business. See the risk factor in Part I, Item 1A of this report titled, Business interruptions resulting from the COVID-19 pandemic or future public health crises, natural disasters or telecommunication and electrical failures may materially and adversely affect our business, operating results and financial condition.

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Recent Events

Termination of 2021 ATM Sales Agreements

In April and October 2021, we entered into common stock sales agreements with SVB Securities LLC relating to the offering and sale of shares of our common stock from time to time in ATM offerings through SVB Securities, acting as sales agent. In March 2023, we provided notice to SVB Securities to terminate both agreements, and the agreements terminated on March 30, 2023. We are exploring entering into a new sales agreement for an ATM offering, but there can be no assurance that we will establish a new ATM facility.

Initiation of Phase 1 Study of DARE-PDM1

As discussed in ITEM 1. "BUSINESS," in Part I of this report, in February 2023, we announced the start of a Phase 1 study of DARE-PDM1 which is being conducted by our wholly owned subsidiary in Australia.

Positive Topline Data from DARE-HRT1 Phase 1/2 Clinical Study

As discussed in ITEM 1. "BUSINESS," in Part I of this report, in January 2023, we announced topline data from our Phase 1/2 clinical study of DARE-HRT1, as well as plans to progress DARE-HRT1 directly into a Phase 3 clinical study to support an NDA for DARE-HRT1 for the treatment of moderate to severe vasomotor symptoms due to menopause.

Receipt of Payment Under 2021 DARE-LARC1 Grant Agreement

In December 2022, we received a grant payment of approximately $4.4 million under our June 2021 grant agreement with the Bill & Melinda Gates Foundation, or the Foundation. We are eligible to receive up to approximately $49.0 million in the aggregate of non-dilutive funding under this agreement. As of the date of this report, we have received payments totaling approximately $23.9 million under the agreement. Future grant payments are contingent upon the DARE-LARC1 program's achievement of development and reporting milestones specified in the agreement.

Receipt of Grant to Develop Novel Hydrogel Formulation for Vaginal Delivery of Live Biotherapeutics to Support Vaginal Health

In November 2022, we entered into a grant agreement with the Foundation for approximately $585,000 to support activities related to development of a vaginal thermosetting gel formulation for the delivery of live biotherapeutics that can be reconstituted at the point of care. We received payment of the full amount of the grant, and DARE-LBT program activities are being funded by this grant.

Positive Topline Data from DARE-VVA1 Phase 1/2 Clinical Study

As discussed in ITEM 1. "BUSINESS," in Part I of this report, in November 2022, we announced topline data from our Phase 1/2 clinical study of DARE-VVA1.

Subject Screening Completed for Exploratory Phase 2b RESPOND Study of Sildenafil Cream, 3.6%

As discussed in ITEM 1. "BUSINESS," in Part I of this report, in November 2022, we announced that subject screening for the exploratory Phase 2b RESPOND clinical study of Sildenafil Cream, 3.6% was complete and that topline data are targeted for the second quarter of 2023.

Ovaprene IDE Application Approval for Phase 3 Clinical Study

As discussed in ITEM 1. "BUSINESS," in Part I of this report, in October 2022, we announced that the FDA approved our Investigational Device Exemption (IDE) application for a single arm, open-label pivotal contraceptive efficacy study of Ovaprene.

Financial Overview

Revenue

To date we have generated $10.0 million in revenue, all of which represents the upfront payment under our license agreement with Organon to commercialize XACIATO, which is recognized as license fee revenue.In the future, we may generate revenue from royalties and commercial milestones based on the net sales of XACIATO, from product sales of other approved products, if any, and from license fees, milestone payments, research and

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development payments in connection with strategic collaborations. Our ability to generate such revenue, with respect to XACIATO, will depend on the extent to which its commercialization is successful, and with respect to our product candidates, will depend on their successful clinical development, the receipt of regulatory approvals to market such product candidates and the eventual successful commercialization of products. If the commercialization of XACIATO is not successful or we fail to complete the development of our product candidates in a timely manner, or to receive regulatory approval for such product candidates, our ability to generate future revenue and our results of operations would be materially adversely affected.

