XML 34 R17.htm IDEA: XBRL DOCUMENT v3.20.2
NOTE 11 – STOCKHOLDERS’ EQUITY
 9 Months Ended
Sep. 30, 2020
Equity [Abstract]  
NOTE 11 – STOCKHOLDERS’ EQUITY

NOTE 11 – STOCKHOLDERS’ EQUITY

 

Preferred Stock

 

At September 30, 2020, we had 10,000,000 shares of preferred stock, par value $0.001 per share, authorized for issuance, of which no shares were issued or outstanding.

 

Common Stock

 

At September 30, 2020, we had 600,000,000 shares of Common Stock authorized for issuance, of which 272,812,271 shares of Common Stock were issued and outstanding.

 

Issuances During the Three and Nine Months ended September 30, 2020

 

During the three months ended September 30, 2020, stock options to purchase an aggregate of 517,891 shares of Common Stock were exercised for $105,494 in cash. During the nine months ended September 30, 2020, stock options to purchase an aggregate of 1,182,195 shares of Common Stock were exercised for $271,678 in cash.

 

Issuances During the Three and Nine Months ended September 30, 2019

 

During the three months ended September 30, 2019, certain individuals exercised stock options to purchase an aggregate of 55,236 shares of Common Stock for $8,549 in cash. During the nine months ended September 30, 2019, certain individuals exercised stock options to purchase an aggregate of 331,619 shares of Common Stock for $108,656 in cash. Also, during the same period, stock options to purchase an aggregate of 12,097 shares of Common Stock were exercised pursuant to the options’ cashless exercise provisions, wherein an aggregate of 11,834 shares of Common Stock were issued.

 

Warrants to Purchase Common Stock

 

As of September 30, 2020, we had warrants outstanding to purchase an aggregate of 6,534,687 shares of Common Stock with a weighted-average contractual remaining life of approximately 7.5 years, and exercise prices ranging from $0.24 to $8.20 per share, resulting in a weighted average exercise price of $1.83 per share.

 

The valuation methodology used to determine the fair value of our warrants is the Black-Scholes Model. The Black-Scholes Model requires the use of a number of assumptions, including volatility of the stock price, the risk-free interest rate, dividend yield and the term of the warrant.

 

In connection with Amendment No. 5 and in lieu of a cash amendment fee, we issued to the Administrative Agent and the lenders under the Financing Agreement the Lender Warrants. The fair value for the Lender Warrants was determined by using the Black-Scholes Model on the date of the grant using a term of ten years, volatility of 68.8%, risk-free interest rate of 0.34% and dividend yield of 0%. The grant date fair value of the warrants was $1.56 per share. The warrants vested upon issuance. We concluded that the modification accounting model is applicable to this warrant issuance and recognized the fair value of the warrants as a debt discount. As a result, the fair value of the Lender Warrants is being amortized to interest expense over the term of the Financing Agreement.

 

We recorded share-based compensation expense related to warrants previously issued of $0 and $56,418 for the three months ended September 30, 2020 and 2019, respectively, and $26,446 and $198,306 for the nine months ended September 30, 2020 and 2019, respectively, in the accompanying consolidated financial statements. At September 30, 2020, there was no unrecognized compensation expense remaining related to unvested warrants.

 

During the nine months ended September 30, 2019, we granted warrants to purchase an aggregate of 75,000 shares of Common Stock to outside consultants at an exercise price of $5.63. The fair value for these warrants was determined by using the Black-Scholes Model on the date of the grant using a term of five years, volatility of 60.8%, risk-free interest rate of 2.52%, and dividend yield of 0%. The grant date fair value of the warrants was $3.00 per share. The warrants are vesting ratably over a 12-month period and have an expiration date of February 12, 2024.

 

During the nine months ended September 30, 2020, no warrants were exercised. During the nine months ended September 30, 2019, warrants to purchase an aggregate of 1,250,000 shares of Common Stock were exercised pursuant to the warrants’ cashless exercise provisions, wherein an aggregate of 471,184 shares of Common Stock were issued.

