What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-12 compared with 2021-08-04 · 180 added, 107 removed, 228 unchanged (56% of the section changed)

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Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of our control.

Important factors that could cause actual results, developments and business decisions to differ materially from forward-looking statements are described in the sections titled “Risk Factors” in our 2020 10-K Report, and include the following:

the effects of the COVID-19 pandemic;

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our ability to successfully commercialize IMVEXXY, BIJUVA, and ANNOVERA, and to develop and commercialize our hormone therapy drug candidates and obtain additional financing necessary therefor, including pursuant to our 2021 ATM Program;

our ability to maintain the listing of our common stock on Nasdaq;

our ability to continue as a going concern;

our commercialization, marketing, and manufacturing capabilities and strategy for our approved products;

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our intellectual property position;

whether we will be able to comply with the covenants and conditions under our term loan facility;

whether we will be able to comply with the covenants and conditions under our term loan facility, including product net revenue requirements and liquidity requirements;

the length, cost, and uncertain results of our clinical trials, the potential of adverse side effects or other safety risks that could adversely affect the commercialization of our current or future approved products or preclude the approval of our future drug candidates;

whether the U.S.

Food and Drug Administration (“FDA”) will approve the efficacy supplement for the lower dose of BIJUVA;

Food and Drug Administration (“FDA”) will approve the efficacy supplement for the lower dose of BIJUVA and the manufacturing supplement for ANNOVERA;

our ability to protect our intellectual property, including with respect to the Paragraph IV notice letters we received regarding IMVEXXY and BIJUVA;

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our reliance on third parties to conduct our manufacturing, R&D and clinical trials;

potential disruptions in our supply chains related to our third party contract manufacturers and their ability to provide the materials necessary to manufacture our products, to successfully manufacture our products, and to timely ship bulk and finished product to their intended destinations;

the ability of our licensees to commercialize and distribute our products;

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and the influence of extensive and costly government regulation;

the potential disposition of vitaCare Prescription Services or any other divestitures we may pursue in the future;

the potential disposition of vitaCare ™ Prescription Services, Inc.

(“vitaCare Prescription Services”), a Florida corporation, or any other divestitures we may pursue in the future;

the volatility of the trading price of our common stock and the concentration of power in our stock ownership.

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We also have a portfolio of branded and generic prescription prenatal vitamins under the vitaMedMD and BocaGreenMD brands that furthers our women’s healthcare focus.

During the first six months of 2021, the recovery from the COVID-19 pandemic drove improved access to health care providers for our sales force and increased consumer demand for our products, which had a positive impact on our net product revenue relating to ANNOVERA, IMVEXXY, and BIJUVA.

During the first nine months of 202 1, the recovery from the COVID-19 pandemic drove improved access to health care providers for our sales force and increased consumer demand for our products, which had a positive impact on our net product revenue relating to ANNOVERA, IMVEXXY, and BIJUVA .

We believe the growth in our net product revenue will continue to be affected by the pace of recovery from the COVID-19 pandemic .

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We are focused on activities necessary for the continued commercialization of IMVEXXY, commercially launched in the third quarter of 2018;

BIJUVA, commercially launched in the second quarter of 2019;

BIJUVA, commercially launched in the third quarter of 2019;

and ANNOVERA, which we started selling in the third quarter of 2019 and commercially launched in March 2020, which was subsequently paused as a result of the COVID-19 pandemic and relaunched in July 2020.

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We have entered into a licensing and supply agreement (the “Theramex License Agreement”) with Theramex HQ UK Limited (“Theramex”) pursuant to which we granted Theramex an exclusive license to commercialize IMVEXXY for human use outside of the U.S., except for Canada and Israel.

As of June 30, 2021, no IMVEXXY sales have been made through these licensing agreements.

As of September 30, 2021, no IMVEXXY sales have been made through these licensing agreements.

BIJUVA (estradiol and progesterone) capsules, 1 mg/100 mg

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In March 2021, the FDA granted the FDRR in our favor.

In May 2021 we resubmitted the NDA efficacy supplement for the 0.5 mg/100 mg dose of BIJUVA to the FDA for review and potential approval.

The NDA efficacy supplement has been accepted for review by the FDA with a target action date for the completion of the FDA’s review under the Prescription Drug User Fee Act of March 21, 2022.

In May 2021 we resubmitted the NDA efficacy

supplement for the 0.5 mg/100 mg dose of BIJUVA to the FDA for review and potential approval.

T he NDA efficacy supplement has been accepted for review by the FDA with a target action date for the completion of the FDA’s review under the Prescription Drug User Fee Act of March 21, 2022.

Notwithstanding our FDRR, there can be no assurance that FDA will approve the 0.5 mg/100 mg dose of BIJUVA, or, if approved, the timing of such approval.

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We have entered into the Theramex License Agreement with Theramex pursuant to which we granted Theramex an exclusive license to commercialize BIJUVA for human use outside of the U.S., except for Canada and Israel.

As of June 3 0 , 2020, no BIJUVA sales have been made through these licensing agreements.

During the third quarter and the first nine months of 2021, we had BIJUVA sales of $0.7 million made through the Theramex License Agreement, and such sales were included as product revenue in the statement of operations.

As of September 30, 2021, no BIJUVA sales have been made through the Knight License Agreement.

ANNOVERA (segesterone acetate (“SA”) and ethinyl estradiol (“EE”) vaginal system)

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Our current prenatal vitamin product line features a unique, proprietary combination of FOLMAX™, FePlus™, and pur-DHA™ and includes the following products:

vitaTrue™, vitaPearl™, vitaMedMD One Rx Prenatal Multivitamin, vitaMedMD RediChew ® Rx Prenatal Multivitamin, BocaGreenMD Prena1 True, BocaGreenMD Prena1 Pearl, and BocaGreenMD Prena1 Chew.

vitaTrue™, vitaPearl™, vitaMedMD One Rx Prenatal Multivitamin, vitaMedMD RediChew ® Rx Prenatal Multivitamin, BocaGreenMD Prena1 True, BocaGreenMD

Prena1 Pearl , and BocaGreenMD Prena1 Chew .