Research and Development Expenses

Research and development expenses include research and development costs for our product candidates and transaction costs related to our acquisitions. We recognize all research and development expenses as they are incurred. Research and development expenses consist primarily of:

•expenses incurred under agreements with clinical trial sites and consultants that conduct research and development and regulatory affairs activities on our behalf;

•laboratory and vendor expenses related to the execution of nonclinical studies and clinical trials;

•contract manufacturing expenses, primarily for the production of clinical supplies;

•transaction costs related to acquisitions of companies, technologies and related intellectual property, and other assets;

•milestone payments due to third parties under acquisition and in-licensing arrangements we incur, or the incurrence of which we deem probable; and

•internal costs associated with activities performed by our research and development organization and generally benefit multiple programs.

We recognize the Australian Research and Development Tax Incentive Program, or the Tax Incentive, as a reduction of research and development expense. The amounts are determined based on our eligible research and development expenditures and are non-refundable, provided that in order to qualify for the Tax Incentive the filing entity must have revenue of less than AUD $20.0 million during the tax year for which a reimbursement claim is made and cannot be controlled by an income tax exempt entity. The Tax Incentive is recognized when there is reasonable assurance that the Tax Incentive will be received, the relevant expenditure has been incurred, and the amount can be reliably measured or reliably estimated.

In 2022, our research and development expenses consisted primarily of costs associated with the continued development of Ovaprene and Sildenafil Cream 3.6%. We expect research and development expenses to increase in the future as we continue to invest in the development of and seek regulatory approval for our clinical-stage and Phase 1-ready product candidates and as any other potential product candidates we may develop are advanced into and through clinical trials in the pursuit of regulatory approvals. Such activities will require a significant increase in investment in regulatory support, clinical supplies, inventory build-up related costs, and the payment of success-based milestones to licensors. In addition, we continue to evaluate opportunities to acquire or in-license other product candidates and technologies, which may result in higher research and development expenses due to, among other factors, license fee and/or milestone payments.

Conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. We may not obtain regulatory approval for any product candidate on a timely or cost-effective basis, or at all. The probability of success of our product candidates may be affected by numerous factors, including clinical results and data, competition, intellectual property rights, manufacturing capability and commercial viability. As a result, we cannot 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.

License Fee Expenses

License fee expenses consist of up-front license fees and annual license fees due under our in-licensing arrangements.

General and Administrative Expenses

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.

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Recently Issued Accounting Standards

From time to time, the Financial Accounting Standards board, or FASB, or other standard setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update. We have implemented all new accounting pronouncements that are in effect and that may impact our financial statements. We have evaluated recently issued accounting pronouncements and determined that there is no material impact on our financial position or results of operations.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements that we prepared in accordance with accounting principles generally accepted in the United States. Preparing these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses, and related disclosures. On an ongoing basis, we evaluate these estimates and judgments. We base our estimates on historical experience and on various assumptions we believe 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. Historically, revisions to our estimates have not resulted in a material change to our financial statements. While our significant account policies are described in more detail in Note 2 to our consolidated financial statements included herein, we believe that the following accounting policies are most important to the portrayal of our financial condition and results of operations and require management's most difficult, subjective and complex judgments.

Revenue Recognition

Under Accounting Standards Codification Topic 606, or ASC 606, we recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. To determine revenue recognition for contracts with customers, we perform five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy our performance obligations. At contract inception, we assess the goods or services agreed upon within each contract, assess whether each good or service is distinct, and determines those that areperformance obligations. We then recognizes as revenue the amount of the transaction price allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

In a contract with multiple performance obligations, we develop estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each performance obligation, which determines how the transaction price is allocated among the performance obligations. The estimation of the stand-alone selling price(s) may include estimates regarding forecasted revenues or costs, development timelines, discount rates, and probabilities of technical and regulatory success. We evaluate each performance obligation to determine if it can be satisfied at a point in time or over time. Any change made to estimated progress towards completion of a performance obligation and, therefore, revenue recognized will be recorded as a change in estimate. In addition, variable consideration must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price.

Collaboration Revenues. We enter into collaboration and licensing agreements under which we out-license certain rights to our products or product candidates to third parties. The terms of these arrangements typically include payment of one or more of the following to us: non-refundable, up-front license fees; development, regulatory and/or commercial milestone payments; and royalties on net sales of licensed products. To date, we have not recognized any collaboration revenues.

