POS AM 1 txmd-posam_100713.htm POST-EFFECTIVE AMENDMENT NO.1 TO S-1 txmd-posam_100713.htm
As filed with the Securities and Exchange Commission on October 9 , 2013
 
Registration No. 333-185156    


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

POST-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

 
 
TherapeuticsMD, Inc.
 
 
(Exact name of registrant as specified in its charter)
 
         
Nevada
 
2834
 
87-0233535
(State or other jurisdiction of
incorporation or organization)
 
(Primary Standard Industrial
Classification Code Number)
 
(I.R.S. Employer
Identification Number)

6800 Broken Sound Parkway NW, Third Floor
Boca Raton, FL 33487
(561) 961-1900
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Robert G. Finizio
Chief Executive Officer
TherapeuticsMD, Inc.
6800 Broken Sound Parkway NW, Third Floor
Boca Raton, FL 33487
(561) 961-1900
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
 
Daniel A. Cartwright
Chief Financial Officer
TherapeuticsMD, Inc.
6800 Broken Sound Parkway NW, Third Floor
Boca Raton, FL 33487
(561) 961-1900
Robert S. Kant, Esq.
Greenberg Traurig, LLP
2375 East Camelback Road, Suite 700
Phoenix, Arizona 85016
(602) 445-8000

Approximate date of commencement of proposed sale to the public:  From time to time after the effective date of this registration statement as determined by the selling stockholders.
 
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. x
 
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):
 
Large accelerated filer   o Accelerated filer                   x
Non-accelerated filer     o   (Do not check if a smaller reporting company)     Smaller reporting company o
 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.


 
 
 

 

EXPLANATORY NOTE
 
This Post-Effective Amendment No. 1 to Form S-1 is being filed to update the registration statement on Form S-1 (Registration No. 333-185156), or the Registration Statement, of TherapeuticsMD, Inc., or the Company or Therapeutics, which was initially declared effective by the Securities and Exchange Commission on December 12, 2012, to make certain updating revisions to the information contained herein so that such information is current as of the date of filing. No additional securities are being registered under this Post-Effective Amendment No. 1.  All applicable filing fees were paid at the time of the original filing of the Registration Statement.

 
 

 

PROSPECTUS
 
Subject to Completion, Dated October 9 , 2013
 
3,953,489 Shares
 
 Logo

Common Stock 

The information in this preliminary prospectus is not complete and may be changed.  These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective.  This prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
 
This prospectus relates to the resale of up to 3,953,489 shares of common stock, or  the Shares, of TherapeuticsMD, Inc.  The Shares will be offered for resale by certain stockholders of Therapeutics listed in this prospectus, or the Selling Stockholders.
 
The Shares to which this prospectus relates may be sold from time to time by and for the accounts of the Selling Stockholders named in this prospectus or in supplements to this prospectus.  The Selling Stockholders may sell all or a portion of these Shares from time to time through public or private transactions at prevailing market prices, at prices related to prevailing market prices, or at privately negotiated prices.
 
The Shares covered by this prospectus were issued on October 2, 2012 in a private placement, or the October Private Placement, pursuant to a Securities Purchase Agreement, or the Purchase Agreement, dated September 26, 2012, between us and certain investors.  As part of the Purchase Agreement, we agreed to file a registration statement, which was filed November 27, 2012.  For a more detailed description of the issuance of the Shares pursuant to the Purchase Agreement, see “Summary of the Underlying Transactions” on page 28 .
 
The Selling Stockholders who may sell or otherwise dispose of the Shares are initial investors (or the permitted transferees of such investors) in the October Private Placement described above. The Selling Stockholders may offer the Shares from time to time directly or through underwriters, broker-dealers or agents and in one or more public or private transactions and at fixed prices, at prevailing market prices, at prices related to prevailing market prices, at various prices determined at the time of sale or otherwise at negotiated prices. If the Shares are sold through underwriters, broker-dealers, or agents, the Selling Stockholders (or the purchasers of the Shares as negotiated with the Selling Stockholders) will be responsible for underwriting discounts or commissions or agent commissions, if any. The registration of the Shares does not necessarily mean that any of the Shares will be sold by the Selling Stockholders. The timing and amount of any sale is within the respective Selling Stockholders’ sole discretion, subject to certain restrictions. See “Plan of Distribution” beginning on page  92 of this prospectus.
 
We will not receive any of the proceeds from the sale of the Shares offered by the Selling Stockholders.   We received aggregate net proceeds of $7,896,000 from the initial sale of the Shares to the Selling Stockholders in the October Private Placement on October 2, 2012.
 
Our common stock is listed on the NYSE MKT under the symbol “TXMD.”  On October 8 , 2013, the reported closing price of our common stock on the NYSE MKT was $ 3.74 per share.
 
See “Risk Factors” beginning on page  6 to read about factors you should consider before buying shares of our common stock.
 
Neither the Securities and Exchange Commission nor any other regulatory body nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus.  Any representation to the contrary is a criminal offense.

 
 
Prospectus dated                                           , 2013.

 
 

 

TABLE OF CONTENTS
Page
 


ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement that we have filed with the Securities and Exchange Commission, or the SEC or the Commission, utilizing a shelf registration process.  Under this shelf registration process, the Selling Stockholders may, from time to time, offer and sell shares of our common stock pursuant to this prospectus.  It is important for you to read and consider all of the information contained in this prospectus and any applicable prospectus supplement before making a decision whether to invest in the common stock.
 
We have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus and any applicable prospectus supplement or amendment.  We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you.  This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so.  The information contained in this prospectus is current only as of its date.

 
 

 
 
 
PROSPECTUS SUMMARY
 
This summary highlights information contained elsewhere in this prospectus.  This summary does not contain all the information that you should consider before investing in our common stock.  You should read this entire prospectus carefully, including “Risk Factors” and our financial statements and related notes.  Unless the context otherwise requires, the terms “Therapeutics,” “TXMD,” “Company,” “we,” “us,” or “our” refer to TherapeuticsMD, Inc., a Nevada corporation, and its subsidiaries, vitaMedMD, LLC, a Delaware limited liability company, or VitaMed, and BocaGreenMD, Inc., a Nevada corporation, or BocaGreen.
 
The Company
 
Our Business
 
We are a women’s healthcare product company focused on creating and commercializing products targeted exclusively for women.  We currently manufacture and distribute branded and generic prescription prenatal vitamins as well as over-the-counter, or OTC, vitamins and cosmetics.  We are currently focused on conducting the clinical trials necessary for regulatory approval and commercialization of advanced hormone therapy pharmaceutical products designed to alleviate the symptoms of and reduce the health risks resulting from menopause-related hormone deficiencies, including hot flashes, osteoporosis, and vaginal dryness.  We are developing these proposed hormone therapy products, which contain estradiol and progesterone alone or in combination, with the aim of providing equivalent efficacy at lower doses, thereby enabling an enhanced side effect profile compared with competing products.  
 
We have obtained U.S. Food and Drug Administration, or FDA, acceptance of our Investigational New Drug, or IND, applications to conduct clinical trials for four of our proposed products:
TX 12-001HR, TX 12 - 002HR, TX 12-003HR, and TX 12-004HR.  We are currently conducting a Phase 3 clinical trial for TX 12 - 001HR; we currently intend to begin Phase 3 clinical trials for TX 12-002HR at the end of 2013; and we currently intend to begin Phase 3 clinical trials for TX 12-004HR in the second quarter of 2014.  We have no current plans for clinical trials for TX 12 - 003HR.
 
On September 5, 2013, we announced the enrollment and dosing of the first patient in the REPLENISH Trial, a Phase 3 clinical trial designed to measure the safety and effectiveness of TX 12-001HR in treating the symptoms of menopause and protecting the endometrium.  We are also currently conducting formulation development of our proposed combination estradiol and progesterone product in a topical cream form.  We currently estimate the cost of this development to be approximately $10 million.  On May 10, 2013, we submitted an IND application to conduct clinical trials for TX 12-004HR, which was accepted by the FDA on June 9, 2013.  On August 12, 2013, we announced that we initiated a Phase 1 clinical trial for TX 12-004HR in vulvar and vaginal atrophy, or VVA, designed to measure the effect of TX 12-004HR on certain clinical endpoints, including a study candidate’s pH levels, vaginal cytology, and most bothersome symptom of VVA, out of the symptoms identified in FDA guidance.
 
TX 12-001HR is a combination estradiol and progesterone drug candidate under development for the treatment of moderate to severe vasomotor symptoms due to menopause, including hot flashes, night sweats, sleep disturbances, and vaginal dryness, for post-menopausal women with an intact uterus.  The product will be chemically identical to the hormones that naturally occur in a woman’s body, namely estradiol and progesterone, and would be studied as a continuous-combined regimen (where the combination of estrogen and progesterone are taken together in one product daily).  If approved by the FDA, we believe this would represent the first time a combination product of these bioidentical hormones would be approved for use in a single combined product.  We currently estimate the cost of our research and development activities through the completion of our Phase 3 trials for TX 12-001HR to be approximately $25 million.  According to Source Healthcare Analytics, for the 12 months ended June 30, 2013, the total FDA-approved market for menopause-related combination estrogen/progestin was approximately $650 million in U.S. sales, and according to IMS Health, Inc., for the 12 months ended December 31, 2012, the total market for menopause-related combination estrogen/progestin was approximately $490 million (as converted from the Euro at an exchange rate of €1.0=US$1.2875) in international sales.
 
TX 12-002HR is a natural progesterone formulation without the potentially allergenic component of peanut oil.  The product would be chemically identical to the hormones that naturally occur in a woman’s body.  We believe it would be similarly effective to traditional treatments, but at lower dosages.  We currently estimate the cost of our research and development activities through the completion of our Phase 3 trials for TX 12 - 002HR to be approximately $6 million.  According to Source Healthcare Analytics, for the 12 months ended June 30, 2013, the total FDA-approved market for oral progestin was approximately $340 million in U.S. sales, and according to IMS Health, Inc., for the 12 months ended December 31, 2012, the total market for oral progestin was approximately $780 million (as converted from the Euro at an exchange rate of €1.0=US$1.2875) in international sales.
 
 
 
 

 
 
        TX 12-004HR is a proposed suppository estradiol product for the treatment of VVA in post-menopausal women with vaginal linings that do not receive enough estrogen.  We believe our proposed product will be as effective as the traditional treatments for VVA and we believe it will have an added advantage of simple, easier to use dosage form versus traditional VVA treatments.  We currently estimate the cost of our research and development activities through the completion of the anticipated Phase 3 clinical trial for TX 12-004HR to be approximately $16 million.  According to Source Healthcare Analytics, for the 12 months ended June 30, 2013, the total FDA-approved market for VVA treatment was approximately $1 billion in U.S. sales.
 
We intend to leverage and grow our current marketing and sales organization to commercialize our proposed products in the United States assuming the successful completion of the FDA regulatory process.  We are also evaluating various other indications for our hormone technology, including oral contraception, treatment of preterm birth, and premature ovarian failure.  According to Source Healthcare Analytics, for the 12 months ended June 30, 2013, the total FDA-approved menopause-related estrogen market was approximately $2.5 billion in U.S. sales.  
 
The hormone therapy market includes two major components: an FDA-approved drug market and a non-FDA approved drug market supplied by compounding pharmacies.  We believe the FDA-approved products are easily measured and monitored, while non-FDA approved hormone therapy drug products, typically referred to as bioidenticals when produced by compounding pharmacies, are sold by compounding pharmacies and not monitored or easily measured.  We estimate the non-FDA approved compounded bioidentical hormone therapy combination sales of estradiol and progesterone products sold by compounding pharmacies are approximately $1.5 billion per year.  Our Phase 3 trials are intended to establish an indication of the safety and efficacy of our proposed bioidentical products at specific dosage levels.  We intend our proposed hormone therapy products, if approved, to provide an alternative to the non-FDA approved compounded bioidentical market based on our belief that our proposed products will offer advantages in terms of proven safety, efficacy, and stability, lower patient cost as a result of insurance coverage, and improved access as a result of availability from major retail pharmacy chains rather than custom order or formulation by individual compounders.  
 
As we continue the clinical development of our proposed hormone therapy products, we continue to market our prescription and over-the-counter dietary supplement and cosmetic product lines, consisting of prenatal vitamins, iron supplements, vitamin D supplements, natural menopause relief products, and cosmetic stretch mark creams under our VitaMed brand name and duplicate formulations of our prescription prenatal vitamins products, also referred to as “generic” formulations,  under our BocaGreenMD brand name.  All of our prenatal vitamins are gluten-, sugar-, and lactose-free.  We believe our product attributes result in greater consumer acceptance and satisfaction than competitive products while offering the highest quality and patented ingredients.
 
Our sales model focuses on the “4Ps”:  patient, provider, pharmacist, and payor.  We market and sell our current dietary supplement and cosmetic products primarily through a direct national sales force of approximately 30 full-time professionals that calls on healthcare providers in the obstetrics and gynecologic market space as well as through our website directly to consumers.  In addition, our products allow healthcare providers to offer an alternative to patients to meet their individual nutritional and financial requirements related to co-payment and cost-of-care considerations and help patients realize cost savings over competing products.  We also believe that our combination of branded, generic, and over-the-counter lines offers physicians, women, and payors cost-effective alternatives for top-quality care.  We supply our prescription dietary supplement products to consumers through retail pharmacies.  We market our over-the-counter products either directly to consumers via our website and phone sales followed by home shipment or through physicians who then re-sell them to their patients.  Our fully staffed customer care center uses current customer relationship management software to respond to healthcare providers, pharmacies, and consumers via incoming and outgoing telephone calls, e-mails, and live-chat.  We also facilitate repeat customer orders for our non-prescription products through our website’s auto-ship feature.
 
Our common stock began trading on the NYSE MKT on April 23, 2013 under the symbol “TXMD” and was previously listed on the OTCQB.  We maintain the following websites at www.therapeuticsmd.com, www.vitamedmd.com, www.vitamedmdrx.com and www.bocagreenmd.com.
 
 
 
2

 
 
 
Our Growth Strategy
 
Our goal is to become the women’s healthcare company recommended by healthcare providers to all patients by becoming the new standard in women’s health with a complete line of products all under one quality brand.  Key elements of our strategy to achieve this goal are as follows:
 
 ●  
focusing exclusively on women’s health issues to enable us to build long-term relationships with women as they move through their life cycles of birth control, pregnancy, child birth, and pre- and post- menopause;
   
 ●  
focusing on our development, clinical trials, and commercialization of hormone therapy products designed to (1) alleviate the symptoms of and reduce the health effects resulting from menopause-related hormone deficiencies, including hot flashes, osteoporosis, and vaginal dryness, and (2) provide equivalent efficiency at lower doses, enabling an enhanced side effect profile compared with competing products;
   
 ●  
providing an alternative to the non-FDA approved compound bioidentical market for estradiol and progesterone products sold by compounding pharmacies;
   
 ●  
maintaining a marketing emphasis on large group OB/GYN practices that provide opportunities to reach large patient bases and that are receptive to the data and savings we provide;
   
 ●  
pursuing multiple distribution channels, including physicians and pharmacies through our direct sales force and our website;
   
 ●  
expanding our geographic market and sales team to cover the entire country by increasing our current inside sales force; and
   
 ●  
introducing new products to build upon the introduction of our first three prescription prenatal vitamin products in the first and second quarters of 2012 and our generic line of prenatal vitamins in the fourth quarter of 2012, as well as our hormone therapy products consisting of a bioidentical oral and topical combination drug of estradiol and progesterone, an oral progesterone drug, and a suppository vulvar and vaginal atrophy estradiol drug.  Early pharmacokinetic, or PK, studies of our proposed combination estradiol and progesterone drug demonstrate d that the product is bioequivalent to the reference listed drug based on the criterion that the 90% confidence interval on the test-to-reference ratio is contained entirely within the interval 0.800 to 1.250.
   
Risk Factors
   
Our business is subject to numerous risks and uncertainties, including those highlighted in “Risk Factors” immediately following this prospectus summary.  These risks include, among others, the following:
   
 ●  
We have incurred significant operating losses since inception and anticipate that we will incur continued losses for the foreseeable future.
   
 ●  
Our independent registered public accounting firm, in its audit report s related to our financial statements for the two years ended December 31, 2012 and 2011, expressed substantial doubt about our ability to continue as a going concern.
   
 ●  
We currently derive all of our revenue from sales of our women’s health care products and our failure to maintain or increase sales of these products would have a material adverse effect on our business, financial condition, results of operations, and growth prospects.
   
 ●  
If our products do not have the healthful effects intended, our business may suffer.
   
 ●  
Our future success will depend in large part on our ability to commercialize our three proposed hormone replacement products for women designed to alleviate the symptoms of and reduce the health risks resulting from menopause, including hot flashes, osteoporosis, and vaginal dryness.
   
 ●  
We have no experience as a company in bringing a drug to regulatory approval.
   
 ●  
We may not be able to complete the development and commercialization of our proposed hormone replacement products if we fail to obtain additional financing.
 
 
 
 
3

 
 
 
The Offering
   
Common stock offered by the Selling Stockholders
3,953,489 shares
   
Common stock outstanding                                                    
144,962,706 shares.  This number does not include 14,655,793 shares of common stock reserved for issuance upon exercise of stock options, 14,293,499 shares of common stock reserved for issuance upon exercise of warrants, and 18,258,990 shares of common stock reserved for future issuance under our non-qualified stock option plans.
   
Use of proceeds                                                    
We will not receive any of the proceeds from the sale of S hares to be offered by the Selling Stockholders.
   
NYSE MKT Symbol                                                    
TXMD
   
Recent Developments
 
On September 25, 2013, we entered into an underwriting agreement, or the Stifel Underwriting Agreement, with Stifel, Nicolaus and Company, Incorporated, as representative of the underwriters named therein, or the September Underwriters, relating to the issuance and sale of 13,750,000 shares of our common stock. The price to the public in this offering was $2.40 per share and the September Underwriters agreed to purchase the shares from us pursuant to the Stifel Underwriting Agreement at a price of $2.232 per share. The net proceeds to us from this offering was approximately $30.4 million, after deducting underwriting discounts and commissions and other offering expenses payable by us. The offering was made pursuant to the registration statement on Form S-3 filed with the Commission on January 25, 2013, and deemed effective by the SEC on February 5, 2013, including prospectus supplements filed thereunder.
 
Our Offices
 
We are a Nevada corporation.  We began our current business in May 2008.  We maintain our principal executive offices at 6800 Broken Sound Parkway NW, Third Floor, Boca Raton, Florida 33487.  Our telephone number is (561) 961-1900.  The Company maintains websites at www.therapeuticsmd.com, www.vitamedmd.com, www.vitamedmdrx.com, and bocagreenmd.com.  The information contained on our websites or that can be accessed through our websites does not constitute part of this prospectus, nor is such content incorporated herein by reference.
 
 
 
 
 
 
 
4

 
 

 
 
Summary Consolidated Financial and Other Data
 
The following table sets forth selected consolidated financial and other data as of and for the periods indicated. You should read the following information together with the more detailed information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus. The consolidated statements of operations for the years ended December 31, 2011 and 2012, and the consolidated balance sheet data as of December 31, 2011 and 2012, are derived from our audited consolidated financial statements included in this prospectus. The consolidated statement of operations for the six months ended June 30, 2012 and 2013 and the balance sheet data as of June 30, 2013 are derived from our unaudited consolidated financial statements included in this prospectus. We have prepared the unaudited consolidated financial statements on the same basis as the audited consolidated financial statements and have included, in our opinion, all adjustments, consisting only of normal recurring adjustments that we consider necessary for a fair presentation of the financial information set forth in those statements.
 