All of our prenatal vitamins are gluten, sugar, and lactose-free.

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Results of operations

Three months ended June 30, 2021 compared with three months ended June 30, 2020

Revenue and gross profit.

Our revenue for the second quarter of 2021 was $23.0 million, an increase of $12.3 million, or 114.9%, compared to the second quarter of 2020.

Our gross profit for the second quarter of 2021 was $18.9 million, an increase of $12.6 million, or 199.5%, compared to the second quarter of 2020.

The following table sets forth our revenue by product, costs of goods sold and gross profit during these periods (in thousands):

Three Months Ended June 30,

Three months ended September 30, 2021 compared with three months ended September 30, 2020

Our total revenue for the third quarter of 2021 was $25.4 million, an increase of $6.1 million, or 31.6%, compared to the third quarter of 2020.

The following table sets forth our revenue during these periods (in thousands):

Three Months Ended September 30,

Prescription vitamin

Cost of goods sold

Our sales of ANNOVERA were $9.6 million for the second quarter of 2021, an increase of $7.7 million, or 420.7%, compared to the second quarter of 2020.

Product revenue, net

License revenue

Total revenue, net

Our sales of ANNOVERA were $11.8 million for the third quarter of 2021, an increase of $5.4 million, or 83.9%, compared to the third quarter of 2020.

This increase was primarily due to a 107.6% increase in sales volume, which was partially offset by a 11.4% decrease in the average sale price.

Our sales of IMVEXXY were $9.8 million for the second quarter of 2021, an increase of $4.8 million, or 93.4%, compared to the second quarter of 2020.

This increase was primarily attributable to a 51.6% increase in the average sale price and a 27.6% increase in sales volume.

Our sales of BIJUVA were $2.2 million for the second quarter of 2021, an increase of $0.8 million, or 59.5%, compared to the second quarter of 2020.

This increase was primarily attributable to a 42.6% increase in the avera g e sale price and an 11.8% increase in sales volume.

Our sales of IMVEXXY were $8.0 million for the third quarter of 2021, an increase of $1.2 million, or 17.2%, compared to the third quarter of 2020.

This increase was primarily attributable to a 34.9% increase in the average sale price, which was partially offset by a 13.1% decrease in sales volume.

Our sales of BIJUVA were $3.3 million for the third quarter of 2021, an increase of $1.7 million, or 100.4%, compared to the third quarter of 2020.

Included in our BIJUVA sales for the third quarter of 2021 was $0.7 million of sales made through the Theramex License Agreement.

Without the sales made through the Theramex License Agreement, our sales of BIJUVA were $2.6 million for the third quarter of 2021, an increase of $1.0 million, or 58.0%, compared to the third quarter of 2020.

This increase was primarily attributable to a 47.0 % increase in the avera g e sale price and a 7.5% increase in sales volume.

Sales of our products utilize copay assistance programs that allow eligible enrolled patients to access the products at a reasonable cost regardless of insurance coverage.

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We expect that our net product revenue will improve from changes in our copay card price in the long term and increases in commercial and Medicare payer coverage when we fully complete the process needed to adjudicate ANNOVERA, IMVEXXY, and BIJUVA prescriptions at pharmacies.

Our prescription vitamin sales were $1.5 million for the second quarter of 2021, a decrease of $1.0 million, or 40.2%, compared to the second quarter of 2020.

This decrease was primarily due to a 25.4% decrease in the aver a ge s a le pri c e and a 19.8% decrease in sales volu m e .

The increase in our gross profit was primarily a result of an increase of 114.9% in product revenue and an overall increase in our product gross margin.

Our product gross margin was 82% for the second quarter of 2021 compared to 59% for the second quarter of 2020.

This increase was attributable to a second quarter of 2020 inventory obsolescence charge of $1.9 million primarily related to BIJUVA and an overall 5% improvement in the profit margins of our products.

Our prescription vitamin sales were $1.3 million for the third quarter of 2021, a decrease of $1.1 million, or 44.7%, compared to the third quarter of 2020.

This decrease was primarily due to a 32.8% decrease in sales volume and a 17.6% decrease in the aver a ge s a le pri c e.

On a consolidated basis, our total product sales were $24.5 million for the third quarter of 2021, an increase of $7.1 million, or 41.1%, compared to the third quarter of 2020.

Our license revenue was $0.9 million for the third quarter of 2021, a decrease of $1.1 million, or 53.2%, compared to the third quarter of 2020.

This decrease was entirely due to the timing of achieving previously established milestone payment targets.

Gross profit.

Our gross profit for the third quarter of 2021 was $ 20 .

1 million, an increase of $ 4 .

1 million, or 2 5 .

3 %, compared to the third quarter of 2020.

The following table sets forth our gross profit during these periods (in thousands):

Three Months Ended September 30,

Total gross profit

The increase in our gross profit was primarily a result of an increase of 41.1% in product revenue, partially offset by a 2.7% decrease in our product gross margin from 81.1% for the third quarter of 2020 to 78.4% for the third quarter of 2021.

This decrease in product gross margins reflects the impact of $0.7 million of BIJUVA export sales, which were sold at cost.

Operating expenses.

Total operating expenses for the second quarter of 2021 were $54.0 million, an increase of $2.7 million, or 5.3%, compared to the second quarter of 2020.

Type of operating expenses reported in prior periods have been reclassified to conform to the current period’s presentation .