License Fee Revenue. If the license to our intellectual property is determined to be distinct from the other performance obligations identified in a contract, we recognize revenues from non-refundable, upfront fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, upfront fees. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. To date, we have recognized $10.0 million in license fee revenue, all of which represents the upfront payment due under our license agreement for XACIATO.

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recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, we have not recognized any royalty revenue.

Product Supply. Arrangements that include a promise for future supply of product for commercial supply at the licensee’s discretion are generally considered as options. We assess if these options provide a material right to the licensee and if so, they are accounted for as separate performance obligations. We evaluate whether we are the principal or agent in the arrangement based on the degree we control the specified product at any time before transfer to the customer. If we are in the capacity of a principal, revenues are recognized on a gross basis. If we are in the capacity of an agent, revenues are recognized on a net basis. To date, we have not recognized any revenue associated with product supply arrangements.

Milestones. At the inception of each arrangement in which we are a licensor and that includes developmental, regulatory or commercial milestones, we evaluate whether achieving the milestones is considered probable and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments not within our control, such as where achievement of the specified milestone depends on activities of a third party or regulatory approval, are not considered probable of being achieved until the specified milestone occurs. To date, we have not recognized any milestone revenue.

Stock-Based Compensation

The compensation cost for all stock-based awards is measured at the grant date, based on the fair value of the award (determined using a Black-Scholes option pricing model), and is recognized as an expense over the requisite service period (generally the vesting period of the award). Determining the fair value of stock-based awards at the grant date requires significant estimates and judgments, including estimating the market price volatility of our common stock, future stock option exercise behavior and requisite service periods. Due to our limited history of stock option exercises we applied the simplified method prescribed by SEC Staff Accounting Bulletin 110, Share-Based Payment: Certain Assumptions Used in Valuation Methods - Expected Term, to estimate expected life.

Stock options or stock awards with performance conditions issued to non-employees who are not directors are measured on the grant date and recognized when the performance is complete. Refer to Note 10 to our consolidated financial statements included in this report for more information.

Grant Funding

We receive certain research and development funding under grants issued by the U.S. government and a not-for-profit foundation. In accordance with a policy we adopted in 2018, we recognize grant funding in the statements of operations as a reduction to research and development expense as the related costs are incurred to meet those obligations over the grant period. Grant funding payments received in advance of research and development expenses incurred are recorded as deferred grant funding liability in our consolidated balance sheets. For the years ended December 31, 2022 and December 31, 2021, there were no material adjustments to our prior period estimates of grant funded research and development expenses. Refer to Note 13 to our consolidated financial statements included in this report for more information.

Clinical Trial Expense Accruals

We estimate expenses resulting from our obligations under contracts with vendors, CROs and consultants and under clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts vary and may result in payment flows that do not match the periods over which materials or services are provided.

We record clinical trial expenses in the period in which services are performed and efforts are expended. We accrue for these expenses according to the progress of the trial as measured by patient progression and the timing of various aspects of the trial. We estimate accruals through financial models taking into account discussion with applicable personnel and outside service providers as to the progress of trials. During the course of a clinical trial, we may adjust our clinical accruals if actual results differ from our estimates. We estimate accrued expenses as of each balance sheet date based on the facts and circumstances known at that time. Our clinical trial accruals are dependent upon accurate reporting by CROs and other third-party vendors. Although we do not expect our estimates to differ materially from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low for any particular period. For the years ended December 31, 2022 and December 31, 2021 there were no material adjustments to our prior period estimates of accrued expenses for clinical trials.

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Results of Operations

Comparison of the Years ended December 31, 2022 and 2021

The following table summarizes our consolidated results of operations for the years ended December 31, 2022 and 2021, and the change in the applicable category in terms of dollars and percentage:

Years EndedDecember 31, Change

Revenue

Operating expenses

Revenues

License fee revenue for the year ended December 31, 2022 relates to our license agreement with Organon to commercialize XACIATO. We earned $10.0 million in revenue related to the transfer of the license and related know-how to Organon upon effectiveness of the agreement on June 30, 2022.

We did not recognize any revenue for the year ended December 31, 2021.