   
   
   
Fiscal Year Ended
December 31,
   
Six Months Ended
June 30,
 
   
2011
   
2012
   
2012
   
2013
 
   
(in thousands, except share data)
 
Consolidated Statements of Operations Data:
                       
Revenue, net
  $ 2,088     $ 3,818     $ 1,540     $ 3,618  
Cost of goods sold
    947       1,348       708       844  
Gross profit
    1,141       2,470       832       2,774  
Operating expense:
                               
Sales, general, and administration
    6,406       14,070       6,401       10,003  
Research and development
    107       4,492       1,245       3,312  
Depreciation and amortization
    55       56       29       19  
Total operating expense
    6,568       18,618       7,675       13,334  
Operating loss
    (5,427 )     (16,148 )     (6,843 )     (10,560 )
Other income (expense)
                               
Loss on extinguishment of debt
    (7,390 )     (10,308 )     (10,308 )      
Beneficial conversion feature
          (6,717 )     (6,717 )      
Amortization of debt discount
    (29 )     (1,604 )            
Financing costs
                      (660 )
Interest expense
    (36 )     (301 )     (1,251 )     (1,166 )
 Loan guaranty costs
    (38 )     (45 )     (23 )     (3 )
Other income
    6       3       2       3  
Total other income (expense)
    (7,486 )     (18,972 )     (18,297 )     (1,825 )
Loss before taxes
    (12,913 )     (35,120 )     (25,140 )     (12,385 )
Provision for income taxes
                       
Net loss
  $ (12,913 )   $ (35,120 )     (25,140 )   $ (12,385 )
                                 
Net loss per share, basic and diluted:
                               
Net loss per share, basic and diluted
  $ (0.21 )   $ (0.38 )   $ (0.29 )   $ (0.11 )
Weighted average number of common shares outstanding
    62,516,461       91,630,693       85,352,818       116,866,764  
                                 
Consolidated Balance Sheet Data (at end of period):
                               
Total assets
  $ 1,439     $ 5,818     $ 4,878     $ 43,066  
Total liabilities
  $ 3,151     $ 7,251     $ 5,582     $ 4,599  
Total stockholders’ equity (deficit)
  $ (1,712 )   $ (1,433 )   $ (704 )   $ 38,467  
                                 
Other Data:
                               
Capital expenditures
  $ 38     $ 273     $ 116     $ 135  
Working capital (deficit) (at end of period)
  $ (1,914 )   $ 1,015     $ 967     $ 35,908  
Net cash provided by (used in)
                               
Operating activities
  $ (4,967 )   $ (12,737 )   $ ( 5,249 )   $ (10,685 )
Investing activities
  $ (38 )   $ (273 )   $ ( 516 )   $ (260 )
Financing activities
  $ 4,708     $ 14,437     $ 6,966     $ 43,827  
 

 
5

 
 
Investing in our common stock involves a high degree of risk.  You should carefully consider the following risk factors, together with all of the information included in this prospectus before you decide to purchase shares of our common stock.  We believe the risks and uncertainties described below are the most significant we face.  Additional risks and uncertainties of which we are unaware, or that we currently deem immaterial, also may become important factors that affect us.  If any of the following risks occur, our business, financial condition, or results of operations could be materially and adversely affected.  In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.
 
Risks Related to Our Business
 
We have incurred significant operating losses since inception and anticipate that we will incur continued losses for the foreseeable future.
 
We have incurred recurring net losses, including net losses of $12.4 million and $25.1 million for the six months ended June 30, 2013 and 2012, respectively.  As of June 30, 2013, we had an accumulated deficit of approximately $64.5 million.  We have generated limited revenue and have funded our operations to date primarily from private sales of equity and debt securities.  We expect to incur substantial additional losses over the next several years as our research, development, and clinical trial activities increase, especially those related to our proposed hormone therapy products.  As a result, we may never achieve or maintain profitability unless we successfully commercialize our products, in particular, our proposed hormone therapy products.  If we are unable to make required payments under any of our obligations for any reason, our creditors may take actions to collect their debts, including foreclosing on our intellectual property that collateralizes our obligations.  If we continue to incur substantial losses and are unable to secure additional financing, we could be forced to discontinue or curtail our business operations, sell assets at unfavorable prices, refinance existing debt obligations on terms unfavorable to us, or merge, consolidate, or combine with a company with greater financial resources in a transaction that might be unfavorable to us.
 
Our independent registered public accounting firm, in its audit reports related to our financial statements for the years ended December 31, 2012 and 2011, expressed substantial doubt about our ability to continue as a going concern.
 
As a result of our continued losses, our independent registered public accounting firm has included an explanatory paragraph in its reports on our financial statements for the years ended December 31, 2012 and 2011, expressing substantial doubt as to our ability to continue as a going concern.  The inclusion of a going concern explanatory paragraph in the report of our independent registered public accounting firm may make it more difficult for us to secure additional financing or enter into strategic relationships on terms acceptable to us, if at all, and may materially and adversely affect the terms of any financing that we might obtain.
 
We currently derive all of our revenue from sales of our women’s healthcare products, and our failure to maintain or increase sales of these products would have a material adverse effect on our business, financial condition, results of operations, and growth prospects.
 
We currently derive all of our revenue from sales of women’s healthcare products, including prenatal and women’s multi-vitamins, iron supplements, vitamin D supplements, natural menopause relief, and scar reduction creams.  While sales of our vitamin products grew from 2010 through 2012, we cannot assure you that such sales will continue to grow.  In addition to other risks described herein, our ability to maintain or increase existing product sales is subject to a number of risks and uncertainties, including the following:
 
·  
the presence of new or existing competing products, including generic copies of our prescription dietary supplement products;
 
·  
any supply or distribution problems arising with any of our manufacturing and distribution strategic partners;
 
·  
changed or increased regulatory restrictions or regulatory actions by the FDA;
 
·  
changes in healthcare laws and policy, including changes in requirements for rebates, reimbursement, and coverage by federal healthcare programs;
 
 
6

 
·  
the impact or efficacy of any price increases we may implement in the future;
 
·  
changes to our label and labeling, including new safety warnings or changes to our boxed warning, that further restrict how we market and sell our products; and
 
·  
acceptance of our products as safe and effective by physicians and patients.
 
If revenue from sales of our existing prescription and over-the-counter dietary supplements and cosmetics does not continue or increase, we may be required to reduce our operating expenses or to seek to raise additional funds, which could have a material adverse effect on our business, financial condition, results of operations, and growth prospects, or we may not be able to commence or continue clinical trials to seek approval for and commercialize our proposed hormone therapy products or any other products we may choose to develop in the future.
 
If our products do not have the effects intended or cause undesirable side effects, our business may suffer.
 
Although many of the ingredients in our current dietary supplement products are vitamins, minerals, and other substances for which there is a long history of human consumption, they also contain innovative ingredients or combinations of ingredients.  Although we believe all of these products and the combinations of ingredients in them are safe when taken as directed, the products could have certain undesirable side effects if not taken as directed or if taken by a consumer who has certain medical conditions.  In addition, these products may not have the effect intended if they are not taken in accordance with certain instructions, which include certain dietary restrictions.  Furthermore, there can be no assurance that any of the products, even when used as directed, will have the effects intended or will not have harmful side effects in an unforeseen way or on an unforeseen cohort.  If any of our products or products we develop or commercialize in the future are shown to be harmful or generate negative publicity from perceived harmful effects, our business, financial condition, results of operations, and prospects would be harmed significantly.
 
Our future success will depend in large part on our ability to commercialize our proposed hormone therapy products designed to alleviate the symptoms of and reduce the health risks resulting from menopause, including hot flashes, osteoporosis, and vaginal dryness.
 
Our future success will depend in large part on our ability to successfully develop and commercialize our proposed hormone therapy products designed to alleviate the symptoms of and reduce the health risks resulting from menopause, including hot flashes, osteoporosis, and vaginal dryness.  We have submitted IND applications for our four proposed hormone therapy products, which the FDA has made effective and which permit us to conduct clinical testing on these proposed products.  We intend to clinically test three of those proposed products.  However, we may not be able to complete the development of these proposed products, the results of the clinical trials may not be sufficient to support a New Drug Application, or NDA, for any of them, and even if we believe the results of our clinical trials are sufficient to support any NDA that we submit, the FDA may disagree and may not approve our NDA.  In addition, even if the FDA approves one or more of our NDAs, it may do so with restrictions on the intended uses that may make commercialization of the product or products financially untenable.  The failure to commercialize or obtain necessary approval for any one or more of these products would substantially harm our prospects and our business.
 
We may not be able to complete the development and commercialization of our proposed hormone therapy products if we fail to obtain additional financing.
 
We need substantial amounts of cash to complete the clinical development of our proposed hormone therapy products.  Our existing cash and cash equivalents  may not be sufficient to fund these requirements.  In addition, changing circumstances may cause us to consume funds significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control.  We do not currently have any committed external source of funds.  We will attempt to raise additional capital from the issuance of equity or debt securities, collaborations with third parties, licensing of rights to these products, or other means, or a combination of any of the foregoing.  Securing additional financing will require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from our day-to-day activities, which may adversely affect our ability to conduct our day-to-day operations.  In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all.  If we are unable to raise additional capital when required or on acceptable terms, we may be required to take one or more of the following actions:
 
 
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·  
significantly delay, scale back, or discontinue our product development and commercialization efforts;
 
·  
seek collaborators for our proposed hormone therapy products at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be the case; and
 
·  
license, potentially on unfavorable terms, our rights to our proposed hormone therapy products that we otherwise would seek to develop or commercialize ourselves.
 
Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends.  To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest 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.  If we raise additional funds through collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or proposed products or grant licenses on terms that may not be favorable to us.
 
If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we will be prevented from pursuing discovery, development, and commercialization efforts, and our ability to generate revenue and achieve or sustain profitability will be substantially harmed.
 
We have no experience as a company in bringing a drug to regulatory approval.
 
We have never obtained regulatory approval for, or commercialized, a drug.  It is possible that the FDA may refuse to accept any or all of our planned NDAs for substantive review or may conclude, after review of our data, that our applications are insufficient to obtain regulatory approval of any of our proposed hormone therapy products.  The FDA may also require that we conduct additional clinical or manufacturing validation studies, which may be costly and time-consuming, and submit that data before it will reconsider our applications.  Depending on the extent of these or any other FDA required studies, approval of any NDA that we submit may be significantly delayed, possibly for years, or may require us to expend more resources than we have available or can secure.  Any delay or inability in obtaining regulatory approvals would delay or prevent us from commercializing our proposed hormone therapy products, generating revenue from these proposed products, and achieving and sustaining profitability.  It is also possible that additional studies, if performed and completed, may not be considered sufficient by the FDA to approve any NDA we submit.  If any of these outcomes occur, we may be forced to abandon our planned NDAs for one or more of our proposed hormone therapy products, which would materially adversely affect our business and could potentially cause us to cease operations.
 
Clinical trials involve a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.
 
Three proposed hormone therapy products are currently in various stages of clinical testing.  We have recently began Phase 3 clinical trial of our estradiol and progesterone combination product and we currently intend to begin Phase 3 clinical trial for our oral progesterone product at the end of 2013.   Clinic trials are expensive, can take many years to complete, and have highly uncertain outcomes.  Failure can occur at any time during the clinical trial process as a result of inadequate performance of a drug, inadequate adherence by patients or investigators to clinical trial protocols, or other factors.  New drugs in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through earlier clinical trials.  A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials as a result of a lack of efficacy or adverse safety profiles, despite promising results in earlier trials.  Our future clinical trials may not be successful or may be more expensive or time-consuming than we currently expect.  If clinical trials for any of our proposed hormone therapy products fail to demonstrate safety or efficacy to the satisfaction of the FDA, the FDA will not approve that drug and we would not be able to commercialize it, which will have a material adverse effect on our business, financial condition, results of operations, and prospects.
 
 
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Delays in clinical trials are common for many reasons, and any such delays could result in increased costs to us and jeopardize or delay our ability to obtain regulatory approval and commence product sales as currently contemplated.
 
We may experience delays in clinical trials for our proposed hormone therapy products.  Our planned clinical trials might not begin on time; may be interrupted, delayed, suspended, or terminated once commenced; might need to be redesigned; might not enroll a sufficient number of patients; or might not be completed on schedule, if at all.  Clinical trials can be delayed for a variety of reasons, including the following:
 
·  
delays in obtaining regulatory approval to commence a trial;
 
·  
imposition of a clinical hold following an inspection of our clinical trial operations or trial sites by the FDA or other regulatory authorities;
 
·  
imposition of a clinical hold because of safety or efficacy concerns by the data safety monitoring board, or DSMB, the FDA, an Institutional Review Board, or IRB, or us;
 
·  
delays in reaching agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites;
 
·  
delays in obtaining required institutional review board approval at each site;
 
·  
delays in identifying, recruiting, and training suitable clinical investigators;
 
·  
delays in recruiting suitable patients to participate in a trial;
 
·  
delays in having patients complete participation in a trial or return for post-treatment follow-up;
 
·  
clinical sites dropping out of a trial to the detriment of enrollment;
 
·  
time required to add new sites;
 
·  
delays in obtaining sufficient supplies of clinical trial materials, including suitable active pharmaceutical ingredient, or API; or
 
·  
delays resulting from negative or equivocal findings of the DSMB for a trial.
 
Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors, including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, competing clinical trials, and clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating.  Any of these delays in completing our clinical trials could increase our costs, slow down our product development and approval process, and jeopardize our ability to commence product sales and generate revenue.
 
We may be required to suspend or discontinue clinical trials because of adverse side effects or other safety risks that could preclude approval of our proposed hormone therapy products.
 
Our clinical trials may be suspended or terminated at any time for a number of reasons.  A clinical trial may be suspended or terminated by us, our collaborators, the FDA, or other regulatory authorities because of a failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, presentation of unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using the investigational drug, changes in governmental regulations or administrative actions, lack of adequate funding to continue the clinical trial, or negative or equivocal findings of the DSMB or the IRB for a clinical trial.  An institutional review board may also suspend or terminate our clinical trials for failure to protect patient safety or patient rights.  We may voluntarily suspend or terminate our clinical trials if at any time we believe that they present an unacceptable risk to participants.  In addition, regulatory agencies may order the temporary or permanent discontinuation of our clinical trials at any time if they believe the clinical trials are not being conducted in accordance with applicable regulatory requirements or present an unacceptable safety risk to participants.  If we elect or are forced to suspend or terminate any clinical trial of any proposed product that we develop, the commercial prospects of such proposed product will be harmed and our ability to generate product revenue from any of these proposed products will be delayed or eliminated.  Any of these occurrences may harm our business, financial condition, results of operations, and prospects significantly.
 
 
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We rely on third parties to conduct our research and development activities, including our clinical trials, and we may experience delays in obtaining or may be unsuccessful in obtaining regulatory approval for, or in commercializing our proposed hormone therapy products if these third parties do not successfully carry out their contractual duties or meet expected deadlines.
 
We do not have the resources to independently conduct research and development activities.  Therefore, we have relied, and plan to continue to rely, on various third-party CROs to conduct our research and development activities and to recruit patients and monitor and manage data for our on-going clinical programs for our proposed hormone therapy products, as well as for the execution of our clinical studies.  Although we control only certain aspects of our CROs’ activities, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory, and scientific standards and our reliance on the CROs does not relieve us of our regulatory responsibilities.  We cannot assure you that the CROs will conduct the research properly or in a timely manner, or that the results will be reproducible.  We and our CROs are required to comply with the FDA’s Current Good Clinical Practices, or cGCPs, which are regulations and guidelines enforced by the FDA for all of our products in clinical development.  The FDA enforces these cGCPs through periodic inspections of trial sponsors, principal investigators, and clinical trial sites.  If we or our CROs fail to comply with applicable cGCPs, the clinical data generated in our clinical trials may be deemed unreliable or invalid, and the FDA may require us to perform additional clinical trials before approving our proposed products.  We cannot assure you that, upon inspection, the FDA will determine that any of our clinical trials comply with cGCPs.  In addition, to evaluate the safety and effectiveness compared to placebo of our proposed hormone therapy products to a statistically significant degree, our clinical trials will require an adequately large number of test subjects.  Any clinical trial that a CRO conducts abroad on our behalf is subject to similar regulation.  Accordingly, if our CROs fail to comply with these regulations or recruit a sufficient number of patients, we may be required to repeat clinical trials, which would delay the regulatory approval process.
 
In addition, we do not employ the personnel of our CROs, and, except for remedies available to us under our agreements with such organizations, we cannot control whether or not they will devote sufficient time and resources to our on-going clinical and pre-clinical programs.  Our CROs may also have relationships with other commercial entities, including one or more of our competitors, for which they may also be conducting clinical studies or other drug development activities, which could impede their ability to devote appropriate time to our clinical programs.  If our CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised because of the failure to adhere to our clinical protocols or regulatory requirements, or for other reasons, our clinical trials may be extended, delayed, or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize our proposed hormone therapy products that we seek to develop.  As a result, our financial results and the commercial prospects for our proposed hormone therapy products that we seek to develop would be harmed, our costs could increase, and our ability to generate revenue could be delayed or ended.
 
We typically engage one or more CROs on a project-by-project basis for each study or trial.  While we have developed and plan to maintain our relationships with CROs that we have previously engaged, we also expect to enter into agreements with other CROs to obtain additional resources and expertise in an attempt to accelerate our progress with regard to on-going clinical programs and, specifically, the compilation of clinical trial data for submission with an NDA for each of our proposed hormone therapy products.  If any of our relationships with these third parties terminate, we may not be able to enter into arrangements with alternative CROs or do so on commercially reasonable terms.  Switching or entering into new relationships with CROs involves substantial cost and requires extensive management time and focus.  In addition, there is a natural transition period when a new CRO commences work.  As a result, delays occur, which can materially affect our ability to meet our desired clinical development timelines and can increase our costs significantly.  Although we try to carefully manage our relationships with our CROs, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition, results of operations, or prospects.
 
Future legislation, regulations, and policies adopted by the FDA or other regulatory authorities may increase the time and cost required for us to conduct and complete clinical trials for our proposed hormone therapy products.
 
The FDA has established regulations, guidelines, and policies to govern the drug development and approval process, as have foreign regulatory authorities.  Any change in regulatory requirements resulting from the adoption of new legislation, regulations, or policies may require us to amend existing clinical trial protocols or add new clinical trials to comply with these changes.  Such amendments to existing protocols or clinical trial applications or the need for new ones, may significantly and adversely affect the cost, timing, and completion of the clinical trials for our proposed hormone therapy products.
 
 
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In addition, the FDA’s policies may change and additional government regulations may be issued that could prevent, limit, or delay regulatory approval of our product candidates, or impose more stringent product labeling and post-marketing testing and other requirements.  If we are slow or unable to adapt to such changes, our business, prospects, and ability to achieve or sustain profitability would be adversely affected.
 
Even if we obtain regulatory approval for our proposed hormone therapy products, we will still face extensive, ongoing regulatory requirements and review, and our products may face future development and regulatory difficulties.
 
Even if we obtain regulatory approval for one or more of our proposed hormone therapy products in the United States, the FDA may still impose significant restrictions on a product’s indicated uses or marketing or to the conditions for approval, or impose ongoing requirements for potentially costly post-approval studies, including Phase 4 clinical trials, or post-market surveillance.  As a condition to granting marketing approval of a product, the FDA may require a company to conduct additional clinical trials.  The results generated in these post-approval clinical trials could result in loss of marketing approval, changes in product labeling, or new or increased concerns about side effects or efficacy of a product.  For example, the labeling for our proposed hormone therapy products, if approved, may include restrictions on use or warnings.  The Food and Drug Administration Amendments Act of 2007, or FDAAA, gives the FDA enhanced post-market authority, including the explicit authority to require post-market studies and clinical trials, labeling changes based on new safety information and compliance with FDA-approved Risk Evaluation and Mitigation Strategies, or REMS, programs.  If approved, our proposed hormone therapy products will also be subject to ongoing FDA requirements governing the manufacturing, labeling, packaging, storage, distribution, safety surveillance, advertising, promotion, record keeping, and reporting of safety and other post-market information.  The FDA’s exercise of its authority could result in delays or increased costs during product development, clinical trials and regulatory review, increased costs to comply with additional post-approval regulatory requirements, and potential restrictions on sales of approved products.  Foreign regulatory agencies often have similar authority and may impose comparable costs.  Post-marketing studies, whether conducted by us or by others and whether mandated by regulatory agencies or voluntary, and other emerging data about marketed products, such as adverse event reports, may also adversely affect sales of our proposed hormone therapy products once approved, and potentially our other marketed products.  Further, the discovery of significant problems with a product similar to one of our products that implicate (or are perceived to implicate) an entire class of products could have an adverse effect on sales of our approved products.  Accordingly, new data about our products could negatively affect demand because of real or perceived side effects or uncertainty regarding efficacy and, in some cases, could result in product withdrawal or recall.  Furthermore, new data and information, including information about product misuse, may lead government agencies, professional societies, and practice management groups or organizations involved with various diseases to publish guidelines or recommendations related to the use of our products or the use of related therapies or place restrictions on sales.  Such guidelines or recommendations may lead to lower sales of our products.
 
The holder of an approved NDA also is subject to obligations to monitor and report adverse events and instances of the failure of a product to meet the specifications in the NDA.  Application holders must submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling, or manufacturing process.  Application holders must also submit advertising and other promotional material to the FDA and report on ongoing clinical trials.  Legal requirements have also been enacted to require disclosure of clinical trial results on publicly available databases.
 