Total operating expenses for the third quarter of 2021 were $60.0 million, an increase of $19.0 million, or 46.3%, compared to the third quarter of 2020.

Of the total increase, $7.3 million was related non-cash and cash severances recorded for certain former senior executives during the third quarter of 2021.

The remining increase was $11.7 million, or 28.5%, compared to the third quarter of 2020.

The type of operating expenses reported in prior periods have been reclassified to conform to the current period’s presentation.

The following table sets forth our operating expense categories (in thousands):

Three Months Ended June 30,

Three Months Ended September 30,

Selling and marketing

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Total operating expenses

Our selling and marketing costs were $32.2 million for the second quarter of 2021, an increase of $2.3 million, or 7.6%, compared to the second quarter of 2020.

This increase was primarily due to $7.2 million in higher advertising expenditures, $3.3 million in higher salaries and employee benefit costs to support the sales growth of our pharmaceutical products, reflecting the continued impact of our formerly outsourced sales personnel who were onboarded in the third quarter of 2020, and $1.0 million in higher costs related to physician education expenses and transportation expenses for traveling sales staff.

These increases were partially offset by $5.8 million in lower outsourced sales personnel costs mainly attributable to the onboarding of such sales personnel in the third quarter of 2020, and $3.6 million in lower product sample costs mainly due to the second quarter of 2020 write down of product samples, primarily related to BIJUVA.

Our general and administrative costs were $19.9 million for the second quarter of 2021, an increase of $1.2 million, or 6.2%, compared to the second quarter of 2020.

This increase was primarily attributable to $1.3 million in higher compensation and employee benefit costs mainly related to the accrual of bonuses expected to be paid in the first quarter of 2022 and $0.9 million in higher costs attributable to proxy related expenditures, bad debt expense and insurance.

These increases were partially offset by $1.0 million in lower expenditures attributable to information technology, dues and subscriptions and legal and professional fees.

In general, these lower expenditures reflect the impact of our cost saving measures in response to the COVID-19 pandemic.

However, we believe our overall general and administration expenditures will increase in future periods in support of our efforts to expand the commercialization of our products.

Our selling and marketing costs were $30.0 million for the third quarter of 2021, an increase of $7.6 million, or 34.1%, compared to the third quarter of 2020.

This increase was primarily due to $6.4 million in higher advertising, $2.2 million in higher compensation and employee benefit costs to support the sales growth of our pharmaceutical products, reflecting the continued impact of our formerly outsourced sales personnel who were onboarded in the third quarter of 2020, and $0.8 million in higher marketing costs.

These increases were partially offset by $1.6 million in lower outsourced sales personnel costs mainly attributable to the onboarding of such sales personnel in the third quarter of 2020 and $0.5 million in lower product sample costs.

Our general and administrative costs were $28.4 million for the third quarter of 2021, an increase of $11.8 million, or 70.9%, compared to the third quarter of 2020.

Of the total increase, $7.3 million was related to non-cash and cash severances recorded for certain former senior executives during the third quarter of 2021.

The remaining increase was $4.5 million, or 27.0%, compared to the third quarter of 2020.

This increase was primarily related to $2.9 million in higher compensation and employee benefit costs, of which $1.1 million was related to the accrual of bonuses expected to be paid in the first quarter of 2022, and $2.1 million in higher expenditures attributable to various professional fees, such as consulting, recruiting, legal, etc., in support of our efforts to expand the commercialization of our products.

These increases were partially offset by $0.6 million in lower expenditures attributable to the write-off of certain intangible assets during the third quarter of 2020.

Our R&D costs consist mainly of costs incurred under agreements with contract research organizations (“CROs”) and other third parties that conduct our clinical related studies, compensation, and benefit costs related employees engaged in R&D activities, costs to developing our chemistry, manufacturing, and controls capabilities, costs related to manufacturing validation, and costs associated with other research activities and regulatory approvals.

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R&D expenditures for the drug products will continue after the clinical trial completes for on-going stability and laboratory testing, regulatory submission, and response work.

Our R&D costs were $2.0 million for the second quarter of 2021, a decrease of $0.7 million, or 26.7%, compared to the second quarter of 2020.

This decrease was primarily attributable to $0.6 million in lower lab research costs and $0.1 million in lower compensation and employee benefit costs.

Our R&D costs were $1.6 million for the third quarter of 2021, a decrease of $0.4 million, or 20.8%, compared to the third quarter of 2020.

This decrease was primarily attributable to $0.5 million in lower lab research costs, partially offset by $0.1 million in higher compensation and employee benefit costs.

We have reduced our R&D expenditures since 2019 as we refocus our resources towards the continued commercialization of our pharmaceutical products.

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Loss from operations .

For the second quarter of 2021, we had a loss from operations of $35.2 million, compared to $45.0 million for the second quarter of 2020.

This $9.9 million improvement was attributable to higher gross profit of $12.6 million, partially offset by higher operating expenses of $2.7 million.

For the third quarter of 2021, we had a loss from operations of $ 3 9 .

9 million , compared to $ 2 5.0 million for the third quarter of 2020 .

Of t h e $14.

9 million total increase , $7.3 million was related non-cash and cash severances recorded for certain former senior executives during the third quarter of 2021.

The rem a ining increase of $ 7.6 million was attributable to higher operating expenses , partially offset by $4.

1 million in higher gross profit .

We anticipate that we will continue to have operating losses for the near future until we are able to successfully commercialize IMVEXXY, BIJUVA, and ANNOVERA, although there is no assurance that our efforts will be successful.

Other expense, net.

For the second quarter of 2021, our non-operating expenses were $7.5 million, compared to $6.9 million for the second quarter of 2020.