 

Options to Purchase Common Stock

 

In 2009, we adopted the 2009 Long Term Incentive Compensation Plan, or the 2009 Plan, to provide financial incentives to employees, directors, advisers, and consultants of our company who are able to contribute towards the creation of or who have created stockholder value by providing them stock options and other stock and cash incentives, or the Awards. As of September 30, 2020, there were non-qualified stock options to purchase an aggregate of 13,346,455 shares of Common Stock outstanding under the 2009 Plan. Effective upon our adoption of the TherapeuticsMD, Inc. 2019 Stock Incentive Plan, or the 2019 Plan, on June 20, 2019, no future awards may be made under the 2009 Plan.

 

In 2012, we adopted the 2012 Stock Incentive Plan, or the 2012 Plan, a non-qualified plan that was amended in August 2013. The 2012 Plan was designed to serve as an incentive for retaining qualified and competent key employees, officers, directors, and certain consultants and advisors of our company. As of September 30, 2020, there were non-qualified stock options to purchase an aggregate of 6,305,974 shares of Common Stock outstanding and an aggregate of 890,000 restricted stock units under the 2012 Plan. Effective upon our adoption of the 2019 Plan, no future awards may be made under the 2012 Plan.

 

On June 20, 2019, we adopted the 2019 Plan to serve as an incentive for retaining qualified and competent key employees, officers, directors, and certain consultants and advisors of our company. The Awards available under the 2019 Plan consist of stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock, performance units, and other stock or cash awards as described in the 2019 Plan. Generally, the options vest annually over four years or as determined by our board of directors, upon each option grant. Options may be exercised by paying the price for shares or on a cashless exercise basis after they have vested and prior to the specified expiration date provided and applicable exercise conditions are met, if any. The expiration date is generally ten years from the date the option is issued.

 

As of September 30, 2020, there were 3,465,514 shares of Common Stock available for issuance under the 2019 Plan, consisting of (i) 470,522 new shares, (ii) 2,405,833 unallocated shares previously available for issuance under the 2012 Plan that were not then subject to outstanding “Awards” (as defined in the 2012 Plan), and (iii) 589,159 unallocated shares previously available for issuance under the 2009 Plan that were not then subject to outstanding “Awards” (as defined in the 2009 Plan). Any shares subject to outstanding options or other equity “Awards” under the 2019 Plan, the 2012 Plan and the 2009 Plan that are forfeited, expire or otherwise terminate without issuance of the underlying shares, or if any such Award is settled for cash or otherwise does not result in the issuance of all or a portion of the shares subject to such Award (other than shares tendered or withheld in connection with the exercise of an Award or the satisfaction of withholding tax liabilities), the shares to which those Awards were subject, shall, to the extent of such forfeiture, expiration, termination, cash settlement or non-issuance, again be available for delivery with respect to Awards under the 2019 Plan. As of September 30, 2020, there were non-qualified stock options to purchase an aggregate of 4,240,751 shares of Common Stock outstanding under the 2019 Plan and an aggregate of 5,139,957 restricted stock units and 2,422,885 performance stock units outstanding under the 2019 Plan.

 

The valuation methodology used to determine the fair value of stock options is the Black-Scholes Model. The Black-Scholes Model requires the use of a number of assumptions including volatility of the stock price, the risk-free interest rate, and the expected life of the stock options. The ranges of assumptions used in the Black-Scholes Model during the nine months ended September 30, 2020 and 2019 are set forth in the table below. 

 

   September 30,  
2020		   September 30,  
2019		 
Weighted average grant date fair value  $0.95   $1.84 
Risk-free interest rate   0.34-1.68%    1.83-2.54% 
Volatility    63.53-67.92%    61.25-64.49% 
Term (in years)   6-6.8    5.5-6.5 
Dividend yield   0.00%   0.00% 

 

 

A summary of option activity under the 2009, 2012 and 2019 Plans and related information during the nine months ended September 30, 2020 is as follows:

 