In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with the FDA’s Current Good Manufacturing Practice, or cGMPs, regulations.  If we or a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturing facility, or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing, requiring new warnings or other labeling changes to limit use of the drug, requiring that we conduct additional clinical trials, imposing new monitoring requirements, or requiring that we establish a REMS.  Advertising and promotional materials must comply with FDA rules in addition to other potentially applicable federal and state laws.  The distribution of product samples to physicians must comply with the requirements of the Prescription Drug Marketing Act.  Sales, marketing, and scientific/educational grant programs must comply with the anti-fraud and abuse provisions of the Social Security Act, the False Claims Act, and similar state laws.  Pricing and rebate programs must comply with the Medicaid rebate requirements of the Omnibus Budget Reconciliation Act of 1990 and the Veterans Health Care Act of 1992.  If products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply.  All of these activities are also potentially subject to federal and state consumer protection and unfair competition laws.  If we or our third-party collaborators fail to comply with applicable regulatory requirements, a regulatory agency may take any of the following actions:
 
 
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·  
conduct an investigation into our practices and any alleged violation of law;
 
·  
issue warning letters or untitled letters asserting that we are in violation of the law;
 
·  
seek an injunction or impose civil or criminal penalties or monetary fines;
 
·  
suspend or withdraw regulatory approval;
 
·  
require that we suspend or terminate any ongoing clinical trials;
 
·  
refuse to approve pending applications or supplements to applications filed by us;
 
·  
suspend or impose restrictions on operations, including costly new manufacturing requirements;
 
·  
seize or detain products, refuse to permit the import or export of products, or require us to initiate a product recall; or
 
·  
exclude us from providing our products to those participating in government healthcare programs, such as Medicare and Medicaid, and refuse to allow us to enter into supply contracts, including government contracts.
 
The occurrence of any of the foregoing events or penalties may force us to expend significant amounts of time and money and may significantly inhibit our ability to bring to market or continue to market our products and generate revenue.  Similar regulations apply in foreign jurisdictions.
 
Our dependence upon third parties for the manufacture and supply of our existing women’s healthcare products and our proposed hormone therapy products may cause delays in, or prevent us from, successfully developing, commercializing, and marketing our products.
 
We do not currently have nor do we plan to build the infrastructure or capability internally to manufacture our existing women’s healthcare products.  For example, we depend on Lang Naturals, Inc., or Lang, to supply approximately 98 % of our vitaMed ® products.  We also rely on third-party contract manufacturing organizations, or CMOs to supply our proposed hormone therapy products for use in the conduct of our clinical trials.  We rely on these third parties to manufacture these products in accordance with our specifications and in compliance with applicable regulatory requirements.  We do not have long-term contracts for the commercial supply of our products or our proposed hormone therapy products.  We intend to pursue long-term manufacturing agreements, but we may not be able to negotiate such agreements on acceptable terms, if at all.
 
In addition, regulatory requirements could pose barriers to the manufacture of our products, including our proposed hormone therapy products.  Our third-party manufacturers are required to comply with cGMP regulations.  As a result, the facilities used by any of our current or future manufacturers must be approved by the FDA.  Holders of NDAs, or other forms of FDA approvals or clearances, or those distributing a regulated product under their own name, are responsible for manufacturing even though that manufacturing is conducted by a third-party CMO.  All of our existing products are and our proposed hormone therapy products, if approved, will be manufactured by CMOs.  These CMOs are required by the terms of our contracts to manufacture our products in compliance with the applicable regulatory requirements.  If our manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA and any applicable foreign regulatory authority, they will not be able to secure the applicable approval for their manufacturing facilities.  If these facilities are not approved for the commercial manufacture of our existing products or our proposed hormone therapy products, we may need to find alternative manufacturing facilities, which would result in disruptions of our sales and significant delays of up to several years in obtaining approval for our proposed hormone therapy products.  In addition, our manufacturers will be subject to ongoing periodic unannounced inspections by the FDA and corresponding state and foreign agencies for compliance with cGMPs and similar regulatory requirements.  Failure by any of our manufacturers to comply with applicable cGMP regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspensions or withdrawals of approvals, operating restrictions, interruptions in supply, recalls, withdrawals, issuance of safety alerts, and criminal prosecutions, any of which could have a material adverse impact on our business, financial condition, results of operations, and prospects.  Finally, we also could experience manufacturing delays if our CMOs give greater priority to the supply of other products over our products and proposed products or otherwise do not satisfactorily perform according to the terms of their agreements with us.
 
 
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If any supplier of the product for our proposed hormone therapy products experiences any significant difficulties in its respective manufacturing processes, does not comply with the terms of the agreement between us, or does not devote sufficient time, energy, and care to providing our manufacturing needs, we could experience significant interruptions in the supply of our proposed hormone therapy products, which could impair our ability to supply our proposed hormone therapy products at the levels required for our clinical trials and commercialization and prevent or delay their successful development and commercialization.
 
The commercial success of our existing products and our proposed hormone therapy products that we develop, if approved in the future, will depend upon gaining and retaining significant market acceptance of these products among physicians and payors.
 
Physicians may not prescribe our products, including any of our proposed hormone therapy products, if approved by the appropriate regulatory authorities for marketing and sale, which would prevent us from generating revenue or becoming profitable.  Market acceptance of our products, including our proposed hormone therapy products by physicians, patients, and payors, will depend on a number of factors, many of which are beyond our control, including the following:
 
·  
the clinical indications for which our proposed hormone therapy products are approved, if at all;
 
·  
acceptance by physicians and payors of each product as safe and effective treatment;
 
·  
the cost of treatment in relation to alternative treatments, including numerous generic drug products;
 
·  
the relative convenience and ease of administration of our products in the treatment of the symptoms for which they are intended;
 
·  
the availability and efficacy of competitive drugs;
 
·  
the effectiveness of our sales force and marketing efforts;
 
·  
the extent to which the product is approved for inclusion on formularies of hospitals and managed care organizations;
 
·  
the availability of adequate reimbursement by third parties, such as insurance companies and other healthcare payors, or by government healthcare programs, including Medicare and Medicaid;
 
·  
limitations or warnings contained in a product’s FDA-approved labeling; and
 
·  
prevalence and severity of adverse side effects.
 
Even if the medical community accepts that our products are safe and efficacious for their approved indications, physicians may not immediately be receptive to the use or may be slow to adopt our products as an accepted treatment for the symptoms for which they are intended.  We cannot assure you that any labeling approved by the FDA will permit us to promote our products as being superior to competing products.  If our products, including, in particular our proposed hormone therapy products, if approved, do not achieve an adequate level of acceptance by physicians and payors, we may not generate sufficient or any revenue from these products and we may not become profitable.  In addition, our efforts to educate the medical community and third-party payors on the benefits of our products may require significant resources and may never be successful.
 
 
 
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Our products, including our proposed hormone therapy products , if approved, face significant competition from branded and generic products, and our operating results will suffer if we fail to compete effectively.
 
Development and awareness of our brand will depend largely upon our success in increasing our customer base.  The dietary supplement and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change.  Our products, including any proposed hormone therapy products that are approved, face intense competition, including from major multinational pharmaceutical and dietary supplement companies, established biotechnology companies, specialty pharmaceutical, and generic drug companies.  Many of these companies have greater financial and other resources, such as larger research and development staffs and more experienced marketing and manufacturing organizations.  As a result, these companies may obtain regulatory approval more rapidly and may be more effective in selling and marketing their products.  They also may invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make the products that we sell or develop obsolete.  As a result, our competitors may succeed in commercializing products before we do.  Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies.  If we are unable to economically promote or maintain our brand, our business, results of operations and financial condition could be severely harmed.  In addition, our efforts to provide an alternative to the non FDA-approved compound bioidentical market for estradiol and progesterone products sold by compounding pharmacies may not be successful.
 
Reimbursement may not be available for our products, which could make it difficult for us to sell our products profitably.
 
Market acceptance and sales of our products, including any proposed hormone therapy products, will depend on coverage and reimbursement policies and may be affected by healthcare reform measures.  Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which products they will pay for and establish reimbursement levels.  Third-party payors generally do not cover over-the-counter products, and coverage for vitamins and dietary supplements varies.  We cannot be sure that coverage and reimbursement will be available for our products, including any proposed hormone therapy products, if approved.  We also cannot be sure that the amount of reimbursement available, if any, will not reduce the demand for, or the price of, our products.  If reimbursement is not available or is available only at limited levels, we may not be able to successfully compete through sales of our existing dietary supplement products or successfully commercialize our proposed hormone therapy products.
 
Specifically, in both the United States and some foreign jurisdictions, there have been a number of legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our products profitably.  In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, also called the Medicare Modernization Act, or MMA, changed the way Medicare covers and pays for pharmaceutical products.  The legislation expanded Medicare coverage for drug purchases by the elderly and certain others, and introduced a new reimbursement methodology based on average sales prices for physician-administered drugs.  In addition, this legislation provided authority for limiting the number of certain outpatient drugs that will be covered in any therapeutic class.  As a result of this legislation and the expansion of federal coverage of drug products, we expect that there will be additional pressure to contain and reduce costs.  These and future cost-reduction initiatives could decrease the coverage and price that we receive for our products, including our proposed hormone therapy products, if approved, and could seriously harm our business.  While the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policies and payment limitations in setting their own reimbursement rates, and any reduction in reimbursement under Medicare may result in a similar reduction in payments from private payors.
 
In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or collectively, PPACA, became law in the United States.  The goal of PPACA is to reduce the cost of healthcare and substantially change the way healthcare is financed by both governmental and private insurers.  Among other measures, PPACA imposes increased rebates on manufacturers for certain covered drug products reimbursed by state Medicaid programs.  While we cannot predict the full effect PPACA will have on federal reimbursement policies in general or on our business specifically, the PPACA may result in downward pressure on drug reimbursement, which could negatively affect market acceptance of our products.  In addition, we cannot predict whether new proposals will be made or adopted, when they may be adopted or what impact they may have on us if they are adopted.
 
The availability of generic products at lower prices than branded products, may also substantially reduce the likelihood of reimbursement for branded products, such as our proposed hormone therapy products, if approved.  We expect to experience pricing pressures in connection with the sale of our products generally due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, and additional legislative proposals.  If we fail to successfully secure and maintain adequate coverage and reimbursement for our products or are significantly delayed in doing so, we will have difficulty achieving market acceptance of our products and our business will be harmed.
 
 
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Product liability lawsuits could divert our resources, result in substantial liabilities and reduce the commercial potential of our products.
 
We face an inherent risk of product liability claims as a result of the marketing of our current products and the clinical testing of our proposed hormone therapy products despite obtaining appropriate informed consents from our clinical trial participants, and we will face an even greater risk if we obtain FDA approval and commercialize our proposed hormone therapy products in the United States or other additional jurisdictions or if we engage in the clinical testing of proposed new products or commercialize any additional products.  For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during clinical testing, manufacturing, marketing, or sale.  Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability, or a breach of warranties.  Claims could also be asserted under state consumer protection acts.  If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our existing products or proposed hormone therapy products, if approved.  Even successful defense would require significant financial and management resources.  Regardless of the merits or eventual outcome, product liability claims may result in any of the following:
 
·  
decreased demand for our products or products that we may develop in the future;
 
·  
loss of revenue;
 
·  
injury to our reputation;
 
·  
difficulty recruiting subjects for clinical trials or withdrawal of these subjects before a trial is completed;
 
·  
initiation of investigations by regulators;
 
·  
costs to defend the related litigation;
 
·  
a diversion of management’s time and our resources;
 
·  
substantial monetary awards to trial participants or patients;
 
·  
product recalls or withdrawals;
 
·  
labeling, marketing, or promotional restrictions;
 
·  
exhaustion of any available insurance and our capital resources;
 
·  
the inability to commercialize our products or proposed hormone therapy products; and
 
·  
a decline in our stock price.
 
Although we maintain general liability insurance of up to $10 million in the aggregate and clinical trial liability insurance of $10 million in the aggregate for our proposed hormone therapy products, this insurance may not fully cover potential liabilities.  The cost of any product liability litigation or other proceeding, even if resolved in our favor, could be substantial.  In addition, our inability to obtain or maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potential product liability claims could prevent or inhibit the development and commercial production and sale of our products, which could adversely affect our business, financial condition, results of operations, and prospects.
 
Our business may be affected by unfavorable publicity or lack of consumer acceptance.
 
We are highly dependent upon consumer acceptance of the safety and quality of our products, as well as similar products distributed by other companies.  Consumer acceptance of a product can be significantly influenced by scientific research or findings, national media attention, and other publicity about product use.  A product may be received favorably, resulting in high sales associated with that product that may not be sustainable as consumer preferences change.  Future scientific research or publicity could be unfavorable to our industry or any of our particular products and may not be consistent with earlier favorable research or publicity.  A future research report or publicity that is perceived by our consumers as less than favorable or that may question earlier favorable research or publicity could have a material adverse effect on our ability to generate revenue.  Adverse publicity in the form of published scientific research, statements by regulatory authorities or otherwise, whether or not accurate, that associates consumption of our product or any other similar product with illness or other adverse effects, or that questions the benefits of our product or a similar product, or that claims that such products do not have the effect intended could have a material adverse effect on our business, reputation, financial condition, or results of operations.
 
 
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If we use hazardous and biological materials in a manner that causes injury or violates applicable law, we may be liable for damages.
 
Our research and development activities involve the controlled use of potentially hazardous substances, including chemical, biological, and radioactive materials.  In addition, our operations produce hazardous waste products.  Federal, state, and local laws and regulations in the United States govern the use, manufacture, storage, handling, and disposal of hazardous materials.  Although we believe that our procedures for use, handling, storing, and disposing of these materials (all of which only occur at third-party sites operated by our contractors) comply with legally prescribed standards, we may incur significant additional costs to comply with applicable laws in the future.  We also cannot predict the impact on our business of new or amended environmental laws or regulations, or any changes in the way existing and future laws and regulations are interpreted or enforced.  Also, even if we are in compliance with applicable laws, we cannot completely eliminate the risk of contamination or injury resulting from hazardous materials, and we may incur liability as a result of any such contamination or injury.  In the event of an accident, we could be held liable for damages or penalized with fines, and the liability could exceed our resources, and we do not carry liability insurance covering the use of hazardous materials.  If we fail to comply with applicable requirements, we could incur substantial costs, including civil or criminal fines and penalties, clean-up costs, or capital expenditures for control equipment or operational changes necessary to achieve or maintain compliance.  Compliance with applicable environmental laws and regulations is expensive, and current or future environmental regulations may impair our research, development and production efforts, which adversely affect our business, financial condition, results of operations, and prospects.
 
We are subject to extensive and costly government regulation.
 
The products we currently market, including the vitamins and cosmetic creams, and the pharmaceutical products we are developing and planning to develop in the future, are subject to extensive and rigorous domestic government regulation, including regulation by the FDA, the Centers for Medicare & Medicaid Services, or CMS, other divisions of the U.S. Department of Health and Human Services, including its Office of Inspector General, the U.S. Department of Justice, the Departments of Defense and Veterans Affairs, to the extent our products are paid for directly or indirectly by those departments, state and local governments, and their respective foreign equivalents.  The FDA regulates dietary supplements, cosmetics, and drugs under different regulatory schemes.  For example, the FDA regulates the processing, formulation, safety, manufacturing, packaging, labeling, advertising, and distribution of dietary supplements and cosmetics under its dietary supplement and cosmetic authority, respectively.  The FDA also regulates the research, development, pre-clinical and clinical testing, manufacture, safety, effectiveness, record keeping, reporting, labeling, storage, approval, advertising, promotion, sale, distribution, import, and export of pharmaceutical products under various regulatory provisions.  If any drug products we develop are tested or marketed abroad, they will also be subject to extensive regulation by foreign governments, whether or not we have obtained FDA approval for a given product and its uses.  Such foreign regulation may be equally or more demanding than corresponding U.S. regulation.
 
Government regulation substantially increases the cost and risk of researching, developing, manufacturing, and selling products.  Our failure to comply with these regulations could result in, by way of example, significant fines, criminal and civil liability, product seizures, recalls, withdrawals, withdrawals of approvals, and exclusion and debarment from government programs.  Any of these actions, including the inability of our proposed hormone therapy products to obtain and maintain regulatory approval, would have a materially adverse effect on our business, financial condition, results of operations, and prospects.
 
We are subject to additional federal and state laws and regulations relating to our business, and our failure to comply with those laws could have a material adverse effect on our results of operations and financial conditions.
 
We are subject to additional healthcare regulation and enforcement by the federal government and the states in which we conduct our business.  The laws that may affect our ability to operate include the following:
 
 
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·  
the federal healthcare program Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering, or paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order, or recommendation of, any good or service for which payment may be made under government healthcare programs such as the Medicare and Medicaid programs;
 
·  
federal false claims laws that prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other government healthcare programs that are false or fraudulent;
 
·  
federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; and
 
·  
state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws that may apply to items or services reimbursed by any third-party payor, including commercial insurers.
 
Further, the recently enacted PPACA, among other things, amends the intent requirement of the federal anti-kickback and criminal healthcare fraud statutes.  A person or entity can now be found guilty of fraud or false claims under PPACA without actual knowledge of the statute or specific intent to violate it.  In addition, PPACA provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the false claims statutes.  Possible sanctions for violation of these anti-kickback laws include monetary fines, civil and criminal penalties, exclusion from Medicare, Medicaid and other government programs and forfeiture of amounts collected in violation of such prohibitions.  Any violations of these laws, or any action against us for violation of these laws, even if we successfully defend against it, could result in a material adverse effect on our reputation, business, results of operations, and financial condition.
 
PPACA also imposes new reporting requirements on device and pharmaceutical manufacturers to make annual public disclosures of payments to healthcare providers and ownership of their stock by healthcare providers.  Failure to submit required information may result in civil monetary penalties of up to an aggregate of $150,000 per year (or up to an aggregate of $1 million per year for “knowing failures”), for all payments, transfers of value or ownership or investment interests that are not reported.  Manufacturers were required to begin data collection on August 1, 2013 and will be required to report such data to CMS by March 31, 2014.
 
In addition, there has been a recent trend of increased federal and state regulation of payments made to physicians for marketing.  Some states, such as California, Massachusetts and Vermont, mandate implementation of corporate compliance programs, along with the tracking and reporting of gifts, compensation and other remuneration to physicians.
 
The scope and enforcement of these laws is uncertain and subject to change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations.  We cannot predict the impact on our business of any changes in these laws.  Federal or state regulatory authorities may challenge our current or future activities under these laws.  Any such challenge could have a material adverse effect on our reputation, business, results of operations, and financial condition.  Any state or federal regulatory review of us, regardless of the outcome, would be costly and time-consuming.
 
If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.
 
Our ability to compete in the highly competitive pharmaceutical industry depends in large part on our ability to attract and retain highly qualified managerial, scientific, and medical personnel.  In order to induce valuable employees to remain with us, we have, among other things, provided stock options that vest over time.  The value to employees of stock options will be significantly affected by movements in our stock price that we cannot control and may at any time be insufficient to counteract more lucrative offers from other companies.
 
Despite our efforts to retain valuable employees, members of our management, scientific, and medical teams may terminate their employment with us on short notice.  We do not have employment agreements with a number of our key employees.  As a result, most employees are employed on an at-will basis, which means that any of these employees could leave our employment at any time, with or without notice, and may go to work for a competitor.  The loss of the services of any of our executive officers or other key employees could potentially harm our business, operating results, and financial condition.  Our success also depends on our ability to continue to attract, retain, and motivate highly skilled scientific and medical personnel.
 
 
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Any failure to adequately expand a direct sales force will impede our growth.
 
We expect to be substantially dependent on a direct sales force to attract new business and to manage customer relationships.  We plan to expand our direct sales force and believe that there is significant competition for qualified, productive direct sales personnel with advanced sales skills and technical knowledge.  Our ability to achieve significant growth in revenue in the future will depend, in large part, on our success in recruiting, training, and retaining sufficient direct sales personnel.  New and future hires may not become as productive as expected, and we may be unable to hire sufficient numbers of qualified individuals in the future in the markets in which we do business.  While there presently exists a high rate of unemployment, if we are unable to hire and develop sufficient numbers of productive sales personnel our business prospects could suffer.
 
Other pharmaceutical companies with which we compete for qualified personnel have greater financial and other resources, different risk profiles, and longer histories than we do.  They also may provide more diverse opportunities and better chances for career advancement.  Some of these characteristics may be more appealing to high-quality candidates than what we offer.  If we are unable to continue to attract and retain high-quality personnel, our ability to commercialize drug candidates will be limited.
 
Our success is tied to our distribution channels.
 
We sell our prescription dietary supplement products to wholesale distributors, specialty pharmacies, specialty distributors, and chain drug stores that generally sell products to retail pharmacies, hospitals, and other institutional customers.  However, over 98% of our product shipments since inception were to only three customers: AmerisourceBergen Corporation, Cardinal Health, Inc., and McKesson Corporation.  Our business would be harmed if any of these customers refused to distribute our products or refused to purchase our products on commercially favorable terms to us.
 
A failure to maintain optimal inventory levels to meet commercial demand for our products could harm our reputation and subject us to financial losses.
 