This $0.5 million increase was attributable to $1.0 million in higher amortization expense of deferred financing costs and the recording of an accrual for interest prepayment fees of $0.9 million associated with our future debt service in the second quarter of 2021.

This was partially offset by $1.3 million in lower interest expense due to overall lower average debt balance during the second quarter of 2021 compared to the second quarter of 2020.

For the second quarter of 2021, we had a net loss of $42.7 million, or $0.11 per basic and diluted common share, compared to $52.0 million, or $0.19 per basic and diluted common share, for the second quarter of 2020.

Six months ended June 30, 2021 compared with six months ended June 30, 2020

Revenue and gross profit.

Our revenue for the first six months of 2021 was $42.8 million, an increase of $19.9 million, or 86.8%, compared to the first six months of 2020.

Our gross profit for the first six months of 2021 was $34.0 million, an increase of $18.2 million, or 115.0%, compared to the first six months of 2020.

The following table sets forth our revenue by product, costs of goods sold and gross profit during these periods (in thousands):

Six Months Ended June 30,

For the third quarter of 2021, our non-operating expenses were $7.5 million, compared to $7.6 million for the third quarter of 2020.

This $0.1 million decrease was attributable to $1.3 million in lower interest expense due to overall lower average debt balance during the third quarter of 2021 compared to the third quarter of 2020, partially offset by the recording of an $0.7 million accrual for interest prepayment fees in the third quarter of 2021 associated with our future debt service, and $0.5 million in higher amortization expense of deferred financing costs.

For the third quarter of 2021, we had a net loss of $47.4 million, or $0.11 per basic and diluted common share, compared to $32.6 million, or $0.12 per basic and diluted common share, for the third quarter of 2020.

Our net loss for the third quarter of 2021 included $7.3 million of non-cash and cash severances recorded for certain former senior executives.

Without such severances, we would have had a net loss of $40.1 million, or $0.10 per basic and diluted common share, for the third quarter of 2021.

Nine months ended September 30, 2021 compared with nine months ended September 30, 2020

Our total revenue for the first nine months of 2021 was $68.3 million, an increase of $26.0 million, or 61.4%, compared to the first nine months of 2020.

The following table sets forth our revenue during these periods (in thousands):

Nine Months Ended September 30,

Prescription vitamin

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License revenue

Cost of goods sold

Our sales of ANNOVERA were $18.3 million for the first six months of 2021, an increase of $14.2 million, or 345.6%, compared to the first six months of 2020.

Total revenue, net

Our sales of ANNOVERA were $30.1 million for the first nine months of 2021, an increase of $19.6 million, or 186.0%, compared to the first nine months of 2020.

This increase was primarily due to a 236.4% increase in sales volume, which was partially offset by a 15.0% decrease in the average sale price.

Our sales of IMVEXXY were $16.9 million for the first six months of 2021, an increase of $5.4 million, or 46.8%, compared to the first six months of 2020.

This increase was primarily attributable to a 44.9% increase in the average sale price and a 1.3% increase in sales volume.

Our sales of BIJUVA were $4.6 million for the first six months of 2021, an increase of $2.1 million, or 86.7%, compared to the first six months of 2020.

Our sales of IMVEXXY were $24.9 million for the first nine months of 2021, an increase of $6.5 million, or 35.7%, compared to the first nine months of 2020.

This increase was primarily attributable to a 40.8% increase in the average sale price, which was partially offset by a 3.6% decrease in sales volume.

Our sales of BIJUVA were $7.9 million for the first nine months of 2021, an increase of $3.8 million, or 92.2%, compared to the first nine months of 2020.

Included in our BIJUVA sales for the first nine months of 2021 was $0.7 million of sales made through the Theramex License Agreement.

Without the sales made through the Theramex License Agreement, our sales of BIJUVA were $7.2 million for the third quarter of 2021, an increase of $3.1 million, or 75.2%, compared to the first nine months of 2020.

This increase was primarily attributable to a 55.9% increase in the avera g e sale price and a 12.4% increase in sales volume.

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Our prescription vitamin sales were $2.9 million for the first six months of 2021, a decrease of $2.0 million, or 41.3%, compared to the first six months of 2020.

Our prescription vitamin sales were $4.2 million for the first nine months of 2021, a decrease of $3.1 million, or 42.4%, compared to the first nine months of 2020.

This decrease was primarily due to a 29.6% decrease in sales volu m e and a 18.2% decrease in the aver a ge s a le pri c e.

Our license revenue for the first six months of 2021 was $0.2 million and was related to the achievement of a milestone during 2021 under the Theramex License Agreement for BIJUVA.

The increase in our gross profit was primarily a result of an increase of 85.7% in product revenue and an overall increase in our product gross margin.

Our product gross margin was 79% for the first six months of 2021 compared to 69% for the first six months of 2020.

This increase was related to an inventory obsolescence charge of $2.0 million in the first six months of 2020 primarily related to BIJUVA and an overall improvement in the profit margins of our products of 3%.

On a consolidated basis, our total product sales were $67.1 million for the first nine months of 2021, an increase of $26.8 million, or 66.5%, compared to the first nine months of 2020.

Our licens e revenue was $1.

2 million for the first nine months of 2021, a decrease of $0.

8 million, or 41 .

5 %, compared to the first nine months o f 2020.

This de crease was entirely due to the timing of achieving previously established milestone payment targets.

Gross profit.

Our gross profit for the first nine months of 2021 was $54.2 million, an increase of $22.3 million, or 69.8%, compared to the first nine months of 2020.

The following table sets forth our gross profit during these periods (in thousands):

Nine Months Ended September 30,

Total gross profit

The increase in our gross profit was primarily a result of an increase of 66.5% in product revenue and a 4.8% increase in our product gross margin from 74.2% for the first nine months of 2020 to 79.0% for the first nine months of 2021.