   Number of Shares Under Options   Weighted Average Exercise Price   Weighted Average Remaining Contractual Life in Years   Aggregate Intrinsic Value 
Balance at December 31, 2019   25,030,234   $4.65    5.84   $3,668,171 
  Granted   736,500   $1.58           
  Exercised   (1,182,195)  $0.23        $1,738,740 
  Expired   (361,109)  $3.66           
  Cancelled/Forfeited   (330,250)  $3.69           
Balance at September 30, 2020   23,893,180   $4.80    5.46   $379,535 
Vested and Exercisable at September 30, 2020   19,827,306   $5.06    4.83   $218,370 
Unvested at September 30, 2020   4,065,874   $3.55    8.53   $161,165 

 

At September 30, 2020, our outstanding options had exercise prices ranging from $0.38 to $8.92 per share. Share-based compensation expense related to options recognized in our results of operations for the three months ended September 30, 2020 and 2019 was $1,143,920 and $2,194,667, respectively, and for the nine months ended September 30, 2020 and 2019 was $4,141,061 and $6,568,736, respectively, and it is based on awards vested. At September 30, 2020, total unrecognized estimated compensation expense related to unvested options was approximately $6,500,000, which may be adjusted for future changes in forfeitures. This cost is expected to be recognized over a weighted-average period of 2.0 years. No tax benefit was realized due to a continued pattern of operating losses.

 

Restricted Stock

 

Restricted stock units granted under our 2009, 2012 and 2019 Plans entitle the holder to receive, at the end of vesting period, a specified number of shares of our Common Stock. Share-based compensation expense is measured by the market value of our Common Stock on the day of the grant. The shares vest ratably over the period specified in the grant. There is no partial vesting and any unvested portion is forfeited.

 

Performance stock units will vest if certain performance targets are achieved. If minimum performance thresholds are achieved, each award will convert into Common Stock at a defined ratio depending on the degree of achievement of the performance target designated by each individual award. If minimum performance thresholds are not achieved, then no shares will be issued. We recognize performance-based restricted stock as compensation expense based on the most likely probability of attaining the prescribed performance and over the requisite service period beginning at its grant date and through the date the restricted stock vests. The expected levels of achievement are reassessed over the requisite service periods and, to the extent that the expected levels of achievement change, stock-based compensation is adjusted and recorded on the consolidated statements of income and the remaining unrecognized stock-based compensation is recognized over the remaining requisite service period. 

 

During the three and nine months ended September 30, 2020 we recorded $1,988,844 and $4,334,537, respectively, and during the three and nine months ended September 30, 2019 we recorded $84,061 and $1,080,738, respectively, in share-based compensation expense related to restricted stock units and performance stock units. As of September 30, 2020, we recognized performance-based compensation expense using our assessment of the most likely probability of attaining EBITDA break-even which would result in vesting two times the base number of performance stock units. At September 30, 2020, total unrecognized estimated compensation expense related to unvested restricted stock units and performance stock units was approximately $11,000,000, which may be adjusted if certain performance targets are achieved or for future changes in forfeitures. This cost is expected to be recognized over a weighted-average period of 1.6 years.

 

Schedule of restricted stock units and performance stock units

    Restricted Stock Units   Performance Stock Units 
    Number of Shares   Weighted Average Grant Date Fair Value   Number of Shares   Weighted Average Grant Date Fair Value 
Balance at December 31, 2019    1,240,000   $3.56    —   $— 
Granted    5,102,817   $1.40    2,585,745   $1.08 
Vested/Released    (301,500)  $1.78    (151,500)  $1.14 
Forfeited    (11,360)  $1.07    (11,360)  $1.07 
Balance at September 30, 2020    6,029,957   $1.83    2,422,885*  $1.08 

 

*The number of performance stock units (PSUs) represents the base number of PSUs that may vest. The actual number of PSUs that will vest will be between zero and two times the base number of PSUs depending on the Company's achievement of break-even quarterly EBITDA.

 

Employee Stock Purchase Plan

 

On June 18, 2020, our stockholders approved the TherapeuticsMD, Inc. 2020 Employee Stock Purchase Plan (the “ESPP”), which reserved 5,400,000 shares of Common Stock for purchase. The ESPP permits eligible employee participants to purchase Common Stock at a price per share which is equal to 85% of the lesser of (a) the fair market value of the shares on the offering date of the offering period or (b) the fair market value of the shares on the purchase date.