Our ability to maintain optimal inventory levels to meet commercial demand depends on the performance of third-party contract manufacturers.  In some instances, our products have unique ingredients used under license arrangements.  If our manufacturers are unsuccessful in obtaining raw materials, if we are unable to manufacture and release inventory on a timely and consistent basis, if we fail to maintain an adequate level of product inventory, if inventory is destroyed or damaged, or if our inventory reaches its expiration date, patients might not have access to our products, our reputation and brands could be harmed, and physicians may be less likely to recommend our products in the future, each of which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
 
Our success depends on how efficiently we respond to changing consumer preferences and demand.
 
Our success depends, in part, on our ability to anticipate and respond to changing consumer trends and preferences.  We may not be able to respond in a timely or commercially appropriate manner to these changes.  Our failure to accurately predict these trends could negatively impact our inventory levels, sales, and consumer opinion of us as a source for the latest product.  The success of our new product offerings depends upon a number of factors, including our ability to achieve the following:
 
·  
accurately anticipate customer needs;
 
·  
innovate and develop new products;
 
·  
successfully commercialize new products in a timely manner;
 
·  
competitively price our products in the market;
 
·  
procure and maintain products in sufficient volumes and in a timely manner; and
 
·  
differentiate our product offerings from those of our competitors.
 
 
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If we do not introduce new products, make enhancements to existing products, or maintain the appropriate inventory levels to meet customers’ demand in a timely manner, our business, results of operations, and financial condition could be materially and adversely affected.
 
We may initiate product recalls or withdrawals, or may be subject to regulatory enforcement actions that could negatively affect our business.
 
We may be subject to product recalls, withdrawals, or seizures if any of the products we formulate, manufacture, or sell are believed to cause injury or illness or if we are alleged to have violated governmental regulations in the manufacture, labeling, promotion, sale, or distribution of any of our products.  A recall, withdrawal, or seizure of any of our products could materially and adversely affect consumer confidence in our brands and lead to decreased demand for our products.  In addition, a recall, withdrawal, or seizure of any of our products would require significant management attention, would likely result in substantial and unexpected expenditures, and could materially and adversely affect our business, financial condition, and results of operations.
 
We will need to grow our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.
 
As of October 7, 2013, we had 68 employees.  As our development and commercialization plans and strategies develop, we expect to expand our employee base for managerial, operational, financial, and other resources and, depending on our commercialization strategy, we may further expand our employee base for sales and marketing resources.  Future growth would impose significant added responsibilities on members of management, including the need to identify, recruit, maintain, motivate, and integrate additional employees.  Also, our management may need to divert a disproportionate amount of its attention away from their day-to-day activities and devote a substantial amount of time to managing these growth activities.  We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees.  Our growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of additional product candidates.  If we are unable to effectively manage our expected growth, our expenses may increase more than expected, our ability to increase revenue could be reduced and we may not be able to implement our business strategy.  Our future financial performance and our ability to commercialize our proposed hormone therapy products, if approved, and compete effectively will depend, in part, on our ability to effectively manage any future growth in our organization.
 
Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements and insider trading.
 
We are exposed to the risk of employee fraud or other misconduct.  Misconduct by employees could include intentional failures to comply with FDA regulations, to provide accurate information to the FDA, to comply with federal and state healthcare fraud and abuse laws and regulations, to report financial information or data accurately, or to disclose unauthorized activities to us.  In particular, sales, marketing, and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing, and other abusive practices.  These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs, and other business arrangements.  Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation.  We have adopted a Code of Conduct and Ethics, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with these laws or regulations.  If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.
 
 
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Risks Related to our Intellectual Property
 
Another party could develop hormone therapy products and obtain FDA regulatory exclusivity in the United States before we do, potentially preventing our ability to commercialize our proposed hormone therapy products and other products in development.
 
We plan to seek to obtain market exclusivity for our proposed hormone therapy products and any other drug candidates we develop in the future.  To the extent that patent protection is not available or has expired, FDA marketing exclusivity may be the only available form of exclusivity available for these proposed products.  Marketing exclusivity can delay the submission or the approval of certain marketing applications.  Potentially competitive products may also be seeking marketing exclusivity and may be in various stages of development, including some more advanced than us.  We cannot predict with certainty the timing of FDA approval or whether FDA approval will be granted, nor can we predict with certainty the timing of FDA approval for competing products or whether such approval will be granted.  It is possible that competing products may obtain FDA approval with marketing exclusivity before we do, which could delay our ability to submit a marketing application or obtain necessary regulatory approvals, result in lost market opportunities with respect to our proposed hormone therapy products, and materially adversely affect our business, financial condition, and results of operations.
 
If our efforts to protect the proprietary nature of the intellectual property covering our proposed hormone therapy products and other products are not adequate, we may not be able to compete effectively in our market.
 
Our commercial success will depend in part on our ability to obtain additional patents and protect our existing patent positions as well as our ability to maintain adequate protection of other intellectual property for our proposed hormone therapy products and other products.  If we do not adequately protect our intellectual property, competitors may be able to use our technologies and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.  The patent positions of pharmaceutical companies are highly uncertain.  The legal principles applicable to patents are in transition due to changing court precedent and legislative action, and we cannot be certain that the historical legal standards surrounding questions of validity will continue to be applied or that current defenses relating to issued patents in these fields will be sufficient in the future.  Changes in patent laws in the United States, such as the recently adopted America Invents Act of 2011, may affect the scope, strength, and enforceability of our patent rights or the nature of proceedings that may be brought by us related to our patent rights.  In addition, the laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the United States, and we may encounter significant problems in protecting our proprietary rights in these countries.  We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary technologies are covered by valid and enforceable patents or are effectively maintained as trade secrets.
 
These risks include the possibility of the following:
 
·  
the patent applications that we have filed may fail to result in issued patents in the United States or in foreign countries;
 
·  
patents issued or licensed to us or our partners may be challenged, discovered to have been issued on the basis of insufficient or incorrect information, or held to be invalid or unenforceable;
 
·  
the scope of any patent protection may be too narrow to exclude other competitors from developing or designing around these patents;
 
·  
we or our licensors were not the first to make the inventions covered by each of our issued patents and pending patent applications;
 
·  
we or our licensors were not the first to file patent applications for these inventions;
 
·  
we may fail to comply with procedural, documentary, fee payment, and other similar provisions during the patent application process, which can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights;
 
·  
future product candidates may not be patentable;
 
·  
others will claim rights or ownership with regard to patents and other proprietary rights that we hold or license;
 
 
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·  
delays in development, testing, clinical trials, and regulatory review may reduce the period of time during which we could market our product candidates under patent protection; and
 
·  
we may fail to timely apply for patents on our technologies or products.
 
While we apply for patents covering our technologies and products, as we deem appropriate, many pharmaceutical companies and university and research institutions already have filed patent applications or have received patents in our areas of product development.  These entities’ applications, patents, and other intellectual property rights may conflict with patent applications to which we have rights and could prevent us from obtaining patents or could call into question the validity of any of our patents, if issued, or could otherwise adversely affect our ability to develop, manufacture, or commercialize our proposed hormone therapy products.  In addition, if third parties file patent applications in the technologies that also claim technology to which we have rights, we may have to participate in interference, derivation, or other proceedings with the U.S. Patent and Trademark Office, or USPTO, or applicable foreign patent regulatory authorities to determine our rights in the invention, which may be time-consuming and expensive.  Moreover, issued patents may be challenged during post-grant proceedings brought by a third party or the USPTO, or in foreign countries, or in the courts.  These proceedings may result in loss of patent claims or adverse changes to the scope of the claims.
 
If we or our licensors or strategic partners fail to obtain and maintain patent protection for our products, or our proprietary technologies and their uses, companies may be dissuaded from collaborating with us.  In such event, our ability to commercialize our proposed hormone therapy products or future product candidates, if approved, may be threatened, we could lose our competitive advantage and the competition we face could increase, all of which could adversely affect our business, financial condition, results of operations, and prospects.
 
In addition, mechanisms exist in much of the world permitting some form of challenge by generic drug marketers to our patents prior to, or immediately following, the expiration of any regulatory exclusivity, and generic companies are increasingly employing aggressive strategies, such as “at risk” launches to challenge our patent rights.
 
Our business also may rely on unpatented proprietary technology, know-how, and trade secrets.  If the confidentiality of this intellectual property is breached, it could adversely impact our business.
 
If we are sued for infringing intellectual property rights of third parties, litigation will be costly and time consuming and could prevent or delay us from developing or commercializing our product candidates.
 
Our commercial success depends, in part, on our not infringing the patents and proprietary rights of other parties and not breaching any collaboration or other agreements we have entered into with regard to our technologies and products.  We are aware of numerous third-party U.S. and non-U.S. issued patents and pending applications that exist in the areas of hormone therapy, including compounds, formulations, treatment methods, and synthetic processes that may be applied towards the synthesis of hormones.  Patent applications are confidential when filed and remain confidential until publication, approximately 18 months after initial filing, while some patent applications remain unpublished until issuance, if at all.  As such, there may be other third-party patents and pending applications of which we are currently unaware with claims directed towards composition of matter, formulations, methods of manufacture, or methods for treatment related to the use or manufacture of our products or product candidates.  Therefore, we cannot ever know with certainty the nature or existence of every third-party patent filing.  We cannot provide assurances that we or our partners will be free to manufacture or market our product candidates as planned, or that we or our licensors’ and partners’ patents will not be opposed or litigated by third parties.  If any third-party patent was held by a court of competent jurisdiction to cover aspects of our materials, formulations, methods of manufacture, or methods of treatment related to the use or manufacture of any of our product candidates, the holders of any such patent may be able to block our ability to develop and commercialize the applicable product candidate unless we obtained a license or until such patent expires or is finally determined to be held invalid or unenforceable.  There can be no assurances that we will be able to obtain a license to such patent on favorable terms or at all.  Failure to obtain such license may have a material adverse effect on our business.
 
There is a substantial amount of litigation involving intellectual property in the pharmaceutical industry generally.  If a third party asserts that we infringe its patents or other proprietary rights, we could face a number of risks that could adversely affect our business, financial condition, results of operations, and prospects, including the following:
 
 
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·  
infringement and other intellectual property claims, which would be costly and time-consuming to defend, whether or not we are ultimately successful, which in turn could delay the regulatory approval process, consume our capital, and divert management’s attention from our business;
 
·  
substantial damages for past infringement, which we may have to pay if a court determines that our products or technologies infringe a competitor’s patent or other proprietary rights;
 
·  
a court prohibiting us from selling or licensing our technologies or future products unless the third party licenses its patents or other proprietary rights to us on commercially reasonable terms, which it is not required to do;
 
·  
if a license is available from a third party, we may have to pay substantial royalties or lump sum payments or grant cross licenses to our patents or other proprietary rights to obtain that license; and
 
·  
redesigning our products so they do not infringe, which may not be possible or may require substantial monetary expenditures and time.
 
We are party from time to time to legal proceedings relating to our intellectual property, and third parties in the future may file claims asserting that our technologies, processes, or products infringe on their intellectual property.  We cannot predict whether third parties will assert these claims against us or our strategic partners or against the licensors of technology licensed to us, or whether those claims will harm our business.  In addition, the outcome of intellectual property litigation is subject to uncertainties that cannot be adequately quantified in advance.  If we or our partners were to face infringement claims or challenges by third parties relating to our product candidates, an adverse outcome could subject us to significant liabilities to such third parties, and force us or our partners to curtail or cease the development of some or all of our product candidates, which could adversely affect our business, financial condition, results of operations, and prospects.
 
We may be required to file lawsuits or take other actions to protect or enforce our patents or the patents of our licensors, which could be expensive and time-consuming.
 
Competitors may infringe our patents or the patents of our licensors.  To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming.  Moreover, there can be no assurance that we will have sufficient financial or other resources to file and pursue such infringement claims, which typically last for years before they are concluded.  The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to pharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally.
 
In addition, in an infringement proceeding, a court may decide that a patent of ours or our licensors is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents, or those of our licensors, do not cover the technology in question or on other grounds.  An adverse result in any litigation or defense proceedings could put one or more of our patents, or those of our licensors, at risk of being invalidated, held unenforceable, or interpreted narrowly and could put our patent applications, or those of our licensors, at risk of not issuing.  Moreover, we may not be able to prevent, alone or with our licensors, misappropriation of our proprietary rights, particularly in countries where the laws may not protect those rights as fully as in the United States.  Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.  In addition, if securities analysts or investors perceive public announcements of the results of hearings, motions, or other interim proceedings or developments to be negative, the price of our common stock could be adversely affected.  The occurrence of any of the above could adversely affect our business, financial condition, results of operations, and prospects.
 
If we are unable to protect the confidentiality of certain information, the value of our products and technology could be materially adversely affected.
 
We also rely on trade secrets, know-how, and continuing technological advancement to develop and maintain our competitive position.  To protect this competitive position, we regularly enter into confidentiality and proprietary information agreements with third parties, including employees, independent contractors, suppliers, and collaborators.  We cannot, however, ensure that these protective arrangements will be honored by third parties, and we may not have adequate remedies if these arrangements are breached.  In addition, enforcement of claims that a third party has illegally obtained and is using trade secrets, know-how, or technological advancements is expensive, time-consuming, and uncertain.  Non-U.S. courts are sometimes less willing than U.S. courts to protect this information.  Moreover, our trade secrets, know-how, and technological advancements may otherwise become known or be independently developed by competitors in a manner providing us with no practical recourse against the competing parties.  If any such events were to occur, they could adversely affect our business, financial condition, results of operations, and prospects.
 
 
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We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
 
As is common in the pharmaceutical industry, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors.  We may be subject to claims that these employees, or we, have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers.  Litigation may be necessary to defend against these claims.  Such claims may lead to material costs for us, or an inability to protect or use valuable intellectual property rights, which could adversely affect our business, financial condition, results of operations, and prospects.
 
 
Risks Related to Ownership of Our Common Stock
 
The market price of our common stock may be highly volatile, and you could lose all or part of your investment.
 
The trading price of our common stock is likely to be volatile.  This volatility may prevent you from being able to sell your shares at or above the price you paid for your shares.  Our stock price could be subject to wide fluctuations in response to a variety of factors, which include the following:
 
·  
any delay in commencement of our Phase 3 clinical trials for our proposed hormone therapy products;
 
·  
adverse results or delays in clinical trials;
 
·  
any delay in filing our NDAs for our proposed hormone therapy products and any adverse development or perceived adverse development with respect to the FDA’s review of the NDAs, including the FDA’s issuance of a “refusal to file” letter or a request for additional information;
 
·  
changes in laws or regulations applicable to our products or proposed products, including clinical trial requirements for approvals;
 
·  
unanticipated serious safety concerns related to the use of our proposed hormone therapy products;
 
·  
a decision to initiate a clinical trial, not to initiate a clinical trial, or to terminate an existing clinical trial;
 
·  
the inability to obtain adequate clinical supply for our proposed hormone therapy products or the inability to do so at acceptable prices;
 
·  
adverse regulatory decisions;
 
·  
the introduction of new products or technologies offered by us or our competitors;
 
·  
the effectiveness of our or our potential strategic partners’ commercialization efforts;
 
·  
developments concerning our sources of manufacturing supply and any commercialization strategic partners;
 
·  
the perception of the pharmaceutical industry by the public, legislatures, regulators, and the investment community;
 
·  
disputes or other developments relating to proprietary rights, including patents, litigation matters, and our ability to obtain patent protection for our technologies;
 
·  
the inability to effectively manage our growth;
 
·  
actual or anticipated variations in quarterly operating results;
 
·  
the failure to meet or exceed the estimates and projections of the investment community;
 
 
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·  
the overall performance of the U.S. equity markets and general political and economic conditions;
 
·  
announcements of significant acquisitions, strategic partnerships, joint ventures, or capital commitments by us or our competitors;
 
·  
additions or departures of key scientific or management personnel;
 
·  
adverse market reaction to any indebtedness we may incur or securities we may issue in the future;
 
·  
sales of our common stock by our stockholders in the future;
 
·  
significant lawsuits, including patent or stockholder litigation;
 
·  
changes in the market valuations of similar companies;
 
·  
the trading volume of our common stock;
 
·  
increases in our common stock available for sale upon expiration of lock-up agreements;
 
·  
effects of natural or man-made catastrophic events or other business interruptions; and
 
·  
other events or factors, many of which are beyond our control.
 
In addition, the stock market in general and the stock of biotechnology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies.  Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance.
 
Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.
 
At October 7, 2013, our executive officers, directors, holders of 5% or more of our stock, and their affiliates beneficially owned approximately 67% of our common stock on an as-if converted basis.  These stockholders may be able to determine the outcome of all matters requiring stockholder approval.  For example, these stockholders may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction.  This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders.
 
If we fail to maintain proper internal controls, our ability to produce accurate financial statements or comply with applicable regulations could be impaired.
 
Pursuant to Section 404 of the Sarbanes-Oxley Act, our management is required annually to deliver a report that assesses the effectiveness of our internal control over financial reporting and our independent registered public accounting firm is required annually to deliver an attestation report on the effectiveness of our internal control over financial reporting.  If we are unable to maintain effective internal control over financial reporting or if our independent auditors are unwilling or unable to provide us with an attestation report on the effectiveness of internal control over financial reporting for future periods as required by Section 404 of the Sarbanes-Oxley Act, we may not be able to produce accurate financial statements, and investors may therefore lose confidence in our operating results, our stock price could decline and we may be subject to litigation or regulatory enforcement actions.
 
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
 
The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business.  If one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline.  If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which might cause our stock price and trading volume to decline.
 
We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.
 
We have never declared or paid any cash dividends on our common stock.  We currently anticipate that we will retain any future earnings for the development, operation, and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future.  Any return to stockholders will be limited to the value of their stock.
 
 
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Some provisions of our charter documents and Nevada law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders and may prevent attempts by our stockholders to replace or remove our current management.
 
Provisions in our articles of incorporation and bylaws, as well as certain provisions of Nevada law, could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if an acquisition would benefit our stockholders, and could also make it more difficult to remove our current management.  These provisions in our articles of incorporation and bylaws include the following:
 
·  
authorizing the issuance of “blank check” preferred stock that could be issued by our board of directors to increase the number of outstanding shares and thwart a takeover attempt;
 
·  
prohibiting cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates; and
 
·  
advance notice provisions in connection with stockholder proposals that may prevent or hinder any attempt by our stockholders to bring business to be considered by our stockholders at a meeting or replace our board of directors.
 
In addition, we are subject to Nevada’s Combination with Interested Stockholders statute (Nevada Revised Statute Sections 78.411 - 78.444), which prohibits an “interested stockholder” from entering into a “combination” with a company, unless certain conditions are met.  An “interested stockholder” is a person who, together with affiliates and associates, beneficially owns (or within the prior two years, did beneficially own) 10% or more of the corporation’s capital stock entitled to vote.
 
 
 
25

 
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
 
This prospectus, including the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business,” contains forward-looking statements.  All statements other than statements of historical fact contained in this prospectus, including statements regarding our future operating results and financial position, business strategy, and plans and objectives of management for future operations, are forward-looking statements.  In many cases, you can identify forward-looking statements by terms such as “may,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other similar expressions.
 
The forward-looking statements contained in this prospectus reflect our views as of the date of this prospectus about future events and are subject to risks, uncertainties, assumptions, and changes in circumstances that may cause our actual results, performance, or achievements to differ significantly from those expressed or implied in any forward-looking statement.  Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, performance, or achievements.  A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, without limitation, those factors described in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Some of the key factors that could cause actual results to differ from our expectations include the following:
 
·  
our operating losses incurred since inception and anticipated for the foreseeable future;
 
·  
our ability to continue as a going concern;
 
·  
our ability to maintain or increase sales of our products;
 
·  
the ability of our products to produce the intended effects;
 
·  
our ability to develop and commercialize our proposed advanced hormone therapies;
 
·  
our estimates regarding our capital requirements and our ability to obtain additional financing;
 
·  
our lack of experience in bringing a drug to regulatory approval;
 
·  
the uncertainty of results from our clinical trials;
 
·  
delays, suspensions, or discontinuation of our clinical trials;
 
·  
our reliance on third-parties to conduct our clinical trials and research and development;
 
·  
the effects of laws, regulations, and enforcement;
 
·  
our dependence on third-party manufacturers;
 
·  
our ability to gain and retain market acceptance for our products;
 
·  
our expectations with respect to the potential commercial value of our proposed products;
 
·  
the competitive nature of the industries in which we conduct our business;
 
·  
the availability of reimbursement from government authorities and health insurance companies for our products;
 
·  
the impact of product liability lawsuits;
 
·  
unfavorable publicity or lack of customer acceptance;
 
·  
our ability to use hazardous or biological materials in compliance with applicable law;
 
·  
our reliance on our executive officers and key personnel;
 
·  
our ability to expand our direct sales force;
 
 
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·  
our dependence on certain customers and distribution channels;
 
·  
our ability to maintain optimal inventory levels;
 
·  
our response to changing consumer preferences and demand;
 
·  
product recalls, withdrawals, or safety alerts;
 
·  
our inability to manage our growth;
 
·  
the conduct of our employees;
 
·  
our ability to protect our intellectual property and not infringe on the intellectual property of others;
 
·  
our ability to use the proceeds from this offering in an effective manner; and
 
·  
our ability to establish and maintain proper internal controls and comply with the financial reporting obligations of the SEC and Sarbanes-Oxley
 
Readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on these forward-looking statements.  All of the forward-looking statements we have included in this prospectus are based on information available to us on the date of this prospectus.  We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as otherwise required by law.
 