This increase was mainly due to $1.1 million in lower inventory obsolescence charges for the first nine months of 2021 compared to the first nine months of 2020, and an overall improvement in the profit margins of our products of 0.9%.

Operating expenses.

Total operating expenses for the first six months of 2021 were $98.5 million, a decrease of $13.3 million, or 11.9%, compared to the first six months of 2020.

Type of operating expenses reported in prior periods have been reclassified to conform to the current period’s presentation .

Total operating expenses for the first nine months of 2021 were $158.6 million, an increase of $5.7 million, or 3.7%, compared to the first nine months of 2020.

Of the total increase, $7.3 million was related non-cash and cash severances recorded for certain former senior executives during the third quarter of 2021.

Without such severances, our total operating expenses for the first nine months of 2021 would have decreased by $1.6 million, or 1.0%, compared to the first nine months of 2020.

The type of operating expenses reported in prior periods have been reclassified to conform to the current period’s presentation.

The following table sets forth our operating expense categories (in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

Selling and marketing

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Total operating expenses

Our selling and marketing costs were $56.2 million for the first six months of 2021, a decrease of $12.5 million, or 18.2%, compared to the first six months of 2020.

This decrease was primarily due to $11.8 million in lower outsourced sales personnel costs mainly attributable to the onboarding of such sales personnel in the third quarter of 2020, $5.0 million in lower product sample costs mainly

due to the second quarter of 2020 write down of product samples, primarily related to BIJUVA, and $ 3.3 million in lower marketing costs primarily related to a national selling and marketing event that occurred during the first six months of 2020 prior to the COVID-19 pandemic.

These decreases were partially offset by $ 4.2 million in higher salaries and employee benefit costs to support the sales growth of our pharmaceutical products, reflecting the continued impact of our formerly outsourced sales personnel who were onboarded in the third quarter of 2020 , $2.8 million in higher advertising expenditures, and $ 0.7 million and in higher costs related to physician education expenses and transportation expenses for traveling sales staff.

Overall, our lower selling and marketing costs for the first six months of 2021 reflect our cost cutting initiatives put in place at the beginning of the COVID-19 pandemic.

Our general and administrative costs were $38.3 million for the first six months of 2021, an increase of $1.2 million, or 3.1%, compared to the first six months of 2020.

This increase was primarily attributable to $1.6 million in higher compensation and employee benefits costs mainly related to the accrual of bonuses expected to be paid in the first quarter of 2022 and $1.5 million in higher costs attributable to proxy related expenditures, bad debt expense, and insurance.

These increases were partially offset by $1.0 million in lower legal and professional fees and $0.8 million in lower expenditures attributable to information technology and dues and subscriptions.

In general, these lower expenditures reflect the impact of our cost saving measures in response to the COVID-19 pandemic.

However, we believe our overall general and administration expenditures will increase in future periods in support of our efforts to expand the commercialization of our products.

Our R&D costs were $4.1 million for the first six months of 2021, a decrease of $2.0 million, or 32.4%, compared to the first six months of 2020.

Our selling and marketing costs were $86.2 million for the first nine months of 2021, a decrease of $4.9 million, or 5.3%, compared to the first nine months of 2020.

This decrease was primarily due to $13.4 million in lower outsourced sales personnel costs mainly attributable to the onboarding of such sales personnel in the third quarter of 2020, $5.5 million in lower product sample costs mainly due to the third quarter of 2020 write down of product samples, primarily related to BIJUVA, and $2.5 million in lower marketing costs primarily related to a national selling and marketing event that occurred during the first nine months of 2020 prior to the COVID-19 pandemic.

These decreases were partially offset by $9.3 million in higher advertising expenditures, $6.4 million in higher salaries and employee benefit costs to support the sales growth of our pharmaceutical products, reflecting the continued impact of our formerly outsourced sales personnel who were onboarded in the third quarter of 2020, and $0.9 million and in higher costs related to physician education expenses and transportation expenses for traveling sales staff.

Overall, our lower selling and marketing costs for the first nine months of 2021 reflect our cost cutting initiatives put in place at the beginning of the COVID-19 pandemic.

Our general and administrative costs were $66.7 million for the first nine months of 2021, an increase of $13.0 million, or 24.1%, compared to the first nine months of 2020.

Of the total increase, $7.3 million was related non-cash and cash severances recorded for certain former senior executives during the third quarter of 2021.

The remaining increase was $5.7 million, or 10.5%, compared to the first nine months of 2020.

This increase was primarily attributable to $4.5 million in higher compensation and employee benefit costs, of which $2.3 million was related to the accrual of bonuses expected to be paid in the first quarter of 2022, $1.4 million in higher costs attributable to bad debt expense and insurance, and $1.1 million in higher professional fees, such as consulting, recruiting, legal, etc., in support of our efforts to expand the commercialization of our products.

These increases were partially offset by $1.3 million in lower expenditures attributable to information technology and dues and subscriptions.

Our R&D costs were $5.7 million for the first nine months of 2021, a decrease of $2.4 million, or 29.5%, compared to the first nine months of 2020.

This decrease was primarily attributable to $1.6 million in lower lab research costs, $0.4 million in lower compensation and employee benefit costs and $0.3 million in lower legal and professional fees.

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Loss from operations.

For the first six months of 2021, we had a loss from operations of $64.5 million, compared to $96.0 million for the first six months of 2020.

This $31.5 million improvement was attributable to higher gross profit of $18.2 million, as well as lower operating expenses of $13.3 million.

For the first nine months of 202 1, we had a loss from operations of $ 104.4 million, compared to $ 120 .

9 million for the first nine months of 202 0 .

This $ 16.5 million improvement was attributable to higher gross profit of $ 2 2 .