General and administrative expenses

The increase of approximately $2.9 million in general and administrative expenses from 2021 to 2022 was primarily attributable to increases in (i) professional services expenses of approximately $1.5 million, (ii) stock-based compensation expense of approximately $406,000, (iii) personnel costs of approximately $363,000, (iv) general corporate overhead expenses of approximately $307,000, and (v) expenses related to commercial-readiness activities for XACIATO of approximately $294,000.

Research and development expenses

The decrease of approximately $575,000 in research and development expenses from 2021 to 2022 was primarily attributable to decreases in (i) costs related to development activities for XACIATO of approximately $4.1 million, (ii) costs related to manufacturing and regulatory affairs activities for Ovaprene of approximately $1.7 million, and (iii) costs related to development activities for our preclinical programs and other development expenses of approximately $1.3 million. Such decreases were partially offset by increases in (a) costs related to development activities for Sildenafil Cream, 3.6% of approximately $4.0 million, (b) costs related to development activities for our Phase 1 and Phase 1-ready programs of approximately $1.3 million, (c) personnel costs of approximately $892,000, (d) rent and facilities expenses of $170,000 attributable to the allocation of a portion of rent and facilities expense included in general and administrative in 2021 to research and development in 2022, and (e) stock-based compensation expense of approximately $152,000.

License fee expenses

For each of the years ended December 31, 2022 and December 31, 2021 we accrued or paid $100,000 of the annual license maintenance fee payable under our license agreement related to DARE-HRT1.

See Note 3 "Strategic Agreements— Strategic Agreements for Pipeline Development" to the accompanying consolidated financial statements for more information about our license agreements.

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Other income and gain on extinguishment of note payable

The increase of $435,230 in other income from 2021 to 2022 was primarily due to an increase in interest earned on cash balances in 2022.

The $369,887 recorded as a gain on extinguishment of note payable and debt forgiveness income represents the forgiveness of all the principal and accrued interest of the loan we obtained under the Paycheck Protection Program of the Coronavirus Aid, Relief, and Economic Security Act, administered by the U.S. Small Business Administration, which forgiveness occurred during the first quarter of 2021.

Liquidity and Capital Resources

Plan of Operations and Future Funding Requirements

At December 31, 2022, our accumulated deficit was approximately $141.1 million, our cash and cash equivalents were approximately $34.7 million, our deferred grant funding liabilities under our grant agreements related to DARE-LARC1 and DARE-LBT were approximately $17.7 million and $573,000, respectively (representing grant funds received that may be applied solely toward direct costs and a portion of indirect costs for the development of those programs and which are included in cash and cash equivalents), and our working capital was approximately $11.4 million. We incurred a loss of operations of approximately $30.9 million and had negative cash flow from operations of approximately $18.1 million for the year ended December 31, 2022.

We expect to incur significant losses from operations and negative cash flows from operations for the foreseeable future as we continue to develop and seek to bring to market our existing product candidates and as we seek to potentially acquire, license and develop additional product candidates. We expect our primary uses of capital to be staff-related expenses, the cost of clinical trials and regulatory activities related to our product candidates, costs associated with contract manufacturing services and third-party clinical research and development services, payments to third-party licensors upon the occurrence of commercial milestones for XACIATO and development milestones for our product candidates pursuant to terms of the agreements under which we acquired or in-licensed rights to those programs, legal expenses, other regulatory expenses and general overhead costs. Our future funding requirements could also include significant costs related to commercialization of our product candidates, if approved, depending on the type, nature and terms of commercial collaborations we establish.