MARKET, INDUSTRY, AND OTHER DATA
 
Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including our general expectations and market position, market opportunity, and market size, is based on information from various sources, on assumptions that we have made that are based on those data and other similar sources, and on our knowledge of the markets for our products.  These data involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates.  In addition, projections, assumptions, and estimates of our future performance and the future performance of the industry in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors” and elsewhere in this prospectus.  These and other factors could cause results to differ materially from those expressed in the estimates made by third parties and by us.
 

 
27

 
SUMMARY OF THE UNDERLYING TRANSACTIONS
 
In September 26, 2012, we entered into the Stock Purchase Agreement with multiple investors, or the Investors, relating to the issuance and sale of our Common Stock in a private placement. The private placement closed on October 2, 2012, or the Closing Date, through which we sold an aggregate of 3,953,489 shares of our Common Stock at $2.15 per share for an aggregate purchase price of $8,500,001. In connection with the private placement, Jefferies LLC, or Jefferies, served as our exclusive placement agent. Jefferies’ compensation for the transaction was a cash fee of $552,500, which is included in accounts payable in the consolidated financial statements included in this prospectus. We also paid legal fees and expenses of the Investors in the aggregate of $52,016, resulting in net proceeds to us of $7,895,485. The Shares were issued in reliance upon the exemptions from registration under the Securities Act of 1933 provided by Section 4(a)(2) and Rule 506 of Regulation D promulgated thereunder. The Shares were issued directly by us and did not involve a public offering or general solicitation. The Investors in the private placement are “accredited investors” as that term is defined in Rule 501 of Regulation D and acquired the Shares for investment only and not with a view toward, or for resale in connection with, the public sale or distribution thereof. As part of the Stock Purchase Agreement, we agreed to file a registration statement, which was filed November 27, 2012.

USE OF PROCEEDS
 
We will not receive any proceeds from the sale of common stock by the Selling Stockholders. The Selling Stockholders will pay all selling commissions and fees and expenses of their legal counsel incurred by them in disposing of the shares. We will bear all other costs, fees and expenses incurred in effecting the issuance and registration of the shares covered by this prospectus, including, without limitation, all registration and filing fees, exchange fees and fees and expenses of our legal counsel and our accountants.
 
MARKET PRICE OF OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
 
Since April 23, 2013, our common stock has been listed on the NYSE MKT under the symbol “TXMD.”  Prior to that time, our common stock was quoted on the OTCQB.  The following table sets forth for the periods indicated the high and low bid or sales prices of our common stock on the OTCQB and the NYSE MKT, as applicable.  The below quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.  Prices listed are historic prices that have been adjusted to reflect the 1:100 reverse split that was effective on October 3, 2011.
 
 
High
 
Low
2013
     
Fourth Quarter (through October 8, 2013)                                                                 
$     3.80
 
$     2.86
Third Quarter
$     3.18
 
$     2.03
Second Quarter                                                                  
$    3.23
 
$    1.73
First Quarter                                                                  
$    3.70
 
$    1.65
       
2012
     
Fourth Quarter                                                                  
$    3.50
 
$    1.25
Third Quarter                                                                  
$    3.60
 
$    2.61
Second Quarter                                                                  
$    2.84
 
$    2.06
First Quarter                                                                  
$    2.50
 
$    1.43
       
2011
     
Fourth Quarter                                                                  
$    1.70
 
$    0.51
Third Quarter                                                                  
$    4.00
 
$    1.00
Second Quarter                                                                  
$    7.00
 
$    1.00
First Quarter                                                                  
$  10.00
 
$    2.00
 
On October 8, 2013, the closing sale price of our common stock was $3.74 per share.
 
 
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Transfer Agent
 
Computershare Trust Co., Inc. is the transfer agent and registrar for our common stock.
 
Holders
 
At the close of business on October 7 , 2013, we had 327 holders of record of our common stock.
 
Dividend Policy
 
Historically, we have not paid dividends on our common stock, and we currently do not intend to pay any dividends on our common stock in the foreseeable future.  We currently plan to retain any earnings to finance the growth of our business rather than to pay cash dividends.  Payments of any cash dividends in the future will depend on our financial condition, results of operations, and capital requirements as well as other factors deemed relevant by our board of directors.
 

 
29

 
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
 
The following table sets forth selected consolidated financial and other data as of and for the periods indicated.  You should read the following information together with the more detailed information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus.  The consolidated statements of operations for the years ended December 31, 2011 and 2012, and the consolidated balance sheet data as of December 31, 2011 and 2012, are derived from our audited consolidated financial statements included in this prospectus.  The consolidated statement of operations for the six months ended June 30, 2012 and 2013 and the balance sheet data as of June 30, 2013 are derived from our unaudited consolidated financial statements included in this prospectus. We have prepared the unaudited consolidated financial statements on the same basis as the audited consolidated financial statements and have included, in our opinion, all adjustments, consisting only of normal recurring adjustments, that we consider necessary for a fair presentation of the financial information set forth in those statements.  The consolidated statements of operations for the year ended December 31, 2010, and the consolidated balance sheet data as of December 31, 2010, are derived from the audited consolidated financial statements of vitaMedMD, LLC, our predecessor, included in this prospectus.  The consolidated statements of operations for the year ended December 31, 2009, and the consolidated balance sheet data as of December 31, 2009, are derived from the audited consolidated financial statements of vitaMedMD, LLC , our predecessor, not included in this prospectus.  We had no material operations in 2008.
 
 
 
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      Fiscal Year Ended December 31,    
Six Months Ended
June 30,
 
   
2009
   
2010
   
2011
   
2012
   
2012
   
2013
 
      (Restated)       (Restated)                          
   
(in thousands, except share data)
 
       
Consolidated Statements of Operations Data:
                                   
Revenue, net
  $ 221     $ 1,242     $ 2,088     $ 3,818     $ 1,540     $ 3,618  
Gross profit
    16       686       1,141       2,470       832       2,774  
Total operating expense
    1,309       3,553       6,568       18,618       7,675       13,334  
Operating loss
    (1,293)       (2,867 )     (5,427 )     (16,148 )     (6,843 )     (10,560 )
Total other income (expense)
    5             (7,486 )     (18,972 )     (18,297 )     (1,825 )
Net loss
  $ ( 1,288 )   $ (2,867 )   $ (12,913 )   $ (35,120 )     (25,140 )   $ (12,385 )
                                                 
Net loss per share, basic and diluted:
                                               
Net loss per share, basic and diluted
  $ ( 0.05 )   $ (0.07 )   $ (0.21 )   $ (0.38 )   $ (0.29 )   $ (0.11 )
Weighted average number of common shares outstanding
    27,423,970       38,289,463       62,516,461       91,630,693        85,352,818       116,866,764  
                                                 
Consolidated Balance Sheet Data (at end of period):
                                               
Total assets
  $ 585     $ 1,197     $ 1,439     $ 5,818     $ 4,878     $ 43,066  
Total liabilities
  $ 102     $ 233     $ 3,151     $ 7,251     $ 5,582     $ 4,599  
Total stockholders’ equity (deficit)
  $ 484     $ 964     $ (1,712 )   $ (1,433 )   $ (704 )   $ 38,467  
                                                 
Other Data:
                                               
Capital expenditures
  $ 102     $ 27     $ 38     $ 273     $ 116     $ 135  
Working capital (deficit) (at end of period)
  $ 361     $ 826     $ (1,914 )   $ 1,015     $ 967     $ 35,908  
 
 
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SELECTED QUARTERLY FINANCIAL DATA
 
The following selected quarterly consolidated financial data should be read in conjunction with the Consolidated Financial Statements and the Notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Registration Statement. The following table sets forth selected financial information for the dates and periods indicated. Our results for any of these periods are not necessarily indicative of the results to be expected for the year ending December 31, 2013 or for any other future period. Dollar amounts are in thousands, except per share amounts.

   
Six Months Ended June 30, 2013
 
   
First Quarter
   
Second Quarter
 
   
(unaudited)
 
Net Revenues
  $ 1,537,195     $ 2,080,885  
Gross Profit
    1,156,849       1,617,279  
Net Loss
    (6,375,653 )     (6,009,646 )
Net Loss Per Share
  $ (0.06 )   $ (0.05 )
Weighted Average Number of Common Shares Outstanding
    103,052,956       130,851,978  



   
Fiscal Year Ended December 31, 2012
 
   
First Quarter
   
Second Quarter
   
Third Quarter
   
Fourth Quarter
 
   
(unaudited)
 
Net Revenues
  $ 721,692     $ 819,150     $ 1,036,456     $ 1,240,715  
Gross Profit
    385,568       446,780       729,613       907,939  
Net Loss
    (13,289,603 )     (11,850,038 )     (4,253,259 )     (5,727,335 )
Net Loss Per Share
  $ (0.16 )   $ (0.14 )   $ (0.04 )   $ (0.06 )
Weighted Average Number of Common Shares Outstanding
    84,556,216       86,149,419       95,895,677       91,630,693  



   
Fiscal Year Ended December 31, 2011
 
   
First Quarter
   
Second Quarter
   
Third Quarter
   
Fourth Quarter
 
   
(unaudited)
 
Net Revenues
  $ 485,856     $ 508,303     $ 539,572     $ 554,446  
Gross Profit
    282,100       269,327       297,884       291,754  
Net Loss
    (774,365 )     (1,066,381 )     (1,486,765 )     (9,585,854 )
Net Loss Per Share
  $ (0.01 )   $ (0.02 )   $ (0.03 )   $ (0.15 )
Weighted Average Number of Common Shares Outstanding
    55,710,076       57,455,491       58,407,327       62,516,461  

 
 
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
 
RESULTS OF OPERATIONS
 
You should read the following discussion and analysis in conjunction with the information set forth under “Selected Consolidated Financial and Other Data” and our consolidated financial statements and the notes to those statements included elsewhere in this prospectus.  This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties.  See “Special Note Regarding Forward-Looking Statements.”  Our actual results may differ materially from those contained in or implied by any forward-looking statements as a result of various factors, including the risks and uncertainties described under “Risk Factors.”
 
Company Overview
 
We are a women’s healthcare product company focused on creating and commercializing products targeted exclusively for women.  We currently manufacture and distribute branded and generic prescription prenatal vitamins as well as over-the-counter, or OTC, vitamins and cosmetics.  We are currently focused on conducting the clinical trials necessary for regulatory approval and commercialization of advanced hormone therapy pharmaceutical products designed to alleviate the symptoms of and reduce the health risks resulting from menopause-related hormone deficiencies, including hot flashes, osteoporosis, and vaginal dryness.  We are developing these proposed hormone therapy products, which contain estradiol and progesterone alone or in combination, with the aim of providing equivalent efficacy at lower doses, thereby enabling an enhanced side effect profile compared with competing products.  
 
We have obtained U.S. Food and Drug Administration, or FDA, acceptance of our Investigational New Drug, or IND, applications to conduct clinical trials for four of our proposed products: TX 12-001HR, TX 12-002HR, TX 12-003HR, and TX 12-004HR. We are currently conducting a Phase 3 clinical trial for TX 12-001HR; we currently intend to begin Phase 3 clinical trials for TX 12-002HR at the end of 2013; and we currently intend to begin Phase 3 clinical trials for TX 12-004HR in the second quarter of 2014.  We have no current plans for clinical trials for TX 12-003HR.
 
On September 5, 2013, we announced the enrollment and dosing of the first patient in the REPLENISH Trial, a Phase 3 clinical trial designed to measure the safety and effectiveness of TX 12-001HR in treating the symptoms of menopause and protecting the endometrium. We are also currently conducting formulation development of our proposed combination estradiol and progesterone product in a topical cream form.  We currently estimate the cost of this development to be approximately $10 million. On May 10, 2013, we submitted an IND application to conduct clinical trials for TX 12-004HR, which was accepted by the FDA on June 9, 2013. On August 12, 2013, we announced that we initiated a Phase 1 clinical trial for TX 12-004HR in vulvar and vaginal atrophy, or VVA, designed to measure the effect of TX 12-004HR on certain clinical endpoints, including a study candidate’s pH levels, vaginal cytology, and most bothersome symptom of VVA, out of the symptoms identified in FDA guidance.
 
TX 12-001HR is a combination estradiol and progesterone drug candidate under development for the treatment of moderate to severe vasomotor symptoms due to menopause, including hot flashes, night sweats, sleep disturbances, and vaginal dryness, for post-menopausal women with an intact uterus. The product will be chemically identical to the hormones that naturally occur in a woman’s body, namely estradiol and progesterone, and would be studied as a continuous-combined regimen (where the combination of estrogen and progesterone are taken together in one product daily).  If approved by the FDA, we believe this would represent the first time a combination product of these bioidentical hormones would be approved for use in a single combined product.  We currently estimate the cost of our research and development activities through the completion of our Phase 3 trials for TX 12-001HR to be approximately $25 million. According to Source Healthcare Analytics, for the 12 months ended June 30, 2013, the total FDA-approved market for menopause-related combination estrogen/progestin was approximately $650 million in U.S. sales, and according to IMS Health, Inc., for the 12 months ended December 31, 2012, the total market for menopause-related combination estrogen/progestin was approximately $490 million (as converted from the Euro at an exchange rate of €1.0=US$1.2875) in international sales.
 
TX 12-002HR is a natural progesterone formulation without the potentially allergenic component of peanut oil.  The product would be chemically identical to the hormones that naturally occur in a woman’s body.  We believe it would be similarly effective to traditional treatments, but at lower dosages.  We currently estimate the cost of our research and development activities through the completion of our Phase 3 trials for TX 12-002HR to be approximately $6 million. According to Source Healthcare Analytics, for the 12 months ended June 30, 2013, the total FDA-approved market for oral progestin was approximately $340 million in U.S. sales, and according to IMS Health, Inc., for the 12 months ended December 31, 2012, the total market for oral progestin was approximately $780 million (as converted from the Euro at an exchange rate of €1.0=US$1.2875) in international sales.
 
 
33

 
TX 12-004HR is a proposed suppository estradiol product for the treatment of VVA in post-menopausal women with vaginal linings that do not receive enough estrogen. We believe our proposed product will be as effective as the traditional treatments for VVA and we believe it will have an added advantage of simple, easier to use dosage form versus traditional VVA treatments. We currently estimate the cost of our research and development activities through the completion of the anticipated Phase 3 clinical trial for TX 12-004HR to be approximately $16 million. According to Source Healthcare Analytics, for the 12 months ended June 30, 2013, the total FDA-approved market for VVA treatment was approximately $1 billion in U.S. sales.
 
We intend to leverage and grow our current marketing and sales organization to commercialize our proposed products in the United States assuming the successful completion of the FDA regulatory process.  We are also evaluating various other indications for our hormone technology, including oral contraception, treatment of preterm birth, and premature ovarian failure.  According to Source Healthcare Analytics, for the 12 months ended June 30, 2013, the total FDA-approved menopause-related estrogen market was approximately $2.5 billion in U.S. sales.  
 
The hormone therapy market includes two major components: an FDA-approved drug market and a non-FDA approved drug market supplied by compounding pharmacies.  We believe the FDA-approved products are easily measured and monitored, while non-FDA approved hormone therapy drug products, typically referred to as bioidenticals when produced by compounding pharmacies, are sold by compounding pharmacies and not monitored or easily measured.  We estimate the non-FDA approved compounded bioidentical hormone therapy combination sales of estradiol and progesterone products sold by compounding pharmacies are approximately $1.5 billion per year.  Our Phase 3 trials are intended to establish an indication of the safety and efficacy of our proposed bioidentical products at specific dosage levels.  We intend our proposed hormone therapy products, if approved, to provide an alternative to the non-FDA approved compounded bioidentical market based on our belief that our proposed products will offer advantages in terms of proven safety, efficacy, and stability, lower patient cost as a result of insurance coverage, and improved access as a result of availability from major retail pharmacy chains rather than custom order or formulation by individual compounders.  
 
As we continue the clinical development of our proposed hormone therapy products, we continue to market our prescription and over-the-counter dietary supplement and cosmetic product lines, consisting of prenatal vitamins, iron supplements, vitamin D supplements, natural menopause relief products, and cosmetic stretch mark creams under our VitaMed brand name and duplicate formulations of our prescription prenatal vitamins products, also referred to as “generic” formulations,  under our BocaGreenMD brand name.  All of our prenatal vitamins are gluten-, sugar-, and lactose-free.  We believe our product attributes result in greater consumer acceptance and satisfaction than competitive products while offering the highest quality and patented ingredients.
 
Our sales model focuses on the “4Ps”:  patient, provider, pharmacist, and payor.  We market and sell our current dietary supplement and cosmetic products primarily through a direct national sales force of approximately 30 full-time professionals that calls on healthcare providers in the obstetrics and gynecologic market space as well as through our website directly to consumers.  In addition, our products allow healthcare providers to offer an alternative to patients to meet their individual nutritional and financial requirements related to co-payment and cost-of-care considerations and help patients realize cost savings over competing products.  We also believe that our combination of branded, generic, and over-the-counter lines offers physicians, women, and payors cost-effective alternatives for top-quality care.  We supply our prescription dietary supplement products to consumers through retail pharmacies.  We market our over-the-counter products either directly to consumers via our website and phone sales followed by home shipment or through physicians who then re-sell them to their patients.  Our fully staffed customer care center uses current customer relationship management software to respond to healthcare providers, pharmacies, and consumers via incoming and outgoing telephone calls, e-mails, and live-chat.  We also facilitate repeat customer orders for our non-prescription products through our website’s auto-ship feature.
 
Our common stock began trading on the NYSE MKT on April 23, 2013 under the symbol “TXMD” and was previously listed on the OTCQB. We maintain the following websites at www.therapeuticsmd.com, www.vitamedmd.com, www.vitamedmdrx.com and www.bocagreenmd.com.
 
 
34

 
Recent Developments
 
Repayment of June 2012 Notes
 
On March 21, 2013, we repaid $4,882,019 including accrued interest, related to secured promissory notes issued on June 19, 2012, or the June 2012 Notes, leaving a balance of $21,595 in accrued interest as of March 31, 2013. On April 25, 2013, the balance of accrued interest was paid in full and the related security agreement was terminated. We issued the June 2012 Notes on June 19, 2012, to an individual and an entity, or, collectively, the Parties, in the principal base amounts of $2,347,128 and $2,344,719, respectively, pursuant to the terms of a note purchase agreement or the June 2012 Note Purchase Agreement. As consideration for the June 2012 Notes, the Parties surrendered the remaining balance of promissory notes issued in February 2012 in the aggregate amount of $1,347,128 and $1,344,719, respectively (which sums included principal and interest through June 19, 2012), and we received an aggregate of $2,000,000 of new funding from the Parties. The principal base amount of each of the June 2012 Notes, plus any additional advances made to us, together with accrued interest at the annual rate of 6%, was due in one lump sum payment on February 24, 2014. As security for our obligations under the June 2012 Note Purchase Agreement and the June 2012 Notes, we entered into a security agreement and pledged all of our assets, tangible and intangible, as further described therein. In connection with the June 2012 Notes, we also granted warrants for the purchase of an aggregate of 7,000,000 shares of our common stock.
 
Bank Line of Credit
 
In March 2011, VitaMed entered into a Business Loan Agreement and Promissory Note with First United Bank, or the Bank for a $300,000 bank line of credit, or the Bank LOC. On November 13, 2012, we entered into an amendment with the Bank to reduce the Bank LOC to $100,000 or the Bank LOC. In February 2013, we borrowed $100,000 under the Amended Bank LOC. The Amended Bank LOC required a personal guarantee and cash collateral limited to $100,000, which was provided by Reich Family Limited Partnership or Reich Family LP, an entity controlled by Mitchell Krassan, an officer of our company. On April 25, 2013, we paid the principal, fees and interest due under the Amended Bank LOC of $100,735. On May 1, 2013, the Amended Bank LOC expired and was not renewed. Accordingly, the personal guarantee was canceled and the cash collateral was returned to Reich Family LP.
 