3 million, partially offset by $ 5.7 million in higher operating expenses.

Our loss from operation s for the first nine months of 2021 included $7.3 million of non-cash and cash severances recorded for certain former senior executives.

Without such severances, we would have had a loss from operations of $ 97.1 million for the first nine months of 2021.

Other expense, net.

For the first six months of 2021, our non-operating expenses were $17.6 million, compared to $12.9 million for the first six months of 2020.

This $4.7 million increase was primarily attributable to a $3.4 million increase in interest prepayment fees, including the recording of an accrual for interest prepayment fees of $0.9 million associated with our future debt service in the second quarter of 2021, and $2.0 million in higher amortization expense of deferred financing costs.

This was partially offset by $0.8 million in lower interest expense due to overall lower average debt balance during the first six months of 2021 compared to the first six months of 2020.

For the first six months of 2021, we had a net loss of $82.0 million, or $0.22 per basic and diluted common share, compared to $108.8 million, or $0.40 per basic and diluted common share, for the first six months of 2020.

For the first nine months of 2021, our non-operating expenses were $25.1 million, compared to $20.5 million for the first nine months of 2020.

This $4.6 million increase was primarily attributable to a $4.0 million increase in interest prepayment fees, including the recording of an $1.5 million accrual for interest prepayment fees in the first nine months of 2021 associated with our future debt service, and $2.5 million in higher amortization expense of deferred financing costs.

These increases were partially offset by $2.1 million in lower interest expense due to overall lower average debt balance during the first nine months of 2021 compared to the first nine months of 2020.

For the first nine months of 2021, we had a net loss of $129.5 million, or $0.33 per basic and diluted common share, compared to $141.4 million, or $0.52 per basic and diluted common share, for the first nine months of 2020.

Our net loss for the first nine months of 2021 included $7.3 million of non-cash and cash severances recorded for certain former senior executives.

Without such severances, we would have had a net loss of $122.2 million, or $0.31 per basic and diluted common share, for the first nine months of 2021.

Liquidity and capital resources

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We have funded our operations primarily through public offerings of our common stock and private placements of equity and debt securities.

As of June 30, 2021, we had cash totaling $111.4 million.

As of September 30, 2021, we had cash totaling $104.8 million.

We maintain cash at financial institutions that at times may exceed the Federal Deposit Insurance Corporation insured limits of approximately $0.3 million per bank.

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The sales agent was entitled to compensation at a fixed commission rate of 3.0% of the aggregate gross sales price per share sold.

As of February 8, 2021, sales of shares of our common stock under the 2020 ATM Program were completed when we sold an aggregate total of 28,600,689 shares of our common stock at an average sale price of $1.75 per share, and we received net proceeds of $47.3 million, after deducting the discounts and commissions to the sales agent and estimated offering expenses.

For the 2020 ATM Program, we received net proceeds of $48.1 million, after deducting the discounts and commissions to the sales agent and estimated offering expenses.

In February 2021, we closed on an underwritten public offering of our common stock, pursuant to which we issued 59,459,460 shares of our common stock at an offering price of $1.85 per share, and we received net proceeds of $96.6 million, after deducting the underwriting discounts and commissions and estimated offering expenses.

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The sales agent is not required to sell any specific number or dollar amounts of securities but will act as sales agent and use commercially reasonable efforts to sell on our behalf all of the shares of common stock requested to be sold by us, consistent with its normal trading and sales practices, on mutually agreed terms between us and the sales agent.

Through June 30, 2021, we have sold a total of 4,935,500 shares of our common stock under the 2021 ATM Program at an average sale price of $1.58 per share and we received estimated net proceeds of $7.2 million, after deducting discounts and commissions to the sales agent and estimated offering expenses.

Subsequently, through the date of this 10-Q Report, we have sold an additional 28,769,815 shares of our common stock under the 2021 ATM Program at an average sale price of $1.14 per share and we received estimated net proceeds of $31.8 million, after deducting discounts and commissions to the sales agent and estimated offering expenses.

Through September 30, 2021, we have sold a total of 33,705,315 shares of our common stock under the 2021 ATM Program at an average sale price of $1.21 per share and we received estimated net proceeds of $38.8 million, after deducting discounts and commissions to the sales agent and estimated offering expenses.

Subsequently, through the date of this 10-Q Report, we have not sold any additional shares of our common stock under the 2021 ATM Program.

Future sales, if any, under the 2021 ATM Program will depend on a variety of factors, including among others, market conditions, the trading price of our common stock, determinations by us of the appropriate sources of funding, and potential uses of funding available to us.

The following table reflects the major categories of cash flows for each of the periods (in thousands) .

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash used in operating activities

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The principal use of cash in operating activities was to fund our current expenditures in support of our continued commercialization activities for IMVEXXY, BIJUVA, and ANNOVERA, sales, marketing, scale-up and manufacturing activities, adjusted for non-cash items.

For the first six months of 2021, net cash used in operating activities was $64.9 million, compared to net cash used in operating activities of $95.1 million for the first six months of 2020.

This decrease of $30.2 million, or 31.7%, was primarily due to a $26.8 million decrease in our net loss and a $6.4 million decrease in cash usage related to changes in operating assets and liabilities, partially offset by a $3.0 million in lower non-cash expenditure adjustment.

For the first nine months of 2021, net cash used in operating activities was $103.1 million, compared to net cash used in operating activities of $129.1 million for the first nine months of 2020.

This decrease of $26.0 million, or 20.1%, was primarily due to a $12.0 million decrease in our net loss, a $12.2 million decrease in cash usage related to changes in operating assets and liabilities, and a $2.8 million increase in non-cash expenditure adjustments.

Investing Activities.