Based on current development plans for our product candidates, we anticipate both our general and administrative and research and development expenses to increase in 2023 compared to 2022as we continue to focus on the advancement of Ovaprene, Sildenafil Cream, 3.6%, DARE-HRT1 and our other product candidates that have reached the human clinical study development phase. If the first commercial sale of XACIATO in the U.S. occurs in the first half of 2023 as expected, we will receive a $2.5 million milestone payment and we will be eligible to receive royalty payments at rates in the low double-digits based on annual net sales of XACIATO. After taking into account our royalty payment obligations under our in-license agreement for XACIATO, we do not expect royalty payments received during 2023 to materially affect our cash resources or requirements. Our general and administrative expenses for 2023 are expected to increase primarily due to increased personnel costs and other general corporate overhead, and are expected to include costs related to commercial-readiness activities and obtaining commercial supply of XACIATO from our contract manufacturer. Under the terms of our license agreement with Organon, Organon will purchase XACIATO from us at a price equal to our manufacturing costs plus a single digit percentage markup. As a result, we do not anticipate our costs for providing XACIATO to Organon will have a material impact on our cash resources and requirements. Following commercial launch of XACIATO, we expect our general and administrative expenses will include payments by us under our in-license agreement for XACIATO, including a $500,000 milestone payment upon first commercial sale of XACIATO in the U.S. and royalty payments at rates in the high single-digit to low double-digits based on annual net sales of XACIATO. The amount of our research and development expenses for 2023 is difficult to predict with certainty and will depend on the pace and extent of our research and development activities. Factors that impact the pace and extent of our research and development activities and, therefore our research and development spend include, without limitation, our cash resources, reprioritization of development programs and activities, the scope, timing of commencement, and rate of progress of our clinical trials and preclinical studies, the cost and timing of manufacture and receipt of clinical supplies, timing of regulatory approval of a clinical study or alignment on study design, the results of our clinical trials and preclinical studies, and the extent to which we establish strategic collaborations or other arrangements and the terms of such arrangements.

Based on our current operating plan estimates, we do not have sufficient cash to satisfy our working capital needs and other liquidity requirements over at least the next 12 months from the date of issuance of the accompanying financial statements. The amount and timing of our capital needs have and will continue to depend

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highly on many factors, including the pace at which our clinical development programs proceed and the expenses associated therewith. The majority of our operating expenses during a fiscal year are research and development expenses, a significant portion of which, excluding those funded by non-dilutive grants, are associated with the clinical development for our product candidates that have reached the human clinical study development phase. We can control the timing of when we incur a majority of those expenses. During the first half of 2023, our research and development expenses will be primarily associated with the anticipated completion of our exploratory Phase 2b RESPOND clinical study of Sildenafil Cream, 3.6%, manufacturing activities in preparation for the commencement of our pivotal Phase 3 clinical study of Ovaprene, and variable expenses for our other programs, the timing of when we incur such expenses we can control. We closely monitor our cash resources and, if all of our clinical development programs proceed on currently anticipated timelines, we will need additional capital by the middle of this year to fund operations and the continued development of all such programs on such timelines. We are in ongoing discussions with multiple potential third-party sources of additional capital and we believe that we will be able to obtain sufficient capital when needed in a manner that will not materially impact the development of our product candidates. However, many aspects of our ability to obtain additional capital are not entirely within our control and there can be no assurance that we will receive additional capital as and when needed.

Historically, the cash used to fund our operations has come from a variety of sources and predominantly from sales of our common stock. We will continue to evaluate and may pursue a variety of capital raising options on an on-going basis, including sales of equity, including sales of our common stock in ATM offerings, debt financings, government or other grant funding, collaborations, structured financings, and strategic alliances or other similar types of arrangements, to cover our operating expenses, and the cost of any license or other acquisition of new product candidates or technologies. There can be no assurance that capital will be available when needed or that, if available, it will be obtained on terms favorable to us and our stockholders. Our ability to raise capital through sales of our common stock will depend on a variety of factors including, among others, market conditions, the trading price and volume of our common stock, our clinical and commercial developments, and investor sentiment. In addition, macroeconomic factors and volatility in the financial market, which may be exacerbated in the short term by concerns over inflation, rising interest rates, economic recession, adverse developments affecting financial institutions or the financial services industry, failure of the U.S. government to raise the federal debt ceiling, impacts of the war in Ukraine, strained relations between the U.S. and several other countries, and social and political discord and unrest in the U.S., among other things, may make equity or debt financings more difficult, more costly or more dilutive to our stockholders, and may increase competition for, or limit the availability of, funding from other potential third-party sources of capital, such as strategic collaborators and sources of grant funding.