Credit Line for $10 Million
 
On January 31, 2013, we entered into a business loan agreement with Plato and Associates, LLC, a limited liability company, or Plato, for a Multiple Advance Revolving Credit Note or the Plato Note. The Plato Note allows us to draw down funding up to the $10 million maximum principal amount, at a stated interest rate of 6% per annum. Plato may make advances to us from time to time under the Plato Note at our request, which advances will be of a revolving nature and may be made, repaid, and made from time to time. Interest payments will be due and payable on the tenth day following the end of each calendar quarter in which any interest is accrued and unpaid, commencing on April 10, 2013, and the principal balance outstanding under the Plato Note, together with all accrued interest and other amounts payable under the Plato Note, if any, will be due and payable on February 24, 2014.  The Plato Note is secured by substantially all of our assets. On each of February 25 and March 13, 2013, $200,000 was drawn against the Plato Note.  On March 21, 2013, we repaid $401,085, including accrued interest, and as of September 30, 2013, there was no balance outstanding under the Plato Note.
 
As additional consideration for the Note, we issued Plato a w arrant to purchase 1,250,000 shares of our common stock at an exercise price $3.20 per share. The Warrant will vest and become exercisable on October 31, 2013 and may be exercised any time after that date prior to its expiration on January 31, 2019.
 
Public Offerings of Common Stock
 
On March 14, 2013, we entered into an underwriting agreement, or the Jefferies Underwriting Agreement, with Jefferies LLC, as representative of the underwriters named therein, or the March Underwriters, relating to the issuance and sale of 29,411,765 shares of our common stock. The price to the public in this offering was $1.70 per share and the March Underwriters agreed to purchase the shares from us pursuant to the Jefferies Underwriting Agreement at a price of $1.581 per share. The net proceeds to us from this offering was approximately $45.4 million, after deducting underwriting discounts and commissions and other offering expenses payable by us. In addition, under the terms of the Jefferies Underwriting Agreement, we granted the March Underwriters a 30-day option, to purchase up to an additional 4,411,765 shares of common stock. The offering closed on March 20, 2013. On April 12, 2013, the March Underwriters exercised their option to purchase an additional 1,954,587 shares of our common stock to cover over-allotments. We issued these shares to the March Underwriters on April 18, 2013 and received net proceeds of approximately $3.1 million after deducting underwriting discounts and commissions and other offering expenses payable by us. The offering was made pursuant to the registration statement on Form S-3 filed with the Commission on January 25, 2013, and deemed effective by the SEC on February 5, 2013, including prospectus supplements filed thereunder.
 
 
35

 
On September 25, 2013, we entered into an underwriting agreement, or the Stifel Underwriting Agreement, with Stifel, Nicolaus and Company, Incorporated, as representative of the underwriters named therein, or the September Underwriters, relating to the issuance and sale of 13,750,000 shares of our common stock. The price to the public in this offering was $2.40 per share and the September Underwriters agreed to purchase the shares from us pursuant to the Stifel Underwriting Agreement at a price of $2.232 per share. The net proceeds to us from this offering was approximately $30.4 million, after deducting underwriting discounts and commissions and other offering expenses payable by us. The offering was made pursuant to the registration statement on Form S-3 filed with the Commission on January 25, 2013, and deemed effective by the SEC on February 5, 2013, including prospectus supplements filed thereunder.
 
Issuance of Stock Options
 
On May 2, 2013, the Compensation Committee of our board of directors recommended the granting of stock options to our directors. The Board approved the recommendation, and we issued 10-year stock options for the purchase of an aggregate of 575,000 shares of our common stock with an exercise price of $2.80, as follows: (i) stock option for the purchase of 225,000 shares of our common stock to the Chairman of the Board; (ii) stock option for the purchase of 75,000 shares of our common stock to the chair of each committee of the Board; and (ii) stock option for the purchase of 50,000 shares of our common stock to each of the remaining directors. All of these stock options vest in full on December 31, 2013.
 
On May 6, 2013, we issued 10-year stock options to consultants for the purchase of an aggregate of 96,068 shares with an exercise price of $2.96, vesting over a 12-month period beginning on June 6, 2013.
 
On May 10, 2013, we issued 10-year stock options to employees for the purchase of an aggregate of 100,000 shares with an exercise price of $2.71. An aggregate of 50,000 shares available under the stock options vest over a 4-year period on the anniversary of issuance and an aggregate of 50,000 shares vested immediately.
 
On June 21, 2013, we issued 10-year stock options to employees and consultants for the purchase of an aggregate of 632,500 shares with an exercise price of $2.98. An aggregate of 232,500 shares available under the stock options vest over a 3-year period on the anniversary of issuance, an aggregate of 100,000 shares vest monthly over an 18-month period, and an aggregate of 300,000 vest monthly over a 3-year period.
 
Exercise of Stock Option
 
On June 28, 2013, an individual exercised a stock option to purchase an aggregate of 61,372 shares of our common stock for an aggregate purchase price of $6,251.
 
Forfeiture of Options by Robert Finizio
 
On May 8, 2013, Robert Finizio, our Chief Executive Officer, forfeited his contractual right to receive 600,000 shares upon exercise of a stock option granted in connection with his employment agreement as well as his right to receive any future stock options. Mr. Finizio gave up these rights with the understanding that these stock options would be returned to the pool of options available for issuance to attract future employees.
 
Issuance of Warrants
 
On May 7, 2013, we entered into a consulting agreement, or the Agreement, with Sancilio & Company, Inc., or SCI, to develop drug platforms to be used in hormone replacement drug products, or the Drug Products. These services include support of our efforts to successfully obtain FDA approval for the Drug Products, including a vaginal capsule for the treatment of vulvar and vaginal atrophy, or VVA. In connection with the Agreement, SCI agreed to forfeit its rights to receive warrants for the purchase of an aggregate of 833,000 shares of our common stock that were to be issued pursuant to the terms of a prior consulting agreement dated May 17, 2012. As consideration under the Agreement, we agreed to issue SCI a warrant to purchase 850,000 shares of our common stock, or the SCI Warrant that vests in three equal installments as follows: (i) 283,333 shares upon SCI’s transfer to us of all intellectual property associated with the Drug Products, (ii) 283,333 shares upon successful filing of the IND application with the FDA for the Drug Product for an estradiol-based product in a softgel vaginal capsule for the treatment of VVA, and (iii) 283,333 shares upon the receipt by us of any final FDA approval of a Drug Product that SCI helped us design. It is anticipated that this event will not occur before December 2015. Pursuant to the terms of the Agreement, no portion of the SCI Warrant could have vested prior to June 30, 2013.
 
 
36

 
New Lease Agreement
 
Our prior lease for premises located at 951 Broken Sound Parkway in Boca Raton, Florida expired on June 30, 2013. With an effective date of July 1, 2013 , we entered into a new lease for administrative office space located at 6800 Broken Sound Parkway in Boca Raton, Florida pursuant to a 63-month non-cancelable operating lease expiring on September 30, 2018. The lease stipulates, among other things, average base monthly rents of $28,442 (inclusive of estimated operating expenses) and sales tax, for a total future minimum payment over the life of the lease of $1,791,900.
 
Results of Operations
 
Six months ended June 30, 2013 compared to six months ended June 30, 2012
 
   
Six Months Ended June 30,
       
   
2013
   
2012
   
Change
 
   
(in thousands)
       
Revenue, net                                                                   
  $ 3,618     $ 1,541     $ 2,077  
Cost of goods sold                                                                   
    844       708       136  
Operating expenses                                                                   
    13,334       7,675       5,659  
  Operating loss                                                                   
    (10,560 )     (6,842 )     (3,718 )
Loss on extinguishment of debt                                                                   
          (10,308 )     10,308  
Beneficial conversion feature                                                                   
          (6,717 )     6,717  
Other expense                                                                   
    (1,825 )     (1,273 )     (552 )
Net loss                                                                   
  $ (12,385 )   $ (25,140 )   $ (12,755 )
                         
 
Revenue and Cost of Goods Sold
 
Revenues for the six months ended June 30, 2013 increased approximately $2,077,000, or approximately 135%, from the six months ended June 30, 2012. This increase was directly attributable to the (i) increase in the number of sales territories, (ii) the associated increase in number of sales people selling in those territories and (iii) the new prescription product introduced in March, April, May and November 2012. Cost of goods sold increased approximately $136,000, or approximately 19%, for the six months ended June 30, 2013 compared to the six months ended June 30, 2012. Cost of goods sold as a percentage of revenue was 23% and 46% for the six months ended June 30, 2013 and 2012, respectively. Approximately 16% of this increase was due to an increase in the number of units sold and approximately 84% of the increase was related to product mix. Our costs of individual products did not change for the six months ended June 30, 2013 as compared to the same period in 2012.
 
Operating Expenses
 
Our principal operating costs include the following items as a percentage of total operating expenses.
 
   
Six Months Ended
June 30,
 
   
2013
   
2012
 
Human resources costs, including salaries, commission, benefits and taxes
    45.1 %     49.7 %
Product and design and development costs                                                                                 
    24.8 %     14.5 %
Sales and marketing, excluding human resources costs
    19.0 %     29.6 %
Professional fees for legal, accounting and consulting
    6.2 %     7.0 %
Other operating expenses                                                                                 
    4.9 %     (0.8 )%

 
37

 
Our operating expenses increased by approximately $5.7 million (74%) as a result of the following items:
 
   
(in thousands)
 
Increase in human resource costs, including salaries, commission, benefits and taxes
  $ 2,198  
Increase in product design and development costs                                                                                           
    2,201  
Increase in sales and marketing, excluding human resource costs
    260  
Increase in legal, accounting and consulting fees                                                                                           
    286  
Increase in other operating expenses                                                                                           
    714  
    $ 5,659  

Human resource costs, including salaries, commissions, benefits and taxes were higher as a result of increases in personnel between the two periods (approximately $918,000) and increases in non-cash compensation related to option awards (approximately $1,280,000).
 
Product design and development costs increased as a direct result of our new hormone replacement therapy and prescription prenatal products.
 
Professional fees increased primarily due to higher costs as a result of SEC reporting and additional requirements related to regulatory compliance.
 
Sales and marketing costs increased due to the addition of new sales territories and expanded client education.
 
Other Expense
 
Other non-operating expense decreased by approximately $16,472,000 for the six months ended June 30, 2013 in comparison to the same period in 2012. This decrease is primarily a result of loss on extinguishment of debt incurred during 2012 as herein described, partially offset by amortization of financing costs of approximately $396,000.
 
Loss on extinguishment of debt
 
In February 2012, we issued notes in the aggregate of approximately $2,700,000 and granted warrants for the purchase of an aggregate of 9,000,000 shares of our common stock. As consideration for these notes and warrants, we received an aggregate of $1,000,000 of new funding, or the New Funding, and the surrender of certain promissory notes previously issued by us in the aggregate amount of approximately $1,700,000. We determined that the resulting modification of the notes was substantial in accordance with ASC 470-50, Modifications and Extinguishments. As such the modification was accounted for as an extinguishment and restructuring of the debt, and the warrants issued, valued at approximately $10,500,000, were expensed as loss on extinguishment of debt. The relative fair value of the New Funding was estimated by calculating the present value of future cash flows discounted at a market rate of return for comparable debt instruments, to be $1,500,000. We recognized a reduction in loss on extinguishment of debt in the amount of $200,000, which represented the difference between the net carrying amount of the New Funding and its fair value. 
 
Beneficial Conversion Feature
 
Beneficial conversion feature of approximately $6,717,000 consists of non-cash costs associated with the conversion of approximately $1,055,000 in debt into 2,775,415 shares of our common stock.
 
Year ended December 31, 2012 compared with year ended December 31, 2011
 
   
Year Ended December 31,
       
   
2012
   
2011
   
Change
 
   
(in thousands)
 
Revenue
  $ 3,818     $ 2,088     $ 1,730  
Cost of goods sold
    1,348       947       401  
Operating expenses
    18,618       6,568       12,050  
     Operating loss
    (16,148 )     (5,427 )     (10,721 )
Loss on extinguishment of debt
    (10,308 )     7,390       (2,918 )
Beneficial conversion feature
    (6,717 )     -0-       (6,717 )
Interest expense
    (1,905 )     (64 )     (1,841 )
Other expense, net
    (42 )     (32 )     (10 )
Net loss
  $ (35,120 )   $ (12,913 )   $ (22,207 )
 
 
38

 
Revenue
 
Revenue for year ended December 31, 2012 increased by $1,730,000, or 83%, from the year ended December 31, 2011.  This increase was directly attributable to the introduction of our prescription prenatal product line and the use of various pharmaceutical distribution sources.
 
Cost of Goods Sold
 
Consistent with our increase in revenue cost of goods sold increased by $401,000, or 42%, for the year ended December 31, 2012 compared with the year ended December 31, 2011.  Our gross margins increased to 65% in 2012 compared to 55% in 2011.  This change is primarily attributed to the fact that our 2012 revenue consisted of prescription and OTC products in contrast to revenue in prior years that consisted exclusively of OTC products.  Our prescription products offer more favorable margins than those of our OTC products.
 
Operating Expenses
 
Our principal operating costs included the following items as a percentage of total operating expenses.
 
   
Year Ended
December 31,
 
   
2012
   
2011
 
Human resource costs
    39 %     48 %
Sales and marketing, excluding human resource costs
    24 %     33 %
Production design and development costs
    24 %     2 %
Professional fees and consulting
    6 %     7 %
Other
    7 %     10 %
 
Operating expenses increased by $12,050,000, or 184%, for fiscal 2012 from fiscal 2011 as a result of the following items:
      (000s)  
Increase in product research and development costs
  $ 4,385  
Increase in human resource costs
    4,155  
Increase in sales and marketing, excluding human resource costs
    2,238  
Increase in professional and consulting
    719  
Increase in all other operating expenses
    553  
    $ 12,050  
 
During 2012 we began the development of new drug products designed to alleviate the symptoms of and reduce the health risks resulting from menopause-related hormone deficiencies, including hot flashes, osteoporosis, and vaginal dryness.  The increase in our product research and development costs was primarily attributable to these proposed hormone therapy products, which contain estradiol and progesterone alone or in combination, with the aim of providing equivalent efficacy at lower doses, thereby enabling an enhanced side effect profile compared with competing products.  We have obtained FDA acceptance of our IND applications to conduct clinical trials for three proposed products and intend to begin clinical trials for two of those products.
 
Human resource related costs, including salaries and benefits, increased by approximately $4,155,000, primarily as a result of an increase in amortization of non-cash compensation totaling approximately $1,678,000 related to employee stock options issued during 2012 and 2011, and an increase of 19 employees in 2012.
 
Sales and marketing costs increased approximately $2,238,000, primarily as a result of expanded marketing, advertising, education, and training.  In addition, we increased spending in the areas of travel, product samples, and commissions.  We also incurred added costs associated with our new product distribution channels introduced in 2012.
 
 
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Professional fees increased approximately $719,000 primarily because of an increase in legal fees of approximately $442,000 arising from contract and patent services, costs related to our October 2012 private placement, and public filings.  We incurred additional accounting and audit costs of approximately $101,000 as a result of SEC reporting and additional requirements related to Sarbanes-Oxley.  Consulting costs also increased by approximately $176,000 as a result of the introduction of new pharmacy-sold products, as well as enhanced SEC reporting.
 
Loss on Extinguishment of Debt
 
In February 2012, we issued promissory notes in the aggregate of approximately $2,700,000 and granted warrants for the purchase of an aggregate of 9,000,000 shares of our common stock, or the February 2012 Funding. In connection with the February 2012 Funding, we received $1,000,000 and the surrender of certain other promissory notes totaling $1,700,000.  We determined that the resulting modification of these notes was substantial in accordance with ASC 470-50. As such, the modification was accounted for as an extinguishment and restructuring of the debt and the fair value of the warrants granted of approximately $10,505,000 was recognized as loss on the extinguishment of debt.  The relative fair value of the promissory notes was estimated to be $1,500,000 by calculating the present value of future cash flows discounted at a market rate of return for comparable debt instruments.  We recognized a reduction in loss of extinguishment of debt in the amount of $197,000, which represented the difference between the net carrying amount of the February 2012 Funding and its fair value.
 
Beneficial Conversion Feature
 
Beneficial conversion feature of approximately $6,717,000 consisted of non-cash costs associated with the conversion of approximately $1,055,000 in debt into 2,775,415 shares of our common stock.  As a result of this conversion, we recognized $6,717,000 in non-cash costs related to a beneficial conversion feature.
 
Interest Expense
 
Interest expense increased approximately $1,841,000, primarily as a result of amortization of debt discount associated with promissory notes we issued during 2012.
 
Year ended December 31, 2011 compared with year ended December 31, 2010
 
   
Year Ended December 31,
       
   
2011
   
2010
   
Change
 
   
(in thousands)
       
Revenue, net
  $ 2,088     $ 1,242     $ 846  
Cost of goods sold
    947       556       391  
Operating expenses
    6,568       3,553       3,015  
  Operating loss
    (5,427 )     (2,867 )     (2,560 )
Settlement of debt
    (7,390 )           (7,390 )
Other expense, net
    (96 )           (96 )
Net loss
  $ (12,913 )   $ (2,867 )   $ (10,046 )
 
Revenue and Cost of Goods Sold
 
Revenue for year ended December 31, 2011 increased $846,000, or approximately 68.1%, from the year ended December 31, 2010.  This increase was directly attributable to the increase in the number of sales territories and the associated increase in number of sales people selling in those territories.  Cost of goods sold increased $391,000, or approximately 70.3%, from year ended December 31, 2011 compared to the year ended December 31, 2010.  Approximately 96.9% of this increase was primarily due to an increase in the amount of product sold and approximately 3.1% of the increase was related to product mix.  Our costs of individual products did not change for year ended December 31, 2011 as compared to 2010.
 
 
40

 
Operating Expenses
 
Our principal operating costs include the following items as a percentage of total expense.
 
   
Year Ended December 31,
 
   
2011
   
2010
 
Human resources costs, including benefits
    52 %     52 %
Sales and marketing
    7 %     6 %
Product and design and development costs
    11 %     8 %
Travel and entertainment
    10 %     13 %
Professional fees for legal, accounting and consulting
    7 %     4 %
Rent and other occupancy costs
    5 %     8 %
Non-cash compensation
    3 %     5 %
Other
    5 %     4 %
 
Our operating expenses increased by $3.0 million (84%) as a result of the following items:
 
   
(in thousands)
 
Increase in human resource costs
  $ 1,551  
Increase in sales and marketing
    257  
Increase in product design and development costs
    457  
Increase in travel and entertainment
    216  
Increase in professional and consulting
    318  
Increase in rent and other occupancy costs
    24  
Increase in non-cash compensation
    19  
Increase in all other
    173  
    $ 3,015  
 
Human resource related costs (including salaries and benefits) increased by $1.6 million primarily due to an increase of 25 employees in 2011.  We had 51 employees at December 31, 2011 which increased from 27 from the prior year.
 
Sales and marketing costs increased $0.3 million due to the increase in both sales territories and sales personnel during 2011.
 
During 2011, we made improvements to products and packaging, which increased costs by a nominal amount.
 
Travel and entertainment expense increased $0.2 million as a direct result of increased activity associated with sales and training efforts.
 
Professional fees increased $0.3 million primarily due to an increase in legal fees arising from contract and patent services as well as due diligence related to our merger with VitaMed in October 2011.  We incurred additional accounting and audit costs related to preparation of audits for 2010 and 2011 as required for this merger.  Consulting cost also increased as a result of opening new sales territories and the additional resources needed to complete the merger.
 
Rent and occupancy costs increased slightly as a result of repairs and maintenance and other ancillary costs.
 
Non-cash compensation costs increased as the result of the additional options granted in 2011.
 
Settlement of Debt
 
On October 18, 2011, we and two noteholders entered into debt conversion agreements and converted the $210,000 principal amount of their convertible notes into 20,000,000 shares of our common stock valued at $7,600,000.
 
 
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Other Expense, net
 
Other non-operating expense increased by $0.1 million for the year ended December 31, 2011 in comparison to the same period in 2010 due primarily to the addition of interest expense not incurred during 2010.
 
Liquidity and Capital Resources
 
We have incurred recurring net losses, including net losses of approximately $12.4 million and $25.1 million for the six months ended June 30, 2013 and 2012, respectively, and $35.1 million and $12.9 million for the years ended December 31, 2012 and 2011, respectively. Net cash outlays from operations and capital expenditures were approximately $10.9 million and $5.7 million for the six months ended June 30, 2013 and 2012, respectively, and $13.0 million and $5.0 million for the years ended December 31, 2012 and 2011, respectively. As of June 30, 2013, we had an accumulated deficit of approximately $64.5 million and stockholders’ equity of $38.5 million. As of December 31, 2012, we had an accumulated deficit of approximately $52.1 million and a stockholders’ deficit of $1.4 million.
 