For the first six months of 2021, net cash used in investing activities was $0.5 million, compared to net cash used in investing activities of $0.8 million for the first six months of 2020.

For the first nine months of 2021, net cash used in investing activities was $0.7 million, compared to net cash used in investing activities of $1.1 million for the first nine months of 2020.

This decrease of $0.4 million, or 35.8%, was primarily due to lower patent related costs.

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Financing activities currently represent the principal source of our cash flow.

For the first six months of 2021, net cash provided by financing activities was $96.4 million, compared to net cash provided by financing activities of $48.9 million for the first six months of 2020.

For the first nine months of 2021, net cash provided by financing activities was $128.2 million, compared to net cash provided by financing activities of $49.0 million for the first nine months of 2020.

This increase of $79.2 million, or 161.5%, was primarily related to sales of our common stock, consisting of $182.9 million in net proceeds in 2021, partially offset by a $50.0 million in repayment of debt in 2021, a $3.9 million increase in the payment of debt financing fees in 2021, and $50.0 million in borrowing of debt in 2020.

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Our net days sales outstanding (“DSO”) is calculated by dividing average gross accounts receivable less the reserve for doubtful accounts, chargebacks, and payment discounts by the average daily net product revenue during the last four quarters for each respective quarterly period.

Our net DSO was 114 days as of June 30, 2021, compared to 165 days as of December 31, 2020 and 143 days as of June 30, 2020.

Our net DSO was 126 days as of September 30, 2021, compared to 165 days as of December 31, 2020 and 128 days as of September 30, 2020.

Our gross DSO is calculated by dividing average gross accounts receivable by the average daily gross product revenue to distributors during the last four quarters for each respective quarterly period.

Our gross DSO was 54 days as of

June 30, 2021 , compared to 67 days as of December 31, 2020 and 49 days as of December 31, 2020.

Our gross DSO was 61 days as of September 30, 2021, compared to 67 days as of December 31, 2020 and 50 days as of September 30, 2020.

Our DSO have fluctuated and will continue to fluctuate in the future due to variety of factors, including longer payment terms associated with the continued commercialization of IMVEXXY, BIJUVA, and ANNOVERA and changes in the healthcare industry.

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Although we have historically not experienced significant credit losses, it is possible that there could be a material adverse impact from potential adjustments of the carrying amount of trade receivables in the future.

We had $200.0 million and $250.0 million in term loans outstanding under our Financing Agreement as of June 30, 2021 and December 31, 2020, respectively.

We rely on third parties to manufacture our finished products, and we have entered into long-term supply agreements for the manufacture of ANNOVERA, IMVEXXY, and BIJUVA.

We do not have a long-term supply agreement for the manufacture of our prescription vitamins.

Additionally, we do not have long-term contracts for the supply of the active pharmaceutical ingredient (“API”) used in ANNOVERA and BIJUVA.

One of our third party contract manufacturers that manufactures ANNOVERA has recently experienced an increase in difficulties with the manufacturing process for ANNOVERA resulting in batch failures.

The challenges are multifactorial and include variability in raw material supply and normal manufacturing variation due to a semi-manual process.

This has recently resulted in challenges to supply ANNOVERA consistently within the approved specification at a rate that meets the projected demand for ANNOVERA.

To mitigate the manufacturing challenges, in August 2021 we filed a supplemental NDA to modify the manufacturing (testing) specification to allow for normal manufacturing variation that would increase the consistency of manufacturing and supply of ANNOVERA.

There can be no assurance that such a modification will be approved by the FDA.

If the FDA fails to approve the requested modification by the Prescription Drug User Fee Act (“PDUFA”) date of December 12, 2021, our third party contract manufacturer may not be able to supply us with sufficient ANNOVERA to adequately supply the market or generate sufficient revenue to meet the covenants under the

Financing Agreement.

If we are unable to achieve any of the total minimum net revenue requirements or otherwise comply with any other covenant of the Financing Agreement, all or a portion of our obligations under the Financing Agreement may be declared immediately due and payable, which would have an adverse effect on our business, results of operations and financial condition.

If any of our third party contract manufacturers or any suppliers of raw materials or API experience further difficulties, do not comply with the terms of an agreement between us, or do not devote sufficient time, energy, and care to providing our manufacturing needs, we could experience additional interruptions in the supply of our products, which may have a material adverse impact on our revenue, results of operations and financial position and ability to meet our revenue and other covenants under our Financing Agreement.

We had $200.0 million and $250.0 million in term loans outstanding under our Financing Agreement as of September 30, 2021 and December 31, 2020, respectively.

For additional information, see Note 8, Debt in Item 1, Financial Statements, appearing elsewhere in this 10-Q Report.

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As of the filing date of this 10-Q Report, our cash balance was above the required minimum balance.

Based on our current projections, along with financing that may be available to us under the 2021 ATM Program, we anticipate that we will remain in compliance with the minimum cash balance covenant for the next twelve months from the date of this 10-Q Report.

In addition, we have reviewed numerous potential scenarios in connection with the impact of COVID-19 pandemic on our business, and we believe that our existing cash reserves, along with financing that may be available to us under the 2021 ATM Program, are sufficient to meet our cash needs arising in the ordinary course of business for the next twelve months from the date of this 10-Q Report.

However, if we are unsuccessful with the commercialization of IMVEXXY, BIJUVA, or ANNOVERA, if such commercialization is delayed, or if the continued impact of the COVID-19 pandemic on our business is worse than we anticipate, among other circumstances, we may consume funds significantly faster than we currently anticipate and our existing cash reserves, along with financing that may be available to us under the 2021 ATM Program, would be insufficient to maintain compliance with the Financing Agreement covenants or satisfy our liquidity requirements until we are able to successfully commercialize IMVEXXY, BIJUVA, and ANNOVERA.