In addition, equity or debt financings may have a dilutive effect on the holdings of our existing stockholders, and debt financings may subject us to restrictive covenants, operational restrictions and security interests in our assets. If we raise capital through collaborations, structured financings, strategic alliances or other similar types of arrangements, we may be required to relinquish some or all of our rights to potential revenue or to intellectual property rights for our product candidates on terms that are not favorable to us. If we cannot raise capital when needed, on favorable terms or at all, we will not be able to continue development of our product candidates, will need to reevaluate our planned operations and may need to delay, scale back or eliminate some or all of our development programs, reduce expenses, file for bankruptcy, reorganize, merge with another entity, or cease operations. If we become unable to continue as a going concern, we may have to liquidate our assets, and might realize significantly less than the values at which they are carried on our financial statements, and stockholders may lose all or part of their investment in our common stock. See ITEM 1A. "RISK FACTORS—Risks Related to Our Financial Position and Capital Needs —We will need to raise substantial additional capital to continue our operations and execute our business strategy, and we may not be able to raise adequate capital on a timely basis, on favorable terms, or at all,” above.

We prepared the accompanying consolidated financial statements on a going concern basis, which assumes that we will realize our assets and satisfy our liabilities in the normal course of business. As discussed above, there is substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and reclassification of assets or the amounts and classifications of liabilities that may result from the outcome of the uncertainty of our ability to remain a going concern.

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Cash Flows

The following table shows a summary of our cash flows for the periods indicated:

Years EndedDecember 31,

Net cash used in investing activities (63,069) (14,524)

Effect of exchange rate changes on cash and cash equivalents (196,338) (63,585)

Net cash used in operating activities

Cash used in operating activities during the year ended December 31, 2022 included the net loss of $30.9 million, decreased by non-cash stock-based compensation expense of approximately $2.2 million. Components providing operating cash were an increase in accrued expenses of approximately $7.8 million, and an increase in deferred grant funding of approximately $7.8 million. Components reducing operating cash were an increase in prepaid expenses of approximately $4.2 million, an increase in other receivables of approximately $558,000, and a decrease in accounts payable of approximately $75,000.

Cash used in operating activities during the year ended December 31, 2021 included the net loss of $38.7 million, decreased by non-cash stock-based compensation expense of approximately $1.6 million, and increased by the non-cash gain on extinguishment of the note payable and accrued interest of approximately $370,000. Components providing operating cash were an increase in deferred grant funding of approximately $9.0 million, and an increase in accounts payable of approximately $1.1 million. Components reducing operating cash were an increase in other receivables of approximately $685,000, an increase in prepaid expenses of approximately $622,000, and a decrease in accrued expenses of approximately $46,000.

Net cash used in investing activities

Cash used in investing activities during the years ended December 31, 2022 and December 31, 2021 was related to purchases of property and equipment of approximately $63,000 and $15,000, respectively.

Net cash provided by financing activities

Net cash provided by financing activities during the years ended December 31, 2022 and December 31, 2021 was approximately $1.3 million and $75.8 million, respectively, consisting primarily of net proceeds from sales of our common stock under our ATM sales agreements, and in 2021, our equity line.

License and Royalty Agreements

We agreed to make royalty and milestone payments under the license and development agreements related to XACIATO, Ovaprene, and Sildenafil Cream, 3.6%, and under other agreements related to our other clinical and preclinical candidates. During 2023, based on our current expectations regarding the development of our product candidates and sales of XACIATO, we expect to pay approximately $4.1 million in royalty and milestone payments under the license and development agreements. For further discussion of these potential payments, see Note 3 "Strategic Agreements—Strategic Agreements for Pipeline Development" to the accompanying consolidated financial statements for more information about our license agreements.

Other Contractual Obligations

We enter into contracts in the normal course of business with various third parties for research studies, clinical trials, testing and other services. These contracts generally provide for termination upon notice, and we do not believe that our non-cancelable obligations under these agreements are material.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable SEC rules.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Under SEC rules and regulations, as a smaller reporting company we are not required to provide the information required by this item.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements required to be included in this Item 8 are set forth in a separate section of this report commencing on page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on an evaluation, performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) were effective as of December 31, 2022 at the reasonable assurance level.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rule 13a-15(f) of the Exchange Act). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on our assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2022 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles in the United States.

Under SEC rules, because we are a non-accelerated filer, we are not required to provide an auditor attestation report on internal control over financial reporting, nor did we engage our independent registered public accounting firm to perform an audit of our internal control over financial reporting.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the fourth quarter ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION

None.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

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PART III