We have generated limited revenue and have funded our operations to date primarily from private sales of equity and debt securities.  We expect to incur substantial additional losses in the near future as our research, development, and clinical trial activities increase, especially those related to our proposed hormone therapy products.  As a result, profitability will elude us unless we successfully commercialize our products, in particular, our proposed hormone therapy products.  If we are unable to make required payments under any of our obligations for any reason, our creditors may take actions to collect their debts, including foreclosing on our intellectual property that collateralizes our obligations.  If we continue to incur substantial losses and are unable to secure additional financing, we could be forced to discontinue or curtail our business operations, sell assets at unfavorable prices or refinance existing debt obligations on terms unfavorable to us.  Such circumstances could compel us to merge, consolidate, or combine with a company with greater financial resources in a transaction that might be unfavorable to us.
 
We need substantial amounts of cash to complete the clinical development of our proposed HT products.  In March, April, and September 2013, we sold an aggregate of 45,116,352 shares of our common stock in public offerings to raise approximately $78.9 million, net of commissions and expenses. We believe our existing cash and cash equivalents will be sufficient to fund our operations, including the clinical development of our HT products for the next 12 months; however, changing circumstances may cause us to consume funds significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control. Currently we have a $10 million line of credit available to us which is our only committed external source of funds. We may need to attempt to raise additional capital from the issuance of equity or debt securities, collaborations with third parties, licensing of rights to these products, other necessary means, or a combination of any of the foregoing. Securing additional financing will require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from our day to day activities, which may adversely affect our ability to conduct our day to day operations. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all.
 
If we are unable to raise additional capital when required or on acceptable terms, we may be required to take one or more of the following actions:
 
 
significantly delay, scale back, or discontinue our product development and commercialization efforts;
     
 
seek collaborators for our proposed HT products at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be the case; and
     
 
license, potentially on unfavorable terms, our rights to our proposed HT products that we otherwise would seek to develop or commercialize ourselves.
 
Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest 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. If we raise additional funds through collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or proposed products. Additionally, we may have to grant licenses on terms that may not be favorable to us.
 
 
42

 
Cash and Cash Equivalents
 
During the years ended December 31, 2012 and 2011, our cash liquidity increased (decreased) as follows:
 
      (000s)  
At December 31, 2012
  $ 1,554  
At December 31, 2011
    126  
     Increase in cash and cash equivalents
  $ 1,428  

     
(000s)
 
At December 31, 2011
  $ 126  
At December 31, 2010
    423  
     Decrease in cash and cash equivalents
  $ (297 )
 
The increase (decrease) in cash and cash equivalents consisted of the following components for the years ended December 31, 2012 and December 31, 2011:
 
     (000s)  
   
2012
        2011  
Proceeds from notes payable and line of credit
  $ 8,700       $ 3,284  
Proceeds from issuance of equity securities
    7,896         1,707  
Proceeds from exercise of stock options
    191         17  
     Sources of cash and cash equivalents
    16,787         5,008  
                   
Cash used in operating activities
    12,737         4,967  
Repayment of debt
    2,350         301  
Cash used in other investing activities
    206         8  
Cash used to purchase equipment
    66         29  
     Uses of cash and cash equivalents
    15,359         5,305  
                   
Increase (decrease) in cash and cash equivalents
  $ 1,428       $ (297 )
 
During the year ended December 31, 2012, working capital increased by $2.9 million as follows:
 
   
December 31,
       
   
2012
   
2011
   
Change
 
      (000s)       
Current assets
  $ 4,527     $ 1,237     $ 3,290  
Current liabilities
    3,512       3,151       361  
Working capital (deficit)
  $ 1,015     $ (1,914 )   $ 2,929  
 
Primary Sources of Cash
 
Between January and September 2012, we received funds from the sale of promissory notes in the aggregate of $8,700,000, of which $1,800,000 was repaid with funds generated by our October 2012 private placement discussed below.
 
In October 2, 2012, we issued 3,953,489 shares of our common stock in a private placement, resulting in aggregate net proceeds of $7,896,000.
 
In January, July, and August 2012, we received funds from the exercise of options to purchase 1,931,788 shares of our common stock at an aggregate exercise price of $191,000.
 
 
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Off Balance Sheet Arrangements
 
As of December 31, 2012 and June 30, 2013, we had no material off-balance sheet arrangements.
 
In the ordinary course of business, we enter into agreements with third parties that include indemnification provisions, which, in our judgment, are normal and customary for companies in our industry sector.  These agreements are typically with business partners, clinical sites, and suppliers.  Pursuant to these agreements, we generally agree to indemnify, hold harmless, and reimburse indemnified parties for losses suffered or incurred by the indemnified parties with respect to our product candidates, use of such product candidates, or other actions taken or omitted by us.  The maximum potential amount of future payments we could be required to make under these indemnification provisions is unlimited.  We have not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions.  As a result, the estimated fair value of liabilities relating to these provisions is minimal.  Accordingly, we have no liabilities recorded for these provisions as of June 30, 2013 or December 31, 2012.
 
In the normal course of business, we may be confronted with issues or events that may result in a contingent liability.  These generally relate to lawsuits, claims, environmental actions or the actions of various regulatory agencies.  We consult with counsel and other appropriate experts to assess the claim.  If, in our opinion, we have incurred a probable loss as set forth by accounting principles generally accepted in the United States, an estimate is made of the loss and the appropriate accounting entries are reflected in our financial statements.
 
Contractual Obligations
 
A summary of contractual cash obligations as of December 31, 2012 is as follows:
 
 
Payments Due By Period
 
Total
 
Less than
1 Year
 
1-3 Years
 
4-5 Years
 
After 5
Years
Long-Term Debt Obligations
4,841,915
 
 
4,841,915
 
 
                   
Operating Lease Obligations
29,667
 
29,667
 
 
 
                   
Total
4,871,582
 
29,667
 
4,841,915
 
 
 
Seasonality
 
The specialty pharmaceutical industry component of women’s health is not subject to seasonal sales fluctuation.
 
Effects of Inflation
 
For each of the fiscal years ended December 31, 2012, 2011 and 2010, our business and operations have not been materially affected by inflation.
 
Critical Accounting Estimates and New Accounting Pronouncements
 
Critical Accounting Estimates
 
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect reported amounts and related disclosures in the financial statements.  We consider an accounting estimate to be critical if
 
·  
it requires assumptions to be made that were uncertain at the time the estimate was made, and
 
·  
changes in the estimate or different estimates that could have been selected could have a material impact on our results of operations or financial condition.
 
 
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We base our estimates and judgments on our experience, our current knowledge, our beliefs of what could occur in the future, our observation of trends in the industry, information provided by our customers, and information available from other sources.  Actual results may differ from these estimates under different assumptions or conditions.  We have identified the following accounting policies and estimates as those that we believe are most critical to our financial condition and results of operations and that require our most subjective and complex judgments in estimating the effect of inherent uncertainties: share-based compensation expense and income taxes.
 
Share-Based Compensation Expense.  We calculate share-based compensation expense for option awards and warrant issuances, or Share-based Awards, based on the estimated grant/issue-date fair value using the Black-Scholes-Merton option pricing model, or the Black-Scholes Model, and recognize the expense on a straight-line basis over the vesting period, net of estimated forfeitures.  The Black-Scholes Model requires the use of a number of assumptions including volatility of the stock price, the weighted average risk-free interest rate, and the vesting period of the Share-based Award in determining the fair value of Share-based Awards.  Although we believe our assumptions used to calculate share-based compensation expense are reasonable, these assumptions can involve complex judgments about future events, which are open to interpretation and inherent uncertainty.  In addition, significant changes to our assumptions could significantly impact the amount of expense recorded in a given period.
 
Income Taxes.  As part of the process of preparing our consolidated financial statements, we are required to estimate income taxes in each of the jurisdictions in which we operate.  We determine provision for income taxes using the asset and liability approach to account for income taxes.  We record current liability for the estimated taxes payable for the current year.  We record deferred tax assets and liabilities for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using the enacted tax rates in effect for the year in which the timing differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of changes in tax rates or tax laws is recognized in the provision for income taxes in the period that includes the enactment date.  Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount more-likely-than-not to be realized.  Changes in valuation allowances will flow through the statement of operations unless related to deferred tax assets that expire unutilized or are modified through translation, in which case both the deferred tax asset and related valuation allowance are similarly adjusted.  Where a valuation allowance was established through purchase accounting for acquired deferred tax assets, any future change will be credited or charged to income tax expense.
 
The determination of our provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws.  In the ordinary course of our business, there are transactions and calculations for which the ultimate tax determination is uncertain.  In spite of our belief that we have appropriate support for all the positions taken on our tax returns, we acknowledge that certain positions may be successfully challenged by the taxing authorities.  We determine the tax benefits more likely than not to be recognized with respect to uncertain tax positions.  Although we believe our recorded tax assets and liabilities are reasonable, tax laws and regulations are subject to interpretation and inherent uncertainty; therefore, our assessments can involve both a series of complex judgments about future events and rely on estimates and assumptions.  Although we believe these estimates and assumptions are reasonable, the final determination could be materially different than that which is reflected in our provision for income taxes and recorded tax assets and liabilities.
 
New Accounting Pronouncements
 
In July 2012, FASB issued ASU No. 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment,” or ASU 2012-02.  ASU 2012-02 gives entities an option to first assess qualitative factors to determine whether the existence of events and circumstances indicate that it is more likely than not that the indefinite-lived intangible asset impaired.  If based on its qualitative assessment an entity concludes that it is more likely than not that the fair value of an indefinite lived intangible asset is less than its carrying amount, quantitative impairment testing is required.  However, if an entity concludes otherwise, quantitative impairment testing is not required.  ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal y ears beginning after September 15, 2012, with early adoption permitted.  ASU 2012-02 is not expected to have a material impact on our financial position or results of operations.
 
In December 2011, the FASB issued ASU No. 2011-11, “Balance Sheet (Topic 210): Disclosures About Offsetting Assets and Liabilities,” or ASU 2011-11.  ASU 2011-11 enhances current disclosures about financial instruments and derivative instruments that are either offset on the statement of financial position or subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset on the statement of financial position.  Entities are required to provide both net and gross information for these assets and liabilities in order to facilitate comparability between financial statements prepared in conformity with U.S. GAAP and financial statements prepared on the basis of International Financial Reporting Standards, or IFRS.  ASU 2011-11 is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual reports.  ASU 2011-11 is not expected to have a material impact on our financial position or results of operations.
 
 
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In September 2011, the FASB issued ASU No. 2011-08 , Intangibles – Goodwill & Other, or ASU 2011-08, which updates the guidance in ASC Topic 350, “ Intangibles – Goodwill & Other , ” or ASC Topic 350.  The amendments in ASU 2011-08 permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than the carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in ASC Topic 350.  The more-likely-than-not threshold is defined as having a likelihood of more than fifty percent. If, after assessing the totality of events or circumstances, an entity determines that it is more likely than now that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary.  The amendments in ASU 2011-08 include examples of events and circumstances that an entity should consider in evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.  However, the examples are not intended to be all-inclusive and an entity may identify other relevant events and circumstances an entity should consider in determining whether it should test for impairment between annual tests, and also supersede the examples of events and circumstances that an entity having a reporting unit with a zero or negative carrying amount should consider in determining whether to perform the second step of the impairment test.  Under the amendments in ASU 2011-08, an entity is no longer permitted to carry forward its detailed calculation of a reporting unit’s fair value from a prior year as previously permitted under ASC Topic 350.  ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 31, 2011.  The adoption of ASU 2011-08 did not have a material impact on our financial position or results of operation.
 
In May 2011, the FASB issued ASU 2011-04, or ASU 2011-04, which updated the guidance in ASC Topic 820, “ Fair Value Measurement, ” or ASC Topic 820.  The amendments in ASU 2011-04 generally represent clarifications of Topic 820, but also include some instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed.  ASU 2011-04 results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP or IFRS.  The amendments in ASU 2011-04 are to be applied prospectively.  For public entities, the amendments are effective for interim and annual periods beginning after December 15, 2011.  The adoption of ASU 2011-04 did not have a material impact on our financial position or results of operations.
 
We do not believe there would be a material effect on the accompanying financial statements had any other recently issued but not yet effective accounting standards been adopted in the current period.
 
Quantitative and Qualitative Disclosures About Market Risk
 
We had cash and cash equivalents totaling $1.6 million as of December 31, 2012. We hold our cash in money market funds and the primary objective of our investment policy is to preserve principal and maintain proper liquidity to meet operating needs. Our investment policy specifies credit quality standards for our investments and limits the amount of credit exposure to any single issue, issuer or type of investment. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. To minimize this risk, we intend to maintain a portfolio that may include cash, cash equivalents and investment securities available-for-sale in a variety of securities which may include money market funds, government and non-government debt securities and commercial paper, all with various maturity dates.  Due to the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our portfolio.
 
We do not hold or issue derivatives, derivative commodity instruments or other financial instruments for speculative trading purposes. Further, we do not believe our cash equivalents and investment securities have significant risk of default or illiquidity. We made this determination based on discussions with our investment advisors and a review of our holdings. While we believe our cash equivalents and investment securities do not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value. All of our investments are held at fair value.
 

 
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BUSINESS
 
Introduction
 
We are a women’s healthcare product company focused on creating and commercializing products targeted exclusively for women.  We currently manufacture and distribute branded and generic prescription prenatal vitamins as well as over-the-counter, or OTC, vitamins and cosmetics.  We are currently focused on conducting the clinical trials necessary for regulatory approval and commercialization of advanced hormone therapy pharmaceutical products designed to alleviate the symptoms of and reduce the health risks resulting from menopause-related hormone deficiencies, including hot flashes, osteoporosis, and vaginal dryness.  We are developing these proposed hormone therapy products, which contain estradiol and progesterone alone or in combination, with the aim of providing equivalent efficacy at lower doses, thereby enabling an enhanced side effect profile compared with competing products.  
 
We have obtained U.S. Food and Drug Administration, or FDA, acceptance of our Investigational New Drug, or IND, applications to conduct clinical trials for four of our proposed products: TX 12-001HR, TX 12 - 002HR, TX 12-003HR, and TX 12-004HR. We are currently conducting a Phase 3 clinical trial for TX 12 - 001HR; we currently intend to begin Phase 3 clinical trials for TX 12-002HR at the end of 2013; and we currently intend to begin Phase 3 clinical trials for TX 12-004HR in the second quarter of 2014.  We have no current plans for clinical trials for TX 12 - 003HR.
 
On September 5, 2013, we announced the enrollment and dosing of the first patient in the REPLENISH Trial, a Phase 3 clinical trial designed to measure the safety and effectiveness of TX 12-001HR in treating the symptoms of menopause and protecting the endometrium. We are also currently conducting formulation development of our proposed combination estradiol and progesterone product in a topical cream form.  We currently estimate the cost of this development to be approximately $10 million. On May 10, 2013, we submitted an IND application to conduct clinical trials for TX 12-004HR, which was accepted by the FDA on June 9, 2013. On August 12, 2013, we announced that we initiated a Phase 1 clinical trial for TX 12-004HR in vulvar and vaginal atrophy, or VVA, designed to measure the effect of TX 12-004HR on certain clinical endpoints, including a study candidate’s pH levels, vaginal cytology, and most bothersome symptom of VVA, out of the symptoms identified in FDA guidance.
 
TX 12-001HR is a combination estradiol and progesterone drug candidate under development for the treatment of moderate to severe vasomotor symptoms due to menopause, including hot flashes, night sweats, sleep disturbances, and vaginal dryness, for post-menopausal women with an intact uterus. The product will be chemically identical to the hormones that naturally occur in a woman’s body, namely estradiol and progesterone, and would be studied as a continuous-combined regimen (where the combination of estrogen and progesterone are taken together in one product daily).  If approved by the FDA, we believe this would represent the first time a combination product of these bioidentical hormones would be approved for use in a single combined product.  We currently estimate the cost of our research and development activities through the completion of our Phase 3 trials for TX 12-001HR to be approximately $25 million. According to Source Healthcare Analytics, for the 12 months ended June 30, 2013, the total FDA-approved market for menopause-related combination estrogen/progestin was approximately $650 million in U.S. sales, and according to IMS Health, Inc., for the 12 months ended December 31, 2012, the total market for menopause-related combination estrogen/progestin was approximately $490 million (as converted from the Euro at an exchange rate of €1.0=US$1.2875) in international sales.
 
TX 12-002HR is a natural progesterone formulation without the potentially allergenic component of peanut oil.  The product would be chemically identical to the hormones that naturally occur in a woman’s body.  We believe it would be similarly effective to traditional treatments, but at lower dosages.  We currently estimate the cost of our research and development activities through the completion of our Phase 3 trials for TX 12 - 002HR to be approximately $6 million. According to Source Healthcare Analytics, for the 12 months ended June 30, 2013, the total FDA-approved market for oral progestin was approximately $340 million in U.S. sales, and according to IMS Health, Inc., for the 12 months ended December 31, 2012, the total market for oral progestin was approximately $780 million (as converted from the Euro at an exchange rate of €1.0=US$1.2875) in international sales.
 
TX 12-004HR is a proposed suppository estradiol product for the treatment of VVA in post-menopausal women with vaginal linings that do not receive enough estrogen. We believe our proposed product will be as effective as the traditional treatments for VVA and we believe it will have an added advantage of simple, easier to use dosage form versus traditional VVA treatments. We currently estimate the cost of our research and development activities through the completion of the anticipated Phase 3 clinical trial for TX 12-004HR to be approximately $16 million. According to Source Healthcare Analytics, for the 12 months ended June 30, 2013, the total FDA-approved market for VVA treatment was approximately $1 billion in U.S. sales.
 
 
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We intend to leverage and grow our current marketing and sales organization to commercialize our proposed products in the United States assuming the successful completion of the FDA regulatory process.  We are also evaluating various other indications for our hormone technology, including oral contraception, treatment of preterm birth, and premature ovarian failure.  According to Source Healthcare Analytics, for the 12 months ended June 30, 2013, the total FDA-approved menopause-related estrogen market was approximately $2.5 billion in U.S. sales.  
 
The hormone therapy market includes two major components: an FDA-approved drug market and a non-FDA approved drug market supplied by compounding pharmacies.  We believe the FDA-approved products are easily measured and monitored, while non-FDA approved hormone therapy drug products, typically referred to as bioidenticals when produced by compounding pharmacies, are sold by compounding pharmacies and not monitored or easily measured.  We estimate the non-FDA approved compounded bioidentical hormone therapy combination sales of estradiol and progesterone products sold by compounding pharmacies are approximately $1.5 billion per year.  Our Phase 3 trials are intended to establish an indication of the safety and efficacy of our proposed bioidentical products at specific dosage levels.  We intend our proposed hormone therapy products, if approved, to provide an alternative to the non-FDA approved compounded bioidentical market based on our belief that our proposed products will offer advantages in terms of proven safety, efficacy, and stability, lower patient cost as a result of insurance coverage, and improved access as a result of availability from major retail pharmacy chains rather than custom order or formulation by individual compounders.  
 
As we continue the clinical development of our proposed hormone therapy products, we continue to market our prescription and over-the-counter dietary supplement and cosmetic product lines, consisting of prenatal vitamins, iron supplements, vitamin D supplements, natural menopause relief products, and cosmetic stretch mark creams under our VitaMed brand name and duplicate formulations of our prescription prenatal vitamins products, also referred to as “generic” formulations,  under our BocaGreenMD brand name.  All of our prenatal vitamins are gluten-, sugar-, and lactose-free.  We believe our product attributes result in greater consumer acceptance and satisfaction than competitive products while offering the highest quality and patented ingredients.
 
Our sales model focuses on the “4Ps”:  patient, provider, pharmacist, and payor.  We market and sell our current dietary supplement and cosmetic products primarily through a direct national sales force of approximately 30 full-time professionals that calls on healthcare providers in the obstetrics and gynecologic market space as well as through our website directly to consumers.  In addition, our products allow healthcare providers to offer an alternative to patients to meet their individual nutritional and financial requirements related to co-payment and cost-of-care considerations and help patients realize cost savings over competing products.  We also believe that our combination of branded, generic, and over-the-counter lines offers physicians, women, and payors cost-effective alternatives for top-quality care.  We supply our prescription dietary supplement products to consumers through retail pharmacies.  We market our over-the-counter products either directly to consumers via our website and phone sales followed by home shipment or through physicians who then re-sell them to their patients.  Our fully staffed customer care center uses current customer relationship management software to respond to healthcare providers, pharmacies, and consumers via incoming and outgoing telephone calls, e-mails, and live-chat.  We also facilitate repeat customer orders for our non-prescription products through our website’s auto-ship feature.
 
Our common stock began trading on the NYSE MKT on April 23, 2013 under the symbol “TXMD,” and was previously listed on the OTCQB.  We maintain the following websites at www.therapeuticsmd.com, www.vitamedmd.com, www.vitamedmdrx.com and www.bocagreenmd.com.
 
Industry and Market
 
Healthcare and Pharmaceutical Market
 
According to statistics compiled by Kaiser Family Foundation, a non-profit foundation focusing on the major healthcare issues facing the United States, healthcare expenditures were approximately $2.6 trillion in 2010 based on U.S. Census Bureau information, representing 17.9% of our nation’s gross domestic product, or GDP, up from 7.2% of GDP in 1970 and 12.5% of GDP in 1990.  In 2010, healthcare spending in the United States averaged $8,402 per person.
 
 
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Pharmaceuticals are a major cost driver in U.S. healthcare.  In a report issued by Centers for Medicare & Medicaid Services, the total national spending on prescription drugs, both private and public, from retail outlets exceeded $259 billion in 2010, or approximately 10% of all national healthcare spending.  Total national spending on prescription drugs, both private and public, from retail outlets increased on average by about 10% a year from 1998 through 2009 — faster than the average 6.7% a year increase in total U.S. health expenditures for the same period.  The pharmaceutical industry is characterized by rapidly advancing technologies, intense competition, and a strong emphasis on proprietary products.
 
Women’s Healthcare Market
 
The U.S. Census Bureau estimates that there were approximately 157 million women and 152 million men living in the United States in 2010.  Women are major consumers of health care services, negotiating not only their own health care but often managing care for their family members as well.  Their reproductive health needs and greater health care spending and longer life spans as compared with men make women’s relationships with the health care system complex.
 
Hormone Therapy Market
 
Menopause is the spontaneous and permanent cessation of menstruation, which naturally occurs in most women between the ages of 40 and 58.  It is defined as the final menstrual period and is confirmed when a woman has not had her period for 12 consecutive months.  Hormone therapy is the only government-approved treatment in the United States and Canada for relief of menopausal symptoms.  These symptoms are caused by the reduced levels of circulating estrogen as the ovarian production shuts down.  The symptoms include hot flashes, night sweats, sleep disturbances, and vaginal dryness.  According to Source Healthcare Analytics, for the 12 months ended June 30, 2013, prescriptions for hormone therapy products for the treatment of menopause symptoms or prevention of osteoporosis generated total sales of over $3.5 billion on over 37 million prescriptions.  Oral hormone therapy accounted for $1.8 billion on 25 million prescriptions over the same time period.
 
Prescriptions for menopausal hormone therapy in the United States dropped significantly following the Women’s Health Initiative, or WHI, study in 2002 that found that subjects using estrogen plus synthetic progestin had, among other things, a greater incidence of coronary heart disease, breast cancer, stroke, and pulmonary embolism.
 
A number of additional studies regarding the benefits and risks of hormone therapy have been conducted over the last decade since the WHI results were first published.  In general, recommendations for hormone therapy use are to be judged on an individual basis, and the FDA recommends that women with moderate to severe menopausal symptoms who want to try menopausal hormone therapy for relief use it for the shortest time needed and at the lowest effective dose.
 
There were approximately 41.7 million women in the United States between the ages of 45 and 64 in 2010, projected to increase slightly (2.8%) to 42.9 million in 2015 and to approximately 44.3 million in 2040, according to the 2010 National Census population figures.  These women are the target market for hormone therapy to treat menopausal related symptoms.
 
Hormone Therapy Products
 
Estrogen (with or without a progestin) is the most effective treatment for menopause-related vasomotor symptoms according to the North American Menopause Society, or NAMS.  Sales of total oral and transdermal hormone therapy products were approximately $2.5 billion for the 12 months ended June 30 , 2013.  That was up approximately 7% over the same time period from the prior year according to Source Healthcare Analytics.  The three primary hormone therapy products are estrogen, progestin, and combination of estrogen and progestin and are produced in a variety of forms, including oral tablets or capsules, skin patches, gels, emulsion, or vaginal suppositories and creams.
 
Estrogen-Only Therapies
 
Estrogen therapies are used for vasomotor symptoms (hot flashes and night sweats) of menopause that are a direct result of the decline in estrogen levels associated with ovarian shutdown at menopause.  Estrogen therapy has been used to manage these symptoms for more than 50 years.  Estrogen is a generic term for any substance, natural or synthetic, that exerts biological effects characteristic of estrogenic hormones, such as estradiol.  Based upon the age demographic for all women receiving prescriptions for estrogen therapy and the average age range during which women experience vasomotor symptoms, we believe that estrogen is primarily used for the treatment of vasomotor symptoms, but also prescribed for the prevention of osteoporosis.
 
 
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Estrogen-only therapy, or ET, is used mainly in women who have had a hysterectomy and are undergoing a surgical menopause, as those women do not require a progestin to protect the uterine endometrium from proliferation.  Approximately 600,000 women undergo a hysterectomy each year in the U.S. according to the United States Centers for Disease Control and Prevention.  Sales of ET were approximately $2.5 billion for a 12-month total at June 30 , 2013, according to Source Healthcare Analytics.
 
ET is also used for vulvar and vaginal atrophy, which has a variety of indications, including vaginal dryness, pain, bleeding, urinary symptoms, incontinence, painful intercourse, and other symptoms.  Sales of ET for vulvar and vaginal atrophy were approximately $660 million for a 12-month total at June 30, 2013, according to Source Healthcare Analytics.
 
Estrogen therapy is approved for the prevention of osteoporosis.  Multiple studies conducted on various estrogen compositions, including studies published in the Journal of the American Medical Association in 2002, Osteoporosis International in 2000, The Lancet in 2002, Maturitas in 2008, and Climacteric in 2005, demonstrated efficacy based on increases in bone mineral density.  Epidemiological and some fracture prevention studies, such as the study published in the New England Journal of Medicine in 1980, also have demonstrated a decrease in bone fractures as a result of estrogen therapy.
 
Progestin-Only Therapies
 
Progestins include the naturally occurring hormone progesterone and a number of synthetic progestin compounds that have progestational activity.  These agents are used for a variety of indications and conditions, but most often, progestins are used either alone or in combination with an estrogen for hormonal contraception and to prevent endometrial hyperplasia from unopposed estrogen in hormone therapy.  They are also used alone or in combination with estrogens for postmenopausal women to treat vasomotor symptoms associated with menopause.  Progestins alone are also used to treat women with secondary amenorrhea in order to create withdrawal bleeding in these women who have not had regular menses.  Progestins are also used to treat dysfunctional uterine bleeding and endometriosis.  Progesterone has also been used to prevent threatened or recurrent pregnancy loss and for the prevention of preterm birth.  Progestins have also been used in fertility treatments.  Progestins have also been used as a palliative measure for metastatic endometrial carcinoma and in the treatment of renal and breast carcinoma.
 
Estrogen/Progestin Combination Products
 
Progestins are used in combination with estrogen in women with uteruses to avoid an increase in the incidence of endometrial hyperplasia.  This is a condition caused by chronic use of estrogen alone by a woman with a uterus and is associated with an increased incidence of uterine, or endometrial, cancer.  Studies have shown that, after one year, the incidence of endometrial hyperplasia is less than 1% in women taking estrogen/progestin combinations, in contrast to up to 20% in women taking estrogen alone.  In accordance with FDA recommendations, doctors typically recommend that a menopausal or postmenopausal woman who has a uterus take estrogen plus a progestin, either as a combination drug or as two separate drugs.  Source Healthcare Analytics estimates that sales of estrogen/progestin combinations were approximately $660 million in the United States for the 12 months ended June 30, 2013, up approximately 12% over the same time period a year prior.
 
Limitations of Existing Estrogen/Progestin Therapies
 
The most commonly prescribed progestin is a synthetic progestin (medroxyprogesterone acetate) which can cause some women to experience painful vaginal bleeding, breast tenderness, and bloating and may reduce cardio-protective benefits potentially associated with estrogen therapy by limiting the estrogen’s ability to raise HDL, cholesterol and LDL cholesterol.
 
A widely prescribed naturally occurring progesterone is known as Prometrium® (progesterone USP), sold by AbbVie Inc., a spinoff business of Abbott Laboratories.  Natural progesterone is used in combination with estrogen for hormone therapy; however, we believe there are currently no FDA-approved hormone therapy combination products with natural progesterone.
 
 
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Prenatal Vitamin Market
 
According to the American Pregnancy Association, approximately six million women become pregnant each year resulting in approximately four million births.  Of these women, over 75% receive prenatal care during the first trimester, and most doctors encourage taking a prenatal vitamin as the recommended standard of care.  Prenatal vitamins are dietary supplements intended to be taken before and during pregnancy and during postnatal lactation that provide nutrients recognized by the various health organizations as helpful for a healthy pregnancy outcome.
 
There are hundreds of prenatal vitamins available, with both prescription and OTC (non-prescription) choices.  According to Source Healthcare Analytics, there were approximately 7.7 million prescriptions for prenatal vitamins sold for a total of approximately $314 million for the 12 months ended June 30, 2013, with sales between branded and generic products split nearly evenly.  According to the 2012 Gallup Target Market Report on Prenatal Vitamins, supplement use has been fairly constant overall between 2008 and 2011.  However, shifts have occurred in terms of types used, with the trend toward OTC prenatal vitamins and away from prescription prenatal vitamins.  During this same period, the use of OTC products surpassed the use of prescription products, largely driven by increased use among women currently pregnant.
 
Our Business Model
 
We are a women’s healthcare product company focused on creating and commercializing products targeted exclusively for women, including products specifically for pregnancy, childbirth, nursing, pre-menopause, and menopause.  We intend to use our current prescription and over-the-counter dietary supplement and cosmetic product lines, consisting of prenatal vitamins, vegan DHA, iron supplements, vitamin D supplements, natural menopause relief products, and scar tissue and cosmetic stretch mark creams, as the foundation of our business platform.  If approved and commercialized, our proposed hormone therapy drugs will allow us to enter the $3.3 billion hormone therapy market, based on 2012 total sales of the hormone therapy market according to Source Healthcare Analytics.
 
Our current product line is marketed and sold by a direct national sales force that calls on healthcare providers in the OB/GYN market space, as well as through our website to consumers who have been referred to our website by physicians.  We market our prescription prenatal vitamins, over-the-counter dietary supplements, and other products under our vitaMedMD brand name and duplicate formulations of our prescription prenatal vitamin products, also referred to as “generic” formulations, under our BocaGreenMD brand name.  We believe that our vitaMedMD brand name has become a recognized name for high quality women’s healthcare, while our BocaGreenMD products will provide physicians, women, and payors with a lower cost alternative for prenatal supplements.  We intend to leverage our existing relationships and distribution system to introduce our proposed hormone therapy products, if approved, which will enable us to provide a comprehensive line of women’s health care products all under one brand.
 
Our sales model focuses on the “4Ps”:  patient, provider, pharmacist, and payor.  We market and sell our current dietary supplement and cosmetic products primarily through a direct national sales force of approximately 30 full-time professionals that calls on healthcare providers in the OB/GYN market space as well as through our website directly to consumers.  In addition, our products allow health care providers to offer an alternative to patients to meet their individual nutritional and financial requirements related to co-payment and cost-of-care considerations and help patients realize cost savings over competing products.  We also believe that our combination of branded, generic, and over-the-counter lines offers physicians, women, and payors cost-effective alternatives for top-quality care.  We supply our prescription dietary supplement products to consumers through retail pharmacies.  We market our over-the-counter products either directly to consumers via our website and phone sales followed by home shipment or through physicians who then re-sell them to their patients.  Our fully staffed customer care center uses current customer relationship management software to respond to health care providers, pharmacies, and consumers via incoming and outgoing telephone calls, e-mails, and live-chat.  We also facilitate repeat customer orders for our non-prescription products through our website’s auto-ship feature.
 
As healthcare becomes increasingly consumer driven, patients are seeking more information, control, and convenience, which places additional time and financial pressures on physicians, and as a result, physicians are looking for improved ways to provide better service to their patients.  A recent study by IMS Health Inc. concludes that physicians desire fewer but more encompassing relationships with companies that can provide more valuable information, deliver more relevant services, and better respond to specific needs of their practice and patients.  Our goal is to meet this challenge by focusing on the opportunities in women’s health, specifically the OB/GYN market, to provide a better customer experience for physician, payor, and patient through the following means:
 
 
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We believe we will offer physicians a comprehensive product line of women’s healthcare products, including our proposed hormone therapy products, if approved.
 
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Our proposed hormone therapy products are designed to use the lowest effective dose for the shortest duration.
 
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We believe the attributes of our dietary supplements will result in greater consumer acceptance and satisfaction than competitive products while offering the highest quality products incorporating patented ingredients, such as Quatrefolic®, chelated iron and life’s DHA™.  All of our prenatal vitamins are gluten, sugar, and lactose free.
 
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We strive to improve our existing products and develop new products to generate additional revenue through our existing sales channels.
 
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We believe health care providers are able to offer alternatives to patients that meet the patient’s individual nutritional and financial requirements and help patients realize cost savings over competing products.
 
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Health care provider practices that choose to dispense our OTC products directly to their patients through their offices could earn revenue from the sale of the products.
 
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Improved patient education, a high level of patient compliance, and reduced cost of products all result in lower cost of care for payors and improved outcomes for patients.
 
Our Growth Strategy
 
Our goal is to become the women’s healthcare company recommended by healthcare providers to all patients by becoming the new standard in women’s health with a complete line of products all under one quality brand.  Key elements of our strategy to achieve this goal are as follows:
 
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focusing exclusively on women’s health issues to enable us to build long-term relationships with women as they move through their life cycles of birth control, pregnancy, child birth, and pre- and post- menopause;
 
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focusing on our development, clinical trials, and commercialization of hormone therapy products designed to (1) alleviate the symptoms of and reduce the health effects resulting from menopause-related hormone deficiencies, including hot flashes, osteoporosis, and vaginal dryness, and (2) provide equivalent efficiency at lower doses, enabling an enhanced side effect profile compared with competing products;
 
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providing an alternative to the non-FDA approved compound bioidentical market for estradiol and progesterone products sold by compounding pharmacies;
 
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maintaining a marketing emphasis on large group OB/GYN practices that provide opportunities to reach large patient bases and that are receptive to the data and savings we provide;
 
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pursuing multiple distribution channels, including physicians and pharmacies through our direct sales force and our website;
 
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expanding our geographic market and sales team to cover the entire country by increasing our current inside sales force; and
 
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introducing new products to build upon the introduction of our first three prescription prenatal vitamin products in the first and second quarters of 2012 and our generic line of prenatal vitamins in the fourth quarter of 2012, as well as our hormone therapy products consisting of a bioidentical oral and topical combination drug of estradiol and progesterone, an oral progesterone drug, and a suppository vulvar and vaginal atrophy estradiol drug.  PK studies of our proposed combination estradiol and progesterone drug demonstrate d that the product is bioequivalent to the reference listed drug based on the criterion that the 90% confidence interval on the test-to-reference ratio is contained entirely within the interval 0.800 to 1.250.
 
 
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Our Products
 
We offer a wide range of products targeted for women’s health specifically associated with pregnancy, child birth, nursing, post-child birth, and menopause, including prescription and over-the-counter prenatal vitamins, vegan DHA, iron supplements, vitamin D supplements, natural menopause relief products, and scar tissue and cosmetic stretch mark creams under our vitaMedMD brand name and duplicate formulations of our prescription prenatal vitamin products, referred to as “generic” formulations, under our BocaGreenMD brand name.
 
In March 2012, we launched our first prescription-only prenatal vitamin, vitaMedMD® Plus Rx, with subsequent launches of our second prescription-only prenatal vitamin, vitaMedMD® One Rx, in April 2012 and our third prescription-only prenatal vitamin, vitaMedMD ® RediChew™ Rx in May 2012.  In the fourth quarter 2012, our BocaGreenMD™ brand was launched and our first products include three prescription products Prena1™ Plus, Prena1™, and Prena1™ Chew, which are duplicate, or “generic” formulations of our vitaMedMD-branded prescription prenatals.  Our product line is detailed below.
 
vitaMedMD® Plus (Prenatal Women’s Multivitamin + DHA)
 
vitaMedMD® Plus Prenatal is a once-daily, two pill combo pack that contains a complete multivitamin with 16 essential vitamins and minerals and 300 mg of life’s DHA™ (a trademarked product of Martek Bioscience Corporation), and is Vegan and Kosher certified.  Based on recent medical and scientific research, we have optimized many of the nutrients found in vitaMedMD® Plus.  All minerals, including iron, zinc, and copper, are chelated to improve absorption.  The 300 mg of plant-based DHA (most comes from fish-based sources) is a critically important component to many pregnant women and health care providers due to concerns over contamination and the associated “burp-backs” and taste of fish-based DHA.
 
vitaMedMD® One Prenatal Multivitamin
 
vitaMedMD® One is a single-dose daily multivitamin that provides 14 vitamins and minerals and 200 mg of vegetarian, plant-based life’s DHA™, which is 100% fish-free with no ocean-borne contaminants, such as mercury or polychlorinated biphenyis, or PCBs.  Each convenient, easy-to-swallow softgel also features 975 mcg of folic acid.
 
vitaMedMD® Plus Rx Prenatal Multivitamin
 
vitaMedMD® Plus Rx is a once-daily, two pill combo prescription-only product containing one prenatal vitamin tablet with Quatrefolic®, the fourth generation folate, and one plant-based life’s DHA™ 300 mg capsule.  Quatrefolic® is a registered trademark of Gnosis S.P.A.  All minerals, including iron, zinc, and copper, are chelated to improve absorption.
 
vitaMedMD® One Rx  Prenatal Multivitamin
 
vitaMedMD® One Rx is a prescription-only product with a single-dose daily multivitamin that provides 14 vitamins and minerals, Quatrefolic®, and 200 mg of vegetarian, plant-based life’s DHA™.
 
vitaMedMD ® RediChew™ Rx Prenatal Multivitamin
 
vitaMedMD® RediChewRx is a prescription-only easy-to-chew, small, vanilla-flavored chewable tablet containing Quatrefolic, vitamin D3 to promote healthy birth weight, vitamin B2 to support bone, muscle, and nerve development, and vitamin B6 and vitamin B12 to help relieve nausea and morning sickness.  We believe vitaMedMD® RediChew Rx is an excellent option for women who have difficulty swallowing tablets or softgels, or are experiencing nausea and morning sickness.
 
vitaMedMD® Iron 21/7
 
vitaMedMD® Iron 21/7 is an iron replacement supplement with a 3-weeks-on/1-week-off dosing schedule intended to maximize absorption and enhance tolerability.  It is formulated with 150 mg of chelated iron to help improve tolerability and limit typical side effects associated with iron replacements.  Each easy-to-swallow single tablet serving also includes 800 mcg of folic acid, plus vitamins C and B12, and succinic acid to aid in absorption.
 
 
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vitaMedMD® Menopause Relief with Lifenol® Plus Bone Support
 
vitaMedMD® Menopause Relief with Lifenol® Plus Bone Support offers a natural treatment for hot flashes, night sweats, and mood disturbances.  Each single tablet dosage delivers 120 mg of Lifenol®, a well-studied female hops extract recognized for its potency and support in alleviating hot flashes, plus plant phytoestrogens.  It also includes calcium and vitamin D3 for added bone support.
 
vitaMedMD® Vitamin D3 50,000 IU and Vitamin D3 2,000 IU
 
vitaMedMD® Vitamin D3 50,000 IU and Vitamin D3 2,000 IU are dietary supplements provided in a small easy-to-swallow gel capsule that help replenish and maintain beneficial levels of vitamin D in the body.  Sustaining adequate levels of vitamin D in the body is essential to bone health, enhancing the absorption of calcium and phosphorus.  Vitamin D3, also known as cholecalciferol, is considered the most preferred form of vitamin D as it is the most active form of the nutrient.  We believe vitaMedMD® Vitamin D3 50,000 IU and Vitamin D3 2,000 IU are ideal for pregnant, breastfeeding, and menopausal women to sustain adequate levels of vitamin D.
 
vitaMedMD® Stretch Mark Body Cream
 
vitaMedMD® Stretch Mark Body Cream contains naturally derived ingredients, including peptides, shea butter, sweet almond oil, and fruit extracts.  This combination of ingredients hydrates, soothes, and pampers skin to make it softer, smoother, and younger-looking.  It helps reduce the appearance of stretch marks, scars, and other skin irregularities by hydrating and replenishing the skin’s moisture, diminishing the look of fine lines and wrinkles, and encouraging the fading of age spots and sun spots.  vitaMedMD® Stretch Mark Body Cream is hypoallergenic, paraben-free, and non-comedogenic.
 
vitaMedMD® Scar Reduction Body Cream
 
vitaMedMD® Scar Reduction Body Cream is rich in vitamins and naturally derived extracts.  It helps to minimize the size and appearance of old and new scars, reduce scar tissue, diminish the appearance of fine line and wrinkles, and encourage the fading of age spots.  It is paraben-free, non-comedogenic, and hypoallergenic.
 
BocaGreenMD™ Prena1 Plus
 
BocaGreenMD™ Prena1 Plus is a prescription-only, comprehensive single-dose dietary supplement containing one prenatal tablet with 16 vitamins and minerals, plus one softgel with 300 mg of plant-based life’s DHA.