The Financing Agreement also requires us to maintain certain minimum quarterly product net revenue requirements and several other restrictive covenants.

Based on our current projections, we will need to raise additional capital to remain in compliance with the minimum cash balance covenant for the next twelve months from the date of this 10-Q Report.

In order to address our projected capital needs, we are pursuing various equity financing and other alternatives including the sale of an interest in vitaCare Prescription Services for which we commenced a sale process.

The equity financing alternatives may include the private placement of equity, equity-linked, or other similar instruments or obligations with one or more investors, lenders, or other institutional counterparties or an underwritten public equity or equity-linked securities offering.

Our ability to sell equity securities may be limited by market conditions.

To the extent that we raise additional capital through the sale of such securities, the ownership interests of our existing stockholders will be diluted, and the terms of these new securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders.

Along with considering additional financings, we have reviewed numerous potential scenarios in connection with steps that we may take to reduce our operating expenses.

Based on our analysis, we believe that our existing cash reserves along with potential proceeds from the sale of certain non-core assets of the Company and proceeds from potential future financings, if available to us, would be sufficient to meet our cash needs arising in the ordinary course of business for the next twelve months from the date of this Quarterly Report on Form 10-Q.

If we are unsuccessful with future financings and if the successful commercialization of IMVEXXY, BIJUVA, or ANNOVERA is delayed, or the continued impact of the COVID-19 pandemic or issues in our supply chains related to our third party contract manufacturers on our business is worse than we anticipate, our existing cash reserves would be insufficient to maintain compliance with the Financing Agreement covenants or satisfy our liquidity requirements until we are able to successfully commercialize IMVEXXY, BIJUVA, and ANNOVERA.

See Inventory above for additional information regarding risks associated with our contract manufacturers, particularly for ANNOVERA.

The presence of these projected factors in conjunction with the uncertainty of the capital markets raises substantial doubt about the Company's ability to continue as a going concern for the next twelve months from the issuance of these financial statements.

The Financing Agreement also requires us to maintain certain minimum quarterly product net revenue requirements and several other restrictive covenants which could also be affected by the continued impact of the COVID-19 pandemic or issues in our supply chains related to our third-party contract manufacturers.

These and other terms in the Financing Agreement have to be monitored closely for compliance and could restrict our ability to grow our business or enter into transactions that we believe would be beneficial to our business.

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The extent of the future impact of the COVID-19 pandemic on our business continues to be highly uncertain and difficult to predict.

We continue to provide an uninterrupted supply of our FDA approved products and the vitaPearl family of products.

We believe we have sufficient inventory of finished products to meet anticipated demand in the near future.

Additionally, we believe we have sufficient active pharmaceutical ingredients on hand for the continued manufacture of our products.

The ultimate global recovery from the pandemic will be dependent on, among other things, actions taken by governments and businesses to contain and combat the virus, including any variant strains, the speed and effectiveness of vaccine production and global distribution, as well as how quickly, and to what extent, normal economic and operating conditions can resume on a sustainable basis globally.

For additional information, see the discussion of our risks and uncertainties related to COVID-19 in Note 1, Basis of presentation and summary of significant accounting policies in Item 1, Financial Statements, appearing elsewhere in this 10-Q Report, and in our 2020 10-K Report.

Going Concern

As of the filing date of this Quarterly Report on Form 10-Q, our cash balance was above the $60.0 million balance as required by the Financing Agreement.

Based on our current projections, we will need to raise additional capital to remain in compliance with this minimum cash balance covenant for the next twelve months from the issuance of these financial statements.

Our ability to sell equity securities may be limited by market conditions.

Along with considering additional financings, we have reviewed numerous potential scenarios in connection with steps that we may take to reduce our operating expenses.

If we are unable to comply with these covenants of the Financing Agreement, all or a portion of our obligations under the Financing Agreement may be declared immediately due and payable, which would have an adverse effect on our business, results of operations and financial condition.

Additionally, if circumstances were to require our independent registered public accounting firm to include a going concern uncertainty in their report on our annual consolidated financial statements, such matter would also take us out of compliance with certain of the Financing Agreement covenants.

The accompanying unaudited consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Recent accounting pronouncements

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The transaction price of a contract is the amount of consideration which we expect to be entitled to in exchange for transferring promised goods or services to a customer.

Prescription products are sold at fixed wholesale acquisition cost (“WAC”),

determined based on our list price.

Prescription products are sold at fixed wholesale acquisition cost (“WAC”), determined based on our list price.

However, the total transaction price is variable as it is calculated net of estimated product returns, chargebacks, rebates, coupons, discounts and wholesaler fees.

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In determining amounts of variable consideration to include in a contract’s transaction price, we rely on our historical experience and other evidence that supports our qualitative assessment of whether product revenue would be subject to a significant reversal.

We consider all the facts and circumstances associated with both the risk of a product revenue reversal arising from an uncertain future event and the magnitude of the reversal if that uncertain event were to occur.

We consider all the facts and circumstances associated with both the risk of a product revenue reversal arising from an uncertain future

event and the magnitude of the reversal if that uncertain event were to occur.

Actual amounts of consideration ultimately received may differ from our estimates.

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The variable consideration is estimated based on contract prices, the estimated percentage of patients that will utilize the copay assistance, the average assistance paid, the estimated levels of inventory in the distribution channel and the current level of prescriptions covered by patients’ insurance.

Payers may change coverage levels for our prescription products positively or negatively, at any time up to the time that we have formally contracted coverage with the payer.

Payers may change coverage levels for our prescription products positively or negatively, at any time up to the time that we have formerly contracted coverage with the payer.

As such, the net transaction price of our prescription products is susceptible to such changes in coverage levels, which are outside of our influence.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis